--------------------------------------------------------------------------------

EXHIBIT 10.31
 

 
AMENDED AND RESTATED
 
CREDIT
 
AGREEMENT
 
between
 
DEEP DOWN, INC.

as Borrower
 
and
 
 
WHITNEY NATIONAL BANK

as Lender
 
 
 

--------------------------------------------------------------------------------

 
TABLE OF CONTENTS
 

      Page           SCHEDULES AND EXHIBITS iv         SECTION 1 DEFINITIONS AND
TERMS. 1   1.1 Definitions 1   1.2 Interpretive Provisions 12   1.3 Accounting
Terms 12   1.4 References to Documents 13   1.5 Time 13         SECTION 2  LOAN
COMMITMENTS.  13   2.1 ROV Term Facility, RE Term Facility, and RLOC Term
Facility 13   2.2 Loan Procedure 13   2.3 Prepayment 13   2.4 LC Facility 14    
    SECTION 3  TERMS OF PAYMENT.  16   3.1 Notes and Payments 16   3.2 ROV Term
Facility, RE Term Facility, and RLOC Term Facility 16   3.3 Order of Application
17   3.4 Interest 17   3.5 Default Rate 17   3.6 Interest Calculations 17   3.7
Maximum Rate 18   3.8 Set off 18   3.9 Debit Account 18         SECTION 4 FEES. 
18   4.1 Treatment of Fees 18   4.2 Letter of Credit Fees 19   4.3 Unused Fees
19   4.4 Modification Fee 19         SECTION 5 CONDITIONS PRECEDENT 19   5.1
Conditions to Initial Loans 19   5.2 Conditions to All Loans 19   5.3 No Waiver
19         SECTION 6 SECURITY AND GUARANTIES  19   6.1 Collateral 19   6.2
Financing Statements 20   6.3 Guaranties 20         SECTION 7 REPRESENTATIONS
AND WARRANTIES  20   7.1 Existence, Good Standing, and Authority to do Business
20   7.2 Subsidiaries 20

 
 
i

--------------------------------------------------------------------------------

 

  7.3 Authorization, Compliance, and No Default 20   7.4 Enforceability 20   7.5
Litigation 20   7.6 Taxes 20   7.7 Environmental Matters 20   7.8 Ownership of
Assets; Intellectual Property 21   7.9 Liens 21   7.10 Debt 21   7.11 Insurance
21   7.12 Place of Business; Real Property 21   7.13 Purpose of Credit
Facilities 21   7.14 Transactions with Affiliates 21   7.15 Financial
Information 21   7.16 Material Agreements and Funded Debt 21   7.17 ERISA 22    
    SECTION 8  AFFIRMATIVE COVENANTS  22   8.1 Items to be Furnished 22   8.2 
Books, Records, Inspections, and Field Audits 23   8.3  Taxes 23   8.4 
Compliance with Laws 24   8.5 Maintenance of Existence, Assets, and Business 24
  8.6  Insurance 24   8.7 Environmental Laws 24   8.8 ERISA 24   8.9 Use of
Proceeds 24   8.10 Application of Insurance and Eminent Domain Proceeds 24  
8.11 New Subsidiaries 25   8.12 Expenses 25   8.13 Maintenance of Cash
Management Agreement 25   8.14 Further Assurances 25         SECTION 9  NEGATIVE
COVENANTS  26   9.1 Debt 26   9.2 Liens 26   9.3 Compliance 26   9.4 Loans and
Investments 26   9.5 Dividends 26   9.6  Acquisition, Mergers, and Dissolutions
26   9.7 Assignment 27   9.8  Fiscal Year and Accounting Methods 27   9.9  Sale
of Assets 27   9.10  New Businesses 27   9.11 Transactions with Affiliates 27  
9.12 Payroll Taxes 27   9.13 Prepayment of Debt 27         SECTION 10 FINANCIAL
COVENANTS 27   10.1 Leverage Ratio 27   10.2 Fixed Charge Coverage Ratio 27

 
 
ii

--------------------------------------------------------------------------------

 

  10.3 Tangible Net Worth 28   10.4 Testing and Calculation 28   10.5 Financial
Covenant Waiver 28         SECTION 11 DEFAULT  28   11.1 Payment of Obligation 
28   11.2 Covenants 28   11.3 Debtor Relief 29   11.4 Judgments 29   11.5 
Misrepresentation 29   11.6 Default Under Other Agreements 29   11.7  Validity
and Enforceability of Loan Documents 29   11.8  Swap Agreement 29   11.9  Change
of Management 29   11.10 Ownership of Other Companies 29   11.11 Material
Adverse Event 29         SECTION 12 RIGHTS AND REMEDIES  29   12.1 Remedies Upon
Default  29   12.2 Waivers  30   12.3 No Waiver 30   12.4 Performance by Lender
30   12.5 Cumulative Rights 30         SECTION 13 MISCELLANEOUS 30   13.1
Governing Law  30   13.2 Invalid Provisions 30   13.3 Multiple Counterparts and
Facsimile Signatures 30   13.4   Notice 30   13.5 Binding Effect; Survival  31  
13.6  Amendments 31   13.7  Participants 31   13.8 Discharge Only Upon Payment
in Full; Reinstatement in Certain Circumstances 31   13.9 Waiver of Jury Trial
31   13.10 Indemnity 31   13.11 ENTIRETY 32   13.12 Confidentiality 32   13.13
Non-Business Days 32   13.14 Amendment and Restatement 32

 
   
               
iii

--------------------------------------------------------------------------------

                
SCHEDULES AND EXHIBITS
 

SCHEDULE 1.1  Parties, Addresses, and Wiring Information SCHEDULE 1.2 Existing
Debt and Liens SCHEDULE 5 Conditions Precedent SCHEDULE 7.2  Subsidiaries
SCHEDULE 7.5 Litigation SCHEDULE 7.12  Place of Business SCHEDULE 7.14 
Transactions with Affiliates SCHEDULE 7.16  Material Agreements SCHEDULE 9.13  
Subordinated Debt that May be Prepaid     EXHIBIT A-1  ROV Term Note EXHIBIT
A-2  RE Term Note EXHIBIT A-3 RLOC Term Note EXHIBIT A-4  LC Note EXHIBIT B 
Guaranty (Corporate Guarantors) EXHIBIT C  Loan Request EXHIBIT D Compliance
Certificate

 
 

                                          
                                          
                                           
                          
                
iv

--------------------------------------------------------------------------------

                               
AMENDED AND RESTATED CREDIT AGREEMENT
 
THIS AMENDED AND RESTATED CREDIT AGREEMENT is entered into as of November 11,
2008, and amended and restated through April 14, 2010, between DEEP DOWN, INC.,
a Nevada corporation (“Borrower”), and WHITNEY NATIONAL BANK, a national banking
association (the “Lender”).
 
RECITALS
 
A.           Borrower and Lender are parties to that certain Credit Agreement
entered into as of November 11, 2008 (as amended by the First Amendment to
Credit Agreement dated December 18, 2008, the Second Amendment to Credit
Agreement dated February 13, 2009, the Third Amendment to Credit Agreement dated
May 29, 2009, and as may be further amended, the "Existing Credit
Agreement").  Pursuant to the terms of the Existing Credit Agreement, Lender
extended credit to Borrower in the form of a revolving credit facility (the
“Revolving Credit Facility”), including a letter of credit subfacility, and two
single advance term loans.
 
B.   The parties to the Existing Credit Agreement desire to amend and restate
the Existing Credit Agreement on the terms set out in this Agreement.
 
C.    To evidence the credit facilities requested hereunder, Borrower and Lender
have agreed that this Agreement is an amendment and restatement of the Existing
Credit Agreement, not a new or substitute credit agreement or novation of the
Existing Credit Agreement.
 
D.   Borrower has requested that Lender renew or modify the credit extended
under the Existing Credit Agreement as follows:
 
1. the single advance term loan in the original principal amount of 1,150,000
used to purchase a new Super Mohawk 21 remote operated vehicle (the “ROV”) will
continue on the same terms but will have a maturity date of April 15, 2011 (the
current principal balance is $730,464);
 
2. the single advance term loan in the original principal amount of $2,100,000
used to acquire the Properties will continue on the same terms but will have a
maturity date of April 15, 2011 (the current principal balance is $2,012,545);
 
3. convert the outstanding $850,000 principal amount of the Revolving Credit
Facility into a term loan in the amount of $850,000;
 
4. convert the Revolving Credit Facility with a letter of credit subfacility
into a letter of credit facility in the maximum amount of $1,150,000 to be used
to support Existing LCs (defined below) and new LCs which are approved by
Lender.
 
Accordingly, Borrower and Lender agree as follow:
 
SECTION 1  DEFINITIONS AND TERMS.
 
1.1 Definitions.  As used in the Loan Documents:
 
Affiliate means as to any Person, any other Person that directly or indirectly
controls, or is controlled by, or is under common control with, that
Person.  For purposes of this definition (a) “control,” “controlled by,” and
“under common control with” mean possession, directly or indirectly, of power to
direct (or cause the direction of) management or policies of a Person, whether
through ownership of voting interests or other ownership interests, by contract,
or otherwise, and (b) the term “Affiliate” includes each director or executive
officer of Borrower, and each of the following as “Affiliates” of the others
(i) each Guarantor, (ii) Borrower, (iii) any corporation, partnership or limited
liability company whose primary shareholders, partners or members are the
spouse, children or other family member of any Management Shareholder, and
(iv) any trust whose primary beneficiaries are the spouse, children or other
family member of any Management Shareholder.
 
1

--------------------------------------------------------------------------------

 
Agreement means this Amended and Restated Credit Agreement, and all exhibits and
schedules to this Agreement, in each case as amended, supplemented or restated
from time to time.
 
Amendment Date means April 14, 2010.
 
Applicable Rate means, the applicable rate for LIBOR Loans, the applicable rate
for LCs, and the applicable rate for the unused fees, in each case, is based on
the Leverage Ratio as follows:
 

 
Level
Leverage Ratio
Applicable Rate
for LC Fees
Applicable Rate
for Unused Fees
   
I
Greater than 1.50 to 1.00
3.50%
0.50%
   
II
Less than or equal 1.50 to 1.00 but greater than or equal to 1.00 to 1.00
3.00%
0.375%
   
III
Less than 1.00 to 1.00
2.50%
0.25%
 

 
The Applicable Rate will be determined from Borrower’s most recent Compliance
Certificate (and Current Financials) received by Lender in accordance with this
Agreement.  Until Lender receives the first Compliance Certificate (and Current
Financials), the Applicable Rate shall be the Level I Applicable Rate.  Upon
receipt of the Compliance Certificate (and Current Financials), the Applicable
Rate will be in effect from the first day of the month following the due date
for such Compliance Certificate (or the Current Financials) until the due date
for the next Compliance Certificate (or Current Financials).  If any Compliance
Certificate is (or Current Financials are) not delivered on time, the Applicable
Rate from the due date of such Compliance Certificate (or Current Financials)
until the date Borrower delivers such items (or until the Default Rate becomes
applicable) shall be the Level III Applicable Rate.
 
Appraised Value means with respect to the Properties, a written statement in
Proper Form independently and impartially prepared by a state-certified
appraiser acceptable to Lender which complies with Title XI of the Financial
Institutions Reform, Recovery and Enforcement Act of 1989 and 12 C.F.R. Section
34 (each as amended and revised from time to time) of such real property’s Fair
Market Sales Value as of the date of the appraisal.  For purposes of this
definition, “Fair Market Sales Value” means the amount (not less than zero) that
would be paid in cash for the ownership of the applicable property in an
arm’s-length transaction between an informed and willing purchaser and an
informed and willing seller, neither of whom is under any compulsion to purchase
or sell.  The Fair Market Sales Value shall be determined based on the
assumption that the property is in good condition, properly maintained and
repaired, ordinary wear and tear excepted.
 
Borrower means Deep Down, Inc., a Nevada corporation.
 
Business Day means any day other than a Saturday, Sunday or other day on which
commercial banks are authorized to close under the Laws of, or are in fact
closed in, the state where Lender’s Office is located and, if such day relates
to any LIBOR Loan, means any such day on which banks in London are open for
business and dealing in offshore dollars.
 
Cash Collateralize means to pledge and deposit with or deliver to Lender, as
collateral for the LC Exposure, cash or deposit account balances in an amount
equal to at least 105% of the face amount of all outstanding LCs pursuant to
documentation in form and substance satisfactory to Lender.
 
 
2

--------------------------------------------------------------------------------

 
Change of Management means that (a) Ronald E. Smith ceases to be an executive
officer of the Borrower, or (b) Eugene L. Butler ceases to be an executive
officer of the Borrower.
 
Closing Date means November 11, 2008.
 
Collateral is defined in Section 6.1.
 
Commitment means Lender’s obligation and commitment under this Agreement to make
Loans to Borrower or maintain, issue, amend, or renew LCs for Borrower’s
account.
 
Company or Companies means, at any time, the Borrower and its Subsidiaries.
 
Compliance Certificate means a certificate substantially in the form of
Exhibit D signed by a Responsible Officer.
 
Current Financials means, when determined, the consolidated financial statements
of the Companies most recently delivered to Lender under Section 8.1.
 
