CREDIT AGREEMENT

Exhibit 4.2

 

$25,000,000 S ENIOR S ECURED 3- YEAR R EVOLVING C REDIT F ACILITY

 

$140,000,000 S ENIOR S ECURED 5-Y EAR T ERM B F ACILITY

 

C REDIT A GREEMENT

 

D ATED AS OF

 

J UNE 29, 2005

 

AMONG

 

H ERCULES O FFSHORE , LLC,

 

AS B ORROWER ,

 

C OMERICA B ANK ,

 

AS A DMINISTRATIVE A GENT ,

 

C ITICORP N ORTH A MERICA , I NC .,

 

AS S YNDICATION A GENT ,

 

C REDIT S UISSE , C AYMAN I SLANDS B RANCH ,

 

AS D OCUMENTATION A GENT ,

 

AND

 

T HE L ENDERS P ARTY H ERETO

 

J OINT L EAD A RRANGERS AND J OINT B OOKRUNNERS

 

C ITIGROUP G LOBAL M ARKETS I NC . AND C REDIT S UISSE , C AYMAN I SLANDS B RANCH

TABLE OF CONTENTS

 

 

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ANNEXES, EXHIBITS AND SCHEDULES

 

 

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THIS CREDIT AGREEMENT dated as of June 29, 2005, is among: Hercules Offshore, LLC, a limited liability company duly formed and existing under the laws of the State of Delaware (the “ Borrower ”); each of the Lenders from time to time party hereto; Comerica Bank (in its individual capacity, “ Comerica ”), as administrative agent for the Lenders (in such capacity, together with its successors in such capacity, the “ Administrative Agent ”); Citicorp North America, Inc. (in its individual capacity, “ Citicorp ”), as syndication agent for the Lenders (in such capacity, together with its successors in such capacity, the “ Syndication Agent ”); and Credit Suisse, Cayman Islands Branch, as documentation agent for the Lenders (in such capacity, together with its successors in such capacity, the “ Documentation Agent ”).

 

R E C I T A L S

 

A. The Borrower has requested that the Lenders provide certain loans to and extensions of credit on behalf of the Borrower.

 

B. The Lenders have agreed to make such loans and extensions of credit subject to the terms and conditions of this Agreement.

 

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

 

ARTICLE I

Definitions and Accounting Matters

 

Section 1.01 Terms Defined Above . As used in this Agreement, each term defined above has the meaning indicated above.

 

Section 1.02 Certain Defined Terms . As used in this Agreement, the following terms have the meanings specified below:

 

“ ABR ”, when used in reference to any Loan or Borrowing, refers to whether such Loan, or the Loans comprising such Borrowing, are bearing interest at a rate determined by reference to the Alternate Base Rate.

 

“ Adjusted LIBO Rate ” means, with respect to any Eurodollar Borrowing for any Interest Period, an interest rate per annum (rounded upwards, if necessary, to the next 1/100 of 1%) equal to (a) the LIBO Rate for such Interest Period multiplied by (b) the Statutory Reserve Rate.

 

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

 

“ Affected Loans ” has the meaning assigned such term in Section 5.05.

 

“ Affiliate ” means, with respect to a specified Person, another Person that directly, or indirectly through one or more intermediaries, Controls or is Controlled by or is under common Control with the Person specified.

 

“ Agents ” means, collectively, the Administrative Agent, the Syndication Agent and the Documentation Agent; and “Agent” shall mean either the Administrative Agent, the Syndication Agent or the Documentation Agent, as the context requires.

 

“ Agreement ” means this Credit Agreement, as the same may from time to time be amended, modified, supplemented or restated.

 

“ Alternate Base Rate ” means, for any day, a rate per annum equal to the greatest of (a) the Base Rate in effect on such day, (b) the Base CD Rate in effect on such day plus ½ of 1% and (c) the Federal Funds Effective Rate in effect on such day plus ½ of 1%. Any change in the Alternate Base Rate due to a change in the Base Rate, the Base CD Rate or the Federal Funds Effective Rate shall be effective from and including the effective date of such change in the Base Rate, the Base CD Rate or the Federal Funds Effective Rate, respectively.

 

“ Applicable Margin ” means, for any day, 2.25% per annum with respect to any ABR Loan or 3.25% per annum with respect to any Eurodollar Loan.

 

“ Applicable Percentage ” means, with respect to (i) any Revolving Lender, the percentage of the total Revolving Commitments represented by such Revolving Lender’s Revolving Commitment as such percentage is set forth on Annex I as such Annex I is amended by the Administrative Agent from time to time to reflect Assignments, (ii) any Term Loan Lender, its Term Loan Percentage and (iii) any Lender, the percentage of the total outstanding Loans and LC Exposure of all Lenders to the outstanding Loans and LC Exposure of such Lender.

 

“ Approved Counterparty ” means (a) any Agent or Lender or any Affiliate of an Agent or Lender and (b) any other Person whose long term senior unsecured debt rating is A-/A3 by S&P or Moody’s (or their equivalent) or higher.

 

“ Approved Fund ” means any Person (other than a natural person) that is engaged in making, purchasing, holding or investing in bank loans and similar extensions of credit in the ordinary course of its business and that is administered or managed by (a) a Lender, (b) an Affiliate of a Lender or (c) an entity or an Affiliate of an entity that administers or manages a Lender.

 

“ Assessment Rate ” means, for any day, the annual assessment rate in effect on such day that is payable by a member of the Bank Insurance Fund classified as “well-capitalized” and within supervisory subgroup “B” (or a comparable successor risk classification) within the meaning of 12 C.F.R. Part 327 (or any successor provision) to the Federal Deposit Insurance Corporation for insurance by such Corporation of time deposits made in dollars at the offices of such member in the United States; provided that if, as a result of any change in any law, rule or regulation, it is no longer possible to determine the Assessment Rate as aforesaid, then the Assessment Rate shall be such annual rate as shall be reasonably determined by the Administrative Agent to be representative of the cost of such insurance to the Lenders.

 

“ Assignment ” has the meaning assigned such term in Section 12.03(b)(i).

 

“ Availability Period ” means the period from and including the Effective Date to but excluding the Revolving Credit Maturity Date.

 

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“ Base CD Rate ” means the sum of (a) the Three-Month Secondary CD Rate multiplied by the Statutory Reserve Rate plus (b) the Assessment Rate.

 

“ Base Rate ” means the rate of interest per annum publicly announced from time to time by Comerica Bank as its base rate in effect at its principal office in Detroit, Michigan; each change in the Base Rate shall be effective from and including the date such change is publicly announced as being effective. Such rate is set by the Administrative Agent as a general reference rate of interest, taking into account such factors as the Administrative Agent may deem appropriate; it being understood that many of the Administrative Agent’s commercial or other loans are priced in relation to such rate, that it is not necessarily the lowest or best rate actually charged to any customer and that the Administrative Agent may make various commercial or other loans at rates of interest having no relationship to such rate.

 

“ Board ” means the Board of Governors of the Federal Reserve System of the United States of America or any successor Governmental Authority.

 

“ Borrowing ” means Loans of the same Type, made, converted or continued on the same date and, in the case of Eurodollar Loans, as to which a single Interest Period is in effect.

 

“ Borrowing Request ” means a request by the Borrower for a Borrowing in accordance with Section 2.03.

 

“ Business Day ” means any day that is not a Saturday, Sunday or other day on which commercial banks in Detroit, Michigan or Houston, Texas are authorized or required by law to remain closed; and if such day relates to a Borrowing or continuation of, a payment or prepayment of principal of or interest on, or a conversion of or into, or the Interest Period for, a Eurodollar Loan or a notice by the Borrower with respect to any such Borrowing or continuation, payment, prepayment, conversion or Interest Period, any day which is also a day on which dealings in dollar deposits are carried out in the London interbank market.

 

“ Capital Expenditures ” means, in respect of any Person, for any period, the aggregate (determined without duplication) of all expenditures and costs that are capital in nature and any other expenditures that are capitalized on the balance sheet of such Person in accordance with GAAP including refurbishment of the Jupiter and dry docking costs and expenses, other than (i) repairs or replacements made with the proceeds of any Casualty Event, and (ii) Capital Expenditures made within nine (9) months of the acquisition of any Property to the extent such expenditure is included in and permitted by Section 9.05(i).

 

“ Capital Leases ” means, in respect of any Person, all leases which shall have been, or should have been, in accordance with GAAP, recorded as capital leases on the balance sheet of the Person liable (whether contingent or otherwise) for the payment of rent thereunder.

 

“ Casualty Event ” means any loss, casualty or other insured damage to, or any nationalization, taking under power of eminent domain or by condemnation or similar proceeding of, any Property of the Borrower or any of its Subsidiaries.

 

“ Change of Control ” means (a) (i) before the IPO, the failure of the Existing Owners to own, directly or indirectly, beneficially or of record, Equity Interests representing more than 50%

 

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of the aggregate ordinary voting power represented by the issued and outstanding Equity Interests of the Borrower, or (ii) after the IPO, (A) the failure of the Existing Owners to own, directly or indirectly, beneficially or of record, Equity Interests representing more than 35% of the aggregate ordinary voting power represented by the issued and outstanding Equity Interests of the Borrower, or (B) any “person” or “group” (as such terms are used in sections 13(d) and 14(d) of the Securities Exchange Act of 1934, as amended (the “ Exchange Act ”)), other than the Existing Owners, shall become, or obtain rights (whether by means of warrants, options, or otherwise) to become a “beneficial owner” as defined in Rules 13(d)-3 and 13(d)-5 under the Exchange Act, directly or indirectly, of more than the percentage of the outstanding Equity Interests of the Borrower then owned by the Existing Owners, (b) occupation of a majority of the seats (other than vacant seats) on the board of directors of the Borrower by Persons who were neither (i) nominated by the board of directors of the Borrower nor (ii) appointed by directors so nominated, or (c) the failure of the Borrower to own all of the issued and outstanding Equity Interests in the Guarantors, except as otherwise permitted by this Agreement.

 

“ 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 any Lender or the Issuing Bank (or, for purposes of Section 5.01(b), by any lending office of such Lender or by such Lender’s or the Issuing Bank’s holding company, if any) with any 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.

 

“ Code ” means the Internal Revenue Code of 1986, as amended from time to time, and any successor statute.

 

“ Commitment ” means with respect to a Term Loan Lender its Term Commitment and respect to a Revolving Lender its Revolving Commitment.

 

“ Commitment Fee Rate ” means 0.50% per annum.

 

“ Commitment Increase Effective Date ” has the meaning assigned such term in Section 2.10(b)(i).

 

“ Consolidated Current Assets ” means, with respect to any Person as at any date of determination, the total assets of such Person and its consolidated Subsidiaries which should properly be classified as current assets on a consolidated balance sheet of such Person and its consolidated Subsidiaries in accordance with GAAP.

 

“ Consolidated Current Liabilities ” means, with respect to any Person as at any date of determination, the total liabilities of such Person and its consolidated Subsidiaries which should properly be classified as current liabilities (other than the current portion of any Loans) on a consolidated balance sheet of such Person and its consolidated Subsidiaries in accordance with GAAP.

 

“ Consolidated Net Income ” means with respect to the Borrower and the Consolidated Subsidiaries, for any period, the aggregate of the net income (or loss) of the Borrower and the Consolidated Subsidiaries after allowances for taxes for such period determined on a

 

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consolidated basis in accordance with GAAP; provided that there shall be excluded from such net income (to the extent otherwise included therein) the following: (a) the net income of any Person in which the Borrower or any Consolidated Subsidiary has an interest (which interest does not cause the net income of such other Person to be consolidated with the net income of the Borrower and the Consolidated Subsidiaries in accordance with GAAP), except to the extent of the amount of dividends or distributions actually paid in cash during such period by such other Person to the Borrower or to a Consolidated Subsidiary, as the case may be; (b) the net income (but not loss) during such period of any Consolidated Subsidiary to the extent that the declaration or payment of dividends or similar distributions or transfers or loans by that Consolidated Subsidiary is not at the time permitted by operation of the terms of its charter or any agreement, instrument or Governmental Requirement applicable to such Consolidated Subsidiary or is otherwise restricted or prohibited, in each case determined in accordance with GAAP; (c) the net income (or loss) of any Person acquired in a pooling-of-interests transaction for any period prior to the date of such transaction; (d) any extraordinary gains or losses during such period and (e) any gains or losses attributable to writeups or writedowns of assets; and provided further that if the Borrower or any Consolidated Subsidiary shall acquire, dispose or discontinue use of any Property during such period, then Consolidated Net Income shall be calculated after giving pro forma effect to such acquisition, disposition or discontinuance, as if such acquisition, disposition or discontinuance had occurred on the first day of such period. With respect to any pro forma adjustment made pursuant to this definition, such adjustments shall be made in good faith by the Borrower based on reasonable assumptions which determination, in each case shall be subject to revision by the Administrative Agent on any reasonable basis. No pro forma adjustment shall be made for the Superior Acquisition except as provided for in the definition of EBITDA.

 

“ Consolidated Subsidiaries ” means each Subsidiary of the Borrower (whether now existing or hereafter created or acquired) the financial statements of which shall be (or should have been) consolidated with the financial statements of the Borrower in accordance with GAAP.

 

“ Consolidated Working Capital ” means, at any time, the excess of Consolidated Current Assets on such date in excess of Consolidated Current Liabilities on such date.

 

“ Control ” means the possession, directly or indirectly, of the power to direct or cause the direction of the management or policies of a Person, whether through the ability to exercise voting power, by contract or otherwise. For the purposes of this definition, and without limiting the generality of the foregoing, any Person that owns directly or indirectly 20% or more of the Equity Interests having ordinary voting power for the election of the directors or other governing body of a Person (other than as a limited partner of such other Person) will be deemed to “control” such other Person. “ Controlling ” and “ Controlled ” have meanings correlative thereto.

 

“ Debt ” means, for any Person, the sum of the following (without duplication): (a) all obligations of such Person for borrowed money or evidenced by bonds, bankers’ acceptances, debentures, notes or other similar instruments; (b) all obligations of such Person (whether contingent or otherwise) in respect of letters of credit, surety or other bonds and similar instruments; (c) all accounts payable and all accrued expenses, liabilities or other obligations of such Person to pay the deferred purchase price of Property or services; (d) all obligations under Capital Leases; (e) all obligations under Synthetic Leases; (f) all Debt (as defined in the other

 

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clauses of this definition) of others secured by (or for which the holder of such Debt has an existing right, contingent or otherwise, to be secured by) a Lien on any Property of such Person, whether or not such Debt is assumed by such Person, provided that the amount of Debt shall be deemed to be limited to the greater of (i) the amount of such Debt assumed and (ii) the fair market value of such Property; (g) all Debt (as defined in the other clauses of this definition) of others guaranteed by such Person or in which such Person otherwise assures a creditor against loss of the Debt (howsoever such assurance shall be made) to the extent of the lesser of the amount of such Debt and the maximum stated amount of such guarantee or assurance against loss; (h) all obligations or undertakings of such Person to maintain or cause to be maintained the financial position or covenants of others or to purchase the Debt or Property of others, provided that the amount of any such obligation or undertaking shall be deemed to be an amount equal to the stated or determinable amount of the related primary obligation, or portion thereof, in respect of which such obligation or undertaking is made or, if not stated or determinable, the maximum reasonably anticipated liability in respect thereof as determined by the Borrower in good faith; (i) any Debt of a partnership for which such Person is liable either by agreement, by operation of law or by a Governmental Requirement but only to the extent of such liability; and (j) Disqualified Capital Stock. The term “ Debt ” as used in this Agreement includes any obligation of a Person that would be considered indebtedness for tax purposes but is not set forth on the balance sheet of such Person, including, but not limited to, (A) any tax retention operating lease, off-balance sheet loan or similar off-balance sheet financing product of such Person, and (B) the aggregate amount of uncollected accounts receivables of such Person subject at such time to a sale of receivables (or similar transaction).

 

“ Default ” means any event or condition which constitutes an Event of Default or which upon notice, lapse of time or both would, unless cured or waived, become an Event of Default.

 

“ Disposition ” or “ Dispose ” means the sale, transfer, license, lease, assignment, conveyance or other transfer or disposition (including any sale and leaseback transaction) of any Property by any Person, including any sale, assignment, transfer or other disposal, with or without recourse, of any notes or accounts receivable or any rights and claims associated therewith, but excluding any such transfer or other disposition of cash or cash equivalents.

 

“ Disqualified Capital Stock ” means any Equity Interest that, by its terms (or by the terms of any security into which it is convertible or for which it is exchangeable) or upon the happening of any event, matures or is mandatorily redeemable for any consideration other than other Equity Interests (which would not constitute Disqualified Capital Stock), pursuant to a sinking fund obligation or otherwise, or is convertible or exchangeable for Debt or redeemable for any consideration other than other Equity Interests (which would not constitute Disqualified Capital Stock) at the option of the holder thereof, in whole or in part, on or prior to the date that is six months after the earlier of (a) the Term Loan Maturity Date and (b) the date on which there are no Loans, LC Exposure or other obligations hereunder outstanding and all of the Commitments are terminated.

 

“ dollars ” or “ $ ” refers to lawful money of the United States of America.

 

“ Domestic Subsidiary ” means any Subsidiary that is organized under the laws of the United States of America or any state thereof or the District of Columbia.

 

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“ Drilling Rigs ” means the jackup and platform drilling rigs of the Borrower and its Subsidiaries, together with the related equipment and spare parts.

 

“ EBITDA ” means, for any period, the sum of Consolidated Net Income for such period plus the following expenses or charges to the extent deducted from Consolidated Net Income in such period: interest, income taxes, depreciation, amortization, and other similar noncash charges, minus all noncash income added to Consolidated Net Income; provided that EBITDA for the four quarters ending September 30, 2005 shall equal EBITDA for the nine-month period ending September 30, 2005 times 4/3 plus $3,000,000; EBITDA for the four quarters ending December 31, 2005 shall equal EBITDA for such four quarters plus $2,000,000; EBITDA for the four quarters ending March 31, 2006 shall equal EBITDA for such four quarters plus $1,000,000.

 

“ Effective Date ” means the date on which the initial funding of the Loans takes place under Section 6.01.

 

“ Environmental Laws ” means any and all Governmental Requirements pertaining in any way to health, safety, the environment or the preservation or reclamation of natural resources, in effect in any and all jurisdictions in which the Borrower or any Subsidiary is conducting or at any time has conducted business, or where any Property of the Borrower or any Subsidiary is located, including without limitation, the Oil Pollution Act of 1990 (“ OPA ”), as amended, the Clean Air Act, as amended, the Comprehensive Environmental, Response, Compensation, and Liability Act of 1980 (“ CERCLA ”), as amended, the Federal Water Pollution Control Act, as amended, the Occupational Safety and Health Act of 1970, as amended, the Resource Conservation and Recovery Act of 1976 (“ RCRA ”), as amended, the Safe Drinking Water Act, as amended, the Toxic Substances Control Act, as amended, the Superfund Amendments and Reauthorization Act of 1986, as amended, the Hazardous Materials Transportation Act, as amended, and other environmental conservation or protection Governmental Requirements. The term “oil” shall have the meaning specified in OPA, the terms “ hazardous substance ” and “ release ” (or “ threatened release ”) have the meanings specified in CERCLA, the terms “ solid waste ” and “ disposal ” (or “ disposed ”) have the meanings specified in RCRA and the term “ oil and gas waste ” shall have the meaning specified in Section 91.1011 of the Texas Natural Resources Code (“ Section 91.1011 ”); provided , however , that (a) in the event either OPA, CERCLA, RCRA or Section 91.1011 is amended so as to broaden the meaning of any term defined thereby, such broader meaning shall apply subsequent to the effective date of such amendment and (b) to the extent the laws of the state or other jurisdiction in which any Property of the Borrower or any Subsidiary is located establish a meaning for “ oil ,” “ hazardous substance ,” “ release ,” “ solid waste ,” “ disposal ” or “ oil and gas waste ” which is broader than that specified in either OPA, CERCLA, RCRA or Section 91.1011, such broader meaning shall apply.

 

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

 

“ ERISA ” means the Employee Retirement Income Security Act of 1974, as amended, and any successor statute.

 

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“ ERISA Affiliate ” means each trade or business (whether or not incorporated) which together with the Borrower or a Subsidiary would be deemed to be a “single employer” within the meaning of section 4001(b)(1) of ERISA or subsections (b), (c), (m) or (o) of section 414 of the Code.

 

“ ERISA Event ” means (a) a “Reportable Event” described in section 4043 of ERISA and the regulations issued thereunder, (b) the withdrawal of the Borrower, a Subsidiary or any ERISA Affiliate from a Plan during a plan year in which it was a “substantial employer” as defined in section 4001(a)(2) of ERISA, (c) the filing of a notice of intent to terminate a Plan or the treatment of a Plan amendment as a termination under section 4041 of ERISA, (d) the institution of proceedings to terminate a Plan by the PBGC, (e) receipt of a notice of withdrawal liability pursuant to section 4202 of ERISA or (f) any other event or condition which might constitute grounds under section 4042 of ERISA for the termination of, or the appointment of a trustee to administer, any Plan.

 

“ Eurodollar ”, when used in reference to any Loan or Borrowing, refers to whether such Loan, or the Loans comprising such Borrowing, are bearing interest at a rate determined by reference to the Adjusted LIBO Rate.

 

“ Event of Default ” has the meaning assigned such term in Section 10.01.

 

“ Excepted Liens ” 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 delinquent; (c) 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 or in the ordinary course of business, each of which is in respect of obligations that 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; (d) banker’s liens, rights of set-off or similar rights and remedies, provided that no deposit account is a dedicated cash collateral account or is subject to restrictions against access by the depositor in excess of those set forth by regulations promulgated by the Board and no such deposit account is intended by Borrower or any of its Subsidiaries to provide collateral to the depository institution; (e) maritime liens for crew wages or for salvage and general average, each of which is in respect of obligations that 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; (f) easements, restrictions, servitudes, permits, conditions, covenants, exceptions or reservations in any real Property of the Borrower or any Subsidiary, which in the aggregate do not materially impair the use of such Property for the purposes of which such Property is held by the Borrower or any Subsidiary or materially impair the value of such Property subject thereto; (g) Liens on cash or securities pledged to secure performance of tenders, surety and appeal bonds, government contracts, performance and return of money bonds, bids, trade contracts, leases, statutory obligations, regulatory obligations and other obligations of a like nature incurred in the ordinary course of business and (h) judgment and attachment Liens not giving rise to an Event of Default, provided that any appropriate legal proceedings which may have been duly initiated for

 

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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; provided , further that Liens described in clauses (a) through (e) shall remain “Excepted Liens” only for so long as no action to enforce such Lien has been commenced and no intention to subordinate the first priority Lien granted in favor of the Administrative Agent and the Lenders is to be hereby implied or expressed by the permitted existence of such Excepted Liens.

