**Exhibit10.1**

 

LOAN AND SECURITY AGREEMENT

Dated as of April 14, 2006

Among

APPLIED LNG TECHNOLOGIES USA, L.L.C.,ARIZONA LNG, L.L.C.,FLEET STAR, INC.,ALTERNATIVE FUELS TECHNOLOGIES, LLC, andRENEWABLE ALTERNATIVE FUELS, LLC

(Borrowers)

and

FCC, LLC, d/b/a FirstCapital

(Lender)

 

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**TABLE OFCONTENTS**
|        | ** **                                      | ** ** | **Page** |
|--------|-------------------------------------------------|------------|----------|
|   |                                            |       |     |
| 1.     | Definitions                                     |       | 2        |
|   |                                            |       |     |
| 2.     | Borrowing                                       |       | 9        |
|   |                                            |       |     |
| 3.     | Interest and Fees                               |       | 14       |
|   |                                            |       |     |
| 4.     | Representations and Warranties of Borrowers     |       | 15       |
|   |                                            |       |     |
| 5.     | Collateral                                      |       | 17       |
|   |                                            |       |     |
| 6.     | Financial Covenants                             |       | 18       |
|   |                                            |       |     |
| 7.     | Collateral Covenants                            |       | 18       |
|   |                                            |       |     |
| 8.     | Negative Covenants                              |       | 20       |
|   |                                            |       |     |
| 9.     | Reporting and Information                       |       | 22       |
|   |                                            |       |     |
| 10.    | Inspection Rights; Expenses; Etc.               |       | 23       |
|   |                                            |       |     |
| 11.    | Rights of Setoff, Application of Payments, Etc. |       | 24       |
|   |                                            |       |     |
| 12.    | Attorney-in-Fact                                |       | 24       |
|   |                                            |       |     |
| 13.    | Defaults and Remedies                           |       | 24       |
|   |                                            |       |     |
| 14.    | Indemnification                                 |       | 27       |
|   |                                            |       |     |
| 15.    | General Provisions                              |       | 28       |

**Attachments:**

**Schedule**

**Exhibit A - Form of Borrowing Base Certificate**

**Exhibit B - Form of Compliance Certificate**

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**LOANAND SECURITY AGREEMENT**

This LOAN ANDSECURITY AGREEMENT (this “Agreement”) is entered into as of this    day of April, 2006 among APPLIED LNG TECHNOLOGIES USA,L.L.C., a Delaware limited liability company (“Applied LNG”), ARIZONALNG, L.L.C., a Nevada limited liability company (“Arizona LNG”), FLEETSTAR, INC., a Delaware corporation (“Fleet Star”), ALTERNATIVE FUELSTECHNOLOGIES, LLC, a Texas limited liability company (“Alternative Fuels”),RENEWABLE ALTERNATIVE FUELS, LLC, a Delaware limited liability company (“RenewableAlternative”; Applied LNG, Arizona LNG, Fleet Star, Alternative Fuels andRenewable Alternative are referred to herein individually as a “Borrower”and collectively as the “Borrowers”), and FCC, LLC, d/b/a FIRST CAPITAL,a Florida limited liability company (“Lender”).

**RECITALS:**

WHEREAS, Borrowershave requested that Lender provide Borrowers with a secured lending facility;and

WHEREAS, Lender iswilling to provided a secured lending facility to Borrowers on the terms setforth herein, which secured lending facility Borrowers will use for thepurposes permitted hereunder; and

WHEREAS, in orderto utilize the financial powers of Borrowers in the most efficient andeconomical manner, and in order to facilitate the financing of Borrowers’ workingcapital needs, Lender will, at the request of Borrowers, extend financialaccommodations to Borrowers based on the combined borrowing base of Borrowersin accordance with the provisions set forth in this Agreement; and

WHEREAS, Borrowersare affiliated by common ownership, Borrowers’ business is a mutual andcollective enterprise and Borrowers believe that the consolidation of all loansand other financial accommodations under this Agreement will enhance theaggregate borrowing powers of Borrowers and facilitate the administration oftheir loan relationship with Lender, all to the mutual advantage of Borrowers;and

WHEREAS, eachBorrower acknowledges that it will receive substantial direct and indirectbenefits by reason of the making of loans and other financial accommodations toBorrowers as provided in this Agreement, by virtue of Borrowers’ variousinter-relationships as joint guarantors or joint obligors and the beneficiariesthereof, as lessors and lessees, as suppliers and customers, and as jointventurers; and

 

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WHEREAS, Lender’swillingness to extend financial accommodations to Borrowers, and to administerBorrowers’ collateral security therefor, on a combined basis as more fully setforth in this Agreement, is done solely as an accommodation to Borrowers and atBorrowers’ request and in furtherance of Borrowers’ mutual and collectiveenterprise.

NOW, THEREFORE, inconsideration of the mutual conditions and agreements set forth in thisAgreement, and for good and valuable consideration, the receipt of which ishereby acknowledged, the parties hereto agree as follows.

1.             **Definitions**.  For purposes of this Agreement:

“Accounts”means all presently existing or hereafter arising accounts receivable due anyBorrower (including medical and health-care-insurance receivables), book debts,notes, drafts and acceptances and other forms of obligations now or hereafterowing to any Borrower, whether arising from the sale or lease of goods or therendition of services by such Borrower (including any obligation that might becharacterized as an account, contract right, general intangible or chattelpaper under the UCC), all of any Borrower’s rights in, to and under allpurchase orders now or hereafter received by such Borrower for goods andservices, all proceeds from the sale of Inventory, all monies due or to becomedue to any Borrower under all contracts for the sale or lease of goods or therendition of services by such Borrower (whether or not yet earned) (includingthe right to receive the proceeds of said purchase orders and contracts), allcollateral security and guarantees of any kind given by any obligor withrespect to any of the foregoing, and all goods returned to or reclaimed by anyBorrower that correspond to any of the foregoing.

“Affiliate” means, with respect to a Person, (a) any familymember, officer, director, member, manager, employee or managing agent of suchPerson, and (b) any other Person (i) that, directly or indirectly, through oneor more intermediaries, controls, or is controlled by, or is under commoncontrol with, such given Person, (ii) that, directly or indirectly beneficiallyowns or holds 10% or more of any class of voting stock, membership interest, orpartnership interest or other interest of such Person or any subsidiary of suchPerson, or (iii) 10% or more of the voting stock, membership interest,partnership interest or other interest of which is directly or indirectlybeneficially owned or held by such Person or a subsidiary of such Person.  The term “control” means the possession,directly or indirectly, of the power to direct or cause the direction of themanagement and policies of a Person, whether through ownership of votingsecurities or partnership or other interests, by con­tract or otherwise.

“Agreement Date” means the date as of which this Agreement isdated.

“Apollo Resources” means Apollo Resources International, Inc., aUtah corporation.

“Borrowers’ Agent” means Applied LNG, in its capacity asagent for Borrowers in accordance with **Section2(o)**.

“Borrowing Base”has the meaning set forth in **Item 1 of the Schedule**.

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“Borrowing BaseCertificate” means the certificate, substantially in the form of ExhibitA, with appropriate insertions, to be submitted to Lender by Borrowers’Agent pursuant to this Agreement and certified as true and correct.

“Business Day” means any day excluding Saturday, Sunday,and any day which is a legal holiday under the laws of the State of Oklahoma orwhich is a day on which Lender is otherwise closed for transacting businesswith the public.

“Collateral”has the meaning set forth in **Section 5(a)**.

“Customer”means any customer of any Borrower.

“Default”has the meaning set forth in **Section 13(a)**.

“EligibleAccounts” means those Accounts arising from the sale of Inventory orperformance of services in the ordinary course of the applicable Borrower’sbusiness; provided, however, that Eligible Accounts shall notinclude the following:

(a)           any Account which has remained unpaidfor more than the number of days specified in **Item 2(a) of the Schedule**;

(b)           Accounts with respect to which theCustomer is an Affiliate of any Borrower;

(c)           Accounts with respect to whichservices or goods are placed on consignment, guaranteed sale, or other terms byreason of which the payment by the Customer may be conditional;

(d)           Accounts with respect to which theCustomer (i) does not maintain its chief executive office in the United States,or (ii) is not organized under the laws of the United States of America or anystate thereof; or (iii) is the government of any foreign country or of anystate, province, municipality, or other political subdivision thereof; exceptto the extent that such Account is secured or payable by a letter of creditsatisfactory to Lender in its discretion;

(e)           any and all Accounts as to which theperfection, enforceability, or validity of Lender’s Collateral or securityinterest in such Account, or Lender’s right or ability to obtain direct paymentto Lender of the proceeds of such Account, is governed by any federal or statestatutory requirements other than those of the Uniform Commercial Code,including any Account subject to the Federal Assignment of Claims Act of 1940; provided,however, that an Account shall not be deemed ineligible by reason ofthis clause (e) if Borrowers have completed all of the steps necessary, in thediscretion of Lender, to comply with the Federal Assignment of Claims Act of1940 with respect to such Account;

(f)            Accounts which may be subject tooffset or recoupment by the Customer, whether as the result of goods sold orservices rendered by the Customer to any Borrower, any contractual arrangementbetween the Customer and any Borrower (including any lease) or otherwise;

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(g)           those Accounts where Lender, inLender’s discretion, has notified Borrowers’ Agent that the Account or Customeris not acceptable to Lender;

(h)           all of the Accounts owed by aCustomer if the aggregate outstanding dollar amount of such Accounts notconsidered as Eligible Accounts under clause (a) above is equal to or greaterthan the Cross Aging Percentage specified in **Item 2(b) of the Schedule**;

(i)            Accounts for which services have notyet been rendered to the Customer or the goods sold have not yet been deliveredto the Customer (commonly referred to as “pre-billed accounts”);

(j)            Accounts owed by a Customer notpreviously approved in writing by Lender where the dollar value for theaggregate amount of Accounts owed by such Customer is greater than thepercentage of Borrowers’ Eligible Accounts specified in **Item 2(c)of the Schedule**, but only to the extent of such excess;

(k)           any Account with respect to all orpart of which a check, promissory note, draft, trade acceptance, or otherinstrument for the payment of money has been received, presented for payment,and returned uncollected for any reason;

(l)            any Account with respect to whichthe applicable Borrower has extended the time for payment without the consentof Lender;

(m)          any Account with respect to which anyone or more of the following events has occurred to the Customer on suchAccount:  death or judicial declarationof incompetency of a Customer who is an individual; the filing by or againstthe Customer of a request or petition for liquidation, reorganization,arrangement, adjustment of debts, adjudication as a bankrupt, winding-up, orother relief under the bankruptcy, insolvency, or similar laws of the UnitedStates, any state or territory thereof, or any foreign jurisdiction, now orhereafter in effect; the making of any general assignment by the Customer forthe benefit of creditors; the appointment of a receiver or trustee for theCustomer or for any of the assets of the Customer, including, withoutlimitation, the appointment of or taking possession by a “custodian,” asdefined in the Bankruptcy Code; the institution by or against the Customer ofany other type of insolvency proceeding (under the bankruptcy laws of theUnited States or otherwise) or of any formal or informal proceeding for thedissolution or liquidation of, settlement of claims against, or winding up ofaffairs of, the Customer; the sale, assignment, or transfer of all or anymaterial part of the assets of the Customer; the nonpayment generally by theCustomer of its debts as they become due; or the cessation of the business ofthe Customer as a going concern;

(n)           any Account which arises out offinance or similar charges;

(o)           any Account in which Lender does nothave a duly perfected, first-priority security interest, subject to no otherLien;

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(p)           any Account which arises under acontract or arrangement covered by a performance or surety bond on behalf ofany Borrower, unless the Person providing such performance or surety bond hasdelivered an acceptable Lien waiver to Lender; or

(q)           any Account which is evidenced by anote, draft, trade acceptance, or other instrument for the payment of moneywhere such instrument, document, chattel paper, note, draft, trade acceptanceor other instrument has not been endorsed and delivered by Borrowers to Lender.

“Equipment”means all of each Borrower’s machinery, apparatus, equipment, motor vehicles,tractors, trailers, rolling stock, fittings, fixtures and other tangiblepersonal property of every kind and description, together with all parts,accessories and special tools and all increases and accessions thereto andsubstitutions and replacements therefor.

“GAAP”means generally accepted accounting principles set forth in the opinions andpronouncements of the Accounting Principles Board of the American Institute ofCertified Public Accountants and statements and pronouncements of the FinancialAccounting Standards Board that are applicable to the circumstances as of thedate of determination and applied on a consistent basis.

“GeneralIntangibles” means all of each Borrower’s present and future generalintangibles and all other presently owned or hereafter acquired intangiblepersonal property of each Borrower (including payment intangibles and any andall choses or things in action, goodwill, patents and patent applications,tradenames, servicemarks, trademarks and trademark applications, copyrights,blueprints, drawings, purchase orders, customer lists, monies due orrecoverable from pension funds, route lists, infringement claims, software,computer programs, computer discs, computer tapes, literature, reports,catalogs, deposit accounts, tax refunds and tax refund claims) other than Goodsand Accounts, as well as each Borrower’s books and records relating to any ofthe foregoing.

“Goods”means all of each Borrower’s present and hereafter acquired goods, as definedin the UCC, wherever located, including imbedded software to the extentincluded in “goods” as defined in the UCC, manufactured homes, and standingtimber that is cut and removed for sale.

“Guarantor”means Apollo Resources, Apollo LNG, Inc., TxHLDM, Inc. and any other Person thathas guaranteed all or any part of the Obligations.

“Inventory”means all of each Borrower’s inventory as defined in the UCC, together with allof each Borrower’s present and future inventory, including goods held for saleor lease or to be furnished under a contract of service and all of eachBorrower’s present and future raw materials, work in process, finished goods,shelving and racking upon which the inventory is stored and packing andshipping materials, wherever located, and any documents of title representingany of the above.

“Lien”means any security interest, securitytitle, mortgage, deed to secure debt, deed of trust, lien, pledge, charge,conditional sale or other title retention agreement, or other encumbrance ofany kind in respect of any property, including the interest of eachlessor under any capitalized

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lease and the interest ofany bondsman under any payment or performance bond, in, of or on any assets orproperties of a Person, whether now owned or hereafter acquired and whetherarising by agreement or operation of law.

“Loan”means any Revolving Loan, the Term Loan or any other loan made by Lender toBorrowers pursuant to this Agreement, and “Loans” means all such loanscollectively.

“Loan Documents” means, collectively, this Agreement andany other agreements, instruments, certificates (including any Borrowing BaseCertificate) or other documents entered into in connection with this Agreement,including collateral documents, letter of credit agreements, securityagreements, pledges, pledge agreements, guaranties, mortgages, deeds of trust,assignments and subordination agreements, and any other agreement executed byany Obligor or any Affiliate of any Obligor pursuant hereto or in connectionherewith.