Debt means (without duplication), for any Person, (a) all obligations required
by GAAP to be classified upon such Person’s balance sheet as liabilities,
(b) liabilities to the extent secured (or for which and to the extent the holder
of the Debt has an existing right, contingent or otherwise, to be so secured) by
any Lien existing on property owned or acquired by that Person, (c) capital
leases and other obligations that have been (or under GAAP should be)
capitalized for financial reporting purposes, (d) all guaranties, endorsements,
letters of credit, and other contingent liabilities with respect to Debt or
obligations of others, and (e) the net obligation of such Person under any Swap
Contract (which, on any date, shall be deemed to be the Swap Termination Value
as of such date).  For purposes hereof, the Debt of any Person shall include the
Debt of any partnership or joint venture (other than a joint venture that is
itself a corporation or limited liability company) in which such Person is a
general partner or a joint venturer, unless such Debt is expressly made
non-recourse to such Person.
 
Debtor Relief Laws means Title 11 of the United States Code and all other
applicable liquidation, conservatorship, bankruptcy, fraudulent transfer,
assignment for the benefit of creditors, moratorium, rearrangement,
receivership, insolvency, reorganization, suspension of payments, or similar
debtor relief Laws of the United States or other applicable jurisdictions from
time to time in effect and affecting the rights of creditors generally.
 
Deed of Trust means each Deed of Trust in Proper Form and executed by any
Company, as debtor, for the benefit of Lender, to secure the Obligation, as the
same may be amended, restated, or supplemented from time to time.
 
Default is defined in Section 11.
 
Default Rate means, from day-to-day, an annual rate of interest equal to the
lesser of (a) 11.5% and (b) the Maximum Rate.
 
Disposition means the sale, lease, transfer, conveyance, assignment, license, or
other disposition (including any sale and leaseback transaction) of any asset by
any Person, including any sale, assignment, transfer, conveyance, or other
disposition, with or without recourse, of any notes or accounts receivable or
any rights and claims associated therewith.
 
Dollar, Dollars or $ mean lawful money of the U. S.
 
3

--------------------------------------------------------------------------------

 
EBITDA means consolidated net income of the Companies, plus income taxes, plus
Interest Expense, plus depreciation and amortization, plus non-cash stock-based
compensation, in each case to the extent subtracted in calculating net
income.   For the fiscal quarters ended December 31, 2009, March 31, 2010, June
30, 2010, and September 30, 2010, EBITDA shall be calculated by adding back to
consolidated net income up to $13,000,000 of the amounts written down related to
impairment of good will and other intangible assets for the fiscal quarter ended
December 31, 2009.
 
Eminent Domain Event means any Governmental Authority or any Person acting under
a Governmental Authority institutes proceedings to condemn, seize or appropriate
all or part of any asset of a Company.
 
Eminent Domain Proceeds means all amounts received by any Company as a result of
any Eminent Domain Event.
 
Employee Plan means a pension, profit-sharing, or stock bonus plan intended to
qualify under Section 401(a) of the Tax Code, maintained or contributed to by
Borrower or any ERISA Affiliate, including any multiemployer plan within the
meaning of Section 4001(a)(3) of ERISA.
 
Environmental Law means any Law that relates to the pollution or protection of
the environment, the release of any materials into the environment, including
those related to Hazardous Substances, air emissions and discharges to waste or
public systems, or to health and safety.
 
ERISA means the Employee Retirement Income Security Act of 1974, as amended, and
its related rules, regulations, and published interpretations.
 
ERISA Affiliate means any trade or business (whether or not incorporated) under
common control with Borrower within the meaning of Section 414(b) or (c) of the
Tax Code (including any multiemployer plan within the meaning of Section
4001(a)(3) of ERISA).
 
Existing LC means any LC issued before the Amendment Date.
 
Finance Code means, Chapter 303 of the Texas Finance Code.
 
Fixed Charge Coverage Ratio means, when determined, for the most recently
completed four fiscal quarter period, the ratio of (a) EBITDA to (b) the sum of
Interest Expense, plus the amount of principal payments made on Subordinated
Debt, plus the amount of scheduled principal payments on senior Funded Debt.
 
Flotation Technologies means Flotation Technologies, Inc., a Maine corporation.
 
Flotation Technologies Real Estate means that certain real property located at
20 Morin Street, Biddeford, Maine 04005.
 
Funded Debt means, when determined, (a) all Debt of the Companies for borrowed
money (whether as a direct obligor on a promissory note, a reimbursement obligor
on a letter of credit, a guarantor, or otherwise), and (b) all capital lease
obligations of the Companies.
 
GAAP means generally accepted accounting principles in the U.S. set out in the
opinions and pronouncements of the of the Accounting Principles Board of the
American Institute of Certified Public Accountants and the Financial Accounting
Standards Board as in effect from time to time.
 
Governmental Authority means any nation or government, any state or other
political subdivision thereof, any agency, authority, instrumentality,
regulatory body, court, administrative tribunal, central bank or other entity
exercising executive, legislative, judicial, taxing, regulatory or
administrative powers or functions of, or pertaining to, government.
 
4

--------------------------------------------------------------------------------

 
Guarantor means each of, and Guarantors means all of, (a) Deep Down Inc., a
Delaware corporation, ElectroWave USA, Inc., a Nevada corporation, Mako
Technologies, LLC, a Nevada limited liability company, and Flotation
Technologies, Inc., a Maine corporation, (b) any of Borrower’s other
Subsidiaries, or (c) any other Person which signs a Guaranty.
 
Guaranty means a guaranty substantially in the form of Exhibit B.
 
Hazardous Substance means (a) any explosive or radioactive substance or waste,
all hazardous or toxic substances, waste, or other pollutants, and any other
substance the presence of which requires removal, remediation or investigation
under any applicable Environmental Law, (b) any substance that is defined or
classified as a hazardous waste, hazardous material, pollutant, contaminant, or
toxic or hazardous substance under any applicable Environmental Law, or
(c) petroleum, petroleum distillates, petroleum products, oil, polychlorinated
biphenyls, radon gas, infectious medical wastes, and asbestos or
asbestos-containing materials.
 
Honor Date has the meaning given such term in Section 2.4(b)(i).
 
ICC has the meaning given such term in Section 2.4(e).
 
Indemnified Liabilities is defined in Section 13.10.
 
Indemnitees is defined in Section 13.10.
 
Insurance Proceeds means all proceeds in respect of any insurance policy
maintained by any Company under the terms of this Agreement.
 
Interest Expense means, for any period, total interest expense of the Companies
for such period in respect of all outstanding Debt of the Companies, whether
paid, accrued, expensed or capitalized, and includes, without limitation, all
commissions, discounts, commitment fees and other fees and charges owed in
respect of such Debt (after taking into account the costs or benefits under any
Swap Agreement), including that portion of any lease payment under a capital
lease which would be treated as interest under GAAP, and interest on Debt used
to finance working capital.
 
Laws means, collectively, all international, foreign, federal, state and local
statutes, treaties, rules, guidelines, regulations, ordinances, codes and
administrative or judicial precedents or authorities, including the
interpretation or administration thereof by any Governmental Authority charged
with the enforcement, interpretation or administration thereof, and all
applicable administrative orders, requests, licenses, authorizations and permits
of, and agreements with, any Governmental Authority (whether or not such orders,
requests, licenses, authorizations, permits or agreements have the force of
law).
 
LC means each standby letter of credit issued by Lender on or after the Closing
Date for the account of Borrower under this Agreement and under an LC
Application.
 
LC Application means an application and agreement for the issuance or amendment
of a standby letter of credit for the account of Borrower in the form from time
to time in use by Lender.
 
LC Borrowing means an extension of credit under the LC Facility resulting from a
drawing under any LC which has not been timely reimbursed by Borrower.
 
LC Committed Amount means $1,150,000.
 
5

--------------------------------------------------------------------------------

 
LC Credit Extension means, with respect to any LC, the issuance, extension of
the expiry date, amendment, renewal, or increase of the amount of such LC.
 
LC Exposure means, at any time and without duplication, the sum of (a) the
aggregate undrawn maximum face amount of each LC at such time, plus (b) the
aggregate unpaid obligations of Borrower to reimburse the issuer for amounts
paid by the issuer under LCs issued under Section 2.4.
 
LC Facility means the facility for the issuance of LCs, as described in
Section 2.4.
 
LC Fee is defined in Section 4.2.
 
LC Note means a promissory note substantially in the form of Exhibit A-4,
executed by Borrower and made payable to Lender, and all renewals, extensions,
modifications, amendments, supplements, restatements, and replacements of, or
substitutions for, that promissory note.
 
LC Termination Date means the earlier of (a) April 15, 2011, and (b) the
acceleration of maturity of the LC Facility in accordance with Section 12 of
this Agreement.
 
Lender’s Office means Lender’s address, and, as appropriate, account as set out
on Schedule 1.1, or such other address or account as Lender may from time to
time notify Borrower.
 
Leverage Ratio means, as of any date of determination, the ratio of (a) the
consolidated Funded Debt of all Companies as of such date to (b) consolidated
EBITDA of all Companies for the period of the four fiscal quarters most recently
ended.
 
Lien means any lien (statutory or other), mortgage, security interest, financing
statement, collateral assignment, pledge, assignment, charge, hypothecation,
deposit arrangement, or preference, priority or other security interest or
preferential arrangement of any kind or nature whatsoever (including any
conditional sale or other title retention agreement, and any financing lease
having substantially the same economic effect as any of the foregoing), or
encumbrance of any kind, and any other right of or arrangement with any creditor
(whether based on common law, constitutional provision, statute or contract) to
have its claim satisfied out of any property or assets, or their proceeds,
before the claims of the general creditors of the owner of the property or
assets.
 
Litigation means any action by or before any Governmental Authority, arbitrator,
or arbitration panel.
 
Loan means any amount disbursed by Lender (a) to, or on behalf of, Borrower
under the Loan Documents, whether or not such amount constitutes an original
disbursement of funds, or (b) in accordance with, and to satisfy the obligations
of Borrower under, any Loan Document.
 
Loan Date means for any Loan requested by a Borrower under a Loan Request, the
date on which funds are to be transferred to, or made available to, Borrower.
 
Loan Documents means (a) this Agreement, certificates and requests delivered
under this Agreement, and exhibits and schedules to this Agreement, (b) the
Notes, (c) all Guaranties, (d) the Security Documents, (e) all Swap Contracts,
(f) all other agreements, documents, and instruments in favor of Lender ever
delivered in connection with or under this Agreement, and (g) all renewals,
extensions, amendments, modifications, supplements, restatements, and
replacements of, or substitutions for, any of the foregoing.
 
Loan Request means a request substantially in the form of Exhibit C.
 
6

--------------------------------------------------------------------------------

 
Management Shareholder means each of, and Management Shareholders means all of,
Eugene L. Butler and Ronald E. Smith.
 
Material Adverse Event means any circumstance or event that, individually or
collectively with other circumstances or events, could reasonably be expected to
result in (a) impairment of the ability of any Company to perform any of its
payment or other material obligations under any Loan Document, (b) impairment of
the ability of Lender to enforce any Company’s material obligations, or Lender’
rights, under any Loan Document, (c) a material adverse effect upon the
legality, validity, binding effect or enforceability against any Company of any
Loan Document to which it is a party, (d) a material and adverse change in, or a
material adverse effect upon, the operations, business, properties, liabilities
(actual or contingent), or condition (financial or otherwise) of any Company as
represented in the initial financial statements delivered to Lender on or about
the Closing Date in respect of such Company, and (e) a material and adverse
change in, or a material adverse effect upon, the operations of the Companies,
taken as a whole (excluding general economic conditions that do not have a
disproportion of impact on the Companies taken as a whole).
 
Material Agreement means, for any Person, any agreement (excluding purchase
orders for material or inventory in the ordinary course of business) to which
that Person is a party by which that Person is bound, or to which any assets of
that Person may be subject, and that is not cancelable by that Person upon 30 or
fewer days’ notice without liability for further payment other than nominal
penalty, and that requires that Person to pay more than $250,000 in the
aggregate during the term of such agreement.
 
Maximum Amount and Maximum Rate respectively mean the maximum non-usurious
amount and the maximum non-usurious rate of interest that, under applicable Law,
Lender is permitted to contract for, charge, take, reserve or receive on the
Obligation.
 
Moody’s means Moody’s Investors Service, Inc. and any successor thereto.
 
Net Proceeds means with respect to (a) any Disposition of any asset by any
Person, the aggregate amount of cash and non-cash proceeds from such Disposition
received by, or paid to or for the account of, such Person, net of customary and
reasonable out-of-pocket costs, fees, and expenses, (b) with respect to the
issuance of equity securities, debt securities, Subordinated Debt, or similar
instruments, or the incurrence of Debt, the cash and non-cash proceeds received
from such issuance or incurrence, net of attorneys’ fees, investment banking
fees, accountants fees, underwriting discounts and commissions and other
customary fees and expenses actually incurred in connection with such issuance,
(c) Insurance Proceeds, the aggregate amount of such cash proceeds received by,
or paid to or for the account of, such Person, net of customary and reasonable
legal fees, out-of-pocket expenses, fees and expenses, and (d) Eminent Domain
Proceeds, the aggregate amount of such cash proceeds received by, or paid to or
for the account of, such Person, net of customary and reasonable legal fees,
out-of-pocket costs, fees and expenses. Non-cash proceeds include any proceeds
received by way of deferred payment of principal pursuant to a note, installment
receivable, purchase price adjustment receivable, or otherwise, but only as and
when received.
 
