Document:

Exhibit 10.1

AMENDMENT
TO

PERFORMANCE
AWARD AGREEMENT

AND PHANTOM STOCK AWARD AGREEMENT

The Performance Award Agreement, dated as of
              
2004, and the Phantom Stock Award Agreement, dated as of
               ,
2004, are hereby amended, effective as of August 19, 2006, by replacing the
last sentence of the first paragraph of Section 2(a) of each Agreement with the
following:

“For purposes of this
Agreement, TSR means the change in fair market value over a specified period of
time, expressed as a percentage, of an initial investment in specified common
stock, with dividends reinvested, all as determined utilizing such methodology
as the Committee, or its delegatee, shall approve, with the average TSR for the
final 30 business days (i.e., trading days, within the meaning of the Plan) of
the period considered the TSR at the end of the period and with common stock
valued for the beginning of the period as of the last preceding business day.”Exhibit 10.2

AMENDMENT TO

PHANTOM STOCK AWARD AGREEMENT

The Phantom Stock Award Agreement, dated as of
               ,
2004, is hereby amended, effective as of August 19, 2006, by adding the
following at the end of Section 5 of the Agreement:

“Notwithstanding anything
else in this Agreement to the contrary, in the event that Phantom Stock units
vest following the determination of the Corporation’s TSR as provided in
Section 2(a), payments shall be made with respect to such vested Phantom Stock
units at such times as would have occurred if the Grantee had remained employed
during the entire term of the Agreement and if such accelerated vesting had not
occurred; provided, however, that if following such accelerated vesting the
Grantee incurs a “separation from service” (within the meaning of Code Section
409A) with the Corporation and its Subsidiaries, all remaining vested Phantom
Stock units will be paid promptly following the separation from service, or, if
the Grantee is identified as a “specified employee,” within the meaning of Code
Section 409A, promptly following the expiration of 6 months following the
separation from service (or, if earlier, following the date of the Grantee’s
death).  It is the intention of the
Corporation and the Grantee that this Award not result in unfavorable tax
consequences to Grantee under Code Section 409A.  Accordingly, Grantee consents to such
amendment of this Agreement as the Corporation may reasonably make in
furtherance of such intention, and the Corporation shall promptly provide, or
make available to, Grantee a copy of any such amendment.”Exhibit
10.1

 

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, and

RENEWABLE ALTERNATIVE FUELS, LLC

(Borrowers)

and

FCC, LLC, d/b/a First
Capital

(Lender)

 

 

TABLE OF
CONTENTS

	
  

  	
   

  	
   

  	
  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

LOAN
AND SECURITY AGREEMENT

This LOAN AND
SECURITY 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”), ARIZONA
LNG, L.L.C., a Nevada limited liability company (“Arizona LNG”), FLEET
STAR, INC., a Delaware corporation (“Fleet Star”), ALTERNATIVE FUELS
TECHNOLOGIES, LLC, a Texas limited liability company (“Alternative Fuels”),
RENEWABLE ALTERNATIVE FUELS, LLC, a Delaware limited liability company (“Renewable
Alternative”; Applied LNG, Arizona LNG, Fleet Star, Alternative Fuels and
Renewable 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, Borrowers
have requested that Lender provide Borrowers with a secured lending facility;
and

WHEREAS, Lender is
willing to provided a secured lending facility to Borrowers on the terms set
forth herein, which secured lending facility Borrowers will use for the
purposes permitted hereunder; and

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

WHEREAS, Borrowers
are affiliated by common ownership, Borrowers’ business is a mutual and
collective enterprise and Borrowers believe that the consolidation of all loans
and other financial accommodations under this Agreement will enhance the
aggregate borrowing powers of Borrowers and facilitate the administration of
their loan relationship with Lender, all to the mutual advantage of Borrowers;
and

WHEREAS, each
Borrower acknowledges that it will receive substantial direct and indirect
benefits by reason of the making of loans and other financial accommodations to
Borrowers as provided in this Agreement, by virtue of Borrowers’ various
inter-relationships as joint guarantors or joint obligors and the beneficiaries
thereof, as lessors and lessees, as suppliers and customers, and as joint
venturers; and

 

 

WHEREAS, Lender’s
willingness to extend financial accommodations to Borrowers, and to administer
Borrowers’ collateral security therefor, on a combined basis as more fully set
forth in this Agreement, is done solely as an accommodation to Borrowers and at
Borrowers’ request and in furtherance of Borrowers’ mutual and collective
enterprise.

NOW, THEREFORE, in
consideration of the mutual conditions and agreements set forth in this
Agreement, and for good and valuable consideration, the receipt of which is
hereby 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 any
Borrower (including medical and health-care-insurance receivables), book debts,
notes, drafts and acceptances and other forms of obligations now or hereafter
owing to any Borrower, whether arising from the sale or lease of goods or the
rendition of services by such Borrower (including any obligation that might be
characterized as an account, contract right, general intangible or chattel
paper under the UCC), all of any Borrower’s rights in, to and under all
purchase orders now or hereafter received by such Borrower for goods and
services, all proceeds from the sale of Inventory, all monies due or to become
due to any Borrower under all contracts for the sale or lease of goods or the
rendition of services by such Borrower (whether or not yet earned) (including
the right to receive the proceeds of said purchase orders and contracts), all
collateral security and guarantees of any kind given by any obligor with
respect to any of the foregoing, and all goods returned to or reclaimed by any
Borrower that correspond to any of the foregoing.

