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The following is an excerpt from a S-1 SEC Filing, filed by IRI INTERNATIONAL CORP on 9/8/1997.
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IRI INTERNATIONAL CORP - S-1 - 19970908 - UNDERWRITING

UNDERWRITING

Under the terms of, and subject to the conditions contained in, the U.S. Underwriting Agreement, the U.S. Underwriters, for whom Lehman Brothers Inc., Howard, Weil, Labouisse, Friedrichs Incorporated, Prudential Securities Incorporated and Credit Lyonnais Securities (USA) Inc. are acting as representatives (the "Representatives"), have severally agreed to purchase from the Company and the Selling Stockholders, and the Company and the Selling Stockholders have agreed to sell to each U.S. Underwriter, the aggregate number of shares of Common Stock set forth opposite the name of each U.S. Underwriter below:

                                                              NUMBER OF
                        UNDERWRITER                            SHARES
                        -----------                           ---------
Lehman Brothers Inc. .......................................
Howard, Weil, Labouisse, Friedrichs Incorporated............
Prudential Securities Incorporated..........................
Credit Lyonnais Securities (USA), Inc. .....................

                                                              ---------
          Total.............................................  9,600,000
                                                              =========

Under the terms of, and subject to the conditions contained in, the International Underwriting Agreement, the International Managers, for whom Lehman Brothers International (Europe), Credit Lyonnais Securities, Howard, Weil, Labouisse, Friedrichs Incorporated and Prudential-Bache Securities (U.K.) Inc. are acting as representatives (the "Lead Managers"), have severally agreed to purchase from the Company and the Selling Stockholders, and the Company and the Selling Stockholders have agreed to sell to each International Manager, the aggregate number of shares of Common Stock set forth opposite the name of each International Manager below:

                                                              NUMBER OF
                   INTERNATIONAL MANAGERS                      SHARES
                   ----------------------                     ---------
Lehman Brothers International (Europe)......................
Credit Lyonnais Securities..................................
Howard, Weil, Labouisse, Friedrichs Incorporated............
Prudential-Bache Securities (U.K.) Inc. ....................

                                                              ---------
          Total.............................................  2,400,000
                                                              =========

48

The U.S. Underwriters and the International Managers (collectively, the "Underwriters") propose to offer the shares to the public at the initial public offering price set forth on the cover page of this Prospectus, and to certain selected dealers (who may include the U.S. Underwriters and the International Managers) at such price, less a selling concession not in excess of $ per share. The U.S. Underwriters and the International Managers may allow, and such dealers may re-allow, a concession not in excess of $ per share to certain other Underwriters or to certain other brokers and dealers. After the initial offering to the public, the offering price and other selling terms may be changed by the Representatives and the Lead Managers.

The U.S. Underwriting Agreement and the International Underwriting Agreement (collectively, the "Underwriting Agreements") provide that the obligations of the several U.S. Underwriters and the International Managers, respectively, to pay for and accept delivery of the shares of Common Stock offered hereby are subject to the approval of certain legal matters by counsel and certain other conditions. The nature of the U.S. Underwriters' and the International Managers' obligations is such that, if any of the shares of Common Stock are purchased by the U.S. Underwriters pursuant to the U.S. Underwriting Agreement or by the International Managers pursuant to the International Underwriting Agreement, all the shares of Common Stock agreed to be purchased by either the U.S. Underwriters or the International Managers, as the case may be, pursuant to their respective Underwriting Agreements, must be so purchased. The initial public offering price and underwriting discounts and commissions for the U.S. Offering and the International Offering are identical. The closing of the U.S. Offering is a condition to the closing of the International Offering. The closing of the International Offering is a condition to the closing of the U.S. Offering.

The Company and the Selling Stockholders have agreed in the Underwriting Agreements to indemnify the U.S. Underwriters and the International Managers against certain liabilities, including liabilities under the Securities Act, and to contribute to payments that the U.S. Underwriters and the International Managers may be required to make in respect thereof.

Each of the Company and the Selling Stockholders has granted to the U.S. Underwriters a 30-day option to purchase up to 720,000 additional shares on the same terms and conditions as set forth above to cover over-allotments, if any. Each of the Company and the Selling Stockholders has granted to the International Managers a similar option to purchase up to 180,000 additional shares to cover over-allotments, if any. To the extent that such options are exercised, each Underwriter will be committed, subject to certain conditions, to purchase a number of the additional shares of Common Stock proportionate to such Underwriter's initial commitment, as indicated in the preceding tables.

The U.S. Underwriters and the International Managers have entered into an Agreement Between U.S. Underwriters and International Managers (the "Agreement Between") pursuant to which each U.S. Underwriter has agreed that, as part of the distribution of the shares of Common Stock (plus any of the shares of Common Stock to cover over-allotments) offered in the U.S. Offering, (a) it is not purchasing any of such shares for the account of anyone other than a U.S. or Canadian Person (as defined below) and (b) it has not offered or sold, and will not offer, sell, resell or deliver, directly or indirectly, any of such shares outside the United States or Canada or to anyone other than a U.S. or Canadian Person. In addition, pursuant to the Agreement Between, each International Manager has agreed that, as part of the distribution of the shares of Common Stock (plus any of the shares of Common Stock to cover over-allotments) offered in the International Offering, (a) it is not purchasing any of such shares for the account of any U.S. or Canadian Person and (b) it has not offered or sold, and will not offer, sell, resell or deliver, directly or indirectly, any of such shares in the United States or Canada or to any U.S. or Canadian Person. Each International Manager has also agreed that it will offer to sell shares of Common Stock only in compliance with all relevant requirements of any applicable laws.

As used herein, "U.S. or Canadian Person" means any resident or citizen of the United States or Canada, any corporation, partnership or other entity created or organized in or under the laws of the United States or Canada or any political subdivision thereof or any estate or trust, the income of which is subject to United States federal income taxation or Canadian income taxation regardless of the source of income (other than a foreign branch of any U.S. or Canadian Person), and includes any United States or Canadian branch of a

49

person who is not otherwise a U.S. or Canadian Person. The term "United States" means the United States of America (including the District of Columbia) and its territories, possessions and other areas subject to its jurisdiction. The term "Canada" means Canada, its provinces, territories and possessions and other areas subject to its jurisdiction.

The foregoing limitations do not apply to stabilization transactions or to certain other transactions specified in the Underwriting Agreements and the Agreement Between, including: (i) certain purchases and sales between the U.S. Underwriters and the International Managers; (ii) certain offers, sales, resales, deliveries or distributions to or through investment advisors or other persons exercising investment discretion; (iii) purchases, offers or sales by a U.S. Underwriter who is also acting as an International Manager or by an International Manager who also is acting as a U.S. Underwriter; and (iv) other transactions specifically approved by the Representatives and the Lead Managers.

Pursuant to the Agreement Between, sales may be made between the U.S. Underwriters and the International Managers of such number of shares of Common Stock as may be mutually agreed upon. Unless otherwise agreed, the price of any shares of Common Stock so sold shall be the public offering price then in effect for the shares of Common Stock being sold by the U.S. Underwriters and the International Managers, less the selling concession allocable to such shares. To the extent that there are sales between the U.S. Underwriters and the International Managers pursuant to the Agreement Between, the number of shares initially available for sale by the U.S. Underwriters or by the International Managers may be more or less than the amount specified on the cover page of this Prospectus.

This Prospectus is not, and under no circumstances is to be construed as, an advertisement or a public offering of shares of Common Stock in Canada or any province or territory thereof. Any offer or sale of shares of Common Stock in Canada may only be made pursuant to an exemption from the requirement to file a prospectus in the province or territory of Canada in which such offer or sale is made.

Each International Manager has represented and agreed that: (i) it has not offered or sold and, prior to the date six months after the latest closing date, will not offer or sell any shares of Common Stock to persons in the United Kingdom except to persons whose ordinary activities involve them in acquiring, holding, managing or disposing of investments (as principal or agent) for the purposes of their businesses or otherwise in circumstances which have not resulted and will not result in an offer to the public in the United Kingdom within the meaning of the Public Offers of Securities Regulations 1995; (ii) it has complied and will comply with all applicable provisions of the Financial Services Act 1986 (the "1986 Act") with respect to anything done by it in relation to the shares of Common Stock in, from or otherwise involving the United Kingdom; and (iii) it has only issued or passed on, and will only issue or pass on, to any person in the United Kingdom any investment advertisement (within the meaning of the 1986 Act) relating to the shares of Common Stock if that person falls within Article II(3) of the Financial Services Act 1986 (Investment Advertisements) (Exemptions) Order 1996 or is a person to whom such document may otherwise lawfully be issued or passed on.

No action has been taken or will be taken in any jurisdiction by the Company, the Selling Stockholders or the Underwriters that would permit a public offering of shares of Common Stock in any jurisdiction where action for that purpose is required, other than the United States. Persons into whose possession this Prospectus comes are required by the Company, the Selling Stockholders and the Underwriters to inform themselves about, and to observe any restrictions as to, the offering of shares of Common Stock offered pursuant to the Offering and the distribution of this Prospectus.

Purchasers of the shares of Common Stock offered hereby may be required to pay stamp taxes and other charges in accordance with the laws and practices of the country of purchase in addition to the offering price set forth on the cover page hereof.

The Company and each of its stockholders have agreed, for a period of 180 days from the date of this Prospectus, not to, directly or indirectly, offer, sell or otherwise dispose of (or enter into any transaction or device which is designed to, or could be expected to, result in the disposition by any person at any time in the future of) any Common Stock of the Company, or sell or grant options, rights or warrants with respect to any

50

Common Stock of the Company, without the prior written consent of Lehman Brothers Inc. on behalf of the Representatives and the Lead Managers.

Prior to this Offering, there has been no public market for the Common Stock. The initial public offering price will be negotiated among the Company, the Selling Stockholders, the Representatives and the Lead Managers. Among the factors considered in determining the initial public offering price of the Common Stock, in addition to prevailing market conditions, are recent financial and operating results of the Company, the proposed capital structure, assets and liabilities of the Company, estimates of the business potential and earnings prospects of the Company, the prospects for the industry in which the Company operates, an assessment of the Company's management, consideration of the above factors in relation to market valuation of companies in related businesses and other factors deemed relevant. Additionally, consideration was given to the general status of the securities markets, the market conditions for new offerings of securities, the demand for similar securities of publicly traded companies in related businesses and other relevant factors. The initial public offering price set forth on the cover page of this Prospectus should not, however, be considered an indication of the actual value of the Common Stock. Such price will be subject to change as a result of market conditions and other factors. There can be no assurance that an active trading market will develop for the Common Stock or that the Common Stock will trade in the public market subsequent to the Offering at or above the initial public offering price.

At June 30, 1997, Lehman Commercial Paper Inc. and Strategic Resource Partners Inc., each an affiliate of Lehman Brothers Inc., in the aggregate owned 10% or more of the outstanding subordinated debt of the Company. As a result of such ownership, the National Association of Securities Dealers, Inc. ("NASD") may view this offering as a participation by Lehman Brothers in the distribution in a public offering of securities issued by a company with which Lehman Brothers has a conflict of interest. As a result, this offering is being made pursuant to the provisions of Rule 2720 of the NASD's Conduct Rules. Such provisions require, among other things, that the initial public offering price be no higher than that recommended by a "qualified independent underwriter," who must participate in the preparation of the registration statement and the prospectus and who must exercise the usual standards of "due diligence" with respect thereto. Prudential Securities Incorporated is acting as a qualified independent underwriter in this Offering, and the initial public offering price of the shares is not higher than the price recommended by Prudential Securities Incorporated, which price was determined based on the factors discussed above. In accordance with such Rule 2720, the U.S. Underwriters and the International Managers will not make sales of shares of Common Stock offered hereby to customers' discretionary accounts without the prior specific written approval of such customers.

In connection with its roles as Advisor, Arranger and Syndication Agent under the Senior Credit Facility, Lehman Commercial Paper Inc., an affiliate of Lehman Brothers Inc., was paid customary fees. In connection with its role as an interim lender under the Senior Notes Agreement, Strategic Resource Partners, an affiliate of Lehman Brothers Inc., was paid customary fees.

Until the distribution of the Common Stock is completed, rules of the Securities and Exchange Commission may limit the ability of the Underwriters and certain selling group members to bid for and purchase shares of Common Stock. As an exception to these rules, the Representatives and the Lead Managers are permitted to engage in certain transactions that stabilize the price of the Common Stock. Such transactions may consist of bids or purchases for the purpose of pegging, fixing or maintaining the price of the Common Stock.

If the Representatives and Lead Managers create a short position in the Common Stock in connection with the Offering, (i.e., if they sell more shares of Common Stock than are set forth on the cover page of this Prospectus), the Representatives and the Lead Managers may reduce that short position by purchasing Common Stock in the open market. The Representatives and the Lead Managers also may elect to reduce any short position by exercising all or part of the Underwriters' Over-Allotment Options described herein.

The Representatives and the Lead Managers also may impose a penalty bid on certain Underwriters and selling group members. This means that if the Representatives or the Lead Managers purchase shares of Common Stock in the open market to reduce such Underwriters' short position or to stabilize the price of the

51

Common Stock they may reclaim the amount of the selling concession from the Underwriters and selling group members who sold those shares as part of this Offering.

In general, purchases of a security for the purpose of stabilization or to reduce a syndicate short position could cause the price of the security to be higher than it might otherwise be in the absence of such purchases. The imposition of a penalty bid might have an effect on the price of a security to the extent that it were to discourage resales of the security by purchasers in this Offering.

Neither the Company, the Selling Stockholders nor any of the Underwriters makes any representation or prediction as to the direction or magnitude of any effect that the transactions described above may have on the price of the Common Stock. In addition, neither the Company, the Selling Stockholders nor any of the Underwriters makes any representation that the Representatives or Lead Managers will engage in such transactions or that such transactions, once commenced, will not be discontinued without notice.

The Company intends to apply to have the Common Stock listed for trading on the NYSE. In order to meet one of the requirements for listing the Common Stock on the NYSE, the U.S. Underwriters will undertake to sell lots of 100 or more shares of Common Stock to a minimum of 2,000 beneficial owners.

LEGAL MATTERS

Certain legal matters with respect to the Common Stock offered hereby will be passed upon for the Company by Jones, Day, Reavis & Pogue, New York, New York and for the Underwriters by Baker & Botts, L.L.P., Houston, Texas.

EXPERTS

The financial statements of the Company for the period from April 1, 1994 through September 19, 1994 (Predecessor), the period from September 20, 1994 through March 31, 1995, the year ended March 31, 1996 and the nine months ended December 31, 1996; the financial statements of Bowen Tools, Inc. as of December 31, 1995 and 1996 and for each of the years in the three year period ended December 31, 1996; and the financial statements of Cardwell International, Ltd. as of October 31, 1996 and for the ten month period then ended, have been included herein and in the registration statement in reliance upon the reports of KPMG Peat Marwick LLP, independent certified public accountants, and upon the authority of said firm as experts in accounting and auditing.

ADDITIONAL INFORMATION

The Company has filed with the Securities and Exchange Commission a Registration Statement on Form S-1 under the Securities Act with respect to the shares of Common Stock offered hereby. This Prospectus, which is a part of the Registration Statement, omits certain information contained in the Registration Statement, and reference is made to the Registration Statement and the exhibits thereto for further information with respect to the Company and the Common Stock offered hereby. Statements contained herein concerning the provisions of any documents are not necessarily complete, and in each instance reference is made to the copy of such document filed as an exhibit to the Registration Statement. Each such statement is qualified in its entirety by such reference. The Registration Statement, including exhibits filed therewith, may be inspected and copied at the public reference facilities maintained by the Securities and Exchange Commission at Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549, and will also be available for inspection and copying at the regional offices of the Securities and Exchange Commission located at 7 World Trade Center, 13th Floor, New York, New York 10048 and Citicorp Center, 500 West Madison Street, Suite 1400, Chicago, Illinois 60661. Copies of such materials may also be obtained from the Public Reference Section of the Securities and Exchange Commission at 450 Fifth Street, N.W., Washington, D.C. 20549 upon payment of the fees prescribed by the Securities and Exchange Commission. The Securities and Exchange Commission maintains a World Wide Web site on the Internet at http://www.sec.gov that contains

52

reports, proxy and information statements and other information regarding registrants that file electronically with the Securities and Exchange Commission.

The Company will be required to file reports and other information with the Securities and Exchange Commission pursuant to the Exchange Act. The Company intends to furnish its stockholders annual reports containing consolidated financial statements certified by its independent accountants and quarterly reports containing unaudited condensed consolidated financial statements for each of the first three quarters of each fiscal year.

53

INDEX TO FINANCIAL STATEMENTS

                                                              PAGE
                                                              ----
IRI INTERNATIONAL CORPORATION
  Independent Auditors' Report..............................  F-2
  Balance Sheets as of March 31, 1996 and December 31,
     1996...................................................  F-3
  Statements of Operations for the Period from April 1, 1994
     through September 19, 1994 (predecessor), Period from
     September 20, 1994 through March 31, 1995, Year Ended
     March 31, 1996 and Nine Months Ended December 31,
     1996...................................................  F-4
  Statements of Shareholder's Equity for the Period from
     April 1, 1994 through September 19, 1994 (predecessor),
     Period from September 20, 1994 through March 31, 1995,
     Year Ended March 31, 1996 and Nine Months Ended
     December 31, 1996......................................  F-5
  Statements of Cash Flows for the Period from April 1, 1994
     through September 19, 1994 (predecessor), Period from
     September 20, 1994 through March 31, 1995, Year Ended
     March 31, 1996 and Nine Months Ended December 31,
     1996...................................................  F-6
  Notes to Financial Statements.............................  F-7
  Consolidated Balance Sheet as of June 30, 1997
     (unaudited)............................................  F-17
  Consolidated Statements of Operations for the Six Months
     Ended June 30, 1996 and 1997 (unaudited)...............  F-18
  Consolidated Statement of Shareholder's Equity for the Six
     Months Ended June 30, 1997 (unaudited).................  F-19
  Consolidated Statements of Cash Flows for the Six Months
     Ended June 30, 1996 and 1997 (unaudited)...............  F-20
  Notes to Condensed Consolidated Financial Statements
     (unaudited)............................................  F-21

BOWEN TOOLS, INC. AND SUBSIDIARIES
  Independent Auditors' Report..............................  F-24
  Consolidated Balance Sheets as of December 31, 1995 and
     December 31, 1996......................................  F-25
  Consolidated Statements of Operations for the Years Ended
     December 31, 1994, 1995 and 1996.......................  F-26
  Consolidated Statements of Shareholder's Equity for the
     Years Ended December 31, 1994, 1995 and 1996...........  F-27
  Consolidated Statements of Cash Flows for the Years Ended
     December 31, 1994, 1995 and 1996.......................  F-28
  Notes to Consolidated Financial Statements................  F-29
  Consolidated Statements of Operations for the Three Months
     Ended March 31, 1996 and 1997 (unaudited)..............  F-37
  Consolidated Statements of Cash Flows for the Three Months
     Ended March 31, 1996 and 1997 (unaudited)..............  F-38
  Notes to Condensed Consolidated Financial Statements
     (unaudited)............................................  F-39

CARDWELL INTERNATIONAL LTD. AND SUBSIDIARIES
  Independent Auditors' Report..............................  F-40
  Consolidated Balance Sheet as of October 31, 1996.........  F-41
  Consolidated Statement of Operations for the Ten Months
     Ended October 31, 1996.................................  F-42
  Consolidated Statement of Shareholder's Equity for the Ten
     Months Ended October 31, 1996..........................  F-43
  Consolidated Statement of Cash Flows for the Ten Months
     Ended October 31, 1996.................................  F-44
  Notes to Consolidated Financial Statements................  F-45
  Consolidated Statements of Operations for the Five Months
     Ended March 31, 1996 and 1997 (unaudited)..............  F-51
  Consolidated Statement of Shareholder's Equity for the
     Five Months Ended March 31, 1997 (unaudited)...........  F-52
  Consolidated Statements of Cash Flows for the Five Months
     Ended March 31, 1996 and 1997 (unaudited)..............  F-53
  Notes to Condensed Consolidated Financial Statements
     (unaudited)............................................  F-54

F-1

INDEPENDENT AUDITORS' REPORT

The Board of Directors
IRI International Corporation:

We have audited the accompanying balance sheets of IRI International Corporation as of March 31, 1996 and December 31, 1996 and the related statements of operations, shareholder's equity and cash flows for the period from April 1, 1994 through September 19, 1994 (Predecessor), the period from September 20, 1994 through March 31, 1995, the year ended March 31, 1996 and the nine months ended December 31, 1996. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits.

We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of IRI International Corporation as of March 31, 1996 and December 31, 1996 and the results of its operations and its cash flows for the period from April 1, 1994 through September 19, 1994 (Predecessor), the period from September 20, 1994 through March 31, 1995, the year ended March 31, 1996 and the nine months ended December 31, 1996 in conformity with generally accepted accounting principles.

KPMG Peat Marwick LLP

Dallas, Texas
June 27, 1997

F-2

IRI INTERNATIONAL CORPORATION

BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)

ASSETS

                                                              MARCH 31,    DECEMBER 31,
                                                                1996           1996
                                                              ---------    ------------
Current assets:
  Cash and cash equivalents.................................   $ 7,704       $ 8,635
  Accounts receivable, less allowance for doubtful accounts
     of $27 at March 31, 1996 and $36 at December 31,
     1996...................................................     5,442         8,036
  Inventories...............................................    31,155        37,995
  Costs and estimated earnings in excess of billings on
     uncompleted contracts..................................        --            23
  Other current assets......................................       855           957
                                                               -------       -------
          Total current assets..............................    45,156        55,646
Property, plant and equipment, net..........................       775         2,398
Prepaid pension cost........................................       700           627
                                                               -------       -------
                                                               $46,631       $58,671
                                                               =======       =======
                         LIABILITIES AND SHAREHOLDER'S EQUITY

Current liabilities:
  Notes payable.............................................   $    --       $ 3,157
  Accounts payable..........................................     4,470         6,790
  Accrued liabilities.......................................     3,122         3,530
  Customer advances.........................................     1,720         2,607
  Other liabilities.........................................       383           760
  Current installments of obligation under capital lease....        --           144
                                                               -------       -------
          Total current liabilities.........................     9,695        16,988
Negative goodwill, less accumulated amortization............    18,786        14,760
Obligation under capital lease, less current installments...        --           522
Accrued postretirement benefits other than pensions.........     1,624         1,498
                                                               -------       -------
          Total liabilities.................................    30,105        33,768
                                                               -------       -------
Shareholder's equity:
  Preferred stock, $1.00 par value, 8,000,000 shares
     authorized, 80,000 issued and outstanding..............        80            80
  Common stock, $.01 par value, 100,000,000 shares
     authorized, 168,000 shares issued, 163,600 shares
     outstanding............................................         2             2
  Additional paid-in capital................................     5,358         5,358
  Retained earnings.........................................    11,526        19,903
  Less treasury stock, 4,400 common shares, at cost.........      (440)         (440)
                                                               -------       -------
          Total shareholder's equity........................    16,526        24,903
Commitments and contingencies
                                                               -------       -------
                                                               $46,631       $58,671
                                                               =======       =======

See accompanying notes to financial statements.

F-3

IRI INTERNATIONAL CORPORATION

STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

                                               PERIOD FROM     PERIOD FROM
                                                APRIL 1,      SEPTEMBER 20,                NINE MONTHS
                                              1994 THROUGH    1994 THROUGH    YEAR ENDED      ENDED
                                              SEPTEMBER 19,     MARCH 31,     MARCH 31,    DECEMBER 31,
                                                  1994            1995           1996          1996
                                              -------------   -------------   ----------   ------------
                                              (PREDECESSOR)
Revenues....................................     $16,473         $20,206       $52,506       $62,298
Cost of goods sold..........................      16,216          14,058        36,877        44,968
                                                 -------         -------       -------       -------
          Gross profit......................         257           6,148        15,629        17,330
Selling expense.............................         696             955         3,513         3,026
Administrative expense......................       1,406           1,350         4,477         5,194
                                                 -------         -------       -------       -------
          Operating income (loss)...........      (1,845)          3,843         7,639         9,110
Other income (expense):
  Interest income...........................          16              21           371            90
  Interest expense..........................      (2,675)            (25)          (47)         (615)
  Other, net................................          90             (13)           --          (110)
                                                 -------         -------       -------       -------
                                                  (2,569)            (17)          324          (635)
                                                 -------         -------       -------       -------
          Income (loss) before income
            taxes...........................      (4,414)          3,826         7,963         8,475
Income taxes................................          --             263            --            98
                                                 -------         -------       -------       -------
          Net income (loss).................      (4,414)          3,563         7,963         8,377
Preferred stock dividend requirements.......        (400)           (400)         (800)         (600)
                                                 -------         -------       -------       -------
          Net income (loss) attributable to
            outstanding common stock........     $(4,814)        $ 3,163       $ 7,163       $ 7,777
                                                 =======         =======       =======       =======
Net income (loss) per common share..........     $(29.43)        $ 19.33       $ 43.78       $ 47.54
                                                 =======         =======       =======       =======

See accompanying notes to financial statements.

F-4

IRI INTERNATIONAL CORPORATION

STATEMENTS OF SHAREHOLDER'S EQUITY
(IN THOUSANDS)

                                                       ADDITIONAL   RETAINED                   TOTAL
                                  PREFERRED   COMMON    PAID-IN     EARNINGS    TREASURY   SHAREHOLDER'S
                                    STOCK     STOCK     CAPITAL     (DEFICIT)    STOCK        EQUITY
                                  ---------   ------   ----------   ---------   --------   -------------
Balances at April 1, 1994
  (predecessor).................     $80       $  2     $ 24,718     $(84,843)   $(440)      $(60,483)
Net loss (predecessor)..........      --         --           --       (4,414)      --         (4,414)
                                     ---       ----     --------     --------    -----       --------
Balances at September 19, 1994
  (predecessor).................      80          2       24,718      (89,257)    (440)       (64,897)
Acquisition by Energy Services
  International.................      --          0      (19,360)      89,257       --         69,897
                                     ---       ----     --------     --------    -----       --------
Balances at September 20,
  1994..........................      80          2        5,358           --     (440)         5,000
Net income......................      --         --           --        3,563       --          3,563
                                     ---       ----     --------     --------    -----       --------
Balances at March 31, 1995......      80          2        5,358        3,563     (440)         8,563
Net income......................      --         --           --        7,963       --          7,963
                                     ---       ----     --------     --------    -----       --------
Balances at March 31, 1996......      80          2        5,358       11,526     (440)        16,526
Net income......................      --         --           --        8,377       --          8,377
                                     ---       ----     --------     --------    -----       --------
Balances at December 31, 1996...     $80       $  2     $  5,358     $ 19,903    $(440)      $ 24,903
                                     ===       ====     ========     ========    =====       ========

See accompanying notes to financial statements.

F-5

IRI INTERNATIONAL CORPORATION

STATEMENTS OF CASH FLOWS
(IN THOUSANDS)

                                                   PERIOD FROM     PERIOD FROM
                                                    APRIL 1,      SEPTEMBER 20,     YEAR      NINE MONTHS
                                                  1994 THROUGH    1994 THROUGH      ENDED        ENDED
                                                  SEPTEMBER 19,     MARCH 31,     MARCH 31,   DECEMBER 31,
                                                      1994            1995          1996          1996
                                                  -------------   -------------   ---------   ------------
                                                   (PREDECESSOR)
Cash flows from operating activities:
  Net income (loss).............................     $(4,414)        $ 3,563       $ 7,963      $ 8,377
  Adjustments to reconcile net income to net
     cash provided by operations:
     Depreciation...............................         341               6            64           98
     Amortization of negative goodwill..........          --          (2,684)       (5,367)      (4,026)
     Change in employee benefit accounts........         370            (648)         (249)         (53)
     Changes in assets and liabilities:
       Accounts receivable......................        (662)            378            72       (2,594)
       Inventories..............................         684           4,175        (2,043)      (6,840)
       Other current assets.....................        (101)            708          (201)        (125)
       Accounts payable and accrued
          liabilities...........................        (555)            995         3,580        2,728
       Customer advances and other
          liabilities...........................       3,957          (2,612)          360        1,264
       Intercompany payable.....................         101              --            --           --
                                                     -------         -------       -------      -------
          Net cash provided by (used in)
            operations..........................        (279)          3,881         4,179       (1,171)
                                                     -------         -------       -------      -------
Cash flows used in investing
  activities -- purchases of property, plant and
  equipment.....................................        (109)           (128)         (717)        (911)
                                                     -------         -------       -------      -------
Cash flows from financing activities:
  Payments on capital lease obligation..........          --              --            --         (144)
  Proceeds from notes payable...................          --              --            --        3,157
                                                     -------         -------       -------      -------
          Net cash flows provided by financing
            activities..........................          --              --            --        3,013
                                                     -------         -------       -------      -------
Increase (decrease) in cash and cash
  equivalents...................................        (388)          3,753         3,462          931
Cash and cash equivalents at beginning of
  year..........................................         877             489         4,242        7,704
                                                     -------         -------       -------      -------
Cash and cash equivalents at end of year........     $   489         $ 4,242       $ 7,704      $ 8,635
                                                     =======         =======       =======      =======
Interest paid...................................     $    --         $    25       $    47      $   303
                                                     =======         =======       =======      =======
Income taxes paid...............................     $    --         $    --       $   263      $    --
                                                     =======         =======       =======      =======

See accompanying notes to financial statements.

F-6

IRI INTERNATIONAL CORPORATION

NOTES TO FINANCIAL STATEMENTS

(1) GENERAL

IRI International Corporation (IRI or Company), a Delaware Corporation, was formed on July 31, 1985, through the combination of Ingersoll-Rand Oilfield Products Company, a wholly-owned subsidiary of Ingersoll-Rand Company, established August 1, 1980, and the Ideco Division of Dresser Industries, Inc.

The Company manufactures and sells a full line of oil and gas mobile well servicing and drilling rigs, deep oil and gas skid-mounted drilling rigs, associated drilling equipment (Oilfield Equipment), and specialty steel products (Specialty Steel). Most of the Company's customers are located in Asia. Raw materials are readily available and the Company is not dependent upon a single or a few suppliers.

On September 20, 1994, all of the outstanding common and preferred stock of IRI was acquired by Energy Services International (ESI) for cash of $5 million. The acquisition has been recorded using the purchase method of accounting and the purchase price has been allocated to the assets acquired and liabilities assumed based upon their fair values at the date of the acquisition as follows (in thousands):

Inventories.......................................  $ 33,287
Other current assets..............................     7,743
Current liabilities...............................    (7,372)
Accrued retirement benefits.......................    (1,821)
Negative goodwill.................................   (26,837)
                                                    --------
                                                    $  5,000
                                                    ========

The excess of the fair value of net assets acquired over consideration paid was applied against nonmonetary assets (property, plant and equipment) reducing the balances at the acquisition date to zero. The remaining excess of the fair value of net assets acquired over consideration paid was recorded as negative goodwill and is being amortized using the straight-line method over 5 years.

Financial statements previously issued by the Company for the period from September 20, 1994 through March 31, 1995 and the year ended March 31, 1996 have been restated to reflect the purchase adjustments arising from the acquisition of the Company by ESI.

During 1997, the Company elected to change its fiscal year end from March 31 to December 31.

(2) SIGNIFICANT ACCOUNTING POLICIES

(a) Statements of Cash Flows

Cash equivalents of $7.7 million and $8.6 million at March 31, 1996 and December 31, 1996, respectively, consisted of interest-bearing cash deposits. For purposes of the statement of cash flows, the Company considers all cash and short-term investments with original maturities of three months or less to be cash equivalents.

During the nine months ended December 31, 1996, the Company entered into a capital lease obligation of $810,000.

(b) Inventories

Inventories are stated at the lower of cost or market. Cost is determined using standard costs which approximate actual cost on a first-in, first-out basis.

F-7

IRI INTERNATIONAL CORPORATION

NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

(c) Property, Plant and Equipment

Depreciation of property, plant and equipment is provided over the estimated service lives of assets principally using the straight-line method. Maintenance, repairs and minor replacements are charged to operations as incurred; major repairs, replacements or improvements are capitalized.

(d) Income Taxes

Income taxes are accounted for under the asset and liability method. Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases and operating loss and tax credit carryforwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date.

(e) Revenue Recognition

During 1996, The Company changed its method for recognizing revenues on construction contracts from the completed contract method to the percentage-of-completion method. The change was made to better match recognition of income on contracts to the related costs incurred as construction progresses. The Company continues to utilize the completed contract method of revenue recognition for tax purposes.

Under the percentage-of-completion method, revenues and profits are recognized based on the percentage of completion throughout the performance period of the contract. The percentage-of-completion is calculated based on the ratio of contract costs incurred to date to total estimated contract costs after providing for all known or anticipated costs. Costs include material, direct labor and engineering and manufacturing overhead. Selling expenses and general and administrative expenses are charged to operations as incurred. The effect of changes in estimates of contract costs is recorded currently. All remaining revenue is generally recorded when the equipment is shipped.

Costs and estimated earnings in excess of billings on uncompleted contracts represent revenues earned under the percentage-of-completion method but not yet billable under the terms of the contract. Amounts are billable under contracts generally upon shipment of the products or completion of the contracts. Included in revenues and cost of goods sold for the nine months ended December 31, 1996 is $764,000 and $741,000, respectively, related to uncompleted contracts ($23,000 net) at December 31, 1996.

(f) Earnings per Common Share

Earnings per common share is based on the net income applicable to common stock and weighted average common stock outstanding (16,360,000 shares) during the periods and year presented.

(g) Financial Instruments and Credit Risk Concentrations

The Company invests its excess cash in financial instruments, primarily overnight investments and money market mutual funds. These financial instruments could potentially subject the Company to concentrations of credit risk; however, the Company's management considers the financial stability and creditworthiness of a financial institution before investing the Company's funds. The carrying amounts of the financial instruments in the accompanying financial statements (cash, accounts receivables and payables) approximate fair value because of the short maturities of these instruments. The note payable to bank and capital lease obligation bear interest at rates that approximate market rates and, thus the carrying amount of debt approximates estimated fair value.

F-8

IRI INTERNATIONAL CORPORATION

NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

A substantial portion of the Company's customers are engaged in the energy industry. This concentration of customers may impact the Company's overall exposure to credit risk, either positively or negatively, in that customers may be similarly affected by changes in economic and industry conditions. The Company performs ongoing credit evaluations of its customers. The Company maintains reserves for potential credit losses, and actual losses have historically been within the Company's expectations. Foreign sales also present various risks, including risks of war, civil disturbances and governmental activities that may limit or disrupt markets, restrict the movement of funds or result in the deprivation of contract rights or the taking of property without fair consideration. Most of the Company's foreign sales, however, are to large international companies or are secured by letters of credit or similar arrangements.

(h) Use of Estimates

The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

(i) Long-Lived Assets

In March 1995, Statement of Financial Accounting Standards (SFAS) No. 121, Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of, was issued which requires impairment losses to be recorded on long-lived assets used in operations when indicators of impairment are present and estimated future undiscounted cash flows indicate the carrying value of those assets may not be recoverable. The Company implemented SFAS No. 121 on April 1, 1996 and the adoption did not have a material effect on the financial statements.

(3) CHANGE IN ACCOUNTING METHOD

As discussed in note 1(e), the Company adopted the percentage of completion method of accounting for long-term contracts to conform its accounting policies with industry standards. For purposes of the proposed registration statement, the accompanying financial statements have been restated to reflect the new accounting method for all periods presented.

(4) INVENTORIES

A summary of inventories follows (in thousands):

                                                MARCH 31,    DECEMBER 31,
                                                  1996           1996
                                                ---------    ------------
Raw materials and supplies..................     $22,473        $29,163
Work in process.............................       7,237          7,645
Finished goods..............................       1,445          1,187
                                                 -------        -------
          Total.............................     $31,155        $37,995
                                                 =======        =======

F-9

IRI INTERNATIONAL CORPORATION

NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

(5) PROPERTY, PLANT AND EQUIPMENT

A summary of property, plant and equipment follows (in thousands):

                                               MARCH 31,    DECEMBER 31,
                                                 1996           1996
                                               ---------    ------------
Land and land improvements...................    $ --          $   13
Buildings....................................     203             277
Machinery and equipment......................     642           2,276
                                                 ----          ------
                                                  845           2,566
Less accumulated depreciation................     (70)           (168)
                                                 ----          ------
          Property, plant and equipment,
            net..............................    $775          $2,398
                                                 ====          ======

Machinery and equipment includes capitalized lease assets of $810,000 at December 31, 1996.

(6) NOTES PAYABLE

During the year ended March 31, 1996, the Company obtained a $15,000,000 revolving credit facility with a bank available through February 1998. The facility agreement contains provisions, among others, that restrict incurrence of indebtedness, guarantees, acquisitions, and distributions to shareholders, and require the Company to meet specified net worth ratios. Borrowings under the credit facility bear interest at the prime rate (8.25% at December 31, 1996) plus an applicable margin. As of December 31, 1996, there was $21,000 outstanding on the line of credit. The line of credit was cancelled on March 31, 1997 in connection with the acquisitions and related financing described in note 14.

At December 31, 1996 the Company had a $3 million unsecured demand note payable to Towers Financial Services bearing interest at 14% per annum. The note and accrued interest were paid in January 1997.

(7) SHAREHOLDER'S EQUITY

The Company's authorized capitalization consists of 100,000,000 shares of common stock, par value $.01 per share, and 80,000 issued and outstanding shares of preferred stock, par value $1.00 per share, cumulative $10 per annum dividend. Cumulative unpaid preferred stock dividends at December 31, 1996 were $9,353,000. The preferred stock has a liquidation value of $1.00 per share, plus cumulative unpaid dividends, and is senior in liquidation preference to the common equity of the Company.

(8) INCOME TAXES

Income tax expense (benefit) differs from the amount computed by applying the statutory rate of 34 percent to income before income taxes as follows (in thousands):

                                        PERIOD FROM     PERIOD FROM                 NINE MONTHS
                                         APRIL 1,      SEPTEMBER 20,                   ENDED
                                       1994 THROUGH    1994 THROUGH    YEAR ENDED     DECEMBER
                                       SEPTEMBER 19,     MARCH 31,     MARCH 31,        31,
                                           1994            1995           1996          1996
                                       -------------   -------------   ----------   ------------
                                       (PREDECESSOR)
Computed "expected" tax expense
  (benefit)..........................     $(1,501)        $1,301        $ 2,707       $ 2,882
Change in the valuation allowance....       1,501           (502)        (1,046)       (1,504)
Amortization of negative goodwill....          --           (896)        (1,825)       (1,369)
Other................................          --            360            164            89
                                          -------         ------        -------       -------
                                          $    --         $  263        $    --       $    98
                                          =======         ======        =======       =======

F-10

IRI INTERNATIONAL CORPORATION

NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

The income tax expense for the period from September 20, 1994 through March 31, 1994 consists of current federal alternative minimum tax.

The tax effects of temporary differences that give rise to significant portions of the deferred federal income tax assets and liabilities as of March 31, 1996 and December 31, 1996, are as follows (in thousands):

                                                       MARCH 31,    DECEMBER 31,
                                                         1996           1996
                                                       ---------    ------------
Deferred income tax assets:
  Basis in inventories...............................   $1,587         $1,692
  Basis in and depreciation of plant, property and
     equipment.......................................    1,432          1,345
  Employee benefits..................................      552            509
  Net operating loss carryforwards...................    3,445          1,800
  Other..............................................      395            536
                                                        ------         ------
          Total deferred income tax assets...........    7,411          5,882
  Less valuation allowance...........................    7,173          5,669
                                                        ------         ------
          Net deferred income tax assets.............      238            213
Deferred income tax liabilities -- prepaid pension
  cost...............................................      238            213
                                                        ------         ------
          Net deferred federal income tax
            liability................................   $   --         $   --
                                                        ======         ======

Because of the uncertainty of generating future taxable income, the Company has provided a valuation allowance for deferred tax assets of $7,173,000 and $5,669,000 at March 31, 1996 and December 31, 1996, respectively. The valuation allowance decreased $1,504,000 during the nine months ended December 31, 1996.

Under the Internal Revenue Code of 1986, in general, a change of more than 50% in the composition of a company's equity owners during any three years results in a limitation on such company's ability to utilize its loss carryforwards in subsequent years. The Company has undergone such an ownership change as a result of the sale described in note 1; accordingly, the amount of the Company's preacquisition net operating loss carryforwards that may be utilized per year is limited to approximately $300,000 (aggregate $3,600,000 available at December 31, 1996) expiring from 2003 through 2009. To the extent such carryforwards are not utilized in a year, they may be utilized in subsequent years. In addition, the Company has $1,694,000 of net operating loss carryforwards, without limitations, expiring from 2010 through 2011.

(9) LEASES

At December 31, 1996, minimum future annual payments required under a capital lease together with the present value of the net minimum lease payments and noncancelable operating leases, primarily for repair facilities and offices and office equipment, were as follows (in thousands):

                                                    OPERATING    CAPITAL
                                                     LEASES      LEASES
                                                    ---------    -------
1997..............................................   $  767       $200
1998..............................................      367        200
1999..............................................      311        200
2000..............................................      259        200
2001..............................................      186         50
                                                     ------       ----
          Total minimum lease payments............   $1,890        850
                                                     ======
Less amount representing interest.................                 184
                                                                  ----
Present value of minimum lease payments...........                $666
                                                                  ====

F-11

IRI INTERNATIONAL CORPORATION

NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

Total rental expense was $289,000 for the period April 1, 1994 through September 19, 1994 (predecessor), $196,000 for the period from September 20, 1994 through March 31, 1995, $546,000 for the year ended March 31, 1996 and $860,000 for the nine months ended December 31, 1996.

(10) PENSION PLAN

The Company has a noncontributory defined benefit plan, which covers substantially all employees. Employees with 10 or more years of service are entitled to pension benefits beginning at normal retirement age (65) based on years of service and the employees' compensation for the 60 consecutive month period in which his compensation is the highest. The plan incorporates provisions for early retirement, the privilege to elect a life annuity, surviving spouse benefits, and disability benefits.

Employees of the Company who were employees of Ingersoll-Rand Oilfield Products Company or the Ideco Division of Dresser Industries, Inc., immediately prior to becoming employees of IRI, are entitled to uninterrupted service tenure for purposes of retirement benefit calculations. Benefits payable under the IRI retirement plan are offset by benefits payable under the retirement plans of Dresser and Ingersoll-Rand Oilfield Products Company.

The Company uses the accrued benefit cost method to compute the annual contributions to the plan, with minimum and maximum contributions determined on a cumulative basis and the Company having the flexibility to choose which contribution to make and which can vary from one period to the next.

The accrued benefit cost includes a normal cost which is computed as the present value of the pro rata portion for the benefit accrual during the year being valued and a past service cost which is the present value of that portion of the projected benefit which has been accrued up to the valuation date. The unfunded past-service cost may be liquidated over a period of between 10 and 30 years.

The funded status and the amounts recognized in the balance sheets as of March 31, 1996 and December 31, 1996, the date of the latest actuarial valuation, are as follows (in thousands):

                                                      MARCH 31,     DECEMBER 31,
                                                        1996            1996
                                                      ---------     ------------
Actuarial present value of benefit obligations:
  Vested............................................   $(6,613)       $(7,231)
  Nonvested.........................................      (769)           (58)
                                                       -------        -------
Accumulated benefit obligation......................   $(7,382)       $(7,289)
                                                       =======        =======
Projected benefit obligation for service rendered to
  date..............................................    (7,382)        (7,289)
Plan assets at fair value...........................     7,433          7,321
                                                       -------        -------
Projected benefit obligation less than plan
  assets............................................        51             32
Unrecognized net gain from past experience different
  from that assumed and effects of changes in
  assumptions.......................................       649            595
                                                       -------        -------
Prepaid pension cost................................   $   700        $   627
                                                       =======        =======

The Plan assets consist primarily of time share real estate notes and fixed income time deposits.

F-12

IRI INTERNATIONAL CORPORATION

NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

Net pension cost includes the following components (in thousands):

                                           PERIOD FROM     PERIOD FROM
                                          APRIL 1, 1994   SEPTEMBER 20,                NINE MONTHS
                                             THROUGH      1994 THROUGH    YEAR ENDED      ENDED
                                          SEPTEMBER 19,     MARCH 31,     MARCH 31,    DECEMBER 31,
                                              1994            1995           1996          1996
                                          -------------   -------------   ----------   ------------
                                          (PREDECESSOR)
Service cost............................      $ 381          $   50         $ 108         $  81
Interest cost...........................        320             257           556           419
Actual return on plan assets............       (274)           (274)         (565)         (270)
Net amortization and deferral...........         34              --           154          (157)
                                              -----          ------         -----         -----
          Total pension expense
            (income)....................      $ 461          $   33         $ 253         $  73
                                              =====          ======         =====         =====

As of September 1, 1995, the pension plan was frozen insofar as future accrual of pension benefits. Because the plan amendment to freeze the plan was planned in conjunction with the ESI acquisition discussed in note 1, the resulting curtailment gain was taken into consideration in remeasuring the Company's projected benefit obligation and the date of the acquisition.

The development of the actuarial present value of the projected benefit obligation at March 31, 1996 and December 31, 1996 was based upon a weighted average discount rate of 7.75% and 7.90%, respectively, and an expected long-term rate of return on assets of 8.0%.

The Pension Benefit Guaranty Corporation provides protection to plan participants by assuring employees that the fixed commitment of the Company for funding vested accrued benefits of the plan will be paid up to specified maximum amounts should the Company be unable to fund the fixed commitment.

The plan is administered by the Pension Committee which is appointed by IRI's Board of Directors.

(11) POSTRETIREMENT BENEFITS OTHER THAN PENSIONS

In addition to the Company's defined benefit pension plan, the Company sponsors a defined benefit health care plan that provides postretirement medical benefits to retirees or full-time employees who retire after attaining age 55 with at least 10 years of service as of September 1, 1996. Current retirees receive benefits for life while full time employees (future retirees) only receive benefits until age 65. The plan is contributory, with retirees contributing 20% of the health care cost. The Company's contribution is capped at a 5% annual increase in health care costs, with the remaining increases to be paid by the employee. The Company's policy is to fund the cost of medical benefits in amounts determined at the discretion of management.

Summary information on the Company's plan at March 31, 1996 and December 31, 1996 is as follows (in thousands):

                                                       MARCH 31,    DECEMBER 31,
                                                         1996           1996
                                                       ---------    ------------
Accumulated postretirement benefit obligation:
  Actives employees eligible to retire...............   $  572         $  594
  Retired participants...............................    1,240          1,227
Unamortized gain or loss associated with actuarial
  assumption changes and plan amendment..............     (188)          (323)
                                                        ------         ------
          Accrued postretirement benefit costs.......   $1,624         $1,498
                                                        ======         ======

F-13

IRI INTERNATIONAL CORPORATION

NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

Net period postretirement benefit cost includes the following components (in thousands):

                                    PERIOD FROM      PERIOD FROM
                                   APRIL 1, 1994    SEPTEMBER 20,                  NINE MONTHS
                                      THROUGH       1994 THROUGH     YEAR ENDED       ENDED
                                   SEPTEMBER 19,      MARCH 31,      MARCH 31,     DECEMBER 31,
                                       1994             1995            1996           1996
                                   -------------    -------------    ----------    ------------
                                   (PREDECESSOR)
Service cost.....................      $247             $ 42            $ 30           $ --
Interest cost....................       664              138             187            103
Net amortization and deferral....        --               --              --              2
                                       ----             ----            ----           ----
          Net periodic
            postretirement
            benefit cost
            (income).............      $911             $180            $217           $105
                                       ====             ====            ====           ====

On August 11, 1995, the plan was amended to terminate all employees from the plan except those eligible to retire on June 30, 1995 and all current retirees. In addition under the amended plan, active employees eligible to retire will, after the age of 65, receive through the retirement plan, 80% of the cost of medical insurance with a 5% cap over a base year premium of calendar 1996. Because it was expected that the plan would be terminated in conjunction with the ESI acquisition discussed in note 1, the effects were considered in measuring the Company's accumulated post retirement benefit obligation as of the acquisition date.

The discount rate used in determining the accumulated postretirement benefit obligation was 7.75% at March 31, 1996 and December 31, 1996. The assumed health care cost trend rate was 10% in 1995 graded down to 5% after 12 years. Because health care cost increases over 5% annually are borne by the employees, the amounts reported are not affected by increases in the assumed health care cost trend rate.

(12) RELATED PARTY TRANSACTIONS

ESI charged the Company $450,000 during the nine months ended December 31, 1996 for certain administrative overhead functions performed from September 20, 1994 through December 31, 1996.

The Company has an account receivable from a related party of $158,000 at December 31, 1996 for services rendered by IRI personnel. The receivable is expected to be paid during fiscal year 1997.

(13) BUSINESS SEGMENTS

The Company operates through two business segments consisting of Oilfield Equipment and Specialty Steel. The Oilfield Equipment segment is principally engaged in the design and manufacture of drilling and well servicing rigs and components for use on land and on offshore drilling platforms. The Company specializes in providing small truck-mounted rigs to stationary land deep drilling rigs to meet the functional requirements of customers drilling in remote and harsh environments. The Company's Specialty Steel segment manufactures premium carbon, alloy and specialty steel for use in commercial and military products as well as for the manufacture of oilfield equipment products. IRI's steel products are also used in the petroleum, aircraft and power generation industries.

F-14

IRI INTERNATIONAL CORPORATION

NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

Financial information by industry segment is summarized below (in thousands).

                                          OILFIELD     SPECIALTY    CORPORATE
                                          EQUIPMENT      STEEL      AND OTHER     TOTAL
                                          ---------    ---------    ---------    --------
Period from April 1, 1994 through
  September 19, 1994 (predecessor):
  Sales to unaffiliated customers.......   $12,545      $ 3,928      $    --     $ 16,473
  Operating income (loss)...............      (671)         232       (1,406)      (1,845)
  Identifiable assets...................    34,169        5,184        1,677       41,030
  Depreciation..........................       188          136           17          341
  Capital expenditures..................        24           85           --          109
Period from September 20, 1994 through
  March 31, 1995:
  Sales to unaffiliated customers.......    14,399        5,807           --       20,206
  Operating income......................     1,269        1,240        1,334        3,843
  Identifiable assets...................    28,924        5,804        5,402       40,130
  Depreciation..........................         2            2            2            6
  Amortization of negative goodwill.....        --           --       (2,684)      (2,684)
  Capital expenditures..................        23           13           92          128
Year ended March 31, 1996:
  Sales to unaffiliated customers.......   $40,176      $12,330      $    --     $ 52,506
  Operating income......................     4,141        2,608          890        7,639
  Identifiable assets...................    30,979        6,302        9,350       46,631
  Depreciation..........................        40           12           12           64
  Amortization of negative goodwill.....        --           --       (5,367)      (5,367)
  Capital expenditures..................       581          130            6          717
Nine months ended December 31, 1996:
  Sales to unaffiliated customers.......   $52,029      $10,269      $    --     $ 62,298
  Operating income (loss)...............     7,399        2,879       (1,168)       9,110
  Identifiable assets...................    40,169        6,956       11,546       58,671
  Depreciation..........................        79           10            9           98
  Amortization of negative goodwill.....        --           --       (4,026)      (4,026)
  Capital expenditures..................       545          218          958        1,721

Sales outside the United States accounted for 65%, 55%, 50% and 50% of total revenues for the period from April 1, 1994 through September 19, 1994 (preacquisition), the period from September 20, 1994 through March 31, 1995, the year ended March 31, 1996 and the nine months ended December 31, 1996, respectively, based upon the ultimate destination in which equipment or services were sold, shipped or provided to the customer by the Company.

During the period from April 1, 1994 through September 19, 1994 (preacquisition), one customer constituted 11% of total revenues. During the period from September 20, 1994 through March 31, 1995, two customers each accounted for revenues of 12%. For the year ended March 31, 1996, one customer accounted for 36% of revenues and for the nine months ended December 31, 1996, two customers accounted for 38% and 14% of revenues, respectively.

(14) ACQUISITIONS

On March 31, 1997, the Company acquired certain assets and assumed certain liabilities of Bowen Tools, Inc. ("Bowen"), a wholly owned subsidiary of the French chemical concern L'Air Liquide, for a total consideration of $73.1 million. On April 17, 1997, the Company also acquired the stock of Cardwell

F-15

IRI INTERNATIONAL CORPORATION

NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

International Ltd. ("Cardwell"), a privately owned company, as well as certain assets held by affiliates of Cardwell for approximately $12 million in cash at closing and partial payment ($3 million) of a note payable to bank. In addition the Company incurred approximately $2.4 million ($1.8 million for Bowen and $0.6 million for Cardwell) of transaction costs in connection with the acquisitions. The acquisitions were financed through a $65 million senior secured term loan facility and $31 million of interim senior subordinated increasing rate notes.

The term loan is payable in increasing amounts over a five-year period and bears interest at a base rate (as defined) plus 1.5% or the Eurodollar rate plus 3.25%. The interim notes bear interest at LIBOR plus 6.5%, increasing .5% per three month period if the notes are not repaid within eight months, to a maximum of 18%. The interim notes mature one year from issuance and at maturity the holders of the interim notes shall receive warrants representing 5% of the common stock of ESI. In addition, holders are required to exchange their interim notes for rollover notes if no event of default has occurred, the Company pays a 3% rollover fee to the holders, the rollover debt registration is declared effective by the SEC and the shelf registration statement with respect to the warrants and warrant shares has been declared effective by the SEC. Proceeds from any public offering or private placement are to be used, subject to certain agreed exceptions, to redeem the interim notes.

Bowen, headquartered in Houston, Texas, designs, manufactures and markets fishing tools and drilling, power and wireline/pressure control equipment used in the drilling and completion of oil and gas wells. Cardwell, headquartered in El Dorado, Kansas, manufactures and sells drilling rigs, related oilfield equipment and supplies predominantly to foreign customers.

The acquisitions have been recorded using the purchase method of accounting and results of operations of the acquired companies will be included in the statement of operations of IRI from the date of the respective acquisitions.

(15) COMMITMENTS AND CONTINGENCIES

The Company has contract commitments aggregating $14.8 million at December 31, 1996 for the manufacture and delivery of drilling rigs during fiscal year 1997.

At December 31, 1996, the Company was contingently liable for approximately $7.3 million in letters of credit which guarantee the Company's performance for payment to third parties in accordance with specified contractual terms and conditions. These letters of credit are primarily secured by the Company's cash, accounts receivable and inventory. Management does not expect any material losses to result from these off-balance-sheet instruments as it anticipates full performance on the related contracts.

F-16

IRI INTERNATIONAL CORPORATION AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEET
JUNE 30, 1997
(UNAUDITED)

(IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)

ASSETS

Current assets:
  Cash and cash equivalents.................................  $  2,366
  Accounts receivable, less allowance for doubtful accounts
     of $228................................................    23,073
  Inventories (note 2)......................................    84,629
  Costs and estimated earnings in excess of billings on
     uncompleted contracts..................................     2,508
  Other current assets......................................     2,042
                                                              --------
          Total current assets..............................   114,618
                                                              --------
Property, plant and equipment, net..........................    38,354
Excess of cost over fair value of net tangible assets of
  businesses acquired, net..................................     5,842
Prepaid pension cost........................................       578
Other assets, principally debt issuance costs, net..........     4,799
                                                              --------
                                                              $164,191
                                                              ========

                 LIABILITIES AND SHAREHOLDER'S EQUITY

Current liabilities:
  Accounts payable..........................................  $  7,162
  Accrued liabilities.......................................     5,025
  Customer advances and security deposits...................     7,875
  Other liabilities.........................................     1,721
  Current installments of long-term debt....................     2,826
  Current installments of obligation under capital lease....       144
                                                              --------
          Total current liabilities.........................    24,753
Negative goodwill, less accumulated amortization............    12,657
Long-term debt, less current installments...................    99,813
Obligation under capital lease, less current installments...       468
Accrued postretirement benefits other than pensions.........     1,176
                                                              --------
          Total liabilities.................................   138,867
                                                              --------
Shareholder's equity:
  Preferred stock, $1 par value, 8,000,000 shares
     authorized, 80,000 shares issued and outstanding.......        80
  Common stock, $.01 par value, 100,000,000 shares
     authorized, 168,000 shares issued, 163,600
     outstanding............................................         2
  Additional paid-in capital................................     5,358
  Retained earnings.........................................    20,324
  Less treasury stock, 4,400 common shares, at cost.........      (440)
                                                              --------
          Total shareholder's equity........................    25,324
Commitments and contingencies
                                                              --------
Total liabilities and shareholder's equity..................  $164,191
                                                              ========

See accompanying notes to condensed consolidated financial statements.

F-17

IRI INTERNATIONAL CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS
SIX MONTHS ENDED JUNE 30, 1996 AND 1997
(UNAUDITED)

(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

                                                               1996       1997
                                                              -------    -------
Revenues....................................................  $29,347    $57,785
Cost of goods sold..........................................   21,149     44,631
                                                              -------    -------
          Gross profit......................................    8,198     13,154
Administrative and selling expense..........................    5,295      8,928
                                                              -------    -------
          Operating income..................................    2,903      4,226
                                                              -------    -------
Other income (expense):
  Interest income...........................................      213         79
  Interest expense..........................................     (207)    (3,147)
  Other, net................................................       --       (569)
                                                              -------    -------
                                                                    6     (3,637)
                                                              -------    -------
          Income before income taxes........................    2,909        589
Income taxes................................................       --        168
                                                              -------    -------
          Net income........................................    2,909        421
Preferred stock dividend requirements.......................     (400)      (400)
                                                              -------    -------
          Net income attributable to outstanding common
           stock............................................  $ 2,509    $    21
                                                              =======    =======
Net income per common share.................................  $ 15.34        .13
                                                              =======    =======

See accompanying notes to condensed consolidated financial statements.

F-18

IRI INTERNATIONAL CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF SHAREHOLDER'S EQUITY
(UNAUDITED)

(IN THOUSANDS)

                                                         ADDITIONAL                             TOTAL
                                    PREFERRED   COMMON    PAID-IN     RETAINED   TREASURY   SHAREHOLDER'S
                                      STOCK     STOCK     CAPITAL     EARNINGS    STOCK        EQUITY
                                    ---------   ------   ----------   --------   --------   -------------
Balances at December 31, 1996.....     $80         2       5,358       19,903      (440)       24,903
Net income........................      --        --          --          421        --           421
                                       ---       ---       -----       ------      ----        ------
Balances at June 30, 1997.........     $80         2       5,358       20,324      (440)       25,324
                                       ===       ===       =====       ======      ====        ======

See accompanying notes to condensed consolidated financial statements.

F-19

IRI INTERNATIONAL CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS
SIX MONTHS ENDED JUNE 30, 1996 AND 1997
(UNAUDITED)

(IN THOUSANDS)

                                                               1996        1997
                                                              -------    --------
Cash flows from operating activities:
  Net income................................................  $ 2,909    $    421
  Adjustments to reconcile net income to net cash provided
     by operations:
     Depreciation and amortization..........................      132       1,073
     Amortization of negative goodwill......................   (2,684)     (2,684)
     Change in accrued employee benefits....................     (278)       (272)
     Changes in assets and liabilities (exclusive of effects
      of acquisitions):
       Inventory............................................   (6,384)     (6,755)
       Accounts receivable..................................    2,107      (1,770)
       Other assets.........................................      862       2,054
       Accounts payable and accrued expenses, customer
        advances and other liabilities......................   (4,738)       (244)
                                                              -------    --------
          Net cash used in operations.......................   (8,074)     (8,177)
                                                              -------    --------
Cash flows from investing activities:
  Purchases of property, plant and equipment................     (336)     (1,191)
  Acquisition of Bowen assets, net of liabilities assumed...       --     (74,978)
  Acquisition of Cardwell assets, net of liabilities
     assumed................................................       --     (12,565)
                                                              -------    --------
          Net cash used in investing activities.............     (336)    (88,734)
                                                              -------    --------
Cash flows from financing activities:
  Proceeds from notes payable...............................       --      99,503
  Payments on capital lease obligation......................      (77)        (54)
  Debt issuance costs.......................................       --      (3,807)
  Payments on notes payable.................................       --      (5,000)
                                                              -------    --------
  Net cash flows provided from financing activities.........      (77)     90,642
                                                              -------    --------
Decrease in cash and cash equivalents.......................   (8,487)     (6,269)
Cash and cash equivalents at beginning of year..............   12,393       8,635
                                                              -------    --------
Cash and cash equivalents at end of year....................  $ 3,906    $  2,366
                                                              =======    ========
Interest paid...............................................  $    17    $     81
                                                              =======    ========
Income taxes paid...........................................  $    --    $     --
                                                              =======    ========

See accompanying notes to condensed consolidated financial statements.

F-20

IRI INTERNATIONAL CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)

(1) GENERAL

The accompanying condensed consolidated financial statements of IRI International Corporation and subsidiaries (the Company) as of June 30, 1997 and for the six months ended June 30, 1996 and 1997 are unaudited; however, they include all adjustments (consisting only of normal recurring adjustments) which, in the opinion of management, are necessary for a fair presentation for such periods. Accounting measurements at interim dates inherently involve greater reliance on estimates than at year end. The results of operations for the interim periods presented are not necessarily indicative of the results to be expected for the entire year.

Certain footnote disclosures normally included in annual consolidated financial statements prepared in accordance with generally accepted accounting principles have been omitted herein. The interim information should be read in conjunction with the Company's annual financial statements and notes.

(2) INVENTORIES

Inventories consist of the following at June 30, 1997 (in thousands):

Raw materials...............................................  $39,171
Work in process.............................................   23,425
Finished goods..............................................   22,033
                                                              -------
                                                              $84,629
                                                              =======

(3) COMMITMENTS AND CONTINGENCIES

The Company has contract commitments aggregating $93.0 million at June 30, 1997 for the manufacture and delivery of drilling rigs.

At June 30, 1997, the Company was contingently liable for approximately $9.3 million in letters of credit which guarantee the Company's performance for payment to third parties in accordance with specified contractual terms and conditions. These letters of credit are primarily secured by the Company's cash, accounts receivable and inventory. Management does not expect any material losses to result from these off-balance-sheet instruments as it anticipates full performance on the related contracts.

The Company is subject to various claims and legal actions arising in the ordinary course of business. Management believes that any ultimate liability resulting from the outcome of such proceedings to the extent not otherwise provided for in the financial statements will not have a material adverse effect on the Company's financial condition.

(4) ACQUISITIONS

On March 31, 1997, the Company acquired certain assets and assumed certain liabilities of Bowen Tools, Inc. ("Bowen"), a wholly owned subsidiary of the French chemical concern L'Air Liquide, for a total consideration of $73.1 million. The Company also held an option to purchase certain real property from Bowen for additional cash consideration of $1.575 million which it exercised in July 1997. On April 17, 1997, the Company also acquired the stock of Cardwell International Ltd. ("Cardwell"), a privately owned company, as well as certain assets held by affiliates of Cardwell for approximately $12 million in cash at closing and partial payment ($3 million) of a note payable to bank. In addition the Company incurred approximately $2.4 million ($1.8 million for Bowen and $.6 million for Cardwell) of transaction costs in connection with the acquisitions. The acquisitions were financed through a $65 million senior secured term loan facility and $31 million of interim senior subordinated increasing rate notes. The term loan is payable in increasing amounts over a five-year period and bears interest at a base rate (as defined) plus 1.5% or the Eurodollar rate plus 3.25%. The interim notes bear interest at LIBOR plus 6.5%, increasing .5% per three month period if the notes are not

F-21

IRI INTERNATIONAL CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

repaid within eight months, to a maximum of 18%. The interim notes mature one year from issuance and at maturity the holders of the interim notes shall receive warrants representing 5% of the common stock of the Company. In addition, holders are required to exchange their interim notes for rollover notes if no event of default has occurred, the Company pays a 3% rollover fee to the holders, the rollover debt registration is declared effective by the SEC and the shelf registration statement with respect to the warrants and warrant shares has been declared effective by the SEC. Proceeds from any public offering or private placement are to be used, subject to certain agreed exceptions, to redeem the interim notes.

Bowen, headquartered in Houston, Texas, designs, manufactures and markets fishing tools and drilling, power and wireline/pressure control equipment used in the drilling and completion of oil and gas wells. Cardwell, headquartered in El Dorado, Kansas, manufactures and sells drilling rigs, related oilfield equipment and supplies predominantly to foreign customers.

The acquisitions have been recorded using the purchase method of accounting and results of operations of the acquired companies have been included in the statement of operations of IRI from the date of the respective acquisitions. Based on management's preliminary estimates, the cost of the Bowen and Cardwell acquisitions have been allocated to the assets acquired and liabilities assumed based on their respective fair values as follows (in thousands):

Current assets..............................................  $ 56,143
Property, plant and equipment...............................    37,647
Excess of cost over fair value of net tangible assets of
  businesses acquired, net..................................     6,096
Other assets................................................       976
Current liabilities.........................................   (13,319)
                                                              --------
                                                              $ 87,543
                                                              ========

The following sets forth selected consolidated financial information for the Company on a pro forma basis for the six months ended June 30, 1996 and 1997 assuming the Bowen and Cardwell acquisitions had occurred on January 1, 1996 (in thousands, except per share amounts):

                                                      1996        1997
                                                    --------    --------
Revenues..........................................  $83,300     $80,195
                                                    =======     =======
Gross profit......................................  $23,829     $22,507
                                                    =======     =======
Operating income..................................  $ 4,180     $ 5,294
                                                    =======     =======
Net loss..........................................  $(1,416)    $(1,231)
                                                    =======     =======
Net loss attributable to outstanding common
 stock............................................  $(1,816)    $(1,631)
                                                    =======     =======
Net loss per common share.........................  $(11.10)    $ (9.97)
                                                    =======     =======

Pro forma adjustments primarily relate to additional interest expense resulting from debt to finance the acquisitions, additional depreciation and amortization expense as a result of the purchase price allocations to property, plant and equipment and excess of cost over net tangible assets purchased and the related tax effects of these adjustments.

The pro forma information is not necessarily indicative of the results that actually would have been achieved had such transactions been consummated as of January 1, 1996, or that may be achieved in the future.

F-22

IRI INTERNATIONAL CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

(5) LONG-TERM DEBT

The Company had debt outstanding at June 30, 1997 as follows (in thousands):

Revolving credit note, due March 31, 2000...................  $  6,000
Senior subordinated note, due March 31, 1998................    31,000
Senior secured term loan, due in increasing quarterly
  payments
  beginning June 30, 1997...................................    65,000
Other.......................................................       639
                                                              --------
                                                               102,639
Less current installments...................................    (2,826)
                                                              --------
Long-term debt, less current installments...................  $ 99,813
                                                              ========

The senior secured term loan facility contains provisions that requires the Company to maintain certain financial ratios commencing June 30, 1997 and achieve consolidated earnings before interest, taxes, depreciation and amortization of $25 million by December 31, 1997. The senior secured term loan facility also limits sales of assets, the incurrence of additional indebtedness, and restricts payments to shareholders.

F-23

INDEPENDENT AUDITORS' REPORT

The Board of Directors
Bowen Tools, Inc.

We have audited the accompanying consolidated balance sheets of Bowen Tools, Inc. as of December 31, 1995 and 1996 and the related consolidated statements of operations, shareholder's equity and cash flows for each of the years in the three-year period ended December 31, 1996. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits.

We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Bowen Tools, Inc. as of December 31, 1995 and 1996 and the results of their operations and their cash flows for each of the years in the three-year period ended December 31, 1996 in conformity with generally accepted accounting principles.

KPMG Peat Marwick LLP

Houston, Texas
May 23, 1997

F-24

BOWEN TOOLS, INC.

CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 1995 AND 1996
(IN THOUSANDS, EXCEPT SHARE AMOUNTS)

                                                               1995       1996
                                                              -------    -------
ASSETS
Current assets:
  Cash......................................................  $ 1,193      1,656
  Accounts receivable, less allowance for doubtful accounts
     of $155 and $200 at 1995 and 1996......................   10,597     13,035
  Inventories (note 5)......................................   20,706     27,125
  Receivable from Parent (notes 4 and 7)....................    7,053         --
  Other assets..............................................    1,647      1,288
                                                              -------    -------
          Total current assets..............................   41,196     43,104
                                                              -------    -------
Property, plant and equipment, net..........................   29,260     32,604
Shop inventories............................................    4,456      3,672
Prepaid pension cost (note 9)...............................    2,971      3,333
Other assets................................................      240        196
                                                              -------    -------
          Total assets......................................  $78,123     82,909
                                                              =======    =======
LIABILITIES AND SHAREHOLDER'S EQUITY
Current liabilities:
  Bank overdraft............................................  $   622      1,812
  Accounts payable..........................................    2,882      1,514
  Accrued liabilities (note 10).............................    2,462      4,045
  Deferred tax liability (note 7)...........................    3,183      2,737
  Payable to Parent (notes 4 and 7).........................       --        897
                                                              -------    -------
          Total current liabilities.........................    9,149     11,005
                                                              -------    -------
Deferred tax liability (note 7).............................    7,080      7,316
Other postretirement benefit obligation.....................      423        457
                                                              -------    -------
          Total liabilities.................................   16,652     18,778
                                                              -------    -------
Shareholder's equity:
  Common stock, $1 par value, 1,000 shares authorized,
     issued and outstanding.................................        1          1
  Common stock, $2.50 par value, 10,000 shares authorized,
     400 shares issued and outstanding......................        1          1
  Capital in excess of par..................................   39,189     39,189
  Retained earnings.........................................   23,015     25,819
  Accumulative translation adjustment.......................     (735)      (879)
                                                              -------    -------
          Total shareholder's equity........................   61,471     64,131
Commitments and contingencies (note 11)
                                                              -------    -------
          Total liabilities and shareholder's equity........  $78,123     82,909
                                                              =======    =======

See accompanying notes to consolidated financial statements.

F-25

BOWEN TOOLS, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS
YEARS ENDED DECEMBER 31, 1994, 1995 AND 1996
(IN THOUSANDS)

                                                               1994       1995      1996
                                                              -------    ------    ------
Net sales...................................................  $46,785    45,123    53,445
Rental tool income..........................................   10,775    12,587    13,412
                                                              -------    ------    ------
          Net sales.........................................   57,560    57,710    66,857
                                                              -------    ------    ------
Cost of goods sold..........................................   32,224    32,282    36,636
                                                              -------    ------    ------
          Gross profit......................................   25,336    25,428    30,221
                                                              -------    ------    ------
Operating expenses:
     Selling and distribution...............................   15,934    17,492    19,144
     General and administrative.............................    4,088     3,476     3,748
     Depreciation and amortization..........................    2,360     1,973     2,470
                                                              -------    ------    ------
          Operating income..................................    2,954     2,487     4,859
Other income (expense):
     Gain (loss) on sale of property and equipment..........     (931)    1,109        40
     Other..................................................      908       177      (492)
                                                              -------    ------    ------
          Income before taxes...............................    2,931     3,773     4,407
                                                              -------    ------    ------
Income taxes................................................    1,113     1,352     1,603
                                                              -------    ------    ------
          Net income........................................  $ 1,818     2,421     2,804
                                                              =======    ======    ======

See accompanying notes to consolidated financial statements.

F-26

BOWEN TOOLS, INC.

CONSOLIDATED STATEMENTS OF SHAREHOLDER'S EQUITY
YEARS ENDED DECEMBER 31, 1994, 1995 AND 1996
(IN THOUSANDS)

                                                      CAPITAL IN              ACCUMULATIVE       TOTAL
                                             COMMON   EXCESS OF    RETAINED   TRANSLATION    SHAREHOLDER'S
                                             STOCK    PAR VALUE    EARNINGS    ADJUSTMENT       EQUITY
                                             ------   ----------   --------   ------------   -------------
Balances at December 31, 1993..............    $2       39,189       61,409         90          100,690
     Net income............................    --           --        1,818         --            1,818
     Change in accumulative translation
       adjustment..........................    --           --           --       (321)            (321)
     Dividends to Parent...................    --           --       (2,633)        --           (2,633)
                                               --      -------     --------      -----         --------
Balances at December 31, 1994..............     2       39,189       60,594       (231)          99,554
     Net income............................    --           --        2,421         --            2,421
     Change in accumulative translation
       adjustment..........................    --           --           --       (504)            (504)
     Dividends to Parent...................    --           --      (40,000)        --          (40,000)
                                               --      -------     --------      -----         --------
Balances at December 31, 1995..............     2       39,189       23,015       (735)          61,471
     Net income............................    --           --        2,804         --            2,804
     Change in accumulative translation
       adjustment..........................    --           --           --       (144)            (144)
                                               --      -------     --------      -----         --------
Balances at December 31, 1996..............    $2       39,189       25,819       (879)          64,131
                                               ==      =======     ========      =====         ========

See accompanying notes to consolidated financial statements.

F-27

BOWEN TOOLS, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 31, 1994, 1995 AND 1996
(IN THOUSANDS)

                                                               1994       1995       1996
                                                              -------    -------    -------
Cash flows from operating activities:
  Net income................................................  $ 1,818      2,421      2,804
  Adjustments to reconcile net income to net cash provided
     by operations:
     Depreciation...........................................    2,360      1,973      2,470
     Deferred income taxes..................................       42        504       (210)
     (Gain) loss on sales of property and equipment.........      931     (1,109)       (40)
     Gain on sale of rental tools...........................     (536)      (833)    (1,286)
     Foreign currency translation...........................    1,058       (475)        72
     Changes in assets and liabilities:
       Accounts receivable..................................   (1,368)       793     (2,438)
       Inventory............................................    5,193      4,779     (5,635)
       Receivable from Parent...............................   (5,519)    (4,736)     7,053
       Other current assets.................................     (224)    (1,117)       359
       Other................................................     (184)       (31)        44
       Prepaid pension cost.................................     (330)      (107)      (362)
       Accounts payable.....................................      449       (118)    (1,368)
       Other postretirement benefits........................       26         30         34
       Accrued liabilities..................................      749     (1,180)     1,583
       Payable to Parent....................................       --         --        897
                                                              -------    -------    -------
          Net cash provided by operations...................    4,465        794      3,977
                                                              -------    -------    -------
Cash flows from investing activities:
  Purchases of property, plant and equipment................   (2,993)    (3,580)    (6,321)
  Proceeds on sales of property and equipment...............      842      1,916      1,833
                                                              -------    -------    -------
          Net cash used in investing activities.............   (2,151)    (1,664)    (4,488)
                                                              -------    -------    -------
Cash flows from financing activities -- change in bank
  overdraft.................................................      557         65      1,190
                                                              -------    -------    -------
Effect of exchange rate changes on cash.....................   (1,379)       (30)      (216)
Increase (decrease) in cash.................................    1,492       (835)       463
Cash at beginning of year...................................      536      2,028      1,193
                                                              -------    -------    -------
Cash at end of year.........................................  $ 2,028      1,193      1,656
                                                              =======    =======    =======
Income taxes paid to Parent.................................  $   524        681      1,364
                                                              =======    =======    =======
Noncash item -- dividend of receivable from Parent..........  $ 2,633     40,000         --
                                                              =======    =======    =======

See accompanying notes to consolidated financial statements.

F-28

BOWEN TOOLS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1994, 1995 AND 1996

(1) ORGANIZATION

(a) General

Bowen Tools, Inc. (the Company) is a wholly-owned subsidiary of Air Liquide America Corporation (Air Liquide or Parent). The Company was acquired in 1986 and these financial statements reflect Air Liquide's purchase price allocation to the Company's net assets.

The Company designs, manufactures, and markets fishing tools and drilling, power, and wireline/pressure control equipment used in the drilling and completion of oil and gas wells. The Company also rents equipment used in the drilling and completion of oil and gas wells. The Company has four foreign locations, which market the Company's products abroad, located in Scotland, Holland, Singapore, and Canada.

On March 31, 1997, IRI International Corporation, a manufacturer of drilling rigs and related equipment, acquired virtually all the assets (excluding the pension asset, cash and cash equivalents and certain fixed assets) and assumed certain liabilities (excluding intercompany payables and certain pending litigation) of the Company for approximately $75,000,000.

(b) Risks Associated with the Company's Business

The Company is subject to certain risks inherent in the ownership and operation of foreign subsidiaries including tax increases, retroactive tax claims, expropriation, adverse changes in currency values, foreign exchange controls, import and export regulations, environmental controls and other laws, regulations or international development that may adversely affect the Company's subsidiaries. The Company does not maintain political risk insurance.

The availability of a ready market and prices received for the Company's products depend upon numerous factors beyond the control of the Company including fluctuating market demand, the price of oil and gas commodities, competition, governmental regulation and world and economic developments. World oil and gas markets are highly volatile and shortage or surplus conditions could substantially affect prices the Company receives for its products.

(2) SIGNIFICANT ACCOUNTING POLICIES

(a) Principles of Consolidation

The consolidated financial statements include the accounts of the Company, its wholly-owned subsidiaries and its allocable portion of sales from Air Liquide's Foreign Sales Corporation. All significant intercompany balances and transactions have been eliminated in consolidation.

(b) Inventories

Inventories are stated at the lower of cost or market. Cost is determined using the first-in, first-out method for all inventories.

(c) Property, Plant, and Equipment

Property, plant, and equipment are stated at cost. Depreciation is principally provided on the straightline method over the estimated useful lives of the assets (20 years for buildings and improvements; 5-12 years for machinery and equipment; and 7-12 years for rental tools). Repairs and maintenance, including rental tool rework costs, are expensed as incurred while betterments are capitalized.

F-29

BOWEN TOOLS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

(d) Revenue Recognition

The Company recognizes revenue from product sales upon shipment to the customer. Revenue is recognized from rentals under operating leases in the month in which they accrue. The sale of rental tools is considered part of the Company's normal operations and, accordingly, are included in net sales in the accompanying consolidated statements of operations.

(e) Shop Inventories

Shop inventories of approximately $4,456,000 (net of an allowance of $5,342,000) and $3,672,000 (net of an allowance of $4,456,000) at December 31, 1995 and 1996, respectively, represent replacement parts for customers and are stated at estimated net realizable value.

(f) Currency Translation

The assets and liabilities of the Company's Canadian subsidiary are translated at current exchange rates. The assets and liabilities of the other foreign subsidiaries where the functional currency is the U.S. dollar are translated at current exchange rates for monetary assets and liabilities and historical exchange rates for nonmonetary assets and liabilities. Revenue and expense accounts are translated using an average rate for the period. Translation gains and losses are not included in determining net income but are reflected as a separate component of shareholder's equity.

(g) Income Taxes

Income taxes are accounted for under the asset and liability method. Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases and operating loss and tax credit carryforwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. The Company is included in the Air Liquide consolidated income tax return. Income taxes are provided as though the Company files a separate income tax return. Income taxes payable are included in the payable to Parent in the accompanying financial statements.

(h) Long-Lived Assets

In March 1995, SFAS No. 121, Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed Of, was issued which requires impairment losses to be recorded on long-lived assets used in operations when indicators of impairment are present and estimated future undiscounted cash flows indicate the carrying value of those assets may not be recoverable. The Company implemented SFAS No. 121 on January 1, 1994 and the adoption did not have a material effect on the financial statements.

(i) Research and Development, and Advertising

Research and development, and advertising costs are expensed in the year in which such costs are incurred. Research and development costs amounted to approximately $142,000, $143,000 and $159,000 in 1994, 1995 and 1996 respectively. Advertising costs amounted to approximately $234,000, $323,000 and $356,000 in 1994, 1995 and 1996, respectively.

(j) Fair Value of Financial Instruments

The Company defines the fair value of a financial instrument as the amount at which the instrument could be exchanged in a current transaction between willing parties. Financial instruments in the accompany-

F-30

BOWEN TOOLS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

ing financial statements include cash, accounts receivable and accounts payable. The carrying value of financial instruments is considered to approximate fair value due to the short maturity and characteristics of those instruments.

(k) Earnings Per Share

Earnings per share is not presented for each of the three years ended December 31, 1996 because it is not meaningful due to the sole ownership of the Company's stock by Air Liquide.

(l) Use of Estimates

The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that effect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

(3) GEOGRAPHIC AREA INFORMATION

The Company is engaged in the business of manufacturing and distributing fishing and drilling equipment for the oil and gas industry in the United States, Scotland, Canada, Singapore, Amsterdam and Mexico. Summarized information regarding the Company's significant operations in different geographic areas, including domestic and export operations, as of and for the years ended December 31, 1994, 1995 and 1996 follows:

                                UNITED    UNITED                         OTHER      ADJUSTMENTS
                                STATES    STATES                        FOREIGN         AND
                               DOMESTIC   EXPORT   SCOTLAND   CANADA   OPERATIONS   ELIMINATIONS   CONSOLIDATED
                               --------   ------   --------   ------   ----------   ------------   ------------
            1994
-----------------------------
Net sales and rental tools...  $27,118    19,176     4,659     3,592      5,040        (2,025)         57,560
                               =======    ======    ======    ======     ======       =======        ========
Gross profit.................  $18,244     3,095     1,805     2,089      2,128        (2,025)         25,336
                               =======    ======    ======    ======     ======       =======        ========
Depreciation and
  amortization...............  $ 2,185        --        79        41         55            --           2,360
                               =======    ======    ======    ======     ======       =======        ========
Selling and distribution.....  $12,494     1,661       495       472        812            --          15,934
                               =======    ======    ======    ======     ======       =======        ========
G & A expense................  $   888       938       973       176      1,113            --           4,088
                               =======    ======    ======    ======     ======       =======        ========
Net income...................  $ 2,257       323       258       928         77        (2,025)          1,818
                               =======    ======    ======    ======     ======       =======        ========
Identifiable assets..........  $92,498     3,855     5,105     5,991      8,862           595         116,906
                               =======    ======    ======    ======     ======       =======        ========

F-31

BOWEN TOOLS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

                                UNITED    UNITED                         OTHER      ADJUSTMENTS
                                STATES    STATES                        FOREIGN         AND
                               DOMESTIC   EXPORT   SCOTLAND   CANADA   OPERATIONS   ELIMINATIONS   CONSOLIDATED
                               --------   ------   --------   ------   ----------   ------------   ------------
            1995
-----------------------------
Net sales and rental tools...  $30,069    17,526     4,052     3,223      4,794        (1,954)         57,710
                               =======    ======    ======    ======     ======       =======        ========
Gross profit.................  $18,482     3,835     1,047     1,529      2,489        (1,954)         25,428
                               =======    ======    ======    ======     ======       =======        ========
Depreciation and
  amortization...............  $ 1,801        --        74        45         53            --           1,973
                               =======    ======    ======    ======     ======       =======        ========
Selling and distribution.....  $13,731     1,736       604       467        954            --          17,492
                               =======    ======    ======    ======     ======       =======        ========
G & A expense................  $   229     1,026       874       174      1,173            --           3,476
                               =======    ======    ======    ======     ======       =======        ========
Net income...................  $ 1,555       698      (506)      362        312            --           2,421
                               =======    ======    ======    ======     ======       =======        ========
Identifiable assets..........  $58,867     3,238     4,386     2,577      7,810         1,245          78,123
                               =======    ======    ======    ======     ======       =======        ========
            1996
-----------------------------
Net sales and rental tools...  $32,832    23,275     4,714     4,228      4,413        (2,605)         66,857
                               =======    ======    ======    ======     ======       =======        ========
Gross profit.................  $23,053     4,173     1,864     1,437      2,299        (2,605)         30,221
                               =======    ======    ======    ======     ======       =======        ========
Depreciation and
  amortization...............  $ 2,077        --       121        45        227            --           2,470
                               =======    ======    ======    ======     ======       =======        ========
Selling and distribution.....  $15,469     1,643       594       556        882            --          19,144
                               =======    ======    ======    ======     ======       =======        ========
G & A expense................  $   298     1,093     1,077       186      1,094            --           3,748
                               =======    ======    ======    ======     ======       =======        ========
Net income...................  $ 3,937       934        72       370         95        (2,605)          2,803
                               =======    ======    ======    ======     ======       =======        ========
Identifiable assets..........  $68,028     4,907     3,475     3,488      4,957        (1,946)         82,909
                               =======    ======    ======    ======     ======       =======        ========

For the years ending December 31, 1994, 1995 and 1996, three, two and two customers, respectively, individually accounted for more than 10% of consolidated sales. Sales to these customers were approximately $19,346,000, $21,856,000 and $23,011,000 in 1994, 1995, and 1996, respectively. No account receivable from one customer exceeded 10% of consolidated stockholder's equity at December 31, 1994, 1995 or 1996.