Net Worth means, when determined, (a) the aggregate amount at which all assets
of the Companies would be shown on a consolidated balance sheet at such date,
less (b) Total Liabilities of the Companies.
 
Notes means the ROV Term Note, the RE Term Note, the RLOC Term Note, and the LC
Note.
 
Obligation means all present and future Debt, liabilities and obligations
(including the Loans, LC Borrowings, and the obligations under any Swap
Contract), whether direct or indirect (including those acquired by assumption),
absolute or contingent, due or to become due, and all renewals, increases and
extensions thereof, or any part thereof, now or in the future owed to Lender by
any Company under any Loan Document, together with all interest accruing
thereon, reasonable fees, costs and expenses payable under the Loan Documents or
in connection with the enforcement of rights under the Loan Documents, including
(a) fees and expenses under Section 8.12, and (b) interest and fees that accrue
after the commencement by or against any Company or any Affiliate thereof of any
proceeding under any Debtor Relief Law naming such Person as the debtor in such
proceeding, regardless of whether such interest and fees are allowed claims in
such proceeding.
 
7

--------------------------------------------------------------------------------

 
Participant has the meaning given such term Section 13.7.
 
Permitted Debt means (a) the Obligation, (b) Debt arising from endorsing
negotiable instruments for collection in the ordinary course of business, (c)
purchase money Debt and capital lease obligations incurred in the ordinary
course of business which, in the aggregate do not exceed $250,000, (d) Debt
among the Companies and guaranties by any Company of Permitted Debt, (e) Debt
existing on the Closing Date and described on Schedule 1.2, (f) indemnities
arising under agreements entered into by any Company in the ordinary course of
business, (g) trade payables, Tax liabilities and other current liabilities
incurred in the ordinary course of business, (h) any Debt approved in writing by
Lender after the Closing Date, and (i) the TD Bank Debt to the extent that the
aggregate principal amount of the TD Bank Debt does not at any time exceed
$2,500,000.
 
Permitted Investments means (a) marketable obligations backed by the full faith
and credit of the U.S. (and investments in mutual funds investing primarily in
those obligations), (b) certificates of deposit or banker’s acceptances that are
fully insured by the Federal Deposit Insurance Corporation and are issued by
Lender, (c) cash or cash equivalents, (d) eurodollar time deposits or
investments managed by Lender, (e) commercial paper and similar obligations
rated “P-1” or better by Moody’s or “A-1” or better by S&P, (f) investments in
securities purchased by any Company under repurchase obligations pursuant to
which arrangements are made with selling financial institutions (being a
financial institution having unimpaired capital and surplus of not less than
$500,000,000 and with a rating of “A-1” by S&P or “P-1” by Moody’s) for such
financial institutions to repurchase such securities within 30 days from the
date of purchase by such Company, and other similar short term investments made
in connection with the Company’s cash management practices, (g) non-cash
proceeds from Dispositions permitted under Section 9.9, (h) investments by any
Company in its wholly-owned Subsidiaries which are Guarantors, and (i) cash or
cash equivalents on deposit with, or issued by, Lender.
 
Permitted Liens means (a) Liens securing the Obligation, (b) Liens existing on
the Closing Date and described on Schedule 1.2, (c) Liens which secure purchase
money Debt and capital lease obligations permitted under clause (c) of the
definition of Permitted Debt, (d) easements, rights-of-way, encumbrances and
other restrictions on the use of real property which do not materially impair
the use thereof, (e) Liens for Taxes; provided that, (i) no amounts are due and
payable and no Lien has been filed or agreed to, or (ii)  the validity or amount
thereof is being contested in good faith by lawful proceedings diligently
conducted, and reserve or other provision required by GAAP has been made, (f)
judgments and attachments permitted by Section 11.4, (g) pledges or deposits
made to secure payment of workers’ compensation, unemployment insurance or other
forms of governmental insurance or benefits or to participate in any fund in
connection with workers’ compensation, unemployment insurance, pensions or other
social security programs, (h) rights of offset or statutory banker’s Liens
arising in the ordinary course of business in favor of commercial banks;
provided that, any such Lien shall only extend to deposits and property in
possession of such commercial bank and its Affiliates, (i) good-faith pledges or
deposits made in the ordinary course of business to secure (i) performance of
bids, tenders, trade contracts (other than for the repayment of borrowed money)
or leases, (ii) statutory obligations, or (iii) surety or appeal bonds, or
indemnity, performance or other similar bonds, which, in the aggregate under
this clause (i), do not exceed $50,000 at any time, (j) Liens (other than for
Taxes) imposed by operation of law (including Liens of mechanics, materialmen,
warehousemen, carriers and landlords and similar Liens); provided that, (i) the
validity or amount thereof is being contested in good faith by lawful
proceedings diligently conducted, (ii) reserve or other provision required by
GAAP has been made, and (iii) within 60 days after the entry thereof, levy and
execution thereon have been (and continue to be) stayed or payment thereof is
covered in full by insurance (subject to the customary deductible), (k) Liens
which secure any Company’s obligations under any lease for equipment used by
such Company in the ordinary course of its business, (l) Liens which secure the
Funded Debt permitted under clause (i) of the definition of Permitted Debt, and
(m) Liens arising pursuant to the TD Bank Loan Documents.
 
8

--------------------------------------------------------------------------------

 
Person means any individual, partnership, limited partnership, corporation,
limited liability company, business trust, joint stock company, trust,
unincorporated association, joint venture, syndicate, Governmental Authority or
other entity or organization of whatever nature.
 
PGBC means Pension Benefit Guaranty Corporation, or any successor thereof,
established under ERISA.
 
Pledge Agreement means each Pledge Agreement in Proper Form, and executed by any
Company, as pledgor, and by Lender, as secured party, granting Lender a Lien on,
and security interest in, among other things, such Person’s equity interests in
any Company or its Subsidiaries.
 
Potential Default means the occurrence of any event or the existence of any
circumstance that would, with the giving of notice or lapse of time or both,
become a Default.
 
Proper Form means in form and substance satisfactory to Lender and its legal
counsel.
 
Property means each of (and Properties means all of) the (a) the 4.9106 acres
located at 15473 Interstate Highway No. 10 (aka East Freeway), Channelview,
Texas 77530, and (b) 3.306 acres located at 15473 East Freeway, Channelview,
Texas 77530.
 
RE Term Facility is defined in Section 2.1(b).
 
RE Term Loan Committed Amount means $2,012,545.
 
RE Term Loan Maturity Date means the earlier of (a) April 15, 2011, and (b) the
acceleration of maturity of RE Term Loan in accordance with Section 12 of this
Agreement.
 
RE Term Note means a promissory note substantially in the form of Exhibit
A-2, executed by Borrower and made payable to Lender in the original principal
amount of the RE Term Loan Committed Amount, together with all renewals,
extensions, modifications, amendments, supplements, restatements and
replacements of, or substitutions for, each such promissory note.
 
RE Term Principal Amount means, when determined, the outstanding principal
balance of the RE Term Note
 
Representatives means agents, representatives, officers, directors, employees,
consultants, contractors and attorneys.
 
Responsible Officer means the president, chief executive officer, or chief
financial officer of Borrower.
 
RLOC Term Committed Amount means $850,000.
 
RLOC Term Facility is defined in Section 2.1(c).
 
RLOC Term Maturity Date means the earlier of (a) April 15, 2011, and (b) the
acceleration of maturity of the RLOC Term Facility in accordance with Section 12
of this Agreement.
 
9

--------------------------------------------------------------------------------

 
RLOC Term Note means a promissory note substantially in the form of Exhibit A-3,
executed by Borrower and made payable to Lender in the original principal amount
of the RLOC Term Committed Amount, together with all renewals, extensions,
modifications, amendments, supplements, restatements and replacements of, or
substitutions for, each such promissory note.
 
RLOC Term Principal Amount means, when determined, the outstanding principal
balance of the RLOC Term Note.
 
ROV Term Committed Amount means $730,464.
 
ROV Term Facility is defined in Section 2.1(a).
 
ROV Term Maturity Date means the earlier of (a) April 15, 2011, and (b) the
acceleration of maturity of the ROV Term Facility in accordance with Section 12
of this Agreement.
 
ROV Term Note means a promissory note substantially in the form of Exhibit A-1,
executed by Borrower and made payable to Lender in the original principal amount
of the ROV Term Committed Amount, together with all renewals, extensions,
modifications, amendments, supplements, restatements and replacements of, or
substitutions for, each such promissory note.
 
ROV Term Principal Amount means, when determined, the outstanding principal
balance of the ROV Term Note.
 
S&P means Standard & Poor’s Ratings Group (a division of The McGraw-Hill
Companies, Inc.).
 
Security Agreement means each Security Agreement in Proper Form, and executed by
any Company, as debtor, and by Lender, as secured party, granting Lender a Lien
on, and security interest in, among other things, such Company’s accounts
receivable, inventory, equipment, goods, general intangibles, intellectual
property, chattel paper, instruments, and documents, as the same may be amended,
restated, or supplemented from time to time.
 
Security Documents means all Security Agreements, Deeds of Trust, Pledge
Agreements, and all documents executed in connection therewith to create or
perfect a Lien on the Collateral.
 
Subordinated Debt means Debt which is contractually subordinated in right of
payment, collection, enforcement and lien rights to the prior payment in full of
the Obligation on terms satisfactory to Lender, and includes Debt in the form of
subordinated convertible debentures or subordinated promissory notes.
 
Subsidiary of a Person means a corporation, partnership, joint venture, limited
liability company or other business entity of which a majority of the voting
interests are at the time beneficially owned, or the management of which is
otherwise controlled, directly, or indirectly through one or more
intermediaries, or both, by such Person.  Unless otherwise specified, all
references in this Agreement or the Loan Documents to a “Subsidiary” or to
“Subsidiaries” shall refer to a Subsidiary or to Subsidiaries of Borrower.
 
Swap Contract means, to the extent any Company and Lender or an Affiliate of
Lender is a party thereto, (a) any and all rate swap transactions, basis swaps,
credit derivative transactions, forward rate transactions, commodity swaps,
commodity options, forward commodity contracts, equity or equity index swaps or
options, bond or bond price or bond index swaps or options or forward bond or
forward bond price or forward bond index transactions, interest rate options,
forward foreign exchange transactions, cap transactions, floor transactions,
collar transactions, currency swap transactions, cross-currency rate swap
transactions, currency options, spot contracts, or any other similar
transactions or any combination of any of the foregoing (including any options
to enter into any of the foregoing), whether or not any such transaction is
governed by or subject to any master agreement, and (b) any and all transactions
of any kind, and the related confirmations, which are subject to the terms and
conditions of, or governed by, any form of master agreement published by the
International Swaps and Derivatives Association, Inc., any International Foreign
Exchange Master Agreement, or any other master agreement (any such master
agreement, together with any related schedules, a “Master Agreement”), including
any such obligations or liabilities under any Master Agreement.
 
10

--------------------------------------------------------------------------------

 
Swap Termination Value means, in respect of any one or more Swap Contracts,
after taking into account the effect of any legally enforceable netting
agreement relating to such Swap Contracts, (a) for any date on or after the date
such Swap Contracts have been closed out and termination value(s) determined in
accordance therewith, such termination value(s), and (b) for any date prior to
the date referenced in clause (a), the amount(s) determined as the
mark-to-market value(s) for such Swap Contracts, as determined based upon one or
more mid-market or other readily available quotations provided by any recognized
dealer in such Swap Contracts (which may include Lender or any Affiliate of
Lender).
 
Tangible Net Worth means, when determined, the Companies’ consolidated Net Worth
after deducting capitalized interest, debt discount and expense, goodwill,
patents, trademarks, copyrights, franchises, licenses and such other assets as
are properly classified as “intangible assets”.
 
Tax Code means the Internal Revenue Code of 1986, as amended, and related rules,
regulations and published interpretations.
 
Taxes means, for any Person, taxes, assessments or other governmental charges or
levies imposed upon that Person, its income, or any of its properties,
franchises or assets.
 
TD Bank means TD Bank, N.A., a national banking association.
 
TD Bank Debt means the indebtedness owed by Flotation Technologies to TD Bank
pursuant to the TD Bank Loan Documents which (a) does not, in the aggregate
principal amount, at any time exceed $2,500,000, and (b) is secured solely by
the TD Bank Loan Documents.
 
TD Bank Loan Agreement means that certain Loan Agreement dated February 13,
2009, between Flotation Technologies, as borrower, and TD Bank.
 
TD Bank Loan Documents means (a) the TD Bank Loan Agreement, (b) the TD Bank
Mortgage, and (c) all other documents and instruments executed in connection
therewith.
 
TD Bank Mortgage means that certain Mortgage and Security Agreement dated
February 13, 2009, from Flotation Technologies to TD Bank, pursuant to which
Flotation Technologies granted a lien on the Flotation Technologies Real Estate
in favor of TD Bank to secure the repayment of the TD Bank Debt.
 
TD Bank Negative Pledge means the prohibition on the pledge of assets by
Flotation Technologies set forth in Section 23 of the TD Bank Mortgage.
 
Total Liabilities means, when determined, all obligations required by GAAP to be
classified as liabilities upon the Companies’ consolidated balance sheet,
including the aggregate amount of all Debt, liabilities (including tax and other
proper accruals) and reserves of the Companies.
 
UCC means the Uniform Commercial Code, as adopted in Texas and as amended from
time to time.
 