 

“ Excess Cash Flow ” means, without duplication, for any Person for any period for which such amount is being determined:

 

(a) Consolidated Net Income (without giving effect to pro forma adjustment with respect to any cash net after-tax income from discontinued operations or after-tax gain on disposal of discontinued operations) adjusted to exclude any amount of extraordinary gain included in Consolidated Net Income and actually applied pursuant to Section 3.04(c)(iii) or (iv), plus

 

(b) the amount of depreciation, amortization, deferred taxes and other non-cash expenses which, pursuant to GAAP, were deducted in determining such Consolidated Net Income of such Person, plus

 

(c) decreases in Consolidated Working Capital, minus

 

(d) increases in Consolidated Working Capital, minus

 

(e) the amount of Capital Expenditures and purchases of intangibles in such period to the extent funded with Internally Generated Funds, minus

 

(f) payments of principal under the Term Loans pursuant to Section 3.01(b) or any payments or repayments of any other Indebtedness (in the case of any revolving credit, only to the extent accompanied by a permanent reduction in commitments thereunder), in each case made during such period to the extent funded with Internally Generated Funds, minus

 

(g) optional prepayments of principal under the Term Loans and the Revolving Loans to the extent accompanied by a permanent reduction of commitments thereunder made during such period to the extent funded with Internally Generated Funds, minus

 

(h) Investments made during such period to the extent funded with Internally Generated Funds.

 

“ Excluded Taxes ” means, with respect to the Administrative Agent, any Lender, the Issuing Bank or any other recipient of any payment to be made by or on account of any obligation of the Borrower or any Guarantor hereunder or under any other Loan Document, (a) income or franchise taxes imposed on (or measured by) its net income by the United States of America or such other jurisdiction under the laws of which such recipient is organized or in which its principal office is located or, in the case of any Lender, in which its applicable lending office is located, (b) any branch profits taxes imposed by the United States of America or any similar tax imposed by any other jurisdiction in which the Borrower or any Guarantor is located and (c) in the case of a Foreign Lender, any withholding tax that is imposed on amounts payable

 

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to such Foreign Lender at the time such Foreign Lender becomes a party to this Agreement (or designates a new lending office) or is attributable to such Foreign Lender’s failure to comply with Section 5.03(e), except to the extent that such Foreign Lender (or its assignor, if any) was entitled, at the time of designation of a new lending office (or assignment), to receive additional amounts with respect to such withholding tax pursuant to Section 5.03(a) or Section 5.03(c).

 

“ Existing Credit Agreements ” means (i) the Credit Agreement dated October 1, 2004, by and between Hercules Liftboat Company, LLC, as borrower, Comerica, as agent, and the banks party thereto, as amended; and (ii) the Credit Agreement dated as of July 30, 2004, among Hercules Holdings LLC, as borrower, Lehman Commercial Paper Inc., as administrative agent and syndication agent, as amended.

 

“ Existing Owners ” means Lime Rock Partners LLC, Greenhill Capital Partners, L.P. and their respective Affiliates.

 

“ Federal Funds Effective Rate ” means, for any day, the weighted average (rounded upwards, if necessary, to the next 1/100 of 1%) of the rates on overnight Federal funds transactions with members of the Federal Reserve System arranged by Federal funds brokers, as published on the next succeeding Business Day by the Federal Reserve Bank of New York, or, if such rate is not so published for any day that is a Business Day, the average (rounded upwards, if necessary, to the next 1/100 of 1%) of the quotations for such day for such transactions received by the Administrative Agent from three Federal funds brokers of recognized standing selected by it.

 

“ Financial Institution ” means any bank, savings and loan, credit union or other Person that takes deposits, any insurance company, broker/dealer, credit, or other similar institution, any private investment fund, hedge fund or other Person regularly in the business of making or participating in loans (or the purchase, sale, holding or managing of equity or financial assets or portfolios) or an Affiliate of any of the foregoing.

 

“ Financial Officer ” means, for any Person, the chief financial officer, principal accounting officer, treasurer or controller of such Person. Unless otherwise specified, all references herein to a Financial Officer means a Financial Officer of the Borrower.

 

“ Financial Statements ” means the financial statement or statements of the Borrower and its Consolidated Subsidiaries referred to in Section 7.04(c).

 

“ First Naval Ship Mortgage ” means a mortgage in substantially the form of Exhibit E-5, as the same may be amended, modified or supplemented from time to time.

 

“ Fleet Mortgages ” means together (x) a mortgage by Hercules Liftboat Company, LLC and (y) a mortgage by Hercules Drilling Company, LLC, each substantially in the form of Exhibit E-6, as the same may be amended, modified or supplemented from time to time.

 

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

 

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

 

“ GAAP ” means generally accepted accounting principles in the United States of America as in effect from time to time subject to the terms and conditions set forth in Section 1.05.

 

“ Governmental Authority ” means the government of the United States of America, any other nation or any political subdivision thereof, whether state or local, and any agency, authority, instrumentality, regulatory body, court, central bank or other entity exercising executive, legislative, judicial, taxing, regulatory or administrative powers or functions of or pertaining to government over the Borrower, any Subsidiary, any of their Properties, any Agent, the Issuing Bank or any Lender.

 

“ Governmental Requirement ” means any law, statute, code, ordinance, order, determination, rule, regulation, judgment, decree, injunction, franchise, permit, certificate, license, authorization or other directive or requirement, whether now or hereafter in effect, including, without limitation, Environmental Laws, energy regulations and occupational, safety and health standards or controls, of any Governmental Authority.

 

“ Guarantors ” means, collectively, each Subsidiary that is required to guarantee the Indebtedness pursuant to Section 8.12(a).

 

“ Guaranty Agreement ” means an agreement executed by the Guarantors in substantially the form of Exhibit F-1 unconditionally guarantying on a joint and several basis, payment of the Indebtedness, as the same may be amended, modified or supplemented from time to time.

 

“ Highest Lawful Rate ” means, with respect to each Lender, the maximum nonusurious interest rate, if any, that at any time or from time to time may be contracted for, taken, reserved, charged or received on the Notes or on other Indebtedness under laws applicable to such Lender which are presently in effect or, to the extent allowed by law, under such applicable laws which may hereafter be in effect and which allow a higher maximum nonusurious interest rate than applicable laws allow as of the date hereof.

 

“ Indebtedness ” means any and all amounts owing or to be owing by the Borrower, any of its Subsidiaries or any Guarantor (whether direct or indirect (including those acquired by assumption), absolute or contingent, due or to become due, now existing or hereafter arising): (a) to the Administrative Agent, the Issuing Bank or any Lender under any Loan Document; (b) to any Lender or Agent or any Affiliate of a Lender or Agent under any Swap Agreement between the Borrower or any Subsidiary and such Lender or Agent or any such Affiliate of a Lender or Agent permitted by the terms of this Agreement while such Person (or in the case of its Affiliate, the Person affiliated therewith) is a Lender or an Agent hereunder and (c) all renewals, extensions and/or rearrangements of any of the above.

 

“ Indemnified Taxes ” means Taxes other than Excluded Taxes.

 

“ Information Memorandum ” means the Confidential Information Memorandum dated June 2005 relating to the Borrower and the Transactions.

 

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“ Interest Election Request ” means a request by the Borrower to convert or continue a Borrowing in accordance with Section 2.04.

 

“ Interest Expense ” means, for any period, the sum (determined without duplication) of the aggregate gross cash interest expense of the Borrower and the Consolidated Subsidiaries for such period; provided that Interest Expense for the four quarters ending September 30, 2005 shall equal Interest Expense for the three-month period ending September 30, 2005 times 4; Interest Expense for the four quarters ending December 31, 2005 shall equal Interest Expense for the six-month period ending December 31,2005 times 2; and Interest Expense for the four quarters ending March 31, 2006 shall equal Interest Expense for the nine-month period ending March 31, 2006 time 4/3.

 

“ Interest Payment Date ” means (a) with respect to any ABR Loan, the first day of each January, April, July and October and (b) with respect to any Eurodollar Loan, the last day of the Interest Period applicable to the Borrowing of which such Loan is a part and, in the case of a Eurodollar Borrowing with an Interest Period of more than three months’ duration, each day prior to the last day of such Interest Period that occurs at intervals of three months’ duration after the first day of such Interest Period.

 

“ Interest Period ” means with respect to any Eurodollar Borrowing, the period commencing on the date of such Borrowing and ending on the numerically corresponding day in the calendar month that is one, two, three or six months (or, with the consent of each applicable Lender that is holding Indebtedness related to such Eurodollar Borrowing, nine or twelve months) thereafter, as the Borrower may elect; provided , that (a) 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; (b) any Interest Period pertaining to a Eurodollar Borrowing 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; (c) no Interest Period for a Revolving Borrowing may end after the Revolving Credit Maturity Date; (d) no Interest Period for a Term Loan Borrowing may end after the Term Loan Maturity Date; (e) no Interest Period for a Term Loan Borrowing shall be selected which extends beyond any date upon which an installment of the Term Loan will be due if such Term Loan Borrowing must be repaid in connection with such installment; (f) the last Interest Period may be such shorter period as to end on the Revolving Credit Maturity Date or the Term Loan Maturity Date, as applicable; and (g) notwithstanding any of the foregoing language, the first two Eurodollar Borrowings under the Term Loan will each have an Interest Period of one week. For purposes hereof, the date of a Borrowing initially shall be the date on which such Borrowing is made and thereafter shall be the effective date of the most recent conversion or continuation of such Borrowing.

 

“ Internally Generated Funds ” means funds not constituting the proceeds of any Debt, issuance of Equity Interests or Dispositions of Property (except proceeds from Dispositions of Property permitted under Section 9.12).

 

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“ Investment ” means, for any Person: (a) the acquisition (whether for Property, services or otherwise) of Equity Interests of any other Person; (b) the making of any deposit with, or advance, loan or capital contribution to, purchase or other acquisition of any Debt or equity participation or interest in, or other extension of credit to, any other Person (including the purchase of Property from another Person subject to an understanding or agreement, contingent or otherwise, to resell such Property to such Person, but excluding any such advance, loan or extension of credit having a term not exceeding ninety (90) days representing the purchase price of inventory or supplies sold by such Person in the ordinary course of business); (c) the purchase or acquisition (in one or a series of transactions) of Property of another Person that constitutes a business unit or (d) the entering into of any guarantee of, or other contingent obligation (including the deposit of any Equity Interests to be sold) with respect to, Debt or other liability of any other Person and (without duplication) any amount committed to be advanced, lent or extended to such Person.

 

“ IPO ” means the initial public offering of the Borrower’s stock.

 

“ Issuing Bank ” means Comerica, in its capacity as the issuer of Letters of Credit hereunder, and its successors in such capacity as provided in Section 2.08(i).

 

“ Joinder ” means a Joinder Agreement executed by any Lender substantially in the form of Exhibit I , as the same may be amended, modified or supplemented from time to time.

 

“ Joint Lead Arrangers ” means with respect to the Term Tranche, Citigroup Global Markets Inc. and Credit Suisse, Cayman Islands Branch, in their capacities as the joint lead arrangers and joint bookrunners hereunder.

 

“ Jupiter ” means the jackup drilling rig named Transocean Jupiter at the time of acquisition thereof by Hercules Drilling Company, LLC.

 

“ LC Commitment ” at any time means five million dollars ($5,000,000).

 

“ LC Disbursement ” means a payment made by the Issuing Bank pursuant to a Letter of Credit.

 

“ LC Exposure ” means, at any time, the sum of (a) the aggregate undrawn amount of all outstanding Letters of Credit at such time plus (b) the aggregate amount of all LC Disbursements that have not yet been reimbursed by or on behalf of the Borrower at such time. The LC Exposure of any Revolving Lender at any time shall be its Applicable Percentage of the total LC Exposure at such time.

 

“ Lenders ” means, collectively, the Revolving Lenders and the Term Loan Lenders.

 

“ Letter of Credit ” means any letter of credit issued pursuant to this Agreement.

 

“ Letter of Credit Agreements ” means all letter of credit applications and other agreements (including any amendments, modifications or supplements thereto) submitted by the Borrower, or entered into by the Borrower, with the Issuing Bank relating to any Letter of Credit.

 

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“ LIBO Rate ” means, with respect to any Eurodollar Borrowing for any Interest Period, the rate appearing on Page 3750 of the Dow Jones Market Service (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 Administrative Agent for the related Eurodollar Borrowing 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 “ LIBO Rate ” with respect to such Eurodollar 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 Administrative Agent 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 interest in Property securing an obligation owed to, or a claim by, a Person other than the owner of the Property, whether such interest is based on the common law, statute or contract, and whether such obligation or claim is fixed or contingent, and including but not limited to the lien or security interest arising from a mortgage, encumbrance, pledge, security agreement, conditional sale or trust receipt or a lease, consignment or bailment for security purposes. The term “ Lien ” shall include easements, restrictions, servitudes, permits, conditions, covenants, exceptions or reservations relating to real Property. For the purposes of this Agreement, the Borrower and its Subsidiaries shall be deemed to be the owner of any Property which they have acquired or hold subject to a conditional sale agreement, or leases under a financing lease or other arrangement pursuant to which title to the Property has been retained by or vested in some other Person in a transaction intended to create a financing.

 

“ Lift Boat ” means the self-propelled, self-elevating vessels of the Borrower and its Subsidiaries, together with the related equipment and spare parts.

 

“ Loan Documents ” means this Agreement, the Notes, the Letter of Credit Agreements, the Letters of Credit and the Security Instruments.

 

“ Loans ” means the loans made by the Lenders to the Borrower pursuant to this Agreement.

 

“ Majority Lenders ” means Majority Revolving Lenders and Majority Term Loan Lenders.

 

“ Majority Revolving Lenders ” means, at any time while no Loans or LC Exposure is outstanding, Revolving Lenders having more than fifty percent (50%) of the total Revolving Commitments; and at any time while any Loans or LC Exposure is outstanding, Revolving Lenders holding more than fifty percent (50%) of the outstanding aggregate principal amount of the Revolving Loans and LC Exposure (without regard to any sale by a Lender of a participation in any Revolving Loan under Section 12.04(b)(ii)).

 

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“ Majority Term Loan Lenders ” means, at any time while no Loans or LC Exposure is outstanding, Term Loan Lenders having more than fifty percent (50%) of the total Term Commitments; and at any time while any Loans or LC Exposure is outstanding, Term Loan Lenders holding more than fifty percent (50%) of the outstanding aggregate principal amount of the Term Loans (without regard to any sale of a participation in any Term Loan under Section 12.04(b)).

 

“ Material Adverse Effect ” means a material adverse change in, or material adverse effect on (a) the business, Property, condition (financial or otherwise) or results of operations of the Borrower and its Subsidiaries taken as a whole, (b) the ability of the Borrower and its Subsidiaries, taken as a whole, to perform any of their payment or other material obligations under the Loan Documents, (c) the validity or enforceability of any Loan Document or (d) the ability of the Administrative Agent, any other Agent, the Issuing Bank or any Lender to enforce any of their respective material rights under the Loan Documents.

 

“ Material Indebtedness ” means Debt (other than the Loans and Letters of Credit), or obligations in respect of one or more Swap Agreements, of any one or more of the Borrower and its Subsidiaries in an aggregate principal amount exceeding $10,000,000. For purposes of determining Material Indebtedness, the “principal amount” of the obligations of the Borrower or any of its Subsidiaries in respect of any Swap Agreement at any time shall be the Swap Termination Value.

 

“ Material Subsidiary ” means a Subsidiary of Borrower having: (a) assets of $2,000,000 or more or (b) EBITDA (calculated on a separate basis) of $500,000 or more. If (i) the asset value of the Subsidiaries that are not Guarantors exceeds $5,000,000 in the aggregate, or (ii) the value of EBITDA (calculated on a separate basis) of such Subsidiaries that are not Guarantors exceeds $3,000,000 in the aggregate, then those Subsidiaries holding a majority of those assets or representing a majority of such EBITDA shall each be a Material Subsidiary.

 

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

 

“ Multiemployer Plan ” means a Plan which is a multiemployer plan as defined in section 3(37) or 4001 (a)(3) of ERISA.

 

“ New Funds Amount ” has the meaning assigned such term in Section 2.10(b)(iii).

 

“ Notes ” means the promissory notes of the Borrower described in Section 2.02(e) and being substantially in the form of Exhibit A-1 or Exhibit A-2, as applicable, together with all amendments, modifications, replacements, extensions and rearrangements thereof.

 

“ Notice of Commitment Increase ” has the meaning assigned such term in Section 2.10(b)(i).

 

“ Notice of Term Loan Increase ” has the meaning assigned such term in Section 2.10(c)(i).

 

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“ Organization Documents ” shall mean, (a) with respect to any corporation, the certificate or articles of incorporation and the bylaws (or equivalent or comparable constitutive documents); (b) with respect to any limited liability company, the certificate or articles of formation or organization and operating agreement; and (c) with respect to any partnership, joint venture, trust or other form of business entity, the partnership, joint venture or other applicable agreement of formation or organization and any agreement, instrument, filing or notice with respect thereto filed in connection with its formation or organization with the applicable Governmental Authority in the jurisdiction of its formation or organization and, if applicable, any certificate or articles of formation or organization of such entity.

 

“ Other Taxes ” means any and all present or future stamp or documentary taxes or any other excise or property taxes, charges or similar levies arising from any payment made hereunder or from the execution, delivery or enforcement of, or otherwise with respect to, this Agreement and any other Loan Document.

 

“ Participant ” has the meaning set forth in Section 12.04(c)(i).

 

“ PBGC ” means the Pension Benefit Guaranty Corporation, or any successor thereto.

 

“ Permitted Refinancing Debt ” means Debt (for purposes of this definition, “ new Debt ”) incurred in exchange for, or proceeds of which are used to refinance, all of any other Debt (the “ Refinanced Debt ”); provided that (a) such new Debt is in an aggregate principal amount not in excess of the sum of (i) the aggregate principal amount then outstanding of the Refinanced Debt (or, if the Refinanced Debt is exchanged or acquired for an amount less than the principal amount thereof to be due and payable upon a declaration of acceleration thereof, such lesser amount) and (ii) an amount necessary to pay any fees and expenses, including premiums, related to such exchange or refinancing; (b) such new Debt has a stated maturity no earlier than the stated maturity of the Refinanced Debt and an average life no shorter than the average life of the Refinanced Debt; (c) such new Debt does not contain any covenants which are more onerous in any material respect to the Borrower and its Subsidiaries than those imposed by the Refinanced Debt and (d) if such Refinanced Debt is subordinated in right of payment to the Indebtedness, such new Debt (and any guarantees thereof) is subordinated in right of payment to the Indebtedness (or, if applicable, the Guaranty Agreement) to at least the same extent as the Refinanced Debt.

 

“ Person ” means any natural person, corporation, limited liability company, trust, joint venture, association, company, partnership, Governmental Authority or other entity.

 

“ Plan ” means any employee pension benefit plan, as defined in section 3(2) of ERISA, which (a) is currently or hereafter sponsored, maintained or contributed to by the Borrower, a Subsidiary or an ERISA Affiliate or (b) was at any time during the six calendar years preceding the date hereof, sponsored, maintained or contributed to by the Borrower or a Subsidiary or an ERISA Affiliate.

 

“ Preferred Ship Mortgage ” means that certain First Preferred Ship Mortgage in substantially the form of Exhibit E-3 as the same may be amended, modified or supplemented from time to time.

 

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“ Property ” means any interest in any kind of property or asset, whether real, personal or mixed, or tangible or intangible, including, without limitation, cash, securities, accounts and contract rights.

 

“ Qualified Equity Interests ” means all Equity Interests of a Person other than Disqualified Capital Stock.

 

“ Redemption ” means with respect to any Debt, the repurchase, redemption, prepayment, repayment, or defeasance or any other acquisition or retirement for value (or the segregation of funds with respect to any of the foregoing) of such Debt. “ Redeem ” has the correlative meaning thereto.

 

“ Reducing Percentage Lender ” has the meaning assigned such term in Section 2.10(b)(iii).

 

“ Reduction Amount ” has the meaning assigned such term in Section 2.10(b)(iii).

 

“ Refinanced Debt ” has the meaning assigned such term in the definition of “Permitted Refinancing Debt”.

 

“ Register ” has the meaning assigned such term in Section 12.04(b).

 

“ Regulation D ” means Regulation D of the Board, as the same may be amended, supplemented or replaced from time to time.

 

“ Related Fund ” shall mean, with respect to any Term Loan Lender that is a fund that invests in bank loans, any other fund that invests in bank loans and is advised or managed by the same investment advisor as such Term Loan Lender or by an Affiliate of such investment advisor.

 

“ Related Parties ” means, with respect to any specified Person, such Person’s Affiliates and the respective directors, officers, employees, agents and advisors (including attorneys, accountants and experts) of such Person and such Person’s Affiliates.

 

“ Remedial Work ” has the meaning assigned such term in Section 8.10(a).

 

“ Request for Advance ” has the meaning assigned such term in Section 2.09(c)(i)

 

“ Required Hedge ” means the Swap Agreements required to be entered into pursuant to Section 8.15.

 

“ Responsible Officer ” means, as to any Person, the Chief Executive Officer, the President or any Financial Officer of such Person. Unless otherwise specified, all references to a Responsible Officer herein shall mean a Responsible Officer of the Borrower.

