EXHIBIT 10.1

 

THIRD AMENDED AND RESTATED CREDIT AGREEMENT

 

This THIRD AMENDED AND RESTATED CREDIT AGREEMENT (this “Agreement”) is entered
into as of June 30, 2018 (“Effective Date”), by and between Permian Pelican
Financial, LLC, a Texas limited liability company (“Lender”), and Aly Energy
Services, Inc., a Delaware corporation (“Borrower”).

 

WHEREAS, Borrower entered into that certain Amended and Restated Credit
Agreement, dated as of April 15, 2014 (as amended and restated prior to the date
hereof, the “Original Credit Agreement”), by and among Borrower, the Lenders (as
defined therein), and Wells Fargo Bank, National Association as Administrative
Agent for the Lenders, as Issuing Lender and as Swing Line Lender; and

 

WHEREAS, on December 12, 2016, Permian Pelican, LLC (“Pelican”) acquired all of
the “Obligations” under the Original Credit Agreement, including without
limitation the rights under the loan documents described on Schedule 1 to the
Second Amended and Restated Credit Agreement (the “Original Loan Documents”);
and

 

WHEREAS, on December 12, 2016, Pelican also acquired all of the rights of Wells
Fargo Equipment Finance, Inc. as lessor under certain lease agreements (the
“Lease Documents”) described in Schedule 2 to the Second Amended and Restated
Credit Agreement, and added the obligations under the Lease Documents to the
Obligations; and

 

WHEREAS, Pelican has formed Lender to succeed to all of its rights hereunder
with respect to the Obligations, the Original Loan Documents and the Lease
Documents; and

 

WHEREAS, as of the Effective Date, Lender and the Borrower desire to amend and
restate the Original Credit Agreement in its entirety;

 

NOW, THEREFORE, the parties do hereby agree as follows:

 

1. DEFINITIONS AND CONSTRUCTION.

 

1.1 Definitions. As used in this Agreement, all capitalized terms shall have the
definitions set forth on Exhibit A. Any term used in the Code and not defined
herein shall have the meaning given to the term in the Code.

 

1.2 Accounting Terms. Any accounting term not specifically defined on Exhibit A
shall be construed in accordance with GAAP and all calculations shall be made in
accordance with GAAP. The term “financial statements” shall include the
accompanying notes and schedules.

 

2. LOANS AND TERMS OF PAYMENT.

 

2.1 Refinancing of the Obligations; Promise to Pay. As of the Effective Date,
the total amount of the Obligations aggregated $6,601,500. Borrower promises to
pay to the order of Lender, in lawful money of the United States, the aggregate
unpaid principal amount of all Credit Extensions made by Lender to Borrower,
together with interest on the unpaid principal amount of such Credit Extensions
at rates in accordance with the terms hereof.

 

2.2 Revolving Line. Of the outstanding obligations as of the Effective Date,
$1,000,000 shall be deemed to constitute outstanding Credit Extensions under the
Revolving Line. Subject to and upon the terms and conditions of this Agreement
Borrower may request Advances in an aggregate outstanding amount not to exceed
the lesser of (A) the Revolving Line Limit or (B) the Borrowing Base. Amounts
borrowed pursuant to this Section 2.2 may be repaid and reborrowed at any time
without penalty or premium prior to the Final Maturity Date, at which time all
Advances under this Section 2.2 shall be immediately due and payable; provided,
however, that Borrower shall repay any outstanding amount to the extent that, as
of the end of any month, the aggregate amount outstanding exceeds the Borrowing
Base.

 

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2.3 Term Loan. Of the outstanding Obligations as of the Effective Date,
$5,601,500 shall be deemed to constitute the Term Loan. The outstanding
principal amount of the Term Loan will be paid in equal monthly installments of
$83,333.33 due on the fifth Business Day following the end of each month,
commencing July 2018, with the remaining principal balance due in full on the
Final Maturity Date. Notwithstanding the foregoing: (i) Borrower shall have the
right to prepay all or a portion of the principal amount of the Term Loan at any
time prior to the Final Maturity Date, without prepayment or penalty; and (ii)
Borrower shall be required to prepay the Term Loan in an amount equal to the Net
Cash Proceeds from any sales of assets. All partial prepayments of the Term Loan
shall be credited first to accrued and unpaid interest on the Term Loan and
second to the outstanding balance of the Term Loan.

 

2.4 Interest. The Company shall pay interest on the unpaid principal amount of
the Credit Extensions until the principal amount thereof shall be paid in full.
The interest rate shall be the lower of (i) the Highest Lawful Rate or (ii) 6
month LIBOR + 3% per annum. Further, upon the occurrence and during the
continuance of an Event of Default, the unpaid principal amount of the Credit
Extensions shall bear interest (after as well as before judgment) at the rate of
6 month LIBOR + 5% but not to exceed 6% per annum. Interest shall be paid in
arrears on the fifth Business Day following the end of each month commencing
July 2018, until the principal amount of, and all accrued and unpaid interest
on, the Credit Extensions has been paid in full. All computations of interest
shall be determined by the Lender on a daily basis and for the actual number of
days elapsed based on a 360 day year.

 

2.5 Place and Method of Payment; Taxes. Any and all payments by the Company in
respect of the Credit Extensions shall be made in U.S. dollars, free and clear
of and without deduction for any and all present or future levies, deductions,
stamp or documentary taxes or similar charges or withholdings.

 

2.6 Guaranty; Security. Payment of the principal amount of, and interest on, the
Credit Extensions will continue to be guaranteed by each of the Guarantors, as
set forth in each Guaranty and secured by the assets of the Borrower and
Guarantors, as set forth in the Security Agreement.

 

2.7 Fees and Expenses. Borrower shall pay to Lender all Lender Expenses as
incurred and billed to Borrower by Lender.

 

2.8 Term. This Agreement shall become effective on the Effective Date and shall
continue in full force and effect for so long as any Obligations remain
outstanding or Lender has any obligation to make Credit Extensions under this
Agreement. Notwithstanding the foregoing, Lender shall have the right to
terminate its obligation to make Credit Extensions under this Agreement
immediately and without notice upon the occurrence and during the continuance of
an Event of Default.

 

3. CONCURRENT AGREEMENTS.

 

[Intentionally omitted].

 

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4. SECURITY INTEREST.

 

4.1 Grant of Security Interest. The Borrower, on behalf of itself and the other
Credit Parties, grants and pledges to Lender a continuing security interest in
the Collateral to secure prompt repayment of any and all Obligations and to
secure prompt performance by the Borrower of each of its covenants and duties
under the Loan Documents. Except for Permitted Liens, such security interest
constitutes a valid, first priority security interest in the presently existing
Collateral, and will constitute a valid, first priority security interest in
later-acquired Collateral. Notwithstanding any termination of this Agreement,
Lender’s Lien on the Collateral shall remain in effect for so long as any
Obligations are outstanding.