“Maximum Line Amount” means $3,000,000.

“NegotiableCollateral” means all of each Borrower’s present and future letters ofcredit, advises of credit, notes, drafts, instruments, and documents,including, without limitation, bills of lading, leases, and chattel paper, andBorrower’s books and records relating to any of the foregoing.

“Obligations”means all indebtedness, obligations and liabilities of any Borrower to Lenderand its Affiliates of every kind and description, direct or indirect, securedor unsecured, joint or several, absolute or contingent, due or to become due,including any overdrafts, whether for payment or performance, now existing orhereafter arising, whether presently contemplated or not, regardless of how thesame arise, or by what instrument, agreement or book account they may beevidenced, or whether evidenced by any instrument, agreement or book account,including, but not limited to, all Loans (including all modifications, renewalsand extensions thereof), all indebtedness arising from any derivativetransactions, all undertakings to take or refrain from taking any action, allindebtedness, liabilities or obligations owing from any Borrower to otherswhich Lender may have obtained by purchase, negotiation, discount, assignmentor otherwise, and all interest, taxes, fees, charges, expenses and attorney’sfees (whether or not such attorney is a regularly salaried employee of Lenderor any of its Affiliates) chargeable to any Borrower or incurred by Lenderunder this Agreement or any other document or instrument delivered inconnection herewith.

“Obligor”means each Borrower, Guarantor, any validity guarantor or any other Personprimarily or secondarily, directly or indirectly, liable on any of theObligations.

“PermittedLiens” means (a) Liens or charges for current taxes, assessments or othergovernmental charges which are not delinquent or remain payable without anypenalty, or the validity of which is contested in good faith by appropriateproceedings upon stay of execution of the enforcement thereof and for whichappropriate reserves have been established in accordance with GAAP; (b)deposits or pledges to secure (i) statutory obligations, (ii) surety or appealbonds, or (iii) bonds for release of attachment, stay of execution orinjunction; (c) statutory Liens on property arising in the ordinary course ofbusiness which, in the aggregate, do not materially impair the use of suchproperty or materially detract from the value of such property; (d) Liens

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existing on the AgreementDate and described on **Item 3 of the Schedule**; (e) Lienson Equipment securing all or part of the purchase price of such Equipment; provided,however, that (i) such Lien is created contemporaneously with theacquisition of such Equipment, (ii) such Lien attaches only to the specificitems of Equipment so acquired, and (iii) such Lien secures only theindebtedness incurred to acquire such Equipment; and (f) Liens in favor ofLender.

“Person” means an individual, corporation, partnership,limited liability company, association, trust, unincorporated organization,government or any agency or political subdivision thereof, or any other entity.

“Revolving Loan”means a revolving loan made by Lender to Borrowers pursuant to **Section 2(a)**hereof.

“SubordinatedDebt” means all of the indebtedness owed by any Borrower to any otherPerson, the repayment of which is subordinated to the repayment of theObligations pursuant to the terms of a subordination agreement approved byLender in its discretion.

“Term Loan”means the term loan made to Borrowers by Lender in one or more installments inan aggregate principal amount of up to $5,000,000 pursuant to **Section 2(e)**hereof.

“Term LoanConditions Precedent” means each of the following conditions precedent,each of which must be satisfied in a manner satisfactory to Lender in its solediscretion, including, in the case of agreements or other documents, therequirement that such agreements and documents be in form, substance and effectsatisfactory to Lender in its discretion:

(a)           No Default shall exist under thisAgreement;

(b)           Lender shall have receivedlandlord’s, warehouseman’s or other bailee waivers for each location of atwhich any Borrower maintains any Equipment (including any location owned orcontrolled by any Customer);

(c)           Lender shall have received an appraisalof the Equipment in form, substance and detail satisfactory to Lender, and,after giving effect to the contemplated installment of the Term Loan, theaggregate outstanding principal balance of the Term Loan shall not exceed 65%of the orderly liquidation value of Borrowers’ Equipment (determined by anappraiser designated by Lender) on which Lender has a perfected, first-prioritysecurity interest, subject to no other Lien;

(d)           Lender shall have received theoriginal certificates of title for all motor vehicles and other assets of eachBorrower which are subject to a certificate of title, together with allagreements, documents, certificates, applications and other items necessary tocause a new certificate of title to be issued showing a Borrower as the ownerof such vehicle or other asset and Lender as the sole lienholder with respectthereto;

(e)           Lender shall have received legaldescriptions for and the name and address of the record owner of each place ofbusiness of each Borrower and any other location of any

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Borrower’s Equipment,together with any other information necessary in order to enable Lender to haveUCC fixture filings recorded for all such locations;

(f)            Lender shall have received evidencethat each Borrower and the Equipment is covered by insurance in such amounts,against such risks and by such insurance companies as may be acceptable toLender in its discretion;

(g)           Lender shall have received suchadditional agreements, certificates, instruments, financing statements, Lienreleases and other items as Lender may reasonably request in connection withthe Term Loan or the creation or perfection of a first-priority, perfectedsecurity interest in each Borrower’s Equipment, subject to no other Lien, andto enable Lender to exercise its rights and remedies with respect thereto; and

(h)           Lender shall be satisfied that noevent or circumstance has occurred that could reasonably be expected to have amaterial adverse effect on the Collateral or the financial condition, businessor prospects of any Borrower.

“Term LoanPrepayment Fee” means, in connection with any prepayment of the Term Loan,whether partial or complete, and whether voluntary or mandatory, an amountequal to 5% of the principal balance of the Term Loan being prepaid; provided,however, that the aggregate amount of the Term Loan Prepayment Fee shallnot exceed $50,000.

“UCC” meansthe Uniform Commercial Code, as in effect from time to time, of the State ofOklahoma or of any other state the laws of which are required as a resultthereof to be applied in connection with the issue of perfection of securityinterests; provided, that to the extent that the UCC is used to defineany term herein or in any other documents and such term is defined differentlyin different Articles or Divisions of the UCC, the definition of such termcontained in Article or Division 9 shall govern.

**OtherDefinitional Provisions.** References to the “Schedule” or any “Section” or “Exhibit” refer to theSchedule or a section or exhibit, respectively, of this Agreement unlessotherwise specifically provided.  Any ofthe terms defined in **Section 1**may, unless the context otherwise requires, be used in the singular or theplural depending on the reference.  Inthis Agreement: words importing any gender include the other genders; the words“including”, “includes” and “include” shall be deemed to be followed by thewords “without limitation”; references to agreements and other contractualinstruments shall be deemed to include subsequent amendments, assignments, andother modifications thereto, but only to the extent such amendments,assignments and other modifications are not prohibited by the terms of thisAgreement; references to any Person includes their respective permittedsuccessors and assigns or people succeeding to the relevant functions of suchPersons; any and all terms which are defined in the UCC and are not definedherein shall be construed and defined in accordance with the definition of suchterms under the UCC; all references to statutes and related regulations shallinclude any amendments of same and any successor statutes and regulations; allreferences to time of day shall refer to Oklahoma City, Oklahoma time; and allreferences to financial calculations or statements on a “consolidated” basismean calculations or statements that reflect information and results withrespect to Borrowers and no other Person.

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2.             **Borrowing**.

(a)           **Amount Available to Be Borrowed**.  From time to time any Borrower may request,and Lender will, subject to the other terms and conditions of this Agreement,lend to Borrowers up to an amount equal to the Borrowing Base at any time.  Borrowed amounts that are repaid may bereborrowed upon the terms and conditions of this Agreement.

(b)           **Standards**.  Lender will determine eligibility and theloan value of Collateral, in its sole discretion, consistent with Lender’sexperience, prudent business judgment and standards of commercialreasonableness applicable to asset-based credits and in good faith.  Any Revolving Loans requested by any Borrowerand made by Lender or at any time outstanding in excess of the Borrowing Baseor any other limitation set forth in this Agreement will, nevertheless, besubject to the terms of this Agreement, will constitute Obligations for allpurposes and be entitled to the benefits of the Collateral.

(c)           **Persons Authorized to Request Loans**.  Borrowershereby authorize and direct Lender to make Loan advances to or for the benefitof Borrowers upon receipt of instructions from any of the persons listed on **Item****4 of the Schedule**.  Lender shall have no liability whatsoever toany Borrower or any other Person for acting upon any such instructions whichLender, in good faith, believes were given by any such person, and Lender shallhave no duty to inquire as to the propriety of any disbursement.  Lender is hereby authorized to makethe Loans provided for herein based on instructions received from any suchperson by facsimile, electronic mail, or other written communication, or bytelephone (confirmed in writing, but subject to the proviso in the lastsentence of this paragraph).  AlthoughLender shall make a reasonable effort to determine the person’s identity,Lender shall not be responsible for determining the authenticity of any such instructions,and Lender may act on the instructions of anyone it perceives to be one of thepersons authorized to request Loans hereunder. Lender shall have the right toaccept the instructions of any of the foregoing persons unless and until Lenderactually receives from Borrowers’ Agent (in accordance with the noticeprovisions of this Agreement) written notice of termination of the authority ofthat person.  Borrowers may changepersons designated to give Lender borrowing instructions only by causing Borrowers’Agent to deliver to Lender written notice of such change.  Borrowers will ensure that each telephoneinstruction from any person designated in or pursuant to this paragraph shallbe followed by written confirmation of the request for disbursement in suchform as Lender makes available to Borrowers from time to time for such purpose;provided, however, that Borrowers’ failure to provide writtenconfirmation of any telephonic instruction shall not invalidate such telephonicinstruction.

(d)           **Application of Remittances**.  Borrowers will use only invoices in formsthat Lender has approved, and Borrowers’ billings on such invoices will beconclusive evidence of assignment and transfer hereunder to Lender of theAccounts represented thereby, whether or not any Borrower executes any otherinstrument with regard to any specific Account. Borrowers will cause the proceeds of Accounts to be forwarded by allCustomers directly to a lockbox designated by Lender.  Such lockbox shall be maintained by a bankdesignated by Lender and all payments received in such lockbox shall bedeposited in a bank account in Lender’s name and owned by Lender at suchdesignated bank for application to the Obligations.  All checks or other remittances received byany Borrower for application to Accounts will be received by such Borrower intrust for Lender, and such Borrower will turn over to Lender the identical

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remittances as speedilyas possible, appropriately endorsed, if necessary.  As compensation to Lender for delays in thecollection and clearance of such checks, Borrowers agree to pay interest oneach remittance, including wire transfers, from the date of Lender’s receiptthereof plus the number of days set forth on **Item 5 of the Schedule**at the rate applicable to Revolving Loans outstanding hereunder, as setforth in **Section 3** below.  Borrowers will account fully and faithfullyfor and promptly pay or turn over to Lender proceeds in whatever form receivedof the sale or other disposition of any Collateral, and Borrowers agree thatthe inclusion of proceeds in “Collateral” will not be deemed to mean thatLender consents to any Borrower’s disposition of Collateral other than inaccordance with the terms of this Agreement.

(e)           **Term Loan**.  Upon theterms and subject to the conditions of, and in reliance upon the representationsand warranties made under, this Agreement, Lender agrees to make the Term Loanto Borrowers in installments as follows: (a) Lender shall advance $4,000,000 to Borrowers on the Agreement Date,and (b) Lender shall advance the remaining $1,000,000 to Borrower not more than5 Business Days following Borrowers’ Agent’s written request therefor; provided,however, that Lender shall have no obligation to advance eitherinstallment of the Term Loan unless all Term Loan Conditions Precedent aresatisfied; provided, further, that in the event that Lender makesthe initial $4,000,000 advance of the Term Loan prior to the satisfaction ofall Term Loan Conditions Precedent, Lender shall not be precluded from refusingto advance the subsequent $1,000,000 installment of the Term Loan to Borrowersbased on the fact that the Term Loan Conditions Precedent are not fullysatisfied.  Subject to the satisfactionof the conditions precedent specified in this Agreement, Lender will disburseeach installment of the Term Loan by wire transfer in immediately availablefunds to such account as may be agreed upon by Borrowers and Lender.  Lender shall have no obligation to advancemore than $5,000,000 to Borrowers with respect to the Term Loan, and the factthat Lender has agreed to advance the Term Loan in installments shall not beconstrued to imply that Borrowers may re-borrow any portion of the Term Loanthat has been repaid.

(f)            **Repayment of Term Loan**. Borrowers shall repay the Term Loan in the manner described in **Item 6 of the Schedule**.

(g)           **Prepayment of Term Loan**.

(i)           **VoluntaryPrepayment**.  Borrowersshall have the right, after the first anniversary of the initial date offunding, upon at least fifteen Business Days’ prior written notice to Lender, to prepay the Term Loan.  On the prepayment date, Borrowers shall payinterest on the amount prepaid, accrued to the prepayment date, together withthe Term Loan Prepayment Fee.  Any noticeof prepayment given by Borrowers hereunder shall be irrevocable, and the amountto be prepaid (including accrued interest and the Term Loan Prepayment Fee)shall be due and payable on the date designated in the notice.

(ii)          **MandatoryPrepayment**.  Borrowersshall be obligated to prepay the Term Loan in full upon (A) termination of thisAgreement, and (B) any acceleration of the maturity of the Term Loan or thefacility for Revolving Loans contemplated hereby.  Any obligation of Lender to advance anyremaining portion of the Term Loan shall terminate automatically upon either ofthe events specified in the preceding sentence. Additionally, Borrowers shall be required to repay the Term Loan to theextent of any proceeds from any

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saleor other disposition of any Equipment (it being understood that this clause(ii) shall not be construed to permit any Borrower to sell or otherwise disposeof any Equipment without Lender’s prior written consent), in each case withinthree Business Days of the receipt thereof. Additionally, if at any time for any reason, the outstandingprincipal balance of the Term Loan exceeds an amount equal to 65% of theorderly liquidation value of Borrowers’ Equipment on which Lender has aperfected, first-priority security interest, Borrowers will immediately,without notice or demand, repay the Term Loan in an amount equal to suchexcess.  Any prepayment of the Term Loan(in whole or in part, and whether mandatory or voluntary) shall be accompaniedby all accrued and unpaid interest on theTerm Loan and the Term Loan Prepayment Fee.

(h)           **Conditions to Obligation to Make Loans**.  Borrowers acknowledge that Lender’sobligation to make Loans to Borrowers (or to issue or create or cause theissuance or creation by Lender or its Affiliates of letters of credit oracceptances for any Borrower’s account) is subject to the following terms andconditions:

(i)            Lender has noobligation to make the initial Loan to Borrowers or to extend any otherfinancial accommodation to any Borrower unless and until each conditionprecedent specified on **Item 7 of the Schedule**has beenfulfilled to Lender’s satisfaction.