Unreimbursed Amount is defined in Section 2.4(b)(i).
 
U.S. means United States of America.
 
11

--------------------------------------------------------------------------------

 
voting interests of any Person means the capital stock (or other equity
interest) of such Person having ordinary voting power for the election of
directors (or other governing body).
 
1.2 Interpretive Provisions.
 
(a) Terms used but not defined in this Agreement, but which are defined in the
UCC, have the meaning given them in the UCC.
 
(b) The meanings of words and defined terms are equally applicable to the
singular and plural forms of the defined terms and words.  Defined terms in
respect of one gender include each other gender where appropriate.  Derivatives
of defined terms have corresponding meanings.
 
(c) Any conflict or ambiguity between this Agreement and any other Loan Document
is controlled by the terms and provisions of this Agreement.
 
(d) The headings and captions used in this Agreement and the other Loan
Documents are for convenience only and will not be deemed to limit, amplify or
modify the terms of this Agreement or the Loan Documents.
 
(e) Article, Section, Exhibit and Schedule references are to the Loan Document
in which such reference appears, unless otherwise indicated.
 
(f) In the computation of periods of time from a specified date to a later
specified date, the word “from” means “from and including;” the words “to” and
“until” each mean “to but excluding;” and the word “through” means “to and
including.”
 
(g) The words “herein,” “hereto,” “hereof” and “hereunder” and words of similar
import when used in any Loan Document shall refer to such Loan Document as a
whole and not to any particular provision of such Loan Document.
 
(h) The term “including” is by way of example and not limitation.
 
1.3 Accounting Terms.
 
(a) All accounting terms not specifically or completely defined in this
Agreement shall be construed in conformity with, and all financial data
(including financial ratios and other financial calculations) required to be
submitted pursuant to this Agreement shall be prepared in conformity with, GAAP,
with all accounting principles being consistently applied from period to period
and on a basis consistent with the most recent audited consolidated financial
statements of Borrower and its Subsidiaries. All accounting and financial terms
and financial calculations (including the calculation of all financial
covenants, ratios, and related definitions) in respect of Borrower are on a
consolidated basis for all Companies, unless otherwise indicated.
 
(b) If at any time any change in GAAP would affect the computation of any
financial ratio or requirement set out in any Loan Document, and Borrower or
Lender shall so request, Lender and Borrower shall negotiate in good faith to
amend such ratio or requirement to preserve the original intent thereof in light
of such change in GAAP (subject to the approval of Lender); provided that, until
so amended, (i) such ratio or requirement shall continue to be computed in
accordance with GAAP as in effect prior to such change and (ii) Borrower shall
provide to Lender financial statements and other documents required under this
Agreement or as reasonably requested hereunder setting forth a reconciliation
between calculations of such ratio or requirement made before and after giving
effect to such change in GAAP.
 
12

--------------------------------------------------------------------------------

 
1.4 References to Documents.  Unless otherwise expressly provided in this
Agreement, (a) references to corporate formation or governance documents,
contractual agreements (including this Agreement and the Loan Documents) and
other contractual instruments shall be deemed to include all subsequent
amendments, restatements, extensions, supplements and other modifications
thereto, but only to the extent that such amendments, restatements, extensions,
supplements and other modifications are not prohibited by any Loan Document; and
(b) references to any Law shall include all statutory and regulatory provisions
consolidating, amending, replacing, supplementing or interpreting such Law.
 
1.5 Time.  Unless otherwise indicated, all time references (e.g., 11:00 a.m.)
are to Central time (daylight or standard, as applicable).
 
SECTION 2  LOAN COMMITMENTS.
 
2.1 ROV Term Facility, RE Term Facility, and RLOC Term Facility.
 
(a) Subject to the terms and conditions of this Agreement, and effective as of
the Amendment Date, Lender agrees to continue a term loan to Borrower in an
amount equal to the ROV Term Committed Amount which, when paid or prepaid, may
not be reborrowed (the “ROV Term Facility”).
 
(b) Subject to the terms and conditions of this Agreement, and effective as of
the Amendment Date, Lender agrees to continue a term loan to Borrower in an
amount equal to the RE Term Loan Committed Amount which, when paid or prepaid,
may not be reborrowed (“RE Term Facility”).
 
(c) Subject to the terms and conditions of this Agreement, and effective as of
the Amendment Date, Lender agrees to refinance a portion of the existing
revolving credit facility by making a term loan to Borrower in an amount equal
to the RLOC Term Loan Committed Amount in a single Loan on the Amendment Date
which, when paid or prepaid, may not be reborrowed (“RLOC Term Facility”).
 
2.2 Loan Procedure.
 
(a) Subject to compliance with Section 5, each Loan under the ROV Term Facility,
the RE Term Facility, or the RLOC Term Facility will be deemed to be made,
advanced or continued on the Amendment Date without the requirement that
Borrower submit a Loan Request to Lender.
 
2.3 Prepayment.
 
(a) Subject to Section 2.3(b), Borrower may voluntarily pay or prepay all or any
part of the ROV Term Principal Amount, the RE Term Principal Amount, or the RLOC
Principal Amount without premium or penalty, at any time, subject to the
following conditions:
 
(i) Lender must receive Borrower’s written or telephonic prepayment notice by
10:00 a.m. on the prepayment date;
 
(ii) Borrower’s prepayment notice shall (A) specify the prepayment date, (B)
specify the amount of the Loan to be prepaid, and (C) indicate whether the ROV
Term Principal Amount, the RE Term Principal Amount, or the RLOC Term Principal
Amount is to be repaid;
 
(iii) each partial prepayment must be in a minimum amount of not less than (A)
$10,000 or a greater integral multiple of $1,000 or (B) if less than the minimum
amount, the outstanding balance of the ROV Term Principal Amount, the RE Term
Principal Amount, or the RLOC Term Principal Amount, as applicable;
 
 
13

--------------------------------------------------------------------------------

 
(iv) all accrued and unpaid interest on the portion of the ROV Term Principal
Amount, the RE Term Principal Amount, or the RLOC Term Principal Amount prepaid
must also be paid in full on the prepayment date; and
 
(v) each partial prepayment of the ROV Term Facility, the RE Term Facility, or
the RLOC Term Facility, as applicable, shall be applied to the scheduled
principal payments in the inverse order of their maturity.
 
(b) All prepayments under this Section 2.3 shall be without premium or penalty.
 
(c) If the LC Exposure at any time exceeds the LC Committed Amount, then
Borrower shall Cash Collateralize the LC Exposure, in at least the amount of
that excess.
 
(d) On the date such amounts are received by, or for the account of, Borrower,
the following amounts shall be paid to Lender in the form received with any
endorsement or assignment and shall be applied first, to the RLOC Term Principal
Amount, second, to the RE Term Principal Amount, and third, to the ROV Term
Principal Amount, in each case in accordance with this Section 2.3:  (i) 100% of
the Net Proceeds from the issuance of any Subordinated Debt; and (ii) 100% of
the Net Proceeds from the Disposition of any asset not permitted by
Section9.9.  The non-cash portion of all Net Proceeds Lender is entitled to
receive under this Section 2.3, shall be pledged to Lender concurrently with the
applicable Disposition.
 
(e) Unless otherwise specified in this Agreement, prepayments under this
Section 2.3 shall be applied (i) first, to the prepayment of the outstanding
RLOC Term Principal Amount, and shall be applied to the scheduled principal
payments in the inverse order of their maturity until the RLOC Term Principal
Amount is paid in full, (ii) second, to the prepayment of the outstanding RE
Term Principal Amount, and shall be applied to the scheduled principal payments
in the inverse order of their maturity until the RE Term Principal Amount is
paid in full, and (iii) third, to the prepayment of the outstanding ROV Term
Principal Amount, and shall be applied to the scheduled principal payments in
the inverse order of their maturity until the ROV Term Principal Amount is paid
in full.
 
(f) After proper application of all proceeds under this Section 2.3, any
remaining proceeds shall be applied (A) to Cash Collateralize all LC Exposure,
and (B) the excess, if any, being payable to Borrower.
 
2.4 LC Facility.
 
(a) The LC Commitment.
 
(i) Subject to the terms and conditions set out in this Agreement, Lender
agrees, to honor drafts under the Existing LCs and any renewals or amendments
thereto.
 
(ii) Lender is not obligated to issue any LCs other than the Existing LCs.
 
(iii) With respect to any LC which is not an Existing LC, Lender may from time
to time on any Business Day during the period from the Amendment Date until the
LC Termination Date, issue new LCs for the account of Borrower, and amend or
renew LCs previously issued by it, provided that, Lender shall not be obligated
to make any LC Credit Extension with respect to any new LC described under this
subsection (a)(ii), if:
 
14

--------------------------------------------------------------------------------

 
(A) the issuance of such new LC has not been approved by Lender in its sole
discretion;
 
(B) as of the date of and after giving effect to such LC Credit Extension, the
LC Exposure would exceed the LC Committed Amount;
 
(C) the expiry date of such requested LC would occur after the LC Termination
Date, unless Lender has approved such expiry date;
 
(D) the issuance of such LC would violate one or more policies of Lender; or
 
(E)  it is denominated in a currency other than Dollars.
 
(iv) Lender shall be under no obligation to amend any LC if (A) Lender would
have no obligation at such time to issue such LC in its amended form under the
terms of this Agreement, or (B) the beneficiary of such LC does not accept the
proposed amendment to such LC.
 
(b) Drawings and Reimbursements.
 
(i) Upon receipt from the beneficiary of any LC of any notice of a drawing under
such LC, Lender shall notify Borrower thereof.  Not later than 12:00 noon on the
date of any payment by Lender under an LC (each such date, an “Honor Date”),
Borrower shall reimburse Lender in an amount equal to the amount of such
drawing.  If Borrower fails to so reimburse Lender by such time, Borrower shall
be deemed to have incurred from Lender an LC Borrowing, to be disbursed on the
Honor Date in an amount equal to the amount of the unreimbursed drawing (the
“Unreimbursed Amount”), without regard to any minimum Loan amount or to the
conditions set out in Section 5.  Any notice given by Lender pursuant to this
Section 2.4(b)(i) may be given by telephone if immediately confirmed in writing;
provided that, the lack of such an immediate confirmation shall not affect the
conclusiveness or binding effect of such notice.
 
(ii) With respect to any Unreimbursed Amount that is deemed to be an LC
Borrowing, such LC Borrowing shall be due and payable immediately (together with
interest) and shall bear interest at the Default Rate.
 
(c) Obligations Absolute. The obligation of Borrower to reimburse Lender for
each drawing under each LC and to repay each LC Borrowing shall be absolute,
unconditional and irrevocable, and shall be paid strictly in accordance with the
terms of this Agreement under all circumstances, Borrower shall promptly examine
a copy of each LC and each amendment thereto that is delivered to it and, in the
event of any claim of noncompliance with Borrower’s instructions or other
irregularity, Borrower will immediately notify Lender.  Borrower shall be
conclusively deemed to have waived any such claim against Lender and its
correspondents unless such notice is given.
 
 
15

--------------------------------------------------------------------------------

 
(d) Cash Collateral.  Upon the request of Lender, (i) if Lender has honored any
full or partial drawing request under any LC and such drawing has resulted in an
LC Borrowing, (ii) Lender has approved the issuance of an LC with an expiry date
which expires after the LC Termination Date, or (iii) if, as of the LC
Termination Date, any LC for any reason remains outstanding and partially or
wholly undrawn, Borrower shall immediately Cash Collateralize the then
outstanding LC Exposure (in an amount equal to the excess of the LC Exposure
over the LC Committed Amount, determined as of the date of such LC Borrowing or
the LC Termination Date, as the case may be).  Borrower hereby grants to Lender,
a security interest in and Lien upon all such cash, deposit accounts and all
balances therein and all proceeds of the foregoing cash collateral shall be
maintained in blocked, non-interest bearing deposit accounts at Lender.
 
(e) Applicability of ISP98 and UCP. Unless otherwise expressly agreed by Lender
and Borrower when an LC is issued, (i) the rules of the “International Standby
Practices 1998” published by the Institute of International Banking Law &
Practice (or such later version thereof as may be in effect at the time of
issuance) shall apply to each standby LC, and (ii) the rules of the Uniform
Customs and Practice for Documentary Credits, as most recently published by the
International Chamber of Commerce (the “ICC”) at the time of issuance shall
apply to each commercial LC.
 
(f) Conflict with LC Application.  In the event of any conflict between the
terms hereof and the terms of any LC Application, the terms hereof shall
control.
 
SECTION 3  TERMS OF PAYMENT.
 
3.1 Notes and Payments.
 
(a) The Loans shall be evidenced as follows:
 
(i) The Loan under the ROV Term Facility shall be evidenced by the ROV Term
Note;
 
(ii) The Loan under the RE Term Facility shall be evidenced by the RE Term Note;
 
(iii) The Loan under the RLOC Term Facility shall be evidenced by the RLOC Term
Note; and
 
(iv) Any LC Borrowings under the LC Facility shall be evidenced by the LC Note.
 
(b) Borrower must make each payment on the Obligation, without offset,
counterclaim or deduction to Lender’s Office, in funds that will be available
for immediate use by Lender by 12:00 noon on the day due.  Payments received
after such time (and payments received on a day which is not a Business Day)
will be deemed received on the next Business Day but interest shall continue to
accrue during such period.
 