(4) RELATED PARTY TRANSACTIONS

The Company has a receivable from and a payable to Air Liquide of approximately $7,053,000 and $897,000 at December 31, 1995 and 1996, respectively. The amount bears no interest and includes allocations by Air Liquide for such items as taxes and insurance. Air Liquide does not incur any general and administrative overhead on behalf of the Company other than certain insurance which was allocated to the Company.

F-32

BOWEN TOOLS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

(5) INVENTORIES

Inventories consist of the following at December 31, 1995 and 1996 (in thousands):

                                                             1995       1996
                                                            -------    ------
Raw materials.............................................  $ 3,074     3,321
Work-in-progress..........................................    3,374     5,415
Finished goods............................................   14,258    18,389
                                                            -------    ------
                                                            $20,706    27,125
                                                            =======    ======

(6) PROPERTY, PLANT AND EQUIPMENT

Property, plant and equipment consists of the following at December 31, 1995 and 1996 (in thousands):

                                                            1995       1996
                                                           -------    -------
Land and land improvements...............................  $ 3,615      3,571
Building and improvements................................   15,454     15,349
Machinery and equipment..................................    6,696      8,843
Rental tools.............................................   12,446     14,772
Construction in progress.................................    1,671      2,256
                                                           -------    -------
                                                            39,882     44,791
Less accumulated depreciation............................  (10,622)   (12,187)
                                                           -------    -------
          Net property, plant and equipment..............  $29,260     32,604
                                                           =======    =======

(7) INCOME TAXES

The components of income tax expense for the years ended December 31, 1994, 1995 and 1996 are as follows (in thousands):

                                                      1994     1995     1996
                                                     ------    -----    -----
Current:
  Federal........................................    $  868      459    1,418
  State..........................................        29       13       50
  Foreign........................................       174      376      345
Deferred.........................................        42      504     (210)
                                                     ------    -----    -----
                                                     $1,113..  1,352    1,603
                                                     ======    =====    =====

Income tax expense for the years ended December 31, 1994, 1995 and 1996 differed from the amounts computed by applying the U.S. federal income tax rate of 35 percent to pretax income from continuing operations as a result of the following (in thousands):

                                                      1994     1995     1996
                                                     ------    -----    -----
Computed "expected" tax expense..................    $1,026    1,321    1,542
State taxes, net of federal benefit..............        10        4       18
Unrealized exchange gain or loss.................        62       13        1
Nondeductible meals and entertainment expenses...        22       24       37
Other............................................        (7)     (10)       5
                                                     ------    -----    -----
                                                     $1,113    1,352    1,603
                                                     ======    =====    =====

F-33

BOWEN TOOLS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

The tax effects of temporary differences that give rise to significant portions of the deferred tax assets and deferred tax liabilities at December 31, 1995 and 1996 are presented below (in thousands).

                                                               1995       1996
                                                              -------    ------
Deferred income tax assets:
  Current:
     Accounts receivable and other assets principally due to
      allowance for doubtful accounts.......................  $    76       105
     Other..................................................      190       190
                                                              -------    ------
          Total deferred income tax assets..................      266       295
                                                              -------    ------
Deferred income tax liabilities:
  Current:
     Inventories, principally due to LIFO cost method used
      for tax purposes and reserve for excess and
      obsolete..............................................    3,449     3,032
  Noncurrent:
     Property, plant and equipment, principally due to
      differences in depreciation and capitalized
      interest..............................................    6,040     6,149
     Pension asset..........................................    1,040     1,167
                                                              -------    ------
          Total deferred income tax liabilities.............   10,529    10,348
                                                              -------    ------
Net deferred income tax liability...........................  $10,263    10,053
                                                              =======    ======

In assessing the reliability of deferred tax assets, management considers whether it is more likely than not that some portion or all of the deferred tax assets will not be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the periods in which those temporary differences become deductible. Management considers the scheduled reversal of deferred tax liabilities, projected future taxable income, and tax planning strategies in making this assessment. Based upon the level of historical taxable income and projections for future taxable income over the periods which the deferred tax assets are deductible, management believes it is more likely than not that the Company will realize the benefits of these deductible differences. There are no deferred taxes provided on the Company's foreign investments due to their permanent nature and the determination of the deferred tax attributable to such foreign investments is not practicable. IRI International Corporation expects to convert to the FIFO (first-in, first-out cost method) inventory method upon the closing of the sale transaction.

(8) LEASES

The Company has several noncancelable operating leases for certain office, shop and warehouse facilities; automobile; and equipment, that expire over the next three years. These leases generally contain renewal options for periods ranging from three to five years and require the Company to pay all executory costs such as maintenance and insurance. Rental expense for leases during 1994, 1995 and 1996 were approximately $529,000, $594,000 and $628,000, respectively.

Future minimum lease payments under noncancelable operating leases (with initial or remaining lease terms in excess of one year) as of December 31, 1996 follows (in thousands):

1997........................................................  $763
1998........................................................   765
1999........................................................   721
2000........................................................   706
2001........................................................   707

F-34

BOWEN TOOLS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

(9) BENEFIT PLANS

The Company participates in a defined benefit pension plan which covers all domestic full-time employees of the Company who have completed one year of service and are at least age 21. The defined benefit plan provides for benefits based primarily on years of service and the employee's compensation near the time of retirement. It is the policy of the Company to fund the plan currently based upon actuarial determination and applicable regulations. The Company made no contributions during 1994, 1995 and 1996, respectively.

The following table presents the defined benefit pension plan's funded status as of December 31, 1995 and 1996, reconciled with amounts recognized in the Company's consolidated balance sheets at December 31, 1995 and 1996 (in thousands):

                                                               1995       1996
                                                              -------    -------
Actuarial present value of accumulated benefit obligations:
  Vested benefit obligation.................................  $10,515     11,015
                                                              =======    =======
  Accumulated benefit obligation............................  $11,118     11,709
                                                              =======    =======
Actuarial present value of projected benefit obligation.....  (13,343)   (14,189)
Plan assets at fair value...................................   20,447     21,669
                                                              -------    -------
Projected benefit obligation less than plan assets..........    7,104      7,480
Unrecognized net gain.......................................   (3,389)    (3,589)
Prior service cost not yet recognized in net periodic
  pension cost..............................................      316        237
Unrecognized net transition asset...........................   (1,060)      (795)
                                                              -------    -------
Prepaid pension cost included in the balance sheet..........  $ 2,971      3,333
                                                              =======    =======

Net pension cost for 1994, 1995 and 1996 included the following components (in thousands):

                                                           1994       1995      1996
                                                          -------    ------    ------
Service cost -- benefits earned during the period.......  $   368       386       428
Interest cost on projected benefit obligation...........      920       966     1,044
Actual return on plan assets............................   (1,377)   (1,270)   (1,511)
Net amortization and deferral...........................     (328)     (186)     (323)
                                                          -------    ------    ------
Net pension cost........................................  $  (417)     (104)     (362)
                                                          =======    ======    ======

Assumptions used in accounting for the pension plan as of December 31, 1994, 1995 and 1996 were (in thousands):

                                                              1994    1995    1996
                                                              ----    ----    ----
Discount rates..............................................   8.5%   7.0     7.5
Rates of increase in compensation levels....................   6.6    6.6     6.6
Expected long-term rate of return on assets.................   7.5    7.5     7.5

The assumed rates used above have a significant effect on the amounts reported. For example, increasing the assumed discount rates by one percentage point in each year would decrease the projected benefit obligation as of December 31, 1996 by approximately $2,000,000 and the unrecognized net gain for the year ended December 31, 1996 by approximately $2,000,000. Increasing the assumed rate of increase in compensation levels by one percentage point in each year would increase the projected benefit obligation as of December 31, 1996 by approximately $1,400,000 and would decrease the unrecognized net gain for the year ended December 31, 1996 by approximately $1,400,000. Increasing the expected long-term rate of return on

F-35

BOWEN TOOLS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

assets by one percentage point in each year would decrease the unrecognized net gain for the year ended December 31, 1996 by $200,000.

The Company also has a defined contribution plan which covers most of their employees. Participants can contribute a percentage of their annual compensation and receive a 50% matching employer contribution on up to 6% of their annual compensation. The Company contributed approximately $382,000 and $452,000 for the year ended December 31, 1995 and 1996, respectively.

(10) OTHER POSTRETIREMENT BENEFIT PLANS

In addition to the Company's defined benefit pension plan and defined contribution plan, the Company sponsors a defined benefit health care plan that provides postretirement medical benefits to full-time employees who meet minimum age and service requirements. The plan is contributory, with retiree contributions adjusted annually, and contains other cost-sharing features such as deductibles and coinsurance. The accounting for the plan anticipates future cost-sharing changes to the written plan that are consistent with the Company's expressed intent to increase the retiree contribution rate annually for the expected general inflation rate for that year. The Company's policy is to fund the cost of medical benefits in amounts determined at the discretion of management.

The following table presents the plans' funded status reconciled with amounts recognized in the Company's consolidated balance sheets at December 31, 1995 and 1996 (in thousands):

                                                              1995    1996
                                                              ----    ----
Accumulated post-retirement benefit obligation:
  Retirees..................................................  $ 52      56
  Fully eligible active plan participants...................    87      94
  Other active plan participants............................   284     307
                                                              ----    ----
                                                               423     457
Plan assets at fair value...................................    --      --
                                                              ----    ----
Accumulated postretirement benefit obligation in excess of
  plan assets...............................................  $423     457
                                                              ====    ====

Net postretirement benefit cost for 1994, 1995 and 1996 include the following components (in thousands):

                                                              1994    1995    1996
                                                              ----    ----    ----
Service cost................................................  $22      24      26
Interest cost...............................................   29      32      35
                                                              ---      --      --
Net periodic postretirement benefit cost....................  $51      56      61
                                                              ===      ==      ==

For measurement purposes, 10.5% and 8.0% annual rates of increase in the per capita cost of covered benefits (i.e., health care cost trend rate) was assumed for 1996 for pre-65 and post-65 employees, respectively; the rate was assumed to decrease gradually to 5.25% by the year 2003 and remain at that level thereafter. The health care cost trend rate assumption has a significant effect on the amounts reported. For example, increasing the assumed health care cost trend rates by one percentage point in each year would increase the accumulated postretirement benefit obligation as of December 31, 1996 by $65,000 and the aggregate of the service and interest cost components of net periodic postretirement benefit cost for the year ended December 31, 1996 by $12,000. A discount rate of 8.0% was used in accounting for the pension plan as of December 31, 1994, 1995 and 1996.

F-36

BOWEN TOOLS, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE THREE MONTHS ENDED MARCH 31, 1996 AND 1997
(UNAUDITED)

(IN THOUSANDS)

                                                               1996       1997
                                                              -------    -------
Net sales...................................................  $10,400     12,349
Rental tool income..........................................    3,862      4,243
                                                              -------    -------
          Net sales.........................................   14,262     16,592
                                                              -------    -------
Cost of goods sold..........................................    6,930      8,141
                                                              -------    -------
          Gross profit......................................    7,332      8,451
                                                              -------    -------
Operating expenses:
  Selling and distribution..................................    4,747      5,319
  General and administrative................................    1,102      1,158
  Depreciation and amortization.............................      537        780
                                                              -------    -------
          Operating income..................................      946      1,194
Other income (expense):
  Gain (loss) on sale of property and equipment.............       37        (32)
  Other.....................................................     (199)       156
                                                              -------    -------
          Income before taxes...............................      784      1,318
                                                              -------    -------
Income taxes................................................      301        493
                                                              -------    -------
          Net income........................................  $   483        825
                                                              =======    =======

See accompanying notes to consolidated financial statements.

F-37

BOWEN TOOLS, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE THREE MONTHS ENDED MARCH 31, 1996 AND 1997
(IN THOUSANDS)

                                                               1996       1997
                                                              -------    -------
Cash flows from operating activities:
  Net income................................................  $   483    $   825
  Adjustments to reconcile net income to net cash provided
     by operations:
     Depreciation...........................................      537        780
     Deferred income taxes..................................      (50)       157
     (Gain) loss on sales of property and equipment.........       37        (32)
     Foreign currency translation...........................       27      1,750
     Changes in assets and liabilities:
       Accounts receivable..................................   (2,981)     1,056
       Inventory............................................   (3,395)    (3,619)
       Other current assets.................................    1,118        539
       Other................................................       46         --
       Accounts payable.....................................   (1,499)       667
       Accrued liabilities..................................      592       (475)
       Payable to Parent....................................    3,938      1,292
                                                              -------    -------
          Net cash provided by (used in) operations.........   (1,147)     2,940
                                                              -------    -------
Cash flows from investing activities:
  Purchases of property, plant and equipment................     (966)    (2,748)
  Proceeds on sales of property and equipment...............    1,427      1,521
                                                              -------    -------
          Net cash provided by (used in) investing
           activities.......................................      461     (1,227)
                                                              -------    -------
Cash flows from financing activities -- change in bank
  overdraft.................................................      605       (855)
                                                              -------    -------
Effect of exchange rate changes on cash.....................      (17)    (1,658)
Decrease in cash............................................  $   (98)   $  (800)
                                                              -------    -------
Cash at beginning of year...................................    1,193      1,656
                                                              -------    -------
Cash at end of period.......................................  $ 1,095    $   856
                                                              -------    -------
Income taxes paid to Parent.................................  $   122    $    --
                                                              =======    =======

See accompanying notes to consolidated financial statements.

F-38

BOWEN TOOLS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)

(1) GENERAL

Bowen Tools, Inc. (the Company) is a wholly-owned subsidiary of Air Liquide America Corporation (Air Liquide or Parent). The Company was acquired in 1986 and these financial statements reflect Air Liquide's purchase price allocation to the Company's net assets.

The Company designs, manufactures, and markets fishing tools and drilling, power, and wireline/pressure control equipment used in the drilling and completion of oil and gas wells. The Company also rents equipment used in the drilling and completion of oil and gas wells. The Company has four foreign locations, which market the Company's products abroad, located in Scotland, Holland, Singapore, and Canada.

The accompanying condensed consolidated financial statements of the Company as of March 31, 1997 and the three months ended March 31, 1996 and 1997 are unaudited; however, they include all adjustments (consisting only of normal recurring adjustments) which, in the opinion of management, are necessary for a fair presentation for such periods. Accounting measurements at interim dates inherently involve greater reliance on estimates than at year end. The results of operations for the interim periods presented are not necessary indicative of the results to be expected for the entire year.

Certain footnote disclosures normally included in annual consolidated financial statements prepared in accordance with generally accepted accounting principles have been omitted herein. The interim information should be read in conjunction with the Company's annual consolidated financial statements and notes.

(2) COMMITMENTS AND CONTINGENCIES

The Company is subject to various claims and legal actions arising in the ordinary course of business, inclusive of various claims pertaining to the Company's inactive Sanstorm operations, which previously marketed a line of blast cleaning equipment and related accessories unrelated to the Company's core oilfield tool product lines. In the opinion of management, the amount of liability with respect to these actions and claims is either not material to the Company's financial statements or, in the case of such claims relating to the inactive Sanstorm operations, are reasonably provided for by Air Liquide, who assumed these liabilities upon its acquisition of Bowen and is also a defendant in such litigation.

(3) ACQUISITION

On March 31, 1997, IRI International Corporation, a manufacturer of drilling rigs and related equipment, acquired virtually all the assets (excluding the pension asset, cash and cash equivalents and certain fixed assets) and assumed certain liabilities (excluding intercompany payables and certain pending litigation) of the Company for approximately $73,100,000. The acquisition of the Company by IRI was recorded as a purchase transaction effective for accounting purposes as of March 31, 1997.

F-39

INDEPENDENT AUDITORS' REPORT

The Board of Directors
Cardwell International Ltd.:

We have audited the accompanying consolidated balance sheet of Cardwell International Ltd. and subsidiaries as of October 31, 1996, and the related consolidated statements of operations and shareholder's equity and cash flows for the ten months then ended. These consolidated financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these consolidated financial statements based on our audit.

We conducted our audit in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Cardwell International Ltd. and subsidiaries as of October 31, 1996, and the results of their operations and their cash flows for the ten-months then ended in conformity with generally accepted accounting principles.

KPMG Peat Marwick LLP

Dallas, Texas
December 6, 1996, except as to note 10,
which is as of April 17, 1997

F-40

CARDWELL INTERNATIONAL LTD.

CONSOLIDATED BALANCE SHEET
(IN THOUSANDS, EXCEPT SHARE AMOUNTS)

OCTOBER 31, 1996

ASSETS
Current assets:
  Cash and cash equivalents.................................  $   432
  Letter of credit deposits.................................    1,915
  Accounts receivable, less allowance for doubtful accounts
     of $21.................................................      574
  Costs and estimated earnings in excess of billings on
     uncompleted contracts..................................    2,109
  Inventories...............................................   12,743
  Other current assets......................................      315
  Deferred income taxes.....................................       77
                                                              -------
          Total current assets..............................   18,165
Property, plant and equipment, net..........................    1,108
Letter of credit deposits...................................    2,097
Other noncurrent assets.....................................       57
                                                              -------
                                                              $21,427
                                                              =======
LIABILITIES AND SHAREHOLDER'S EQUITY
Current liabilities:
  Accounts payable and accrued liabilities..................  $ 4,974
  Commissions payable.......................................    1,194
  Customer advances.........................................    3,047
  Income taxes payable......................................      468
  Notes payable to bank.....................................    5,935
  Current installments of long-term debt....................      146
  Demand notes payable to related parties...................    1,230
                                                              -------
          Total current liabilities.........................   16,994
Long-term debt, less current installments...................      340
Deferred income taxes.......................................       51
                                                              -------
          Total liabilities.................................   17,385
                                                              -------
Shareholder's equity:
  Class A common stock -- $1 par value; 30,000 shares,
     authorized; 3,000 shares issued and outstanding........        3
  Retained earnings.........................................    4,083
                                                              -------
                                                                4,086
  Less treasury stock, 2,000 shares, at cost................       44
                                                              -------
          Total shareholder's equity........................    4,042
                                                              -------
Commitments and contingencies
                                                              -------
                                                              $21,427
                                                              =======

See accompanying notes to consolidated financial statements.

F-41

CARDWELL INTERNATIONAL LTD.
AND SUBSIDIARIES

CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE TEN MONTHS ENDED OCTOBER 31, 1996
(IN THOUSANDS)

Revenues....................................................  $40,598
Cost of goods sold..........................................   31,615
                                                              -------
          Gross profit......................................    8,983
Administrative and selling expense..........................    6,836
                                                              -------
          Operating income (loss)...........................    2,147
                                                              -------
Other income (expense):
  Interest income...........................................       95
  Interest expense..........................................     (532)
  Other, net................................................       76
                                                              -------
                                                                 (361)
                                                              -------
          Income before income taxes........................    1,786
Income taxes................................................      512
                                                              -------
          Net income........................................  $ 1,274
                                                              =======

See accompanying notes to consolidated financial statements.

F-42

CARDWELL INTERNATIONAL LTD.
AND SUBSIDIARIES

CONSOLIDATED STATEMENT OF SHAREHOLDER'S EQUITY
FOR THE TEN MONTHS ENDED OCTOBER 31, 1996
(IN THOUSANDS)

                                                                                              TOTAL
                                                           COMMON   RETAINED   TREASURY   SHAREHOLDER'S
                                                           STOCK    EARNINGS    STOCK        EQUITY
                                                           ------   --------   --------   -------------
Balances at December 31, 1995............................    $3      2,809       (44)         2,768
Net income...............................................    --      1,274        --          1,274
                                                             --      -----       ---          -----
Balances at October 31, 1996.............................    $3      4,083       (44)         4,042
                                                             ==      =====       ===          =====

See accompanying notes to consolidated financial statements.

F-43

CARDWELL INTERNATIONAL LTD.
AND SUBSIDIARIES

CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE TEN MONTHS ENDED OCTOBER 31, 1996
(IN THOUSANDS)

Cash flows from operating activities:
  Net income................................................  $  1,274
  Adjustments to reconcile net income to net cash used in
     operating activities:
     Depreciation and amortization..........................       149
     Deferred income taxes..................................       (12)
     Loss on sale of property and equipment.................        50
     Changes in assets and liabilities:
       Deposits.............................................    (2,052)
       Accounts receivable..................................         2
       Costs and estimated earnings in excess of billings on
        uncompleted contracts...............................      (306)
       Inventories..........................................    (8,377)
       Other current assets.................................       (45)
       Accounts payable and accrued liabilities.............     1,488
       Commissions payable..................................     1,037
       Customer advances....................................     2,909
       Income taxes payable.................................       536
       Other................................................       (96)
                                                              --------
          Net cash used in operating activities.............    (3,443)
                                                              --------
Cash flows from investing activities -- purchases of
  property, plant and equipment.............................      (368)
                                                              --------
Cash flows from financing activities:
  Payments on long-term debt................................       (20)
  Proceeds from notes payable to bank.......................    16,559
  Payments on notes payable to bank.........................   (13,568)
  Proceeds from demand notes payable to related parties.....     4,541
  Payments on demand notes payable to related parties.......    (3,311)
                                                              --------
          Net cash provided by financing activities.........     4,201
                                                              --------
Increase in cash and cash equivalents.......................       390
Cash and cash equivalents at beginning of year..............        42
                                                              --------
Cash and cash equivalents at end of year....................  $    432
                                                              ========
Interest paid...............................................  $    485
                                                              ========
Income taxes paid...........................................  $     98
                                                              ========

See accompanying notes to consolidated financial statements.

F-44

CARDWELL INTERNATIONAL LTD.
AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(1) GENERAL

Cardwell International, Ltd. and subsidiaries (the Company), incorporated in 1980, manufactures and sells drilling rigs and related oilfield equipment and supplies to predominately foreign customers. Raw materials are readily available and the Company is not dependent upon a single or a few suppliers.

(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

(a) Principles of Consolidation

The Company consolidates the accounts of its wholly-owned subsidiaries, Cardwell Manufacturing Co., Ltd., a Canadian company, and Cardwell Exports, Ltd., a foreign sales corporation. All significant intercompany transactions are eliminated.

(b) Cash and Cash Equivalents

Cash and cash equivalents consist of short-term, highly liquid investments with original maturities of three months or less. Cash equivalents consist of money market accounts at October 31, 1996.

(c) Letter of Credit Deposits

Letter of credit deposits consist of certificates of deposit and other investments placed with financial institutions as collateral to secure letters of credit on contract performance guarantees and bid bonds. The Company classifies deposits between current and long-term based on the investment maturity date. All investments with a maturity date of less than one year are classified as current. Deposits are to be returned to the Company upon the expiration of the performance guarantee or bid bond.

(d) Inventories

Inventories are stated at the lower of cost or market. Cost is determined using the first-in, first-out method.

(e) Property and Equipment

Property and equipment are stated at cost. Depreciation is calculated using the straight-line method over the following estimated useful lives:

Land improvements...........................................      15 years
Buildings...................................................   27-39 years
Machinery and equipment.....................................       7 years
Computer equipment..........................................     3-7 years
Automotive equipment........................................       5 years
Furniture, fixtures and other...............................     5-7 years

Maintenance, repairs and renewals which neither materially add to the value of the property nor appreciably prolong its life are charged to expense as incurred. Gains or losses on dispositions of property and equipment are included in operations.

(f) Revenues

Significant contracts (generally valued at $50,000 or greater) are accounted for by the Company using the percentage-of-completion revenue recognition method, whereby revenues and profits are recognized throughout the performance period of the contract. The percentage-of-completion is calculated based on the

F-45

CARDWELL INTERNATIONAL LTD.
AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

ratio of contract costs incurred to date to total estimated contract costs after providing for all known or anticipated costs. Costs include material, direct labor and engineering and manufacturing overhead. Selling expenses and general and administrative expenses are charged to operations as incurred. The effect of changes in estimates of contract costs is recorded currently. All remaining revenues are generally recorded when the equipment is shipped.

Costs and estimated earnings in excess of billings on uncompleted contracts represent revenues earned under the percentage of completion revenue recognition method but not yet billable under the terms of the contract. These amounts are billable based on the terms of the contract which include shipment of the products or completion of the contracts. Included in revenues and cost of goods sold for the ten months ended October 31, 1996 is $9,803,000 and $7,694,000, respectively, related to uncompleted contracts ($2,109,000, net).

For the ten months ended October 31, 1996, approximately 91% of the Company's revenues were provided by sales to Russian customers. Additionally, 3 customers, each accounting for more than 10% of total revenues, aggregated 79% of the Company's gross revenues for the ten months ended October 31, 1996.

(g) Income Taxes

Income taxes are accounted for under the asset and liability method. Deferred tax assets and liabilities are recognized for the future tax consequences attributable to operating losses and tax credit carryforwards and differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date.

(h) Financial Instruments

The carrying amounts of the financial instruments in the accompanying financial statements (cash and cash equivalents, deposits, accounts receivable and payable) approximate fair value because of the short maturity of these instruments. Letter of credit deposits approximate fair value because they earn interest at current market rates. Outstanding borrowings (notes payable to bank, long-term debt and demand notes payable to related parties) bear interest at current market rates and thus the carrying amount of debt approximates estimated fair value.

All of the Company's customers are engaged in the energy industry. This concentration of customers may impact the Company's overall exposure to credit risk, either positively or negatively, in that customers may be similarly affected by changes in economic and industry conditions. The Company performs ongoing credit evaluations of its customers. The Company maintains reserves for potential credit losses, and actual losses have historically been within the Company's expectations. Foreign sales also present various risks, including risks of war, civil disturbances and governmental activities that may limit or disrupt markets, restrict the movement of funds or result in the deprivation of contract rights or the taking of property without fair consideration. Most of the Company's foreign sales, however, are to larger international companies or are secured by letters of credit or similar arrangements.

(i) Use of Estimates

The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the

F-46

CARDWELL INTERNATIONAL LTD.
AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

(j) Commissions Payable

The Company accrues commissions payable as related revenues are recognized.

(k) Customer Advances

The Company requires customers to make prepayments on certain contracts. The amount of prepayment varies from contract to contract, but is typically based on a percentage of the contract price. These prepayments are recorded as customer advances until the contract has been completed and billed, at which time the customer advance is offset against accounts receivable.

(3) INVENTORIES

Inventories consist of the following at October 31, 1996 (in thousands):

Raw materials...............................................  $   783
Work in process.............................................    7,786
Parts.......................................................    3,791
Used equipment..............................................      383
                                                              -------
                                                              $12,743
                                                              =======

(4) PROPERTY, PLANT AND EQUIPMENT

Property, plant and equipment consist of the following at October 31, 1996 (in thousands):

Land and improvements.......................................  $   70
Buildings...................................................     569
Machinery and equipment.....................................     696
Computer equipment..........................................     166
Automotive equipment........................................     129
Furniture, fixtures and other...............................      48
                                                              ------
                                                               1,678
Less accumulated depreciation...............................     570
                                                              ------
                                                              $1,108
                                                              ======

(5) NOTE PAYABLE TO BANKS

The Company has a $10,000,000 revolving line of credit with a bank available for working capital purposes subject to borrowing base limitations. The net borrowing base was $6,799,000 at October 31, 1996. Notes payable outstanding under the line of credit as of October 31, 1996 aggregated $5,935,000. The note is secured by accounts receivable, inventories, property and equipment and guarantees of the sole stockholder of the Company and a company wholly-owned by the sole stockholder. The note bears interest at .75% above prime rate (8.25% at October 31, 1996). Interest is payable monthly and all unpaid principal and interest are due on October 31, 1997.

F-47

CARDWELL INTERNATIONAL LTD.
AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

The note agreement contains covenants which, among other things, restrict additional borrowings and payment of dividends, and require that the Company maintain minimum tangible net worth and other minimum financial ratios.

(6) LONG-TERM DEBT

Long-term debt consists of the following at October 31, 1996 (dollars in thousands):

7.75% (interest rate changes to 1.75% over prime on June 3,
  1999 and is adjusted each April 1 thereafter) note payable
  to bank, payable in monthly installments of $12, including
  interest, to June 2, 2004; collateralized by certain real
  property and guarantees of the (1) sole stockholder of the
  Company, (2) a company wholly-owned by the sole
  stockholder of the Company and (3) 75% by the Small
  Business Administration...................................  $405
10.55% note payable in monthly installments of $1, including
  interest, to August 1999; secured by lien on an
  automobile................................................    24
7% note payable, payable in monthly installments of $2,
  including interest, to July 1998 -- July 2000.............    57
                                                              ----
                                                               486
Less current installments...................................   146
                                                              ----
                                                              $340
                                                              ====

Aggregate installments of long-term debt at October 31, 1996 follow (in thousands):

October 31:
  1997......................................................  $146
  1998......................................................   153
  1999......................................................   160
  2000......................................................    27

(7) INCOME TAXES

Income taxes consist of the following components for the ten-month period ended October 31, 1996 (in thousands):

Current.....................................................  $524
Deferred....................................................   (12)
                                                              ----
                                                              $512
                                                              ====

Income tax expense for the ten-month period ended October 31, 1996 differs from the amount computed by applying the U.S. federal tax rate of 34% to income before income taxes as a result of the following (in thousands):

Computed "expected" tax expense.............................  $ 607
Nondeductible expenses......................................     10
Foreign sales corporation exclusion.........................   (160)
States taxes, net of federal benefit........................     54
Other.......................................................      1
                                                              -----
                                                              $ 512
                                                              =====

F-48

CARDWELL INTERNATIONAL LTD.
AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

The tax effect (federal and state) of temporary differences that give rise to significant portions of the deferred tax assets and deferred tax liabilities at October 31, 1996 are as follows (in thousands):

Current deferred tax assets:
  Allowance for doubtful accounts...........................  $ 8
  Vacation accrual..........................................   49
  Warranty accrual..........................................   20
                                                              ---
                                                              $77
                                                              ===
Noncurrent deferred tax liability -- plant and equipment
  depreciation..............................................  $51
                                                              ===

No valuation allowance related to the deferred tax asset was necessary for any of the periods presented as management believes it is more likely than not that such deferred tax assets will be realized within the next fiscal year.

(8) LEASES

The Company has operating leases for office facilities, machinery and equipment and certain automotive equipment. Rental expense on operating leases was $410,000 for the ten-month period ended October 31, 1996. The following is a yearly schedule of future minimum rental payments under operating leases as of October 31, 1996 (in thousands):

1997........................................................  $200
1998........................................................   142
1999........................................................    62
2000........................................................    62
2002........................................................    49
Thereafter..................................................   140

(9) RELATED PARTY TRANSACTIONS

The Company leases certain buildings, equipment and automotive equipment from related parties including management of the Company, members of their families and companies related by common ownership. Related party rental expense was $206,000 for the ten months ended October 31, 1996 and is included in general and administrative expense in the accompanying consolidated statement of operations.

The Company has license agreements with certain businesses owned by the President of the Company. The agreements provide for payments of $11,000 and $2,000 per month plus 4.5% of spare parts sales for the use of trademarks, patterns and prints used by the Company. Payments under the license agreements totaled $430,000 for the ten months ended October 31, 1996 and are included in general and administrative expense in the accompanying consolidated statement of operations.

Demand notes payable to related parties are unsecured and bear interest at 8% to 15%. Interest expense on these notes aggregated $83,000 for the ten months ended October 31, 1996.

On certain of the demand notes payable to related parties, the Company pays a fee in excess of stated interest for the use of the related party's funds. On contracts awarded to the Company and for which the related party funded the related bid bond, the Company is required to pay the related lending party a fee of approximately .5% of the contract price. No fee is required if the contract is not awarded to the Company. For the ten months ended October 31, 1996 the Company paid fees of approximately $151,000. Such fees are included in general and administrative expense in the accompanying consolidated statement of operations.

F-49

CARDWELL INTERNATIONAL LTD.
AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

(10) CONTINGENCIES

The Company has contract commitments aggregating $8,670,706 at October 31, 1996 for the manufacture and delivery of drilling rigs during fiscal 1997.

At October 31, 1996, the company had outstanding letters of credit for bid and performance bonds totaling $6,313,000 of which $2,256,000 is secured by the Company's bank revolving line of credit (see note 10).

(11) SUBSEQUENT EVENT

On April 17, 1997, all of the outstanding common stock of the Company and certain assets held by affiliates of the Company were purchased by IRI International Corporation (IRI) for $12,000,000 in cash. In addition, IRI partially paid ($3,000,000) of Cardwell's notes payable to bank, and Cardwell liquidated outstanding letters of credit deposits to pay off the remaining notes payable to bank ($2,119,000) outstanding prior to the close of the purchase. IRI assumed the underlying obligations on the bid and performance bonds.

F-50

CARDWELL INTERNATIONAL LTD.
AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE FIVE MONTHS ENDED MARCH 31, 1996 AND 1997
(UNAUDITED)

(IN THOUSANDS)

                                                               1996      1997
                                                              -------   -------
Revenues....................................................  $21,794    11,091
Cost of goods sold..........................................   16,999     9,005
                                                              -------   -------
          Gross profit......................................    4,795     2,086
Administrative and selling expense..........................    3,303     2,206
                                                              -------   -------
          Operating income (loss)...........................    1,492      (120)
Other income (expense):
  Interest income...........................................        5        62
  Interest expense..........................................     (222)     (246)
  Other, net................................................       14        70
                                                              -------   -------
                                                                 (203)     (114)
                                                              -------   -------
          Income (loss) before taxes........................    1,289      (234)
Income tax expense (benefit)................................      299       (73)
                                                              -------   -------
          Net income (loss).................................  $   990      (161)
                                                              =======   =======

See accompanying notes to condensed consolidated financial statements.

F-51

CARDWELL INTERNATIONAL LTD.
AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDER'S EQUITY
FOR THE FIVE MONTHS ENDED MARCH 31, 1997
(UNAUDITED)

(IN THOUSANDS)

                                                                                              TOTAL
                                                           COMMON   RETAINED   TREASURY   SHAREHOLDER'S
                                                           STOCK    EARNINGS    STOCK        EQUITY
                                                           ------   --------   --------   -------------
Balances at October 31, 1996.............................    $3      4,083       (44)         4,042
Net loss.................................................    --       (161)       --           (161)
                                                             --      -----       ---          -----
Balances at March 31, 1997...............................    $3      3,922       (44)         3,881
                                                             ==      =====       ===          =====

See accompanying notes to condensed consolidated financial statements.

F-52

CARDWELL INTERNATIONAL LTD.
AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE FIVE MONTHS ENDED MARCH 31, 1996 AND 1997
(UNAUDITED)

(IN THOUSANDS)

                                                               1996        1997
                                                              -------    --------
Cash flows from operating activities:
  Net income (loss).........................................  $   990        (161)
  Adjustments to reconcile net income to net cash used in
     operating activities:
     Depreciation and amortization..........................       62          70
     Deferred income taxes..................................       51        (111)
     Loss on disposal of property and equipment.............       --           5
     Changes in assets and liabilities:
       Letter of credit deposits............................      550         997
       Accounts receivable..................................    3,812        (911)
       Costs and estimated earnings in excess of billings on
        uncompleted contracts...............................   (5,748)      1,593
       Inventories..........................................   (2,247)      6,510
       Other current assets.................................       95          22
       Accounts payable and accrued liabilities.............    1,063      (1,776)
       Commissions payable..................................      (39)       (995)
       Customer advances....................................    2,157      (2,729)
       Income taxes payable.................................      180        (407)
       Other................................................       72          13
                                                              -------    --------
          Net cash provided by operating activities.........      998       2,120
                                                              -------    --------
Cash flows from investing activities -- purchases of
  property, plant and equipment.............................     (162)        (18)
                                                              -------    --------
Cash flows from financing activities:
  Payments on long-term debt................................      (48)        (57)
  Proceeds from notes payable to bank.......................    7,868      10,665
  Payments on notes payable.................................   (8,265)    (11,910)
  Proceeds from demand notes payable to related parties.....      300          86
  Payments on demand notes payable to related parties.......     (469)     (1,135)
                                                              -------    --------
          Net cash used in financing activities.............     (614)     (2,351)
                                                              -------    --------
Increase in cash and cash equivalents.......................      222        (249)
Cash and cash equivalents at beginning of period............       34         432
                                                              -------    --------
Cash and cash equivalents at end of period..................  $   256         183
                                                              =======    ========
Interest paid...............................................  $   262         270
                                                              =======    ========
Income taxes paid...........................................  $    87         320
                                                              =======    ========

See accompanying notes to condensed consolidated financial statements.

F-53

CARDWELL INTERNATIONAL LTD.
AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)

(1) GENERAL

The accompanying condensed consolidated financial statements of Cardwell International, Ltd. and subsidiaries (the Company), as of March 31, 1997 and for the five months ended March 31, 1996 and 1997 are unaudited; however, they include all adjustments (consisting only of normal recurring adjustments) which, in the opinion of management, are necessary for a fair presentation for such periods. Accounting measurements at interim dates inherently involve greater reliance on estimates than at year end. The results of operations for the interim periods presented are not necessarily indicative of the results to be expected for the entire year.

Certain footnote disclosures normally included in annual consolidated financial statements prepared in accordance with generally accepted accounting principles have been omitted herein. The interim information should be read in conjunction with the Company's annual consolidated financial statements and notes included elsewhere herein.

Summarized results from operations for the three months ended March 31, 1996 and 1997 follows (in thousands):

                                                               1996       1997
                                                              -------    ------
Revenues....................................................  $12,948     5,818
                                                              =======    ======
Gross profit................................................  $ 3,196     1,082
                                                              =======    ======
Net income (loss)...........................................  $   928       (35)
                                                              =======    ======

(2) INVENTORIES

Inventories consist of the following at March 31, 1997 (in thousands):

Raw materials...............................................   $  752
Work in process.............................................    2,614
Parts.......................................................    2,517
Used equipment..............................................      350
                                                               ------
                                                               $6,233
                                                               ======

(3) COMMITMENTS AND CONTINGENCIES

The Company had contract commitments aggregating $17.9 million at March 31, 1997 for the manufacture and delivery of drilling rigs during the remainder of fiscal 1997.

At March 31, 1997, the Company had outstanding letters of credit for bid and performance bonds totaling $3,597,000 of which $3,020,747 is secured by the Company's bank revolving line of credit (see note 3).

(4) SUBSEQUENT EVENT

On April 17, 1997, all of the outstanding common stock of the Company and certain assets held by affiliates of the Company were purchased by IRI International Corporation (IRI) for $12,000,000 in cash. In addition, IRI partially paid ($3,000,000) of Cardwell's notes payable to bank, and Cardwell liquidated outstanding letters of credit deposits to pay off the remaining notes payable to bank ($2,119,000) outstanding prior to the close of the purchase. IRI assumed the underlying obligations on the bid and performance bonds secured by the letters of credit.

F-54


NO PERSON IS AUTHORIZED IN CONNECTION WITH ANY OFFERING MADE HEREBY TO GIVE ANY INFORMATION OR TO MAKE ANY REPRESENTATION OTHER THAN AS CONTAINED IN THIS PROSPECTUS, AND IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATION MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY OR BY ANY U.S. UNDERWRITER. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF AN OFFER TO BUY ANY SECURITY OTHER THAN THE SHARES OF COMMON STOCK OFFERED HEREBY, NOR DOES IT CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF AN OFFER TO BUY ANY OF THE SECURITIES OFFERED HEREBY TO ANY PERSONS IN ANY JURISDICTION IN WHICH IT IS UNLAWFUL TO MAKE SUCH AN OFFER OR SOLICITATION TO SUCH PERSON. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL UNDER ANY CIRCUMSTANCE CREATE ANY IMPLICATION THAT THE INFORMATION CONTAINED HEREIN IS CORRECT AS OF ANY DATE SUBSEQUENT TO THE DATE HEREOF.


TABLE OF CONTENTS

                                             PAGE
                                             ----
Prospectus Summary.........................    3
Risk Factors...............................    7
The Company................................   10
Use of Proceeds............................   10
Dividend Policy............................   11
Capitalization.............................   12
Dilution...................................   13
Pro Forma Financial Data...................   14
Selected Financial Data....................   20
Management's Discussion and Analysis of
  Financial Condition and Results of
  Operations...............................   21
Business...................................   26
Management.................................   37
Security Ownership of Certain Beneficial
  Owners and Management....................   44
Selling Stockholders.......................   44
Certain Relationships and Related
  Transactions.............................   45
Description of Capital Stock...............   46
Shares Eligible for Future Sale............   46
Underwriting...............................   48
Legal Matters..............................   52
Experts....................................   52
Additional Information.....................   52
Index to Financial Statements..............  F-1


UNTIL , 1997 (25 DAYS AFTER THE COMMENCEMENT OF THE OFFERING), ALL DEALERS EFFECTING TRANSACTIONS IN THE COMMON STOCK, WHETHER OR NOT PARTICIPATING IN THIS DISTRIBUTION, MAY BE REQUIRED TO DELIVER A PROSPECTUS. THIS DELIVERY REQUIREMENT IS IN ADDITION TO THE OBLIGATION OF DEALERS TO DELIVER A PROSPECTUS WHEN ACTING AS UNDERWRITERS AND WITH RESPECT TO THEIR UNSOLD ALLOTMENTS OR SUBSCRIPTIONS.


12,000,000 SHARES

[LOGO]

IRI INTERNATIONAL
CORPORATION

COMMON STOCK
PROSPECTUS
, 1997

LEHMAN BROTHERS

HOWARD, WEIL, LABOUISSE, FRIEDRICHS
INCORPORATED

PRUDENTIAL SECURITIES INCORPORATED

CREDIT LYONNAIS
SECURITIES (USA) INC.


INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE.

[Alternate page for International Prospectus]

Subject to Completion, dated September, 1997

PROSPECTUS

12,000,000 SHARES

[LOGO]
IRI INTERNATIONAL CORPORATION

COMMON STOCK


Of the 12,000,000 shares of common stock, par value $.01 per share (the "Common Stock"), of IRI International Corporation (the "Company") offered hereby, 9,000,000 shares are being issued and sold by the Company and 3,000,000 shares are being offered for the account of certain stockholders of the Company (the "Selling Stockholders"). Of the shares being offered hereby, 2,400,000 shares are being offered initially outside the United States and Canada by the International Managers (the "International Offering"), and 9,600,000 shares are being offered initially in the United States and Canada by the U.S. Underwriters (the "U.S. Offering" and, together with the U.S. Offering, the "Offering"). The initial public offering price and underwriting discounts and commissions will be identical for both offerings. See "Underwriting." The Company will not receive any of the proceeds from the sale of the shares by the Selling Stockholders.

Prior to the Offering, there has been no public market for the Common Stock. It is currently estimated that the initial public offering price for the Common Stock will be between $14.00 and $17.00 per share. See "Underwriting" for information relating to the factors to be considered in determining the initial public offering price. The Company intends to apply to have the Common Stock listed for trading on the New York Stock Exchange (the "NYSE") under the symbol "IIL".

SEE "RISK FACTORS" BEGINNING ON PAGE 7 OF THIS PROSPECTUS FOR INFORMATION THAT SHOULD BE CONSIDERED BY PROSPECTIVE PURCHASERS OF THE COMMON STOCK OFFERED HEREBY.

THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
NOR HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE
SECURITIES COMMISSION PASSED UPON THE ACCURACY OR
ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION
TO THE CONTRARY IS A CRIMINAL OFFENSE.

=======================================================================================================================
                                                        UNDERWRITING                                  PROCEEDS TO
                                   PRICE TO            DISCOUNTS AND           PROCEEDS TO              SELLING
                                    PUBLIC            COMMISSIONS (1)          COMPANY (2)            STOCKHOLDERS
-----------------------------------------------------------------------------------------------------------------------
Per Share..................           $                      $                      $                      $
-----------------------------------------------------------------------------------------------------------------------
Total (3)..................       $                      $                      $                      $
=======================================================================================================================

(1) The Company and the Selling Stockholders have agreed to indemnify the International Managers and the U.S. Underwriters against certain liabilities, including liabilities under the Securities Act of 1933, as amended (the "Securities Act"). See "Underwriting."

(2) Before deducting offering expenses payable by the Company estimated to be $ .

(3) Each of the Company and the Selling Stockholders have granted the International Managers a 30-day option to purchase up to 180,000 additional shares of Common Stock on the same terms and conditions as set forth above to cover over-allotments, if any. Each of the Company and the Selling Stockholders have granted to the U.S. Underwriters a similar option to purchase up to 720,000 additional shares of Common Stock to cover over-allotments, if any. If such options (the "Underwriters' Over-Allotment Options") are exercised in full, the total Price to Public, Underwriting Discounts and Commissions, Proceeds to Company and Proceeds to Selling Stockholders will be $ , $ , $ and $ , respectively. See "Underwriting."


The shares of Common Stock offered by this Prospectus are offered severally by the International Managers subject to prior sale, to withdrawal, cancellation or modification of the offer without notice, to delivery to and acceptance by the International Managers and to certain further conditions. It is expected that delivery of the shares of Common Stock will be made at the offices of Lehman Brothers Inc., New York, New York on or about , 1997.


LEHMAN BROTHERS

CREDIT LYONNAIS SECURITIES

HOWARD, WEIL, LABOUISSE, FRIEDRICHS
INCORPORATED

PRUDENTIAL-BACHE SECURITIES

, 1997


[ALTERNATE PAGE FOR INTERNATIONAL PROSPECTUS]


NO PERSON IS AUTHORIZED IN CONNECTION WITH ANY OFFERING MADE HEREBY TO GIVE ANY INFORMATION OR TO MAKE ANY REPRESENTATION OTHER THAN AS CONTAINED IN THIS PROSPECTUS, AND IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATION MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY OR BY ANY INTERNATIONAL MANAGER. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF AN OFFER TO BUY ANY SECURITY OTHER THAN THE SHARES OF COMMON STOCK OFFERED HEREBY, NOR DOES IT CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF AN OFFER TO BUY ANY OF THE SECURITIES OFFERED HEREBY TO ANY PERSONS IN ANY JURISDICTION IN WHICH IT IS UNLAWFUL TO MAKE SUCH AN OFFER OR SOLICITATION TO SUCH PERSON. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL UNDER ANY CIRCUMSTANCE CREATE ANY IMPLICATION THAT THE INFORMATION CONTAINED HEREIN IS CORRECT AS OF ANY DATE SUBSEQUENT TO THE DATE HEREOF.

TABLE OF CONTENTS

                                             Page
                                             ----
Prospectus Summary.........................    3
Risk Factors...............................    7
The Company................................   10
Use of Proceeds............................   10
Dividend Policy............................   11
Capitalization.............................   12
Dilution...................................   13
Pro Forma Financial Data...................   14
Selected Financial Data....................   20
Management's Discussion and Analysis of
  Financial Condition and Results of
  Operations...............................   21
Business...................................   26
Management.................................   37
Security Ownership of Certain Beneficial
  Owners and Management....................   44
Selling Stockholders.......................   44
Certain Relationships and Related
  Transactions.............................   45
Description of Capital Stock...............   46
Shares Eligible for Future Sale............   46
Underwriting...............................   48
Legal Matters..............................   52
Experts....................................   52
Additional Information.....................   52
Index to Financial Statements..............  F-1


UNTIL , 1997 (25 DAYS AFTER THE COMMENCEMENT OF THE OFFERING), ALL DEALERS EFFECTING TRANSACTIONS IN THE COMMON STOCK, WHETHER OR NOT PARTICIPATING IN THIS DISTRIBUTION, MAY BE REQUIRED TO DELIVER A PROSPECTUS. THIS DELIVERY REQUIREMENT IS IN ADDITION TO THE OBLIGATION OF DEALERS TO DELIVER A PROSPECTUS WHEN ACTING AS UNDERWRITERS AND WITH RESPECT TO THEIR UNSOLD ALLOTMENTS OR SUBSCRIPTIONS.


12,000,000 SHARES

[LOGO]

IRI INTERNATIONAL
CORPORATION

COMMON STOCK


PROSPECTUS
, 1997

LEHMAN BROTHERS

CREDIT LYONNAIS SECURITIES

HOWARD, WEIL, LABOUISSE, FRIEDRICHS
INCORPORATED

PRUDENTIAL-BACHE SECURITIES


PART II

INFORMATION NOT REQUIRED IN PROSPECTUS

ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.

The following table sets forth the expenses, other than underwriting discounts and commissions, paid or payable in connection with the issuance and distribution of the Common Stock being registered hereby:

Securities and Exchange Commission Registration Fee.........  $
National Association of Securities Dealers, Inc. Filing
  Fee.......................................................
New York Stock Exchange Listing Fee.........................
Printing and Engraving Expenses.............................
Legal Fees and Expenses.....................................
Accounting Fees and Expenses................................
Blue Sky Fees and Expenses..................................
Transfer Agent and Registrar Fees...........................
Miscellaneous Fees and Expenses.............................
                                                              -------
          Total.............................................
                                                              =======

All amounts are estimated except the Securities and Exchange Commission Registration Fee, the National Association of Securities Dealers, Inc. Filing Fee and the New York Stock Exchange Listing Fee.

ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS.

The Company's Certificate of Incorporation provides that the personal liability of directors of the Company to the Company is eliminated to the maximum extent permitted by Delaware law. Under Delaware law, absent these provisions, directors could be held liable for gross negligence in the performance of their duty of care, but not for simple negligence. The Company's Certificate of Incorporation absolves directors of liability for negligence in the performance of their duties, including gross negligence. However, the Company's directors remain liable for breaches of their duty of loyalty to the Company and its stockholders, as well as for acts or omissions not in good faith or which involve intentional misconduct or a knowing violation of law and transactions from which a director derives improper personal benefit. The Company's Certificate of Incorporation also does not absolve directors of liability under Section 174 of the Delaware General Corporation Law, which makes directors personally liable for unlawful dividends or unlawful stock repurchases or redemptions in certain circumstances and expressly sets forth a negligence standard with respect to such liability.

Under Delaware law, directors, officers, employees, and other individuals may be indemnified against expenses (including attorneys' fees), judgments, fines, and amounts paid in settlement in connection with specified actions, suits or proceedings, whether civil, criminal, administrative or investigative (other than an action by or in the right of the corporation -- a "derivative action") if they acted in good faith and in a manner they reasonably believed to be in or not opposed to the best interests of the Company and, with respect to any criminal action or proceeding, had no reasonable cause to believe their conduct was unlawful. A similar standard of care is applicable in the case of a derivative action, except that indemnification only extends to expenses (including attorneys' fees) incurred in connection with defense or settlement of such an action and Delaware law requires court approval before there can be any indemnification of expenses where the person seeking indemnification has been found liable to the Company.

The Company entered into indemnification agreements with each of its directors and executive officers. These indemnification agreements provide for, among other things, (i) the indemnification by the Company of the indemnities thereunder to the extent described above and (ii) the advancement of attorneys' fees and other expenses.

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ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES.

Since September 20, 1994 (the date of the Company Acquisition), the Company has made the following sales of unregistered securities, all of which were exempt from the registration requirements of the Securities Act pursuant to
Section 4(2) thereof:

On March 31, 1997 the Company issued (i) $31 million aggregate principal amount of promissory notes pursuant to the Senior Notes Agreement and (ii) a $65 million principal amount promissory note pursuant to the Term Loan.

ITEM 16. EXHIBITS AND FINANCIAL STATEMENTS SCHEDULES.

(A) EXHIBITS.

EXHIBIT
  NO.                                    DESCRIPTION
-------                                  -----------
   *1.1          Form of Underwriting Agreement.
    3.1          Certificate of Incorporation of the Company dated July 30,
                 1985.
    3.2          Certificate of Amendment of Certificate of Incorporation
                 dated September 1, 1996.
   *3.3          Certificate of Merger of ESI with the Company dated
                           , 1997.
    3.4          Form of Certificate of Amendment of Certificate of
                 Incorporation of the Company.
    3.5          Form of Amended and Restated By-Laws of the Company.
   *4.1          Specimen Common Stock Certificate.
    4.2          Form of Registration Rights Agreement between the Company
                 and its current stockholders.
   *5.1          Opinion of Jones, Day, Reavis & Pogue regarding the legality
                 of issuance of the Common Stock being registered.
   10.1          Form of Indemnification Agreement among the Company and its
                 officers and directors.
   10.2          Employment Agreement, dated as of April 17, 1997, between
                 Cardwell and A.C. Teichgraeber and joined by the Company.
   10.3          Credit Agreement, dated as of March 31, 1997, among ESI, the
                 Company, the several lenders from time to time parties
                 thereto, Credit Lyonnais New York Branch and Lehman
                 Commercial Paper Inc. (the "Credit Agreement").
  *10.3A         Amendment No. 1 to the Credit Agreement.
   10.4          Senior Subordinated Increasing Rate Note Purchase Agreement,
                 dated as of March 31, 1997, the Company, Energy Services
                 International Limited and Strategic Resource Partners Fund.
   10.5          Asset Purchase Agreement, dated as of January 20, 1997, by
                 and among Bowen Tools, Inc.-Delaware, Bowen, Air Liquide and
                 the Company.
  *10.6          Acquisition Agreement, dated as of March 20, 1997, by and
                 among A.C. Teichgraeber, Teichgraeber Family Limited
                 Partnership, L.P., Arthur C. Teichgraeber Charitable
                 Remainder Trust, Greenwood Pipe and Threading Company, EDCO
                 Drilling Company Inc. and the Company.
   10.7          Equity Incentive Plan of the Company.
   10.8          Form of Nonqualified Stock Option Agreement.
   21            List of Subsidiaries of the Company.
   23.1          Consent of KPMG Peat Marwick LLP.
  *23.2          Consent of Jones, Day, Reavis & Pogue (included in Exhibit
                 5.1).


* To be filed by amendment.

II-2


(B) FINANCIAL STATEMENT SCHEDULES.

All schedules for which provision is made in the applicable regulations of the Securities and Exchange Commission are not required under the related instructions or are inapplicable or the information is contained in the Financial Statements and therefore have been omitted.

ITEM 17. UNDERTAKINGS.

The undersigned registrant hereby undertakes to provide to the Underwriters at the closing specified in the Underwriting Agreement certificates in such denominations and registered in such names as required by the Underwriters to permit prompt delivery to each purchaser.

Insofar as indemnification for liabilities arising under the Securities Act of 1933 (the "Securities Act") may be permitted to directors, officers and controlling persons of the registrant pursuant to the foregoing provisions, or otherwise, the registrant has been advised that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Securities Act and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the registrant of expenses incurred or paid by a director, officer or controlling person of the registrant in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities registered, the registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Securities Act and will be governed by the final adjudication of such issue.

The undersigned registrant hereby undertakes that:

(1) For purposes of determining any liability under the Securities Act, the information omitted from the form of prospectus filed as part of this registration statement in reliance upon Rule 430A and contained in a form of prospectus filed by the registrant pursuant to Rule 424(b)(1) or
(4) or 497(h) under the Securities Act shall be deemed to be part of this registration statement as of the time it was declared effective.

(2) For the purpose of determining any liability under the Securities Act, each post-effective amendment that contains a form of prospectus shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof.

II-3


SIGNATURES

Pursuant to the requirements of the Securities Act of 1933, the registrant has duly caused this registration statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Houston, in the State of Texas, on September 8, 1997.

IRI INTERNATIONAL CORPORATION

By:      /s/ HUSHANG ANSARY

  ------------------------------------
  Hushang Ansary
  Chairman and Chief Executive Officer

POWER OF ATTORNEY

KNOW ALL MEN BY THESE PRESENTS that each person whose signature appears below does hereby constitute and appoint Daniel G. Moriarty, Munawar H. Hidayatallah and William F. Henze II, and each of them, such person's true and lawful attorneys-in-fact and agents, with full power of substitution and resubstitution in each of them, to do any and all acts and things in such person's respective name and on such person's respective behalf in any and all capacities that they or any of them may deem necessary or advisable to enable IRI International Corporation to comply with the Securities Act of 1933, as amended (the "Securities Act"), and any rules, regulations and requirements of the Securities and Exchange Commission, in connection with a Registration Statement on Form S-1 to be filed by IRI International Corporation, including specifically, but not limited to, power and authority to sign for such respective person any and all amendments (including post-effective amendments and filings under Rule 462(b) under the Securities Act) thereto and to file the same, with all exhibits thereto and other documents therewith, with the Securities and Exchange Commission; and each such person does hereby ratify and confirm all that they, or any of them, shall do or cause by virtue hereof. This power of attorney may be signed in counterparts.

Pursuant to the requirements of the Securities Act of 1933, this Registration Statement has been signed below by the following persons in the capacities indicated as of September 8, 1997:

                      SIGNATURE                                            TITLE
                      ---------                                            -----
                 /s/ HUSHANG ANSARY                              Chairman of the Board and
-----------------------------------------------------             Chief Executive Officer
                   Hushang Ansary

               /s/ DANIEL G. MORIARTY                            Vice Chairman of the Board
-----------------------------------------------------
                 Daniel G. Moriarty

             /s/ MUNAWAR H. HIDAYATALLAH                   Chief Financial and Accounting Officer
-----------------------------------------------------                   and Director
               Munawar H. Hidayatallah

                /s/ ABDALLAH ANDRAWOS                              Secretary and Director
-----------------------------------------------------
                  Abdallah Andrawos

               /s/ GARY W. STRATULATE                      President and Chief Operating Officer
-----------------------------------------------------         of the IRI Division and Director
                 Gary W. Stratulate

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                      SIGNATURE                                            TITLE
                      ---------                                            -----
             /s/ RICHARD D. HIGGINBOTHAM                   President and Chief Operating Officer
-----------------------------------------------------     of the Bowen Tools Division and Director
               Richard D. Higginbotham

             /s/ ARTHUR C. TEICHGRAEBER                    President and Chief Operating Officer
-----------------------------------------------------   of Cardwell International, Ltd. and Director
               Arthur C. Teichgraeber

                   /s/ NINA ANSARY                                        Director
-----------------------------------------------------
                     Nina Ansary

                /s/ FRANK C. CARLUCCI                                     Director
-----------------------------------------------------
                  Frank C. Carlucci

                  /s/ PHILIP DAVID                                        Director
-----------------------------------------------------
                    Philip David

                /s/ JOHN D. MACOMBER                                      Director
-----------------------------------------------------
                  John D. Macomber

                /s/ EDWARD L. PALMER                                      Director
-----------------------------------------------------
                  Edward L. Palmer

                /s/ STEPHEN J. SOLARZ                                     Director
-----------------------------------------------------
                  Stephen J. Solarz

             /s/ ALEXANDER B. TROWBRIDGE                                  Director
-----------------------------------------------------
               Alexander B. Trowbridge

                /s/ J. ROBINSON WEST                                      Director
-----------------------------------------------------
                  J. Robinson West

II-5


INDEX TO EXHIBITS

EXHIBIT
  NO.                                    DESCRIPTION
-------                                  -----------
   *1.1          Form of Underwriting Agreement.
    3.1          Certificate of Incorporation of the Company dated July 30,
                 1985.
    3.2          Certificate of Amendment of Certificate of Incorporation
                 dated September 1, 1996.
   *3.3          Certificate of Merger of ESI with the Company dated
                           , 1997.
    3.4          Form of Certificate of Amendment of Certificate of
                 Incorporation of the Company.
    3.5          Form of Amended and Restated By-Laws of the Company.
   *4.1          Specimen Common Stock Certificate.
    4.2          Form of Registration Rights Agreement between the Company
                 and its current stockholders.
   *5.1          Opinion of Jones, Day, Reavis & Pogue regarding the legality
                 of issuance of the Common Stock being registered.
   10.1          Form of Indemnification Agreement among the Company and its
                 officers and directors.
   10.2          Employment Agreement, dated as of April 17, 1997, between
                 Cardwell and A.C. Teichgraeber and joined by the Company.
   10.3          Credit Agreement, dated as of March 31, 1997, among ESI, the
                 Company, the several lenders from time to time parties
                 thereto, Credit Lyonnais New York Branch and Lehman
                 Commercial Paper Inc. (the "Credit Agreement").
  *10.3A         Amendment No. 1 to the Credit Agreement.
   10.4          Senior Subordinated Increasing Rate Note Purchase Agreement,
                 dated as of March 31, 1997, the Company, Energy Services
                 International Limited and Strategic Resource Partners Fund.
   10.5          Asset Purchase Agreement, dated as of January 20, 1997, by
                 and among Bowen Tools, Inc.-Delaware, Bowen, Air Liquide and
                 the Company.
  *10.6          Acquisition Agreement, dated as of March 20, 1997, by and
                 among A.C. Teichgraeber, Teichgraeber Family Limited
                 Partnership, L.P., Arthur C. Teichgraeber Charitable
                 Remainder Trust, Greenwood Pipe and Threading Company, EDCO
                 Drilling Company Inc. and the Company.
   10.7          Equity Incentive Plan of the Company
   10.8          Form of Nonqualified Stock Option Agreement
   21            List of Subsidiaries of the Company.
   23.1          Consent of KPMG Peat Marwick LLP.
  *23.2          Consent of Jones, Day, Reavis & Pogue (included in Exhibit
                 5.1).


* To be filed by amendment.


CERTIFICATE OF INCORPORATION

OF

IRI INTERNATIONAL CORPORATION

The undersigned, in order to form a corporation for the purpose hereinafter stated, under and pursuant to the provisions of the Delaware General Corporation Law, hereby certifies that:

FIRST: The name of the Corporation is IRI International Corporation (hereinafter referred to as the "Corporation").

SECOND: The registered office and registered agent of the Corporation is The Prentice-Hall Corporation System, Inc., 229 South Street, Dover, Kent County, Delaware.

THIRD: The purpose of the Corporation is to engage in any lawful act or activity for which corporations may be organized under the General Corporation Law of the State of Delaware.

FOURTH: The total number of shares of all classes of stock that the Corporation is authorized to issue is 1,080,000 shares, consisting of 1,000,000 shares of Common Stock, par value $1.00 each (hereinafter referred to as the "Common Stock"), and 80,000 shares of Preferred Stock, par value $1.00 each (herein after referred to as the "Preferred Stock").

I. Preferred Stock

1. Dividends

1.A. General Dividend Obligation. When and as declared by the Board of Directors of the Corporation, the Corporation shall pay to the holders of Preferred Stock, out of the assets of the Corporation available for the payment of dividends, cumulative, preferential cash dividends at the rates and times provided for in this Paragraph 1.

1.B. Payment of Dividends. Dividends shall be payable on each outstanding share of Preferred Stock at the rate of $10 per annum, payable quarterly on each Dividend Payment Date to the holders of record on the respective dates fixed for such purposes by the Board of Directors in advance of each Dividend Payment Date, provided, however, that the holder of record of shares of Preferred Stock on the date such Preferred Stock is transferred to the Corporation in payment of the exercise price of Warrants in accordance with the Warrant Certificate (as defined in Section 6 of Article II of this Certificate of Incorporation), shall be


entitled to any accrued and unpaid dividends on such shares of Preferred Stock to the date of such transfer, when such dividends are declared and paid. The initial dividend on the outstanding shares of Preferred Stock shall be prorated from the date of issuance to the first Dividend Payment Date. Such dividends shall be cumulative, whether or not such dividends shall have been declared and whether or not there shall be (at the time such dividend shall become payable or at any other time) surplus, net profits or other assets of the Corporation legally available for the payment of dividends.

1.C. Dividend Preference. So long as any shares of Preferred Stock shall remain outstanding, no Junior Securities shall be acquired or redeemed by the Corporation or any Subsidiary, except, in the case of the Corporation, for shares of Common Stock pursuant to Section 4 or Section 6 of a Stock Transfer and Repurchase Agreement dated as of July 31, 1985 among the Corporation and the certain stockholders named therein, nor shall any dividend be declared or paid upon, nor shall any distribution be made upon, any Junior Securities by the Corporation, if at any time any dividend which shall have become payable on any share of Preferred Stock shall remain unpaid. A conversion of a convertible security, or the exercise of a right to acquire a security, by the holder thereof shall not for this purpose be deemed an acquisition or redemption of the security so converted.

2. Liquidation Preference. Upon any liquidation, dissolution or winding up of the Corporation, or any similar distribution of its assets to its stockholders which results in a return of capital, whether voluntary or involuntary, the holders of the Preferred Stock shall be entitled, before any distribution or payment is made upon any Junior Securities, to be paid out of the assets of the Corporation available for distribution to its stockholders (whether from capital, surplus or earnings) $100 in cash for each share of Preferred Stock outstanding, plus full accrued, unpaid, cumulative dividends (whether or not earned or declared) to the date of payment. If, upon any liquidation, dissolution or winding up of the Corporation, or any similar distribution of assets to its stockholders which results in a return of capital, whether voluntary or involuntary, the amounts payable with respect to Preferred Stock and any other shares of capital stock of the Corporation ranking as to such distribution on a parity with Preferred Stock are not paid in full, holders of Preferred Stock and of such other capital stock will share ratably in any such distribution of assets of the Corporation in accordance with the sums which would be payable in respect of such shares if all sums payable were discharged in full. After payment to the holders of the Preferred Stock of the full preferential amounts to which they are entitled, the holders of Preferred Stock will not be entitled to any further participation in and distribution of assets of the Corporation. Neither the

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consolidation or merger of the Corporation into or with any other corporation or corporations, nor the sale or transfer by the Corporation of all or any part of its assets, nor the reduction of the capital stock of the Corporation, shall be deemed to be a liquidation, dissolution, winding up or similar distribution of the Corporation within the meaning of any of the provisions of this Paragraph 2, provided that such transaction does not effect a return of capital to the Corporation's stockholders.

3. Voting Rights. Except as otherwise provided by law, holders of shares of Preferred Stock shall not be entitled to vote on any matter relating to the business or affairs of the Corporation or for any other purpose.

4. Redemption.

4.A. Optional Redemptions. The Corporation may, at its option, purchase or redeem shares of Preferred Stock in the manner, upon the notice and with the effect specified in paragraph 4A hereof from time to time after July 31, 1990, either in whole or in such portions as from time to time the Board of Directors of the Corporation may determine in accordance with the By-laws of the Corporation.

4.B. Redemption Price. For each share of Preferred Stock which is to be redeemed by the Corporation at any time in a redemption pursuant to this Paragraph 4, the Corporation shall be obligated on the Redemption Date to pay to the holder thereof (upon surrender by such holder at the Corporation's principal office of the certificate representing such share of Preferred Stock duly endorsed in blank or accompanied by an appropriate form of assignment) an amount (the "Redemption Price") equal to $100 per share, plus the sum of money equivalent to all accrued and unpaid dividends (whether or not earned or declared) thereon to and including the Redemption Date.

4.C. Redeemed or Otherwise Acquired Shares to be Cancelled. Any shares of Preferred Stock redeemed pursuant to this Paragraph 4 or otherwise acquired by the Corporation in any manner whatsoever shall be cancelled and shall not under any circumstances be reissued, sold or transferred; and the Corporation shall from time to time take such appropriate action as may be necessary to reduce the authorized number of shares of Preferred Stock accordingly.

4.D. Determination of Number of Each Holder's Shares to be Redeemed. The number of shares of Preferred Stock to be redeemed from each holder thereof in redemptions under this Paragraph 4 shall be determined by the Board of Directors in accordance with the By-laws of the Corporation. In case less than all the shares represented by any share certificate are

-3-

redeemed, a new certificate shall be issued representing the unredeemed shares without cost to the holder thereof.

4.E. Notice of Redemption. Notice of any redemption of Preferred Stock, specifying the time and place of redemption an the Redemption Price shall be mailed by certified or registered mail, return receipt requested, to each holder of record of the shares of Preferred Stock to be redeemed, at the address for such holder shown on the Corporation's records, not more than sixty (60) nor less than twenty (20) days prior to the date on which such redemption is to be made; if less than all the shares of the Preferred Stock owned by such holder are then to be redeemed, the notice shall also specify the number of shares and the certificate numbers thereof which are to be redeemed. Upon mailing any such notice of redemption, the Corporation shall become obligated to redeem at the time of redemption specified therein all of the shares of Preferred Stock therein specified.

4.F. Dividends After Redemption Date. No share of Preferred Stock shall be entitled to any dividend payable after its Redemption Date, and no such Redemption Date all rights of the holder of such share, as a shareholder of the Corporation by reason of the ownership of such share, shall cases, except the right to receive the Redemption Price of such share upon presentation and surrender of the certificate representing such share, and such share shall not be deemed to be outstanding after such Redemption Date. The occurrence of such Redemption Date shall not, however, affect the obligation of the Corporation to pay dividends theretofore payable on such share but not paid prior to such Redemption Date, as provided in paragraph 4B.

4.G. Limitations. The Corporation shall not redeem any shares of Preferred Stock at any time outstanding unless all dividends theretofore payable on the Preferred Stock through the Dividend Payment Date next preceding or coinciding with the Redemption Date shall have been paid.

5. Conversion. Shares of Preferred Stock shall not be convertible into shares of any other class of stock of the Corporation.

6. Registration of Transfer. The Corporation shall keep at its principal office (or such other place as the Corporation reasonably designates) a register for registration shares of Preferred Stock. Upon the surrender of any certificate representing Preferred Stock at such place, the Corporation shall, at the request of the registered holder of such certificate, execute and deliver (at the Corporation's expense) a new certificate or certificates in exchange therefor representing in the aggregate the number of shares represented by the surrendered certificate, subject to the requirements of applicable securities laws. Each such new certificate shall be

-4-

registered in such name and shall represent such number of shares as shall be requested by the holder of the surrendered certificate, shall be substantially identical in form to be surrendered certificate, and the holders of the shares represented by such new certificate shall be entitled to receive all theretofore payable but unpaid dividend payments on the shares represented by the surrendered certificate.

7. Replacement.

(i) Upon receipt of evidence reasonably satisfactory to the Corporation (an affidavit of the registered holder shall be satisfactory) of the ownership and the loss, theft, destruction or mutilation of any certificate evidencing one or more shares of the Preferred Stock and, in the case of any such loss, theft, destruction or mutilation, upon receipt of indemnity reasonably satisfactory to the Corporation or, in the case of any such mutilation, upon surrender of such certificate, the Corporation shall (at its expenses) execute and deliver in lieu of such certificate a new certificate of like kind representing the number of shares represented by such lost, stolen, destroyed or mutilated certificate, and the holders of the shares represented by such new certificate shall be entitled to receive all theretofore payable but unpaid dividend payments on the shares represented by the lost, stolen, destroyed or mutilated certificate.

(ii) The term "outstanding" when used in this Certificate of Incorporation with reference to shares of Preferred Stock as of any particular time shall not include any shares represented by any certificate in lieu of which is new certificate has been executed and delivered by the Corporation in accordance with Paragraph 6 or this Paragraph 7, but shall include only those shares represented such new certificate.

8. Definitions. The following terms shall have the following meanings, which meanings shall be equally applicable to the singular and plural forms of such terms:

(i) "Dividend Payment Date" means each February 1, May 1, August 1 and November 1 in each year, commencing with November 1, 1985.

(ii) "Junior Security" means the Common Stock, and any other equity security of any kind which the Corporation or any Subsidiary shall at any time issue or be authorized to issue as to which the Preferred Stock has preference over with respect to the payment of dividends or rights upon the dissolution, liquidation or winding up of the Corporation or the distribution of assets to its stockholders by way of return of capital.

-5-

(iii) "Person" means and includes an individual, a partnership, a corporation, a trust, a joint Venture, an unincorporated organization and a government or any department or agency thereof.

(iv) "Redemption Date" means as to any share of Preferred Stock redeemed pursuant to Paragraph 4 hereof the date specified in the notice of redemption, provided that for purposes of Paragraph 4F, no such date shall be a Redemption Date unless the applicable Redemption Price is actually paid or tendered on such date.

(v) "Subsidiary" means any corporation at least 50% of the voting stock of every class of which shall, at the time as of which any determination is being made, be owned by the Corporation either directly or through one or more Subsidiaries.

II. Common Stock

1. Dividends. Holders of Common Stock shall be paid dividends when and as declared by the Board of Directors of the Corporation out of the assets of the Corporation available for the payment of dividends.

2. Registration of Transfer. The Corporation shall keep at its principal office (or such other place as the Corporation reasonably designates) a register for the registration of shares of Common Stock. Upon the surrender of any certificate representing shares of Common Stock at such place, the Corporation shall, at the request of the registered holder of such certificate, execute and deliver (at the Corporation's expense) a new certificate or certificates in exchange therefor representing in the aggregate the number of shares of such class represented by the surrendered certificate, subject to the requirements of applicable securities laws. Each such new certificate shall be registered in such name and shall represent such number of shares of such class as shall be requested by the holder of the surrendered certificate and shall be substantially identical in form to the surrendered certificate.

3. Replacement.

(i) Upon receipt of evidence reasonably satisfactory to the Corporation (an affidavit of the registered holder shall be satisfactory) of the ownership and the loss, theft, destruction, or mutilation of any certificate evidencing one or more shares of Common Stock and, in the case of any loss, theft, destruction or mutilation, upon receipt of indemnity reasonably satisfactory to the Corporation or, in the case of any such mutilation, upon surrender of such certificate, the Corporation shall (at its expense) execute and deliver in lieu of such

-6-

certificate a new certificate of like kind representing the number of shares of such class represented by such lost, stolen, destroyed, or mutilated certificate and dated the date of such lost, stolen, destroyed, or mutilated certificate, and the holders of the shares represented by such new certificate shall be entitled to receive all theretofore payable but unpaid dividend payments on the shares represented by the lost, stolen, destroyed, or mutilated certificate.

(ii) The term "outstanding" when used in this subdivision with reference to the shares of Common Stock as of any particular time shall not include any such shares represented by any certificate in lieu of which a new certificate has been executed and delivered by the Corporation in accordance with Paragraph 2 or this Paragraph 3, but shall include only those shares represented by such new certificate.

4. Voting Rights. Except as otherwise provided by law, holders of Common Stock shall be entitled to one vote per share on all matters to be voted on by the stockholders of the Corporation.

5. Preemption. Holders of shares of Common Stock shall not, as such, have preemptive or other right to subscribe for or purchase any shares of capital stock of the Corporation of any class now or hereafter authorized or issued by the Corporation.

6. Warrants.

6.A. General. Except as expressly provided otherwise in the Warrant Certificate (as defined below), each certificate representing a share of Common Stock issued pursuant to the Stockholder Agreement dated as of July 30, 1985 among Ingersoll- Rand Company, Ingersoll-Rand Oilfield Products Company and Dresser Industries, Inc. (the "Stockholder Agreement") shall have attached thereto a warrant certificate (a "Warrant Certificate") substantially in the form of Exhibit 2.1 to the Stockholder Agreement certificating that the holder thereof is the registered holder of warrants ("Warrants") to purchase, on the terms and subject to the conditions contained therein, Common Stock. The number of Warrants represented by a Warrant Certificate initially shall equal four times the number of shares of Common Stock represented by the Common Stock certificate to which such Warrant Certificate is attached No Warrant Certificate may be detached from its Common Stock certificate, and Warrants shall not be transferrable except by and in connection with the transfer of the shares of Common Stock represented by the Common Stock certificate to which the Warrant Certificate evidencing such Warrants is attached. The Warrants, on the terms and subject to the conditions contained in the Warrant Certificate evidencing such Warrants, shall entitle the holders thereof to purchase

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fully paid and non-assessable whole shares of Common Stock. Such right to purchase Common Stock, as to any particular Warrant, shall not be exercisable on or before July 31, 990 and shall terminate at 5:00 P.M., Pampa, Texas time, on July 31, 1995.

6.B. Reservation and Availability of Common Stock. The Corporation will at all times reserve and keep available out of its authorized and unissued shares of Common Stock, free from preemptive rights, solely for the purpose of issue upon exercise of Warrants, such number of shares of Common Stock as shall then be issuable upon exercise of all Warrants then outstanding. The Corporation covenants that all shares of Common Stock issued upon due exercise of Warrants shall, when issued, be duly and validly issued, fully paid and nonassessable and free from all taxes, liens, charges and security interests with respect to the issues thereof. The Corporation will not take any action which results in any adjustment of the number of shares of Common Stock, issuable upon exercise of all of the Warrants then outstanding, together with the total number of shares of Common Stock reserved for any purpose other than issuance upon due exercise of Warrants, would exceed the total number of shares of Common Stock then authorized by this Certificate of Incorporation. If any shares of Common Stock required hereby to be reserved for the purpose of issue upon due exercise of Warrants require registration with, or approval of, any governmental authority under any federal or state law (other than any registration under the Securities Act of 1933 or any state securities law) before such shares may be issued upon such exercise, the Corporation will, at its expense and as expeditiously as possible, use its best efforts to cause such shares to be duly registered.

6.C. Stock Transfer Books. The Corporation will not close its books against the transfer of any share of Common Stock in any manner which interferes with the timely exercise of a Warrant.

FIFTH: The name and address of the incorporator are R.G. Dickerson 229 South State Street, Dover, Delaware 19901

SIXTH: The Board of Directors of the Corporation, acting by the affirmative vote of not less than all of the Directors of the Corporation, and the stockholders of the Corporation, acting by the affirmative vote (by written consent or otherwise) of (a) holders of record of not less than 90% of the issued and outstanding shares of Common Stock are held by Unaffiliated Stockholders as of the applicable date for the determination of stockholders entitled to vote thereon or consent thereto, Unaffiliated Stockholders who or which are holders of record of not less than a majority of the total number of issued and outstanding shares of Common Stock held by all Unaffiliated Stockholders, each may alter, amend or repeal any provision of

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the By-Laws of the Corporation. For purpose of this Article SIXTH, an "Unaffiliated Stockholder" shall mean any individual, partnership, corporation or other entity (a "person") who or which, as of the date on which such determination is made; (a) is not the beneficial owner, directly or indirectly, of more than 35% of the issued and outstanding shares of Common Stock; or (b) does not directly or indirectly, control such a beneficial owner of Common Stock or is not, directly or indirectly, controlled by, or under common control with, such a beneficial owner of Common Stock.

SEVENTH: This Certificate of Incorporation may be amended, and a provision hereof may be modified or repealed, only by the stockholders of the Corporation, acting by the affirmative vote (by written consent or otherwise) of
(a) holders of record of not less than 90% of the issued and outstanding shares of Common Stock and (b) if 4% or more of the total number of issued and outstanding shares of Common Stock are held by Unaffiliated Stockholders as of the applicable date for the determination of stockholders entitled to vote thereon or consent thereto, Unaffiliated Stockholders who or which are holders of record of not less than a majority of the total number of issued and outstanding shares of Common Stock held by all Unaffiliated Stockholders. For purpose of this Article SEVENTH, the term "Unaffiliated Stockholder" shall have the meaning ascribed to it in Article SIXTH.

EIGHTH: Except as otherwise provided by law or by Article SIXTH or SEVENTH of this Certificate of Incorporation, all matters submitted to a meeting of stockholders shall be decided by vote of holders of record, present in person or by proxy, of not less than 90% of the issued and outstanding shares of Common Stock. At any meeting of stockholders, the holders of record, present in person or by proxy, of not less than 80% of the issued and outstanding shares of Common Stock shall constitute a quorum for the transaction of business.

IN WITNESS WHEREOF, the undersigned has signed this Certificate of Incorporation on July 30, 1985.

/s/R.G. Dickerson
------------------------------------
R.G. Dickerson
Sole Incorporator

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CERTIFICATE OF AMENDMENT

OF

CERTIFICATE OF INCORPORATION

OF

IRI INTERNATIONAL CORPORATION

IRI International Corporation, a corporation duly organized and existing under the General Corporation Law of the State of Delaware (the "Corporation"), hereby certifies as follows:

1. The amendments to the Certificate of Incorporation set forth below have been duly adopted in accordance with the provisions of Section 242 of the General Corporation Law of the State of Delaware.

2. Article Fourth of the Corporation's Certificate of Incorporation is amended to read in its entirety as follows:

FOURTH: The total number of shares of all classes of stock that the Corporation is authorized to issue is 108,000,000 shares, consisting of 100,000,000 shares of Common Stock, par value $.01 each (hereinafter referred to as the "Common Stock"), and 8,000,000 shares of Preferred Stock, par value $1.00 each (herein after referred to as the "Preferred Stock").

I. PREFERRED STOCK

1. Dividends

1A. General Dividend Obligation. When and as declared by the Board of Directors of the Corporation, the Corporation shall pay to the holders of Preferred Stock, out of the assets of the Corporation available for the payment of dividends, cumulative, preferential cash dividends at the rates and times provided for in this Paragraph 1.

1B. Payment of Dividends. Dividends shall be payable on each outstanding share of Preferred Stock at the rate of $10 per annum, payable quarterly on each Dividend Payment Date to the holders of record on the respective dates fixed for such purposes by the Board of Directors in advance of each Dividend Payment Date. The initial dividend on the outstanding shares of Preferred Stock shall be prorated from the date of issuance to the first Dividend Payment Date. Such dividends shall accrue from the date of issuance and, if not paid, shall be cumulative, whether or not such


dividends shall have been declared and whether or not there shall be
(at the time such dividend shall become payable or at any other time)
surplus, net profits or other assets of the Corporation legally available for the payment of dividends.

1C. Dividend Preference. So long as any shares of Preferred Stock shall remain outstanding, no Junior Securities shall be acquired or redeemed by the Corporation or any Subsidiary, nor shall any dividend be declared or paid upon, nor shall any distribution be made upon, any Junior Securities by the Corporation, if at any time any dividend which shall have unpaid. A conversion of a convertible security, or the exercise of a right to acquire a security, or the exercise of a right to acquire a security, by the holder thereof shall not for this purpose be deemed an acquisition or redemption of the security so converted.

2. Liquidation Preference. Upon any liquidation, dissolution or winding up of the Corporation, or any similar distribution of its assets to its stockholders which results in a return of capital, whether voluntary or involuntary, the holders of the Preferred Stock shall be entitled, before any distribution or payment is made upon any Junior Securities, to be paid out of the assets of the Corporation available for distribution to its stockholders (whether from capital, surplus or earnings) $100 in cash for each share of Preferred Stock outstanding, plus full accrued, unpaid, cumulative dividends (whether or not earned or declared) to the date of payment. If, upon any liquidation, dissolution or winding up of the Corporation, or any similar distribution of assets to its stockholders which results in a return of capital, whether voluntary or involuntary, the amounts payable with respect to Preferred Stock and any other shares of capital stock of the Corporation ranking as to such distribution on a parity with Preferred Stock are not paid in full, holders of Preferred Stock and of such other capital stock will share ratably in any such distribution of assets of the Corporation in accordance with the sums which would be payable in respect of such shares if all sums payable were discharged in full. After payment to the holders of Preferred Stock of the full preferential amounts to which they are entitled, the holders of Preferred Stock will not be entitled to any further participation in and distribution of assets of the corporation. Neither the consolidation or merger of the Corporation into or with any other corporation or corporations, nor the sale assets, nor the reduction of the capital stock of the Corporation, shall be deemed to be a liquidation, dissolution, winding up or similar distribution of the Corporation within the meaning of any of the provisions of this Paragraph 2, provided that such transaction does not effect a return of capital to the Corporation's stockholders.

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3. Voting Rights. Except as otherwise provided by law, holders of shares of Preferred Stock shall not be entitled to vote on any matter relating to the business or affairs of the Corporation or for any other purpose.

4. Redemption.

4A. Optional redemptions. The Corporation may, at its option, purchase or redeem shares of Preferred Stock in the manner, upon the notice and with the effect specified in paragraph 4E hereof from time to time after July 31, 1990, either in whole or in such portions as from time to time the Board of Directors of the Corporation may determine in accordance with the By-laws of the Corporation.

4B. Redemption Price. For each share of Preferred Stock which is to be redeemed by the Corporation at any time in a redemption pursuant to this Paragraph 4, the Corporation shall be obligated on the Redemption Date to pay to the holder thereof (upon surrender by such holder at the Corporation's principal office of the certificate representing such share of Preferred Stock duly endorsed in blank or accompanies by an appropriate form of assignment) an amount (the "Redemption Price") equal to $100 per share, plus the sum of money equivalent to all accrued and unpaid dividends (whether or not earned or declared) thereon to and including the Redemption Date.

4C. Determination of Number of Each Holder's Shares to be Redeemed. The number of shares of Preferred Stock to be redeemed from each holder thereof in redemptions under this Paragraph 4 shall be determined by the Board of Directors in accordance with the By-laws of the Corporation. In case less than all the shares represented by any share certificate are redeemed, a new certificate shall be issued representing the unredeemed shares without cost to the holder thereof.