“Affiliate” means, with respect to a Person, (a) any family
member, officer, director, member, manager, employee or managing agent of such
Person, and (b) any other Person (i) that, directly or indirectly, through one
or more intermediaries, controls, or is controlled by, or is under common
control with, such given Person, (ii) that, directly or indirectly beneficially
owns or holds 10% or more of any class of voting stock, membership interest, or
partnership interest or other interest of such Person or any subsidiary of such
Person, or (iii) 10% or more of the voting stock, membership interest,
partnership interest or other interest of which is directly or indirectly
beneficially 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 the
management and policies of a Person, whether through ownership of voting
securities or partnership or other interests, by con­tract or otherwise.

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

“Apollo Resources” means Apollo Resources International, Inc., a
Utah corporation.

“Borrowers’ Agent” means Applied LNG, in its capacity as
agent for Borrowers in accordance with Section
2(o).

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

 2
 

 

“Borrowing Base
Certificate” means the certificate, substantially in the form of Exhibit
A, 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 or
which is a day on which Lender is otherwise closed for transacting business
with 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).

“Eligible
Accounts” means those Accounts arising from the sale of Inventory or
performance of services in the ordinary course of the applicable Borrower’s
business; provided, however, that Eligible Accounts shall not
include the following:

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

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

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

(d)           Accounts with respect to which the
Customer (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 any
state thereof; or (iii) is the government of any foreign country or of any
state, province, municipality, or other political subdivision thereof; except
to the extent that such Account is secured or payable by a letter of credit
satisfactory to Lender in its discretion;

(e)           any and all Accounts as to which the
perfection, enforceability, or validity of Lender’s Collateral or security
interest in such Account, or Lender’s right or ability to obtain direct payment
to Lender of the proceeds of such Account, is governed by any federal or state
statutory 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 of
this clause (e) if Borrowers have completed all of the steps necessary, in the
discretion of Lender, to comply with the Federal Assignment of Claims Act of
1940 with respect to such Account;

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

 3
 

 

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

(h)           all of the Accounts owed by a
Customer if the aggregate outstanding dollar amount of such Accounts not
considered as Eligible Accounts under clause (a) above is equal to or greater
than the Cross Aging Percentage specified in Item 2(b) of the Schedule;

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

(j)            Accounts owed by a Customer not
previously approved in writing by Lender where the dollar value for the
aggregate amount of Accounts owed by such Customer is greater than the
percentage 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 or
part of which a check, promissory note, draft, trade acceptance, or other
instrument for the payment of money has been received, presented for payment,
and returned uncollected for any reason;

(l)            any Account with respect to which
the applicable Borrower has extended the time for payment without the consent
of Lender;

(m)          any Account with respect to which any
one or more of the following events has occurred to the Customer on such
Account:  death or judicial declaration
of incompetency of a Customer who is an individual; the filing by or against
the Customer of a request or petition for liquidation, reorganization,
arrangement, adjustment of debts, adjudication as a bankrupt, winding-up, or
other relief under the bankruptcy, insolvency, or similar laws of the United
States, any state or territory thereof, or any foreign jurisdiction, now or
hereafter in effect; the making of any general assignment by the Customer for
the benefit of creditors; the appointment of a receiver or trustee for the
Customer or for any of the assets of the Customer, including, without
limitation, the appointment of or taking possession by a “custodian,” as
defined in the Bankruptcy Code; the institution by or against the Customer of
any other type of insolvency proceeding (under the bankruptcy laws of the
United States or otherwise) or of any formal or informal proceeding for the
dissolution or liquidation of, settlement of claims against, or winding up of
affairs of, the Customer; the sale, assignment, or transfer of all or any
material part of the assets of the Customer; the nonpayment generally by the
Customer of its debts as they become due; or the cessation of the business of
the Customer as a going concern;

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

(o)           any Account in which Lender does not
have a duly perfected, first-priority security interest, subject to no other
Lien;

 4
 

 

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

(q)           any Account which is evidenced by a
note, draft, trade acceptance, or other instrument for the payment of money
where such instrument, document, chattel paper, note, draft, trade acceptance
or 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 tangible
personal property of every kind and description, together with all parts,
accessories and special tools and all increases and accessions thereto and
substitutions and replacements therefor.

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

“General
Intangibles” means all of each Borrower’s present and future general
intangibles and all other presently owned or hereafter acquired intangible
personal property of each Borrower (including payment intangibles and any and
all 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 or
recoverable 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 Goods
and Accounts, as well as each Borrower’s books and records relating to any of
the foregoing.