 

4.2 Perfection of Security Interest. The Borrower authorizes Lender to file at
any time financing statements, continuation statements, and amendments thereto
that (i) either specifically describe the Collateral or describe the Collateral
as all assets of the Borrower of the kind pledged hereunder, and (ii) contain
any other information required by the Code for the sufficiency of filing office
acceptance of any financing statement, continuation statement, or amendment,
including whether the Borrower is an organization, the type of organization and
any organizational identification number issued to the Borrower, if applicable.
Any such financing statements may be filed by Lender at any time in any
jurisdiction whether or not Division 9 of the Code is then in effect in that
jurisdiction. The Borrower shall from time to time endorse and deliver to
Lender, at the request of Lender, all Negotiable Collateral and other documents
that Lender may reasonably request, in form satisfactory to Lender, to perfect
and continue perfection of Lender’s security interests in the Collateral and in
order to fully consummate all of the transactions contemplated under the Loan
Documents. Borrower shall have possession of the Collateral, except where
expressly otherwise provided in this Agreement or where Lender is required by
the Code, or (after an Event of Default) otherwise chooses, to perfect its
security interest by possession in addition to the filing of a financing
statement. Where Collateral is in possession of a third party bailee, Borrower
shall take such steps as Lender reasonably requests for Lender (i) to obtain an
acknowledgment, in form and substance satisfactory to Lender, of the bailee that
the bailee holds such Collateral for the benefit of Lender, and (ii) to obtain
“control” of any Collateral consisting of investment property, deposit accounts,
securities accounts, letter-of-credit rights or electronic chattel paper (as
such items and the term “control” are defined in Division 9 of the Code) by
causing the securities intermediary or depositary institution or issuing Lender
to execute a control agreement in form and substance satisfactory to Lender. No
Borrower will create any chattel paper without placing a legend on the chattel
paper acceptable to Lender indicating that Lender has a security interest in the
chattel paper.

 

4.3 Right to Inspect . Lender (through any of its officers, employees, or
agents) shall have the right, upon reasonable prior notice and at its own
expense, from time to time during the Borrower’s usual business hours but no
more than one time per year (unless an Event of Default has occurred and is
continuing), to inspect the Borrower’s Books and to make copies thereof and to
check, test, and appraise the Accounts in order to verify the Borrower’s
financial condition or the amount, condition of, or any other matter relating
to, the Accounts.

 

5. REPRESENTATIONS AND WARRANTIES.

 

The Borrower represents and warrants as follows:

 

5.1 Due Organization and Qualification. The Borrower and each of its
Subsidiaries is an entity duly existing under the laws of the jurisdiction in
which it is organized and qualified and licensed to do business in any state in
which the conduct of its business or its ownership of property requires that it
be so qualified, except where the failure to do so could not reasonably be
expected to cause a Material Adverse Effect

 

5.2 Due Authorization; No Conflict. The execution, delivery, and performance of
the Loan Documents are within the Borrower’s powers, have been duly authorized,
and are not in conflict with nor constitute a breach of any provision contained
in the Borrower’s organizational documents, nor will they constitute an event of
default under any material agreement by which the Borrower is bound. The
Borrower is not in default under any agreement by which it is bound, except to
the extent such default would not reasonably be expected to cause a Material
Adverse Effect.

 

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5.3. Collateral. The Credit Parties have rights in or the power to transfer the
Collateral, and their title to the Collateral is free and clear of Liens,
adverse claims, and restrictions on transfer or pledge except for Permitted
Liens.

 

5.4 Actions, Suits, Litigation, or Proceedings. There are no actions, suits,
litigation or proceedings, at law or in equity, pending by or against the
Borrower or any Subsidiary of the Borrower before any court, administrative
agency, or arbitrator in which a likely adverse decision could reasonably be
expected to have a Material Adverse Effect.

 

5.5 No Material Adverse Change in Financial Statements. All consolidated and
consolidating financial statements related to the Borrower and any Subsidiary of
the Borrower that are delivered by the Borrower to Lender fairly present in all
material respects the Borrower’s consolidated and consolidating financial
condition as of the date thereof and the Borrower’s consolidated and
consolidating results of operations for the period then ended. There has not
been a material adverse change in the consolidated or in the consolidating
financial condition of the Borrower since the date of the most recent of such
financial statements submitted to Lender.

 

5.6 Compliance with Laws and Regulations. The Borrower and each of its
Subsidiaries have met the minimum funding requirements of ERISA with respect to
any employee benefit plans subject to ERISA. No event has occurred resulting
from the Borrower’s failure to comply with ERISA that is reasonably likely to
result in the Borrower’s incurring any liability that could reasonably be
expected to have a Material Adverse Effect. The Borrower is not an “investment
company” or a company “controlled” by an “investment company” within the meaning
of the Investment Company Act of 1940. The Borrower is not engaged principally,
or as one of the important activities, in the business of extending credit for
the purpose of purchasing or carrying margin stock (within the meaning of
Regulations T, U and X of the Board of Governors of the Federal Reserve System).
The Borrower has complied in all material respects with all the provisions of
the Federal Fair Labor Standards Act. The Borrower has complied in all material
respects with all environmental laws, regulations and ordinances. The Borrower
has not violated any statutes, laws, ordinances or rules applicable to it, the
violation of which could reasonably be expected to have a Material Adverse
Effect. The Borrower and each Subsidiary of the Borrower have filed or caused to
be filed all tax returns required to be filed, and have paid, or have made
adequate provision for the payment of, all taxes reflected therein except those
being contested in good faith with adequate reserves under GAAP or where the
failure to file such returns or pay such taxes could not reasonably be expected
to have a Material Adverse Effect.

 

5.7 Investments. The Borrower does not own any Equity Interests of any Person,
except for Permitted Investments.

 

5.8 Government Consents. The Borrower and each of its Subsidiaries have obtained
all consents, approvals and authorizations of, made all declarations or filings
with, and given all notices to, all Governmental Authorities that are necessary
for the continued operation of the Borrower’s business as currently conducted,
except where the failure to do so would not reasonably be expected to cause a
Material Adverse Effect.

 

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6. AFFIRMATIVE COVENANTS.

 

The Borrower covenants that, until payment in full of all outstanding
Obligations, and for so long as Lender may have any commitment to make a Credit
Extension hereunder, the Borrower shall, and shall cause the other Credit
Parties to, do all of the following, unless the consent or waiver of the Lender
is obtained:

 

6.1 Good Standing and Government Compliance. The Borrower shall maintain its,
and each of its Subsidiaries’ organizational existence and good standing in
their respective jurisdictions of formation, shall maintain qualification and
good standing in each other jurisdiction in which the failure to so qualify
could reasonably be expected to have a Material Adverse Effect, and shall
furnish to Lender the organizational identification number issued to the
Borrower by the authorities of the jurisdiction in which the Borrower is
organized, if applicable. The Borrower shall meet, and shall cause each of its
Subsidiaries to meet, the minimum funding requirements of ERISA with respect to
any employee benefit plans subject to ERISA. The Borrower shall comply in all
material respects with all applicable Environmental Laws, and maintain all
material permits, licenses and approvals required thereunder where the failure
to do so could reasonably be expected to have a Material Adverse Effect. The
Borrower shall comply, and shall cause each of its Subsidiaries to comply, with
all statutes, laws, ordinances and government rules and regulations to which it
is subject, and shall maintain, and shall cause each of its Subsidiaries to
maintain, in force all licenses, approvals and agreements, the loss of which or
failure to comply with which would reasonably be expected to have a Material
Adverse Effect.