4D. Notice of Redemption. Notice of any redemption of Preferred Stock, specifying the time and place of redemption and the Redemption Price shall be mailed by certified or registered mail, return receipt requested, to each holder of record of the shares of Preferred Stock to be redeemed, at the address for such holder shown on the Corporation's records, not more than sixty (60) nor less than twenty (20) days prior to the date on which such redemption is to be made; if less than all the shares of the Preferred Stock owned by such holder are then to be redeemed, the notice shall also specify the number of shares and the certificate numbers thereof which are to be redeemed. Upon mailing any such notice of redemption, the Corporation shall become obligated to redeem at the time of redemption specified therein all of the shares of Preferred Stock therein specified.

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4E. Dividends After Redemption Date. No share of Preferred Stock shall be entitled to any dividend payable after its Redemption Date, and on such Redemption Date all rights of the holder of such share, as a shareholder of the Corporation by reason of the ownership of such share, shall cease, except the right to receive the Redemption Price of such share upon presentation and surrender of the certificate representing such share, and such share shall not be deemed to be outstanding after such Redemption Date. The occurrence of such Redemption Date shall not, however, affect the obligation of the Corporation to pay dividends theretofore payable on such share but not paid prior to such Redemption Date, as provided in paragraph 4B.

4F. Limitations. The Corporation shall not redeem any shares of Preferred Stock at any time outstanding unless all dividends theretofore payable on the Preferred Stock through the Dividend Payment Date next proceeding or coinciding with the Redemption Date shall have been paid.

5. Conversion. Shares of Preferred Stock shall not be convertible into shares of any other class of stock of the Corporation.

6. Registration of Transfer. The Corporation shall keep at its principal office (or such other place as the Corporation reasonably designates) a register for registration of shares of Preferred Stock. Upon the surrender of any certificate representing Preferred Stock at such place, the Corporation shall, at the request of the registered holder of such certificate, execute and deliver (at the Corporation's expense) a new certificate of certificates in exchange therefor representing in the aggregate the number of shares represented by the surrendered certificate, subject to the requirements of applicable securities laws. Each such new certificate shall be registered in such name and shall represent such number of shares as shall be requested by the holder of the surrendered certificate, shall be substantially identical in form to the surrendered certificate, and the holders of the shares represented by such new certificate shall be entitled to receive all theretofore payable but unpaid dividend payments on the shares represented by the surrendered certificate.

7. Replacement.

(i) Upon receipt of evidence reasonably satisfactory to the Corporation (an affidavit of the registered holder shall be satisfactory) of the ownership and the loss, theft, destruction or mutilation of any certificate evidencing one or more shares of the Preferred Stock and, in the case of any such loss, theft, destruction or mutilation, upon receipt of indemnity reasonably satisfactory to the

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Corporation or, in the case of any such mutilation, upon surrender of such certificate, the Corporation shall (at its expense) execute and deliver in lieu of such certificate a new certificate of like kind representing the number of shares represented by such lost, stolen, destroyed or mutilated certificate and dated the date of such lost, stolen, destroyed or mutilated certificate, and the holders of the shares represented by such new certificate shall be entitled to receive all theretofore payable but unpaid dividend payments on the shares represented by the lost, stolen, destroyed or mutilated certificate.

(ii) The term "outstanding" when used in this Certificate of Incorporation with reference to shares of Preferred Stock as of any particular time shall not include any shares represented by any certificate in lieu of which a new certificate has been executed and delivered by the Corporation in accordance with Paragraph 6 or this Paragraph 7, but shall include only those shares represented such new certificate.

8. Definitions. The following terms shall have the following meanings, which meanings shall be equally applicable to the singular and plural forms of such terms:

(i) "Dividend Payment Date" means each February 1, May 1, August 1 and November 1 in each year, commencing with November 1, 1985.

(ii) "Junior Security" means the Common Stock, and any other equity security of any kind which the Corporation or any Subsidiary shall at any time issue or be authorized to issue as to which the Preferred Stock has preference over with respect to the payment of dividends or rights upon the dissolution, liquidation or winding up of the Corporation or the distribution of assets to its stockholders by way of return of capital.

(iii) "Person" means and includes an individual, a partnership, a corporation, a trust, a joint venture, an unincorporated organization and a government or any department or agency thereof.

(iv) "Redemption Date" means as to any share of Preferred Stock redeemed pursuant to Paragraph 4 hereof the date specified in the notice of redemption, provided that for purposes of Paragraph 4E, no such date shall be a Redemption Date unless the applicable Redemption Price is actually paid or tendered on such date.

(v) "Subsidiary" means any corporation at least 50% of the voting stock of every class of which shall, at the time as of which any determination is being made, be owned by the

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Corporation either directly or through one or more Subsidiaries.

II. COMMON STOCK

1. Dividends. Holders of Common Stock shall be paid dividends when and as declared by the Board of Directors of the Corporation out of the assets of the Corporation available for the payment of dividends.

2. Registration of Transfer. The Corporation shall keep at its principal office (or such other place as the Corporation reasonably designates) a register for the registration of shares of Common Stock. Upon the surrender of any certificate representing shares of Common Stock at such place, the Corporation shall, at the request of the registered holder of such certificate, execute and deliver (at the Corporation's expense) a new certificate of certificates in exchange therefor representing in the aggregate the number of shares of such class represented by the surrendered certificate, subject to the requirements of applicable securities laws. Each such new certificate shall be registered in such name and shall represent such number of shares of such class as shall be requested by the holder of the surrendered certificate and shall be substantially identical in form to the surrendered certificate.

3. Replacement.

(i) Upon receipt of evidence reasonably satisfactory to the Corporation (an affidavit of the registered holder shall be satisfactory) of the Ownership and the loss, theft, destruction or mutilation of any certificate evidencing one or more shares of Common Stock and, in the case of any such loss, theft, destruction or mutilation, upon receipt of indemnity reasonably satisfactory to the Corporation or, in the case of any such mutilation, upon surrender of such certificate, the Corporation shall (at its expense) execute and deliver in lieu of such certificate a new certificate of like kind representing the number of shares of such class represented by such lost, stolen, destroyed or mutilated certificate and dated the date of such lost, stolen, destroyed or mutilated certificate, and the holders of the shares represented by such new certificate shall be entitled to receive all theretofore payable but unpaid dividend payments on the shares represented by the lost, stolen, destroyed or mutilated certificate.

(ii) The term "outstanding" when used in this subdivision with reference to the shares of Common Stock as of any particular time shall not include any such shares represented by any certificate in lieu of which a new certificate has been executed and delivered by the

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Corporation in accordance with Paragraph 2 or this Paragraph 3, but shall include only those shares represented by such new certificate.

4. Voting Rights. Except as otherwise provided by law, holders of Common Stock shall be entitled to one vote per share on all matters to be voted on by the stockholders of the Corporation.

5. Preemption. Holders of shares of Common Stock shall not, as such, have any preemptive or other right to subscribe for or purchase any shares of capital stock of the Corporation of any class now or hereafter authorized or issued by the Corporation.

3. Article Sixth of the Corporation's Certificate of Incorporation is deleted and replaced with the following:

SIXTH: The Board of Directors of the Corporation, acting by the affirmative vote of not less than all of the Directors of the Corporation, and the stockholders of the Corporation, acting by the affirmative vote (by written consent or otherwise) of holders of not less than 90% of the issued and outstanding shares of Common Stock each may alter, amend or repeal any provision of the By-Laws of the Corporation.

4. Article Seventh of the Corporation's Certificate of Incorporation is deleted and replaced with the following:

SEVENTH: This Certificate of Incorporation may be amended, and a provision hereof may be modified or repealed, only by stockholders of the Corporation, acting by the affirmative vote (by written consent or otherwise) of holders of not less than 90% of the issued and outstanding shares of Common Stock.

5. Article Eighth of the Corporation's Certificate of Incorporation is deleted and replaced with the following:

EIGHTH: Except as otherwise provided by law or this Certificate of Incorporation, all matters submitted to a meeting of stockholders shall be decided by vote of holders of record, present in person or by proxy, of not less than 80% of the issued and outstanding shares of stock. At any meeting of stockholders, the holders of record, present in person or by proxy, of not less than 80% of the issued and outstanding shares of Common Stock shall constitute a quorum for the transaction of business.

6. The Corporation's Certificate of Incorporation is further amended to include a new Article Ninth which reads in its entirety as follows:

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NINTH: Each person who is or was or had agreed to become a director or officer of the Corporation, or each such person who is or was serving or who had agreed to serve at the request of the Board of Directors or an officer of the Corporation as an employee or agent of the Corporation or as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise (including the heirs, executors, administrators or estate of such person), shall be indemnified by the Corporation to the full extent permitted by the General Corporation Law of the State of Delaware or any other applicable laws as presently or hereafter in effect. Without limiting the generality or the effect of the foregoing, the Corporation may enter into one or more agreements with any person which provide for indemnification greater or different than that provided in this Article. Any repeal or modification of this Article Ninth shall not adversely affect any right or protection existing hereunder immediately prior to such repeal or modification.

7. The Corporation's Certificate of Incorporation is further amended to include a new Article Tenth which reads in its entirety as follows:

TENTH: To the full extent permitted by the General Corporation Law of the State of Delaware or any other applicable laws presently or hereafter in effect, no Director of the Corporation shall be personally liable to the Corporation or its stockholders for or with respect to any acts or omissions in the performance of his or her duties as a Director of the Corporation. Any repeal or modification of this Article Tenth will not adversely affect any right or protection of a Director of the Corporation existing prior to such repeal or modification.

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IN WITNESS WHEREOF, the undersigned has executed this Certificate of Amendment this 19th day of September, 1996.

By: /s/ Hushang Ansary
    --------------------------------
Name:  Hushang Ansary
Title: Chairman

-9-

CERTIFICATE OF AMENDMENT

of

CERTIFICATE OF INCORPORATION

of

IRI INTERNATIONAL CORPORATION

IRI International Corporation, a corporation duly organized and existing under the General Corporation Law of the State of Delaware (the "Corporation"), hereby certifies as follows:

1. The amendments to the Certificate of Incorporation set forth below have been duly adopted in accordance with the provisions of Section 242 of the General Corporation Law of the State of Delaware.

2. Article Fourth of the Corporation's Certificate of Incorporation is amended and restated to read in its entirety as follows:

FOURTH: The total number of shares of all classes of stock that the Corporation is authorized to issue is 125,000,000 shares, consisting of 100,000,000 shares of Common Stock, par value $.01 each (hereinafter referred to as the "Common Stock"), and 25,000,000 shares of Preferred Stock, par value $1.00 each (hereinafter referred to as the "Preferred Stock").

I. PREFERRED STOCK

The Preferred Stock may be issued in one or more series. The Board of Directors of the Company (the "Board"), with the approval of the holders of a majority of the outstanding shares of the Company's Common Stock, is hereby authorized to authorize the issuance of shares of Preferred Stock in such series and to fix from time to time before issuance the number of shares to be included in any such series and the designation, relative powers, preferences, and rights and qualifications, limitations, or restrictions of all shares of such series. The authority of the Board with respect to each such series will include, without limiting the generality of the foregoing, the determination of any or all of the following:


(a) the number of shares of any series and the designation to distinguish the shares of such series from the shares of all other series;

(b) the voting powers, if any, and whether such voting powers are full or limited in such series;

(c) the redemption provisions, if any, applicable to such series, including the redemption price or prices to be paid;

(d) whether dividends, if any, will be cumulative or noncumulative, the dividend rate of such series, and the dates and preferences of dividends on such series;

(e) the rights of such series upon the voluntary or involuntary dissolution of, or upon any distribution of the assets of, the Company;

(f) the provisions, if any, pursuant to which the shares of such series are convertible into, or exchangeable for, shares of any other class or classes or of any other series of the same or any other class or classes of stock, or any other security, of the Company or any other corporation or other entity, and the price or prices or the rates of exchange applicable thereto;

(g) the right, if any, to subscribe for or to purchase any securities of the Company or any other corporation or other entity;

(h) the provisions, if any, of a sinking fund applicable to such series; and

(i) any other relative, participating, optional, or other special powers, preferences, rights, qualifications, limitations, or restrictions thereof;

all as may be determined from time to time by the Board and stated in the resolution or resolutions providing for the issuance of such Preferred Stock (collectively, a "Preferred Stock Designation").

II. COMMON STOCK

Except as may otherwise be provided in a Preferred Stock Designation, the holders of Common Stock will be entitled to one vote on each matter submitted to a vote at a meeting of stockholders for each share of Common Stock held of record by such holder as of the record date for such meeting.

3. Article Sixth of the Corporation's Certificate of Incorporation is deleted in its entirety.

4. Article Seventh of the Corporation's Certificate of Incorporation is deleted in its entirety.

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5. Article Eighth of the Corporation's Certificate of Incorporation is deleted in its entirety.

IN WITNESS WHEREOF, the undersigned has executed this Certificate of Amendment this __ day of __________, 1997.

By:
Name:


Title:

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IRI INTERNATIONAL CORPORATION

AMENDED AND RESTATED

BYLAWS

As Adopted and in Effect
as of June 17, 1997


IRI INTERNATIONAL CORPORATION

AMENDED AND RESTATED
BYLAWS

TABLE OF CONTENTS

Page

MEETING OF STOCKHOLDERS................................................... 1

     1.   Place of Meeting................................................    1
     2.   Annual Meetings.................................................    1
     3.   Special Meetings................................................    1
     4.   Notice..........................................................    1
     5.   Inspectors......................................................    2
     6.   Quorum..........................................................    2
     7.   Voting..........................................................    2
     8.   Order of Business...............................................    2
     9.   Written Action..................................................    3

DIRECTORS.................................................................    3
     10.  Function........................................................    3
     11.  Number, Election and Removal of Directors.......................    3
     12.  Vacancies and New Directorships.................................    3
     13.  Resignation.....................................................    4
     14.  Regular Meetings................................................    4
     15.  Special Meetings................................................    4
     16.  Quorum..........................................................    4
     17.  Written Action..................................................    4
     18.  Participation in Meetings by Telephone Conference...............    4
     19.  Committees......................................................    4
     20.  Compensation....................................................    5
     21.  Rules...........................................................    5

NOTICES...................................................................    6
     22.  Generally.......................................................    6
     23.  Waivers.........................................................    6

OFFICERS..................................................................    6
     24.  Generally.......................................................    6
     25.  Compensation....................................................    6
     26.  Succession......................................................    6
     27.  Authority and Duties............................................    6

STOCK.....................................................................    6
     28.  Certificates....................................................    6
     29.  Classes of Stock................................................    7
     30.  Transfers.......................................................    7


     30.  Lost, Stolen, or Destroyed Certificates.........................    7
     31.  Record Dates....................................................    7

INDEMNIFICATION...........................................................    8
     32.  Damages and Expenses............................................    8
     33.  Insurance, Contracts, and Funding...............................   11

GENERAL...................................................................   12
     34.  Fiscal Year.....................................................   12
     35.  Seal............................................................   12
     36.  Reliance upon Books, Reports, and Records.......................   12
     37.  Time Periods....................................................   12
     38.  Amendments......................................................   12
     39.  Certain Defined Terms...........................................   12


MEETING OF STOCKHOLDERS

1. Place of Meeting. Meetings of the stockholders of the Corporation shall be held in Houston, Texas, or at such place either within or without the State of Delaware as the Board (the "Board") may determine.

2. Annual Meetings. Annual meetings of stockholders, commencing with year 1998, shall be held on the fourth Tuesday in May if not a legal holiday, and if a legal holiday, then on the next business day following, at 10:00 a.m., or at such other date and time as shall be designated from time to time by the Board, to elect a Board by plurality vote and to transact such other business as may properly come before the meeting.

3. Special Meetings. (a) Special meetings of the stockholders, for any purpose or purposes, unless otherwise prescribed by law or by the Certificate of Incorporation, may be called only by (i) the Chairman of the Board or, if there shall then be no elected and acting Chairman of the Board, the Chief Executive Officer, (ii) the holders of a majority of the outstanding shares of the Company's Common Stock, or (iii) the Secretary within 10 calendar days after receipt of the written request of a majority of the Board. Any such request by a majority of the Board must be sent to the Chairman and the Secretary and must state the purpose or purposes of the proposed meeting. Special meetings of holders of the outstanding Preferred Stock, if any, may be called in the manner and for the purposes provided in the applicable Preferred Stock Designation.

(b) Upon the receipt by the Company of a written request executed by the holders of not less than a majority of the outstanding Common Stock (a "Meeting Request"), the Board will (i) call a special meeting of the stockholders for any lawful purpose (which may not, however, include the election of Directors) and (ii) fix a record date for the determination of stockholders entitled to notice of and to vote at such meeting, which record date will not be later than 60 calendar days after the date of receipt by the Company of the Meeting Notice; provided, however, that no separate special meeting of stockholders requested pursuant to a Meeting Request will be required to be convened if (A) the Board calls an annual or special meeting of stockholders to be held not later than 90 calendar days after receipt of such Meeting Request and (B) the purposes of such annual or special meeting include (among any other matters properly brought before the meeting) the purposes specified in such Meeting Request. Notwithstanding any provision of the Certificate of Incorporation or these Bylaws to the contrary, this Bylaw 3(b) may not be amended or repealed by the Board, and no provision inconsistent therewith may be adopted by the Board, without the affirmative vote of the holders of a majority of the Common Stock present or represented by proxy and entitled to vote at any annual or special meeting of stockholders at which such vote is to be taken.

4. Notice. Written notice of every meeting of the stockholders, stating the place, date, and hour of the meeting and, in the case of a special meeting, the purpose or purposes for which the meeting is called, will be given not less than 10 nor more than 60 calendar days before the date of the meeting to each stockholder of record entitled to vote at such meeting, except as otherwise provided herein or by law. When a meeting is adjourned to another place, date, or time, written notice need not be given of the adjourned meeting if the place, date, and time thereof are announced at the meeting at which the adjournment is taken; provided, however, that if the adjournment is for more than 30 calendar days, or if after the adjournment a new record date is fixed for the adjourned meeting, written notice of the place, date, and time of the adjourned meeting must be given in conformity herewith. At any adjourned meeting, any business may be transacted which might have been transacted at the original meeting.

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5. Inspectors. The Board may appoint one or more inspectors of election to act as judges of the voting and to determine those entitled to vote at any meeting of the stockholders, or any adjournment thereof, in advance of such meeting. The Board may designate one or more persons as alternate inspectors to replace any inspector who fails to act. If no inspector or alternate is able to act at a meeting of stockholders, the presiding officer of the meeting may appoint one or more substitute inspectors.

6. Quorum. Except as otherwise provided by law or in a Preferred Stock Designation, the holders of a majority of the stock issued and outstanding and entitled to vote thereat, present in person or represented by proxy, will constitute a quorum at all meetings of the stockholders for the transaction of business thereat. If, however, such quorum is not present or represented at any meeting of the stockholders, the stockholders entitled to vote thereat, present in person or represented by proxy, will have the power to adjourn the meeting from time to time, without notice other than announcement at the meeting, until a quorum is present or represented. At any meeting of the stockholders that has been adjourned three times, the holders of stock issued and outstanding and entitled to vote thereat, present in person or represented by proxy, will constitute a quorum for the transaction of business at such third adjourned meeting.

7. Voting. Except as otherwise provided by law or in a Preferred Stock Designation, each stockholder will be entitled at every meeting of the stockholders to one vote for each share of stock having voting power standing in the name of such stockholder on the books of the Company on the record date for the meeting and such votes may be cast either in person or by written proxy. Every proxy must be duly executed and filed with the Secretary. A stockholder may revoke any proxy that is not irrevocable by attending the meeting and voting in person or by filing an instrument in writing revoking the proxy or another duly executed proxy bearing a later date with the Secretary. The vote upon any question brought before a meeting of the stockholders may be by voice vote, unless otherwise required by these Bylaws or unless the Chairman or the holders of a majority of the outstanding shares of all classes of stock entitled to vote thereon present in person or by proxy at such meeting otherwise determine. Every vote taken by written ballot will be counted by the inspectors of election. When a quorum is present at any meeting, the vote of the holders of a majority of the stock which has voting power present in person or represented by proxy and which has actually voted will decide any question properly brought before such meeting, unless the question is one upon which by express provision of law, the Certificate of Incorporation, a Preferred Stock Designation, or these Bylaws, a different vote is required, in which case such express provision will govern and control the decision of such question.

8. Order of Business. (a) The Chairman, or if there shall then be no elected and acting Chairman, the Chief Executive Officer, will call meetings of the stockholders to order and will act as presiding officer thereof. Unless otherwise determined by the Board prior to the meeting, the presiding officer of the meeting of the stockholders will also determine the order of business and have the authority in his sole discretion to regulate the conduct of any such meeting, including without limitation by imposing restrictions on the persons (other than stockholders of the Company or their duly appointed proxies) who may attend any such stockholders' meeting, by ascertaining whether any stockholder or his proxy may be excluded from any meeting of the stockholders based upon any determination by the presiding officer, in his sole discretion, that any such person has unduly disrupted or is likely to disrupt the proceedings thereat, and by determining the circumstances in which any person may make a statement or ask questions at any meeting of the stockholders.

(b) At an annual meeting of the stockholders, only such business will be conducted or considered as is properly brought before the meeting. To be properly brought before an

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annual meeting, business must be (i) specified in the notice of meeting (or any supplement thereto) given by or at the direction of the Board in accordance with Bylaw 4, (ii) otherwise properly brought before the meeting by the presiding officer, or (iii) otherwise properly requested to be brought before the meeting by a stockholder of the Company.

(c) At a special meeting of stockholders, only such business may be conducted or considered as is properly brought before the meeting. To be properly brought before a special meeting, business must be (i) specified in the notice of the meeting (or any supplement thereto) given in accordance with Bylaw 4 or (ii) otherwise properly brought before the meeting by the presiding officer.

(d) The determination of whether any business sought to be brought before any annual or special meeting of the stockholders is properly brought before such meeting in accordance with this Bylaw 8 will be made by the presiding officer of such meeting. If the presiding officer determines that any business is not properly brought before such meeting, he will so declare to the meeting and any such business will not be conducted or considered.

9. Written Action. Any Action required or permitted to be taken at any meeting of stockholders may be taken without a meeting if the holders of the required number of outstanding shares of Common Stock consent thereto in writing, such writing or writings are delivered to the Secretary by hand or registered mail, return receipt requested and, in the case of the taking of corporate action without a meeting by less than unanimous written consent, notice of such action is delivered promptly to those stockholders who did not consent in writing and who, if the action had been taken at a meeting would have been entitled to notice of the meeting if the record date for such meeting had been the date that written consents were delivered to the Corporation.

DIRECTORS

10. Function. The business and affairs of the Company will be managed under the direction of the Board. The Directors may, but need not, elect from among themselves a Chairman and one or more Vice-Chairmen.

11. Number, Election and Removal of Directors. Subject to the rights, if any, of the holders of any series of Preferred Stock to elect additional Directors under circumstances specified in a Preferred Stock Designation, the number of the Directors of the Company that shall constitute the Board will not be less than three nor more than seventeen and will be fixed from time to time in the manner described in the By-Laws of the Company. At each annual meeting of the stockholders of the Company, Directors will be elected by plurality vote of all votes cast at such meeting to hold office for a term expiring at the next annual meeting of stockholders, or if later until their successors are elected and qualified. Subject to the rights, if any, of the holders of any series of Preferred Stock to elect additional Directors under circumstances specified in a Preferred Stock Designation, Directors may be elected by the stockholders only at an annual meeting of stockholders. Election of Directors of the Company need not be by written ballot unless requested by the presiding officer or by the holders of a majority of the stock which has voting power present in person or represented by proxy at a meeting of the stockholders at which Directors are to be elected.

12. Vacancies and New Directorships. Subject to the rights, if any, of the holders of any series of Preferred Stock to elect additional Directors under circumstances specified in a Preferred Stock Designation, additional directorships may be created, the number of Directors may be

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decreased, and vacancies and newly created directorships resulting from any increase in the number of Directors may be filled by the affirmative vote of holders of records of a majority of the Corporation's issued and outstanding Common Stock. Any Director elected in accordance with the preceding sentence will hold office for the remainder of the full term of the Directors then elected and acting, or until such Director's successor has been elected and qualified. Subject to the rights, if any, of the holders of any series of Preferred Stock in respect of the election additional Directors under circumstances specified in a Preferred Stock Designation, any Director may be removed with or without cause by the affirmative vote of holders of a majority of the Corporation's issued and outstanding shares of Common Stock.

13. Resignation. Any Director may resign at any time by giving written notice of his resignation to the Chairman or the Secretary. Any resignation will be effective upon actual receipt by any such person or, if later, as of the date and time specified in such written notice.

14. Regular Meetings. Regular meetings of the Board shall be held immediately after the annual meeting of the stockholders, at least quarterly, unless the Board shall otherwise determine, and at such other times and places as may from time to time be determined by the Board. Notice of regular meetings of the Board need not be given.

15. Special Meetings. Special meetings of the Board may be called by the Chairman or if there shall then be no elected and acting Chairman, the Chief Executive Officer, on one day's notice to each Director by whom such notice is not waived, given either personally or by mail, telephone, telegram, telex, facsimile, or similar medium of communication, and will be called by the Chairman or the Chief Executive Officer in like manner and on like notice on the written request of two or more Directors. Special meetings of the Board may be held at such time and place either within or without the State of Delaware as is determined by the Board or specified in the notice of any such meeting.

16. Quorum. At all meetings of the Board, a majority of the total number of Directors then in office will constitute a quorum for the transaction of business. Except for the designation of committees as hereinafter provided and except for actions required by these Bylaws or the Certificate of Incorporation to be taken by a different vote of the Board, the act of a majority of the Directors present at any meeting at which there is a quorum will be the act of the Board. If a quorum is not present at any meeting of the Board, the Directors present thereat may adjourn the meeting from time to time to another place, time, or date, without notice other than announcement at the meeting, until a quorum is present.

17. Written Action. Any action required or permitted to be taken at any meeting of the Board or of any committee thereof may be taken without a meeting if the required members of the Board or committee, as the case may be, consent thereto in writing, and the writing or writings are filed with the minutes or proceedings of the Board or committee.

18. Participation in Meetings by Telephone Conference. Members of the Board, or any committee designated by the Board, may participate in a meeting of the Board, or any such committee, by means of telephone conference or similar means by which all persons participating in the meeting can hear each other, and such participation in a meeting will constitute presence in person at the meeting.

19. Committees. (a) The Board, by resolution passed by a majority of the Board, including the affirmative vote of the Chairman, will designate an executive committee (the "Executive

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Committee") of not less than three and not more than five members of the Board. The Executive Committee will have and may exercise the powers of the Board, except as otherwise provided by law. Unless otherwise provided in the resolution designating the Executive Committee, sixty percent (60%) of the members of the Executive Committee will constitute a quorum for the transaction of business, and the act of sixty percent (60%) of the members of the Executive Committee will constitute the act of such committee.

(b) The Board, by resolution passed by a majority of the Board, including the affirmative vote of the Chairman, may designate one or more additional committees, each such committee to consist of one or more Directors and each to have such lawfully delegable powers and duties as the Board may confer.

(c) The Executive Committee and each other committee of the Board will serve at the pleasure of the Board or as may be specified in any resolution from time to time adopted by the Board. The Board may designate one or more Directors as alternate members of any such committee, who may replace any absent or disqualified member at any meeting of such committee.

(d) Except as otherwise provided in these Bylaws or by law, any committee of the Board, to the extent provided in Paragraph (a) of this Bylaw or, if applicable, in the resolution of the Board designating such committee, will have and may exercise all the powers and authority of the Board in the direction of the management of the business and affairs of the Company. Any such committee designated by the Board will have such name as may be determined from time to time by resolution adopted by the Board. Except as provided in Paragraph
(a) of this Bylaw 18 or in the resolution of the Board designating such committee, a majority of the members of any committee of the Board will constitute a quorum for the transaction of business, and the act of a majority of the members will be the act of such committee. Each committee of the Board may prescribe its own rules for calling and holding meetings and its method of procedure, subject to any rules prescribed by the Board, and will keep a written record of all actions taken by it.

(e) All of the members of any committee the primary responsibilities of which include reviewing the professional services to be provided by the Company's independent auditors and the independence of such firm from the Company's management, reviewing financial statements with management or independent auditors, and/or reviewing internal accounting controls, will be directors who are not employees of the Company, or any affiliate thereof. Notwithstanding any provision of the Certificate of Incorporation or these Bylaws to the contrary, this Bylaw 18(e) may not be amended or repealed by the Board, and no provision inconsistent therewith may be adopted by the Board, without the affirmative vote of the holders of a majority of the stock which has voting power present or represented by proxy and entitled to vote at any annual or special meeting of stockholders at which such vote is to be taken.

20. Compensation. The Board, with the approval of the holders of a majority of the shares of Common Stock issued and outstanding, may establish such compensation for, and reimbursement of the expenses of, Directors for membership on the Board and on committees of the Board, attendance at meetings of the Board or committees of the Board, or for other services by Directors to the Company or any of its majority-owned subsidiaries, as the Board may determine.

21. Rules. The Board may adopt rules and regulations for the conduct of its meetings and the management of the affairs of the Company.

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NOTICES

22. Generally. Whenever by law or under the provisions of the Certificate of Incorporation or these Bylaws, notice is required to be given to any Director or stockholder, such notice may be given in writing, by mail, addressed to such Director or stockholder, at his, her, or its address as it appears on the records of the Company, with postage thereon prepaid, and such notice will be deemed to be given three business days after the same is deposited in the United States mail. Notice to Directors may also be given by telephone, telegram, telex, facsimile, or similar medium of communication or as may otherwise be permitted by these Bylaws, and shall be effective upon actual receipt thereof.

23. Waivers. Whenever any notice is required to be given by law or under the provisions of the Certificate of Incorporation or these Bylaws, a waiver thereof in writing, signed by the person or persons entitled to such notice, whether before or after the time of the event for which notice is to be given, will be deemed equivalent to such notice. Attendance of a person at a meeting will constitute a waiver of notice of such meeting, except when the person attends a meeting for the express purpose of objecting, at the beginning of the meeting, to the transaction of any business because the meeting is not lawfully called or convened.

OFFICERS

24. Generally. The officers of the Company will be elected by the Board and will consist of a Chief Executive Officer, and such other officers as the Board may from time to time deem necessary and appropriate, including but not limited to, a President, a Secretary, a Treasurer, one or more Vice Presidents and such other officers as the Board may from time to time determine. Any number of offices may be held by the same person. Any of the offices may be left vacant from time to time as the Board may determine. In the case of the absence or disability of any officer of the Company or for any other reason deemed sufficient by a majority of the Board, the Board may delegate the absent or disabled officer's powers or duties to any other officer or to any Director.

25. Compensation. The compensation of all officers and agents of the Company who are also Directors of the Company will be fixed by the Board or by a committee of the Board. The Board may fix, or delegate the power to fix, the compensation of other officers and agents of the Company to an officer of the Company.

26. Succession. The officers of the Company will hold office until their successors are elected and qualified. Any officer may be removed at any time by the affirmative vote of a majority of the Board. Any vacancy occurring in any office of the Company may be filled by the Board as provided in Bylaw 23.

27. Authority and Duties. Each of the officers of the Company will have such authority and will perform such duties as are customarily incident to their respective offices or as may be specified from time to time by the Chief Executive Officer.

STOCK

28. Certificates. Certificates representing shares of stock of the Company will be in such form as is determined by the Board or an authorized committee thereof, subject to applicable

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legal requirements. Each such certificate will be numbered and its issuance recorded in the books of the Company, and such certificate will exhibit the holder's name and the number of shares and will be signed by, or in the name of, the Company by the Chairman or a Vice Chairman or the Chief Executive Officer and the Secretary or an Assistant Secretary or the Treasurer or an Assistant Treasurer, and will also be signed by, or bear the facsimile signature of, any properly designated transfer agent of the Company. Any or all of the signatures and the seal of the Company, if any, upon such certificates may be facsimiles, engraved, or printed. Such certificates may be issued and delivered notwithstanding that the person whose facsimile signature appears thereon may have ceased to be such officer at the time certificates are issued and delivered.

29. Classes of Stock. The designations, preferences, and relative participating, optional, or other special rights of the various classes of stock or series thereof, and the qualifications, limitations, or restrictions thereof, will be set forth in full or summarized on the face or back of the certificates which the Company issues to represent its stock or, in lieu thereof, such certificates will set forth the office of the Company from which the holders of certificates may obtain a copy of such information.

30. Transfers. Upon surrender to the Company or the transfer agent of the Company of a certificate for shares duly endorsed or accompanied by proper evidence of succession, assignment, or authority to transfer, it will be the duty of the Company to issue, or cause its transfer agent to issue, a new certificate to the person entitled thereto, cancel the old certificate, and record the transaction upon its books.

31. Lost, Stolen, or Destroyed Certificates. The Secretary may direct a new certificate or certificates to be issued in place of any certificate or certificates theretofore issued by the Company alleged to have been lost, stolen, or destroyed upon the making of an affidavit of that fact, satisfactory to the Secretary, by the person claiming the certificate of stock to be lost, stolen, or destroyed. As a condition precedent to the issuance of a new certificate or certificates, the Secretary may require the owners of such lost, stolen, or destroyed certificate or certificates to give the Company a bond in such sum and with such surety or sureties as the Secretary may direct as indemnity against any claims that may be made against the Company with respect to the certificate alleged to have been lost, stolen, or destroyed or the issuance of the new certificate.

32. Record Dates. (a) In order that the Company may determine the stockholders entitled to notice of or to vote at any meeting of stockholder or any adjournment thereof, the Board may fix a record date, which will not be more than 60 nor less than 10 calendar days before the date of such meeting. If no record date is fixed by the Board, the record date for determining stockholders entitled to notice of or to vote at a meeting of stockholders will be at the close of business on the calendar day next preceding the day on which notice is given, or, if notice is waived, at the close of business on the calendar next preceding the day on which the meeting is held. A determination of stockholders of record entitled to notice of or to vote at a meeting of the stockholders will apply to any adjournment of the meeting; provided, however, that the Board may fix a new record date for the adjourned meeting.

(b) In order that the Company may determine the stockholders entitled to receive payment of any dividend or other distribution or allotment of any rights or the stockholders entitled to exercise any rights in respect of any change, conversion, or exchange of stock, or for the purpose of any other lawful action, the Board may fix a record date, which record date will not be more than 60 calendar days prior to such action. If no record date is fixed, the record date for determining

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stockholders for any such purpose will be at the close of business on the calendar day on which the Board adopts the resolution relating thereto.

(c) The Company will be entitled to treat the person in whose name any share of its stock is registered as the owner thereof for all purposes, and will not be bound to recognize any equitable or other claim to, or interest in, such share on the part of any other person, whether or not the Company has notice thereof, except as expressly provided by applicable law.

INDEMNIFICATION

33. Damages and Expenses. (a) Without limiting the generality or effect of any provision of the Certificate of Incorporation, the Company will to the fullest extent permitted by applicable law as then in effect indemnify any person (an "Indemnitee") who is or was involved in any manner (including without limitation as a party or a witness) or is threatened to be made so involved in any threatened, pending, or completed investigation, claim, action, suit, or proceeding, whether civil, criminal, administrative, or investigative (including without limitation any action, suit, or proceeding by or in the right of the Company to procure a judgment in its favor) (a "Proceeding") by reason of the fact that such person is or was or had agreed to be a Director, officer, employee, or agent of the Company, or is or was serving at the request of the Board or an officer of the Company as a director, officer, employee, or agent of another corporation, partnership, joint venture, trust, or other entity, whether or not for profit (including the heirs, executors, administrators, or estate of such person), or anything done or not done by such person in any such capacity, against all expenses (including attorneys' fees), judgments, fines, and amounts paid in settlement actually and reasonably incurred by such person in connection with such Proceeding. Such indemnification will be a contract right and will include the right to receive payment in advance of any expenses incurred by an Indemnitee in connection with such Proceeding, consistent with the provisions of applicable law as then in effect.

(b) The right of indemnification provided in this Bylaw 32 will not be exclusive of any other rights to which any person seeking indemnification may otherwise be entitled, and will be applicable to Proceedings commenced or continuing after the adoption of this Bylaw 32, whether arising from acts or omissions occurring before or after such adoption.

(c) In furtherance, but not in limitation of the foregoing provisions, the following procedures, presumptions, and remedies will apply with respect to advancement of expenses and the right to indemnification under this Bylaw 32:

(i) All reasonable expenses incurred by or on behalf of an Indemnitee in connection with any Proceeding will be advanced to the Indemnitee by the Company within 30 calendar days after the receipt by the Company of a statement or statements from the Indemnitee requesting such advance or advances from time to time, whether prior to or after final disposition of such Proceeding. Such statement or statements will reasonably evidence the expenses incurred by the Indemnitee and, if and to the extent required by law at the time of such advance, will include or be accompanied by an undertaking by or on behalf of the Indemnitee to repay such amounts advanced as to which it may ultimately be determined that the Indemnitee is not entitled. If such an undertaking is required by law at the time of an advance, no security will be required for such undertaking and such undertaking will be accepted without reference to the recipient's financial ability to make repayment.

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(ii) To obtain indemnification under this Bylaw 32, the Indemnitee will submit to the Secretary a written request, including such documentation supporting the claim as is reasonably available to the Indemnitee and is reasonably necessary to determine whether and to what extent the Indemnitee is entitled to indemnification (the "Supporting Documentation"). The determination of the Indemnitee's entitlement to indemnification will be made not less than 60 calendar days after receipt by the Company of the written request for indemnification together with the Supporting Documentation. The Secretary will promptly upon receipt of such a request for indemnification advise the Board in writing that the Indemnitee has requested indemnification. The Indemnitee's entitlement to indemnification under this Bylaw 32 will be determined in one of the following ways: (A) by a majority vote of the Disinterested Directors (as hereinafter defined), if they constitute a quorum of the Board, or, in the case of an Indemnitee that is not a present or former officer of the Company, by any committee of the Board or committee of officers or agents of the Company designated for such purpose by a majority of the Board; (B) by a written opinion of Independent Counsel
(as hereinafter defined) if (1) a Change of Control (as hereinafter defined) has occurred and the Indemnitee so requests or (2) in the case of an Indemnitee that is a present or former officer of the Company, a quorum of the Board consisting of Disinterested Directors is not obtainable or, even if obtainable, a majority of such Disinterested Directors so directs; (C) by the stockholders (but only if a majority of the Disinterested Directors, if they constitute a quorum of the Board, presents the issue of entitlement to indemnification to the stockholders for their determination); or (D) as provided in subparagraph (iii) below. In the event the determination of entitlement to indemnification is to be made by Independent Counsel pursuant to clause (B) above, a majority of the Disinterested Directors will select the Independent Counsel, but only an Independent Counsel to which the Indemnitee does not reasonably object; provided, however, that if a Change of Control has occurred, the Indemnitee will select such Independent Counsel, but only an Independent Counsel to which the Board does not reasonably object.

(iii) Except as otherwise expressly provided in this Bylaw 32, the Indemnitee will be presumed to be entitled to indemnification under this Bylaw 32 upon submission of a request for indemnification together with the Supporting Documentation in accordance with subparagraph (c)(ii) above, and thereafter the Company will have the burden of proof to overcome that presumption in reaching a contrary determination. In any event, if the person or persons empowered under subparagraph (c)(ii) to determine entitlement to indemnification has not been appointed or has not made a determination within 60 calendar days after receipt by the Company of the request therefor together with the Supporting Documentation, the Indemnitee will be deemed to be entitled to indemnification and the Indemnitee will be entitled to such indemnification unless (A) the Indemnitee misrepresented or failed to disclose a material fact in making the request for indemnification or in the Supporting Documentation or (B) such indemnification is prohibited by law. The termination of any Proceeding described in paragraph (a) of this Bylaw 32, or of any claim, issue, or matter therein, by judgment, order, settlement, or conviction, or upon a plea of nolo contendere or its equivalent, will not, in and of itself, adversely affect the right of the Indemnitee to indemnification or create a presumption that the Indemnitee did not act in good faith and in a manner which the Indemnitee reasonably believed to be in or not opposed to the best interests of the Company or, with respect to any criminal Proceeding, that the Indemnitee had reasonable cause to believe that his or her conduct was unlawful.

(iv) (A) In the event that a determination is made pursuant to subparagraph (c)(ii) that the Indemnitee is not entitled to indemnification under this Bylaw 32, (1) the Indemnitee will be entitled to seek an adjudication of his entitlement to such indemnification either, at the

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Indemnitee's sole option, in (x) an appropriate court of the State of Delaware or any other court of competent jurisdiction or (y) an arbitration to be conducted by a single arbitrator pursuant to the rules of the American Arbitration Association, (2) any such judicial proceeding or arbitration will be de novo and the Indemnitee will not be prejudiced by reason of such adverse determination, and (3) in any such judicial proceeding or arbitration the Company will have the burden of proving that the Indemnitee is not entitled to indemnification under this Bylaw 32.

(B) If a determination is made or deemed to have been made, pursuant to subparagraph (c)(ii) or (iii) of this Bylaw 32 that the Indemnitee is entitled to indemnification, the Company will be obligated to pay the amounts constituting such indemnification within five business days after such determination has been made or deemed to have been made and will be conclusively bound by such determination unless (1) the Indemnitee misrepresented or failed to disclose a material fact in making the request for indemnification or in the Supporting Documentation or (2) such indemnification is prohibited by law. In the event that advancement of expenses is not timely made pursuant to subparagraph (c)(i) of this Bylaw 32 or payment of indemnification is not made within five business days after a determination of entitlement to indemnification has been made or deemed to have been made pursuant to subparagraph (c)(ii) or (iii) of this Bylaw 32, the Indemnitee will be entitled to seek judicial enforcement of the Company's obligation to pay to the Indemnitee such advancement of expenses or indemnification. Notwithstanding the foregoing, the Company may bring an action, in an appropriate court in the State of Delaware or any other court of competent jurisdiction, contesting the right of the Indemnitee to receive indemnification hereunder due to the occurrence of any event described in subclause (1) or (2) of this clause (C) (a "Disqualifying Event"); provided, however, that in any such action the Company will have the burden of proving the occurrence of such Disqualifying Event.

(C) The Company will be precluded from asserting in any judicial proceeding or arbitration commenced pursuant to the provisions of this subparagraph (c)(iv) that the procedures and presumptions of this Bylaw 32 are not valid, binding, and enforceable and will stipulate in any such court or before any such arbitrator that the Company is bound by all the provisions of this Bylaw 32.

(D) In the event that the Indemnitee, pursuant to the provisions of this subparagraph (c)(iv), seeks a judicial adjudication of, or an award in arbitration to, enforce his or her rights under, or to recover damages for breach of, this Bylaw 32, the Indemnitee will be entitled to recover from the Company, and will be indemnified by the Company against, any expenses actually and reasonably incurred by the Indemnitee if the Indemnitee prevails in such judicial adjudication or arbitration. If it is determined in such judicial adjudication or arbitration that the Indemnitee is entitled to receive part but not all of the indemnification or advancement of expenses sought, the expenses incurred by the Indemnitee in connection with such judicial adjudication or arbitration will be prorated accordingly.

(iv) For purposes of this paragraph (c):

(A) "Change in Control" means the occurrence of any of the following events:

(1) The Company is merged, consolidated, or reorganized into or with another corporation or other legal entity, and as a result of such merger, consolidation, or reorganization less than a majority of the combined voting power of the then-outstanding securities of such corporation or entity

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immediately after such transaction are held in the aggregate by the holders of the then-outstanding securities entitled to vote generally in the election of directors ("Voting Stock") of the Company immediately prior to such transaction;

(2) The Company sells or otherwise transfers all or substantially all of its assets to another corporation or other legal entity and, as a result of such sale or transfer, less than a majority of the combined voting power of the then-outstanding securities of such other corporation or entity immediately after such sale or transfer is held in the aggregate by the holders of Voting Stock of the Company immediately prior to such sale or transfer;

(3) If, during any period of two consecutive years, individuals who at the beginning of any such period constitute the Directors cease for any reason to constitute at least a majority thereof; provided, however, that for purposes of this clause (3) each Director who is first elected as provided in Bylaw 10 or Bylaw 11, then still in office who were Directors at the beginning of any such period will be deemed to have been a Director at the beginning of such period.

(B) "Disinterested Director" means a Director of the Company who is not or was not a party to the Proceeding in respect of which indemnification is sought by the Indemnitee.

(C) "Independent Counsel" means a law firm or a member of a law firm that neither presently is, nor in the past five years has been, retained to represent (1) the Company or the Indemnitee in any matter material to either such party or (2) any other party to the Proceeding giving rise to a claim for indemnification under this Bylaw 32. Notwithstanding the foregoing, the term "Independent Counsel" will not include any person who, under the applicable standards of professional conduct then prevailing under the law of the State of Delaware, would be precluded from representing either the Company or the Indemnitee in an action to determine the Indemnitee's rights under this Bylaw 32.

(d) If any provision or provisions of this Bylaw 32 are held to be invalid, illegal, or unenforceable for any reason whatsoever: (i) the validity, legality, and enforceability of the remaining provisions of this Bylaw 32 (including without limitation all portions of any paragraph of this Bylaw 32 containing any such provision held to be invalid, illegal, or unenforceable, that are not themselves invalid, illegal, or unenforceable) will not in any way be affected or impaired thereby and (ii) to the fullest extent possible, the provisions of this Bylaw 32 (including without limitation all portions of any paragraph of this Bylaw 32 containing any such provision held to be invalid, illegal, or unenforceable, that are not themselves invalid, illegal, or unenforceable) will be construed so as to give effect to the intent manifested by the provision held invalid, illegal, or unenforceable.

34. Insurance, Contracts, and Funding. The Company may purchase and maintain insurance to protect itself and any Indemnitee against any expenses, judgments, fines, and amounts paid in settlement or incurred by any Indemnitee in connection with any Proceeding referred to in Bylaw 32 or otherwise, to the fullest extent permitted by applicable law as then in effect. The Company may enter into contracts with any person entitled to indemnification under Bylaw 32 or otherwise, and may create a trust fund, grant a security interest, or use other means (including without limitation a letter of credit) to ensure the payment of such amounts as may be necessary to effect indemnification as provided in Bylaw 32. Notwithstanding anything to the contrary contained in Bylaw 32, in the event that the Company enters into a contract with any person providing for

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indemnification of such person, the provisions of such contract will exclusively govern the Company's obligations in respect of indemnification for or advancement of fees or disbursements of such person's counsel or any other professional engaged by such person.

GENERAL

35. Fiscal Year. The fiscal year of the Company will be fixed from time to time by the Board.

36. Seal. The Board may adopt a corporate seal and use the same by causing it or a facsimile thereof to be impressed or affixed or reproduced or otherwise.

37. Reliance upon Books, Reports, and Records. Each Director, each member of a committee designated by the Board, and each officer of the Company will, in the performance of his or her duties, be fully protected in relying in good faith upon the records of the Company and upon such information, opinions, reports, or statements presented to the Company by any of the Company's officers or employees, or committees of the Board, or by any other person or entity as to matters the Director, committee member, or officer believes are within such other person's professional or expert competence and who has been selected with reasonable care by or on behalf of the Company.

38. Time Periods. In applying any provision of these Bylaws that requires that an act be done or not be done a specified number of days prior to an event or that an act be done during a period of a specified number of days prior to an event, calendar days will be used unless otherwise specified, the day of the doing of the act will be excluded and the day of the event will be included.

39. Amendments. These Bylaws or any of them may be amended in any respect or repealed at any time, only at a meeting of stockholders or by written consent in lieu thereof, provided that any amendment or supplement proposed to be acted upon at any such meeting or any other such action has been described or referred to in the notice of such meeting.

40. Certain Defined Terms. Terms used herein with initial capital letters that are defined in the Certificate of Incorporation are used herein as so defined.

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REGISTRATION RIGHTS AGREEMENT

between

IRI International Corporation

and

Energy Services International Ltd.



                                TABLE OF CONTENTS

                                                                            PAGE


Recitals..................................................................    1

Article 1.   Definitions and Incorporations by Reference..................    1
       Section 1.1   Definitions..........................................    1
       Section 1.2   Rules of Construction................................    3

Article 2.   Registrations................................................    4
       Section 2.1   Piggy-Back Registration..............................    4
       Section 2.2   Demand Registration..................................    5

Article 3.   Indemnification..............................................    6
       Section 3.1   Indemnification by the Company.......................    6
       Section 3.2   Indemnification by Participating Holders.............    7
       Section 3.3   Indemnity from Underwriters, etc.....................    8
       Section 3.4   Contribution.........................................    8
       Section 3.5   Notices of Claims, Etc...............................    8

Article 4.   Holdback Agreements..........................................    9
       Section 4.1   Obligations of Holders...............................    9
       Section 4.2   Obligations of the Company...........................    9

Article 5.   Rule 144 Reporting; Rule 144A................................    9
       Section 5.1   Rule 144 Reporting, Rule 144A........................    9

Article 6.   Registration Procedures......................................   10
       Section 6.1   Procedures...........................................   10
       Section 6.2   Obligations of Participating Holders.................   13
       Section 6.3   Conditions on Registration...........................   13

Article 7.   Miscellaneous................................................   14
       Section 7.1   Acknowledgment and Consent of Significant Holders....   14
       Section 7.2   Remedies.............................................   15
       Section 7.3   Amendments and Waivers...............................   15
       Section 7.4   Notices..............................................   15
       Section 7.5   Headings.............................................   16
       Section 7.6   Governing Law........................................   16
       Section 7.7   Severability.........................................   16
       Section 7.8   Entire Agreement.....................................   16
       Section 7.9   Transfers............................................   16
       Section 7.10  Counterparts.........................................   16


REGISTRATION RIGHTS AGREEMENT

This Registration Rights Agreement (together with all amendments and supplements hereto, this "Agreement") dated as of ______________, 1997, is by and among IRI INTERNATIONAL CORPORATION, a corporation incorporated under the laws of Delaware (together with its successors and assigns, the "Company"), and Energy Services International Ltd., a corporation incorporated under the laws of Delaware (the "Initial Significant Holder").

RECITALS

In order to facilitate an initial public offering by the Company of its Shares, the Company has agreed to provide registration rights to the Initial Significant Holder and each other Significant Holder with respect to its Shares as set forth in this Agreement.

NOW THEREFORE, in consideration of the premises, intending to be legally bound hereby, the Company agrees as follows:

ARTICLE 1.

DEFINITIONS AND INCORPORATIONS BY REFERENCE

Section 1.1 Definitions. For all purposes of this Agreement, the following definitions shall apply:

"Affiliate" means with respect to any Person, any other Person directly or indirectly controlling or controlled by or under common control with such Person. For purposes of this definition the term "control" means possession, directly or indirectly, of the power to direct or cause the direction of the management or policies of a Person, whether through ownership of voting securities, by contract or otherwise.

"Agreement" has the meaning set forth in the preamble hereof.

"Company" has the meaning set forth in the preamble hereof.

"Designated Transferee" means, with respect to the Initial Significant Holder, any Person who receives Registrable Securities in a transfer from the Initial Significant Holder pursuant to which the Initial Significant Holder transfers to such Person all of its rights to require the Company to file a registration statement hereunder in respect of such Registrable Securities, or as a result of a merger or consolidation of the Company and the Initial Significant Holder.

"Exchange Act" means the Securities Exchange Act of 1934, as amended, or any successor statute.

"Indemnified Party" has the meaning set forth in Section 3.4 hereof.

"Indemnifying Party" has the meaning set forth in Section 3.5 hereof.


"Initial Significant Holder" has the meaning set forth in the preamble hereof.

"Inspectors" has the meaning set forth in Section 6.1(xi) hereof.

"Participating Holder" means any Significant Holder which has Registrable Securities registered for sale pursuant to a Registration Statement.

"Person" means any individual, corporation, limited liability company, partnership, trust, incorporated or unincorporated association, joint venture, joint stock company, government (or any agency or political subdivision thereof) or other entity of any kind.

"Prospectus" means the prospectus included in a Registration Statement, including any and all post-effective amendments and material incorporated by reference.

"Public Securities" means Securities of the Company which (a) have been sold pursuant to an effective Registration Statement, or (b) due to the passage of time, method of transfer (including transfers pursuant to Rule 144) or other circumstances can be sold publicly without registration under the Securities Act.

"Records" has the meaning set forth in Section 6.1(xi) hereof.

"Registrable Securities" means Securities of the Company owned by a Significant Holder which are not Public Securities.

"Registration Expenses" means, all expenses of the Company or the Participating Holders, as the case may be, incident to the performance of or compliance with Sections 2.1 and 2.2, respectively, including, without limitation all SEC and any registration and filing fees and expenses; fees and expenses of compliance with securities and blue sky laws (including reasonable fees and disbursements of counsel for the underwriters, if any, in connection with Blue Sky qualifications of the Registrable Securities and the preparation of legal investment surveys, if any) and listing on any national securities exchange or exchanges on which listing may be sought; document and security certificate preparation and printing expenses, messenger and delivery expenses; fees and expenses of any escrow agent, trustee or custodian; any fees charged by securities rating services for rating Registrable Securities; internal expenses of the Company (including, without limitation, all salaries and expenses of the Company's officers and employees performing legal or accounting duties); fees and disbursements of counsel and independent certified public accountants of the Company (including the expenses of any special audit or "cold comfort" letters required by or incident to such performance and compliance); and fees and expenses of any other persons, including special experts, retained by the Company.

"Registration Period" has the meaning set forth in Section 6.1(i) hereof.

"Registration Statement" means any registration statement of the Company provided for in this Agreement, including the Prospectus and any and all post-effective amendments and material incorporated by reference.

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"SEC" means the Securities and Exchange Commission or any other federal agency at the time administering the Securities Act or the Exchange Act.

"Securities" means (i) any Shares and (ii) any securities issued or issuable in respect of or in exchange for Shares by way of split, dividend or other distribution, or any securities issued pursuant to any pro rata distribution with respect to the Shares in connection with a combination of Shares, recapitalization, reclassification, merger, consolidation or exchange offer or other, similar transaction.

"Securities Act" means the Securities Act of 1933, as amended, or any successor statute.

"Shares" means shares of common stock of the Company, par value $.01 per share.

"Significant Holder" means each Person owning Securities of record if such Person executes and delivers to the Company a completed counterpart signature page of this Agreement and is (a) an Affiliate of the Company or (b) owns Securities possessing ten (10) percent or more of the total voting power of an outstanding class of Securities.

Section 1.2 Rules of Construction. Unless the context otherwise requires:

(a) whenever the context may require, any pronoun shall include the corresponding masculine, feminine and neuter forms;

(b) the words "include," "includes" and "including" shall be deemed to be followed by the phrase "without limitation";

(c) all terms used in Article 9 of the Uniform Commercial Code as in effect in the State of New York that are used but not defined herein shall have the meaning assigned to such terms therein;

(d) references to documents, contracts or agreements shall include any and all supplements and amendments thereto;

(e) references to a specific Person shall include the successors and assigns of such Person;

(f) references to "applicable laws" shall include statutes, ordinances, rules, regulations, court and administrative decisions and conditions, restrictions and limitations in licenses, permits, approvals and authorizations issued or granted by federal, state or local United States or foreign governmental bodies and agencies;

(g) unless otherwise specified in the computation of a period of time from a specified date to a later specified date, the word "from" means "from and including," and the words "to" and "until" each mean "to but excluding";

(h) words in the singular include the plural, and words in the plural include the singular;

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(i) provisions apply to successive events and transactions; and

(j) "herein," "hereof" and other words of similar import refer to this Agreement as a whole and not to any particular Article, Section or other subsection.

ARTICLE 2.

REGISTRATIONS

Section 2.1 Piggy-Back Registration. (a) If at any time the Company determines to register any Securities for its own account or for the account of any other Person, the Company shall:

(i) give each Significant Holder thirty (30) days' written notice thereof (which notice shall include, to the extent available, a list of the jurisdictions in which the Company intends to attempt to qualify such Securities under applicable blue sky or other state securities laws); and

(ii) use its reasonable efforts to include in any such registration all Registrable Securities which the Significant Holders, within twenty (20) days of receipt of such notice, request in writing to be registered.

The Company shall not be required to comply with any of the provisions of this
Section 2.1, however, if a registration will be (i) made pursuant to a registration statement on either Form S-4 or Form S-8 (or any successor forms then in effect), (ii) filed in connection with an exchange offer or a transaction pursuant to Rule 145 of the Securities Act, or (iii) filed after the tenth (10th) anniversary of the date hereof.

(b) If the registration of which the Company gives notice is for a public offering involving an underwriting, the Company shall so advise the Significant Holders as a part of the written notice given pursuant to Section 2.1(a) hereof. In such event, any Significant Holder desiring to exercise its right to registration pursuant to this Section 2.1 shall include within its registration request a statement as to whether such Significant Holder desires to (i) participate in such underwriting. All Significant Holders proposing to distribute their Registrable Securities through such underwriting shall (together with the Company and the other Persons distributing their Securities through such underwriting) enter into an underwriting agreement in customary form with the underwriter or underwriters selected for such underwriting by the Company.

(c) Notwithstanding any other provision of this Section 2.1, if the managing underwriter or underwriters determine that marketing factors require a limitation on the amount of Securities to be underwritten and so advise the Company in writing, the amount of Securities included in the underwriting shall be that amount, if any, which such underwriters determine can be sold, allocated as follows: (i) first, all of the Securities the Company proposed to sell for its own account, and second, the Securities requested to be registered by Significant Holders and other Persons, which shall be ratably reduced to the extent required by the underwriter's marketing limitation. If any Significant Holder disapproves of the terms

4

of any such underwriting, it may elect to withdraw therefrom by written notice to the Company and the managing underwriter or underwriters.

(d) The Company shall pay all Registration Expenses in connection with each registration pursuant to this Section 2.1; provided, however, that the Participating Holders who include Registrable Securities in a registration pursuant to this Section 2.1 shall bear the cost of any underwriters' discount or commission relating to such Registrable Securities which are sold.

(e) The Company shall not be required by this Section 2.1 to file a registration statement at any time or to prosecute a filing to effectiveness.

Section 2.2 Demand Registration. (a) At any time after an initial public offering of Securities by the Company, any one or more Significant Holders may request in writing that the Company effect a registration of Registrable Securities held by such Significant Holder or Significant Holders, so long as at least ten (10) percent of the number of shares of Registrable Securities or aggregate principal amount of Registrable Securities outstanding at such time is requested to be registered by the Significant Holder or Significant Holders. Upon receipt of any such written request, the Company shall:

(i) promptly give written notice of the proposed registration to all other Significant Holders; and

(ii) use its reasonable efforts to effect as soon as practicable the registration of the Registrable Securities which (x) the Significant Holder or Significant Holders have requested to be registered and (y) the other Significant Holders have, within twenty
(20) days of such notice, requested in writing to be registered. The Company may include Securities for its own account or Securities for the account of other Persons having rights to participate in the Company's registrations in any registration and underwriting pursuant to this Section 2.2.

(b) Notwithstanding Section 2.2(a) hereof, the Company shall not be required to file a Registration Statement thereunder unless the request is made more than six (6) months after the most recent date on which there was an effective Registration Statement in which Significant Holders were permitted to include Registrable Securities. The Company also shall not be required to file a Registration Statement under Section 2.2(a) if the request is made after the tenth (10th) anniversary of the date of the initial public offering by Securities. In addition, the Company shall not be required to effect more than a total of ten registrations of Securities at the request of a Significant Holder or Significant Holders pursuant to this Section 2.2; provided that in the event a registration requested pursuant to this Section 2.2 fails to become effective (other than as a result of revocation by the Significant Holder or Significant Holders), the request for registration shall be deemed not to have been made for purposes of this Section 2.2.

(c) If the registration of which the Significant Holder or Significant Holders give notice is for a public offering involving an underwriting, the Company shall so advise the other Significant Holders as a part of the written notice given pursuant to Section 2.2(a) hereof. In such event, any Significant Holder desiring to exercise its right to registration

5

pursuant to this Section 2.2 shall include within its registration request a statement as to whether such Significant Holder desires to participate in such underwriting. All Significant Holders proposing to distribute their Registrable Securities through such underwriting shall (together with the Company and any other Persons distributing their Securities through such underwriting) enter into an underwriting agreement in customary form with the underwriter or underwriters selected for such underwriting. If the Company will include Securities in such underwriting, the underwriter shall be selected by the Company. If the Company will not include Securities in such underwriting, the underwriter shall be selected by the Significant Holders of a majority of the number of shares of Registrable Securities or aggregate principal amount of Registrable Securities with the consent of the Company, which consent shall not be unreasonably withheld.

(d) Notwithstanding any other provision of this Section 2.2, if the managing underwriter or underwriters determine that marketing factors require a limitation on the amount of Securities to be underwritten and so advise the Company in writing, the amount of Securities included in the underwriting shall be that number, if any, which such underwriters determine can be sold, allocated in proportion to the amount of Securities the Significant Holders, the other Persons and the Company requested to be registered.

(e) The Company shall pay all Registration Expenses in connection with any registration pursuant to this Section 2.2; provided, however, that the Significant Holders who include Registrable Securities in a registration pursuant to this Section 2.2 shall bear the cost of any underwriters' discount or commission relating to such Registrable Securities which are sold.

ARTICLE 3.

INDEMNIFICATION

Section 3.1 Indemnification by the Company. The Company will indemnify each Participating Holder with respect to whose shares registration has been effected pursuant to Article 2, its agents, each of their respective directors, officers and partners, each underwriter, if any, of the Company's Securities covered by such a registration statement and each Person who controls such Participating Holder or such underwriter within the meaning of Section 15 of the Securities Act or Section 20 of the Exchange Act, against all claims, losses, damages and liabilities (or actions in respect thereof) arising out of or based on (i) any untrue statement (or alleged untrue statement) of a material fact contained in any Registration Statement, Prospectus (including without limitation preliminary and supplemental Prospectuses), offering circular or other similar document, or based on any omission (or alleged omission) to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading in light of the circumstances under which they are made, or (ii) any violation by the Company of any federal, state or common law rule or regulation applicable to the Company and relating to action or inaction required of the Company in connection with any such registration, and will reimburse (an "Expense Reimbursement") each such Participating Holder, its agents, each of their respective directors, officers and partners, and each Person controlling such Participating Holder, each such underwriter, and each Person who controls any such underwriter, for any legal and any

6

other expenses reasonably incurred in connection with investigating or defending any such claim, loss, damage, liability or action; provided, however, that the Company will not be liable in any such case to the extent that any such claim, loss, damage, liability or expense arises out of or is based on any untrue statement or omission made in a Registration Statement, Prospectus, offering circular or other document in reliance upon and in conformity with information furnished to the Company in writing by such Participating Holder or underwriter specifically for use therein; and provided, further, that, with respect to any untrue statement or omission or alleged untrue statement or omission made in any preliminary Prospectus, the Company will not be liable to any Participating Holder to the extent that any loss, claim, damage, liability or expense results from the fact that a current copy of the Prospectus was not sent or given to the Person asserting any such loss, claim, damage, liability or expense at or prior to the written confirmation of the sale of the Securities concerned to such Person if it is determined that it was the responsibility of such Participating Holder to provide such Person with a current copy of the Prospectus and such current copy of the Prospectus would have cured the defect giving rise to such loss, claim, damage, liability or expense. The Company shall make such Expense Reimbursements as are periodically requested by a Participating Holder; provided that the Company shall not be required to make such Expense Reimbursements more frequently than once every month; and provided, further, that by accepting such Expense Reimbursements, such Participating Holder agrees to repay the amount of such Expense Reimbursements to the Company if it is finally determined that such Participating Holder is not entitled to indemnification hereunder.

Section 3.2 Indemnification by Participating Holders. Each Participating Holder will, if Securities held by such Participating Holder are included in the Securities as to which such registration, qualification or compliance is being effected, indemnify the Company, its agents, each of its directors and officers, each underwriter, if any, of the Company's Securities covered by such a registration statement, each Person who controls the Company or such underwriter within the meaning of Section 15 of the Securities Act or
Section 20 of the Exchange Act, and each other such Participating Holder, each of its directors, officers and partners and each Person who controls such other Participating Holder, against all claims, losses, damages and liabilities (or actions in respect thereof) arising out of or based on any untrue statement (or alleged untrue statement) of a material fact contained in any such Registration Statement, Prospectus (including without limitation preliminary and supplemental Prospectuses), offering circular or other similar document, or based on any omission (or alleged omission) to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading in light of the circumstances under which they are made, and will reimburse the Company, each such other Participating Holder, its agents, each of their respective directors, officers and partners, and each Person controlling such Participating Holder, each such underwriter, and each Person who controls any such underwriter, for any legal and any other expenses reasonably incurred in connection with investigating or defending any such claim, loss, damage, liability or action, in each case to the extent, but only to the extent, that such untrue statement (or alleged untrue statement) or omission (or alleged omission) is made in such Registration Statement, Prospectus, offering circular or other document in reliance upon and in conformity with information furnished to the Company in writing by such Participating Holder specifically for use therein; provided, however, that, with respect to any untrue statement or omission or alleged untrue statement or omission made in any preliminary Prospectus, the indemnity agreement contained in this Section 3.2 shall not apply to the extent that any loss, claim, damage, liability or expense

7

results from the fact that a current copy of the Prospectus was not sent or given to the Person asserting any such loss, claim, damage, liability or expense at or prior to the written confirmation of the sale of the Securities concerned to such Person if it is determined that it was the responsibility of the Company or other Participating Holder, its agents, any of its directors, officers or partners, or any underwriter to provide such Person with a current copy of the Prospectus and such current copy of the Prospectus would have cured the defect giving rise to such loss, claim, damage, liability or expense.

Section 3.3 Indemnity from Underwriters, etc. The Company shall be entitled to receive indemnities from underwriters, selling brokers, dealer managers and similar securities industry professionals participating in the distribution, to the same extent as provided above with respect to information so furnished in writing by such Persons specifically for inclusion in any prospectus or registration statement or any amendment or supplement thereto, or any preliminary prospectus.

Section 3.4 Contribution. To the extent that the undertaking to indemnify, pay and hold harmless set forth in Sections 3.1 and 3.2 hereof may be unenforceable because it is violative of any law or public policy, each party that would have been required to provide the indemnity shall contribute the maximum portion which it is permitted to pay and satisfy under applicable law, to the payment and satisfaction of all indemnified liabilities incurred by each party entitled to indemnification under this Article 3 (the "Indemnified Party") or any of them; provided that in no event shall a Participating Holder be required to contribute an amount greater than the dollar amount of net proceeds received by such Participating Holder with respect to the sale of any Registrable Securities.

Section 3.5 Notices of Claims, Etc. Each Indemnified Party shall give notice to the party required to provide indemnification (the "Indemnifying Party") promptly after such Indemnified Party has actual knowledge of any claim as to which indemnity may be sought, and shall permit the Indemnifying Party to assume the defense of any such claim or any litigation resulting therefrom, provided that counsel for the Indemnifying Party, who shall conduct the defense of such claim or litigation, shall be approved by the Indemnified Party (whose approval shall not unreasonably be withheld), and the Indemnified Party may participate in such defense at such party's expense, and provided, further that the failure of any Indemnified Party to give notice as provided herein shall not relieve the Indemnifying Party of its obligations under this Article 3 unless such failure to give notice shall materially adversely affect the Indemnifying Party in the defense of any such claim or any such litigation. With respect to any claim or litigation being conducted by the Indemnifying Party, no Indemnified Party shall, except with the consent of such Indemnifying Party, consent to entry of any judgment or enter into any settlement of any claim as to which indemnity may be sought. No Indemnifying Party, in the defense of any such claim or litigation, shall, except with the consent of each Indemnified Party, consent to entry of any judgment or enter into any settlement which does not include as an unconditional term thereof the giving by the claimant or plaintiff to such Indemnified Party of a release from all liability in respect to such claim or litigation.

8

ARTICLE 4.

HOLDBACK AGREEMENTS

Section 4.1 Obligations of Holders. If any registration of Registrable Securities shall be in connection with an underwritten public offering, each Participating Holder of Registrable Securities agrees not to effect any public sale or distribution, including any sale pursuant to Rule 144 under the Securities Act, of any Registrable Securities (other than as part of such underwritten public offering), during the fifteen (15) days prior to, and during the ninety (90) day period (or such other period as each Participating Holder agrees with the underwriter of such offering) beginning on, the effective date of such Registration Statement (except as part of such registration), provided that each Participating Holder of Registrable Securities has received written notice of such registration at least fifteen (15) days prior to such effective date.

Section 4.2 Obligations of the Company. If any registration of Registrable Securities shall be in connection with an underwritten public offering, the Company agrees (i) not to effect any public sale or distribution of any of its Securities (other than any such sale or distribution of such Securities in connection with any merger or consolidation by the Company or any subsidiary of the Company or the acquisition by the Company or a subsidiary of the Company of the capital stock or substantially all the assets of any other Person or in connection with an employee stock option or other benefit plan) during the fifteen (15) days prior to, and during the ninety (90) day period (or such other period as the underwriters retained by the Company may reasonably request) beginning on, the effective date of such Registration Statement (except as part of such registration) and (ii) that any agreement entered into after the date of this Agreement pursuant to which the Company issues or agrees to issue any privately placed Securities shall contain a provision under which holders of such Securities agree not to effect any public sale or distribution of any such Securities during the period referred to in the foregoing clause (i), including any sale pursuant to Rule 144 under the Securities Act (except as part of such registration, if permitted).

ARTICLE 5.

RULE 144 REPORTING; RULE 144A

Section 5.1 Rule 144 Reporting, Rule 144A. (a) Commencing the date on which and for so long as the Company is subject to the reporting requirements under the Exchange Act and with a view to making available to the Significant Holders the benefits of certain rules and regulations of the SEC which may permit the sale of Securities to the public without registration, the Company agrees, as follows:

(i) The Company will make and keep public information available as those terms are understood and defined in Rule 144 under the Securities Act;

9

(ii) The Company will file with the SEC in a timely manner all reports and other documents required of the Company under the Securities Act and the Exchange Act; and

(iii) The Company will furnish to the Significant Holders forthwith upon request a written statement by the Company as to its compliance with the reporting requirements of Rule 144 under the Securities Act, and of the Securities Act and the Exchange Act, a copy of the most recent annual or quarterly report of the Company filed with the SEC, if any, and such other reports and documents of the Company and other information in the possession of or reasonably obtainable by the Company as the Significant Holders, or any of them, may reasonably request in availing themselves of any rule or regulation of the SEC allowing the Significant Holders to sell Securities without registration.

(b) Commencing the date on which and for so long as the Company is subject to the reporting requirements under the Exchange Act, the Company shall make available to the Significant Holders, from time to time as reasonably requested in order to qualify for the safe harbor exemption of Rule 144A and if not previously made public, such information as is required for such holders to qualify a disposition of Shares for the exemption from registration provided by Rule 144A under the Securities Act.

ARTICLE 6.

REGISTRATION PROCEDURES

Section 6.1 Procedures. If and whenever the Company is required to use its reasonable efforts to effect or cause the registration of any Registrable Securities under Article 2, the Company will as promptly as practicable:

(i) With respect to any registration requested pursuant to
Section 2.2 hereof, prepare and file with the SEC within a period (the "Registration Period") which, except as provided in Section 6.3 hereof, shall be a ninety (90) day period, after receipt of a request for registration pursuant to Section 2.2 hereof, a Registration Statement on any form for which the Company then qualifies or which counsel for the Company shall deem appropriate, and which form shall be available for the sale of Registrable Securities in accordance with the intended methods of distribution thereof, and use its reasonable efforts to cause such Registration Statement to become and remain effective;

(ii) Before filing with the SEC a Registration Statement or Prospectus or any amendments or supplements thereto, the Company will
(a) furnish to each Significant Holder of Registrable Securities covered by such Registration Statement copies of all such documents proposed to be filed, and (b) notify each Significant Holder holding Registrable Securities covered by such Registration Statement of any stop order issued or threatened by the SEC and take all reasonable actions required to prevent the entry of such stop order or to remove it if entered;

10

(iii) Prepare and file with the SEC such amendments and supplements to such Registration Statement and the Prospectus used in connection therewith as may be necessary to keep such Registration Statement effective and to comply with the provisions of the Securities Act with respect to the disposition of all Registrable Securities covered by such Registration Statement during the applicable period in accordance with the intended methods of disposition by the Participating Holders thereof set forth in such Registration Statement, but, with respect to registrations effected pursuant to Section 2.2 hereof, in no event for a period of more than five months after such Registration Statement becomes effective;

(iv) Furnish to each Significant Holder of Registrable Securities covered by such Registration Statement such reasonable number of copies of such Registration Statement and of each such amendment and supplement thereto (in each case including all exhibits), such reasonable number of copies of the Prospectus included in such Registration Statement (including each preliminary prospectus), in conformity with the requirements of the Securities Act and such other documents, as such Significant Holder may reasonably request in order to facilitate the deposition of the Registrable Securities owned by such Significant Holder;

(v) Use its reasonable efforts to register or qualify such Registrable Securities covered by such Registration Statement under such other securities or blue sky laws of such jurisdictions within the United States (including territories and commonwealths thereof) as each Significant Holder of Registrable Securities covered by such Registration Statement shall reasonably request, and do any and all other acts and things which may be reasonably necessary or advisable to enable such Significant Holder or Significant Holders to consummate the disposition in such jurisdictions of the Securities owned by such Significant Holder or Significant Holders, except that the Company shall not for any such purpose be required to qualify generally to do business as a foreign corporation in any jurisdiction wherein it is not so qualified, to subject itself to taxation in any such jurisdiction, or to consent to general service of process in any such jurisdiction;

(vi) Notify each Significant Holder of Registrable Securities covered by such Registration Statement, at any time when a Prospectus relating thereto is required to be delivered under the Securities Act, of the happening of any event as a result of which the Prospectus included in such Registration Statement (including any documents incorporated by reference) as then in effect, includes an untrue statement of a material fact or omits to state any material fact required to be stated therein or necessary to make the statements therein not misleading in light of the circumstances then existing, and at the request of any such Significant Holder prepare and furnish to such Significant Holder a reasonable number of copies of a supplement to or an amendment of such Prospectus as may be necessary;

(vii) Advise each Significant Holder of Registrable Securities covered by such Registration Statement, promptly after it shall receive notice or obtain knowledge thereof, of the issuance of any stop order by the SEC suspending the effectiveness of such Registration Statement or the initiation or threatening of any proceeding for that purpose;

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(viii) Otherwise use its reasonable efforts to comply with all applicable rules and regulations of the SEC, and make generally available to the Significant Holders of any Registrable Securities covered by such Registration Statement, earnings statements satisfying the provisions of Section 11(a) of the Securities Act, no later than forty-five (45) days after the end of any twelve (12) month period (or ninety (90) days, if such period is a fiscal year) (a) commencing at the end of any fiscal quarter in which Securities are sold to underwriters in an underwritten offering, or (b) if not sold to underwriters in such an offering, beginning with the first day of the month of the Company's first fiscal quarter commencing after the effective date of a Registration Statement;

(ix) Permit any Significant Holder holding Registrable Securities covered by such Registration Statement or Prospectus to withdraw their Securities from such Registration Statement or Prospectus if such Significant Holder has informed the Company that it believes that such amendment or supplement does not comply in all material respects with the requirements of the Securities Act or the rules and regulations thereunder, after having been furnished with a copy thereof at least five (5) business days prior to the filing thereof;

(x) Enter into such customary agreements (including an underwriting agreement in customary form) and take all such other actions as Significant Holders of a majority in number of shares of Registrable Securities or aggregate principal amount of Registrable Securities being sold or the underwriters retained by such Significant Holders, if any, reasonably request in order to expedite or facilitate the disposition of such Registrable Securities, including customary opinions and indemnification;

(xi) Make available for inspection by any Significant Holder of any Registrable Securities covered by such Registration Statement, any underwriter participating in any disposition pursuant to such Registration Statement, and any attorney, accountant or other agent retained by any such Significant Holder or underwriter (collectively, the "Inspectors"), all financial and other records, pertinent corporate documents and properties of the Company and its subsidiaries (collectively, the "Records"), if any, as shall be reasonably necessary to enable them to exercise their due diligence responsibility, and cause the Company's and its subsidiaries' directors, officers and employees to supply all information and respond to all inquiries reasonably requested by any such Inspector in connection with such Registration Statement. Significant Holders of Registrable Securities agree that Records and other information which the Company determines in good faith to be confidential, and of which determination the Inspectors and Significant Holders are so notified, shall not be disclosed by the Inspectors or the Significant Holders unless (a) the disclosure of such Records is necessary to avoid or correct a misstatement or omission in the Registration Statement or (b) the release of such Records is required pursuant to a subpoena or court order. Significant Holders of Registrable Securities agree that they will, upon learning that disclosure of the Records is being sought in a court of competent jurisdiction or by a government agency, give prompt notice to the Company and allow the Company to undertake appropriate action to prevent disclosure of the Records deemed confidential;

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(xii) If requested by the managing underwriters or a Significant Holder of Registrable Securities being sold in connection with an underwritten offering, promptly incorporate in a Prospectus supplement or post-effective amendment such information as the managing underwriters and the Significant Holders of a majority in number of shares of Registrable Securities or aggregate principal amount of Registrable Securities being sold agree should be included therein relating to the plan of distribution with respect to such Registrable Securities including, without limitation, information with respect to the Securities being sold to such underwriters, the purchase price being paid therefor by such underwriters and with respect to any other terms of the underwritten offering of the Registrable Securities to be sold in such offering; and make all required filings of such Prospectus supplement or post-effective amendment as soon as notified of the matters to be incorporated in such Prospectus supplement or post-effective amendment.

Section 6.2 Obligations of Participating Holders. The Company may require and each Participating Holder of any Securities as to which any registration is being effected agrees to:

(i) (a) Furnish promptly to the Company such information regarding such seller and its ownership of Registrable Securities and the distribution of such Securities as the Company may from time to time reasonably request or as shall be required by law in connection therewith and (b) otherwise cooperate with the Company as necessary to enable the Company to comply with the provisions of this Agreement;

(ii) Upon receipt of any notice from the Company of the happening of any event of the kind described in Section 6.1(vi) hereof, forthwith discontinue disposition of Securities pursuant to the Registration Statement covering such Securities until such Significant Holder's receipt of the copies of the supplemented or amended Prospectus contemplated by Section 6.1(vi) hereof, and, if so directed by the Company, such Significant Holder will deliver to the Company (at the Company's expense) all copies, other than permanent file copies, then in such Significant Holder's possession, of the Prospectus covering such Securities current at the time of receipt of such notice; and

(iii) (a) Sell such Person's securities on the basis provided in any underwriting arrangements approved by the underwriters and other Persons entitled hereunder to approve such arrangements and (b) complete and execute all questionnaires, powers of attorney, indemnities, underwriting agreements and other documents required under the terms of such underwriting arrangements.

Section 6.3 Conditions on Registration. The provisions of Section 6.1(i) hereof shall be subject to the following additional conditions, qualifications and limitations:

(i) Financial Statement Requirements. If the Company would be required under the Securities Act to include in an applicable form of Registration Statement being filed pursuant to Section 2.2 hereof audited financial statements, other than the Company's fiscal year-end financial statements for its three full fiscal years (or such other number of fiscal years as may then be ordinarily required under SEC

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regulations for registration statements on Form S-1 or its equivalent) immediately preceding the date of such filing (or, if fewer, the number of fiscal years that have elapsed from the date of the Company's inception through the date of such filing), together with any schedules with respect to such financial statements as may be required to be included in the registration statement, the Registration Period shall be a period not to exceed one hundred and fifty (150) days.

(ii) Year End Filing. If the Registration Period (as defined in
Section 6.1(i)) would otherwise expire within one hundred and twenty
(120) days after the beginning of any fiscal year, then the Company may, at its option, defer the filing of a Registration Statement pursuant to Section 6.1(i) hereof to the closest subsequent date which is not less than one hundred and twenty (120) days after the beginning of a fiscal year.

(iii) Adverse Impact on the Company. If the Board of Directors of the Company determines that the filing of a Registration Statement pursuant to Section 2.2 would adversely affect the Company, the Company may defer preparing and filing a Registration Statement with the SEC for a period of up to one hundred and twenty (120) days after the date filing would otherwise be required hereunder.

(iv) Notice of Deferral; Limitation. In the event of any deferral of registration or other increase in the length of the Registration Period pursuant to this Section 6.3, the Company will promptly give written notice of such deferral, specifying the basis therefor and the anticipated duration thereof, to each Significant Holder whose Securities are covered by or included in such Registration Statement. Notwithstanding the occurrence of any one or more of the events described in this Section 6.3, and notwithstanding anything herein to the contrary, the Registration Period shall not under any circumstances exceed two hundred and ten (210) days.

ARTICLE 7.

MISCELLANEOUS

Section 7.1 Acknowledgment and Consent of Significant Holders. (a) Each Significant Holder hereby acknowledges (i) its Registrable Securities have not been registered under the Securities Act and (ii) its Registrable Securities may not be disposed of unless such disposition is either registered under the Securities Act or is exempt from registration under the Securities Act and other applicable securities laws.

(b) Until registered under the Securities Act, all certificates evidencing Shares shall bear a legend in the form substantially as follows:

"THE SECURITIES REPRESENTED BY THIS CERTIFICATE AND ANY SECURITIES THAT MAY BE ISSUED IN RESPECT OF OR IN EXCHANGE FOR SUCH SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), OR UNDER ANY STATE SECURITIES LAWS.

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THE SECURITIES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO THE PROVISIONS OF A SHAREHOLDERS' AGREEMENT DATED AS OF ____________ __, 1997 AND MAY NOT BE TRANSFERRED, SOLD, HYPOTHECATED, PLEDGED, ASSIGNED OR OTHERWISE DISPOSED OF EXCEPT AS THEREIN PROVIDED UNLESS THE SAME IS REGISTERED UNDER THE SECURITIES ACT AND APPLICABLE STATE SECURITIES LAWS OR UNLESS AN EXEMPTION FROM SUCH REGISTRATION IS AVAILABLE AND THE COMPANY SHALL HAVE RECEIVED, AT THE EXPENSE OF THE HOLDER HEREOF, EVIDENCE OF SUCH EXEMPTION REASONABLY SATISFACTORY TO THE COMPANY (WHICH MAY INCLUDE, AMONG OTHER THINGS, AN OPINION OF COUNSEL SATISFACTORY TO THE COMPANY)."

Section 7.2 Remedies. Each Significant Holder of Registrable Securities, in addition to being entitled to exercise all rights granted by law, including recovery of damages, will be entitled to specific performance of its rights under this Agreement. The Company agrees that monetary damages would not be adequate compensation for any loss incurred by reason of a breach by the Company of the provisions of this Agreement and hereby agrees to waive the defense in any action for specific performance that a remedy at law would be adequate.

Section 7.3 Amendments and Waivers. Except as otherwise provided herein, the provisions of this Agreement may not be amended, modified or supplemented, and waivers or consents to departures from the provisions hereof may not be given unless the Company has obtained the written consent of Significant Holders of at least a majority of the Registrable Securities then outstanding affected by such amendment, modification, supplement, waiver or departure.

Section 7.4 Notices. All notices and other communications provided for or permitted hereunder shall be made by hand-delivery or registered first-class mail:

(i) if to a Significant Holder of Registrable Securities, at the most current address, and with a copy to be sent to each additional address given by such holder to the Company and the transfer agent for the Registrable Securities; and

(ii) if to the Company, at:

IRI International Corporation



Attention: __________________

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With a copy to:

Jones, Day, Reavis & Pogue 599 Lexington Avenue
New York, New York 10022
Attention: William F. Henze II

All such notices and communications shall be deemed to have been duly given when delivered by hand, if personally delivered, or two business days after being deposited in the mail, postage prepaid, if mailed.

Section 7.5 Headings. The headings in this Agreement are for convenience of reference only and shall not limit or otherwise affect the meaning hereof.

Section 7.6 Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK APPLICABLE TO CONTRACTS MADE AND TO BE PERFORMED WHOLLY WITHIN THAT STATE WITHOUT REGARD TO PRINCIPLES OF CONFLICTS OF LAW.

Section 7.7 Severability. In the event that any one or more of the provisions contained herein, or the application thereof in any circumstances, is held invalid, illegal or unenforceable in any respect for any reason, the validity, legality and enforceability of any such provision in every other respect and of the remaining provisions contained herein shall not be in any way impaired thereby, it being intended that all of the rights and privileges of the Significant Holders shall be enforceable to the fullest extent permitted by law.