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

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

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

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

 5
 

 

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

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

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

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

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

“Obligations”
means all indebtedness, obligations and liabilities of any Borrower to Lender
and its Affiliates of every kind and description, direct or indirect, secured
or unsecured, joint or several, absolute or contingent, due or to become due,
including any overdrafts, whether for payment or performance, now existing or
hereafter arising, whether presently contemplated or not, regardless of how the
same arise, or by what instrument, agreement or book account they may be
evidenced, or whether evidenced by any instrument, agreement or book account,
including, but not limited to, all Loans (including all modifications, renewals
and extensions thereof), all indebtedness arising from any derivative
transactions, all undertakings to take or refrain from taking any action, all
indebtedness, liabilities or obligations owing from any Borrower to others
which Lender may have obtained by purchase, negotiation, discount, assignment
or otherwise, and all interest, taxes, fees, charges, expenses and attorney’s
fees (whether or not such attorney is a regularly salaried employee of Lender
or any of its Affiliates) chargeable to any Borrower or incurred by Lender
under this Agreement or any other document or instrument delivered in
connection herewith.

“Obligor”
means each Borrower, Guarantor, any validity guarantor or any other Person
primarily or secondarily, directly or indirectly, liable on any of the
Obligations.

“Permitted
Liens” means (a) Liens or charges for current taxes, assessments or other
governmental charges which are not delinquent or remain payable without any
penalty, or the validity of which is contested in good faith by appropriate
proceedings upon stay of execution of the enforcement thereof and for which
appropriate reserves have been established in accordance with GAAP; (b)
deposits or pledges to secure (i) statutory obligations, (ii) surety or appeal
bonds, or (iii) bonds for release of attachment, stay of execution or
injunction; (c) statutory Liens on property arising in the ordinary course of
business which, in the aggregate, do not materially impair the use of such
property or materially detract from the value of such property; (d) Liens

 6
 

 

existing on the Agreement
Date and described on Item 3 of the Schedule; (e) Liens
on Equipment securing all or part of the purchase price of such Equipment; provided,
however, that (i) such Lien is created contemporaneously with the
acquisition of such Equipment, (ii) such Lien attaches only to the specific
items of Equipment so acquired, and (iii) such Lien secures only the
indebtedness incurred to acquire such Equipment; and (f) Liens in favor of
Lender.

“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.

“Subordinated
Debt” means all of the indebtedness owed by any Borrower to any other
Person, the repayment of which is subordinated to the repayment of the
Obligations pursuant to the terms of a subordination agreement approved by
Lender in its discretion.

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

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

(a)           No Default shall exist under this
Agreement;

(b)           Lender shall have received
landlord’s, warehouseman’s or other bailee waivers for each location of at
which any Borrower maintains any Equipment (including any location owned or
controlled by any Customer);

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

(d)           Lender shall have received the
original certificates of title for all motor vehicles and other assets of each
Borrower which are subject to a certificate of title, together with all
agreements, documents, certificates, applications and other items necessary to
cause a new certificate of title to be issued showing a Borrower as the owner
of such vehicle or other asset and Lender as the sole lienholder with respect
thereto;

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

 7
 

 

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

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

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

(h)           Lender shall be satisfied that no
event or circumstance has occurred that could reasonably be expected to have a
material adverse effect on the Collateral or the financial condition, business
or prospects of any Borrower.

“Term Loan
Prepayment Fee” means, in connection with any prepayment of the Term Loan,
whether partial or complete, and whether voluntary or mandatory, an amount
equal to 5% of the principal balance of the Term Loan being prepaid; provided,
however, that the aggregate amount of the Term Loan Prepayment Fee shall
not exceed $50,000.

“UCC” means
the Uniform Commercial Code, as in effect from time to time, of the State of
Oklahoma or of any other state the laws of which are required as a result
thereof to be applied in connection with the issue of perfection of security
interests; provided, that to the extent that the UCC is used to define
any term herein or in any other documents and such term is defined differently
in different Articles or Divisions of the UCC, the definition of such term
contained in Article or Division 9 shall govern.

Other
Definitional Provisions. 
References to the “Schedule” or any “Section” or “Exhibit” refer to the
Schedule or a section or exhibit, respectively, of this Agreement unless
otherwise specifically provided.  Any of
the terms defined in Section 1
may, unless the context otherwise requires, be used in the singular or the
plural depending on the reference.  In
this Agreement: words importing any gender include the other genders; the words
“including”, “includes” and “include” shall be deemed to be followed by the
words “without limitation”; references to agreements and other contractual
instruments shall be deemed to include subsequent amendments, assignments, and
other modifications thereto, but only to the extent such amendments,
assignments and other modifications are not prohibited by the terms of this
Agreement; references to any Person includes their respective permitted
successors and assigns or people succeeding to the relevant functions of such
Persons; any and all terms which are defined in the UCC and are not defined
herein shall be construed and defined in accordance with the definition of such
terms under the UCC; all references to statutes and related regulations shall
include any amendments of same and any successor statutes and regulations; all
references to time of day shall refer to Oklahoma City, Oklahoma time; and all
references to financial calculations or statements on a “consolidated” basis
mean calculations or statements that reflect information and results with
respect 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 be
reborrowed upon the terms and conditions of this Agreement.

(b)           Standards.  Lender will determine eligibility and the
loan value of Collateral, in its sole discretion, consistent with Lender’s
experience, prudent business judgment and standards of commercial
reasonableness applicable to asset-based credits and in good faith.  Any Revolving Loans requested by any Borrower
and made by Lender or at any time outstanding in excess of the Borrowing Base
or any other limitation set forth in this Agreement will, nevertheless, be
subject to the terms of this Agreement, will constitute Obligations for all
purposes and be entitled to the benefits of the Collateral.