(ii)           Lender’sobligation to make any Loans to Borrowers and extend other financialaccommodations to Borrowers (including the initial Loans) is subject to theconditions that, as of the date of any such Loan or other accommodation, noDefault will have occurred and be continuing hereunder, there will haveoccurred no material adverse change in any Borrower’s financial condition oroperations or in any Borrower’s business prospects as compared to the state offacts existing on the Agreement Date, and Borrowers’ representations andwarranties set forth in this Agreement (including any amendment, modification,supplement or extension hereof) will be true and correct as if made on and asof the date of each subsequent credit request. Each request for a Loan or other financial accommodation by any Borrowerwill be deemed to be a reaffirmation of all of Borrowers’ warranties andrepresentations hereunder.

(i)            **Repayment of Loans**.  In the event of any breach by any Borrower ofany provision hereof or upon termination of this Agreement, Borrowers willrepay upon demand all of the Obligations. If no demand is earlier made, Borrowers will repay all Obligations infull, without demand or notice, on the last day of the term of this Agreement(as provided in clause (j)below).  If at any time for any reason,the aggregate outstanding principal amount of all Revolving Loans exceeds theBorrowing Base or any other limitation on the amount available to be borrowedhereunder, Borrowers will immediately, without notice or demand, repay theoutstanding principal amount of the Revolving Loans, together with accrued andunpaid interest on the amount repaid, in an amount equal to such excess.  Borrowers shall make each payment requiredhereunder or under any other Loan Document without setoff, deduction orcounterclaim.

(j)            **Maturity**.  This Agreement will continue in full forceand effect from the Agreement Date until the termination date provided for in **Item 8 ofthe Schedule**.

(k)           **Voluntary Termination**.  Borrowers may terminate this Agreement afterthe first anniversary of the initial date of funding upon 60 days’ priorwritten notice from Borrowers’

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Agent to Lender.  On the date specified in such notice,termination will be effective, so long as Borrowers have paid to Lender, insame day funds, an amount equal to the aggregate principal amount of all Loansoutstanding on such date, together with accrued interest thereon, the originalsof all letters of credit and bankers acceptances, if any, issued, created orguaranteed by Lender or any of its Affiliates for any Borrower’s account havebeen returned for cancellation or have been presented and paid by Borrowers orother arrangements satisfactory to Lender have been made, all other Obligationsoutstanding and unpaid have been paid in full in cash, and Borrowers haveprovided Lender an indemnification agreement satisfactory to Lender withrespect to returned and dishonored items and such other matters as Lender shallrequire.

(l)            **Termination on Default**.  Notwithstanding the foregoing, should aDefault occur and be continuing, Lender will have the right to terminate thisAgreement at any time without notice.

(m)          **Survival**.  Notwithstanding termination, all the terms,conditions, and provisions hereof (including Lender’s security interest in theCollateral, but excluding any obligations of Lender hereunder) will continue tobe fully operative until all Obligations have been fully disposed of,concluded, paid, satisfied, and liquidated.

(n)           **Payments as Loans**.  Borrowers’ failure to pay any amount due fromBorrowers under this Agreement or any other Loan Document, whether forprincipal, interest, fees, premiums, costs, expenses or otherwise, shall bedeemed to be a request by Borrowers for a Revolving Loan hereunder, and Lendermay charge Borrowers’ loan account for any such amount.  Additionally, if Lender determines in itsdiscretion that extensions of credit are necessary to protect the Collateral,Lender is hereby authorized to make such extensions of credit and charge themto Borrowers’ loan account as a Revolving Loan.

(o)           **Borrowers’ Agent**.  Each Borrower other than Applied LNG herebyappoints Applied LNG, and Applied LNG shall act under this Agreement and theother Loan Documents, as, the agent, attorney-in-fact and legal representativeof all Borrowers for all purposes, including requesting Loans and receivingaccount statements and other notices and communications to Borrowers (or any ofthem) from Lender.  Lender may rely, andshall be fully protected in relying, on any request for an advance,disbursement instruction, report, information or any other notice orcommunication made or given by Applied LNG, whether in its own name, asBorrowers’ Agent, or on behalf of one or more Borrowers, and Lender shall nothave any obligation to make any inquiry or request any confirmation from or onbehalf of any other Borrower as to the binding effect on it of any suchrequest, instruction, report, information, other notice or communication, norshall the joint and several character of Borrowers’ obligations hereunder beaffected, provided, that the provisions of this paragraph shall not beconstrued so as to preclude any Borrower from taking actions permitted to betaken by a “Borrower” hereunder.

(p)           **Joint and Several Liability**.

(i)            All Loans made to Borrowers and allof the other Obligations of Borrowers, including all interest, fees andexpenses with respect thereto, shall constitute one joint and several directand general obligation of all Borrowers. Notwithstanding anything to the contrary contained herein, each Borrowershall be jointly and severally, with each other 

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Borrower, directly andunconditionally liable to Lender for all Obligations, it being understood thatthe advances to each Borrower inure to the benefit of all Borrowers, and thatLender is relying on the joint and several liability of Borrowers as co-makersin extending the Loans hereunder.  EachBorrower hereby unconditionally and irrevocably agrees that upon default in thepayment when due (whether at stated maturity, by acceleration or otherwise) ofany principal of, or interest on, any Obligation payable to Lender, it willforthwith pay the same, without notice or demand, unless such payment is thenprohibited by application of law (provided such Obligation shall not beextinguished by any such prohibition).

(ii)           No payment or payments made by anyBorrower or any other Person or received or collected by Lender from anyBorrower or any other Person by virtue of any action or proceeding or anysetoff or appropriation or application at any time or from time to time inreduction of or in payment of the Obligations shall be deemed to modify,reduce, release or otherwise affect the liability of each Borrower under thisAgreement, and each Borrower shall remain liable for all of the Obligationsuntil the Obligations are paid in full.

(q)           **Obligations Absolute**.  Each Borrower agrees that the Obligationswill be paid strictly in accordance with the terms of the Loan Documents,regardless of any law, regulation or order now or hereafter in effect in anyjurisdiction affecting any of such terms or the rights of Lender with respectthereto, unless such payment is then prohibited by applicable law (providedsuch Obligation shall not be extinguished by any such prohibition.)  All Obligations shall be conclusivelypresumed to have been created in reliance hereon.  The Obligations and other liabilities underthis Agreement and the other Loan Documents shall be absolute and unconditionalirrespective of:  (a) any lack ofvalidity or enforceability of any Loan Document or any other agreement orinstrument relating thereto; (b) any change in the time, manner or placeof payments of, or in any other term of, all or any part of the Obligations, orany other amendment or waiver thereof or any consent to departure therefrom,including any increase in the Obligations resulting from the extension ofadditional credit to any Borrower or otherwise; (c) any taking, exchange,release of or non-perfection in any Collateral, or any release or amendment orwaiver of or consent to departure from any guaranty for all or any of theObligations; (d) any change, restructuring or termination of the corporatestructure or existence of any Borrower; or (e) any other circumstancewhich may otherwise constitute a defense available to, or a discharge of, anyBorrower.  This Agreement shall continueto be effective or be reinstated, as the case may be, if at any time anypayment of any of the Obligations is rescinded or must otherwise be returned byLender upon the insolvency, bankruptcy or reorganization of any Borrower orotherwise, all as though such payment had not been made.

(r)            **Waiver of Suretyship Defenses**.  Each Borrower agrees that the joint andseveral liability of Borrowers provided for in this Agreement shall not beimpaired or affected by any modification, supplement, extension or amendment ofany contract or agreement to which one or more other Borrowers may hereafteragree (other than an agreement signed by Lender specifically releasing suchliability), nor by any delay, extension of time, renewal, compromise or otherindulgence granted by Lender with respect to any of the Obligations, nor by anyother agreements or arrangements whatever with one or more other Borrowers orwith any other Person, each Borrower hereby waiving all notice of such delay,extension, release, substitution, renewal, compromise or other indulgence, andhereby consenting to be bound thereby as fully

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and effectually as if ithad expressly agreed thereto in advance. The liability of each Borrower is direct and unconditional as to all ofthe Obligations and may be enforced without requiring Lender first to resort toany other right, remedy or security. Each Borrower hereby expressly waives promptness, diligence, notice ofacceptance and any other notice (except to the extent expressly provided forherein or in another Loan Document) with respect to any of the Obligations,this Agreement or any other Loan Document and any requirement that Lenderprotect, secure, perfect or insure any Lien or any property subject thereto orexhaust any right or take any action against any Borrower or any other Personor any Collateral.

(s)           **Contribution and Indemnification among Borrowers**.  Each Borrower is obligated to repay theObligations as joint and several obligors under this Agreement.  To the extent that any Borrower shall, underthis Agreement as a joint and several obligor, repay any of the Obligationsconstituting Loans made to another Borrower hereunder or other Obligationsincurred directly and primarily by any other Borrower (an “AccommodationPayment”), then, to the extent that such Borrower has not received thebenefit of such repaid Obligations (whether through an inter-company loan orotherwise), the Borrower making such Accommodation Payment shall be entitled tocontribution and indemnification from, and be reimbursed by, each of the otherBorrowers in an amount, for each of such other Borrowers, equal to a fractionof such Accommodation Payment, the numerator of which fraction is such otherBorrower’s “Allocable Amount” (as defined below) and the denominator of whichfraction is the sum of the Allocable Amounts of all of the Borrowers.  As of any date of determination, the “AllocableAmount” of each Borrower shall be equal to the greater of (a) the amount ofsuch repaid Obligations actually received by such Borrower (whether through aninter-company loan or otherwise), and (b) the maximum amount of liability forAccommodation Payments which could be asserted against such Borrower hereunder without(i) rendering such Borrower “insolvent” within the meaning of Title 11 of theUnited States Code (the “Bankruptcy Code”), Section 2 of theUniform Fraudulent Transfer Act (the “UFTA”), or Section 2 of theUniform Fraudulent Conveyance Act (“UFCA”), (ii) leaving suchBorrower with unreasonably small capital or assets, within the meaning ofSection 548 of the Bankruptcy Code, Section 4 of the UFTA, orSection 4 of the UFCA, or (iii) leaving such Borrower unable to payits debts as they become due within the meaning of Section 548 of theBankruptcy Code, Section 4 of the UFTA, or Section 5 of theUFCA.  All rights and claims ofcontribution, indemnification and reimbursement under this paragraph shall be subordinatein right of payment to the prior payment in full of the Obligations.

3.             **Interest and Fees**.

(a)           **Interest on Loans**.  Borrowers will pay Lender or, at Lender’soption, Lender may charge Borrowers’ loan account with, interest on the averagedaily net principal amount of Loans outstanding hereunder, calculated monthlyand payable on the first day of each calendar month, at a rate (computed on thebasis of the actual number of days elapsed over a year of 360 days) equal tothe greater of (i) 5.5% plus the interest margin specified in**Item 9of the Schedule**, and (ii) the Prime Rate plus the interestmargin specified in **Item 9 of the Schedule**.  The “Prime Rate” is, at any time, therate of interest noted in The Wall Street Journal, Money Rates section,as the “Prime Rate” (currently defined as the base rate on corporate loansposted by at least 75% of the nation’s thirty (30) largest banks).  In the event that The Wall Street

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Journalquotes more than one rate, or a range of rates, as the Prime Rate, then thePrime Rate shall mean the average of the quoted rates.  In the event that The Wall Street Journalceases to publish a Prime Rate, then the Prime Rate shall be the average of thethree (3) largest U.S. money center commercial banks, as determined byLender.  The “Prime Rate” may not be thelowest or best rate at which Lender calculates interest or extends credit.  Any change in the Prime Rate shall beeffective for purposes of calculating interest hereunder as of the date of suchchange.

(b)           **Default Interest**.  To the extent permitted by law and without limitingany other right or remedy of Lender hereunder, whenever there is a Defaultunder this Agreement, the rate of interest on the unpaid principal balance ofthe Obligations shall, at the option of Lender, be increased by adding thedefault margin identified on **Item 10 of the Schedule** to theinterest rate otherwise in effect hereunder. Lender may charge such default interest rate retroactively beginning onthe date the applicable Default first occurred or existed.  Borrowers acknowledge that:  (i) such additional rate is a materialinducement to Lender to make the Loans described herein; (ii) Lender would nothave made the Loans in the absence of the agreement of Borrowers to pay suchadditional rate; (iii) such additional rate represents compensation forincreased risk to Lender that the Loans will not be repaid; and (iv) such rateis not a penalty and represents a reasonable estimate of (A) the cost to Lenderin allocating its resources (both personnel and financial) to the ongoingreview, monitoring, administration and collection of the Loans, and (B)compensation to Lender for losses that are difficult to ascertain.  In the event of termination of this Agreementby either party hereto, Lender’s entitlement to this charge will continue untilall Obligations are paid in full.

(c)           **Fees**. Borrowers will pay to Lender the fees set forth in **Item 11 ofthe Schedule**.

(d)           **No Usury**.  Borrowers acknowledge that Lender does notintend to reserve, charge or collect interest on money borrowed under thisAgreement at any rate in excess of the rates permitted by applicable law andthat, should any interest rate provided for in this Agreement exceed thelegally permissible rate(s), the rate will automatically be reduced to themaximum rate permitted under applicable law. If Lender should collect any amount from Borrowers which, if it wereinterest, would result in the interest rate charged hereunder exceeding themaximum rate permitted by applicable law, such amount will be applied to reduceprincipal of the Obligations or, if no Obligations remain outstanding, will berefunded to Borrowers.

(e)           **Monthly Statements**.** **Lenderwill render a statement to Borrowers’ Agent each month for Loans, payments, andother transactions pursuant to this Agreement, and such statement rendered byLender will be binding upon all Borrowers unless Lender is notified in writingto the contrary within 30 days after the date such statement is rendered.

4.             **Representations and Warranties of Borrowers**.