3.2 ROV Term Facility, RE Term Facility, and RLOC Term Facility.
 
(a) Payments of principal and accrued and unpaid interest on the Loan made under
the ROV Term Facility in the amount of $35,246.35 are due and payable monthly in
arrears beginning on the first day of May 2010, and continuing on the first day
of each month thereafter.
 
(b) All outstanding principal and all accrued and unpaid interest in respect of
the ROV Term Facility is due and payable on the ROV Term Maturity Date.
 
16

--------------------------------------------------------------------------------

 
(c) Payments of principal and accrued and unpaid interest on the RE Term
Facility in the amount of $18,293.25 are due and payable monthly in arrears
beginning on the first day of May 2010, and continuing on the first day of each
month thereafter.
 
(d) All outstanding principal and all accrued and unpaid interest in respect of
the RE Term Facility is due and payable on the RE Term Loan Maturity Date.
 
(e) Payments of principal in the amount of $40,000, plus accrued and unpaid
interest on the RLOC Term Principal Amount, are due and payable monthly in
arrears beginning on the first day of May 2010, and continuing on the first day
of each month thereafter.
 
(f) All outstanding principal and all accrued and unpaid interest in respect of
the RLOC Term Facility is due and payable on the RLOC Term Loan Maturity Date.
 
3.3 Order of Application.
 
(a) All payments and prepayments shall be applied as specified in this Agreement
and, if not specified, shall be applied in the following order: (i) to all fees,
expenses, late charges, collection costs, and other charges, costs and expenses
for which Lender has not been paid or reimbursed under the Loan Documents, (ii)
accrued and unpaid interest on the Notes in the order Lender elects, (iii) to
the remaining outstanding principal balance of the Notes in the order Lender
elects, and (iv) to the remaining Obligation in the order and manner Lender
deems appropriate in its sole discretion.
 
(b) All proceeds from the exercise of any rights shall be applied at Lender’s
discretion among principal, interest, fees, expenses, late charges, collection
costs, and other charges, costs and expenses, for which Lender has not been paid
or reimbursed under the Loan Documents.
 
3.4 Interest.  Except as otherwise provided in this Agreement.
 
(a) The ROV Term Principal Amount shall accrue interest at an annual rate equal
to the lesser of (i) 6.50% and (ii) the Maximum Rate.
 
(b) The RE Term Principal Amount shall accrue interest at an annual rate equal
to the lesser of (i) 6.50% and (ii) the Maximum Rate.
 
(c) The RLOC Term Principal Amount shall accrue interest at an annual rate equal
to the lesser of (i) 6.50% and (ii) the Maximum Rate.
 
(d) Each change in the Maximum Rate is effective has of the date of such change
without notice to Borrower or any other Person.
 
3.5 Default Rate.  To the extent permitted by Law, while a Default exists, the
Obligation shall accrue interest at the lesser of (a) the Default Rate and
(b) the Maximum Rate, until all past due amounts are paid (whether payment is
made before or after entry of a judgment or the Default is otherwise cured or
waived).  Subject to Section 3.7, if a Default exists, Lender may, in its sole
discretion, to the extent permitted by Law, add accrued and unpaid interest to
the outstanding principal amount of all Loans and such amount will accrue
interest until paid at the applicable interest rate.
 
3.6 Interest Calculations.  Interest on Loans and on the amount of all fees and
other amounts due under the Loan Documents will be calculated on the basis of
actual number of days elapsed (including the first day but excluding the last
day), but computed as if each calendar year consisted of 360 days (unless
computation would result in an interest rate in excess of the Maximum Rate, in
which event the computation is made on the basis of a year of 365 or 366 days,
as the case may be).  All interest rate determinations and calculations by
Lender are conclusive and binding, absent manifest error.
 
17

--------------------------------------------------------------------------------

 
3.7 Maximum Rate.  It is the intention of the parties to comply with applicable
usury laws.  The parties agree that the total amount of interest contracted for,
charged, collected or received by Lender under this Agreement shall not exceed
the Maximum Rate.  To the extent, if any, that Chapter 303 of the Texas Finance
Code (the “Finance Code”) is relevant to Lender for purposes of determining the
Maximum Rate, the parties elect to determine the Maximum Rate under the Finance
Code pursuant to the “weekly ceiling” from time to time in effect, as referred
to and defined in § 303.001-303.016 of the Finance Code; subject, however, to
any right Lender subsequently may have under applicable law to change the method
of determining the Maximum Rate.  Notwithstanding any contrary provisions
contained herein, (a) the Maximum Rate shall be calculated on the basis of the
actual number of days elapsed over a year of 365 or 366 days, as the case may
be; (b) in determining whether the interest hereunder exceeds interest at the
Maximum Rate, the total amount of interest shall be spread throughout the entire
term of this Agreement until its payment in full; (c) if at any time the
interest rate chargeable under this Agreement would exceed the Maximum Rate,
thereby causing the interest payable under this Agreement to be limited to the
Maximum Rate, then any subsequent reductions in the interest rate(s) shall not
reduce the rate of interest charged under this Agreement below the Maximum Rate
until the total amount of interest accrued from and after the date of this
Agreement equals the amount of interest which would have accrued if the interest
rate(s) had at all times been in effect; (d) if Lender ever charges or receives
anything of value which is deemed to be interest under applicable Texas law, and
if the occurrence of any event, including acceleration of maturity of
obligations owing to Lender, should cause such interest to exceed the maximum
lawful amount, any amount which exceeds interest at the Maximum Rate shall be
applied to the reduction of the unpaid principal balance of all Loans under this
Agreement or any other indebtedness owed to Lender by Borrower, and if this
Agreement and such other indebtedness are paid in full, any remaining excess
shall be paid to the applicable Borrower; and (e) Chapter 346 of the Finance
Code shall not be applicable to this Agreement or the indebtedness outstanding
hereunder.
 
3.8 Set off.  While a Default exists, Lender (and each of its Affiliates) is
hereby authorized at any time and from time to time, to the fullest extent
permitted by Law, to set off and apply (a) any and all deposits (general or
special, time or demand, provisional or final) at any time held by Lender (or
its Affiliates) and (b) any other Debt at any time owing by Lender (or any of
its Affiliates) to or for the credit or the account of any Company, against the
Obligation even if Lender has not made demand under this Agreement and the
Obligation is unmatured.  Lender agrees to promptly notify the applicable
Company after any such set off and application is made; provided that, the
failure to give such notice shall not affect the validity of such set off and
application.  The rights of Lender under this Section 3.8 are in addition to
other rights and remedies (including other rights of set off) that Lender may
have.
 
3.9 Debit Account.  Borrower agrees that the interest and principal payments and
any fees will be deducted automatically on the due date from such of Borrower’s
accounts with Lender as designated in writing by Borrower.  This authorization
shall not affect the obligation of Borrower to pay such sums when due, without
notice, if there are insufficient funds in such account to make such payment in
full on the due date thereof, or if Lender fails to debit such account.
 
SECTION 4  FEES.
 
4.1 Treatment of Fees.  To the extent permitted by Law, the fees described in
this Section 4 (a) do not constitute compensation for the use, detention, or
forbearance of money, (b) are in addition to, and not in lieu of, interest and
expenses otherwise described in this Agreement or in any other Loan Document,
(c) are non-refundable, (d) accrue interest, if not paid when due, at the
Default Rate, and (e) are calculated on the basis of actual number of days
elapsed (including the first day but excluding the last day), but computed as if
each calendar year consisted of 360 days (unless computation would result in an
interest rate in excess of the Maximum Rate, in which event the computation is
made on the basis of a year of 365 or 366 days, as the case may be).  The fees
described in this Section 4 are in all events subject to the provisions of
Section 3.7.
 
18

--------------------------------------------------------------------------------

 
4.2 Letter of Credit Fees.  Borrower shall pay to Lender, a letter of credit fee
(the “LC Fee”) for each LC in an amount equal to (a) the Applicable Rate
multiplied by (b) the maximum daily amount available to be drawn under such
LC.  LC Fees shall be (a) computed on a quarterly basis in advance and (b) due
and payable on the first Business Day of each April, July, October and January,
commencing with the first such date to occur after the issuance of such LC, on
the LC Termination Date, and thereafter on demand.  In addition, Borrower shall
pay to Lender an issuance fee equal to $500, and all other applicable fees
customarily charged by its letter of credit department.
 
4.3 Unused Fees.  Borrower shall pay to Lender, a fee in an amount equal to (a)
the Applicable Rate multiplied by (b) the actual daily amount by which the LC
Committed Amount exceeds the LC Exposure, which fee shall be due and payable
quarterly in arrears, on the first day of each April, July, October and January
(beginning January 1, 2009) until the LC Termination Date.
 
4.4 Modification Fee.  On the Amendment Date, Borrower shall pay to Lender for
its own account a modification fee in the amount of $20,000.  Such fee shall be
fully earned when paid and shall not be refundable for any reason whatsoever.
 
SECTION 5  CONDITIONS PRECEDENT.
 
5.1 Conditions to Initial Loans.  This Agreement will become effective once all
parties have executed and delivered this Agreement. Lender will not be obligated
to make the initial Loans until (i) Lender has received all of the items
described on Schedule 5, each in Proper Form, (ii) Lender has received a field
audit in proper form, and (iii) Borrower has established with Lender an
operating account acceptable to Borrower and Lender.
 
5.2 Conditions to All Loans.  Lender will not be obligated to make any Loan
unless on the applicable Loan Date or LC Credit Extension Date (and after giving
effect to the requested Loan or LC):  (a) Lender has timely received a Loan
Request, (b) all of the representations and warranties of the Companies in the
Loan Documents are true and correct in all material respects (except to the
extent that the representations and warranties speak to a specific date), (c)
Lender has received and continues to maintain evidence of insurance as set out
in Section 8.6 (including certificates and endorsements), (d) no Material
Adverse Event exists, and (e) no Default or Potential Default exists or will
result from such funding, issuance, amendment or renewal.  Each Loan Request
delivered to Lender constitutes the representation and warranty by the Companies
that the statements in clauses (b), (c), (d), and (e) above are true and correct
in all material respects.
 
5.3 No Waiver.  Each condition precedent in this Agreement (including matters
listed on Schedule 5) is material to the transactions contemplated by this
Agreement, and time is of the essence with respect to each condition
precedent.  Lender may make any Loan without all conditions being satisfied, but
such Loan shall not be deemed a waiver of any condition precedent for any
subsequent Loan.
 
SECTION 6  SECURITY AND GUARANTIES.
 
6.1 Collateral.  The complete payment and performance of the Obligation shall be
secured by all of the items and types of property described as “Collateral” in
the Security Agreement, and as “Mortgaged Property” in the Deed of Trust
(collectively, the “Collateral”).  Each Company shall execute all applicable
Security Documents to pledge all of the Collateral it owns, provided that,
Flotation Technologies shall not be required to grant a Lien on the Flotation
Technologies Real Estate in favor of Lender.
 
 
19

--------------------------------------------------------------------------------

 
6.2 Financing Statements.  Each Company hereby authorizes Lender to file in
Proper Form, if requested, financing statements, continuation statements, or
termination statements, or take other action reasonably requested by Lender
relating to the Collateral, including any Lien search required by Lender.
 
6.3 Guaranties.  Each Guarantor shall guaranty the complete payment and
performance of the Obligation by executing and delivering a Guaranty to Lender
on the Closing Date.  Each other Company (other than Borrower) shall execute and
deliver to Lender a Guaranty in Proper Form within 30 days after such Company is
created or acquired.
 
SECTION 7  REPRESENTATIONS AND WARRANTIES.  Each Company represents and warrants
to Lender as follows:
 
7.1 Existence, Good Standing, and Authority to do Business.  Borrower is a
corporation, duly organized and validly existing and in good standing under the
Laws of the jurisdiction in which it is organized.  Each other Company is duly
organized, validly existing, and in good standing under the Laws of the
jurisdiction in which it is organized.  In each state in which each Company does
business and the nature and extent thereof requires it to be duly qualified to
transact business in such state, it is properly licensed, in good standing, and,
where required, in compliance with fictitious name statutes.
 
7.2 Subsidiaries.  Schedule 7.2 lists the name, address, entity type and
jurisdiction of organization of each Company, the number of issued and
outstanding shares (or other equity interests) of such Company and Borrower’s
(or other Company’s) percentage ownership of each other Company.
 
7.3 Authorization, Compliance, and No Default.  The execution and delivery by
each Company of the Loan Documents to which it is a party and each Company’s
performance of its obligations under the Loan Documents are within such
Company’s organizational powers, have been duly authorized, do not violate any
of its organizational documents, and do not violate any Law or Material
Agreement by which such Company is bound.
 
7.4 Enforceability.  Each Loan Document has been executed and delivered by each
Company which is a party to it, and the Loan Documents are enforceable against
each Company in accordance with their respective terms, except as enforceability
may be limited by applicable Debtor Relief Laws and general principles of
equity.
 
7.5 Litigation.  Except as disclosed on Schedule 7.5, no Company is subject to,
or aware of the threat of, any Litigation involving any Company which, (a)
purports to affect or pertain to this Agreement, any other Loan Document, or any
of the transactions contemplated by the Loan Documents, or (b) if determined
adversely to any Company could reasonably be expected to result in a Material
Adverse Event.
 