(c)           Persons Authorized to Request Loans.  Borrowers
hereby authorize and direct Lender to make Loan advances to or for the benefit
of Borrowers upon receipt of instructions from any of the persons listed on Item 4 of the Schedule.  Lender shall have no liability whatsoever to
any Borrower or any other Person for acting upon any such instructions which
Lender, in good faith, believes were given by any such person, and Lender shall
have no duty to inquire as to the propriety of any disbursement.  Lender is hereby authorized to make
the Loans provided for herein based on instructions received from any such
person by facsimile, electronic mail, or other written communication, or by
telephone (confirmed in writing, but subject to the proviso in the last
sentence of this paragraph).  Although
Lender 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 the
persons authorized to request Loans hereunder. 
Lender shall have the right to
accept the instructions of any of the foregoing persons unless and until Lender
actually receives from Borrowers’ Agent (in accordance with the notice
provisions of this Agreement) written notice of termination of the authority of
that person.  Borrowers may change
persons 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 telephone
instruction from any person designated in or pursuant to this paragraph shall
be followed by written confirmation of the request for disbursement in such
form as Lender makes available to Borrowers from time to time for such purpose;
provided, however, that Borrowers’ failure to provide written
confirmation of any telephonic instruction shall not invalidate such telephonic
instruction.

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

 9
 

 

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

(e)           Term Loan.  Upon the
terms and subject to the conditions of, and in reliance upon the representations
and warranties made under, this Agreement, Lender agrees to make the Term Loan
to 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 than
5 Business Days following Borrowers’ Agent’s written request therefor; provided,
however, that Lender shall have no obligation to advance either
installment of the Term Loan unless all Term Loan Conditions Precedent are
satisfied; provided, further, that in the event that Lender makes
the initial $4,000,000 advance of the Term Loan prior to the satisfaction of
all Term Loan Conditions Precedent, Lender shall not be precluded from refusing
to advance the subsequent $1,000,000 installment of the Term Loan to Borrowers
based on the fact that the Term Loan Conditions Precedent are not fully
satisfied.  Subject to the satisfaction
of the conditions precedent specified in this Agreement, Lender will disburse
each installment of the Term Loan by wire transfer in immediately available
funds to such account as may be agreed upon by Borrowers and Lender.  Lender shall have no obligation to advance
more than $5,000,000 to Borrowers with respect to the Term Loan, and the fact
that Lender has agreed to advance the Term Loan in installments shall not be
construed to imply that Borrowers may re-borrow any portion of the Term Loan
that 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)           Voluntary
Prepayment.  Borrowers
shall have the right, after the first anniversary of the initial date of
funding, upon at least fifteen Business Days’ prior written notice to Lender, to prepay the Term Loan.  On the prepayment date, Borrowers shall pay
interest on the amount prepaid, accrued to the prepayment date, together with
the Term Loan Prepayment Fee.  Any notice
of prepayment given by Borrowers hereunder shall be irrevocable, and the amount
to be prepaid (including accrued interest and the Term Loan Prepayment Fee)
shall be due and payable on the date designated in the notice.

(ii)          Mandatory
Prepayment.  Borrowers
shall be obligated to prepay the Term Loan in full upon (A) termination of this
Agreement, and (B) any acceleration of the maturity of the Term Loan or the
facility for Revolving Loans contemplated hereby.  Any obligation of Lender to advance any
remaining portion of the Term Loan shall terminate automatically upon either of
the events specified in the preceding sentence. 
Additionally, Borrowers shall be required to repay the Term Loan to the
extent of any proceeds from any

 10
 

 

sale
or other disposition of any Equipment (it being understood that this clause
(ii) shall not be construed to permit any Borrower to sell or otherwise dispose
of any Equipment without Lender’s prior written consent), in each case within
three Business Days of the receipt thereof. 
Additionally, if at any time for any reason, the outstanding
principal balance of the Term Loan exceeds an amount equal to 65% of the
orderly liquidation value of Borrowers’ Equipment on which Lender has a
perfected, first-priority security interest, Borrowers will immediately,
without notice or demand, repay the Term Loan in an amount equal to such
excess.  Any prepayment of the Term Loan
(in whole or in part, and whether mandatory or voluntary) shall be accompanied
by all accrued and unpaid interest on the
Term Loan and the Term Loan Prepayment Fee.

(h)           Conditions to Obligation to Make Loans.  Borrowers acknowledge that Lender’s
obligation to make Loans to Borrowers (or to issue or create or cause the
issuance or creation by Lender or its Affiliates of letters of credit or
acceptances for any Borrower’s account) is subject to the following terms and
conditions:

(i)            Lender has no
obligation to make the initial Loan to Borrowers or to extend any other
financial accommodation to any Borrower unless and until each condition
precedent specified on Item 7 of the Schedule  has been
fulfilled to Lender’s satisfaction.

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

(i)            Repayment of Loans.  In the event of any breach by any Borrower of
any provision hereof or upon termination of this Agreement, Borrowers will
repay upon demand all of the Obligations. 
If no demand is earlier made, Borrowers will repay all Obligations in
full, 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 the
Borrowing Base or any other limitation on the amount available to be borrowed
hereunder, Borrowers will immediately, without notice or demand, repay the
outstanding principal amount of the Revolving Loans, together with accrued and
unpaid interest on the amount repaid, in an amount equal to such excess.  Borrowers shall make each payment required
hereunder or under any other Loan Document without setoff, deduction or
counterclaim.