 

6.2 Financial Statements, Reports, Certificates. Borrower shall deliver to
Lender: (i) as soon as available, but in any event within thirty (30) days after
the end of each calendar month, a company prepared consolidated and
consolidating balance sheet and income statement covering Borrower’s and its
consolidated Subsidiaries’ operations during such period, prepared in accordance
with GAAP, and in a form reasonably acceptable to Lender; (ii) as soon as
available, but in any event within one hundred twenty (120) days after the end
of Borrower’s fiscal year, audited consolidated and consolidating financial
statements of Borrower and its consolidated Subsidiaries prepared in accordance
with GAAP, consistently applied, together with an opinion or otherwise consented
to in writing by Lender on such financial statements of an independent certified
public accounting firm reasonably acceptable to Lender; (iii) if applicable,
copies of all statements, reports and notices sent or made available generally
by Borrower to their security holders and all reports on Forms 10-K and 10-Q
filed with the Securities and Exchange Commission; (iv) promptly upon receipt of
notice thereof, a report of any legal actions pending or threatened against the
Borrower or any of its Subsidiaries that could result in damages or costs to the
Borrower or any of its Subsidiaries of One Hundred Thousand Dollars ($100,000)
or more; (v) promptly upon receipt, each management letter prepared by the
Borrower’s independent certified public accounting firm regarding the Borrower’s
management control systems; (vi) as soon as available, but in any event not
later than January 15 of each calendar year, the Borrower’s financial and
business projections and budget for such calendar year, with evidence of
approval thereof by the Borrower’s Board of Directors (copies of any Board of
Directors approved revisions to projections shall be delivered to Lender within
thirty (30) days of such approval); (vii) on or before the 7th Business Day of
each calendar month, a Borrowing Base report as of the end of the immediately
preceding month, and (viii) such other budgets, sales projections, operating
plans or other financial information as Lender may reasonably request from time
to time. Immediately upon becoming aware of the occurrence or existence of an
Event of Default hereunder, a written statement of the Borrower setting forth
details of the Event of Default, and the action which the Borrower has taken or
proposes to take with respect thereto.

 

6.3 Taxes. The Borrower shall make, and cause each of its Subsidiaries to make,
due and timely payment or deposit of all material federal, state, and local
taxes, assessments, or contributions required of it by law, including, but not
limited to, those laws concerning income taxes, F.I.C.A., F.U.T.A. and state
disability, and will execute and deliver to Lender, on demand, proof
satisfactory to Lender indicating that the Borrower or a Subsidiary of the
Borrower has made such payments or deposits and any appropriate certificates
attesting to the payment or deposit thereof; provided that the Borrower or a
Subsidiary of the Borrower need not make any payment if the amount or validity
of such payment is contested in good faith by appropriate proceedings and is
reserved against (to the extent required by GAAP) by the Borrower or its
Subsidiary, as applicable.

 

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6.4 Insurance. The Borrower, at its expense, shall keep the Collateral insured
against loss or damage by fire, theft, explosion, sprinklers, and all other
hazards and risks, and in such amounts, as ordinarily insured against by other
owners in similar businesses conducted in the locations where the Credit
Parties’ business is conducted on the date hereof. Notwithstanding the
foregoing, the Lender acknowledges that the Borrower does not, and will not,
carry property and casualty insurance in respect of its equipment. Subject to
the foregoing, the Borrower shall also maintain liability and other insurance in
amounts and of a type that are customary to businesses similar to the
Borrower’s. If a Credit Party fails to maintain insurance as required by this
Agreement, Lender may, but shall not be obliged to, maintain or effect such
insurance coverage, or so much thereof as Lender considers necessary for its
protection. All such policies of insurance shall be in such form, with such
companies, and in such amounts as reasonably satisfactory to Lender. All
policies of property insurance shall contain a lender’s loss payable
endorsement, in a form satisfactory to Lender, showing Lender as an additional
loss payee, and all liability insurance policies shall show Lender as an
additional insured and specify that the insurer must give at least twenty (20)
days’ notice to Lender before canceling its policy for any reason. Upon Lender’s
request, the Borrower shall deliver to Lender certified copies of the policies
of insurance and evidence of all premium payments. If no Event of Default has
occurred and is continuing, proceeds payable under any casualty policy will, at
the Borrower’s option, be payable to the Borrower to replace the property
subject to the claim, provided that any such replacement property shall be
deemed Collateral in which Lender has been granted a first priority security
interest. If an Event of Default has occurred and is continuing, all proceeds
payable under any such policy shall, at Lender’s option, be payable to Lender to
be applied on account of the Obligations.

 

6.5 Restricted Agreement Consents. Prior to any Credit Party entering into or
becoming bound by any Restricted Agreement, the Borrower shall: (i) provide
written notice to Lender of the material terms of such Restricted Agreement with
a description of its likely impact on the Borrower’s business or financial
condition; and (ii) upon Lender’s request, will use commercially reasonable
efforts to obtain the consent of, or waiver by, any person whose consent or
waiver is necessary for (A) the Borrower’s interest in such licenses or contract
rights to be deemed Collateral and for Lender to have a security interest in
such license or contract right, and to have the power to assign such license or
contract rights in connection with an enforcement of remedies, that might
otherwise be restricted by the terms of the applicable license or agreement,
whether now existing or entered into in the future, and (B) Lender to have the
ability in the event of a liquidation of any Collateral to dispose of such
Collateral in accordance with Lender’s rights and remedies under this Agreement
and the other Loan Documents.

 

6.6 Further Assurances. At any time and from time to time the Borrower shall
execute and deliver such further instruments and take such further action as may
reasonably be requested by Lender to effect the purposes of this Agreement.

 

7. NEGATIVE COVENANTS.

 

The Borrower covenants and agrees that, so long as any credit hereunder shall be
available and until the outstanding Obligations are paid in full or for so long
as Lender may have any commitment to make any Credit Extensions, the Borrower
shall not, and shall each Credit Party to not, do any of the following unless
the consent or waiver of the Lender is obtained:

 

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7.1 Change in Name, Location, Executive Office, or Executive Management; Change
in Business; Change in Fiscal Year; Change in Control. Change its name or state
of formation or relocate its chief executive office or principal place of
business without thirty (30) days prior written notification to Lender; replace
its chief executive officer or chief financial officer without thirty (30) days
prior written notification to Lender; engage in any business, or permit any of
its Subsidiaries to engage in any business, other than or reasonably related or
incidental to the businesses currently engaged in by the Borrower; change its
fiscal year end; or have a Change in Control unless such Change in Control
occurs in connection with the complete satisfaction and repayment of all
Obligations and Lender’s termination of all of its commitments to extend credit
to Borrower.

