Exhibit 10.2

Execution Version

____________________________________________________________________________________
 
Line of Credit, Guarantee and Security Agreement
 
Dated as of May 3, 2019 (As amended AND RESTATED as of May 9, 2019 and May 10,
2019)
 
among
 
PILOT TRAVEL CENTERS LLC
 
the Lender,
 
and
 
NIXON PRODUCT STORAGE, LLC,
 
the Borrower
 
and
 
THE OTHER LOAN PARTIES PARTY HERETO
 
____________________________________________________________________________________
 
 
 
 

 

 
TABLE OF CONTENTS
 
 
 
Page 
Section 1
DEFINITIONS.
1
1.1.
Definitions.
1
Section 2
LOANS.
11
2.1.
Line of Credit Commitment.
11
2.2.
Advances; Loans under Line of Credit.
11
2.3.
Borrowing Procedures.
12
2.4.
Funding.
12
2.5.
Repayment of Loans.
12
2.6.
Interest on Loans.
12
2.7.
Default Interest.
12
2.8.
Payment Procedures.
12
2.9.
Prepayments of the Loans.
13
2.10.
Commitment Fee.
13
2.11.
Recordkeeping.
13
2.12.
Costs and Expenses.
12
2.13.
Taxes.
14
2.14.
Maximum Interest.
15
2.15.
Change in Circumstances.
15
2.16.
Change in Legality.
15
Section 3
GUARANTY
15
3.1.
Guaranty of the Obligations.
15
3.2.
Payment by Guarantors.
16
3.3.
Liability of Guarantor Absolute.
16
3.4.
Waivers by Guarantor.
17

3.5.
Guarantors’ Right of Subrogation.
18

3.6.
Subordination of Other Obligations.
18

3.7.
Continuing Guaranty.
18

3.8.
Authority of Guarantors or the Borrower.
18

3.9.
Financial Condition of the Borrower.
18

3.10.
Bankruptcy, Etc.
19

3.11.
Maximum Liability.
19

 
 

 
 
Section 4
COLLATERAL GRANTED.
20
4.1.
Grant of Security Interest to Lender.
20
4.2.
Collection of Receivables.
20
4.3.
Other Security.
21
4.4.
Possessory Collateral.
21
4.5.
Electronic Chattel Paper.
21
4.6.
Preservation of Collateral and Perfection of Security Interests Therein.
21
Section 5
TERMINATION OF THIS AGREEMENT; TERMINATION OF LIENS.
22
Section 6
REPRESENTATIONS AND WARRANTIES.
22
6.1.
Financial Statements and Other Information.
22
6.2.
Locations.
22
6.3.
Loans by Loan Parties.
22
6.4.
Liens.
23

6.5.
Organization, Authority and No Conflict.
23
6.6.
Litigation.
23
6.7.
Compliance with Laws and Maintenance of Permits.
23
6.8.
Affiliate Transactions.
23
6.9.
Names and Trade Names.
23
6.10.
Equipment.
24

6.11.
Enforceability.
24
6.12.
Solvency.
24
6.13.
Indebtedness.
24
6.14.
Margin Security and Use of Proceeds.
24
6.15.
Parent, Subsidiaries and Affiliates.
24
6.16.
Contracts; No Defaults.
24
6.17.
Employee Matters.
25
6.18.
Intellectual Property.
25
6.19.
Environmental Matters.
25
6.20.
ERISA Matters.
25

6.21.
Investment Company Act.
25

6.22.
AML Laws, Anti-Corruption Laws, Anti-Terrorism Laws and Sanctions.
26

6.23.
Taxes.
26

6.24.
Collection Accounts.
26

 
 

 
 
Section 7
AFFIRMATIVE COVENANTS.
26

7.1.
Maintenance of Records.
26

7.2.
Notices.
27

7.3.
Compliance with Laws and Maintenance of Permits.
27

7.4.
Inspection and Audits.
28

7.5.
Insurance.
28

7.6.
Collateral.
28

7.7.
Use of Proceeds.
29

7.8.
Taxes.
29

7.9.
Intellectual Property.
29

7.10.
Deposit Accounts.
29

7.11.
AML Laws, Anti-Corruption Laws, Anti-Terrorism Laws and Sanctions.
29

7.12.
Financial Statements and Reports.
30
7.13.
Commitment Period Reports.
30
7.14.
GEL Tex Settlement Agreement.
30
7.15.
Veritex Lien Release.
36
7.16.
Green Bank Account.
31
Section 8
NEGATIVE COVENANTS.
31
8.1.
[Reserved.]
31
8.2.
Indebtedness.
31
8.3.
Liens.
31
8.4.
Mergers, Sales, Acquisitions, Subsidiaries and Other Transactions Outside the
Ordinary Course of Business.
31
8.5.
Restricted Payments.
32
8.6.
Investments; Loans.
32
8.7.
Prepayment of Subordinated Debt.
32
8.8.
Sale Leasebacks.
32
8.9.
Fundamental Changes, Accounting Changes, Line of Business.
32
8.10.
Equipment.
32
8.11.
Affiliate Transactions.
33
8.12.
Settling of Accounts.
33
8.13.
Management Fees; Compensation.
33
8.14.
Restrictive Agreements.
33
8.15.
Dispositions.
34

8.16.
ERISA.
34

 
 

 
 
Section 9
DEFAULT.
34

9.1.
Payment.
34

9.2.
Breach of this Agreement and the other Loan Documents.
34

9.3.
Breaches of Other Obligations.
35

9.4.
Breach of Representations and Warranties.
35

9.5.
Loss of Collateral.
35

9.6.
Levy, Seizure or Attachment.
35

9.7.
Bankruptcy or Similar Proceedings.
35

9.8.
Appointment of Receiver.
35

9.9.
Judgment.
36

9.10.
Dissolution of Loan Party.
36

9.11.
Default or Revocation of Guaranty.
36

9.12.
Criminal Proceedings.
36

9.13.
Change of Control.
36

9.14.
Material Adverse Change.
36

Section 10
REMEDIES UPON AN EVENT OF DEFAULT.
36

10.1.
Acceleration.
36

10.2.
Other Remedies.
37

Section 11
CONDITIONS PRECEDENT.
37

11.1.
Conditions to Loans.
37

Section 12
MISCELLANEOUS.
40
12.1.
Assignments; Participations.
40
12.2.
Customer Identification - USA Patriot Act Notice.
42

12.3.
Indemnification by Borrower.
42

12.4.
Notice.
42

12.5.
Modification and Benefit of Agreement.
42

12.6.
Headings of Subdivisions.
42

12.7.
Power of Attorney.
42

12.8.
Counterparts.
42

12.9.
Refinancing Support.
42

12.10.
Waiver of Jury Trial: Other Waivers.
42

12.11.
Choice of Governing Laws; Construction; Forum Selection.
43

Section 13
LIABILITY.
44

Section 14
NONLIABILITY OF LENDER.
45

 
 

 
 
 
EXHIBIT A
 
–
FORM OF COMPLIANCE CERTIFICATE
 
EXHIBIT B
 
–
FORM OF NOTICE OF BORROWING
 
EXHIBIT C
 
–
COMMERCIAL TORT CLAIMS OF LOAN PARTIES
 
EXHIBIT D
 
–
FORM OF PLEDGE AGREEMENT
 
EXHIBIT E
 
–
FORM OF JOINDER AGREEMENT
 
SCHEDULE 1.01
 
–
EXISTING INDEBTEDNESS
 
SCHEDULE 1.03
 
–
COLLECTION ACCOUNTS OF GRANTORS
 
SCHEDULE 2.3
 
–
BORROWING SCHEDULE
 
SCHEDULE 6.2
 
–
BUSINESS AND COLLATERAL LOCATIONS OF LOAN PARTIES
 
SCHEDULE 6.4
 
–
PERMITTED LIENS
 
SCHEDULE 6.6
 
–
LITIGATION
 
SCHEDULE 6.8
 
–
AFFILIATE TRANSACTIONS
 
SCHEDULE 6.9
 
–
NAMES & TRADE NAMES
 
SCHEDULE 6.14
 
–
MARGIN SECURITIES OWNED BY LOAN PARTIES
 
SCHEDULE 6.15
 
–
PARENT, SUBSIDIARIES AND AFFILIATES
 
SCHEDULE 6.16
 
–
BORROWER’S CONTRACTS; MATERIAL CONTRACTS UNDER WHICH ANY LOAN PARTY HAS
DEFAULTED
 
SCHEDULE 6.23
 
–
TAXES
 
SCHEDULE 8.14
 
–
RESTRICTIVE AGREEMENTS OF LOAN PARTIES
 
SCHEDULE 11.1(d)
 
–
LOAN PARTIES MATERIAL ADVERSE EFFECT EVENTS
 

 
-1-
 
 

 

 
LINE OF CREDIT, GUARANTEE AND SECURITY AGREEMENT
 
THIS LINE OF CREDIT, GUARANTEE AND SECURITY AGREEMENT (as amended, modified or
supplemented from time to time, this “Agreement”) made as of May 3, 2019 (as
amended as of May 9, 2019 and May 10, 2019) by and among Pilot Travel Centers
LLC, a Delaware limited liability company (the “Lender”), Nixon Product Storage,
LLC, a Delaware limited liability company (the “Borrower”), Lazarus Refining &
Marketing, LLC, a Delaware limited liability company (“LR&M” and, together with
the Borrower, the “Grantors”), Lazarus Energy Holdings LLC, a Delaware limited
liability company (“Lazarus”), Lazarus Energy LLC, a Delaware limited liability
company (“Lazarus Energy”), Blue Dolphin Energy Company, a Delaware corporation
(“Blue Dolphin” or “Pledgor”) and any other Loan Parties (as defined below) from
time to time a party hereto.
 
WHEREAS, Borrower may request advances from Lender under a line of credit, and
the parties wish to provide for the terms and conditions upon which such
advances, if made by Lender, shall be made; and
 
WHEREAS, the Guarantors (as defined below) desire to guarantee the Obligations
(as defined below) of the Loan Parties (as defined below), and the Grantors
desire to grant to the Lender a security interest in the Collateral (as defined
below) to secure any and all Obligations.
 
NOW, THEREFORE, in consideration of any Loan (including any Loan by renewal or
extension) hereafter made to Borrower by Lender and for other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged by
Borrower, the parties agree as follows:
 
SECTION 1
DEFINITIONS.
 
1.1. Definitions.
 
When used herein the following terms shall have the following meanings:
 
“Account” has the meaning ascribed to such term in the UCC.
 
“Account Debtor” has the meaning ascribed to such term in the UCC.
 
“Affiliate” of any Person means (a) any other Person which directly or
indirectly through one or more intermediaries controls, is controlled by, or is
under common control with, such Person, (b) any other Person which beneficially
owns or holds twenty percent (20%) or more of the voting control or Equity
Interests of such Person, (c) any other Person of which twenty percent (20%) or
more of the voting control or Equity Interest of which is beneficially owned or
held by such Person, or (d) any officer or director of such Person.
 
“Affiliate Funding Transactions” means (a) any extension of credit by any Loan
Party (other than Borrower) to, and any corresponding payment by any Loan Party
(other than Borrower) in exchange for such credit on account of, any Affiliate
(or the ordinary-course repayment of such credit to such Loan Party) to fund the
ordinary course of business operations, or administrative or capital
expenditures required in connection with ordinary course of business operations,
of such Affiliate consistent with past practice or (b) otherwise expressly
consented to by the Lender (which consent may be provided by email).
 
 
-1-

 
 
“Agreement” has the meaning assigned in the introductory paragraph hereof.
 
“AML Laws” means all laws, rules, and regulations of any jurisdiction applicable
to any Loan Party or their Subsidiaries from time to time concerning or relating
to anti-money laundering.
 
“Anti-Corruption Laws” means all laws, rules, and regulations of any
jurisdiction applicable to any Loan Party or their Subsidiaries from time to
time concerning or relating to bribery or corruption.
 
“Anti-Terrorism Laws” means any of the following: (a) the Anti-Terrorism Order;
(b) the Terrorism Sanctions Regulations (Title 31 Part 595 of the U.S. Code of
Federal Regulations); (c) the Terrorism List Governments Sanctions
Regulations (Title 31 Part 596 of the U.S. Code of Federal Regulations); (d) the
Foreign Terrorist Organizations Sanctions Regulations (Title 31 Part 597 of the
U.S. Code of Federal Regulations); (e) the PATRIOT Act; and (f) any regulations
promulgated pursuant thereto.
 
“Anti-Terrorism Order” means Section 1 of Executive Order 13224 of September 24,
2001, Blocking Property and Prohibiting Transactions With Persons Who Commit,
Threaten to Commit, or Support Terrorism (Title 12, Part 595 of the U.S. Code of
Federal Regulations).
 
“Asset Sale” means any sale, lease, transfer or other disposition of property or
series of related sales, leases, transfers or other dispositions of property, in
each case, constituting Collateral by any of the Loan Parties and their
Subsidiaries that yields Net Cash Proceeds to any of the Loan Parties and their
Subsidiaries.
 
“Assignee” has the meaning set forth in Section 12.1.1 hereof.
 
“Blue Dolphin” has the meaning assigned in the introductory paragraph hereof.
 
“Blue Dolphin Parent Guarantee” has the meaning assigned in Section 11.1 hereof.
 
“Borrower” has the meaning assigned in the introductory paragraph hereof.
 
“Borrowing” means a borrowing of an advance hereunder.
 
“Business Day” means any day other than Saturday, Sunday or a day on which banks
in New York, New York, or Houston, Texas, are authorized or required to close.
 
“Cadence Bank Account” has the meaning set forth in Section 7.16 hereof.
 
“Change in Law” means the occurrence, after the date of this Agreement, of any
of the following: (a) the adoption or taking effect of any law, rule, regulation
or treaty, (b) any change in any law, rule, regulation or treaty or in the
administration, interpretation, implementation or application thereof by any
Governmental Authority, or (c) the making or issuance of any request, rule
guideline or directive (whether or not having the force of law) by any
Governmental Authority.
 
 
-2-

 
 
“Chattel Paper” has the meaning ascribed to such term in the UCC.
 
“Closing Date” has the meaning set forth in Section 11.1 hereof.
 
“Code” means the Internal Revenue Code of 1986, as amended from time to time.
 
“Collateral” means (a) the “Pledged Collateral” as defined in the Pledge
Agreement, (b) all of the property of the Grantors described in Section 4.1
hereof, and (c) all other real or personal property of any Loan Party or any
other Person, now or hereafter pledged to Lender to secure, either directly or
indirectly, repayment of any of the Obligations.
 
“Collection Accounts” means each deposit account or securities account
maintained, in each case in the name of a Grantor at a bank or other financial
institution pursuant to a control agreement in form and substance satisfactory
to the Lender for the purpose of receiving Collections and each other deposit
account or securities account maintained in Borrower’s name.
 
“Collections” means, with respect to any Receivable that is Collateral, all
funds that are received by a Grantor in payment of any amounts owed in respect
of such Receivable (including purchase price, finance charges, interest and all
other charges and all proceeds of any drawing under any letter of credit with
respect to such Receivable), or applied to amounts owed in respect of such
Receivable (including insurance payments and net proceeds of the sale or other
disposition of repossessed goods or other collateral or property of the related
obligor or any other Person directly or indirectly liable for the payment of
such Receivable and available to be applied thereon).
 
“Commercial Tort Claims” has the meaning ascribed to such term in the UCC.
 
“Commitment Period” means the period commencing on the date when the Lender has
received a copy of a commitment executed by the Borrower and a proposed lender,
subject only to customary and usual conditions, for a loan for the purpose of
refinancing all of the Obligations, which commitment is in form and substance
reasonably satisfactory to Lender and is provided by a proposed lender
reasonably believed to be capable of providing such refinancing prior to the
Maturity Date on the terms in the commitment letter and ending on the first to
occur of (i) the termination, withdrawal, repudiation, or similar action of such
commitment letter by either party thereto, (ii) termination of the commitment
period set forth in such commitment letter, (iii) the failure by the Borrower to
meet any condition set forth in such commitment letter, (iv) the one hundred and
fifty (150th) day following the date of such commitment letter, (v) the Lender
having a reasonable belief that the proposed loan will not be provided by the
proposed lender in accordance with the terms of the commitment letter, or (vi) a
failure by any Loan Parties to comply with Section 7.13.
 
“Commodity Transaction Documents” means (a) the Crude Supply Agreement, (b) the
Jet Fuel Master Agreement, (c) the Crude Storage Lease, (d) the Jet Storage
Lease, (e) the Blue Dolphin Parent Guarantee, (f) the Jet Inventory Purchase and
Sale Agreements, (g) the NPS Exclusivity Letter, and (h) the crude sale
agreement (reference number NP519750001) dated April 30, 2019 by and among the
Lender and the Borrower.
 
“Connection Income Taxes” means Other Connection Taxes that are imposed on or
measured by net income (however denominated) or that are franchise Taxes or
branch profits Taxes.
 
“Consent and Assignment Agreement (Storage Tank Lease)” has the meaning
specified in Section 11.1 hereof.
 
 
-3-

 
 
“Consent and Assignment Agreement (Haltermann MSA)” has the meaning specified in
Section 11.1 hereof.
 
“Covenant Party” has the meaning specified in Section 8 hereof.
 
“Crude Storage Lease” has the meaning specified in Section 11.1 hereof.
 
“Crude Supply Agreement” has the meaning specified in Section 11.1 hereof.
 
“Debt” of any Person means, without duplication, (a) all indebtedness of such
Person for borrowed money, (b) all indebtedness of such Person for the deferred
purchase price of property or services, (c) all obligations of such Person
evidenced by notes, bonds, debentures or other similar instruments, (d) all
indebtedness of such Person created or arising under any conditional sale or
other title retention agreement with respect to property acquired by such Person
(even though the rights and remedies of the seller or lender under such
agreement in the event of default are limited to repossession or sale of such
property), (e) all obligations of such Person as lessee under capitalized
leases, (f) all reimbursement obligations, whether contingent or otherwise, of
such Person under acceptance, letter of credit or similar facilities, (g) all
mandatory obligations of such Person to purchase, redeem, retire, defease or
otherwise make any payment in cash in respect of any disqualified capital stock
in such Person or any other Person or any warrants, rights or options to acquire
such disqualified capital stock, valued at the greater of its voluntary or
involuntary liquidation preference plus accrued and unpaid dividends, (h) all
obligations of such Person in respect of hedge agreements, valued at the
agreement value thereof, (i) all guarantee obligations of such Person, and
(j) all indebtedness and other payment obligations referred to in clauses (a)
through (i) above of another Person secured by (or for which the holder of such
Debt has an existing right, contingent or otherwise, to be secured by) any lien
on property (including, without limitation, accounts and contract rights) owned
by such Person, even though such Person has not assumed or become liable for the
payment of such indebtedness or other payment obligations.
 
“Default” means any event or condition which upon notice, lapse of time or both
would constitute an Event of Default.
 
“Deposit Account” has the meaning ascribed to such term in the UCC.
 
“Documents” has the meaning ascribed to such term in the UCC.
 
“Electronic Chattel Paper” has the meaning ascribed to such term in the UCC.
 
“Employee Benefit Plan” means any employee benefit plan as defined in Section
3(3) of ERISA.
 
“Environmental Laws” means all federal, state, district, local and foreign laws,
rules, regulations, ordinances, and consent decrees relating to health, safety,
hazardous substances, pollution and environmental matters, as now or at any time
hereafter in effect, applicable to a Loan Party’s business or facilities owned
or operated by a Loan Party, including laws relating to emissions, discharges,
releases or threatened releases of pollutants, contamination, chemicals, or
hazardous, toxic or dangerous substances, materials or wastes into the
environment (including, without limitation, ambient air, surface water, ground
water, land surface or subsurface strata) or otherwise relating to the
generation, manufacture, processing, distribution, use, treatment, storage,
disposal, transport or handling of Hazardous Materials.
 
 
-4-

 
 
“Equipment” has the meaning ascribed to such term in the UCC.
 
“ERISA” means the Employee Retirement Income Security Act of 1974, as amended,
modified or restated from time to time.
 
“ERISA Affiliate” means any trade or business (whether or not incorporated) that
together with any Loan Party or its Subsidiaries is or, at any relevant time,
was treated as a single employer under Section 414 of the Code or Section 4001
of ERISA.
 
“Event of Default” has the meaning specified in Section 9 hereof.
 
“Excluded Taxes” means with respect to any payment under any Loan Document to
Lender (a) taxes based upon, or measured by, Lender's overall net income
(including franchise taxes imposed in lieu of such taxes), but only to the
extent such taxes are imposed by a taxing authority (i) in a jurisdiction in
which Lender is organized, (ii) in a jurisdiction which Lender's principal
office is located, or (iii) in a jurisdiction in which Lender's lending office
(or branch) in respect of which payments under this Agreement are made is
located; (b) branch profits taxes (x) imposed by the United States and (y) that
are Other Connection Taxes; (c) any United States federal withholding taxes that
would not have been imposed but for the failure of the Lender to comply with
Section 2.13(d) hereof; or (d) United States federal taxes imposed by FATCA.
 
“Existing Indebtedness” means the Debt described and listed on Schedule 1.01,
which shall describe whether such Debt is secured and the assets subject to a
security interest in the benefit of Persons other than the Lender.
 
“FATCA” means (a) Sections 1471 through 1474 of the Code (or successor statutes
that are substantially comparable and not materially more onerous to comply
with) and any current or future regulations or official interpretations thereof,
(b) any treaty, law, regulation or other official guidance enacted in any other
jurisdiction which facilitates the implementation of the preceding clause (a),
and (c) any applicable intergovernmental agreements with respect to clause (a)
entered into with the United States Government or any governmental or taxation
authority under any other jurisdiction.
 
“Equity Interests” means, as to any Person, all of the shares of capital stock
of (or other ownership or profit interests in) such Person, all of the warrants,
options or other rights for the purchase or acquisition from such Person of
shares of capital stock of (or other ownership or profit interests in) such
Person, all of the securities convertible into or exchangeable for shares of
capital stock of (or other ownership or profit interests in) such Person or
warrants, rights or options for the purchase or acquisition from such Person of
such shares (or such other interests), and all of the other ownership or profit
interests in such Person (including partnership, member or trust interests
therein), whether voting or nonvoting, and whether or not such shares, warrants,
options, rights or other interests are outstanding on any date of determination.
 