(j)            Maturity.  This Agreement will continue in full force
and effect from the Agreement Date until the termination date provided for in Item 8 of
the Schedule.

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

 11
 

 

Agent to Lender.  On the date specified in such notice,
termination will be effective, so long as Borrowers have paid to Lender, in
same day funds, an amount equal to the aggregate principal amount of all Loans
outstanding on such date, together with accrued interest thereon, the originals
of all letters of credit and bankers acceptances, if any, issued, created or
guaranteed by Lender or any of its Affiliates for any Borrower’s account have
been returned for cancellation or have been presented and paid by Borrowers or
other arrangements satisfactory to Lender have been made, all other Obligations
outstanding and unpaid have been paid in full in cash, and Borrowers have
provided Lender an indemnification agreement satisfactory to Lender with
respect to returned and dishonored items and such other matters as Lender shall
require.

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

(m)          Survival.  Notwithstanding termination, all the terms,
conditions, and provisions hereof (including Lender’s security interest in the
Collateral, but excluding any obligations of Lender hereunder) will continue to
be 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 from
Borrowers under this Agreement or any other Loan Document, whether for
principal, interest, fees, premiums, costs, expenses or otherwise, shall be
deemed to be a request by Borrowers for a Revolving Loan hereunder, and Lender
may charge Borrowers’ loan account for any such amount.  Additionally, if Lender determines in its
discretion that extensions of credit are necessary to protect the Collateral,
Lender is hereby authorized to make such extensions of credit and charge them
to Borrowers’ loan account as a Revolving Loan.

(o)           Borrowers’ Agent.  Each Borrower other than Applied LNG hereby
appoints Applied LNG, and Applied LNG shall act under this Agreement and the
other Loan Documents, as, the agent, attorney-in-fact and legal representative
of all Borrowers for all purposes, including requesting Loans and receiving
account statements and other notices and communications to Borrowers (or any of
them) from Lender.  Lender may rely, and
shall be fully protected in relying, on any request for an advance,
disbursement instruction, report, information or any other notice or
communication made or given by Applied LNG, whether in its own name, as
Borrowers’ Agent, or on behalf of one or more Borrowers, and Lender shall not
have any obligation to make any inquiry or request any confirmation from or on
behalf of any other Borrower as to the binding effect on it of any such
request, instruction, report, information, other notice or communication, nor
shall the joint and several character of Borrowers’ obligations hereunder be
affected, provided, that the provisions of this paragraph shall not be
construed so as to preclude any Borrower from taking actions permitted to be
taken by a “Borrower” hereunder.

(p)           Joint and Several Liability.

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

 12
 

 

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

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

(q)           Obligations Absolute.  Each Borrower agrees that the Obligations
will 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 any
jurisdiction affecting any of such terms or the rights of Lender with respect
thereto, unless such payment is then prohibited by applicable law (provided
such Obligation shall not be extinguished by any such prohibition.)  All Obligations shall be conclusively
presumed to have been created in reliance hereon.  The Obligations and other liabilities under
this Agreement and the other Loan Documents shall be absolute and unconditional
irrespective of:  (a) any lack of
validity or enforceability of any Loan Document or any other agreement or
instrument relating thereto; (b) any change in the time, manner or place
of payments of, or in any other term of, all or any part of the Obligations, or
any other amendment or waiver thereof or any consent to departure therefrom,
including any increase in the Obligations resulting from the extension of
additional credit to any Borrower or otherwise; (c) any taking, exchange,
release of or non-perfection in any Collateral, or any release or amendment or
waiver of or consent to departure from any guaranty for all or any of the
Obligations; (d) any change, restructuring or termination of the corporate
structure or existence of any Borrower; or (e) any other circumstance
which may otherwise constitute a defense available to, or a discharge of, any
Borrower.  This Agreement shall continue
to be effective or be reinstated, as the case may be, if at any time any
payment of any of the Obligations is rescinded or must otherwise be returned by
Lender upon the insolvency, bankruptcy or reorganization of any Borrower or
otherwise, all as though such payment had not been made.

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

 13
 

 