(a)           **Authority, Compliance with Laws, Litigation, NoMaterial Adverse Change, Etc.** Borrowers represent and warrant to Lender that:  (i) each Borrower’s exact legal name, type oforganization, state of organization and organizational identification numberare fully and accurately set forth on **Item12 of the Schedule**,and each Borrower is duly organized and

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validly existing underthe laws of its state of organization; (ii) the execution, delivery, andperformance of this Agreement and the other Loan Documents are within eachBorrower’s corporate or limited liability company powers, have been dulyauthorized, do not violate any Borrower’s constituent documents, any law orregulation, including without limitation, any law or regulation relating tooccupational health and safety or protection of the environment, applicable toany Borrower, or any indenture, agreement, or undertaking to which any Borroweris a party or by which any Borrower or any Borrower’s property is bound; (iii)this Agreement and the other Loan Documents to which any Borrower is a party constitutevalid, binding and enforceable obligations of each Borrower party thereto inaccordance with the terms hereof and thereof, except as enforceability may belimited by bankruptcy, insolvency, fraudulent conveyance, moratorium or othersimilar laws applicable to creditors’ rights generally or by generallyapplicable equitable principles affecting the enforcement of creditors’ rights;(iv) no Borrower has any subsidiaries or other investments in other Persons,except as set forth on **Item 13 of the Schedule**; (v) eachBorrower is in compliance in all material respects with all laws, rules andregulations applicable to such Borrower, including laws, rules or regulationsconcerning the environment, occupational health and safety and pensions orother employee benefits; (vi) except as set forth on **Item 14 ofthe Schedule**, there is no litigation or investigation pendingagainst any Borrower (or, so far as any Borrower is aware, threatened) which,if it were decided adversely to such Borrower, could reasonably be expected tohave a material adverse effect on such Borrower, such Borrower’s financial oroperational condition or such Borrower’s prospects (taking into account anyinsurance coverage that has been acknowledged by the insurer); (vii) other thandebt that is to be repaid from the proceeds of the first advance hereunder, noBorrower is indebted to any other Person for money borrowed nor has anyBorrower issued any guaranty of payment or performance by any other Person,except as set forth on **Item 15 of the Schedule**; (viii)since the date of the financial statements of Borrowers most recently deliveredto Lender, there has been no material adverse change in any Borrower’sbusiness, any Borrower’s financial or operational condition or any Borrower’sbusiness prospects; and (ix) each Borrower is, and after giving effect to theinitial Loans under this Agreement and the application of the proceeds of suchLoans each Borrower will be, solvent and has sufficient revenues to pay suchBorrower’s obligations as they come due and adequate capital with which toconduct such Borrower’s business.

(b)           **Title to Assets, Other Collateral Matters**.  Borrowers represent and warrant to Lenderthat:  (i) Borrowers have good andmarketable title to the Collateral, free of all Liens except for PermittedLiens, and no financing statement, mortgage, notice of Lien, deed of trust,security agreement, or any other agreement or instrument creating or givingnotice of any Lien against any of the Collateral has been signed, authorized ordelivered by any Borrower, except in Lender’s favor or with respect toPermitted Liens; (ii) with regard to each Account as it arises, except as setforth on a Borrowing Base Certificate including such Account:  (A) Borrowers will have made delivery of thegoods or will have rendered the services ordered; (B) the Customer will haveaccepted the goods and/or services; and (C) no Customer dispute will exist inany respect, including, without limitation, disputes as to price, terms,warranties, quantity or quality, and claims of set-off, release from liabilityor defense based upon any act of God or a public enemy or war or because of therequirements of law or of rules, orders, or regulations having the force oflaw; (iii) all Inventory is in good condition, meets all applicablegovernmental standards and is currently usable or saleable in the ordinarycourse of the applicable Borrower’s business for a price approximating at leastsuch Borrower’s cost thereof; (iv) all Equipment is in good

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condition and state ofrepair, ordinary wear and tear excepted; (v) all Collateral meets applicablegovernment standards; (vi) since December 7, 2005, except as set forth on **Item 16 ofthe Schedule** (A) no Borrower has used any other legal, trade orfictitious names, and (B) no Borrower has been a party to any merger orpurchased assets from any other Person other than in the ordinary course ofbusiness; and (vii) each Borrower’s chief executive office and principal placeof business, all Inventory, all Equipment and all other Collateral is locatedat the addresses (including the county) set forth on **Item 17 ofthe Schedule**and has not been located at any other locationduring the five year period prior to the Agreement Date.

(c)           **Ownership Structure**.** **Borrowersrepresent and warrant that (i) **Item18 of the Schedule** accurately describes the ownership of eachBorrower’s membership interests, stock or other equity interests, and (ii)Apollo Resources has, directly or indirectly, voting and managerial control ofeach Borrower.

(d)           **Additional Representations**.  Borrowers represent and warrant to Lenderthat: (i) no Borrower is engaged as one of such Borrower’s principal activitiesin owning, carrying or financing the purchase or ownership by others of “marginstock” (as defined in Regulation U of the Board of Governors of the FederalReserve System); (ii) no Borrower owns any real property or leases any realproperty other than as listed on **Item 19 of the Schedule**; (iii) atrue, correct and complete list of any warehousemen, processors, consignees,bailees or other Persons with possession or control of any Inventory orEquipment is set forth on **Item 19 of the Schedule**; and (iv)a list and brief description of all bank accounts maintained by any Borrowerwith any bank or financial institution is set forth on **Item 20 ofthe Schedule**.

5.             **Collateral**.

(a)           **Grant of Security Interest**.  To induce Lender to accept this Agreement andto make Loans to Borrowers from time to time pursuant to its terms, eachBorrower hereby grants to Lender, for itself and as agent for any Affiliate ofLender, a security interest in, and assigns, mortgages and pledges to Lender,for itself and as agent for any Affiliate of Lender, all of such Borrower’sright, title and interest in and to all of such Borrower’s property, whetherreal or personal, tangible or intangible, now owned or existing or hereafteracquired or arising, including all of the following (collectively, the “Collateral”):

(i)            all Accounts,Inventory, Equipment, Goods, GeneralIntangibles and Negotiable Collateral;

(ii)           all investment property, securitiesand securities accounts and financial assets, as well as all bank anddepository accounts and all funds on deposit therein;

(iii)          all chattel paper (whether tangible orelectronic) and contract rights;

(iv)          all guaranties, collateral,Liens on real or personal property, leases, letters of credit, letter-of-creditrights, supporting obligations, and all other rights, agreements, and propertysecuring or relating to payment of Accounts or any other Collateral;

(v)           all documents, books and records relating to anyCollateral or to any Borrower’s business;

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(vi)          all other property of anyBorrower now or hereafter in the possession or control of Lender or any ofLender’s Affiliates (including cash, money, credits and balances of anyBorrower held by or on deposit with Lender or any Affiliate of Lender);

(vii)         all other assets of any Borroweror any other Obligor in which Lender receives a security interest to secure allor part of the Obligations or which hereafter come into the possession, custodyor control of Lender or any Affiliate of Lender;

(viii)        all of eachBorrower’s commercial tort claims listed on (A) **Item 21 of the Schedule**(which Borrowers represent and warrant is a true, accurate and completelist of all of each Borrower’s commercial tort claims as of the Agreement Date)or (B) any other writing provided to Lender pursuant to **Section 7(g)**; and

(ix)           all proceeds and products ofall of the foregoing in any form, including amounts payable under any policiesof insurance insuring all or any of the foregoing against loss or damage, allparts, accessories, attachments, special tools, additions, replacements,substitutions and accessions to or for all or any of the foregoing, allcondemnation or requisition payments with respect to all or any of theforegoing and all increases and profits received from all or any of theforegoing.

(b)           **Obligations**.  Such grant, assignment, mortgage and transferis made for the purpose of securing and the Collateral secures and willcontinue to secure all of the Obligations.

6.             **Financial Covenants**.  Borrowers, on a consolidated basis, shallcomply with each of the financial covenants set forth on **Item 22 ofthe Schedule**.

7.             **Collateral Covenants**.

(a)           **Accounts**.  Borrowers will notify Lender promptly of andsettle all Customer disputes, but, if Lender so elects, Lender will have theright at all times to settle, compromise, adjust, or litigate all Customerdisputes directly with the Customer or other complainant upon such terms andconditions as Lender deems advisable without incurring liability to anyBorrower for Lender’s performance of such acts. All of each Borrower’s books and records concerning Accounts and a copyof each Borrower’s general ledger will be maintained at the address ofBorrowers’ chief executive office set forth on **Item 17 of the Schedule**.  All Accounts included on any Borrowing BaseCertificate will be, except as indicated on such Borrowing Base Certificate orsubsequently in writing to Lender, bona fide**and existing obligations of Customers arising out of the sale ofgoods and/or the rendering of services by Borrowers in the ordinary course ofBorrowers’ business, owned by and owing to the applicable Borrower withoutdefense, setoff or counterclaim, and will be subject to a perfected,first-priority security interest in Lender’s favor and will be free and clearof all other Liens.

(b)           **Inventory**.  All Inventory will at all times be located atone of the Inventory locations set forth on **Item 17 of the Schedule**as the current location of Borrowers’ chief executive office or a currentlocation of other Collateral, will be subject to a perfected, first-prioritysecurity interest in Lender’s favor and will be free and clear of all otherLiens.  Sales of Inventory will be madein compliance with all material requirements of applicable law.

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(c)           **Equipment**.  Borrowers will maintain all Equipment used oruseful in Borrowers’ business in good and workable condition, ordinary wear andtear excepted, subject to a perfected, first-priority security interest inLender’s favor and free and clear of all other Liens (other than PermittedLiens), at one of the locations set forth on **Item 17 of the Schedule**as the current location of Borrowers’ chief executive office or a currentlocation of other Collateral.

(d)           **Defense of Title**.  All Collateral will at all times be owned byBorrowers, and Borrowers will defend Borrowers’ title to the Collateral againstthe claims of third parties.  Borrowerswill at all times keep accurate and complete records of the Collateral.

(e)           **Perfection; Further Assurances**.  Borrowers will give Lender at least 30 days’prior written notice of any change in any Borrower’s name, state oforganization or organizational identification number, any change in thelocation of any Borrower’s principal place of business or chief executiveoffice, any change in the locations of any Borrower’s Inventory or Equipmentand any acquisition by any Borrower of any interest in real property.  Each Borrower will, at Borrowers’ expense,promptly execute and deliver from time to time at Lender’s request and pay thecosts of filing such additional financing statements, mortgages, or otherevidences of Liens as may be necessary or desirable to perfect or continueperfection of Lender’s security interest in Borrowers’ property or, at Lender’srequest, to create and perfect a Lien on newly acquired real property.  Borrowers will use all reasonable efforts toobtain from any landlord, warehouseman, or other third party operator ofpremises on which any Collateral is located an acceptable Lien waiver orsubordination agreement in Lender’s favor with respect to such Collateral.  All Collateral is and will continue to be,except as expressly consented to by Lender, personal property and will not, byreason of attachment or connection to any realty, either become or be deemed tobe a fixture or appurtenance to such realty and will at all times be readilyremovable without material damage to any realty.  In the event that any Collateral, includingproceeds, is evidenced by or consists of Negotiable Collateral, Borrowersshall, immediately upon written request therefor from Lender, endorse andassign such Negotiable Collateral over to Lender and deliver actual physicalpossession of the Negotiable Collateral to Lender.  Borrowers shall at any time and from time totime take such steps as Lender may request for Lender (i) to obtain anacknowledgment, in form and substance satisfactory to Lender, of any baileehaving possession of any of the Collateral that such bailee holds suchCollateral for Lender, (ii) to obtain “control” of any investment property,deposit accounts, letter-of-credit rights or chattel paper (includingelectronic chattel paper) in accordance with Article 9 of the UCC, with anyagreements establishing control to be in form and substance satisfactory toLender, and (iii) otherwise to insure the continued perfection and priority ofLender’s security interest in any of the Collateral and of the preservation ofits rights therein.  Lender may, fromtime to time at Borrowers’ expense, obtain an appraisal on some or all of theCollateral.

(f)            **Insurance**.  Borrowers will obtain and maintain in fullforce and effect insurance covering the Collateral against all risks to whichthe Collateral is exposed, including loss, damage, fire, theft, and all othersuch risks, in such amounts, with such companies, under such policies and insuch form as will be reasonably satisfactory to Lender, which policies willname Lender as an additional insured and provide that loss thereunder will bepayable to Lender as Lender’s interests may appear upon a loss payeeendorsement acceptable to Lender.  Allproceeds of any such insurance will be paid over to Lender directly, and Lendermay apply such proceeds to payment of the Obligations, whether or not due, insuch order of application as

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Lender determines or, inLender’s sole discretion, apply such proceeds, in whole or in part, to thereplacement, restoration or rebuilding of the lost or damaged property.  Borrowers will provide to Lender from time totime certificates showing such coverage in effect and, promptly upon Lender’sreasonable request therefor, the underlying policies.

(g)           **Commercial Tort Claims**.  If any Borrower shall at any time acquire acommercial tort claim, Borrowers shall immediately notify Lender in a writingsigned by the applicable Borrower of the details thereof and grant to Lender insuch writing a security interest therein and in the proceeds thereof, all uponthe terms of this Agreement, with such writing to be in form and substancesatisfactory to Lender.

(h)           **Financing Statements**.  Lender may at any time and from time to timefile financing statements, continuation statements and amendments thereto thatdescribe the Collateral as “all assets” of Borrowers or words of similar effectand which contain any other information required by Part 5 of Article 9 ofthe UCC for the sufficiency or filing office acceptance of any financingstatement, continuation statement or amendment, including whether theapplicable Borrower is an organization, the type of organization and anyorganization identification number issued to any Borrower.  Each Borrower agrees to furnish any suchinformation to Lender promptly upon request. Any such financing statements, continuation statements or amendments maybe signed by Lender on behalf of any Borrower or filed by Lender without thesignature of any Borrower and may be filed at any time in anyjurisdiction.  Each Borrower acknowledges that it is not authorizedto file any financing statement or amendment or termination statement withrespect to any financing statement naming any Borrower as the debtor and Lenderas the secured party without the prior written consent of Lender, and eachBorrower agrees that it shall not do so without the prior written consent ofLender.

(i)            **Certificates of Title**.  Borrowers shall ensure that, at all timesfrom and after the Agreement Date, the certificate of title for each item ofCollateral subject to a certificate of title lists a Borrower as the owner ofsuch item and Lender as the sole lienholder with respect thereto.  Borrowers shall deliver the originals of allsuch certificates of title to Lender, and, promptly following any request byLender, Borrowers shall execute and deliver or cause to be executed anddelivered to Lender such agreements, certificates, applications, affidavits andother items which Lender may reasonably request in order to perfect or evidenceLender’s security interest in such items and to release any other Liens.

8.             **Negative Covenants**.

(a)           **No Merger**.  No Borrower will merge or consolidate withany other Person or sell, transfer, lease, abandon, or otherwise dispose of asubstantial portion of such Borrower’s assets or any of the Collateral or anyinterest therein, except that, so long as no Default has occurred and iscontinuing, each Borrower may sell Inventory in the ordinary course of suchBorrower’s business.