Section 7.8 Entire Agreement. This Agreement is intended by the parties as a final expression of their agreement and intended to be a complete and exclusive statement of the agreement and understanding of the parties hereto in respect of the subject matter contained herein and therein. There are no restrictions, promises, warranties or undertakings, other than those set forth or referred to herein and therein. This Agreement supersedes all prior agreements and understandings between the parties with respect to such subject matter.

Section 7.9 Transfers. If an Initial Significant Holder transfers any Registrable Securities to a Designated Transferee, such transferee receiving Registrable Securities in such transfer shall be entitled to execute this Agreement, and upon such execution, shall become, and thereafter shall have the rights and obligations of, a Significant Holder hereunder.

Section 7.10 Counterparts. The Registration Rights Agreement may be executed in counterparts, each of which shall be deemed an original but all of which together shall be deemed to constitute one and the same agreement.

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IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first written above.

IRI INTERNATIONAL
CORPORATION

By: _______________________________
Its:

ENERGY SERVICES
INTERNATIONAL LTD.

By: _______________________________
Name: _________________________
Title: ________________________

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INDEMNIFICATION AGREEMENT

This Indemnification Agreement ("Agreement") is made as of the ___ day of ______________,199_, by and between IRI International Corporation, a Delaware corporation (the "Company"), and _________________, a director and/or officer of the Company (the "Indemnitee").

In consideration of the mutual agreements herein set forth, the Company and the Indemnitee agree as follows:

1. Certain Definitions.

(a) "Board" means the Board of Directors of the Company.

(b) "Change in Control" means the occurrence of any of the following events:

(i) The Company is merged, consolidated or reorganized into or with another corporation or other entity, and as a result of such merger, consolidation or reorganization less than a majority of the combined voting power of the then-outstanding securities of such corporation or entity immediately after such transaction are held in the aggregate by the holders of Voting Stock immediately prior to such transaction;

(ii) The Company sells or otherwise transfers all or substantially all of its assets to another corporation or other entity and, as a result of such sale or transfer, less than a majority of the combined voting power of the then-outstanding securities of such other corporation or entity immediately after such sale or transfer is held in the aggregate by the holders of Voting Stock immediately prior to such sale or transfer;

(iii) There is a report filed on Schedule 13D or Schedule 14D-1 (or any successor schedule, form or report or item therein), each as promulgated pursuant to the Exchange Act, disclosing that any Person, other than an Existing Shareholder, has become the beneficial owner (as the term "beneficial owner" is defined under Rule 13d-3 or any successor rule or regulation promulgated under the Exchange Act) of securities representing 15% or more of the combined voting power of the Voting Stock; or

(iv) If, during any period of two consecutive years, individuals who at the beginning of any such period constitute the Board cease for any reason to constitute at least a majority thereof; provided, however, that for purposes of this clause (iv) each Director of the Company who is first elected, or first nominated for election by the Company's stockholders, by a vote of at least majority of the Directors of the Company (or a committee of the Board) then still in office who were Directors of the


Company at the beginning of any such period shall be deemed to have been a Director of the Company at the beginning of such period;

notwithstanding the provisions of clauses (iii) or (iv) above, unless otherwise determined in a specific case by majority vote of the Board, a Change in Control shall not be deemed to have occurred for purposes of such clauses (iii) or (iv) solely because the Company, any Subsidiary or any employee stock ownership plan or any other employee benefit plan of the Company or any Subsidiary either files or becomes obligated to file a report or a proxy statement under or in response to Schedule 13D, Schedule 14D-1, Form 8-K or Schedule 14A (or any successor schedule, form or report or item therein) under the Exchange Act disclosing beneficial ownership by it of shares of Voting Stock, whether in excess of 15% or otherwise, or because the Company reports that a change in control of the Company has occurred or will occur in the future by reason of such beneficial ownership.

(c) "DGCL" means the General Corporation Law of the State of Delaware.

(d) "Disinterested Director" means a Director of the Company who is not or was not a party to the Proceeding in respect of which indemnification is sought by the Indemnitee.

(e) "Exchange Act" means the Securities Exchange Act of 1934, as amended.

(f) "Existing Shareholder" shall mean any Person who is the beneficial owner (as the term "beneficial owner" is defined under Rule 13d-3 or any successor rule or regulation promulgated under the Exchange Act) of securities representing 15% or more of the combined voting power of the Voting Stock as of the date hereof.

(g) "Expense Request" shall have the meaning ascribed thereto in
Section 4(e) hereof.

(h) "Indemnification Statement" means a sworn statement of request for indemnification substantially in the form of Exhibit 1 attached hereto and made a part hereof.

(i) "Independent Counsel" means a law firm or a member of a law firm that neither at the time in question, nor in the five years immediately preceding such time has been, retained to represent (i) the Company or the Indemnitee in any matter material to either such party or (ii) any other party to the Proceeding giving rise to a claim for indemnification under this Agreement. Notwithstanding the foregoing, the term "Independent Counsel" shall not include any person who, under the applicable standards of professional conduct then prevailing under the law of the State of ___________, would be precluded from representing either the Company or the Indemnitee in an action to determine the Indemnitee's rights under this Agreement.

(j) "Person" means any "person" as used in Section 13(d)(3) or Section 14(d)(2) of the Exchange Act).

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(k) "Proceeding" means any pending, threatened or completed investigation, claim, action, suit or proceeding, whether civil, administrative, investigative or criminal, and any appeals therefrom.

(l) "Subsidiary" means any entity in which the Company, directly or indirectly, beneficially owns 50% or more of the voting securities.

(m) "Supporting Documentation" shall have the meaning ascribed thereto in Section 4(a) hereof.

(n) "Undertaking" means a sworn statement of request for advancement of expenses substantially in the form of Exhibit 2 attached hereto and made a part hereof.

(o) "Voting Stock" means stock of the Company of any class or series entitled to vote generally in the election of Directors.

2. Initial Indemnity. (a) The Company shall indemnify the Indemnitee when he or she was or is involved in any manner (including without limitation as a party or as a deponent or witness) or is threatened to be made so involved in any Proceeding (other than a Proceeding by or in the name of the Company), by reason of the fact that he or she is or was or had agreed to become a director or officer of the Company, or is or was serving or had agreed to serve at the request of the Company as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise or entity, or by reason of any action alleged to have been taken or omitted in such capacity, against any and all costs, charges and expenses, including without limitation attorneys' and others' fees and expenses, actually incurred by the Indemnitee in connection with the defense or settlement thereof or appeal therefrom if the Indemnitee acted in good faith and in a manner he or she reasonably believed to be in or not opposed to the best interests of the Company, and, with respect to any criminal action or Proceeding, had no reasonable cause to believe his or her conduct was unlawful. The termination of any Proceeding by judgment, order, settlement, conviction or upon a plea of nolo contendre or its equivalent shall not, of itself, adversely affect the right of the Indemnitee to indemnification or create a presumption that the Indemnitee did not satisfy the foregoing standard of conduct to the extent applicable thereto.

(b) The Company shall indemnify the Indemnitee when he or she was or is involved in any manner (including without limitation as a party or as a witness) or is threatened to be made so involved in any Proceeding by or in the name of the Company to procure a judgment in its favor by reason of the fact that he or she is or was or had agreed to become a director or officer of the Company, or is or was serving or had agreed to serve at the request of the Company as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise or entity against any and all costs, charges and expenses, including without limitation attorneys' and others' fees and expenses, actually incurred by the Indemnitee in connection with the defense or settlement thereof or any appeal therefrom if the Indemnitee acted in good faith and in a manner he or she reasonably believed to be in or not opposed to the best interests of the Company and except that no indemnification shall be made in respect of any claim, issue or matter as to which the Indemnitee shall have been adjudged to be liable to the Company unless and only to the

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extent that the Court of Chancery or the court in which such Proceeding was brought shall determine upon application that, despite the adjudication of liability but in view of all the circumstances of the case, the Indemnitee is fairly and reasonably entitled to indemnity for such expenses which the Court of Chancery or such other court shall deem proper.

(c) To the extent that the Indemnitee has been successful on the merits or otherwise, including without limitation the dismissal of a Proceeding without prejudice, in defense of any Proceeding referred to in Sections 2(a) or 2(b) hereof or in defense of any claim, issue or matter therein, he or she shall be indemnified against any and all costs, charges and expenses, including without limitation attorneys' and others' fees and expenses, actually incurred by him in connection therewith.

(d) Any indemnification under Sections 2(a) or 2(b) (unless ordered by a court) shall be made by the Company only as authorized in the specific case upon a determination in accordance with Section 4 hereof or any applicable provision of the Certificate of Incorporation of the Company (the "Certificate of Incorporation"), By-Laws of the Company (the "Bylaws"), other agreement, resolution or otherwise.

(e) Any and all costs, charges and expenses, including without limitation attorneys' and others' fees and expenses, incurred by the Indemnitee in his or her capacity as a director or officer of the Company in defending a Proceeding shall be paid by the Company in advance of the final disposition of such Proceeding in the manner prescribed by Section 4(e) hereof.

(f) Notwithstanding anything in this Agreement to the contrary, the Indemnitee shall not be entitled to indemnification pursuant hereto in connection with any Proceeding initiated by the Indemnitee against the Company or any director or officer of the Company (except for any Proceeding initiated by the Indemnitee pursuant to Section 6 hereof) unless the Company has joined in or consented to the initiation of such Proceeding.

(g) The provisions of this Section 2 shall not affect the rights or obligations of the parties under Section 3 hereof.

3. Additional Indemnification. (a) Pursuant to Section 145(f) of the DGCL, without limiting any right which the Indemnitee may have pursuant to
Section 2 hereof, the Certificate of Incorporation, the By-Laws, the DGCL, any policy of insurance or otherwise, but subject to the limitations set forth in
Section 2(f) hereof and to any maximum permissible indemnity which may exist under applicable law at the time of any request for indemnity hereunder determined as contemplated by this Section 3(a), the Company shall indemnify the Indemnitee against any amount which he or she is or becomes legally obligated to pay relating to or arising out of any claim made against the Indemnitee because of any act, failure to act or neglect or breach of duty, including any actual or alleged error, misstatement or misleading statement, which he or she commits, suffers, permits or acquiesces in while acting in his or her capacity as a director and/or officer of the Company, or, at the request of the Company, as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise or entity. The payments which the Company is obligated to make pursuant to this Section 3 shall include without limitation

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damages, judgments, settlements and charges, costs, expenses, expenses of investigation and expenses of defense of Proceedings, and expenses of appeal, attachment or similar bonds; provided, however, that the Company shall not be obligated under this Section 3(a) to make any payment in connection with any claim against the Indemnitee:

(i) to the extent of any fine or similar governmental imposition which the Company is prohibited by applicable law from paying which results in a final, nonappealable order; or

(ii) to the extent based upon or attributable to the Indemnitee gaining in fact a personal profit to which he or she was not legally entitled, including without limitation profits made from the purchase and sale by the Indemnitee of equity securities of the Company which are recoverable by the Company pursuant to Section 16(b) of the Exchange Act and profits arising from transactions in publicly traded securities of the Company which were effected by the Indemnitee in violation of Section 10(b) of the Exchange Act, including Rule l0b-5 promulgated thereunder. The determination of whether the Indemnitee shall be entitled to indemnification under this Section 3(a) may be, but shall not be required to be, made in accordance with Section 4 hereof. If that determination is so made, it shall be binding upon the Company and the Indemnitee for all purposes.

(b) Expenses, including without limitation attorneys' and others' fees and expenses, incurred by Indemnitee in connection with any claim for which the Indemnitee may be entitled to indemnification pursuant to Section 3(a) hereof shall be paid by the Company in advance of the final disposition thereof as authorized in accordance with Section 4(e) hereof.

4. Certain Procedures Relating to Indemnification and Advancement of Expenses. (a) Except as otherwise permitted or required by the DGCL, for purposes of pursuing his or her rights to indemnification under Sections 2(a), 2(b) or 3(a) hereof, as the case may be, the Indemnitee, may, but shall not be required to, submit an Indemnification Statement to the Company, to the attention of the Secretary, stating that he or she is entitled to indemnification hereunder, together with such documents supporting the request as are reasonably available to the Indemnitee and are reasonably necessary to determine whether and to what extent the Indemnitee is entitled to indemnification hereunder (the "Supporting Documentation"). The Company shall promptly upon receipt of any Indemnification Statement advise the Board in writing that the Indemnitee has requested indemnification.

(b) The Indemnitee's entitlement to indemnification under Sections
2(a), 2(b) or 3(a), as the case may be, shall be determined not less than 30 calendar days after receipt by the Company of an Indemnification Statement and Supporting Documentation and shall be made in one of the following ways: (i) by a majority vote of the Disinterested Directors, if they constitute a quorum of the Board, or, in the case of an Indemnitee that is not a present or former officer of the Company, by any committee of the Board or committee of officers or agents of the Company designated for such purpose by a majority of the Board;
(ii) by a written opinion of Independent Counsel if (A) a Change of Control has occurred and the Indemnitee so requests or (B) in the case of an Indemnitee that is a present or former officer of the Company, a quorum of the Board consisting of Disinterested Directors is not

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obtainable or, even if obtainable, a majority of such Disinterested Directors so directs; (iii) by the stockholders of the Company (but only if a majority of the Disinterested Directors, if they constitute a quorum of the Board, presents the issue of entitlement to indemnification to the stockholders of the Company for their determination); or (iv) as deemed to have been determined in accordance with Section 4(c) hereof. In the event the determination of entitlement to indemnification is to be made by Independent Counsel pursuant to clause (ii) above, a majority of the Disinterested Directors shall select the Independent Counsel, but only an Independent Counsel to which the Indemnitee does not reasonably object; provided, however, that if a Change of Control has occurred, the Indemnitee shall select such Independent Counsel, but only an Independent Counsel to which the Board does not reasonably object.

(c) Submission of an Indemnification Statement and Supporting Documentation to the Company pursuant to Section 4(b) hereof shall create a presumption that the Indemnitee is entitled to indemnification under Sections
2(a), 2(b) or 3(a) hereof, as the case may be, and thereafter the Company shall have the burden of proof to overcome that presumption in reaching a contrary determination. In any event, if the Person empowered under Section 4(b) hereof to determine the Indemnitee's entitlement to indemnification has not been appointed or has not made a determination within 30 calendar days after receipt by the Company of such Indemnification Statement and Supporting Documentation, the Indemnitee shall be deemed to be entitled to indemnification unless within such 30-calendar day period the Person empowered under Section 4(b) hereof to determine entitlement to indemnification has made a determination, based upon clear and convincing evidence (sufficient to rebut the foregoing presumption), that the Indemnitee is not entitled to such indemnification and the Indemnitee shall have received notice within such period in writing of such determination, which notice shall (i) disclose with particularity the evidence in support of such determination and (ii) be sworn to by all Persons who participated in the determination and voted to deny indemnification. The provisions of this Section 4(c) are intended to be procedural only and shall not affect the right of the Indemnitee to indemnification under this Agreement and any determination that the Indemnitee is not entitled to indemnification and any failure to make the payments requested in the Indemnification Statement shall be subject to review as provided in Section 6 hereof.

(d) If a determination is made or deemed to have been made pursuant to this Section 4 that the Indemnitee is entitled to indemnification, the Company shall pay to the Indemnitee the amounts to which the Indemnitee is entitled within two business days after such determination of entitlement to indemnification has been made or deemed to have been made.

(e) For purposes of determining whether to authorize advancement of expenses pursuant to Section 2(e) hereof, the Indemnitee shall submit an Undertaking to the Company, stating that (i) he or she has incurred or will incur actual expenses in defending a Proceeding and (ii) if and to the extent required by law at the time of such advance, he or she undertakes to repay such amounts advanced as to which it may ultimately be determined that the Indemnitee is not entitled. For purposes of requesting advancement of expenses pursuant to
Section 3(b) hereof, the Indemnitee may, but shall not be required to, submit an Undertaking or such other form of request as he or she determines to be appropriate (an "Expense Request"). Upon receipt of an Undertaking or Expense Request, as the case may be, the

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Company shall within 30 calendar days make payment of the expenses stated in the Undertaking or Expense Request. No security shall be required in connection with any Undertaking or Expense Request and any Undertaking or Expense Request shall be accepted without reference to the Indemnitee's ability to make repayment.

5. Subrogation; Duplication of Payments. (a) In the event of payment under this Agreement, the Company shall be subrogated to the extent of such payment to all of the rights of recovery of the Indemnitee, who shall execute all papers required and shall do everything that may be necessary to secure such rights, including the execution of such documents necessary to enable the Company effectively to bring suit to enforce such rights.

(b) The Company shall not be liable under this Agreement to make any payment in connection with any claim made against the Indemnitee to the extent the Indemnitee has actually received payment (under any insurance policy, the Certificate of Incorporation, the By-Laws or otherwise) of the amounts otherwise payable hereunder.

6. Enforcement. (a) If a claim for indemnification or advancement of expenses made to the Company pursuant to Section 4 hereof is not timely paid in full by the Company as required by Section 4 hereof, the Indemnitee shall be entitled to seek judicial enforcement of the Company's obligations to make such payment. In the event that a determination is made pursuant to Section 4(c) hereof that the Indemnitee is not entitled to indemnification hereunder, (i) the Indemnitee may at any time thereafter seek an adjudication of his or her entitlement to such indemnification or advancement either, at the Indemnitee's sole option, in (A) an appropriate court of the State of Delaware or any other court of competent jurisdiction or (B) an arbitration to be conducted by a single arbitrator pursuant to the rules of the American Arbitration Association;
(ii) any such judicial proceeding or arbitration shall be de novo and the Indemnitee shall not be prejudiced by reason of such adverse determination; and
(iii) in any such judicial proceeding or arbitration the Company shall have the burden of proving that the Indemnitee is not entitled to indemnification under this Agreement.

(b) The Company shall be precluded from asserting in any judicial proceeding or arbitration commenced pursuant to the provisions of Section 6(a) that the procedures and presumptions of this Agreement are not valid, binding and enforceable and shall stipulate in any such court or before any such arbitrator that the Company is bound by all the provisions of this Agreement.

(c) In any action brought under Section 6(a) hereof, it shall be a defense to a claim for indemnification pursuant to Sections 2(a) or 2(b) hereof (other than an action brought to enforce a claim for expenses incurred in defending any Proceeding in advance of its final disposition where the Undertaking, if any is required, has been tendered to the Company) that the Indemnitee has not met the standards of conduct which make it permissible under the DGCL for the Company to indemnify the Indemnitee for the amount claimed, but the burden of proving such defense shall be on the Company. Neither the failure of the Company (including any Person empowered under Section 4(b) hereof to determine the Indemnitee's entitlement to indemnification) to have made a determination prior to commencement of such action that indemnification of the Indemnitee is proper in the circumstances because he or she has met the applicable standard of conduct set forth in the

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DGCL, nor an actual determination by the Company (including any person or persons empowered under Section 4(b) hereof to determine the Indemnitee's entitlement to indemnification) that the Indemnitee has not met such applicable standard of conduct, shall be a defense to the action or create a presumption that the Indemnitee has not met the applicable standard of conduct.

(d) It is the intent of the Company that the Indemnitee not be required to incur the expenses associated with the enforcement of his or her rights under this Agreement by litigation or other legal action because the cost and expense thereof would substantially detract from the benefits intended to be extended to the Indemnitee hereunder. Accordingly, if it should appear to the Indemnitee that the Company has failed to comply with any of its obligations under this Agreement or in the event that the Company or any other person takes any action to declare this Agreement void or unenforceable, or institutes any action, suit or proceeding designed (or having the effect of being designed) to deny, or to recover from, the Indemnitee the benefits intended to be provided to the Indemnitee hereunder, the Company irrevocably authorizes the Indemnitee from time to time to retain counsel of his or her choice, at the expense of the Company as hereafter provided, to represent the Indemnitee in connection with the initiation or defense of any litigation or other legal action, whether by or against the Company or any director, officer, stockholder or other Person affiliated with the Company, in any jurisdiction. Regardless of the outcome thereof, the Company shall pay and be solely responsible for any and all costs, charges and expenses, including without limitation attorneys' and others' fees and expenses, incurred by the Indemnitee (i) as a result of the Company's failure to perform this Agreement or any provision thereof or (ii) as a result of the Company or any Person contesting the validity or enforceability of this Agreement or any provision thereof as aforesaid.

7. Liability Insurance and Funding. To the extent the Company maintains an insurance policy or policies providing directors' and officers' liability insurance, the Indemnitee shall be covered by such policy or policies, in accordance with its or their terms, to the maximum extent of the coverage available for any Director or officer of the Company. The Company may, but shall not be required to, create a trust fund, grant a security interest or use other means (including without limitation a letter of credit) to ensure the payment of such amounts as may be necessary to satisfy its obligations to indemnify and advance expenses pursuant to this Agreement.

8. Merger or Consolidation. In the event that the Company shall be a constituent corporation in a merger, consolidation or other reorganization, the Company shall require as a condition thereto, (a) if it shall not be the surviving, resulting or other corporation therein, the surviving, resulting or acquiring corporation to agree to indemnify the Indemnitee to the full extent provided herein, and (b) whether or not the Company is the surviving, resulting or acquiring corporation therein, the Indemnitee shall also stand in the same position under this Agreement with respect to the surviving, resulting or acquiring corporation as he or she would have with respect to the Company if its separate existence had continued.

9. Nonexclusivity and Severability. (a) The right to indemnification and advancement of expenses provided by this Agreement shall not be exclusive of any other rights to which the Indemnitee may be entitled under the Certificate of Incorporation,

8

By-Laws, the DGCL, any other statute, insurance policy, agreement, vote of stockholders of the Company or of the Board or otherwise, both as to actions in his or her official capacity and as to actions in another capacity while holding such office, and shall continue after the Indemnitee has ceased to be a director, officer, employee or agent of the Company and shall inure to the benefit of his or her heirs, executors and administrators; provided, however, that to the extent the Indemnitee otherwise would have any greater right to indemnification and/or advancement of expenses under any provision of the Certificate of Incorporation or the By-Laws as in effect on the date hereof, the Indemnitee shall be deemed to have such greater right pursuant to this Agreement; and, provided further, that to the extent that any change is made to the DGCL (whether by legislative action or judicial decision), the Certificate of Incorporation and/or the By-Laws that permits any greater right to indemnification and/or advancement of expenses than that provided under this Agreement as of the date hereof, the Indemnitee shall be deemed to have such greater right pursuant to this Agreement.

(b) The Company shall not adopt any amendment to the Certificate of Incorporation or By-Laws the effect of which would be to deny, diminish or encumber the Indemnitee's rights to indemnity pursuant to the Certificate of Incorporation, By-Laws, the DGCL or any other applicable law as applied to any act or failure to act occurring in whole or in part prior to the date upon which the amendment was approved by the Board or the Company's stockholders, as the case may be. Notwithstanding the foregoing, in the event that the Company shall adopt any amendment to the Certificate of Incorporation or By-Laws the effect of which is to so deny, diminish or encumber the Indemnitee's rights to such indemnity, such amendment shall apply only to acts or failures to act occurring entirely after the effective date thereof.

(c) If any provision or provisions of this Agreement are held to be invalid, illegal or unenforceable for any reason whatsoever: (i) the validity, legality and enforceability of the remaining provisions of this Agreement (including without limitation all portions of any paragraph of this Agreement containing any such provision held to be invalid, illegal, or unenforceable, that are not themselves invalid, illegal, or unenforceable) shall not in any way be affected or impaired thereby and (ii) to the fullest extent possible, the provisions of this Agreement (including without limitation all portions of any paragraph of this Agreement containing any such provision held to be invalid, illegal or unenforceable, that are not themselves invalid, illegal or unenforceable) shall be construed so as to give effect to the intent manifested by the provision held invalid, illegal or unenforceable.

10. Governing Law. This Agreement shall be governed by and construed in accordance with the laws of the State of Delaware, without giving effect to the principles of conflict of laws thereof.

11. Modification; Survival. This Agreement contains the entire agreement of the parties relating to the subject matter hereof. This Agreement may be modified only by an instrument in writing signed by both parties hereto. The provisions of this Agreement shall survive the death, disability or incapacity of the Indemnitee or the termination of the Indemnitee's service as a director of the Company and shall inure to the benefit of the Indemnitee's heirs, executors and administrators.

9

12. Certain Interpretations. For purposes of this Agreement, references to "other enterprises" shall include employee benefit plans; references to "fines" shall include any excise taxes assessed on Indemnitee with respect to any employee benefit plan; and references to "serving at the request of the Company" shall include any service as a director, officer, employee or agent of the Company which imposes duties on, or involves services by, the Indemnitee with respect to an employee benefit plan, its participants or beneficiaries; references to the masculine shall include the feminine; references to the singular shall include the plural and vice versa; and if the Indemnitee acted in good faith and in a manner he or she reasonably believed to be in the interest of the participants and beneficiaries of an employee benefit plan he or she shall be deemed to have acted in a manner "not opposed to the best interests of the Company" as referred to herein.

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IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement as of the date first above written.

IRI INTERNATIONAL CORPORATION

By__________________________________
[Name]
[Title]

[INDEMNITEE]


[Name]

11

Exhibit 1

INDEMNIFICATION STATEMENT

STATE OF _________________)

) SS

COUNTY OF ________________)

I, ____________________ , being first duly sworn, do depose and say as follows:

1. This Indemnification Statement is submitted pursuant to the Indemnification Agreement, dated as of ________________, 19 __, between ______________ (the Company"), a Delaware corporation, and the undersigned.

2. I am requesting indemnification against charges, costs, expenses, including without limitation attorneys' and others' fees and expenses, judgments, fines and amounts paid in settlement, all of which (collectively, "Liabilities") have been or will be incurred by me in connection with an actual or threatened action, suit, proceeding or claim to which I am a party or am threatened to be made a party.

3. With respect to all matters related to any such action, suit, proceeding or claim, I am entitled to be indemnified as herein contemplated pursuant to the aforesaid Indemnification Agreement.

12

4. Without limiting any other rights which I have or may have, I am requesting indemnification against Liabilities which have or may arise out of
___________________________________________.

Subscribed and sworn to before me, a Notary Public in and for said County and State, this day of , 19 .


[Seal]

My commission expires the ______ day of _____________, 19____.

13

Exhibit 2

UNDERTAKING

STATE OF _________________)

) SS

COUNTY OF ________________)

I, ____________________ , being first duly sworn, do depose and say as follows:

1. This Undertaking is submitted pursuant to the Indemnification Agreement, dated as of ________________, 199_, between _________________, (the "Company"), a Delaware corporation, and the undersigned.

2. I am requesting advancement of certain costs, charges and expenses which I have incurred or will incur in defending an actual or pending civil or criminal action, suit, proceeding or claim.

3. I hereby undertake to repay this advancement of expenses if it shall ultimately be determined that I am not entitled to be indemnified by the Company under the aforesaid Indemnification Agreement or otherwise.

4. The costs, charges and expenses for which advancement is requested are, in general, all expenses related to _______________________________________
______________________________.

Subscribed and sworn to before me, a Notary Public in and for said County and State, this day of , 19 .


[Seal]

My commission expires the _____ day of _______________, 19__.

14

EMPLOYMENT AGREEMENT

THIS EMPLOYMENT AGREEMENT ("Agreement"), dated as of April 17, 1997, is made and entered into by and between Cardwell International Ltd., a Kansas corporation (the "Company"), and A.C. Teichgraeber (the "Executive") and joined in to the extent set forth in the Joinder below by IRI International Corporation, a Delaware corporation ("IRI").

RECITALS

A. The Company desires to retain the services of the Executive as a senior executive of the Company;

B. Concurrently herewith, the Company, the Executive, IRI and certain other parties have entered into an Acquisition Agreement (the "Acquisition Agreement") pursuant to which, among other things, (1) IRI will acquire all of the issued and outstanding shares of the Company, and (2) the Executive will sell (or cause entities controlled by him to sell) certain property to IRI for cash, subject to the terms and conditions of such Acquisition Agreement; and

C. The Executive desires to continue to provide his services to the Company on the terms and conditions herein provided.

NOW, THEREFORE, the parties agree as follows:

1. DEFINITIONS. In addition to terms defined elsewhere herein, the following terms have the following meanings when used in this Agreement with initial capital letters:

(a) " AFFILIATE" means IRI and any entity controlling, controlled by or under common control with, IRI.

(b) "BASE PAY" means the salary provided for in Section 4(a), as such amount may be adjusted hereunder.

(c) "BOARD" means the Board of Directors of the Company or an authorized committee thereof.

(d) "CAUSE" means that the Executive shall have committed:

(i) an intentional act of fraud, embezzlement or theft in connection with his duties or in the course of his employment with the Company or any Affiliate;

(ii) any intentional wrongful damage to property of the Company or any Affiliate;


(iii) intentional Unauthorized Disclosure, Use or Solicitation;

(iv) intentional wrongful engagement in any Competitive Activity; or

(v) any violation of IRI's ethics policy, a copy of which is attached hereto;

and any such act shall have been materially harmful to the Company or any Affiliate.

(e) "CHANGE IN CONTROL" means the occurrence of any event that causes any person (as the term "person" is used in Section 13(d)(3) or Section 14(d)(2) of the Securities Exchange Act of 1934, as amended (the "Exchange Act")) other than Energy Services International Limited, a Delaware corporation, or any of its Affiliates, individually or in the aggregate, to become the beneficial owner (as the term "beneficial owner" is defined under Rule 13d-3 or any successor rule or regulation promulgated under the Exchange Act) of securities representing 50% or more of the combined voting power of the then-outstanding securities entitled to vote generally in the election of directors of IRI.

(f) "COMPETITIVE ACTIVITY" means any act by the Executive that is prohibited under Section 6(a).

(g) "DISABILITY" means the Executive's inability, as a result of mental or physical illness, injury or disease, substantially to perform his material duties and responsibilities under this Agreement for a period of 180 consecutive calendar days within any 12-month period.

(h) "GOOD REASON" means that, during the Term of Employment, the Company shall have (i) assigned to the Executive any duties or responsibilities materially inconsistent with his position and title or otherwise breached any material provision of this Agreement, and (ii) failed to correct such condition promptly after receipt by the Board of written notice from the Executive requesting correction.

(i) "TERM OF EMPLOYMENT" means the period specified in Section 2.

(j) "UNAUTHORIZED DISCLOSURE, USE OR SOLICITATION" means any violation or breach by the Executive of any provision of Section 7.

2. TERM OF EMPLOYMENT. The Company hereby continues the employment of the Executive and the Executive hereby accepts such continued employment, effective as of April 17, 1997 and ending on April 16, 2002. The Executive will devote his full time and attention to the business and affairs of the Company and its Affiliates (excluding reasonable amounts of time devoted to

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charitable purposes, other investments and periods in which he is physically or mentally ill, injured or otherwise disabled).

3. TITLE, DUTIES AND RESPONSIBILITIES. During the Term of Employment, the Executive will (a) have the title of President of the Cardwell Division, (b) have and perform such duties and responsibilities substantially similar to those that the Executive had and performed prior to the date of this Agreement and such other duties and responsibilities as may be assigned to him from time to time by the Board, and (c) report directly to the Board. The Executive shall be invited to join the Board of Directors of IRI.

4. COMPENSATION AND BENEFITS. (a) BASE PAY. During the Term of Employment, the Executive will receive Base Pay of $250,000 per year, subject to review by the Company for increases (but not decreases) at the end of each fiscal year during the Term of Employment. Such Base Pay will be payable by the Company in accordance with its regular compensation practices and policies applicable to senior executives of the Company, which practices and policies shall be substantially similar to the practices and policies of IRI applicable to senior executives of IRI.

(b) ANNUAL PERFORMANCE BONUS. For each fiscal year of the Company during the Term of Employment, commencing with the fiscal year ending March 31, 1998, the Executive will be eligible to receive an annual performance bonus of up to $600,000, which bonus, if any, shall be determined by the Company, in its sole discretion. Such bonus, if any, will be payable by the Company in cash in accordance with its regular compensation practices and policies applicable to its senior executives, which practices and policies shall be substantially similar to the practices and policies of IRI applicable to senior executives of IRI.

(c) SPECIAL BONUS. If a Change in Control occurs during the Term of Employment and while the Executive is still employed hereunder, the Executive may be eligible to receive a special change in control bonus, which bonus, if any, shall be determined by the Company, in its sole discretion. Such bonus, if any, will be payable by the Company in cash in accordance with its regular compensation practices and policies applicable to its senior executives, which practices and policies shall be substantially similar to the practices and policies of IRI applicable to senior executives of IRI.

(d) EMPLOYEE BENEFITS. During the Term of Employment, the Executive will be entitled to (i) participate in all employee benefit plans, programs, policies and arrangements sponsored, maintained or contributed to by the Company, subject to and in accordance with the terms and conditions of such plans, programs, policies and arrangements as they relate to similarly situated senior executives of the Company, which plans, programs, policies and arrangements shall be substantially similar to those of IRI

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applicable to senior executives of IRI, and (ii) receive all other benefits and perquisites provided or made available by the Company to its senior executives, subject to and in accordance with the terms and conditions of such benefits and perquisites as they relate to senior executives of the Company, which other benefits and perquisites shall be substantially similar to those of IRI applicable to senior executives of IRI.

(e) EXPENSES. During the Term of Employment, the Executive will be entitled to reimbursement of all documented reasonable travel and entertainment expenses incurred by him on behalf of the Company in the course of the performance of his duties hereunder, subject to and in accordance with the terms and conditions of the Company's expense reimbursement policies as they relate to senior executives of the Company, which terms and conditions shall be substantially similar to those of IRI applicable to senior executives of IRI.

(f) VACATION. During the Term of Employment, the Executive will be entitled to vacation, in addition to paid public holidays as observed by the Company from year to year, subject to and in conformity with the Company's regular compensation practices and policies as they relate to its senior executives, which vacation practices and policies shall be substantially similar to those of IRI applicable to senior executives of IRI.

(g) OTHER AGREEMENTS. The rights and obligations of the parties under the Acquisition Agreement will be governed by the terms and conditions of each such agreement and will not be enlarged or affected hereby.

5. TERMINATION OF EMPLOYMENT. Subject to the provisions of this
Section 5, the Executive's employment hereunder will be for the Term of Employment specified in Section 2.

(a) TERMINATION FOR ANY REASON OTHER THAN GOOD REASON OR TERMINATION FOR CAUSE. The Company may, with or without notice, terminate the Executive's employment hereunder for Cause. If the Executive's employment is terminated effective during the Term of Employment by the Executive for any reason other than Good Reason or by the Company for Cause, the Executive will thereupon no longer be entitled to any compensation or benefits provided herein, and nothing herein will limit the Company's rights against the Executive or the rights and obligations of the parties under Sections 6 and 7.

(b) TERMINATION FOR ANY REASON OTHER THAN CAUSE OR DISABILITY. The Company may terminate the Executive's employment hereunder for any reason or for no reason. If the Executive's employment is terminated effective during the Term of Employment by the Executive for Good Reason or by the Company for any reason other than Cause or the Executive's Disability, the Executive will be entitled to receive payments equal to his Base Pay (at

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the rate in effect on the effective date of his termination of employment) for the remainder of the Term of Employment, payable in a single lump sum on the effective date of such termination in accordance with the Company's regular compensation practices and policies applicable to senior executives of the Company, which practices and policies shall be substantially similar to those of IRI applicable to senior executives of IRI.

(c) DEATH OR DISABILITY. If the Executive's employment is terminated effective during the Term of Employment as a result of his death or by the Company as a result of his Disability, the Executive (or, in the event of his death, his designated beneficiary) will be entitled to receive payments equal to his Base Pay (at the rate in effect on the effective date of his termination of employment) for a period of six (6) months following such effective date, payable in accordance with the Company's regular compensation practices and policies applicable to senior executives, which practices and policies shall be substantially similar to those of IRI applicable to senior executives of IRI, but less any amounts paid to the Executive under any long-term disability plan, program, policy or arrangement of the Company or any Affiliate.

(d) COMPENSATION AND BENEFITS ON TERMINATION. Except as otherwise provided in Section 5(b) and (c), all compensation and benefits payable to the Executive pursuant to Section 4 (other than compensation and benefits previously earned and, if applicable, vested under the terms of this Agreement or any other applicable employee benefit plan, program, policy, arrangement or agreement) will terminate as of the effective date of the Executive's termination of employment, and the Executive hereby waives any claims for damages arising in connection with his termination of employment pursuant to this Agreement.

6. COMPETITIVE ACTIVITY. (a) During the period ending on the later of
(i) the effective date of the Executive's termination of employment, and (ii) the last day of the Term of Employment, the Executive will not:

(i) enter into or engage in any business which competes with the business of the Company or any Affiliate within the Restricted Territory (as defined below); or

(ii) solicit customers, business patronage or orders for, or sell, any product or products, or service or services, in competition with, or for any business, wherever located, that competes with the business of the Company or any Affiliate within the Restricted Territory; or

(iii) divert, entice or otherwise take away any customers, business or patronage or orders of

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the Company or any Affiliate within the Restricted Territory, or attempt to do so; or

(iv) promote or assist, financially or otherwise, any firm, person, association, partnership, corporation or other entity engaged in any business which competes with the business of the Company or any Affiliate within the Restricted Territory.

(b) For the purposes of this Section 6, the Restricted Territory will be defined as and limited to:

(i) the geographic areas within a 50 mile radius of any and all Company and/or Affiliate locations in, to or for which the Executive worked, was assigned or had any responsibility (either direct or supervisory) at the time of the termination of his employment or at any time during the two year period prior to such termination;

(ii) any customer, whether within or outside of the geographic area described in paragraph (i) above, for or to which the Executive worked, was assigned or had any direct responsibility at the time of the termination of his employment or at any time during the two year period prior to such termination; or

(iii) the following pipe, threading, drilling and/or equipment companies and their subsidiaries and affiliates, whether within or outside of the geographic area described in paragraph (i) above: Dreco, Inc.; National-Oilwell L.P.; and Continental Emsco Co.

7. UNAUTHORIZED DISCLOSURE, USE OR SOLICITATION. (a) The Executive will keep in strict confidence, and will not, directly or indirectly, at any time during or after his employment with the Company, disclose, furnish, disseminate, make available or, except in the course of performing his duties of employment hereunder, use any trade secrets or confidential business and technical information of the Company or its customers, vendors, employees or Affiliates, without limitation as to when or how Executive may have acquired such information. Such confidential information will include, without limitation, the Company's products, designs, processes, methods and techniques, management, training, marketing and selling manuals, promotional materials, training courses and other training and instructional materials, vendor, product and service information, customer lists, other customer information and other trade information. Executive specifically acknowledges that all such confidential information

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including, without limitation, customer lists, other customer information and other trade information, whether reduced to writing, maintained on any form of electronic media, or maintained in the mind or memory of Executive and whether compiled by the Company, any Affiliate and/or Executive, derives independent economic value from not being readily known to or ascertainable by proper means by others who can obtain economic value from its disclosure or use, that reasonable efforts have been made by the Company and its Affiliates to maintain the secrecy of such information, that such information is the sole property of the Company and that any retention and use of such information by Executive during his employment with the Company (except in the course of performing his duties and obligations hereunder) or after the termination of his employment will constitute a misappropriation of the trade secrets of the Company or any Affiliate.

(b) Executive agrees that upon termination of Executive's employment with the Company, for any reason, Executive will return to the Company, in good condition, all property of the Company, including without limitation, the originals and all copies of all product, design, process, management, training, marketing and selling manuals, promotional materials, other training and instructional materials, vendor, product and service information, customer lists, other customer information and all other selling, service and trade information and equipment. In the event that such items are not so returned, the Company will have the right to charge Executive for all reasonable damages, costs, attorneys' fees and other expenses incurred in searching for, taking, removing and/or recovering such property.

(c) Executive acknowledges that to the extent permitted by law, all work papers, reports, documentation, drawing, photographs, negatives, tapes and masters therefor, prototypes and other materials (hereinafter, "items"), including, without limitation, any and all such items generated and maintained on any form of electronic media, generated by Executive during his employment with the Company will be considered a "work made for hire" and that ownership of any and all copyrights in any and all such items will belong to the Company (other than any such items generated by the Executive solely for Cardwell Concrete Systems, Inc.). The item will recognize the Company as the copyright owner, will contain all proper copyright notices, e.g., "(year of creation) Cardwell International Ltd. All rights reserved," and will be in condition to be registered or otherwise placed in compliance with registration or other statutory requirements throughout the world.

(d) Executive hereby assigns and agrees to assign to the Company, its successors, assigns or nominees, all of his rights to any discoveries, inventions and improvements, whether patentable or not, made, conceived or suggested, either solely or

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jointly with others, by Executive while in the Company's employ, whether or not made, conceived or suggested in the course of his employment with the use of the Company's time, materials or facilities or in any way within or related to the existing or contemplated scope of the Company's business (other than any discoveries, inventions or improvements made, conceived or suggested by Executive while in the employ or service of Cardwell Concrete Systems, Inc.). Any discovery, invention or improvement relating to any subject matter with which the Company was concerned during Executive's employment and made, conceived or suggested by Executive, either solely or jointly with others, within one year following termination of Executive's employment under this Agreement or any successor agreements will be irrebuttably presumed to have been so made, conceived or suggested in the course of such employment with the use of the Company's time, materials or facilities. Upon request by the Company with respect to any such discoveries, inventions or improvements, Executive will execute and deliver to the Company, at any time during or after his employment, all appropriate documents for use in applying for, obtaining and maintaining such domestic and foreign patents as the Company may desire, and all proper assignments therefor, when so requested, at the expense of the Company, but without further or additional consideration.

(e) Executive may use the Company's trade names, trademarks and/or service marks in connection with the sale of the Company's products and services, but only in such manner and for such purposes as may be authorized by the Company. Upon any termination of this Agreement, Executive immediately will cease the use of such trade names, trademarks and/or service marks and eliminate them wherever they have been used or incorporated by Executive.

(f) During the period ending on the later of (i) the effective date of the Executive's termination of employment, and (ii) the last day of the Term of Employment, the Executive will not directly or indirectly solicit or endeavor to cause any employee of the Company or any Affiliate to leave his employment or induce or attempt to induce any such employee to breach any employment agreement with the Company or any Affiliate or otherwise interfere with the employment of any such employee, other than in the course of performing his duties and obligations hereunder.

8. SUCCESSORS AND BINDING AGREEMENT. (a) The Company will require any successor (whether direct or indirect, by purchase, merger, consolidation, reorganization or otherwise) to all or substantially all of the business or assets of the Company, by agreement in form and substance reasonably satisfactory to the Executive, expressly to assume and agree to perform this Agreement in the same manner and to the same extent the Company would be required to perform if no such succession had taken place. This Agreement will be binding upon and inure to the benefit of the Company and any successor to the Company,

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including without limitation any persons acquiring directly or indirectly all or substantially all of the business or assets of the Company whether by purchase, merger, consolidation, reorganization or otherwise (and such successor will thereafter be deemed the "Company" for the purposes of this Agreement), but will not otherwise be assignable, transferable or delegable by the Company.

(b) This Agreement will inure to the benefit of and be enforceable by the Executive's personal or legal representatives, executors, administrators, successors, heirs, distributees and legatees.

(c) This Agreement is personal in nature and neither of the parties hereto will, without the consent of the other, assign, transfer or delegate this Agreement or any rights or obligations hereunder except as expressly provided in Sections 8(a) and (b). Without limiting the generality or effect of the foregoing, the Executive's right to receive payments hereunder will not be assignable, transferable or delegable, whether by pledge, creation of a security interest, or otherwise, other than by a transfer by Executive's will or by the laws of descent and distribution and, in the event of any attempted assignment or transfer contrary to this Section 8(c), the Company will have no liability to pay any amount so attempted to be assigned, transferred or delegated.

9. ADDITIONAL REMEDIES. Notwithstanding any other remedy herein provided for or available, if the Executive should be in breach of any of the provisions of Section 6 or 7, the Executive expressly acknowledges and agrees that the Company will be entitled to injunctive relief or specific performance, without the necessity of proving damages, in addition to any other remedies it may have.

10. REPRESENTATION. Each party represents and warrants that it is fully authorized and empowered to enter into this Agreement and that the performance of its obligations under this Agreement will not violate any agreement between it and any other person or entity.

11. SEVERABILITY. In the event that any provision or portion of this Agreement is determined to be invalid or unenforceable for any reason, in whole or in part, the remaining provisions of this Agreement will be unaffected thereby and will remain in full force and effect to the fullest extent permitted by law.

12. NOTICES. For all purposes of this Agreement, all communications, including without limitation notices, consents, requests or approvals, required or permitted to be given hereunder will be in writing and will be deemed to have been duly given when hand delivered or dispatched by electronic facsimile transmission (with receipt thereof orally confirmed), or five

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business days after having been mailed by United States registered or certified mail, return receipt requested, postage prepaid, or three business days after having been sent by a nationally recognized overnight courier service such as Federal Express or UPS, addressed to the Company (to the attention of the Secretary of the Company) at its principal executive office and to the Executive at his principal residence (with a copy to any counsel designated by the Executive), or to such other address as any party may have furnished to the other in writing and in accordance herewith, except that notices of changes of address will be effective only upon receipt.

13. DISCLOSURE. During the Term of Employment and for one year thereafter, Executive will communicate the contents of this Agreement to any person, firm, association, partnership, corporation or other entity which he or she intends to be employed by, associated with, or represent and which is engaged in a business that is competitive to the business of the Company.

14. MODIFICATIONS AND WAIVERS. No provision of this Agreement may be modified or discharged unless such modification or discharge is authorized by the Board and is agreed to in writing, signed by the Executive and by an officer of the Company duly authorized by the Board. No waiver by either party hereto of any breach by the other party hereto of any condition or provision of this Agreement to be performed by such other party will be deemed a waiver of similar or dissimilar provisions or conditions at the time or at any prior or subsequent time.

15. ENTIRE AGREEMENT. This Agreement constitutes the entire understanding of the parties hereto with respect to its subject matter, except as such parties may otherwise agree in a writing which specifies that it is an exception to the foregoing. This Agreement supersedes all prior agreements between the parties hereto with respect to its subject matter and, notwithstanding any other provision hereof, will become effective upon the execution of this Agreement by the parties.

16. GOVERNING LAW. The validity, interpretation, construction and performance of this Agreement will be governed by and construed in accordance with the substantive laws of the State of Kansas, without giving effect to the principles of conflict of laws of such State.

17. COUNTERPARTS. This Agreement may be executed simultaneously in one or more counterparts, each of which will be deemed to be an original but all of which together will constitute one and the same instrument.

18. HEADINGS, ETC. The section headings contained in this Agreement are for convenience of reference only and will not be deemed to control or affect the meaning or construction of any provision of this Agreement. References to Sections are to Sections in this Agreement.

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19. ARBITRATION; EXCLUSIVE REMEDY. Any and all claims, disputes or controversies involving the Executive and the Company arising under or in connection with this Agreement (except those arising under Sections 6 and 7 hereof) which cannot be resolved amicably by the Company and the Executive shall be submitted to and finally settled by arbitration as provided in this Section
19. There shall be one arbitrator who shall be selected from a list of five arbitrators who are experienced in the oil field servicing and drilling manufacturing industries, two of whom shall be chosen by the Company, two of whom shall be chosen by the Executive and one of whom shall be chosen by the American Arbitration Association. The arbitrator shall be selected from this list pursuant to the following procedure: the Executive and the Company shall each alternately strike one person's name off the list until there is only one person's name remaining, which person shall be the arbitrator. The location of any such arbitration proceedings shall be in the city where the arbitrator's office is located, and such proceedings shall be conducted in accordance with the Arbitration Rules of the American Arbitration Association currently in effect unless the Executive and the Company mutually agree otherwise. The award rendered by the arbitrator shall be final. An action or proceeding to enforce such award may be brought in any court of competent jurisdiction.

IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the date first above written.

Cardwell International Ltd.

By: ____________________________________
Its: ______________________________


A.C. Teichgraeber

- 11 -

JOINDER

IRI hereby unconditionally and absolutely guarantees the due and punctual performance by the Company of its payment obligations under this Agreement. IRI hereby represents and warrants to the Executive that it is authorized and empowered to enter into this guarantee and that the performance of its obligations under this guarantee will not violate any agreement between it and any other person or entity.

IRI INTERNATIONAL CORPORATION

By:_____________________________
Name: Munawar H. Hidayatallah
Title: Executive President -
Corporate Development

- 12 -


CREDIT AGREEMENT

AMONG

ENERGY SERVICES INTERNATIONAL LTD.,

IRI INTERNATIONAL CORPORATION,

THE SEVERAL LENDERS
FROM TIME TO TIME PARTIES HERETO,

CREDIT LYONNAIS NEW YORK BRANCH,
AS ADMINISTRATIVE AGENT

AND

LEHMAN COMMERCIAL PAPER INC.,
AS ADVISOR, ARRANGER AND SYNDICATION AGENT

DATED AS OF MARCH 31, 1997



                                TABLE OF CONTENTS

                                                                           Page
                                                                           ----

SECTION 1.    DEFINITIONS..................................................  2
    1.1       Defined Terms................................................  2
    1.2       Other Definitional Provisions................................ 23

SECTION 2.    AMOUNT AND TERMS OF COMMITMENTS.............................. 23
    2.1       Tranche A Term Loans......................................... 23
    2.2       Procedure for Tranche A Term Loan Borrowing.................. 23
    2.3       Tranche B Term Loans......................................... 24
    2.4       Procedure for Tranche B Term Loan Borrowing.................. 24
    2.5       Revolving Credit Commitments................................. 25
    2.6       Procedure for Revolving Credit Borrowing..................... 25
    2.7       Commitment Fees, etc. ....................................... 26
    2.8       Repayment of Loans; Evidence of Debt......................... 26
    2.9       Optional Termination or Reduction of Commitments............. 27
    2.10      Optional Prepayments......................................... 28
    2.11      Mandatory Prepayments and Commitment Reductions.............. 28
    2.12      Conversion and Continuation Options.......................... 30
    2.13      Minimum Amounts and Maximum Number of Eurodollar Tranches.... 31
    2.14      Interest Rates and Payment Dates............................. 31
    2.15      Computation of Interest and Fees............................. 31
    2.16      Inability to Determine Interest Rate......................... 32
    2.17      Pro Rata Treatment and Payments; Use of Proceeds............. 32
    2.18      Illegality................................................... 33
    2.19      Requirements of Law.......................................... 34
    2.20      Taxes........................................................ 35
    2.21      Indemnity.................................................... 37
    2.22      Change of Lending Office..................................... 38

SECTION 3.    LETTERS OF CREDIT............................................ 38
    3.1       L/C Commitment............................................... 38
    3.2       Procedure for Issuance of Letter of Credit................... 38
    3.3       Fees, Commissions and Other Charges.......................... 39
    3.4       L/C Participations........................................... 39
    3.5       Reimbursement Obligation of the Borrower..................... 40
    3.6       Obligations Absolute......................................... 41
    3.7       Letter of Credit Payments.................................... 41
    3.8       Applications................................................. 41

SECTION 4.    REPRESENTATIONS AND WARRANTIES............................... 41
    4.1       Financial Condition.......................................... 42
    4.2       No Change.................................................... 44

                                       -i-

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    4.3       Corporate Existence; Compliance with Law..................... 44
    4.4       Corporate Power; Authorization; Enforceable Obligations...... 44
    4.5       No Legal Bar................................................. 45
    4.6       No Material Litigation....................................... 45
    4.7       No Default................................................... 45
    4.8       Ownership of Property; Liens................................. 45
    4.9       Intellectual Property........................................ 45
    4.10      No Burdensome Restrictions................................... 45
    4.11      Taxes........................................................ 45
    4.12      Federal Regulations.......................................... 46
    4.13      ERISA........................................................ 46
    4.14      Investment Company Act; Other Regulations.................... 46
    4.15      Subsidiaries................................................. 47
    4.16      Purpose of Loans; Limitations on Use......................... 47
    4.17      Environmental Matters. ...................................... 47
    4.18      Accuracy of Information...................................... 48
    4.19      Security Documents........................................... 49
    4.20      Solvency..................................................... 50
    4.21      Acquisition Documents........................................ 50
    4.22      Labor Matters................................................ 50

SECTION 5.    CONDITIONS PRECEDENT......................................... 50
     5.1      Conditions to Initial Extension of Credit.................... 50
     5.2      Conditions to Tranche B Term Loans........................... 55
     5.3      Conditions to Each Extension of Credit....................... 56

SECTION 6.    AFFIRMATIVE COVENANTS........................................ 57
    6.1       Financial Statements......................................... 57
    6.2       Certificates; Other Information.............................. 58
    6.3       Payment of Obligations....................................... 59
    6.4       Conduct of Business and Maintenance of Existence, etc. ...... 59
    6.5       Maintenance of Property; Insurance........................... 59
    6.6       Inspection of Property; Books and Records; Discussions....... 59
    6.7       Notices...................................................... 60
    6.8       Environmental Laws........................................... 60
    6.9       Interest Rate Protection..................................... 61
    6.10      Further Assurances........................................... 61
    6.11      Additional Collateral........................................ 61
    6.12      Construction Credit Support Policy........................... 63

SECTION 7.    NEGATIVE COVENANTS........................................... 63
    7.1       Financial Condition Covenants................................ 63
    7.2       Limitation on Indebtedness................................... 65
    7.3       Limitation on Liens.......................................... 66
    7.4       Limitation on Guarantee Obligations.......................... 67

                                      -ii-

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                                                                           ----

    7.5       Limitation on Fundamental Changes............................ 68
    7.6       Limitation on Sale of Assets................................. 68
    7.7       Limitation on Restricted Payments............................ 69
    7.8       Limitation on Capital Expenditures........................... 69
    7.9       Limitation on Investments, Loans and Advances................ 70
    7.10      Limitation on Optional Payments and Modifications of Debt
                Instruments and Organizational Documentation, etc.......... 70
    7.11      Limitation on Transactions with Affiliates................... 71
    7.12      Limitation on Sales and Leasebacks........................... 71
    7.13      Limitation on Changes in Fiscal Year......................... 71
    7.14      Limitation on Negative Pledge Clauses........................ 71
    7.15      Limitation on Lines of Business.............................. 72
    7.16      Limitation on Consolidated Lease Expense..................... 72
    7.17      Limitation on Activities of the Parent....................... 72
    7.18      Limitation on Foreign Subsidiaries........................... 72

SECTION 8.    EVENTS OF DEFAULT............................................ 72

SECTION 9.    THE ARRANGER; THE ADMINISTRATIVE AGENT
                                 AND THE SYNDICATION AGENT................. 76
    9.1       Appointment.................................................. 76
    9.2       Delegation of Duties......................................... 76
    9.3       Exculpatory Provisions....................................... 76
    9.4       Reliance by Arranger and Administrative Agent................ 77
    9.5       Notice of Default............................................ 77
    9.6       Non-Reliance on Arranger, Administrative Agent and Other
                Lenders.................................................... 78
    9.7       Indemnification.............................................. 78
    9.8       Arranger and Administrative Agent in Their Individual
                Capacities................................................. 79
    9.9       Successor Administrative Agent............................... 79
    9.10      The Syndication Agent........................................ 79

SECTION 10.   MISCELLANEOUS................................................ 80
    10.1      Amendments and Waivers....................................... 80
    10.2      Notices...................................................... 81
    10.3      No Waiver; Cumulative Remedies............................... 82
    10.4      Survival..................................................... 82
    10.5      Payment of Expenses and Taxes................................ 82
    10.6      Successors and Assigns; Participations and Assignments....... 83
    10.7      Adjustments; Set-off......................................... 86
    10.8      Counterparts................................................. 87
    10.9      Severability................................................. 87
    10.10     Integration.................................................. 87
    10.11     GOVERNING LAW................................................ 87
    10.12     Submission To Jurisdiction; Waivers.......................... 87
    10.13     Acknowledgements............................................. 88

                                      -iii-

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    10.14     WAIVERS OF JURY TRIAL........................................ 88
    10.15     Confidentiality.............................................. 88


                                      -iv-

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SCHEDULES:

1.1A         Commitments and Addresses of Lenders
1.1B         Mortgaged Property
1.1C         Tranche A Term Loan Amortization Schedule
1.1D         Tranche B Term Loan Amortization Schedule
4.15         Subsidiaries
4.16         Refinanced Indebtedness
4.17         Environmental Matters
4.19(b)      UCC Filing Jurisdictions
4.19(c)      Mortgage Filing Jurisdictions
7.3          Liens



EXHIBITS:

A            Form of Master Guarantee and Collateral Agreement
B            Form of Mortgage
C-1          Form of Revolving Credit Note
C-2          Form of Tranche A Term Note
C-3          Form of Tranche B Term Note
D            Form of Closing Certificate
E            Legal Opinion of Jones, Day, Reavis & Pogue
F            Form of Exemption Certificate
G            Form of Assignment and Acceptance
H            Form of Cash Collateral Agreement

-v-

CREDIT AGREEMENT, dated as of March 31, 1997, among ENERGY SERVICES INTERNATIONAL LTD., a Delaware corporation (the "Parent"), IRI INTERNATIONAL CORPORATION, a Delaware corporation (the "Borrower"), the several banks and other financial institutions or entities from time to time parties to this Agreement (the "Lenders"), CREDIT LYONNAIS NEW YORK BRANCH, as Administrative Agent for the Lenders hereunder (in such capacity, the "Administrative Agent"), LEHMAN COMMERCIAL PAPER INC., as advisor and arranger with respect to the credit facilities contained herein (the "Arranger") and LEHMAN COMMERCIAL PAPER INC., as syndication agent with respect to the credit facilities contained herein (the "Syndication Agent").

W I T N E S S E T H

WHEREAS, the Borrower, which is a wholly owned subsidiary of the Parent, intends to acquire substantially all of the assets of Bowen Tools Inc. ("Bowen") and its affiliates (the "Bowen Acquisition"), all of the capital stock of Cardwell International Ltd. ("Cardwell"; together with Bowen, the "Acquired Companies") and certain assets related to Cardwell's business which are owned by affiliates of Cardwell (the "Cardwell Acquisition"; and together with the Bowen Acquisition, the "Acquisitions");

WHEREAS, the Acquisitions will be financed, in part, with the proceeds of senior subordinated notes in the aggregate principal amount of $31,000,000 to be issued by the Borrower (the "Interim Notes") and, in part, with the proceeds of the credit facilities provided for herein;

WHEREAS, pending the consummation of the Cardwell Acquisition and the satisfaction of certain conditions precedent related thereto, proceeds of certain of the Tranche A Term Loans borrowed by the Borrower on the Closing Date will be held by the Administrative Agent in the Cash Collateral Account (as defined herein); and

WHEREAS, all the obligations of the Borrower and the other Loan Parties (as defined herein) under the Loan Documents (as defined herein)
(a) will be secured by, among other things, (i) a security interest in certain assets and property of the Loan Parties and (ii) a pledge of all the issued and outstanding capital stock of each of the Borrower's direct and indirect Subsidiaries, and (b) will be unconditionally guaranteed by the Parent and each of the Parent's direct and indirect Subsidiaries;

NOW, THEREFORE, the parties hereto hereby agree as follows:


SECTION 1. DEFINITIONS

1.1 Defined Terms. As used in this Agreement, the following terms shall have the following meanings:

"Acquired Companies": as defined in the recitals hereto.

"Acquisitions": as defined in the recitals hereto.

"Acquisition Agreements": collectively (a) the Bowen Asset Purchase Agreement and (b) the Cardwell Acquisition Agreement.

"Acquisition Documents": as defined in Section 4.21.

"Administrative Agent": as defined in the preamble hereto.

"Affiliate": as to any Person, any other Person which, directly or indirectly, is in control of, is controlled by, or is under common control with, such Person. For purposes of this definition, "control" of a Person means the power, directly or indirectly, either to (a) vote 10% or more of the securities having ordinary voting power for the election of directors of such Person or (b) direct or cause the direction of the management and policies of such Person, whether by contract or otherwise.

"Aggregate Outstanding Revolving Extensions of Credit": as to any Revolving Credit Lender at any time, an amount equal to the sum of
(a) the aggregate principal amount of all Revolving Credit Loans made by such Lender then outstanding and (b) such Lender's Revolving Credit Percentage of the L/C Obligations then outstanding.

"Agreement": this Credit Agreement, as amended, supplemented or otherwise modified from time to time.

"Applicable Margin": for each Type of Loan, the rate per annum set forth under the relevant column heading below:

                                                        Eurodollar
                                  Base Rate Loans       Loans
                                  ---------------       ----------
Revolving Credit Loans                  1%                2-3/4%
Term Loans                            1-1/2%              3-1/4%

provided that if (a) on May 31, 1997, the Eligible Backlog (as certified to the Lenders pursuant to Section 6.2(f)) is less than the Backlog Threshold or (b) on May 31, 1997, such certificate is not provided to the Lenders in accordance with Section 6.2(f), then


each of the foregoing Applicable Margins shall be increased by .50% effective May 31, 1997.

"Application": an application, in such form as the Issuing Lender may specify from time to time, requesting the Issuing Lender to issue a Letter of Credit.

"Arranger": as defined in the preamble hereto.

"Asset Sale": any sale or other disposition by the Parent, the Borrower or any of their Subsidiaries of any asset or assets of the Parent, the Borrower or such Subsidiary (including any sale and leaseback of assets and any mortgage of real property other than pursuant to a Mortgage); provided that any sale of assets expressly permitted by clauses (a), (c) or (d) of Section 7.6 shall not constitute an "Asset Sale" hereunder.

"Assignee": as defined in Section 10.6(c).

"Available Revolving Credit Commitment": as to any Lender at any time, an amount equal to the excess, if any, of (a) such Lender's Revolving Credit Commitment over (b) such Lender's Aggregate Outstanding Revolving Extensions of Credit.

"Backlog Threshold": (i) $70,000,000 less (ii) the amount of Rig Orders constituting Eligible Backlog on the Closing Date but not constituting Eligible Backlog on May 31, 1997 solely because performance has commenced under such rig orders during such period.

"Base Rate": for any day, a rate per annum (rounded upwards, if necessary, to the next 1/16 of 1%) equal to the greatest of (a) the Prime Rate in effect on such day, (b) the Base CD Rate in effect on such day plus 1% and (c) the Federal Funds Effective Rate in effect on such day plus 1/2 of 1%. For purposes hereof: "Prime Rate" shall mean the rate of interest per annum established from time to time by the Administrative Agent as its prime rate in effect at its principal office in New York City (the Prime Rate not being intended to be the lowest rate of interest charged by the Administrative Agent in connection with extensions of credit to debtors); "Base CD Rate" shall mean the sum of (a) the product of (i) the Three-Month Secondary CD Rate and (ii) a fraction, the numerator of which is one and the denominator of which is one minus the C/D Reserve Percentage and (b) the C/D Assessment Rate; "Three-Month Secondary CD Rate" shall mean, 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 shall not be 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 shall not be 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 shall not be a Business Day, on the next preceding Business Day) by the Administrative Agent from three New York City negotiable certificate of deposit dealers of recognized standing selected by it; and "Federal Funds Effective Rate" shall mean, for any day, the weighted average 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 which is a Business Day, the average of the quotations for the day of such transactions received by the Administrative Agent from three federal funds brokers of recognized standing selected by it. Any change in the Base Rate due to a change in the Prime Rate, the Three-Month Secondary CD Rate or the Federal Funds Effective Rate shall be effective as of the opening of business on the effective day of such change in the Prime Rate, the Three-Month Secondary CD Rate or the Federal Funds Effective Rate, respectively.

"Base Rate Loans": Loans the rate of interest applicable to which is based upon the Base Rate.

"Board": the Board of Governors of the Federal Reserve System of the United States (or any successor).

"Borrower": as defined in the preamble hereto.

"Borrowing Date": any Business Day specified in a notice pursuant to Section 2.4 or 2.6 as a date on which the Borrower requests the Lenders to make Loans hereunder.

"Bowen": as defined in the recitals hereto.

"Bowen Asset Purchase Agreement": the Asset Purchase Agreement by and among the Bowen Sellers and the Borrower dated as of January 20, 1997, and all agreements, assignments, schedules, instruments and other documents executed in connection therewith, together with such amendments, waivers, supplements and other modifications thereto as shall be reasonably satisfactory to the Arranger, the Administrative Agent and the Lenders.

"Bowen Sellers": collectively, Bowen Tools, Inc. - Delaware, Bowen and Air Liquide America Corporation.

"Business": as defined in Section 4.17(b).

"Business Day": (i) for all purposes other than as covered by clause (ii) below, a day other than a Saturday, Sunday or other day on which commercial banks in New


York City are authorized or required by law to close and (ii) with respect to all notices and determinations in connection with, and payments of principal and interest on, Eurodollar Loans, any day which is a Business Day described in clause (i) and which is also a day for trading by and between banks in Dollar deposits in the interbank eurodollar market.

"Capital Expenditures": for any period, with respect to any Person, the aggregate of all expenditures by such Person and its Subsidiaries for the acquisition or leasing (pursuant to a Financing Lease) of fixed or capital assets or additions to equipment (including replacements, capitalized repairs and improvements during such period) which should be capitalized under GAAP on a consolidated balance sheet of such Person and its Subsidiaries.

"Capital Lease Obligations": as to any Person, the obligations of such Person to pay rent or other amounts under any Financing Lease and, for the purposes of this Agreement, the amount of such obligations at any time shall be the capitalized amount thereof at such time determined in accordance with GAAP.

"Capital Stock": any and all shares, interests, participations or other equivalents (however designated) of capital stock of a corporation, any and all equivalent ownership interests in a Person (other than a corporation) and any and all warrants, rights or options to purchase any of the foregoing.

"Cardwell": as defined in the recitals hereto.

"Cardwell Acquisition Agreement": the Acquisition Agreement dated as of March 20, 1997 by and among the Cardwell Sellers and the Borrower, and all agreements, assignments, schedules, instruments and other documents executed in connection therewith (including any material employment agreements), together with such amendments, waivers, supplements and other modifications thereto as shall be reasonably satisfactory to the Arranger, the Administrative Agent and the Lenders.

"Cardwell Deposit Amount": as defined in Section 2.2.

"Cardwell Purchase Price": the "Purchase Price" as defined in the Cardwell Acquisition Agreement.

"Cardwell Sellers": collectively, the Teichgraeber Family Limited Partnership, L.P., the Arthur C. Teichgraeber Charitable Remainder Trust, A.C. Teichgraeber, Greenwood Pipe and Threading Company and Edco Drilling Company Inc.

"Cash Collateral Account": as defined in the Cash Collateral Agreement.


"Cash Collateral Agreement": the Cash Collateral Agreement to be executed and delivered by the Borrower, substantially in the form of Exhibit H, as the same may be amended, supplemented or otherwise modified from time to time.

"Cash Equivalents": (a) marketable direct obligations issued by, or unconditionally guaranteed by, the United States Government or issued by any agency thereof and backed by the full faith and credit of the United States, in each case maturing within one year from the date of acquisition; (b) certificates of deposit, time deposits, eurodollar time deposits or overnight bank deposits having maturities of six months or less from the date of acquisition issued by any Lender or by any commercial bank organized under the laws of the United States or any state thereof having combined capital and surplus of not less than $250,000,000; and (c) commercial paper of (i) an issuer rated at least A-1 by Standard & Poor's Ratings Services or P-1 by Moody's Investors Service, Inc., or carrying an equivalent rating by a nationally recognized rating agency, if both of the two named rating agencies cease publishing ratings of commercial paper issuers generally or (ii) the holding company of any Lender, and, in either case, maturing within six months from the date of acquisition.

"C/D Assessment Rate": for any day as applied to any Base Rate Loan, the annual assessment rate in effect on such day which is payable by a member of the Bank Insurance Fund maintained by the Federal Deposit Insurance Corporation (the "FDIC") classified as well-capitalized and within supervisory subgroup "B" (or a comparable successor assessment risk classification) within the meaning of 12 C.F.R. Section 327.3(d) (or any successor provision) to the FDIC (or any successor) for the FDIC's (or such successor's) insuring time deposits at offices of such institution in the United States.

"C/D Reserve Percentage": for any day as applied to any Base Rate Loan, that percentage (expressed as a decimal) which is in effect on such day, as prescribed by the Board, for determining the maximum reserve requirement for a Depositary Institution (as defined in Regulation D of the Board as in effect from time to time) in respect of new non-personal time deposits in Dollars having a maturity of 30 days or more.

"Closing Date": the date on which the conditions precedent set forth in Section 5.1 shall be satisfied.

"Code": the Internal Revenue Code of 1986, as amended.

"Collateral": all assets of the Loan Parties, now owned or hereafter acquired, upon which a Lien is purported to be created by any Security Document.

"Commercial Letter of Credit": as defined in Section 3.1(a).


"Commitment": as to any Lender, the sum of the Tranche A Term Loan Commitment, the Tranche B Term Loan Commitment and the Revolving Credit Commitment of such Lender.

"Commonly Controlled Entity": an entity, whether or not incorporated, which is under common control with the Borrower within the meaning of Section 4001 of ERISA or is part of a group which includes the Borrower and which is treated as a single employer under
Section 414 of the Code.

"Confidential Information Memorandum": the Confidential Information Memorandum dated as of February, 1997 with respect to the Borrower and the credit facilities provided for herein.

"Consolidated Current Assets": at a particular date, all amounts (other than cash and Cash Equivalents) which would, in conformity with GAAP, be set forth opposite the caption "total current assets" (or any like caption) on a consolidated balance sheet of the Borrower and its Subsidiaries at such date.

"Consolidated Current Liabilities": at a particular date, all amounts which would, in conformity with GAAP, be set forth opposite the caption "total current liabilities" (or any like caption) on a consolidated balance sheet of the Borrower and its Subsidiaries at such date, but excluding (a) the current portion of any Funded Debt of the Borrower and its Subsidiaries and (b) without duplication of clause (a) above, all Indebtedness consisting of Revolving Credit Loans to the extent otherwise included therein.

"Consolidated Debt": at any date, the aggregate principal amount of all Indebtedness of the Borrower and its Subsidiaries at such date, determined on a consolidated basis in accordance with GAAP.

"Consolidated EBITDA": for any period, Consolidated Net Income for such period plus, without duplication and to the extent reflected as a charge in the statement of such Consolidated Net Income for such period, the sum of (a) total income tax expense, (b) interest expense, amortization or writeoff of debt discount and debt issuance costs and commissions, discounts and other fees and charges associated with Indebtedness (including the Loans), (c) depreciation and amortization expense, (d) amortization of intangibles (including, but not limited to, goodwill) and organization costs, (e) any extraordinary expenses or losses (including, whether or not otherwise includable as a separate item in the statement of such Consolidated Net Income for such period, losses on sales of assets outside of the ordinary course of business),
(f) any other noncash charges, (g) if applicable, restructuring charges, write-off of goodwill and licensing agreements and (h) all non-recurring fees and expenses incurred or paid by the Borrower in connection with the Acquisitions, the transactions contemplated by this Agreement, the issuance of the Interim Notes and the Permanent Notes and the


other transactions contemplated by the Interim Note Documentation and the Permanent Note Documentation and minus, to the extent included in the statement of such Consolidated Net Income for such period, the sum of (a) interest income, (b) any extraordinary income or gains (including, whether or not otherwise includable as a separate item in the statement of such Consolidated Net Income for such period, gains on the sales of assets outside of the ordinary course of business) and (c) any other noncash income, all as determined on a consolidated basis; provided that with respect to any calculation of Consolidated EBITDA for purposes of Section 7.1 for the four fiscal quarters ending on the following dates the following amounts (the "Added EBITDA Amount") shall be added to Consolidated EBITDA on such dates: (A) June 30, 1997 - $5,500,000; (B) September 30, 1997 - $4,100,000; (C) December 31, 1997
- $2,800,000 and (D) March 31, 1998 - $1,400,000; and, provided, further, that, for purposes of clarifying the preceding proviso, it is understood that on any date specified in such proviso for which Consolidated EBITDA is determined with respect to a period of four fiscal quarters only the Added EBITDA Amount in respect of such date shall be added to the calculation of Consolidated EBITDA and not the Added EBITDA Amount with respect to a prior date within such period of four fiscal quarters.

"Consolidated Fixed Charge Coverage Ratio": as of the last day of any period, the ratio of (a) Consolidated EBITDA for such period to
(b) the sum of (without duplication) (i) income tax expense actually paid in cash during such period, (ii) Capital Expenditures actually paid in cash for such period, excluding Capital Expenditures financed with the proceeds of Indebtedness permitted to be incurred under
Section 7.2(c) and Capital Expenditures paid for with the proceeds of any Reinvestment Deferred Amount, (iii) Consolidated Interest Expense for such period, (iv) scheduled payments required to have been made during such period on account of principal of Indebtedness of the Borrower or any of its Subsidiaries (including the Loans but excluding optional principal prepayments in respect of Revolving Credit Loans) and (v) Consolidated Lease Expense.

"Consolidated Interest Coverage Ratio": for any period, the ratio of (a) Consolidated EBITDA for such period to (b) Consolidated Interest Expense for such period.

"Consolidated Interest Expense": for any period, total interest expense (including that attributable to Capital Lease Obligations), both expensed and capitalized, of the Borrower and its Subsidiaries for such period with respect to all outstanding Indebtedness of the Borrower and its Subsidiaries (including, without limitation, all commissions, discounts and other fees and charges owed with respect to letters of credit and bankers' acceptance financing and net costs under Interest Rate Protection Agreements to the extent such net costs are allocable to such period in accordance with GAAP), determined on a consolidated basis in accordance with GAAP, net of interest income of the Borrowers and its Subsidiaries for such period (determined on a consolidated basis in accordance with GAAP).


"Consolidated Lease Expense": for any period, the aggregate amount of fixed and contingent rentals payable by the Borrower and its Subsidiaries, determined on a consolidated basis in accordance with GAAP, for such period with respect to leases of real and personal property; provided that amounts included in Capital Lease Obligations shall be excluded from Consolidated Lease Expense.

"Consolidated Leverage Ratio": as of the last day of any period, the ratio of (a) Consolidated Debt as of such day to (b) Consolidated EBITDA for such period.

"Consolidated Net Income": for any period, the consolidated net income (or loss) of the Borrower and its Subsidiaries, determined on a consolidated basis in accordance with GAAP; provided that there shall be excluded (a) the income (or deficit) of any Person accrued prior to the date it becomes a Subsidiary of the Borrower or is merged into or combined with the Borrower or any of its Subsidiaries, (b) the income (or deficit) of any Person (other than a Subsidiary of the Borrower) in which the Borrower or any of its Subsidiaries has an ownership interest, except to the extent that any such income is actually received by the Borrower or such Subsidiary in the form of dividends or similar distributions and (c) the undistributed earnings of any Subsidiary of the Borrower to the extent that the declaration or payment of dividends or similar distributions by such Subsidiary is not at the time permitted by the terms of any Contractual Obligation (other than under any Loan Document) or Requirement of Law applicable to such Subsidiary.

"Consolidated Net Worth": at a particular date, all amounts which would, in conformity with GAAP, be included on a consolidated balance sheet of the Borrower and its Subsidiaries under stockholders' equity as of such date.

"Consolidated Working Capital": the excess, if any, of Consolidated Current Assets over Consolidated Current Liabilities.

"Contractual Obligation": as to any Person, any provision of any security issued by such Person or of any agreement, instrument or other undertaking to which such Person is a party or by which it or any of its property is bound.

"Default": any of the events specified in Section 8, whether or not any requirement for the giving of notice, the lapse of time, or both, has been satisfied.

"Dollars" and "$": dollars in lawful currency of the United States.

"Domestic Subsidiary": any Subsidiary of the Parent or the Borrower organized under the laws of any jurisdiction within the United States.

"Eligible Backlog": the aggregate contract value (determined in accordance with the Borrower's prior practices) of the Rig Orders
(i) for which the Borrower or


any of its Subsidiaries has entered into a definitive binding contract,
(ii) under which the Borrower or any of its Subsidiaries has not commenced to perform and (iii) which are supported by all required documentation (including standby letters of credit) satisfactory to the Lenders.

"Environmental Laws": any and all foreign, Federal, state, local or municipal laws, rules, orders, regulations, statutes, ordinances, codes, decrees, requirements of any Governmental Authority or other Requirements of Law (including common law) regulating, relating to or imposing liability or standards of conduct concerning the protection of human health or the environment, as now or may at any time hereafter be in effect.

"ERISA": the Employee Retirement Income Security Act of 1974, as amended from time to time.

"Eurocurrency Reserve Requirements": for any day as applied to a Eurodollar Loan, the aggregate (without duplication) of the rates (expressed as a decimal fraction) of reserve requirements in effect on such day (including, without limitation, basic, supplemental, marginal and emergency reserves under any regulations of the Board or other Governmental Authority having jurisdiction with respect thereto) dealing with reserve requirements prescribed for eurocurrency funding (currently referred to as "Eurocurrency Liabilities" in Regulation D of the Board) maintained by a member bank of the Federal Reserve System.

"Eurodollar Base Rate": with respect to each day during each Interest Period pertaining to a Eurodollar Loan, the rate per annum of interest determined on the basis of the rate for deposits in Dollars for a period equal to such Interest Period commencing on the first day of such Interest Period appearing on Page 3750 of the Telerate screen as of 11:00 A.M., London time, two Business Days prior to the beginning of such Interest Period. In the event that such rate does not appear on Page 3750 of the Telerate Service (or otherwise on such service), the "Eurodollar Base Rate" for purposes of this definition shall be determined by reference to such other comparable publicly available service for displaying eurodollar rates as may be selected by the Administrative Agent or, in the absence of such availability, by reference to the rate at which the Administrative Agent is offered Dollar deposits at or about 11:00 A.M., New York City time, two Business Days prior to the beginning of such Interest Period in the interbank eurodollar market where its eurodollar and foreign currency and exchange operations are then being conducted for delivery on the first day of such Interest Period for the number of days comprised therein.

"Eurodollar Loans": Loans the rate of interest applicable to which is based upon the Eurodollar Rate.


"Eurodollar Rate": with respect to each day during each Interest Period pertaining to a Eurodollar Loan, a rate per annum determined for such day in accordance with the following formula (rounded upward to the nearest 1/100th of 1%):

Eurodollar Base Rate

1.00 - Eurocurrency Reserve Requirements

"Eurodollar Tranche": the collective reference to Eurodollar Loans that are Tranche A Term Loans, Tranche B Term Loans or Revolving Credit Loans, as the case may be, the then current Interest Periods with respect to all of which begin on the same date and end on the same later date (whether or not such Loans shall originally have been made on the same day).

"Event of Default": any of the events specified in Section 8, provided that any requirement for the giving of notice, the lapse of time, or both, has been satisfied.

"Excess Cash Flow": for any fiscal year of the Borrower, the excess of (a) the sum, without duplication, of (i) Consolidated Net Income for such fiscal year, (ii) the net decrease, if any, in Consolidated Working Capital during such fiscal year and (iii) to the extent deducted in computing such Consolidated Net Income, (A) non-cash interest expense, depreciation and amortization, (B) extraordinary non-cash losses, (C) deferred income tax expense, (D) non-cash losses in connection with asset dispositions whether or not constituting extraordinary losses, and (E) non-cash ordinary losses over (b) the sum, without duplication, of (i) the aggregate amount of permitted cash Consolidated Capital Expenditures during such fiscal year, (ii) the net increase, if any, in Consolidated Working Capital during such fiscal year, (iii) the aggregate amount of payments of principal in respect of any Indebtedness not prohibited hereunder during such fiscal year (other than (x) prepayments of Revolving Credit Loans not accompanied by reductions of the Revolving Credit Commitments, (y) mandatory prepayments pursuant to Section 2.11 and (z) payments in respect of short-term Indebtedness) and (iv) to the extent added in computing such Consolidated Net Income, (A) deferred income tax credit, (B) extraordinary non-cash gains, (C) non-cash gains in connection with asset dispositions whether or not constituting extraordinary gains and (D) non-cash ordinary gains.

"Excess Cash Flow Application Date": as defined in Section 2.11(d).

"Financing Lease": any lease (or other arrangement conveying the right to use) of property, real or personal, the obligations of the lessee in respect of which are required in accordance with GAAP to be capitalized on a balance sheet of the lessee.

"Foreign Subsidiary": any Subsidiary of the Parent or the Borrower organized under the laws of any jurisdiction outside the United States.


"Funded Debt": as to any Person, all Indebtedness of such Person that matures more than one year from the date of its creation or matures within one year from such date but is renewable or extendible, at the option of such Person, to a date more than one year from such date or arises under a revolving credit or similar agreement that obligates the lender or lenders to extend credit during a period of more than one year from such date, including, without limitation, all current maturities and current sinking fund payments in respect of such Indebtedness whether or not required to be paid within one year from the date of its creation and, in the case of the Borrower, all current maturities in respect of the Loans.

"GAAP": generally accepted accounting principles in the United States in effect from time to time.

"Governmental Authority": any nation or government, any state or other political subdivision thereof and any entity exercising executive, legislative, judicial, regulatory or administrative functions of or pertaining to government.

"Guarantee Obligation": as to any Person (the "guaranteeing person"), any obligation of (a) the guaranteeing person or (b) another Person (including, without limitation, any bank under any letter of credit) to induce the creation of which the guaranteeing person has issued a reimbursement, counterindemnity or similar obligation, in either case guaranteeing or in effect guaranteeing any Indebtedness, leases, dividends or other obligations (the "primary obligations") of any other third Person (the "primary obligor") in any manner, whether directly or indirectly, including, without limitation, any obligation of the guaranteeing person, whether or not contingent, (i) to purchase any such primary obligation or any property constituting direct or indirect security therefor, (ii) to advance or supply funds (1) for the purchase or payment of any such primary obligation or (2) to maintain working capital or equity capital of the primary obligor or otherwise to maintain the net worth or solvency of the primary obligor, (iii) to purchase property, securities or services primarily for the purpose of assuring the owner of any such primary obligation of the ability of the primary obligor to make payment of such primary obligation or (iv) otherwise to assure or hold harmless the owner of any such primary obligation against loss in respect thereof; provided, however, that the term Guarantee Obligation shall not include endorsements of instruments for deposit or collection in the ordinary course of business. The amount of any Guarantee Obligation of any guaranteeing person shall be deemed to be the lower of (a) an amount equal to the stated or determinable amount of the primary obligation in respect of which such Guarantee Obligation is made and (b) the maximum amount for which such guaranteeing person may be liable pursuant to the terms of the instrument embodying such Guarantee Obligation, unless such primary obligation and the maximum amount for which such guaranteeing person may be liable are not stated or determinable, in which case the amount of such Guarantee Obligation shall be such guaranteeing person's maximum reasonably anticipated liability in respect thereof as determined by the Borrower in good faith.


"Hedge Obligations": as defined in the Master Guarantee and Collateral Agreement.

"Indebtedness": of any Person at any date, without duplication, (a) all indebtedness of such Person for borrowed money,
(b) all obligations of such Person for the deferred purchase price of property or services (other than current trade payables and accrued expenses incurred in the ordinary course of such Person's business),
(c) all obligations of such Person evidenced by notes, bonds, debentures or other similar instruments, (d) all indebtedness created or arising under any conditional sale or other title retention agreement with respect to property acquired by such Person, (e) all Capital Lease Obligations of such Person, (f) all obligations, contingent or otherwise, of such Person as an account party under acceptance, letter of credit or similar facilities (other than obligations in respect of undrawn letters of credit securing current trade payables or performance obligations incurred in the ordinary course of business), (g) all obligations of such Person to purchase, redeem, retire or otherwise acquire for value any Capital Stock of such Person, (h) all Guarantee Obligations of such Person in respect of Indebtedness of others, (i) all net payment obligations, contingent or otherwise, of such Person in respect of Hedge Obligations and (j) all obligations of the kind referred to in clauses (a) through (i) above secured by any Lien on property (including, without limitation, accounts and contract rights) owned by such Person, whether or not such Person has assumed or become liable for the payment of such obligation (but if not so assumed, the amount of such obligation shall be deemed not to exceed the fair market value of the property subject to the Lien).

"Insolvency": with respect to any Multiemployer Plan, the condition that such Plan is insolvent within the meaning of Section 4245 of ERISA.

"Insolvent": pertaining to a condition of Insolvency.

"Insurance Policies": (i) the insurance policies the Borrower is required to maintain pursuant to Section 6.5 and (ii) the insurance policies the Borrower is required to maintain pursuant to Section 5.3 of the Master Guarantee and Collateral Agreement.