 

“ Restricted Payment ” means (a) any dividend or other distribution (whether in cash, securities or other Property) with respect to any Equity Interests in the Borrower or any Subsidiary, or any payment (whether in cash, securities or other Property), including any sinking

 

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fund or similar deposit, on account of the purchase, redemption, retirement, acquisition, cancellation or termination of any such Equity Interests in the Borrower or any Subsidiary or any option, warrant or other right to acquire any such Equity Interests in the Borrower or any Subsidiary, but excluding any dividend or distribution paid in the Borrower’s Qualified Equity Interests, or (b) any payment made by the Borrower or any of its Subsidiaries to Redeem (including pursuant to mandatory repurchase covenants), prior to any scheduled maturity, scheduled sinking fund or scheduled mandatory redemption, any Debt (other than Indebtedness).

 

“ Revolving Borrowing ” shall mean a Borrowing comprised of Revolving Loans.

 

“ Revolving CI Lender ” has the meaning assigned such term in Section 2.10(a).

 

“ Revolving Commitment ” shall mean with respect to each Revolving Lender, the commitment of such Revolving Lender to make Revolving Loans pursuant to Section 2.01(a) and to acquire participations in Letters of Credit pursuant to Section 2.01(b), as such commitment may be (a) reduced or terminated from time to time pursuant to Section 2.06, (b) terminated pursuant to ARTICLE X, or (c) modified from time to time to reflect any assignments permitted by Section 12.04. The initial amount of each Revolving Lender’s Revolving Commitment shall be the amount set forth on Annex I attached hereto.

 

“ Revolving Credit Exposure ” means, with respect to any Revolving Lender at any time, the sum of the outstanding principal amount of such Revolving Lender’s Revolving Loans, risk participations in Swing Line Loans and its LC Exposure at such time.

 

“ Revolving Commitment Increase ” has the meaning assigned such term in Section 2.10(a).

 

“ Revolving Credit Maturity Date ” shall mean the earlier to occur of (a) June 29, 2008 or (b) the date that the Aggregate Revolving Commitments are sooner terminated pursuant to Section 2.03(b) or Section 10.02.

 

“ Revolving Lender ” means a Lender with an outstanding Revolving Loan, and those Persons listed on Annex I and any other Person that shall have become a party hereto as a Revolving Lender pursuant to an Assignment from a Revolving Lender, other than any such Person that ceases to be a party hereto pursuant to an Assignment.

 

“ Revolving Loans ” shall mean Loans made under the Revolving Commitments.

 

“ Revolving Notes ” shall mean Notes issued pursuant to Section 2.06 evidencing Loans under the Revolving Tranche.

 

“ Revolving Tranche ” shall mean the Revolving Commitments, the Revolving Loans including the Swing Line Loans and the LC Exposure.

 

“ SEC ” means the Securities and Exchange Commission or any successor Governmental Authority.

 

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“ Security Agreement ” means an agreement substantially in the form of Exhibit F-2, as the same may be amended, modified or supplemented from time to time.

 

“ Security Instruments ” means the Guaranty Agreement, the Security Agreement, each Fleet Mortgage, each First Naval Mortgage, the Preferred Ship Mortgage and any and all other agreements now or hereafter executed and delivered by the Borrower or any other Person as security for the payment or performance of the Indebtedness, as such agreements securing the Indebtedness may be amended, modified, supplemented or restated from time to time.

 

“ S&P ” means Standard & Poor’s Ratings Group, a division of The McGraw-Hill Companies, Inc., and any successor thereto that is a nationally recognized rating agency.

 

“ 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 Administrative Agent is subject (a) with respect to the Base CD Rate, for new negotiable nonpersonal time deposits in dollars of over $100,000 with maturities approximately equal to three months and (b) with respect to the Adjusted LIBO 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. Eurodollar 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.

 

“ Subsidiary ” means any Person of which at least a majority of the outstanding Equity Interests having by the terms thereof ordinary voting power to elect a majority of the board of directors, manager or other governing body of such Person (irrespective of whether or not at the time Equity Interests of any other class or classes of such Person shall have or might have voting power by reason of the happening of any contingency) is at the time directly or indirectly owned or controlled by the Borrower or one or more of its Subsidiaries or by the Borrower and one or more of its Subsidiaries. Unless otherwise indicated herein, each reference to the term “ Subsidiary ” shall mean a Subsidiary of the Borrower.

 

“ Superior Acquisition ” means the acquisition of certain Lift Boats by the Borrower and its Subsidiaries pursuant to the Vessel Purchase Agreement dated as of May 19, 2005 between the Borrower and Superior Energy Services, L.L.C.

 

“ Swap Agreement ” means any agreement with respect to any swap, forward, future or derivative transaction or option or similar agreement, whether exchange traded, “over-the-counter” or otherwise, involving, or settled by reference to, one or more rates, currencies, commodities, equity or debt instruments or securities, or economic, financial or pricing indices or measures of economic, financial or pricing risk or value or any similar transaction or any combination of these transactions; provided that no phantom stock or similar plan providing for

 

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payments only on account of services provided by current or former directors, officers, employees or consultants of the Borrower or the Subsidiaries shall be a Swap Agreement.

 

“ Swap Termination Value ” means, in respect of any one or more Swap Agreements, after taking into account the effect of any legally enforceable netting agreement relating to such Swap Agreements, (a) for any date on or after the date such Swap Agreements have been closed out and termination value(s) determined in accordance therewith, such termination value(s) and (b) for any date prior to the date referenced in clause (a), the amount(s) determined as the mark-to-market value(s) for such Swap Agreements, as determined by the counterparties to such Swap Agreements.

 

“ Swing Line ” means the Revolving Tranche made available by Swing Line Bank pursuant to Section 2.09.

 

“ Swing Line Borrowing ” means a borrowing of a Swing Line Loan pursuant to Section 2.09.

 

“ Swing Line Bank ” means Comerica in its capacity as provider of Swing Line Loans, or any successor swing line lender hereunder.

 

“ Swing Line Loan ” has the meaning specified in Section 2.09(a).

 

“ Swing Line Loan Notice ” means a notice of a Swing Line Borrowing pursuant to Section 2.09(b), which, if in writing, shall be substantially in the form of Exhibit B.

 

“ Swing Line Sublimit ” means an amount equal to the lesser of (a) $2,500,000 and (b) the aggregate of the Revolving Commitments of all Revolving Lenders. The Swing Line Sublimit is part of, and not in addition to, the Revolving Commitments.

 

“ Synthetic Leases ” means, in respect of any Person, all leases which shall have been, or should have been, in accordance with GAAP, treated as operating leases on the financial statements of the Person liable (whether contingently or otherwise) for the payment of rent thereunder and which were properly treated as indebtedness for borrowed money for purposes of U.S. federal income taxes, if the lessee in respect thereof is obligated to either purchase for an amount in excess of, or pay upon early termination an amount in excess of, 80% of the residual value of the Property subject to such operating lease upon expiration or early termination of such lease.

 

“ Taxes ” means any and all present or future taxes, levies, imposts, duties, deductions, charges or withholdings imposed by any Governmental Authority.

 

“ Term CI Lender ” has the meaning assigned such term in Section 2.10(a).

 

“ Term Commitments ” shall mean with respect to each Term Loan Lender, the commitment of such Term Loan Lender to make Term Loans, expressed as an amount representing the maximum aggregate amount of such Term Loan Lender’s Term Credit Exposure hereunder. The amount of each Term Loan Lender’s Term Commitment is set forth on Annex II attached hereto. Each Term Loan Lender’s Term Commitment shall terminate immediately after

 

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the Term Loan Funding Date. The aggregate amount of the Term Loan Lenders’ Term Commitments is $140,000,000.

 

“ Term Credit Exposure ” shall mean with respect to any Term Loan Lender at any time, the outstanding principal amount of such Term Loan Lender’s Term Loans.

 

“ Term Loan ” shall have the meaning assigned such term in Section 2.01(b).

 

“ Term Loan Borrowing ” shall mean a Borrowing comprised of Term Loans.

 

“ Term Loan Increase ” has the meaning assigned such term in Section 2.10(a).

 

“ Term Loan Increase Effective Date ” has the meaning assigned such term in Section 2.10(c)(i)

 

“ Term Loan Lender ” shall mean a Lender with an outstanding Term Loan, and those Persons listed on Annex II and any other Person that shall have become a party hereto as a Term Loan Lender pursuant to an Assignment from a Term Loan Lender, other than any such Person that ceases to be a party hereto pursuant to an Assignment.

 

“ Term Loan Maturity Date ” shall mean the earlier to occur of (a) June 29, 2010 or (b) the date the Term Loans are accelerated pursuant to Section 11.02.

 

“ Term Loan Percentages ” shall mean with respect to any Term Loan Lender, the percentage set forth in the column titled “Term Loan Percentage” on Annex II for such Term Loan Lender or in the Assignment pursuant to which such Term Loan Lender becomes a party hereto, as applicable.

 

“ Term Notes ” shall mean Notes issued pursuant to Section 2.02(e) evidencing Loans under the Term Loan B Facility.

 

“ Term Tranche ” shall mean the Term Commitments and the Term Loans.

 

“ Three-Month Secondary CD Rate ” means, for any day, the secondary market rate for three-month certificates of deposit reported as being in effect on such day (or, if such day is not a Business Day, the next preceding Business Day) by the Board through the public information telephone line of the Federal Reserve Bank of New York (which rate will, under the current practices of the Board, be published in Federal Reserve Statistical Release H.15(519) during the week following such day) or, if such rate is not so reported on such day or such next preceding Business Day, the average of the secondary market quotations for three-month certificates of deposit of major money center banks in New York City received at approximately 10:00 a.m., New York City time, on such day (or, if such day is not a Business Day, on the next preceding Business Day) by the Administrative Agent from three negotiable certificate of deposit dealers of recognized standing selected by it.

 

“ Total Debt ” means, at any date, all Debt of the Borrower and the Consolidated Subsidiaries on a consolidated basis, excluding (i) non-cash obligations under FAS 133, (ii) accounts payable and other accrued liabilities (for the deferred purchase price of Property or

 

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services) from time to time incurred in the ordinary course of business which are not greater than ninety (90) days past the date of invoice or which are being contested in good faith by appropriate action and for which adequate reserves have been maintained in accordance with GAAP, (iii) Debt between or among the Borrower and its Subsidiaries permitted by Section 9.02, and (iv) Debt permitted under Section 9.02(c).

 

“ Tranche ” means the Revolving Tranche or the Term Tranche as the context may require.

 

“ Transactions ” means, with respect to (a) the Borrower, the execution, delivery and performance by the Borrower of this Agreement, and each other Loan Document to which it is a party, the borrowing of Loans, the use of the proceeds thereof and the issuance of Letters of Credit hereunder, and the grant of Liens by the Borrower on Properties pursuant to the Security Instruments and (b) each Guarantor, the execution, delivery and performance by such Guarantor of each Loan Document to which it is a party, the guaranteeing of the Indebtedness and the other obligations under the Guaranty Agreement by such Guarantor and such Guarantor’s grant of the security interests and provision of collateral under the Security Instruments, and the grant of Liens by such Guarantor on Properties pursuant to the Security Instruments.

 

“ Type ”, when used in reference to any Loan or Borrowing, refers to whether the Loan or Borrowing is under the Revolving Tranche or the Term Tranche and whether the rate of interest on such Loan, or on the Loans comprising such Borrowing under the Revolving Tranche or the Term Tranche, is determined by reference to the Alternate Base Rate or the Adjusted LIBO Rate.

 

“ USA Patriot Act ” shall have the meaning assigned such in Section 12.18.

 

“ Wholly-Owned Subsidiary ” means any Subsidiary of which all of the outstanding Equity Interests (other than any directors’ qualifying shares mandated by applicable law), on a fully-diluted basis, are owned by the Borrower or one or more of the Wholly-Owned Subsidiaries of the Borrower or are owned by the Borrower and one or more of the Wholly-Owned Subsidiaries of the Borrower.

 

Section 1.03 Types of Loans and Borrowings . For purposes of this Agreement, Loans and Borrowings, respectively, may be classified and referred to by Type ( e.g ., a “ Eurodollar Loan ” or a “ Eurodollar Borrowing ”).

 

Section 1.04 Terms Generally; Rules of Construction . 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 in the Loan Documents), (b) any reference herein to any law shall be construed as referring to such law as amended, modified, codified or reenacted, in whole or in part, and in effect from time to time, (c) any reference herein to any Person shall be construed to

 

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include such Person’s successors and assigns (subject to the restrictions contained in the Loan Documents), (d) 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, (e) with respect to the determination of any time period, the word “from” means “from and including” and the word “to” means “to and including” and (f) any reference herein to Articles, Sections, Annexes, Exhibits and Schedules shall be construed to refer to Articles and Sections of, and Annexes, Exhibits and Schedules to, this Agreement. No provision of this Agreement or any other Loan Document shall be interpreted or construed against any Person solely because such Person or its legal representative drafted such provision.

 

Section 1.05 Accounting Terms and Determinations; GAAP . Unless otherwise specified herein, all accounting terms used herein shall be interpreted, all determinations with respect to accounting matters hereunder shall be made, and all financial statements and certificates and reports as to financial matters required to be furnished to the Administrative Agent or the Lenders hereunder shall be prepared, in accordance with GAAP, as in effect from time to time; provided that, if the Borrower notifies the Administrative Agent that the Borrower requests an amendment to any provision hereof to eliminate the effect of any change occurring after the date hereof in GAAP or in the application thereof on the operation of such provision (or if the Administrative Agent notifies the Borrower that the Majority Lenders request an amendment to any provision hereof for such purpose), regardless of whether any such notice is given before or after such change in GAAP or in the application thereof, then such provision shall be interpreted on the basis of GAAP as in effect and applied immediately before such change shall have become effective until such notice shall have been withdrawn or such provision amended in accordance herewith.

 

ARTICLE II

The Credits

 

Section 2.01 Commitments .

 

(a) Revolving Commitments . Subject to the terms and conditions set forth herein, each Revolving Lender agrees to make Revolving Loans to the Borrower during the Availability Period in an aggregate principal amount that will not result in (i) such Revolving Lender’s Revolving Credit Exposure exceeding such Revolving Lender’s Revolving Commitment or (ii) the total Revolving Credit Exposures exceeding the total Revolving Commitments. Within the foregoing limits and subject to the terms and conditions set forth herein, the Borrower may borrow, repay and reborrow the Revolving Loans.

 

(b) Term Commitments . Each Term Loan Lender severally agrees, subject to the terms and conditions set forth herein, to make an amortizing term loan (collectively, the “ Term Loans ”) to the Borrower on the Effective Date in the principal amount of such Term Loan Lender’s Term Commitment. Once repaid or prepaid, Term Loans may not be reborrowed.

 

Section 2.02 Loans and Borrowings .

 

(a) Borrowings; Several Obligations . Each Loan made under the Revolving Tranche shall be made as part of a Revolving Borrowing consisting of Revolving Loans made by the

 

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Revolving Lenders ratably in accordance with their respective Revolving Commitments. Each Loan made under the Term Tranche shall be made as part of a Term Loan Borrowing consisting of Term Loans made by the Term Loan Lenders ratably in accordance with their respective Term Commitments. The failure of any Lender to make any Loan required to be made by it shall not relieve any other Lender of its obligations hereunder; provided that the Commitments are several and no Lender shall be responsible for any other Lender’s failure to make Loans as required.

 

(b) Types of Loans . Subject to Section 3.03, each Borrowing shall be comprised entirely of ABR Loans or Eurodollar Loans as the Borrower may request in accordance herewith. Each Lender at its option may make any Eurodollar Loan by causing any domestic or foreign branch or Affiliate of such Lender to make such Loan; provided that any exercise of such option shall not affect the obligation of the Borrower to repay such Loan in accordance with the terms of this Agreement.

 

(c) Minimum Amounts; Limitation on Number of Revolving Borrowings . At the commencement of each Interest Period for any Eurodollar Borrowing that is a Revolving Borrowing, such Revolving Borrowing shall be in an aggregate amount that is an integral multiple of $100,000 and not less than $1,000,000. At the time that each ABR Borrowing that is a Revolving Borrowing is made, such Revolving Borrowing shall be in an aggregate amount that is an integral multiple of $100,000 and not less than $500,000; provided that an ABR Borrowing that is a Revolving Borrowing may be in an aggregate amount that is equal to the entire unused balance of the total Revolving Commitments or that is required to finance the reimbursement of an LC Disbursement as contemplated by Section 2.08(e). Revolving Borrowings of more than one Type may be outstanding at the same time, provided that there shall not at any time be more than a total of 5 Eurodollar Revolving Borrowings outstanding.

 

(d) Minimum Amounts; Limitation on Number of Term Loan Borrowings . At the commencement of each Interest Period for any Eurodollar Borrowing that is a Term Loan Borrowing, such Term Loan Borrowing shall be in an aggregate amount that is an integral multiple of $1,000,000 and not less than $5,000,000. At the time that each ABR Borrowing that is a Term Loan Borrowing is made, such Term Loan Borrowing shall be in an aggregate amount that is an integral multiple of $1,000,000 and not less than $3,000,000. Term Loan Borrowings of more than one Type may be outstanding at the same time, provided that there shall not at any time be more than a total of 5 Eurodollar Term Loan Borrowings outstanding.

 

(e) Notes . Any Lender may request that the Loans made by it be evidenced by a promissory note. In such event, the Borrower shall prepare, execute and deliver to such Lender a promissory note payable to the order of such Lender, substantially in the form of Exhibit A-1 , with respect to Revolving Loans and Exhibit A-2 with respect to Term Loans, as applicable, dated (i) the Effective Date or (ii) the effective date of an Assignment pursuant to Section 12.04(b), in a principal amount equal to its Revolving Commitment or Term Commitment as the case may be, as originally in effect and otherwise duly completed and such substitute Notes as required by Section 12.04(b); provided that promissory notes requested in amounts less than $1,000,000 shall require the consent of the Borrower, such consent not to be unreasonably withheld or delayed. The date, amount, Type, interest rate and Interest Period of each Loan made by each Lender, and all payments made on account of the principal thereof, shall be recorded by such Lender on its books and maintained in accordance with its usual practice.

 

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Failure to make such recordation shall not affect any Lender’s or the Borrower’s rights or obligations in respect of such Loans.

 

Section 2.03 Requests for Borrowings . To request a Borrowing, the Borrower shall notify the Administrative Agent of such request by telephone (a) in the case of a Eurodollar Borrowing, not later than 12:00 noon, New York City time, three Business Days before the date of the proposed Borrowing or (b) in the case of an ABR Borrowing, not later than 12:00 noon, New York City time, one Business Day before the date of the proposed Borrowing; provided that no such notice shall be required for any deemed request of an ABR Borrowing to finance the reimbursement of an LC Disbursement as provided in Section 2.08(e). Each such telephonic Borrowing Request shall be irrevocable and shall be confirmed promptly by hand delivery or telecopy to the Administrative Agent of a written Borrowing Request in substantially the form of Exhibit B and signed by the Borrower. Each such telephonic and written Borrowing Request shall specify the following information in compliance with Section 2.02:

 

(i) the aggregate amount of the requested Borrowing;

 

(ii) the date of such Borrowing, which shall be a Business Day;

 

(iii) whether such Borrowing is to be an ABR Borrowing or a Eurodollar Borrowing;

 

(iv) in the case of a Eurodollar Borrowing, the initial Interest Period to be applicable thereto, which shall be a period contemplated by the definition of the term “Interest Period”; and

 

(v) the location and number of the Borrower’s account to which funds are to be disbursed.

 

If no election as to the Type of Borrowing is specified, then the requested Borrowing shall be an ABR Borrowing. If no Interest Period is specified with respect to any requested Eurodollar Borrowing, then the Borrower shall be deemed to have selected an Interest Period of one month’s duration. Each Borrowing Request for Revolving Loans shall constitute a representation to the Administrative Agent of the Revolving Loans that the amount of the requested Borrowing shall not cause the total Revolving Credit Exposures to exceed the total Revolving Commitments.

 

Promptly following receipt of a Borrowing Request in accordance with this Section 2.03, the Administrative Agent shall advise each Term Loan Lender or Revolving Lender, as the case may be, of the details thereof and of the amount of such Lender’s Loan to be made as part of the requested Borrowing.

 

Section 2.04 Interest Elections .

 

(a) Conversion and Continuance . Each Borrowing initially shall be of the Type specified in the applicable Borrowing Request and, in the case of a Eurodollar Borrowing, shall have an initial Interest Period as specified in such Borrowing Request. Thereafter, the Borrower may elect to convert such Borrowing to a different Type or to continue such Borrowing and, in

 

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the case of a Eurodollar Borrowing, may elect Interest Periods therefor, all as provided in this Section 2.04. The Borrower may elect different options with respect to different portions of the affected Borrowing, in which case each such portion shall be allocated ratably among the Lenders holding the Loans comprising such Borrowing, and the Loans comprising each such portion shall be considered a separate Borrowing.

 

(b) Interest Election Requests . To make an election pursuant to this Section 2.04, the Borrower shall notify the Administrative Agent of such election by telephone by the time that a Borrowing Request would be required under Section 2.03 if the Borrower were requesting a Borrowing of the Type resulting from such election to be made on the effective date of such election. Each such telephonic Interest Election Request shall be irrevocable and shall be confirmed promptly by hand delivery or telecopy to the Administrative Agent of a written Interest Election Request in substantially the form of Exhibit C and signed by the Borrower.

 

(c) Information in Interest Election Requests . Each telephonic and written Interest Election Request shall specify the following information in compliance with Section 2.02:

 

(i) the Borrowing to which such Interest Election Request applies and, if different options are being elected with respect to different portions thereof, the portions thereof to be allocated to each resulting Borrowing (in which case the information to be specified pursuant to Section 2.04(c)(iii) and (iv) shall be specified for each resulting Borrowing);

 

(ii) the effective date of the election made pursuant to such Interest Election Request, which shall be a Business Day;

 

(iii) whether the resulting Borrowing is to be an ABR Borrowing or a Eurodollar Borrowing; and

 

(iv) if the resulting Borrowing is a Eurodollar Borrowing, the Interest Period to be applicable thereto after giving effect to such election, which shall be a period contemplated by the definition of the term “Interest Period”.

 

(d) If any such Interest Election Request requests a Eurodollar Borrowing but does not specify an Interest Period, then the Borrower shall be deemed to have selected an Interest Period of one month’s duration.

 

(e) Notice to Lenders by the Administrative Agent . Promptly following receipt of an Interest Election Request, the Administrative Agent shall advise each Term Loan Lender or Revolving Lender, as the case may be, of the details thereof and of such Lender’s portion of each resulting Borrowing.