(b)           **No Debt or Liens; Taxes**.  No Borrower will obtain or attempt to obtainfrom any Person other than Lender any loans, advances, or other financialaccommodations or indebtedness of any kind, nor will any Borrower enter intoany direct or indirect guaranty of any obligation of another Person, other than(i) Subordinated Debt, and (ii) indebtedness in

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connection with purchasemoney security interests constituting Permitted Liens (and capital leases) notto exceed, in aggregated principal amount for all Borrowers on a consolidatedbasis, the amount set forth on **Item 23 of the Schedule** at anyone time outstanding.  No Borrower willpermit any of its assets to be subject to any Lien other than Permitted Liens.  Each Borrower shall pay when due (or beforethe expiration of any extension period) any tax or other assessment (includingall required payments or deposits with respect to withholding taxes), andBorrowers will, upon request by Lender, promptly furnish Lender with proofsatisfactory to Lender that Borrowers have made such payments and deposits.

(c)           **No Distributions**.  No Borrower will retire, repurchase or redeemany of such Borrower’s membership interests, stock or other ownership interestin such Borrower, nor declare or pay any dividend in cash or other property(other than additional membership interests, stock or additional ownershipinterests) to any owner or holder of such Borrower’s membership interests,stock or other ownership interest.

(d)           **No ERISA Liabilities**.  Borrowers will make timely payments of allcontributions required to meet the minimum funding standards for Borrowers’employee benefit plans subject to the Employee Retirement Income Security Actof 1974 (as amended, “ERISA”) and will promptly report to Lender theoccurrence of any reportable event (as defined in ERISA) and any giving orreceipt by any Borrower of any governmental notice (other than routine requestsfor information) in respect of any such plan.

(e)           **Transactions with Affiliates**.  No Borrower will engage in any transactionwith any of such Borrower’s or any other Borrower’s officers, directors,members, managers, employees or other Affiliates, except for an “arms-length”transaction on terms no less favorable to such Borrower than would be grantedto such Borrower in a transaction with a Person who is not an Affiliate of anyBorrower, which transaction shall be approved by such Borrower’s members andshall be disclosed in writing in a timely manner to Lender prior to the consummationof the transaction.

(f)            **Loans/Investments**.  No Borrower will make any loans or advancesto or extend any credit to any Person except (i) the extension of trade creditin the ordinary course of business; (ii) advances to such Borrower’s employees notto exceed an aggregate outstanding amount of $10,000 at any one timeoutstanding for all employees of all Borrowers on a consolidated basis; (iii)intercompany transfers of money or other assets from one Borrower to anotherBorrower; and (iv) hedge contracts with respect to natural gas prices in anaggregate notional principal amount not to exceed $100,000 at any time for thepurpose of hedging risk and not for speculation.  No Borrower shall purchase, acquire or otherwiseinvest in any Person except: (A) existing investments in such Borrower’ssubsidiaries described on **Item 13 of the Schedule**; (B)direct obligations of the United States of America maturing within one yearfrom the acquisition thereof; (C) certificates of deposit issued by, orinvestment accounts in, banks or financial institutions having a net worth ofnot less than $50,000,000; (D) commercial paper rated A-1 by Standard &Poor’s Ratings Group or P-1 by Moody’s Investors Service, Inc.; and (E)investments in other Borrowers.  Withoutlimiting the generality of the foregoing, no Borrower shall create any newsubsidiary or transfer any money or other assets to any subsidiary that is nota Borrower hereunder.

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(g)           **Capital Expenditures**.  Without the prior written consent of Lender,Borrowers shall not make or incur capital expenditures in excess of the amountset forth on **Item 24 of the Schedule** during any fiscal year,determined for all Borrowers on a consolidated basis.

(h)           **Compensation**.  No Borrower shall increase the totalcompensation paid to its officers, directors, members, or managers (or any oftheir relatives), including salaries, withdrawals, fees, bonuses, commissions,drawing accounts and other payments, whether directly or indirectly, in moneyor otherwise, during any fiscal year of such Borrower during the term of thisAgreement in an aggregate amount for all such officers, directors, members andmanagers in excess of the limit specified in **Item 25 of the Schedule**.

(i)            **Amendments of Documents**.  Borrowers shall not amend or modify theirarticles of organization, limited liability company agreements or any note,instrument or agreement in connection with any Subordinated Debt without theprior written consent of Lender.

9.             **Reporting and Information**.

(a)           **Financial Statements**.  Borrowers will submit to Lender as soon asavailable, and in any case not later than 30 days after the end of each month,a balance sheet and a detailed statement of profit and loss, and a statement ofcash flows, in each case prepared in accordance with GAAP on a consolidated andconsolidating****basis, certified bythe chief financial or accounting officer of Applied LNG as presenting fairly,in accordance with GAAP, Borrowers’ financial condition as of the last day ofsuch month and Borrowers’ results of operations for such month and for theportion of Borrowers’ fiscal year ending with such month.  Borrowers will also submit to Lender annualfinancial statements within 90 days after the end of each fiscal year,including a balance sheet and the related statement of profit and loss andowners’ equity, and a statement of cash flows, in each case prepared inaccordance with the requirements set forth on **Item 26 of the Schedule**on a consolidated and consolidating****basis.  Borrowers will also submit to Lender annuallyat least 60 days prior to Borrowers’ fiscal year end forecasted financialstatements for the upcoming fiscal year, containing a projected balance sheetand profit and loss statement on a consolidated and consolidating****basis. Together with each monthly and annual financial statement, Borrowerswill deliver to Lender the certification of the chief financial or accountingofficer of Applied LNG in the form of Exhibit B attached hereto to theeffect that Borrowers are in compliance with the terms and conditions of thisAgreement, and setting forth in detail the calculation of all financialcovenants, or, if Borrowers are not in compliance, describing the nature of anynoncompliance and the steps Borrowers are taking or propose to take to remedythe same.

(b)           **Collateral Reports**.  Concurrent with the execution of thisAgreement by Borrowers and concurrent with each request for a Revolving Loanpursuant to **Section 2(a)**, but no less frequently than as required by **Item 27 ofthe Schedule**, Borrowers shall deliver to Lender a fullycompleted Borrowing Base Certificate certified by the Chief Executive Officeror Chief Financial Officer of Applied LNG as being true and correct.  Concurrent with the delivery of each suchBorrowing Base Certificate, Borrowers shall provide a written report to Lenderof all materially significant returns, disputes and claims, together with salesand other reports relating to the Accounts and Inventory as required byLender.  Borrowers shall deliver to Lenderwithin ten (10) days after the end of each month a report, reflecting thestatus as of the end of

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each month and certifiedby the Chief Executive Officer or Chief Financial Officer of Applied LNG asbeing true and correct, containing (i) a current detailed aging, by total andby Customer, of Borrowers’ Accounts, (ii) a current detailed aging, by totaland by vendor, of Borrowers’ accounts payable, and (iii) a detailed report ofBorrowers’ Inventory, setting forth the quantity, type and cost thereof, all ofwhich shall be set forth in a form and shall contain such information as isacceptable to Lender.  Borrowers willalso conduct a physical inventory count no less frequently than annually,adjust Borrowers’ records to reflect the results of the count and deliver toLender monthly a list of locations of Inventory and the types and values ofInventory at each such location, in such form as Lender may require.  At Lender’s request, Borrowers shall conductsuch physical inventory counts and deliver such information more or less oftenthan described above and such other information with respect to the Collateral,Obligors or Obligors’ business or financial condition as Lender may reasonablyrequest.

(c)           **Guarantor Financials**.  Within ninety days after each fiscalyear-end, Borrowers will cause each Guarantor and each other Obligor (otherthan Borrowers) to deliver to Lender a financial statement as of such year-end,in such form as Lender may reasonably request.

(d)           **Other Information**.  Borrowers will notify Lender as promptly aspossible of any Default, any receipt by any Borrower of notice from anygovernmental authority that any Borrower has or may have violated any law, ruleor regulation applicable to any Borrower or the terms or conditions of anypermit or license any Borrower holds or is required to hold in connection withthe conduct of such Borrower’s business, any amendment to any Borrower’sconstituent documents and any change in any Borrower’s management or ownership,and the commencement of any material litigation, claim or action against anyBorrower.

10.           **Inspection Rights; Expenses; Etc.**

(a)           **Inspection**.  Lender may examine and make copies of eachBorrower’s records, the Collateral and all other assets of each Borrower or anyportion thereof, wherever located, and may enter upon each Borrower’s premisesfor such purposes, without notice, during business hours.  Borrowers will assist Lender in whatever waynecessary to make each such examination. Lender may discuss each Borrower’s financial condition with Borrowers’independent accountants without liability to Lender or such accountants.

(b)           **Performance by Lender**.  Lender may, from time to time at Lender’soption, perform any agreement of any Borrower hereunder which such Borrowerfails to perform and take any other action which Lender deems necessary for themaintenance or preservation of any of the Collateral or Lender’s interesttherein, and Borrowers agree to reimburse Lender immediately on demand for allof Lender’s expenses in connection with the foregoing (including, without beinglimited to, reasonable fees and expenses of legal counsel), together withinterest thereon at the default rate of interest provided for herein from thedate any such expense is incurred until reimbursed by Borrowers.

(c)           **Field Examinations; Inspections**.  Lender shall have the right without hindranceor delay to conduct field examinations to inspect the Collateral, Borrowers’books and records and all other aspects of Borrowers’ business.  Borrowers agree to pay for such examinationsas more fully described on **Item 28 of the Schedule**.  Lender shall have full access to all records

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available to Borrowersfrom any credit reporting service, bureau or similar service and shall have theright to examine and make copies of any such records.  Lender may exhibit a copy of this Agreementto such service and such service shall be entitled to rely on the provisionshereof in providing access to Lender as provided herein.

11.           **Rights of Setoff, Application of Payments, Etc.**  Lender will be entitled to hold or set offall sums and all other property of any Borrower at any time to any Borrower’scredit or in Lender’s possession (or the possession of any of Lender’sAffiliates) by pledge or otherwise or upon or in which Lender may have a Lien,as security for any and all of the Obligations. Lender will have the right and is hereby irrevocably authorized anddirected to charge to Borrowers’ loan account as Revolving Loans the amounts ofany and all such Obligations.  Recourseto the Collateral or other security for the Obligations will not at any time berequired and each Borrower hereby waives any right of marshalling that suchBorrower may have.  Each Borrower’sobligation to pay or repay the Obligations is unconditional.  Borrowers agree that Lender may take suchaction with regard to the custody and collection of Accounts assigned to Lenderas Lender may deem necessary.  EachBorrower agrees that failure to take any action with regard to any givenAccount will not be unreasonable until and unless Lender receives a writtenrequest for specific action from Borrowers’ Agent with regard thereto and failsto respond thereto within a commercially reasonable time.  Each Borrower irrevocably waives the right todirect the application of any and all payments and collections at any time or timeshereafter received by Lender from or on behalf of any Borrower, and eachBorrower hereby irrevocably agrees that Lender shall have the continuingexclusive right to apply and reapply any and all such payments and collectionsreceived at any time or times hereafter by Lender or its agent against theObligations, in such manner and in such order as Lender may deem advisable.

12.           **Attorney-in-Fact**.  Each Borrower hereby appoints and constitutesLender as such Borrower’s attorney-in-fact: (a) at any time, (i) to endorse such Borrower’s name upon any notes,acceptances, checks, drafts, money orders, and other evidences of payment thatcome into Lender’s possession and to deposit or otherwise collect the same;(ii) to send verifications of accounts to Customers; and (iii) to execute insuch Borrower’s name any financing statements, affidavits and notices withregard to any and all Lien rights; and (b) while any Default exists, (i) toreceive, open, and dispose of all mail addressed to such Borrower; (ii) to notifythe postal authorities to change the address and delivery of mail addressed tosuch Borrower to such address as Lender may designate; (iii) to sign suchBorrower’s name on any invoice or bill of lading relating to the Collateral, ondrafts against Customers, and notices to Customers; and (iv) to do all otheracts and things necessary to carry out this Agreement.  All acts of said attorney-in-fact are herebyauthorized, ratified and approved, and said attorney-in-fact will not be liablefor any errors or mistake of fact or law. This power, being coupled with an interest, is irrevocable while any ofthe Obligations remain unpaid or Lender has any commitment to Borrowers underthis Agreement or otherwise.

13.           **Defaults and Remedies**.

(a)           **Defaults**.  For purposes of this Agreement, “Default”means the occurrence of any of the following events:  (i) non-payment when due of any amountpayable on any of the Obligations or breach of any covenant or failure toperform any agreement or failure to meet any of any Borrower’s or any otherObligor’s obligations contained herein, in any other Loan

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Document or in anyagreement out of which any of the Obligations arose; (ii) non-payment when dueof the premium on any insurance policy required to be maintained hereunder; (iii)any statement, representation, or warranty made in writing in this Agreement orin any other writing or statement at any time furnished or made by any Borroweror any other Obligor to Lender proves to have been untrue in any materialrespect as of the date furnished or made; (iv) any Borrower’s default under anyother agreement for borrowed money or any other agreement involving more thanthe amount set forth on **Item 29 of the Schedule**; (v)suspension of the operation of any Borrower’s present business; (vi) anyObligor becomes insolvent or unable to pay its debts as they mature, or admitsin writing that it is insolvent or unable to pay its debts, makes an assignmentfor the benefit of creditors, makes a conveyance fraudulent as to creditorsunder any state or federal law, or a proceeding is instituted by or against anyObligor alleging that such Obligor is insolvent or unable to pay debts as theymature, or a petition under any provision of Title 11 of the United StatesCode, as amended, is filed by or against any Obligor; (vii) entry of anyjudgment in excess of the amount set forth on **Item 30 of the Schedule**against any Obligor or creation, assertion, or filing of any judgment or taxLien against the property of any Obligor, in each case which remains undischargedfor 10 days after such entry or filing; (viii) death of any Obligor who was anatural person, or death or withdrawal of any partner of any Obligor which is apartnership, or dissolution, merger, or consolidation of any Obligor which is acorporation, partnership or limited liability company; (ix) transfer of asubstantial part (determined by market value) of the property of any Obligor;(x) sale, transfer or exchange, either directly or indirectly, of a controllingmembership interest, stock interest or other equity ownership interest of anyObligor (without limiting the generality of the foregoing, a Default shallexist if Apollo Resources shall cease to own, directly or indirectly, less than100% of the membership interests or capital stock of any Borrower or cease tohave direct or indirect voting control of any Borrower; (xi) termination,unenforceability or withdrawal of any guaranty or validity guaranty for theObligations, or failure of any Obligor to perform any of its obligations undersuch a guaranty or validity guaranty or assertion by any Obligor that it has noliability or obligation under such a guaranty or validity guaranty; (xii)appointment of a receiver for any of the Collateral or for any other propertyin which any Borrower has an interest; (xiii) seizure of any Collateral by anyPerson other than Lender; (xiv) any person identified on **Item 31 ofthe Schedule** shall for any reason cease to hold the office ofthe applicable Borrower set forth opposite such person’s name on **Item 31 ofthe Schedule** (or any such person shall cease to perform theduties associated with office listed for such person) and a replacementsatisfactory to Lender shall not be appointed within 60 days; (xv) theoccurrence of any act, omission, event or circumstance which has or couldreasonably be expected to have a materially adverse effect on any Borrower orany other Obligor; (xvi) payment by any Borrower on any Subordinated Debt inviolation of the applicable subordination agreement; or (xvii) the Pension BenefitGuaranty Corporation or the Department of Labor commences proceedings underERISA to terminate any of any Borrower’s employee pension benefit plans.