“Fiscal Year” means each twelve (12) month accounting period of Borrower, which
ends on December 31 of each year.
 
“Fixtures” has the meaning ascribed to such term in the UCC.
 
“GAAP” means generally accepted accounting principles set forth from time to
time in the opinions and pronouncements of the Accounting Principles Board and
the American Institute of Certified Public Accountants and statements and
pronouncements of the Financial Accounting Standards Board (or agencies with
similar functions of comparable stature and authority within the U.S. accounting
profession) and the Securities and Exchange Commission, which are applicable to
the circumstances as of the date of determination.
 
 
-5-

 
 
“GEL Tex” has the meaning specified in Section 11.1 hereof.
 
“GEL Tex Settlement Agreement” has the meaning specified in Section 11.1 hereof.
 
“General Intangibles” has the meaning ascribed to such term in the UCC.
 
“Goods” has the meaning ascribed to such term in the UCC.
 
“Governmental Authority” means any applicable federal, state, local or foreign
court or governmental agency, authority, instrumentality or regulatory body
having jurisdiction over a Person.
 
“Grantors” has the meaning assigned in the introductory paragraph hereof.
 
“Green Bank Account” has the meaning set forth in Section 7.16 hereof.
 
 “Guaranteed Obligations” has the meaning specified in Section 3.1 hereof.
 
“Guarantors” means Blue Dolphin, LR&M, Lazarus, Lazarus Energy, and all future
Subsidiaries of the Borrower, Lazarus Energy and LR&M.
 
“Guaranty Beneficiaries” has the meaning specified in Section 3.1 hereof.
 
“Hazardous Materials” means any hazardous, toxic or dangerous substance,
materials and wastes, including, without limitation, hydrocarbons (including
naturally occurring or man-made petroleum and hydrocarbons), flammable
explosives, asbestos, urea formaldehyde insulation, radioactive materials,
biological substances, polychlorinated biphenyls, pesticides, herbicides and any
other kind and/or type of pollutants or contaminants (including, without
limitation, materials which include hazardous constituents), sewage, sludge,
industrial slag, solvents and/or any other similar substances, materials, or
wastes and including any other substances, materials or wastes that are or
become regulated under any Environmental Law (including, without limitation any
that are or become classified as hazardous or toxic under any Environmental
Law).
 
“Indemnified Liabilities” has the meaning specified in Section 12.3 hereof.
 
“Indemnified Taxes” means (a) Taxes, other than Excluded Taxes, imposed on or
with respect to any payment made by, or on account of, a Loan Party under a Loan
Document, and (b) to the extent not otherwise described in (a), Other Taxes.
 
“Instruments” has the meaning ascribed to such term in the UCC.
 
“Interest Payment Date” means, (a) the second day of each calendar month,
commencing with the first such date to occur at least fifteen days after the
date hereof, (b) the Maturity Date, and (c) the date of any prepayment.
 
“Inventory” has the meaning ascribed to such term in the UCC.
 
 
-6-

 
 
“Investment Property” has the meaning ascribed to such term in the UCC.
 
“Jet Fuel Master Agreement” has the meaning specified in Section 11.1 hereof.
 
“Jet Inventory Purchase and Sale Agreements” has the meaning specified in
Section 11.1 hereof.
 
“Jet Storage Lease” has the meaning specified in Section 11.1 hereof.
 
“Lazarus” has the meaning assigned in the introductory paragraph hereof.
 
“Lazarus Energy” has the meaning assigned in the introductory paragraph hereof.
 
“Lender” has the meaning assigned in the introductory paragraph hereof.
 
“Lender Party” has the meaning set forth in Section 12.3 hereof.
 
“Line of Credit” has the meaning given to such term in Section 2.1 hereof.
 
“Loan Documents” means (a) this Agreement, (b) the Pledge Agreement, (c) the
Consent and Assignment Agreement (Storage Tank Lease), (d) the Consent and
Assignment Agreement (Haltermann MSA), and (e) each document, agreement or
certificate executed by a Loan Party and delivered to the Lender in connection
with or pursuant to any of the foregoing, as each of the same may be amended,
modified or supplemented from time to time.
 
“Loan Party” means the Borrower, the Pledgor, each Grantor and each Guarantor.
 
“Loans” has the meaning given to such term in Section 2.2 hereof.
 
“LR&M” has the meaning assigned in the introductory paragraph hereof.
 
“LR&M Receivables” means Receivables owed to LR&M arising from or in connection
with any lease of tank 66 (which tank, for the avoidance of doubt, is being
leased by LR&M to Pilot Thomas Logistics LLC (f/k/a Western Petroleum LLC and
Thomas Petroleum LLC) as of the date hereof).
 
“Material Adverse Effect” means (a) a material adverse change in, or a material
adverse effect on, the business, property, assets, operations or prospects of
any of (x) the Borrower, (y) the Refinery Assets taken as a whole, or (z) the
Loan Parties taken as a whole, (b) a material impairment of the ability of
either (x) the Borrower or (y) the Loan Parties taken as a whole to perform
their obligations under this Agreement and the other Loan Documents, (c) a
material adverse effect upon the Collateral, or (d) a material impairment of the
enforceability or priority of Lender's liens upon the Collateral or the
legality, validity, binding effect or enforceability of the Loan Documents.
Except during a Commitment Period, the occurrence of a “Material Adverse Effect”
shall be determined by the Lender in its sole discretion, exercised in good
faith.
 
 
-7-

 
 
“Maturity Date” means May 3, 2020, subject to the proviso in Section 11.1.
 
“Maximum Liability” has the meaning set forth in Section 3.11 hereof.
 
“Multiemployer Plan” means a “multiemployer plan” as defined in Section
4001(a)(3) of ERISA.
 
“Net Cash Proceeds” means, with respect to any Asset Sale or Recovery Event, the
excess, if any, of (i) the sum of cash and cash equivalents received in
connection with such Asset Sale or Recovery Event (including any cash or cash
equivalents received by way of deferred payment pursuant to, or by monetization
of, a note receivable or otherwise, but only as and when so received) over
(ii) the sum of (A)  the reasonable and customary out-of-pocket costs, fees
(including investment banking fees, attorneys’ fees and accountants’ fees),
commissions, premiums and expenses incurred by any of the Loan Parties or their
Subsidiaries and (B) the amount of any reasonable reserve established in
accordance with GAAP against any adjustment to the sale price or any
liabilities.
 
“Notice of Borrowing” has the meaning set forth in Section 2.3 hereof.
 
“NPS Exclusivity Letter” has the meaning specified in Section 11.1 hereof.
 
“NPS Note” means Intercompany Note made by Borrower in favor of Lazarus Energy,
effective as of June 1, 2018.
 
“Obligations” means any and all obligations, liabilities and indebtedness of
each Loan Party to Lender or to any Affiliate of Lender of any and every kind
and nature, howsoever created, arising or evidenced and howsoever owned, held or
acquired, whether now or hereafter existing, whether now due or to become due,
whether primary, secondary, direct, indirect, absolute, contingent or otherwise,
whether several, joint or joint and several, arising under any Loan Document.
 
 “Other Connection Taxes” means Taxes imposed as a result of a present or former
connection between the Lender and the jurisdiction imposing such Tax (other than
connections arising from the Lender having executed, delivered, become a party
to, performed its obligations under, received payments under, received or
perfected a security interest under, engaged in any other transaction pursuant
to or enforced any Loan Document, or sold or assigned an interest in any Loan or
Loan Document).
 
“Other Taxes” means all present or future stamp, court or documentary,
intangible, excise, value added, transfer, recording, filing or similar Taxes
that arise from any payment made under, from the execution, delivery,
performance, enforcement or registration of, from the receipt or perfection of a
security interest under, or otherwise with respect to, any Loan Document.
 
“Outside Date” has the meaning set forth in Section 11.1 hereof.
 
“Parent” means any Person now or at any time or times hereafter owning or
controlling (alone or with any other Person) at least a majority of the issued
and outstanding equity of a Loan Party.
 
“Participant” has the meaning specified in Section 12.1.2 hereof.
 
“Participant Register” has the meaning specified in Section 12.1.2 hereof.
 
“PATRIOT Act” means the Uniting and Strengthening America by Providing
Appropriate Tools Required to Intercept and Obstruct Terrorism Act of 2001, Pub.
L.107-56, signed into law October 26, 2001.
 
“Pension Plan” means any Employee Benefit Plan, other than a Multiemployer Plan,
subject to the provisions of Section 302 or Title IV of ERISA or Section 412 of
the Code.
 
 
-8-

 
 
“Permitted Liens” means (a) statutory liens of landlords, carriers,
warehousemen, processors, mechanics, materialmen or suppliers incurred in the
ordinary course of business and securing amounts not yet due or declared to be
due by the claimant thereunder or amounts which are being contested in good
faith and by appropriate proceedings and for which the applicable Loan Party has
maintained adequate reserves; (b) liens or security interests in favor of
Lender; (c) liens for taxes, assessments and governmental charges not yet due
and payable or which are being contested in good faith and by appropriate
proceedings and the applicable Loan Party is in compliance with clauses (i) and
(iii) of Section 7.8 hereof; (d) zoning restrictions and easements, licenses,
covenants and other restrictions affecting the use of real property that do not
individually or in the aggregate have a material and adverse effect on the
applicable Loan Party’s ability to use such real property for its intended
purpose in connection with such Loan Party’s business; (e) liens in connection
with purchase money indebtedness and capitalized leases otherwise permitted
under this Agreement, provided, that such liens attach only to the assets the
purchase of which was financed by such purchase money indebtedness or which are
the subject of such capitalized leases; (f) liens set forth on Schedule 6.4; and
(g) liens specifically permitted by Lender in writing.
 
“Permitted Tax Distribution” means, for any taxable period or portion thereof in
which Lazarus is a pass through entity for federal income tax purposes, payments
and distributions which are distributed to the direct or indirect members of
Lazarus on or prior to each estimated payment date as well as each other
applicable due date to enable such holders to timely make payments of federal,
state and local taxes for such taxable period that are imposed with respect to
the income of Lazarus allocated to such holders not to exceed the product of (a)
the net taxable income of Lazarus for such period, and (b) the highest
applicable marginal U.S. federal, state and local tax rates applicable to an
individual resident in Houston, Texas; provided that the amount of such
distribution shall be decreased by (i) the amount of any taxable losses
allocated to such direct or indirect members in prior taxable periods in respect
of Lazarus, and (ii) to the extent the amount distributed to such direct or
indirect members of Lazarus in any prior taxable period exceeded the actual tax
liability for such member attributable to that taxable period.
 
“Person” means any individual, sole proprietorship, partnership, joint venture,
trust, unincorporated organization, association, corporation, limited liability
company, institution, entity, party or foreign or United States government
(whether federal, state, county, city, municipal or otherwise), including,
without limitation, any instrumentality, division, agency, body or department
thereof.
 
“Pledge Agreement” means the Pledge Agreement, substantially in the form of
Exhibit D, by Pledgor in favor of the Lender.
 
“Pledgor” has the meaning assigned in the introductory paragraph hereof.
 
“Proceeds” has the meaning ascribed to such term in the UCC.
 
“Receivable” means any right to payment from a Person, whether constituting an
“account,” “chattel paper,” “payment intangible,” “instrument” or “general
intangible” (each, as defined in the UCC), arising from the sale of goods and/or
provision of services, and includes, without limitation, the obligation of the
obligor thereon to pay any finance charges, fees and other charges with respect
thereto, including, without limitation, with respect to any unbilled
receivables, 100% of the amount to be or thereafter invoiced.
“Recovery Event” means any settlement of or payment in respect of any property
or casualty insurance claim or any condemnation proceeding relating to any asset
of a Loan Party or any of its Subsidiaries constituting Collateral.
 
“Refinery Assets” means a certain 15,000 BPD crude oil and condensate processing
facility located in Nixon, TX, including associated real and personal property
such as the pipeline infrastructure, crude oil, feedstock and refined product
storage tanks and truck racks (or, in each case, contracts granting rights to
use the same) and other assets and any other personal and real property owned by
Lazarus that is appurtenant to or necessary for the commercial operation of such
processing facility.
 
“Register” has the meaning set forth in Section 12.1.1 hereof.
 
“Reinvestment Event” shall mean any Asset Sale permitted under Section 8.4 or
Recovery Event in respect of which a Loan Party has delivered a Reinvestment
Notice.
 
 
-9-

 
 
“Reinvestment Notice” shall mean a written notice to the Lender executed by an
authorized officer of a Loan Party stating that no Event of Default has occurred
and is continuing or would result therefrom and that such Loan Party (directly
or indirectly through a Subsidiary) intends and expects to use all or a
specified portion of the Net Cash Proceeds of a Reinvestment Event to acquire or
repair assets (in the case of any Asset Sale pursuant to Section 8.4 hereof) or
long-term assets (in the case of any Recovery Event), in each case useful in its
business.
 
“Related Party Agreements” has the meaning specified in Section 11.1 hereof.
 
“Related Security” means, with respect to any Receivable that is Collateral, (a)
any goods (including returned goods), and documentation of title evidencing the
shipment or storage of any goods (including returned goods), the sale of which
gave rise to such Receivable, (b) all instruments and chattel paper that may
evidence such Receivable, (c) all other security interests or liens in favor of
Grantor and property subject thereto from time to time purporting to secure
payment of such Receivable, whether pursuant to a contract related to such
Receivable or otherwise, together with all UCC financing statements or similar
filings relating thereto, (d) to the extent applicable to such Receivable, all
rights, interests and claims under the contracts relating to such Receivable,
and all guaranties, indemnities, insurance and other agreements (including the
related contract), Supporting Obligations or arrangements of whatever character
from time to time supporting or securing payment of such Receivable or otherwise
relating to such Receivable, whether pursuant to the contract or other
arrangement related to such Receivable or otherwise and (e) all proceeds of such
Receivable or Related Security with respect thereto.
 
“Restricted Payment” means any dividend or other distribution (whether in cash,
securities or other property) with respect to any Equity Interest of any Person,
or any payment (whether in cash, securities or other property), including any
sinking fund or similar deposit, on account of the purchase, redemption,
retirement, acquisition, cancellation or termination of any such Equity
Interest, or on account of any return of capital to such Person’s shareholders,
partners or members (or the equivalent Persons thereof); provided that, for the
avoidance of doubt, ordinary-course payments under Affiliate Funding
Transactions are not Restricted Payments.
 
“Sanctioned Country” means, at any time, a country or territory which is, or
whose government is, the subject or target of any Sanctions broadly restricting
or prohibiting dealings with such country, territory or government (currently,
Cuba, Iran, Crimea, North Korea, and Syria).
 
“Sanctioned Person” means, at any time, any Person with whom dealings are
restricted or prohibited under Sanctions, including (a) any Person listed in any
Sanctions-related list of designated Persons maintained by the United States
(including by the Office of Foreign Assets Control of the U.S. Department of the
Treasury, the U.S. Department of State, or the U.S. Department of Commerce), the
United Nations Security Council, the European Union or any of its member states,
Her Majesty’s Treasury, Switzerland or any other relevant authority, (b) any
Person located, organized or resident in, or any Governmental Authority or
governmental instrumentality of, a Sanctioned Country or (c) any Person 25% or
more directly or indirectly owned by, controlled by, or acting for the benefit
or on behalf of, any Person described in clauses (a) or (b) hereof.
 
“Sanctions” means economic or financial sanctions or trade embargoes or
restrictive measures enacted, imposed, administered or enforced from time to
time by (a) the U.S. government, including those administered by the Office of
Foreign Assets Control of the U.S. Department of the Treasury, the U.S.
Department of State, or the U.S. Department of Commerce; (b) the United Nations
Security Council; (c) the European Union or any of its member states; (d) Her
Majesty’s Treasury; (e) the Australian Department of Foreign Affairs and Trade,
(f) Switzerland; or (g) any other relevant authority.
 
“Subsidiary” means with respect to any Person, a corporation of which such
Person owns, directly or indirectly, more than fifty percent (50%) of the
outstanding capital stock having ordinary voting power to elect a majority of
the board of directors of such corporation (irrespective of whether at the time
stock of any other class of such corporation shall have or might have voting
power by reason of the happening of any contingency) and any partnership, joint
venture or limited liability company of which more than fifty percent (50%) of
the outstanding Equity Interests are at the time, directly or indirectly, owned
by such Person or any partnership of which such Person is a general partner.
Unless the context otherwise requires, each reference to Subsidiaries herein
shall be a reference to Subsidiaries of Borrower.
 
 
-10-

 
 
“Supporting Obligations” has the meaning set forth in the UCC.
 
“Tangible Chattel Paper” has the meaning ascribed to such term in the UCC.
 
“Taxes” shall mean any and all present and future taxes, duties, levies,
imposts, deductions, assessments, charges or withholdings (including backup
withholding) and any and all liabilities (including interest and penalties and
other additions to taxes) with respect to the foregoing.
 
“Termination Date” shall be the date on which the Borrower shall have repaid all
of the Obligations (other than unasserted contingent obligations) and this
Agreement (including the Lender’s commitment to make Loans hereunder) has
terminated.
 
“UCC” means the Uniform Commercial Code as in effect from time to time in the
State of New York or any other state the laws of which are required to be
applied in connection with the creation or perfection of the security interest
granted hereunder.
 
“USA Patriot Act” has the meaning set forth in Section 12.2 hereof.
 
“Veritex” has the meaning set forth in Section 11.1 hereof.
 
“Veritex Release Date” has the meaning set forth in Section 7.15.
 
SECTION 2
LOANS.
 
2.1. Line of Credit Commitment.
 
Subject to the terms and conditions of this Agreement and the other Loan
Documents, and relying upon the representations and warranties herein set forth,
Lender hereby establishes a line of credit to Borrower in an aggregate principal
amount of up to twelve million eight hundred thousand Dollars ($12,800,000.00)
(the “Line of Credit”).
 
2.2. Advances; Loans under Line of Credit.
 
Subject to the terms and conditions of this Agreement and the other Loan
Documents, and relying upon the representations and warranties herein set forth,
(a) on the date hereof, notwithstanding that the Closing Date has not yet
occurred, Lender shall make an advance to the Borrower in an aggregate principal
amount of $3,300,000, (b) on May 9, 2019 notwithstanding that the Closing Date
has not yet occurred, Lender shall make an advance to the Borrower in an
aggregate principal amount of $1,200,000 and (c) from time to time after the
Closing Date until the later of (i) the twentieth (20th) Business Day following
the Closing Date and (ii) such later date as Lender may in its sole discretion
agree from time to time, Lender shall make advances to the Borrower in an
aggregate principal amount, when taken together with the advances contemplated
by the foregoing clauses (a) and (b), up to the amount of the Line of Credit
specified in Section 2.1 (such advances, collectively, the “Loans”); provided
that each advance hereunder shall be in an amount not less than one million
Dollars ($1,000,000). Amounts repaid with respect to the Loans may not be
reborrowed.
 
 
-11-

 
 
2.3. Borrowing Procedures.
 
Borrower shall give written notice (each such written notice, a “Notice of
Borrowing”) substantially in the form of Exhibit B to Lender of each proposed
Borrowing not later than 11:00 A.M., New York time, one Business Day prior to
the proposed date of such Borrowing. Each such notice shall be effective upon
receipt by Lender, shall be irrevocable, and shall specify the date and amount
of such proposed Borrowing, which shall be a Business Day. Borrower shall be
deemed to have duly provided a Notice of Borrowing (and, for the avoidance of
doubt, made the representations, warranties and certifications set forth
therein) in respect of (a) the advance on the date hereof contemplated by
Section 2.2(a), (b) the advance contemplated by Section 2.2(b) on the date
thereof and (c) each date and for each respective amount that, in each case, is
set forth in Schedule 2.3.
 
2.4. Funding.
 
The Lender shall make each advance to be made by it hereunder (other than the
advance on the date hereof and the advance contemplated by Section 2.2(b) on the
date thereof) on the applicable Borrowing date by wire transfer of immediately
available funds by 2:00 P.M., New York time.
 
2.5. Repayment of Loans.
 
The Borrower hereby unconditionally promises to pay to the Lender the
outstanding principal amount of the Loans on the Maturity Date. To the extent
not previously paid, the outstanding balance of the Loans shall be due and
payable on the Maturity Date, together with accrued and unpaid interest thereon.
 
2.6. Interest on Loans.
 
Subject to the provisions of Section 2.7 below, the outstanding principal amount
of the Loans shall bear interest (computed on the basis of the actual number of
days elapsed over a year of three hundred sixty (360) days) at a rate of twelve
percent (12%) per annum. Interest on the Loans shall be payable on each Interest
Payment Date.
 
2.7. Default Interest.
 
If any Event of Default has occurred and is continuing, then to the extent
permitted by law all amounts outstanding under this Agreement and the other Loan
Documents shall bear interest (after as well as before judgment), immediately
upon the occurrence and during the continuance of such Event of Default, payable
on demand, at a rate of fourteen percent (14%) per annum (and not for the
avoidance of doubt at the rate set forth in Section 2.6); provided, however,
that immediately upon and after the date that such Event of Default is cured,
waived or no longer continuing, the interest rate shall revert to the interest
rate specified in Section 2.6.
 
2.8. Payment Procedures.
 
The Borrower shall make each payment (including principal of or interest on any
Borrowing or any fees or other amounts) required hereunder and under any other
Loan Document not later than 2:00 p.m., New York time, on the date when due in
immediately available Dollars, without setoff, defense or counterclaim. Any
amounts received after such time on any date may, in the discretion of the
Lender, be deemed to have been received on the next succeeding Business Day for
purposes of calculating interest thereon. Each such payment shall be made to the
Lender at the account designated in writing by an authorized officer of the
Lender. Except as otherwise expressly provided herein, whenever any payment
(including principal of or interest on any Borrowing or any fees or other
amounts) hereunder or under any other Loan Document shall become due, or
otherwise would occur, on a day that is not a Business Day, such payment may be
made on the next succeeding Business Day, and such extension of time shall in
such case be included in the computation of interest or fees, if applicable,
unless such next succeeding Business Day would fall in the next calendar month,
in which case payment will be made on the next preceding Business Day.
 