 

(f) Effect of Failure to Deliver Timely Interest Election Request and Events of Default . If the Borrower fails to deliver a timely Interest Election Request with respect to a Eurodollar Borrowing prior to the end of the Interest Period applicable thereto, then, unless such Borrowing is repaid as provided herein, at the end of such Interest Period such Borrowing shall be converted to an ABR Borrowing. Notwithstanding any contrary provision hereof, if an Event of Default has occurred and is continuing: (i) no outstanding Borrowing may be converted to or

 

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continued as a Eurodollar Borrowing (and any Interest Election Request that requests the conversion of any Borrowing to, or continuation of any Borrowing as, a Eurodollar Borrowing shall be ineffective) and (ii) unless repaid, each Eurodollar Borrowing shall be converted to an ABR Borrowing at the end of the Interest Period applicable thereto.

 

Section 2.05 Funding of Borrowings .

 

(a) Funding by Lenders . Each Lender shall make each Loan to be made by it hereunder on the proposed date thereof by wire transfer of immediately available funds by 1:00 p.m., New York City time, to the account of the Administrative Agent most recently designated by it for such purpose by notice to the Lenders. The Administrative Agent will make such Loans available to the Borrower by promptly crediting the amounts so received, in like funds, to an account of the Borrower maintained with the Administrative Agent in Dallas, Texas for Revolving Loans and in Dallas, Texas for Term Loans and designated by the Borrower in the applicable Borrowing Request; provided that ABR Loans made to finance the reimbursement of an LC Disbursement as provided in Section 2.08(e) shall be remitted by the Administrative Agent to the Issuing Bank. Nothing herein shall be deemed to obligate any Lender to obtain the funds for its Loan in any particular place or manner or to constitute a representation by any Lender that it has obtained or will obtain the funds for its Loan in any particular place or manner.

 

(b) Presumption of Funding by the Lenders . Unless the Administrative Agent shall have received notice from a Lender under its Tranche prior to the proposed date of any Borrowing under such Tranche that such Lender will not make available to the Administrative Agent such Lender’s share of such Borrowing, the Administrative Agent may assume that such Lender has made such share available on such date in accordance with Section 2.05(a) and may, in reliance upon such assumption, make available to the Borrower a corresponding amount. In such event, if such Lender has not in fact made its share of the applicable Borrowing available to Administrative Agent, then the applicable Lender and the Borrower severally agree to pay to the Administrative Agent forthwith on demand such corresponding amount with interest thereon, for each day from and including the date such amount is made available to the Borrower to but excluding the date of payment to the Administrative Agent, at (i) in the case of such Lender, at a rate per annum equal to the Federal Funds Effective Rate for the first three (3) Business Days after the date such payment is required, and thereafter at the rate then applicable to Borrower or (ii) in the case of the Borrower, the interest rate applicable to ABR Loans. If such Lender pays such amount to the Administrative Agent, then such amount shall constitute such Lender’s Loan included in such Borrowing.

 

Section 2.06 Termination and Reduction of Revolving Commitments .

 

(a) Scheduled Termination of Revolving Commitments . Unless previously terminated, the Revolving Commitments shall terminate on the Revolving Credit Maturity Date.

 

(b) Optional Termination and Reduction of Revolving Commitments .

 

(i) The Borrower may at any time terminate, or from time to time reduce, the Revolving Commitments; provided that (A) each reduction of the Revolving Commitments shall be in an amount that is an integral multiple of $100,000 and not less

 

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than $1,000,000 and (B) the Borrower shall not terminate or reduce the Revolving Commitments if, after giving effect to any concurrent prepayment of the Loans in accordance with Section 3.04(c), the total Revolving Credit Exposures would exceed the total Revolving Commitments.

 

(ii) The Borrower shall notify the Administrative Agent of any election to terminate or reduce the Revolving Commitments under Section 2.06(b)(i) at least three Business Days prior to the effective date of such termination or reduction, specifying such election and the effective date thereof. Promptly following receipt of any notice, the Administrative Agent shall advise the Revolving Lenders of the contents thereof. Each notice delivered by the Borrower pursuant to this Section 2.06(b)(ii) shall be irrevocable; provided that a notice of termination of the Revolving Commitments delivered by the Borrower may state that such notice is conditioned upon the effectiveness of other credit facilities, in which case such notice may be revoked by the Borrower (by notice to the Administrative Agent on or prior to the specified effective date) if such condition is not satisfied. Any termination or reduction of the Revolving Commitments shall be permanent and may not be reinstated. Each reduction of the Revolving Commitments shall be made ratably among the Revolving Lenders in accordance with each Revolving Lender’s Applicable Percentage.

 

Section 2.07 Reserved .

 

Section 2.08 Letters of Credit .

 

(a) General . Subject to the terms and conditions set forth herein, the Borrower may request, and the Issuing Bank shall cause, the issuance of dollar denominated Letters of Credit for the Borrower’s own account or for the account of any of its Subsidiaries, in a form reasonably acceptable to the Administrative Agent and the Issuing Bank, at any time and from time to time during the Availability Period. In the event of any inconsistency between the terms and conditions of this Agreement and the terms and conditions of any form of letter of credit application or other agreement submitted by the Borrower to, or entered into by the Borrower with, the Issuing Bank relating to any Letter of Credit, the terms and conditions of this Agreement shall control.

 

(b) Notice of Issuance, Amendment, Renewal, Extension; Certain Conditions . To request the issuance of a Letter of Credit (or the amendment, renewal or extension of an outstanding Letter of Credit), the Borrower shall hand deliver or telecopy (or transmit by electronic communication, if arrangements for doing so have been approved by the Issuing Bank) to the Issuing Bank and the Administrative Agent (not less than five (5) Business Days in advance of the requested date of issuance, amendment, renewal or extension) a notice:

 

(i) requesting the issuance of a Letter of Credit or identifying the Letter of Credit to be amended, renewed or extended;

 

(ii) specifying the date of issuance, amendment, renewal or extension (which shall be a Business Day);

 

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(iii) specifying the date on which such Letter of Credit is to expire (which shall comply with Section 2.08(c));

 

(iv) specifying the amount of such Letter of Credit; and

 

(v) specifying the name and address of the beneficiary thereof and such other information as shall be necessary to prepare, amend, renew or extend such Letter of Credit.

 

Each notice shall constitute a representation that after giving effect to the requested issuance, amendment, renewal or extension, as applicable, (A) the LC Exposure shall not exceed the LC Commitment and (B) the total Revolving Credit Exposures shall not exceed the total Revolving Commitments.

 

If requested by the Issuing Bank, the Borrower also shall submit a letter of credit application on the Issuing Bank’s standard form in connection with any request for a Letter of Credit.

 

(c) Expiration Date . Each Letter of Credit shall expire at or prior to the close of business on the date one year after the date of the issuance of such Letter of Credit (or, in the case of any renewal or extension thereof, one year after such renewal or extension).

 

(d) Participations . By the issuance of a Letter of Credit (or an amendment to a Letter of Credit increasing the amount thereof) and without any further action on the part of the Issuing Bank or the Revolving Lenders, the Issuing Bank hereby grants to each Revolving Lender, and each Revolving Lender hereby acquires from the Issuing Bank, a participation in such Letter of Credit equal to such Revolving Lender’s Applicable Percentage of the aggregate amount available to be drawn under such Letter of Credit. In consideration and in furtherance of the foregoing, each Revolving Lender hereby absolutely and unconditionally agrees to pay to the Administrative Agent, for the account of the Issuing Bank, such Revolving Lender’s Applicable Percentage of each LC Disbursement made by the Issuing Bank and not reimbursed by the Borrower on the date due as provided in Section 2.08(e), or of any reimbursement payment required to be refunded to the Borrower for any reason. Each Revolving Lender acknowledges and agrees that its obligation to acquire participations pursuant to this Section 2.08(d) in respect of Letters of Credit is absolute and unconditional and shall not be affected by any circumstance whatsoever, including any amendment, renewal or extension of any Letter of Credit or the occurrence and continuance of a Default or reduction or termination of the Revolving Commitments, and that each such payment shall be made without any offset, abatement, withholding or reduction whatsoever.

 

(e) Reimbursement . If the Issuing Bank shall make any LC Disbursement in respect of a Letter of Credit, the Borrower shall reimburse such LC Disbursement by paying to the Administrative Agent an amount equal to such LC Disbursement not later than 12:00 noon, New York City time, on the date that such LC Disbursement is made, if the Borrower shall have received notice of such LC Disbursement prior to 11:00 a.m., New York City time, on such date, or, if such notice has not been received by the Borrower prior to such time on such date, then not later than 12:00 noon, New York City time, on the Business Day immediately following the day that the Borrower receives such notice, if such notice is not received prior to such time on the

 

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day of receipt; provided that if such LC Disbursement is not less than $500,000, the Borrower shall, subject to the conditions to Borrowing set forth herein, be deemed to have requested, and the Borrower does hereby request under such circumstances, that such payment be financed with an ABR Borrowing in an equivalent amount and, to the extent so financed, the Borrower’s obligation to make such payment shall be discharged and replaced by the resulting ABR Borrowing. If the Borrower fails to make such payment when due, the Administrative Agent shall notify each Revolving Lender of the applicable LC Disbursement, the payment then due from the Borrower in respect thereof and such Revolving Lender’s Applicable Percentage thereof. Promptly following receipt of such notice, each Revolving Lender shall pay to the Administrative Agent its Applicable Percentage of the payment then due from the Borrower, in the same manner as provided in Section 2.04(a) with respect to Revolving Loans made by such Revolving Lender (and Section 2.04(a) shall apply, mutatis mutandis , to the payment obligations of the Lenders), and the Administrative Agent shall promptly pay to the Issuing Bank the amounts so received by it from the Revolving Lenders. Promptly following receipt by the Administrative Agent of any payment from the Borrower pursuant to this Section 2.08(e), the Administrative Agent shall distribute such payment to the Issuing Bank or, to the extent that Revolving Lenders have made payments pursuant to this Section 2.08(e) to reimburse the Issuing Bank, then to such Revolving Lenders and the Issuing Bank as their interests may appear. Any payment made by a Revolving Lender pursuant to this Section 2.08(e) to reimburse the Issuing Bank for any LC Disbursement (other than the funding of ABR Loans as contemplated above) shall not constitute a Revolving Loan and shall not relieve the Borrower of its obligation to reimburse such LC Disbursement.

 

(f) Obligations Absolute . The Borrower’s obligation to reimburse LC Disbursements as provided in Section 2.08(e) shall be absolute, unconditional and irrevocable, and shall be performed strictly in accordance with the terms of this Agreement under any and all circumstances whatsoever and irrespective of (i) any lack of validity or enforceability of any Letter of Credit, any Letter of Credit Agreement or this Agreement, or any term or provision therein, (ii) any draft or other document presented under a Letter of Credit proving to be forged, fraudulent or invalid in any respect or any statement therein being untrue or inaccurate in any respect, (iii) payment by the Issuing Bank under a Letter of Credit against presentation of a draft or other document that does not comply with the terms of such Letter of Credit or any Letter of Credit Agreement, or (iv) any other event or circumstance whatsoever, whether or not similar to any of the foregoing, that might, but for the provisions of this Section 2.08(f), constitute a legal or equitable discharge of, or provide a right of setoff against, the Borrower’s obligations hereunder. Neither the Administrative Agent, the Revolving Lenders nor the Issuing Bank, nor any of their Related Parties shall have any liability or responsibility by reason of or in connection with the issuance or transfer of any Letter of Credit or any payment or failure to make any payment thereunder (irrespective of any of the circumstances referred to in the preceding sentence), or any error, omission, interruption, loss or delay in transmission or delivery of any draft, notice or other communication under or relating to any Letter of Credit (including any document required to make a drawing thereunder), any error in interpretation of technical terms or any consequence arising from causes beyond the control of the Issuing Bank; provided that the foregoing shall not be construed to excuse the Issuing Bank from liability to the Borrower to the extent of any direct damages (as opposed to consequential damages, claims in respect of which are hereby waived by the Borrower to the extent permitted by applicable law) suffered by the Borrower that are caused by the Issuing Bank’s failure to exercise care when determining

 

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whether drafts and other documents presented under a Letter of Credit comply with the terms thereof. The parties hereto expressly agree that, in the absence of gross negligence or willful misconduct on the part of the Issuing Bank (as finally determined by a court of competent jurisdiction), the Issuing Bank shall be deemed to have exercised all requisite care in each such determination. In furtherance of the foregoing and without limiting the generality thereof, the parties agree that, with respect to documents presented which appear on their face to be in substantial compliance with the terms of a Letter of Credit, the Issuing Bank may, in its sole discretion, either accept and make payment upon such documents without responsibility for further investigation, regardless of any notice or information to the contrary, or refuse to accept and make payment upon such documents if such documents are not in strict compliance with the terms of such Letter of Credit.

 

(g) Disbursement Procedures . The Issuing Bank shall, promptly following its receipt thereof, examine all documents purporting to represent a demand for payment under a Letter of Credit. The Issuing Bank shall promptly notify the Administrative Agent and the Borrower by telephone (confirmed by telecopy) of such demand for payment and whether the Issuing Bank has made or will make an LC Disbursement thereunder; provided that any failure to give or delay in giving such notice shall not relieve the Borrower of its obligation to reimburse the Issuing Bank and the Revolving Lenders with respect to any such LC Disbursement.

 

(h) Interim Interest . If the Issuing Bank shall make any LC Disbursement, then, until the Borrower shall have reimbursed the Issuing Bank for such LC Disbursement (either with its own funds or a Borrowing under Section 2.08(e)), the unpaid amount thereof shall bear interest, for each day from and including the date such LC Disbursement is made to but excluding the date that the Borrower reimburses such LC Disbursement, at the rate per annum then applicable to ABR Loans. Interest accrued pursuant to this Section 2.08(h) shall be for the account of the Issuing Bank, except that interest accrued on and after the date of payment by any Revolving Lender pursuant to Section 2.08(e) to reimburse the Issuing Bank shall be for the account of such Revolving Lender to the extent of such payment.

 

(i) Replacement of the Issuing Bank . The Issuing Bank may be replaced at any time by written agreement among the Borrower, the Administrative Agent, the replaced Issuing Bank and the successor Issuing Bank. The Administrative Agent shall notify the Revolving Lenders of any such replacement of the Issuing Bank. At the time any such replacement shall become effective, the Borrower shall pay all unpaid fees accrued for the account of the replaced Issuing Bank pursuant to Section 3.05(b). From and after the effective date of any such replacement, (i) the successor Issuing Bank shall have all the rights and obligations of the Issuing Bank under this Agreement with respect to Letters of Credit to be issued thereafter and (ii) references herein to the term “Issuing Bank” shall be deemed to refer to such successor or to any previous Issuing Bank, or to such successor and all previous Issuing Banks, as the context shall require. After the replacement of the Issuing Bank hereunder, the replaced Issuing Bank shall remain a party hereto and shall continue to have all the rights and obligations of the Issuing Bank under this Agreement with respect to Letters of Credit issued by it prior to such replacement, but shall not be required to issue additional Letters of Credit.

 

(j) Cash Collateralization . If (i) any Event of Default shall occur and be continuing and the Borrower receives notice from the Administrative Agent or the Majority Revolving

 

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Lenders demanding the deposit of cash collateral pursuant to this Section 2.08(j), or (ii) the Borrower is required to pay to the Administrative Agent the excess attributable to an LC Exposure in connection with any prepayment pursuant to Section 3.04(c), then the Borrower shall deposit, in an account with the Administrative Agent, in the name of the Administrative Agent and for the benefit of the Revolving Lenders, an amount in cash equal to, in the case of an Event of Default, the LC Exposure, and in the case of a payment required by Section 3.04(c), the amount of such excess as provided in Section 3.04(c), as of such date plus any accrued and unpaid interest thereon; provided that the obligation to deposit such cash collateral shall become effective immediately, and such deposit shall become immediately due and payable, without demand or other notice of any kind, upon the occurrence of any Event of Default with respect to the Borrower or any Subsidiary described in Section 10.01(h) or Section 10.01(i). The Borrower hereby grants to the Administrative Agent, for the benefit of the Issuing Bank and the Lenders, an exclusive first priority and continuing perfected security interest in and Lien on such account and all cash, checks, drafts, certificates and instruments, if any, from time to time deposited or held in such account, all deposits or wire transfers made thereto, any and all investments purchased with funds deposited in such account, all interest, dividends, cash, instruments, financial assets and other Property from time to time received, receivable or otherwise payable in respect of, or in exchange for, any or all of the foregoing, and all proceeds, products, accessions, rents, profits, income and benefits therefrom, and any substitutions and replacements therefor. The Borrower’s obligation to deposit amounts pursuant to this Section 2.08(j) shall be absolute and unconditional, without regard to whether any beneficiary of any such Letter of Credit has attempted to draw down all or a portion of such amount under the terms of a Letter of Credit, and, to the fullest extent permitted by applicable law, shall not be subject to any defense or be affected by a right of set-off, counterclaim or recoupment which the Borrower or any of its Subsidiaries may now or hereafter have against any such beneficiary, the Issuing Bank, the Administrative Agent, the Lenders or any other Person for any reason whatsoever. Such deposit shall be held as collateral securing the payment and performance of the Borrower’s and the Guarantor’s obligations under this Agreement and the other Loan Documents. The Administrative Agent shall have exclusive dominion and control, including the exclusive right of withdrawal, over such account. Other than any interest earned on the investment of such deposits, which investments shall be made at the option and sole discretion of the Administrative Agent and at the Borrower’s risk and expense, such deposits shall not bear interest. Interest or profits, if any, on such investments shall accumulate in such account. Moneys in such account shall be applied by the Administrative Agent, subject to Section 10.02(c), to reimburse the Issuing Bank for LC Disbursements for which it has not been reimbursed and, to the extent not so applied, shall be held for the satisfaction of the reimbursement obligations of the Borrower for the LC Exposure at such time or, if the maturity of the Loans has been accelerated, be applied to satisfy other obligations of the Borrower and the Guarantors under this Agreement or the other Loan Documents. If the Borrower is required to provide an amount of cash collateral hereunder as a result of the occurrence of an Event of Default, and the Borrower is not otherwise required to pay to the Administrative Agent the excess attributable to an LC Exposure in connection with any prepayment pursuant to Section 3.04(c), then such amount (to the extent not applied as aforesaid) shall be returned to the Borrower within three Business Days after all Events of Default have been cured or waived.

 

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Section 2.09 Swing Line Loans .

 

(a) The Swing Line . Subject to the terms and conditions set forth herein, the Swing Line Bank agrees to make loans (each such loan, a “ Swing Line Loan ”) to Borrower from time to time on any Business Day in an aggregate amount not to exceed at any time outstanding the amount of the Swing Line Sublimit; provided , however , that after giving effect to any Swing Line Loan, the sum of (i) the outstanding principal balance of all Revolving Loans plus (ii) the LC Exposure plus (iii) the outstanding principal balance of all Swing Line Loans shall not exceed the Revolving Commitment. Within the foregoing limits, and subject to the other terms and conditions hereof, the Borrower may borrow under this Section 2.09, prepay under Section 3.04, and reborrow under this Section 2.09. Immediately upon the making of a Swing Line Loan, each Revolving Lender shall be deemed to, and hereby irrevocably and unconditionally agrees to, purchase from the Swing Line Bank a risk participation in such Swing Line Loan in an amount equal to the product of such Revolving Lender’s Applicable Percentage times the amount of such Swing Line Loan.

 

(b) Borrowing Procedures . Each Swing Line Loan shall be made upon Borrower’s irrevocable notice to the Swing Line Bank and Administrative Agent (a “ Swing Line Loan Notice ”), which may be given by telephone. Each such notice must be received by Swing Line Bank and Administrative Agent not later than 12:00 p.m. New York City time on the requested borrowing date, and shall specify (i) the amount to be borrowed and (ii) the requested borrowing date, which shall be a Business Day. Each such telephonic notice must be confirmed promptly by delivery to the Swing Line Bank and Administrative Agent of a written Swing Line Loan Notice, appropriately completed and signed by a Responsible Officer. Promptly after receipt by Swing Line Bank of any telephonic Swing Line Loan Notice, Swing Line Bank will confirm with Administrative Agent (by telephone or in writing) that Administrative Agent has also received such Swing Line Loan Notice and, if not, Swing Line Bank will notify Administrative Agent (by telephone or in writing) of the contents thereof. Unless Swing Line Bank has received notice (by telephone or in writing) from Administrative Agent (including at the request of any Revolving Lender) prior to 12:00 p.m. New York City time on the date of the proposed Swing Line Loan (A) directing Swing Line Bank not to make such Swing Line Loan as a result of the limitations set forth in the proviso to the first sentence of Section 2.09(a), or (B) that one or more of the applicable conditions specified in Section 6.01 hereof is not then satisfied, then, subject to the terms and conditions hereof, Swing Line Bank will, not later than 1:00 p.m. New York City time on the borrowing date specified in such Swing Line Loan Notice, make the amount of its Swing Line Loan available to Borrower.

 

(c) Refinancing of Swing Line Loans .

 

(i) Swing Line Bank at any time in its sole and absolute discretion may request, on behalf of Borrower (which hereby irrevocably authorizes Swing Line Bank to so request on its behalf), that each Revolving Lender make a Revolving Loan in an amount equal to such Revolving Lender’s Applicable Percentage of the amount of Swing Line Loans then outstanding. Such request shall be made in writing (which written request shall be deemed to be a “ Request for Advance ” for purposes hereof) and in accordance with the requirements of Section 2.03, without regard to the minimum and multiples specified therein for the principal amount of Revolving Loans, but subject to

 

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the unutilized portion of the Revolving Commitment and the conditions set forth in Section 6.01. Swing Line Bank shall furnish Borrower with a copy of the applicable Request for Advance promptly after delivering such notice to Administrative Agent. Each Revolving Lender shall make an amount equal to such Revolving Lender’s Applicable Percentage of the amount specified in such Request for Advance available to Administrative Agent in immediately available funds for the account of Swing Line Bank at Administrative Agent’s office not later than 12:00 p.m. New York City time on the day specified in such Request for Advance, whereupon subject to Section 2.09(c)(ii), each Revolving Lender that so makes funds available shall be deemed to have made a Revolving Loan to Borrower in such amount. Administrative Agent shall remit the funds so received to Swing Line Bank.