"Interest Payment Date": (a) as to any Base Rate Loan, the last day of each March, June, September and December to occur while such Loan is outstanding, (b) as to any Eurodollar Loan having an Interest Period of three months or less, the last day of such Interest Period, (c) as to any Eurodollar Loan having an Interest Period longer than three months, each day which is three months, or a whole multiple thereof, after the first day of such Interest Period and the last day of such Interest Period.

"Interest Period": as to any Eurodollar Loan, (a) initially, the period commencing on the borrowing or conversion date, as the case may be, with respect to such Eurodollar Loan and ending one, two, three or six months thereafter, as selected by the Borrower in its notice of borrowing or notice of conversion, as the case may be,


given with respect thereto; and (b) thereafter, each period commencing on the last day of the next preceding Interest Period applicable to such Eurodollar Loan and ending one, two, three or six months thereafter, as selected by the Borrower by irrevocable notice to the Administrative Agent not less than three Business Days prior to the last day of the then current Interest Period with respect thereto; provided that all of the foregoing provisions relating to Interest Periods are subject to the following:

(i) if any Interest Period would otherwise end on a day that is not a Business Day, such Interest Period shall be extended to the next succeeding Business Day unless the result of such extension would be to carry such Interest Period into another calendar month in which event such Interest Period shall end on the immediately preceding Business Day;

(ii) any Interest Period that would otherwise extend beyond the Revolving Credit Termination Date (in the case of Revolving Credit Loans) or beyond the Term Loan Termination Date (in the case of the Term Loans) shall end on the Revolving Credit Termination Date or the Term Loan Termination Date, as applicable;

(iii) any Interest Period that begins on the last Business Day of a calendar month (or on a day for which there is no numerically corresponding day in the calendar month at the end of such Interest Period) shall end on the last Business Day of a calendar month; and

(iv) the Borrower shall select Interest Periods so as not to require a payment or prepayment of any Eurodollar Loan during an Interest Period for such Loan.

"Interest Rate Protection Agreement": any interest rate protection agreement, interest rate futures contract, interest rate option, interest rate cap or other interest rate hedge arrangement, to or under which the Borrower or any Subsidiary is a party or a beneficiary on the date hereof or becomes a party or a beneficiary after the date hereof.

"Interest Rate Protection Agreement Obligation": in respect of any Loan Party, the obligation of such Loan Party under an Interest Rate Protection Agreement to make a payment to the counterparty thereto in the event of a termination event or similar occurrence thereunder.

"Interim Note Documentation": collectively (a) the Senior Subordinated Increasing Rate Note Purchase Agreement dated as of March 31, 1997 among the Borrower, the Parent, certain Subsidiaries, Strategic Resource Partners Fund, a Delaware statutory business trust, and certain financial institutions party thereto as lenders and (b) all other agreements, schedules, certificates and other documents executed in connection therewith, including, but not limited to, any guarantees of the Interim Notes, as the same may be entered into, modified, amended or supplemented from time to time in accordance with the terms hereof and thereof.


"Interim Notes": as defined in the recitals hereto.

"Issuing Lender": Credit Lyonnais New York Branch, in its capacity as issuer of any Letter of Credit and any other Lender designated as "Issuing Lender" hereunder by the Borrower with the consent of the Arranger, the Administrative Agent and such Lender.

"L/C Commitment": $20,000,000.

"L/C Fee Payment Date": the last day of each March, June, September and December and the last day of the Revolving Credit Commitment Period.

"L/C Obligations": at any time, an amount equal to the sum of
(a) the aggregate then undrawn and unexpired amount of the then outstanding Letters of Credit and (b) the aggregate amount of drawings under Letters of Credit which have not then been reimbursed pursuant to
Section 3.5.

"L/C Participants": the collective reference to all the Revolving Credit Lenders other than the Issuing Lender.

"Lenders": as defined in the preamble hereto (which shall include the Issuing Lender).

"Letters of Credit": as defined in Section 3.1(a).

"Lien": any mortgage, pledge, hypothecation, assignment, deposit arrangement, encumbrance, lien (statutory or other), charge or other security interest or any preference, priority or other security agreement or preferential arrangement of any kind or nature whatsoever (including, without limitation, any conditional sale or other title retention agreement and any capital lease having substantially the same economic effect as any of the foregoing) and any filing of or agreement to give any financing statement under the Uniform Commercial Code (or equivalent statutes) of any jurisdiction.

"Loan": any loan made by any Lender pursuant to this Agreement.

"Loan Documents": this Agreement, the Notes, the Applications and the Security Documents.

"Loan Parties": the Parent, the Borrower and each Subsidiary of the Parent or the Borrower which is, or is required by the terms hereof to be, a party to a Loan Document.


"Master Guarantee and Collateral Agreement": the Master Guarantee and Collateral Agreement to be executed and delivered by the Parent, the Borrower and each of their Subsidiaries, substantially in the form of Exhibit A, as the same may be amended, supplemented or otherwise modified from time to time.

"Material Adverse Effect": a material adverse effect on (a) the consummation of either of the Acquisitions in accordance with the applicable Acquisition Documents, (b) the business, assets, results of operations, condition (financial or otherwise) or prospects (provided that the Term "prospects" shall not be deemed to be included in this definition when the term "Material Adverse Effect" is used in Section
4) of the Borrower and its Subsidiaries taken as a whole (prior to and after giving effect to the Acquisitions) or (c) the validity or enforceability of this Agreement or any of the other Loan Documents or the rights or remedies of the Administrative Agent, the Arranger or the Lenders hereunder or thereunder.

"Material Environmental Amount": an amount payable by the Parent, the Borrower and/or their Subsidiaries in excess of $500,000 for remedial costs, compliance costs, compensatory damages, punitive damages, fines, penalties or any combination thereof.

"Materials of Environmental Concern": any gasoline or petroleum (including crude oil or any fraction thereof) or petroleum products or any hazardous or toxic substances, materials or wastes, defined or regulated as such in or under any Environmental Law, including, without limitation, asbestos, polychlorinated biphenyls and urea-formaldehyde insulation.

"Mortgage": the mortgage or deed of trust made by the appropriate Loan Party in favor of, or for the benefit of, the Administrative Agent for the benefit of the Lenders, substantially in the form of Exhibit B (with such changes thereto as shall be advisable under the law of the jurisdiction in which such mortgage or deed of trust is to be recorded), as the same may be amended, supplemented or otherwise modified from time to time.

"Mortgaged Property": the real property listed on Schedule 1.1B, as to which the Administrative Agent for the benefit of the Lenders shall be granted a Lien pursuant to each Mortgage.

"Multiemployer Plan": a Plan which is a multiemployer plan as defined in Section 4001(a)(3) of ERISA.

"Net Cash Proceeds": (a) in connection with any Asset Sale or any Recovery Event, the proceeds thereof in the form of cash and Cash Equivalents (including any such proceeds received by way of deferred payment of principal pursuant to a note or installment receivable or purchase price adjustment receivable or otherwise, but only as


and when received) of such Asset Sale or Recovery Event, net of attorneys' fees, accountants' fees, investment banking fees, brokers' and underwriters' commissions paid to third parties, amounts required to be applied to the repayment of Indebtedness secured by a Lien expressly permitted hereunder on any asset which is the subject of such Asset Sale or Recovery Event (other than any Lien in favor of the Administrative Agent for the benefit of the Lenders), the aggregate amount of reserves required in the reasonable judgment of the Borrower to pay contingent liabilities with respect to such Asset Sale (provided that amounts deducted from aggregate proceeds pursuant to this clause and not actually paid by the Borrower or any of its Subsidiaries in liquidation of such contingent liabilities shall be deemed to be Net Cash Proceeds and shall be applied in accordance with Section 2.11(c) at such time as the Borrower shall reasonably determine that such amounts are not required to pay contingent liabilities with respect to such Asset Sale) and other customary fees and expenses actually incurred in connection therewith and net of taxes paid or reasonably estimated to be payable as a result thereof (after taking into account any available tax credits or deductions and any tax sharing arrangements) and (b) in connection with any issuance or sale of Capital Stock or debt securities or instruments or the incurrence of Indebtedness, the cash proceeds received from such issuance or incurrence, net of attorneys' fees, investment banking fees, accountants' fees, underwriting discounts and commissions and other customary fees and expenses actually incurred in connection therewith.

"Non-Excluded Taxes": as defined in Section 2.20(a).

"Non-U.S. Lender": as defined in Section 2.20(b).

"Notes": the collective reference to the Tranche A Term Notes, the Tranche B Term Notes and the Revolving Credit Notes.

"Obligations": the unpaid principal of and interest on (including, without limitation, interest accruing after the maturity of the Loans and Reimbursement Obligations and interest accruing after the filing of any petition in bankruptcy, or the commencement of any insolvency, reorganization or like proceeding, relating to the Borrower, whether or not a claim for post-filing or post-petition interest is allowed in such proceeding) the Notes and all other obligations and liabilities of the Borrower to the Arranger, the Administrative Agent or to any Lender, whether direct or indirect, absolute or contingent, due or to become due, or now existing or hereafter incurred, which may arise under, out of, or in connection with, this Agreement, any other Loan Document, the Letters of Credit, any Interest Rate Protection Agreement entered into with any Lender or any other document made, delivered or given in connection herewith or therewith, whether on account of principal, interest, reimbursement obligations, fees, indemnities, costs, expenses (including, without limitation, all fees, charges and disbursements of counsel to the Arranger, the Administrative Agent or to any Lender that are required to be paid by the Borrower pursuant hereto).


"Parent": as defined in the preamble hereto.

"Participant": as defined in Section 10.6(b).

"PBGC": the Pension Benefit Guaranty Corporation established pursuant to Subtitle A of Title IV of ERISA (or any successor).

"Permanent Note Documentation": collectively (a) one or more note purchase agreements or Indentures entered into by a Loan Party with respect to the issuance of Permanent Notes in the form referred to in, or having the terms permitted by, Section 7.2(e) and (b) all other agreements, schedules, certificates and other documents executed in connection therewith, including, but not limited to, any guarantees of the Permanent Notes, as the same may be entered into, modified, amended or supplemented from time to time in accordance with the terms hereof and thereof.

"Permanent Notes": senior subordinated notes issued in accordance with Section 7.2(e), including, but not limited to, the Rollover Notes.

"Person": an individual, partnership, corporation, business trust, joint stock company, trust, unincorporated association, joint venture, Governmental Authority or other entity of whatever nature.

"Plan": at a particular time, any employee benefit plan which is covered by ERISA and in respect of which the Borrower or a Commonly Controlled Entity is (or, if such plan were terminated at such time, would under Section 4069 of ERISA be deemed to be) an "employer" as defined in Section 3(5) of ERISA.

"Pledged Notes", "Pledged Securities" and "Pledged Stock":
each as defined in the Master Guarantee and Collateral Agreement.

"Pro Forma Balance Sheet": as defined in Section 4.1(a)(i).

"Pro Forma Income Statement": as defined in Section 4.1(a)(ii).

"Projections": as defined in Section 6.2(c).

"Properties": the collective reference to the real property owned, leased or operated by the Parent, the Borrower or any of their Subsidiaries.

"Recovery Event": any settlement of or payment in respect of a property or casualty insurance claim relating to any asset of the Parent, the Borrower or any of their Subsidiaries.

"Register": as defined in Section 10.6(e).


"Reimbursement Obligation": the obligation of the Borrower to reimburse the Issuing Lender pursuant to Section 3.5 for amounts drawn under Letters of Credit.

"Reinvestment Deferred Amount": with respect to any Reinvestment Event, the aggregate Net Cash Proceeds received by the Parent, the Borrower or any of their Subsidiaries in connection therewith which are not applied to prepay the Term Loans or reduce the Revolving Credit Commitments pursuant to Section 2.11(c) as a result of the delivery of a Reinvestment Notice.

"Reinvestment Event": any Recovery Event in respect of which the Borrower has delivered a Reinvestment Notice.

"Reinvestment Notice": a written notice executed by a Responsible Officer of the Borrower to the Administrative Agent within 30 days of the Reinvestment Event to which it relates stating that no Event of Default has occurred and is continuing and that the Borrower (directly or indirectly through another Subsidiary), in good faith, intends and expects to use all or a specified portion of the Net Cash Proceeds of a Recovery Event to restore or replace the assets in respect of which such Recovery Event occurred within twelve months from the date of receipt of such Net Cash Proceeds (provided that if the affected assets constituted Collateral, such restored or replacement assets shall also constitute Collateral).

"Reinvestment Prepayment Amount": with respect to any Reinvestment Event, the Reinvestment Deferred Amount relating thereto less any amount expended prior to the relevant Reinvestment Prepayment Date to restore or replace the assets in respect of which a Recovery Event has occurred.

"Reinvestment Prepayment Date": with respect to any Reinvestment Event, the earliest of (a) the first date occurring after such Reinvestment Event on which a Default or an Event of Default shall have occurred, (b) the date occurring twelve months after such Reinvestment Event and (c) the date on which the Borrower shall have determined not to, or shall have otherwise ceased to, restore or replace the assets in respect of which a Recovery Event has occurred.

"Reorganization": with respect to any Multiemployer Plan, the condition that such plan is in reorganization within the meaning of
Section 4241 of ERISA.

"Reportable Event": any of the events set forth in Section 4043(c) of ERISA, other than those events as to which the thirty day notice period is waived under subsection .13, .14, .16, .18, .19 or .20 of PBGC Reg. Section 2615.

"Required Lenders": at any date shall mean the holders of more than 50% of (a) until the Closing Date, the Commitments and (b) thereafter, the sum of (i) the aggregate unpaid principal amount of the Term Loans (or if Tranche B Term Loans


have not been borrowed, the sum of (A) the aggregate unpaid principal of the Tranche A Term Loans and (B) the Tranche B Term Loan Commitments, if any) and (ii) the aggregate Revolving Credit Commitments, or, if the Revolving Credit Commitments have been terminated, the Aggregate Outstanding Revolving Extensions of Credit of the Revolving Credit Lenders.

"Requirement of Law": as to any Person, the Certificate of Incorporation and By-Laws or other organizational or governing documents of such Person, and any law, treaty, rule or regulation or determination of an arbitrator or a court or other Governmental Authority, in each case applicable to or binding upon such Person or any of its property or to which such Person or any of its property is subject.

"Responsible Officer": the chief executive officer, president or chief financial officer of the Parent or the Borrower, as the case may be, but in any event, with respect to financial matters, the chief financial officer of the Parent or the Borrower, as the case may be.

"Revolving Credit Commitment": as to any Lender, the obligation of such Lender, if any, to make Revolving Credit Loans to and/or issue or participate in Letters of Credit issued on behalf of the Borrower hereunder in an aggregate principal and/or face amount not to exceed the amount set forth under the heading "Revolving Credit Commitment" opposite such Lender's name on Schedule 1.1A, as the same may be changed from time to time pursuant to the terms hereof.

"Revolving Credit Commitment Period": the period from and including the Closing Date to but not including the Revolving Credit Termination Date, or such earlier date on which the Revolving Credit Commitments shall have been terminated.

"Revolving Credit Lender": each Lender which has a Revolving Credit Commitment or which has made Revolving Credit Loans.

"Revolving Credit Loans": as defined in Section 2.5(a).

"Revolving Credit Note": as defined in Section 2.8(e).

"Revolving Credit Percentage": as to any Revolving Credit Lender at any time, the percentage which such Lender's Revolving Credit Commitment then constitutes of the aggregate Revolving Credit Commitments (or, at any time after the Revolving Credit Commitments shall have expired or terminated, the percentage which the aggregate principal amount of such Lender's Revolving Credit Loans then outstanding constitutes of the aggregate principal amount of the Revolving Credit Loans then outstanding).

"Revolving Credit Termination Date": March 31, 2000.


"Rig Orders": contracts under which the Borrower or one or more of its Subsidiaries is to build, repair or modify drill rigs.

"Rollover Note Indenture": the Indenture dated as of March 31, 1997 among IRI International Corporation, as issuer, Energy Services International Ltd., as guarantor, and The Bank of New York, as trustee, as amended, supplemented or otherwise modified from time to time in accordance with the terms thereof and hereof.

"Rollover Notes": senior subordinated increasing rate rollover notes issued pursuant to the Rollover Note Indenture.

"Security Documents": the collective reference to each Mortgage, the Master Guarantee and Collateral Agreement, the Cash Collateral Agreement and all other security documents hereafter delivered to the Administrative Agent granting a Lien on any asset or assets of any Person to secure the obligations and liabilities of the Borrower hereunder and/or under any of the other Loan Documents or to secure any guarantee of any such obligations and liabilities.

"Sellers": collectively, the Bowen Sellers and the Cardwell Sellers.

"Single Employer Plan": any Plan which is covered by Title IV of ERISA, but which is not a Multiemployer Plan.

"Solvent": when used with respect to any Person, means that, as of any date of determination, (a) the amount of the "present fair saleable value" of the assets of such Person will, as of such date, exceed the amount of all "liabilities of such Person, contingent or otherwise", as of such date, as such quoted terms are determined in accordance with applicable federal and state laws governing determinations of the insolvency of debtors, (b) the present fair saleable value of the assets of such Person will, as of such date, be greater than the amount that will be required to pay the liability of such Person on its debts as such debts become absolute and matured, (c) such Person will not have, as of such date, an unreasonably small amount of capital with which to conduct its business, and (d) such Person will be able to pay its debts as they mature. For purposes of this definition, (i) "debt" means liability on a "claim", and (ii) "claim" means any (x) right to payment, whether or not such a right is reduced to judgment, liquidated, unliquidated, fixed, contingent, matured, unmatured, disputed, undisputed, legal, equitable, secured or unsecured or (y) right to an equitable remedy for breach of performance if such breach gives rise to a right to payment, whether or not such right to an equitable remedy is reduced to judgment, fixed, contingent, matured or unmatured, disputed, undisputed, secured or unsecured.

"Standby Letter of Credit": as defined in Section 3.1(a).


"Subsidiary": as to any Person, a corporation, partnership or other entity of which shares of stock or other ownership interests having ordinary voting power (other than stock or such other ownership interests having such power only by reason of the happening of a contingency) to elect a majority of the board of directors or other managers of such corporation, partnership or other entity are at the time owned, or the management of which is otherwise controlled, directly or indirectly through one or more intermediaries, or both, by such Person. Unless otherwise qualified, all references to a "Subsidiary" or to "Subsidiaries" in this Agreement shall refer to a Subsidiary or Subsidiaries of the Parent.

"Subsidiary Guarantor": each of the Subsidiaries of the Parent which is a party to the Master Guarantee and Collateral Agreement.

"Syndication Agent": as defined in the preamble hereto.

"Term Loan Lenders": the collective reference to the Tranche A Term Loan Lenders and the Tranche B Term Loan Lenders.

"Term Loans": the collective reference to the Tranche A Term Loans and Tranche B Term Loans.

"Term Loan Termination Date": March 31, 2002.

"Tranche A Term Loan": as defined in Section 2.1.

"Tranche A Term Loan Commitment": as to any Lender, the obligation of such Lender, if any, to make a Tranche A Term Loan to the Borrower hereunder in a principal amount not to exceed the amount set forth under the heading "Tranche A Term Loan Commitment" opposite such Lender's name on Schedule 1.1A.

"Tranche A Term Loan Lender": each Lender which has a Tranche A Term Loan Commitment or which has made a Tranche A Term Loan.

"Tranche A Term Loan Percentage": as to any Tranche A Term Loan Lender at any time, the percentage which such Lender's Tranche A Term Loan Commitment then constitutes of the aggregate Tranche A Term Loan Commitments (or, at any time after the Closing Date, the percentage which the aggregate principal amount of such Lender's Tranche A Term Loan then outstanding constitutes of the aggregate principal amount of the Tranche A Term Loans then outstanding).

"Tranche A Term Note": as defined in Section 2.8(e).


"Tranche B Commitment Period": the period from and including the Closing Date to but not including the first anniversary of the Closing Date, or such earlier date on which the Tranche B Term Loan Commitments shall have been terminated.

"Tranche B Term Loan": as defined in Section 2.3.

"Tranche B Term Loan Commitment": as to any Tranche B Term Loan Lender, the obligation of such Lender, if any, to make a Tranche B Term Loan to the Borrower hereunder in a principal amount not to exceed the amount set forth under the heading "Tranche B Term Loan Commitment" opposite such Lender's name on Schedule 1.1A.

"Tranche B Term Loan Lender": each Lender which has a Tranche B Term Loan Commitment or which has made a Tranche B Term Loan.

"Tranche B Term Loan Percentage": as to any Lender at any time, the percentage which such Lender's Tranche B Term Loan Commitment then constitutes of the aggregate Tranche B Term Loan Commitments (or, at any time after the Borrower borrows Tranche B Term Loans, the percentage which the aggregate principal amount of such Lender's Tranche B Term Loan then outstanding constitutes of the aggregate principal amount of the Tranche B Term Loans then outstanding).

"Tranche B Term Note": as defined in Section 2.8(e).

"Transferee": as defined in Section 10.6(g).

"Type": as to any Loan, its nature as a Base Rate Loan or a Eurodollar Loan.

"Uniform Customs": the Uniform Customs and Practice for Documentary Credits (1993 Revision), International Chamber of Commerce Publication No. 500, as the same may be amended from time to time.

"United States": the United States of America.

"Warrant Agreement": the Warrant Agreement dated as of March 31, 1997 between the Parent and The Bank of New York, as warrant agent.

"Warrants": the warrants to purchase up to 10% of the fully diluted common stock of the Parent pursuant to the Warrant Agreement.

"Wholly Owned Subsidiary": as to any Person, any other Person all of the Capital Stock of which (other than directors' qualifying shares required by law) is owned by such Person directly and/or through other Wholly Owned Subsidiaries.


1.2 Other Definitional Provisions. (a) Unless otherwise specified therein, all terms defined in this Agreement shall have the defined meanings when used in the other Loan Documents or any certificate or other document made or delivered pursuant hereto or thereto.

(b) As used herein and in the other Loan Documents, and any certificate or other document made or delivered pursuant hereto or thereto, accounting terms relating to the Parent, the Borrower and their Subsidiaries not defined in Section 1.1 and accounting terms partly defined in Section 1.1, to the extent not defined, shall have the respective meanings given to them under GAAP.

(c) The words "hereof", "herein" and "hereunder" and words of similar import when used in this Agreement shall refer to this Agreement as a whole and not to any particular provision of this Agreement, and Section, Schedule and Exhibit references are to this Agreement unless otherwise specified.

(d) The meanings given to terms defined herein shall be equally applicable to both the singular and plural forms of such terms.

SECTION 2. AMOUNT AND TERMS OF COMMITMENTS

2.1 Tranche A Term Loans. Subject to the terms and conditions hereof, each Tranche A Term Loan Lender severally agrees to make a term loan (a "Tranche A Term Loan") to the Borrower on the Closing Date in an amount not to exceed the amount of the Tranche A Term Loan Commitment of such Lender. The Tranche A Term Loans may from time to time be (a) Eurodollar Loans, (b) Base Rate Loans or (c) a combination thereof, as determined by the Borrower and notified to the Administrative Agent in accordance with Sections 2.2 and 2.12.

2.2 Procedure for Tranche A Term Loan Borrowing. The Borrower shall give the Administrative Agent irrevocable notice (which notice must be received by the Administrative Agent prior to 10:00 A.M., New York City time, one Business Day prior to the anticipated Closing Date) requesting that the Tranche A Term Loan Lenders make Tranche A Term Loans on the Closing Date and specifying (a) the amount to be borrowed and (b) the Closing Date. The Tranche A Term Loans made on the Closing Date shall initially be Base Rate Loans, no Tranche A Term Loan may be converted into a Eurodollar Loan prior to the date which is 3 Business Days after the Closing Date and (except with the prior written consent of the Arranger) no Tranche A Term Loan may be made, converted into or continued as a Eurodollar Loan having an Interest Period in excess of one month prior to the date which is 60 days after the Closing Date. Upon receipt of such notice, the Administrative Agent shall promptly notify each Tranche A Term Loan Lender thereof. Not later than 12:00 Noon, New York City time, on the Closing Date, each Tranche A Term Loan Lender shall make available to the Administrative Agent at its office specified in Section 10.2 an amount in immediately available funds equal to the Tranche A Term Loan to be made by such Lender. The Administrative Agent shall on such date by 2:00 P.M., New York City time, (i) make


available to the Borrower, in accordance with the instructions of the Borrower, in like funds as received by the Administrative Agent, $50,000,000, and (ii) deposit in the Cash Collateral Account the remainder of all such amounts made available to the Administrative Agent by the Tranche A Term Loan Lenders (the "Cardwell Deposit Amount"). The Cardwell Deposit Amount shall be held by the Administrative Agent as security for the Obligations on the terms and conditions set forth in the Cash Collateral Agreement. Notwithstanding any other provisions of this Agreement, the portion of the Tranche A Term Loans equal to the Cardwell Deposit Amount shall at all times be Base Rate Loans.

2.3 Tranche B Term Loans. Subject to the terms and conditions hereof, each Tranche B Term Loan Lender severally agrees to make a term loan (a "Tranche B Term Loan") to the Borrower in a single drawing on or prior to the date which is twelve months after the Closing Date (the "Tranche B Closing Date") in an amount not to exceed the amount of the Tranche B Term Loan Commitment of such Lender then in effect. The Tranche B Term Loans may from time to time be (a) Eurodollar Loans, (b) Base Rate Loans or (c) a combination thereof, as determined by the Borrower and notified to the Administrative Agent in accordance with Sections 2.4 and 2.12. The Tranche B Term Loan Commitments shall terminate immediately subsequent to any drawing on the Tranche B Closing Date.

2.4 Procedure for Tranche B Term Loan Borrowing. The Borrower shall give the Administrative Agent irrevocable notice (which notice must be received by the Administrative Agent prior to 10:00 A.M., New York City time, one Business Day prior to the requested Borrowing Date) requesting that the Tranche B Term Loan Lenders make the Tranche B Term Loans on the requested Borrowing Date and specifying (a) the amount to be borrowed and (b) the requested Borrowing Date. If the Borrower requests that the Borrowing Date with respect to the Tranche B Term Loans be a date within 3 Business Days of the Closing Date, then the Tranche B Term Loans shall initially be Base Rate Loans. No Tranche B Term Loan may be converted into or continued as a Eurodollar Loan prior to the date which is 3 Business Days after the Closing Date. Upon receipt of such notice, the Administrative Agent shall promptly notify each Tranche B Term Loan Lender thereof. Not later than 12:00 Noon, New York City time, on the requested Borrowing Date, each Tranche B Term Loan Lender shall make available to the Administrative Agent at its office specified in Section 10.2 an amount in immediately available funds equal to the Tranche B Term Loan to be made by such Lender. The Administrative Agent shall on such date by 2:00 P.M., New York City time, deposit to the designated account, in accordance with the instructions of the Borrower, the aggregate of the amounts made available to the Administrative Agent by the Tranche B Term Loan Lenders in immediately available funds.

2.5 Revolving Credit Commitments. (a) Subject to the terms and conditions hereof, each Revolving Credit Lender severally agrees to make revolving credit loans ("Revolving Credit Loans") to the Borrower from time to time during the Revolving Credit Commitment Period in an aggregate principal amount at any one time outstanding which, when added to such Lender's Revolving Credit Percentage of the L/C Obligations then outstanding, does not exceed the amount of such Lender's Revolving Credit Commitment.


During the Revolving Credit Commitment Period, the Borrower may use the Revolving Credit Commitments by borrowing, prepaying the Revolving Credit Loans in whole or in part, and reborrowing, all in accordance with the terms and conditions hereof.

(b) The Revolving Credit Loans may from time to time be (i) Eurodollar Loans, (ii) Base Rate Loans or (iii) a combination thereof, as determined by the Borrower and notified to the Administrative Agent in accordance with Sections 2.6 and 2.12, provided that no Revolving Credit Loan shall be made as a Eurodollar Loan after the day that is one month prior to the Revolving Credit Termination Date.

2.6 Procedure for Revolving Credit Borrowing. The Borrower may borrow under the Revolving Credit Commitments during the Revolving Credit Commitment Period on any Business Day, provided that the Borrower shall give the Administrative Agent irrevocable notice (which notice must be received by the Administrative Agent prior to 12:00 Noon, New York City time, (a) three Business Days prior to the requested Borrowing Date, if all or any part of the requested Revolving Credit Loans are to be Eurodollar Loans or (b) one Business Day prior to the requested Borrowing Date, otherwise), specifying (i) the amount to be borrowed, (ii) the requested Borrowing Date, (iii) whether the borrowing is to be of Eurodollar Loans, Base Rate Loans, or a combination thereof and (iv) if the borrowing is to be entirely or partly of Eurodollar Loans, the respective amounts of each such Type of Loan and the respective lengths of the initial Interest Periods therefor; provided that prior to the date which is 5 Business Days after the Closing Date no Revolving Credit Loan may be made as or converted into a Eurodollar Loan and (except with the prior written consent of the Arranger) no Revolving Credit Loan may be made, converted into or continued as a Eurodollar Loan having an Interest Period in excess of one month prior to the date which is 60 days after the Closing Date. Each borrowing under the Revolving Credit Commitments shall be in an amount equal to (x) in the case of Base Rate Loans, $1,000,000 or a whole multiple thereof (or, if the then Available Revolving Credit Commitments are less than $1,000,000, such lesser amount) and
(y) in the case of Eurodollar Loans, $1,000,000 or a whole multiple of $1,000,000 in excess thereof. Upon receipt of any such notice from the Borrower, the Administrative Agent shall promptly notify each Revolving Credit Lender thereof. Each Revolving Credit Lender will make the amount of its pro rata share of each borrowing available to the Administrative Agent for the account of the Borrower at the office of the Administrative Agent specified in Section 10.2 prior to 11:00 A.M., New York City time, on the Borrowing Date requested by the Borrower in funds immediately available to the Administrative Agent. The aggregate of the amounts made available to the Administrative Agent by the Revolving Credit Lenders will then be made available to the Borrower by the Administrative Agent in accordance with the instructions of the Borrower in like funds as received by the Administrative Agent.

2.7 Commitment Fees, etc. (a) The Borrower agrees to pay to the Administrative Agent for the account of each Revolving Credit Lender a commitment fee for the period from and including the Closing Date to the last day of the Revolving Credit Commitment Period, computed at the rate of 1/2 of 1% per annum on the average daily


amount of the Available Revolving Credit Commitment of such Lender during the period for which payment is made, payable quarterly in arrears on the last day of each March, June, September and December and on the last day of the Revolving Credit Commitment Period, commencing on the first of such dates to occur after the date hereof.

(b) The Borrower agrees to pay to the Administrative Agent for the account of each Tranche B Term Loan Lender a commitment fee for the period from and including the Closing Date to the last day of the Tranche B Commitment Period, computed at the rate of 1/2 of 1% per annum on the average daily amount of the undrawn Tranche B Term Loan Commitment of such Lender during the period for which payment is made, payable quarterly in arrears on the last day of each March, June, September and December and on the last day of the Tranche B Commitment Period, commencing on the first of such dates to occur after the date hereof.

(c) The Borrower agrees to pay to the Arranger the fees and other compensation in the amounts and on the dates previously agreed to in writing by the Borrower and the Arranger.

(d) The Borrower agrees to pay to the Administrative Agent the fees in the amounts and on the dates agreed to in writing from time to time by the Borrower and the Administrative Agent.

2.8 Repayment of Loans; Evidence of Debt. (a) The Borrower hereby unconditionally promises to pay to the Administrative Agent for the account of the appropriate Lender (i) the then unpaid principal amount of each Revolving Credit Loan of such Revolving Credit Lender on the last day of the Revolving Credit Commitment Period (or such earlier date on which the Revolving Credit Loans become due and payable pursuant to Section 8), (ii) the principal amount of the Tranche A Term Loans of such Tranche A Term Loan Lender, in 20 consecutive quarterly installments, according to the amortization schedule set forth on Schedule 1.1C, commencing on June 30, 1997 (or on such earlier date on which the then unpaid principal amount of the Tranche A Term Loans become due and payable pursuant to Section 8) and (iii) the principal amount of the Tranche B Term Loans of such Tranche B Term Loan Lender, in 5 consecutive annual installments, according to the amortization schedule set forth on Schedule 1.1D, commencing on March 31, 1998 (or on such earlier date on which the then unpaid principal amount of such Tranche B Term Loans become due and payable pursuant to
Section 8). The Borrower hereby further agrees to pay interest on the unpaid principal amount of the Loans from time to time outstanding from the date hereof until payment in full thereof at the rates per annum, and on the dates, set forth in Section 2.14.

(b) Each Lender shall maintain in accordance with its usual practice an account or accounts evidencing indebtedness of the Borrower to such Lender resulting from each Loan of such Lender from time to time, including the amounts of principal and interest payable and paid to such Lender from time to time under this Agreement.


(c) The Administrative Agent, on behalf of the Borrower, shall maintain the Register pursuant to Section 10.6(e) and a subaccount therein for each Lender, in which shall be recorded (i) the amount of each Revolving Credit Loan, Tranche A Term Loan and Tranche B Term Loan made hereunder, the Type thereof and each Interest Period applicable thereto, (ii) the amount of any principal or interest due and payable or to become due and payable from the Borrower to each Lender hereunder and (iii) both the amount of any sum received by the Administrative Agent hereunder from the Borrower and each Lender's share thereof.

(d) The entries made in the Register and the accounts of each Lender maintained pursuant to Section 2.8(b) shall, to the extent permitted by applicable law, be prima facie evidence of the existence and amounts of the obligations of the Borrower therein recorded; provided, however, that the failure of any Lender or the Administrative Agent to maintain the Register or any such account, or any error therein, shall not in any manner affect the obligation of the Borrower to repay (with applicable interest) the Loans made to such Borrower by such Lender in accordance with the terms of this Agreement.

(e) The Borrower agrees that, upon the request to the Administrative Agent by any Lender, the Borrower will execute and deliver to such Lender (i) a promissory note of the Borrower evidencing any Revolving Credit Loans of such Lender, substantially in the form of Exhibit C-1 with appropriate insertions as to date and principal amount (a "Revolving Credit Note"), and/or (ii) a promissory note of the Borrower evidencing any Tranche A Term Loan of such Lender, substantially in the form of Exhibit C-2 with appropriate insertions as to date and principal amount (a "Tranche A Term Note") and/or (iii) a promissory note of the Borrower evidencing any Tranche B Term Loan of such Lender, substantially in the form of Exhibit C-3 with appropriate insertions as to date and principal amount (a "Tranche B Term Note"). A Note and the Obligation evidenced thereby may be assigned or otherwise transferred in whole or in part only by registration of such assignment or transfer of such Note and the Obligation evidenced thereby in the Register (and each Note shall expressly so provide). Any assignment or transfer of all or part of an Obligation evidenced by a Note shall be registered in the Register only upon surrender for registration of assignment or transfer of the Note evidencing such Obligation, accompanied by an Assignment and Acceptance substantially in the form of Exhibit G duly executed by the Assignor thereof, and thereupon one or more new Notes shall be issued to the designated Assignee and the old Note shall be returned by the Administrative Agent to the Borrower marked "cancelled." No assignment of a Note and the Obligation evidenced thereby shall be effective unless it shall have been recorded in the Register by the Administrative Agent as provided in this Section 2.8(e).

2.9 Optional Termination or Reduction of Commitments. The Borrower shall have the right, upon not less than three Business Days' notice to the Administrative Agent, to terminate the Revolving Credit Commitments or the Tranche B Term Loan Commitments or, from time to time, to reduce the amount of the Revolving Credit Commitments or the Tranche B Term Loan Commitments; provided that no such termination or reduction of Revolving Credit Commitments shall be permitted if, after giving effect thereto and to any prepayments of the Revolving Credit Loans made on the effective date thereof, the sum of the Aggregate


Outstanding Revolving Extensions of Credit of all Revolving Credit Lenders would exceed the Revolving Credit Commitments then in effect. Any such reduction shall be in an amount equal to $1,000,000, or a whole multiple thereof, and shall reduce permanently the Revolving Credit Commitments or the Tranche B Term Loan Commitments, as the case may be, then in effect.

2.10 Optional Prepayments. The Borrower may at any time and from time to time prepay the Loans, in whole or in part, without premium or penalty, upon at least three Business Days' irrevocable notice to the Administrative Agent by the Borrower, specifying the date and amount of prepayment and whether the prepayment is of Eurodollar Loans, Base Rate Loans or a combination thereof, and, if of a combination thereof, the amount allocable to each, provided that if a Eurodollar Loan is prepaid on any day other than the last day of the Interest Period applicable thereto the Borrower shall also pay any amounts owing pursuant to Section 2.21. Upon receipt of any such notice, the Administrative Agent shall promptly notify each Lender thereof. If any such notice is given, the amount specified in such notice shall be due and payable on the date specified therein, together with accrued interest to such date on the amount prepaid. Partial prepayments of the Term Loans shall be applied pro rata to the Tranche A Term Loans and the Tranche B Term Loans and to the remaining installments of principal thereof in the inverse order of maturity. Notwithstanding the foregoing, so long as any Tranche B Term Loans are outstanding, each Tranche A Term Loan Lender shall have the right to refuse all or any portion of any prepayment pursuant to this Section 2.10 allocable to such Lender's Tranche A Term Loans, and the amount so refused shall be applied to prepay the Tranche B Term Loans in accordance with the preceding sentence. Amounts prepaid on account of the Term Loans may not be reborrowed. Partial prepayments of Term Loans and Revolving Credit Loans shall be in an aggregate principal amount of $1,000,000 or a whole multiple thereof.

2.11 Mandatory Prepayments and Commitment Reductions. (a) If any debt securities or instruments of the Parent, the Borrower or any of their Subsidiaries shall be issued or sold or the Parent, the Borrower or any of their Subsidiaries shall incur any Indebtedness (except any debt securities or instruments issued or Indebtedness incurred in accordance with Section 7.2 (other than Net Cash Proceeds not required to be prepaid pursuant to the proviso in Section 7.2(e))) an amount equal to 100% of the Net Cash Proceeds thereof shall be applied on the date of such issuance or incurrence toward the prepayment of the Term Loans and the reduction of the Revolving Credit Commitments as set forth in paragraph (e) of this Section 2.11. Nothing in this paragraph (a) shall be deemed to permit the incurrence of Indebtedness not permitted by Section 7.2.

(b) If any Capital Stock of the Parent, the Borrower or any of their Subsidiaries shall be issued or sold (except (i) any Capital Stock the proceeds of which are used solely to refinance the Interim Notes or the Rollover Notes in accordance with the second paragraph of Section 7.10, (ii) the Warrants and (iii) any Capital Stock issued upon exercise of the Warrants) an amount equal to 100% of the first $25,000,000 of Net Cash Proceeds thereof and 50% of the Net Cash Proceeds thereof in excess of $25,000,000 shall be applied on the date of


such issuance or incurrence toward the prepayment of the Term Loans and the reduction of the Revolving Credit Commitments as set forth in paragraph (e) of this Section 2.11.

(c) If on any date the Parent, the Borrower or any of their Subsidiaries shall receive Net Cash Proceeds from any Asset Sale or from any Recovery Event (other than, if no Default or Event of Default shall have occurred and be continuing, to the extent that such Net Cash Proceeds are to be used to restore or replace the assets in respect of which such Recovery Event occurred within twelve months from the date of such Recovery Event, as certified by a Responsible Officer of the Borrower pursuant to a Reinvestment Notice; provided that if such Net Cash Proceeds exceed $5,000,000, the Borrower shall deposit such Net Cash Proceeds in a cash collateral account under the exclusive dominion and control of the Administrative Agent as security for the Obligations in accordance with terms and conditions reasonably satisfactory to the Administrative Agent), such Net Cash Proceeds shall be applied on such date toward the prepayment of the Term Loans and the reduction of the Revolving Credit Commitments as set forth in paragraph (e) of this Section 2.11; provided that, notwithstanding the foregoing, on each Reinvestment Prepayment Date, an amount equal to the Reinvestment Prepayment Amount with respect to the relevant Reinvestment Event shall be applied toward the prepayment of the Term Loans and the reduction of the Revolving Credit Commitments as set forth in paragraph (e) of this Section 2.11.

(d) If, for any fiscal year of the Borrower ending after the Closing Date, there shall be Excess Cash Flow, the Borrower shall, on the relevant Excess Cash Flow Application Date, apply toward the prepayment of the Term Loans and the reduction of the Revolving Credit Commitments as set forth in paragraph (e) of this Section 2.11 a percentage of such Excess Cash Flow equal to 75%. Each such prepayment and commitment reduction shall be made on a date (an "Excess Cash Flow Application Date") no later than five days after the earlier of (i) the date on which the financial statements of the Borrower referred to in Section 6.1(a) for the fiscal year with respect to which such prepayment is made are required to be delivered to the Lenders and (ii) the date such financial statements are actually delivered.

(e) Amounts to be applied in connection with prepayments and Commitment reductions made pursuant to this Section 2.11 shall be applied first to the prepayment of the Term Loans and second to reduce permanently the Revolving Credit Commitments. Any such reduction of the Revolving Credit Commitments shall be accompanied by prepayment of the Revolving Credit Loans to the extent, if any, that the sum of the Aggregate Outstanding Revolving Extensions of Credit of all Revolving Credit Lenders exceeds the amount of the aggregate Revolving Credit Commitments as so reduced, provided that if the aggregate principal amount of Revolving Credit Loans then outstanding is less than the amount of such excess (because L/C Obligations constitute a portion thereof), the Borrower shall, to the extent of the balance of such excess, replace outstanding Letters of Credit and/or deposit an amount in cash in a cash collateral account established with the Administrative Agent for the benefit of the Lenders on terms and conditions satisfactory to the Administrative Agent. The application of any prepayment pursuant to this Section 2.11 shall be made, within each category of Loans to be prepaid as provided above, first to Base Rate Loans and second to Eurodollar Loans.


Each prepayment of the Loans under this Section 2.11 shall be accompanied by accrued interest to the date of such prepayment on the amount prepaid. All prepayments of the Term Loans pursuant to this Section 2.11 shall be applied pro rata to the Tranche A Term Loans and the Tranche B Term Loans and to the remaining installments of principal thereof in the inverse order of scheduled maturity. Notwithstanding the foregoing, so long as any Tranche B Term Loans are outstanding, each Tranche A Term Loan Lender shall have the right to refuse all or any portion of any prepayment pursuant to this Section 2.11 allocable to such Lender's Tranche A Term Loans and the amount so refused shall be applied first pro rata to prepay the Tranche B Term Loans and second to reduce permanently the Revolving Credit Commitments as provided above. Amounts prepaid on account of the Term Loans may not be reborrowed.

2.12 Conversion and Continuation Options. (a) The Borrower may elect from time to time to convert Eurodollar Loans to Base Rate Loans by giving the Administrative Agent at least two Business Days' prior irrevocable notice of such election, provided that any such conversion of Eurodollar Loans may only be made on the last day of an Interest Period with respect thereto. The Borrower may elect from time to time to convert Base Rate Loans to Eurodollar Loans by giving the Administrative Agent at least three Business Days' prior irrevocable notice of such election. Any such notice of conversion to Eurodollar Loans shall specify the length of the initial Interest Period therefor. Upon receipt of any such notice, the Administrative Agent shall promptly notify each Lender thereof. All or any part of outstanding Eurodollar Loans and Base Rate Loans may be converted as provided herein, provided that (i) no Loan may be converted into a Eurodollar Loan (A) when any Event of Default has occurred and is continuing and the Administrative Agent has or the Required Lenders have determined in its or their sole discretion not to permit such a conversion or (B) having an Interest Period in excess of one month prior to the date which is 60 days after the Closing Date and (ii) no Loan may be converted into a Eurodollar Loan after the date that is one month prior to (y) the Revolving Credit Termination Date, with respect to Revolving Credit Loans and (z) the Term Loan Termination Date, with respect to Term Loans.

(b) Any Eurodollar Loans may be continued as such upon the expiration of the then current Interest Period with respect thereto by the Borrower giving irrevocable notice to the Administrative Agent, in accordance with the applicable provisions of the term "Interest Period" set forth in
Section 1.1, of the length of the next Interest Period to be applicable to such Loans, provided that no Eurodollar Loan may be continued as such (i) when any Event of Default has occurred and is continuing and the Administrative Agent has or the Required Lenders have determined in its or their sole discretion not to permit such a continuation or (ii) after the date that is one month prior to (A) the Revolving Credit Termination Date, with respect to the Revolving Credit Loans or (B) the Term Loan Termination Date, with respect to Term Loans, and provided, further, that if the Borrower shall fail to give any required notice as described above in this paragraph or if such continuation is not permitted pursuant to the preceding proviso such Loans shall be automatically converted to Base Rate Loans on the last day of such then expiring Interest Period.


2.13 Minimum Amounts and Maximum Number of Eurodollar Tranches. Notwithstanding anything to the contrary in this Agreement, all borrowings, conversions, continuations and optional prepayments of Loans hereunder and all selections of Interest Periods hereunder shall be in such amounts and be made pursuant to such elections so that, (a) after giving effect thereto, the aggregate principal amount of the Loans comprising each Eurodollar Tranche shall be equal to $1,000,000 or a whole multiple of $1,000,000 in excess thereof, (b) no more than four Eurodollar Tranches in respect of the Revolving Credit Loans shall be outstanding at any one time and (c) no more than eight Eurodollar Tranches in respect of all Loans (including the Revolving Credit Loans) shall be outstanding at any one time.

2.14 Interest Rates and Payment Dates. (a) Each Eurodollar Loan shall bear interest for each day during each Interest Period with respect thereto at a rate per annum equal to the Eurodollar Rate determined for such day plus the Applicable Margin.

(b) Each Base Rate Loan shall bear interest at a rate per annum equal to the Base Rate plus the Applicable Margin.

(c) If all or a portion of (i) any principal of any Loan or Reimbursement Obligations, (ii) any interest payable thereon, (iii) any commitment fee or (iv) any other amount payable hereunder shall not be paid when due (whether at the stated maturity, by acceleration or otherwise), the principal of the Loans and Reimbursement Obligations and any such overdue interest, commitment fee or other amount shall bear interest at a rate per annum which is the highest rate applicable to Term Loans provided for herein on such nonpayment date plus 2%, in each case from the date of such non-payment until such overdue principal, interest, commitment fee or other amount is paid in full (as well after as before judgment).

(d) Interest shall be payable in arrears on each Interest Payment Date, provided that interest accruing pursuant to paragraph (c) of this
Section 2.14 shall be payable from time to time on demand.

2.15 Computation of Interest and Fees. (a) Interest on Loans and Reimbursement Obligations, commitment fees, letter of credit commissions and interest on overdue interest, commitment fees and other amounts payable hereunder shall be calculated on the basis of a 360-day year for the actual days elapsed, except that, with respect to Base Rate Loans the rate of interest on which is calculated on the basis of the Prime Rate, the interest thereon shall be calculated on the basis of a 365- (or 366-, as the case may be) day year for the actual days elapsed. The Administrative Agent shall as soon as practicable notify the Borrower and the Lenders of each determination of a Eurodollar Rate. Any change in the interest rate on a Loan resulting from a change in the Base Rate or the Eurocurrency Reserve Requirements shall become effective as of the opening of business on the day on which such change becomes effective. The Administrative Agent shall as soon as practicable notify the Borrower and the Lenders of the effective date and the amount of each such change in interest rate.


(b) Each determination of an interest rate by the Administrative Agent pursuant to any provision of this Agreement shall be conclusive and binding on the Borrower and the Lenders in the absence of manifest error. The Administrative Agent shall, at the request of the Borrower, deliver to the Borrower a statement showing the quotations used by the Administrative Agent in determining any interest rate pursuant to Section 2.15(a).

2.16 Inability to Determine Interest Rate. If prior to the first day of any Interest Period:

(a) the Administrative Agent shall have determined (which determination shall be conclusive and binding upon the Borrower) that, by reason of circumstances affecting the relevant market, adequate and reasonable means do not exist for ascertaining the Eurodollar Rate for such Interest Period, or

(b) the Administrative Agent shall have received notice from the Required Lenders that the Eurodollar Rate determined or to be determined for such Interest Period will not adequately and fairly reflect the cost to such Lenders (as conclusively certified by such Lenders) of making or maintaining their affected Loans during such Interest Period,

the Administrative Agent shall give telecopy or telephonic notice thereof to the Borrower and the Lenders as soon as practicable thereafter. If such notice is given (x) any Eurodollar Loans requested to be made on the first day of such Interest Period shall be made as Base Rate Loans, (y) any Loans that were to have been converted on the first day of such Interest Period to Eurodollar Loans shall be continued as Base Rate Loans and (z) any outstanding Eurodollar Loans that were to be continued on the first day of such Interest Period as Eurodollar Loans shall be converted, on the first day of such Interest Period, to Base Rate Loans. Until such notice has been withdrawn by the Administrative Agent, no further Eurodollar Loans shall be made or continued as such, nor shall the Borrower have the right to convert Loans to Eurodollar Loans.

2.17 Pro Rata Treatment and Payments; Use of Proceeds. (a) Each borrowing by the Borrower from the Lenders hereunder, each payment by the Borrower on account of any commitment fee and any reduction of the Commitments of the Lenders shall be made pro rata according to the respective Tranche A Term Loan Percentages, Tranche B Term Loan Percentages or Revolving Credit Percentages, as the case may be, of the relevant Lenders. Except as provided in
Section 2.10 and 2.11, each payment (including each prepayment) by the Borrower on account of principal of and interest on the Term Loans shall be made pro rata according to the respective outstanding principal amounts of the Term Loans then held by the Term Loan Lenders (or, in the case of installment payments made pursuant to Section 2.8 or payments of accrued interest in respect thereof, the affected Term Loans then held by the relevant Term Loan Lenders). Each payment (including each prepayment) by the Borrower on account of principal of and interest on the Revolving Credit Loans shall be made pro rata according to the respective outstanding principal amounts of the Revolving Credit Loans then


held by the Revolving Credit Lenders. All payments (including prepayments) to be made by the Borrower hereunder and under the Notes, whether on account of principal, interest, fees or otherwise, shall be made without setoff or counterclaim and shall be made prior to 12:00 Noon, New York City time, on the due date thereof to the Administrative Agent, for the account of the Lenders, at the Administrative Agent's office specified in Section 10.2, in Dollars and in immediately available funds. The Administrative Agent shall distribute such payments to the Lenders promptly upon receipt in like funds as received. If any payment hereunder (other than payments on the Eurodollar Loans) becomes due and payable on a day other than a Business Day, such payment shall be extended to the next succeeding Business Day. If any payment on a Eurodollar Loan becomes due and payable on a day other than a Business Day, the maturity thereof shall be extended to the next succeeding Business Day unless the result of such extension would be to extend such payment into another calendar month, in which event such payment shall be made on the immediately preceding Business Day. In the case of any extension of any payment of principal pursuant to the preceding two sentences, interest thereon shall be payable at the then applicable rate during such extension.

(b) Unless the Administrative Agent shall have been notified in writing by any Lender prior to a borrowing that such Lender will not make the amount that would constitute its share of such borrowing available to the Administrative Agent, the Administrative Agent may assume that such Lender is making such amount available to the Administrative Agent, and the Administrative Agent may, in reliance upon such assumption, make available to the Borrower a corresponding amount. If such amount is not made available to the Administrative Agent by the required time on the Borrowing Date therefor, such Lender shall pay to the Administrative Agent, on demand, such amount with interest thereon at a rate equal to the daily average Federal Funds Effective Rate for the period until such Lender makes such amount immediately available to the Administrative Agent. A certificate of the Administrative Agent submitted to any Lender with respect to any amounts owing under this Section 2.17(b) shall be conclusive in the absence of manifest error. If such Lender's share of such borrowing is not made available to the Administrative Agent by such Lender within three Business Days of such Borrowing Date, the Administrative Agent shall also be entitled to recover such amount with interest thereon at the rate per annum applicable to Base Rate Loans hereunder, on demand, from the Borrower (together with any amounts due under Section 2.21).

(c) The Borrower shall use the proceeds of the Loans only in the manner expressly contemplated by Section 4.16.

2.18 Illegality. Notwithstanding any other provision herein, if the adoption of or any change in any Requirement of Law or in the interpretation or application thereof shall make it unlawful for any Lender to make or maintain Eurodollar Loans as contemplated by this Agreement, (a) the commitment of such Lender hereunder to make Eurodollar Loans, continue Eurodollar Loans as such and convert Base Rate Loans to Eurodollar Loans shall forthwith be cancelled and (b) such Lender's Loans then outstanding as Eurodollar Loans, if any, shall be converted automatically to Base Rate Loans on the respective last days of the then current Interest Periods with respect to such Loans or within such earlier period as required by law. If


any such conversion of a Eurodollar Loan occurs on a day which is not the last day of the then current Interest Period with respect thereto, the Borrower shall pay to such Lender such amounts, if any, as may be required pursuant to Section 2.21.

2.19 Requirements of Law. (a) If the adoption of or any change in any Requirement of Law or in the interpretation or application thereof or compliance by any Lender with any request or directive (whether or not having the force of law) from any central bank or other Governmental Authority made subsequent to the date hereof:

(i) shall subject any Lender to any tax of any kind whatsoever with respect to this Agreement, any Note, any Letter of Credit, any Application or any Eurodollar Loan made by it, or change the basis of taxation of payments to such Lender in respect thereof (except for taxes covered by Section 2.20 and changes in the rate of tax on the overall net income of such Lender);

(ii) shall impose, modify or hold applicable any reserve, special deposit, compulsory loan or similar requirement against assets held by, deposits or other liabilities in or for the account of, advances, loans or other extensions of credit by, or any other acquisition of funds by, any office of such Lender which is not otherwise included in the determination of the Eurodollar Rate hereunder; or

(iii) shall impose on such Lender any other condition;

and the result of any of the foregoing is to increase the cost to such Lender, by an amount which such Lender deems to be material, of making, converting into, continuing or maintaining Eurodollar Loans or issuing or participating in Letters of Credit, or to reduce any amount receivable hereunder in respect thereof, then, in any such case, the Borrower shall promptly pay such Lender, upon its demand, any additional amounts necessary to compensate such Lender for such increased cost or reduced amount receivable. If any Lender becomes entitled to claim any additional amounts pursuant to this Section 2.19, it shall promptly notify the Borrower (with a copy to the Administrative Agent) of the event by reason of which it has become so entitled.

(b) If any Lender shall have determined that the adoption of or any change in any Requirement of Law regarding capital adequacy or in the interpretation or application thereof or compliance by such Lender or any corporation controlling such Lender with any request or directive regarding capital adequacy (whether or not having the force of law) from any Governmental Authority made subsequent to the date hereof shall have the effect of reducing the rate of return on such Lender's or such corporation's capital as a consequence of its obligations hereunder or under or in respect of any Letter of Credit to a level below that which such Lender or such corporation could have achieved but for such adoption, change or compliance (taking into consideration such Lender's or such corporation's policies with respect to capital adequacy) by an amount deemed by such Lender to be material, then from time to time, after submission by such Lender to the Borrower (with a copy to the Administrative


Agent) of a written request therefor, the Borrower shall pay to such Lender such additional amount or amounts as will compensate such Lender for such reduction.

(c) If any Lender becomes entitled to claim any additional amounts pursuant to this subsection, it shall promptly notify the Borrower (with a copy to the Administrative Agent) of the event by reason of which it has become so entitled. A certificate as to any additional amounts payable pursuant to this Section 2.19, together with a calculation thereof in reasonable detail, shall be submitted by the affected Lender to the Borrower (with a copy to the Administrative Agent) and such certificate shall be conclusive in the absence of manifest error. The obligations of the Borrower pursuant to this Section 2.19 shall survive the termination of this Agreement and the payment of the Notes and all other amounts payable hereunder.

(d) In the event any Lender delivers a certificate requesting compensation pursuant to this Section 2.19, the Borrower may, at its sole expense and effort, upon notice to such Lender and the Administrative Agent, require such Lender to transfer and assign, without recourse (in accordance with and subject to the restrictions contained in Section 10.6), all of its interests, rights and obligations under this Agreement and the other Loan Documents to an assignee which shall assume such assigned obligations (which assignee may be another Lender, if a Lender accepts such assignment); provided, however, that (x) such assignment shall not conflict with any law, rule or regulation or order of any court or other Governmental Authority having jurisdiction, (y) the Borrower shall have received the prior written consent to such assignment of the Administrative Agent, which consent shall not unreasonably be delayed or withheld and (z) the Borrower or such assignee shall have paid to the affected Lender in immediately available funds an amount equal to the sum of the principal of the outstanding Loans of such Lender plus all interest, fees and other amounts accrued and unpaid for the account of such Lender hereunder (including any amounts under this Section 2.19); provided, further, that if prior to any such transfer and assignment the circumstances or event that resulted in such Lender's claim for compensation under this Section 2.19 cease to cause such Lender to suffer increased costs or reductions in amounts received or receivable or reduction in return on capital (including as a result of any action taken by such Lender pursuant to Section 2.22), or if such Lender shall waive its right to claim further compensation under this Section 2.19 in respect of such circumstances or event, then such Lender shall not thereafter be required to make any such transfer and assignment hereunder.

2.20 Taxes. (a) All payments made by the Borrower under this Agreement and the Notes shall be made free and clear of, and without deduction or withholding for or on account of, any present or future income, stamp or other taxes, levies, imposts, duties, charges, fees, deductions or withholdings, now or hereafter imposed, levied, collected, withheld or assessed by any Governmental Authority, excluding net income taxes and franchise taxes (imposed in lieu of net income taxes) imposed on the Administrative Agent or any Lender as a result of a present or former connection between the Administrative Agent or such Lender and the jurisdiction of the Governmental Authority imposing such tax or any political subdivision or taxing authority thereof or therein (other than any such connection arising solely


from the Administrative Agent or such Lender having executed, delivered or performed its obligations or received a payment under, or enforced, this Agreement or any other Loan Document). If any such non-excluded taxes, levies, imposts, duties, charges, fees, deductions or withholdings ("Non-Excluded Taxes") are required to be withheld from any amounts payable to the Administrative Agent or any Lender hereunder or under the Notes, the amounts so payable to the Administrative Agent or such Lender shall be increased to the extent necessary to yield to the Administrative Agent or such Lender (after payment of all Non-Excluded Taxes) interest or any such other amounts payable hereunder at the rates or in the amounts specified in this Agreement and the Notes, provided, however, that the Borrower shall make payments net of and after deduction for Non-Excluded Taxes and shall not be required to increase any such amounts payable to any Non-U.S. Lender (as defined below) that fails to comply with Section 2.20(b). Whenever any Non-Excluded Taxes are payable by the Borrower, as promptly as possible thereafter the Borrower shall send to the Administrative Agent for its own account or for the account of such Lender, as the case may be, a certified copy of an original official receipt received by the Borrower showing payment thereof. If the Borrower fails to pay any Non-Excluded Taxes when due to the appropriate taxing authority or fails to remit to the Administrative Agent the required receipts or other required documentary evidence, the Borrower shall indemnify the Administrative Agent and the Lenders for any Non-Excluded Taxes, incremental taxes, interest or penalties that may become payable by the Administrative Agent or any Lender as a result of any such failure. The agreements in this Section 2.20 shall survive the termination of this Agreement and the payment of the Notes and all other amounts payable hereunder.

(b) Each Lender (or Transferee) that is not a corporation or partnership created or organized in or under the laws of the United States, any estate that is subject to federal income taxation regardless of the source of its income or any trust which is subject to the supervision of a court within the United States and the control of a United States fiduciary as described in section 7701(a)(30) of the Code (a "Non-U.S. Lender") shall deliver to the Borrower and the Administrative Agent (or, in the case of a Participant, to the Lender from which the related participation shall have been purchased) on or before the date on which it becomes a party to this Agreement (or, in the case of a Participant, on or before the date on which such Participant purchases the related participation) either:

(A) (x) two duly completed and signed copies of either Internal Revenue Service Form 1001 (relating to such Non-U.S. Lender and entitling it to a complete exemption from withholding of U.S. Taxes on all amounts to be received by such Non-U.S. Lender pursuant to this Agreement and the other Loan Documents) or Form 4224 (relating to all amounts to be received by such Non-U.S. Lender pursuant to this Agreement and the other Loan Documents), or successor and related applicable forms, as the case may be, and (y) two duly completed and signed copies of Internal Revenue Service Form W-8 or W-9, or successor and related applicable forms, as the case may be; or


(B) in the case of a Non-U.S. Lender that is not a "bank" within the meaning of Section 881(c)(3)(A) of the Code and that does not comply with the requirements of clause (A) hereof, (x) a statement in the form of Exhibit F (or such other form of statement as shall be reasonably requested by the Borrower or the Administrative Agent from time to time) to the effect that such Non-U.S. Lender is eligible for a complete exemption from withholding of U.S. Taxes under Code Section 871(h) or 881(c), and (y) two duly completed and signed copies of Internal Revenue Service Form W-8 or successor and related applicable form.

Further, each Non-U.S. Lender agrees to deliver to the Borrower and the Administrative Agent, and if applicable, the assigning Lender (or, in the case of a Participant, to the Lender from which the related participation shall have been purchased) two further duly completed and signed copies of such Forms 1001, 4224, W-8 or W-9, as the case may be, or successor and related applicable forms, on or before the date that any such form expires or becomes obsolete and promptly after the occurrence of any event requiring a change from the most recent form(s) previously delivered by it to the Borrower or the Administrative Agent (or, in the case of a Participant, to the Lender from which the related participation shall have been purchased) in accordance with applicable United States laws and regulations; unless, in any such case, any change in law or regulation has occurred subsequent to the date such Lender became a party to this Agreement (or in the case of a Participant, the date on which such Participant purchased the related participation) which renders all such forms inapplicable or which would prevent such Lender (or Participant) from properly completing and executing any such form with respect to it and such Lender promptly notifies the Borrower and the Administrative Agent (or, in the case of a Participant, the Lender from which the related participation shall have been purchased) if it is no longer able to deliver, or if it is required to withdraw or cancel, any form or statement previously delivered by it pursuant to this
Section 2.20(b). A Non-U.S. Lender shall not be required to deliver any form or statement pursuant to the immediately preceding sentences in this Section 2.20(b) that such Non-U.S. Lender is not legally able to deliver (it being understood and agreed that the Borrower shall withhold or deduct such amounts from any payments made to such Non-U.S. Lender that the Borrower reasonably determines are required by law and that payments resulting from a failure to comply with this paragraph (b) shall not be subject to payment or indemnity by the Borrower pursuant to Section 2.20(a)).

2.21 Indemnity. The Borrower agrees to indemnify each Lender and to hold each Lender harmless from any loss or expense which such Lender may sustain or incur as a consequence of (a) default by the Borrower in making a borrowing of, conversion into or continuation of Eurodollar Loans after the Borrower has given a notice requesting the same in accordance with the provisions of this Agreement, (b) default by the Borrower in making any prepayment after the Borrower has given a notice thereof in accordance with the provisions of this Agreement or (c) the making of a prepayment of Eurodollar Loans on a day which is not the last day of an Interest Period with respect thereto. Such indemnification may include an amount equal to the excess, if any, of (i) the amount of interest which would have accrued on the amount so prepaid, or not so borrowed, converted or continued, for the period from the


date of such prepayment or of such failure to borrow, convert or continue to the last day of such Interest Period (or, in the case of a failure to borrow, convert or continue, the Interest Period that would have commenced on the date of such failure) in each case at the applicable rate of interest for such Loans provided for herein (excluding, however, the Applicable Margin included therein, if any) over (ii) the amount of interest (as reasonably determined by such Lender) which would have accrued to such Lender on such amount by placing such amount on deposit for a comparable period with leading banks in the interbank eurodollar market. A certificate as to any amounts payable pursuant to this
Section 2.21, together with a calculation thereof in reasonable detail, shall be submitted to the Borrower by any affected Lender and such certificate shall be conclusive in the absence of manifest error. This covenant shall survive the termination of this Agreement and the payment of the Notes and all other amounts payable hereunder.

2.22 Change of Lending Office. Each Lender agrees that, upon the occurrence of any event giving rise to the operation of Section 2.18, 2.19(a) or 2.20 with respect to such Lender, it will, if requested by the Borrower, use reasonable efforts (subject to overall policy considerations of such Lender) to designate another lending office for any Loans affected by such event with the object of avoiding the consequences of such event; provided that such designation is made on terms that, in the sole judgment of such Lender, cause such Lender and its lending office(s) to suffer no material economic, legal or regulatory disadvantage, and provided, further, that nothing in this
Section 2.22 shall affect or postpone any of the obligations of the Borrower or the rights of any Lender pursuant to Section 2.18, 2.19(a) or 2.20.

SECTION 3. LETTERS OF CREDIT

3.1 L/C Commitment. (a) Subject to the terms and conditions hereof, the Issuing Lender, in reliance on the agreements of the other Revolving Credit Lenders set forth in Section 3.4(a), agrees to issue letters of credit ("Letters of Credit") for the account of the Borrower on any Business Day during the Revolving Credit Commitment Period in such form as may be approved from time to time by the Issuing Lender; provided that the Issuing Lender shall have no obligation to issue any Letter of Credit if, after giving effect to such issuance, (i) the L/C Obligations would exceed the L/C Commitment or (ii) the Aggregate Outstanding Revolving Extensions of Credit would exceed the aggregate Revolving Credit Commitments. Each Letter of Credit shall (i) be denominated in Dollars, (ii) be either (x) a standby letter of credit issued to support (I) obligations of the Borrower or any of its Subsidiaries, contingent or otherwise, which finance the working capital and business needs of the Borrower or its Subsidiaries or (II) performance obligations of the Borrower and its Subsidiaries, in each case, incurred in the ordinary course of business (a "Standby Letter of Credit"), or (y) a commercial letter of credit in respect of the purchase of goods or services by the Borrower or any of its Subsidiaries in the ordinary course of business (a "Commercial Letter of Credit"), (iii) expire no later than five Business Days prior to the Revolving Credit Termination Date and (iv) expire no later than 365 days after its date of issuance, provided that any Letter of Credit with a 365-day duration may provide for the renewal thereof at the election of the Borrower (in


accordance with procedures to be established by the Issuing Lender) for additional 365-day periods (which shall not expire later than five Business Days prior to the Revolving Credit Termination Date).

(b) Each Letter of Credit shall be subject to the Uniform Customs and, to the extent not inconsistent therewith, the laws of the State of New York.

(c) The Issuing Lender shall not at any time be obligated to issue any Letter of Credit hereunder if such issuance would conflict with, or cause the Issuing Lender or any L/C Participant to exceed any limits imposed by, any applicable Requirement of Law.

3.2 Procedure for Issuance of Letter of Credit. The Borrower may from time to time request that the Issuing Lender issue a Letter of Credit by delivering to the Issuing Lender at its address for notices specified herein an Application therefor, completed to the satisfaction of the Issuing Lender, and such other certificates, documents and other papers and information as the Issuing Lender may request. Upon receipt of any Application, the Issuing Lender will process such Application and the certificates, documents and other papers and information delivered to it in connection therewith in accordance with its customary procedures and shall promptly issue the Letter of Credit requested thereby (but in no event shall the Issuing Lender be required to issue any Letter of Credit earlier than three Business Days after its receipt of the Application therefor and all such other certificates, documents and other papers and information relating thereto) by issuing the original of such Letter of Credit to the beneficiary thereof or as otherwise may be agreed to by the Issuing Lender and the Borrower. The Issuing Lender shall furnish a copy of such Letter of Credit to the Borrower promptly following the issuance thereof. The Issuing Lender shall promptly furnish to the Administrative Agent, which shall in turn promptly furnish to the Lenders, notice of the issuance of each Standby Letter of Credit (including the amount thereof). On each L/C Fee Payment Date, the Issuing Lender shall promptly furnish to the Administrative Agent, which shall in turn promptly furnish to the Lenders, notice of the aggregate face amount of the Commercial Letters of Credit outstanding on such date.

3.3 Fees, Commissions and Other Charges. (a) The Borrower agrees that it will pay a commission on all outstanding Standby Letters of Credit at a rate per annum equal to 1/8 of 1% above the Applicable Margin then in effect with respect to Revolving Credit Loans that are Eurodollar Loans of the face amount of each such Letter of Credit, of which 1/8 of 1% per annum will be a fronting fee for the account of the Issuing Lender, and the remainder will be shared ratably among the Revolving Credit Lenders in accordance with their Revolving Credit Percentages, payable quarterly in arrears on each L/C Fee Payment Date after the issuance date. The Borrower agrees that it will pay a commission on all outstanding Commercial Letters of Credit at a rate per annum equal to 1/8 of 1% above the Applicable Margin then in effect with respect to Revolving Credit Loans that are Eurodollar Loans of the average daily face amount of such Letters of Credit during the period for which such payment is made, of which 1/8 of 1% per annum will be a fronting fee for the account of the Issuing Lender, and the remainder will be shared ratably among the Revolving Credit Lenders in


accordance with the Revolving Credit Percentage, payable quarterly in arrears on each L/C Fee Payment Date.

(b) In addition to the foregoing fees and commissions, the Borrower agrees that it shall pay or reimburse the Issuing Lender promptly upon demand for such normal and customary costs and expenses as are incurred or charged by the Issuing Lender in issuing, negotiating, effecting payment under, amending or otherwise administering any Letter of Credit.

(c) The Administrative Agent shall, promptly following its receipt thereof, distribute to the Issuing Lender and the L/C Participants all fees and commissions received by the Administrative Agent for their respective accounts pursuant to this Section.

3.4 L/C Participations. (a) The Issuing Lender irrevocably agrees to grant and hereby grants to each L/C Participant, and, to induce the Issuing Lender to issue Letters of Credit hereunder, each L/C Participant irrevocably agrees to accept and purchase and hereby accepts and purchases from the Issuing Lender, on the terms and conditions hereinafter stated, for such L/C Participant's own account and risk an undivided interest equal to such L/C Participant's Revolving Credit Percentage in the Issuing Lender's obligations and rights under each Letter of Credit issued hereunder and the amount of each draft paid by the Issuing Lender thereunder. Each L/C Participant unconditionally and irrevocably agrees with the Issuing Lender that, if a draft is paid under any Letter of Credit for which the Issuing Lender is not reimbursed in full by the Borrower in accordance with the terms of this Agreement, such L/C Participant shall pay to the Issuing Lender upon demand at the Issuing Lender's address for notices specified herein an amount equal to such L/C Participant's Revolving Credit Percentage of the amount of such draft, or any part thereof, which is not so reimbursed.

(b) If any amount required to be paid by any L/C Participant to the Issuing Lender pursuant to Section 3.4(a) in respect of any unreimbursed portion of any payment made by the Issuing Lender under any Letter of Credit is paid to the Issuing Lender within three Business Days after the date such payment is due, such L/C Participant shall pay to the Issuing Lender on demand an amount equal to the product of (i) such amount, times (ii) the daily average Federal Funds Effective Rate during the period from and including the date such payment is required to the date on which such payment is immediately available to the Issuing Lender, times (iii) a fraction the numerator of which is the number of days that elapse during such period and the denominator of which is
360. If any such amount required to be paid by any L/C Participant pursuant to
Section 3.4(a) is not made available to the Issuing Lender by such L/C Participant within three Business Days after the date such payment is due, the Issuing Lender shall be entitled to recover from such L/C Participant, on demand, such amount with interest thereon calculated from such due date at the rate per annum applicable to Base Rate Loans hereunder. A certificate of the Issuing Lender submitted to any L/C Participant with respect to any amounts owing under this Section shall be conclusive in the absence of manifest error.


(c) Whenever, at any time after the Issuing Lender has made payment under any Letter of Credit and has received from any L/C Participant its pro rata share of such payment in accordance with Section 3.4(a), the Issuing Lender receives any payment related to such Letter of Credit (whether directly from the Borrower or otherwise, including proceeds of collateral applied thereto by the Issuing Lender), or any payment of interest on account thereof, the Issuing Lender will distribute to such L/C Participant its pro rata share thereof; provided that in the event that any such payment received by the Issuing Lender shall be required to be returned by the Issuing Lender, such L/C Participant shall return to the Issuing Lender the portion thereof previously distributed by the Issuing Lender to it.

3.5 Reimbursement Obligation of the Borrower. The Borrower agrees to reimburse the Issuing Lender on each date on which the Issuing Lender notifies the Borrower of the date and amount of a draft presented under any Letter of Credit and paid by the Issuing Lender for the amount of (a) such draft so paid and (b) any taxes, fees, charges or other costs or expenses incurred by the Issuing Lender in connection with such payment. Each such payment shall be made to the Issuing Lender at its address for notices specified herein in lawful money of the United States and in immediately available funds. Interest shall be payable on any and all amounts remaining unpaid by the Borrower under this
Section from the date such amounts become payable (whether at stated maturity, by acceleration or otherwise) until payment in full at the rate set forth in
Section 2.14(c). Each drawing under any Letter of Credit shall constitute a request by the Borrower to the Administrative Agent for a borrowing pursuant to
Section 2.6 of Base Rate Loans in the amount of such drawing, the proceeds of such Loans to be applied to reimburse such drawing. The Borrowing Date with respect to such borrowing shall be the date of such drawing.

3.6 Obligations Absolute. The Borrower's obligations under this Section 3 shall be absolute and unconditional under any and all circumstances and irrespective of any setoff, counterclaim or defense to payment which the Borrower may have or have had against the Issuing Lender, any beneficiary of a Letter of Credit or any other Person. The Borrower also agrees with the Issuing Lender that the Issuing Lender shall not be responsible for, and the Borrower's Reimbursement Obligations under Section 3.5 shall not be affected by, among other things, the validity or genuineness of documents or of any endorsements thereon, even though such documents shall in fact prove to be invalid, fraudulent or forged, or any dispute between or among the Borrower and any beneficiary of any Letter of Credit or any other party to which such Letter of Credit may be transferred or any claims whatsoever of the Borrower against any beneficiary of such Letter of Credit or any such transferee. The Issuing Lender shall not be liable for any error, omission, interruption or delay in transmission, dispatch or delivery of any message or advice, however transmitted, in connection with any Letter of Credit, except for errors or omissions found by a final and nonappealable decision of a court of competent jurisdiction to have resulted from the gross negligence or willful misconduct of the Issuing Lender. The Borrower agrees that any action taken or omitted by the Issuing Lender under or in connection with any Letter of Credit or the related drafts or documents, if done in the absence of gross negligence or willful misconduct and in accordance with the standards or care specified in the Uniform Commercial Code of the State of New York, shall


be binding on the Borrower and shall not result in any liability of the Issuing Lender to the Borrower.

3.7 Letter of Credit Payments. If any draft shall be presented for payment under any Letter of Credit, the Issuing Lender shall promptly notify the Borrower of the date and amount thereof. The responsibility of the Issuing Lender to the Borrower in connection with any draft presented for payment under any Letter of Credit shall, in addition to any payment obligation expressly provided for in such Letter of Credit, be limited to determining that the documents (including each draft) delivered under such Letter of Credit in connection with such presentment are substantially in conformity with such Letter of Credit.

3.8 Applications. To the extent that any provision of any Application related to any Letter of Credit is inconsistent with the provisions of this Section 3, the provisions of this Section 3 shall apply.

SECTION 4. REPRESENTATIONS AND WARRANTIES

To induce the Arranger, the Administrative Agent and the Lenders to enter into this Agreement and to make the Loans and issue or participate in the Letters of Credit, the Parent and the Borrower hereby represent and warrant to the Administrative Agent and each Lender that:

4.1 Financial Condition. (a)(i) The unaudited pro forma consolidated balance sheet of the Borrower as at December 31, 1996 (including the notes thereto) (the "Pro Forma Balance Sheet"), copies of which have heretofore been furnished to each Lender, has been prepared giving effect (as if such events had occurred on such date) to (A) the Acquisitions and the other transactions contemplated by the Acquisition Documents, (B) the borrowings under this Agreement contemplated to be made on the Closing Date (including all borrowings to be held by the Administrative Agent pursuant to the Cash Collateral Agreement) and the use of proceeds thereof, (C) the issuance of the Interim Notes and (D) the payment of fees and expenses in connection with the foregoing. The Pro Forma Balance Sheet has been prepared based on the best information available to the Borrower as of the date of delivery thereof and presents fairly on a pro forma basis the estimated consolidated financial position of the Borrower as of December 31, 1996, assuming that the events specified in the preceding sentence had actually occurred at such date.

(ii) The unaudited pro forma consolidated income statement of the Borrower for the period of four consecutive fiscal quarters ended as of December 31, 1996 (including the notes thereto) (the "Pro Forma Income Statement"), copies of which have heretofore been furnished to each Lender, has been prepared giving effect (as if such events had occurred on the first day of such period) to (A) the Acquisitions and the other transactions contemplated by the Acquisition Documents, (B) the borrowings under this Agreement contemplated to be made on the Closing Date (including all borrowings to be held by the Administrative Agent pursuant


to the Cash Collateral Agreement) and the use of proceeds thereof, (C) the issuance of the Interim Notes and (D) the payment of fees and expenses in connection with the foregoing. The Pro Forma Income Statement has been prepared based on the best information available to the Borrower as of the date of delivery thereof and presents fairly on a pro forma basis the estimated consolidated results of operations of the Borrower for the period of four consecutive fiscal quarters ended as of December 31, 1996, assuming that the events specified in the preceding sentence had actually occurred on the first day of such period. The Pro Forma Income Statement presents Consolidated EBITDA for the Borrower for such period of not less than $27,200,000.

(b) (i) The consolidated balance sheets of the Borrower as at March 31, 1996 and March 31, 1995 and the related consolidated statements of income and of cash flows for the fiscal years ended on such dates, reported on by KPMG Peat Marwick L.P., copies of which have heretofore been furnished to each Lender, are complete and correct and present fairly in all material respects the consolidated financial condition of the Borrower as at such dates, and the consolidated results of operations and consolidated cash flows for the fiscal years then ended. The unaudited consolidated balance sheet of the Borrower as at February 28, 1997 and the related unaudited consolidated statements of income and of cash flows for the eleven-month period ended on such date, certified by a Responsible Officer of the Borrower, copies of which have heretofore been furnished to each Lender, are complete and correct and present fairly in all material respects the consolidated financial condition of the Borrower as at such date, and the consolidated results of operations and consolidated cash flows for the eleven-month period then ended (subject to normal year-end audit adjustments).

(ii) The audited consolidated and combined balance sheet of Bowen as at September 30, 1996 and the related unaudited statement of income for the nine-month period ended on such date, reported on, in the case of such balance sheet, by Ernst & Young LLP, copies of which have heretofore been furnished to each Lender, are complete and correct and present fairly in all material respects the consolidated financial condition of Bowen as at such date. The unaudited consolidated and combined balance sheets of Bowen as at December 31, 1995 and December 31, 1996 and the related unaudited statements of income and of cash flows (in the case of December 31, 1995) for the fiscal years ended on such dates, certified by the chief financial officer of Bowen, copies of which have heretofore been furnished to each Lender, are complete and correct and present fairly in all material respects the consolidated financial condition of Bowen as at such dates, and the results of operations and consolidated cash flows for the fiscal years then ended.

(iii) The consolidated balance sheets of Cardwell as at December 31, 1995 and October 31, 1996 and the related consolidated statements of income and of cash flows for the fiscal year and ten-month period, respectively, ended on such dates, reported on by Grant Thornton in the case of the December 31, 1995 financial statements and by KPMG Peat Marwick L.P. in the case of the October 31, 1996 financial statements, copies of which have heretofore been furnished to each Lender, are complete and correct and present fairly in all material respects the consolidated financial condition of Cardwell as at such dates, and the


consolidated results of operations and consolidated cash flows for the fiscal year and ten-month period, respectively, then ended. The unaudited consolidated balance sheets of Cardwell as at December 31, 1996 and January 31, 1997 and the related unaudited consolidated statement of income for the fiscal year ended on December 31, 1996, certified by the chief financial officer of Cardwell, copies of which have heretofore been furnished to each Lender, are complete and correct and present fairly the consolidated financial condition of Cardwell as at such dates, and the consolidated results of operations for the fiscal year ended on December 31, 1996 (subject to normal year-end audit adjustments in the case of the January 31, 1997 financial statements).

All such financial statements, including the related schedules and notes thereto, have been prepared in accordance with GAAP applied consistently throughout the periods involved (except as approved by such accountants and as disclosed therein). Neither the Borrower nor any of the Acquired Companies had at the date of the most recent balance sheet referred to above any undisclosed liabilities, any material Guarantee Obligation, contingent liability or liability for taxes, or any long-term lease or unusual forward or long-term commitment, including, without limitation, any interest rate or foreign currency swap or exchange transaction, which is not reflected in the foregoing statements or in the notes thereto and not required to be disclosed by GAAP except, in the case of Bowen, matters expressly identified or referred to in any exhibit or schedule to the Bowen Asset Purchase Agreement or matters which are not required to be expressly so identified or referred to in any such exhibit or schedule by reason of any express limitation or exclusion in any representation, warranty, covenant, agreement or undertaking contained in the Bowen Asset Purchase Agreement. During the period from March 31, 1996 to and including the date hereof there has been no sale, transfer or other disposition by the Borrower or any of its consolidated Subsidiaries or by any of the Acquired Companies or any of their consolidated Subsidiaries of any material part of their business or property and no purchase or other acquisition of any business or property (including any Capital Stock of any other Person) material in relation to the consolidated financial condition of the Borrower or the Acquired Companies, in each case, at March 31, 1996, other than pursuant to the Acquisition Documents.

4.2 No Change. (a) Since March 31, 1996, there has been no development or event which has had or could reasonably be expected to have a Material Adverse Effect, and (b) during the period from March 31, 1996 to and including the date hereof no dividends or other distributions have been declared, paid or made upon the Capital Stock of the Parent or the Borrower nor has any of the Capital Stock of the Parent or the Borrower been redeemed, retired, purchased or otherwise acquired for value by the Parent or the Borrower.

4.3 Corporate Existence; Compliance with Law. Each of the Parent, the Borrower and their Subsidiaries (a) is duly organized, validly existing and in good standing under the laws of the jurisdiction of its organization, (b) has the power and authority, and the legal right, to own and operate its property, to lease the property it operates as lessee and to conduct the business in which it is currently engaged, (c) is duly qualified and in good standing under the laws of each jurisdiction where its ownership, lease or operation of property or the conduct of its business requires such qualification, except where the failure to be so


qualified could not reasonably be expected to have a Material Adverse Effect and
(d) is in compliance with all Requirements of Law except to the extent that the failure to comply therewith could not, in the aggregate, reasonably be expected to have a Material Adverse Effect.

4.4 Corporate Power; Authorization; Enforceable Obligations. Each Loan Party has the power and authority, and the legal right, to make, deliver and perform each Loan Document to which it is a party and, in the case of the Borrower, to borrow hereunder. Each Loan Party has taken all necessary action to authorize the execution, delivery and performance of the Loan Documents to which it is a party and, in the case of the Borrower, to authorize the borrowings on the terms and conditions of this Agreement and the Notes. No material consent or authorization of, filing with, notice to or other act by or in respect of, any Governmental Authority or any other Person is required in connection with the Acquisitions and the other transactions contemplated hereby, the borrowings hereunder or with the execution, delivery, performance, validity or enforceability of this Agreement or any of the Loan Documents, except the filings referred to in Section 4.19(b) and (c). Each Loan Document has been duly executed and delivered on behalf of each Loan Party thereto. This Agreement constitutes, and each other Loan Document upon execution will constitute, a legal, valid and binding obligation of each Loan Party thereto, enforceable against each such Loan Party in accordance with its terms, except as enforceability may be limited by applicable bankruptcy, insolvency, reorganization, moratorium or similar laws affecting the enforcement of creditors' rights generally and by general equitable principles (whether enforcement is sought by proceedings in equity or at law).

4.5 No Legal Bar. The execution, delivery and performance of this Agreement and the other Loan Documents, the issuance of Letters of Credit, the borrowings hereunder, the use of the proceeds thereof and the consummation of the Acquisitions will not violate any Requirement of Law or Contractual Obligation of the Parent, the Borrower or of any of their Subsidiaries and will not result in, or require, the creation or imposition of any Lien on any of their respective properties or revenues pursuant to any such Requirement of Law or Contractual Obligation (other than the Liens created by the Security Documents).

4.6 No Material Litigation. No litigation, investigation or proceeding of or before any arbitrator or Governmental Authority is pending or, to the knowledge of the Parent or the Borrower, threatened by or against the Parent, the Borrower or any of their Subsidiaries or against any of its or their respective properties or revenues (a) with respect to any of the Loan Documents or any of the transactions contemplated hereby or thereby or (b) which could reasonably be expected to have a Material Adverse Effect.