 

7.2. Mergers or Acquisitions. Merge or consolidate, or permit any of its
Subsidiaries to merge or consolidate, with or into any other business
organization (other than mergers or consolidations of a Subsidiary of the
Borrower into another Subsidiary of the Borrower or into the Borrower), or
acquire, or permit any of its Subsidiaries to acquire, all or substantially all
of the Equity Interests or property of another Person, or enter into any
agreement to do any of the same.

 

7.3 Indebtedness. Create, incur, assume, guarantee or be or remain liable with
respect to any Indebtedness, or permit any of its Subsidiaries to do so, other
than Permitted Indebtedness, or prepay any Indebtedness or take any actions
which impose on a Credit Party an obligation to prepay any Indebtedness, except
Indebtedness to Lender.

 

7.4 Encumbrances. Create, incur, assume or allow any Lien with respect to any of
its property, or assign or otherwise convey any right to receive income,
including the sale of any Accounts, or permit any of its Subsidiaries so to do,
except for Permitted Liens, or covenant to any other Person that a Credit Party
in the future will refrain from creating, incurring, assuming or allowing any
Lien with respect to any of a Credit Party’s property.

 

7.5 Distributions. Pay any dividends or make any other distribution or payment
on account of or in redemption, retirement or purchase of any Equity Interests
of the Borrower.

 

7.6 Investments. Directly or indirectly acquire or own, or make any Investment
in or to any Person, or permit any of its Subsidiaries to do so, other than
Permitted Investments, or maintain or invest any of its property with a Person
other than Lender or Lender’s Affiliates or permit any of its Subsidiaries to do
so unless such Person has entered into a control agreement with Lender, in form
and substance satisfactory to Lender, or suffer or permit any of its
Subsidiaries to be a party to, or be bound by, an agreement that restricts such
Subsidiary of the Borrower from paying dividends or otherwise distributing
property to the Borrower. Further, the Credit Parties shall not enter into any
license or agreement with any Prohibited Territory or with any Person organized
under or doing business in a Prohibited Territory

 

7.7 Subordinated Debt. Make any payment in respect of any Subordinated Debt, or
permit any of its Subsidiaries to make any such payment, except in compliance
with the terms of such Subordinated Debt and the terms of the subordination
agreement relating to such Subordinated Debt, or amend any provision of any
document evidencing such Subordinated Debt, except in compliance with the terms
of the subordination agreement relating to such Subordinated Debt, or amend any
provision affecting Lender’s rights contained in any documentation relating to
the Subordinated Debt without Lender’s prior written consent.

 

7.8 Asset Sales. Sell assets in excess of an aggregate of $1.0 million in any
calendar year.

 

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8. EVENTS OF DEFAULT.

 

Any one or more of the following events shall constitute an Event of Default by
Borrower under this Agreement:

 

8.1 Payment Default. If the Borrower fails to pay any of the Obligations when
due.

 

8.2 Covenant Default.

 

(a) If the Borrower fails to perform any obligation under Article 6 or violates
any of the covenants contained in Article 7 of this Agreement; or

 

(b) If the Borrower fails or neglects to perform or observe any other material
term, provision, condition, covenant contained in this Agreement, in any of the
Loan Documents, or in any other present or future agreement between the Borrower
and Lender and as to any default under such other term, provision, condition or
covenant that can be cured, has failed to cure such default within ten (10) days
after the Borrower receives notice thereof or any officer of the Borrower
becomes aware thereof; provided, however, that if the default cannot by its
nature be cured within the ten (10) day period or cannot after diligent attempts
by Borrower be cured within such ten (10) day period, and such default is likely
to be cured within a reasonable time, then Borrower shall have an additional
reasonable period (which shall not in any case exceed thirty (30) days) to
attempt to cure such default, so long as Borrower continue to diligently attempt
to cure such default, and within such reasonable time period the failure to have
cured such default shall not be deemed an Event of Default but no Credit
Extensions will be made.

 

8.3. Material Adverse Change. If there occurs any circumstance or circumstances
that could reasonably be expected to have a Material Adverse Effect.

 

8.4 Attachment. If any material portion of the Borrower’s and/or any of its
Subsidiaries’ assets is attached, seized, subjected to a writ or distress
warrant, or is levied upon, or comes into the possession of any trustee,
receiver or person acting in a similar capacity and such attachment, seizure,
writ or distress warrant or levy has not been removed, discharged or rescinded
within five (5) days, or if the Borrower and/or any of its Subsidiaries is
enjoined, restrained, or in any way prevented by court order from continuing to
conduct all or any material part of its business affairs, or if a judgment or
other claim becomes a lien or encumbrance upon any material portion of the
Borrower’s and/or any of its Subsidiaries’ assets, or if a notice of lien, levy,
or assessment is filed of record with respect to any of the Borrower’s and/or
any of its Subsidiaries’ assets by the United States, or any department, agency,
or instrumentality thereof, or by any state, county, municipal, or governmental
agency, and the same is not paid within five (5) days after the Borrower and/or
any of its Subsidiaries receives notice thereof, provided that none of the
foregoing shall constitute an Event of Default where such action or event is
stayed or an adequate bond has been posted pending a good faith contest by the
applicable Credit Party (provided that no Credit Extensions will be made during
such cure period).

 

8.5 Insolvency. If an Insolvency Proceeding is commenced by the Borrower and/or
any of its Subsidiaries, or if an Insolvency Proceeding is commenced against the
Borrower and/or any of its Subsidiaries and is not dismissed or stayed within
thirty (30) days (provided that no Credit Extensions will be made prior to the
dismissal of such Insolvency Proceeding).

 

8.6 Other Agreements. If there is a default or other failure to perform in any
agreement to which the Borrower and/or any of its Subsidiaries is a party with a
third party or parties resulting in a right by such third party or parties,
whether or not exercised, to accelerate the maturity of any Indebtedness in an
amount in excess of One Hundred Thousand Dollars ($100,000) or that would
reasonably be expected to have a Material Adverse Effect.

 

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8.7 Judgments; Settlements. If one or more (a) judgments, orders, decrees or
arbitration awards requiring the Borrower and/or any of its Subsidiaries to pay
an aggregate amount of One Hundred Thousand Dollars ($100,000) or greater shall
be rendered against the Borrower and/or its Subsidiaries and the same shall not
have been vacated or stayed within ten (10) days thereafter (provided that no
Credit Extensions will be made prior to such matter being vacated or stayed); or
(b) settlements is agreed upon by the Borrower and/or its Subsidiaries for the
payment by the Borrower and/or its Subsidiaries of an aggregate amount of One
Hundred Thousand Dollars ($100,000) or greater or that could reasonably be
expected to have a Material Adverse Effect.