 

(ii) If for any reason any Swing Line Loan cannot be refinanced by such a Revolving Loan in accordance with Section 2.09(c)(i), the request for Revolving Loans submitted by Swing Line Bank as set forth herein shall be deemed to be a request by Swing Line Bank that each Revolving Lender fund its risk participation in the relevant Swing Line Loan and each Revolving Lender’s payment to Administrative Agent for the account of Swing Line Bank pursuant to Section 2.09(c)(i), shall be deemed payment in respect of such participation.

 

(iii) If any Revolving Lender fails to make available to Administrative Agent for the account of Swing Line Bank any amount required to be paid by such Revolving Lender pursuant to the foregoing provisions of this Section 2.09(c) by the time specified in Section 2.09(c)(i), Swing Line Bank shall be entitled to recover from such Revolving Lender (acting through Administrative Agent), on demand, such amount with interest thereon for the period from the date such payment is required to the date on which such payment is immediately available to Swing Line Bank at a rate per annum equal to the Federal Funds Effective Rate for the first three (3) Business Days after the date such payment is required, and thereafter at the rate then applicable to Borrower. A certificate of Swing Line Bank submitted to any Revolving Lender (through Administrative Agent) with respect to any amounts owing under this clause (iii) shall be conclusive absent manifest error.

 

(iv) Each Revolving Lender’s obligation to make Revolving Loans or to purchase and fund risk participations in Swing Line Loans pursuant to this Section 2.09(c) shall be absolute and unconditional and shall not be affected by any circumstance, including (A) any setoff, counterclaim, recoupment, defense or other right which such Revolving Lender may have against Swing Line Bank, Borrower or any other Person for any reason whatsoever, (B) the occurrence or continuance of an Event of Default, or (C) any other occurrence, event or condition, whether or not similar to any of the foregoing.

 

(d) Repayment of Participations .

 

(i) At any time after any Revolving Lender has purchased and funded a risk participation in a Swing Line Loan, if Swing Line Bank receives any payment on account of such Swing Line Loan, Swing Line Bank will distribute to such Revolving Lender its Applicable Percentage of such payment (appropriately adjusted, in the case of interest

 

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payments, to reflect the period of time during which such Revolving Lender’s risk participation was funded) in the same funds as those received by Swing Line Bank.

 

(ii) If any payment received by Swing Line Bank in respect of principal or interest on any Swing Line Loan is required to be returned by Swing Line Bank under any circumstance (including pursuant to any settlement entered into by Swing Line Bank in its discretion), each Revolving Lender shall pay to Swing Line Bank its Applicable Percentage thereof on demand of Administrative Agent, plus interest thereon from the date of such demand to the date such amount is returned, at a rate per annum equal to the Federal Funds Effective Rate. Administrative Agent will make such demand upon the request of Swing Line Bank. The obligations of Revolving Lenders under this clause shall survive the payment in full of the Indebtedness and the termination of this Agreement.

 

(e) Interest for Account of Swing Line Bank . Swing Line Bank shall be responsible for invoicing Borrower for interest on the Swing Line Loans. Until each Revolving Lender funds its Revolving Loan or risk participation pursuant to Section 2.09 to refinance such Revolving Lender’s Applicable Percentage of any Swing Line Loan, interest in respect of such Applicable Percentage shall be solely for the account of Swing Line Bank.

 

(f) Payments Directly to Swing Line Bank . Borrower shall make all payments of principal and interest in respect of the Swing Line Loans directly to Swing Line Bank.

 

Section 2.10 Revolving Commitment Increase; Term Loan Increase .

 

(a) Subject to the terms and conditions set forth herein, the Borrower shall have the right, without the consent of the Lenders, to cause either a one-time increase in the Revolving Commitments of the Revolving Lenders (a “ Revolving Commitment Increase ”) or to borrow additional Term Loans (a “ Term Loan Increase ”) by adding to this Agreement one or more additional financial institutions that (A) in the case of a Revolving Commitment Increase, are not already Revolving Lenders hereunder and that are reasonably satisfactory to the Administrative Agent (each a “ Revolving CI Lender ”) or by allowing one or more existing Revolving Lenders to increase their respective Revolving Commitments, or (B) in the case of a Term Loan Increase, are not already Term Loan Lenders hereunder and that are reasonably satisfactory to the Administrative Agent (each a “ Term CI Lender ”) or by allowing one or more existing Term Loan Lenders to increase their respective Term Credit Exposure; provided , however that (i) no Event of Default shall have occurred which is continuing, (ii) the Term Credit Exposure of all Term Lenders shall be no greater than $105,000,000, (iii) the ratio of Total Debt immediately after such Revolving Commitment Increase or Term Loan Increase (assuming for the purpose of such calculation, in the case of a Revolving Commitment Increase, that such Revolving Commitment Increase is fully utilized) to EBITDA for the four fiscal quarters ending on the last day of the fiscal quarter immediately preceding the date of determination is not greater than 2.5 to 1.0, (iv) no such Revolving Commitment Increase or Term Loan Increase shall exceed $25,000,000, (v) no Revolving Lender’s Revolving Commitment shall be increased without such Revolving Lender’s prior written consent and (vi) if, on the effective date of such Revolving Commitment Increase, any Revolving Loans have been funded, then the Borrower shall be

 

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obligated to pay any breakage fees or costs in connection with the reallocation of such outstanding Revolving Loans.

 

(b) Revolving Commitment Increase .

 

(i) The Revolving Commitment Increase shall be requested by written notice from the Borrower to the Administrative Agent (a “ Notice of Commitment Increase ”) in the form of Exhibit H attached hereto and shall be approved by the Administrative Agent, such consent to not be unreasonably withheld. Such Notice of Commitment Increase shall specify (A) the proposed effective date of such Revolving Commitment Increase, which date shall be no earlier than five (5) Business Days after receipt by the Administrative Agent of such Notice of Commitment Increase, (B) the amount of the requested Revolving Commitment Increase, (C) the identity of each Revolving CI Lender or Revolving Lender that has agreed in writing to increase its Revolving Commitment hereunder, and (D) the amount of the respective Revolving Commitments of the then existing Revolving Lenders and the Revolving CI Lenders from and after the Commitment Increase Effective Date (as defined below). The Administrative Agent shall execute a counterpart of the Notice of Commitment Increase, the Revolving CI Lenders shall execute a Joinder and such Revolving Commitment Increase shall be effective on the proposed effective date set forth in the Notice of Commitment Increase or on another date agreed to by the Administrative Agent and the Borrower (such date referred to as the “ Commitment Increase Effective Date ”).

 

(ii) On the Commitment Increase Effective Date, to the extent that there are Revolving Loans outstanding as of such date, (A) each Revolving CI Lender shall, by wire transfer of immediately available funds, deliver to the Administrative Agent such Revolving CI Lender’s New Funds Amount, which amount, for each such Revolving CI Lender, shall constitute Revolving Loans made by such Revolving CI Lender to the Borrower pursuant to this Agreement on such Commitment Increase Effective Date, (B) the Administrative Agent shall, by wire transfer of immediately available funds, pay to each then Reducing Percentage Lender its Reduction Amount, which amount, for each such Reducing Percentage Lender, shall constitute a prepayment by the Borrower pursuant to Section 3.04, ratably in accordance with the respective principal amounts thereof, of the principal amounts of all then outstanding Revolving Loans of such Reducing Percentage Lender, and (C) the Borrower shall be responsible to pay to each Revolving Lender any breakage fees or costs in connection with the reallocation of any outstanding Revolving Loans.

 

(iii) For purposes of this Section 2.10 and Exhibit H , the following defined terms shall have the following meanings: (A) “ New Funds Amount ” means the amount equal to the product of a Revolving Lender’s increased Revolving Commitment or a Revolving CI Lender’s Revolving Commitment (as applicable) represented as a percentage of the aggregate Revolving Commitments after giving effect to the Revolving Commitment Increase, times the aggregate principal amount of the outstanding Revolving Loans immediately prior to giving effect to the Revolving Commitment Increase, if any, as of a Commitment Increase Effective Date (without regard to any increase in the aggregate principal amount of Revolving Loans as a result of borrowings

 

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made after giving effect to the Revolving Commitment Increase on such Commitment Increase Effective Date); (B) “ Reducing Percentage Lender ” means each then existing Revolving Lender immediately prior to giving effect to the Revolving Commitment Increase that does not increase its respective Revolving Commitment as a result of the Revolving Commitment Increase and whose relative percentage of the Revolving Commitments shall be reduced after giving effect to such Revolving Commitment Increase; and (C) “ Reduction Amount ” means the amount by which a Reducing Percentage Lender’s outstanding Revolving Loans decrease as of the Commitment Increase Effective Date (without regard to the effect of any borrowings made on such Commitment Increase Effective Date after giving effect to the Revolving Commitment Increase).

 

(iv) The Revolving Commitment Increase shall become effective on the Commitment Increase Effective Date and upon such effectiveness (A) the Administrative Agent shall record in the register each then Revolving CI Lender’s information as provided in the Notice of Commitment Increase and pursuant to an Administrative Questionnaire satisfactory to the Administrative Agent that shall be executed and delivered by each Revolving CI Lender to the Administrative Agent on or before the Commitment Increase Effective Date, (B) Annex I hereof shall be amended and restated to set forth all Revolving Lenders (including any Revolving CI Lenders) that will be Revolving Lenders hereunder after giving effect to such Revolving Commitment Increase (which shall be set forth in Annex I to the applicable Notice of Commitment Increase) and the Administrative Agent shall distribute to each Revolving Lender (including each Revolving CI Lender) a copy of such amended and restated Annex I, and (C) each Revolving CI Lender identified on the Notice of Commitment Increase for such Revolving Commitment Increase shall be a “Revolving Lender” for all purposes under this Agreement.

 

(c) Term Loan Increase .

 

(i) The Term Loan Increase shall be requested by written notice from the Borrower to the Administrative Agent (a “ Notice of Term Loan Increase ”) in the form of Exhibit J attached hereto and shall be approved by the Administrative Agent, such consent to not be unreasonably withheld. Such Notice of Term Loan Increase shall specify (A) the proposed effective date of such Term Loan Increase, which date shall be no earlier than five (5) Business Days after receipt by the Administrative Agent of such Notice of Term Loan Increase, (B) the amount of the requested Term Loan Increase, (C) the identity of each Term CI Lender or Term Loan Lender that has agreed in writing to increase its Term Credit Exposure hereunder, and (D) the amount of the respective Term Credit Exposure of the then existing Term Loan Lenders and the Term CI Lenders from and after the Term Loan Increase Effective Date (as defined below). The Administrative Agent shall execute a counterpart of the Notice of Term Loan Increase, the Term CI Lenders shall execute a Joinder and such Term Loan Increase shall be effective on the date that the Term CI Lender or Term Loan Lender, as applicable, makes such additional Term Loan to the Borrower or on another date agreed to by the Administrative Agent and the Borrower (such date referred to as the “ Term Loan Increase Effective Date ”).

 

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(ii) The Term Loan Increase shall become effective on the Term Loan Increase Effective Date and upon such effectiveness (A) the Administrative Agent shall record in the register each then Term CI Lender’s information as provided in the Notice of Term Loan Increase and pursuant to an Administrative Questionnaire satisfactory to the Administrative Agent that shall be executed and delivered by each Term CI Lender to the Administrative Agent on or before the Term Loan Increase Effective Date, (B) Annex II hereof shall be amended and restated to set forth all Term Loan Lenders (including any Term CI Lenders) that will be Term Loan Lenders hereunder after giving effect to such Term Loan Increase (which shall be set forth in Annex II to the applicable Notice of Term Loan Increase) and the Administrative Agent shall distribute to each Term Loan Lender (including each Term CI Lender) a copy of such amended and restated Annex II, and (C) each Term CI Lender identified on the Notice of Term Loan Increase for such Term Loan Increase shall be a “Term Loan Lender” for all purposes under this Agreement.

 

ARTICLE III

Payments of Principal and Interest; Prepayments; Fees

 

Section 3.01 Repayment of Loans .

 

(a) Revolving Loans . The Borrower hereby unconditionally promises to pay to the Administrative Agent, for the account of each Revolving Lender, the then unpaid principal amount of each Revolving Loan on the Revolving Credit Maturity Date.

 

(b) Term Loans . The Borrower shall pay to the Administrative Agent, for the account of each Term Loan Lender, the Term Loans in an initial installment on or before October 1, 2005 and thereafter in consecutive quarterly installments on or before each Quarterly Date, as set forth below:

 

 

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; provided that upon any partial prepayment pursuant to Section 3.04, such prepayment shall be applied pro rata to the remaining installments including the final payment on the Term Loan Maturity Date in accordance with Section 3.04.

 

If not sooner paid, the Borrower promises to repay in full the Term Loans on the Term Loan Maturity Date.

 

(c) The Borrower shall repay each Swing Line Loan as provided in Section 2.09.

 

Section 3.02 Interest .

 

(a) ABR Loans . The Loans, including all Swing Line Loans, comprising each ABR Borrowing shall bear interest at the Alternate Base Rate plus the Applicable Margin, but in no event to exceed the Highest Lawful Rate.

 

(b) Eurodollar Loans . The Loans comprising each Eurodollar Borrowing shall bear interest at the Adjusted LIBO Rate for the Interest Period in effect for such Borrowing plus the Applicable Margin, but in no event to exceed the Highest Lawful Rate.

 

(c) Post-Default . Notwithstanding the foregoing, if an Event of Default under Sections 10.01(a) or (b) has occurred and is continuing, then all Loans outstanding shall bear interest, after as well as before judgment, at a rate per annum equal to two percent (2%) plus the then applicable rate of interest accruing on the Loans, but in no event to exceed the Highest Lawful Rate.

 

(d) Interest Payment Dates . Accrued interest on each Loan shall be payable in arrears on each Interest Payment Date for such Loan and on the Revolving Credit Maturity Date for Revolving Loans and on the Term Loan Maturity Date for Term Loans; provided that (i) interest accrued pursuant to Section 3.02(c) shall be payable on demand, (ii) in the event of any repayment or prepayment of any Loan (other than an optional prepayment of an ABR Loan prior to the Revolving Credit Maturity Date or the Term Loan Maturity Date, as applicable), accrued interest on the principal amount repaid or prepaid shall be payable on the date of such repayment or prepayment, and (iii) in the event of any conversion of any Eurodollar Loan prior to the end of the current Interest Period therefor, accrued interest on such Loan shall be payable on the effective date of such conversion.

 

(e) Interest Rate Computations . All interest hereunder shall be computed on the basis of a year of 360 days, unless such computation would exceed the Highest Lawful Rate, in which case interest shall be computed on the basis of a year of 365 days (or 366 days in a leap year), except that interest computed by reference to the Alternate Base Rate at times when the Alternate Base Rate is based on the Base Rate shall be computed on the basis of a year of 365 days (or 366 days in a leap year), and in each case shall be payable for the actual number of days elapsed (including the first day but excluding the last day). The applicable Alternate Base Rate,

 

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Adjusted LIBO Rate or LIBO Rate shall be determined by the Administrative Agent, and such determination shall be conclusive absent manifest error, and be binding upon the parties hereto.

 

Section 3.03 Alternate Rate of Interest . If prior to the commencement of any Interest Period for a Eurodollar Borrowing:

 

(a) the Administrative Agent determines (which determination shall be conclusive absent manifest error) that adequate and reasonable means do not exist for ascertaining the Adjusted LIBO Rate or the LIBO Rate for such Interest Period; or

 

(b) the Administrative Agent is advised by the Majority Revolving Lenders or the Majority Term Lenders, as the case may be, that the Adjusted LIBO Rate or LIBO Rate, as applicable, for such Interest Period will not adequately and fairly reflect the cost to such Lenders of making or maintaining their Loans included in such Borrowing for such Interest Period;

 

then the Administrative Agent shall give notice thereof to the Borrower and the Revolving Lenders or the Term Loan Lenders, as the case may be, by telephone or telecopy as promptly as practicable thereafter and, until the Administrative Agent notifies the Borrower and the relevant Lenders that the circumstances giving rise to such notice no longer exist, (i) any Interest Election Request that requests the conversion of any Borrowing to, or continuation of any Borrowing as, a Eurodollar Borrowing shall be ineffective, and (ii) if any Borrowing Request requests a Eurodollar Borrowing, such Borrowing shall be made as an ABR Borrowing.

 

Section 3.04 Prepayments .

 

(a) Optional Prepayments . The Borrower shall have the right at any time and from time to time to prepay any Borrowing in whole or in part, subject to prior notice in accordance with Section 3.04(b).

 

(b) Notice and Terms of Optional Prepayment . The Borrower shall notify the Administrative Agent by telephone (confirmed by telecopy) of any prepayment hereunder (i) in the case of prepayment of a Eurodollar Borrowing, not later than 12:00 noon, New York City time, three Business Days before the date of prepayment, or (ii) in the case of prepayment of an ABR Borrowing, not later than 12:00 noon, New York City time, one Business Day before the date of prepayment. Each such notice shall be irrevocable and shall specify the prepayment date, the principal amount of each Borrowing or portion thereof to be prepaid and whether the prepayment is to be applied to Revolving Loans, Term Loans or Swing Line Loans; provided that, if a notice of prepayment is given in connection with a conditional notice of termination of the Commitments as contemplated by Section 2.06(b), then such notice of prepayment may be revoked if such notice of termination is revoked in accordance with Section 2.06(b), but the Borrower shall be responsible for any break funding payments pursuant to Section 5.02. Promptly following receipt of any such notice relating to a Borrowing, the Administrative Agent shall advise the applicable Lenders of the contents thereof. Each partial prepayment of any Borrowing shall be in an amount that would be permitted in the case of an advance of a Borrowing of the same Type as provided in Section 2.02. Each prepayment of a Borrowing shall be applied ratably to the Loans included in the prepaid Borrowing. Prepayments shall be accompanied by accrued interest to the extent required by Section 3.02. Prepayments of the

 

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Term Loan shall be applied pro rata to the remaining installments of principal including the payment due on the Term Loan Maturity Date.

 

(c) Mandatory Prepayments .

 

(i) After giving effect to any termination or reduction of the Revolving Commitments pursuant to Section 2.06(b), the Borrower shall (A) prepay the Revolving Borrowings on the date of such termination or reduction in an aggregate principal amount equal to the difference between the new Revolving Commitments and the Revolving Credit Exposure, and (B) if any excess remains after prepaying all of the Revolving Borrowings as a result of an LC Exposure, pay to the Administrative Agent on behalf of the Revolving Lenders an amount equal to such excess to be held as cash collateral as provided in Section 2.08(j).

 

(ii) Within five (5) Business Days of the delivery of the financial statements required by Section 8.01(a), the Borrower shall prepay the Term Loans during any period of time when the aggregate Term Loans outstanding exceeds $110,000,000 and thereafter when the leverage ratio referenced in Section 9.01(b) is greater than or equal to 3.0 to 1.0, in an amount equal to 50% of the Excess Cash Flow for the four quarters ending on the preceding December 31, commencing December 31, 2005.

 

(iii) The Borrower shall prepay the Term Loans to the extent required by Section 9.02(f), Section 9.04(b) and Section 9.12(e) on the date fixed for prepayment as set forth therein, in an amount equal to 100% of the principal amount due, plus, accrued and unpaid interest on the principal amount prepaid to the date of prepayment and any payments required by Section 5.02; provided that for any mandatory prepayment under Section 9.04(b), the Borrower shall provide the Term Loan Lenders with written notice of the amount of such prepayment, and each Term Loan Lender shall have ten (10) Business Days from receipt of such notice to notify the Borrower in writing that it will accept or reject such mandatory prepayment.

 

(iv) No later than thirty (30) days following the date of receipt by the Borrower or any of its Subsidiaries of net cash proceeds in excess of $1,000,000 from any Casualty Event, the Borrower shall prepay the Term Loans in an amount equal to 100% of the net cash proceeds from such Casualty Event, plus accrued and unpaid interest on the principal amount prepaid to the date of prepayment and any payments required by Section 5.02; provided , however , that no such prepayment shall be required if, within thirty (30) days following the date of receipt of such proceeds, the Borrower provides written notice to the Administrative Agent of the Borrower’s intent to reinvest the proceeds of such Casualty Event, in which case the Borrower shall, directly or through one or more of its Subsidiaries, invest such net cash proceeds within three hundred sixty-five (365) days of receipt thereof in long term productive assets of the general type used in the business of the Borrower and its Subsidiaries, which investment may include the repair, restoration or replacement of the applicable assets the subject of such Casualty Event.

 

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(v) Each prepayment of Borrowings pursuant to this Section 3.04(c) shall be applied, first, ratably to any ABR Borrowings then outstanding, and, second, to any Eurodollar Borrowings then outstanding, and if more than one Eurodollar Borrowing is then outstanding, to each such Eurodollar Borrowing in order of priority beginning with the Eurodollar Borrowing with the least number of days remaining in the Interest Period applicable thereto and ending with the Eurodollar Borrowing with the most number of days remaining in the Interest Period applicable thereto.

 

(vi) Each prepayment of Borrowings pursuant to this Section 3.04(c) shall be applied ratably to the Loans included in the prepaid Borrowings. Prepayments pursuant to this Section 3.04(c) shall be accompanied by accrued interest to the extent required by Section 3.02. Prepayments of the Term Loan shall be applied pro rata to the remaining installments of principal including the payment due on the Term Loan Maturity Date.

 

(vii) Each prepayment of Borrowings pursuant to this Section 3.04(c) shall be accompanied by a written statement from a Responsible Officer of the Borrower detailing the reason for such prepayment as reasonably requested by the Administrative Agent.

 

(d) No Premium or Penalty . Prepayments permitted or required under this Section 3.04 shall be without premium or penalty, except as required under Section 5.02. Any mandatory prepayment of the Term Loans pursuant to Section 9.02(f) or any repricing prior to the first anniversary of the Effective Date shall be in the amount of 101% of the principal being repaid.

 

Section 3.05 Fees .