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

(s)           Contribution and Indemnification among Borrowers.  Each Borrower is obligated to repay the
Obligations as joint and several obligors under this Agreement.  To the extent that any Borrower shall, under
this Agreement as a joint and several obligor, repay any of the Obligations
constituting Loans made to another Borrower hereunder or other Obligations
incurred directly and primarily by any other Borrower (an “Accommodation
Payment”), then, to the extent that such Borrower has not received the
benefit of such repaid Obligations (whether through an inter-company loan or
otherwise), the Borrower making such Accommodation Payment shall be entitled to
contribution and indemnification from, and be reimbursed by, each of the other
Borrowers in an amount, for each of such other Borrowers, equal to a fraction
of such Accommodation Payment, the numerator of which fraction is such other
Borrower’s “Allocable Amount” (as defined below) and the denominator of which
fraction is the sum of the Allocable Amounts of all of the Borrowers.  As of any date of determination, the “Allocable
Amount” of each Borrower shall be equal to the greater of (a) the amount of
such repaid Obligations actually received by such Borrower (whether through an
inter-company loan or otherwise), and (b) the maximum amount of liability for
Accommodation Payments which could be asserted against such Borrower hereunder without
(i) rendering such Borrower “insolvent” within the meaning of Title 11 of the
United States Code (the “Bankruptcy Code”), Section 2 of the
Uniform Fraudulent Transfer Act (the “UFTA”), or Section 2 of the
Uniform Fraudulent Conveyance Act (“UFCA”), (ii) leaving such
Borrower with unreasonably small capital or assets, within the meaning of
Section 548 of the Bankruptcy Code, Section 4 of the UFTA, or
Section 4 of the UFCA, or (iii) leaving such Borrower unable to pay
its debts as they become due within the meaning of Section 548 of the
Bankruptcy Code, Section 4 of the UFTA, or Section 5 of the
UFCA.  All rights and claims of
contribution, indemnification and reimbursement under this paragraph shall be subordinate
in 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’s
option, Lender may charge Borrowers’ loan account with, interest on the average
daily net principal amount of Loans outstanding hereunder, calculated monthly
and payable on the first day of each calendar month, at a rate (computed on the
basis of the actual number of days elapsed over a year of 360 days) equal to
the greater of (i) 5.5% plus the interest margin specified in Item 9
of the Schedule, and (ii) the Prime Rate plus the interest
margin specified in Item 9 of the Schedule.  The “Prime Rate” is, at any time, the
rate of interest noted in The Wall Street Journal, Money Rates section,
as the “Prime Rate” (currently defined as the base rate on corporate loans
posted by at least 75% of the nation’s thirty (30) largest banks).  In the event that The Wall Street

 14
 

 

Journal
quotes more than one rate, or a range of rates, as the Prime Rate, then the
Prime Rate shall mean the average of the quoted rates.  In the event that The Wall Street Journal
ceases to publish a Prime Rate, then the Prime Rate shall be the average of the
three (3) largest U.S. money center commercial banks, as determined by
Lender.  The “Prime Rate” may not be the
lowest or best rate at which Lender calculates interest or extends credit.  Any change in the Prime Rate shall be
effective for purposes of calculating interest hereunder as of the date of such
change.

(b)           Default Interest.  To the extent permitted by law and without limiting
any other right or remedy of Lender hereunder, whenever there is a Default
under this Agreement, the rate of interest on the unpaid principal balance of
the Obligations shall, at the option of Lender, be increased by adding the
default margin identified on Item 10 of the Schedule to the
interest rate otherwise in effect hereunder. 
Lender may charge such default interest rate retroactively beginning on
the date the applicable Default first occurred or existed.  Borrowers acknowledge that:  (i) such additional rate is a material
inducement to Lender to make the Loans described herein; (ii) Lender would not
have made the Loans in the absence of the agreement of Borrowers to pay such
additional rate; (iii) such additional rate represents compensation for
increased risk to Lender that the Loans will not be repaid; and (iv) such rate
is not a penalty and represents a reasonable estimate of (A) the cost to Lender
in allocating its resources (both personnel and financial) to the ongoing
review, 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 Agreement
by either party hereto, Lender’s entitlement to this charge will continue until
all Obligations are paid in full.

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

(d)           No Usury.  Borrowers acknowledge that Lender does not
intend to reserve, charge or collect interest on money borrowed under this
Agreement at any rate in excess of the rates permitted by applicable law and
that, should any interest rate provided for in this Agreement exceed the
legally permissible rate(s), the rate will automatically be reduced to the
maximum rate permitted under applicable law. 
If Lender should collect any amount from Borrowers which, if it were
interest, would result in the interest rate charged hereunder exceeding the
maximum rate permitted by applicable law, such amount will be applied to reduce
principal of the Obligations or, if no Obligations remain outstanding, will be
refunded to Borrowers.

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

4.             Representations and Warranties of Borrowers.

(a)           Authority, Compliance with Laws, Litigation, No
Material Adverse Change, Etc. 
Borrowers represent and warrant to Lender that:  (i) each Borrower’s exact legal name, type of
organization, state of organization and organizational identification number
are fully and accurately set forth on Item
12 of the Schedule,
and each Borrower is duly organized and

 15
 

 

validly existing under
the laws of its state of organization; (ii) the execution, delivery, and
performance of this Agreement and the other Loan Documents are within each
Borrower’s corporate or limited liability company powers, have been duly
authorized, do not violate any Borrower’s constituent documents, any law or
regulation, including without limitation, any law or regulation relating to
occupational health and safety or protection of the environment, applicable to
any Borrower, or any indenture, agreement, or undertaking to which any Borrower
is 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 constitute
valid, binding and enforceable obligations of each Borrower party thereto in
accordance with the terms hereof and thereof, except as enforceability may be
limited by bankruptcy, insolvency, fraudulent conveyance, moratorium or other
similar laws applicable to creditors’ rights generally or by generally
applicable 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) each
Borrower is in compliance in all material respects with all laws, rules and
regulations applicable to such Borrower, including laws, rules or regulations
concerning the environment, occupational health and safety and pensions or
other employee benefits; (vi) except as set forth on Item 14 of
the Schedule, there is no litigation or investigation pending
against any Borrower (or, so far as any Borrower is aware, threatened) which,
if it were decided adversely to such Borrower, could reasonably be expected to
have a material adverse effect on such Borrower, such Borrower’s financial or
operational condition or such Borrower’s prospects (taking into account any
insurance coverage that has been acknowledged by the insurer); (vii) other than
debt that is to be repaid from the proceeds of the first advance hereunder, no
Borrower is indebted to any other Person for money borrowed nor has any
Borrower 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 delivered
to Lender, there has been no material adverse change in any Borrower’s
business, any Borrower’s financial or operational condition or any Borrower’s
business prospects; and (ix) each Borrower is, and after giving effect to the
initial Loans under this Agreement and the application of the proceeds of such
Loans each Borrower will be, solvent and has sufficient revenues to pay such
Borrower’s obligations as they come due and adequate capital with which to
conduct such Borrower’s business.