 
-12-

 
 
2.9. Prepayments of the Loans.
 
2.9.1.  Voluntary Prepayments.
 
Upon at least three (3) days’ prior written notice to the Lender, the Borrower
may prepay a portion or all of the Loans, together with accrued and unpaid
interest thereon and all other amounts payable by the Borrower under this
Agreement, without premium or penalty.
 
2.9.2. Mandatory Prepayments of the Loans.
 
(a) Asset Sale. If at any time Borrower shall receive Net Cash Proceeds in an
aggregate amount equal to or exceeding fifty thousand Dollars ($50,000) from (i)
any Asset Sale or (ii) any Recovery Event, the Borrower shall, within five
Business Days after the date of the receipt of such Net Cash Proceeds by such
Loan Party or any of its Subsidiaries, prepay the Loans and other Obligations in
an amount equal to 100% of such Net Cash Proceeds; provided that, if prior to
that date a Reinvestment Notice is delivered to the Lender in respect thereof,
then the Loan Party or its Subsidiary shall be permitted to defer such
prepayment for a period of up to 45 days after the date of such Asset Sale or
Recovery Event and on such 45th day shall be required to make such prepayment to
the extent that such reinvestment shall not have been made.
 
(b) Issuance of Debt. If at any time any Loan Party or any of its Subsidiaries
shall receive Net Cash Proceeds from the issuance or incurrence of any Debt
prohibited under Section 8.2 below, the Borrower shall, within one Business Day
after the date of receipt of such Net Cash Proceeds by such Loan Party or any of
its Subsidiaries, prepay the Loans and other Obligations in an amount equal to
100% of such Net Cash Proceeds.
 
2.9.3. Prepayment Procedures.
 
Any prepayment under this section shall be applied first, to payment of that
portion of the Obligations constituting fees, indemnities, costs and expenses
payable to Lender hereunder, second, to payment of that portion of the
Obligations constituting accrued but unpaid interest, third, to payment of that
portion of the Obligations constituting unpaid principal of the Loans and,
fourth, to payment of any other Obligations due.
 
2.10. Commitment Fee.
 
The Borrower agrees to pay to the Lender on the date hereof the following
amounts which amount shall be paid from the proceeds of the first Loan: (a) a
commitment fee in the amount of one hundred thousand Dollars ($100,000) and (b)
all expenses contemplated by Section 2.12(a)(i) incurred through the date
hereof.
 
2.11. Recordkeeping.
 
Lender shall record in its records, the date and amount of each advance made by
Lender hereunder, and each repayment thereof. The aggregate unpaid principal
amount so recorded shall be rebuttably presumptive evidence of the principal
amount of the Loans owing and unpaid. The failure to so record any such amount
or any error in so recording any such amount shall not, however, limit or
otherwise affect the Obligations of Borrower hereunder to repay the principal
amount of the Loans hereunder, together with all interest accruing thereon. The
Lender shall provide the Borrower with the foregoing books and records upon
reasonable request.
 
2.12. Costs and Expenses.
 
Regardless of whether the Loan Documents are executed and delivered, Borrower
agrees to reimburse Lender for (a) all reasonable, documented out-of-pocket
costs and expenses incurred by Lender in connection with the (i) preparation,
due diligence, development, consummation and administration of any of the Loan
Documents including, without limitation, attorney’s fees and other expenses of
internal and external legal counsel, independent engineers, investigators or
other consultants to the Lender, Uniform Commercial Code and other public record
searches and filings, overnight courier, other express or messenger delivery,
appraisal costs, surveys, title insurance and environmental audit or review
costs; and (ii) administration of this Agreement or any other Loan Document
(including, without limitation, any costs and expenses of any third party
provider engaged by Lender for such purposes) and (b) all costs and expenses
incurred by Lender (including, without limitation, any costs and expenses of any
third party provider engaged by Lender for such purposes) in connection with the
(i) collection, protection or enforcement of any of Lender’s rights in or to the
Collateral; (ii) collection of any Obligations; and (iii) enforcement of any of
Lender's remedies under this Agreement or any other Loan Document.
 
 
-13-

 
 
2.13. Taxes.
 
(a)      All payments made by a Loan Party hereunder or under any Loan Documents
shall be made without setoff, counterclaim, or other defense. To the extent
permitted by applicable law, all payments hereunder or under the Loan Documents
(including any payment of principal, interest, or fees) to, or for the benefit,
of any person shall be made by the Loan Party free and clear of and without
deduction or withholding for, or account of, any Taxes now or hereinafter
imposed by any taxing authority.
 
(b) If a Loan Party makes any payment hereunder or under any Loan Document in
respect of which it is required by applicable law to deduct or withhold any
Indemnified Taxes, the Loan Parties shall increase the payment hereunder or
under any such Loan Document such that after the reduction for the amount of
Indemnified Taxes withheld (and any Taxes withheld or imposed with respect to
the additional payments required under this Section 2.13(b)), the amount paid to
Lender equals the sum it would have received had no such deduction or
withholding been made. To the extent a Loan Party withholds any Taxes on
payments hereunder or under any Loan Document, such Loan Party shall pay the
full amount deducted to the relevant taxing authority within the time allowed
for payment under applicable law and shall deliver to Lender within 30 days
after it has made payment to such authority a receipt issued by such authority
(or other evidence satisfactory to Lender) evidencing the payment of all amounts
so required to be deducted or withheld from such payment. In addition, the Loan
Parties shall timely pay to the relevant Governmental Authority in accordance
with applicable law, or at the option of the Lender timely reimburse it for the
payment of, any Other Taxes.
 
(c) If Lender (or any of its Affiliates, agents, or employees) is required by
law to make any payments of any Indemnified Taxes on or in relation to any
amounts received or receivable hereunder or under any other Loan Document, or
any Indemnified Tax is assessed against Lender (or any of its Affiliates,
agents, or employees) with respect to amounts received or receivable hereunder
or under any other Loan Document, the Loan Parties will jointly and severally
indemnify such person within 10 days after demand therefor, for the full amount
of (i) such Indemnified Tax (and any reasonable counsel fees and other expenses
associated with such Tax) and (ii) any Taxes imposed as a result of the receipt
of the payment under this Section 2.13, in each case, whether or not such
Indemnified Taxes were correctly or legally imposed or asserted by the relevant
Governmental Authority. A certificate prepared in good faith by Lender and
delivered to any Loan Party as to the amount of such payment or liability shall,
absent manifest error, be final, conclusive, and binding on all parties.
 
(d) If a payment made to Lender under any Loan Document would be subject to U.S.
federal withholding tax imposed by FATCA if such Lender were to fail to comply
with the applicable reporting requirements of FATCA (including those contained
in Section 1471(b) or 1472(b) of the Code, as applicable), such Lender shall
deliver to the Borrower at the time or times prescribed by law and at such time
or times reasonably requested by the Borrower such documentation prescribed by
applicable law (including as prescribed by Section 1471(b)(3)(C)(i) of the Code)
and such additional documentation reasonably requested by the Borrower as may be
necessary for the Borrower to comply with its obligations under FATCA and to
determine that such Lender has complied with such Lender’s obligations under
FATCA or to determine the amount to deduct and withhold from such payment.
Solely for purposes of this clause (d), “FATCA” shall include any amendments
made to FATCA after the date of this Agreement.
 
(e) If any party determines, in its sole discretion exercised in good faith,
that it has received a refund of any Indemnified Taxes as to which it has been
indemnified pursuant to this Section 2.13 (including by the payment of
additional amounts pursuant to Section 2.13(b)), it shall, so long as no Event
of Default has occurred and is continuing, pay to the indemnifying party an
amount equal to such refund (but only to the extent of indemnity payments made
under this Section with respect to the Indemnified Taxes giving rise to such
refund), net of all out-of-pocket expenses (including Taxes) of such indemnified
party and without interest (other than any interest paid by the relevant
Governmental Authority with respect to such refund). Such indemnifying party,
upon the request of such indemnified party, shall repay to such indemnified
party the amount paid over pursuant to this Section 2.13(e) (plus any penalties,
interest or other charges imposed by the relevant Governmental Authority) in the
event that such indemnified party is required to repay such refund to such
Governmental Authority. Notwithstanding anything to the contrary in this Section
2.13(e), in no event will the indemnified party be required to pay any amount to
an indemnifying party pursuant to this Section, the payment of which would place
the indemnified party in a less favorable net after-Tax position than the
indemnified party would have been in if the indemnification payments or
additional amounts giving rise to such refund had never been paid. This Section
2.13(e) shall not be construed to require any indemnified party to make
available its Tax returns (or any other information relating to its Taxes that
it deems confidential) to the indemnifying party or any other Person.
 
(f) All obligations of the Loan Parties provided for in this Section 2.13 shall
survive payment in full of the Loans, any foreclosure thereunder, any
modification, release, discharge of, or termination of, any of the Loan
Documents.
 
 
-14-

 
 
2.14. Maximum Interest.
 
It is the intent of the parties that the rate of interest and other charges to
Borrower under this Agreement and the other Loan Documents shall be lawful;
therefore, if for any reason the interest or other charges payable under this
Agreement are found by a court of competent jurisdiction, in a final
determination, to exceed the limit which Lender may lawfully charge Borrower,
then the obligation to pay interest and other charges shall automatically be
reduced to such limit and, if any amount in excess of such limit shall have been
paid, then such amount shall be refunded to such Borrower.
 
2.15. Change in Circumstances.
 
(a)      Notwithstanding any other provision of this Agreement, if any Change in
Law shall (i) impose, modify or deem applicable any reserve, special deposit,
compulsory loan, insurance charge or similar requirement against assets of,
deposits with or for the account of or credit extended by the Lender; or (ii)
subject the Lender to any Taxes (other than (A) Indemnified Taxes, (B) Taxes
described in clauses (c) and (d) of the definition of Excluded Taxes and (C)
Connection Income Taxes) on its loans, loan principal, letters of credit,
commitments, or other obligations, or its deposits, reserves, other liabilities
or capital attributable thereto; or (iii) impose on the Lender or the London
interbank market any other condition, cost or expense (other than Taxes)
affecting this Agreement or Loans made by the Lender, and the result of any of
the foregoing shall be to increase the cost to the Lender of making, converting
to, continuing or maintaining any Loan or of maintaining its obligation to make
any such Loan or to reduce the amount of any sum received or receivable by the
Lender hereunder (whether of principal, interest or any other amount), then the
Borrower will pay to the Lender, as the case may be, upon demand such additional
amount or amounts as will compensate the Lender, as the case may be, for such
additional costs incurred or reduction suffered.
 
(b) If the Lender shall have determined that any Change in Law regarding capital
or liquidity requirements has or would have the effect of reducing the rate of
return on the Lender’s capital or on the capital of the Lender’s holding
company, if any, as a consequence of this Agreement, the Loans made to a level
below that which the Lender or the Lender’s holding company could have achieved
but for such Change in Law (taking into consideration the Lender’s policies and
the policies of the Lender’s holding company with respect to capital adequacy),
then from time to time the Borrower shall pay to the Lender, as the case may be,
such additional amount or amounts as will compensate the Lender or the Lender’s
holding company for any such reduction actually incurred or suffered. Lender
agrees to provide Borrower with reasonable evidence as to the basis for such
determination and such amounts, but Lender’s entitlement to such amounts shall
not be subject to delivery of such evidence or Borrower’s satisfaction with any
evidence so provided.
 
(c) A certificate of the Lender setting forth the amount or amounts necessary to
compensate the Lender or its holding company, as applicable, as specified in
paragraph (a) or (b) above shall be delivered to the Borrower and shall be
conclusive absent manifest error. The Borrower shall pay the Lender the amount
shown as due on any such certificate delivered by it within twenty (20) Business
Days after its receipt of the same.
 
(d) Failure or delay on the part of the Lender to demand compensation for any
increased costs or reduction in amounts received or receivable or reduction in
return on capital shall not constitute a waiver of the Lender’s right to demand
such compensation; provided that the Borrower shall not be under any obligation
to compensate the Lender under paragraph (a) or (b) above with respect to
increased costs or reductions with respect to any period prior to the date that
is one hundred eighty (180) days prior to such request; provided further that
the foregoing limitation shall not apply to any increased costs or reductions
arising out of the retroactive application of any Change in Law within such one
hundred eighty (180)-day period.
 
2.16. Change in Legality.
 
Notwithstanding any other provision of this Agreement, if any Change in Law
shall make it unlawful for the Lender to make or maintain any Loan, if such law
shall mandate, then, upon notice from the Lender to the Borrower, the Borrower
shall prepay such Loans, together with accrued and unpaid interest thereon and
all other amounts payable by the Borrower under this Agreement on or before such
date as shall be mandated by such law.
 
SECTION 3
GUARANTY
 
3.1. Guaranty of the Obligations.
 
Each Guarantor jointly and severally hereby irrevocably and unconditionally
guarantees to the Lender, and its successors and permitted assignees (the
“Guaranty Beneficiaries”) the due and punctual payment in full of all
Obligations when the same shall become due, whether at stated maturity, by
required prepayment, declaration, acceleration, demand or otherwise (including
amounts that would become due but for the operation of the automatic stay under
Section 362(a) of the Bankruptcy Code, 11 USC. § 362(a), collectively, the
“Guaranteed Obligations”).
 
 
-15-

 
 
3.2. Payment by Guarantors.
 
Each Guarantor hereby jointly and severally agrees in furtherance of the
foregoing and not in limitation of any other right which any Guaranty
Beneficiaries may have at law or in equity against any Guarantor by virtue
hereof, that upon the failure of the Borrower to pay any of the Guaranteed
Obligations when and as the same shall become due (or, in the case of any
extension of time of payment or renewal of any of the Guaranteed Obligations, in
accordance with the terms of such extension or renewal), whether at stated
maturity, by required prepayment, declaration, acceleration, demand or otherwise
(including amounts that would become due but for the operation of the automatic
stay under Section 362(a) of the Bankruptcy Code, 11 USC. § 362(a)), each
Guarantor will, upon demand, pay, or cause to be paid, in cash, to the Guaranty
Beneficiaries, an amount equal to the sum of the unpaid principal amount of all
Guaranteed Obligations then due as aforesaid, accrued and unpaid interest on
such Guaranteed Obligations (including interest which, but for the Borrower’s
becoming the subject of a proceeding under any debtor relief law, would have
accrued on such Guaranteed Obligations, whether or not a claim is allowed
against the Borrower for such interest in such proceeding) and all other
Guaranteed Obligations then owed to Guaranty Beneficiaries as aforesaid.
 
3.3. Liability of Guarantor Absolute.
 
Each Guarantor agrees that its obligations hereunder are irrevocable, absolute,
independent and unconditional and shall not be affected by any circumstance
which constitutes a legal or equitable discharge of a guarantor or surety other
than payment in full of the Guaranteed Obligations. In furtherance of the
foregoing and without limiting the generality thereof, each Guarantor agrees as
follows:
 
(a) this Guaranty is a guaranty of payment when due and not of collectability;
this Guaranty is a primary obligation of each Guarantor and not merely a
contract of surety;
 
(b) any Guaranty Beneficiary may enforce this Guaranty upon the occurrence of an
Event of Default notwithstanding the existence of any dispute between the
Borrower and any Guaranty Beneficiary with respect to the existence of such
Event of Default;
 
(c) the obligations of each Guarantor hereunder are independent of the
obligations of the Borrower and the obligations of any other guarantor of the
obligations of the Borrower, and a separate action or actions may be brought and
prosecuted against each Guarantor whether or not any action is brought against
the Borrower or any of such other guarantors and whether or not the Borrower is
joined in any such action or actions;
 
(d) payment by each Guarantor of a portion, but not all, of the Guaranteed
Obligations shall in no way limit, affect, modify or abridge each Guarantor’s
liability for any portion of the Guaranteed Obligations which has not been paid.
Without limiting the generality of the foregoing, if any Guaranty Beneficiary is
awarded a judgment in any suit brought to enforce each Guarantor’s covenant to
pay a portion of the Guaranteed Obligations, such judgment shall not be deemed
to release Guarantor from its covenant to pay the portion of the Guaranteed
Obligations that is not the subject of such suit;
 
(e) any Guaranty Beneficiaries, upon such terms as it deems appropriate, without
notice or demand and without affecting the validity or enforceability hereof or
giving rise to any reduction, limitation, impairment, discharge or termination
of any Guarantor’s liability hereunder, from time to time may, without limiting
this Guaranty, (i) renew, extend, accelerate, increase the rate of interest on,
or otherwise change the time, place, manner or terms of payment of the
Guaranteed Obligations; (ii) settle, compromise, release or discharge, or accept
or refuse any offer of performance with respect to, or substitutions for, the
Guaranteed Obligations or any agreement relating thereto and/or subordinate the
payment of the same to the payment of any other obligations; (iii) request and
accept other guaranties of the Guaranteed Obligations and take and hold security
for the payment hereof or the Guaranteed Obligations; (iv) release, surrender,
exchange, substitute, compromise, settle, rescind, waive, alter, subordinate or
modify, with or without consideration, any security for payment of the
Guaranteed Obligations, any other guaranties of the Guaranteed Obligations, or
any other obligation of any Person with respect to the Guaranteed Obligations;
(v) enforce and apply any security now or hereafter held by or for the benefit
of such Beneficiaries in respect hereof or the Guaranteed Obligations and direct
the order or manner of sale thereof, or exercise any other right or remedy that
such Guaranty Beneficiaries may have against any such security, in each case as
such Guaranty Beneficiaries in its discretion may determine consistent herewith
or the applicable Loan Documents and any applicable security agreement,
including foreclosure on any such security pursuant to one or more judicial or
no judicial sales, whether or not every aspect of any such sale is commercially
reasonable, and even though such action operates to impair or extinguish any
right of reimbursement or subrogation or other right or remedy of any Guarantor
against the Borrower or any security for the Guaranteed Obligations; and (vi)
exercise any other rights available to it under the Loan Documents. The
foregoing shall not be deemed to modify Section 12.5 of this Agreement; and
 
 
-16-

 
 
(f) this Guaranty and the obligations of each Guarantor hereunder shall be valid
and enforceable and shall not be subject to any reduction, limitation,
impairment, discharge or termination for any reason (other than payment in full
of the Guaranteed Obligations or the occurrence of the Termination Date),
including the occurrence of any of the following, whether or not any Guarantor
shall have had notice or knowledge of any of them: (i) any failure or omission
to assert or enforce or agreement or election not to assert or enforce, or the
stay or enjoining, by order of court, by operation of law or otherwise, of the
exercise or enforcement of, any claim or demand or any right, power or remedy
(whether arising under the Loan Documents, at law, in equity or otherwise) with
respect to the Guaranteed Obligations or any agreement relating thereto, or with
respect to any other guaranty of or security for the payment of the Guaranteed
Obligations; (ii) any rescission, waiver, amendment or modification of, or any
consent to departure from, any of the terms or provisions (including provisions
relating to events of default) hereof, any of the other Loan Documents, or any
agreement or instrument executed pursuant thereto, or of any other guaranty or
security for the Guaranteed Obligations, in each case whether or not in
accordance with the terms hereof or such Loan Document or any agreement relating
to such other guaranty or security; (iii) the Guaranteed Obligations, or any
agreement relating thereto, at any time being found to be illegal, invalid or
unenforceable in any respect; (iv) the application of payments received from any
source (other than payments received pursuant to the other Loan Documents or
from the proceeds of any security for the Guaranteed Obligations, except to the
extent such security also serves as collateral for indebtedness other than the
Guaranteed Obligations) to the payment of indebtedness other than the Guaranteed
Obligations, even though any Guaranty Beneficiaries might have elected to apply
such payment to any part or all of the Guaranteed Obligations; (v) any failure
to perfect or continue perfection of a security interest in any collateral which
secures any of the Guaranteed Obligations; (vii) any defenses, set-offs or
counterclaims which the Borrower may allege or assert against any Guaranty
Beneficiaries in respect of the Guaranteed Obligations, including failure of
consideration, breach of warranty, payment, statute of frauds, statute of
limitations, accord and satisfaction and usury; and (viii) any other act or
thing or omission, or delay to do any other act or thing, which may or might in
any manner or to any extent vary the risk of any Guarantor as an obligor in
respect of the Guaranteed Obligations.
 
3.4. Waivers by Guarantor.
 
Each Guarantor hereby waives, for the benefit of the Guaranty Beneficiaries:
 
(a) any right to require any Guaranty Beneficiaries, as a condition of payment
or performance by such Guarantor, to (i) proceed against the Borrower, any other
guarantor of the Guaranteed Obligations or any other Person, (ii) proceed
against or exhaust any security held from the Borrower, any such other guarantor
or any other Person, (iii) proceed against or have resort to any balance of any
deposit account or credit on the books of any Guaranty Beneficiaries in favor of
the Borrower or any other Person, or (iv) pursue any other remedy in the power
of any Guaranty Beneficiaries whatsoever;
 
(b) any defense arising by reason of the incapacity, lack of authority or any
disability or other defense of the Borrower including any defense based on or
arising out of the lack of validity or the unenforceability of the Guaranteed
Obligations or any agreement or instrument relating thereto or by reason of the
cessation of the liability of the Borrower from any cause other than payment in
full of the Guaranteed Obligations;
 
(c) any defense based upon any statute or rule of law which provides that the
obligation of a surety must be neither larger in amount nor in other respects
more burdensome than that of the principal;
 
(d) any defense based upon any Guaranty Beneficiaries’ errors or omissions in
the administration of the Guaranteed Obligations, except behavior which amounts
to bad faith;
 
(e) (i) any principles or provisions of Law, statutory or otherwise, which are
or might be in conflict with the terms hereof and any legal or equitable
discharge of such Guarantor’s obligations hereunder, (ii) the benefit of any
statute of limitations affecting such Guarantor’s liability hereunder or the
enforcement hereof, (iii) any rights to set-offs, recoupments and counterclaims,
and (iv) promptness, diligence and any requirement that any Guaranty
Beneficiaries protect, secure, perfect or insure any security interest or lien
or any property subject thereto;
 
(f) notices, demands, presentments, protests, notices of protest, notices of
dishonor and notices of any action or inaction, including acceptance hereof,
notices of default hereunder, or under any agreement or instrument related
thereto, notices of any renewal, extension or modification of the Guaranteed
Obligations or any agreement related thereto, notices of any extension of credit
to the Borrower and any right to consent to any thereof; and
 
(g) any defenses or benefits that may be derived from or afforded by Law which
limit the liability of or exonerate guarantors or sureties, or which may
conflict with the terms hereof.
 