 

(a) Commitment Fees . The Borrower agrees to pay to the Administrative Agent for the account of each Revolving Lender a commitment fee, which shall accrue at the applicable Commitment Fee Rate on the average daily amount of the unused amount of the Revolving Commitment of such Revolving Lender (after deducting all outstanding Revolving Loans, Swing Line Loans and LC Exposure) during the period from and including the Effective Date to but excluding the Revolving Credit Maturity Date. Accrued commitment fees shall be payable in arrears on the first day of January, April, July and October of each year and on the Revolving Credit Maturity Date, commencing on the first such date to occur after the date hereof. All commitment fees shall be computed on the basis of a year of 360 days, unless such computation would exceed the Highest Lawful Rate, in which case interest shall be computed on the basis of a year of 365 days (or 366 days in a leap year), and shall be payable for the actual number of days elapsed (including the first day but excluding the last day).

 

(b) Letter of Credit Fees . The Borrower agrees to pay (i) to the Administrative Agent for the account of each Revolving Lender a participation fee with respect to its participations in Letters of Credit, which shall accrue at the same Applicable Margin used to determine the interest rate applicable to Eurodollar Loans on the average daily amount of such Revolving Lender’s LC Exposure (excluding any portion thereof attributable to unreimbursed LC Disbursements) during the period from and including the Effective Date to but excluding the later of the date on which such Revolving Lender’s Revolving Commitment terminates and the date on which such Revolving Lender ceases to have any LC Exposure, (ii) to the Issuing Bank a

 

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fronting fee, which shall accrue at the rate of 0.125% per annum on the average daily amount of the LC Exposure (excluding any portion thereof attributable to unreimbursed LC Disbursements) during the period from and including the Effective Date to but excluding the later of the date of termination of the Revolving Commitments and the date on which there ceases to be any LC Exposure, provided that in no event shall such fee be less than $250 during any quarter, and (iii) to the Issuing Bank, for its own account, its standard fees with respect to the issuance, amendment, renewal or extension of any Letter of Credit or processing of drawings thereunder. Participation fees and fronting fees accrued through and including the last day of March, June, September and December of each year shall be payable on the third Business Day following such last day, commencing on the first such date to occur after the date of this Agreement; provided that all such fees shall be payable on the Revolving Credit Maturity Date and any such fees accruing after the Revolving Credit Maturity Date shall be payable on demand. Any other fees payable to the Issuing Bank pursuant to this Section 3.05(b) shall be payable within 10 days after demand. All participation fees and fronting fees shall be computed on the basis of a year of 360 days, unless such computation would exceed the Highest Lawful Rate, in which case interest shall be computed on the basis of a year of 365 days (or 366 days in a leap year), and shall be payable for the actual number of days elapsed (including the first day but excluding the last day).

 

(c) Administrative Agent Fees . The Borrower agrees to pay to the Administrative Agent, for its own account, fees payable in the amounts and at the times separately agreed upon between the Borrower and the Administrative Agent.

 

ARTICLE IV

Payments; Pro Rata Treatment; Sharing of Set-offs.

 

Section 4.01 Payments Generally; Pro Rata Treatment; Sharing of Set-offs .

 

(a) Payments by the Borrower . The Borrower shall make each payment required to be made by it hereunder (whether of principal, interest, fees or reimbursement of LC Disbursements, or of amounts payable under Section 5.01, Section 5.02, Section 5.03 or otherwise) prior to 12:00 noon, New York City time, on the date when due, in immediately available funds, without defense, deduction, recoupment, set-off or counterclaim. Fees, once paid, shall be fully earned and shall not be refundable under any circumstances. Any amounts received after such time on any date may, in the discretion of the Administrative Agent, be deemed to have been received on the next succeeding Business Day for purposes of calculating interest thereon. All such payments shall be made to the Administrative Agent at its offices specified in Section 12.01, except payments to be made directly to the Issuing Bank as expressly provided herein and except that payments pursuant to Section 5.01, Section 5.02, Section 5.03 and Section 12.03 shall be made directly to the Persons entitled thereto. The Administrative Agent shall distribute any such payments received by it for the account of any other Person to the appropriate recipient promptly following receipt thereof. If any payment hereunder 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. All payments hereunder shall be made in dollars.

 

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(b) Application of Insufficient Payments . If at any time insufficient funds are received by and available to the Administrative Agent to pay fully all amounts of principal, unreimbursed LC Disbursements, interest and fees then due hereunder, such funds shall be applied (i) first, towards payment of interest and fees then due hereunder, ratably among the parties entitled thereto in accordance with the amounts of interest and fees then due to such parties, and (ii) second, towards payment of principal and unreimbursed LC Disbursements then due hereunder, ratably among the parties entitled thereto in accordance with the amounts of principal and unreimbursed LC Disbursements then due to such parties.

 

(c) Sharing of Payments by Lenders . If any Lender shall, by exercising any right of set-off or counterclaim or otherwise, obtain payment in respect of any principal of or interest on any of its Loans or participations in LC Disbursements resulting in such Lender receiving payment of a greater proportion of the aggregate amount of its Loans and participations in LC Disbursements and accrued interest thereon than the proportion received by any other Lender, then the Lender receiving such greater proportion shall purchase (for cash at face value) participations in the Loans and participations in LC Disbursements of other Lenders to the extent necessary so that the benefit of all such payments shall be shared by the Lenders ratably in accordance with the aggregate amount of principal of and accrued interest on their respective Loans and participations in LC Disbursements; provided that (i) if any such participations are purchased and all or any portion of the payment giving rise thereto is recovered, such participations shall be rescinded and the purchase price restored to the extent of such recovery, without interest, and (ii) the provisions of this Section 4.01(c) shall not be construed to apply to any payment made by the Borrower pursuant to and in accordance with the express terms of this Agreement or any payment obtained by a Lender as consideration for the assignment of or sale of a participation in any of its Loans or participations in LC Disbursements to any assignee or participant, other than to the Borrower or any Subsidiary or Affiliate thereof (as to which the provisions of this Section 4.01(c) shall apply). The Borrower consents to the foregoing and agrees, to the extent it may effectively do so under applicable law, that any Lender acquiring a participation pursuant to the foregoing arrangements may exercise against the Borrower rights of set-off and counterclaim with respect to such participation as fully as if such Lender were a direct creditor of the Borrower in the amount of such participation.

 

Section 4.02 Presumption of Payment by the Borrower . Unless the Administrative Agent shall have received notice from the Borrower prior to the date on which any payment is due to the Administrative Agent for the account of the Lenders or the Issuing Bank that the Borrower will not make such payment, the Administrative Agent may assume that the Borrower has made such payment on such date in accordance herewith and may, in reliance upon such assumption, distribute to the Lenders or the Issuing Bank, as the case may be, the amount due. In such event, if the Borrower has not in fact made such payment, then each of the Lenders or the Issuing Bank, as the case may be, severally agrees to repay to the Administrative Agent forthwith on demand the amount so distributed to such Lender or Issuing Bank with interest thereon, for each day from and including the date such amount is distributed to it to but excluding the date of payment to the Administrative Agent, at the greater of the Federal Funds Effective Rate and a rate determined by the Administrative Agent in accordance with banking industry rules on interbank compensation.

 

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Section 4.03 Certain Deductions by the Administrative Agent . If any Lender shall fail to make any payment required to be made by it pursuant to Section 2.05(b), Section 2.08(d), Section 2.08(e) or Section 4.02 then the Administrative Agent may, in its discretion (notwithstanding any contrary provision hereof), apply any amounts thereafter received by the Administrative Agent for the account of such Lender to satisfy such Lender’s obligations under such Sections until all such unsatisfied obligations are fully paid.

 

ARTICLE V

Increased Costs; Break Funding Payments; Taxes; Illegality

 

Section 5.01 Increased Costs .

 

(a) Eurodollar Changes in Law . If any Change in Law shall:

 

(i) impose, modify or deem applicable any reserve, special deposit or similar requirement against assets of, deposits with or for the account of, or credit extended by, any Lender (except any such reserve requirement reflected in the Adjusted LIBO Rate); or

 

(ii) impose on any Lender or the London interbank market any other condition affecting this Agreement or Eurodollar Loans made by such Lender;

 

and the result of any of the foregoing shall be to increase the cost to such Lender of making or maintaining any Eurodollar Loan (or of maintaining its obligation to make any such Loan) or to reduce the amount of any sum received or receivable by such Lender (whether of principal, interest or otherwise), then the Borrower will pay to such Lender such additional amount or amounts as will compensate such Lender for such additional costs incurred or reduction suffered.

 

(b) Capital Requirements . If any Lender or the Issuing Bank determines that any Change in Law regarding capital requirements has or would have the effect of reducing the rate of return on such Lender’s or the Issuing Bank’s capital or on the capital of such Lender’s or the Issuing Bank’s holding company, if any, as a consequence of this Agreement or the Loans made by, or participations in Letters of Credit held by, such Lender, or the Letters of Credit issued by the Issuing Bank, to a level below that which such Lender or the Issuing Bank or such Lender’s or the Issuing Bank’s holding company could have achieved but for such Change in Law (taking into consideration such Lender’s or the Issuing Bank’s policies and the policies of such Lender’s or the Issuing Bank’s holding company with respect to capital adequacy), then from time to time the Borrower will pay to such Lender or the Issuing Bank, as the case may be, such additional amount or amounts as will compensate such Lender or the Issuing Bank or such Lender’s or the Issuing Bank’s holding company for any such reduction suffered.

 

(c) Certificates . A certificate of a Lender or the Issuing Bank setting forth the amount or amounts necessary to compensate such Lender or the Issuing Bank or its holding company, as the case may be, as specified in Section 5.01(a) or (b) shall be delivered to the Borrower and shall be conclusive absent manifest error. The Borrower shall pay such Lender or the Issuing Bank, as the case may be, the amount shown as due on any such certificate within 10 days after receipt thereof.

 

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(d) Effect of Failure or Delay in Requesting Compensation . Failure or delay on the part of any Lender or the Issuing Bank to demand compensation pursuant to this Section 5.01 shall not constitute a waiver of such Lender’s or the Issuing Bank’s right to demand such compensation; provided that the Borrower shall not be required to compensate a Lender or the Issuing Bank pursuant to this Section 5.01 for any increased costs or reductions incurred more than 365 days prior to the date that such Lender or the Issuing Bank, as the case may be, notifies the Borrower of the Change in Law giving rise to such increased costs or reductions and of such Lender’s or the Issuing Bank’s intention to claim compensation therefor; provided further that, if the Change in Law giving rise to such increased costs or reductions is retroactive, then the 365-day period referred to above shall be extended to include the period of retroactive effect thereof.

 

Section 5.02 Break Funding Payments . In the event of (a) the payment of any principal of any Eurodollar Loan other than on the last day of an Interest Period applicable thereto (including as a result of an Event of Default), (b) the conversion of any Eurodollar Loan into an ABR Loan other than on the last day of the Interest Period applicable thereto, or (c) the failure to borrow, convert, continue or prepay any Eurodollar Loan on the date specified in any notice delivered pursuant hereto, then, in any such event, the Borrower shall compensate each Lender requesting a reimbursement for the loss, cost and expense attributable to such event. In the case of a Eurodollar Loan, such loss, cost or expense to any Lender shall be deemed to include an amount determined by such Lender to be the excess, if any, of (i) the amount of interest which would have accrued on the principal amount of such Loan had such event not occurred, at the Adjusted LIBO Rate that would have been applicable to such Loan, for the period from the date of such event to the last day of the then current Interest Period therefor (or, in the case of a failure to borrow, convert or continue, for the period that would have been the Interest Period for such Loan), over (ii) the amount of interest which would accrue on such principal amount for such period at the interest rate which such Lender would bid were it to bid, at the commencement of such period, for dollar deposits of a comparable amount and period from other banks in the eurodollar market.

 

A certificate of any Lender setting forth any amount or amounts that such Lender is entitled to receive pursuant to this Section 5.02 shall be delivered to the Borrower and shall be conclusive absent manifest error. The Borrower shall pay such Lender the amount shown as due on any such certificate within 10 days after receipt thereof.

 

Section 5.03 Taxes .

 

(a) Payments Free of Taxes . Any and all payments by or on account of any obligation of the Borrower or any Guarantor under any Loan Document shall be made free and clear of and without deduction for any Indemnified Taxes or Other Taxes; provided that if the Borrower or any Guarantor shall be required to deduct any Indemnified Taxes or Other Taxes from such payments, then (i) the sum payable shall be increased as necessary so that after making all required deductions (including deductions applicable to additional sums payable under this Section 5.03(a)), the Administrative Agent, Lender or Issuing Bank (as the case may be) receives an amount equal to the sum it would have received had no such deductions been made, (ii) the Borrower or such Guarantor shall make such deductions and (iii) the Borrower or such Guarantor shall pay the full amount deducted to the relevant Governmental Authority in accordance with applicable law.

 

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(b) Payment of Other Taxes by the Borrower . The Borrower shall pay any Other Taxes to the relevant Governmental Authority in accordance with applicable law.

 

(c) Indemnification by the Borrower . The Borrower shall indemnify the Administrative Agent, each Lender and the Issuing Bank, within 10 days after written demand therefor, for the full amount of any Indemnified Taxes or Other Taxes paid by the Administrative Agent, such Lender or the Issuing Bank, as the case may be, on or with respect to any payment by or on account of any obligation of the Borrower hereunder (including Indemnified Taxes or Other Taxes imposed or asserted on or attributable to amounts payable under this Section 5.03) and any penalties, interest and reasonable expenses arising therefrom or with respect thereto, whether or not such Indemnified Taxes or Other Taxes were correctly or legally imposed or asserted by the relevant Governmental Authority. A certificate of the Administrative Agent, a Lender or the Issuing Bank as to the amount of such payment or liability under this Section 5.03 shall be delivered to the Borrower and shall be conclusive absent manifest error.

 

(d) Evidence of Payments . As soon as practicable after any payment of Indemnified Taxes or Other Taxes by the Borrower or a Guarantor to a Governmental Authority, the Borrower shall deliver to the Administrative Agent the original or a certified copy of a receipt issued by such Governmental Authority evidencing such payment, a copy of the return reporting such payment or other evidence of such payment reasonably satisfactory to the Administrative Agent.

 

(e) Foreign Lenders . Any Foreign Lender that is entitled to an exemption from or reduction of withholding tax under the law of the jurisdiction in which the Borrower is located, or any treaty to which such jurisdiction is a party, with respect to payments under this Agreement or any other Loan Document shall deliver to the Borrower (with a copy to the Administrative Agent), at the time or times prescribed by applicable law, such properly completed and executed documentation prescribed by applicable law or reasonably requested by the Borrower as will permit such payments to be made without withholding or at a reduced rate.

 

Section 5.04 Mitigation Obligations . If any Lender requests compensation under Section 5.01, or if the Borrower is required to pay any additional amount to any Lender or any Governmental Authority for the account of any Lender pursuant to Section 5.03, then such Lender shall use reasonable efforts to designate a different lending office for funding or booking its Loans hereunder or to assign its rights and obligations hereunder to another of its offices, branches or affiliates, if, in the judgment of such Lender, such designation or assignment (i) would eliminate or reduce amounts payable pursuant to Section 5.01 or Section 5.03, as the case may be, in the future and (ii) would not subject such Lender to any unreimbursed cost or expense and would not otherwise be disadvantageous to such Lender. The Borrower hereby agrees to pay all reasonable costs and expenses incurred by any Lender in connection with any such designation or assignment.

 

Section 5.05 Illegality . Notwithstanding any other provision of this Agreement, in the event that it becomes unlawful for any Lender or its applicable lending office to honor its obligation to make or maintain Eurodollar Loans either generally or having a particular Interest Period hereunder, then (a) such Lender shall promptly notify the Borrower and the Administrative Agent thereof and such Lender’s obligation to make such Eurodollar Loans shall

 

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be suspended (the “ Affected Loans ”) until such time as such Lender may again make and maintain such Eurodollar Loans and (b) all Affected Loans which would otherwise be made by such Lender shall be made instead as ABR Loans (and, if such Lender so requests by notice to the Borrower and the Administrative Agent, all Affected Loans of such Lender then outstanding shall be automatically converted into ABR Loans on the date specified by such Lender in such notice) and, to the extent that Affected Loans are so made as (or converted into) ABR Loans, all payments of principal which would otherwise be applied to such Lender’s Affected Loans shall be applied instead to its ABR Loans.

 

ARTICLE VI

Conditions Precedent

 

Section 6.01 Effective Date . The obligations of the Lenders to make Loans and of the Issuing Bank to issue Letters of Credit hereunder shall not become effective until the date on which each of the following conditions is satisfied (or waived in accordance with Section 12.02 or the last paragraph of this Section 6.01):

 

(a) The Administrative Agent, the Joint Lead Arrangers and the Lenders shall have received all commitment, facility and agency fees and all other fees and amounts due and payable on or prior to the Effective Date, including, to the extent invoiced, reimbursement or payment of all out-of-pocket expenses required to be reimbursed or paid by the Borrower hereunder.

 

(b) The Administrative Agent shall have received a certificate of the Secretary or an Assistant Secretary of the Borrower and each Guarantor setting forth (i) resolutions of its board of directors or members with respect to the authorization of the Borrower or such Guarantor to execute and deliver the Loan Documents to which it is a party and to enter into the transactions contemplated in those documents, (ii) the officers of the Borrower or such Guarantor (y) who are authorized to sign the Loan Documents to which the Borrower or such Guarantor is a party and (z) who will, until replaced by another officer or officers duly authorized for that purpose, act as its representative for the purposes of signing documents and giving notices and other communications in connection with this Agreement and the transactions contemplated hereby, (iii) specimen signatures of such authorized officers, and (iv) the Organizational Documents of the Borrower and such Guarantor, certified as being true and complete. The Administrative Agent and the Lenders may conclusively rely on such certificate until the Administrative Agent receives notice in writing from the Borrower to the contrary.

 

(c) The Administrative Agent shall have received certificates of the appropriate State agencies with respect to the existence, qualification and good standing of the Borrower and each Guarantor.

 

(d) The Administrative Agent shall have received a compliance certificate which shall be substantially in the form of Exhibit D, duly and properly executed by a Responsible Officer and dated as of the Effective Date.

 

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(e) The Administrative Agent shall have received from each party hereto counterparts (in such number as may be requested by the Administrative Agent) of this Agreement signed on behalf of such party.

 

(f) The Administrative Agent shall have received duly executed Notes payable to the order of each Lender that has requested a Note in a principal amount equal to its respective Commitment dated as of the date hereof.

 

(g) The Administrative Agent shall have received from each party thereto duly executed counterparts (in such number as may be requested by the Administrative Agent) of the Security Instruments, including the Guaranty Agreement. In connection with the execution and delivery of the Security Instruments, the Syndication Agent shall:

 

(i) be reasonably satisfied that the Security Instruments create first priority, perfected Liens (subject only to Excepted Liens identified in clauses (a) to (c) and (e) and (f) of the definition thereof but subject to the provisos at the end of such definition) on (A) the Equity Interests of the Subsidiaries of the Borrower, (B) the Drilling Rigs and Lift Boats, and (C) all other personal Property of the Borrower and the Subsidiaries for which a security interest can be perfected under the Uniform Commercial Code by the filing of a financing statement; and

 

(ii) have received certificates, if any, together with undated, blank stock or membership interest powers for each such certificate, representing all of the issued and outstanding Equity Interests of the Subsidiaries of the Borrower (which certificates shall promptly be delivered to the Administrative Agent by Syndication Agent).

 

(h) The Administrative Agent shall have received an opinion of (i) Baker Botts L.L.P., special counsel to the Borrower, substantially in the form of Exhibit E-1 hereto, and (ii) local counsel in each of the following jurisdictions: Panama and any other jurisdictions reasonably requested by the Syndication Agent, substantially in the form of Exhibit E-2.

 

(i) The Syndication Agent shall have received a certificate of insurance coverage of the Borrower evidencing that the Borrower is carrying insurance in accordance with Section 7.13.

 

(j) The Administrative Agent shall have received appropriate UCC or other relevant search certificates reflecting no prior Liens encumbering the Properties of the Borrower and the Subsidiaries for each of the following jurisdictions: Delaware, Panama and any other jurisdiction requested by the Syndication Agent; other than those being assigned or released on or prior to the Effective Date or Liens permitted by Section 9.03 (which search certificates shall be promptly delivered to Administrative Agent by Syndication Agent).

 

(k) The Administrative Agent shall have received a certificate of a Responsible Officer of the Borrower certifying that the Borrower has received all consents and approvals required by Section 7.03.

 

(l) The Administrative Agent shall have received the projections referred to in Section 7.04(a), together with a certificate of a Responsible Officer of the Borrower to the effect

 

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that such projections were prepared in good faith based upon assumptions believed to be reasonable at the time, and the Administrative Agent shall be satisfied that such projections are not materially inconsistent with the forecasts previously provided to the Joint Lead Arrangers.

 

(m) The Administration Agents shall have received reasonably satisfactory evidence (including an officer’s certificate accompanied by satisfactory supporting schedules and other data) that (x) the ratio of Total Debt of the Borrower as of the Effective Date to EBITDA of the Borrower for the twelve months ended on May 31, 2005, in each case calculated on a pro forma basis reasonably acceptable to the Joint Lead Arrangers, inclusive of the Jupiter acquisition, is not greater than 2.0 to 1.0. The Administrative Agent shall have received a solvency certificate from a Responsible Officer of the Borrower, in form and substance reasonably satisfactory to the Administrative Agent, confirming the solvency of the Borrower and the Guarantors, taken as a whole, after giving effect to the Transactions.

 

(n) The Syndication Agent shall have received, reviewed and been satisfied with, the following:

 

(i) title information as the Syndication Agent may reasonably require satisfactory to the Syndication Agent setting forth the status of title to the Borrower’s and its Subsidiaries’ personal Properties; and

 

(ii) information as the Syndication Agent may reasonably require regarding litigation, tax, accounting, labor, insurance, pension liabilities (actual or contingent), leases, material contracts, debt agreements, corporate organization, legal structure, contingent liabilities and management of the Borrower and its Subsidiaries.

 

(o) The Administrative Agent shall have received a letter from CT Corporation System evidencing the appointment of CT Corporation System as authorized agent for service of process on each of the Borrower and each Guarantor under each Loan Document to which it is a party.

 

(p) Concurrently with the initial funding of the Revolving Loans, the Borrower and the Guarantors shall have repaid the Existing Credit Agreements and all of the agreements evidencing and securing such Debt shall have been terminated and the related financing statements released, amended or assigned as required by the Administrative Agent.