(b)           **Remedies**.  If a Default occurs and is continuing:

(i)            Lender may,without demand or notice to any Borrower, terminate Lender’s commitment, ifany, to make Loans or to extend other financial accommodations to Borrowers,and may declare the entire principal amount of all Loans outstanding hereunder,all interest thereon, any unpaid fees and all other Obligations of any kind ornature to be, and thereupon the same will immediately become, due and payablein full; and, in the event of a

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Default described underclause (vi) of **Section 13(a)**,such termination and acceleration shall automatically occur without any notice,demand or presentment of any kind. Borrowers agree to deposit with Lender a cash sum equal to the amount ofletters of credit and acceptances issued or guaranteed by Lender or anyAffiliate of Lender which have not been drawn upon or matured, which funds willbe used to reimburse Lender or such Affiliate of Lender upon drawing under anyletter of credit or maturity of any acceptance.

(ii)           Lender maydecrease the advance rates set forth in the definition of “Borrowing Base” inLender’s discretion.

(iii)          Lender orLender’s designee may notify Customers that the Accounts have been assigned toLender and that Lender has a security interest therein, collect them directly,and charge the collection costs and expenses to Borrowers’ loan account as RevolvingLoans.

(iv)          Lender may (A)exercise any of its remedies under any other Loan Document, (B) apply any cashcollateral to the Obligations (without limiting the foregoing, Lender mayinstruct any bank or other financial institution holding any cash, certificateof deposit or other Collateral to pay over such Collateral to Lender), and (C)draw on any letter of credit issued for the benefit of Lender in connectionwith this Agreement or any other Loan Document and apply the proceeds thereofto the Obligations, in each case without demand or notice to any Borrower orany other Person.

(v)           Without noticeto or demand upon any Borrower or any other Person, Lender may make suchpayments and do such acts as Lender considers necessary or reasonable toprotect its security interest in the Collateral.  Borrowers authorize Lender to enter eachpremises where any Collateral is located, take and maintain possession of theCollateral, or any part of it, and to pay, purchase, contest or compromise anyLien which in Lender’s opinion appears to be prior or superior to its securityinterest and to pay all expenses incurred in connection therewith.

(vi)          Lender mayship, reclaim, recover, store, finish, maintain, repair, prepare for sale,advertise for sale and sell the Collateral. Any such sale may be either a public or private sale, or both, by way ofone or more contracts or transactions, for cash or on terms.  It is not necessary that the Collateral bepresent at any such sale.

(vii)         Lender may, withoutregard to any waste, adequacy of the security or solvency of Borrower, applyfor appointment of a receiver of the Collateral, to which appointment Borrowerhereby consents, whether or not foreclosure proceedings have been commencedhereunder or under any other Loan Documents and whether or not a foreclosuresale has occurred;

(viii)        Lender may,without notice to any Borrower except as expressly provided herein, at Lender’soption, exercise any of the remedies available to Lender as a secured partyunder the Uniform Commercial Code as in effect in any applicable jurisdiction,or otherwise available to Lender under applicable law.  Borrowers agree, upon Default, to cease thesale or other disposition of the Collateral, except with Lender’s prior writtenconsent, and to assemble at Borrowers’ expense all the Collateral at aconvenient place acceptable to Lender. Lender may charge to Borrowers’ loan account as Revolving Loans andBorrowers will pay Lender upon

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demand all costs andexpenses, including reasonable attorneys’ fees (including fees of attorneysthat are regular salaried employees of Lender or any of its Affiliates), inconnection with:  (A) the liquidation ofany Collateral; (B) obtaining or enforcing payment of the Obligations; (C) thesettlement, adjustment, compromise, or litigation of Customer disputes; or (D)the prosecution or defense of any action or proceeding either against Lender oragainst any Borrower concerning any matter growing out of or in connection withthis Agreement and/or any Collateral and/or any Obligations.  If at any time Lender pays any state, city,local, federal, or other tax or levy attributable to the Collateral, Borrowerswill repay to Lender the amount of tax so paid by Lender.  Borrowers agree that Lender may apply anyproceeds from disposition of the Collateral first to satisfy obligationssecured by Liens prior to Lender’s security interest.  Borrowers will remain liable and will pay ondemand any deficiencies arising upon the liquidation of any Collateral held byLender.

(c)           **Notices**.  If any notice of intended disposition of theCollateral or of any other act by Lender is required by law and a specific timeperiod is not stated therein, such notice, if given five days before suchdisposition or act, in accordance with the provisions of **Section 15(a)**, will be deemed reasonablyand properly given.

(d)           **License**.  Each Borrower hereby grants to Lender alicense or other right to use, without charge, such Borrower’s labels, patents,copyrights, rights of use of any name, trade secrets, trade names, trademarksand advertising matter, or any property of a similar nature, as it pertains tothe Collateral, in completing production of, advertising for sale and sellingany Collateral, and each Borrower agrees that all of its rights under all licensesand all franchise agreements shall inure to Lender’s benefit.

(e)           **Remedies Cumulative**.  Lender’s rights and remedies under thisAgreement and all other Loan Documents shall be cumulative.  Lender shall have all other rights andremedies not inconsistent herewith as provided under the UCC, by law, or inequity.  No exercise by Lender of oneright or remedy shall be deemed an election, and no waiver by Lender of anydefault on Borrowers’ part shall be deemed a continuing waiver.  No delay by Lender shall constitute a waiver,election or acquiescence by it.

14.           **Indemnification**.  Borrowers jointly and severally agree todefend, indemnify, and hold harmless Lender and Lender’s members, managers,officers, directors, employees, Affiliates, representatives, attorneys andagents (each an “Indemnified Person”) from and against any and allpenalties, fines, liabilities, damages, costs, or expenses of whatever kind ornature asserted against any such Indemnified Person, arising out of, or in anyway related to this Agreement or any other Loan Document, or the transactionscontemplated hereby or thereby, including by reason of the violation of any lawor regulation relating to the protection of the environment or the presence,generation, disposal, release, or threatened release of any hazardous materialsin connection with any Borrower’s business on, at or from any property at anytime owned or operated by any Borrower, including, without limitation,reasonable attorneys’ and consultants’ fees, investigation and laboratory fees,court costs, and litigation expenses actually incurred.  Without limiting the foregoing, Borrowersrepresent and warrant that there has been no loan broker or investment bankerinvolved in connection with the transactions contemplated hereby, and Borrowersagree to indemnify and hold Lender harmless from any claim of

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compensation payable toany loan broker or investment banker in connection with the transactionscontemplated hereby.

15.           **General Provisions**.

(a)           **Notices**.  Except as specifically provided in thisAgreement or in any of the other Loan Documents, all notices and communicationshereunder and thereunder will be in writing or by telephone subsequentlyconfirmed in writing.  Notices in writingwill be delivered personally or sent by overnight courier service, by certifiedor registered mail, postage pre-paid, or by facsimile transmission and will bedeemed received, in the case of personal delivery, when delivered; in the caseof overnight courier service, on the next Business Day after delivery to suchservice; in the case of mailing, on the fourth Business Day after mailing; and,in the case of facsimile transmission, upon transmittal if confirmed by thesender’s facsimile device; provided that in the case of notices toLender, Lender will be charged with knowledge of the contents thereof only whensuch notice is actually received by Lender. A telephonic notice to Lender as understood by Lender will be deemed tobe the controlling and proper notice in the event of a discrepancy with or failureto receive a confirming written notice. Notices to Lender or Borrowers will be sent to the addresses set forthon **Item 32of the Schedule**, or any other address for Borrowers or Lender ofwhich the other is notified by like notice.

(b)           **No Waiver**.  No waiver hereunder will be valid unless inwriting signed by Lender and then only to the extent therein stated.  No delay or failure on Lender’s part in theexercise of any right or remedy hereunder will operate as a waiver thereof orof Lender’s right to exercise any other right or remedy.

(c)           **Time of Essence**.  Time is of the essence of this Agreement.

(d)           **Severability**.  Wherever possible, each provision of thisAgreement will be interpreted in such manner as to be effective and valid underapplicable law, but if any provision of this Agreement will be prohibited by orinvalid under applicable law, such provision will be ineffective to the extentof such prohibition or invalidity, without invalidating the remainder of suchprovision or the remaining provisions of this Agreement.

(e)           **Successors and Assigns**.  Each Borrower’s and Lender’s rights andobligations hereunder will inure to the benefit of such Person’s respectivesuccessors and assigns, provided that Borrowers acknowledge and agreethat without Lender’s prior written consent, which may be withheld for anyreason or no reason, no Borrower may assign such Borrower’s rights orobligations or any part thereof hereunder to any other Person.  Notwithstanding anything herein to thecontrary, Lender may, without the consent of any Obligor, grant a securityinterest in, sell or assign, grant or sell participations or otherwise transferall or any portion of its rights and obligations hereunder to one or morePersons.

(f)            **Governing Law; Submission to Jurisdiction, Service,Etc.**  This Agreement and the other Loan Documents shallbe governed by and construed in accordance with the substantive laws (otherthan conflict of law provisions and principles) of the State of Oklahoma.  Each Borrower hereby consents to thenon-exclusive jurisdiction of any United States Federal Court sitting in orwith direct or indirect jurisdiction over the Western District of Oklahoma orany

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Oklahoma state courtsitting in Oklahoma City, Oklahoma in any action, suit or other proceeding arisingout of or relating to this Agreement or any of the other Loan Documents, andeach Borrower irrevocably agrees that all claims and demands in respect of anysuch action, suit or proceeding may be heard and determined in any such courtand irrevocably waives any objection it may now or hereafter have as to thevenue of any such action, suit or proceeding brought in any such court or thatsuch court is an inconvenient forum. Each Borrower hereby waives personal service of any and all process uponit and consents that all such service of process may be made by registered mail(return receipt requested) directed to Borrowers at Borrowers’ address fornotices pursuant to this Agreement, and service so made shall be deemed to becompleted five (5) days after the same shall have been so deposited in theUnited States mails.  Nothing hereinshall limit the right of Lender to bring proceedings against any Borrower orone or more Affiliates of any Borrower in the courts of any otherjurisdiction.  Any judicial proceedingcommenced by any Borrower against Lender or any other holder of anyObligations, or any Affiliate of Lender or any other holder of any Obligations,involving, directly or indirectly, any matter in any way arising out of,related to or connected with any Loan Document shall be brought only in aUnited States Federal Court sitting in or with direct jurisdiction over theWestern District of Oklahoma or any Oklahoma state court sitting in OklahomaCity, Oklahoma.  Nothing in thisAgreement shall be deemed or operate to affect the right of Lender to servelegal process in any other manner permitted by law or to preclude theenforcement by Lender of any judgment or order obtained in such forum or thetaking of any action under this Agreement to enforce same in any otherappropriate forum or jurisdiction.

(g)           **Waiver of Jury Trial**.  TO THE FULLEST EXTENT PERMITTED BY APPLICABLELAW, BORROWERS AND LENDER HEREBY IRREVOCABLY AND EXPRESSLY WAIVE ALL RIGHT TO ATRIAL BY JURY IN ANY ACTION, PROCEEDING, OR COUNTERCLAIM (WHETHER BASED UPONCONTRACT, TORT, OR OTHERWISE) ARISING OUT OF OR RELATING TO THIS AGREEMENT, ANYOTHER LOAN DOCUMENT, THE OBLIGATIONS OR ANY OF THE TRANSACTIONS CONTEMPLATEDHEREBY OR THEREBY OR ANY PARTY’S ACTIONS IN THE NEGOTIATION, ADMINISTRATION, ORENFORCEMENT HEREOF OR THEREOF.  EACHBORROWER AND LENDER ACKNOWLEDGE THAT SUCH WAIVER IS MADE WITH FULL KNOWLEDGEAND UNDERSTANDING OF THE NATURE OF THE RIGHTS AND BENEFITS WAIVED HEREBY, ANDWITH THE BENEFIT OF ADVICE OF COUNSEL OF ITS CHOOSING.

(h)           **Waiver of Hearing**.  EACH BORROWER HEREBY KNOWINGLY, INTENTIONALLYAND VOLUNTARILY WAIVES ALL RIGHTS WHICH SUCH BORROWER HAS UNDER ANY APPLICABLELAW TO NOTICE AND TO A JUDICIAL HEARING PRIOR TO THE ISSUANCE OF A WRIT OFPOSSESSION ENTITLING LENDER, ITS SUCCESSORS AND ASSIGNS TO POSSESSION OF THECOLLATERAL UPON A DEFAULT.  WITHOUTLIMITING THE GENERALITY OF THE FOREGOING AND WITHOUT LIMITING ANY OTHER RIGHTWHICH LENDER MAY HAVE, EACH BORROWER CONSENTS THAT, IF LENDER FILES A PETITIONFOR AN IMMEDIATE WRIT OF POSSESSION IN COMPLIANCE WITH APPLICABLE LAW AND THISWAIVER OR A COPY HEREOF IS ALLEGED IN SUCH PETITION AND ATTACHED THERETO, THECOURT BEFORE WHICH SUCH PETITION IS FILED MAY DISPENSE WITH ALL RIGHTS ANDPROCEDURES HEREIN WAIVED AND MAY ISSUE

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FORTHWITH AN IMMEDIATEWRIT OF POSSESSION IN ACCORDANCE WITH APPLICABLE LAW, WITHOUT THE NECESSITY OFAN ACCOMPANYING BOND TO THE EXTENT OTHERWISE REQUIRED BY APPLICABLE LAW.