 

9. LENDER’S RIGHTS AND REMEDIES.

 

9.1 Rights and Remedies. Upon the occurrence and during the continuance of an
Event of Default, Lender may, at its election, without notice of its election
and without demand, do any one or more of the following, all of which are
authorized by the Borrower:

 

(a) Declare all Obligations, whether evidenced by this Agreement, by any of the
other Loan Documents, or otherwise, immediately due and payable provided that
upon the occurrence of an Event of Default described in Section 8.5
(insolvency), all Obligations shall become immediately due and payable without
any action by Lender);

 

(b) Cease advancing money or extending credit to or for the benefit of Borrower
under this Agreement or under any other agreement between Borrower and Lender

 

(c) Settle or adjust disputes and claims directly with account debtors for
amounts, upon terms and in whatever order that Lender reasonably considers
advisable;

 

(d) Make such payments and do such acts as Lender considers necessary or
reasonable to protect its security interest in the Collateral. The Borrower
agrees to assemble the Collateral if Lender so requires, and to make the
Collateral available to Lender as Lender may designate. The Borrower authorizes
Lender to enter the premises where the Collateral is located, to take and
maintain possession of the Collateral, or any part of it, and to pay, purchase,
contest, or compromise any encumbrance, charge, or lien which in Lender’s
determination appears to be prior or superior to its security interest and to
pay all expenses incurred in connection therewith. With respect to a Credit
Party’s owned premises, the Borrower hereby grants Lender a license to enter
into possession of such premises and to occupy the same, without charge, in
order to exercise any of Lender’s rights or remedies provided herein, at law, in
equity, or otherwise;

 

(e) Set off and apply to the Obligations any and all (i) balances and deposits
of Borrower held by Lender, and (ii) indebtedness at any time owing to or for
the credit or the account of Borrower held by Lender;

 

(f) Ship, reclaim, recover, store, finish, maintain, repair, prepare for sale,
advertise for sale, and sell (in the manner provided for herein) the Collateral.
Lender is hereby granted a license or other right, solely pursuant to the
provisions of this Section 9.1, to use, without charge, the Borrower’s labels,
patents, copyrights, rights of use of any name, trade secrets, trade names,
trademarks, service marks, and advertising matter, or any property of a similar
nature, as it pertains to the Collateral, in completing production of,
advertising for sale, and selling any Collateral and, in connection with
Lender’s exercise of its rights under this Section 9.1, the Borrower’s rights
under all licenses and all franchise agreements shall inure to Lender’s benefit;

 

  9

   

 

(g) Sell the Collateral at either a public or private sale, or both, by way of
one or more contracts or transactions, for cash or on terms, in such manner and
at such places (including a Credit Party’s premises) as Lender determines is
commercially reasonable and as more particularly set forth in the Security
Agreement.

 

9.2 Power of Attorney. Effective only upon the occurrence and during the
continuance of an Event of Default, the Borrower hereby irrevocably appoints
Lender (and any of Lender’s designated officers, or employees) as the true and
lawful attorney for each of the Credit Parties to: (a) send requests for
verification of Accounts or notify account debtors of Lender’s security interest
in the Accounts; (b) endorse a Credit Party’s name on any checks or other forms
of payment or security that may come into Lender’s possession; (c) sign a Credit
Party’s name on any invoice or bill of lading relating to any Account, drafts
against account debtors, schedules and assignments of Accounts, verifications of
Accounts, and notices to account debtors; (d) dispose of any Collateral; (e)
make, settle, and adjust all claims under and decisions with respect to a Credit
Party’s policies of insurance; (f) settle and adjust disputes and claims
respecting the accounts directly with account debtors, for amounts and upon
terms which Lender determines to be reasonable; and (g) file, in its sole
discretion, one or more financing or continuation statements and amendments
thereto, relative to any of the Collateral without the signature of a Credit
Party where permitted by law. The appointment of Lender as attorney in fact, and
each and every one of Lender’s rights and powers, being coupled with an
interest, is irrevocable until all of the Obligations have been fully repaid and
performed and Lender’s obligation to provide advances hereunder is terminated.

 

9.3 Accounts Collection. At any time after the occurrence and during the
continuation of an Event of Default, Lender may notify any Person owing funds to
a Credit Party of Lender’s security interest in such funds and verify the amount
of such Account. The Borrower shall collect all amounts owing to the Credit
Parties for Lender, receive in trust all payments as Lender’s trustee, and
immediately deliver such payments to Lender in their original form as received
from the account debtor, with proper endorsements for deposit.

 

9.4 Lender Expenses. If Borrower fails to pay any amounts or furnish any
required proof of payment due to third persons or entities, as required under
the terms of this Agreement, then Lender may do any or all of the following
after reasonable notice to Borrower: (a) make payment of the same or any part
thereof; (b) set up such reserves under the Revolving Line as Lender deems
necessary to protect Lender from the exposure created by such failure; or (c)
obtain and maintain insurance policies of the type referenced in this Agreement,
and take any action with respect to such policies as Lender deems prudent. Any
amounts so paid or deposited by Lender shall constitute Lender Expenses, shall
be immediately due and payable, and shall bear interest at the then applicable
rate hereinabove provided, and shall be secured by the Collateral. Any payments
made by Lender shall not constitute an agreement by Lender to make similar
payments in the future or a waiver by Lender of any Event of Default under this
Agreement.

 

9.5 Lender’s Liability for Collateral. Lender has no obligation to clean up or
otherwise prepare the Collateral for sale. All risk of loss, damage or
destruction of the Collateral shall be borne by Borrower.

 

9.6 No Obligation to Pursue Others. Lender has no obligation to attempt to
satisfy the Obligations by collecting them from any other Person liable for them
and Lender may release, modify or waive any collateral provided by any other
Person to secure any of the Obligations, all without affecting Lender’s rights
against Borrower. Borrower waives any right it may have to require Lender to
pursue any other Person for any of the Obligations.

 

  10

   

  

9.7 Remedies Cumulative. Lender’s rights and remedies under this Agreement, the
Loan Documents, and all other agreements shall be cumulative. Lender shall have
all other rights and remedies not inconsistent herewith as provided under the
Code, by law, or in equity. No exercise by Lender of one right or remedy shall
be deemed an election, and no waiver by Lender of any Event of Default on the
Borrower’s part shall be deemed a continuing waiver. No delay by Lender shall
constitute a waiver, election, or acquiescence by it. No waiver by Lender shall
be effective unless made in a written document signed on behalf of Lender and
then shall be effective only in the specific instance and for the specific
purpose for which it was given. The Borrower expressly agrees that this Section
9.7 may not be waived or modified by Lender by course of performance, conduct,
estoppel or otherwise.

 

9.8 Demand; Protest. Except as otherwise provided in this Agreement, the
Borrower waives demand, protest, notice of protest, notice of default or
dishonor, notice of payment and nonpayment and any other notices relating to the
Obligations.