7.6 Taxes.  All Tax returns of each Company required to be filed have been
timely filed (or extensions have been granted) and all Taxes imposed upon any
Company that are due and payable have been paid before delinquency, other than
Taxes which are being contested in good faith by lawful proceedings diligently
conducted, against which reserve or other provision required by GAAP has been
made.
 
7.7 Environmental Matters.  No facility of any Company is used for, or to the
knowledge of any Company has been used for, storage, treatment, or disposal of
any Hazardous Substance in violation of any applicable Environmental Law, other
than violations that individually or collectively would not constitute a
Material Adverse Event.  Except for the items disclosed to Lender in writing
prior to the Closing Date, no Company knows of any environmental condition or
circumstance adversely affecting its assets, properties, or operations that
could reasonably be expected to result in a Material Adverse Event.
 
20

--------------------------------------------------------------------------------

 
7.8 Ownership of Assets; Intellectual Property.  Each Company has
(a) indefeasible title to its real property, (b) a vested leasehold interest in
all of its leased property, and (c) good and marketable title to its personal
property, all as reflected on the Current Financials (except for property that
has been disposed of as permitted by Section 9.9).  Each Company is conducting
its business without infringement or claim of infringement of any license,
patent, copyright, service mark, trademark, trade name, trade secret or other
intellectual property right of others, other than any infringements or claims
that, if successfully asserted against or determined adversely to any Company,
could not, individually or collectively, reasonably be expected to result in a
Material Adverse Event.
 
7.9 Liens.  No Lien exists on any asset of any Company, other than Permitted
Liens.
 
7.10 Debt.  No Company is an obligor on any Debt, other than Permitted Debt.
 
7.11 Insurance.  The Companies maintain the insurance required under Section
8.6.
 
7.12 Place of Business; Real Property.  The location of each Company’s place of
business or chief executive office is set out on Schedule 7.12.  The books and
records of each Company are located at its place of business or chief executive
office.  Except for the locations set out on Schedule 7.12, Borrower has no
ownership, leasehold, or other interest in real estate.
 
7.13 Purpose of Credit Facilities.
 
(a) The original proceeds of the ROV Term Facility were used to finance (or
refinance) Borrower’s acquisition of the ROV.  The original proceeds of the RE
Term Facility were used to finance (or refinance) Borrower’s acquisition of the
Properties. The proceeds of the RLOC Term Facility will be used to refinance a
portion of the Revolving Credit Facility under the Existing Credit Agreement as
a term loan.  The LC Facility will be used to support all Existing LCs and any
additional LCs approved by Lender.
 
(b) No part of the proceeds of any Loan will be used, directly or indirectly,
for a purpose that violates any Law, including the provisions of Regulation U.
 
7.14 Transactions with Affiliates.  Except as disclosed on Schedule 7.14, no
Company is a party to a material agreement or transaction with any of its
Affiliates (excluding other Companies), other than transactions in the ordinary
course of business and upon fair and reasonable terms not materially less
favorable than it could obtain or could become entitled to in an arm’s-length
transaction with a Person that was not its Affiliate.
 
7.15 Financial Information.  Each material fact or condition relating to the
Loan Documents or the Companies’ financial condition, business, property, or
prospects has been disclosed to Lender in writing.  All financial and other
information supplied to Lender is sufficiently complete to give Lender accurate
knowledge of each Company's financial condition, including all material
contingent liabilities.  Since the date of the most recent financial statement
provided to Lender, there has been no material adverse change in the business
condition (financial or otherwise), operations or properties of the Companies.
 
7.16 Material Agreements and Funded Debt.  No Company is a party to any Material
Agreement, other than the Loan Documents and the Material Agreements described
on attached Schedule 7.16.  No Company has breached or is in default under any
Material Agreement or Funded Debt obligation.
 
21

--------------------------------------------------------------------------------

 
7.17 ERISA.
 
(a) Each Employee Plan (i) (other than a multiemployer plan) is in compliance in
all material respects with the applicable provisions of ERISA, the Tax Code and
other federal or state law, and (ii) has received a favorable determination
letter from the IRS and to the best knowledge of Borrower, nothing has occurred
which would cause the loss of such qualification.
 
(b) Borrower has fulfilled its material obligations, if any, under the minimum
funding standards of ERISA and the Tax Code with respect to each Employee Plan,
and has not incurred any liability with respect to any Employee Plan under Title
IV of ERISA.
 
(c) There is no Litigation (including by any Governmental Authority), and there
has been no prohibited transaction or violation of the fiduciary responsibility
rules, with respect to any Employee Plan which is or could reasonably be
expected to be a Material Adverse Event.
 
(d) With respect to any Employee Plan subject to Title IV of ERISA: (i) no
reportable event has occurred under Section 4043(c) of ERISA for which the PBGC
requires 30 day notice, (ii) no action by Borrower or any ERISA Affiliate to
terminate or withdraw from any Employee Plan has been taken and no notice of
intent to terminate a Employee Plan has been filed under Section 4041 of ERISA,
and (iii) no termination proceeding has been commenced with respect to a
Employee Plan under Section 4042 of ERISA, and, to the best knowledge of
Borrower, no event has occurred or condition exists which might constitute
grounds for the commencement of such a proceeding.
 
SECTION 8  AFFIRMATIVE COVENANTS.  So long as Lender is committed to make any
Loan under this Agreement, and thereafter until the Obligation is paid in full,
each Company agrees as follows:
 
8.1 Items to be Furnished.  Borrower shall cause the following to be furnished
to Lender:
 
(a) Promptly after preparation, and no later than 90 days after the last day of
each fiscal year of Borrower beginning with the fiscal year ending December 31,
2008, audited financial statements (including statements of operations,
stockholders’ equity, and cash flows and a balance sheet) showing the
consolidated financial condition and results of operations of the Companies as
of, and for the year ended on, that last day, and accompanied by:
 
(i) the opinion of a firm of independent certified public accountants
satisfactory to Lender, based on an audit using generally accepted auditing
standards, that the financial statements were prepared in accordance with GAAP
and present fairly, in all material respects, the consolidated financial
condition and results of operations of Companies, and
 
(ii) a Compliance Certificate with respect to such financial statements to be
delivered under this clause (a), calculating and certifying as to the Companies’
compliance with the financial covenants under this Agreement.
 
(b) Promptly after preparation, and no later than 45 days after the last day of
each March, June, September and December unaudited financial statements
(including statements of operations, stockholders’ equity, and cash flows and a
balance sheet) showing the consolidated financial condition and results of
operations of the Companies for the prior quarter and for the period from the
beginning of the current fiscal year to the last day of that quarter,
accompanied by a Compliance Certificate, with respect to such financial
statements to be delivered under this clause (b), calculating and certifying as
to the Companies’ compliance with the financial covenants under this Agreement
and certifying that no Default or Potential Default exists.
 
22

--------------------------------------------------------------------------------

 
(c) Notice, promptly after any Company receives notice of, or otherwise becomes
aware of, (i) the institution of any Litigation involving any Company for which
the monetary amount at issue is greater than $250,000, individually, or $250,000
in the aggregate, (ii) any liability or alleged liability under any
Environmental Law arising out of, or directly affecting, the properties or
operations of such Company, (iii) any substantial dispute with any Governmental
Authority, (iv) the incurrence of any material contingent Debt other than
performance guaranties in respect of contracts entered into by any Company in
the ordinary course of its business, and (v) a Default or Potential Default,
specifying the nature thereof and what action each Company has taken, is taking,
or proposes to take.
 
(d) Promptly after preparation, but no later than 10 days after the date of
filing, a completed tax return of Borrower, together with a certificate of
Responsible Officer of Borrower certifying as to the dividends or distributions
declared or made in respect of the calendar year covered by such tax return.
 
(e) To the extent it is not part of the Borrower’s consolidated tax return,
promptly after preparation, but no later than 10 days after the date of filing,
a completed tax return of each Guarantor.
 
(f) Concurrently with the occurrence of (i) such change, notify Lender of any
change in the name, legal structure, place of business, or chief executive
office of any Company, or (ii) any acquisition or creation of a Subsidiary by
any Company, notify Lender that any Person has become a Subsidiary of such
Company.
 
(g) Upon Lender’s request, but in any event on at least an annual basis, true
and correct current financial statements of Borrower and each Guarantor in form
and substance satisfactory to Lender.  The financial statements shall include,
among other things, detailed information regarding (i) any entities such as
corporations, partnerships, or limited liability companies of which Borrower or
any Guarantor is the majority owner and (ii) any entities of which Borrower or
any Guarantor is not the majority owner, but for which Borrower or such
Guarantor is directly or contingently liable on debts or obligations of any kind
incurred by those entities.
 
(h) Promptly upon reasonable request by Lender, information and documents not
otherwise required to be furnished under the Loan Documents respecting the
business affairs, assets and liabilities of the Companies.
 
8.2 Books, Records, Inspections, and Field Audits.  Each Company shall maintain
books, records, and accounts necessary to prepare the financial statements
required by Section 8.1.  Upon reasonable notice (not less than 2 Business
Days), each Company shall allow Lender (or its Representatives) during business
hours or at other reasonable times to inspect each Company’s properties and
examine, audit, and make copies of books and records.  If any of the Companies’
properties, books or records are in the possession of a third party, the
applicable Company shall authorize that third party to permit Lender or its
Representatives to have access to perform inspections or audits and to respond
to Lender's requests for information concerning such properties, books and
records.  Lender may discuss, from time to time, any of the Companies’ affairs,
conditions and finances with its directors, officers, and certified public
accountants.  Each Company shall permit Lender to perform (or engage an third
party to perform) a field audit of Borrower’s operations, inventory, accounts
receivables, accounts payable, and other assets once each year; provided that
while a Default exists, Lender may perform (or engage an third party to perform)
a field audit at any time.
 
8.3 Taxes.  Each Company will promptly pay when due any and all Taxes, other
than Taxes which are being contested in good faith by lawful proceedings
diligently conducted, against which reserve or other provision required by GAAP
has been made, and in respect of which levy and execution of any Lien are
stayed.
 
23

--------------------------------------------------------------------------------

 
8.4 Compliance with Laws.  Each Company shall comply in all material respects of
the requirements of all Laws (including fictitious or trade name statutes) and
all orders, writs, injunctions and decrees applicable to it or its business or
property, except in such instances in which (a) such requirement is deemed
contested in good faith by lawful proceedings diligently conducted, against
which reserve or other provision required by GAAP has been made, and (b) the
failure to comply would not result in a Material Adverse Event.
 
8.5 Maintenance of Existence, Assets, and Business.  Except as otherwise
permitted by Section 9.6, each Company will (a) maintain its existence and good
standing in its state of organization and its authority to transact business and
good standing in all other jurisdictions where the nature and extent of its
business and properties require due qualification and good standing,
(b) maintain all licenses, permits and franchises necessary for its business
where failure to do so is a Material Adverse Event, and (c) keep all of its
assets that are useful in and necessary to its business in good working order
and condition (ordinary wear and tear excepted) and make all necessary repairs
and replacements.
 
8.6 Insurance.  Each Company shall maintain insurance with responsible and
reputable insurance companies or associations concerning its property and
business against casualties and contingencies and of the types and amounts
customarily maintained by similar businesses (including coverage for contractual
liability and product liability).  Each policy shall provide for at least 30
days prior notice to Lender of any cancellation thereof, and insurance policies
covering the tangible property comprising the Collateral.  Upon Lender’s
request, Borrower shall deliver to Lender a certificate of insurance listing all
insurance in force.
 
8.7 Environmental Laws.  Each Company shall (a) conduct its business so as to
comply with (i) all applicable Environmental Laws, and (ii) the requirements of
any purchase agreement under which it acquired any Property, (b) promptly take
corrective action to remedy any violation of any Environmental Law, and (c)
immediately notify Lender of any claims or demands in excess of $100,000 by any
Governmental Authority or Person with respect to any Environmental Law or
Hazardous Substance.
 
8.8 ERISA.  Promptly during each year (a) pay contributions adequate to meet at
least the minimum funding standards under ERISA with respect to each and every
Employee Plan, (b) file each annual report required to be filed pursuant to
ERISA in connection with each Employee Plan for each year, and (c) notify Lender
within 10 days of the occurrence of any reportable event under Section 4043(c)
of ERISA that might constitute grounds for termination of any capital Employee
Plan by the Pension Benefit Guaranty Corporation or for the appointment by the
appropriate United States District Court of a trustee to administer any Employee
Plan.
 
8.9 Use of Proceeds.  Borrower shall use the proceeds of any Loan or LC only for
the purposes represented in this Agreement.
 
8.10 Application of Insurance and Eminent Domain Proceeds.
 
(a) Lender and each Company agree (i) that all Insurance Proceeds shall be paid
by the insurers directly to Lender (as loss payee or additional insured), and
(ii) to cause all Eminent Domain Proceeds to be paid by the condemning
Governmental Authority directly to Lender.
 
(b) If any Insurance Proceeds or Eminent Domain Proceeds are paid to any
Company, such Insurance Proceeds or Eminent Domain Proceeds shall be received
only in trust for Lender, shall be segregated from other funds of the Companies
and shall promptly be paid over to Lender in the same form as received (with any
necessary endorsement).
 
24

--------------------------------------------------------------------------------

 
(c) Notwithstanding anything to the contrary in this Section 8.10, reimbursement
under any liability insurance maintained by any Company may be paid directly to
the Person who incurred the liability, cost, or expense covered by such
insurance.
 