(i)            **Expenses**.  Borrowers shall pay on demand all of Lender’scosts and expenses in connection with underwriting and performing due diligencewith respect to the transactions contemplated hereby and the preparation,reproduction, execution, delivery, administration and enforcement of thisAgreement, including the reasonable fees and out-of-pocket expenses of Lender’scounsel, in each case whether incurred on, prior or subsequent to the AgreementDate.  In addition, Borrowers shall payany and all stamp and other taxes and recording and filing fees payable inconnection with the execution and delivery of all other instruments anddocuments to be delivered hereunder. Such amounts may be charged by Lender to Borrowers’ account as one ormore Revolving Loans hereunder.  Allprovisions in this Agreement providing for the payment or reimbursement ofLender’s attorneys’ fees and expenses include, without limitation, such feesand expenses incurred pursuant to or in connection with proceedings broughtunder 11 U.S.C., the Federal Bankruptcy Code.

(j)            **Execution in Counterparts**.  This Agreement may be executed in separatecounterparts, all of which shall constitute one and the same agreement.  Delivery of an executed counterpart of thisAgreement or any other Loan Document by facsimile shall be equally as effectiveas delivery of an original executed counterpart of this Agreement or such otherLoan Document.  Any party delivering anexecuted counterpart of this Agreement or any other Loan Document by facsimilealso shall deliver an original executed counterpart of this Agreement or suchother Loan Document, but the failure to deliver an original executedcounterpart shall not affect the validity, enforceability, and binding effectof this Agreement or such other Loan Document. To the fullest extent permitted by applicable law, Borrower waivesnotice of Lender’s acceptance of this Agreement and the other Loan Documents.

(k)           **Entire Agreement**.  This Agreement and the other Loan Documentsembody the entire agreement and understanding among Lender and Borrowers andsupersede all prior agreements and understandings relating to the subjectmatter hereof.

[REMAINDER OF PAGEINTENTIONALLY LEFT BLANK]

30

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INWITNESS WHEREOF, Borrowers and Lender have executed this Agreement as of theday and year first above written.
|        | APPLIED LNG TECHNOLOGIES USA, L.L.C.       |
|--------|--------------------------------------------|
|   |                                       |
|   | By:                                        |   |
|   | Dennis McLaughlin, Chief Executive Officer |
|   |                                       |
|   |                                       |
|   | ARIZONA LNG, L.L.C.                        |
|   |                                       |
|   | By:                                        |   |
|   | Dennis McLaughlin, Chief Executive Officer |
|   |                                       |
|   |                                       |
|   | FLEET STAR, INC.                           |
|   |                                       |
|   | By:                                        |   |
|   | Dennis McLaughlin, Chief Executive Officer |
|   |                                       |
|   |                                       |
|   | ALTERNATIVE FUELS TECHNOLOGIES, LLC        |
|   |                                       |
|   | By:                                        |   |
|   | Dennis McLaughlin, Chief Executive Officer |
|   |                                       |
|   |                                       |
|   | RENEWABLE ALTERNATIVE FUELS, LLC           |
|   |                                       |
|   | By:                                        |   |
|   | Dennis McLaughlin, Chief Executive Officer |
|   |                                       |
|   |                                       |
|   | FCC, LLC, d/b/a FIRST CAPITAL              |
|   | By:                                        |   |
|   | John A. Curtis, Senior Vice President      |

 

----

**NOTARYJURAT FOR EXECUTION OF**

**WRITTENOBLIGATIONS TO PAY MONEY**

On this the    day of April, 2006, before me, the undersigned, a Notary Public in and for theState of Texas, County of                                   ,Dennis McLaughlin personallyappeared, who is personally known to me or proved to me on the basis ofsatisfactory evidence to be the (a) Chief Executive Officer of Applied LNGTechnologies USA, L.L.C., a Delaware limited liability company, (b) ChiefExecutive Officer of Arizona LNG, L.L.C., a Nevada limited liability company,(c) Chief Executive Officer of Fleet Star, Inc., a Delaware corporation, (d)Chief Executive Officer of Alternative Fuels Technologies, LLC, a Texas limitedliability company, and (e) Chief Executive Officer of Renewable AlternativeFuels, LLC, a Delaware limited liability company, who, being by me first dulysworn, stated that:

1.               He executed the foregoing Loan and SecurityAgreement on behalf of such limited liability companies and such corporationpursuant to their limited liability company agreements or by-laws or aresolution of their members, managers and/or directors, said execution takingplace in the State of Texas, County of                                    ;and

2.               He has this day delivered the foregoing Loan andSecurity Agreement to FCC, LLC, d/b/a FIRST CAPITAL, at Oklahoma City, Oklahomavia overnight courier.
|                                                                                 | Signature of Borrowers’ Officer: |
|--------------------------------------------------------------------------------------|---------------------------------------|
|                                                                                 |                                  |
|                                                                                 |                                  |
|                                                                                 | By:                                   |   |   |
|                                                                                 | Dennis McLaughlin                     |
|                                                                                 |                                  |
|                                                                                 |                                  |
| Sworn to and subscribed before me this       day of April, 2006: |
|                                                                                 |                                  |
|                                                                                 |                                  |   |
| Notary Signature                                                                     |                                  |   |
|                                                                                 |                                  |   |
| My Commission Expires:                                                               |                                  |
|                                                                                 |                                  |   |
|                                                                                 |                                  |   |
|                                                                                 |                                  |   |
| [Affix Notarial  Seal]                                                               |                                  |   |

 

----

**AFFIDAVITREGARDING DELIVERY**

On this the    day of April, 2006, before me, the undersigned, a Notary Public in and for theState of Oklahoma, County of                                 ,John A. Curtis personally appeared, personally known to me or proved to me onthe basis of satisfactory evidence to be a Senior Vice President of FCC, LLC,d/b/a FIRST CAPITAL, who, being by me first duly sworn, stated that he hasreceived delivery of the foregoing Loan and Security Agreement on behalf ofFCC, LLC, d/b/a FIRST CAPITAL in Oklahoma City, Oklahoma.
|                                                                                      |                                                   |
|--------------------------------------------------------------------------------------|--------------------------------------------------------|
|                                                                                 | Signature of Officer of FCC,  LLC, d/b/a First Capital |
|                                                                                 |                                                   |
|                                                                                 |                                                   |
| Sworn to and subscribed before me this       day of April, 2006: |
|                                                                                 |                                                   |
|                                                                                 |                                                   |   |
| Notary Signature                                                                     |                                                   |   |
|                                                                                 |                                                   |   |
| My Commission Expires:                                                               |                                                   |
|                                                                                 |                                                   |   |
|                                                                                 |                                                   |   |
|                                                                                 |                                                   |   |
| [Affix Notarial  Seal]                                                               |                                                   |   |

 

----

**SCHEDULE**

 

This Schedule is a partof the foregoing Loan and Security Agreement dated as of April    , 2006, among APPLIED LNG TECHNOLOGIES USA,L.L.C., a Delaware limited liability company (“Applied LNG”), ARIZONALNG, L.L.C., a Nevada limited liability company (“Arizona LNG”), FLEETSTAR, INC., a Delaware corporation (“Fleet Star”); ALTERNATIVE FUELSTECHNOLOGIES, LLC, a Texas limited liability company (“Alternative Fuels”),RENEWABLE ALTERNATIVE FUELS, LLC, a Delaware limited liability company (“RenewableAlternative”; Applied LNG, Arizona LNG, Fleet Star, Alternative Fuels andRenewable Alternative are referred to herein individually as a “Borrower”and collectively as the “Borrowers”),, and FCC, LLC, d/b/a FIRSTCAPITAL, a Florida limited liability company (“Lender”).

 

**1.****             BorrowingBase**

“Borrowing Base”means, at any time, an amount equal to:

(a)           thelesser of:

(i)            theMaximum Line Amount, and

(ii)           85% of thedollar amount of Eligible Accounts;

minus

(b)           thesum of:

(i)            suchreserves as Lender may establish from time to time in its discretion, plus

(ii)                                  theamount available to be drawn under, plus the amount of any unreimbursed drawswith respect to, any letters of credit or acceptances which have been issued,created or guaranteed by Lender or any Affiliate of Lender for any Borrower’saccount.

**2.****             AccountsEligibility**

**(a)****           Accounts Age: **Any Account with respect to which morethan 90 days have elapsed since the date of the original invoice therefor shallnot constitute an Eligible Account.

**(b)****           Cross-Aging Percentage: **50%

**(c)****           Concentration Limit:**  20% with respect to the City of Los Angeles,and 10% for all other Customers, unless otherwise approved by Lender

----

**3.****             PermittedLiens**

Existing Liens andfinancing statements:

VariousUCC financing statements with respect to equipment leased by one or moreBorrowers.

Liens in favor of Jack B. Kelley, Inc. on the assetsof Applied LNG, and liens of Oliver Kendall Kelley on the assets of Arizona LNGand Applied LNG; provided, however, that such Liens in favor ofsuch Persons shall be permitted hereunder only so long as an intercreditoragreement in form and substance acceptable to Lender with each such Person isin full force and effect and no dispute exists thereunder

**4.****             PersonsAuthorized to Request Loans**
| Officer or Employee Name | ** ** | **Borrower**                    | ** ** | **Title**  |
|--------------------------|------------|---------------------------------|------------|------------|
| Lyle Justus              |       | Applied LNG,                    |       | Controller |
|                          |       | Arizona LNG, Fleet  Star,       |       |       |
|                          |       | Alternative  Fuels,             |       |       |
|                          |       | Renewable  Alternative Fuels    |       |       |
|                     |       |                            |       |       |
| Mark Ariail              |       | Applied LNG, Arizona LNG,       |       | CFO        |
|                          |       | Fleet Star,  Alternative Fuels, |       |       |
|                          |       | Renewable  Alternative Fuels    |       |       |

**5.****             Collection Days: **Three Business Days

**6.****             Repayment of Term Loan: **Borrowers shall make principal paymentswith respect to the Term Loan on the first day of each month, commencing May 1,2006, in an amount equal to the amount necessary to fully amortize the TermLoan over a period of five years from the Agreement Date.  In the event that any subsequent advance ismade with respect to the Term Loan, the monthly payment amount will be adjustedin order to cause the new principal balance of the Term Loan to be fully amortizedover a period of five years from the Agreement Date.  Borrowers shall pay all accrued interest withrespect to the Term Loan on the first day of each calendar month, commencingMay 1, 2006, and Borrowers shall make a final payment of all outstanding principalplus accrued interest with respect to the Term Loan on the earlier of (a) April1, 2009, and (b) the termination of this Agreement (after which date Lendershall have no obligation to disburse any portion of the Term Loan which has notpreviously been advanced).

**7.****             ConditionsTo Initial Loans**

Items listed beloware required to be delivered, in form and substance satisfactory to Lender inits sole discretion, as a condition to Lender’s obligation to fund the initialLoans or extend the first financial accommodation to Borrowers under thisAgreement.

2

----

Certified copy ofarticles of organization, certificate of formation or certificate ofincorporation for each Borrower

Limited liability companyagreement or by-laws for each Borrower

Secretary’s certificateas to constituent documents, limited liability company agreement, by-laws,authorizing action (e.g., resolutions of directors, members and/or managers)and incumbency of officers/status and specimen signatures of authorized signers

Good StandingCertificates (state of organization and all other states in which any Borroweris qualified to do business)

Lien search results

Payoff letter from anylender whose loans are to be refinanced from proceeds of loans made under thisAgreement

Lien terminationdocuments from existing lender, any other creditor whose filings are to beterminated, etc.

Landlord, warehouseman orother bailee waivers

Guaranty of eachGuarantor

Financial statements

Pledge Agreements withrespect to 100% of each Borrower’s membership interests or stock, together withtransfer powers executed in blank and original stock certificates andmembership interest certificates

Intercreditor Agreementswith each of Oliver Kendall Kelley and Jack B. Kelley, Inc.

Borrowing BaseCertificate, together with schedules of Accounts and other supportingdocumentation, in each case as of a date acceptable to Lender

Financing statements

Officer’s certificate asto representations, warranties and no defaults

Solvency certificates

Opinion letter ofBorrowers’ and Guarantors’ legal counsel

All other items describedon the Schedule of Closing Documents previously delivered by Lender or Lender’scounsel to Borrowers or Borrowers’ counsel

3

----

**8.****             TerminationDate**

This Agreement willterminate on the third anniversary of the date of funding; provided, however,that this Agreement will be renewed for succeeding one-year periods thereafterunless written notice of termination is provided by Borrowers’ Agent to Lenderor by Lender to Borrowers’ Agent at least 60 days prior to the then-effectivetermination date.

**9.****             InterestMargin: **1.50% with respect toall Loans

**10.****          DefaultMargin: **3.00%

**11.****          Fees**

a.             Uponexecution of this Agreement, in consideration of Lender’s structuring,approving and committing to this Agreement, but without affecting Borrowers’obligation to reimburse Lender for costs associated with this Agreement and thetransactions contemplated hereby as provided elsewhere in this Agreement,Borrowers agree to pay Lender a fee in the amount of $55,000, which will befully earned on the Agreement Date and non-refundable when paid.

b.             Forservices performed by Lender in connection with Lender’s continuingadministration hereof, on each anniversary of the initial date of funding andcontinuing so long as any Loan shall remain outstanding or this Agreement shallnot have been terminated, Borrowers shall pay to Lender a fee of in an amountequal to the greater of (i) 0.50% of the Maximum Line Amount, and (ii) $15,000.

c.             Inconsideration of the maintenance of Lender’s commitment hereunder, Borrowerswill pay Lender a monthly fee at the rate of 0.25% per annum of the differencebetween (i) the Maximum Line Amount, minus $1,000,000, less (ii) theaverage daily outstanding principal balance of Revolving Loans hereunder.  Such fee is payable monthly in arrears on thefirst day of each calendar month and on the termination date of this Agreement,beginning on the first such date following the initial date of funding.

d.             Solong as no interest is then unpaid, Borrowers may, at their option, prepay theObligations in full and terminate this Agreement after the first anniversary ofthe initial date of funding by giving Lender irrevocable written notice oftheir intention to make such prepayment and termination at least ninety (90)days prior thereto, provided that, in order for notice of such termination byBorrowers to become effective, Borrowers shall, on the date specified for suchprepayment, pay to Lender, in cash or by federal wire transfer, the totalamount of outstanding Obligations owed to the date of such prepayment, togetherwith the Term Loan Prepayment Fee and a prepayment fee of five percent (5%) ofthe Maximum Line Amount.

e.             Forservices performed by Lender in connection with Lender’s continuingadministration hereof, Borrowers will pay Lender a monthly fee of $2,500.  Such fee is payable on the first day of eachcalendar month, beginning on the first such date following the initial date offunding and shall also be due on the termination date of this Agreement for thelast month (or part thereof) of this Agreement.

4

----

All of the foregoing feesconstitute compensation to Lender for services rendered and are not interest ora charge for the use of money.  Eachinstallment of such fees shall be fully earned when due and payable and shallnot be subject to refund or rebate.