 
-17-

 
 
3.5. Guarantors’ Right of Subrogation.
 
Until the Termination Date, each Guarantor hereby waives any claim, right or
remedy, direct or indirect, that such Guarantor now has or may hereafter have
against the Borrower or any of its assets in connection with this Guaranty or
the performance by such Guarantor of its obligations hereunder, in each case
whether such claim, right or remedy arises in equity, under contract, by
statute, under common law or otherwise and including:
 
(a) any right of subrogation, reimbursement or indemnification that such
Guarantor now has or may hereafter have against the Borrower with respect to the
Guaranteed Obligations,
 
(b) any right to enforce, or to participate in, any claim, right or remedy that
any Beneficiaries now has or may hereafter have against the Borrower, and
 
(c) any benefit of, and any right to participate in, any collateral or security
now or hereafter held by any Guaranty Beneficiaries. Guarantor further agrees
that, to the extent the waiver or agreement to withhold the exercise of its
rights of subrogation, reimbursement or indemnification as set forth herein is
found by a court of competent jurisdiction to be void or voidable for any
reason, any rights of subrogation, reimbursement or indemnification such
Guarantor may have against the Borrower or against any collateral or security,
shall be junior and subordinate to any rights of the Beneficiaries against the
Borrower, and to all right, title and interest the Beneficiaries may have in any
such collateral or security. If any amount shall be paid to each Guarantor
before the Termination Date on account of any such subrogation, reimbursement,
indemnification contribution rights at any time when all Guaranteed Obligations
shall not have been finally and indefeasibly paid in full, such amount shall be
held in trust for the Guaranty Beneficiaries and shall forthwith be paid over to
the Guaranty Beneficiaries to be credited and applied against the Guaranteed
Obligations, whether matured or unmatured, in accordance with the terms hereof.
 
3.6. Subordination of Other Obligations.
 
Any Debt of the Borrower now or hereafter held by any Guarantor is hereby
subordinated in right of payment to the Guaranteed Obligations, and any such
indebtedness collected or received by such Guarantor after an Event of Default
has occurred and is continuing shall be held in trust for the Guaranty
Beneficiaries and shall forthwith be paid over to the Guaranty Beneficiaries to
be credited and applied against the Guaranteed Obligations but without
affecting, impairing or limiting in any manner the liability of such Guarantor
under any other provision hereof.
 
3.7. Continuing Guaranty.
 
This Guaranty is a continuing guaranty and shall remain in effect until the
Termination Date. Each Guarantor hereby irrevocably waives any right to revoke
this Guaranty as to future transactions giving rise to any Guaranteed
Obligations.
 
3.8. Authority of Guarantors or the Borrower.
 
It is not necessary for any Guaranty Beneficiaries to inquire into the capacity
or powers of the Borrower or the officers, members of the Board of Directors or
any agents acting or purporting to act on behalf of any of them.
 
3.9. Financial Condition of the Borrower.
 
Any advance under the Line of Credit may be made to the Borrower or continued
from time to time, without notice to or authorization from any Guarantor
regardless of the financial or other condition of the Borrower at the time of
any such grant. No Guaranty Beneficiaries shall have any obligation to disclose
or discuss with any Guarantor its assessment, or any Guarantor’s assessment, of
the financial condition of the Borrower. Each Guarantor has adequate means to
obtain information from the Borrower on a continuing basis concerning the
financial condition of the Borrower and its ability to perform its obligations
under the Loan Documents, and each Guarantor assumes the responsibility for
being and keeping informed of the financial condition of the Borrower and of all
circumstances bearing upon the risk of nonpayment of the Guaranteed Obligations.
Each Guarantor hereby waives and relinquishes any duty on the part of any
Beneficiaries to disclose any matter, fact or thing relating to the business,
operations or conditions of the Borrower now known or hereafter known by any
Guaranty Beneficiaries.
 
 
-18-

 
 
3.10. Bankruptcy, Etc.
 
(a)            So long as any Guaranteed Obligations remain outstanding, each
Guarantor shall not, without the prior written consent of the Lender, commence
or join with any other Person in commencing any proceeding under any debtor
relief law of or against the Borrower. The obligations of each Guarantor
hereunder shall not be reduced, limited, impaired, discharged, deferred,
suspended or terminated by any case or proceeding, voluntary or involuntary,
involving the bankruptcy, insolvency, receivership, reorganization, liquidation
or arrangement of the Borrower or by any defense which the Borrower may have by
reason of the order, decree or decision of any court or administrative body
resulting from any such proceeding.
 
(b) Each Guarantor acknowledges and agrees that any interest on any portion of
the Guaranteed Obligations which accrues after the commencement of any case or
proceeding referred to in clause (a) above (or, if interest on any portion of
the Guaranteed Obligations ceases to accrue by operation of law by reason of the
commencement of such case or proceeding, such interest as would have accrued on
such portion of the Guaranteed Obligations if such case or proceeding had not
been commenced) shall be included in the Guaranteed Obligations because it is
the intention of Guarantors and Guaranty Beneficiaries that the Guaranteed
Obligations which are Guaranteed by Guarantors pursuant hereto should be
determined without regard to any rule of law or order which may relieve the
Borrower of any portion of such Guaranteed Obligations. Each Guarantor will
permit any trustee in bankruptcy, receiver, debtor in possession, assignee for
the benefit of creditors or similar Person to pay the Lender, or allow the claim
of the Lender in respect of, any such interest accruing after the date on which
such case or proceeding is commenced.
 
(c) In the event that all or any portion of the Guaranteed Obligations are paid
by the Borrower, the obligations of Guarantors hereunder shall continue and
remain in full force and effect or be reinstated, as the case may be, in the
event that all or any part of such payment(s) are rescinded or recovered
directly or indirectly from any Beneficiaries as a preference, fraudulent
transfer or otherwise, and any such payments which are so rescinded or recovered
shall constitute Guaranteed Obligations for all purposes hereunder.
 
3.11. Maximum Liability.
 
It is the desire and intent of the Guarantors and the Guaranty Beneficiaries
that this Guaranty shall be enforced against each Guarantor to the fullest
extent permissible under the laws and public policies applied in each
jurisdiction in which enforcement is sought. The provisions of this Guaranty are
severable, and in any action or proceeding involving any state corporate law, or
any state, Federal or foreign bankruptcy, insolvency, reorganization or other
law affecting the rights of creditors generally, if the obligations of any
Guarantor under this Guaranty would otherwise be held or determined to be
avoidable, invalid or unenforceable on account of the amount of such Guarantor’s
liability under this Guaranty, then, notwithstanding any other provision of this
Guaranty to the contrary, the amount of such liability shall, without any
further action by the Guarantor Subsidiaries or the Guaranty Beneficiaries, be
automatically limited and reduced to the highest amount that is valid and
enforceable as determined in such action or proceeding (such highest amount
determined hereunder being the Guarantor’s “Maximum Liability”). Each Guarantor
agrees that the Guaranteed Obligations may at any time and from time to time
exceed the Maximum Liability of Guarantor without impairing this Guaranty or
affecting the rights and remedies of the Guaranty Beneficiaries hereunder;
provided, nothing in this sentence shall be construed to increase any
Guarantor’s obligations hereunder beyond its Maximum Liability.
 
 
-19-

 
 
SECTION 4
COLLATERAL GRANTED.
 
4.1. Grant of Security Interest to Lender.
 
As security for the payment of the Loans made by Lender to the Borrower
hereunder and for the payment, performance or other satisfaction of all other
Obligations:
 
(a) Borrower hereby grants to Lender and its Affiliates a continuing security
interest in Borrower’s right, title and interest in the following, whether now
or hereafter owned, existing, acquired or arising and wherever now or hereafter
located: (i) all Accounts and all Goods whose sale, lease or other disposition
has given rise to Accounts and have been returned, repossessed or stopped in
transit; (ii) all Chattel Paper, Instruments, Documents and General Intangibles
(including, without limitation, all patents, patent applications, trademarks,
trademark applications, trade names, trade secrets, goodwill, copyrights,
copyright applications, registrations, licenses, software, franchises, customer
lists, Tax refund claims, claims against carriers and shippers, guarantee
claims, contract rights, payment intangibles, security interests, security
deposits and rights to indemnification); (iii) all Inventory; (iv) all Goods
(other than Inventory), including, without limitation, Equipment, vehicles and
Fixtures; (v) all Investment Property; (vi) all Deposit Accounts, Securities
Accounts, bank accounts, deposits and cash; (vii) all Letter-of-Credit Rights;
(viii) Commercial Tort Claims listed on Exhibit C hereto; (ix) all Supporting
Obligations; (x) any other property now or hereafter in the possession, custody
or control of Lender, Lender’s agent or Lender’s parent, any Affiliates of
Lender, or any Subsidiary of Lender or any participant with Lender in the Loans,
for any purpose (whether for safekeeping, deposit, collection, custody, pledge,
transmission or otherwise) and (xi) all additions and accessions to,
substitutions for, and replacements, products and Proceeds of the foregoing
property, including, without limitation, proceeds of all insurance policies
insuring the foregoing property, and all books and records relating to any of
the foregoing and to Borrower’s business.
 
(b) Borrower hereby grants to Lender and its Affiliates a security interest in
Borrower’s right, title and interest in the following, whether now or hereafter
owned, existing, acquired or arising and wherever now or hereafter located: (i)
all Receivables and all Related Security, (ii) all Collections, (iii) the
Collection Accounts and all amounts on deposit therein, and all certificates and
instruments, if any, from time to time evidencing such Collection Accounts and
amounts on deposit therein, (iv) all books and records to the extent related to
any of the foregoing, together with all rights (but not obligations) under the
contracts related to the Receivables, and (v) all proceeds of, and all amounts
received or receivable under, any or all of the foregoing.
 
(c) LR&M hereby grants to Lender and its Affiliates a security interest in
LR&M’s right, title and interest in the following, whether now or hereafter
owned, existing, acquired or arising and wherever now or hereafter located, upon
the occurrence of the Veritex Release Date: (i) all LR&M Receivables and Related
Security, (ii) all Collections in respect thereof, (iii) the Collection Accounts
and all amounts on deposit therein, and all certificates and instruments, if
any, from time to time evidencing such Collection Accounts and amounts on
deposit therein, (iv) all books and records to the extent related to any of the
foregoing, and (v) all proceeds of, and all amounts received or receivable
under, any or all of the foregoing.
 
4.2. Collection of Receivables.
 
(a)            Each Grantor shall direct all of its Account Debtors to make all
payments on Receivables that are Collateral directly into a Collection Account.
If a Loan Party, any Affiliate or Subsidiary, any shareholder, officer,
director, employee or agent of a Loan Party or any Affiliate or Subsidiary, or
any other Person acting for or in concert with a Loan Party shall receive any
monies, checks, notes, drafts or other payments relating to, or as Collections
of Receivables included in, the Collateral, such Loan Party and each such Person
shall receive all such items in trust for the Lender and, immediately upon
receipt thereof, shall remit the same (or cause the same to be remitted) in kind
to a Collection Account in a manner satisfactory to Lender. Each Loan Party
agrees that, if an Event of Default occurs and is continuing, all payments made
to such Collection Account or otherwise received by Lender, whether in respect
of the Receivables or as Proceeds of other Collateral or otherwise (except for
proceeds of Collateral which are required to be delivered to the holder of a
Permitted Lien which is prior in right of payment), may be applied on account of
the Obligations in accordance with the terms of this Agreement. Each Loan Party
agrees to pay all customary fees, costs and expenses in connection with opening
and maintaining each Collection Account. All of such fees, costs and expenses if
not paid by a Loan Party, may be paid by Lender or otherwise charged to Borrower
and in such event all amounts paid by Lender or charged by Lender shall
constitute Obligations hereunder, shall be payable to Lender by Borrower upon
demand, and, until paid, shall bear interest at the highest rate then applicable
to Loans hereunder.
 
 
-20-

 
 
(b) Lender may, at any time and from time to time after the occurrence and
during the continuance of an Event of Default, whether before or after
notification to any Account Debtor and whether before or after the maturity of
any of the Obligations, (i) enforce collection of any of a Grantor’s Receivables
that are Collateral or other amounts owed to a Grantor by suit or otherwise that
are Collateral; (ii) exercise all of such Grantor’s rights and remedies with
respect to proceedings brought to collect any Receivables that are Collateral or
other amounts owed to such Grantor that are Collateral; (iii) surrender, release
or exchange all or any part of any Receivables that are Collateral or other
amounts owed to such Grantor that are Collateral, or compromise or extend or
renew for any period (whether or not longer than the original period) any
indebtedness thereunder; (iv) sell or assign any Receivable of a Grantor that is
Collateral or other amount owed to a Grantor that is Collateral upon such terms,
for such amount and at such time or times as Lender deems advisable;
(v) prepare, file and sign the applicable Grantor’s name on any proof of claim
in bankruptcy or other similar document against any Account Debtor or other
Person obligated to such Grantor; and (vi) do all other acts and things which
are necessary, in Lender's sole discretion, to fulfill Loan Parties' obligations
under this Agreement and the other Loan Documents and to allow Lender to collect
the Receivables that are Collateral or other amounts owed to each Grantor that
are Collateral. In addition to any other provision hereof, Lender may at any
time, after the occurrence and during the continuance of an Event of Default, at
Borrowers' expense, notify any parties obligated on any of the Receivables that
are Collateral to make payment directly to Lender of any amounts due or to
become due thereunder.
 
4.3. Other Security.
 
Lender, in its sole discretion, without waiving or releasing (i) any obligation,
liability or duty of any Loan Party under this Agreement or the other Loan
Documents or (ii) any Event of Default, may at any time or times hereafter, but
shall not be obligated to, pay, acquire or accept an assignment of any security
interest, lien, encumbrance or claim asserted by any Person in, upon or against
the Collateral that is prohibited under Section 8.3, provided, that Lender may
take such actions with respect to Permitted Liens only after the occurrence and
during the continuance of an Event of Default. All sums paid by Lender in
respect thereof and all costs, fees and expenses including, without limitation,
reasonable attorney fees, all court costs and all other charges relating thereto
incurred by Lender shall constitute Obligations, payable by Borrower to Lender
on demand and, until paid, shall bear interest at the highest rate then
applicable to Loans hereunder.
 
4.4. Possessory Collateral.
 
Immediately upon a Loan Party’s receipt of any portion of the Collateral worth
in excess of fifty thousand dollars ($50,000) evidenced by an Instrument or
Document, including, without limitation, any Tangible Chattel Paper or any
Investment Property consisting of certificated securities, such Loan Party shall
deliver the original thereof to Lender together with an appropriate endorsement
or other specific evidence of assignment thereof to Lender (in form and
substance acceptable to Lender). If an endorsement or assignment of any such
items shall not be made for any reason, Lender is hereby irrevocably authorized,
as such Loan Party’s attorney and agent-in-fact, to endorse or assign the same
on such Loan Party’s behalf.
 
4.5. Electronic Chattel Paper.
 
To the extent that a Loan Party obtains or maintains any Electronic Chattel
Paper that is Collateral and worth in excess of fifty thousand dollars
($50,000), such Loan Party shall create, store and assign the record or records
comprising the Electronic Chattel Paper in such a manner that (i) a single
authoritative copy of the record or records exists which is unique, identifiable
and except as otherwise provided in clauses (iv), (v) and (vi) below,
unalterable, (ii) the authoritative copy identifies Lender as the assignee of
the record or records, (iii) the authoritative copy is communicated to and
maintained by the Lender or its designated custodian, (iv) copies or revisions
that add or change an identified assignee of the authoritative copy can only be
made with the participation of Lender, (v) each copy of the authoritative copy
and any copy of a copy is readily identifiable as a copy that is not the
authoritative copy and (vi) any revision of the authoritative copy is readily
identifiable as an authorized or unauthorized revision.
 
4.6. Preservation of Collateral and Perfection of Security Interests Therein.
 
(a)            Each Grantor shall, at Lender's request, at any time and from
time to time, authenticate, execute and deliver to Lender such financing
statements, documents and other agreements and instruments (and pay the cost of
filing or recording the same in all public offices deemed necessary or desirable
by Lender) and do such other acts and things or cause third parties to do such
other acts and things as Lender may deem necessary or desirable in its sole
discretion in order to establish and maintain a valid, attached and perfected
security interest in the Collateral in favor of Lender (free and clear of all
other liens, claims, encumbrances and rights of third parties whatsoever,
whether voluntarily or involuntarily created, except Permitted Liens) to secure
payment of the Obligations, and in order to facilitate the collection of the
Collateral. Each Grantor irrevocably hereby makes, constitutes and appoints
Lender (and all Persons designated by Lender for that purpose) as such Grantor's
true and lawful attorney and agent-in-fact solely to, following the occurrence
and during the continuation of an Event of Default, execute and file such
financing statements, documents and other agreements and instruments and do such
other acts and things as may be necessary to preserve and perfect Lender's
security interest in the Collateral. Each Grantor further ratifies and confirms
the prior filing by Lender of any and all financing statements which identify
such Grantor as debtor, Lender as secured party and any or all Collateral as
collateral.
 
 
-21-

 
 
(b) The Lender is hereby authorized to file (at the sole expense and cost of the
Borrower) UCC financing or continuation statements, intellectual property
security agreements and amendments to any of the foregoing or any similar
document, in any jurisdictions and with any filing offices as the Lender may
reasonably determine are necessary or advisable to perfect or otherwise protect
the security interests granted to the Lender herein. Such documents may describe
the Collateral in the same manner as described herein or may contain an
indication or description of collateral that describes such property in any
other manner as the Lender may reasonably determine is necessary or advisable,
including (in respect of the Borrower only) describing such property as “all
assets” or words of similar effect.
 
SECTION 5
TERMINATION OF THIS AGREEMENT; TERMINATION OF LIENS.
 
Lender's obligations under this Agreement shall be in effect from the date
hereof until the earlier of (i) the Maturity Date, (ii) the date that the
Obligations are accelerated pursuant to Section 10.1, and (iii) the Termination
Date. Upon the Termination Date, remaining Collateral shall automatically be
released from the Lien of this Agreement and all rights to the Collateral shall
revert to the Grantors and Pledgor. Upon such release or any such sale, transfer
or disposition of Collateral or any part thereof, Lender shall, upon the request
of the Grantors and Pledgor and at the sole expense of the Borrower, assign,
transfer and deliver to the Grantors and/or Pledgor proper documents and
instruments (including UCC-3 termination financing statements or releases)
acknowledging the termination hereof or the release of such Collateral, as the
case may be.
 
SECTION 6
REPRESENTATIONS AND WARRANTIES.
 
Each Loan Party hereby represents and warrants to Lender, which representations
and warranties (whether appearing in this Section 6, elsewhere in this Agreement
or in any other Loan Document) shall be true at the time of the date hereof
(other than the representation in Section 6.5 that Blue Dolphin is in good
standing in the State of Delaware), the date of the advance contemplated by
Section 2.2(b) (other than the representation in Section 6.5 that Blue Dolphin
is in good standing in the State of Delaware), and the Closing Date, and shall
be remade by each applicable Loan Party at the time each Loan is made pursuant
to this Agreement, provided, that representations and warranties made as of a
particular date shall be true and correct as of such date:
 
6.1. Financial Statements and Other Information.
 
The financial statements and other information delivered or to be delivered by
any Loan Party to Lender at or prior to the date of this Agreement fairly
present in all material respects the financial condition of each Loan Party, and
there has been no material adverse change in the financial condition, the
operations or any other status of any Loan Party since the date of the financial
statements delivered to Lender most recently prior to the date of this
Agreement. All written information now or heretofore furnished by each Loan
Party to Lender is true and correct as of the date with respect to which such
information was furnished.
 
6.2. Locations.
 
The office where each Loan Party keeps its books, records and accounts (or
copies thereof) concerning the Collateral, each Loan Party’s principal place of
business and all of each Loan Party’s other places of business, locations of
Collateral and post office boxes and locations of bank accounts are as set forth
in Schedule 6.2 and at other locations within the continental United States of
which Lender has been advised by a Loan Party in accordance with Section 7.2.1.
The Collateral (except any part thereof which a Loan Party shall have advised
Lender in writing consists of Collateral normally used in more than one state)
is kept, or, in the case of vehicles, based, only at the addresses set forth on
Schedule 6.2, and at other locations within the continental United States of
which Lender has been advised by a Loan Party in writing in accordance with
Section 7.2.1 hereof.
 
6.3. Loans by Loan Parties.
 
No Loan Party has made any loans or advances to any Affiliate or other Person
except (i) Existing Indebtedness, (ii) advances authorized hereunder to
employees, officers and directors of a Loan Party for travel and other expenses
arising in the ordinary course of such Loan Party’s business and (iii) Affiliate
Funding Transactions.
 
 
-22-

 
 
6.4. Liens.
 
Each Loan Party is the lawful owner of all Collateral now purportedly owned or
hereafter purportedly acquired by such Loan Party, free from all liens, claims,
security interests and encumbrances whatsoever, whether voluntarily or
involuntarily created and whether or not perfected, other than Permitted Liens.
 