(d) Any Eminent Domain Proceeds arising from the Properties or Insurance
Proceeds arising from losses incurred by Borrower shall be applied (i) first, to
the RLOC Term Facility, (ii) second, to the RE Term Facility, (ii) third, to the
ROV Term Facility, (iv) fourth, to Cash Collateralize LC Exposure, with the
excess, if any, payable to Borrower.
 
(e) Notwithstanding anything in this Agreement to the contrary, Borrower may
retain the first $100,000 of Insurance Proceeds or Eminent Domain Proceeds paid
to Borrower under this Agreement and use such proceeds to repair or replace
damaged property or for working capital purposes.
 
8.11 New Subsidiaries.  Each Company shall promptly cause each newly created or
acquired Subsidiary to comply with Section 6.
 
8.12 Expenses.  Borrower shall promptly pay upon demand (a) all reasonable
costs, fees and expenses paid or incurred by Lender (including those incurred
under Section 6) in connection with the negotiation, preparation, delivery and
execution of any Loan Document, and any related or subsequent amendment, waiver,
or consent (including in each case, the reasonable fees and expenses of Lender’s
counsel), (b) all due diligence, closing, and post-closing costs including
filing fees, recording costs, lien searches, corporate due diligence,
third-party expenses, appraisals (if required), title insurance (if required),
environmental surveys, annual field audits, and other related due diligence,
closing and post-closing costs and expenses, and (c) all costs, fees and
expenses of Lender incurred in connection with the enforcement of the Loan
Documents or the exercise of any rights arising under the Loan Documents or the
negotiation, workout, or restructure and any action taken in connection with any
Debtor Relief Laws (including in each case, the reasonable fees and expenses of
Lender’s counsel), all of which shall be a part of the Obligation and shall
accrue interest, if not paid upon demand, at the Default Rate until repaid.
 
8.13 Maintenance of Cash Management Agreement.  Borrower shall at all times
maintain a Cash Management Agreement established in compliance with Section 5.1
(or an alternate treasury management arrangement acceptable to Lender).
 
8.14 Further Assurances.  Each Company shall take such action as Lender may
reasonably request to carry out the intent of this Agreement and the terms of
the Loan Documents (including to perfect and protect its security interests and
Liens or comply with applicable Laws), including executing, acknowledging,
authorizing, delivering or recording or filing additional instruments or
documents or obtaining and delivering new or updated surveys, appraisals, title
commitments, or environmental site assessments.  Because Borrower agrees that
Lender’s remedies at Law for failure of Borrower to comply with the provisions
of this Section 8.14 would be inadequate and that failure would not be
adequately compensable in damages, Borrower agrees that the covenants of this
Section 8.14 may be specifically enforced.
 
 
25

--------------------------------------------------------------------------------

 
SECTION 9  NEGATIVE COVENANTS.  So long as Lender is committed to make any Loan
or issue any LC under this Agreement, and thereafter until the Obligation is
paid in full, each Company agrees as follows:
 
9.1 Debt.  No Company may create, incur, or permit any Debt except Permitted
Debt.  The Funded Debt permitted under clause (i) of the defined term “Permitted
Debt”, shall be pari passu in right of payment with the Obligation, and the
Liens which secure such Funded Debt shall be pari passu in right of priority
with the Liens which secure the Obligation.
 
9.2 Liens.  No Company shall create, incur, or permit any Lien upon any of its
assets, except Permitted Liens.  No Company shall enter into any agreement
(other than the Loan Documents ]or the TD Bank Documents]) prohibiting the
creation or assumption of any Lien upon its assets or revenues or prohibiting or
restricting the ability of any Company to amend or otherwise modify this
Agreement or any other Loan Document.
 
9.3 Compliance.  No Company may violate the provisions of any Laws applicable to
it, any agreement to which it is a party, or the provisions of its
organizational documents, if such violations individually or collectively would
constitute a Material Adverse Event.  No Company will modify, repeal, replace or
amend any provision of its organizational or governing documents in any manner
which would be adverse to the interests of Lender.
 
9.4 Loans and Investments.
 
(a) No Company may extend credit to any other Person, other than (i) existing
extensions of credit disclosed to Lender in writing, (ii) extensions of credit
among the Companies which have recourse liability for the Obligation, (iii)
extensions of credit in the nature of accounts receivable or notes receivable
arising from the sale or lease of goods or services in the ordinary course of
business to Persons which are not Affiliates, (iv) demand deposit accounts
maintained in the ordinary course of business, (v) expense accounts for
employees in the ordinary course of business which do not, in the aggregate, at
any time exceed $50,000, (vi) extensions of credit that do not exceed an
aggregate amount of $20,000 outstanding at any one time, and (vii) Permitted
Investments.
 
(b) No Company may make any investment in, or purchase or commit to purchase any
equity interests in, any other Person, other than Permitted Investments.
 
9.5 Dividends.  No Company may (a) declare or make any dividend or other
distribution (other than (i) dividends or distributions declared or made by such
Company wholly in the form of its capital stock, (ii) dividends or distributions
by a Company to Borrower, and (iii) Borrower may from time to time make cash
distributions to its shareholders if no Default exists prior to or after giving
effect to any such distribution, (b) retire, redeem, purchase, withdraw, or
otherwise acquire any equity interests in such Company (including the purchase
of warrants or other options to acquire such interests), or (c) declare or make
any distribution of assets to the holders of its equity interests (in that
capacity), whether in cash, assets, or in its obligations.  No Company may enter
into or permit to exist any arrangement or agreement (other than this Agreement)
that prohibits it from paying dividends or making other distributions.
 
9.6 Acquisition, Mergers, and Dissolutions.
 
(a) Except as provided in this Section 9.6, no Company may (whether in one
transaction or a series of transactions) (i) acquire all or any substantial
portion of the stock issued by, equity interest in, voting interest in, or
assets of, any other Person, (ii) merge or consolidate with any other Person,
(iii) liquidate, wind up or dissolve (or suffer any liquidation or dissolution),
(iv) suspend operations, or (v) acquire any Subsidiaries.
 
 
26

--------------------------------------------------------------------------------

 
(b) Any Company may merge or consolidate with, or acquire stock issued by,
equity interest in, or assets of, another Company (and, in the case of such
merger or consolidation or, in the case of the conveyance or distribution of all
of such assets, the non-surviving or selling entity, as the case may be, may be
liquidated, wound up or dissolved); provided that, if the surviving entity is a
Guarantor it shall comply with Section 6 and if Borrower is a party to such
merger or consolidation, Borrower must be the surviving entity.
 
9.7 Assignment.  No Company may assign or transfer any of its rights, duties or
obligations under any of the Loan Documents.
 
9.8 Fiscal Year and Accounting Methods.  No Company may change its fiscal year
or its method of accounting (other than immaterial changes in methods or as
required by GAAP).
 
9.9 Sale of Assets.  No Company may make any Disposition or enter into any
agreement to make any Disposition, except (a) Dispositions in the ordinary
course of business, (b) Dispositions of  (i) obsolete or worn out assets, (ii)
assets which are no longer needed in such Company’s business, (iii) inventory in
the ordinary course of business, or (iv) delinquent accounts receivable in the
ordinary course of business for purposes of collection; provided that, all of
the consideration of each such Disposition is cash, and (c) to the extent
permitted by Section 9.6.
 
9.10 New Businesses.  No Company may engage in any business except the business
in which it is engaged as of the Closing Date.
 
9.11 Transactions with Affiliates.  Except as disclosed on Schedule 7.14, no
Company may enter into any Material Agreement or any material transaction with
any of its Affiliates, provided that, any Company may enter into a Material
Agreement or any material transaction with any of its Affiliates if (a) such
transaction is in the ordinary course of business, and (b) is on fair and
reasonable terms not materially less favorable to such Company than such Company
could obtain in an arms’ length transaction with a Person that was not an
Affiliate.
 
9.12 Payroll Taxes.  No Company may use any portion of the proceeds of any Loan
to pay the wages of employees, unless a timely payment to or deposit with the
appropriate Governmental Authority of all amounts of Tax required to be deducted
and withheld with respect to such wages is also made.
 
9.13 Prepayment of Debt.  No Company may voluntarily prepay principal of, or
interest on, any Debt, other than the Obligation, if a Default or Potential
Default exists or would result after giving effect to such payment.  No Company
may prepay, repurchase, redeem or defease Subordinated Debt (other than
Subordinated Debt listed on Schedule 9.13) prior to the irrevocable payment and
performance in full of the Obligation without the prior written consent of
Lender.
 
SECTION 10  FINANCIAL COVENANTS.  So long as Lender is committed to make any
Loan or issue any LC under this Agreement, and thereafter until the Obligation
is paid in full, the Companies agree as follows:
 
10.1 Leverage Ratio.  The Leverage Ratio may not at any time from and after
April 1, 2010 be greater than 3.00 to 1.00.
 
10.2 Fixed Charge Coverage Ratio.  The Fixed Charge Coverage Ratio may not at
any time from and after April 1, 2010 be less than 1.50 to 1.00.
 
27

--------------------------------------------------------------------------------

 
10.3 Tangible Net Worth.  The Tangible Net Worth may not at any time from and
after April 1, 2010 be less than an amount equal to  the sum of (a) $15,000,000,
plus (b) 50% of the Companies’ net income, if positive, after provision for
Taxes, for each whole or partial fiscal year completed after the Amendment Date.
 
10.4 Testing and Calculation.
 
(a) Each of the foregoing financial covenants shall be calculated and tested
quarterly, as of the last day of each quarter, beginning with the quarter ending
June 30, 2010.
 
(b) For the quarter ending June 30, 2010, and each quarter thereafter, the
Leverage Ratio and the Fixed Charge Coverage Ratio shall be calculated for the
four immediately preceding quarters; provided that, for the four fiscal quarter
period ending June 30, 2010, the quarter ending September 30, 2009 shall be
omitted from such calculation and the Leverage Ratio and the Fixed Charge
Coverage Ratio for such period shall be calculated by multiplying their
respective constituent components for such periods by 4/3.
 
10.5 Financial Covenant Waiver.  Lender (a) waives any noncompliance with
Section 8.1(a) and Sections 10.1, 10.2, and 10.3 of the Existing Credit
Agreement for the fiscal quarter ended December 31, 2009, and all prior fiscal
quarters, (b) waives any implied noncompliance with Sections 10.1, 10.2, and
10.3 of this Agreement, or under the Existing Credit Agreement, for the fiscal
quarter ended March 31, 2010, and (c) agrees not to exercise any of the rights
or remedies available to Lender under the Loan Documents solely as a result of
the noncompliance described in the immediately preceding clauses (a) and
(b).  Except as set out in the preceding sentence, Borrower hereby agrees that
the foregoing waiver does not constitute a waiver of any present or future
violation of or noncompliance with any provision of any Loan Document or a
waiver of Lender’s right to insist upon strict compliance with each term,
covenant, condition, and provision of the Loan Documents.
 
SECTION 11  DEFAULT.  The term “Default” means the occurrence of any one or more
of the following events:
 
11.1 Payment of Obligation.  The failure of any Company to pay any part of the
Obligation within 2 days after the date when it becomes due and payable under
the Loan Documents.
 
11.2 Covenants.  The failure of any Company to punctually and properly perform,
observe and comply with:
 
(a) Any covenant, agreement, or condition contained in (i) Sections 6.1, 6.3,
8.2, 8.6, 8.8, 8.9, or 8.10 and such failure continues for 10 days or (ii)
Sections 9 and 10, or
 
(b) Any other covenant, agreement, or condition contained in any Loan Document,
(other than the covenants to pay the Obligation as set out in Section 11.1
above, the covenants in clause (a) preceding and as set out below in this
Section 11), and such failure continues for 30 days.
 
11.3 Debtor Relief.  Any Company (a) voluntarily seeks, consents to, or
acquiesces in the benefit of any Debtor Relief Law, other than a voluntary
liquidation or dissolution permitted by Section 9.6, (b) becomes a party to or
is made the subject of any proceeding provided for by any Debtor Relief Law
(other than as a creditor or claimant), and (i) the petition is not controverted
within 10 days and is not dismissed within 60 days, or (ii) an order for relief
is entered under Title 11 of the United States Code, (c) makes an assignment for
the benefit of creditors, or (d) fails (or admits in writing its inability) to
pay its debts generally as they become due.
 
28

--------------------------------------------------------------------------------

 
11.4 Judgments.  Any Company fails, within 30 days after entry, to pay, bond or
otherwise discharge any (a) a final non-appealable judgment or arbitration award
for the payment of money in the amount exceeding $250,000 (individually or in
the aggregate and net of applicable insurance if the insurer has accepted
coverage) or (b) one or more non-monetary judgments that could be, or could
reasonably be expected to be, individually or in the aggregate, a Material
Adverse Event, and, in either case enforcement of such judgment or award is not
stayed.
 
11.5 Misrepresentation.  Any representation or warranty made to Lender by any
Company or contained in any Loan Document at any time proves to have been
incorrect in any material respect when made.
 
11.6 Default Under Other Agreements.
 
(a) Except for trade payables in the ordinary course of business, any Company
fails to pay when due (after any applicable grace period) any Debt which
(individually or in the aggregate) exceeds $100,000, or any default exists under
any agreement which permits any Person to cause any Debt which (individually or
in the aggregate) exceeds $100,000 to become due and payable by any Company
before its stated maturity.
 