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

 16
 

 

condition and state of
repair, ordinary wear and tear excepted; (v) all Collateral meets applicable
government standards; (vi) since December 7, 2005, except as set forth on Item 16 of
the Schedule (A) no Borrower has used any other legal, trade or
fictitious names, and (B) no Borrower has been a party to any merger or
purchased assets from any other Person other than in the ordinary course of
business; and (vii) each Borrower’s chief executive office and principal place
of business, all Inventory, all Equipment and all other Collateral is located
at the addresses (including the county) set forth on Item 17 of
the Schedule  and has not been located at any other location
during the five year period prior to the Agreement Date.

(c)           Ownership Structure.  Borrowers
represent and warrant that (i) Item
18 of the Schedule accurately describes the ownership of each
Borrower’s membership interests, stock or other equity interests, and (ii)
Apollo Resources has, directly or indirectly, voting and managerial control of
each Borrower.

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

5.             Collateral.

(a)           Grant of Security Interest.  To induce Lender to accept this Agreement and
to make Loans to Borrowers from time to time pursuant to its terms, each
Borrower hereby grants to Lender, for itself and as agent for any Affiliate of
Lender, 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’s
right, title and interest in and to all of such Borrower’s property, whether
real or personal, tangible or intangible, now owned or existing or hereafter
acquired or arising, including all of the following (collectively, the “Collateral”):

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

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

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

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

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

 17

 

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

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

(viii)        all of each
Borrower’s commercial tort claims listed on (A) Item 21 of the Schedule
(which Borrowers represent and warrant is a true, accurate and complete
list 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 of
all of the foregoing in any form, including amounts payable under any policies
of insurance insuring all or any of the foregoing against loss or damage, all
parts, accessories, attachments, special tools, additions, replacements,
substitutions and accessions to or for all or any of the foregoing, all
condemnation or requisition payments with respect to all or any of the
foregoing and all increases and profits received from all or any of the
foregoing.

(b)           Obligations.  Such grant, assignment, mortgage and transfer
is made for the purpose of securing and the Collateral secures and will
continue to secure all of the Obligations.

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

7.             Collateral Covenants.

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

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

 18
 

 

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

(d)           Defense of Title.  All Collateral will at all times be owned by
Borrowers, and Borrowers will defend Borrowers’ title to the Collateral against
the claims of third parties.  Borrowers
will 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 of
organization or organizational identification number, any change in the
location of any Borrower’s principal place of business or chief executive
office, any change in the locations of any Borrower’s Inventory or Equipment
and 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 the
costs of filing such additional financing statements, mortgages, or other
evidences of Liens as may be necessary or desirable to perfect or continue
perfection of Lender’s security interest in Borrowers’ property or, at Lender’s
request, to create and perfect a Lien on newly acquired real property.  Borrowers will use all reasonable efforts to
obtain from any landlord, warehouseman, or other third party operator of
premises on which any Collateral is located an acceptable Lien waiver or
subordination 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, by
reason of attachment or connection to any realty, either become or be deemed to
be a fixture or appurtenance to such realty and will at all times be readily
removable without material damage to any realty.  In the event that any Collateral, including
proceeds, is evidenced by or consists of Negotiable Collateral, Borrowers
shall, immediately upon written request therefor from Lender, endorse and
assign such Negotiable Collateral over to Lender and deliver actual physical
possession of the Negotiable Collateral to Lender.  Borrowers shall at any time and from time to
time take such steps as Lender may request for Lender (i) to obtain an
acknowledgment, in form and substance satisfactory to Lender, of any bailee
having possession of any of the Collateral that such bailee holds such
Collateral for Lender, (ii) to obtain “control” of any investment property,
deposit accounts, letter-of-credit rights or chattel paper (including
electronic chattel paper) in accordance with Article 9 of the UCC, with any
agreements establishing control to be in form and substance satisfactory to
Lender, and (iii) otherwise to insure the continued perfection and priority of
Lender’s security interest in any of the Collateral and of the preservation of
its rights therein.  Lender may, from
time to time at Borrowers’ expense, obtain an appraisal on some or all of the
Collateral.