6.5. Organization, Authority and No Conflict.
 
The Borrower is a limited liability company, duly organized, validly existing
and in good standing in the State of Delaware and its state organizational
identification number is 5279048. Lazarus is a limited liability company, duly
organized, validly existing and in good standing in the State of Delaware and
its organizational identification number is 4108611. Blue Dolphin is a
corporation, duly organized, validly existing and in good standing in the State
of Delaware and its organizational identification number is 2081487. LR&M is a
limited liability company, duly organized, validly existing and in good standing
in the State of Delaware and its organizational identification number is
4169296. Each Loan Party is duly qualified and in good standing in all states
where the nature and extent of the business transacted by it or the ownership of
its assets makes such qualification necessary or, if such Loan Party is not so
qualified, such Loan Party may cure any such failure without losing any of its
rights, incurring any liens or material penalties, or otherwise affecting
Lender's rights. Each Loan Party has the right and power and is duly authorized
and empowered to enter into, execute and deliver this Agreement and the other
Loan Documents and perform its obligations hereunder and thereunder. Each Loan
Party’s execution, delivery and performance of this Agreement and the other Loan
Documents does not conflict with the provisions of the organizational documents
of such Loan Party, any statute, regulation, ordinance or rule of law, or any
agreement, contract or other document which may now or hereafter be binding on
such Loan Party, except for conflicts with agreements, contracts or other
documents which would not have a Material Adverse Effect, and such Loan Party’s
execution, delivery and performance of this Agreement and the other Loan
Documents shall not result in the imposition of any lien or other encumbrance
upon any of such Loan Party’s property (other than Permitted Liens) under any
existing indenture, mortgage, deed of trust, loan or credit agreement or other
agreement or instrument by which such Loan Party or any of its property may be
bound or affected. If a Loan Party is a partnership or limited liability
company, such Loan Party has not expressly elected to have its Equity Interests
treated as “Securities” under and as defined in Article 8 of the Uniform
Commercial Code.
 
6.6. Litigation.
 
(a)            Except as disclosed to Lender on Schedule 6.6 hereto, there are
no actions or proceedings which are pending or, to the best of any Loan Party’s
knowledge, threatened against a Loan Party which is, in the determination of
Lender, reasonably likely to have a Material Adverse Effect, and each Loan Party
shall, promptly upon becoming aware of any such pending or threatened action or
proceeding, give written notice thereof to Lender.
 
(b) Borrower has no Commercial Tort Claims pending other than those set forth on
Exhibit C hereto as such exhibit may be amended from time to time.
 
6.7. Compliance with Laws and Maintenance of Permits.
 
Each Loan Party has obtained all governmental consents, franchises,
certificates, licenses, authorizations, approvals and permits, the lack of which
would have a Material Adverse Effect. Each Loan Party is in compliance in all
material respects with all applicable federal, state, local and foreign
statutes, orders, regulations, rules and ordinances (including, without
limitation, Environmental Laws and statutes, orders, regulations, rules and
ordinances relating to taxes, employer and employee contributions and similar
items, securities, ERISA or employee health and safety) the failure to comply
with which would have a Material Adverse Effect.
 
6.8. Affiliate Transactions.
 
Except as set forth on Schedule 6.8 hereto or as permitted pursuant to Section
8.11 hereof, no Loan Party is conducting, permitting or suffering to be
conducted, transactions with any Affiliate other than Affiliate Funding
Transactions and transactions with Affiliates for the purchase or sale of
Inventory or services in the ordinary course of business pursuant to terms that
are no less favorable to such Loan Party than the terms upon which such
transactions would have been made had they been made to or with a Person that is
not an Affiliate.
 
6.9. Names and Trade Names.
 
Each Loan Party’s name has always been as set forth on the first page of this
Agreement and no Loan Party uses any trade names, assumed names, fictitious
names or division names in the operation of its business, except as set forth on
Schedule 6.9 hereto.
 
 
-23-

 
 
6.10. Equipment.
 
Except for Permitted Liens, Borrower has good and indefeasible and merchantable
title to and ownership of all of its Equipment. No Equipment is a Fixture to
real estate unless such real estate is owned by a Loan Party and is subject to a
mortgage in favor of Lender, or if such real estate is leased, is subject to a
landlord's agreement in favor of Lender on terms acceptable to Lender, or an
accession to other personal property unless such personal property is subject to
a first priority lien in favor of Lender.
 
6.11. Enforceability.
 
This Agreement and the other Loan Documents to which each Loan Party is a party
are the legal, valid and binding obligations of such Loan Party and are
enforceable against such Loan Party in accordance with their respective terms.
 
6.12. Solvency.
 
Borrower is and, upon the occurrence of the Settlement Payment Date (as defined
in the GEL Tex Settlement Agreement), each other Loan Party is, after giving
effect to the transactions contemplated hereby solvent, able to pay its debts as
they become due, has capital sufficient to carry on its business, now owns
property having a value both at fair valuation and at present fair saleable
value greater than the amount required to pay its debts, and will not be
rendered insolvent by the execution and delivery of this Agreement or any of the
other Loan Documents or by completion of the transactions contemplated hereunder
or thereunder.
 
6.13. Indebtedness.
 
As of the date hereof, except as set forth on Schedule 1.01 hereto, no Loan
Party is obligated (directly or indirectly), for any loans or other indebtedness
for borrowed money other than the Loans.
 
6.14. Margin Security and Use of Proceeds.
 
Except as set forth on Schedule 6.14 hereto, no Loan Party owns any margin
securities. None of the proceeds of the Loans hereunder shall be used for the
purpose of purchasing or carrying any margin securities or for the purpose of
reducing or retiring any indebtedness which was originally incurred to purchase
any margin securities or for any other purpose not permitted by Regulation U of
the Board of Governors of the Federal Reserve System as in effect from time to
time.
 
6.15. Parent, Subsidiaries and Affiliates.
 
Except as set forth on Schedule 6.15 hereto, no Loan Party has any Parents,
Subsidiaries or other Affiliates or divisions, nor is any Loan Party engaged in
any joint venture or partnership with any other Person.
 
6.16. Contracts; No Defaults.
 
Schedule 6.16 includes all contracts, leases, commitments and other agreements
to which the Borrower is a party. Except as set forth on Schedule 6.16, (i) (a)
the Borrower is not in default under any material contract, lease or commitment
to which it is a party or by which it is bound, and (b) no other Loan Party is
in default under any material contract, lease or commitment to which it is a
party or by which it is bound other than a default which would not have a
Material Adverse Effect; and (ii) no Loan Party knows of any dispute regarding
any contract, lease or commitment which would have a Material Adverse Effect.
 
 
-24-

 
 
6.17. Employee Matters.
 
There are no controversies pending or threatened between a Loan Party and any of
its employees, agents or independent contractors other than employee grievances
arising in the ordinary course of business which would not, in the aggregate,
have a Material Adverse Effect, and each Loan Party is in compliance with all
federal and state laws respecting employment and employment terms, conditions
and practices except for such non-compliance which would not have a Material
Adverse Effect.
 
6.18. Intellectual Property.
 
(a) Each Loan Party possesses adequate licenses, patents, patent applications,
copyrights, service marks, trademarks, trademark applications, tradestyles and
trade names to continue to conduct its business as heretofore conducted by it
except to the extent that the failure to possess such items would not have a
Material Adverse Effect.
 
(b) The Borrower owns no registered intellectual property.
 
6.19. Environmental Matters.
 
No Loan Party has generated, used, stored, treated, transported, manufactured,
handled, produced or disposed of any Hazardous Materials, on or off its premises
(whether or not owned by it) in any manner which at any time violates in any
material respect any Environmental Law or any license, permit, certificate,
approval or similar authorization thereunder and the operations of each Loan
Party comply in all material respects with all Environmental Laws and all
licenses, permits, certificates, approvals and similar authorizations
thereunder. There has been no investigation, proceeding, complaint, order,
directive, claim, citation or notice by any Governmental Authority or any other
Person, nor is any pending or to the best of each Loan Party’s knowledge
threatened with respect to any non-compliance with or violation of the
requirements of any Environmental Law by a Loan Party or the release, spill or
discharge, threatened or actual, of any Hazardous Materials or the generation,
use, storage, treatment, transportation, manufacture, handling, production or
disposal of any Hazardous Materials or any other environmental, health or safety
matter, which affects the Loan Party or its business, operations or assets or
any properties at which a Loan Party has transported, stored or disposed of any
Hazardous Materials. No Loan Party has any material liability (contingent or
otherwise) in connection with a release, spill or discharge, threatened or
actual, of any Hazardous Materials or the generation, use, storage, treatment,
transportation, manufacture, handling, production or disposal of any Hazardous
Materials.
 
6.20. ERISA Matters.
 
None of the Loan Parties nor any of their respective Subsidiaries sponsors,
maintains, contributes to, or has any obligation to contribute to, and within
the prior six (6) years has not sponsored, maintained, contributed to or had any
obligation to contribute to, any Employee Benefit Plan. None of the Loan Parties
nor any of their respective Subsidiaries has any liability (whether actual,
contingent or otherwise) with respect to a Pension Plan or a Multiemployer Plan.
No ERISA Affiliate of any Loan Party sponsors, maintains, contributes to, or has
any liability (whether actual, contingent or otherwise) with respect to a
Pension Plan, or has any obligation to contribute to or any liability (whether
actual, contingent or otherwise) with respect to any Multiemployer Plan.
 
6.21. Investment Company Act.
 
No Loan Party is an “investment company” or a company “controlled” by an
“investment company” or a “subsidiary” of an “investment company” within the
meaning of the Investment Company Act of 1940.
 
 
-25-

 
 
6.22. AML Laws, Anti-Corruption Laws, Anti-Terrorism Laws and Sanctions.
 
(a)           Each of the Loan Parties has implemented and maintains in effect
policies and procedures designed to ensure compliance by such Loan Party, its
Subsidiaries and their respective directors, officers, employees and agents with
Anti-Corruption Laws, Anti-Terrorism Laws, applicable AML Laws and applicable
Sanctions. None of (i) the Loan Parties or any of their Subsidiaries or any of
their respective directors or officers, or, to the knowledge of the Loan
Parties, any of their respective employees or Affiliates, or (ii) to the
knowledge of the Loan Parties, any agent of a Loan Party (A) is a Sanctioned
Person, or (B) is in violation of AML Laws, Anti-Corruption Laws, Anti-Terrorism
Laws or Sanctions.
 
(b) The use of the proceeds of the Loan by the Borrower will not violate the
Trading with the Enemy Act, or any of the foreign assets control regulations of
the United States Treasury Department (Title 31, Subtitle B, Chapter V of the
U.S.  Code of Federal Regulations, as amended) or any enabling legislation or
executive order relating thereto.
 
(c) No Borrowing, use of proceeds or other transaction contemplated by this
Agreement will cause a violation of AML Laws, Anti-Corruption Laws,
Anti-Terrorism Laws or applicable Sanctions by any Person participating in the
transactions contemplated by this Agreement, whether as lender, borrower,
guarantor, agent or otherwise. Each of the Loan Parties represents that, except
as disclosed in writing to the Lender prior to the date of this Agreement, none
of the Loan Parties nor any of their Subsidiaries, nor, to the knowledge of the
Loan Parties, any of their Affiliates, or and of their members has engaged in or
intends to engage in any dealings or transactions with, or for the benefit of,
any Sanctioned Person or with or in any Sanctioned Country.
 
6.23. Taxes.
 
The Borrower and each other Loan Party has timely filed all federal and state
income tax returns and other material tax returns and reports required by law to
have been filed by it, and the Borrower and each other Loan Party and has paid
all material Taxes and governmental charges due and owing, whether or not shown
on any return or report, except for any such Taxes or charges which are being
diligently contested in good faith by appropriate proceedings and for which
adequate reserves in accordance with GAAP shall have been set aside on its
books. Schedule 6.23 hereto sets forth the entity classification for United
States federal income tax purposes of each Loan Party as of the date hereof.
 
6.24. Collection Accounts.
 
Schedule 1.03 sets forth the Collection Accounts of each Grantor.
 
SECTION 7
AFFIRMATIVE COVENANTS.
 
Until the Termination Date, unless Borrower obtains Lender’s prior written
consent waiving or modifying any of Loan Parties’ covenants hereunder in any
specific instance, each Loan Party covenants and agrees as follows:
 
7.1. Maintenance of Records.
 
Each Loan Party shall at all times keep accurate and complete books, records and
accounts with respect to all of such Loan Party’s business activities, in
accordance with sound accounting practices and GAAP consistently applied, and
shall keep such books, records and accounts, and any copies thereof, only at the
addresses indicated for such purpose on Schedule 6.2.
 
 
-26-

 
 
7.2. Notices.
 
Each Loan Party shall:
 
7.2.1. Locations. Promptly (but in no event less than ten (10) days prior to the
occurrence thereof) notify Lender in writing of the proposed opening of any new
place of business or new location of Collateral, the closing of any existing
place of business or location of Collateral, any change of in the location of
such Loan Party’s books, records and accounts (or copies thereof), the opening
or closing of any post office box, the opening or closing of any bank account
or, if any of the Collateral consists of Goods of a type normally used in more
than one state, the use of any such Goods in any state other than a state in
which such Loan Party has previously advised Lender that such Goods will be
used.
 
7.2.1. Litigation and Proceedings. Promptly upon becoming aware thereof, notify
Lender of any actions or proceedings which are pending or threatened against a
Loan Party in which the claim exceeds one-hundred thousand Dollars ($100,000) or
which might have a Material Adverse Effect and of any Commercial Tort Claims of
Borrower which may arise, which notice shall constitute such Loan Party’s
authorization to amend Exhibit C to add such Commercial Tort Claim.
 
7.2.2. Names and Trade Names. Provide Lender with at least ten (10) days’
advance written notice of the change of its name or the use of any trade name,
assumed name, fictitious name or division name not previously disclosed to
Lender in writing.
 
7.2.3. [Reserved].
 
7.2.4. Environmental Matters. Immediately notify Lender upon becoming aware of
any investigation, proceeding, complaint, order, directive, claim, citation or
notice with respect to any non-compliance with or violation of the requirements
of any Environmental Law by such Loan Party or the generation, use, storage,
treatment, transportation, manufacture handling, production or disposal of any
Hazardous Materials or any other environmental, health or safety matter which
affects such Loan Party or its business operations or assets or any properties
at which such Loan Party has transported, stored or disposed of any Hazardous
Materials unless the foregoing could not reasonably be expected to have a
Material Adverse Effect.
 
7.2.5. Default; Material Adverse Change. Promptly advise Lender of the
occurrence of any event having or causing a Material Adverse Effect or the
occurrence of any Default or Event of Default hereunder.
 
7.2.6. New Subsidiaries of the Borrower, Lazarus Energy or LR&M. Promptly (but
in no event less than ten (10) days prior to the occurrence thereof) notify
Lender of the proposed formation of any new Subsidiary of the Borrower, Lazarus
Energy or LR&M. The Loan Party that is a Parent to the new Subsidiary of the
Borrower, Lazarus Energy, or LR&M shall cause such Subsidiary to become a
Guarantor by executing a Joinder Agreement substantially in the form of Exhibit
E.
 
All of the notices provided for in this section shall be provided by each Loan
Party to Lender in writing in accordance with the provisions of Section 12.4
below.
 
7.3. Compliance with Laws and Maintenance of Permits.
 
Each Loan Party shall maintain all governmental consents, franchises,
certificates, licenses, authorizations, approvals and permits, the lack of which
would have a Material Adverse Effect and each Loan Party shall remain in
compliance with all applicable federal, state, local and foreign statutes,
orders, regulations, rules and ordinances (including, without limitation,
Environmental Laws and statutes, orders, regulations, rules and ordinances
relating to taxes, employer and employee contributions and similar items,
securities, ERISA or employee health and safety) the failure with which to
comply would have a Material Adverse Effect. Following any determination by
Lender that there is non-compliance, or any condition which requires any action
by or on behalf of such Loan Party in order to avoid non-compliance, with any
Environmental Law, at Borrower’s expense cause an independent environmental
engineer acceptable to Lender to conduct such tests of the relevant site(s) as
are appropriate and prepare and deliver a report setting forth the results of
such tests, a proposed plan for remediation and an estimate of the costs
thereof.
 
 
-27-

 
 
7.4. Inspection and Audits.

 
(a)            Each Loan Party shall permit Lender, or any Persons designated by
it, to call at such Loan Party’s places of business at any reasonable times,
and, without hindrance or delay, to inspect the Collateral and to inspect,
audit, check and make extracts from such Loan Party’s books, records, journals,
orders, receipts and any correspondence and other data relating to such Loan
Party’s business, the Collateral or any transactions between the parties hereto,
and shall have the right to make such verification concerning such Loan Party’s
business as Lender may consider reasonable under the circumstances. Each Loan
Party shall furnish to Lender such information relevant to Lender's rights under
this Agreement and the other Loan Documents as Lender shall at any time and from
time to time request. Lender, through its officers, employees or agents shall
have the right, at any time and from time to time, to verify the validity,
amount or any other matter relating to any of such Loan Party’s Accounts and
other Receivables that are Collateral, by mail, telephone, telecopy, electronic
mail, or otherwise.
 
(b) Prior to Closing Date and upon reasonable prior notice by Lender, the Loan
Parties shall permit any representative designated by the Lender to perform, to
the reasonable satisfaction of Lender, engineering, environmental, commercial,
operations and legal due diligence of the Refinery Assets, a review of the
required permits and authorizations, and a review the financial model of Lazarus
of the Refinery Assets.
 
(c) Each Loan Party agrees to provide Lender and its agents with reasonable
access during normal business hours to any officers, employees or directors of
such Loan Party, its Parent and its Affiliates to discuss the affairs, finances
and business of such Loan Party, and to permit discussions of the financial
condition of such Loan Party with such Loan Party’s independent public
accountants. Any such discussions shall be without liability to Lender or to
such Loan Party’s independent public accountants.
 
7.5. Insurance.
 
Each Loan Party shall:
 
7.5.1. Casualty Insurance; Business Interruption Insurance. Keep the Collateral
properly housed and insured for the full insurable value thereof against loss or
damage by fire, theft, explosion, sprinklers, collision (in the case of motor
vehicles) and such other risks as are customarily insured against by Persons
engaged in businesses similar to that of such Loan Party, with such companies,
in such amounts, with such deductibles, and under policies in such form, as
shall be satisfactory to Lender. Original (or certified) copies of such policies
of insurance have been or shall be, within ninety (90) days of the date hereof,
delivered to Lender, together with evidence of payment of all premiums therefor,
and shall contain an endorsement, in form and substance acceptable to Lender,
showing loss under such insurance policies payable to Lender. Such endorsement,
or an independent instrument furnished to Lender, shall provide that the
insurance company shall give Lender at least thirty (30) days written notice
before any such policy of insurance is altered or canceled and that no act,
whether willful or negligent, or default of such Loan Party or any other Person
shall affect the right of Lender to recover under such policy of insurance in
case of loss or damage. In addition, each Loan Party shall cause to be executed
and delivered to Lender an assignment of proceeds of its business interruption
insurance policies. Each Loan Party hereby directs all insurers under all
policies of insurance to pay all proceeds payable thereunder directly to Lender.
Each Loan Party irrevocably makes, constitutes and appoints Lender (and all
officers, employees or agents designated by Lender) as such Loan Party’s true
and lawful attorney (and agent-in-fact) for the purpose of making, settling and
adjusting claims under such policies of insurance, endorsing the name of such
Loan Party on any check, draft, instrument or other item of payment for the
proceeds of such policies of insurance and making all determinations and
decisions with respect to such policies of insurance, provided however, that if
no Event of Default shall have occurred and is continuing, such Loan Party may
make, settle and adjust claims involving less than $100,000 in the aggregate
without Lender's consent.
 
7.5.2. Liability Insurance. Maintain, at its expense, such public liability and
third party property damage insurance as is customary for Persons engaged in
businesses similar to that of such Loan Party with such companies and in such
amounts, with such deductibles and under policies in such form as shall be
satisfactory to Lender and original (or certified) copies of such policies have
been or shall be, within ninety (90) days after the date hereof, delivered to
Lender, together with evidence of payment of all premiums therefor; each such
policy shall contain an endorsement showing Lender as additional insured
thereunder and providing that the insurance company shall give Lender at least
thirty (30) days written notice before any such policy shall be altered or
canceled.
 
7.6. Collateral.
 
Each Loan Party shall keep the Collateral in good condition, repair and order
and shall make all necessary repairs to the Equipment that is Collateral and
replacements thereof so that the operating efficiency and the value thereof
shall at all times be preserved and maintained in all material respects. Each
Loan Party shall permit Lender to examine any of the Collateral at any time and
wherever the Collateral may be located and, such Loan Party shall, immediately
upon request therefor by Lender, deliver to Lender any and all evidence of
ownership of any of the Equipment that is Collateral including, without
limitation, certificates of title and applications of title. Each Loan Party
shall, at the request of Lender, indicate on its records concerning the
Collateral a notation, in form satisfactory to Lender, of the security interest
of Lender hereunder.
 
 
-28-

 
 
7.7. Use of Proceeds.
 
All monies and other property obtained by Borrower from Lender pursuant to this
Agreement shall be used solely for working capital purposes and for other
business purposes of Borrower.
 
7.8. Taxes.
 
Each Loan Party shall file all required tax returns and pay all of its Taxes
when due, subject to any extensions granted by the applicable taxing authority,
including, without limitation, taxes imposed by federal, state or municipal
agencies, and shall cause any liens for Taxes to be promptly released; provided,
that each Loan Party shall have the right to contest the payment of such Taxes
in good faith by appropriate proceedings so long as (i) the amount so contested
is shown on such Loan Party’s financial statements, (ii) adequate reserves for
such Taxes have been set aside in accordance with GAAP, and (iii)  the
contesting of any such payment does not give rise to a lien for Taxes. If such
Loan Party fails to pay any such Taxes and in the absence of any such contest by
such Loan Party, Lender may (but shall be under no obligation to) advance and
pay any sums required to pay any such Taxes and/or to secure the release of any
lien therefor, and any sums so advanced by Lender shall constitute Loans
hereunder, shall be payable by Borrower to Lender on demand, and, until paid,
shall bear interest at the highest rate then applicable to Loans hereunder.
 
7.9. Intellectual Property.
 
Each Loan Party shall maintain adequate licenses, patents, patent applications,
copyrights, service marks, trademarks, trademark applications, tradestyles and
trade names to continue its business as heretofore conducted by it or as
hereafter conducted by it unless the failure to maintain any of the foregoing
could not reasonably be expected to have a Material Adverse Effect.
 