4.7 No Default. Neither the Parent, the Borrower nor any of their Subsidiaries is in default under or with respect to any of its Contractual Obligations in any respect which could reasonably be expected to have a Material Adverse Effect. No Default or Event of Default has occurred and is continuing.


4.8 Ownership of Property; Liens. Each of the Parent, the Borrower and their Subsidiaries has title in fee simple to, or a valid leasehold interest in, all its real property, and good title to, or a valid leasehold interest in, all its other property, and none of such property is subject to any Lien except as permitted by Section 7.3. The Borrower and its Subsidiaries have title in fee simple to no real property other than the Mortgaged Property and any real property the fair market value of which the Borrower reasonably believes is less than $75,000.

4.9 Intellectual Property. The Parent, the Borrower and each of their Subsidiaries owns, or is licensed to use, all trademarks, tradenames, copyrights, technology, know-how and processes necessary for the conduct of its business as currently conducted, except for those the failure to own or license which could not reasonably be expected to have a Material Adverse Effect (collectively, the "Intellectual Property"). No material claim has been asserted and is pending by any Person challenging or questioning the use of any Intellectual Property or the validity or effectiveness of any Intellectual Property, nor does the Parent or the Borrower know of any valid basis for any such claim. The use of Intellectual Property by the Parent, the Borrower and their Subsidiaries does not infringe on the rights of any Person in any material respect.

4.10 No Burdensome Restrictions. No Requirement of Law or Contractual Obligation of the Parent, the Borrower or any of their Subsidiaries could reasonably be expected to have a Material Adverse Effect.

4.11 Taxes. Each of the Parent, the Borrower and their Subsidiaries has filed or caused to be filed all Federal, state and other material tax returns which are required to be filed and has paid all taxes shown to be due and payable on said returns or on any assessments made against it or any of its property and all other taxes, fees or other charges imposed on it or any of its property by any Governmental Authority (other than any the amount or validity of which are currently being contested in good faith by appropriate proceedings and with respect to which reserves in conformity with GAAP have been provided on the books of the Borrower); no tax Lien has been filed, and, to the knowledge of the Parent and the Borrower, no claim is being asserted, with respect to any such tax, fee or other charge.

4.12 Federal Regulations. No part of the proceeds of any Loans will be used for "purchasing" or "carrying" any "margin stock" within the respective meanings of each of the quoted terms under Regulation G or Regulation U of the Board as now and from time to time hereafter in effect or for any purpose which violates the provisions of the Regulations of the Board. If requested by any Lender or the Administrative Agent, the Borrower will furnish to the Administrative Agent and each Lender a statement to the foregoing effect in conformity with the requirements of FR Form G-1 or FR Form U-1 referred to in said Regulation G or Regulation U, as the case may be.

4.13 ERISA. Neither a Reportable Event nor an "accumulated funding deficiency" (within the meaning of Section 412 of the Code or Section 302 of ERISA) has occurred during the five-year period prior to the date on which this representation is made or


deemed made with respect to any Plan, and each Plan has complied in all material respects with the applicable provisions of ERISA and the Code. No termination of a Single Employer Plan has occurred, and no Lien in favor of the PBGC or a Plan has arisen, during such five-year period. The present value of all accrued benefits under each Single Employer Plan (based on those assumptions used to fund such Plans) did not, as of the last annual valuation date prior to the date on which this representation is made or deemed made, exceed the value of the assets of such Plan allocable to such accrued benefits by a material amount. Neither the Borrower nor any Commonly Controlled Entity has had a complete or partial withdrawal from any Multiemployer Plan which has resulted or could reasonably be expected to result in a material liability under ERISA, and neither the Borrower nor any Commonly Controlled Entity would become subject to any material liability under ERISA if the Borrower or any such Commonly Controlled Entity were to withdraw completely from all Multiemployer Plans as of the valuation date most closely preceding the date on which this representation is made or deemed made. To the knowledge of the Borrower and the Commonly Controlled Entities, no such Multiemployer Plan is in Reorganization or Insolvent. The present value (determined using actuarial and other assumptions which are reasonable in respect of the benefits provided and the employees participating) of the liability of the Borrower and each Commonly Controlled Entity for post retirement benefits to be provided to their current and former employees under Plans which are welfare benefit plans (as defined in Section 3(1) of ERISA) does not, in the aggregate, exceed the assets under all such Plans allocable to such benefits by an amount in excess of $100,000.

4.14 Investment Company Act; Other Regulations. No Loan Party is an "investment company", or a company "controlled" by an "investment company", within the meaning of the Investment Company Act of 1940, as amended. No Loan Party is subject to regulation under any Federal or State statute or regulation (other than Regulation X of the Board) which limits its ability to incur Indebtedness.

4.15 Subsidiaries. The Subsidiaries listed on Schedule 4.15 constitute all the direct or indirect Subsidiaries of the Parent and the Borrower and Schedule 4.15 shows, as to each such Subsidiary, its jurisdiction of its incorporation, its authorized capitalization and the ownership of Capital Stock of such Subsidiary. The Parent has no direct Subsidiaries other than the Borrower.

4.16 Purpose of Loans; Limitations on Use. The proceeds of the Tranche A Term Loans shall be used to finance the Acquisitions and to pay related fees and expenses. The proceeds of the Tranche B Term Loans shall be used to repay a portion of the Interim Notes. The Revolving Credit Loans shall be used to refinance certain existing indebtedness of the Borrower and the Acquired Companies as described on Schedule 4.16 and to finance the working capital needs and other general corporate purposes of the Borrower and its Subsidiaries in the ordinary course of business.


4.17 Environmental Matters. Except as set forth on Schedule 4.17:

(a) The Properties do not contain, and have not previously contained, any Materials of Environmental Concern in amounts or concentrations or under circumstances which (i) constitute or constituted a violation of, or (ii) could give rise to liability under, any Environmental Law, except in either case insofar as such violation or liability, or any aggregation thereof, could not reasonably be expected to result in the payment of a Material Environmental Amount.

(b) The Properties and all operations at the Properties are in material compliance, and have in the last five years been in material compliance, with all applicable Environmental Laws, and there is no contamination at, under or about the Properties or violation of any Environmental Law with respect to the Properties or the business operated by the Parent, the Borrower or any of their Subsidiaries (the "Business") which could reasonably be expected to materially interfere with the continued operation of the Properties. Neither the Parent, the Borrower nor any of their Subsidiaries has assumed any liability of any other Person under Environmental Laws.

(c) Neither the Parent, the Borrower nor any of their Subsidiaries has received or is aware of any notice of violation, alleged violation, non-compliance, liability or potential liability regarding environmental matters or compliance with Environmental Laws with regard to any of the Properties or the Business, nor does the Parent, the Borrower or any of their Subsidiaries have knowledge or reason to believe that any such notice will be received or is being threatened, except insofar as such notice or threatened notice, or any aggregation thereof, does not involve a matter or matters that could reasonably be expected to result in the payment of a Material Environmental Amount.

(d) Materials of Environmental Concern have not been transported or disposed of from the Properties in violation of, or in a manner or to a location which could reasonably be expected to give rise to liability under, any Environmental Law, nor have any Materials of Environmental Concern been generated, treated, stored or disposed of at, on or under any of the Properties in violation of, or in a manner that could give rise to liability under, any applicable Environmental Law, except insofar as any such violation or liability referred to in this paragraph, or any aggregation thereof, could not reasonably be expected to result in the payment of a Material Environmental Amount.

(e) No judicial proceeding or governmental or administrative action is pending or, to the knowledge of the Parent, the Borrower or any of their Subsidiaries, threatened, under any Environmental Law to which the Parent, the Borrower or any of their Subsidiaries is or will be named as a party with respect to the Properties or the Business, nor are there any consent decrees or other decrees, consent orders, administrative orders or other orders, or other administrative or judicial requirements


outstanding under any Environmental Law with respect to the Properties or the Business, except insofar as such proceeding, action, decree, order or other requirement, or any aggregation thereof, could not reasonably be expected to result in the payment of a Material Adverse Amount.

(f) There has been no release or threat of release of Materials of Environmental Concern at or from the Properties, or arising from or related to the operations of the Parent, the Borrower or any of their Subsidiaries in connection with the Properties or otherwise in connection with the Business, in violation of or in amounts or in a manner that could give rise to liability under Environmental Laws, except insofar as any such violation or liability referred to in this paragraph, or any aggregation thereof, could not reasonably be expected to result in the payment of a Material Environmental Amount.

4.18 Accuracy of Information. No statement or information contained in this Agreement, any other Loan Document, the Confidential Information Memorandum or any other document, certificate or statement furnished to the Arranger, the Administrative Agent or the Lenders, by or on behalf of any Loan Party for use in connection with the transactions contemplated by this Agreement or the other Loan Documents, contained as of the date such statement, information, document or certificate was so furnished any untrue statement of a material fact or omitted to state a material fact necessary in order to make the statements contained herein or therein not misleading. It is understood that no representation or warranty is made concerning the forecasts, estimates, pro forma information, projections and statements as to anticipated future performance or conditions, and the assumptions on which they were based contained in any such information, reports, financial statements, exhibits or schedules, except that as of the date such forecasts, estimates, pro forma information, projections and statements were generated, such forecasts, estimates, pro forma information, projections and statements were based upon good faith estimates and assumptions believed by management of the Parent, the Borrower and their Subsidiaries to be reasonable at such time. Such forecasts, estimates, pro forma information and statements, and the assumptions on which they were based, may or may not prove to be correct. There is no fact known to the Parent, the Borrower or any of their Subsidiaries that could reasonably be expected to have a Material Adverse Effect that has not been expressly disclosed herein, in the other Loan Documents, or in such other documents, certificates and statements furnished to the Administrative Agent and the Lenders for use in connection with the transactions contemplated hereby and by the other Loan Documents.

4.19 Security Documents. (a) The Master Guarantee and Collateral Agreement is effective to create in favor of the Administrative Agent, for the benefit of the Lenders, a legal, valid and enforceable security interest in the Pledged Securities described therein and proceeds thereof and, when the Pledged Notes and the stock certificates representing the Pledged Stock described therein are delivered to the Administrative Agent, the Master Guarantee and Collateral Agreement shall constitute a fully perfected first priority Lien on, and security interest in, all right, title and interest of the relevant pledgor in such Pledged Securities and the proceeds thereof, as security for the Obligations (as defined in the Master


Guarantee and Collateral Agreement), in each case prior and superior in right to any other Person.

(b) The Master Guarantee and Collateral Agreement is effective to create in favor of the Administrative Agent, for the benefit of the Lenders, a legal, valid and enforceable security interest in the Collateral described therein (other than the Pledged Securities) and proceeds thereof, and when financing statements in appropriate form are filed in the offices specified on Schedule 4.19(b), the Master Guarantee and Collateral Agreement shall constitute a fully perfected Lien on, and security interest in, all right, title and interest of the Loan Parties in such Collateral (other than the Pledged Securities) and the proceeds thereof, as security for the Obligations (as defined in the Master Guarantee and Collateral Agreement), in each case prior and superior in right to any other Person, other than with respect to Liens expressly permitted by Section 7.3.

(c) Each Mortgage, when executed and delivered by the relevant Loan Party, shall be effective to create in favor of the Administrative Agent, for the benefit of the Lenders, a legal, valid and enforceable Lien on the Mortgaged Property described therein and proceeds thereof, and when each Mortgage is filed in the office(s) specified on Schedule 4.19(c), each Mortgage shall constitute a fully perfected Lien on, and security interest in, all right, title and interest of the Loan Parties in the Mortgaged Property and the proceeds thereof, as security for the Obligations (as defined in the relevant Mortgage), in each case prior and superior in right to any other Person, other than with respect to Liens expressly permitted by Section 7.3.

(d) The Cash Collateral Agreement is effective to create in favor of the Administrative Agent, for the benefit of the Lenders, a legal, valid and enforceable security interest in the Collateral described therein and proceeds thereof and the Cash Collateral Agreement shall constitute a fully perfected first priority Lien on, and security interest in, all right, title and interest of the Borrower in such Collateral and the proceeds thereof, as security for the Obligations (as defined herein), in each case prior and superior in right to any other Person.

4.20 Solvency. Each Loan Party is, and after giving effect to the consummation of the Acquisitions and the incurrence of all Indebtedness and obligations being incurred in connection herewith and therewith will be and will continue to be, Solvent.

4.21 Acquisition Documents. The Borrower has heretofore furnished to each Lender a true, complete and correct copy of the Acquisition Agreements and all schedules, exhibits, annexes and amendments thereto and all side letters or agreements affecting the terms thereof (collectively, the ("Acquisition Documents"). The Acquisition Documents have not been amended, supplemented or otherwise modified; none of the provisions thereof has been waived; to the knowledge of each of the Parent and the Borrower, each of the parties thereto is in material compliance with its covenants and agreements contained therein; each of the representations and warranties contained therein is true and correct in all material respects as of the time made or deemed made; and the Acquisition Documents constitute the complete


understanding among the Sellers and the Borrower relating to the Acquisitions. The Acquisition Documents have been duly authorized, executed and delivered by the Borrower, and, to the best knowledge of the Borrower, the Acquisition Documents have been duly authorized, executed and delivered by the other parties thereto. The Acquisition Documents are in full force and effect and constitute the legal, valid and binding obligation of the Borrower and the other parties thereto enforceable against each such party in accordance with its terms, except as enforceability may be limited by applicable bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium or similar laws affecting the enforcement of creditors' rights generally and by general equitable principles (whether enforcement is sought by proceedings in equity or at law). Except as specified in the Acquisition Documents, no consent or authorization of, filing with, notice to or other act by or in respect of, any Governmental Authority or any other Person is required in connection with the Acquisitions or with the execution, delivery, performance, validity or enforceability of the Acquisition Documents.

4.22 Labor Matters. There are no strikes pending or, to the knowledge of each of the Parent and the Borrower, threatened against the Parent, the Borrower or any of their Subsidiaries which, individually or in the aggregate, could reasonably be expected to have a Material Adverse Effect. The hours worked and payments made to employees of the Parent, the Borrower and each of their Subsidiaries have not been in violation of the Fair Labor Standards Act or any other applicable Requirement of Law, except to the extent such violations could not, individually or in the aggregate, be reasonably expected to have a Material Adverse Effect. All material payments due from the Parent, the Borrower or any of their Subsidiaries on account of wages and employee health and welfare insurance and other benefits have been paid or accrued as a liability on the books of the Parent, the Borrower or such Subsidiary.

SECTION 5. CONDITIONS PRECEDENT

5.1 Conditions to Initial Extension of Credit. The agreement of each Lender to make the initial extension of credit requested to be made by it is subject to the satisfaction, prior to or concurrently with the making of such extension of credit on the Closing Date (which Closing Date shall occur on or before March 31, 1997), of the following conditions precedent:

(a) Loan Documents. The Arranger shall have received (i) this Agreement, executed and delivered by a duly authorized officer of the Parent and the Borrower, with a counterpart or a conformed copy for each Lender, (ii) for the account of any Lender requesting Notes in accordance with Section 2.8(e), Notes conforming to the requirements hereof and executed and delivered by a duly authorized officer of the Borrower, (iii) the Master Guarantee and Collateral Agreement, executed and delivered by a duly authorized officer of each party thereto, with a counterpart or a conformed copy for each Lender, (iv) the Cash Collateral Agreement, executed and delivered by a duly authorized officer of the Borrower, with a counterpart or conformed copy for each


Lender and (v) each Mortgage, executed and delivered by a duly authorized officer of each party thereto, with a counterpart for each Lender.

(b) Bowen Acquisition. The Bowen Acquisition shall have been consummated for an aggregate purchase price not exceeding $75,000,000, subject to any purchase price adjustments. The Bowen Acquisition and the other transactions described in the Bowen Asset Purchase Agreement which were to occur on or prior to the Closing Date shall have been consummated in all material respects in accordance with the terms and provisions thereof, no material provisions of the Bowen Asset Purchase Agreement shall have been amended, supplemented or otherwise modified or waived without the prior written consent of the Arranger, and the Arranger shall have received a certificate of the Borrower signed by a duly authorized officer of the Borrower to such effect and to the effect that the only condition to the consummation of such Acquisition remaining to be satisfied under the Bowen Asset Purchase Agreement (which condition shall be satisfied simultaneously with the making of the initial extension of credit hereunder) is the delivery of funds sufficient to pay the amounts required to be paid under the Bowen Asset Purchase Agreement. Prior to or simultaneously with the making of the initial extension of credit hereunder, the Arranger shall have received
(i) evidence satisfactory to it that ownership of the fee and leasehold interests in the real property purchased in such Acquisition shall have been transferred to the Borrower or a Subsidiary Guarantor and all other rights and assets acquired by the Borrower pursuant to the Bowen Asset Purchase Agreement shall have been transferred to the Borrower or a Subsidiary Guarantor and (ii) a true, correct, complete and fully executed copy of the Bowen Asset Purchase Agreement and all schedules and material documents executed or delivered in connection therewith, accompanied by a certificate of a duly authorized officer of the Borrower to such effect, all of which shall be in form and substance reasonably satisfactory to the Arranger.

(c) Related Agreements. The Arranger shall have received, in form and substance reasonably satisfactory to it, with a copy for each Lender, true and correct copies, certified as to authenticity by the Borrower of (i) the Interim Note Documentation and (ii) the Permanent Note Documentation, to the extent agreed to on or prior to the Closing Date. The Arranger shall have received (in a form reasonably satisfactory to the Arranger), with a copy for each Lender, true and correct copies, certified as to authenticity by the Borrower, of the Insurance Policies (or certificates evidencing the effectiveness of such Insurance Policies and the material terms thereof) and such other documents or instruments as may be reasonably requested by the Arranger, including, without limitation, a copy of any other debt instrument, security agreement or other material contract to which the Loan Parties may be a party.

(d) Capitalization; Capital Structure. The Borrower shall have received at least $31,000,000 in net cash proceeds from the issuance of the Interim Notes pursuant to the Interim Note Documentation, the terms and conditions (including without limitation the subordination provisions applicable thereto) of which shall be satisfactory to the


Arranger in all material respects. The capital structure of the Parent, the Borrower and each of their Subsidiaries after the Acquisitions and the financings contemplated hereby shall be satisfactory to the Arranger and the Lenders in all respects.

(e) Pro Forma Financial Statements; Interim Financial Statements. The Lenders shall have received (i) the Pro Forma Balance Sheet, which Pro Forma Balance Sheet shall be in form and substance reasonably satisfactory to the Lenders, (ii) the Pro Forma Income Statement, which Pro Forma Income Statement shall be in form and substance reasonably satisfactory to the Lenders and (iii) satisfactory unaudited interim consolidated financial statements of the Borrower and each of the Acquired Companies for each fiscal month ended in the 1997 fiscal year as to which such financial statements are available prior to the Closing Date and such financial statements shall not reflect any material adverse change in the consolidated financial condition of such reporting entity as reflected in the financial statements previously delivered to the Lenders. The Pro Forma Income Statement presents Consolidated EBITDA for the Borrower for such period of not less than $27,200,000.

(f) Approvals. All governmental and third party approvals (including landlords' and other consents) necessary or, in the reasonable discretion of the Arranger, advisable in connection with the Bowen Acquisition, the financings contemplated hereby and the continuing operations of the Borrower and its Subsidiaries shall have been obtained and be in full force and effect, and all applicable waiting periods shall have expired without any action being taken or threatened by any competent authority which would restrain, prevent or otherwise impose adverse conditions on the Bowen Acquisition, the financing thereof or the continuing operations of the Borrower.

(g) Business Plan. The Lenders shall have received a detailed business plan of the Borrower for fiscal years 1997 - 2003 and a written analysis of the business and prospects of the Borrower and its Subsidiaries for the period from the Closing Date through the final maturity of the Term Loans, in each case, (i) on a pro forma basis reflecting the Acquisitions and the other transactions contemplated hereby and (ii) reasonably satisfactory to the Lenders.

(h) Lien Searches. The Arranger shall have received the results of a recent search by a Person satisfactory to the Arranger, of the Uniform Commercial Code, judgment and tax lien filings in each of the relevant jurisdictions where assets of the Loan Parties (prior and subsequent to the Bowen Acquisition) are located, and such search shall reveal no liens on any of such assets except for liens permitted by
Section 7.3 or liens to be discharged on or prior to the Closing Date pursuant to documentation satisfactory to the Arranger.


(i) Expenses. The fees and expenses incurred or to be incurred in connection with the Acquisitions and the financing thereof, excluding the refinancing of the Interim Notes, shall not exceed $6,500,000 in the aggregate.

(j) Environmental. The Lenders shall have received such environmental information with respect to the real property owned or leased by the Loan Parties or to be acquired pursuant to the Acquisitions as such Lenders may reasonably request and such information shall be provided by a firm satisfactory to the Arranger and in form and substance satisfactory to the Lenders.

(k) Closing Certificate. The Arranger shall have received, with a counterpart for each Lender, a certificate of each Loan Party, dated the Closing Date, substantially in the form of Exhibit D, with appropriate insertions and attachments, executed by the President or any Vice President and the Secretary or any Assistant Secretary of such Loan Party.

(l) Corporate Proceedings of Loan Parties. The Arranger shall have received, with a counterpart for each Lender, a copy of the resolutions of the Board of Directors of each Loan Party authorizing
(i) the execution, delivery and performance of the Loan Documents to which it is a party (including, but not limited to, the granting of any Liens provided for therein), and (ii) in the case of the Borrower, the borrowings contemplated hereunder.

(m) Fees. The Arranger and the Administrative Agent shall have received all fees required to be paid, and all expenses for which invoices have been presented, on or before the Closing Date.

(n) Legal Opinions. The Arranger shall have received, with a counterpart for each Lender, (i) the following executed legal opinions:

(1) the executed legal opinion of Jones, Day, Reavis & Pogue, counsel to the Loan Parties, substantially in the form of Exhibit E; and

(2) such legal opinions in respect of the filing of the Mortgages as may be reasonably requested by the Arranger, from local counsel;

(ii) a reliance letter or reliance letters permitting the Administrative Agent and the Lenders to rely on all of the opinions of counsel rendered in connection with the Interim Notes and the Bowen Acquisition.

Each such legal opinion shall be in form and substance satisfactory to the Lenders and shall cover such matters incident to the transactions contemplated by this Agreement as the Arranger may reasonably require.


(o) Pledged Securities; Stock Powers. The Administrative Agent shall have received the Pledged Notes (duly indorsed to the bearer) and the certificates representing the shares pledged pursuant to the Master Guarantee and Collateral Agreement, together with an undated stock power for each such certificate executed in blank by a duly authorized officer of the pledgor thereof.

(p) Filings, Registrations and Recordings. Each document (including, without limitation, any Uniform Commercial Code financing statement) required by the Security Documents or under law or reasonably requested by the Arranger to be filed, registered or recorded in order to create in favor of the Administrative Agent, for the benefit of the Lenders, a perfected Lien on the Collateral described therein, prior and superior in right to any other Person (other than with respect to Liens expressly permitted by Section 7.3), shall be in proper form for filing, registration or recordation in each jurisdiction in which the filing, registration or recordation thereof is so required or requested.

(q) Surveys. The Arranger shall have received, and the title insurance company issuing the policy referred to in Section 5.1(r) (the "Title Insurance Company") shall have received, maps or plats of an as-built survey of the sites of the property covered by each Mortgage (except as otherwise agreed to by the Arranger) certified to the Administrative Agent and the Title Insurance Company in a manner satisfactory to them, dated a date satisfactory to the Arranger and the Title Insurance Company by an independent professional licensed land surveyor satisfactory to the Arranger and the Title Insurance Company, which maps or plats and the surveys on which they are based shall be made in accordance with the Minimum Standard Detail Requirements for Land Title Surveys jointly established and adopted by the American Land Title Association and the American Congress on Surveying and Mapping in 1992, and, without limiting the generality of the foregoing, there shall be surveyed and shown on such maps, plats or surveys the following: (i) the locations on such sites of all the buildings, structures and other improvements and the established building setback lines; (ii) the lines of streets abutting the sites and width thereof;
(iii) all access and other easements appurtenant to the sites or necessary or desirable to use the sites; (iv) all roadways, paths, driveways, easements, encroachments and overhanging projections and similar encumbrances affecting the site, whether recorded, apparent from a physical inspection of the sites or otherwise known to the surveyor; (v) any encroachments on any adjoining property by the building structures and improvements on the sites; and (vi) if the site is described as being on a filed map, a legend relating the survey to said map.

(r) Title Insurance Policy. The Arranger shall have received in respect of each parcel covered by each Mortgage a mortgagee's title policy (or policies) or marked up unconditional binder for such insurance dated the Closing Date. Each such policy shall (i) be in an amount satisfactory to the Arranger; (ii) be issued at ordinary rates;
(iii) insure that the Mortgage insured thereby creates a valid first Lien on such parcel free


and clear of all defects and encumbrances, except such as may be approved by the Arranger; (iv) name the Administrative Agent for the benefit of the Lenders as the insured thereunder; (v) be in the form of ALTA Loan Policy - 1992; (vi) contain such endorsements and affirmative coverage as the Arranger may request; and (vii) be issued by title companies satisfactory to the Arranger (including any such title companies acting as co-insurers or reinsurers, at the option of the Arranger). The Arranger shall have received evidence satisfactory to it that all premiums in respect of each such policy, and all charges for mortgage recording tax, if any, have been paid.

(s) Flood Insurance. If requested by the Arranger, the Arranger shall have received (i) a policy of flood insurance which (A) covers any parcel of improved real property which is encumbered by any Mortgage, (B) is written in an amount not less than the outstanding principal amount of the indebtedness secured by such Mortgage which is reasonably allocable to such real property or the maximum limit of coverage made available with respect to the particular type of property under the National Flood Insurance Act of 1968, whichever is less, and
(C) has a term ending not earlier than the maturity of the indebtedness secured by such Mortgage and (ii) confirmation that the Company has received the notice requirement pursuant to Section 208(e)(3) of Regulation H of the Board.

(t) Copies of Documents. The Arranger shall have received a copy of all recorded documents referred to, or listed as exceptions to title in, the title policy or policies referred to in Section 5.1(r) and a copy, certified by such parties as the Arranger may deem appropriate, of all other documents affecting the property covered by each Mortgage.

(u) Solvency Analysis. The Lenders shall have received an analysis from the chief financial officer of the Borrower documenting the solvency of the Borrower and its Subsidiaries after giving effect to the Acquisitions, the financings and the other transactions contemplated hereby.

(v) Borrowing Notice. The Administrative Agent shall have received notice pursuant to Section 2.2 requesting the Tranche A Term Loan Lenders to make Tranche A Term Loans in an amount sufficient to consummate the Acquisitions and to pay related fees and expenses.

5.2 Conditions to Tranche B Term Loans. The agreement of each Tranche B Term Loan Lender to make any Tranche B Term Loan requested to be made by it on any date is subject to the satisfaction of the following conditions precedent:

(a) Issuance of Common Stock. The Parent shall have issued common stock on terms satisfactory to the Lenders, received net cash proceeds thereof of at least $15,500,000 and contributed such net proceeds to the Borrower in a manner reasonably satisfactory to the Lenders, and the Borrower shall have applied the proceeds thereof to


repay the portion of the Interim Notes not to be repaid with the proceeds of the Tranche B Term Loans; and

(b) Consolidated EBITDA. The Consolidated EBITDA of the Borrower and its Subsidiaries shall have been at least $30,000,000 for the four consecutive fiscal quarters most recently ended prior to the date of borrowing the Tranche B Term Loans. For purposes of this test, Consolidated EBITDA shall be determined in the same manner as set forth in the Pro Forma Income Statement.

5.3 Conditions to Each Extension of Credit. The agreement of each Lender to make any extension of credit requested to be made by it on any date (including, without limitation, its initial extension of credit) is subject to the satisfaction of the following conditions precedent:

(a) Representations and Warranties. Each of the representations and warranties made by any Loan Party in or pursuant to the Loan Documents shall be true and correct in all material respects on and as of such date as if made on and as of such date.

(b) No Default. No Default or Event of Default shall have occurred and be continuing on such date or after giving effect to the extensions of credit requested to be made on such date.

(c) Additional Matters. All proceedings, and all documents, instruments and other legal matters in connection with the transactions contemplated by this Agreement, the other Loan Documents and the Acquisitions shall be reasonably satisfactory in form and substance to the Administrative Agent, and the Administrative Agent shall have received such other documents and legal opinions in respect of any aspect or consequence of the transactions contemplated hereby or thereby as it shall reasonably request.

(d) Borrowing Notice. The Borrower shall have delivered to the Administrative Agent the applicable borrowing notice in accordance with the relevant subsection of Section 2.

Each borrowing by and issuance of a Letter of Credit on behalf of the Borrower hereunder shall constitute a representation and warranty by the Borrower as of the date of such extension of credit that the conditions contained in this
Section 5.3 have been satisfied.

SECTION 6. AFFIRMATIVE COVENANTS

The Parent and the Borrower hereby jointly and severally agree that, so long as the Commitments remain in effect, any Note or Letter of Credit remains outstanding and unpaid or any other amount is owing to any Lender, the Arranger or the Administrative Agent


hereunder, the Parent and the Borrower shall and shall cause each of their respective Subsidiaries to:

6.1 Financial Statements. Furnish to the Administrative Agent for distribution to each Lender:

(a) as soon as available, but in any event within 90 days after the end of each fiscal year of the Borrower, a copy of the consolidated balance sheet of the Borrower and its Subsidiaries as at the end of such year and the related consolidated statements of income and retained earnings and of cash flows for such year, setting forth in each case in comparative form the figures for the previous year, reported on without a "going concern" or like qualification or exception, or qualification arising out of the scope of the audit, by KPMG Peat Marwick L.P. or other independent certified public accountants of nationally recognized standing;

(b) as soon as available, but in any event not later than 45 days after the end of each of the first three quarterly periods of each fiscal year of the Borrower, the unaudited consolidated balance sheet of the Borrower and its Subsidiaries as at the end of such quarter and the related unaudited consolidated statements of income and retained earnings and of cash flows of the Borrower and its Subsidiaries for such quarter and the portion of the fiscal year through the end of such quarter, setting forth in each case in comparative form the figures for the previous year, certified by a Responsible Officer of the Borrower as being fairly stated in all material respects (subject to normal year-end audit adjustments); and

(c) as soon as available, but in any event not later than 45 days after the end of each month occurring during each fiscal year of the Borrower (other than the third, sixth, ninth and twelfth such month), the unaudited consolidated balance sheet of the Borrower and its Subsidiaries as at the end of such month and the related unaudited consolidated statements of income and retained earnings and of cash flows of the Borrower and its Subsidiaries for such month and the portion of the fiscal year through the end of such month, setting forth in each case in comparative form the figures for the previous year;

all such financial statements shall be complete and correct in all material respects and shall be prepared in reasonable detail and in accordance with GAAP applied consistently throughout the periods reflected therein and with prior periods.

6.2 Certificates; Other Information. Furnish to each Lender:

(a) concurrently with the delivery of the financial statements referred to in Section 6.1(a), (i) a certificate of the independent certified public accountants reporting on such financial statements stating that in making the examination necessary therefor no knowledge was obtained of any Default or Event of Default, except as specified in


such certificate and (ii) copies of all reports or written communications providing advice, recommendations or analysis to the management of the Parent or the Borrower, as the case may be, from such independent certified public accountants with regard to their audit of the financial statements referred to in Sections 6.1(a) and (c) or the internal financial controls and systems of the Parent or the Borrower;

(b) concurrently with the delivery of any financial statement pursuant to Section 6.1, (x) a certificate of a Responsible Officer of each of the Parent and the Borrower stating that, to the best of each such Responsible Officer's knowledge, during such period (i) no Subsidiary has been formed or acquired (or, if any such Subsidiary has been formed or acquired, the Loan Parties have complied with the requirements of Section 6.11 with respect thereto), (ii) neither the Parent, the Borrower nor any of their Subsidiaries has changed its name, its principal place of business, its chief executive office or the location of any material item of tangible Collateral without complying with the requirements of this Agreement and the Security Documents with respect thereto, (iii) the Parent has observed and performed and is in compliance with Section 7.17 and (iv) each Loan Party has observed or performed all of its covenants and other agreements, and satisfied every condition, contained in this Agreement and the other Loan Documents to which it is a party to be observed, performed or satisfied by it, and that such Responsible Officer has obtained no knowledge of any Default or Event of Default except as specified in such certificate, (y) in the case of quarterly or annual financial statements, a certificate containing all information reasonably necessary for determining compliance by the Parent, the Borrower and their Subsidiaries with the provisions of this Agreement (including but not limited to Sections 2.11 and 7.1) as of the last day of such fiscal quarter or fiscal year of the Parent or the Borrower, as the case may be and (z) a certificate of a Responsible Officer of the Borrower stating that to the best of such Responsible Officer's knowledge, the Eligible Backlog of the Borrower and its Subsidiaries is as specified in such certificate;

(c) as soon as available, and in any event no later than 30 days after the end of each fiscal year of the Borrower, a projected consolidated balance sheet of the Borrower as of the end of the following fiscal year, and the related consolidated statements of projected cash flow, projected changes in financial position and projected income for the following fiscal year, together with an operating budget with respect to the following fiscal year, and, as soon as available, significant revisions, if any, of such projections with respect to such fiscal year (collectively, the "Borrower Projections"), which Borrower Projections shall in each case be accompanied by a certificate of a Responsible Officer of the Borrower stating that such Borrower Projections are based on reasonable estimates, information and assumptions believed by such Responsible Officer to be reasonable and that such Responsible Officer has no reason to believe that such Borrower Projections are incorrect or misleading in any material respect;


(d) within 45 days after the end of each fiscal quarter of each fiscal year of the Borrower, a narrative discussion and analysis of the financial condition and results of operations of the Borrower and its Subsidiaries for such fiscal quarter and for the period from the beginning of the then current fiscal year to the end of such fiscal quarter, as compared to the portion of the Borrower Projections, as applicable, covering such periods and to the comparable periods of the previous year;

(e) within five days after the same are filed, copies of all financial statements and reports which the Parent, the Borrower or any of their Subsidiaries may make to, or file with, the Securities and Exchange Commission or any successor or analogous Governmental Authority; and

(f) promptly, such additional financial and other information as any Lender may from time to time reasonably request.

6.3 Payment of Obligations. Pay, discharge or otherwise satisfy at or before maturity or before they become delinquent, as the case may be, all its material obligations of whatever nature, except where the amount or validity thereof is currently being contested in good faith by appropriate proceedings and reserves in conformity with GAAP with respect thereto have been provided on the books of the Parent, the Borrower or their Subsidiaries, as the case may be.

6.4 Conduct of Business and Maintenance of Existence, etc. (a) Continue to engage in business of the same general type as now conducted by it,
(b) preserve, renew and keep in full force and effect its existence and (c) take all reasonable action to maintain all rights, privileges and franchises necessary or desirable in the normal conduct of its business, except, in each case, as otherwise permitted pursuant to Section 7.5 and except, in the case of clause (c) above, to the extent that failure to do so could not reasonably be expected to have a Material Adverse Effect; and (d) comply with all Contractual Obligations and Requirements of Law except to the extent that failure to comply therewith could not, in the aggregate, reasonably be expected to have a Material Adverse Effect.

6.5 Maintenance of Property; Insurance. (a) Keep all material property useful and necessary in its business in good working order and condition, ordinary wear and tear excepted; (b) maintain with financially sound and reputable insurance companies insurance on all its property in at least such amounts and against at least such risks (but including in any event public liability, product liability and business interruption) as are usually insured against in the same general area by companies engaged in the same or a similar business; and (c) furnish to each Lender, upon written request, full information as to the insurance carried.

6.6 Inspection of Property; Books and Records; Discussions. Keep proper books of records and account in which full, true and correct entries in conformity with GAAP and all Requirements of Law shall be made of all dealings and transactions in relation to its business and activities; and upon reasonable notice permit representatives of any Lender upon


reasonable notice to visit and inspect any of its properties and examine and make abstracts from any of its books and records at any reasonable time and as often as may reasonably be desired and to discuss the business, operations, properties and financial and other condition of the Parent, the Borrower and their Subsidiaries with senior officers of the Parent, the Borrower and their Subsidiaries and with its independent certified public accountants.

6.7 Notices. Promptly give notice to the Administrative Agent of:

(a) the occurrence of any Default or Event of Default;

(b) any (i) default or event of default under any Contractual Obligation of the Parent, the Borrower or any of their Subsidiaries or
(ii) litigation, investigation or proceeding which may exist at any time between the Parent, the Borrower or any of their Subsidiaries and any Governmental Authority, which in either case, if not cured or if adversely determined, as the case may be, could reasonably be expected to have a Material Adverse Effect;

(c) any litigation or proceeding affecting the Parent, the Borrower or any of their Subsidiaries in which the amount involved is $250,000 or more and not covered by insurance or in which injunctive or similar relief is sought;

(d) the following events, as soon as possible and in any event within 30 days after the Parent, the Borrower or any of their Subsidiaries knows or has reason to know thereof: (i) the occurrence or expected occurrence of any Reportable Event with respect to any Plan, a failure to make any required contribution to a Plan, the creation of any Lien in favor of the PBGC or a Plan or any withdrawal from, or the termination, Reorganization or Insolvency of, any Multiemployer Plan or
(ii) the institution of proceedings or the taking of any other action by the PBGC or the Borrower or any Commonly Controlled Entity or any Multiemployer Plan with respect to the withdrawal from, or the terminating, Reorganization or Insolvency of, any Plan; and

(e) any development or event which could reasonably be expected to have a Material Adverse Effect.

Each notice pursuant to this Section 6.7 shall be accompanied by a statement of a Responsible Officer of the Borrower setting forth details of the occurrence referred to therein and stating what action the Parent, the Borrower or the relevant Subsidiary proposes to take with respect thereto.

6.8 Environmental Laws. (a) Comply in all material respects with, and take all reasonable efforts to ensure compliance in all material respects by all tenants and subtenants, if any, with, all applicable Environmental Laws, except to the extent that the same are being contested in good faith by appropriate proceedings and the pendency of such


proceedings could not reasonably be expected to have a Material Adverse Effect, and obtain and comply in all material respects with and maintain, and take all reasonable efforts to ensure that all tenants and subtenants obtain and comply in all material respects with and maintain, any and all licenses, approvals, notifications, registrations or permits required by applicable Environmental Laws insofar as any failure to so comply, obtain or maintain reasonably could be expected to have a Material Adverse Effect.

(b) Conduct and complete all investigations, studies, sampling and testing, and all remedial, removal and other actions required under Environmental Laws and promptly comply in all material respects with all lawful orders and directives of all Governmental Authorities regarding Environmental Laws, except to the extent that the same are being contested in good faith by appropriate proceedings and the pendency of such proceedings could not reasonably be expected to have a Material Adverse Effect.

6.9 Interest Rate Protection. In the case of the Borrower, within 30 days after the Closing Date, enter into Interest Rate Protection Agreements with one or more of the Lenders providing interest rate protection with respect to at least $35,000,000 of the Term Loans for a period of at least 24 months such that the Eurodollar Base Rate for determining the interest rate thereon shall not be higher than 1% above the Eurodollar Base Rate that would be applicable to a six-month Interest Period commencing on the Closing Date.

6.10 Further Assurances. Promptly perform or cause to be performed any and all acts and execute or cause to be executed any and all documents (including, without limitation, financing statements and continuation statements) for filing under the provisions of the Uniform Commercial Code or any other Requirement of Law which are necessary or advisable to maintain in favor of the Administrative Agent, for the benefit of the Lenders, Liens on the Collateral that are duly perfected in accordance with all applicable Requirements of Law.

6.11 Additional Collateral. (a) With respect to any assets acquired after the Closing Date by the Parent, the Borrower or any of their Domestic Subsidiaries that are intended to be subject to the Lien created by any of the Security Documents but which are not so subject (other than any assets described in paragraph (b), (c) or (d) of this Section), promptly (and in any event within 30 days after the acquisition or creation thereof): (i) execute and deliver to the Administrative Agent such amendments to the Master Guarantee and Collateral Agreement or such other documents as the Administrative Agent shall deem necessary or advisable to grant to the Administrative Agent, for the benefit of the Lenders, a Lien on such assets, (ii) take all actions necessary or advisable to cause such Lien to be duly perfected in accordance with all applicable Requirements of Law, including, without limitation, the filing of Uniform Commercial Code financing statements in such jurisdictions as may be requested by the Administrative Agent, and (iii) if requested by the Administrative Agent, deliver to the Administrative Agent legal opinions relating to the matters described in clauses (i) and (ii) immediately preceding, which opinions shall be in form and substance and from counsel reasonably satisfactory to the Administrative Agent.


(b) With respect to any Person that, subsequent to the Closing Date, becomes a Subsidiary of the Parent or the Borrower (other than a Foreign Subsidiary), promptly: (i) execute and deliver to the Administrative Agent, for the benefit of the Lenders, such amendments to the Master Guarantee and Collateral Agreement as the Administrative Agent shall deem necessary or advisable to grant to the Administrative Agent, for the benefit of the Lenders, a Lien on the Capital Stock of such Subsidiary which is owned by the Parent, the Borrower or any of their Subsidiaries, (ii) deliver to the Administrative Agent the certificates representing such Capital Stock, together with undated stock powers duly executed and delivered in blank, (iii) cause such new Subsidiary (A) to become a party to the Master Guarantee and Collateral Agreement, pursuant to documentation which is in form and substance satisfactory to the Administrative Agent, and (B) to take all actions necessary or advisable to cause the Lien created by such security agreement to be duly perfected in accordance with all applicable Requirements of Law, including, without limitation, the filing of Uniform Commercial Code financing statements in such jurisdictions as may be requested by the Administrative Agent and (iv) if requested by the Administrative Agent, deliver to the Administrative Agent legal opinions relating to the matters described in clauses (i), (ii) and (iii) immediately preceding, which opinions shall be in form and substance and from counsel reasonably satisfactory to the Administrative Agent.

(c) With respect to any fee interest in any real estate having a value (together with improvements thereof) of at least $100,000, in each case acquired after the Closing Date by the Parent, the Borrower or any of their Domestic Subsidiaries, or, in the case of any real property encumbered by any mortgage or deed of trust on the Closing Date, promptly after the Indebtedness secured thereby shall have been paid in full (other than with the proceeds of permitted Indebtedness incurred to refinance such secured Indebtedness), promptly (i) execute and deliver a first priority mortgage or deed of trust, as the case may be (subordinate only to such mortgages or deeds of trust as are necessary to permit the Borrower or such Subsidiary to purchase such real estate), in favor of the Administrative Agent, for the benefit of the Lenders, covering such real estate, in form and substance reasonably satisfactory to the Administrative Agent, (ii) if requested by the Administrative Agent, provide the Lenders with (x) title and extended coverage insurance covering such real estate in an amount at least equal to the purchase price of such real estate (or such other amount as shall be reasonably specified by the Administrative Agent) as well as a current ALTA survey thereof, together with a surveyor's certificate and (y) any consents or estoppels deemed necessary or advisable by the Administrative Agent in connection with such mortgage or deed of trust, each of the foregoing in form and substance reasonably satisfactory to the Administrative Agent and (iii) if requested by the Administrative Agent, deliver to the Administrative Agent legal opinions relating to the matters described in the preceding clauses (i) and (ii), which opinions shall be in form and substance and from counsel reasonably satisfactory to the Administrative Agent.

(d) With respect to any new Foreign Subsidiary created or acquired after the Closing Date by the Parent, the Borrower or any of their Domestic Subsidiaries (the creation or acquisition of which shall not be permitted hereunder except in accordance with the terms of Section 7.18), promptly (i) execute and deliver to the Administrative Agent such amendments


to the Master Guarantee and Collateral Agreement (or comparable documentation) as the Administrative Agent deems necessary or advisable in order to grant to the Administrative Agent, for the benefit of the Lenders, a perfected first priority security interest in the Capital Stock of such new Subsidiary which is owned by the Parent, the Borrower or any of their Subsidiaries (provided that in no event shall more than 65% of the Capital Stock of any such new Subsidiary be required to be so pledged), (ii) deliver to the Administrative Agent the certificates representing such Capital Stock, together with undated stock powers, in blank, executed and delivered by a duly authorized officer of the Parent, the Borrower or such Subsidiary, as the case may be, and (iii) if requested by the Administrative Agent, deliver to the Administrative Agent legal opinions relating to the matters described in the preceding clauses (i) and
(ii), which opinions shall be in form and substance and from counsel reasonably satisfactory to the Administrative Agent.

(e) Within 60 days of the Closing Date, if reasonably requested by the Administrative Agent, provide the Administrative Agent with the surveys described in Section 5.1(q) with respect to certain Mortgaged Properties for which surveys were not provided on or prior to the Closing Date.

6.12 Construction Credit Support Policy. Maintain its current policy of requiring non-U.S. customers to provide an irrevocable letter of credit to support the portion of any material equipment sale not paid for in advance in cash.

SECTION 7. NEGATIVE COVENANTS

The Parent and the Borrower hereby jointly and severally agree that, so long as the Commitments remain in effect, any Note or Letter of Credit remains outstanding and unpaid or any other amount is owing to any Lender, the Arranger or the Administrative Agent hereunder, the Parent and the Borrower shall not, and shall not permit any of their respective Subsidiaries to, directly or indirectly:

7.1 Financial Condition Covenants.

(a) Consolidated Leverage Ratio. Permit the Consolidated Leverage Ratio of the Borrower and its Subsidiaries for any period of four consecutive fiscal quarters of the Borrower ending on any date set forth below to exceed the ratio set forth below opposite such date:


                                               Consolidated
Fiscal Quarter Ending                         Leverage Ratio

June 30, 1997                                  4.00 to 1.0
September 30, 1997                             4.00 to 1.0
December 31, 1997                              4.00 to 1.0
March 31, 1998                                 4.00 to 1.0
June 30, 1998                                  3.50 to 1.0
September 30, 1998                             3.50 to 1.0
December 31, 1998                              3.50 to 1.0
March 31, 1999                                 3.00 to 1.0
June 30, 1999                                  3.00 to 1.0
September 30, 1999                             3.00 to 1.0
December 31, 1999                              3.00 to 1.0
March 31, 2000                                 2.50 to 1.0
June 30, 2000                                  2.50 to 1.0
September 30, 2000                             2.50 to 1.0
December 31, 2000                              2.50 to 1.0
March 31, 2001 and thereafter                  2.00 to 1.0

(b) Consolidated EBITDA. Permit Consolidated EBITDA of the Borrower and its Subsidiaries for any period of four consecutive fiscal quarters of the Borrower ending with any fiscal quarter set forth below to be less than the amount set forth below opposite such date:

                                               Consolidated
Fiscal Quarter Ending                             EBITDA

December 31, 1997                              $25,000,000
March 31, 1998                                  28,000,000
June 30, 1998                                   28,000,000
September 30, 1998                              28,000,000
December 31, 1998                               28,000,000
March 31, 1999                                  35,000,000
June 30, 1999                                   35,000,000
September 30, 1999                              35,000,000
December 31, 1999                               35,000,000
March 31, 2000                                  40,000,000
June 30, 2000                                   40,000,000
September 30, 2000                              40,000,000
December 31, 2000                               40,000,000
March 31, 2001 and thereafter                   50,000,000


(c) Consolidated Interest Coverage Ratio. Permit the Consolidated Interest Coverage Ratio of the Borrower and its Subsidiaries for any period of four consecutive fiscal quarters of the Borrower ending with any fiscal quarter set forth below to be less than the ratio set forth below opposite such fiscal quarter:

                                                Consolidated
                                                  Interest
Fiscal Quarter Ending                          Coverage Ratio

June 30, 1997                                    2.5 to 1.0
September 30, 1997                               2.5 to 1.0
December 31, 1997                                2.5 to 1.0
March 31, 1998                                   2.75 to 1.0
June 30, 1998                                    2.75 to 1.0
September 30, 1998                               3.0 to 1.0
December 31, 1998                                3.0 to 1.0
March 31, 1999                                   3.25 to 1.0
June 30, 1999                                    3.25 to 1.0
September 30, 1999                               3.50 to 1.0
Thereafter                                       3.50 to 1.0

(d) Consolidated Fixed Charge Coverage Ratio. Permit the Consolidated Fixed Charge Coverage Ratio of the Borrower and its Subsidiaries for any period of four consecutive fiscal quarters of the Borrower to be less than 1.05 to 1.00 on any date during the period from March 31, 1998 through March 30, 1999 or be less than 1.10 to 1.0 on any date from March 31, 1999 and thereafter.

7.2 Limitation on Indebtedness. Create, incur, assume or suffer to exist any Indebtedness, except:

(a) Indebtedness of the Borrower under the Loan Documents;

(b) Indebtedness (i) of the Borrower to a Wholly Owned Subsidiary, (ii) of a Domestic Wholly Owned Subsidiary to the Borrower or any other Subsidiary and (iii) of any Foreign Subsidiary to the Borrower or any Subsidiary in an aggregate principal amount at any time outstanding (with respect to all Foreign Subsidiaries of the Parent) not to exceed $1,000,000, provided that such Indebtedness referred to in this clause (iii), if to the Borrower or any Domestic Subsidiary, is evidenced by a promissory note or promissory notes which has or have been pledged to the Administrative Agent on terms and conditions satisfactory to the Administrative Agent;

(c) Indebtedness of the Borrower or any Subsidiary incurred to finance the acquisition or construction of fixed or capital assets (whether pursuant to a loan, a


Financing Lease or otherwise) in an aggregate principal amount not exceeding as to the Borrower and its Subsidiaries $5,000,000 at any time outstanding;

(d) (i) Interim Notes in an aggregate principal amount not to exceed $31,000,000 and (ii) Interim Notes issued in lieu of cash interest on other Interim Notes in accordance with the Interim Note Documentation; and

(e) Indebtedness of any of the Loan Parties incurred to prepay, redeem, retire or repurchase in full the Interim Notes or the Rollover Notes, as the case may be, pursuant to Permanent Note Documentation so long as (i) the terms and conditions thereof are reasonably satisfactory to the Arranger and the Required Lenders (provided that the Rollover Indenture as entered into on the Closing Date shall be deemed to be reasonably satisfactory to the Arranger and the Required Lenders) and (ii) the aggregate principal amount of such Indebtedness shall not exceed the sum (the "Interim Note Principal Amount") of $31,000,000 plus the amount of additional Interim Notes or the Rollover Notes, as the case may be, issued to pay interest in lieu of payment of interest in cash; provided that to the extent such Indebtedness consists of "High Yield Notes" (as defined in the Interim Note Documentation) issued pursuant to the Interim Note Documentation the aggregate principal amount of such Indebtedness may exceed the Interim Note Principal Amount to the extent the Net Cash Proceeds thereof in excess of the amount required to pay in full the aggregate principal amount of the Interim Notes or the Rollover Notes, as the case may be (which aggregate principal amount shall not exceed the Interim Note Principal Amount) plus any accrued and unpaid interest and fees due in accordance with the Interim Note Documentation or the Rollover Indenture, as the case may be, are applied pursuant to Section 2.11(a) to the prepayment of the Term Loans and to reduce permanently the Revolving Credit Commitments.

7.3 Limitation on Liens. Create, incur, assume or suffer to exist any Lien upon any of its property, assets or revenues, whether now owned or hereafter acquired, except for:

(a) Liens for taxes not yet due or which are being contested in good faith by appropriate proceedings, provided that adequate reserves with respect thereto are maintained on the books of the Parent, the Borrower or their Subsidiaries, as the case may be, in conformity with GAAP;

(b) carriers', warehousemen's, mechanics', materialmen's, repairmen's, landlord's or other like Liens arising in the ordinary course of business which are not overdue for a period of more than 60 days or which are being contested in good faith by appropriate proceedings;

(c) pledges or deposits in connection with workers' compensation, unemployment insurance and other social security legislation;


(d) deposits to secure the performance of bids, trade contracts (other than for borrowed money), leases, statutory obligations, surety and appeal bonds, performance bonds and other obligations of a like nature incurred in the ordinary course of business;

(e) easements, rights-of-way, restrictions and other similar encumbrances incurred in the ordinary course of business which, in the aggregate, are not substantial in amount and which do not in any case materially detract from the value of the property subject thereto or materially interfere with the ordinary conduct of the business of the Borrower or any Subsidiary;

(f) Liens securing Indebtedness of the Borrower or any Subsidiary incurred to finance the acquisition or construction of fixed or capital assets, provided that (i) such Liens shall be created substantially simultaneously with the acquisition or construction of such fixed or capital assets, (ii) such Liens do not at any time encumber any property other than the property financed by such Indebtedness, (iii) the amount of Indebtedness secured thereby is not increased and (iv) the proceeds of the Indebtedness secured by any such Lien shall at no time exceed 100% of the original purchase price of such property;

(g) Liens created pursuant to the Security Documents;

(h) Liens in favor of customs and revenue authorities to secure payment of customs duties in connection with the importation of goods in the ordinary course of business and other similar Liens arising in the ordinary course of business;

(i) Liens existing on the Closing Date and listed on Schedule 7.3;

(j) leases or subleases granted to third Persons not interfering with the ordinary course of business of the Parent, the Borrower or any of their Subsidiaries;

(k) Permitted Exceptions (as defined in the Mortgages); and

(l) Liens created under Environmental Laws that are being contested in good faith and as to which adequate reserves have been established to the extent required by GAAP and secure obligations not in excess of $500,000; provided that the Borrower and its Subsidiaries shall take all reasonable actions to terminate such Liens.

7.4 Limitation on Guarantee Obligations. Create, incur, assume or suffer to exist any Guarantee Obligation except:

(a) Guarantee Obligations of the Loan Parties in respect of the Interim Notes or the Permanent Notes in accordance with the Interim Note Documentation or the Permanent Note Documentation, respectively;


(b) Guarantee Obligations made in the ordinary course of its business by the Borrower of obligations of any of its Subsidiaries (provided that the Guarantee Obligations by the Borrower in respect of the obligations of any and all Foreign Subsidiaries shall not exceed $1,000,000) which obligations are otherwise permitted under this Agreement;

(c) Guarantee Obligations in respect of Standby Letters of Credit; and

(d) the Guarantee Obligations of the Loan Parties pursuant to the Master Guarantee and Collateral Agreement.

7.5 Limitation on Fundamental Changes. Enter into any merger, consolidation or amalgamation, or liquidate, wind up or dissolve itself (or suffer any liquidation or dissolution), or convey, sell, lease, assign, transfer or otherwise dispose of, all or substantially all of its property, business or assets, or make any material change in its present method of conducting business, except:

(a) any Wholly Owned Subsidiary of the Parent or the Borrower may be merged or combined with or into the Borrower (provided that the Borrower shall be the continuing or surviving corporation) or with or into any one or more Domestic Wholly Owned Subsidiaries of the Borrower (provided that the Domestic Wholly Owned Subsidiary or Subsidiaries shall be the continuing or surviving corporation); and

(b) any Wholly Owned Subsidiary may sell, lease, transfer or otherwise dispose of any or all of its assets (upon voluntary liquidation or otherwise) to Borrower or any Domestic Wholly Owned Subsidiary of the Borrower.

7.6 Limitation on Sale of Assets. Convey, sell, lease, assign, transfer or otherwise dispose of any of its property, business or assets (including, without limitation, receivables and leasehold interests), whether now owned or hereafter acquired, or, in the case of any Subsidiary of the Parent or the Borrower, issue or sell any shares of such Subsidiary's Capital Stock to any Person other than the Borrower or any Domestic Wholly Owned Subsidiary of the Borrower, except:

(a) the sale or other disposition of obsolete or worn out property in the ordinary course of business having a fair market value not to exceed, in the aggregate, $500,000 in any period of twelve consecutive months;

(b) the sale or other disposition of any property in the ordinary course of business, provided that (other than inventory) the aggregate book value of all assets so sold or disposed of in any period of twelve consecutive months shall not exceed $500,000;

(c) the sale of inventory in the ordinary course of business;

and


(d) as permitted by Section 7.5(b).

To the extent the Required Lenders waive the provisions of this Section 7.6 with respect to the sale of any Collateral, or any Collateral is sold as permitted by this Section 7.6, such Collateral in each case shall be sold free and clear of the Liens in favor of the Administrative Agent created by the Security Documents and the Administrative Agent shall take such actions as it deems appropriate in connection therewith or may be reasonably requested by the Borrower to evidence such Lien release, in each case at the Borrower's expense.

7.7 Limitation on Restricted Payments. Declare or pay any dividend (other than dividends payable solely in common stock of the Person making such dividend) on, or make any payment on account of, or set apart assets for a sinking or other analogous fund for, the purchase, redemption, defeasance, retirement or other acquisition of, any shares of any class of Capital Stock (including but not limited to in respect of any preferred Capital Stock outstanding or dividends accumulated thereon on the Closing Date) of the Parent or the Borrower or any of their Subsidiaries or any warrants or options to purchase any such Capital Stock, whether now or hereafter outstanding, or make any other distribution in respect thereof, either directly or indirectly, whether in cash or property or in obligations of the Parent, the Borrower or any Subsidiary, except the issuance of the Warrants and Capital Stock in respect of the Warrants pursuant to the terms of the Warrant Agreement. Notwithstanding the foregoing, (A) provided that no Default or Event of Default shall have occurred and be continuing or would occur as a consequence thereof, the Borrower may pay dividends to the Parent for the purpose of (i) permitting the Parent to satisfy its federal, state and local income tax obligations to the extent such obligations are actually due and owing and are a direct result of the net income of the Borrower being included on a consolidated, combined or unitary income tax return filed by the Parent or otherwise being attributed to the Parent for tax purposes (provided that the Parent shall promptly pay such tax obligations);
(ii) permitting the Parent to pay the necessary fees and expenses to maintain its corporate existence and good standing (in an aggregate amount not to exceed $50,000 per annum); and (iii) permitting the Parent to comply with the Interim Note Documentation (in an aggregate amount not to exceed $50,000 per annum) and (B) any Subsidiary of the Borrower may pay dividends to Borrower.

7.8 Limitation on Capital Expenditures. (a) Make or commit to make (by way of the acquisition of securities of a Person or otherwise) any Capital Expenditure except for expenditures in the ordinary course of business not exceeding, in the aggregate for the Borrower and its Subsidiaries during any of the fiscal years of the Borrower set forth below, the amount set forth opposite such fiscal year:


Fiscal Year                     Amount

   1997                      $10,000,000
   1998                       10,000,000
   1999                       10,000,000
   2000                       10,000,000
   2001                       10,000,000
   2002                       10,000,000

(b) Notwithstanding the foregoing, in the event that the amount of Capital Expenditures permitted to be made by the Borrower and its Subsidiaries pursuant to clause (a) above in any fiscal year (before giving effect to any increase in such permitted expenditure amount pursuant to this clause (b)) is greater than the amount of such Capital Expenditures made by the Borrower and its Subsidiaries during such fiscal year, such excess may be carried forward and utilized to make Capital Expenditures in the immediately succeeding fiscal year.

(c) Notwithstanding the foregoing, the Borrower and its Subsidiaries may make Capital Expenditures (which Capital Expenditures will not be included in any determination under the foregoing clause (a)) with the proceeds of Indebtedness received by the Borrower or any of its Subsidiaries pursuant to Section 7.2(c).

(d) Notwithstanding the foregoing, the Borrower and its Subsidiaries may make Capital Expenditures (which Capital Expenditures will not be included in any determination under the foregoing clause (a)) with any Reinvestment Deferred Amount.

7.9 Limitation on Investments, Loans and Advances. Make any advance, loan, extension of credit or capital contribution to, or purchase any stock, bonds, notes, debentures or other securities of or any assets constituting a business unit of, or make any other investment in, any Person, except:

(a) extensions of trade credit in the ordinary course of business;

(b) investments in Cash Equivalents;

(c) loans and advances to employees of the Loan Parties for travel, entertainment and relocation expenses in the ordinary course of business in an aggregate amount for the Borrower and its Subsidiaries not to exceed $500,000 at any one time outstanding;

(d) investments by the Borrower in a Domestic Wholly Owned Subsidiary and investments by any Subsidiary in the Borrower and in one or more Domestic Wholly Owned Subsidiaries; and


(e) additional investments in an aggregate amount, so long as at the time of such investment no Default or Event of Default shall have occurred and be continuing or would result therefrom, at any time not to exceed $1,000,000.

7.10 Limitation on Optional Payments and Modifications of Debt Instruments and Organizational Documentation, etc. (a) Make any optional payment or prepayment on or redemption or purchase of any material Indebtedness (other than the Loans) or preferred Capital Stock including, without limitation, the Interim Notes or the Permanent Notes, (b) amend, modify or change, or consent or agree to any amendment, modification or change to any of the terms of any such Indebtedness, including, without limitation, the provisions of the Interim Notes, the Rollover Notes or the Permanent Notes (other than any such amendment, modification or change which would extend the maturity or reduce the amount of any payment of principal thereof or which would reduce the rate or extend the date for payment of interest or dividends thereon) or (c) amend, modify or change in any material respect, or consent or agree to any amendment, modification, or change in any material respect to the terms of any of its capitalization or organizational documents (including but not limited to in respect of any preferred Capital Stock of any Loan Party) or, to the extent such amendment, modification or change could reasonably be expected to have a Material Adverse Effect, a material contract.

Notwithstanding the foregoing, (a) the Interim Notes and the Rollover Notes may be refinanced with Permanent Notes in accordance with the provisions of Section 7.2(e) without limitation by this Section 7.10 and (b) so long as no Default or Event of Default exists or would result therefrom, the Interim Notes and the Rollover Notes and any accrued interest thereon may be repaid with the proceeds of the sale of Capital Stock of the Parent in accordance with the terms and conditions of the Interim Note Documentation or the Rollover Indenture, as the case may be.

7.11 Limitation on Transactions with Affiliates. Enter into any transaction, including, without limitation, any purchase, sale, lease or exchange of property or the rendering of any service, with any Affiliate (other than the Parent or the Borrower) unless such transaction (a) is otherwise permitted under this Agreement, (b) is in the ordinary course of business of the Parent, the Borrower or such Subsidiary, (c) is upon fair and reasonable terms no less favorable to the Parent, the Borrower or such Subsidiary, as the case may be, than it would obtain in a comparable arm's length transaction with a Person which is not an Affiliate and (d) with respect to any transaction or series of related transactions involving aggregate payments in excess of $100,000, is disclosed in writing to the Administrative Agent.

7.12 Limitation on Sales and Leasebacks. Enter into any arrangement with any Person providing for the leasing by the Parent, the Borrower or any of their Subsidiaries of real or personal property which has been or is to be sold or transferred by the Parent, the Borrower or such Subsidiary to such Person or to any other Person to whom funds have been or are to be advanced by such Person on the security of such property or rental obligations of the Parent, the Borrower or such Subsidiary.


7.13 Limitation on Changes in Fiscal Year. Permit the fiscal year of the Parent, the Borrower or any of their respective Subsidiaries to end on a day other than March 31.

7.14 Limitation on Negative Pledge Clauses. Enter into with any Person, or suffer to exist, any agreement, other than (a) this Agreement and the other Loan Documents, (b) the Interim Note Documentation, (c) the Permanent Note Documentation and (d) any industrial revenue bonds, purchase money mortgages or Financing Leases permitted by this Agreement (in which cases, any prohibition or limitation shall only be effective against the assets financed thereby) which prohibits or limits the ability of the Parent, the Borrower or any of their Subsidiaries to create, incur, assume or suffer to exist any Lien upon any of its property, assets or revenues, whether now owned or hereafter acquired.

7.15 Limitation on Lines of Business. Enter into any business, either directly or through any Subsidiary, except for those businesses in which the Borrower and its Subsidiaries are engaged on the date of this Agreement or which are directly related thereto.

7.16 Limitation on Consolidated Lease Expense. Permit Consolidated Lease Expense for any fiscal year of the Borrower and its Subsidiaries to exceed $1,000,000.

7.17 Limitation on Activities of the Parent. In the case of the Parent, notwithstanding anything to the contrary in this Agreement or any other Loan Document, (a) conduct, transact or otherwise engage in, or commit to conduct, transact or otherwise engage in, any business or operations other than those incidental to its ownership of the Capital Stock of the Borrower, (b) incur, create, assume or suffer to exist any Indebtedness or other liabilities or financial obligations, except (i) nonconsensual obligations imposed by operation of law, (ii) pursuant to the Loan Documents to which it is a party and
(iii) obligations with respect to its Capital Stock (other than any such obligations constituting Indebtedness), (c) own, lease, manage or otherwise operate any properties or assets (including cash and cash equivalents) other than the ownership of shares of Capital Stock of the Borrower, (d) create or permit to exist any Subsidiary of the Parent or the Borrower other than a Wholly Owned Subsidiary or (e) directly or indirectly, convey, sell, transfer of otherwise dispose of, or create, assume, incur or permit to be created, assumed, incurred or to exist, any Lien of any kind upon, any Capital Stock of the Borrower owned by the Parent.

7.18 Limitation on Foreign Subsidiaries. Create or permit to exist any Foreign Subsidiary except with the prior written consent of the Arranger and the Required Lenders.


SECTION 8. EVENTS OF DEFAULT

If any of the following events shall occur and be continuing:

(a) The Borrower shall fail to pay any principal of any Loan or Reimbursement Obligation when due in accordance with the terms hereof; or the Borrower shall fail to pay any interest on any Loan or Reimbursement Obligation, or any other amount payable hereunder or under any other Loan Document, within five days after any such interest or other amount becomes due in accordance with the terms hereof; or

(b) Any representation or warranty made or deemed made by the Parent, the Borrower or any other Loan Party herein or in any other Loan Document or which is contained in any certificate, document or financial or other statement furnished by it at any time under or in connection with this Agreement or any such other Loan Document or under or in connection with the Interim Note Documentation or Permanent Note Documentation shall prove to have been incorrect in any material respect on or as of the date made or deemed made; or

(c) The Parent, the Borrower or any other Loan Party shall default in the observance or performance of any agreement contained in
(i) Sections 6 (other than Sections 6.3, 6.4 and 6.5) or 7, (ii)
Section 5.6 or 5.8(b) of the Master Guarantee and Collateral Agreement,
(iii) Section 5, 6 or 7 of any Mortgage or (iv) Section 6 of the Cash Collateral Agreement; or

(d) The Parent, the Borrower or any other Loan Party shall default in the observance or performance of any other agreement contained in this Agreement or any other Loan Document (other than as provided in paragraphs (a) through (c) of this Section), and such default shall continue unremedied for a period of 30 days; or

(e) The Parent, the Borrower or any of their Subsidiaries shall (i) default in making any payment of any principal of any Indebtedness (including, without limitation, any Guarantee Obligation) or Interest Rate Protection Agreement Obligation on the scheduled or original due date with respect thereto; or (ii) default in making any payment of any interest on any such Indebtedness beyond the period of grace, if any, provided in the instrument or agreement under which such Indebtedness or Interest Rate Protection Agreement Obligation was created; or (iii) default in the observance or performance of any other agreement or condition relating to any such Indebtedness or Interest Rate Protection Agreement Obligation or contained in any instrument or agreement evidencing, securing or relating thereto, or any other event shall occur or condition exist, the effect of which default or other event or condition is to cause, or to permit the holder or beneficiary of such Indebtedness (or a trustee or agent on behalf of such holder or beneficiary) to cause, with the giving of notice if required, such Indebtedness to become due prior to its stated maturity or (in the case of any such Indebtedness constituting a Guarantee Obligation or Interest Rate Protection Agreement


Obligation) to become payable; provided that a default, event or condition described in clause (i), (ii) or (iii) of this paragraph (e) shall not at any time constitute an Event of Default under this Agreement unless, at such time, one or more defaults, events or conditions of the type described in clauses (i), (ii) and (iii) of this paragraph (e) shall have occurred and be continuing with respect to Indebtedness and/or Guarantee Obligations and/or Interest Rate Protection Agreement Obligations of the Parent, the Borrower and their Subsidiaries the outstanding principal amount of which exceeds in the aggregate $1,000,000; or

(f) (i) The Parent, the Borrower or any of their Subsidiaries shall commence any case, proceeding or other action (A) under any existing or future law of any jurisdiction, domestic or foreign, relating to bankruptcy, insolvency, reorganization or relief of debtors, seeking to have an order for relief entered with respect to it, or seeking to adjudicate it a bankrupt or insolvent, or seeking reorganization, arrangement, adjustment, winding-up, liquidation, dissolution, composition or other relief with respect to it or its debts, or (B) seeking appointment of a receiver, trustee, custodian, conservator or other similar official for it or for all or any substantial part of its assets, or the Parent, the Borrower or any of their Subsidiaries shall make a general assignment for the benefit of its creditors; or (ii) there shall be commenced against the Parent, the Borrower or any of their Subsidiaries any case, proceeding or other action of a nature referred to in clause (i) above which (A) results in the entry of an order for relief or any such adjudication or appointment or (B) remains undismissed, undischarged or unbonded for a period of 60 days; or (iii) there shall be commenced against the Parent, the Borrower or any of their Subsidiaries any case, proceeding or other action seeking issuance of a warrant of attachment, execution, distraint or similar process against all or any substantial part of its assets which results in the entry of an order for any such relief which shall not have been vacated, discharged, or stayed or bonded pending appeal within 60 days from the entry thereof; or (iv) the Parent, the Borrower or any of their Subsidiaries shall take any action in furtherance of, or indicating its consent to, approval of, or acquiescence in, any of the acts set forth in clause (i), (ii), or
(iii) above; or (v) the Parent, the Borrower or any of their Subsidiaries shall generally not, or shall be unable to, or shall admit in writing its inability to, pay its debts as they become due; or

(g) (i) Any Person shall engage in any "prohibited transaction" (as defined in Section 406 of ERISA or Section 4975 of the Code) involving any Plan, (ii) any "accumulated funding deficiency" (as defined in Section 302 of ERISA), whether or not waived, shall exist with respect to any Plan or any Lien in favor of the PBGC or a Plan shall arise on the assets of any Loan Party or any Commonly Controlled Entity, (iii) a Reportable Event shall occur with respect to, or proceedings shall commence to have a trustee appointed, or a trustee shall be appointed, to administer or to terminate, any Single Employer Plan, which Reportable Event or commencement of proceedings or appointment of a trustee is, in the reasonable opinion of the Required Lenders, likely to result in the termination of such Plan for purposes of Title IV of ERISA, (iv) any


Single Employer Plan shall terminate for purposes of Title IV of ERISA,
(v) any Loan Party or any Commonly Controlled Entity shall, or in the reasonable opinion of the Required Lenders is likely to, incur any liability in connection with a withdrawal from, or the Insolvency or Reorganization of, a Multiemployer Plan or (vi) any other event or condition shall occur or exist with respect to a Plan; and in each case in clauses (i) through (vi) above, such event or condition, together with all other such events or conditions, if any, could, in the sole judgment of the Required Lenders, reasonably be expected to have a Material Adverse Effect; or

(h) One or more judgments or decrees shall be entered against the Parent, the Borrower or any of their Subsidiaries involving in the aggregate a liability (not paid or fully covered by insurance) of $1,000,000 or more, and all such judgments or decrees shall not have been vacated, discharged, stayed or bonded pending appeal within 60 days from the entry thereof; or

(i) Any of the Security Documents shall cease, for any reason, to be in full force and effect, or any Loan Party or any Affiliate of any Loan Party shall so assert, or any Lien created by any of the Security Documents shall cease to be enforceable and of the same effect and priority purported to be created thereby; or

(j) (i) There shall be a direct or indirect holding company parent of the Borrower other than the Parent; (ii) the Parent shall cease to own and control, of record and beneficially, directly, 100% of each class of outstanding Capital Stock of the Borrower free and clear of all Liens; (iii) any Wholly Owned Subsidiary of the Borrower shall issue any Capital Stock (or any security convertible into any of its Capital Stock) which is not pledged to the Administrative Agent for the benefit of the Lenders; (iv) Hushang Ansary shall cease to own, directly or indirectly, Capital Stock of the Parent possessing the voting power, including in combination with any applicable stockholder agreements, to elect a majority of the Parent's directors; (v) any Person or "group" (within the meaning of Section 13(d) or 14(d) of the Securities Exchange Act of 1934, as amended) (other than Hushang Ansary) shall have beneficial ownership of more than 25% of the economic and or voting interest in the Parent's Capital Stock; or (vi) (A) prior to the date of an initial registered public offering by the Borrower or the Parent of its common Capital Stock, Hushang Ansary shall cease to own, directly or indirectly, on a fully diluted basis in the aggregate at least 66-2/3% of the economic and voting interest in the Capital Stock of the Borrower and the Parent free of Liens except Liens created by the Security Documents and (B) on or after the date of an initial registered public offering by the Borrower or the Parent of its common Capital Stock, Hushang Ansary shall cease to own, directly or indirectly, on a fully diluted basis in the aggregate at least 51% of the economic and voting interest in the Capital Stock of the Borrower and the Parent free of Liens except Liens created by the Security Documents; or


(k) the subordination provisions of the Interim Notes or the Permanent Notes shall cease, for any reason, to be valid or any Loan Party shall so assert in writing;

then, and in any such event, (A) if such event is an Event of Default specified in clause (i) or (ii) of paragraph (f) above with respect to the Parent, the Borrower or any of their Subsidiaries, automatically the Commitments shall immediately terminate and the Loans hereunder (with accrued interest thereon) and all other amounts owing under this Agreement and the other Loan Documents (including, without limitation, all amounts of L/C Obligations, whether or not the beneficiaries of the then outstanding Letters of Credit shall have presented the documents required thereunder) shall immediately become due and payable, and (B) if such event is any other Event of Default, either or both of the following actions may be taken: (i) with the consent of the Required Lenders, the Administrative Agent may, or upon the request of the Required Lenders, the Administrative Agent shall, by notice to the Borrower declare the Commitments to be terminated forthwith, whereupon the Commitments shall immediately terminate; and (ii) with the consent of the Required Lenders, the Administrative Agent may, or upon the request of the Required Lenders, the Administrative Agent shall, by notice to the Borrower, declare the Loans hereunder (with accrued interest thereon) and all other amounts owing under this Agreement and the other Loan Documents (including, without limitation, all amounts of L/C Obligations, whether or not the beneficiaries of the then outstanding Letters of Credit shall have presented the documents required thereunder) to be due and payable forthwith, whereupon the same shall immediately become due and payable. With respect to all Letters of Credit with respect to which presentment for honor shall not have occurred at the time of an acceleration pursuant to this paragraph, the Borrower shall at such time deposit in a cash collateral account opened by the Administrative Agent an amount equal to the aggregate then undrawn and unexpired amount of such Letters of Credit. Amounts held in such cash collateral account shall be applied by the Administrative Agent to the payment of drafts drawn under such Letters of Credit, and the unused portion thereof after all such Letters of Credit shall have expired or been fully drawn upon, if any, shall be applied to repay other obligations of the Borrower hereunder and under the other Loan Documents. After all such Letters of Credit shall have expired or been fully drawn upon, all Reimbursement Obligations shall have been satisfied and all other obligations of the Borrower hereunder and under the other Loan Documents shall have been paid in full, the balance, if any, in such cash collateral account shall be returned to the Borrower (or such other Person as may be lawfully entitled thereto). Except as expressly provided above in this Section, presentment, demand, protest and all other notices of any kind are hereby expressly waived.

SECTION 9. THE ARRANGER; THE ADMINISTRATIVE AGENT AND THE SYNDICATION AGENT

9.1 Appointment. Each Lender hereby irrevocably designates and appoints the Arranger as the arranger of such Lender under this Agreement and the other Loan Documents, and each Lender irrevocably authorizes the Arranger, in such capacity, to take such action on its behalf under the provisions of this Agreement and the other Loan Documents and to exercise such powers and perform such duties as are expressly delegated to the Arranger by the


terms of this Agreement and the other Loan Documents, together with such other powers as are reasonably incidental thereto. Each Lender hereby irrevocably designates and appoints the Administrative Agent as the agent of such Lender under this Agreement and the other Loan Documents, and each Lender irrevocably authorizes the Administrative Agent, in such capacity, to take such action on its behalf under the provisions of this Agreement and the other Loan Documents and to exercise such powers and perform such duties as are expressly delegated to the Administrative Agent by the terms of this Agreement and the other Loan Documents, together with such other powers as are reasonably incidental thereto. Notwithstanding any provision to the contrary elsewhere in this Agreement, neither the Arranger nor the Administrative Agent shall not have any duties or responsibilities, except those expressly set forth herein, or any fiduciary relationship with any Lender, and no implied covenants, functions, responsibilities, duties, obligations or liabilities shall be read into this Agreement or any other Loan Document or otherwise exist against the Arranger or the Administrative Agent.

9.2 Delegation of Duties. The Arranger and the Administrative Agent may execute any of its duties under this Agreement and the other Loan Documents by or through agents or attorneys-in-fact and shall be entitled to advice of counsel concerning all matters pertaining to such duties. The Arranger and the Administrative Agent shall not be responsible for the negligence or misconduct of any agents or attorneys in-fact selected by it with reasonable care.

9.3 Exculpatory Provisions. Neither the Arranger, the Administrative Agent nor any of their officers, directors, employees, agents, attorneys-in-fact or Affiliates shall be (i) liable for any action lawfully taken or omitted to be taken by it or such Person under or in connection with this Agreement or any other Loan Document (except to the extent that any of the foregoing are found by a final and nonappealable decision of a court of competent jurisdiction to have resulted from its or such Person's own gross negligence or willful misconduct) or (ii) responsible in any manner to any of the Lenders for any recitals, statements, representations or warranties made by any Loan Party or any officer thereof contained in this Agreement or any other Loan Document or in any certificate, report, statement or other document referred to or provided for in, or received by the Arranger or the Administrative Agent under or in connection with, this Agreement or any other Loan Document or for the value, validity, effectiveness, genuineness, enforceability or sufficiency of this Agreement or the Notes or any other Loan Document or for any failure of any Loan Party a party thereto to perform its obligations hereunder or thereunder. The Arranger and the Administrative Agent shall not be under any obligation to any Lender to ascertain or to inquire as to the observance or performance of any of the agreements contained in, or conditions of, this Agreement or any other Loan Document, or to inspect the properties, books or records of any Loan Party.

9.4 Reliance by Arranger and Administrative Agent. The Arranger and the Administrative Agent shall be entitled to rely, and shall be fully protected in relying, upon any Note, writing, resolution, notice, consent, certificate, affidavit, letter, telecopy, telex or


teletype message, statement, order or other document or conversation believed by it to be genuine and correct and to have been signed, sent or made by the proper Person or Persons and upon advice and statements of legal counsel (including, without limitation, counsel to the Parent or the Borrower), independent accountants and other experts selected by the Arranger or the Administrative Agent. The Administrative Agent may deem and treat the payee of any Note as the owner thereof for all purposes unless a written notice of assignment, negotiation or transfer thereof shall have been filed with the Administrative Agent. The Arranger and the Administrative Agent shall be fully justified in failing or refusing to take any action under this Agreement or any other Loan Document unless it shall first receive such advice or concurrence of the Required Lenders (or, if so specified by this Agreement, all Lenders) as it deems appropriate or it shall first be indemnified to its satisfaction by the Lenders against any and all liability and expense which may be incurred by it by reason of taking or continuing to take any such action; provided that neither the Arranger nor the Administrative Agent shall fail or refuse to take any action under this Agreement or any other Loan Document as a result of a failure of the Lenders to indemnify them against liabilities or expenses resulting from their own gross negligence or willful misconduct. The Arranger and the Administrative Agent shall in all cases be fully protected in acting, or in refraining from acting, under this Agreement and the other Loan Documents in accordance with a request of the Required Lenders (or, if so specified by this Agreement, all Lenders), and such request and any action taken or failure to act pursuant thereto shall be binding upon all the Lenders and all future holders of the Notes.

9.5 Notice of Default. The Arranger and the Administrative Agent shall not be deemed to have knowledge or notice of the occurrence of any Default or Event of Default hereunder unless the Arranger or the Administrative Agent, as the case may be, has received written notice from a Lender, the Parent or the Borrower referring to this Agreement, describing such Default or Event of Default and stating that such notice is a "notice of default". In the event that the Administrative Agent receives such a notice, the Administrative Agent shall give notice thereof to the Lenders. The Administrative Agent shall take such action with respect to such Default or Event of Default as shall be reasonably directed by the Required Lenders (or, if so specified by this Agreement, all Lenders); provided that unless and until the Administrative Agent shall have received such directions, the Administrative Agent may (but shall not be obligated to) take such action, or refrain from taking such action, with respect to such Default or Event of Default as it shall deem advisable in the best interests of the Lenders.

9.6 Non-Reliance on Arranger, Administrative Agent and Other Lenders. Each Lender expressly acknowledges that neither the Arranger nor the Administrative Agent nor any of their officers, directors, employees, agents, attorneys-in-fact or Affiliates has made any representations or warranties to it and that no act by the Arranger or the Administrative Agent hereinafter taken, including any review of the affairs of a Loan Party or any Affiliate of a Loan Party, shall be deemed to constitute any representation or warranty by the Arranger or the Administrative Agent to any Lender. Each Lender represents to the Arranger and the Administrative Agent that it has, independently and without reliance upon the Arranger or the Administrative Agent or any other Lender, and based on such documents and information as it


has deemed appropriate, made its own appraisal of and investigation into the business, operations, property, financial and other condition and creditworthiness of the Loan Parties and their Affiliates and made its own decision to make its Loans hereunder and enter into this Agreement. Each Lender also represents that it will, independently and without reliance upon the Arranger or the Administrative Agent or any other Lender, and based on such documents and information as it shall deem appropriate at the time, continue to make its own credit analysis, appraisals and decisions in taking or not taking action under this Agreement and the other Loan Documents, and to make such investigation as it deems necessary to inform itself as to the business, operations, property, financial and other condition and creditworthiness of the Loan Parties and their Affiliates. Except for notices, reports and other documents expressly required to be furnished to the Lenders by the Arranger or the Administrative Agent hereunder, the Arranger and the Administrative Agent shall not have any duty or responsibility to provide any Lender with any credit or other information concerning the business, operations, property, condition (financial or otherwise), prospects or creditworthiness of any Loan Party or any Affiliate of a Loan Party which may come into the possession of the Arranger or the Administrative Agent or any of its officers, directors, employees, agents, attorneys-in-fact or Affiliates.

9.7 Indemnification. The Lenders agree to indemnify the Arranger and the Administrative Agent in its capacity as such (to the extent not reimbursed by the Parent or the Borrower and without limiting the obligation of the Parent or the Borrower to do so), ratably according to their respective Revolving Credit Percentages, Tranche A Term Loan Percentages and Tranche B Term Loan Percentages in effect on the date on which indemnification is sought under this Section 9.7, from and against any and all liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses or disbursements of any kind whatsoever which may at any time (including, without limitation, at any time following the payment of the Notes) be imposed on, incurred by or asserted against the Arranger or the Administrative Agent in any way relating to or arising out of, the Commitments, this Agreement, any of the other Loan Documents or any documents contemplated by or referred to herein or therein or the transactions contemplated hereby or thereby or any action taken or omitted by the Arranger or the Administrative Agent under or in connection with any of the foregoing; provided that no Lender shall be liable for the payment of any portion of such liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses or disbursements which are found by a final and nonappealable decision of a court of competent jurisdiction to have resulted from the Arranger's or the Administrative Agent's gross negligence or willful misconduct. The agreements in this Section 9.7 shall survive the payment of the Notes and all other amounts payable hereunder.

9.8 Arranger and Administrative Agent in Their Individual Capacities. The Arranger and its Affiliates and the Administrative Agent and its Affiliates may make loans to, accept deposits from and generally engage in any kind of business with any Loan Party as though the Arranger were not the Arranger and the Administrative Agent were not the Administrative Agent hereunder and under the other Loan Documents. With respect to its Loans made or renewed by it and any Note issued to it and with respect to any Letter of Credit


issued or participated in by it, the Arranger and the Administrative Agent shall have the same rights and powers under this Agreement and the other Loan Documents as any Lender and may exercise the same as though it were not the Arranger and the Administrative Agent, respectively, and the terms "Lender" and "Lenders" shall include the Arranger and the Administrative Agent in their individual capacities.