 

10. NOTICES.

 

Unless otherwise provided in this Agreement, all notices or demands by any party
relating to this Agreement or any other agreement entered into in connection
herewith shall be in writing and (except for financial statements and other
informational documents which may be sent by first-class mail, postage prepaid)
shall be personally delivered or sent by a recognized overnight delivery
service, certified mail, postage prepaid, return receipt requested, or by
facsimile to Borrower or to Lender, as the case may be, at the principal place
of business of the Borrower or Lender, as the case may be. The parties hereto
may change the address at which they are to receive notices hereunder, by notice
in writing in the foregoing manner given to the other.

 

11. CHOICE OF LAW AND VENUE; JURY TRIAL WAIVER.

 

This Agreement shall be governed by, and construed in accordance with, the
internal laws of the State of Texas, without regard to principles of conflicts
of law. The Borrower and Lender hereby submit to the exclusive jurisdiction of
the State and Federal courts located in the State of Texas. THE UNDERSIGNED
ACKNOWLEDGE THAT THE RIGHT TO TRIAL BY JURY IS A CONSTITUTIONAL ONE, BUT THAT IT
MAY BE WAIVED UNDER CERTAIN CIRCUMSTANCES. TO THE EXTENT PERMITTED BY LAW, EACH
PARTY, AFTER CONSULTING (OR HAVING HAD THE OPPORTUNITY TO CONSULT) WITH COUNSEL
OF ITS, HIS OR HER CHOICE, KNOWINGLY AND VOLUNTARILY, AND FOR THE MUTUAL BENEFIT
OF ALL PARTIES, WAIVES ANY RIGHT TO TRIAL BY JURY IN THE EVENT OF LITIGATION
ARISING OUT OF OR RELATED TO THIS AGREEMENT OR ANY OTHER DOCUMENT, INSTRUMENT OR
AGREEMENT BETWEEN THE UNDERSIGNED PARTIES.

 

12. GENERAL PROVISIONS.

 

12.1 Successors and Assigns. This Agreement shall bind and inure to the benefit
of the respective successors and permitted assigns of each of the parties and
shall bind all persons who become bound as a debtor to this Agreement; provided,
however, that neither this Agreement nor any rights hereunder may be assigned by
Borrower without Lender’s prior written consent, which consent may be granted or
withheld in Lender’s sole discretion. Lender shall have the right without the
consent of or notice to the Borrower to sell, assign, transfer, negotiate, or
grant participation in all or any part of, or any interest in, Lender’s
obligations, rights and benefits hereunder.

 

  11

   

  

12.2 Indemnification. INDEMNIFICATION AND HOLD HARMLESS,WITHOUT LIMITING ANY
OTHER PROVISIONS OF THIS AGREEMENT, THE BORROWER AGREES TO INDEMNIFY AND HOLD
LENDER HARMLESS FROM AND AGAINST ALL LOSSES, COSTS, DAMAGES, LIABILITIES AND
EXPENSES, INCLUDING, WITHOUT LIMITATION, IN-HOUSE AND OUTSIDE ATTORNEYS’ FEES
AND DISBURSEMENTS, INCURRED BY LENDER IN CONNECTION WITH THIS AGREEMENT OR ANY
OF THE OTHER LOAN DOCUMENTS OR ANY LOANS OR TRANSACTIONS CONTEMPLATED HEREBY OR
THEREBY OR BY REASON OF ANY DEFAULT OR EVENT OF DEFAULT, OR ENFORCING THE
OBLIGATIONS OF BORROWER OR ANY LOAN PARTY UNDER THIS AGREEMENT OR ANY OF THE
OTHER LOAN DOCUMENTS, AS APPLICABLE, OR IN EXERCISING ANY RIGHTS OR REMEDIES OF
LENDER OR IN THE PROSECUTION OR DEFENSE OF ANY ACTION OR PROCEEDING CONCERNING
ANY MATTER GROWING OUT OF OR CONNECTED WITH THIS AGREEMENT OR ANY OF THE LOAN
DOCUMENTS; PROVIDED, HOWEVER, THAT THE FOREGOING SHALL NOT BE APPLICABLE, AND
THE BORROWER SHALL NOT BE LIABLE FOR ANY SUCH LOSSES, COSTS, DAMAGES,
LIABILITIES OR EXPENSES, TO THE EXTENT (BUT ONLY TO THE EXTENT) THE SAME ARISE
OR RESULT FROM THE GROSS NEGLIGENCE OR WILLFUL MISCONDUCT OF LENDER OR ANY OF
ITS AGENTS OR EMPLOYEES, THE PROVISIONS OF THIS SECTION SHALL SURVIVE REPAYMENT
OF THE INDEBTEDNESS AND SATISFACTION OF ALL OBLIGATIONS OF BORROWER TO LENDER
AND TERMINATION OF THIS AGREEMENT.

 

12.3 Time of Essence. Time is of the essence for the performance of all
obligations set forth in this Agreement.

 

12.4 Severability of Provisions. Each provision of this Agreement shall be
severable from every other provision of this Agreement for the purpose of
determining the legal enforceability of any specific provision.

 

12.5 Amendments in Writing, Integration. All amendments to or terminations of
this Agreement or the other Loan Documents must be in writing signed by the
parties. All prior agreements, understandings, representations, warranties, and
negotiations between the parties hereto with respect to the subject matter of
this Agreement and the other Loan Documents, if any, are merged into this
Agreement and the Loan Documents.

 

12.6 Counterparts. This Agreement may be executed in any number of counterparts
and by different parties on separate counterparts, each of which, when executed
and delivered, shall be deemed to be an original, and all of which, when taken
together, shall constitute but one and the same Agreement.

 

12.7 Survival. All covenants, representations and warranties made in this
Agreement shall continue in full force and effect so long as any Obligations
remain outstanding or Lender has any obligation to make any Credit Extension to
Borrower. The obligations of Borrower to indemnify Lender with respect to the
expenses, damages, losses, costs and liabilities described in Section 13.2 shall
survive until all applicable statute of limitations periods with respect to
actions that may be brought against Lender have run.

 

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

 

 

ALY ENERGY SERVICES, INC.

        By: /s/ ALYA HIDAYATALLAH

 

 

Alya Hidayatallah, Chief Financial Officer

       

 

 

 

 

 

PERMIAN PELICAN FINANCIAL, LLC

 

 

 

 

 

  By: /s/ MICKI HIDAYATALLAH  

 

 

Micki Hidayatallah, Manager

 

 

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EXHIBIT A

 

DEFINITIONS

 

“Accounts” mean all presently existing and hereafter arising accounts, contract
rights, payment intangibles and all other forms of obligations owing to a Credit
Party arising out of the sale or lease of goods or the rendering of services by
a Credit Party and any and all credit insurance, guaranties, and other security
therefor, and the Borrower’s Books relating to any of the foregoing.

 

“Advance” or “Advances” mean a cash advance or cash advances under the Revolving
Line.