 

(q) The Administrative Agent shall have received such other documents as the Administrative Agent or special counsel to the Administrative Agent may reasonably request.

 

The Administrative Agent shall notify the Borrower and the Lenders of the Effective Date, and such notice shall be conclusive and binding. Notwithstanding the foregoing, the obligations of the Lenders to make Loans and of the Issuing Bank to issue Letters of Credit hereunder shall not become effective unless each of the foregoing conditions is satisfied (or waived pursuant to Section 12.02 or deemed waived pursuant to the following provisions) at or prior to 2:00 p.m., New York City time, on July 6, 2005 (and, in the event such conditions are not so satisfied or waived, the Commitments shall terminate at such time); provided that upon the funding of the Term Loans and the initial Revolving Loans hereunder, the foregoing conditions

 

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in this Section 6.01 shall be deemed satisfied unless otherwise specified in writing by the Administrative Agent.

 

Section 6.02 Each Credit Event . The obligation of each Lender to make a Loan on the occasion of any Borrowing (including the initial funding), and of the Issuing Bank to issue, amend, renew or extend any Letter of Credit, is subject to the satisfaction of the following conditions:

 

(a) At the time of and immediately after giving effect to such Borrowing or the issuance, amendment, renewal or extension of such Letter of Credit, as applicable, no Default shall have occurred and be continuing.

 

(b) At the time of and immediately after giving effect to such Borrowing or the issuance, amendment, renewal or extension of such Letter of Credit, as applicable, no event, development or circumstance has occurred or shall then exist that has resulted in, or could reasonably be expected to have, a Material Adverse Effect.

 

(c) The representations and warranties of the Borrower and the Guarantors set forth in this Agreement and in the other Loan Documents shall be true and correct on and as of the date of such Borrowing or the date of issuance, amendment, renewal or extension of such Letter of Credit, as applicable, except to the extent any such representations and warranties are expressly limited to an earlier date.

 

(d) The making of such Loan or the issuance, amendment, renewal or extension of such Letter of Credit, as applicable, would not cause any Lender or the Issuing Bank to violate or exceed any applicable Governmental Requirement, and no Change in Law shall have occurred, and no litigation shall be pending or threatened, which does or, with respect to any threatened litigation, seeks to, enjoin, prohibit or restrain, the making or repayment of any Loan, the issuance, amendment, renewal, extension or repayment of any Letter of Credit or any participations therein or the consummation of the transactions contemplated by this Agreement or any other Loan Document.

 

(e) The receipt by the Administrative Agent of a Borrowing Request in accordance with Section 2.03 or a request for a Letter of Credit in accordance with Section 2.08(b), as applicable.

 

Each request for a Borrowing and each request for the issuance, amendment, renewal or extension of any Letter of Credit shall be deemed to constitute a representation and warranty by the Borrower on the date thereof as to the matters specified in Section 6.02(a) through (e).

 

ARTICLE VII

Representations and Warranties

 

The Borrower represents and warrants to the Lenders that:

 

Section 7.01 Organization; Powers . Each of the Borrower and the Subsidiaries is duly organized, validly existing and in good standing under the laws of the jurisdiction of its organization, has all requisite power and authority, and has all material governmental licenses,

 

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authorizations, consents and approvals necessary, to own its assets and to carry on its business as now conducted, and is qualified to do business in, and is in good standing in, every jurisdiction where such qualification is required, except where failure to have such power, authority, licenses, authorizations, consents, approvals and qualifications could not reasonably be expected to have a Material Adverse Effect.

 

Section 7.02 Authority; Enforceability . The Transactions are within the Borrower’s and each Guarantor’s limited liability company, corporate or partnership powers and have been duly authorized by all necessary limited liability company, corporate or partnership and, if required, member, shareholder or partner action (including, without limitation, any action required to be taken by any class of directors of the Borrower or any other Person, whether interested or disinterested, in order to ensure the due authorization of the Transactions). Each Loan Document to which the Borrower and each Guarantor is a party has been duly executed and delivered by the Borrower and such Guarantor and constitutes a legal, valid and binding obligation of the Borrower and such Guarantor, as applicable, enforceable in accordance with its 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.

 

Section 7.03 Approvals; No Conflicts . The Transactions (a) do not require any consent or approval of, registration or filing with, or any other action by, any Governmental Authority or any other third Person (including members, partners, shareholders or any class of directors, whether interested or disinterested, of the Borrower or any other Person), nor is any such consent, approval, registration, filing or other action necessary for the validity or enforceability of any Loan Document or the consummation of the transactions contemplated thereby, except such as have been obtained or made and are in full force and effect other than the recording and filing of the Security Instruments as required thereby or by this Agreement, (b) will not violate any applicable law or regulation or the organizational or governing documents of the Borrower or any Subsidiary or any order of any Governmental Authority, (c) will not violate or result in a default under any material indenture, agreement or other instrument binding upon the Borrower or any Subsidiary or its Properties, or give rise to a right thereunder to require any payment to be made by the Borrower or such Subsidiary and (d) will not result in the creation or imposition of any Lien on any Property of the Borrower or any Subsidiary (other than the Liens created by the Loan Documents).

 

Section 7.04 Financial Projections; No Material Adverse Change .

 

(a) The Borrower has heretofore furnished to the Lenders the Borrower’s consolidated projections for the period beginning the Effective Date and ending December 31, 2009. The Borrower’s consolidated projections were prepared in good faith based upon assumptions believed to be reasonable at the time. Such projections are not materially inconsistent with the projections previously provided to the Joint Lead Arrangers.

 

(b) The Administrative Agent shall have received a pro forma consolidated balance sheet of the Borrower as of the Effective Date, after giving effect to the Transactions, together with a certificate of a Responsible Officer of the Borrower to the effect that such statements present fairly, in all material respects, the pro forma financial position of the Borrower and its

 

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Subsidiaries in accordance with GAAP, subject to year-end audit adjustments and the absence of footnotes.

 

(c) The Borrower has heretofore furnished to the Lenders its consolidated balance sheet and statements of income, stockholders equity and cash flows (i) as of and for the fiscal year ended December 31, 2004, reported on by Grant Thornton LLP, independent public accountants, and (ii) as of and for the fiscal quarter and the portion of the fiscal year ended March 31, 2005, certified by its chief financial officer. Such financial statements present fairly, in all material respects, the financial position and results of operations and cash flows of the Borrower and its Consolidated Subsidiaries as of such dates and for such periods in accordance with GAAP, subject to year-end audit adjustments and the absence of footnotes in the case of the unaudited quarterly financial statements.

 

(d) Since December 31, 2004 there has been no event, development or circumstance that has had or could reasonably be expected to have a Material Adverse Effect.

 

(e) Neither the Borrower nor any Subsidiary has any material Debt (including Disqualified Capital Stock) or any contingent liabilities, off-balance sheet liabilities or partnerships, liabilities for taxes, unusual forward or long-term commitments or unrealized or anticipated losses from any unfavorable commitments, except for those arising with respect to the Transactions and those disclosed in the financial statements or other written materials delivered to the Administrative Agent and/or the Joint Lead Arrangers.

 

Section 7.05 Litigation .

 

(a) Except as set forth on Schedule 7.05, there are no actions, suits, investigations or proceedings by or before any arbitrator or Governmental Authority pending against or, to the knowledge of the Borrower, threatened against or affecting the Borrower or any Subsidiary or any of their Properties (i) as to which there is a reasonable possibility of an adverse determination that would reasonable be expected to have a Material Adverse Effect, or (ii) that involve any Loan Document or the Transactions.

 

(b) Since the date of this Agreement, there has been no change in the status of the matters disclosed in Schedule 7.05 that has resulted in, or would reasonably be expected to have, Material Adverse Effect.

 

Section 7.06 Environmental Matters . Except as could not be reasonably expected to have a Material Adverse Effect (or with respect to (c), (d) and (e) below, where the failure to take such actions could not be reasonably expected to have a Material Adverse Effect):

 

(a) neither any Property of the Borrower or any Subsidiary nor the operations conducted thereon violate any order or requirement of any court or Governmental Authority or any Environmental Laws.

 

(b) no Property of the Borrower or any Subsidiary nor the operations currently conducted thereon or, to the knowledge of the Borrower, by any prior owner or operator of such Property or operation, are in violation of or subject to any existing, pending or threatened action, suit, investigation, inquiry or proceeding by or before any court or Governmental Authority or to

 

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any remedial obligations under Environmental Laws, other than the asbestos remediation to be undertaken on the following vessels: Snapper, Pike, and Lorina.

 

(c) all notices, permits, licenses, exemptions, approvals or similar authorizations, if any, required to be obtained or filed in connection with the operation or use of any and all Property of the Borrower and each Subsidiary, including, without limitation, past or present treatment, storage, disposal or release of a hazardous substance, oil and gas waste or solid waste into the environment, have been duly obtained or filed, and the Borrower and each Subsidiary are in compliance with the terms and conditions of all such notices, permits, licenses and similar authorizations.

 

(d) all hazardous substances, solid waste and oil and gas waste, if any, generated at any and all Property of the Borrower or any Subsidiary have in the past been transported, treated and disposed of in accordance with Environmental Laws and so as not to pose an imminent and substantial endangerment to public health or welfare or the environment, and, to the knowledge of the Borrower, all such transport carriers and treatment and disposal facilities have been and are operating in compliance with Environmental Laws and so as not to pose an imminent and substantial endangerment to public health or welfare or the environment, and are not the subject of any existing, pending or threatened action, investigation or inquiry by any Governmental Authority in connection with any Environmental Laws.

 

(e) the Borrower has taken all steps reasonably necessary to determine and has determined that no oil, hazardous substances, solid waste or oil and gas waste, have been disposed of or otherwise released and there has been no threatened release of any oil, hazardous substances, solid waste or oil and gas waste on or to any Property of the Borrower or any Subsidiary except in compliance with Environmental Laws and so as not to pose an imminent and substantial endangerment to public health or welfare or the environment.

 

(f) to the extent applicable, all Property of the Borrower and each Subsidiary currently satisfies all design, operation, and equipment requirements imposed by the OPA, and the Borrower does not have any reason to believe that such Property, to the extent subject to the OPA, will not be able to maintain compliance with the OPA requirements during the term of this Agreement.

 

(g) neither the Borrower nor any Subsidiary has any known contingent liability or Remedial Work in connection with any release or threatened release of any oil, hazardous substance, solid waste or oil and gas waste into the environment.

 

Section 7.07 Compliance with the Laws and Agreements; No Defaults .

 

(a) Each of the Borrower and each Subsidiary is in compliance with all Governmental Requirements applicable to it or its Property and all agreements and other instruments binding upon it or its Property, except where the failure to do so, individually or in the aggregate, could not reasonably be expected to result in a Material Adverse Effect, and possesses all licenses, permits, franchises, exemptions, approvals and other governmental authorizations necessary for the ownership of its Property and the conduct of its business, except where the failure to do so,

 

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individually or in the aggregate, could not reasonably be expected to result in a Material Adverse Effect.

 

(b) Neither the Borrower nor any Subsidiary is in default nor has any event or circumstance occurred which, but for the expiration of any applicable grace period or the giving of notice, or both, would constitute a default or would require the Borrower or a Subsidiary to Redeem or make any offer to Redeem under any indenture, note, credit agreement or instrument pursuant to which any Material Indebtedness is outstanding or by which the Borrower or any Subsidiary or any of their Properties is bound.

 

(c) No Default has occurred and is continuing.

 

Section 7.08 Investment Company Act . Neither the Borrower nor any Subsidiary is an “investment company” or a company “controlled” by an “investment company,” within the meaning of, or subject to regulation under, the Investment Company Act of 1940, as amended.

 

Section 7.09 Public Utility Holding Company Act . Neither the Borrower nor any Subsidiary is a “holding company,” or a “subsidiary company” of a “holding company,” or an “affiliate” of a “holding company” or of a “subsidiary company” of a “holding company,” or a “public utility” within the meaning of, or subject to regulation under, the Public Utility Holding Company Act of 1935, as amended.

 

Section 7.10 Taxes . Each of the Borrower and its Subsidiaries has timely filed or caused to be filed all Tax returns and reports required to have been filed and has paid or caused to be paid all Taxes required to have been paid by it, except (a) Taxes that are being contested in good faith by appropriate proceedings and for which the Borrower or such Subsidiary, as applicable, has set aside on its books adequate reserves in accordance with GAAP or (b) to the extent that the failure to do so could not reasonably be expected to result in a Material Adverse Effect. The charges, accruals and reserves on the books of the Borrower and its Subsidiaries in respect of Taxes and other governmental charges are, in the reasonable opinion of the Borrower, adequate.

 

Section 7.11 ERISA .

 

(a) The Borrower, the Subsidiaries and each ERISA Affiliate have complied in all material respects with ERISA and, where applicable, the Code regarding each Plan.

 

(b) Each Plan is, and has been, maintained in substantial compliance with ERISA and, where applicable, the Code.

 

(c) No act, omission or transaction has occurred which could result in imposition on the Borrower, any Subsidiary or any ERISA Affiliate (whether directly or indirectly) of (i) either a material civil penalty assessed pursuant to subsections (c), (i) or (l) of section 502 of ERISA or a tax imposed pursuant to Chapter 43 of Subtitle D of the Code or (ii) material breach of fiduciary duty liability damages under section 409 of ERISA.

 

(d) No Plan (other than a defined contribution plan) or any trust created under any such Plan has been terminated since September 2, 1974. No liability to the PBGC (other than for

 

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the payment of current premiums which are not past due) by the Borrower, any Subsidiary or any ERISA Affiliate has been or is expected by the Borrower, any Subsidiary or any ERISA Affiliate to be incurred with respect to any Plan. No ERISA Event with respect to any Plan has occurred.

 

(e) Full payment when due has been made of all material amounts which the Borrower, the Subsidiaries or any ERISA Affiliate is required under the terms of each Plan or applicable law to have paid as contributions to such Plan as of the date hereof, and no accumulated funding deficiency (as defined in section 302 of ERISA and section 412 of the Code), whether or not waived, exists with respect to any Plan.

 

(f) The actuarial present value of the benefit liabilities under each Plan which is subject to Title IV of ERISA does not, as of the end of the Borrower’s most recently ended fiscal year, exceed the current value of the assets (computed on a plan termination basis in accordance with Title IV of ERISA) of such Plan allocable to such benefit liabilities. The term “actuarial present value of the benefit liabilities” shall have the meaning specified in section 4041 of ERISA.

 

(g) Neither the Borrower, the Subsidiaries nor any ERISA Affiliate sponsors, maintains, or contributes to an employee welfare benefit plan, as defined in section 3(1) of ERISA, including, without limitation, any such plan maintained to provide benefits to former employees of such entities, that may not be terminated by the Borrower, a Subsidiary or any ERISA Affiliate in its sole discretion at any time without any material liability.

 

(h) Neither the Borrower, the Subsidiaries nor any ERISA Affiliate sponsors, maintains or contributes to, or has at any time in the six-year period preceding the date hereof sponsored, maintained or contributed to, any Multiemployer Plan.

 

(i) Neither the Borrower, the Subsidiaries nor any ERISA Affiliate is required to provide security under section 401(a)(29) of the Code due to a Plan amendment that results in an increase in current liability for the Plan.

 

Section 7.12 Disclosure; No Material Misstatements . The Borrower has disclosed to the Agents all agreements, instruments and corporate or other restrictions to which it or any of its Subsidiaries is subject, and all other matters known to it, that, individually or in the aggregate, could reasonably be expected to result in a Material Adverse Effect. Neither the Information Memorandum nor any of the other reports, financial statements, certificates or other oral or written information furnished by the Borrower or any Subsidiary to the Agents or any of their Affiliates in connection with the negotiation of this Agreement or any other Loan Document or delivered hereunder or under any other Loan Document (as modified or supplemented by other information so furnished) contains any material misstatement of fact or omits to state any material fact necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading. As of the Effective Date, to the knowledge of the Borrower, there is no fact peculiar to the Borrower or any Subsidiary which could reasonably be expected to have a Material Adverse Effect or in the future is reasonably likely to have a Material Adverse Effect and which has not been set forth in this Agreement or the Loan Documents or the other documents, certificates and statements furnished to the Agents by or on

 

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behalf of the Borrower or any Subsidiary prior to, or on, the date hereof in connection with the transactions contemplated hereby.

 

Section 7.13 Insurance . The Borrower has, and has caused all of its Subsidiaries to have, (a) all insurance policies sufficient for the compliance by each of them with all material Governmental Requirements, all material agreements and all other Loan Documents and (b) insurance coverage in at least amounts and against such risk (including, without limitation, public liability) that are usually insured against by companies similarly situated and engaged in the same or a similar business for the assets and operations of the Borrower and its Subsidiaries. The Administrative Agent and the Lenders have been named in a manner such that they are afforded the stature of additional insureds in respect of such liability insurance policies and the Administrative Agent has been named as loss payee with respect to Property loss insurance.

 

Section 7.14 Restriction on Liens . Except as permitted by Section 9.16, neither the Borrower nor any of the Subsidiaries is a party to any material agreement or arrangement, or subject to any order, judgment, writ or decree, which either restricts or purports to restrict its ability to grant Liens to the Administrative Agent for the benefit of the Lenders on or in respect of their Properties to secure the Indebtedness and the Loan Documents.

 

Section 7.15 Subsidiaries . Except as set forth on Schedule 7.15 or as disclosed in writing to the Administrative Agent (which shall promptly furnish a copy to the Lenders), which shall be a supplement to Schedule 7.15, the Borrower has no Subsidiaries and each Subsidiary on such schedule is a Wholly-Owned Subsidiary. As of the Effective Date, the Borrower has no Foreign Subsidiaries.

 

Section 7.16 Location of Business and Offices . The Borrower’s jurisdiction of organization is Delaware; the name of the Borrower as listed in the public records of its jurisdiction of organization is Hercules Offshore, LLC; and the organizational identification number of the Borrower in its jurisdiction of organization is 3834166 (or, in each case, as set forth in a notice delivered to the Administrative Agent pursuant to Section 8.01(l) in accordance with Section 12.01). The Borrower’s principal place of business and chief executive offices are located at the address specified in Section 12.01 (or as set forth in a notice delivered pursuant to Section 8.01(l) and Section 12.01(c)). Each Subsidiary’s jurisdiction of organization, name as listed in the public records of its jurisdiction of organization, organizational identification number in its jurisdiction of organization, and the location of its principal place of business and chief executive office is stated on Schedule 7.15 (or as set forth in a notice delivered pursuant to Section 8.01(l)).

 

Section 7.17 Properties; Titles, Etc .

 

(a) Each of the Borrower and the Subsidiaries has good and defensible title to all of its material real Properties and good title to all of its material personal Properties, in each case, free and clear of all Liens except Liens permitted by Section 9.03.

 

(b) All material leases and agreements necessary for the conduct of the business of the Borrower and the Subsidiaries are valid and subsisting, in full force and effect, and there exists no default or event or circumstance which with the giving of notice or the passage of time

 

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or both would give rise to a default under any such lease or leases that could reasonably be expected to have a Material Adverse Effect.

 

(c) The rights and Properties presently owned, leased or licensed by the Borrower and the Subsidiaries including, without limitation, all easements and rights of way, include all rights and Properties necessary to permit the Borrower and the Subsidiaries to conduct their business in all material respects in the same manner as its business has been conducted prior to the date hereof.

 

(d) Except as set forth in Schedule 7.17, all of the material Properties of the Borrower and the Subsidiaries which are reasonably necessary for the operation of their businesses are in good working condition and are maintained in accordance with prudent business standards.

 

(e) The Borrower and each Subsidiary owns, or is licensed to use, all trademarks, tradenames, copyrights, patents and other intellectual Property material to its business, and the use thereof by the Borrower and such Subsidiary does not infringe upon the rights of any other Person, except for any such infringements that, individually or in the aggregate, could not reasonably be expected to result in a Material Adverse Effect. The Borrower and its Subsidiaries either own or have valid licenses or other rights to use all databases, geological data, geophysical data, engineering data, seismic data, maps, interpretations and other technical information used in their businesses as presently conducted, subject to the limitations contained in the agreements governing the use of the same, which limitations are customary for companies engaged in its line of business, with such exceptions as could not reasonably be expected to have a Material Adverse Effect.

 

Section 7.18 Maintenance of Properties . Except for such acts or failures to act as could not be reasonably expected to have a Material Adverse Effect, and other than with respect to the Properties described on Schedule 7.18, the Properties of the Borrower and its Subsidiaries have been maintained, operated and developed in a good and workmanlike manner and in conformity with all Government Requirements and in conformity with the provisions of all leases, subleases or other contracts comprising a part of their Properties and other contracts and agreements related thereto. Other than the Properties described on Schedule 7.18, all plants, platforms and other material improvements, fixtures and equipment owned in whole or in part by the Borrower or any of its Subsidiaries that are necessary to conduct normal operations are being maintained in a state adequate to conduct normal operations, and with respect to such of the foregoing which are operated by the Borrower or any of its Subsidiaries, in a manner consistent with practices of the industry and in compliance in all material respects with all applicable contracts, agreements and all Governmental Requirements.

 

Section 7.19 Swap Agreements . As of the Effective Date, Schedule 7.19 sets forth a true and complete list of all Swap Agreements of the Borrower and each Subsidiary, the material terms thereof (including the type, term, effective date, termination date and notional amounts or volumes), the net mark to market value thereof, all credit support agreements relating thereto (including any margin required or supplied) and the counterparty to each such agreement.

 

Section 7.20 Use of Proceeds . The proceeds of the Revolving Loans and the Letters of Credit shall be used for working capital and general corporate purposes of the Borrower and its

 

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Subsidiaries. The proceeds of the Term Loan shall be used to provide funding in connection with the acquisition of the Jupiter and its refurbishment, to refinance the Debt under the Existing Credit Agreements and to pay fees and expenses related to the foregoing. The Borrower and its Subsidiaries are not engaged principally, or as one of its or their important activities, in the business of extending credit for the purpose, whether immediate, incidental or ultimate, of buying or carrying margin stock (within the meaning of Regulation T, U or X of the Board). No part of the proceeds of the Term Loan will be used for any purpose which violates the provisions of Regulations T, U or X of the Board.