7.10. Deposit Accounts.
 
Each Grantor shall notify Lender in writing thirty (30) days prior to opening
any new Deposit Account or Securities Account and shall enter into a control
agreement satisfactory to Lender for each such Deposit Account or Securities
Account of any Grantor on or before the opening of such Deposit Account or
Securities Account; provided, however, that no control agreement shall be
required in respect of (i) any Deposit Account or Securities Account of LR&M if
no obligor on LR&M Receivables will be directed to make payment of Collections
to such account or (ii) the Green Bank Account.
 
7.11. AML Laws, Anti-Corruption Laws, Anti-Terrorism Laws and Sanctions.
 
(a)            The Loan Parties shall not request any Borrowing, and the Loan
Parties shall not use, and shall cause their Subsidiaries and its or their
respective directors, officers, employees, Affiliates and agents not to use,
directly or indirectly, the proceeds of any Borrowing, or lend, contribute or
otherwise make available such proceeds to any Subsidiary, other Affiliate, joint
venture partner or other Person, (A) in furtherance of an offer, payment,
promise to pay, or authorization of the payment or giving of money, or anything
else of value, to any Person in violation of any Anti-Corruption Laws, AML Laws
or Anti-Terrorism Laws, (B) for the purpose of funding, financing or
facilitating any activities, business or transaction of or with any Sanctioned
Person, or in any Sanctioned Country, or involving any goods originating in or
with a Sanctioned Person or Sanctioned Country, or (C) in any manner that would
result in the violation of any Sanctions by any Person (including any Person
participating in the transactions contemplated hereunder, whether as
underwriter, advisor, lender, investor or otherwise).
 
(b) The Loan Parties shall not fund all or part of any repayment under the Loans
out of proceeds derived from transactions which would be prohibited by AML Laws,
Anti-Terrorism Laws, Anti-Corruption Laws or applicable Sanctions or would
otherwise cause any Person to be in breach of any of the foregoing.
 
(c) The Loan Parties shall ensure, and cause each other Loan Party to ensure,
that no Person who owns a controlling interest in or otherwise controls a Loan
Party is or shall be a Sanctioned Person, and comply, and cause each other Loan
Party to comply, with all applicable Anti-Corruption Laws, AML Laws and
Anti-Terrorism Laws.
 
 
-29-

 
 
7.12. Financial Statements and Reports.
 
(a)            Monthly Reports. The Grantors shall deliver to Lender, in
addition to any other reports, as soon as practicable and in any event:
(i) within ten (10) days after the end of each month, (A) a detailed trial
balance of the Accounts of the Grantors aged per invoice date, in form and
substance reasonably satisfactory to Lender including, without limitation, the
names and addresses of all Account Debtors of the Grantors, and (B) a summary
and detail of accounts payable (such Accounts and accounts payable divided into
such time intervals as Lender may require in its sole discretion), including a
listing of any held checks; and (ii) within ten (10) days after the end of each
month, the general ledger inventory account balance and a perpetual inventory
report, for Borrower by each category of Inventory, together with a description
of the monthly change in each category of Inventory.
 
(b) Financial Statements. The Borrower and each Guarantor shall deliver to
Lender the following financial information, all of which shall be prepared in
accordance with generally accepted accounting principles consistently applied,
and shall be accompanied by a compliance certificate in the form of Exhibit A
hereto: (i) no later than twenty (20) days after each calendar month, copies of
internally prepared financial statements, including, without limitation, balance
sheets and statements of income, retained earnings and cash flow of the Borrower
and each Guarantor, on a consolidated and consolidating basis, certified by the
Chief Financial Officer of each of the Borrower and each Guarantor; and (iii) no
later than ninety (90) days after the end of each of the Fiscal Years of the
Borrower and each Guarantor, audited annual financial statements with an
unqualified opinion by independent certified public accountants selected by the
Borrower and each Guarantor and reasonably satisfactory to Lender, which
financial statements shall be accompanied by (A) a letter from such accountants
acknowledging that they are aware that a primary intent of the Borrower and each
Guarantor in obtaining such financial statements is to influence Lender and that
Lender is relying upon such financial statements in connection with the exercise
of its rights hereunder, provided, that the Borrower and each Guarantor shall
only be required to use their reasonable efforts exercised in good faith to
obtain such letter; and (B) copies of any management letters sent to the
Borrower and each Guarantor by such accountants.
 
(c) Annual Projections of the Borrower and each Guarantor. As soon as
practicable and in any event prior to the beginning of each Fiscal Year, the
Borrower and each Guarantor shall deliver to Lender projected balance sheets,
statements of income and cash flow for the Borrower and each Guarantor, on a
consolidated and consolidating basis for each of the twelve (12) months during
such Fiscal Year, which shall include the assumptions used therein, together
with appropriate supporting details as reasonably requested by Lender.
 
(d) Public Reporting of Blue Dolphin. Promptly upon the filing thereof, Borrower
shall deliver to Lender copies of all registration statements and annual,
quarterly, monthly or other regular reports which Blue Dolphin or any of its
Subsidiaries files with the Securities and Exchange Commission, as well as
promptly providing to Lender copies of any reports and proxy statements
delivered to its shareholders.
 
(e) Other Information. Promptly following request therefor by Lender, such other
business or financial data, reports, appraisals and projections as Lender may
reasonably request.
 
7.13. Commitment Period Reports.
 
During a Commitment Period, the Loan Parties shall provide Lender with (i)
weekly updates regarding the status of negotiations regarding the applicable
commitment and documentation of the refinancing contemplated thereby, (ii)
subject to Lender’s execution of a nondisclosure agreement, if applicable,
copies of all material communications regarding the commitment letter and the
proposed loan set forth therein, and (iii) copies of any final term sheets and
other related documents regarding such commitment or the financing contemplated
thereby within five (5) business days of any Loan Party’s execution of such
documents.
 
7.14. GEL Tex Settlement Agreement.
 
Lazarus Energy shall (a) pay all payments required under the GEL Tex Settlement
Agreement when due and (b) promptly provide Lender with evidence of each such
payment in a form satisfactory to Lender.
 
 
-30-

 
 
7.15. Veritex Lien Release.
 
By June 1, 2019, all liens granted by LR&M to Veritex on the Collateral shall be
released and LR&M shall provide evidence thereof satisfactory to the Lender (the
date of such occurrence, the “Veritex Release Date”); provided that, if such
liens are not released by June 1, 2019, LR&M may elect, in its sole discretion
with notice to the Lender, to instead grant a perfected, first lien security
interest in cash collateral in an amount of no less than $60,000 (which shall be
“Collateral”) on such date; provided, further, that upon providing such
perfected first lien security interest on such collateral, the definition for
the term “LR&M Receivables” shall be deleted in its entirety and replaced with
the following: ““LR&M Receivables” means nothing.”
 
7.16. Green Bank Account.
 
(a) On or before May 17, 2019, Borrower shall transfer the entire balance of
funds in or credited to the Borrower’s account at Green Bank with the account
number 5501265168 as further described in Schedule 1.03 (the “Green Bank
Account”) to the Borrower’s account at Cadence Bank, N.A., a national banking
association, with the account number 5500212658 as further described in Schedule
1.03 (the “Cadence Bank Account”) and provide Lender with evidence thereof
(satisfactory to Lender) on the date of such transfer, (b) after the transfer
described in the preceding clause (a), if, at any time, funds are deposited in
or credited to the Green Bank Account, Borrower shall promptly transfer such
funds to the Cadence Bank Account and provide Lender with evidence thereof
(satisfactory to Lender) on the date of such transfer, (c) on or before May 17,
2019, Borrower shall close the Green Bank Account and provide Lender with
evidence of such closure (satisfactory to Lender) and (d) on each Business Day
until Borrower has closed the Green Bank Account, Borrower shall provide an
electronic screen capture image of the online balance statement for the Green
Bank Account by email to the following address: 
James.Chiu@pilottravelcenters.com.
 
SECTION 8
NEGATIVE COVENANTS.
 
Until the Termination Date, unless Borrower obtains Lender’s prior written
consent waiving or modifying any of Loan Party’s covenants hereunder in any
specific instance (which consent may be provided by email), each Loan Party
(other than Blue Dolphin) (each, a “Covenant Party”) agrees as follows:
 
8.1. [Reserved.]
 
8.2.            Indebtedness.
 
No Covenant Party shall create, incur, assume or become obligated (directly or
indirectly), for any Debt other than the Loans, except that Borrower and the
other Covenant Parties may (i) maintain their present indebtedness listed on
Schedule 1.01 hereto; (ii) incur unsecured indebtedness to trade creditors in
the ordinary course of business; (iii) incur indebtedness under Affiliate
Funding Transactions; (iv) incur purchase money indebtedness or capitalized
lease obligations in the ordinary course of business in an aggregate principal
amount not to exceed two million Dollars ($2,000,000); and (v) incur
indebtedness under the Loan Documents.
 
8.3. Liens.
 
No Covenant Party shall grant or permit to exist (voluntarily or involuntarily)
any lien, claim, security interest or other encumbrance whatsoever on any of its
assets (other than margin stock) other than Permitted Liens, and no Loan Party
shall grant or permit to exist (voluntarily or involuntarily) any lien, claim,
security interest or other encumbrance whatsoever on any Collateral other than
Permitted Liens set forth in clauses (a) through (f) of the definition thereof
and, until the Veritex Release Date, liens of Veritex on the LR&M Collateral
granted by LR&M.
 
8.4. Mergers, Sales, Acquisitions, Subsidiaries and Other Transactions Outside
the Ordinary Course of Business.
 
No Covenant Party shall (i) enter into any merger or consolidation; (ii) change
the state of such Covenant Party’s organization or enter into any transaction
which has the effect of changing such Covenant Party’s state of organization;
(iii) sell, lease or otherwise dispose of any of its assets other than in the
ordinary course of business or as permitted under Section 8.15 hereto;
(iv) purchase the stock, other Equity Interests or all or a material portion of
the assets of any Person or division of such Person; or (v) enter into any other
transaction outside the ordinary course of such Covenant Party’s business,
including, without limitation, any purchase, redemption or retirement of any
shares of any class of its stock or any other Equity Interest, and any issuance
of any shares of, or warrants or other rights to receive or purchase any shares
of, any class of its stock or any other Equity Interest. No Covenant Party shall
enter into any joint ventures or partnerships with any other Person.
 
 
-31-

 
 
8.5. Restricted Payments.
 
No Covenant Party shall declare or pay, directly or indirectly, any Restricted
Payment, or incur any obligation (contingent or otherwise) to do so, except
that, so long as no Event of Default shall have occurred and be continuing at
the time of payment thereof, Permitted Tax Distributions may be declared or
paid.
 
8.6. Investments; Loans.
 
No Covenant Party shall purchase or otherwise acquire, or contract to purchase
or otherwise acquire, the obligations or stock of any Person, other than direct
obligations of the United States, obligations insured by the Federal Deposit
Insurance Corporation and obligations unconditionally guaranteed by the United
States; nor shall Covenant Party lend or otherwise advance funds to any Person
except for advances made to employees, officers and directors for travel and
other expenses arising in the ordinary course of business and Affiliate Funding
Transactions.
 
8.7. Prepayment of Subordinated Debt.
 
The Covenant Parties will not, and will not permit any of their Subsidiaries to,
purchase, redeem, retire, or otherwise acquire for value, or set apart any money
for a sinking, defeasance or other analogous fund for the purchase, redemption,
retirement, or other acquisition of, or make any voluntary payment or prepayment
of the principal of or interest on, or any other amount owning in respect of,
any Debt that is subordinate to the Obligations, except for (a) regularly
scheduled payments, prepayments, or redemptions of principal and interest in
respect thereof required pursuant to the instruments evidencing such Debt, (b)
extensions, renewals, and refinancings thereof permitted under Section 8.2
above, and (c) dispositions permitted under Section 8.15(a).
 
8.8. Sale Leasebacks.
 
The Covenant Parties will not, directly or indirectly, enter into any
arrangement providing for the sale or transfer of property, real or personal,
used or useful in the business of any of the Covenant Parties, whether now owned
or hereafter acquired, and thereafter rent or lease such property or other
property that any of them intend to use for substantially the same purpose or
purposes as the property sold or transferred.
 
8.9. Fundamental Changes, Accounting Changes, Line of Business.
 
No Covenant Party shall (i) amend its organizational documents or change its
Fiscal Year or make any change in accounting treatment or reporting except as
required by GAAP unless (w) such actions would not have a Material Adverse
Effect; (x) such actions would not affect the obligations of such Covenant Party
to Lender; (y) such actions would not adversely affect the interpretation of any
of the terms of this Agreement or the other Loan Documents and (z) Lender has
received ten (10) days prior written notice of such amendment or change or (ii)
enter into a new line of business materially different from such Covenant
Party’s current business. No Covenant Party shall change its entity
classification for United States federal income tax purposes from that set forth
on Schedule 6.23 without prior written notice to, and consent of, Lender.
 
8.10. Equipment.
 
Borrower shall not (i) permit any Equipment that is Collateral to become a
Fixture to real property unless such real property is owned by Borrower and is
subject to a mortgage in favor of Lender, or if such real estate is leased, is
subject to a landlord's agreement in favor of Lender on terms acceptable to
Lender, or (ii) permit any Equipment that is Collateral to become an accession
to any other personal property unless such personal property is subject to a
first priority lien in favor of Lender.
 
 
-32-

 
 
8.11. Affiliate Transactions.
 
Except as set forth on Schedule 6.8 hereto or as permitted under Sections 6.3 or
8.5 hereof, no Covenant Party shall conduct, permit or suffer to be conducted,
transactions with Affiliates other than Affiliate Funding Transactions,
transactions for the purchase or sale of Inventory or services in the ordinary
course of business pursuant to terms that are no less favorable to such Covenant
Party than the terms upon which such transactions would have been made had they
been made to or with a Person that is not an Affiliate or transfers of items to
the Borrower for no consideration.
 
8.12. Settling of Accounts.
 
No Grantor shall settle or adjust any Account that is Collateral without the
consent of Lender.
 
8.13. Management Fees; Compensation.
 
Borrower shall not pay any management or consulting fees to any Persons, or pay
annual aggregate compensation, whether as salary, bonus or otherwise, to all
directors or officers of such Borrower in excess of $70,000. The aggregate
annual compensation amount(s) shall be adjusted each year for the net addition
or loss of directors or officers.
 
8.14. Restrictive Agreements.
 
Except as set forth on Schedule 8.14, no Covenant Party shall enter into any
agreement prohibiting or otherwise restricting the creation or assumption of any
lien in favor of the Lender upon the properties, revenues or assets of such
Covenant Party, whether now owned or hereafter acquired, except restrictions
existing by reason of:
 
(a) restrictions imposed by applicable law;
 
(b) any restrictions imposed by any agreement relating to secured Debt permitted
by this Agreement to the extent that such restrictions apply only to the
property or assets securing such Debt;
 
(c) customary provisions contained in leases or licenses of intellectual
property and other similar agreements entered into in the ordinary course of
business;
 
(d) customary provisions restricting subletting or assignment of any lease
governing a leasehold interest and not for the purpose of avoiding the
restrictions imposed by this Section 8.14;
 
(e) customary provisions restricting assignment of any agreement entered into in
the ordinary course of business and not for the purpose of avoiding the
restrictions imposed by this Section 8.14;
 
(f) customary restrictions and conditions contained in any agreement relating to
the sale of any asset permitted under Section 8.15 hereto pending the
consummation of such sale;
 
(g) contractual encumbrances or restrictions contained in any agreement in
respect of permitted unsecured Debt so long as such encumbrances or restrictions
permit the liens granted to secure the Obligations;
 
(h) customary restrictions and conditions contained in the documents relating to
any lien, so long as: (i) such lien is permitted hereunder and such restrictions
or conditions relate only to the specific asset subject to such lien; and
(ii) such restrictions and conditions are not created for the purpose of
avoiding the restrictions imposed by this Section 8.14;
 
The foregoing prohibitions shall not apply to restrictions contained in any Loan
Document or Commodity Transaction Document.
 
 
-33-

 
 
8.15. Dispositions.
 
No Covenant Party shall dispose of any of such Covenant Party’s assets (other
than margin stock), including (i) Equity Interests and (ii) Receivables that are
Collateral, to any Person in one transaction or a series of transactions, unless
such disposition is:
 
(a) sales of crude oil by Borrower to Lazarus Energy at a price no less than the
price paid by Borrower for such crude oil and not to exceed the price paid by
the Borrower plus $0.50 per barrel;
 
(b) of inventory or obsolete, damaged, worn out, or surplus assets disposed of
in the ordinary course of business;
 
(c) of cash equivalent investments in the ordinary course of business;
 
(a) in respect of investments permitted under Section 8.6 hereto; Permitted
Liens permitted pursuant to Section 8.3 (to the extent that the granting of any
such lien would constitute a disposition); or Restricted Payments permitted
under Section 8.5;
 
(b) for cash or cash equivalents and for fair market value, in an aggregate
amount not to exceed one hundred thousand Dollars ($100,000) during the term of
this Agreement; and
 
(c) leases, granting of easements, or subleases of real or personal property in
the ordinary course of business that could not reasonably be expected, either
individually or in the aggregate, to materially and adversely impact the
operation of the Refinery Assets taken as a whole.
 
8.16. ERISA.
 
No Loan Party shall, nor shall any Loan Party permit any of its Subsidiaries to,
sponsor, maintain, contribute to, or incur any liability (whether actual,
contingent or otherwise) with respect to any Employee Benefit Plan, including a
Pension Plan or a Multiemployer Plan.  No Loan Party shall permit any ERISA
Affiliate to sponsor, maintain, contribute to, or have any liability (whether
actual, contingent or otherwise) with respect to a Pension Plan, or to have an
obligation to contribute to or have any liability (whether actual, contingent or
otherwise) with respect to a Multiemployer Plan.
 
SECTION 9
DEFAULT.
 
The occurrence of any one or more of the following events shall constitute an
“Event of Default” by Borrower hereunder:
 
9.1. Payment.
 
The failure of any Loan Party to (i) pay any principal of or interest on the
Loans when due in accordance with the terms hereof or (ii) pay any other amount
payable hereunder or under any other Loan Document if such failure is not
remedied within (x) during a Commitment Period, ten (10) Business Days and (y)
otherwise, five (5) Business Days.
 
9.2. Breach of this Agreement and the other Loan Documents.
 
The failure of any Loan Party to perform, keep or observe any of the covenants,
conditions, promises, agreements or obligations of such Loan Party under this
Agreement or any of the other Loan Documents (a) set forth in Section 7.2, 7.5
7.10, 7.12, 7.13 or 7.14 of this Agreement or in Section 8 of this Agreement or
(b) otherwise, if such failure is not remedied on or before (i) during a
Commitment Period, fifteen (15) Business Days and (ii) otherwise, five (5)
Business Days, in each case, after notice of such failure is given to Borrower;
provided that any such failure by a Loan Party under subsections 7.2.1 and 7.2.3
of this Agreement shall not constitute an Event of Default hereunder until the
fifteenth (15th) day following the occurrence thereof.
 
 
-34-

 
 
9.3. Breaches of Other Obligations.
 
The failure of any Loan Party to perform, keep or observe (after any applicable
notice and cure period) any of the covenants, conditions, promises, agreements
or obligations of such Loan Party (other than a covenant not to incur liens on
margin stock) under (a) any agreement with any Person other than the Loan
Documents or the Commodity Transaction Documents if such failure could
reasonably be expected to have a Material Adverse Effect and such failure is not
remedied within (i) during a Commitment Period, fifteen (15) Business Days and
(ii) otherwise, five (5) Business Days, in each case, after notice of such
failure is given to Borrower, or (b) any Commodity Transaction Document and such
failure is not remedied within five (5) Business Days after notice of such
failure is given to Borrower.
 
9.4. Breach of Representations and Warranties.
 
The making or furnishing by any Loan Party to Lender of any representation,
warranty, certificate, schedule, report or other communication within or in
connection with this Agreement or the other Loan Documents or in connection with
any other agreement between such Loan Party and Lender, which is untrue or
misleading in any material respect as of the date made. Any Event of Default
under this Section 9.4 shall be deemed cured at such time as the applicable
representation, warranty, certificate, schedule, report or other communication
becomes true in all respects if none of the Loan Parties or the Lender suffered
any uncured harm as a result of the facts and circumstances that made the
representation, warranty, certificate, schedule, report or other communication
untrue or misleading.
 
9.5. Loss of Collateral.
 
The loss, theft, damage or destruction of any of the Collateral in an amount in
excess of five hundred thousand Dollars ($500,000) in the aggregate for all such
events during any Fiscal Year as determined by Lender in its sole discretion
determined in good faith, or (except as permitted hereby) sale, lease or
furnishing under a contract of service of, any of the Collateral.
 
9.6. Levy, Seizure or Attachment.
 
The making or any attempt by any Person to make any levy, seizure or attachment
upon any of the Collateral in excess of five hundred thousand Dollars
($500,000).
 
9.7. Bankruptcy or Similar Proceedings.
 
The commencement of any proceedings in bankruptcy by or against any Loan Party
or for the liquidation or reorganization of any Loan Party, or alleging that
such Loan Party is insolvent or unable to pay its debts as they mature, or for
the readjustment or arrangement of any Loan Party 's debts, whether under the
United States Bankruptcy Code or under any other law, whether state or federal,
now or hereafter existing, for the relief of debtors, or the commencement of any
analogous statutory or non-statutory proceedings involving any Loan Party;
provided, however, that if such commencement of proceedings against such Loan
Party is involuntary, such action shall not constitute an Event of Default
unless such proceedings are not dismissed within forty-five (45) days after the
commencement of such proceedings.
 
9.8. Appointment of Receiver.
 
The appointment of a receiver or trustee for any Loan Party, for any of the
Collateral or for any substantial part of any Loan Party’s assets or the
institution of any proceedings for the dissolution, or the full or partial
liquidation, or the merger or consolidation, of any Loan Party which is a
corporation, limited liability company or a partnership; provided, however, that
if such appointment or commencement of proceedings against such Loan Party is
involuntary, such action shall not constitute an Event of Default unless such
appointment is not revoked or such proceedings are not dismissed within
forty-five (45) days after the commencement of such proceedings.
 
 
-35-

 
 
9.9. Judgment.
 
The entry of any judgments or orders aggregating in excess of five hundred
thousand Dollars ($500,000) against any Loan Party which remains unsatisfied or
undischarged and in effect for thirty (30) days after such entry without a stay
of enforcement or execution.
 