 

“Affiliate” means, with respect to any Person, any Person that owns or controls
directly or indirectly such Person, any Person that controls or is controlled by
or is under common control with such Person, and each of such Person’s senior
executive officers, directors, and partners.

 

“Board of Directors” means the Board of Directors of Borrower.

 

“Borrower’s Books” mean all of the books and records of the Credit Parties
including: ledgers; accounting records concerning the assets or liabilities, the
Collateral, business operations or financial condition of the Credit Parties;
and all computer programs, or tape files, and the equipment, containing such
information.

 

“Borrowing Base” means 80% of the Eligible Accounts Receivable of the Credit
Parties.

 

“Business Day” means any day that is not a Saturday, Sunday, or other day on
which Lenders in the State of Texas are authorized or required to close.

 

“Cash” means unrestricted cash and cash equivalents.

 

“Change in Control” shall mean any transaction or series of related transactions
in which any “person” or “group” (within the meaning of Section 13(d) and
14(d)(2) of the Securities Exchange Act of 1934) becomes the “beneficial owner”
(as defined in Rule 13d-3 under the Securities Exchange Act of 1934), directly
or indirectly, of a sufficient number of shares of all classes of Equity
Interests then outstanding of the Borrower ordinarily entitled to vote in the
election of directors, empowering such “person” or “group” to elect a majority
of the Board of Directors of the Borrower, who did not have such power before
such transaction.

 

“Code” means the Texas Uniform Commercial Code as amended or supplemented from
time to time.

 

“Collateral” has the meaning set forth in the Security Agreement.

 

“Contingent Obligation” means, as applied to any Person, any direct or indirect
liability, contingent or otherwise, of that Person with respect to (i) any
indebtedness, lease, dividend, letter of credit or other obligation of another
Person including, without limitation, any such obligation directly or indirectly
guaranteed, endorsed, co-made or discounted or sold with recourse by that
Person, or in respect of which that Person is otherwise directly or indirectly
liable; (ii) any obligations with respect to undrawn letters of credit,
corporate credit cards or merchant services issued or provided for the account
of that Person; and (iii) all obligations arising under any interest rate,
currency or commodity swap agreement, interest rate cap agreement, interest rate
collar agreement, or other agreement or arrangement designed to protect such
Person against fluctuation in interest rates, currency exchange rates or
commodity prices; provided, however, that the term “Contingent Obligation” shall
not include endorsements for collection or deposit in the ordinary course of
business. The amount of any Contingent Obligation shall be deemed to be an
amount equal to the stated or determined amount of the primary obligation in
respect of which such Contingent Obligation is made or, if not stated or
determinable, the maximum reasonably anticipated liability in respect thereof as
determined by Lender in good faith; provided, however, that such amount shall
not in any event exceed the maximum amount of the obligations under the
guarantee or other support arrangement.

 

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“Copyrights” mean any and all copyright rights, copyright applications,
copyright registrations and like protections in each work or authorship and
derivative work thereof, whether published or unpublished and whether or not the
same also constitutes a trade secret, now or hereafter existing, created,
acquired or held.

 

“Credit Extension” means each credit by Lender to or for the benefit of the
Credit Parties hereunder.

 

“Credit Parties” means the Borrower and its Subsidiaries.

 

“Dollars” mean lawful money of the United States.

 

“Eligible Receivables” means, as to the Credit Parties, on a consolidated basis
and without duplication, all Accounts reflected on its books in accordance with
GAAP and which under 90 days old.

 

“Environmental Laws” mean all laws, rules, regulations, orders and the like
issued by any federal, state, municipal, local, foreign or other governmental or
quasi-Governmental Authority or any agency pertaining to the environment or to
any hazardous materials or wastes, toxic substances, flammable, explosive or
radioactive materials, asbestos or other similar materials.

 

“Equipment” means all present and future machinery, equipment, tenant
improvements, furniture, fixtures, vehicles, tools, parts and attachments in
which a Credit Party has any interest.

 

“Equity Interests” mean, with respect to any Person, the capital stock,
partnership, membership or limited liability company interest, or other equity
securities or equity ownership interest of such Person.

 

“ERISA” means the Employee Retirement Income Security Act of 1974, as amended,
and the regulations thereunder.

 

“Final Maturity Date” means June 30, 2021.

 

“GAAP” means generally accepted accounting principles, consistently applied, as
in effect from time to time in the United States of America.

 

“Governmental Authority” shall mean any federal, state or local government, or
any agency or instrumentality thereof.

 

“Guaranty” means the Amended and Restated Guaranty Agreement executed by the
Credit Parties in connection with the Original Credit Agreement.

 

“Indebtedness” means (a) all indebtedness for borrowed money or the deferred
purchase price of property or services, including without limitation
reimbursement and other obligations with respect to surety bonds and letters of
credit, (b) all obligations evidenced by notes, bonds, debentures or similar
instruments, (c) all capital lease obligations and (d) all Contingent
Obligations.

 

“Insolvency Proceeding” means any proceeding commenced by or against any Person
or entity under any provision of the United States Bankruptcy Code, as amended,
or under any other bankruptcy or insolvency law, including assignments for the
benefit of creditors, formal or informal moratoria, compositions, extension
generally with its creditors, or proceedings seeking reorganization,
arrangement, or other relief.

 

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“Intellectual Property Collateral” means, with respect to the Borrower, all of
the Borrower’s right, title, and interest in and to the following: (i)
Copyrights, Trademarks and Patents; (ii) any and all trade secrets and design
rights hereafter existing, created, acquired or held; (iii) any and all claims
for damages by way of past, present and future infringement of any of the rights
included above, with the right, but not the obligation, to sue for and collect
such damages for said use or infringement of the intellectual property rights
identified above; (iv) all licenses or other rights to use any of the
Copyrights, Patents or Trademarks, and all license fees and royalties arising
from such use to the extent permitted by such license or rights; and (v) all
proceeds and products of the foregoing, including without limitation all
payments under insurance or any indemnity or warranty payable in respect of any
of the foregoing.

 

“Inventory” means all present and future inventory in which a Credit Party has
any interest.

 

“Investment” means any beneficial ownership (including Equity Interests) of any
Person, or any loan, advance or capital contribution to any Person.

 

“IRC” means the Internal Revenue Code of 1986, as amended, and the regulations
thereunder.

 

“Lender Expenses” mean all costs or expenses of Lender, or any other holder or
owner of the Loan Documents (including, without limit, court costs, legal
expenses and reasonable attorneys’ fees and expenses, whether generated in-house
or by outside counsel, whether or not suit is instituted, and, if suit is
instituted, whether at trial court level, appellate court level, in a
bankruptcy, probate or administrative proceeding or otherwise) incurred in
connection with the preparation, negotiation, execution, delivery, amendment,
administration, and performance, or incurred in collecting, attempting to
collect under the Loan Documents or the Obligations, or incurred in defending
the Loan Documents, or incurred in any other matter or proceeding relating to
the Loan Documents or the Obligations.