(b) Any Company breaches or defaults under any material term, condition,
provision, representation or warranty contained in any Material Agreement,
including any agreement with Lender (other than the Loan Documents), and such
Company fails for 10 Business Days to commence and thereafter diligently pursue
a cure.
 
11.7 Validity and Enforceability of Loan Documents.  Except in accordance with
its terms, any Loan Document at any time after its execution and delivery (a)
ceases to be in effect in any material respect or is declared by a Governmental
Authority to be null and void, or (b) its validity or enforceability is
contested by a Company or a Company denies that it has any further liability or
obligations under any Loan Document.
 
11.8 Swap Agreement.  Notwithstanding Section 11.2(b) above, any Company
breaches any provision of any Swap Agreement and the breach is not cured or
waived within any applicable grace period.
 
11.9 Change of Management.  (a) A Change of Management occurs or (b) an
agreement, letter of intent, or agreement in principle is executed which by its
terms will result in a Change of Management.
 
11.10 Ownership of Other Companies.  Borrower fails to own, beneficially and of
record, with power to vote, 66 2/3% of the issued and outstanding shares of
capital stock, partnership interests or other equity interests of any Subsidiary
that has executed a Loan Document (except as a result of a transaction permitted
by this Agreement).
 
11.11 Material Adverse Event.  A Material Adverse Event exists.
 
SECTION 12  RIGHTS AND REMEDIES.
 
12.1 Remedies Upon Default.
 
(a) If a Default exists under Section 11.3, the Commitment under this Agreement
automatically terminates and the unpaid balance of the Obligation automatically
becomes due and payable without any action of any kind.
 
(b) If a Default exists, Lender may do any one or more of the following:  (i) if
the maturity of the Obligation has not already been accelerated under
Section 12.1(a), declare the unpaid balance of the Obligation immediately due
and payable and to the extent permitted by applicable Law, the Obligation shall
accrue interest at the Default Rate; (ii) terminate the Commitment; (iii) reduce
any claim to judgment; (iv) exercise the rights of set-off or banker’s Lien
under Section 3.9 to the extent of the full amount of the Obligation; (v)
require Borrower to Cash Collateralize all LC Exposure; and (vi) exercise any
and all other legal or equitable rights afforded by the Loan Documents, the Laws
of the State of Texas, or any other applicable jurisdiction.
 
29

--------------------------------------------------------------------------------

 
12.2 Waivers.  To the extent permitted by Law, each Company waives presentment
and demand for payment, protest, notice of intention to accelerate, notice of
acceleration and notice of protest and nonpayment, and agrees that its liability
with respect to all or any part of the Obligation is not affected by any renewal
or extension in the time of payment of all or any part of the Obligation, by any
indulgence, or by any release or change in any security for the payment of all
or any part of the Obligation.
 
12.3 No Waiver.  No waiver of any Default shall be deemed to be a waiver of any
other then-existing or subsequent Default.  No delay or omission by Lender in
exercising any right under the Loan Documents will impair that right or be
construed as a waiver thereof or any acquiescence therein, nor will any single
or partial exercise of any right preclude other or further exercise thereof or
the exercise of any other right.  The acceptance by Lender of any partial
payment shall not be deemed to be a waiver of any Default then existing.
 
12.4 Performance by Lender.  If any covenant, duty or agreement of any Company
is not performed in accordance with the terms of the Loan Documents, Lender may,
but is not obligated to, perform or attempt to perform that covenant, duty or
agreement on behalf of that Company (and any amount expended by Lender in its
performance or attempted performance is payable on demand, becomes part of the
Obligation, and bears interest at the Default Rate from the date of Lender’s
expenditure until paid).
 
12.5 Cumulative Rights.  All rights available to Lender under the Loan Documents
are cumulative of, and in addition to, all other rights granted at law or in
equity, whether or not the Obligation is due and payable and whether or not
Lender has instituted any suit for collection, foreclosure, or other action  in
connection with the Loan Documents.
 
SECTION 13  MISCELLANEOUS.
 
13.1 Governing Law.  Each Loan Document (other than the Deed of Trust) must be
construed, and its performance enforced, under Texas law.
 
13.2 Invalid Provisions.  If any provision of this Agreement or the other Loan
Documents is held to be illegal, invalid or unenforceable, (a) the legality,
validity and enforceability of the remaining provisions of this Agreement and
the other Loan Documents shall not be affected or impaired thereby and (b) the
parties shall engage in good faith negotiations to replace the illegal, invalid
or unenforceable provisions with valid provisions the economic effect of which
comes as close as possible to that of the illegal, invalid or unenforceable
provisions.  The invalidity of a provision in a particular jurisdiction shall
not invalidate or render unenforceable such provision in any other jurisdiction.
 
13.3 Multiple Counterparts and Facsimile Signatures.  Each Loan Document may be
executed in any number of counterparts with the same effect as if all
signatories had signed the same document.  All counterparts must be construed
together to constitute one and the same instrument.  Loan Documents may be
transmitted and signed by facsimile or portable document format (PDF) and shall
have the same effect as manually-signed originals and shall be binding on all
Companies and Lender.
 
13.4 Notice.  Unless otherwise provided in this Agreement, all notices or
consents required under this Agreement shall be personally delivered or sent by
first class mail, postage prepaid, or by overnight courier, or sent by
facsimile.  Notices and other communications shall be effective (a) if mailed,
upon the earlier of receipt or 5 days after properly addressed, sealed and
deposited in the U.S. mail, first class, postage prepaid, return receipt
requested, (b) if faxed, when transmitted, or (c) if hand-delivered, by courier
or otherwise (including telegram, lettergram or mailgram), when
delivered.  Until changed by notice pursuant to this Agreement, the addresses
and facsimile numbers for each party is set out on Schedule 1.  Lender shall be
entitled to rely and act upon any notices (including telephonic Loan Requests)
purportedly given by or on behalf of Borrower even if (i) such notices were not
made in a manner specified in this Section, were incomplete or were not preceded
or followed by any other form of notice specified in this Section, or (ii) the
terms of the notice, as understood by the recipient, varied from any
confirmation of the notice.  Borrower shall indemnify Lender and its Affiliates
and representatives from all losses, costs, expenses and liabilities resulting
from the reliance by such Person on each notice purportedly given by or on
behalf of Borrower except to the extent of the Lender’s and its Affiliates gross
negligence or willful misconduct relating to reliance and action upon any such
notices.  All telephonic notices to and other communications with Lender may be
recorded by Lender, and each of the parties to this Agreement hereby consents to
such recording.
 
30

--------------------------------------------------------------------------------

 
13.5 Binding Effect; Survival.  This Agreement is binding upon, and inures to
the benefit of, the parties hereto and their respective successors and permitted
assigns.  Unless otherwise provided, all covenants, agreements, indemnities,
representations and warranties made in any of the Loan Documents survive and
continue in effect as long as the Commitment is in effect or the Obligation is
outstanding.
 
13.6 Amendments.  The Loan Documents may be amended, modified, supplemented or
be the subject of a waiver only by a writing executed by Lender and Borrower.
 
13.7 Participants.  Lender may, at any time, sell to one or more Persons (each a
“Participant”) participating interests in the Obligation; provided that,
(a) Lender remains the holder of the Principal Amount, (b) Lender’s obligations
under this Agreement remain unchanged and Lender remains solely responsible for
the performance of those obligations, and (c) each Company continues to deal
solely and directly with Lender regarding the Loan Documents.  Lender may
furnish any information concerning the Companies in its possession from time to
time to assignees and Participants (including prospective assignees and
Participants), provided that, to the extent applicable, such information is
subject to the terms of Section 13.12 hereof.
 
13.8 Discharge Only Upon Payment in Full; Reinstatement in Certain
Circumstances.  Each Company’s obligations under the Loan Documents remain in
full force and effect until the aggregate Commitment is terminated and the
Obligation is paid in full (except for provisions under the Loan Documents which
by their terms expressly survive payment of the Obligation and termination of
the Loan Documents).  If at any time any payment of the principal of or interest
on any Note or any other amount payable by any Company or any other obligor on
the Obligation under any Loan Document is rescinded or must be restored or
returned upon the insolvency, bankruptcy or reorganization of Borrower or
otherwise, the obligations of each Company under the Loan Documents with respect
to that payment shall be reinstated as though the payment had been due but not
made at that time.
 
13.9 Waiver of Jury Trial.  Borrower and Lender irrevocably and voluntarily
waive any right they may have to a trial by jury in respect of any claim.  This
provision is a material inducement for the parties entering into this Agreement
and the other Loan Documents.
 
13.10 Indemnity.  Whether or not the transactions contemplated by this Agreement
are consummated, Borrower, jointly and severally, shall indemnify and hold
harmless Lender and its Affiliates and representatives (collectively the
“Indemnitees”) from and against any and all liabilities, obligations, losses,
damages, penalties, claims, demands, actions, judgments, suits, costs, expenses
and disbursements (including reasonable fees and expenses of counsel) of any
kind or nature whatsoever which may at any time be imposed on, incurred by or
asserted against any such Indemnitee in any way relating to or arising out of or
in connection with (i) the execution, delivery, enforcement, performance or
administration of any Loan Document or any other agreement, letter or instrument
delivered in connection with the transactions contemplated thereby or the
consummation of the transactions contemplated thereby, (ii) any use or proposed
use of the proceeds therefrom, (iii) any actual or alleged presence or release
of Hazardous Substance on or from any property currently or formerly owned or
operated by Borrower, any Subsidiary or any other Company, or any liability in
respect of any Environmental Law related in any way to Borrower, or any other
Company, or (iv) any actual or prospective Litigation, claim, or investigation
relating to any of the foregoing, whether based on contract, tort or any other
theory (including any investigation of, preparation for, or defense of any
pending or threatened claim, investigation, litigation or proceeding) and
regardless of whether any Indemnitee is a party thereto (all the foregoing,
collectively, the “Indemnified Liabilities”), IN ALL CASES, WHETHER OR NOT
CAUSED BY OR ARISING, IN WHOLE OR IN PART, OUT OF THE NEGLIGENCE OF THE
INDEMNITEE; provided that, such indemnity shall not, as to any Indemnitee, be
available to the extent that such liabilities, obligations, losses, damages,
penalties, claims, demands, actions, judgments, suits, costs, expenses or
disbursements are determined by a court of competent jurisdiction by final and
nonappealable judgment to have resulted from the gross negligence or willful
misconduct of such Indemnitee.  All amounts due under this Section shall be
payable within 10 Business Days after demand.  The agreements in this Section
shall survive the termination of the Commitment and the repayment, satisfaction
or discharge of the Obligation.
 
 
31

--------------------------------------------------------------------------------

 
13.11 ENTIRETY.  THE LOAN DOCUMENTS REPRESENT THE FINAL AGREEMENT BETWEEN THE
PARTIES AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS, OR
SUBSEQUENT ORAL AGREEMENTS BY THE PARTIES.  THERE ARE NO UNWRITTEN ORAL
AGREEMENTS AMONG THE PARTIES.
 
13.12 Confidentiality.  Lender may not disclose to any Person any material
non-public information that is now or in the future required to be furnished to
Lender under the express terms of this Agreement or any other Loan Document
(“Confidential Information”) without the consent of the Borrower, other than (a)
Lender’s Affiliates and their officers, directors, employees, agents, attorneys,
and advisors, (b) prospective assignees or Participants, field auditors,
appraisers and valuation consultants, or other third parties engaged to assist
Lender in connection with its monitoring or evaluation of the  Borrower’s
collateral, credit quality, or  financial covenant compliance, (c) as required
by any Laws or judicial process, (d) in connection with any Litigation to which
the Lender or any of its Affiliates may be a party with notice to the Borrower,
(e) in connection with any right or remedy under any Loan Document or (f) as
such information has become generally available to the public other than by
virtue of a breach of this clause by the Lender or any other Person to whom the
Lender has provided such information as permitted by this Section; provided
that, to the extent practicable and permitted by applicable Laws, the Lender
shall notify the Borrower of any disclosure under clause (c) and shall
reasonably cooperate with the Borrower to the extent the Borrower seeks to
obtain confidential treatment of such Confidential Information.
 
13.13 Non-Business Days.  Any payment or action that is due under any Loan
Document on a non-Business Day may be delayed until the next-succeeding Business
Day.
 
13.14 Amendment and Restatement.  This Agreement amends and restates in its
entirety, but does not extinguish, the Existing Credit Agreement.  All Security
Documents, as defined in the Existing Credit Agreement, shall constitute
Security Documents as defined in this Agreement, and they shall continue to
secure all Obligations of Borrower under this Agreement.
 
[Signatures appear on following page.]
 
 
 
 
32

--------------------------------------------------------------------------------

 
EXECUTED as of the day and year set out in the Preamble.
 

  BORROWER:           DEEP DOWN, INC., a Nevada corporation          
 
By:
/s/ Eugene L. Butler       Eugene L. Butler       Chief Financial Officer      
   

 
 
 
 
 
 
 
 
 
Signature Page to Amended and Restated Credit Agreement

--------------------------------------------------------------------------------

 
 

  LENDER:           WHITNEY NATIONAL BANK, a national banking association      
   
 
By:
/s/ Paul W. Cole       Paul W. Cole       Vice President          

 
 

 
 

                                
 
 
 

Signature Page to Amended and Restated Credit Agreement

--------------------------------------------------------------------------------