9.9 Successor Administrative Agent. The Administrative Agent may resign as Administrative Agent upon 10 days' notice to the Lenders. If the Administrative Agent shall resign as Administrative Agent under this Agreement and the other Loan Documents, then the Required Lenders shall appoint from among the Lenders a successor agent for the Lenders, which successor agent shall have been approved by the Borrower (which approval shall not be unreasonably withheld or delayed), whereupon such successor agent shall succeed to the rights, powers and duties of the Administrative Agent hereunder. Effective upon such appointment and approval, the term "Administrative Agent" shall mean such successor agent and the former Administrative Agent's rights, powers and duties as Administrative Agent shall be terminated, without any other or further act or deed on the part of such former Administrative Agent or any of the parties to this Agreement or any holders of the Notes. After any retiring Administrative Agent's resignation as Administrative Agent, the provisions of this Section 9 shall inure to its benefit as to any actions taken or omitted to be taken by it while it was Administrative Agent under this Agreement and the other Loan Documents. The Required Lenders, with the consent of the Borrower, may replace the Administrative Agent, provided that if a Default or an Event of Default shall occur and be continuing the consent of the Borrower shall not be required.

9.10 The Syndication Agent. The Syndication Agent, in its capacity as such, shall not have any duties or responsibilities hereunder or under any Loan Document nor any fiduciary relationship with any Lender, and no implied covenants, functions, responsibilities duties, obligations or liabilities shall be read into this Agreement or otherwise exist against the Syndication Agent in its capacity as such.

SECTION 10. MISCELLANEOUS

10.1 Amendments and Waivers. Neither this Agreement, any other Loan Document, nor any terms hereof or thereof may be amended, supplemented or modified except in accordance with the provisions of this Section 10.1. The Required Lenders and each Loan Party to the relevant Loan Documents may, or, with the written consent of the Required Lenders, the Administrative Agent and each Loan Party to the relevant Loan Document may, from time to time, (a) enter into written amendments, supplements or modifications hereto and to the other Loan Documents for the purpose of adding any provisions to this Agreement or the other Loan Documents or changing in any manner the rights of the Lenders or of the Loan Parties hereunder or thereunder or (b) waive, on such terms and conditions as the Required Lenders or the Administrative Agent, as the case may be, may specify in such instrument, any of the requirements of this Agreement or the other Loan Documents or any Default or Event of


Default and its consequences; provided that no such waiver and no such amendment, supplement or modification shall (i) forgive the principal amount or extend the final scheduled date of maturity of any Note, or reduce the stated rate of any interest, fee or letter of credit commission payable hereunder or extend the scheduled date of any payment thereof or increase the amount or extend the expiration date of any Lender's Revolving Credit Commitment, or make any change in the application of any prepayment of the Loans specified in the first sentence of Section 2.11(e) or in Section 2.17(a), or the right to refuse prepayments set forth in the last sentence of Section 2.11(e), in each case without the consent of each Lender directly affected thereby, (ii) extend the scheduled date or change the amount of any amortization payment or waive or extend the date of any mandatory prepayment in respect of the Tranche A Term Loans referred to in Section 2.8 without the consent of each Lender affected thereby or extend the scheduled date or change the amount of any amortization payment or waive or extend the date of any mandatory prepayment in respect of the Tranche B Term Loans referred to in Section 2.8 without the consent of each Lender affected thereby, (iii) amend, modify or waive any provision of this
Section 10.1 or reduce any percentage specified in the definition of Required Lenders, or consent to the assignment or transfer by any Loan Party of any of its rights and obligations under this Agreement and the other Loan Documents or release all or a substantial portion of the Collateral (other than in connection with any sale or other disposition of assets permitted by Section 7.6) or any guarantee of the Obligations, in each case, without the written consent of all the Lenders, (iv) amend, modify or waive any provision of Sections 9.1 through 9.9 without the written consent of the Arranger and the Administrative Agent,
(v) amend, modify or waive any provision of Section 9.10 without the written consent of the Syndication Agent or (vi) amend, modify or waive any provision of
Section 3 without the written consent of the Issuing Lender. Any such waiver and any such amendment, supplement or modification shall apply equally to each of the Lenders and shall be binding upon the Loan Parties, the Lenders, the Administrative Agent and all future holders of the Notes. In the case of any waiver, the Loan Parties, the Lenders and the Administrative Agent shall be restored to their former position and rights hereunder and under the other Loan Documents, and any Default or Event of Default waived shall be deemed to be cured and not continuing; but no such waiver shall extend to any subsequent or other Default or Event of Default or impair any right consequent thereon.

10.2 Notices. All notices, requests and demands to or upon the respective parties hereto to be effective shall be in writing (including by telecopy), and, unless otherwise expressly provided herein, shall be deemed to have been duly given or made when delivered, or three Business Days after being deposited in the mail, postage prepaid, or, in the case of telecopy notice, when received, addressed as follows in the case of the Parent, the Borrower, the Administrative Agent and the Arranger, and as set forth in Schedule 1.1B in the case of the Lenders, or to such other address as may be hereafter notified by the respective parties hereto and any future holders of the Notes:


The Parent:          Energy Services International Ltd.
                     First Interstate Bank Plaza
                     1000 Louisiana, Suite 5900
                     Houston, Texas  77002

                     Attention Mr. Munawar H. Hidayatallah
                     Telecopy  (713) 659-1526
                     Telephone:(713) 751-2717

The Borrower:        IRI International Corporation
                     First Interstate Bank Plaza
                     1000 Louisiana, Suite 5900
                     Houston, Texas  77002

                     Attention Mr. Munawar H. Hidayatallah
                     Telecopy  (713) 659-1526
                     Telephone:(713) 751-2717


The Administrative
  Agent:             Credit Lyonnais New York Branch
                     1000 Louisiana, Suite 5360
                     Houston, Texas  77002

                     Attention Thomas Byargeon
                     Telecopy  (713) 751-0307
                     Telephone:(713) 751-0500


The Arranger:        LEHMAN COMMERCIAL PAPER INC.
                     3 World Financial Center
                     New York, New York  10285

                     Attention Michelle Swanson
                     Telecopy  (212) 528-0819
                     Telephone:(212) 526-0330

provided that any notice, request or demand to or upon the Administrative Agent or the Lenders pursuant to Section 2.2, 2.4, 2.6, 2.9, 2.10 or 2.12 shall not be effective until received. Any notice or delivery to or from or consent required of the Borrower hereunder or pursuant to any other Loan Document may be made to or by the Borrower.

10.3 No Waiver; Cumulative Remedies. No failure to exercise and no delay in exercising, on the part of the Administrative Agent or any Lender, any right, remedy, power


or privilege hereunder or under the other Loan Documents shall operate as a waiver thereof; nor shall any single or partial exercise of any right, remedy, power or privilege hereunder preclude any other or further exercise thereof or the exercise of any other right, remedy, power or privilege. The rights, remedies, powers and privileges herein provided are cumulative and not exclusive of any rights, remedies, powers and privileges provided by law.

10.4 Survival. All representations and warranties made hereunder, in the other Loan Documents and in any document, certificate or statement delivered pursuant hereto or in connection herewith shall survive the execution and delivery of this Agreement and the Notes and the making of the Loans hereunder.

10.5 Payment of Expenses and Taxes. The Borrower agrees (a) to pay or reimburse the Administrative Agent and the Arranger for all their reasonable out-of-pocket costs and expenses incurred in connection with the development, preparation and execution of, and any amendment, supplement or modification to, this Agreement and the other Loan Documents and any other documents prepared in connection herewith or therewith, and the consummation and administration of the transactions contemplated hereby and thereby, including, without limitation, the reasonable fees and disbursements of counsel to the Administrative Agent, (b) to pay or reimburse each Lender and the Administrative Agent for all its costs and expenses incurred in connection with the enforcement or preservation of any rights under this Agreement, the other Loan Documents and any such other documents, including, without limitation, the fees and disbursements of counsel (including the allocated fees and expenses of in-house counsel) to each Lender and counsel to the Administrative Agent, (c) to pay, indemnify, and hold each Lender, the Administrative Agent, the Arranger and the Syndication Agent harmless from, any and all recording and filing fees and any and all liabilities with respect to, or resulting from any delay in paying, stamp, excise and other taxes, if any, which may be payable or determined to be payable in connection with the execution and delivery of, or consummation or administration of any of the transactions contemplated by, or any amendment, supplement or modification of, or any waiver or consent under or in respect of, this Agreement, the other Loan Documents and any such other documents, and (d) to pay, indemnify, and hold each Lender and the Administrative Agent, the Arranger and the Syndication Agent and their respective officers, directors, trustees, employees, affiliates, agents and controlling persons (each, an "indemnitee") harmless from and against any and all other liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses or disbursements of any kind or nature whatsoever with respect to the execution, delivery, enforcement, performance and administration of this Agreement, the other Loan Documents and any such other documents, including, without limitation, any of the foregoing relating to the use of proceeds of the Loans or the violation of, noncompliance with or liability under, any Environmental Law applicable to the operations of the Parent, the Borrower, any of their Subsidiaries or any of the Properties (all the foregoing in this clause
(d), collectively, the "indemnified liabilities"), provided that the Borrower shall have no obligation hereunder to any indemnitee with respect to indemnified liabilities to the extent such indemnified liabilities are found by a final and nonappealable decision of a court of competent jurisdiction to have resulted from the gross negligence or willful misconduct of such indemnitee. The agreements


in this Section 10.5 shall survive repayment of the Notes and all other amounts payable hereunder and the termination of the Commitments and, in the case of any Lender that may assign any interest in its Commitments, Loans or Letter of Credit Interest hereunder, shall survive the making of such assignment, notwithstanding that such assigning Lender may cease to be a "Lender" hereunder.

10.6 Successors and Assigns; Participations and Assignments.
(a) This Agreement shall be binding upon and inure to the benefit of the Parent, the Borrower, the Lenders, the Administrative Agent, the Arranger, all future holders of the Notes and their respective successors and assigns, except that neither the Parent nor the Borrower may assign or transfer any of its rights or obligations under this Agreement without the prior written consent of each Lender.

(b) Any Lender may, without the consent of the Borrower, in the ordinary course of its business and in accordance with applicable law, at any time sell to one or more banks or other entities (each, a "Participant") participating interests in any Loan owing to such Lender, any Note held by such Lender, any Commitment of such Lender or any other interest of such Lender hereunder and under the other Loan Documents. In the event of any such sale by a Lender of a participating interest to a Participant, such Lender's obligations under this Agreement to the other parties to this Agreement shall remain unchanged, such Lender shall remain solely responsible for the performance thereof, such Lender shall remain the holder of any such Note for all purposes under this Agreement and the other Loan Documents, and the Borrower and the Administrative Agent shall continue to deal solely and directly with such Lender in connection with such Lender's rights and obligations under this Agreement and the other Loan Documents. In no event shall any Participant under any such participation have any right to approve any amendment or waiver of any provision of any Loan Document, or any consent to any departure by any Loan Party therefrom, except to the extent that such amendment, waiver or consent would reduce the principal of, or interest on, the Notes or any fees payable hereunder, postpone the date of the final maturity of the Notes, consent to the assignment or transfer by the Borrower of any of its rights and obligations under this Agreement and the other Loan Documents, release all or a substantial portion of the Collateral (other than in connection with any sale or other disposition of assets permitted by Section 7.6) or any guarantee of the Obligations, in each case to the extent subject to such participation. The Borrower agrees that if amounts outstanding under this Agreement and the Notes are due or unpaid, or shall have been declared or shall have become due and payable upon the occurrence of an Event of Default, each Participant shall, to the maximum extent permitted by applicable law, be deemed to have the right of setoff in respect of its participating interest in amounts owing under this Agreement and any Note to the same extent as if the amount of its participating interest were owing directly to it as a Lender under this Agreement or any Note, provided that, in purchasing such participating interest, such Participant shall be deemed to have agreed to share with the Lenders the proceeds thereof as provided in Section 10.7(a) as fully as if it were a Lender hereunder. The Borrower also agrees that each Participant shall be entitled to the benefits of Sections 2.19, 2.20 and 2.21 with respect to its participation in the Commitments and the Loans outstanding from time to time as if it was a Lender; provided


that, in the case of Section 2.20, such Participant shall have complied with the requirements of said Section and provided, further, that no Participant shall be entitled to receive any greater amount pursuant to any such Section than the transferor Lender would have been entitled to receive in respect of the amount of the participation transferred by such transferor Lender to such Participant had no such transfer occurred.

(c) Any Lender may, in the ordinary course of its business and in accordance with applicable law, at any time and from time to time assign to any Lender or any affiliate thereof or any Person under common management with any such Lender or, with the consent of the Borrower, the Administrative Agent, the Arranger and, in the case of an assignment of Revolving Credit Commitments, the Issuing Lender (which, in each case, shall not be unreasonably withheld, delayed or conditioned) (provided that no such consent need be obtained by Lehman Commercial Paper Inc. for a period of 120 days following the Closing Date), to an additional bank, financial institution or other entity (an "Assignee") all or any part of its rights and obligations under this Agreement, the Letters of Credit and the Notes pursuant to an Assignment and Acceptance, substantially in the form of Exhibit G, executed by such Assignee, such assigning Lender (and, in the case of an Assignee that is not then a Lender or an affiliate thereof, by the Borrower, the Administrative Agent, the Arranger and, in the case of an assignment of Revolving Credit Commitments, the Issuing Lender) and delivered to the Administrative Agent for its acceptance and recording in the Register with a copy to the Arranger; provided that (except with the consent of the Borrower, the Administrative Agent and the Arranger) (i) no such assignment to an Assignee (other than any Lender or any affiliate thereof or any Person under common management with such Lender) shall be in an aggregate principal amount of less than $5,000,000 (other than in the case of an assignment of all of a Lender's interests under this Agreement and the Notes) and (ii) subsequent to any such assignment the assigning Lender shall not retain an aggregate principal amount of less than $5,000,000 in Commitments and Loans. Such assignment need not be ratable as among any Tranche A Term Loan Commitments and/or Tranche A Term Loans, Tranche B Term Loan Commitments and/or Tranche B Term Loans and Revolving Credit Commitments and/or Revolving Credit Loans of the assigning Lender. Upon such execution, delivery, acceptance and recording, from and after the effective date determined pursuant to such Assignment and Acceptance, (x) the Assignee thereunder shall be a party hereto and, to the extent provided in such Assignment and Acceptance, have the rights and obligations of a Lender hereunder with a Commitment as set forth therein, and
(y) the assigning Lender thereunder shall, to the extent provided in such Assignment and Acceptance, be released from its obligations under this Agreement (and, in the case of an Assignment and Acceptance covering all or the remaining portion of an assigning Lender's rights and obligations under this Agreement, such assigning Lender shall cease to be a party hereto). Notwithstanding any provision of this paragraph (c) and paragraph (e) of this Section 10.6, the consent of the Borrower shall not be required, and, unless requested by the Assignee and/or the assigning Lender, new Notes shall not be required to be executed and delivered by the Borrower, for any assignment which occurs at any time when any Event of Default shall have occurred and be continuing.


(d) A Note and the Obligation(s) evidenced thereby may be assigned or otherwise transferred in whole or in part only by registration of such assignment or transfer of such Note and the Obligation(s) evidenced thereby on the Register (and each Note shall expressly so provide). Any assignment or transfer of all or part of such Obligation(s) and the Note(s) evidencing the same shall be registered on the Register only upon surrender for registration of assignment or transfer of the Note(s) evidencing such Obligation(s), accompanied by an Assignment and Acceptance duly executed by the Noteholder thereof, and thereupon one or more new Note(s) in the same aggregate principal amount shall be issued to the designated Assignee(s) and the old Notes(s) shall be returned by the Administrative Agent to the Borrower marked "cancelled." No assignment of a Note and the Obligation(s) evidenced thereby shall be effective unless it has been recorded in the Register as provided in this Section 10.6(d).

(e) The Administrative Agent shall maintain at its address referred to in Section 10.2 a copy of each Assignment and Acceptance delivered to it and a register (the "Register") for the recordation of the names and addresses of the Lenders and the Commitment of, and principal amount of the Loans owing to, each Lender from time to time and the registered owners of the Obligation(s) evidenced by the Note(s). The entries in the Register shall be conclusive, in the absence of manifest error, and the Borrower, the Administrative Agent and the Lenders shall treat each Person whose name is recorded in the Register as the owner of the Loan or the Obligation evidenced by a Note recorded therein for all purposes of this Agreement. The Register shall be available for inspection by the Borrower or any Lender at any reasonable time and from time to time upon reasonable prior notice.

(f) Upon its receipt of an Assignment and Acceptance executed by an assigning Lender and an Assignee (and, in the case of an Assignee that is not then a Lender or an affiliate thereof, by the Borrower, the Administrative Agent, the Arranger and the Issuing Lender) together with payment to the Administrative Agent of a registration and processing fee of $2,000 (except that no such registration and processing fee shall be payable (y) by Lehman Commercial Paper Inc. for a period of 120 days following the Closing Date or (z) in the case of an Assignee which is already a Lender or is an affiliate of a Lender), the Administrative Agent shall (i) promptly accept such Assignment and Acceptance and (ii) on the effective date determined pursuant thereto record the information contained therein in the Register and give notice of such acceptance and recordation to the Lenders and the Borrower. On or prior to such effective date, the Borrower, at its own expense, upon request, shall execute and deliver to the Administrative Agent (in exchange for the Revolving Credit Note, Tranche A Term Note and/or Tranche B Term Note, as the case may be, of the assigning Lender) a new Revolving Credit Note, Tranche A Term Note and/or Tranche B Term Note, as the case may be, to the order of such Assignee in an amount equal to the Revolving Credit Commitment, Tranche A Term Loan and/or Tranche B Term Loan, as the case may be, assumed by it pursuant to such Assignment and Acceptance and, if the assigning Lender has retained a Revolving Credit Commitment, Tranche A Term Loan and/or Tranche B Term Loan, as the case may be, upon request, a new Revolving Credit Note, Tranche A Term Note and/or Tranche B Term Note, as the case may be, to the order of the assigning Lender in an amount


equal to the Revolving Credit Commitment, Tranche A Term Loan and/or Tranche B Term Loan, as the case may be, retained by it hereunder. Such new Notes shall be dated the Closing Date and shall otherwise be in the form of the Note replaced thereby.

(g) Each of the Parent and the Borrower authorizes each Lender to disclose to any Participant or Assignee (each, a "Transferee") and any prospective Transferee any and all financial information in such Lender's possession concerning the Parent, the Borrower and their respective Affiliates which has been delivered to such Lender by or on behalf of the Parent or the Borrower pursuant to this Agreement or which has been delivered to such Lender by or on behalf of the Parent or the Borrower in connection with such Lender's credit evaluation of the Parent, the Borrower and their respective Affiliates prior to becoming a party to this Agreement.

(h) Nothing herein shall prohibit or restrict any Lender from
(i) pledging or assigning any Note to any Federal Reserve Bank in accordance with applicable law or (ii) with the prior consent of the Administrative Agent and the Borrower (which, in each case, shall not be unreasonably withheld or delayed or conditioned), pledging its rights in connection with any Loan or Note to any other Person.

10.7 Adjustments; Set-off. (a) If any Lender (a "Benefitted Lender") shall at any time receive any payment of all or part of its Loans or the Reimbursement Obligations owing to it, or interest thereon, or receive any collateral in respect thereof then due and owing to such Lender (whether voluntarily or involuntarily, by set-off, pursuant to events or proceedings of the nature referred to in Section 8(f), or otherwise), in a greater proportion than any such payment to or collateral received by any other Lender, if any, in respect of such other Lender's Loans or the Reimbursement Obligations then due and owing to such other Lender, or interest thereon, such Benefitted Lender shall purchase for cash from the other Lenders a participating (or, at the option of such Lender, a direct) interest in such portion of each such other Lender's Loan and/or of the Reimbursement Obligations owing to each such other Lender, or shall provide such other Lenders with the benefits of any such collateral, or the proceeds thereof, as shall be necessary to cause such Benefitted Lender to share the excess payment or benefits of such collateral or proceeds ratably with each of the Lenders; provided that if all or any portion of such excess payment or benefits is thereafter recovered from such Benefitted Lender, such purchase shall be rescinded, and the purchase price and benefits returned, to the extent of such recovery, but without interest.

(b) In addition to any rights and remedies of the Lenders provided by law, each Lender shall have the right, without prior notice to the Parent or the Borrower, any such notice being expressly waived by the Parent and the Borrower to the extent permitted by applicable law, upon any amount becoming due and payable by the Parent or the Borrower hereunder or under the Notes (whether at the stated maturity, by acceleration or otherwise) to set off and appropriate and apply against such amount any and all deposits (general or special, time or demand, provisional or final), in any currency, and any other credits, indebtedness or claims, in any currency, in each case whether direct or indirect, absolute or contingent, matured or


unmatured, at any time held or owing by such Lender or any branch or agency thereof to or for the credit or the account of the Parent or the Borrower. Each Lender agrees promptly to notify the Parent, the Borrower and the Administrative Agent after any such setoff and application made by such Lender, provided that the failure to give such notice shall not affect the validity of such setoff and application.

10.8 Counterparts. This Agreement may be executed by one or more of the parties to this Agreement on any number of separate counterparts (including by telecopy), and all of said counterparts taken together shall be deemed to constitute one and the same instrument. A set of the copies of this Agreement signed by all the parties shall be lodged with the Borrower and the Administrative Agent.

10.9 Severability. Any provision of this Agreement which is prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such prohibition or unenforceability without invalidating the remaining provisions hereof, and any such prohibition or unenforceability in any jurisdiction shall not invalidate or render unenforceable such provision in any other jurisdiction.

10.10 Integration. This Agreement and the other Loan Documents represent the agreement of the Parent, the Borrower, the Administrative Agent, the Arranger and the Lenders with respect to the subject matter hereof, and there are no promises, undertakings, representations or warranties by the Administrative Agent, the Arranger or any Lender relative to subject matter hereof not expressly set forth or referred to herein or in the other Loan Documents.

10.11 GOVERNING LAW. THIS AGREEMENT AND THE NOTES AND THE RIGHTS AND OBLIGATIONS OF THE PARTIES UNDER THIS AGREEMENT AND THE NOTES SHALL BE GOVERNED BY, AND CONSTRUED AND INTERPRETED IN ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK.

10.12 Submission To Jurisdiction; Waivers. Each of the Parent and the Borrower hereby irrevocably and unconditionally:

(a) submits for itself and its property in any legal action or proceeding relating to this Agreement and the other Loan Documents to which it is a party, or for recognition and enforcement of any judgment in respect thereof, to the non-exclusive general jurisdiction of the Courts of the State of New York, the courts of the United States for the Southern District of New York, and appellate courts from any thereof;

(b) consents that any such action or proceeding may be brought in such courts and waives any objection that it may now or hereafter have to the venue of any such


action or proceeding in any such court or that such action or proceeding was brought in an inconvenient court and agrees not to plead or claim the same;

(c) agrees that service of process in any such action or proceeding may be effected by mailing a copy thereof by registered or certified mail (or any substantially similar form of mail), postage prepaid, to the Parent or the Borrower, as the case may be at its address set forth in Section 10.2 or at such other address of which the Administrative Agent shall have been notified pursuant thereto;

(d) agrees that nothing herein shall affect the right to effect service of process in any other manner permitted by law or shall limit the right to sue in any other jurisdiction; and

(e) waives, to the maximum extent not prohibited by law, any right it may have to claim or recover in any legal action or proceeding referred to in this Section 10.12 any special, exemplary, punitive or consequential damages.

10.13 Acknowledgements. Each of the Parent and the Borrower hereby acknowledges that:

(a) it has been advised by counsel in the negotiation, execution and delivery of this Agreement and the other Loan Documents;

(b) neither the Administrative Agent, the Arranger nor any Lender has any fiduciary relationship with or duty to the Parent or the Borrower arising out of or in connection with this Agreement or any of the other Loan Documents, and the relationship between Administrative Agent, the Arranger and Lenders, on one hand, and the Parent and the Borrower, on the other hand, in connection herewith or therewith is solely that of debtor and creditor; and

(c) no joint venture is created hereby or by the other Loan Documents or otherwise exists by virtue of the transactions contemplated hereby among the Lenders or among the Parent, the Borrower and the Lenders.

10.14 WAIVERS OF JURY TRIAL. THE PARENT, THE BORROWER, THE ADMINISTRATIVE AGENT, THE ARRANGER AND THE LENDERS HEREBY IRREVOCABLY AND UNCONDITIONALLY WAIVE TRIAL BY JURY IN ANY LEGAL ACTION OR PROCEEDING RELATING TO THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT AND FOR ANY COUNTERCLAIM THEREIN.

10.15 Confidentiality. Each of the Administrative Agent, the Arranger and each Lender agrees to keep confidential all non-public information provided to it by any Loan Party pursuant to this Agreement that is designated by such Loan Party as confidential; provided that nothing herein shall prevent the Administrative Agent, the Arranger or any


Lender from disclosing any such information (a) to the Administrative Agent, the Arranger any other Lender or any affiliate or investment advisor of any Lender,
(b) to any Transferee or prospective Transferee which agrees to comply with the provisions of this Section 10.15, (c) to the employees, directors, agents, attorneys, accountants and other professional advisors of such Lender or its affiliates, (d) upon the request or demand of any Governmental Authority having jurisdiction over the Administrative Agent or such Lender, (e) in response to any order of any court or other Governmental Authority or as may otherwise be required pursuant to any Requirement of Law, (f) if requested or required to do so in connection with any litigation or similar proceeding, (g) which has been publicly disclosed other than in breach of this Section 10.15 or (h) in connection with the exercise of any remedy hereunder or under any other Loan Document.


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

ENERGY SERVICES INTERNATIONAL LTD.

By: /s/ Munawar H. Hidayatallah
    -----------------------------------------------
    Title:  Executive Vice President-
              Corporate Development

IRI INTERNATIONAL CORPORATION

By: /s/ Munawar H. Hidayatallah
    -----------------------------------------------
    Title:  Executive Vice President-
              Corporate Development

LEHMAN COMMERCIAL PAPER INC., as Arranger
and as a Lender

By: /s/ Dennis Dee
    -----------------------------------------------
    Title: Authorized Signatory

CREDIT LYONNAIS NEW YORK BRANCH, as
Administrative Agent, Issuing Lender and as a Lender

By: /s/ Mark Koneval
    -----------------------------------------------
   Title:  Vice President


BHF-BANK AKTIENGESELLSCHAFT, as a Lender

By: /s/ Paul Travers
   ---------------------------------------------------
   Title:  Vice President

By: /s/ Thomas J. Scifo
   ---------------------------------------------------
   Title:  Assistant Vice President

CITIBANK, N.A., as a Lender

By: /s/ Hans L. Christensen
   ---------------------------------------------------
   Title:  Vice President

PRIME INCOME TRUST, as a Lender

By: /s/ Rafael Scolari
   ---------------------------------------------------
   Title:  Vice President - Portfolio Manager

SENIOR HIGH INCOME PORTFOLIO, as a Lender

By: /s/ Gilles Marchand
   ---------------------------------------------------
   Title:  Authorized Signatory

MERRILL LYNCH SENIOR FLOATING RATE FUND,
INC., as a Lender

By: /s/ Gilles Marchand
   ---------------------------------------------------
   Title:  Authorized Signatory


PILGRIM AMERICA PRIME RATE TRUST, as a
Lender

By: /s/ Thomas C. Hunt
   ---------------------------------------------------
    Title:  Portfolio Analyst

CRESCENT/MACH I PARTNERS, L.P.
By: TCW Asset Management Company
Its Investment Manager, as a Lender

By: /s/ Justin Driscoll
    --------------------------------------------------
    Title:  Senior Vice President


COMMITMENTS; LENDING OFFICES AND ADDRESSES

                                REVOLVING CREDIT   TRANCHE A TERM    TRANCHE B TERM
LENDER AND ADDRESS              LOAN COMMITMENT    LOAN COMMITMENT   LOAN COMMITMENT    TOTAL COMMITMENT

BHF - BANK AKTIENGESELLSCHAFT      $5,900,000        $1,425,000        $3,700,000          $11,025,000
590 Madison Avenue
New York, NY 10022
Tel: (212) 756-5912
Fax: (212) 756-5536
Contact: Tom Scifo

CREDIT LYONNAIS                    $9,550,000        $1,425,000        $5,900,000          $16,875,000
NEW YORK BRANCH
1301 Avenue of the Americas
18th Floor
New York, NY 10019
Tel: (212) 261-7867
Fax: (212) 459-3176
Contact:  Mark Koneval

CITIBANK, N.A.                                       $11,425,000                           $11,425,000
399 Park Avenue
9th Floor (zone 8)
New York, NY 10043
Tel: (212) 559-8785
Fax: (212) 793-1871
Contact: Ghazali Inam

PRIME INCOME TRUST                                   $11,425,000                           $11,425,000
2 World Trade Center
New York, NY 10048
Tel: (212) 392-5686
Fax: (212) 392-5345
Contact: Rafael Scolari


                                   REVOLVING CREDIT     TRANCHE A TERM    TRANCHE B TERM
LENDER AND ADDRESS                 LOAN COMMITMENT      LOAN COMMITMENT   LOAN COMMITMENT      TOTAL COMMITMENT
MERRILL LYNCH SENIOR FLOATING                             $11,425,000                            $11,425,000
RATE FUND, INC.
SENIOR HIGH INCOME PORTFOLIO
800 Scudders Mill Road
Plainsborough, NJ 08536
Tel: (609) 282-3348
Fax: (609) 282-2757
Contact: Gilles Marchand

PILGRIM AMERICA PRIME RATE                                $10,000,000                            $10,000,000
TRUST
Two Renaissance Square
40 North Central, Suite 1200
Phoenix, AZ 85004
Tel: (602) 417-8100
Fax:
Contact: Tim Hunt

CRESCENT/MACH I PARTNERS, L.P.                            $5,000,000                              $5,000,000
BY: TCW ASSET MANAGEMENT
COMPANY, ITS INVESTMENT MANAGER
200 Park Avenue
Suite 2200
New York, NY 10166-0228
Tel: (212) 297-4138
Fax: (212) 297-4159
Contact: Mark L. Gold

LEHMAN BROTHERS INC.                  $9,550,000          $12,875,000       $5,900,000           $28,325,000
3 World Financial Center
9th Floor
New York, NY 10285
Tel: (212) 526-2204
Fax: (212) 526-4827
Contact: Jack Lucid


Schedule 1.1C

TRANCHE A TERM LOAN AMORTIZATION SCHEDULE

Quarter                         Principal Amount

June 30, 1997                     $   500,000
September 30, 1997                    500,000
December 31, 1997                     500,000
March 31, 1998                        500,000
June 30, 1998                         750,000
September 30, 1998                    750,000
December 31, 1998                     750,000
March 31, 1999                        750,000
June 30, 1999                       1,250,000
September 30, 1999                  1,250,000
December 31, 1999                   1,250,000
March 31, 2000                      1,250,000
June 30, 2000                       2,500,000
September 30, 2000                  2,500,000
December 31, 2000                   2,500,000
March 31, 2001                      2,500,000
June 30, 2001                      11,250,000
September 30, 2001                 11,250,000
December 31, 2001                  11,250,000
March 31, 2002                     11,250,000


Schedule 1.1D

TRANCHE B TERM LOAN AMORTIZATION SCHEDULE

Quarter                           Principal Amount

March 31, 1998                      $   175,000
March 31, 1999                          175,000
March 31, 2000                          175,000
March 31, 2001                          175,000
March 31, 2002                       14,800,000


Schedule 4.15

SUBSIDIARIES

Bowen Mexicana, S.A. De C.V.
Bowen Tools, Ltd.



SENIOR SUBORDINATED INCREASING RATE

NOTE PURCHASE AGREEMENT

among

IRI INTERNATIONAL CORPORATION

ENERGY SERVICES INTERNATIONAL LIMITED

and

STRATEGIC RESOURCE PARTNERS FUND


Dated as of March 31, 1997

$31,000,000



                                TABLE OF CONTENTS
                                                                                                               PAGE
                                                                                                               ----


ARTICLE I

                                                    DEFINITIONS
         Section 1.1           Defined Terms....................................................................  1
         Section 1.2           Interpretation................................................................... 16

                                                     ARTICLE II

                                           REPRESENTATIONS AND WARRANTIES

         Section 2.1           Representations and Warranties in the Acquisition Agreements and
                               the Senior Credit Facility....................................................... 16
         Section 2.2           Organization; Good Standing...................................................... 16
         Section 2.3           Due Authorization and Enforceability............................................. 17
         Section 2.4           No Conflicts..................................................................... 17
         Section 2.5           No Violations; Material Contracts................................................ 18
         Section 2.6           Capital Stock; Subsidiaries...................................................... 18
         Section 2.7           Senior Credit Facility; Liens.................................................... 19
         Section 2.8           No Violation of Regulations of Board of Governors of Federal
                               Reserve System................................................................... 19
         Section 2.9           Governmental Regulations......................................................... 19
         Section 2.10          Financial Statements; No Undisclosed Liabilities................................. 19
         Section 2.11          Full Disclosure.................................................................. 20
         Section 2.12          Private Offering; Rule 144A Matters.............................................. 20
         Section 2.13          Proprietary Matter............................................................... 21
         Section 2.14          Absence of Proceedings........................................................... 21
         Section 2.15          Absence of Labor Disputes........................................................ 21
         Section 2.16          Taxes............................................................................ 22
         Section 2.17          Absence of Employment Law Violations, Etc........................................ 22
         Section 2.18          Environmental Laws............................................................... 22
         Section 2.19          Permits.......................................................................... 23
         Section 2.20          Properties; Leases............................................................... 23
         Section 2.21          Insurance........................................................................ 23
         Section 2.22          Financial Condition; Solvency.................................................... 23
         Section 2.23          Foreign Corrupt Practices Act.................................................... 24
         Section 2.24          No Material Adverse Change....................................................... 24
         Section 2.25          ERISA............................................................................ 24

                                                    ARTICLE III

                                                 SALE AND REPAYMENT

         Section 3.1           Sale of the Interim Notes........................................................ 25
         Section 3.2           Maturity......................................................................... 25
         Section 3.3           Mandatory Exchange; Issuance of Rollover Notes and Warrants...................... 25
         Section 3.4           Interest on the Interim Notes.................................................... 26

                                        i


                                                                                                      PAGE
                                                                                                      ----

Section 3.5           Default Interest................................................................. 27
Section 3.6           Mandatory Redemption............................................................. 27
Section 3.7           Optional Prepayment.............................................................. 27
Section 3.8           Rollover Fee..................................................................... 28
Section 3.9           Indemnity........................................................................ 28
Section 3.10          Effect of Notice of Prepayment................................................... 28
Section 3.11          Method of Payment................................................................ 28
Section 3.12          Inability to Determine Interest Rate; Interest Periods Less Than
                      Three Months..................................................................... 28
Section 3.13          Payment on Business Days......................................................... 29
Section 3.14          Partial Redemption............................................................... 29

                                            ARTICLE IV

                                            COVENANTS

Section 4.1           Use of Proceeds.................................................................. 29
Section 4.2           Notice of Default on Interim Notes and Related Matters........................... 29
Section 4.3           Offering......................................................................... 29
Section 4.4           Issuance of High Yield Notes and Warrants........................................ 30
Section 4.5           Additional Subsidiary Guarantees................................................. 31
Section 4.6           Merger and Sale.................................................................. 31
Section 4.7           Information; SEC Reports; Compliance Certificates................................ 32
Section 4.8           Authorizations and Approvals..................................................... 33
Section 4.9           Limitation on Incurrence of Additional Indebtedness and Issuance
                      of Preferred Stock............................................................... 33
Section 4.10          Restricted Payments.............................................................. 34
Section 4.11          Limitation on Restrictions on Distributions from Subsidiaries.................... 35
Section 4.12          Limitation on Sales of Assets and Subsidiary Stock............................... 35
Section 4.13          Limitation on Transactions with Affiliates....................................... 35
Section 4.14          Line of Business................................................................. 36
Section 4.15          Capitalization; Restrictions on Certain Amendments............................... 36
Section 4.16          Liens............................................................................ 36
Section 4.17          No Senior Subordinated Indebtedness.............................................. 36
Section 4.18          Corporate Existence; Compliance with Laws; Taxes; Maintenance
                      of Insurance..................................................................... 36
Section 4.19          Liquidation...................................................................... 37
Section 4.20          Stay, Extension and Usury Laws................................................... 37
Section 4.21          Change of Control................................................................ 37

                                            ARTICLE V

                          CONDITIONS TO THE INTERIM LENDERS' OBLIGATIONS

Section 5.1           Closing.......................................................................... 38
Section 5.2           Conditions of the Interim Lenders' Obligations................................... 39


                                                ii


                                                                                                      PAGE
                                                                                                      ----

                                            ARTICLE VI


                TRANSFER OF THE INTERIM NOTES; REPRESENTATIONS OF INTERIM LENDERS

Section 6.1           Transfer of the Interim Notes.................................................... 42
Section 6.2           Registration of Transfer or Exchange............................................. 43
Section 6.3           Register......................................................................... 43

                                           ARTICLE VII

                                        EVENTS OF DEFAULT

Section 7.1           Events of Default................................................................ 43
Section 7.2           Acceleration..................................................................... 45
Section 7.3           No Avoidance..................................................................... 45
Section 7.4           Rights and Remedies Cumulative................................................... 45
Section 7.5           Delay or Omission Not Waiver..................................................... 46
Section 7.6           Waiver of Past Defaults.......................................................... 46
Section 7.7           Rights of Holders To Receive Payment............................................. 46

                                           ARTICLE VIII

                                  SUBORDINATION OF INTERIM NOTES

Section 8.1           Agreement to Subordinate......................................................... 46
Section 8.2           Liquidation, Dissolution, Bankruptcy............................................. 46
Section 8.3           Default on Senior Credit Facility................................................ 46
Section 8.4           When Distribution Must Be Paid Over.............................................. 47
Section 8.5           Subrogation...................................................................... 47
Section 8.6           Relative Rights.................................................................. 47
Section 8.7           Subordination May Not Be Impaired by Company..................................... 48
Section 8.8           Distribution or Notice to Representative......................................... 48
Section 8.9           Holders Entitled to Rely......................................................... 48
Section 8.10          Acceleration of Interim Notes.................................................... 48
Section 8.11          Reliance by Holders of Senior Debt on Subordination Provisions................... 48
Section 8.12          Amendments....................................................................... 48

                                            ARTICLE IX

                                           TERMINATION

Section 9.1           Termination...................................................................... 49
Section 9.2           Liability........................................................................ 49

                                            ARTICLE X

                                     RELATED PARTY GUARANTEES

Section 10.1          Related Party Guarantees......................................................... 49
Section 10.2          Subordination of Related Party Guarantees........................................ 50

                                               iii


                                                                                                      PAGE
                                                                                                      ----
Section 10.3          Limitation on Guarantor Liability................................................ 51
Section 10.4          Execution and Delivery of Related Party Guarantees............................... 51
Section 10.5          Stay of Acceleration............................................................. 51
Section 10.6          Consolidation or Merger of Guarantors............................................ 51

                                            ARTICLE XI

                                            INDEMNITY

Section 11.1          Indemnification.................................................................. 52
Section 11.2          Notice of Action................................................................. 52
Section 11.3          Indemnity not Available.......................................................... 53
Section 11.4          Indemnity for Taxes, Reserves and Expenses....................................... 53
Section 11.5          Indemnification for Underwriting Services........................................ 54
Section 11.6          Survivorship of Indemnification.................................................. 54
Section 11.7          Liability Not Exclusive; Payments................................................ 54

                                           ARTICLE XII

                                          MISCELLANEOUS

Section 12.1          Expenses; Documentary Taxes...................................................... 54
Section 12.2          Notices.......................................................................... 54
Section 12.3          Consent to Amendments and Waivers................................................ 55
Section 12.4          Statements Required in Officers' Certificate and Opinion......................... 56
Section 12.5          Parties.......................................................................... 56
Section 12.6          New York Law; Submission to Jurisdiction; Waiver of Jury Trial................... 56
Section 12.7          Replacement Interim Notes........................................................ 57
Section 12.8          Successors and Assigns........................................................... 57
Section 12.9          Severability Clause.............................................................. 57
Section 12.10         Representations, Warranties and Agreements To Survive Delivery................... 57
Section 12.11         No Adverse Interpretation of Other Agreements.................................... 57

                                                iv


EXHIBITS

Exhibit A        -     Form of Debt Registration Rights Agreement
Exhibit B        -     Form of Equity Registration Rights Agreement
Exhibit C        -     Form of Escrow Agreement
Exhibit D        -     Form of Interim Note
Exhibit E        -     Form of Rollover Note Indenture
Exhibit F        -     Form of Stockholders Agreement
Exhibit G        -     Form of Warrant Agreement
Exhibit H        -     Form of Opinion of Counsel

SCHEDULES

Schedule 1E      -     Existing Debt
Schedule 1P      -     Permitted Liens
Schedule 2.5     -     Material Contracts
Schedule 2.6     -     Subsidiaries; Percentage Ownership
Schedule 2.10    -     Financial Statements
Schedule 2.13    -     Intellectual Property
Schedule 2.14    -     Proceedings
Schedule 2.18    -     Environmental
Schedule 2.25    -     ERISA Schedule
Schedule 5.2(l)  -     Additional Liabilities

v

SENIOR SUBORDINATED INCREASING RATE NOTE PURCHASE AGREEMENT

SENIOR SUBORDINATED INCREASING RATE NOTE PURCHASE AGREEMENT, dated
as of March 31, 1997 (the "Agreement"), among IRI International Corporation, a Delaware corporation (the "Company"), Energy Services International Ltd., a Delaware corporation and the Company's direct parent (the "Parent"), and Strategic Resource Partners Fund, a Delaware statutory business trust managed by an affiliate of Lehman Brothers Inc. ("Strategic Resource Partners" and, together with any successors and assigns, the "Interim Lenders").

RECITALS

The Company and the Parent have authorized the execution and issuance of $31,000,000 of Senior Subordinated Increasing Rate Notes dated March 31, 1997 (the "Interim Notes") to facilitate the financing of the Company's acquisition of the assets of Bowen Tools, Inc. - Delaware ("Bowen-Delaware"), a Delaware corporation, Bowen Tools, Inc., a Delaware corporation (Bowen Tools, Inc. and Bowen-Delaware together, "Bowen"), and all of the issued and outstanding capital stock and certain related assets of Cardwell International Ltd, a Kansas corporation ("Cardwell").

This Agreement sets forth the terms and conditions upon which the Interim Lenders will purchase the Interim Notes.

AGREEMENT

Accordingly, the parties agree as follows:

ARTICLE I

DEFINITIONS

Section 1.1 Defined Terms. As used in this Agreement, the following terms shall have the meanings specified below:

"Acquired Businesses" means Cardwell and Bowen.

"Acquired Debt" means, with respect to any specified Person, (i) Indebtedness of any other Person existing at the time such other Person is merged with or into or became a Subsidiary of such specified Person including, without limitation, Indebtedness incurred in connection with, or in contemplation of, such other Person merging with or into or becoming a Subsidiary of such specified Person, and (ii) Indebtedness secured by a Lien encumbering any asset acquired by such specified Person.

"Acquisitions" means, collectively, the Bowen Acquisition and the Cardwell Acquisition.

"Acquisition Agreements" means, collectively, the agreement entered into by the Company in connection with the Bowen Acquisition and the agreement entered into by the Company in connection with the Cardwell Acquisition.

"Action" has the meaning specified in Section 11.2.

1

"Administrative Agent" means Credit Lyonnais, New York Branch, as Administrative Agent under the Senior Credit Facility, or any successor thereto.

"Affected Party" means any Interim Lender or Holder, any beneficial owner of any Interim Lender or Holder and their respective successors and assigns.

"Affiliate" means, with respect to any specified Person, any other Person directly or indirectly controlling or controlled by or under direct or indirect common control with such specified Person. For purposes of this definition, "control" (including, with correlative meanings, the terms "controlling," "controlled by" and "under common control with"), as used with respect to any Person, shall mean the possession, directly or indirectly, of the power to direct or cause the direction of the management or policies of such Person, whether through the ownership of voting securities, by agreement or otherwise; provided that beneficial ownership of 10% or more of the voting securities of a Person shall be deemed to be control. Neither the Interim Lenders nor their Affiliates nor any Holder will be treated as an Affiliate of the Company for purposes of this Agreement.

"Affiliate Transaction" has the meaning specified in Section 4.13.

"Applicable LIBOR Rate" means, for each Interest Period, the quotient (rounded upwards, if necessary, to the nearest 1/100 of 1%) of (x) the rate for deposits in U.S. dollars for a period of three months commencing on the first day of such Interest Period which appear on Page 3750 of the Telerate Screen as of 11:00 a.m., London time, on the Determination Date for such Interest Period; provided, however, that if more than one rate appears on Page 3750 of the Telerate Screen, the rate for such Interest Period will be the arithmetic mean of such rates rounded upwards, if necessary, to the nearest 1/100 of 1%; provided, further, however, that if such rate is not available on any Determination Date for any Interest Period, then the Applicable LIBOR Rate for such Interest Period shall mean the arithmetic mean rounded upwards, if necessary, to the nearest 1/100 of 1%, of the interest rates per annum at which deposits in an amount comparable to the aggregate principal amount of the Interim Notes then outstanding in U.S. dollars are offered to Lehman Brothers by no less than three leading banks in the London Interbank market for a period of three months commencing on the first day of such Interest Period, as of 11:00
a.m., London time, on such Determination Date divided by (y) a number equal to 1.00 minus the Eurodollar Reserve Percentage.

"Applicable Spread" means 650 basis points for each day on or prior to November 30, 1997 and increasing by 50 basis points on November 30, 1997 and increasing by 50 basis points on each three-month anniversary of November 30, 1997 for so long as the Interim Notes are outstanding.

"Asset Sale" means (i) the sale, lease, conveyance or other disposition of any assets or rights (including, without limitation, by way of a sale and leaseback), other than in the ordinary course of business consistent with past practices and (ii) the issue or sale by any Person or any of its Subsidiaries of Equity Interests of any of such Person's Subsidiaries. Notwithstanding the foregoing: (i) a transfer of assets by a Wholly Owned Subsidiary to the Company or to another Wholly Owned Subsidiary that is a Guarantor and (ii) an issuance or sale of Equity Interests by a Subsidiary of the Parent or the Company to the Company or to a Wholly Owned Subsidiary that is a Guarantor will not be deemed to be Asset Sales.

"Bankruptcy Law" means Title 11, United States Code, or any similar federal or state law for the relief of debtors.

2

"Base CD Rate" means, for any day, the sum of (a) the quotient of (i) the Three-Month Secondary CD Rate divided by (ii) a number equal to 1.0 minus the CD Reserve Percentage and (b) the CD Assessment Rate;

"Base Rate" means, for any day, a rate per annum (rounded upwards, if necessary, to the next 1/16 of 1%) equal to the greatest of (a) the Prime Rate in effect on such day, (b) the Base CD Rate in effect on such day plus 1% and
(c) the Federal Funds Effective Rate in effect on such day plus 1/2 of 1%. Any change in the Base Rate due to a change in the Prime Rate, the Base CD Rate or the Federal Funds Effective Rate shall be effective as of the opening of business on the effective day of such change in the Prime Rate, the Base CD Rate or the Federal Funds Effective Rate, as the case may be.

"beneficial owner" has the meaning as defined in Rule 13d-3 and Rule 13d-5 under the Exchange Act.

"Board" means the Board of Governors of the Federal Reserve System of the United States or any successor.

"Bowen" has the meaning specified in the recitals to this Agreement.

"Bowen Acquisition" means the acquisition of all of the assets of Bowen.

"Bowen Mexicana" means Bowen Mexicana S.A. De C.V., a Mexican corporation.

"Business Day" means each day other than a Saturday, a Sunday or any other day on which banking institutions in the City of New York are authorized by law, regulation or executive order to remain closed and, if such day relates to a payment or prepayment of principal of, or interest on, or an Interest Period for, the Interim Notes on which the interest rate is determined by the Applicable LIBOR Rate, any day which is also a day on which dealings in dollar deposits are carried out in the London interbank markets.

"Businesses" has the meaning specified in Section 2.18.

"Capital Lease Obligations" means, at the time any determination thereof is to be made, the amount of the liability in respect of a capital lease that would at such time be required to be capitalized on a balance sheet in accordance with GAAP.

"Capital Market Transaction" has the meaning specified in Section 3.6(a).

"Capital Stock" means (i) in the case of a corporation, corporate stock, (ii) in the case of an association or business entity, any and all shares, interests, participations, rights or other equivalents (however designated) of corporate stock, (iii) in the case of a partnership or limited liability company, partnership or membership interests (whether general or limited) and (iv) any other interest or participation that confers on a Person the right to receive a share of the profits and losses of, or distributions of assets of, the issuing Person.

"Cardwell" has the meaning specified in the recitals to this Agreement.

"Cardwell Acquisition" means the acquisition of all of the issued and outstanding capital stock and certain related assets of Cardwell.

3

"Cardwell Employment Agreement" means the employment agreement dated as of March 31, 1997 between Cardwell and A.C. Teichgraeber (and joined by the Company as a guarantor) pursuant to which Cardwell has agreed to pay A.C. Teichgraeber an annual salary equal to $250,000 per year and, in the sole discretion of Cardwell, an annual bonus of up to $600,000, in each case, at such times and under the terms set forth therein.

"Cash Equivalents" means (i) United States dollars, (ii) securities issued or directly and fully guaranteed or insured by the United States government or any agency or instrumentality thereof having maturities of not more than six months from the date of acquisition, (iii) certificates of deposit and eurodollar time deposits with maturities of not more than six months from the date of acquisition, bankers' acceptances with maturities of not more than six months from the date of acquisition and overnight bank deposits, in each case with any domestic commercial bank having capital and surplus in excess of $500.0 million and a Thompson Bank Watch Rating of "B" or better, (iv) repurchase obligations with a term of not more than seven days for underlying securities of the types described in clauses (ii) and (iii) above entered into with any financial institution meeting the qualifications specified in clause
(iii) above and (v) commercial paper having the highest rating obtainable from Moody's Investors Service, Inc. or one of the two highest ratings from Standard & Poor's with maturities of not more than six months from the date of acquisition.

"CD Assessment Rate" means, for the purpose of calculation of the Base CD Rate on any day, the annual assessment rate in effect on such day which is payable by a member of the C/D Bank Insurance Fund maintained by the Federal Deposit Insurance Corporation (the "FDIC") classified as well-capitalized and within supervisory subgroup "B" (or a comparable successor assessment risk classification) within the meaning of 12 C.F.R. Section 327.3(d) (or any successor provision) to the FDIC (or any successor) for the FDIC's (or such successor's) insuring time deposits at offices of such institution in the United States.

"CD Reserve Percentage" means, for the purpose of calculation of the Base CD Rate on any day, that percentage (expressed as a decimal) which is in effect on such day, as prescribed by the Board, for determining the maximum reserve requirement for a Depositary Institution (as defined in Regulation D of the Board as in effect from time to time) in respect of new non-personal time deposits in Dollars having a maturity of 30 days or more.

"Change of Control" means the occurrence of any of the following: (i) the consummation of any transaction (including, without limitation, any merger or consolidation) the result of which is that any Person, other than the Principal and his Related Parties, becomes the beneficial owner (except that a Person shall be deemed to have "beneficial ownership" of all securities that such Person has the right to acquire, whether such right is currently exercisable or is exercisable only upon the occurrence of a subsequent condition), directly or indirectly, of more than 40% of the Voting Stock of the Parent (measured by voting power rather than number of shares), (ii) the first day on which a majority of the members of the board of directors of the Company or the Parent are not Continuing Directors, (iii) the first day on which the Parent ceases to own 100% of the outstanding Capital Stock and other Equity Interests of the Company, (iv) the Parent or the Company consolidates with, or merges with or into, any Person, or any Person consolidates with or merges with or into the Parent or the Company, in any such event pursuant to a transaction in which any of the outstanding Voting Stock of the Parent or the Company is converted into or exchanged for cash, securities or other property, other than any such transaction where the Voting Stock of the Parent or the Company outstanding immediately prior to such transaction is converted into or exchanged for Voting Stock of the surviving or transferee Person constituting a majority of the outstanding shares of such Voting Stock of such surviving or transferee Person (immediately after giving effect to such conversion or exchange) or (v) the Principal ceases to be

4

the beneficial owner of 51% or more of the total voting power of all classes of Voting Stock of the Parent calculated on a fully-diluted basis.

"Change of Control Offer" has the meaning specified in Section 4.21.

"Change of Control Payment" has the meaning specified in Section 4.21.

"Change of Control Payment Date" has the meaning specified in Section 4.21.

"Closing" has the meaning specified in Section 5.1.

"Closing Date" has the meaning specified in Section 5.1.

"Code" means the Internal Revenue Code of 1986, as amended, and any regulation promulgated thereunder.

"Commitment Letter" means the commitment letter among Strategic Resources Partners, the Parent and the Company dated January 20, 1997.

"Company" has the meaning specified in the preamble to this Agreement.

"Consolidated Net Income" means, for any period, the net earnings (or loss) after taxes of the Company and its Subsidiaries on a consolidated basis, determined for such period in conformity with GAAP.

"Consolidated Net Interest Expense" means, for any period, total interest expense (including the interest component of Capital Lease Obligations) of the Company and its Subsidiaries on a consolidated basis, determined for such period in conformity with GAAP, including, without limitation, all commissions, discounts and other fees and charges owed with respect to any financings or letters of credit and net costs under Hedging Obligations.

"Continuing Director" means, as of any date of determination, any member of the board of directors of a Person who (i) was a member of such board of directors on the date of this Agreement or (ii) was nominated for election or elected to such board of directors with the approval of a majority of the members described in clause (i) of such board.

"Custodian" means any receiver, trustee, assignee, liquidator, custodian or similar official under any Bankruptcy Law.

"Debt Registration Rights Agreement" means the registration rights agreement among the Parent, the Company, the Guarantors and the Interim Lenders pursuant to which the Rollover Notes are required to be registered for public sale, in the form attached as Exhibit A.

"Default" means any event that is, or after the passage of time or the giving of notice (or both) would be, an Event of Default.

"Determination Date" means, with respect to any Interest Period, the day that is two Business Days prior to the first Business Day of such Interest Period.

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"Disqualified Stock" means any Capital Stock that, by its terms (or by the terms of any security into which it is convertible or for which it is exchangeable at the option of the holder thereof), or upon the happening of any event, matures or is mandatorily redeemable, pursuant to a sinking fund obligation or otherwise, or redeemable at the option of the holder thereof, in whole or in part on, or prior to, the date that is 91 days after the maturity date of the Rollover Notes.

"Domestic Subsidiary" means any Subsidiary of the Parent or the Company organized under the laws of any jurisdiction within the United States.

"EBITDA" means, for any period, Consolidated Net Income for such period (excluding extraordinary gains and losses), plus (i) Consolidated Net Interest Expense, plus (ii) all charges in such period for income taxes, plus
(iii) all charges in such period for amortization of intangibles, depletion and depreciation, in each case to the extent reflected in Consolidated Net Income, plus or minus, as the case may be, (iv) non-cash items decreasing or increasing such Consolidated Net Income for such period (including, without limitation, foreign exchange translation adjustments), plus (v) all non-recurring fees and expenses incurred or paid by the Company in connection with the Acquisitions and the transactions contemplated by the Transaction Documents, the Engagement Letter and the Senior Credit Facility.

"Engagement Letter" means the engagement letter among Lehman Brothers, the Parent and the Company dated January 20, 1997.

"Environmental Laws" means any and all foreign, federal, state, local or municipal laws, rules, orders, regulations, statutes, ordinances, codes, decrees, requirements of any Governmental Entity or other requirements of law (including common law) regulating, relating to or imposing liability or standards of conduct concerning the protection of human health or the environment, as now or may at any time be in effect.

"Equity Interests" means Capital Stock and all warrants, options or other rights to acquire Capital Stock (but excluding any debt security that is convertible into, or exchangeable for, Capital Stock).

"Equity Registration Rights Agreement" means the registration rights agreement between the Parent and the Interim Lenders pursuant to which the Warrants and the Warrant Shares are required to be registered for public sale, in the form attached as Exhibit B.

"ERISA" means the Employee Retirement Income Security Act of 1974, as amended, and any regulation promulgated thereunder.

"ERISA Affiliate" means any trade or business (whether or not incorporated) under common control with the Company or any Subsidiary of the Company within the meaning of Section 414(b), 414(c) or 414(m) of the Code.

"ERISA Event" means (i) a Reportable Event with respect to a Qualified Plan or a Multiemployer Plan; (ii) a withdrawal by the Company or any ERISA Affiliate from a Qualified Plan subject to Section 4063 of ERISA during a plan year in which it was a substantial employer (as defined in Section 4001(a)(2) of ERISA); (iii) a complete or partial withdrawal by the Company or any ERISA Affiliate from a Multiemployer Plan; (iv) the filing of a notice of intent to terminate, the treatment of a plan amendment as a termination under
Section 4041 or 4041A of ERISA or the commencement of proceedings by the PBGC to terminate a Qualified Plan or Multiemployer Plan subject to Title IV of ERISA;
(v) a failure to make required contributions to a Qualified Plan or Multiemployer Plan; (vi) the

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imposition of any liability under Title IV of ERISA, other than PBGC premiums due but not delinquent under Section 4007 of ERISA, upon the Company or any ERISA Affiliate; (vii) an application for a funding waiver or an extension of any amortization period pursuant to Section 412 of the Code with respect to any Qualified Plan; (viii) the Company or ERISA Affiliate engages in a nonexempt prohibited transaction or otherwise become liable with respect to a nonexempt prohibited transaction, the consequences of which, in the aggregate, have a Material Adverse Effect; or (ix) a violation of the applicable requirements of
Section 404 or 405 of ERISA or the exclusive benefit rule under Section 401(a) of the Code by the Company or any ERISA Affiliate with respect to any Qualified Plan for which the Company or any of its Subsidiaries may be liable, the consequences of which, in the aggregate, have a Material Adverse Effect.

"ERISA Schedule" has the meaning specified in Section 2.25.

"Escrow Agent" means The Bank of New York, a New York banking corporation.

"Escrow Agreement" means the escrow agreement between the Parent, the Company and the Escrow Agent, in the form attached as Exhibit C.

"Eurodollar Reserve Percentage" means the maximum percentage (expressed as a decimal) specified from time to time by the Board for determining the maximum reserve requirements (including, but not limited to, supplemental, marginal and emergency reserves) with respect to eurocurrency funding (currently referred to as "Eurocurrency Liabilities") of a member bank in the Federal Reserve System. The Applicable LIBOR Rate shall be adjusted on the effective date of any change in the Eurodollar Reserve Percentage, as of such effective date.

"Event of Default" means any event specified in Section 7.1.

"Exchange Act" means the Securities Exchange Act of 1934, as amended.

"Existing Debt" means the Indebtedness identified on Schedule 1E of the Parent, the Company and each of their respective Subsidiaries.

"Federal Funds Effective Rate" means, for any day, the weighted average 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, the average of the quotations for the day of such transactions received by Citibank N.A. from three federal funds brokers of recognized standing selected by it.

"Financial Statements" has the meaning specified in Section 2.10.

"Foreign Subsidiary" means any Subsidiary of the Parent or the Company organized under the laws of any jurisdiction outside the United States.

"fully-diluted" means, with respect to any series of Capital Stock of a Person, all of the shares of such series of Capital Stock that have been issued or reserved for future issuance, calculated assuming that all Equity Interests and any other rights convertible or exchangeable into such Capital Stock or exercisable for such Capital Stock have been converted, exchanged or exercised, regardless of whether such Equity Interests and rights are then entitled to be or have been converted, exchanged or exercised, or are subject to a future contingency or the passage of time or any other condition that currently prevents or may in the future prevent such conversion, exchange or exercise.

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"GAAP" means generally accepted accounting principles set forth in the opinions and pronouncements of the Accounting Principles Board of the American Institute of Certified Public Accountants, the statements and pronouncements of the Financial Accounting Standards Board and such other statements by such other entities as have been approved by a significant segment of the accounting profession, which are in effect from time to time.

"Governmental Entity" means any government or political subdivision or any agency, authority, bureau, central bank, commission, department or instrumentality thereof, or any court, tribunal, grand jury or arbitrator, in each case whether foreign or domestic.

"Guarantee" means a guarantee (other than by endorsement of negotiable instruments for collection in the ordinary course of business), direct or indirect, in any manner (including, without limitation, letters of credit and reimbursement agreements in respect thereof), of all or any part of any Indebtedness.

"Guarantors" means the Parent and any Domestic Subsidiary of the Company that executes the Related Party Guarantee in accordance with the provisions of Section 10.4, and their respective successors and assigns.

"Hazardous Material" means any gasoline or petroleum (including crude oil or any fraction thereof) or petroleum products or any hazardous or toxic substances, materials or wastes, defined or regulated as such in or under any Environmental Law, including, without limitation, asbestos, polychlorinated biphenyls and urea-formaldehyde insulation.

"Hedging Obligations" means, with respect to any Person, the Obligations of such Person under (i) interest rate swap agreements, interest rate cap agreements and interest rate collar agreements and (ii) other agreements or arrangements designed to protect such Person against fluctuations in interest rates or currency exchange rates.

"High Yield Notes" has the meaning specified in Section 4.4(b).

"Holder" means each Interim Lender and each other Person, if any, in whose name an Interim Note is registered on the Note Register.

"incur" has the meaning specified in Section 4.9.

"Indebtedness" means, with respect to any Person, any indebtedness of such Person, whether or not contingent, in respect of borrowed money or evidenced by bonds, notes, debentures or similar instruments or letters of credit (or reimbursement agreements in respect thereof) or banker's acceptances or representing Capital Lease Obligations or the balance deferred and unpaid of the purchase price of any property or representing any Hedging Obligations, except any such balance that constitutes an accrued expense or trade payable, if and to the extent any of the foregoing indebtedness (other than letters of credit and Hedging Obligations) would appear as a liability upon a balance sheet of such Person prepared in accordance with GAAP, as well as all indebtedness of others secured by a Lien on any asset of such Person (whether or not such indebtedness is assumed by such Person) and, to the extent not otherwise included, the Guarantee by such Person of any indebtedness of any other Person. The amount of any Indebtedness outstanding as of any date shall be (i) the accreted value thereof, in the case of any Indebtedness that does not require current payments of interest, and (ii) the principal amount thereof, together with any interest thereon that is more than 30 days past due, in the case of any other Indebtedness.

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"Indemnified Party" has the meaning specified in Section 11.1.

"Indemnifying Party" has the meaning specified in Section 11.1

"Intellectual Property" has the meaning specified in Section 2.13.

"Interest Payment Date" means the last day of each Interest Period, the Maturity Date and the date of any redemption or prepayment of the Interim Notes.

"Interest Period" means, in the case of the first Interest Period, the date commencing on and including the Closing Date and ending on and including June 30, 1997, and, for each subsequent Interest Period, the date commencing on the last day of the preceding Interest Period and ending on the three-month anniversary of such date; provided, that if any Interest Period would end on a day other than a Business Day, such Interest Period shall be extended until the next succeeding Business Day unless the next Business Day would fall in the next calendar month, in which case such Interest Period shall end on the next preceding Business Day. Notwithstanding the foregoing, no Interest Period may extend beyond the Maturity Date and each Interest Period which would otherwise commence before and end after the Maturity Date shall end on the Maturity Date.

"Interim Lenders" has the meaning specified in the preamble to this Agreement.

"Interim Notes" has the meaning specified in the recitals to this Agreement. The form of Interim Note is attached as Exhibit D.

"Investments" means, with respect to any Person, all investments by such Person in other Persons (including Affiliates) in the form of direct or indirect loans (including Guarantees of Indebtedness or other Obligations), advances or capital contributions (excluding commission, travel and similar advances to officers and employees made in the ordinary course of business), purchases or other acquisitions for consideration of Indebtedness, Equity Interests or other securities, together with all items that are or would be classified as investments on a balance sheet prepared in accordance with GAAP. If the Parent, the Company or any of their respective Subsidiaries sells or otherwise disposes of any Equity Interests of any direct or indirect Subsidiary of the Parent or the Company such that, after giving effect to any such sale or disposition, such Person is no longer a direct or indirect Subsidiary of the Parent or the Company, the Parent or the Company, as the case may be, shall be deemed to have made an Investment on the date of any such sale or disposition equal to the fair market value of the Equity Interests of such Subsidiary not sold or disposed of.

"Lehman Brothers" means Lehman Brothers Inc., a Delaware corporation.

"Lenders" means the banks and other lending institutions named in the Senior Credit Facility as lenders.

"Lien" means, with respect to any asset, any mortgage, lien, pledge, charge, security interest or encumbrance of any kind in respect of such asset, whether or not filed, recorded or otherwise perfected under applicable law (including any conditional sale or other title retention agreement, any lease in the nature thereof, any option or other agreement to sell or give a security interest in any asset and any filing of or agreement to give any financing statement under the Uniform Commercial Code (or equivalent statutes) of any jurisdiction).

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"Liquidated Damages" means any and all liquidated damages then owing pursuant to any of the Transaction Documents.

"Material Contracts" has the meaning specified in Section 2.4.

"Material Adverse Effect" means any circumstance or event that (i) has, or may be reasonably expected to have, any materially adverse effect upon the validity or enforceability of this Agreement or any of the other Transaction Documents (ii) is, or may be reasonably expected to be, materially adverse to the consolidated financial condition, business, operations, assets, liabilities, management, prospects or value of the Parent, the Company or the Acquired Businesses (including any event which, in the opinion of the Interim Lenders, is reasonably likely to result in such a material adverse change), (iii) materially impairs the ability of the Company to pay its Obligations under this Agreement or the Interim Notes or (iv) materially impairs the ability of any Guarantor to pay its Obligations under its Related Party Guarantee.

"Maturity Date" has the meaning specified in Section 3.2.

"Multiemployer Plan" means a "multiemployer plan" (within the meaning of Section 4001(a)(3) of ERISA) and to which the Company or any ERISA Affiliate makes, is making, or is obligated to make contributions or has made, or been obligated to make, contributions.

"Net Cash Proceeds" means the aggregate cash proceeds received (including any cash payments received by way of deferred payment of principal pursuant to a promissory note or installment receivable or otherwise, but only as and when received) from any Capital Market Transaction, net of (i) all commissions (including any underwriter's discounts) and (ii) other ordinary and reasonable fees and expenses (including legal fees and expenses) incurred as a consequence of such Capital Market Transaction.

"Note Register" means the register maintained by the Company pursuant to Section 6.3.

"Obligations" means any principal, premium (if any), interest (including interest accruing on or after the filing of any petition in bankruptcy or for reorganization relating to the Parent, the Company or their Subsidiaries whether or not a claim for post-filing interest is allowed in such proceeding), penalties, fees, charges, expenses, indemnifications, reimbursement obligations, damages (including Liquidated Damages), guarantees and other liabilities or amounts payable under the documentation governing any Indebtedness or in respect thereof.

"Offering Documents" means an offering memorandum or prospectus together with such other documents, instruments and agreements as Lehman Brothers may request in its sole discretion in connection with the issuance of High Yield Notes pursuant to Section 4.4.

"Officer" means, with respect to any Person, the Chairman of the Board, the Chief Executive Officer, the President, the Chief Operating Officer, the Chief Financial Officer, the Treasurer, any Assistant Treasurer, the Controller, the Secretary or any Vice-President of such Person.

"Officers' Certificate" means a certificate signed on behalf of either the Parent or the Company by two Officers of the Parent or the Company, as the case may be, one of whom must be the principal executive officer, a vice chairman, the principal financial officer, the treasurer or the principal accounting officer of the Parent or the Company, as the case may be, that meets the requirements of Section 12.4.

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"Opinion of Counsel" means an opinion from legal counsel of the Parent or the Company that is reasonably acceptable to the Interim Lenders that meets the requirements of Section 12.4.

"Parent" has the meaning specified in the preamble to this Agreement.

"Payment Blockage Notice" has the meaning specified in Section 8.3(b).

"Payment Default" has the meaning specified in Section 7.1(g).

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

"Permanent Securities" means securities issued by either the Parent or the Company that the Parent or the Company intends to either register with the SEC and sell pursuant to a registration statement in a public offering or privately place or otherwise sell in an offering exempt from registration with the SEC in connection with the mandatory redemption provisions of Sections 3.6 and 4.3.

"Permits" has the meaning specified in Section 2.19.

"Permitted Investments" means (i) any Investment in the Company or in a Wholly Owned Subsidiary of the Company that is a Guarantor, (ii) Investments in Foreign Subsidiaries of the Company not exceeding in the aggregate $1.0 million at any one time outstanding, (iii) any Investment in Cash Equivalents,
(iv) extensions of trade credit in the ordinary course of business, and (v) loans and advances to employees of the Company and its Subsidiaries for travel, entertainment and relocation expenses in the ordinary course of business in an aggregate amount for the Company and its Subsidiaries not to exceed $500,000 at any one time outstanding.

"Permitted Liens" means (i) Liens on assets of the Company or any of the Guarantors to secure Senior Debt permitted by this Agreement to be incurred;
(ii) Liens on assets of the Company or any of the Guarantors to secure Hedging Obligations permitted by this Agreement to be incurred; (iii) Liens in favor of the Company; (iv) Liens to secure the performance of statutory obligations, surety or appeal bonds, performance bonds, deposits to secure the performance of bids, trade contracts, licenses or leases (other than financing leases) or other obligations of a like nature incurred in the ordinary course of business; (v) Liens existing on the Closing Date and listed on Schedule 1P; (vi) Liens for taxes, assessments or governmental charges or claims that are not yet delinquent or that are being contested in good faith by appropriate proceedings promptly instituted and diligently prosecuted, provided that any reserve or other appropriate provision as shall be required in conformity with GAAP shall have been made therefor; (vii) carriers', warehousemen's, mechanics', landlords', materialmen's, repairmen's or other like Liens arising in the ordinary course of business in respect of obligations not overdue for a period in excess of 60 days or which are being contested in good faith by appropriate proceedings promptly instituted and diligently prosecuted, provided that any reserve or other appropriate provision as shall be required in accordance with GAAP shall have been made therefor; (viii) easements, rights-of-way, zoning and similar restrictions and other similar encumbrances or title defects incurred, or leases or subleases granted to others, in the ordinary course of business, which do not in any case materially detract from the value of the property subject thereto or do not interfere with or adversely affect in any material respect the ordinary conduct of the business of the Company and its Subsidiaries taken as a whole;
(ix) Liens upon real and/or tangible personal property acquired after the Closing Date (by purchase, construction or otherwise) by the Company or any of its Subsidiaries, each of which Liens was created solely for the purpose of securing Indebtedness representing, or incurred to finance, refinance or refund 100% of the cost (including the cost of construction) of such property to the extent such

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Indebtedness is permitted by Section 4.9 (viii) and provided the Liens cover only such property so acquired or constructed and no other property and such Liens are created within three months after such acquisition or construction;
(x) pledges or deposits in connection with workers' compensation, unemployment insurance and other social security legislation; (xi) Liens in favor of customs and revenue authorities to secure payment of customs duties in connection with the importation of goods in the ordinary course of business and other similar Liens arising in the ordinary course of business; (xii) permitted exception enumerated in the mortgages or deeds of trust by any Relevant Party in favor of, or for the benefit of the Administrative Agent for the benefit of the lenders under the Senior Credit Facility; and (xiii) Liens created under ERISA and under Environmental Laws that are being contested in good faith and as to which adequate reserves have been established to the extent required by GAAP and secure obligations not in excess of $500,000; provided that the Company and its Subsidiaries shall take all reasonable actions to terminate such Liens.

"Permitted Refinancing Indebtedness" means any Indebtedness of the Parent, the Company or any of their Subsidiaries issued in exchange for, or the net proceeds of which are used to extend, refinance, renew, replace, defease or refund the Senior Credit Facility; provided that: (i) the principal amount (or accreted value, if applicable) of such Permitted Refinancing Indebtedness does not exceed the principal amount of (or accreted value, if applicable), plus accrued and unpaid interest on, the Indebtedness so extended, refinanced, renewed, replaced, defeased or refunded (plus the amount of reasonable expenses incurred in connection therewith); (ii) such Permitted Refinancing Indebtedness has a final maturity date later than the final maturity date of, and has a Weighted Average Life to Maturity equal to or greater than the Weighted Average Life to Maturity of, the Indebtedness being extended, refinanced, renewed, replaced, defeased or refunded and (iii) such Indebtedness is incurred either by the Parent or the Company (and may be Guaranteed by a Subsidiary that is a Guarantor of the Indebtedness being extended, refinanced, renewed, replaced, defeased or refunded).

"Person" means any individual, corporation, partnership, limited liability company, joint venture, association, trust, unincorporated organization or government or any agency or political subdivision thereof or any other entity.

"Plan" means any "employee benefit plan" as defined in Section 3(3) of ERISA (A) which the Company or any ERISA Affiliate maintains, administers, contributes to or is required to contribute to, or, within the five years prior to the Closing Date, maintained, administered, contributed to or was required to contribute to, or under which the Company or any ERISA Affiliate may incur any liability and (B) which covers any employee or former employee of the Company or any ERISA Affiliate (with respect to their relationship with such entities).

"Prepayment Date" has the meaning specified in Section 3.10.

"Prime Rate" means the rate of interest per annum publicly announced from time to time by Citibank N.A. as its prime rate in effect at its principal office in New York City (such rate of interest not necessarily the lowest rate of interest charged by Citibank N.A. in connection with extensions of credit).

"Principal" means Hushang Ansary.

"Properties" has the meaning specified in Section 2.18.

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"Qualified Plan" means a pension plan (as defined in Section 3(2) of ERISA) intended to be tax-qualified under Section 401(a) of the Code and which the Company or any ERISA Affiliate sponsors, maintains, or to which it makes or is obligated to make contributions, or in the case of a multiple employer plan (as described in Section 4064(a) of ERISA) has made contributions at any time during the immediately preceding period covering at least five (5) plan years, but excluding any Multiemployer Plan.

"Record Date" means the fifteenth day of the calendar month preceding an Interest Payment Date.

"Related Documents" means the Rollover Notes, the Rollover Note Indenture, the Debt Registration Rights Agreement, the Escrow Agreement, the Warrant Agreement, the Equity Registration Rights Agreement, the Stockholders Agreement, the Engagement Letter and the documents contemplated in those agreements.

"Related Party" means, with respect to the Principal, (A) any spouse or immediate family member (in the case of an individual) of such Principal or (B) a trust, corporation, partnership or other entity, the beneficiaries, stockholders, partners or Persons beneficially holding an 80% or more controlling interest of which consist of such Principal and/or such other Persons referred to in the immediately preceding clause (A).

"Related Party Guarantee" means the Guarantee by the Guarantors of the Interim Notes pursuant to Article X.

"Relevant Parties" means the Parent, the Company, the Guarantors and each of their respective Subsidiaries.

"Reportable Event" means any of the events set forth in Section 4043(b) of ERISA or the regulations thereunder, a withdrawal from a plan described in Section 4063 of ERISA or a cessation of operations described in
Section 4062(e) of ERISA.

"Representative" means the indenture trustee or other trustee, agent or representative designated as such in connection with the issuance of any Senior Debt.

"Restricted Investment" means any Investment other than a Permitted Investment.

"Restricted Payments" has the meaning specified in Section 4.10.

"Rollover Fee" means a fee payable to each Holder on the Maturity Date equal to 3% of the aggregate principal amount of Interim Notes held by such Holder as of such date.

"Rollover Note Indenture" means, with respect to the Rollover Notes, an indenture among the Parent, the Company, the Guarantors and The Bank of New York, as trustee, in the form attached as Exhibit E.

"Rollover Notes" means the Senior Subordinated Rollover Notes of the Company placed into escrow on the Closing Date, to be issued in exchange for the Interim Notes pursuant to Section 3.3, in the form attached as an exhibit to the Rollover Note Indenture.

"SEC" means the Securities and Exchange Commission.

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"Securities Act" means the Securities Act of 1933, as amended.

"Sellers" means Bowen, Teichgraeber Family Limited Partnership L.P., Arthur C. Teichgraeber Charitable Remainder Trust, A.C. Teichgraeber, Greenwood Pipe and Threading Company, and Edco Drilling Company Inc.

"Senior Credit Facility" means the Credit Agreement dated as of March 31, 1997 among the Parent, the Company, the financial institutions named therein, the Administrative Agent and Lehman Commercial Paper Inc., as Advisor, Arranger and Syndication Agent, and any related notes, collateral documents, letters of credit and guarantees, including appendices, exhibits or schedules to any of the foregoing, as such agreements may be amended, modified, supplemented or restated from time to time thereafter, including any appendices, exhibits or schedules to any of the foregoing, as the same may be in effect at any time, in each case, as such agreements may be amended, modified, supplemented or restated from time to time, or refunded, refinanced, replaced, renewed or extended from time to time (whether with the original agents and lenders or other agents and lenders or otherwise, and whether provided under the original credit agreement or other credit agreements or otherwise), provided that such refunded, refinanced, replaced, renewed or extended agreements constitute Permitted Refinancing Indebtedness.

"Senior Debt" means (i) all Indebtedness of the Company or any of the Guarantors outstanding at any time under or in respect of the Senior Credit Facility and all Hedging Obligations with respect thereto, and (ii) any other Indebtedness that is permitted to be incurred by the Company pursuant to this Agreement unless the instrument under which such Indebtedness is incurred expressly provides that it is on a parity with or subordinated in right of payment to the Interim Notes, and (iii) all Obligations of the Company or any of the Guarantors with respect to the foregoing. Without expanding the foregoing, Senior Debt will not include (v) any Obligation of the Company to any Subsidiary of the Company or any other Affiliates, (w) any liability for federal, state, local or other taxes owed or owing by the Company (other than such taxes owing or owed under the Senior Credit Facility), (x) any accounts payable or other liability to trade creditors arising in the ordinary course of business
(including Guarantees thereof or instruments evidencing such liabilities), (y)
any Obligations in respect of Capital Stock of the Company or (z) that portion of any Indebtedness which at the time of incurrence is incurred in violation of this Indenture.

"Senior Guarantees" means the Guarantees issued by the Guarantors pursuant to the Senior Credit Facility.

"Significant Subsidiary" means any Subsidiary that would be a "significant subsidiary" as defined in Article 1, Rule 1-02 of Regulation S-X, promulgated pursuant to the Securities Act, as such Regulation is in effect on the date hereof.

"Solvent" means, with respect to the Parent or the Company on a pro forma basis immediately after the consummation of the Acquisitions, that (a) the fair value of each of the Parent's and the Company's assets exceeds its stated liabilities, including all contingent liabilities, (b) the present fair saleable value of each of the Parent's and the Company's assets exceeds that amount that will be required to pay its probable liability on its debts as they become absolute and mature, (c) neither the Parent nor the Company will have incurred debts beyond its ability to pay such debts as they mature, and (d) the then remaining assets of each of the Parent and the Company will not constitute an unreasonably small capital for the business in which each of the Parent and the Company is engaged.

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"Stated Maturity" means, with respect to any installment of interest or principal on any series of Indebtedness, the date on which such payment of interest or principal was scheduled to be paid in the original documentation governing such Indebtedness, and shall not include any contingent obligations to repay, redeem or repurchase any such interest or principal prior to the date originally scheduled for the payment thereof.

"Stockholders Agreement" means the stockholder agreement among the Interim Lenders, the Parent and each of the other parties listed therein, in the form attached as Exhibit F.

"Subsidiary" means, with respect to any Person, (i) any corporation, association or other business entity of which more than 50% of the total voting power of shares of Capital Stock entitled (without regard to the occurrence of any contingency) to vote in the election of directors, managers or trustees thereof is at the time owned or controlled, directly or indirectly, by such Person and (ii) any partnership (a) the sole general partner or the managing general partner of which is such Person or an entity described in clause (i) and related to such Person or (b) the only general partners of which are such Person or of one or more entities described in clause (i) and related to such Person (or any combination thereof).

"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 shall not be 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 shall not be 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 shall not be a Business Day, on the next preceding Business Day) by Citibank N.A. from three New York City negotiable certificate of deposit dealers of recognized standing selected by it.

"Transaction Documents" means this Agreement, the Interim Notes and the Related Documents.

"Trust Indenture Act" means the Trust Indenture Act of 1939, as amended.

"Unfunded Pension Liabilities" means the excess of a Plan's accrued benefits, as defined in Section 3(23) of ERISA, over the current value of that Plan's assets, as defined in Section 3(26) of ERISA.

"Voting Stock" means, with respect to any Person at any time, the Capital Stock of such Person that is at such time entitled to vote in the election of the board of directors of such Person.

"Warrant Agent" means The Bank of New York, a New York banking corporation.

"Warrant Agreement" means the warrant agreement between the Parent and the Warrant Agent, in the form attached as Exhibit G.

"Warrant Shares" has the meaning specified in Section 4.4(a).

"Warrants" means the warrants to purchase common stock of the Parent to be issued pursuant to the Warrant Agreement.

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"Weighted Average Life to Maturity" means, when applied to any Indebtedness at any date, the number of years obtained by dividing (i) the sum of the products obtained by multiplying (a) the amount of each then remaining installment, sinking fund, serial maturity or other required payments of principal, including payment at final maturity, in respect thereof, by (b) the number of years (calculated to the nearest one-twelfth) that will elapse between such date and the making of such payment, by (ii) the then outstanding principal amount of such Indebtedness.

"Wholly Owned Subsidiary" means (i) a Subsidiary, 100 percent of the Capital Stock and other Equity Interests of which is owned directly or indirectly by the Company and (ii) Bowen Mexicana.

"Withdrawal Liabilities" means, as of any determination date, the aggregate amount of the liabilities, if any, pursuant to Section 4201 of ERISA if the Company and each ERISA Affiliate made a complete withdrawal from all Multiemployer Plans and any increase in contributions pursuant to Section 4243 of ERISA.

Section 1.2 Interpretation. In this Agreement, the singular includes the plural and the plural includes the singular; words implying any gender include the other genders; references to any section, exhibit or schedule are to sections, exhibits or schedules hereto unless otherwise indicated; references to statutes are to be construed as including all statutory provisions consolidating, amending or replacing the statute referred to; references to "writing" include printing, typing, lithography and other means of reproducing words in a visible form; "including" following a word or phrase shall not be construed to limit the generality of such word or phrase; and an accounting term not otherwise defined has the meaning assigned to it in accordance with GAAP as in effect from time to time.

ARTICLE II

REPRESENTATIONS AND WARRANTIES

As of the date hereof and as of the Closing Date (after giving pro forma effect to the Acquisitions, the Senior Credit Facility, the Transaction Documents, the issuance of the Interim Notes and the application of the proceeds thereof, and the transactions contemplated hereby and thereby), the Parent and the Company hereby agree with, and represent and warrant to, the Interim Lenders and any subsequent Holder as follows:

Section 2.1 Representations and Warranties in the Acquisition Agreements and the Senior Credit Facility. The representations and warranties of the Relevant Parties contained in the Senior Credit Facility and, to the best of the Parent's and Company's knowledge, representations and warranties of the Sellers contained in the Acquisition Agreements are true and correct in all material respects and are hereby incorporated herein by reference.

Section 2.2 Organization; Good Standing. Each of the Relevant Parties has been duly incorporated, duly organized or duly constituted and is a validly existing corporation, limited partnership, or limited liability company in good standing under the laws of its jurisdiction of organization, with corporate, partnership or other necessary power and authority to own, lease and operate its properties and conduct its business as it is being conducted and is duly qualified to do business and is in good standing as a foreign corporation, limited partnership, or limited liability company in all jurisdictions in which it owns, leases or operates substantial properties or in which the conduct of its business requires such qualification except where the failure to so qualify will not cause a Material Adverse Effect.

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Section 2.3 Due Authorization and Enforceability. (a) Each of the Acquisition Agreements, the Senior Credit Facility and the Transaction Documents
(i) has been duly authorized, executed and delivered by each Relevant Party to the extent a party thereto and (ii) constitutes a valid and binding obligation of such Relevant Party enforceable against it in accordance with its terms, except as enforcement may be limited by applicable bankruptcy, insolvency, reorganization, moratorium and other similar laws affecting the enforceability of creditors' rights generally and by general principles of equity (whether arising under a proceeding at law or in equity).