9.10. Dissolution of Loan Party.
 
The dissolution of any Loan Party.
 
9.11. Default or Revocation of Guaranty.
 
The occurrence of an event of default under, or the revocation or termination
of, any agreement, instrument or document executed and delivered by any Loan
Party to Lender pursuant to which such Loan Party has guaranteed to Lender the
payment of all or any of the Obligations or has granted Lender a security
interest in or lien upon some or all of such Loan Party's real and/or personal
property to secure the payment of all or any of the Obligations.
 
9.12. Criminal Proceedings.
 
(a) The institution in any court of a criminal proceeding against any Loan Party
which would have a Material Adverse Effect, (b) the indictment of any officer of
a Loan Party, for any crime which would have a Material Adverse Effect or (c)
the indictment of any Loan Party for any crime.
 
9.13. Change of Control.
 
The failure of (i) Lazarus to own and have voting control of at least
seventy-nine percent (79%) of the issued and outstanding voting Equity Interests
of Blue Dolphin; (ii) Blue Dolphin to own and have voting control of one hundred
percent (100%) of the issued and outstanding voting Equity Interests of each of
the Borrower and LR&M; (iii) the Borrower to own and have voting control of at
least one hundred percent (100%) of the issued and outstanding voting Equity
Interests of each Subsidiary of the Borrower, if any; or (iv) LR&M to own and
have voting control of at least one hundred percent (100%) of the issued and
outstanding voting Equity Interests of each Subsidiary of LR&M, if any.
 
9.14. Material Adverse Change.
 
The occurrence and continuation of any Material Adverse Effect.
 
SECTION 10
REMEDIES UPON AN EVENT OF DEFAULT.
 
10.1. Acceleration.
 
Upon the occurrence and during the continuance of an Event of Default described
in Sections 9.7 or 9.8 hereof, all of the Obligations shall immediately and
automatically become due and payable, without notice of any kind. Upon the
occurrence and during the continuation of any other Event of Default, the
Lender, by notice to the Borrower, may take any or all of the following actions,
at the same or different times: (i) declare the Loans then outstanding to be
forthwith due and payable in whole or in part, whereupon the principal of the
Loans so declared to be due and payable, together with accrued interest thereon
and any unpaid accrued fees and all other liabilities of the Borrower accrued
hereunder and under any other Loan Document, shall become forthwith due and
payable, without presentment, demand, protest or any other notice of any kind,
all of which are hereby expressly waived by the Borrower, anything contained
herein or in any other Loan Document to the contrary notwithstanding; and (ii)
exercise any rights and remedies provided to the Lender under this Agreement,
any other Loan Documents (subject to the restrictions referred to therein) or at
law or at equity.
 
 
-36-

 
 
10.2. Other Remedies.
 
Upon the occurrence and during the continuance of an Event of Default, Lender
may exercise from time to time any rights and remedies available to it under the
Uniform Commercial Code and any other applicable law in addition to, and not in
lieu of, any rights and remedies expressly granted in this Agreement or in any
of the other Loan Documents and all of Lender's rights and remedies shall be
cumulative and non-exclusive to the extent permitted by law. In particular, but
not by way of limitation of the foregoing, Lender may, without notice, demand or
legal process of any kind, take possession of any or all of the Collateral (in
addition to Collateral of which it already has possession), wherever it may be
found, and for that purpose may pursue the same wherever it may be found, and
may enter onto any of each Loan Party’s premises where any of the Collateral may
be, and search for, take possession of, remove, keep and store any of the
Collateral until the same shall be sold or otherwise disposed of, and Lender
shall have the right to store the same at any of Loan Party’s premises without
cost to Lender. At Lender's request, each Loan Party shall, at Borrower’s
expense, assemble the Collateral and make it available to Lender at one or more
places to be designated by Lender and reasonably convenient to Lender and Loan
Parties. Each Loan Party recognizes that if a Loan Party fails to perform,
observe or discharge any of its Obligations under this Agreement or the other
Loan Documents, no remedy at law will provide adequate relief to Lender, and
agrees that Lender shall be entitled to temporary and permanent injunctive
relief in any such case without the necessity of proving actual damages. Any
notification of intended disposition of any of the Collateral required by law
will be deemed to be a reasonable authenticated notification of disposition if
given at least ten (10) days prior to such disposition and such notice shall
(i) describe Lender and such Loan Party, (ii) describe the Collateral that is
the subject of the intended disposition, (iii) state the method of the intended
disposition, (iv) state that such Loan Party is entitled to an accounting of the
Obligations and state the charge, if any, for an accounting and (v) state the
time and place of any public disposition or the time after which any private
sale is to be made. Lender may disclaim any warranties that might arise in
connection with the sale, lease or other disposition of the Collateral and has
no obligation to provide any warranties at such time. Any Proceeds of any
disposition by Lender of any of the Collateral may be applied by Lender to the
payment of expenses in connection with the Collateral, including, without
limitation, legal expenses and reasonable attorneys' fees, and any balance of
such Proceeds and all other payments received by Lender during the continuance
of an Event of Default may be applied by Lender toward the payment of such of
the Obligations, and in such order of application, as Lender may from time to
time elect.
 
SECTION 11
CONDITIONS PRECEDENT.
 
11.1. Conditions to Loans.
 
The obligation of Lender to fund the Loans is subject to the satisfaction or
waiver (each in form and substance satisfactory to the Lender in its sole
discretion) of the following conditions precedent on or before the date falling
one month after the date of this Agreement (the “Outside Date”) (and “Closing
Date” is the first Business Day on or before the Outside Date on which all such
conditions precedent have been satisfied or waived (in form and substance
satisfactory to the Lender in its sole discretion), as applicable). If the
conditions set forth in this Section 11.1 are not satisfied or waived (in form
and substance satisfactory to the Lender in its sole discretion) by the Outside
Date, then (x) the obligation of the Lender to fund the Loans shall not become
effective, (y) the Lender's commitments under this Agreement shall automatically
terminate without further action by any party hereto, and (z) the Maturity Date
shall be deemed to be the Outside Date:
 
(a) Lender shall have received (i) a copy of the certificate of formation,
including all amendments thereto, of Borrower, certified as of a recent date by
the Secretary of State of the State of Delaware; (ii) a certificate as to the
good standing of Borrower as of a recent date from such Secretary of State of
the State of Delaware; and (iii) a certificate of the Secretary or Assistant
Secretary or other authorized officer of Borrower dated as of the Closing Date
and certifying: (A) that attached thereto is a true and complete copy of the
constitutive documents of Borrower as in effect on the Closing Date, (B) that
attached thereto is a true and complete copy of the written consent duly adopted
by an authorized officer of the sole member of the Borrower authorizing the
execution, delivery and performance of the Loan Documents to which Borrower is a
party, (C) that such written consent has not been modified, rescinded or amended
and is in full force and effect, (D) that the certificate of formation of
Borrower has not been amended since the date of the last amendment thereto shown
on the certificate of good standing furnished pursuant to clause (ii) above, and
(E) as to the incumbency and specimen signature of each officer executing any
Loan Document or any other document delivered in connection herewith on behalf
of Borrower;
 
(b) Lender shall have received (i) a copy of the certificate of formation,
including all amendments thereto, of each Guarantor and Grantor, certified as of
a recent date by the Secretary of State of the State of Delaware; (ii) a
certificate as to the good standing of each Guarantor and Grantor as of a recent
date from such Secretary of State of the State of Delaware; and (iii) a
certificate of the Secretary or Assistant Secretary or other authorized officer
of each Guarantor and Grantor dated as of the Closing Date and certifying: (A)
that attached thereto is a true and complete copy of the constitutive documents
of such Guarantor and/or Grantor as in effect on the Closing Date, (B) that
attached thereto is a true and complete copy of the written consent duly adopted
by the sole Member or Board (as applicable) of such Guarantor and/or Grantor
authorizing the execution, delivery and performance of the Loan Documents to
which such Guarantor and/or Grantor is a party, (C) that such written consent
has not been modified, rescinded or amended and is in full force and effect,
(D) that the certificate of formation of such Guarantor and/or Grantor has not
been amended since the date of the last amendment thereto shown on the
certificate of good standing furnished pursuant to clause (ii) above, and (E) as
to the incumbency and specimen signature of each officer executing any Loan
Document or any other document delivered in connection herewith on behalf of
such Guarantor and/or Grantor;
 
 
-37-

 
 
(c) [Reserved];
 
(d) except as set forth on Schedule 11.1(d), since December 31, 2018, no event
shall have occurred which has had or could reasonably be expected to have a
Material Adverse Effect on any Loan Party, its lines of business or the markets
in which such Person operates or in the ownership, control and/or management of
any Loan Party, as determined by Lender in its sole discretion and in good faith
(it being agreed for the purpose of this Section 11.1(d) that a Material Adverse
Effect includes the Refinery Assets (i) not producing refined products for a
period of five (5) consecutive days, or (ii) being shut down or ceasing to
operate for a period of one (1) day, in each case as determined by the Lender in
its sole discretion);
 
(e) Lender shall have received payment in full of all fees and expenses payable
to it by Borrower or any other Person in connection herewith, on or before
disbursement of the Loans hereunder;
 
(f) each Loan Party shall have duly executed and delivered to Lender the
following documents, each in form and substance satisfactory to the Lender in
its sole discretion:
 
(i) this Agreement;
 
(ii) the Pledge Agreement;
 
(iii) a one-year crude supply agreement automatically renewed for successive
terms of one year, dated on or about the date hereof, between the Lender as
seller and Lazarus Energy as buyer (the “Crude Supply  Agreement”);
 
(iv) a one-year master purchase and sale agreement, dated on or about the date
hereof, between the Lender and Lazarus (including any confirmations thereunder,
the “Jet Fuel Master Agreement”);
 
(v) a one-year crude storage lease dated on or about the date hereof, between
the Lender as customer and the Borrower as terminal (the “Crude Storage Lease”);
 
(vi) a one-year jet storage lease dated on or about the date hereof, between the
Lender as customer and the Borrower as terminal (the “Jet Storage Lease”);
 
(vii) (i) a jet fuel purchase agreement dated on or about the date hereof
between the Lender as buyer and the Lazarus as seller, and (ii) a jet fuel sale
agreement dated on or about the date hereof between the Lender as seller and
Lazarus as buyer (together the “Jet Inventory Purchase and Sale Agreements”);
 
(viii) a parent guaranty from Blue Dolphin guaranteeing certain obligations
under the Crude Supply Agreement (the “Blue Dolphin Parent Guarantee”);
 
(ix) a letter agreement dated on or about the date hereof between the Borrower,
Lazarus Energy, LR&M and the Lender (the “NPS Exclusivity Letter”);
 
(x) a consent and assignment agreement for the benefit of the Lender dated as of
the date hereof among the Borrower, Lazarus Energy, and the Lender (the “Consent
and Assignment Agreement (Storage Tank Lease)”) in relation to the Storage Tank
Lease Agreement effective as of June 1, 2018 between Lazarus Energy and the
Borrower;
 
(xi) a consent and assignment agreement for the benefit of the Lender dated as
of the date hereof among the Borrower, Haltermann Solutions and the Lender (the
“Consent and Assignment Agreement (Haltermann MSA)”) in relation to the Master
Service Agreement effective as of January 1, 2018 between Haltermann Solutions
and the Borrower; and
 
 
-38-

 
 
(xii) amendments, subordinations, notes, forbearances, consents, and such other
agreements from each of the following parties as may be required by the Lender
in its sole discretion, in form and substance acceptable to Lender
(collectively, the “Related Party Agreements”):
 
(A) Veritex Community Bank (“Veritex”);
 
(B) GEL Tex Marketing, LLC (“GEL Tex”);
 
(C) Notre Dame Investors, Inc.; and
 
(D) all other holders of Debt of the Loan Parities set forth on Schedule 1.01
other than Affiliates of Loan Parties;
 
(xiii) A Subordination Agreement in form and substance satisfactory to the
Lender from each Affiliate of a Loan Party (other than any other Loan Party)
that is a holder of Existing Indebtedness of a Loan Party (which, for the
avoidance of doubt, shall not restrict or subordinate Affiliate Funding
Transactions that are (A) extensions of credit by Lazarus to, or (B) payments by
Lazarus in exchange for such extensions of credit on account, any other Loan
Party);
 
(xiv) control agreements in respect of each account listed on Schedule 1.03,
other than the Green Bank Account;
 
(xv) any other documents, instruments and agreements which Lender determines are
reasonably necessary to consummate the transactions contemplated hereby;
 
(g) as of the date hereof and at the time of and immediately after giving effect
to each Borrowing, no Default or Event of Default shall exist at the time of or
result from such funding, grant or pledge;
 
(h) as of the date hereof and at the time of and immediately after giving effect
to each Borrowing, the representations and warranties of each Loan Party in this
Agreement and the other Loan Documents shall be true and correct in all material
respects (except for representations and warranties that expressly relate to an
earlier date which must be true and correct as of such earlier date);
 
(i) there is no action or proceeding from a Governmental Authority and no Person
has initiated litigation that is pending or has been threatened in writing
against a Loan Party which is reasonably likely to prevent any Loan Party from
continuing operations;
 
(j) this Agreement and the Pledge Agreement shall be in full force and effect on
the date hereof through the Closing Date, as applicable, and the Lender shall
have a perfected security interest in the Collateral of the type and priority
described in this Agreement and the Pledge Agreement;
 
(k) the Lender shall have received the Notice of Borrowing for any Loans made as
of the Closing Date as contemplated by Section 2.3 above;
 
(l) [Reserved];
 
(m) the Lender shall have received a copy of an amendment to the Settlement
Agreement, dated as of July 20, 2018, among GEL Tex Marketing, LLC, Lazarus
Energy, Blue Dolphin, Lazarus, the Borrower, Carroll & Company Financial
Holdings, L.P. and Jonathan Carroll (as amended pursuant to the First Amendment
to the Settlement Agreement dated as of October 17, 2018, the Second Amendment
to the Settlement Agreement dated as of November 15, 2018, the Third Amendment
to the Settlement Agreement dated as of December 19, 2018, and the Fourth
Amendment to the Settlement Agreement dated as of March 19, 2019, and as further
amended, supplemented or otherwise modified from time to time, the “GEL Tex
Settlement Agreement”) in form and substance satisfactory to Lender in its sole
discretion;
 
 
-39-

 
 
(n) the Lender shall have received copies of all consents from third parties,
including Veritex and GEL Tex (which may be in the form of an amendment to the
GEL Tex Settlement Agreement specifically authorizing the Loan Parties to enter
into the Loan Documents), which are required for the Loan Parties to enter into
the Loan Documents, as determined by Lender in its sole discretion and in good
faith;
 
(o) the Lender shall have received (i) a duly executed release agreement (in
form and substance satisfactory to the lender in its sole discretion) in respect
of any liens or other encumbrances granted in favor of any Person in respect of
the Collateral, and (ii) satisfactory evidence that any lien filings, fixture
filings or other filings in respect of any such liens and encumbrances have been
terminated or amended to exclude the Collateral from the collateral description
therein (the form of any such amendment to be pre-approved by the Lender), and
(iii) satisfactory lien search results;
 
(p) the Lender shall have received a copy of an IRS Form W-9 in respect of the
Borrower; and
 
(q) the Lender shall have received a certified copy of each of the following:
(i) a crude purchase contract between the Borrower and Lazarus Energy, (ii) a
Subordination and Attornment Agreement between Borrower, Lazarus Energy and
Veritex Community Bank, and (iii) a Tank Access Agreement between Lender and
Veritex.
 
SECTION 12
MISCELLANEOUS.
 
12.1. Assignments; Participations.
 
12.1.1.    Assignments.
 
(a) Lender may at any time assign to one or more Persons (any such Person, an
“Assignee”) all or any portion of its Loans or its commitment to make advances
under the Line of Credit, without consent of Borrower. Any such assignment shall
be made with prior written notice to Borrower and delivery to Borrower of an
Assignment Agreement that identifies the Assignee, its address, its U.S. tax
identification number, if any, and any requisite documentation required by
Section 12.2 and the principal amount of the Loans and interest owing thereon
assigned to Assignee. Borrower shall maintain a copy of each such notice and
Assignment Agreement delivered to it and register (the “Register”) for the
recordation of names and addresses of the Lenders and the commitment of, and
principal amount and interest thereon of each Loan assigned to each Lender from
time to time and whether such Lender is the original Lender or the Assignee. No
assignment shall be effective unless and until the Assignment Agreement is
accepted and registered in the Register. All records of transfer of a Lender's
interest in the Register shall be conclusive, absent manifest error, as to the
ownership of the interests in the Loans. The parties hereto agree and intend
that the Loans shall be treated as being in “registered form” for the purposes
of the Code, and the Register shall be maintained in accordance with such
intention. Each Lender granting a participation shall, as a non-fiduciary agent
of the Borrower, maintain a register containing information similar to that of
the Register in a manner such that the Loans hereunder are in “registered form”
for the purposes of the Code. To the extent Lender assigns all or a portion of
the Loans and commitments hereunder, Borrower and the other Loan Parties hereby
agree to execute such amendments and/or restatements of this agreement and the
other Loan Documents to reflect the existence of an administrative agent for the
Lenders and/or reflect tax provisions to protect any foreign lenders.
 
(b) From and after the date on which the conditions described above have been
met, (i) such Assignee shall be deemed automatically to have become a party
hereto and, to the extent that rights and obligations hereunder have been
assigned to such Assignee pursuant to an assignment agreement between Lender and
the Assignee, shall have the rights and obligations of Lender hereunder and (ii)
Lender, to the extent that rights and obligations hereunder have been assigned
by it pursuant to such Assignment Agreement, shall be released from its rights
(other than its indemnification rights) and obligations hereunder. Upon the
request of the Assignee (and, as applicable, Lender) pursuant to an effective
assignment agreement, Borrower shall execute and deliver to the Assignee (and,
as applicable, Lender) a note in the principal amount of the principal amount of
the Assignee's Loans (and, as applicable, a note in the principal amount of the
pro rata share of the principal amount of the Loans retained by Lender). Each
such note shall be dated the effective date of such assignment. Upon receipt by
Lender of such note, Lender shall return to Borrower any prior note held by it.
 
(c) Lender may at any time pledge or assign a security interest in all or any
portion of its rights under this Agreement to secure obligations of Lender,
including any pledge or assignment to secure obligations to a Federal Reserve
Bank, and this Section shall not apply to any such pledge or assignment of a
security interest; provided that no such pledge or assignment of a security
interest shall release Lender from any of its obligations hereunder or
substitute any such pledgee or assignee for Lender as a party hereto.
 
 
-40-

 
 
12.1.2. Participations. Lender may at any time sell to one or more Persons
participating interests in its Loans, commitment to make advance under the Line
of Credit or other interests hereunder (any such Person, a “Participant”). In
the event of a sale by Lender of a participating interest to a Participant, (a)
Lender's obligations hereunder shall remain unchanged for all purposes, (b)
Borrower shall continue to deal solely and directly with Lender in connection
with Lender's rights and obligations hereunder and (c) all amounts payable by
Borrower shall be determined as if Lender had not sold such participation and
shall be paid directly to Lender. Each Loan Party agrees that, if amounts
outstanding under this Agreement are due and payable (as a result of
acceleration or otherwise), each Participant shall be deemed to have the right
of set-off in respect of its participating interest in amounts owing under this
Agreement to the same extent as if the amount of its participating interest were
owing directly to it as Lender under this Agreement; provided that such right of
set-off shall be subject to the obligation of each Participant to share with
Lender, and Lender agrees to share with each Participant, on a pro rata basis.
Each Loan Party also agrees that each Participant shall be entitled to the
benefits of Sections 2.13 and 2.15 as if it were Lender; provided that on the
date of the participation no Participant shall be entitled to any greater
compensation pursuant to Sections 2.13 and 2.15 than would have been paid to
Lender on such date if no participation had been sold, except to the extent such
entitlement to receive a greater payment results from a Change in Law that
occurs after the Participant acquired the applicable participation. Lender,
acting solely for this purpose as a non-fiduciary agent of Borrower, shall
maintain a register on which it enters the name and address of each Participant
and the principal amounts (and stated interest) of each Participant’s interest
in the Loans or other obligations under the Loan Documents (the “Participant
Register”); provided that Lender shall not have any obligation to disclose all
or any portion of the Participant Register (including the identity of any
Participant or any information relating to a Participant’s interest in any
commitments, loans, letters of credit or its other obligations under any Loan
Document) to any Person except to the extent that such disclosure is necessary
to establish that such commitment, loan, letter of credit or other obligation is
in registered form under Section 5f.103-1(c) of the United States Treasury
Regulations. The entries in the Participant Register shall be conclusive absent
manifest error, and such Lender shall treat each Person whose name is recorded
in the Participant Register as the owner of such participation for all purposes
of this Agreement notwithstanding any notice to the contrary.
 
12.2. Customer Identification - USA Patriot Act Notice.
 
Lender (for itself and not on behalf of any other party) hereby notifies the
Loan Parties that, pursuant to the requirements of the USA Patriot Act, Title
III of Pub. L. 107-56, signed into law October 26, 2001 (the “USA Patriot Act”),
it is required to obtain, verify and record information that identifies the Loan
Parties, which information includes the name and address of the Loan Parties and
other information that will allow Lender, as applicable, to identify the Loan
Parties in accordance with the Act.
 