 

Section 7.21 Solvency . After giving effect to the transactions contemplated hereby, (a) the aggregate assets (after giving effect to amounts that could reasonably be received by reason of indemnity, offset, insurance or any similar arrangement), at a fair valuation, of the Borrower and the Guarantors, taken as a whole, will exceed the aggregate Debt of the Borrower and the Guarantors on a consolidated basis, as the Debt becomes absolute and matures, (b) each of the Borrower and the Guarantors will not have incurred or intended to incur, and will not believe that it will incur, Debt beyond its ability to pay such Debt (after taking into account the timing and amounts of cash to be received by each of the Borrower and the Guarantors and the amounts to be payable on or in respect of its liabilities, and giving effect to amounts that could reasonably be received by reason of indemnity, offset, insurance or any similar arrangement) as such Debt becomes absolute and matures and (c) each of the Borrower and the Guarantors will not have (and will have no reason to believe that it will have thereafter) unreasonably small capital for the conduct of its business.

 

Section 7.22 Charters and Contracts . Schedule 7.22, as of the date hereof, and after the date hereof, each report required to be delivered by the Borrower pursuant to Section 8.01(i), sets forth, a true and complete list of all drilling contracts and other revenue producing charters and contracts related to each Drilling Rig and Lift Boat and such other information relating to such contracts and charters as has been previously delivered to the Administrative Agent in similar reports.

 

ARTICLE VIII

Affirmative Covenants

 

Until the Commitments have expired or been terminated and the principal of and interest on each Loan and all fees payable hereunder and all other amounts payable under the Loan Documents shall have been paid in full and all Letters of Credit have expired, terminated or been cash collateralized to the reasonable satisfaction of the Issuing Bank and all LC Disbursements shall have been reimbursed,, the Borrower covenants and agrees with the Lenders that:

 

Section 8.01 Financial Statements; Ratings Change; Other Information . The Borrower will furnish to the Administrative Agent:

 

(a) Annual Financial Statements . As soon as available, but in any event in accordance with then applicable law and not later than 90 days after the end of each fiscal year of the Borrower, its audited consolidated balance sheet and related statements of operations, stockholders’ equity and cash flows as of the end of and for such year, setting forth in each case in comparative form the figures for the previous fiscal year, all reported on by independent

 

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public accountants of recognized national standing (without a “going concern” or like qualification or exception and without any qualification or exception as to the scope of such audit) to the effect that such consolidated financial statements present fairly in all material respects the financial condition and results of operations of the Borrower and its Consolidated Subsidiaries on a consolidated basis in accordance with GAAP.

 

(b) Quarterly Financial Statements . As soon as available, but in any event in accordance with then applicable law and not later than 45 days after the end of each of the first three fiscal quarters of each fiscal year of the Borrower, its consolidated balance sheet and related statements of operations, stockholders’ equity and cash flows as of the end of and for such fiscal quarter and the then elapsed portion of the fiscal year, setting forth in each case in comparative form the figures for the corresponding period or periods of (or, in the case of the balance sheet, as of the end of) the previous fiscal year, all certified by one of its Financial Officers as presenting fairly in all material respects the financial condition and results of operations of the Borrower and its Consolidated Subsidiaries on a consolidated basis in accordance with GAAP, subject to normal year-end audit adjustments and the absence of footnotes.

 

(c) Certificate of Financial Officer — Compliance . Concurrently with any delivery of financial statements under Section 8.01(a) or Section 8.01(b), a certificate of a Financial Officer in substantially the form of Exhibit D hereto (i) certifying as to whether a Default exists and, if a Default exists, specifying the details thereof and any action taken or proposed to be taken with respect thereto and (ii) setting forth reasonably detailed calculations of Excess Cash Flow (for the period ending December 31) and demonstrating compliance with Section 9.01.

 

(d) [Intentionally omitted] .

 

(e) Certificate of Insurer – Insurance Coverage . Concurrently with any delivery of financial statements under Section 8.01(a), a certificate of insurance coverage from each insurer with respect to the insurance required by Section 8.07, in form and substance reasonably satisfactory to the Administrative Agent, and, if requested by the Administrative Agent, all copies of the applicable policies.

 

(f) Other Accounting Reports . Promptly upon receipt thereof, a copy of each other report or letter submitted to the Borrower or any of its Subsidiaries by independent accountants in connection with any annual, interim or special audit made by them of the books of the Borrower or any such Subsidiary, and a copy of any response by the Borrower or any such Subsidiary, or the Board of Directors of the Borrower or any such Subsidiary, to such letter or report.

 

(g) SEC and Other Filings; Reports to Shareholders . Promptly after the same become publicly available, copies of all periodic and other reports, proxy statements and other materials filed by the Borrower or any Subsidiary with the SEC, or with any national securities exchange, or distributed by the Borrower to its shareholders generally, as the case may be.

 

(h) Notices Under Material Instruments . Promptly after the furnishing thereof, copies of any financial statement, material report or material notice furnished to or by any Person

 

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pursuant to the terms of any preferred stock designation, indenture, loan or credit or other similar agreement in respect of Material Indebtedness, other than this Agreement and not otherwise required to be furnished to the Administrative Agent pursuant to any other provision of this Section 8.01.

 

(i) Charter Report . Concurrently with any delivery of financial statements under Section 8.01(a) and Section 8.01(b), a report, in form and substance reasonably satisfactory to the Administrative Agent, setting forth for the immediately preceding fiscal quarter, with respect to each Drilling Rig, Lift Boat and other vessel of the Borrower or any of its Subsidiaries, all drilling contracts and other revenue producing charters and contracts related to such Drilling Rig, Lift Boat or such other information related to such charter or contract as the Administrative Agent may reasonably request.

 

(j) [Intentionally Omitted.]

 

(k) Notice of Casualty Events . Prompt written notice, and in any event within ten Business Days, of the occurrence of any Casualty Event or the commencement of any action or proceeding that could reasonably be expected to result in a Casualty Event; provided that such loss, casualty or other insured damage is in excess of $1,000,000.

 

(l) Information Regarding Borrower and Guarantors . Prompt written notice (and in any event within three (3) Business Days prior thereto) of any change (i) in the Borrower or any Guarantor’s corporate name, (ii) in the location of the Borrower or any Guarantor’s chief executive office or principal place of business, (iii) in the Borrower or any Guarantor’s identity or corporate structure or in the jurisdiction in which such Person is incorporated or formed, (iv) in the Borrower or any Guarantor’s jurisdiction of organization or such Person’s organizational identification number in such jurisdiction of organization, and (v) in the Borrower or any Guarantor’s federal taxpayer identification number.

 

(m) [Intentionally Omitted.]

 

(n) Other Requested Information . Promptly following any request therefor, such other information regarding the operations, business affairs and financial condition of the Borrower or any Subsidiary (including, without limitation, any Plan or Multiemployer Plan and any reports or other information required to be filed under ERISA), or compliance with the terms of this Agreement or any other Loan Document, as the Administrative Agent or any Lender through the Administrative Agent may reasonably request.

 

Section 8.02 Notices of Material Events . The Borrower will furnish to the Administrative Agent prompt written notice of the following:

 

(a) the occurrence of any Default;

 

(b) the filing or commencement of, or the threat in writing of, any action, suit, proceeding, investigation or arbitration by or before any arbitrator or Governmental Authority against or affecting the Borrower or any Affiliate thereof not previously disclosed in writing to the Administrative Agent or any material adverse development in any action, suit, proceeding, investigation or arbitration (whether or not previously disclosed to the Administrative Agent)

 

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that, in either case, if adversely determined, could reasonably be expected to result in liability in excess of $3,000,000;

 

(c) the occurrence of any ERISA Event that, alone or together with any other ERISA Events that have occurred, could reasonably be expected to result in liability of the Borrower and its Subsidiaries in an aggregate amount exceeding $1,000,000; and

 

(d) any other development that results in, or could reasonably be expected to result in, a Material Adverse Effect.

 

Each notice delivered under this Section 8.02 shall be accompanied by a statement of a Responsible Officer of the Borrower setting forth the details of the event or development requiring such notice and any action taken or proposed to be taken with respect thereto.

 

Section 8.03 Existence; Conduct of Business . Except as permitted by Section 9.11 and Section 9.12, the Borrower will, and will cause each Subsidiary to, do or cause to be done all things necessary to preserve, renew and keep in full force and effect (a) its legal existence and (b) the rights, licenses, permits, privileges and franchises material to the conduct of its business and maintain, if necessary, its qualification to do business in each other jurisdiction in which its Properties is located or the ownership of its Properties requires such qualification, except where the failure to do so could not reasonably be expected to have a Material Adverse Effect.

 

Section 8.04 Payment of Obligations . The Borrower will, and will cause each Subsidiary to, pay its obligations, including Tax liabilities of the Borrower and all of its Subsidiaries before the same shall become delinquent or in default, except where (a) the validity or amount thereof is being contested in good faith by appropriate proceedings and the Borrower or such Subsidiary has set aside on its books adequate reserves with respect thereto in accordance with GAAP or (b) the failure to make payment could not reasonably be expected to result in a Material Adverse Effect or result in the seizure or levy of any Property of the Borrower or any Subsidiary.

 

Section 8.05 Performance of Obligations under Loan Documents . The Borrower will pay the Notes according to the reading, tenor and effect thereof, and the Borrower will, and will cause each Subsidiary to, do and perform every act and discharge all of the obligations to be performed and discharged by them under the Loan Documents, including, without limitation, this Agreement, at the time or times and in the manner specified.

 

Section 8.06 Operation and Maintenance of Properties . The Borrower, at its own expense, will, and will cause each Subsidiary to:

 

(a) operate its Properties or cause such Properties to be operated in a careful and efficient manner in accordance with the practices of the industry and in compliance with all applicable contracts and agreements and in compliance with all Governmental Requirements, including, without limitation, Environmental Laws, and all applicable laws, rules and regulations of every other Governmental Authority from time to time constituted to regulate the development and operation of its Properties, except, in each case, where the failure to comply could not reasonably be expected to have a Material Adverse Effect.

 

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(b) preserve, maintain and keep in good repair, working order and efficiency (ordinary wear and tear excepted) all of its Properties, including, without limitation, all vessels, rigs, equipment, machinery and facilities, except, in each case, where the failure to do so could not reasonably be expected to have a Material Adverse Effect.

 

(c) promptly pay and discharge, or make reasonable and customary efforts to cause to be paid and discharged, all rentals, royalties, expenses and indebtedness accruing under the leases or other agreements affecting or pertaining to its Properties and will do all other things necessary to keep unimpaired their rights with respect thereto and prevent any forfeiture thereof or default thereunder except, in each case, where the failure to comply could not reasonably be expected to have a Material Adverse Effect.

 

(d) promptly perform or make reasonable and customary efforts to cause to be performed, in accordance with industry standards, the obligations required by each and all of the assignments, deeds, leases, sub-leases, contracts and agreements affecting its interests in its Properties except, in each case, where the failure to comply could not reasonably be expected to have a Material Adverse Effect.

 

(e) to the extent the Borrower is not the operator of any of its Property, the Borrower shall use reasonable efforts to cause the operator to comply with this Section 8.06.

 

Section 8.07 Insurance . The Borrower will, and will cause each Subsidiary to, maintain, with financially sound and reputable insurance companies, insurance in such amounts and against such risks as are customarily maintained by companies engaged in the same or similar businesses operating in the same or similar locations, but in any event as required by applicable law and the other Loan Documents. The loss payable clauses or provisions in said insurance policy or policies insuring any of the collateral for the Loans shall be endorsed in favor of and made payable to the Administrative Agent as its interests may appear and such policies shall name the Administrative Agent and the Lenders in a manner such that they are afforded the stature of “additional insureds” and provide that the insurer will endeavor to give at least 30 days prior notice of any cancellation to the Administrative Agent.

 

Section 8.08 Books and Records; Inspection Rights . The Borrower will, and will cause each Subsidiary to, keep proper books of record and account in which full, true and correct entries are made of all dealings and transactions in relation to its business and activities. The Borrower will, and will cause each Subsidiary to, permit any representatives designated by the Administrative Agent or any of the Lenders, upon reasonable prior notice, to visit and inspect its Properties, to examine and make extracts from its books and records, and to discuss its affairs, finances and condition with its officers and independent accountants, all at such reasonable times and as often as reasonably requested.

 

Section 8.09 Compliance with Laws . The Borrower will, and will cause each Subsidiary to, comply with all laws, rules, regulations and orders of any Governmental Authority applicable to it or its Property, except where the failure to do so, individually or in the aggregate, could not reasonably be expected to result in a Material Adverse Effect.

 

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Section 8.10 Environmental Matters .

 

(a) Except where the failure to do so could not reasonably be expected to have a Material Adverse Effect, the Borrower shall at its sole expense: (i) comply, and shall cause its Properties and operations and each Subsidiary and each Subsidiary’s Properties and operations to comply, with all applicable Environmental Laws; (ii) not dispose of or otherwise release, and shall cause each Subsidiary not to dispose of or otherwise release, any oil, oil and gas waste, hazardous substance, or solid waste on, under, about or from any of the Borrower’s or its Subsidiaries’ Properties or any other Property to the extent caused by the Borrower’s or any of its Subsidiaries’ operations except in compliance with applicable Environmental Laws; (iii) timely obtain or file, and shall cause each Subsidiary to timely obtain or file, all notices, permits, licenses, exemptions, approvals, registrations or other authorizations, if any, required under applicable Environmental Laws to be obtained or filed in connection with the operation or use of the Borrower’s or its Subsidiaries’ Properties; (iv) promptly commence and diligently prosecute to completion, and shall cause each Subsidiary to promptly commence and diligently prosecute to completion, any assessment, evaluation, investigation, monitoring, containment, cleanup, removal, repair, restoration, remediation or other remedial obligations (collectively, the “ Remedial Work ”) in the event any Remedial Work is required or reasonably necessary under applicable Environmental Laws because of or in connection with the actual or suspected past, present or future disposal or other release of any oil, oil and gas waste, hazardous substance or solid waste on, under, about or from any of the Borrower’s or its Subsidiaries’ Properties; and (v) establish and implement, and shall cause each Subsidiary to establish and implement, such procedures as may be necessary to continuously determine and assure that the Borrower’s and its Subsidiaries’ obligations under this Section 8.10(a) are timely and fully satisfied.

 

(b) The Borrower will promptly, but in no event later than five days after the occurrence thereof, notify the Administrative Agent in writing of any threatened action, investigation or inquiry by any Governmental Authority or any threatened demand or lawsuit by any landowner or other third party against the Borrower or its Subsidiaries or their Properties of which the Borrower has knowledge in connection with any Environmental Laws (excluding routine testing and corrective action) if the Borrower reasonably anticipates that such action will result in liability (whether individually or in the aggregate) in excess of $3,000,000, not fully covered by insurance, subject to normal deductibles.

 

Section 8.11 Further Assurances .

 

(a) The Borrower at its sole expense will, and will cause each Subsidiary to, promptly execute and deliver to the Administrative Agent, all such other documents, agreements and instruments reasonably requested by the Administrative Agent to comply with, cure any defects or accomplish the conditions precedent, covenants and agreements of the Borrower or any Subsidiary, as the case may be, in the Loan Documents, including the Notes, or to further evidence and more fully describe the collateral intended as security for the Indebtedness, or to correct any omissions in this Agreement or the Security Instruments, or to state more fully the obligations secured therein, or to perfect, protect or preserve any Liens created pursuant to this Agreement or any of the Security Instruments or the priority thereof, or to make any recordings, file any notices or obtain any consents, all as may be reasonably necessary or appropriate, in the sole reasonable discretion of the Administrative Agent, in connection therewith.

 

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(b) The Borrower hereby authorizes the Administrative Agent to file one or more financing or continuation statements, and amendments thereto, relative to all or any part of its Property without the signature of the Borrower or any other Guarantor where permitted by law. A carbon, photographic or other reproduction of the Security Instruments or any financing statement covering its Property or any part thereof shall be sufficient as a financing statement where permitted by law.

 

Section 8.12 Credit Support; Collateral .

 

(a) The Borrower shall promptly cause each Material Subsidiary (whether now in existence or hereafter created, acquired or coming into existence), but no later than five days after such Subsidiary has been created, acquired or otherwise comes into existence, to absolutely and unconditionally guarantee the timely payment of the Indebtedness pursuant to the Guaranty Agreement; in connection therewith, the Borrower shall, or shall cause such Subsidiary to, (i) execute and deliver the Guaranty Agreement or a supplement to the Guaranty Agreement as required by the Administrative Agent, (ii) pledge all of the Equity Interests of such Subsidiary (including, if certificated, delivery of original stock or membership interest certificates evidencing the Equity Interests of such Subsidiary, together with an appropriate undated stock or membership interest powers for each certificate duly executed in blank by the registered owner thereof), (iii) execute and deliver a Security Agreement, together with any and all applicable financing statements, and (iv) execute and deliver such other additional closing documents, certificates and legal opinions as shall be reasonably requested by the Administrative Agent.

 

(b) The Borrower will at all times cause all of the Drilling Rigs, Lift Boats and other personal Properties of the Borrower and each Material Subsidiary for which a security interest can be perfected under the Uniform Commercial Code by the filing of a financing statement and other property of Borrower and its Material Subsidiaries reasonably requested by the Administrative Agent to be subject to a Lien pursuant to Security Instruments, in form and substance satisfactory to the Administrative Agent. In order to comply with the foregoing, the Borrower shall, and shall promptly cause each Material Subsidiary (whether now in existence or hereafter created, acquired or coming into existence), but no later than five days after such Subsidiary has been created, acquired or otherwise comes into existence, to execute and deliver First Naval Ship Mortgages, Fleet Mortgages or other types of mortgages, and such other Security Instruments, other additional closing documents, certificates and legal opinions as shall be reasonably requested by the Administrative Agent.

 

Section 8.13 ERISA Compliance . The Borrower will promptly furnish and will cause the Subsidiaries and any ERISA Affiliate to promptly furnish to the Administrative Agent (i) promptly after the filing thereof with the United States Secretary of Labor, the Internal Revenue Service or the PBGC, copies of each annual and other report with respect to each Plan or any trust created thereunder, (ii) immediately upon becoming aware of the occurrence of any ERISA Event or of any material “prohibited transaction,” as described in section 406 of ERISA or in section 4975 of the Code, in connection with any Plan or any trust created thereunder, a written notice signed by the President or the principal Financial Officer, the Subsidiary or the ERISA Affiliate, as the case may be, specifying the nature thereof, what action the Borrower, the Subsidiary or the ERISA Affiliate is taking or proposes to take with respect thereto, and, when known, any action taken or proposed by the Internal Revenue Service, the Department of Labor

 

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or the PBGC with respect thereto, and (iii) immediately upon receipt thereof, copies of any notice of the PBGC’s intention to terminate or to have a trustee appointed to administer any Plan. With respect to each Plan (other than a Multiemployer Plan), the Borrower will, and will cause each Subsidiary and ERISA Affiliate to, (A) satisfy in full and in a timely manner, without incurring any late payment or underpayment charge or penalty and without giving rise to any lien, all of the contribution and funding requirements of section 412 of the Code (determined without regard to subsections (d), (e), (f) and (k) thereof) and of section 302 of ERISA (determined without regard to sections 303, 304 and 306 of ERISA), and (B) pay, or cause to be paid, to the PBGC in a timely manner, without incurring any late payment or underpayment charge or penalty, all premiums required pursuant to sections 4006 and 4007 of ERISA.

 

Section 8.14 Vessel Information . On or before July 30th of each year, commencing July 30, 2005, the Borrower shall furnish to the Administrative Agent (a) the class certificates required by Section 1.11 of the First Naval Ship Mortgages and the Fleet Mortgages, and (b) the insurance certificate required by Section 1.15(g) of the First Naval Ship Mortgages and the Fleet Mortgages.

 

Section 8.15 Hedging Contracts . On or before forty-five (45) days after the Effective Date, the Borrower shall enter into a Swap Agreement satisfactory to the Administrative Agent with the purpose and effect of fixing interest rates on the Term Loan, that is accruing interest at a variable rate, provided that (a) the aggregate notional amount of such contracts shall be at least fifty percent (50%) of the anticipated outstanding principal balance of the indebtedness to be hedged by such contracts or an average of such principal balances calculated using a generally accepted method of matching interest swap contracts to declining principal balances, (b) the floating rate index of each such contract generally matches the index used to determine the floating rates of interest on the corresponding indebtedness to be hedged by such contract and (c) each such contract is with an Approved Counterparty.

 

ARTICLE IX

Negative Covenants

 

Until the Commitments have expired or terminated and the principal of and interest on each Loan and all fees payable hereunder and all other amounts payable under the Loan Documents shall have been paid in full and all Letters of Credit have expired, terminated or been cash collateralized to the reasonable satisfaction of the Issuing Bank and all LC Disbursements shall have been reimbursed, the Borrower covenants and agrees with the Lenders that:

 

Section 9.01 Financial Covenants .

 

(a) Interest Coverage Ratio . The Borrower will not, as of the last day of any fiscal quarter commencing with the quarter ending on September 30, 2005, permit its ratio of EBITDA for the period of four fiscal quarters then ending to Interest Expense for such period to be less than 3.5 to 1.0.

 

(b) Leverage Ratio . The Borrower will not, as of the last day of any fiscal quarter commencing with the quarter ending on September 30, 2005, permit its ratio of Total Debt as of

 

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such day to EBITDA for the four fiscal quarters ending on such day to be greater than 3.75 to 1.0.

 

Section 9.02 Debt . The Borrower will not, and will not permit any Subsidiary to, incur, create, assume or suffer to exist any Debt, except:

 

(a) the Indebtedness;

 

(b) accounts payable and accrued expenses, liabilities or other obligations to pay the deferred purchase price of Property or services, from time to time incurred in the ordinary course of business which are not greater than ninety (90) days past the date of invoice or which are being contested in good faith by appropriate action and for which adequate reserves have been maintained in accordance with GAAP.

 

(c) Debt associated with bonds or surety obligations required by Governmental Requirements and performance bonds issued in connection with the operation of its Properties in the ordinary course of its business;

 

(d) endorsements of negotiable instruments for collection in the ordinary course of business;

 

(e) Debt existing on the Effective Date and described in Schedule 9.02 attached hereto;