(b) The Interim Notes have been duly authorized by the Company and, when executed and delivered pursuant to the terms of this Agreement against payment thereof by the Interim Lenders, will be valid and binding obligations of the Company, enforceable against it in accordance with their terms, except as enforcement thereof may be limited by applicable bankruptcy, insolvency, reorganization, moratorium and other similar laws affecting the enforceability of creditors' rights generally and by general principles of equity (whether arising under a proceeding at law or in equity).

(c) The Related Party Guarantee has been duly authorized by each of the Guarantors and, when the Interim Notes have been delivered pursuant to the terms of this Agreement against payment thereof by the Interim Lenders, the Related Party Guarantee will be a valid and binding obligation of each of the Guarantors, enforceable against each of them in accordance with its terms, except as enforcement thereof may be limited by applicable bankruptcy, insolvency, reorganization, moratorium and other similar laws affecting the enforceability of creditors' rights generally and by general principles of equity (whether arising under a proceeding at law or in equity).

(d) The Warrants have been duly authorized by the Parent and, when executed and authenticated pursuant to the terms of the Warrant Agreement and delivered to the Escrow Agent pursuant to the provisions of this Agreement, will be valid and binding obligations of the Parent, enforceable against it in accordance with its terms, except as enforcement thereof may be limited by applicable bankruptcy, insolvency, reorganization, moratorium and other similar laws affecting the enforceability of creditors' rights generally and by general principles of equity (whether arising under a proceeding at law or in equity).

(e) The Warrant Shares to be issued upon exercise of the Warrants have been duly authorized and reserved for issuance by the Parent and will be issued at the times and in the manner required by the Warrant Agreement and, upon due exercise of a Warrant, the Warrant Shares issued will be validly issued, fully paid and nonassessable.

Section 2.4 No Conflicts. (a) Neither the execution and delivery of the Acquisition Agreements, the Senior Credit Facility or the Transaction Documents nor the consummation of any of the transactions contemplated hereby or thereby nor compliance with the terms and provisions hereof or thereof (i) violates or will violate any law or regulation or any order or decree of any court or Governmental Entity applicable to the Relevant Parties or by which any of their respective properties or assets may be bound, (ii) constitutes or will constitute a breach or a violation of, any of the terms or provisions of, or a default under, the organizational documents (including any certificate of incorporation or bylaws) or any other corporate restriction of any of the Relevant Parties or (iii) conflicts with or will result in the breach of, or constitutes a default under, any material contract, lease, indenture, loan agreement (including the Senior Credit Facility), mortgage, deed of trust or other agreement or instrument (each, a "Material Contract") to which a Relevant Party is a party or by which any of them or any of their respective assets may be bound.

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(b) No consent, approval, authorization or order of, or any registration or filing with, any Governmental Entity is or will be required in connection with (i) the execution and delivery of the Acquisition Agreements, the Senior Credit Facility or the Transaction Documents by the Relevant Parties or the consummation of the transactions contemplated hereby or thereby, or (ii) the issuance and delivery of the Warrants or the Warrant Shares by the Parent, other than (A) such authorizations, approvals, consents, exemptions, registrations or filings as shall have been made or secured by the date hereof and as may be required in connection with registration of the Rollover Notes pursuant to the Debt Registration Rights Agreement and the registration of the Warrants and the Warrant Shares pursuant to the Equity Registration Rights Agreement, and approval of the Cardwell Acquisition by the U.S. Department of Justice under the Hart-Scott-Rodino Antitrust Act of 1976, (B) informational filings with the SEC and certain "blue sky" administrators which have no bearing on the validity or enforceability of the Warrants or the Warrant Shares and (C) such actions as may be required after the date hereof in connection with any transfer of the Warrants or the Warrant Shares.

Section 2.5 No Violations; Material Contracts. (a) There does not currently exist with respect to any Relevant Party (i) any violation of any law or regulation or any order or decree of any court or Governmental Entity applicable to such Relevant Party or (ii) any conflict or violation of any terms or provisions of its organization documents (including any certificate of incorporation or bylaws) and any other corporate restriction.

(b) None of the Relevant Parties is a party to any agreement or instrument or subject to any corporate or other restriction that, individually or in the aggregate, has had or could have a Material Adverse Effect. Each Material Contract to which a Relevant Party (except Cardwell) is a party or by which such Relevant Party or any of its properties or assets are or may be bound as of the Closing Date is listed on Schedule 2.5 and true and correct copies of all such Material Contracts have been delivered to the Interim Lenders and to Latham & Watkins, special counsel to the Interim Lenders.

(c) As of the Closing Date, each Material Contract is in all material respects valid, binding and in full force and effect and is enforceable by each Relevant Party that is a party thereto in accordance with its terms. As of the Closing Date, each Relevant Party has performed in all material respects all obligations required to be performed by it to date under all of its Material Contracts and is not (with or without the lapse of time or the giving of notice, or both) in breach or default in any material respect thereunder and, to the knowledge of the Parent or the Company, no other party to any of the Material Contracts is (with or without the lapse of time or the giving of notice, or both) in breach or default or in any material respect thereunder. As of the Closing Date, neither the Parent nor the Company, nor, to the knowledge of the Parent or the Company, any other party to any Material Contract, has given notice of termination of, or taken any action inconsistent with the continuation of, any Material Contract. As of the Closing Date, none of such other parties has any presently exercisable or future right to terminate any Material Contract, including any right to terminate any Material Contract on account of the execution, delivery or performance of the Senior Credit Facility, the Acquisition Agreements, or the Transaction Documents.

Section 2.6 Capital Stock; Subsidiaries. (a) All shares of Capital Stock and other Equity Interests of the Acquired Businesses after the Acquisitions will be duly authorized, validly issued, fully paid and non-assessable and owned by the Company or one of its Wholly Owned Domestic Subsidiaries (other than Bowen-Mexicana) beneficially and of record, free and clear of any Lien, other than under the Senior Credit Facility. After the Bowen Acquisition, 95% of the Capital Stock and other Equity Interests of Bowen-Mexicana will be owned by the Company beneficially and of record. All shares of Capital Stock and other Equity Interests of the Company are duly authorized, validly issued, fully paid and non-assessable and owned by the Parent beneficially and of record, free and clear of any Lien. All shares

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of Capital Stock and other Equity Interests of the Parent are duly authorized, validly issued, fully paid and non-assessable, owned free and clear of any Lien. Ninety-one percent of the Capital Stock and other Equity Interests of the Parent is owned by Energy Services International Limited, a British Virgin Islands corporation ("BVI"), beneficially and of record. All shares of Capital Stock and other Equity Interests of BVI are duly authorized, validly issued, fully paid and non-assessable, owned free and clear of any Lien. One-hundred percent of the Capital Stock and other Equity Interests of BVI is owned by the Principal, his immediate family members (i.e. his spouse and his children) and trusts for the benefit of his immediate family members beneficially and of record. BVI has no significant liabilities of any kind and has no assets other than its interests in the Parent.

(b) There are (i) no outstanding subscriptions, warrants, options, calls or commitments of any character related to or entitling any Person to purchase or otherwise acquire any shares of BVI's, the Parent's or the Company's Capital Stock or the Capital Stock of any Subsidiary of the Parent or the Company, (ii) no obligations or securities convertible into or exchangeable for shares of any Capital Stock of BVI, the Parent, the Company or any such Subsidiary or any commitments of any character relating to or entitling any Person to purchase or otherwise acquire any such obligations or securities, other than the Warrant Agreement and (iii) no preemptive or similar rights to subscribe for or to purchase any Capital Stock of BVI, the Parent, the Company or any such Subsidiary, except (A) those that are currently owned or that will be owned after the Acquisitions, beneficially and of record by the Company and (B) those contemplated by the Warrant Agreement.

(c) Neither the Parent nor the Company owns, directly or indirectly, any stock, partnership interest, joint venture or other equity investment or interest in any other corporation, organization or entity other than the Subsidiaries set forth on Schedule 2.6. Schedule 2.6 is a true and complete list of the record and beneficial owners of all outstanding Capital Stock of, and other Equity Interests in, the Parent, the Company and each of their respective Subsidiaries listed by name, number of shares and percentage ownership.

Section 2.7 Senior Credit Facility; Liens. At the Closing: (i) all Indebtedness represented by the Interim Notes will be subordinated in right of payment only to Indebtedness incurred pursuant to the Senior Credit Facility and
(ii) there will be no Liens on any assets of the Parent or the Company or any of their respective Subsidiaries except Permitted Liens.

Section 2.8 No Violation of Regulations of Board of Governors of Federal Reserve System. None of the transactions contemplated by this Agreement (including without limitation the use of the proceeds from the sale of the Interim Notes and the Permanent Securities) will violate or result in a violation of Section 7 of the Exchange Act, or any rule or regulation issued pursuant thereto, including, without limitation, Regulations G, T, U and X of the Board of Governors of the Federal Reserve System.

Section 2.9 Governmental Regulations. None of the Relevant Parties is or will be subject to regulation under the Investment Company Act of 1940, as amended, the Public Utility Holding Company Act of 1935, as amended, the Federal Power Act, the Interstate Commerce Act or to any other Federal or state statute or regulation limiting its ability to incur Indebtedness for borrowed money.

Section 2.10 Financial Statements; No Undisclosed Liabilities. (a) The financial statements that have been delivered to the Interim Lenders pursuant to Sections 5.2(i) and (j) and attached as Schedule 2.10 (the "Financial Statements"), comply with the requirements of Sections 5.2(i) and
(j). Except as set forth in the notes thereto, the Financial Statements have been prepared from, and are consistent with, the books and records of the Relevant Parties and fairly present the historical results of operations and financial position of the Relevant Parties for the periods and as of the dates set forth

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therein, in each case in accordance with GAAP consistently applied during the periods involved (except as otherwise specifically indicated therein). The pro forma income statement delivered pursuant to Section 5.2(j) fairly presents the estimated consolidated income of the Company assuming the consummation of the Acquisitions and the financings contemplated hereby (including borrowings under the Senior Credit Facility) as if such transactions had occurred on the first day of such period, and the financial condition of the Company on the Closing Date does not differ in any material respect from the information therein set forth.

(b) None of the Relevant Parties has any liability (absolute or contingent) except those shown on the Financial Statements or those incurred in the ordinary course of business since the date of the last Financial Statements that do not, in the aggregate, exceed 5% of the total assets of the Relevant Parties.

(c) Each Relevant Party maintains a system of internal accounting controls sufficient to provide reasonable assurance that (i) transactions are executed in accordance with management's general or specific authorizations,
(ii) transactions are recorded as necessary to permit preparation of financial statements in conformity with GAAP and to maintain asset accountability, (iii) access to assets is permitted only in accordance with management's general or specific authorization and (iv) the recorded accountability for assets is compared with the existing assets at reasonable intervals and appropriate action is taken with respect to any differences.

Section 2.11 Full Disclosure. No information, report, Financial Statement or certificate delivered or to be delivered to the Interim Lenders in connection with the Transaction Documents contains or will contain any untrue statement of material fact or omitted or omits or will omit to state a material fact necessary to make such statements not misleading in light of the circumstances in which such statements were made. It is understood, however, that to the extent any such information, report, Financial Statement or certificate includes projections, such projections are based upon good faith estimates and assumptions believed to be reasonable at the time made and are not to be viewed as facts. Actual results during the period or periods covered by such projections may differ from the projected results.

Section 2.12 Private Offering; Rule 144A Matters. (a) Based in part on the accuracy of the representations of the Interim Lenders in Section 6.1, the sale of the Interim Notes hereunder and the issuance of the Rollover Notes and the Warrants are and will be exempt from the registration and prospectus delivery requirements of the Securities Act. Neither the Parent nor the Company has issued or sold Interim Notes, Rollover Notes or Warrants to anyone other than the Interim Lenders. No securities of the same class as the Interim Notes or the Warrants have been issued or sold by the Company or the Parent, as the case may be, within the six-month period immediately prior to the date hereof. The Parent and the Company agree that neither of them, nor anyone acting on their behalf, will offer the Interim Notes, the Rollover Notes or the Warrants so as to bring the issuance and/or sale of the Interim Notes, the Rollover Notes or Warrants within the provisions of Section 5 of the Securities Act nor offer any similar securities for issuance or sale to, or solicit any offer to acquire any of the same from, or otherwise approach or negotiate with respect thereto with, anyone if the issuance or sale of the Interim Notes, the Rollover Notes or the Warrants or any such securities would be integrated as a single offering for the purposes of the Securities Act, including without limitation, Regulation D thereunder. Each Interim Note, Rollover Note and Warrant shall have a legend setting forth the restrictions on transferability and sale imposed by Regulation D under the Securities Act for at least so long as such restrictions apply.

(b) In the case of each offer, sale or issuance of the Interim Notes, Rollover Notes and Warrants, no form of general solicitation or general advertising was or will be used by the Parent or the

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Company or their representatives, including, but not limited to, advertisements, articles, notices or other communications published in any newspaper, magazine or similar medium or broadcast over television or radio, or any seminar or meeting whose attendees have been invited by any general solicitation or general advertising.

(c) The Interim Notes, the Rollover Notes and the Warrants will be eligible for resale pursuant to Rule 144A under the Securities Act. When the Interim Notes, the Rollover Notes and the Warrants are issued and delivered pursuant to this Agreement, they will not be of the same class (within the meaning of Rule 144A(d)(3) under the Securities Act) as any security of the Parent or the Company that is listed on a national securities exchange registered under Section 6 of the Exchange Act or that is quoted in a United States automated interdealer quotation system. The issuance of the Interim Notes and the execution, delivery and performance of the Transaction Documents (other than the Debt Registration Rights Agreement) will not require the qualification of an indenture under the Trust Indenture Act of 1939, as amended.

Section 2.13 Proprietary Matter. Each of the Relevant Parties owns, possesses or has the right to employ all patents, patent rights, licenses, inventions, copyrights, know-how (including trade secrets and other unpatented and/or unpatentable proprietary or confidential information, systems or procedures), trademarks, service marks and trade names (collectively, the "Intellectual Property") now used or proposed to be used in connection with the businesses conducted by the Relevant Parties. No Relevant Party has received any notice of infringement of or conflict with asserted rights of others or of any challenge to the validity or effectiveness with respect to any of the foregoing. The use of the Intellectual Property in connection with the businesses and operations of each Relevant Party does not infringe on any rights of any person and the completion of the Acquisitions will not in any manner impair the ownership of (or the license to use, as the case may be) any of such Intellectual Property by any of the Relevant Parties. Schedule 2.13 sets forth a complete and correct list, as of the Closing Date, of: (i) all patented or registered Intellectual Property and pending patent applications or applications for registration of Intellectual Property owned or filed by or on behalf of any of the Relevant Parties, (ii) all trade names and unregistered trademarks or service marks owned by or used by any of the Relevant Parties, and (iii) all licenses of Intellectual Property to which any of the Relevant Parties is a party, either as licensee or licensor.

Section 2.14 Absence of Proceedings. Except with respect to the matters disclosed in Schedule 2.14, there is not pending or threatened any action, suit or proceeding to which any Relevant Party is a party, before or by any court or Governmental Entity or body (domestic or foreign), that could reasonably be expected to cause a Material Adverse Effect.

Section 2.15 Absence of Labor Disputes. (a) None of the Relevant Parties is involved in any material labor dispute nor is any material dispute threatened which, if such dispute were to occur, could reasonably be expected to have a Material Adverse Effect.

(b) There is, as of the Closing Date (i) no unfair labor practice complaint pending against any of the Relevant Parties or threatened against any of them, before the National Labor Relations Board, (ii) no material grievance or arbitration proceeding arising out of or under any collective bargaining agreement pending against any of the Relevant Parties or threatened against any of them, (iii) no union representation question existing with respect to the employees of any of the Relevant Parties and (iv) no union organizing activities are taking place, except (with respect to any matter specified in clause (i) through (iii) above) such as could not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect.

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Section 2.16 Taxes. The Relevant Parties have duly and timely filed all required tax returns and reports and paid prior to delinquency all taxes, assessments, and governmental levies except those not in process of enforcement and being contested in good faith and by appropriate proceedings.

Section 2.17 Absence of Employment Law Violations, Etc. None of the Relevant Parties has violated any safety or similar law applicable to its business, nor any federal, state or foreign law relating to discrimination in the hiring, promotion or pay of employees nor any applicable federal, state or foreign wages and hours laws, or the rules and regulations promulgated thereunder, which in each case could reasonably be expected to have a Material Adverse Effect.

Section 2.18 Environmental Laws. Except as described on Schedule 2.18: (a) the real property owned, leased or operated by any of the Relevant Parties (collectively, the "Properties") do not contain any Hazardous Material in amounts or concentrations or under circumstances which (i) constitute or constituted a violation of, or (ii) could give rise to liability under, any Environmental Law, except in either case insofar as such violation or liability, or any aggregation thereof, could not reasonably be expected to have a Material Adverse Effect.

(b) The Properties and all operations at the Properties are in material compliance, and have in the last five years been in material compliance, with all applicable Environmental Laws, and there is no contamination at, under or about the Properties or violation of any Environmental Law with respect to the Properties or the business operated or proposed to be operated by any of the Relevant Parties (the "Businesses") which could reasonably be expected to materially interfere with the continued operation of the Properties. None of the Relevant Parties has assumed any liability of any other Person under any of the Environmental Laws.

(c) None of the Relevant Parties has received or is aware of any notice of violation, alleged violation, non-compliance, liability or potential liability regarding environmental matters or compliance with Environmental Laws with regard to any of the Properties or the Businesses, nor does any of the Relevant Parties have knowledge or reason to believe that any such notice will be received or is being threatened, except insofar as such notice or threatened notice, or any aggregation thereof, does not involve a matter or matters that could reasonably be expected to have a Material Adverse Effect.

(d) Hazardous Materials have not been transported or disposed of from the Properties in violation of, or in a manner or to a location which could reasonably be expected to give rise to liability under, any Environmental Law, nor have any Hazardous Materials been generated, treated, stored or disposed of at, on or under any of the Properties in violation of, or in a manner that could give rise to liability under, any applicable Environmental Law, except insofar as any such violation or liability referred to in this paragraph, or any aggregation thereof, could not reasonably be expected to have a Material Adverse Effect.

(e) No judicial proceeding or governmental or administrative action is pending or, to the knowledge of the Parent or the Company, threatened, under any Environmental Law to which any of the Relevant Parties is or, to the knowledge of the Parent or the Company, will be named as a party with respect to the Properties or the Businesses, nor are there any consent decrees or other decrees, consent orders, administrative orders or other orders, or other administrative or judicial requirements outstanding under any Environmental Law with respect to the Properties or the Businesses, except insofar as such proceeding, action, decree, order or other requirement, or any aggregation thereof, could not reasonably be expected to have a Material Adverse Effect.

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(f) There has been no release or threat of release of Hazardous Materials at or from the Properties, or arising from or related to the operations of the Relevant Parties in connection with the Properties or otherwise in connection with the Businesses, in violation of or in amounts or in a manner that could give rise to liability under Environmental Laws, except insofar as any such violation or liability referred to in this paragraph, or any aggregation thereof, could not reasonably be expected to have a Material Adverse Effect.

Section 2.19 Permits. Each of the Relevant Parties has such material permits, licenses, franchises, consents, approvals and authorizations of Governmental Entities ("Permits") as are necessary to own, lease and operate its respective properties and to conduct its business as presently conducted. Each of the Relevant Parties has fulfilled and performed all of its material obligations with respect to such Permits, and, to the best of their knowledge, no event has occurred which allows, or after notice or lapse of time would allow, revocation or termination by the issuer thereof or which results in any other material impairment of the rights of any of such Relevant Parties with respect to any such Permits. Such Permits contain no restrictions that are materially burdensome to any of the Relevant Parties, and the Parent and the Company have no knowledge that any Governmental Entity is considering limiting, suspending or revoking any such Permit. Neither the Parent nor the Company has any knowledge of the facts or circumstances that would reasonably allow it to conclude that any Permit necessary in the future to conduct the businesses of the Relevant Parties will not be granted upon application.

Section 2.20 Properties; Leases. The Relevant Parties have good and marketable title to their respective properties and assets, free and clear of all Liens, claims, encumbrances and restrictions, except Permitted Liens. All real property leases to which any Relevant Party is a party are valid and binding, and neither the Parent nor the Company has any knowledge of any facts or circumstances that would reasonably allow it to conclude that a default has occurred or is continuing thereunder. The Relevant Parties enjoy peaceful and undisturbed possession under all such leases to which any of them is a party as lessee with such exceptions as do not materially interfere with the use made by them.

Section 2.21 Insurance. The Relevant Parties maintain commercially reasonable insurance for the businesses in which they are engaged. All such policies are in full force and effect, all premiums due and payable thereon have been paid and no notice of cancellation or termination has been received with respect to any such policy which has not been replaced. The activities and operations of the Relevant Parties have been conducted in a manner so as to conform in all material respects to the applicable provisions of such insurance policies.

Section 2.22 Financial Condition; Solvency. (a) (i) The fair value of the assets of each Relevant Party will exceed the debts and liabilities, direct, subordinated, contingent or otherwise, of such Relevant Party; (ii) the present fair salable value of the property of such Relevant Party will be greater than the amount that will be required to satisfy any probable liability of such Relevant Party on its debts and other liabilities, direct, subordinated, contingent or otherwise, as such debts and other liabilities become absolute and matured; (iii) such Relevant Party will be able to pay its debts and liabilities, direct, subordinated, contingent or otherwise, as such debts and liabilities become absolute and matured; and (iv) such Relevant Party will not have unreasonably small capital with which to conduct the businesses in which it is engaged as such business is now conducted and is proposed to be conducted, in each case, following the Closing Date.

(b) Each Relevant Party does not intend to incur debts beyond its ability to pay such debts as they mature, taking into account the timing and amounts of cash to be received by it and the timing and amounts of cash to be payable on or in respect of its Indebtedness.

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Section 2.23 Foreign Corrupt Practices Act. None of the Relevant Parties, nor any director, officer, agent, employee or other person associated with or acting on behalf of any of the Relevant Parties, (i) has used any corporate funds for any unlawful contribution, gift, entertainment or other unlawful expense relating to political activity; (ii) made any direct or indirect unlawful payment to any foreign or domestic government official or employee from corporate funds; (iii) violated or is in violation of any provision of the Foreign Corrupt Practices Act of 1977; or (iv) made any bribe, rebate, payoff, influence payment, kickback or other unlawful payment.

Section 2.24 No Material Adverse Change. There has been no material adverse change in the consolidated financial condition, business, operations, assets, liabilities, management, prospects or value of any of the Relevant Parties or, to the best of the Parents and the Company's knowledge, Cardwell or Bowen (including any event which, in the opinion of the Interim Lenders, is reasonably likely to result in such a material adverse change) since March 31, 1996.

Section 2.25 ERISA. (a) Schedule 2.25 (the "ERISA Schedule") lists all Plans maintained or sponsored by the Company or to which the Company or any ERISA Affiliate is obligated to contribute, and separately identifies Plans intended to be Qualified Plans and Multiemployer Plans.

(b) Each Plan is in compliance in all material respects with the applicable provisions of ERISA, the Code and other applicable federal or state law.

(c) Each Qualified Plan has been determined by the IRS to qualify under Section 401 of the Code, and the trusts created thereunder have been determined to be exempt from tax under the provisions of Section 501 of the Code, and to the best knowledge of the Company nothing has occurred which would cause the loss of such qualification or tax-exempt status.

(d) Except as set forth in ERISA Schedule, there is no outstanding material liability under Title IV of ERISA with respect to any Plan maintained or sponsored by the Company or any ERISA Affiliate (as to which the Company is or may be liable), nor with respect to any Plan to which the Company or any ERISA Affiliate (wherein the Company is or may be liable) contributes or is obligated to contribute.

(e) Except as set forth on ERISA Schedule, none of the Qualified Plans subject to Title IV of ERISA has any material Unfunded Pension Liability as to which the Company is or may be liable.

(f) Except as set forth in ERISA Schedule, no Plan maintained or sponsored by the Company or any ERISA Affiliate provides medical or other welfare benefits or extends coverage relating to such benefits beyond the date of a participant's termination of employment with the Company or such ERISA Affiliate, except to the extent required by Section 4980B of the Code and at the sole expense of the participant or the beneficiary of the participant to the fullest extent permissible under such Section of the Code. The Company and each ERISA Affiliate have complied in all material respects with the notice and continuation coverage requirements of Section 4980B of the Code.

(g) Except as set forth in ERISA Schedule, no ERISA Event has occurred or, to the best knowledge of the Company, is reasonably expected to occur with respect to any Plan maintained or sponsored by the Company or to which the Company or any ERISA Affiliate is obligated to contribute.

(h) There are no pending or, to the best knowledge of the Company, threatened claims, actions or lawsuits, other than routine claims for benefits in the usual and ordinary course, asserted or instituted against (i) any Plan maintained or sponsored by the Company or any ERISA Affiliate, (ii) the Company or any ERISA Affiliate with respect to any Qualified Plan, or (iii) any other fiduciary with respect to any

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Plan for which the Company may be directly or indirectly liable, through indemnification obligations or otherwise.

(i) Except as set forth in ERISA Schedule, the Company has not incurred nor reasonably expects to incur (i) any material liability (and no event has occurred which, with the giving of notice under Section 4219 of ERISA, would result in such material liability) under Section 4201 or 4243 of ERISA with respect to a Multiemployer Plan or (ii) any material liability under Title IV of ERISA (other than premiums due and not delinquent under Section 4007 of ERISA) with respect to any Plan.

(j) Except as set forth in ERISA Schedule, neither the Company nor any ERISA Affiliate has transferred any Unfunded Pension Liability to an entity other than an ERISA Affiliate or otherwise engaged in a transaction that could be subject to Section 4069 or 4212(c) of ERISA.

(k) Neither the Company nor any ERISA Affiliate has engaged, directly or indirectly, in a prohibited transaction (as defined in Section 4975 of the Code or Section 406 of ERISA) for which no statutory or administrative exemption is applicable in connection with any Plan the consequences of which, in the aggregate, have a reasonable likelihood of having a Material Adverse Effect.

ARTICLE III

SALE AND REPAYMENT

Section 3.1 Sale of the Interim Notes. On the basis of the representations and warranties herein contained and subject to the terms and conditions herein set forth, the Company agrees to sell to the Interim Lenders, and the Interim Lenders agree to purchase from the Company Interim Notes in an aggregate principal amount of $31.0 million, at an aggregate purchase price equal to 100% of such principal amount, payable by wire transfer on the Closing Date as provided in Section 5.1.

Section 3.2 Maturity. Each Interim Note will mature on March 31, 1998, (the "Maturity Date").

Section 3.3 Mandatory Exchange; Issuance of Rollover Notes and Warrants. On the Maturity Date, (i) the Escrow Agent shall deliver to each Holder of Interim Notes, in such names and as such Holder shall request, such Holder's pro rata share of Warrants representing 5% of the fully-diluted common stock of the Parent, such pro rata share to be equal to such Holder's pro rata share of the aggregate principal amount of Interim Notes outstanding on such date and (ii) the Escrow Agent shall deliver to each Holder of Interim Notes, in exchange for such Interim Notes, a Rollover Note (or Rollover Notes), in such names as such Holder shall request, in an aggregate principal amount equal to the unpaid principal amount of the Interim Notes delivered by such Holder to the Escrow Agent; provided, however, that no Holder shall be required to accept Rollover Notes in exchange for Interim Notes (in which case the principal of, premium, if any, and accrued and unpaid interest on the Interim Notes shall be due and payable immediately) unless the following conditions shall have been satisfied (or are concurrently satisfied) as of the Maturity Date or waived by all the Holders:

(i) no Default or Event of Default shall have occurred and be continuing under this Agreement and no payment default shall have occurred and be continuing under the Engagement Letter;

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(ii) the Company shall have paid the Rollover Fee to each Holder in immediately available funds and shall have paid all accrued and unpaid interest with respect to the Interim Notes in accordance with the terms thereof;

(iii) pursuant to the Debt Registration Rights Agreement, the Shelf Registration Statement (as defined in the Debt Registration Rights Agreement) with respect to the Rollover Notes shall have been declared effective by the SEC; and

(iv) pursuant to the Equity Registration Rights Agreement, the Shelf Registration Statement (as defined in the Equity Registration Rights Agreement) with respect to the Warrants and the Warrant Shares shall have been declared effective by the SEC.

Section 3.4 Interest on the Interim Notes. (a) Subject to Section 3.4(d), interest on each Interim Note shall be payable in cash by wire transfer pursuant to Section 3.11 on each Interest Payment Date for the Interest Period then ended. Subject to Sections 3.4(c) and 3.12, interest on the Interim Notes shall be calculated and shall accrue on a daily basis for each day during each Interest Period at a rate per annum equal to the Applicable LIBOR Rate for such Interest Period plus the Applicable Spread for such day. Accrued interest on each Interim Note for each Interest Period shall be calculated on the basis of the actual number of days elapsed and a 360-day year (or, in the case of interest accruing at the Base Rate determined by reference to the Prime Rate, a 365-day or 366-day year as appropriate).

(b) Interest on the Interim Notes will accrue from the most recent date to which interest has been paid or, if no interest has been paid, from the Closing Date. Interest shall accrue with respect to principal on each Interim Note to, but not including, the date of repayment of such principal; provided, however, that if such repayment occurs after 12:00 noon, New York City time, interest shall be deemed to accrue until the following Business Day.

(c) Notwithstanding anything contained in this Agreement to the contrary, the interest rate on the Interim Notes for any Interest Period shall not exceed an annual rate equal to the lesser of (i) 18% and (ii) the maximum interest rate permitted by law.

(d) To the extent that the interest rate on the Interim Notes for any Interest Period exceeds an annual rate equal to 14%, the Company shall have the option to pay to the Holders, pro rata, all incremental interest accruing during such Interest Period at a rate in excess of 14% per annum in the form of additional Interim Notes having a principal amount equal to the amount of such incremental interest provided, that such additional Interim Notes shall be in denominations of $1,000 and integral multiples thereof and that any difference between such incremental interest owing and such additional Interim Notes shall be paid in cash by wire transfer pursuant to Section 3.11. In the event that the Company elects to pay any interest in the form of additional Interim Notes, it will:

(i) deliver by hand or by overnight courier to each Holder an additional authorized, executed and authenticated Interim Note in a principal amount equal to the amount of such incremental interest, payable to the order of such Holder, dated the date of the applicable Interest Payment Date, to the address of such Holder shown on the Note Register,

(ii) deliver by hand or by overnight courier duly authorized, executed and authenticated Rollover Notes to the Escrow Agent, dated the Maturity Date, unregistered as to payee or registered in blank, in an aggregate principal amount equal to the aggregate principal amount of the Interim Notes so delivered in accordance with clause (i) above, and

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(iii) deliver an Officers' Certificate setting forth the calculation of such incremental interest, resolutions of the board of directors of the Company, the Parent and the Guarantors authorizing, as appropriate, the issuance of such additional Interim Notes and Rollover Notes and each Related Party Guarantee with respect to such additional Interim Notes and Rollover Notes, and an Opinion of Counsel as to the validity and enforceability of such Interim Notes, Rollover Notes and Related Party Guarantees, each such Officer's Certificate, resolutions and Opinion of Counsel to be reasonably satisfactory to each of the Holders.

Section 3.5 Default Interest. Interest will accrue on any overdue amount (whether interest or principal), to the extent lawful, at a rate per annum equal to 2% over the then current interest rate on the Interim Notes until such amount (plus all accrued and unpaid interest) is paid in full. The Company shall pay such default interest and all interest accruing on any overdue installment of interest or principal on demand from time to time.

Section 3.6 Mandatory Redemption. (a) The Parent and the Company shall cause the Interim Notes to be redeemed with (i) the Net Cash Proceeds of
(x) any direct or indirect public offering or private placement of High Yield Notes, subordinated debt or equity securities of the Company or the Parent or
(y) the incurrence of any other Indebtedness by the Company, the Parent or any Subsidiary of the Parent or the Company (other than Indebtedness permitted to be incurred under Section 4.9) or (ii) any net proceeds from an Asset Sale by the Company, the Parent or any Subsidiary of the Parent or the Company (other than an Asset Sale permitted under Section 4.12) (each, a "Capital Market Transaction"), subject, in the case of clauses (i) (y) and (ii) only, to the required prior repayment of any amount outstanding under the Senior Credit Facility. The Company shall, not later than the second Business Day following any Capital Market Transaction, redeem Interim Notes pursuant to this Section 3.6 at a redemption price equal to 100% of the principal amount of the Interim Notes redeemed, plus accrued and unpaid interest to the date of the redemption, provided, however, that the Company shall redeem the Interim Notes at a redemption price equal to 103% of the principal amount of the Interim Notes redeemed, plus accrued and unpaid interest to the date of redemption, if the Interim Notes are redeemed with, or in anticipation of, proceeds from any transaction in which Lehman Brothers did not or will not act as exclusive placement agent or sole underwriter to the Parent or the Company or any of their respective Subsidiaries (unless it shall otherwise have agreed in writing prior to such repayment date not to so act) other than the proceeds of a borrowing under the Tranche B Term Loan (as such term is defined in the Senior Credit Facility) under the Senior Credit Facility.

(b) Subject to and in accordance with Section 4.21, in the event of any Change of Control, the Company shall offer to repurchase Interim Notes pursuant to Section 4.21.

Section 3.7 Optional Prepayment. The Company may, upon five Business Days' prior written notice to each of the Holders, redeem the Interim Notes at any time in whole or in part, on a pro rata basis, by paying to each Holder an amount equal to 100% of such Holder's pro rata share of the aggregate principal amount of Interim Notes to be redeemed, plus accrued and unpaid interest thereon to the Prepayment Date; provided, however, that the Company shall pay each Holder 103% of such Holder's pro rata share of the aggregate principal amount of Interim Notes to be redeemed, plus accrued and unpaid interest thereon to the Prepayment Date, if the Interim Notes are redeemed with, or in anticipation of, proceeds from any transaction in which Lehman Brothers did not or will not act as exclusive placement agent or sole underwriter to the Parent or the Company or a Subsidiary (unless it shall otherwise have agreed in writing prior to such repayment date not to so act) other than the proceeds of a borrowing under the Tranche B Term Loan under the Senior Credit Facility. The Interim Notes shall be presumed to be prepaid with cash flow from operations unless the Parent, the Company or one

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of their Subsidiaries has recently or simultaneously completed a financial transaction generating at least the applicable amount of net proceeds.

Section 3.8 Rollover Fee. On the Maturity Date the Company shall pay to the Holder of each Interim Note outstanding on the Maturity Date the Rollover Fee.

Section 3.9 Indemnity. The Parent and the Company jointly and severally agree to indemnify each Holder and to hold each Holder harmless from any loss or expense which such Holder may sustain or incur as a consequence of
(a) the failure by the Company to issue the Interim Notes on the Closing Date after the Company has given a notice with respect thereof in accordance with
Section 5.1, (b) default by the Company in making any prepayment or redemption after the Company has given a notice thereof in accordance with the provisions of Section 3.10 or (c) the making of a prepayment or redemption of the Interim Notes on a day which is not the last day of an Interest Period. Such indemnification may include an amount equal to (a) such Affected Party's actual loss and expenses incurred (excluding lost profits) in connection with, or by reason of, any of the foregoing events and (b) the excess, if any, of (i) the amount of interest which would have accrued on the principal amount of Interim Notes not so issued or the principal amount of Interim Notes so prepaid or redeemed from the date of such proposed issuance or prepayment or redemption, as the case may be, in the case of a failure to issue Interim Notes, to the last day of the Interest Period that would have commenced on the proposed date of such issuance, or, in the case of any such prepayment or redemption, to the last day of the Interest Period in which such repayment or redemption occurred, in each case at the applicable rate of interest for such Interim Notes provided for herein (excluding, however, the Applicable Spread included therein, if any) over
(ii) the amount of interest (as reasonably determined by such Holder) which would have accrued to such Holder on such amount by placing such amount on deposit for a period comparable to such Interest Period or remaining Interest Period in the case of prepayment or redemption with leading banks in the interbank eurodollar market. A certificate as to any amounts payable pursuant to this Section 3.9 submitted to the Company by any Holder shall be conclusive in the absence of manifest error. This covenant shall survive the termination of this Agreement and the payment of the Interim Notes and all other amounts payable hereunder.

Section 3.10 Effect of Notice of Prepayment. The Company shall notify the Holders in writing at their addresses shown in the Note Register of any date set for redemption, prepayment or repurchase (each such day, a "Prepayment Date") of Interim Notes. Once such notice is sent or mailed, the Interim Notes called for redemption, prepayment or repurchase shall become due and payable on the Prepayment Date set forth in such notice. Such notice may not be conditional.

Section 3.11 Method of Payment. Except as provided in Section 3.4(e) with respect to the payment of certain interest in the form of additional Interim Notes, the principal of, premium, if any, and interest on each Interim Note and all other Obligations arising under the Transaction Documents shall be payable by wire transfer in immediately available funds to the account of the Holder thereof, designated in a written notice to the Company at least three Business Days prior to the due date therefor.

Section 3.12 Inability to Determine Interest Rate; Interest Periods Less Than Three Months. If prior to the first day of any Interest Period Lehman Brothers shall have determined (which determinations shall be conclusive and binding upon the Company and each of the Holders) that (a) by reason of circumstances affecting the relevant market, adequate and reasonable means do not exist for ascertaining the Applicable LIBOR Rate for such Interest Period, or (b) the Applicable LIBOR Rate determined or to be determined for such Interest Period will not adequately and fairly reflect the cost to a Holder of holding such Interim Note during such Interest Period, then Lehman Brothers shall give facsimile or telephone notice thereof to the Company and the Holders as soon as practicable thereafter.

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If such notice is given, the interest rate on each Interim Note for such Interest Period and for each subsequent Interest Period until Lehman Brothers gives notice to the Holders and the Company otherwise shall equal the Base Rate plus the Applicable Spread.

Except in the case of optional and mandatory prepayment or redemption pursuant to Sections 3.6 and 3.7, if any Interest Period will have a duration of less than three months, the interest rate for such Interest Period shall equal the Base Rate plus the Applicable Spread.

Section 3.13 Payment on Business Days. If any payment to be made hereunder or under any Interim Note shall be due on a day other than a Business Day, such payment shall be made on the next succeeding Business Day (and such extension of time shall be included in computing interest in connection with such payment); provided, however, that if such succeeding Business Day could fall in the next calendar month, such payment shall be made on the next preceding Business Day.

Section 3.14 Partial Redemption. In the event that less than all of the Interim Notes are to be repurchased or redeemed (including pursuant to an offer to repurchase), the Company shall redeem or repurchase (or offer to repurchase) a pro rata portion of the Interim Notes held by each Holder.

ARTICLE IV

COVENANTS

So long as the principal of or interest on the Interim Notes or any other Obligation in respect of the Interim Notes shall be unpaid, the Parent and the Company and each of the Guarantors covenants and agrees with the Interim Lenders and each Holder as follows:

Section 4.1 Use of Proceeds. The Parent and the Company shall use the proceeds received by the Company from the sale of the Interim Notes solely to finance the purchase price of the Acquisitions and to pay fees and expenses related thereto.

Section 4.2 Notice of Default on Interim Notes and Related Matters. The Company shall furnish to the Holders written notice, promptly upon any Officer of the Parent or the Company becoming aware of the existence thereof, of:

(a) any condition or event that constitutes a Default, specifying the nature and period of existence thereof and the action that the Company is taking or proposes to take with respect thereto;

(b) the filing or commencement of, or any threat or notice of intention of any Person to file or commence, any action, suit or proceeding, whether at law or in equity or by or before any Governmental Entity, against or affecting the Parent, the Company or any of their respective Subsidiaries that, if adversely determined, would reasonably be expected to result in individually or in the aggregate, a Material Adverse Effect; and

(c) any development that, individually or in the aggregate, has resulted in, or could reasonably be expected to have, a Material Adverse Effect.

Section 4.3 Offering. (a) The Parent, the Company and the Guarantors shall use their best efforts to cause Permanent Securities to be issued and sold no later than the 270th day following the

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Closing Date in such amounts as will yield Net Cash Proceeds sufficient to prepay in full the principal amount of the Interim Notes, all accrued and unpaid interest and premium, if any, thereon and all other Obligations incurred in connection with the Interim Notes and this Agreement.

(b) The Parent and the Company have engaged Lehman Brothers as their exclusive placement agent or sole managing underwriter in connection with the private placement or public offering of the Permanent Securities in accordance with the provisions of the Engagement Letter. The Parent and the Company and each of the Guarantors hereby covenant, for the benefit of each of the Holders, to comply with each of its agreements set forth in the Engagement Letter.

Section 4.4 Issuance of High Yield Notes and Warrants. (a) Escrow of Warrants. If the Interim Notes remain outstanding on December 26, 1997, the Parent shall, no later than the close of business in New York City on such date:

(1) execute and deliver to the Escrow Agent fully authenticated Warrants, unregistered or registered in blank, representing the right to purchase at any time prior to March 31, 2007 10% of the fully-diluted common stock of the Parent (the "Warrant Shares"), calculated after giving effect to the issuance and exercise of such Warrants, at an exercise price of $.01 per share; and

(2) deliver to the Holders an Opinion of Counsel addressed to them and dated the date the Warrants are issued, stating (i) that the Warrants have been duly authorized, executed and delivered and that they constitute valid and binding obligations of the Parent, enforceable against it in accordance with their terms and (ii) that the Warrant Shares have been duly authorized and reserved for issuance and (iii) as to such other matter as the Holders may reasonably request.

(b) Issuance of High Yield Notes. If the Interim Notes remain outstanding on December 26, 1997, the Company shall be obligated to issue, and the Parent and the other Guarantors shall be obligated to guarantee, senior unsecured debt securities (the "High Yield Notes") having an aggregate principal amount of up to $100.0 million (as specified by Lehman Brothers in its sole discretion) with a fixed coupon (as specified by Lehman Brothers in its sole discretion) not exceeding the then prevailing interest rate on the Interim Notes and having such covenants, default and subordination provisions, registration rights and other terms as are customary for new issuances of high yield senior unsecured debt securities of this type, all as determined by Lehman Brothers, in its sole discretion. The High Yield Notes shall be unconditionally Guaranteed by the Parent and the other Guarantors on a senior unsecured basis (or subordinated basis in the event that the High Yield Notes are subordinated as contemplated by
Section 4.4(d)).

(c) The proceeds from the issuance of the High Yield Notes shall be used to prepay the Interim Notes pursuant to Section 3.6. Any remaining proceeds shall be applied to repay Senior Debt of the Company and for such other purposes as may be mutually agreed by Lehman Brothers and the Company.

(d) To the extent that the Lenders under the Senior Credit Facility require, the High Yield Notes will be subordinated to borrowings under the Senior Credit Facility on terms substantially identical to the subordination provisions contained in the Rollover Note Indenture.

(e) The Relevant Parties shall use their best efforts to do all things required in the opinion of Lehman Brothers, in its sole discretion, in connection with the sale of the High Yield Notes, including, but not limited to
(i) no later than October 27, 1997, commencing the preparation of a Rule 144A

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offering memorandum or registration statement under the Securities Act with respect to the High Yield Notes, and other documentation (including an indenture), all as deemed necessary by Lehman Brothers, in its sole discretion, to effect the offering of High Yield Notes, (ii) no later than October 27, 1997, delivering to Lehman Brothers such unaudited consolidated and pro forma financial information, projections as to future operations and such other financial information relating to the Parent, the Company, the Acquired Businesses, their Subsidiaries and all other completed or probable acquisitions, if any, as may be reasonably requested by Lehman Brothers, (iii) no later than November 27, 1997, finalizing the Offering Documents in form and substance satisfactory to Lehman Brothers, in its sole discretion including, if applicable, filings of a registration statement under the Securities Act, (iv) no later than December 19, 1997, making appropriate Officers of the Company and the Acquired Businesses available to Lehman Brothers for meetings with prospective purchasers of the High Yield Notes and preparing and presenting to potential investors road show material in a manner consistent with other new issuances of high yield debt securities and (v) executing an underwriting or purchase agreement substantially in the form of Lehman Brothers' standard underwriting or purchase agreement, as the case may be, modified as appropriate to reflect the terms of the transactions contemplated thereby and containing such terms, covenants, conditions, representations, warranties and indemnities as are customary in similar transactions and providing for the delivery of legal opinions, comfort letters, and Officers' Certificates, all in form and substance satisfactory to Lehman Brothers and its counsel, as well as such other terms and conditions as Lehman Brothers and its counsel may in their reasonable discretion consider appropriate in light of then prevailing market conditions applicable to similar financings or in light of any aspect of the transactions contemplated hereby that requires such other terms or conditions.

(f) In connection with the issuance of the High Yield Notes, at the request of Lehman Brothers, the Parent will issue to the purchasers of the High Yield Notes, on the date of such sale and without additional charge, warrants to purchase the Capital Stock of the Parent pursuant to a warrant agreement in the form specified by Lehman Brothers (which form will be substantially identical to the Warrant Agreement attached as Exhibit G, which request Lehman Brothers may make if it determines that such issuance of Warrants is advisable or necessary in order for the Company to issue High Yield Notes). In connection therewith, the Parent covenants to do all things necessary or convenient in the opinion of Lehman Brothers, in its sole discretion, including, without limitation, executing such warrant agreement and an equity registration rights agreement and a stockholders agreement, in each case in form and substance satisfactory to Lehman Brothers, in its sole discretion. Each Person that purchases warrants privately shall become party to such equity registration rights agreement and such stockholders agreement by executing a joinder agreement. The total amount of warrants issued pursuant to this Section 4.4(f) shall not entitle the holders thereof to purchase more than an aggregate of 5% of the fully-diluted common stock of the Parent without the consent of the Parent.

Section 4.5 Additional Subsidiary Guarantees. If the Parent, the Company or any of their respective Subsidiaries shall acquire or create a Domestic Subsidiary after the date of this Agreement, then such newly acquired or created Domestic Subsidiary shall become a party to this Agreement as a Guarantor by executing a joinder to this Agreement and shall deliver to each of the Holders an Opinion of Counsel, in a form reasonably satisfactory to the Holders. Upon execution of such joinder, such Domestic Subsidiary shall be bound by, and become a party to, this Agreement as a Guarantor and shall agree to perform each and every obligation and covenant of a Guarantor hereunder.

Section 4.6 Merger and Sale. The Parent and the Company shall not, and shall not permit any of their respective Subsidiaries to, consolidate or merge with or into, or sell, convey or transfer or lease all or substantially all of its assets (in one or more related transactions, including by way of liquidation or dissolution), or assign any of its respective obligations under the Transaction Documents,

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to another Person, except that any Subsidiary may merge with or into, or convey its assets to, the Company or another Wholly Owned Subsidiary that is a Guarantor.

Section 4.7 Information; SEC Reports; Compliance Certificates. (a) The Parent and the Company shall, and shall cause each of their respective Subsidiaries to, promptly provide such information concerning the business, properties or financial condition of the Parent, the Company and such Subsidiaries as any Holder may from time to time reasonably request. The Parent and the Company shall, and shall cause each of their Subsidiaries to, keep proper books of record and account in which full, true and correct entries shall be made of all dealings and transactions in relation to its business and activities, and shall permit the Holders or their representatives to visit and inspect any of their respective properties, to examine and make abstracts from any of their respective books and records and to discuss their respective affairs, finances and accounts with their respective executive officers and, subject to the right of the Parent's, the Company's or any such Subsidiary's representatives to participate in any such discussion, independent public accountants, all upon reasonable notice and at such reasonable times and as often as may reasonably be desired.

(b) The Parent and the Company shall furnish to the Holders (i) all quarterly and annual financial information that would be required to be contained in a filing with the SEC on Forms 10-Q and 10-K if the Parent and the Company were required to file such financial information, including a "Management's Discussion and Analysis of Financial Condition and Results of Operations" that describes the financial condition and results of operations of the Parent and the Company and any consolidated Subsidiaries and, with respect to the annual information only, a report thereon by the Parent's and the Company's certified independent public accountants (who shall be firm(s) of established national reputation) and (ii) all current reports that would be required to be filed with the SEC on Form 8-K if the Company were required to file such reports. In addition, the Parent and the Company shall, and shall cause their Subsidiaries to, furnish to the Holders and to securities analysts and prospective investors, upon their request, the information required to be delivered pursuant to Rule 144A(d)(4) under the Securities Act. All such information and reports shall be delivered to each Holder on or prior to the dates on which such filing would have been required to be made had the Parent and the Company been subject to the rules and regulations of the SEC.

(c) The Parent and the Company shall deliver to the Holders, within 30 days after the end of each fiscal quarter of the Parent and the Company, an Officers' Certificate stating that a review of the activities of the Parent, the Company and their Subsidiaries during the preceding fiscal quarter has been performed with a view to determining whether the Parent and the Company and their respective Subsidiaries have kept, observed, performed and fulfilled their respective Obligations under this Agreement, and further stating that (i) the Parent and the Company and their respective Subsidiaries have kept, observed, performed and fulfilled each and every covenant contained in this Agreement and are not in default in the performance or observance of any of the terms, provisions or conditions hereof or under any other mortgage, indenture or debt instrument (or, if a Default, Event of Default or default under any such mortgage, indenture or debt instrument shall have occurred, describing all such Defaults, Events of Default or defaults and what action the Parent and the Company are taking or propose to take with respect thereto) and (ii) no event has occurred and remains in existence which prohibits the Company or any Guarantor to make payments on account of the principal of or interest, if any, on the Interim Notes and if such event has occurred, a description of the event and the action the Parent and the Company are taking or propose to take with respect thereto.

(d) So long as not contrary to the then current recommendations of the American Institute of Certified Public Accountants, the annual financial statements delivered pursuant to paragraph (b) above shall be accompanied by a written statement of the Parent's and the Company's certified independent

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public accountants (who shall be from a firm of established national reputation reasonably satisfactory to the majority of the Holders) that, solely in making the examination necessary for certification of such financial statements and without independent investigation or inquiry, nothing has come to their attention that would lead them to believe that the Parent, the Company or any of their Subsidiaries has violated any provisions of Article IV of this Agreement or, if any such violation has occurred, specifying the nature and period of existence thereof, it being understood that such accountants shall not be liable directly or indirectly to any Person for any failure to obtain knowledge of any such violation.

Section 4.8 Authorizations and Approvals. The Parent and the Company shall, and shall cause each of their respective Subsidiaries to, promptly obtain, from time to time, all such Permits, consents and approvals as may be required to enable the Parent, the Company and each of such Subsidiaries to comply with their respective obligations under the Transaction Documents and the Interim Notes.

Section 4.9 Limitation on Incurrence of Additional Indebtedness and Issuance of Preferred Stock. The Parent and the Company shall not, and shall not permit any of their respective Subsidiaries to, directly or indirectly, create, incur, issue, assume, guarantee or otherwise become liable, contingently or otherwise, with respect to (collectively, "incur") any Indebtedness (including Acquired Debt) or issue any shares of preferred stock except for:

(i) the incurrence by the Company of revolving credit Indebtedness and indebtedness under letters of credit (with letters of credit being deemed to have a principal amount equal to the maximum potential liability of the Company and its Subsidiaries thereunder) under the Senior Credit Facility (and the Guarantees thereof by the Guarantors); provided that the aggregate principal amount of all revolving credit Indebtedness and letters of credit outstanding at any one time under the Senior Credit Facility after giving effect to such incurrence, including all Permitted Refinancing Indebtedness incurred to refund, refinance or replace any Indebtedness incurred pursuant to this clause (i), does not exceed an amount equal to $25.0 million;

(ii) the incurrence by the Company of term Indebtedness under the Senior Credit Facility (and the Guarantees thereof by the Guarantors); provided that the aggregate principal amount of all term Indebtedness outstanding under the Senior Credit Facility after giving effect to such incurrence, including all Permitted Refinancing Indebtedness incurred to refund, refinance or replace any Indebtedness incurred pursuant to this clause (ii), does not exceed an amount equal to (a) $65.0 million or (b) $53.0 million if the Cardwell Acquisition is not completed on or prior to June 30, 1997, in each case, less the aggregate amount of all repayments, optional or mandatory, of the principal of any term Indebtedness under the Senior Credit Facility that have been made since the date of this Agreement;

(iii) the Interim Notes and the incurrence of the Related Party Guarantees by the Guarantors;

(iv) the issuance of the Rollover Notes to the Escrow Agent in accordance with Section 3.3;

(v) Permitted Refinancing Indebtedness;

(vi) the incurrence of Indebtedness (i) by the Company to a Wholly Owned Subsidiary that is a Guarantor (ii) by a Domestic Wholly Owned Subsidiary to the Company or any other Subsidiary that is a Guarantor and
(iii) by any direct or indirect Foreign Subsidiary to the Company or any

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Subsidiary that is a Guarantor in an aggregate principal amount at any time outstanding (with respect to all Foreign Subsidiaries) not to exceed $1.0 million;

(vii) Indebtedness of the Parent, the Company or their respective Subsidiaries incurred in respect of Hedging Obligations entered into in order to fix or cap the interest rate on Indebtedness permitted to be incurred by this Agreement or to protect against loss from changes in currency exchange rates incurred pursuant to clauses (i) or (ii) of this
Section 4.9;

(viii) the incurrence by the Parent, the Company or any of their respective Subsidiaries of additional Indebtedness to finance the acquisition of fixed or capital assets (whether pursuant to a loan, a financing, lease or otherwise) in an aggregate principal amount at any time outstanding not to exceed $5.0 million; and

(ix) Existing Debt.

For purposes of determining compliance with this Section 4.9 accrual of interest, the accretion of accreted value and the payment of interest in the form of additional Indebtedness will not be deemed to be an incurrence of Indebtedness.

Section 4.10 Restricted Payments. The Parent and the Company shall not, and shall not permit any of their respective Subsidiaries to, directly or indirectly: (i) declare or pay any dividend or make any other payment or distribution on account of their respective Equity Interests (including, without limitation, any payment in connection with any merger or consolidation involving the Parent or the Company) to the direct or indirect holders of any of their respective Equity Interests (other than dividends or distributions payable in Equity Interests (other than Disqualified Stock) of the Parent or payable to the Company or a Wholly Owned Subsidiary of the Company); (ii) purchase, redeem or otherwise acquire or retire for value (including without limitation, in connection with any merger or consolidation involving the Parent or the Company) any Equity Interests of the Company or the Parent or any of their respective Affiliates (other than any such Equity Interests owned by the Company or any Wholly Owned Subsidiary of the Company); (iii) make any payment on or with respect to, or purchase, redeem, defease or otherwise acquire or retire for value any Indebtedness that is pari passu with or subordinated to the Interim Notes or any of the Related Party Guarantees, except a payment of interest or principal at Stated Maturity; or (iv) make any Restricted Investment (all such payments and other actions set forth in clauses (i) through (iv) above being collectively referred to as "Restricted Payments").

Notwithstanding the foregoing, provided that no Default or Event of Default shall have occurred and be continuing or would occur as a consequence thereof, the Company may pay dividends to the Parent for the purpose of (i) permitting the Parent to satisfy its federal, state and local income tax obligations to the extent such obligations are actually due and owing and are a direct result of the net income of the Company being included on a consolidated, combined or unitary income tax return filed by the Parent or otherwise being attributed to the Parent for tax purposes; (ii) permitting the Parent to pay the necessary fees and expenses to maintain its corporate existence and good standing (in an aggregate amount not to exceed $250,000 per annum); and (iii) permitting the Parent to comply with the Transaction Documents (in an aggregate amount not to exceed $250,000 per annum).

Not later than the date of making any Restricted Payment, the Company shall deliver to the Holders an Officers' Certificate stating that such Restricted Payment is permitted and setting forth the basis upon which the amount of such Restricted Payment is derived.

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Section 4.11 Limitation on Restrictions on Distributions from Subsidiaries. The Parent and the Company shall not, and shall not permit any of their respective Subsidiaries to, directly or indirectly, create or otherwise cause or suffer to exist or become effective any encumbrance or restriction on the ability of any Subsidiary of the Company to (i)(a) pay dividends or make any other distributions to the Company or any of its Subsidiaries (1) on its Capital Stock or other Equity Interests or (2) with respect to any other interest or participation in, or measured by, its profits, or (b) pay any Indebtedness owed to the Company or any of its Subsidiaries, (ii) make loans or advances to the Company or any of its Subsidiaries or (iii) transfer any of its properties or assets to the Company or any of its Subsidiaries, except for such encumbrances or restrictions existing under or by reason of (a) this Agreement or the Senior Credit Facility as in effect on the date hereof, (b) the Interim Notes, (c) applicable law, (d) restrictions of the nature described in clause (iii) above by reason of customary non-assignment provisions in leases entered into in the ordinary course of business and consistent with past practices or (e) purchase money obligations for property acquired in the ordinary course of business that impose restrictions of the nature described in clause (iii) above on the property so acquired.

Section 4.12 Limitation on Sales of Assets and Subsidiary Stock. The Parent and the Company shall not, and shall not permit any of their respective Subsidiaries to, enter into an agreement with respect to or consummate any Asset Sale, except:

(a) the sale or other disposition of obsolete or worn out property in the ordinary course of business having a fair market value not to exceed, in the aggregate, $1.0 million in any period of twelve consecutive months;

(b) the sale or other disposition of any property (other than inventory and obsolete or worn out property) in the ordinary course of business, provided that the aggregate book value of all such property so sold or disposed of in any period of twelve consecutive months shall not exceed $1.0 million provided, further, that the net proceeds therefrom are applied within one Business Day of receipt to permanently repay Indebtedness under the Senior Credit Facility or to redeem or repurchase Interim Notes; and

(c) the sale of inventory in the ordinary course of business.

Section 4.13 Limitation on Transactions with Affiliates. The Parent and the Company shall not, and shall not permit any of their respective Subsidiaries to, make any payment to, or sell, lease, transfer or otherwise dispose of any properties or assets to, or purchase any property or assets from, or enter into or make or amend any transaction, contract, agreement, understanding, loan, advance or Guarantee with, or for the benefit of, any Affiliate of any such Person (each of the foregoing, an "Affiliate Transaction"), unless (i) such Affiliate Transaction is on terms that are no less favorable to the Parent, the Company or the relevant Subsidiary than those that would have been obtained in a comparable transaction by the Parent, the Company or such Subsidiary with an unrelated Person and (ii) the Parent or the Company, as the case may be, delivers to the Holders (a) with respect to any Affiliate Transaction or series of related Affiliate Transactions involving aggregate consideration in excess of $250,000, a resolution of its board of directors set forth in an Officers' Certificate certifying that such Affiliate Transaction complies with clause (i) above and that such Affiliate Transaction has been approved by a majority of the disinterested members of its board of directors, and (b) with respect to any Affiliate Transaction or series of related Affiliate Transactions involving aggregate consideration in excess of $500,000, an opinion as to the fairness to the Holders of such Affiliate Transaction from a financial point of view issued by an investment banking firm (or, if an investment banking firm is generally not qualified to give such an opinion, by an appraisal firm) of national standing; provided that (x) any employment agreement entered into by the Parent, the Company or such Subsidiary in the ordinary course of business

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and consistent with the past practices of the Parent, the Company or such Subsidiary, as the case may be, (y) transactions between or among any of the Parent, the Company and/or any Wholly Owned Subsidiary of the Company that is a Guarantor and (z) Restricted Payments that are permitted by Section 4.10 in each case, shall not be deemed Affiliate Transactions.

Section 4.14 Line of Business. The Parent and the Company shall not, and shall not permit any of their respective Subsidiaries to, directly or indirectly, engage in any line of business other than the businesses conducted on the Closing Date and businesses reasonably related thereto. The Parent shall not create or acquire any direct or indirect Subsidiary and shall not engage in any activity other than the holding of the stock of the Company. The Parent shall own, directly, 100% of the issued and outstanding Voting Stock and other Equity Interests of the Company.

Section 4.15 Capitalization; Restrictions on Certain Amendments. (a) The Company shall not, and shall not permit any of its Subsidiaries to, issue or agree to issue any Capital Stock (including treasury shares) or other Equity Interests except to the Company or a Wholly Owned Subsidiary of the Company that is a Guarantor.

(b) The Parent and the Company shall not, and shall not permit any of their respective Subsidiaries to, amend, or suffer to be amended, their organizational documents (including any certificate of incorporation or bylaws) or any terms of their Capital Stock or any Material Contract (other than the Senior Credit Facility) to which it is a party if any such amendment could reasonably be expected to have a Material Adverse Effect.

Section 4.16 Liens. The Parent and the Company shall not, and shall not permit any of their respective Subsidiaries to, directly or indirectly, create, incur, assume or suffer to exist any Lien on any asset now owned or hereafter acquired, or any income or profits therefrom or assign or convey any right to receive income therefrom, except Permitted Liens.

Section 4.17 No Senior Subordinated Indebtedness. Notwithstanding any other provision hereof, (i) the Company will not incur, create, issue, assume, guarantee or otherwise become directly or indirectly liable for any Indebtedness that is subordinate or junior in right of payment to any Indebtedness under Senior Debt and senior in any respect in right of payment to the Interim Notes and (ii) no Guarantor will incur, create, issue, assume, guarantee or otherwise become liable for any Indebtedness that is subordinate or junior in right of payment to the Senior Guarantee and senior in any respect in right of payment to any Related Party Guarantee.

Section 4.18 Corporate Existence; Compliance with Laws; Taxes; Maintenance of Insurance. (a) The Parent and the Company shall, and shall cause each of their respective Subsidiaries to, do or cause to be done all things necessary to preserve and keep in full force and effect their respective corporate, partnership or other existence in accordance with their respective organizational documents and their respective rights (charter and statutory), licenses and franchises; provided, however, that neither the Parent nor the Company shall be required to preserve any such right, license or franchise, or such corporate, partnership or other existence of any of their respective Subsidiaries if the relevant board of directors shall determine that the preservation thereof is no longer desirable in the conduct of their respective businesses taken as a whole, and that the loss thereof could not reasonably be expected to have a Material Adverse Effect.

(b) The Parent and the Company shall, and shall cause each of their respective Subsidiaries to, comply in all material respects with all statutes, laws, ordinances, or government rules and regulations to which it is subject.

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(c) The Parent and the Company shall, and shall cause each of their respective Subsidiaries to, pay prior to delinquency all taxes, assessments, and governmental levies except those contested in good faith and by appropriate proceedings.

(d) The Parent and the Company shall, and shall cause their respective Subsidiaries to, (a) keep insurable properties insured in accordance with industry standards at all times by financially sound and reputable insurers; (b) maintain such other insurance, to such extent and against such risks, including
(i) fire and other risks insured against by extended coverage, as is customary with companies in the same or similar businesses operating in the same or similar location, (ii) public liability insurance against claims for personal injury or death or property damage occurring upon, in, about or in connection with the use of any properties owned, occupied or controlled by them and (iii) business interruption insurance; and (c) maintain such other insurance as may be required by law.

Section 4.19 Liquidation. The Parent and the Company shall not, and shall not permit any of their respective Subsidiaries to, adopt a plan of liquidation or dissolution.

Section 4.20 Stay, Extension and Usury Laws. The Parent and the Company covenant (to the extent that they may lawfully do so) that they shall not, and shall not permit any of their respective Subsidiaries to, at any time insist upon, plead, or in any manner whatsoever claim or take the benefit or advantage of, any stay, extension or usury law wherever enacted, now or at any time hereafter in force, that may affect the covenants in or the performance of this Agreement; and the Parent and the Company waive, and shall cause each of their respective Subsidiaries to waive (to the extent that they may lawfully do so), all benefit or advantage of any such law, and covenant that they shall not, and shall not permit their respective Subsidiaries to, by resort to any such law, hinder, delay or impede the execution of any power herein granted to the Holders, but shall suffer and permit, and shall cause their respective Subsidiaries to suffer and permit, the execution of every such power as though no such law has been enacted.

Section 4.21 Change of Control. (a) Upon the occurrence of a Change of Control, each Holder will have the right to require the Company to repurchase all or any part (equal to $1,000 or an integral multiple thereof) of such Holder's Interim Notes pursuant to the offer described below (the "Change of Control Offer") at an offer price in cash equal to 101% of the aggregate principal amount thereof plus accrued and unpaid interest and Liquidated Damage thereon, if any, to the date of purchase (the "Change of Control Payment"). Within ten days following any Change of Control, the Company will mail a notice to each Holder describing the transaction or transactions that constitute the Change of Control and offer to repurchase Interim Notes on the date specified in such notice, which date shall be no earlier than 30 days and no later than 45 days from the date such notice is mailed (the "Change of Control Payment Date"), pursuant to the procedures set forth below. Prior to purchasing any Interim Notes in a Change of Control Offer, but in any event within 30 days following a Change of Control, the Company shall either repay all outstanding Senior Debt or obtain the requisite consents, if any, under all agreements governing outstanding Senior Debt to permit the repurchase of Interim Notes pursuant to this Section 4.21.

(b) Notice of a Change of Control Offer shall be mailed by the Company to the Holders at their addresses set forth in the Note Register. The Change of Control Offer shall remain open from the time of mailing until the Change of Control Payment Date. The notice shall be accompanied by a copy of each of the most recent reports furnished pursuant to Section 4.7(b) (i) and (ii). The notice shall contain all instructions and materials necessary to enable such Holders to tender Interim Notes pursuant to the Change of Control Offer. The notice, which shall govern the terms of the Change of Control Offer, shall state:

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(1) that the Change of Control Offer is being made pursuant to this
Section 4.21, that Interim Notes may be surrendered in whole or in part (in denominations of $1,000 and integral multiples thereof), and that all Interim Notes will be accepted for payment;

(2) the purchase price and the Change of Control Payment Date;

(3) that any Interim Note not tendered will continue to accrue interest;

(4) that any Interim Note (or part thereof) accepted for payment pursuant to the Change of Control Offer shall cease to accrue interest after the Change of Control Payment Date;

(5) that Holders electing to have an Interim Note purchased pursuant to a Change of Control Offer will be required to surrender the Interim Note, with the form entitled "Option of Holder to Elect Purchase" on the reverse of the Interim Note completed, to the Company at the address specified in the notice prior to 5:00 p.m., New York City time, on the Change of Control Payment Date;

(6) that Holders will be entitled to withdraw their election if the Company receives not later than 5:00 p.m., New York City time, on the Change of Control Payment Date, a telegram, telex, facsimile transmission or letter setting forth the name of the Holder, the principal amount of Interim Notes such Holder delivered for purchase and a statement that such Holder is withdrawing his election to have such Interim Notes purchased; and

(7) that Holders whose Interim Notes are purchased only in part will be issued new Interim Notes equal in principal amount to the unpurchased portion of the corresponding Interim Notes surrendered.

(c) On the Change of Control Payment Date, the Company shall accept for payment all Interim Notes or portions thereof properly tendered pursuant to the Change of Control Offer, pay the purchase price of each Interim Note surrendered for purchase to the related Holder and deliver to each Holder a new Interim Note equal in principal amount (excluding premiums, if any) to any unpurchased portion of the corresponding Interim Note surrendered. The Company will notify the remaining Holders of the results of the Change of Control Offer on or as soon as practicable after the Change of Control Payment Date.

(d) The Company shall comply with the requirements of Rule 14e-1 under the Exchange Act and any other securities laws and regulations thereunder to the extent such laws and regulations are applicable in connection with the repurchase of the Interim Notes as a result of a Change of Control.

ARTICLE V

CONDITIONS TO THE INTERIM LENDERS' OBLIGATIONS

Section 5.1 Closing. Upon satisfaction of the conditions set forth herein, the Interim Lenders shall pay the purchase price set forth in Section 3.1 of the Interim Notes by wire transfer of immediately available funds to the account designated by the Company in New York, New York, against delivery to the Interim Lenders of Interim Notes in the names and denominations specified by the Interim Lenders (the "Closing"). The Company shall give the Interim Lenders at least two Business Days' notice of the

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expected date of such Closing (the "Closing Date"). The Closing shall take place at such place as shall be agreed upon by the Interim Lenders and the Company.

Section 5.2 Conditions of the Interim Lenders' Obligations. The obligation of the Interim Lenders to purchase and pay for the Interim Notes to be purchased by them hereunder on the Closing Date is several and not joint and is subject to the prior or concurrent satisfaction on the Closing Date of each of the following conditions:

(a) Representations and Warranties; Agreements; No Default. The representations and warranties of the Parent and the Company set forth in or incorporated by reference in this Agreement shall be true and correct at and as if repeated on and as of the Closing Date after giving effect to the transactions occurring simultaneously with the Closing. The Company shall have performed all agreements on its part to be performed pursuant to this Agreement on or prior to the Closing Date and there shall exist no Default or Event of Default.

(b) Fees. All fees and expenses due to any Interim Lender or Lehman Brothers on or before the Closing Date in connection with the Interim Notes, the Engagement Letter and the Commitment Letter or otherwise shall have been paid in full.

(c) Opinions; Reliance Letters. The Interim Lenders shall have received
(i) the legal opinion of Jones, Day, Reavis & Pogue, special counsel for the Parent and the Company, addressed to the Interim Lenders and dated as of the Closing Date, in the form attached as Exhibit H, and (ii) a reliance letter, or reliance letters permitting the Interim Lenders to rely on all of the opinions of counsel rendered in connection with the Senior Credit Facility and the Acquisition Agreements.

(d) Closing Papers. The Interim Lenders shall have received the following, dated as of the Closing Date and in form and substance reasonably satisfactory to them and to their special counsel, Latham & Watkins:

(i) a certificate of the Secretary of each Relevant Party certifying as to the attached copy of the resolutions adopted by the board of directors of such Relevant Party, authorizing, to the extent applicable, the execution, delivery and performance of each of this Agreement, the Senior Credit Facility, the Acquisition Agreements, the Related Documents and each of the other agreements, instruments and transactions contemplated hereby and thereby;

(ii) a certificate of the Secretary of each Relevant Party certifying as to attached copies of the certificate of incorporation and by-laws of such Relevant Party, as in effect on the Closing Date;

(iii) a certificate of the Secretary of each Relevant Party, dated the Closing Date, as to the incumbency and signatures of the Officers of such Relevant Party, authorized, to the extent applicable, to act with respect to this Agreement, the Senior Credit Facility, the Acquisition Agreements, the Related Documents and all instruments and agreements contemplated hereby and thereby; and

(iv) an Officers' Certificate signed by the President and Chief Financial Officer of the Parent and the Company certifying as to the matters set forth in Sections 5.2(a) and 5.2(l).

(e) Related Documents. The Interim Lenders shall have received executed copies of the Rollover Note Indenture, the Debt Registration Rights Agreement, the Equity Registration Rights

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Agreement, the Warrant Agreement, the Stockholders Agreement and the Escrow Agreement. All such documents shall have been duly authorized, executed and delivered by each of the parties thereto, and the Interim Lenders shall have received a certificate from the Escrow Agent, satisfactory to the Interim Lenders in their sole discretion, to the effect that the Escrow Agent has received, and is holding in escrow for the benefit of the Holders, the Rollover Note Indenture and authenticated, executed and delivered Rollover Notes dated as of the Maturity Date in an aggregate principal amount equal to at least $31.0 million.

(f) Concurrent Transactions.

(i) Each of the Relevant Parties and each of the financial institutions party thereto shall have entered into the Senior Credit Facility. All conditions precedent to borrowings under the Senior Credit Facility shall have been satisfied or, with the prior approval of each of the Interim Lenders, waived and the Company shall have borrowed funds under the Senior Credit Facility, which, together with the proceeds from the sale of the Interim Notes will be sufficient to consummate the Acquisitions and pay all related fees and expenses. After giving effect to the consummation of the transaction contemplated hereby, the amount undrawn and available to the Company under the Senior Credit Facility shall be at least $10.0 million.

(ii) The terms of the Senior Credit Facility and the Acquisition Agreements shall be satisfactory in all respects to each of the Interim Lenders and to their special counsel, Latham & Watkins. There shall not exist (pro forma for the Acquisitions and the financing thereof) any default or event of default under the Senior Credit Facility, the Interim Notes, this Agreement, or under any other material Indebtedness or agreement of the Parent, the Company or any of their Subsidiaries.

(iii) The total purchase price for the Bowen Acquisition shall be approximately $75.0 million and the total purchase price for the Cardwell Acquisition (including the refinancing of all of the existing debt of Cardwell) shall be approximately $15.25 million. The Acquisitions shall be financed with (x) $65.0 million of borrowings by the Company under the Senior Credit Facility and (y) the issuance by the Company of $31.0 million in aggregate principal amount of Interim Notes to the Interim Lenders.

(iv) The Bowen Acquisition shall have been consummated concurrently with or prior to the issuance of the Interim Notes pursuant to the provisions of the acquisition agreements related thereto in the forms previously delivered to Lehman Brothers and all conditions precedent to the consummation of the Bowen Acquisition set forth in the acquisition agreements related thereto shall have been satisfied or, with the prior approval of each of the Interim Lenders, waived.

(v) The agreement entered into in connection with the Cardwell Acquisition shall have been executed by the appropriate parties in the forms previously delivered to Lehman Brothers.

(g) Documentation, Legal Matters, etc. All matters relating to the transactions contemplated by this Agreement, the Related Documents, the Acquisition Agreements, the Senior Credit Facility and the transactions contemplated hereby and thereby shall be satisfactory to the Interim Lenders in their sole discretion, and the Interim Lenders shall have received such additional certificates, legal and other opinions (including with respect to solvency) and documentation as they shall request.

(h) Solvency Matters. The Interim Lenders shall have received an Officer's Certificate from the President and the Chief Financial Officer of each of the Parent and the Company in form and

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substance satisfactory to the Interim Lenders certifying that after giving effect to the Acquisitions and the transactions contemplated in this Agreement, the Parent and the Company are Solvent.

(i) Financial Statements. The Interim Lenders shall have received all audited and unaudited historical financial statements of the Parent, the Company, the other Guarantors and Cardwell (including pro forma financial statements giving effect to all other completed or probable acquisitions) meeting the requirements of Regulations S-X for a Form S-1 registration statement, and all such financial statements shall be satisfactory in form and substance to the Interim Lenders. Such financial statement shall show actual consolidated EBITDA of the Company for the twelve-month period ended December 31, 1996 of not less than $22.1 million. The Interim Lenders shall have received all historical financial statements of Bowen that would be required under Regulation S-X for a Form S-1 registration statement (although such financial statements may be unaudited), which shall be satisfactory in form and substance to the Interim Lenders.

(j) Pro Forma Financial Statements. The Interim Lenders shall have received a satisfactory pro forma consolidated income statement of the Company meeting the requirements of Regulation S-X for a Form S-1 registration statement for the period of four consecutive fiscal quarters most recently ended prior to the Closing Date, adjusted to give effect to the consummation of the Acquisitions, and the financings contemplated by this Agreement and the Senior Credit Facility as if such transactions had occurred on the first day of such period, and such pro forma consolidated income statement shall show consolidated EBITDA for such four-quarter period of not less than $27.2 million.

(k) Absence of Certain Capital Market Events. There shall not have occurred and be continuing as of the Closing Date any of the following conditions: (i) trading on the New York Stock Exchange ("NYSE"), the NASDAQ National Market or the American Stock Exchange ("AMEX") shall have been wholly suspended; (ii) minimum or maximum prices for trading shall have been fixed, or maximum ranges for prices for securities other than in connection with program trading shall have been imposed, on the NYSE, the NASDAQ National Market or the AMEX or by order of the Commission or any other governmental authority having jurisdiction; (iii) a banking moratorium shall have been declared by federal or New York authorities; or (iv) an outbreak of major hostilities or other national or international calamity (financial or other) or any other material adverse change in the financial markets since the date hereof, or any event the effect of which, in the opinion of Lehman Brothers, is likely to be materially adverse to the financial markets or, in the opinion of Lehman Brothers, will make it impracticable or inadvisable to proceed with the marketing of the Permanent Securities or the High Yield Notes.

(l) Absence of Certain Changes. No material adverse change in the consolidated financial condition, business, operations, assets, liabilities, management, prospects or value of the Parent, the Company or the Acquired Businesses (including any event which, in the opinion of the Interim Lenders, is reasonably likely to result in such a material adverse change) shall have occurred since March 31, 1996. Except as set forth on Schedule 5.2(l), the Parent, the Company and the Acquired Businesses shall have no liabilities (absolute or contingent) except those set forth on the Financial Statements, those incurred under the Senior Credit Facility and the Transaction Documents or those incurred in the ordinary course of business since the date of the last Financial Statements delivered pursuant to Section 5.2(i) that do not, in the aggregate, exceed 5% of their total assets.

(m) Net Capital. There shall not have occurred any change in law, regulation or interpretation thereof that could result in any Interim Lender's commitment to provide, or any Interim Lender's providing, the financing contemplated by this Agreement being a charge to the net capital of any Affected Party.

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(n) Environmental Audit. The Interim Lenders shall have received satisfactory environmental information with respect to the real property owned or leased by the Parent, the Company, any of their respective Subsidiaries and the Acquired Businesses from a firm satisfactory to the Interim Lenders, in their sole respective discretion.

(o) Capitalization; Corporate Structure. The capitalization and corporate and ownership structure of the Company before and after the transactions contemplated hereby and the financing thereof shall be satisfactory to the Interim Lenders in all material respects.

(p) Approvals and Consents. All governmental, quasi-governmental, shareholder, and material third-party approvals and consents necessary or desirable in connection with the Acquisitions (except for approval of the Cardwell Acquisition by the U.S. Department of Justice under the Hart-Scott-Rodino Antitrust Act of 1976) and the transactions contemplated hereby and the financing thereof shall have been received and shall be in full force and effect.

(q) Due Diligence. The Interim Lenders and their counsel shall have completed their due diligence review of the Parent and the Company and their respective operations (including the operations of the Acquired Businesses), and each of them shall be satisfied with the results thereof. Such review may include, among other things, an examination of (i) accounting, litigation, regulatory, tax, labor, insurance, pension and environmental liabilities, actual or contingent, (ii) material contracts, leases and debt agreements and (iii) the general business, operations, financial conditions, management, prospects and value of the Parent, the Company and the Acquired Businesses.

(r) Litigation, etc. There shall not exist any action, suit, investigation, litigation or proceeding pending or threatened in any court or before any arbitrator or Governmental Entity that, in the opinion of any of the Interim Lenders, affects the transactions contemplated hereby, or that could reasonably be expected to have a Material Adverse Effect (including any such action, suit, investigations, litigation or proceeding which, in the reasonable opinion of any of the Interim Lenders is reasonably likely to result in such a Material Adverse Effect) or any of the transactions contemplated by any of the Transaction Documents.

The sale of Interim Notes by the Company on the Closing Date shall constitute a representation and warranty by the Parent and the Company to the effect that the applicable conditions precedent set forth in this Article V are satisfied on the Closing Date.

ARTICLE VI

TRANSFER OF THE INTERIM NOTES; REPRESENTATIONS OF INTERIM LENDERS

Section 6.1 Transfer of the Interim Notes. Each Interim Lender represents and agrees that it is purchasing Interim Notes for its own account or for the account of its beneficial owners and that it will not, directly or indirectly, transfer, sell, assign, pledge or otherwise dispose of the Interim Notes unless such transfer, sale, assignment, pledge or other disposition is made (i) pursuant to an effective registration statement under the Securities Act or (ii) pursuant to an available exemption from registration under, or otherwise in compliance with, the Securities Act. Each of the Interim Lenders also represents and warrants to the Company that it is an "accredited investor" (as that term is defined in Rule 501 of Regulation D under the Securities Act). Each of the Interim Lenders acknowledges that the Interim Notes will bear a legend restricting the transfer thereof for so long as may be required by the Securities Act.

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Subject to the provisions of the previous paragraph, each of the Relevant Parties agrees that (i) each Interim Lender and each subsequent Holder will be free to sell or transfer all or any part of the Interim Notes to any third party and to pledge any or all of the Interim Notes to any commercial bank or other institutional lender, provided, however, that, in the case of such sale or transfer, each Holder shall first give the Company a one Business Day opportunity to purchase such Interim Notes on the same terms as are being offered by such third party and (ii) Strategic Resource Partners will be free to sell or transfer all or any part of the Interim Notes to any of its beneficial owners.

Section 6.2 Registration of Transfer or Exchange. Upon surrender of any Interim Note by a Holder for registration of transfer or exchange, the Company will execute and deliver in exchange therefor a new Interim Note or Interim Notes of the same aggregate tenor and principal amount, registered in such names and in such denominations as such Holder may request. The Company may require certificates of transferors and transferees of Interim Notes, or an Opinion of Counsel, in order to establish compliance with the Securities Act. The Company may require payment by such Holder of a sum sufficient to cover any stamp tax or governmental charge imposed in respect of any such transfer.

Section 6.3 Register. The Company shall maintain a register of the Holders of all the Interim Notes issued pursuant to this Agreement. The Company will allow any Holder of an Interim Note to inspect and copy such register at the Company's principal place of business during normal business hours.

ARTICLE VII

EVENTS OF DEFAULT

Section 7.1 Events of Default. An "Event of Default" with respect to the Interim Notes occurs if:

(a) any representation or warranty made or deemed made by the Parent or the Company or any of their Subsidiaries herein or in the Senior Credit Facility or that is contained in any certificate, document or financial or other statement furnished by any of them at any time under this Agreement or shall prove to have been incorrect in any material respect on or as of the date made or deemed made; provided that any incorrect statement made in
Section 2.6 shall be material;

(b) the Company defaults in the payment of the principal of or premium on any of the Interim Notes, when the same shall become due and payable, whether at stated maturity, upon acceleration, upon redemption, or otherwise, and whether or not such payment is prohibited by Article VIII;

(c) the Company defaults in the payment of any interest upon any of the Interim Notes, when the same becomes due and payable, whether or not such payment is prohibited by Article VIII, and such default continues for five calendar days;

(d) the Company defaults in the payment of any other amounts payable under this Agreement and such default continues for five calendar days;

(e) the Parent, the Company or any of their respective Subsidiaries fails to observe or perform any of its covenants or agreements in Article IV (excluding Sections 4.8 and 4.18) or the Parent, the Company or any of their respective Subsidiaries fails to observe or perform any of its covenants or agreements contained in Section 4.8 or 4.18 and such failure continues for a period of 30 days.

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(f) the Parent, the Company or any of their respective Subsidiaries fails to observe or perform any of its covenants or agreements (other than those set forth in clause (e) above) contained in any of the Transaction Documents or the Interim Notes, and such failure continues for a period of 20 Business Days following the earlier of (i) written notice to the Parent or the Company of such failure by any Holder of outstanding Interim Notes or
(ii) the date on which such failure is discovered by the Parent, the Company or such Subsidiary;

(g) a default occurs under any agreement, mortgage, indenture or instrument under which there is or may be issued or by which there is or may be secured or evidenced any Indebtedness for money borrowed by the Parent, the Company or any of their respective Subsidiaries (or the payment of which is Guaranteed by the Parent, the Company or any of their respective Subsidiaries), whether such Indebtedness or Guarantee now exists or shall be created hereafter, which default (i) is caused by a failure to pay principal of or premium, if any, or interest on such Indebtedness or Guarantee prior to the expiration of the grace period provided in such Indebtedness or Guarantee (a "Payment Default") or (ii) results in the acceleration of such Indebtedness or Guarantee prior to its express maturity and, in each case, the principal amount of such Indebtedness or Guarantee, together with the principal amount of any other Indebtedness or Guarantee as to which there has been a Payment Default or the maturity of which has been so accelerated, aggregates $1.0 million or more;

(h) the Parent, the Company or any Subsidiary of the Parent or the Company pursuant to or within the meaning of any Bankruptcy Law:

(i) commences a voluntary case;

(ii) consents to the entry of an order for relief against it in an involuntary case;

(iii) consents to the appointment of a Custodian of it or for any substantial part of its property;

(iv) makes a general assignment for the benefit of its creditors; or

(v) generally is not paying, or admits its inability to pay, its debts as the same become due;

or takes any comparable action under foreign laws relating to insolvency;

(i) a court of competent jurisdiction enters an order or decree under any Bankruptcy Law that:

(i) is for relief against the Parent, the Company or any Subsidiary of the Parent or the Company in an involuntary case or proceeding;

(ii) appoints a Custodian of the Parent, the Company or any Subsidiary of the Parent or the Company or for all or substantially all of the property of the Parent, the Company or any such Subsidiary; or

(iii) orders the winding up or liquidation of the Parent, the Company or any Subsidiary of the Parent or the Company;

or any similar relief is granted under any foreign laws relating to insolvency, and such order, decree or similar relief remains unstayed and in effect for 60 days;

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(j) a final judgment or final judgments for the payment