**12.****          Organizational Information**
| **Exact Legal  Name**                 | ** ** | **State of Organization** | ** ** | **Type of Organization**  | ** ** | **Organizational  Identification  Number** |
|---------------------------------------|------------|---------------------------|------------|---------------------------|------------|--------------------------------------------|
| Applied LNG  Technologies USA, L.L.C. |       | Delaware                  |       | Limited Liability Company |       | 2515877                                    |
| Arizona LNG,  L.L.C.                  |       | Nevada                    |       | Limited Liability Company |       | 8142-2003                                  |
| Fleet Star, Inc.                      |       | Delaware                  |       | Corporation               |       | 2276275                                    |
| Alternative  Fuels Technologies, LLC  |       | Texas                     |       | Limited Liability Company |       | 800082225                                  |
| Renewable  Alternative Fuels, LLC     |       | Delaware                  |       | Limited Liability Company |       | 3642432                                    |

**13.****          Subsidiaries and Investments in OtherPersons:**  Applied LNG has threesubsidiaries:  Fleet Star, AlternativeFuels and Renewable Fuels.  AlternativeFuels has one subsidiary, Alternative Dual Fuels, Inc. (“Dual Fuels”).  Borrowers represent and warrant that DualFuels is an inactive subsidiary with no significant assets or liabilities, andeach Borrower, without limiting any other restrictions set forth in thisAgreement, agrees that it shall not transfer any money or other assets to DualFuels or include any assets of Dual Fuels on any Borrowing Base Certificate.

**14.****          Pending Litigation: **None.

**15.****          ExistingDebt and Guarantees:**  Applied LNGowes $3,898,044.43 to Jack B. Kelly, Inc., a portion of****which will be repaid from the initialloans made hereunder.  Apollo Resourcesand Apollo LNG, Inc. collectively owe $6,000,000 to Oliver Kendall Kelley.  While not directly obligated on this debt,Arizona LNG and Applied LNG have granted a security interest in certain oftheir assets to secure such debt.

**16.****          Prior Legal Names: **Arizona LNG was previously known as ElPaso Field Services, L.P.

**Prioror Current Trade or Fictitious Names: **None.

**Mergersand Acquisitions: **None.

**17.****          Locationsof Offices and Collateral**

**CurrentChief Executive Office:**

3001 Knox Street, Suite403

Dallas, Texas  75205

5

----

**OtherLocations of Chief Executive Office in past five years: **None.

**OtherCurrent Collateral Locations:**

Neadle MoutainPlant:  5499 W. Needle Mountain Rd.,Topock, Arizona, 86436

Equipment Storage:  1710 W. Rillita Drive, Tuscon, Arizona

Equipment Storage:  9645 Interchange 552, Amarillo, Texas 79124

Equipment Storage:  1500 Santa Ana Ave., Fontana, California92337

OfficeManagement:  8101 W. 34th Ave., Amarillo, Texas 79121

**18.****          OwnershipStructure:**

a.             AppliedLNG owns 100% of the outstanding common stock and membership interests of eachof Fleet Star, Alternative Fuels and Renewable Alternative.

b.             TxHLDM,Inc. owns 100% of the membership interests of Arizona LNG.

c.             ApolloLNG, Inc. owns 100% of the membership interests of Applied LNG and 100% of thecapital stock of TxHLDM, Inc.

d.             ApolloResources owns 100% of the common stock of Apollo LNG, Inc.

**19.****          OwnedReal Property:**  None.

**LeasedReal Property (including legal name of landlord and monthly rent):**

Applied LNG leases the premises located at 3001 KnoxStreet, Suite 403, Dallas, Texas  75205from Schaffer Property Company for $10,330.97 per month.

**Warehousemen,processors, consignees, bailees or other Persons in possession or control ofany Inventory or Equipment (include name, address where Inventory or Equipmentis stored and description of the arrangement):**

Applied LNG stores Equipment and/or Inventory at:

(a)           8101 W. 34th Avenue, Amarillo, Texas  79121; such premises is controlled by GoldenSpread Energy, and Applied LNG pays $0 per month to such Person in connectionwith such arrangement;

(b)           9645Interchange 552, Amarillo, Texas  79121;such premises is controlled by Knox Park Village, L.P. and Applied LNG pays $0per month to such Person in connection with such arrangement;

(c)           1500 SantaAna Avenue, Fontana, California  92337;such premises is controlled by Mike Mecurio and Applied LNG pays $0 per monthto such Person in connection with such arrangement.

6

----

**20.****          Bank Accounts:**

JP Morgan Chase:  704033745 / Checking

JP Morgan Chase:  2047351099 / Savings

Amarillo NationalBank:  60081914 / Checking

**21.****          CommercialTort Claims: **None.

**22.****          Financial Covenants:**

(a)           Borrowers shall maintain, as of the last day ofeach month from and after July 31, 2006, on a consolidated basis, a ratio ofBorrowers’ (i) net income (excluding extraordinary gains) before provision forinterest expense, taxes, depreciation and amortization, to (ii) interestexpense, plus payments of principal actually made or scheduled to be made withrespect to indebtedness (other than scheduled but unpaid payments onSubordinated Debt and principal payments on Revolving Loans), plus paymentswith respect to capitalized leases, plus taxes, plus dividends anddistributions, plus unfinanced capital expenditures, of at least 1.0 to 1.  Such ratio shall be calculated as of the endof each month from and after July 31, 2006 and shall be measured (y) for eachtest date from July 31, 2006 through and including May 31, 2007, for the periodfrom July 1, 2006 through and including such test date, and (z) for each testdate from and after June 30, 2007, for the twelve-month period ending on suchtest date.

(b)           Borrowers shall maintain, on a consolidated basis,a Tangible Net Worth, plus the outstanding principal balance of Subordinated Debt,of at least $7,000,000 at all times.  Asused herein, “Tangible Net Worth” means, as of any date, the totalassets of Borrowers minus the total liabilities of Borrowers calculated inconformity with GAAP, less all amounts duefrom Borrowers’ Affiliates and the amount of all intangible items reflectedtherein, including all unamortized debt discount and expense, unamortizedresearch and development expense, prepaid expenses, unamortized deferredcharges, goodwill, intellectual property, unamortized excess cost of invest­mentsin subsidiaries over equity at dates of acquisition, and all similar itemswhich should properly be treated as intangibles in accordance with GAAP.

(c)           Borrowers shall not permit, on a consolidatedbasis, their ratio of (i) all liabilities (excluding the outstanding principalbalance of Subordinated Debt), to (ii) Tangible Net Worth, to exceed 1.5 to 1at any time.

**23.****          Permitted Purchase Money Debt: **$100,000

**24.****          PermittedCapital Expenditures: **$250,000during any fiscal year

**25.****          MaximumAnnual Increase in Officers’ Compensation: **Ten percent (10%) per year over the base amount previously disclosedby Borrowers to Lender.

**26.****          AnnualFinancial Statements: **To beaudited and certified without qualification by an independent practicing certifiedpublic accountant acceptable to Lender.

7

----

**27.****          BorrowingBase Certificates: **Borrowersshall deliver to Lender a Borrowing Base Certificate no less frequently thanweekly by 10:30 a.m. central time prepared as of the close of business on theimmediately preceding Business Day.

**28.****          FieldExaminations: **In connection withfield examinations of the Collateral, Borrowers, Borrowers’ business andBorrowers’ books and records, Borrowers agree to pay to Lender****all of the out-of-pocket examination costsand travel and other expenses incurred by such examiners.

**29.****          CrossDefault Amount: **$ 10,000

**30.****          JudgmentCross Default Amount: **$ 10,000

**31.****          Changeof Management Default:**
| OfficerName        | ** ** | **Borrower** | ** ** | **Office**              |
|--------------------|------------|--------------|------------|-------------------------|
| Wayne McPherson    |       | Applied LNG  |       | Chief Operating Officer |
| Wayne McPherson    |       | Arizona LNG  |       | Chief Operating Officer |
| Dennis  McLaughlin |       | Applied LNG  |       | Chief Executive Officer |
| Dennis  McLaughlin |       | Arizona LNG  |       | Chief Executive Officer |

 

**32.****          NoticeAddresses:**
| If to Borrowers: |   | Applied LNG Technologies USA, L.L.C.          |
|------------------|--------|-----------------------------------------------|
|             |   | 3001 Knox  Street, Suite 403                  |
|             |   | Dallas, Texas  75205                          |
|             |   | Attn.: Mark  Ariail                           |
|             |   | Facsimile No.:  214-389-9805                  |
|             |   |                                          |
| With a copy to:  |   | Roger A. Crabb, Esq.                          |
|             |   | Scheef &  Stone, L.L.P.                   |
|             |   | 5956 Sherry  Lane, Suite 1400                 |
|             |   | Dallas, Texas  75225                          |
|             |   | Facsimile No.:  214-706-4242                  |
|             |   |                                          |
| If to Lender :   |   | FCC, LLC, d/b/a First Capital                 |
|             |   | 3520 Northwest  58th Street                   |
|             |   | Oklahoma City,  Oklahoma 73112                |
|             |   | Attn.: John A.  Curtis, Senior Vice President |
|             |   | Facsimile No.:  405-917-9660                  |

 

8

----

 
| With  a copy to: |   | Stephen D. Palmer, Esq.           |
|------------------|--------|-----------------------------------|
|             |   | Greenberg Traurig, LLP            |
|             |   | The Forum                         |
|             |   | 3290 Northside Parkway, Suite 400 |
|             |   | Atlanta, Georgia 30327            |
|             |   | Facsimile No.: 678-553-2261       |

 

9

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**EXHIBIT A**

**[Attach form of Borrowing BaseCertificate]**

----

**EXHIBIT B**

**FORM OF COMPLIANCE CERTIFICATE**

**[TO BE PROVIDED ON BORROWERS’AGENT’S LETTERHEAD]**

                                     ,200   

FCC, LLC, d/b/aFirst Capital3520 Northwest 58th StreetOklahoma City, Oklahoma  73112Attn.:  John A. Curtis, Senior VicePresident

Theundersigned, the                                               of **APPLIED LNG TECHNOLOGIES USA, L.L.C.**,****a Delaware limited liabilitycompany (“Company”), gives this certificate to **FCC, LLC**,d/b/a First Capital, a Florida limited liability company****(“Lender”),in accordance with the requirements of that certain Loan and Security Agreementdated as of April    , 2006 among Company, **ARIZONA LNG,L.L.C.** (together with Company, “Borrowers”) and Lender (as amendedfrom time to time, the “Loan Agreement”). Capitalized terms used in this Certificate, unless otherwise definedherein, shall have the meanings ascribed to them in the Loan Agreement.

NoDefault exists on the date hereof, other than:                                                [ifnone, so state].

As ofthe date hereof, each Borrower is current in its payment of all accrued rentand other charges to Persons who own or lease any premises where any of theCollateral is located, and there are no pending disputes or claims regardingany Borrower’s failure to pay or delay in payment of any such rent or othercharges.

Setforth on Appendix 1 attached hereto is a true, accurate and completecalculation with respect to the financial covenants of Borrowers under the LoanAgreement.
|   | Yours truly,                                 |
|--------|----------------------------------------------|
|   |                                         |
|   | APPLIED LNG  TECHNOLOGIES USA,  L.L.C.       |
|   |                                         |
|   |                                         |
|   | By:                                          |   |   |
|   | Dennis  McLaughlin, Chief Executive  Officer |

 

----

###### **Appendix1**

| A.     | Minimum Fixed Charge Coverage Ratio Requirement of  1.0 to 1                                          |
|--------|------------------------------------------------------------------------------------------------------------|
|   |                                                                                                       |
|   | Fixed Charge Coverage Ratio                                                                                | (a) net income (excluding extraordinary gains), plus  interest expense, plus taxes, plus depreciation and amortization, divided by  (b) interest expense, plus principal payments made or scheduled to be made with respect to indebtedness (other than  scheduled but unpaid amounts on Subordinated Debt and principal repayments of  Revolving Loans) plus payments on capitalized leases, plus taxes, plus  dividends and distributions, plus unfinanced  capital expenditures |
|   |                                                                                                       |
|   |                                                                                                       | Net Income |   | $                                            ,  plus |
|   |                                                                                                       | Interest Expense |   | $                                            ,  plus |
|   |                                                                                                       | Taxes |   | $                                            ,  plus |
|   |                                                                                                       | Depreciation |   | $                                            ,  plus |
|   |                                                                                                       | Amortization |   | $                                             equals |
|   |                                                                                                       |   |   |   |
|   |                                                                                                       | Numerator |   | $                                             |
|   |                                                                                                       |   |   |   |
|   |                                                                                                       | Interest Expense |   | $                                            ,  plus |
|   |                                                                                                       | Principal  Payments made and scheduled to be made with respect to indebtedness |   | $                                            ,  plus |
|   |                                                                                                       | Capitalized  Lease Payments |   | $                                            ,  plus |
|   |                                                                                                       | Taxes |   | $                                            ,  plus |
|   |                                                                                                       | Dividends &  Distributions |   | $                                            ,  plus |
|   |                                                                                                       | Unfinanced  capital expenditures |   | $                                             equals |
|   |                                                                                                       |   |   |   |
|   |                                                                                                       | Denominator |   | $                                             |
|   |                                                                                                       |   |   |   |
|   |                                                                                                       | Actual Fixed  Charge  Coverage Ratio | = |   |                       to 1 |
|   |                                                                                                       |   |
| B.     | Minimum Tangible Net Worth Plus Subordinated Debt  Requirement of $7,000,000.                              |
|   |                                                                                                       |
|   | Tangible Net Worth = Net Worth, plus Subordinated  Debt less Intangibles                                   |
|   |                                                                                                       |   |   |   |
|   |                                                                                                       | Net Worth |   | $                                  ,  plus |
|   |                                                                                                       |   |   |   |
|   |                                                                                                       | Subordinated  Debt |   | $                                  ,  less |
|   |                                                                                                       |   |   |   |
|   |                                                                                                       | Intangible  assets |   | $                                   |
|   |                                                                                                       |   |   |   |
|   | Actual Tangible  Net Worth                                                                                 |   | $                                       |
|   |                                                                                                       |
| C.     | Maximum Ratio of Liabilities (other than  Subordinated Debt) to Tangible Net Worth Requirement of 1.5 to 1 |
|   |                                                                                                       |
|   | Liabilities                                                                                                | = |   | $ |
|   | Tangible Net Worth                                                                                         | = |   | $ |
|   |                                                                                                       |   |   |
|   | Actual Ratio of  Debt to Tangible Net Worth                                                                |   | =                                to 1 |
|        |                                                                                                            |  |  |  |  |  |  |

 

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