 

“LIBOR” means, for any date of determination, a rate per annum equal to the
greater of (a) zero percent (0%) and (b) the offered rate for deposits for a six
month period in United States dollars as displayed in the Bloomberg Financial
Markets system (or such other authoritative source as selected by Lender in its
sole discretion) as of 11:00 a.m. (London time) two Business Days prior to the
date of determination.

 

“Lien” means any mortgage, lien, deed of trust, charge, pledge, security
interest or other encumbrance.

 

“Loan Documents” mean, collectively, the Original Loan Documents, the Lease
Documents, this Agreement and any other document, instrument or agreement
entered into in connection with this Agreement, all as amended or extended from
time to time.

 

“Material Adverse Effect” means (i) a material adverse change in the prospects,
business or financial condition of the Credit Parties considered as a whole,
(ii) a material impairment in the prospect of repayment of all or any portion of
the Obligations or in otherwise performing a Credit Party’s obligations under
the Loan Documents, or (iii) a material impairment in the perfection, value or
priority of Lender’s security interests in the Collateral.

 

“Negotiable Collateral” means, with respect to the Borrower, all of the
Borrower’s present and future letters of credit of which it is a beneficiary,
drafts, instruments (including promissory notes), securities, documents of
title, and chattel paper, and the Borrower’s Books relating to any of the
foregoing.

 

“Net Cash Proceeds” shall mean with respect to any sale of assets by a Credit
Party, all cash and cash equivalents received from such sale, transfer or other
disposition after (i) payment of, or provision for, all brokerage commissions
and other reasonable out‑of‑pocket fees and expenses actually incurred; (ii)
payment of any outstanding obligations relating to such property; (iii) the
amount of reserves recorded in accordance with GAAP for indemnity or similar
obligations of the Credit Party directly related to such sale, transfer or other
disposition and (iv) all income taxes and other taxes as a result of such
transaction.

 

“Net Income” shall mean gross revenues and other proper income credits of
Borrower and its Subsidiaries, less all proper income charges, including taxes
on income, all determined in accordance with GAAP on a consolidated basis.

 

  16

   

 

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

 

“Patents” mean all patents, patent applications and like protections including
without limitation improvements, divisions, continuations, renewals, reissues,
extensions and continuations-in-part of the same.

 

“Permitted Indebtedness” means: (i) Indebtedness of a Credit Party in favor of
Lender arising under this Agreement or any other Loan Document; (ii)
Indebtedness existing on the Effective Date; (iii) other Indebtedness not to
exceed One Hundred Thousand Dollars ($100,000) in the aggregate secured by a
lien described in clause (iii) of the defined term “Permitted Liens,” provided
such Indebtedness does not exceed the lesser of the cost or fair market value of
the equipment financed with such Indebtedness; (iv) Indebtedness to trade
creditors incurred in the ordinary course of business; (v) Indebtedness incurred
to finance the payment of insurance premiums up to an aggregate of $750,000 at
any time outstanding; and (vi) extensions, refinancings and renewals of any
items of Permitted Indebtedness, provided that the principal amount is not
increased or the terms modified to impose more burdensome terms upon the
applicable Credit Party.

 

“Permitted Investments” mean: (i) Investments existing on the Effective Date;
(ii) marketable direct obligations issued or unconditionally guaranteed by the
United States or any agency or any State thereof maturing within one (1) year
from the date of acquisition thereof, (iii) commercial paper maturing no more
than one (1) year from the date of creation thereof and currently having rating
of at least A-2 or P-2 from either Standard & Poor’s Rating Service or Moody’s
Investors Service, Inc., and (iv) money market accounts and deposit accounts.

 

“Permitted Liens” mean: (i) any Liens existing on the Effective Date or arising
under this Agreement or the other Loan Documents; (ii) Liens for taxes, fees,
assessments or other governmental charges or levies, either not delinquent or
being contested in good faith by appropriate proceedings and for which the
applicable Credit Party maintains adequate reserves, provided the same have no
priority over any of Lender’s security interests; (iii) Liens securing
Indebtedness (A) upon or in any Equipment (other than Equipment financed by an
Term Loan Advance) acquired or held by a Credit Party or any of its Subsidiaries
to secure the purchase price of such Equipment or indebtedness incurred solely
for the purpose of financing the acquisition or lease of such Equipment, or (B)
existing on such Equipment at the time of its acquisition, provided that the
Lien is confined solely to the property so acquired and improvements thereon,
and the proceeds of such Equipment; and (iv) Liens incurred in connection with
the extension, renewal or refinancing of the indebtedness secured by Liens of
the type described in clauses (i) through (iii) above, provided that any
extension, renewal or replacement Lien shall be limited to the property
encumbered by the existing Lien and the principal amount of the indebtedness
being extended, renewed or refinanced does not increase.

 

“Person” means any individual, sole proprietorship, partnership, limited
liability company, joint venture, trust, unincorporated organization,
association, corporation, institution, public benefit corporation, firm, joint
stock company, estate, entity or governmental agency.

 

  17

   

 

“Prohibited Territory” means any person or country listed by the Office of
Foreign Assets Control of the United States Department of Treasury as to which
transactions between a United States Person and that territory are prohibited.

 

“Restricted Agreement” is any material license (other than over-the-counter
software that is commercially available to the public and “open source”
licenses) pursuant to which a Credit Party is the licensee: (a) that prohibits
or otherwise restricts a Credit Party from assigning to Lender, or granting to
Lender a Lien in, the Borrower’s interest in such license or agreement, the
rights arising thereunder or any other property, or (b) for which a default
under or termination of such license or contract could interfere with the
Lender’s right to use, license, sell or collect any Collateral or otherwise
exercise its rights and remedies with respect to the Collateral under the Loan
Documents or applicable law.

 

“Revolving Line” means Credit Extensions which are made in accordance with the
provisions of Section 2.2.

 

“Revolving Line Limit” means $1,675,000.

 

“Security Agreement” means collectively (i) the Amended and Restated Pledge and
Security Agreement among the Credit Parties and Wells Fargo Bank in connection
with the Original Credit Agreement and (ii) all amendments thereto through the
Effective Date.

 

“Subordinated Debt” means any debt incurred by a Credit Party that is
subordinated in writing to the Obligations on terms reasonably acceptable to
Lender.

 

“Subsidiary” means any corporation, partnership or limited liability company or
joint venture in which (i) any general partnership interest or (ii) more than
fifty percent (50%) of the Equity Interests of which by the terms thereof
ordinary voting power to elect the Board of Directors, managers or trustees of
the entity, at the time as of which any determination is being made, is owned by
a Credit Party, either directly or through an Affiliate.

 

“Term Loan” means all Credit Extensions which are not part of the Revolving
Line.

 

“Trademarks” mean any trademark and servicemark rights, whether registered or
not, applications to register and registrations of the same and like
protections, and the entire goodwill of the business of a Credit Party connected
with and symbolized by such trademarks.

 

“United States” means the United States of America.

 

 

18