12.3. Indemnification by Borrower.
 
IN CONSIDERATION OF THE EXECUTION AND DELIVERY OF THIS AGREEMENT AND THE
AGREEMENT TO EXTEND THE COMMITMENTS PROVIDED HEREUNDER, EACH LOAN PARTY HEREBY
AGREES TO INDEMNIFY, EXONERATE AND HOLD LENDER AND EACH OF THE OFFICERS,
DIRECTORS, EMPLOYEES, AFFILIATES AND AGENTS OF LENDER (EACH A “LENDER PARTY”)
FREE AND HARMLESS FROM AND AGAINST ANY AND ALL ACTIONS, CAUSES OF ACTION, SUITS,
LOSSES, LIABILITIES, TAXES, DAMAGES AND EXPENSES, INCLUDING ATTORNEY COSTS
(COLLECTIVELY, THE “INDEMNIFIED LIABILITIES”), INCURRED BY LENDER PARTIES OR ANY
OF THEM AS A RESULT OF, OR ARISING OUT OF, OR RELATING TO (A) ANY TENDER OFFER,
MERGER, PURCHASE OF CAPITAL SECURITIES, PURCHASE OF ASSETS OR OTHER SIMILAR
TRANSACTION FINANCED OR PROPOSED TO BE FINANCED IN WHOLE OR IN PART, DIRECTLY OR
INDIRECTLY, WITH THE PROCEEDS OF ANY OF THE LOANS, (B) THE USE, HANDLING,
RELEASE, EMISSION, DISCHARGE, TRANSPORTATION, STORAGE, TREATMENT OR DISPOSAL OF
ANY HAZARDOUS MATERIAL AT ANY PROPERTY OWNED OR LEASED BY ANY LOAN PARTY, (C)
ANY VIOLATION OF ANY ENVIRONMENTAL LAWS WITH RESPECT TO CONDITIONS AT ANY
PROPERTY OWNED OR LEASED BY ANY LOAN PARTY OR THE OPERATIONS CONDUCTED THEREON,
(D) THE INVESTIGATION, CLEANUP OR REMEDIATION OF OFFSITE LOCATIONS AT WHICH ANY
LOAN PARTY OR THEIR RESPECTIVE PREDECESSORS ARE ALLEGED TO HAVE DIRECTLY OR
INDIRECTLY DISPOSED OF HAZARDOUS MATERIALS OR (E) THE EXECUTION, DELIVERY,
PERFORMANCE OR ENFORCEMENT OF THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT BY ANY
OF LENDER PARTIES, EXCEPT FOR ANY SUCH INDEMNIFIED LIABILITIES ARISING ON
ACCOUNT OF THE APPLICABLE LENDER PARTY’S GROSS NEGLIGENCE OR WILLFUL MISCONDUCT
AS DETERMINED BY A FINAL, NONAPPEALABLE JUDGMENT BY A COURT OF COMPETENT
JURISDICTION. IF AND TO THE EXTENT THAT THE FOREGOING UNDERTAKING MAY BE
UNENFORCEABLE FOR ANY REASON, EACH LOAN PARTY HEREBY AGREES TO MAKE THE MAXIMUM
CONTRIBUTION TO THE PAYMENT AND SATISFACTION OF EACH OF THE INDEMNIFIED
LIABILITIES WHICH IS PERMISSIBLE UNDER APPLICABLE LAW. ALL OBLIGATIONS PROVIDED
FOR IN THIS SECTION 12.3 SHALL SURVIVE REPAYMENT OF THE LOANS, CANCELLATION OF
THE LOANS, ANY FORECLOSURE UNDER, OR ANY MODIFICATION, RELEASE OR DISCHARGE OF,
ANY OR ALL OF THE COLLATERAL DOCUMENTS AND TERMINATION OF THIS AGREEMENT.
NOTWITHSTANDING ANYTHING TO THE CONTRARY IN THE FOREGOING, THIS SECTION 12.3
SHALL NOT APPLY WITH RESPECT TO TAXES OTHER THAN ANY TAXES THAT REPRESENT
LOSSES, CLAIMS, DAMAGES, ETC. ARISING FROM ANY NON-TAX CLAIM. The foregoing
indemnity shall not require reimbursement of costs and expenses in connection
with the execution and delivery of the Loan Documents and the ongoing ordinary
course administration thereof, which amounts are subject to Section 2.12 hereof.
 
 
-41-

 
 
12.4. Notice.
 
All written notices and other written communications with respect to this
Agreement shall be sent by ordinary, certified or overnight mail, by telecopy or
delivered in person, and in the case of Lender shall be sent to it at Pilot
Travel Centers LLC, 20 Greenway Plaza, Suite 310, Houston, TX 77046, attention:
Head of Commercial Credit and Finance (Jason Sohmer), email:
CommercialCredit@pilottravelcenters.com, and in the case of Loan Parties shall
be sent to it at its principal place of business set forth on Schedule 6.2
hereto or as otherwise directed by Borrower in writing. All notices shall be
deemed received upon actual receipt thereof or refusal of delivery.
Notwithstanding the foregoing, requests for written consent may be communicated
by email to James.Chiu@pilottravelcenters.com, or such other person or address
that Lender may designate from time to time.
 
12.5. Modification and Benefit of Agreement.
 
This Agreement and the other Loan Documents may not be modified, altered or
amended except by an agreement in writing signed by each Loan Party who is a
party to such Loan Document and Lender.
 
12.6. Headings of Subdivisions.
 
The headings of subdivisions in this Agreement are for convenience of reference
only, and shall not govern the interpretation of any of the provisions of this
Agreement.
 
12.7. Power of Attorney.
 
Each Loan Party acknowledges and agrees that its appointment of Lender as its
attorney and agent-in-fact for the purposes specified in this Agreement is an
appointment coupled with an interest and shall be irrevocable until the
Termination Date, provided that Lender shall have no rights in respect of such
appointment except after the occurrence and during the continuance of an Event
of Default.
 
12.8. Counterparts.
 
This Agreement, any of the other Loan Documents, and any amendments, waivers,
consents or supplements may be executed in any number of counterparts and by
different parties hereto in separate counterparts, each of which, when so
executed and delivered, shall be deemed an original, but all of which
counterparts together shall constitute but one agreement.
 
12.9. Refinancing Support.
 
Lender agrees to make available information regarding the Line of Credit as may
be reasonably requested by the Loan Parties to facilitate a refinancing of the
Loans.
 
12.10. Waiver of Jury Trial: Other Waivers.
 
(a)            EACH LOAN PARTY AND LENDER EACH HEREBY WAIVES ALL RIGHTS TO TRIAL
BY JURY IN ANY ACTION OR PROCEEDING WHICH PERTAINS DIRECTLY OR INDIRECTLY TO
THIS AGREEMENT, ANY OF THE OTHER LOAN DOCUMENTS, THE OBLIGATIONS, THE
COLLATERAL, ANY ALLEGED TORTIOUS CONDUCT BY A LOAN PARTY OR LENDER OR WHICH, IN
ANY WAY, DIRECTLY OR INDIRECTLY, ARISES OUT OF OR RELATES TO THE RELATIONSHIP
BETWEEN A LOAN PARTY AND LENDER. IN NO EVENT SHALL LENDER BE LIABLE FOR LOST
PROFITS OR OTHER SPECIAL, EXEMPLARY, PUNITIVE OR CONSEQUENTIAL DAMAGES.
 
 
-42-

 
 
(b) Each Loan Party hereby waives demand, presentment, protest and notice of
nonpayment, and further waives the benefit of all valuation, appraisal and
exemption laws.
 
(c) Each Loan Party hereby waives the benefit of any law that would otherwise
restrict or limit Lender or any Affiliate of Lender in the exercise of its
right, which is hereby acknowledged and agreed to, to set-off against the
Obligations, without notice at any time hereafter, any indebtedness, matured or
unmatured, owing by Lender or such Affiliate of Lender to such Loan Party.
 
(d) EACH LOAN PARTY HEREBY WAIVES ALL RIGHTS TO NOTICE AND HEARING OF ANY KIND
PRIOR TO THE EXERCISE BY LENDER OF ITS RIGHTS TO REPOSSESS THE COLLATERAL OF
SUCH LOAN PARTY WITHOUT JUDICIAL PROCESS OR TO REPLEVY, ATTACH OR LEVY UPON SUCH
COLLATERAL, PROVIDED THAT IN THE EVENT THAT LENDER SEEKS TO ENFORCE ITS RIGHTS
HEREUNDER BY JUDICIAL PROCESS OR SELF HELP, LENDER SHALL PROVIDE SUCH LOAN PARTY
WITH SUCH NOTICES AS ARE REQUIRED BY LAW.
 
Lender's failure, at any time or times hereafter, to require strict performance
by any Loan Party of any provision of this Agreement or any of the other Loan
Documents shall not waive, affect or diminish any right of Lender thereafter to
demand strict compliance and performance therewith. Any suspension or waiver by
Lender of an Event of Default under this Agreement or any default under any of
the other Loan Documents shall not suspend, waive or affect any other Event of
Default under this Agreement or any other default under any of the other Loan
Documents, whether the same is prior or subsequent thereto and whether of the
same or of a different kind or character. No delay on the part of Lender in the
exercise of any right or remedy under this Agreement or any other loan Document
shall preclude other or further exercise thereof or the exercise of any right or
remedy. None of the undertakings, agreements, warranties, covenants and
representations of Loan Parties contained in this Agreement or any of the other
Loan Documents and no Event of Default under this Agreement or default under any
of the other Loan Documents shall be deemed to have been suspended or waived by
Lender unless such suspension or waiver is in writing, signed by a duly
authorized officer of Lender and directed to Borrower specifying such suspension
or waiver.
 
12.11. Choice of Governing Laws; Construction; Forum Selection.
 
(a)            This Agreement and the other Loan Documents are submitted by each
Loan Party to Lender for Lender's acceptance or rejection at Lender's principal
place of business as an offer by Borrower to borrow monies from Lender now and
from time to time hereafter, and shall not be binding upon Lender or become
effective until accepted by Lender, in writing, at said place of business. If so
accepted by Lender, this Agreement and the other Loan Documents shall be deemed
to have been made at said place of business. THIS AGREEMENT AND THE OTHER LOAN
DOCUMENTS SHALL BE GOVERNED AND CONTROLLED BY THE INTERNAL LAWS OF THE STATE OF
NEW YORK AS TO INTERPRETATION, ENFORCEMENT, VALIDITY, CONSTRUCTION, EFFECT, AND
IN ALL OTHER RESPECTS, INCLUDING, WITHOUT LIMITATION, THE LEGALITY OF THE
INTEREST RATE AND OTHER CHARGES, BUT EXCLUDING PERFECTION OF THE SECURITY
INTERESTS IN COLLATERAL LOCATED OUTSIDE OF THE STATE OF NEW YORK, WHICH SHALL BE
GOVERNED AND CONTROLLED BY THE LAWS OF THE RELEVANT JURISDICTION IN WHICH SUCH
COLLATERAL IS LOCATED. If any provision of this Agreement shall be held to be
prohibited by or invalid under applicable law, such provision shall be
ineffective only to the extent of such prohibition or invalidity, without
invalidating the remainder of such provision or remaining provisions of this
Agreement.
 
(b) To induce Lender to accept this Agreement, EACH LOAN PARTY IRREVOCABLY
AGREES THAT, SUBJECT TO LENDER'S SOLE AND ABSOLUTE ELECTION, ANY LEGAL ACTION OR
PROCEEDING ARISING OUT OF OR WITH RESPECT TO THIS AGREEMENT AND ANY ACTION FOR
ENFORCEMENT OF ANY JUDGMENT IN RESPECT THEREOF (OTHER THAN THE RIGHTS AND
OBLIGATIONS UNDER ANY LOAN DOCUMENT EXPRESSLY GOVERNED BY THE LAWS OF ANOTHER
JURISDICTION) SHALL BE BROUGHT ONLY IN ANY OF THE COURTS OF THE STATE OF NEW
YORK OR OF THE UNITED STATES OF AMERICA SITTING IN THE BOROUGH OF MANHATTAN, IN
THE CITY OF NEW YORK. BY EXECUTION AND DELIVERY OF THIS AGREEMENT, EACH OF THE
LOAN PARTIES HERETO HEREBY EXPRESSLY AND IRREVOCABLY ACCEPTS FOR ITSELF AND IN
RESPECT OF ITS PROPERTY, GENERALLY AND UNCONDITIONALLY, THE EXCLUSIVE
JURISDICTION OF THE AFORESAID COURTS AND APPELLATE COURTS IN ANY LEGAL ACTION,
SUIT OR PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT. EACH OF THE
LOAN PARTIES HERETO HEREBY EXPRESSLY AND IRREVOCABLY AND UNCONDITIONALLY WAIVES,
TO THE FULLEST EXTENT PERMITTED BY LAW, THE JURISDICTION OF ANY OTHER COURTS
THAT MAY CORRESPOND BY VIRTUE OF SUCH PARTY’S DOMICILE (PRESENT OR FUTURE), THE
LOCATION OF ITS ASSETS OR OTHERWISE. FURTHERMORE, EACH OF THE LOAN PARTIES
HERETO HEREBY EXPRESSLY AND IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED
BY LAW, ANY OBJECTION WHICH IT MAY NOW OR HEREAFTER HAVE TO THE LAYING OF VENUE
OF ANY OF THE AFORESAID ACTIONS OR PROCEEDINGS ARISING OUT OF OR IN CONNECTION
WITH THIS AGREEMENT BROUGHT IN THE COURTS REFERRED TO ABOVE AND HEREBY FURTHER
IRREVOCABLY WAIVES AND AGREES NOT TO PLEAD OR CLAIM IN ANY SUCH COURT THAT ANY
SUCH ACTION OR PROCEEDING BROUGHT IN ANY SUCH COURT HAS BEEN BROUGHT IN AN
INCONVENIENT FORUM. NOTHING IN THIS AGREEMENT SHALL AFFECT ANY RIGHT THAT THE
LENDER MAY HAVE TO BRING ANY ACTION OR PROCEEDING ARISING OUT OF OR WITH RESPECT
TO THIS AGREEMENT AGAINST ANY OF THE LOAN PARTIES OR THEIR PROPERTY IN THE
COURTS OF ANY JURISDICTION.
 
 
-43-

 
 
SECTION 13
LIABILITY.
 
(a) Notwithstanding any provisions of this Agreement to the contrary, it is
intended that the joint and several nature of the Obligations of the Loan
Parties and the liens and security interests granted by Borrower to secure the
Obligations, not constitute a “Fraudulent Conveyance” (as defined below).
Consequently, Lender and of the Loan Parties agree that if the Obligations of
the Loan Parties, or any liens or security interests granted by such Loan
Parties securing the Obligations would, but for the application of this
sentence, constitute a Fraudulent Conveyance, the Obligations of such Loan Party
and the liens and security interests securing such Obligations shall be valid
and enforceable only to the maximum extent that would not cause such Obligations
or such lien or security interest to constitute a Fraudulent Conveyance, and the
Obligations of such Loan Party and this Agreement shall automatically be deemed
to have been amended accordingly. For purposes hereof, “Fraudulent Conveyance”
means a fraudulent conveyance under Section 548 of Chapter 11 of Title II of the
United States Code (11 U.S.C. § 101, et seq.), as amended (the “Bankruptcy
Code”) or a fraudulent conveyance or fraudulent transfer under the applicable
provisions of any fraudulent conveyance or fraudulent transfer law or similar
law of any state, nation or other governmental unit, as in effect from time to
time.
 
(b) Each Loan Party assumes responsibility for keeping itself informed of the
financial condition of each other Loan Party, and any and all endorsers and/or
guarantors of any instrument or document evidencing all or any part of such
other Loan Party 's Obligations and of all other circumstances bearing upon the
risk of nonpayment by such other Loan Party of their Obligations and each Loan
Party agrees that Lender shall not have any duty to advise such Loan Party of
information known to Lender regarding such condition or any such circumstances
or to undertake any investigation not a part of its regular business routine. If
Lender, in its sole discretion, undertakes at any time or from time to time to
provide any such information to a Loan Party, Lender shall not be under any
obligation to update any such information or to provide any such information to
such Loan Party on any subsequent occasion.
 
(c) Lender is hereby authorized, without notice or demand and without affecting
the liability of Loan Party hereunder or under the other Loan Documents, to, at
any time and from time to time, (i) accept partial payments on Loan Party’s
Obligations; (ii) take and hold security or collateral for the payment of Loan
Party’s Obligations hereunder or for the payment of any guaranties of Loan
Party’s Obligations or other liabilities of Loan Party and exchange, enforce,
waive and release any such security or collateral; (iii) apply such security or
collateral and direct the order or manner of sale thereof as Lender, in its sole
discretion, may determine; and (iv) settle, release, compromise, collect or
otherwise liquidate Loan Party’s Obligations and any security or collateral
therefor in any manner, without affecting or impairing the obligations of the
other Loan Parties. Lender shall have the exclusive right to determine the
manner of application of any payments or credits, whether received from a Loan
Party or any other source, and such determination shall be binding on such
Borrower. All such payments and credits may be applied, reversed and reapplied,
in whole or in part, to any of a Loan Party’s Obligations as Lender shall
determine in its sole discretion without affecting the validity or
enforceability of the Obligations of the other Loan Parties.
 
(d) Each Loan Party hereby agrees that, except as hereinafter provided, its
obligations hereunder shall be unconditional, irrespective of (i) the absence of
any attempt to collect Loan Party’s Obligations from any Borrower or any
guarantor or other action to enforce the same; (ii) the waiver or consent by
Lender with respect to any provision of any instrument evidencing Borrower’s
Obligations, or any part thereof, or any other agreement heretofore, now or
hereafter executed by a Loan Party and delivered to Lender; (iii) failure by
Lender to take any steps to perfect and maintain its security interest in, or to
preserve its rights to, any security or collateral for Borrower’s Obligations;
(iv) the institution of any proceeding under the Bankruptcy Code, or any similar
proceeding, by or against a Loan Party or Lender’s election in any such
proceeding of the application of Section 1111(b)(2) of the Bankruptcy Code;
(v) any Borrowing or grant of a security interest by any Borrower as
debtor-in-possession, under Section 364 of the Bankruptcy Code; (vi) the
disallowance, under Section 502 of the Bankruptcy Code, of all or any portion of
Lender's claim(s) for repayment of any of Loan Parties’ Obligations; or
(vii) any other circumstance which might otherwise constitute a legal or
equitable discharge or defense of a guarantor.
 
(e) No payment made by or for the account of a Loan Party including, without
limitations, (i) a payment made by such Loan Party on behalf of another Loan
Party 's Obligations or (ii) a payment made by any other person under any
guaranty, shall entitle such Loan Party, by subrogation or otherwise, to any
payment from such other Borrower or from or out of such other Loan Party 's
property and such Loan Party shall not exercise any right or remedy against such
other Loan Party or any property of such other Loan Party by reason of any
performance of such Loan Party of its joint and several obligations hereunder.
 
 
-44-

 
 
SECTION 14
NONLIABILITY OF LENDER.
 
The relationship between the Loan Parties on the one hand and Lender on the
other hand shall be solely that of borrower, guarantor or grantor (as
applicable) and lender. Lender has no fiduciary relationship with or duty to any
Loan Party arising out of or in connection with this Agreement or any of the
other Loan Documents, and the relationship between the Loan Parties, on the one
hand, and Lender, on the other hand, in connection herewith or therewith is
solely that of debtor and creditor. Lender undertakes no responsibility to any
Loan Party to review or inform any Loan Party of any matter in connection with
any phase of any Loan Party’s business or operations. Each Loan Party agrees
that Lender shall have no liability to any Loan Party (whether sounding in tort,
contract or otherwise) for losses suffered by any Loan Party in connection with,
arising out of, or in any way related to the transactions contemplated and the
relationship established by the Loan Documents, or any act, omission or event
occurring in connection therewith, unless it is determined in a final
non-appealable judgment by a court of competent jurisdiction that such losses
resulted from the gross negligence or willful misconduct of the party from which
recovery is sought. NO LENDER PARTY SHALL HAVE ANY LIABILITY WITH RESPECT TO,
AND EACH LOAN PARTY HEREBY WAIVES, RELEASES AND AGREES NOT TO SUE FOR ANY
SPECIAL, PUNITIVE, EXEMPLARY, INDIRECT OR CONSEQUENTIAL DAMAGES RELATING TO THIS
AGREEMENT OR ANY OTHER LOAN DOCUMENT OR ARISING OUT OF ITS ACTIVITIES IN
CONNECTION HEREWITH OR THEREWITH (WHETHER BEFORE OR AFTER THE CLOSING DATE).
Each Loan Party acknowledges that it has been advised by counsel in the
negotiation, execution and delivery of this Agreement and the other Loan
Documents to which it is a party. No joint venture is created hereby or by the
other Loan Documents or otherwise exists by virtue of the transactions
contemplated hereby among the Loan Parties and Lender.
 
[Signature Pages Follow]
 
 
-45-

 
 
IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement as of
the date first written above.
 
NIXON PRODUCT STORAGE, LLC,
as Borrower and Grantor
By: BLUE DOLPHIN ENERGY COMPANY, its sole Member
By:
/s/ JONATHAN CARROLL
Name:
Jonathan Carroll
Title:
President

 
 
 
 
[Signature Page to Line of Credit, Guarantee and Security Agreement]
 
 
-46-

 
PILOT TRAVEL CENTERS LLC,
as Lender
 
By:
/s/ SHAMEEK KONAR
Name:
Shameek Konar
Title:
CSO

 
 
 
[Signature Page to Line of Credit, Guarantee and Security Agreement]
 
 
-47-

 
LAZARUS ENERGY HOLDINGS LLC,
as Guarantor
 
By:
/s/ JONATHAN CARROLL
Name:
Jonathan Carroll
Title:
President

 
 
[Signature Page to Line of Credit, Guarantee and Security Agreement]
 
 
-48-

 
LAZARUS ENERGY LLC,
as Guarantor
By: BLUE DOLPHIN ENERGY COMPANY, its sole Member
 
By:
/s/ JONATHAN CARROLL
Name:
Jonathan Carroll
Title:
President

 
 
 
[Signature Page to Line of Credit, Guarantee and Security Agreement]
 
 
-49-

 
BLUE DOLPHIN ENERGY COMPANY,
as Guarantor and Pledgor
 
By:
/s/ JONATHAN CARROLL
Name:
Jonathan Carroll
Title:
President

 
 
[Signature Page to Line of Credit, Guarantee and Security Agreement]
 
 
-50-

 
 
LAZARUS REFINING & MARKETING, LLC,
as Guarantor and Grantor
By: BLUE DOLPHIN ENERGY COMPANY, its sole Member
 
By:
/s/ JONATHAN CARROLL
Name:
Jonathan Carroll
Title:
President

 
 
 
[Signature Page to Line of Credit, Guarantee and Security Agreement]
 
 
 
-51-