(f)            Insurance.  Borrowers will obtain and maintain in full
force and effect insurance covering the Collateral against all risks to which
the Collateral is exposed, including loss, damage, fire, theft, and all other
such risks, in such amounts, with such companies, under such policies and in
such form as will be reasonably satisfactory to Lender, which policies will
name Lender as an additional insured and provide that loss thereunder will be
payable to Lender as Lender’s interests may appear upon a loss payee
endorsement acceptable to Lender.  All
proceeds of any such insurance will be paid over to Lender directly, and Lender
may apply such proceeds to payment of the Obligations, whether or not due, in
such order of application as

 19
 

 

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

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

(h)           Financing Statements.  Lender may at any time and from time to time
file financing statements, continuation statements and amendments thereto that
describe the Collateral as “all assets” of Borrowers or words of similar effect
and which contain any other information required by Part 5 of Article 9 of
the UCC for the sufficiency or filing office acceptance of any financing
statement, continuation statement or amendment, including whether the
applicable Borrower is an organization, the type of organization and any
organization identification number issued to any Borrower.  Each Borrower agrees to furnish any such
information to Lender promptly upon request. 
Any such financing statements, continuation statements or amendments may
be signed by Lender on behalf of any Borrower or filed by Lender without the
signature of any Borrower and may be filed at any time in any
jurisdiction.  Each Borrower acknowledges that it is not authorized
to file any financing statement or amendment or termination statement with
respect to any financing statement naming any Borrower as the debtor and Lender
as the secured party without the prior written consent of Lender, and each
Borrower agrees that it shall not do so without the prior written consent of
Lender.

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

8.             Negative Covenants.

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

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

 20
 

 

connection with purchase
money security interests constituting Permitted Liens (and capital leases) not
to exceed, in aggregated principal amount for all Borrowers on a consolidated
basis, the amount set forth on Item 23 of the Schedule at any
one time outstanding.  No Borrower will
permit any of its assets to be subject to any Lien other than Permitted Liens.  Each Borrower shall pay when due (or before
the expiration of any extension period) any tax or other assessment (including
all required payments or deposits with respect to withholding taxes), and
Borrowers will, upon request by Lender, promptly furnish Lender with proof
satisfactory to Lender that Borrowers have made such payments and deposits.

(c)           No Distributions.  No Borrower will retire, repurchase or redeem
any of such Borrower’s membership interests, stock or other ownership interest
in such Borrower, nor declare or pay any dividend in cash or other property
(other than additional membership interests, stock or additional ownership
interests) 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 all
contributions required to meet the minimum funding standards for Borrowers’
employee benefit plans subject to the Employee Retirement Income Security Act
of 1974 (as amended, “ERISA”) and will promptly report to Lender the
occurrence of any reportable event (as defined in ERISA) and any giving or
receipt by any Borrower of any governmental notice (other than routine requests
for information) in respect of any such plan.

(e)           Transactions with Affiliates.  No Borrower will engage in any transaction
with 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 granted
to such Borrower in a transaction with a Person who is not an Affiliate of any
Borrower, which transaction shall be approved by such Borrower’s members and
shall be disclosed in writing in a timely manner to Lender prior to the consummation
of the transaction.

(f)            Loans/Investments.  No Borrower will make any loans or advances
to or extend any credit to any Person except (i) the extension of trade credit
in the ordinary course of business; (ii) advances to such Borrower’s employees not
to exceed an aggregate outstanding amount of $10,000 at any one time
outstanding for all employees of all Borrowers on a consolidated basis; (iii)
intercompany transfers of money or other assets from one Borrower to another
Borrower; and (iv) hedge contracts with respect to natural gas prices in an
aggregate notional principal amount not to exceed $100,000 at any time for the
purpose of hedging risk and not for speculation.  No Borrower shall purchase, acquire or otherwise
invest in any Person except: (A) existing investments in such Borrower’s
subsidiaries described on Item 13 of the Schedule; (B)
direct obligations of the United States of America maturing within one year
from the acquisition thereof; (C) certificates of deposit issued by, or
investment accounts in, banks or financial institutions having a net worth of
not 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.  Without
limiting the generality of the foregoing, no Borrower shall create any new
subsidiary or transfer any money or other assets to any subsidiary that is not
a Borrower hereunder.

 21
 

 

(g)           Capital Expenditures.  Without the prior written consent of Lender,
Borrowers shall not make or incur capital expenditures in excess of the amount
set 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 total
compensation paid to its officers, directors, members, or managers (or any of
their relatives), including salaries, withdrawals, fees, bonuses, commissions,
drawing accounts and other payments, whether directly or indirectly, in money
or otherwise, during any fiscal year of such Borrower during the term of this
Agreement in an aggregate amount for all such officers, directors, members and
managers in excess of the limit specified in Item 25 of the Schedule.

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

9.             Reporting and Information.

(a)           Financial Statements.  Borrowers will submit to Lender as soon as
available, 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 of
cash flows, in each case prepared in accordance with GAAP on a consolidated and
consolidating basis, certified by
the chief financial or accounting officer of Applied LNG as presenting fairly,
in accordance with GAAP, Borrowers’ financial condition as of the last day of
such month and Borrowers’ results of operations for such month and for the
portion of Borrowers’ fiscal year ending with such month.  Borrowers will also submit to Lender annual
financial statements within 90 days after the end of each fiscal year,
including a balance sheet and the related statement of profit and loss and
owners’ equity, and a statement of cash flows, in each case prepared in
accordance with the requirements set forth on Item 26 of the Schedule
on a consolidated and consolidating basis.  Borrowers will also submit to Lender annually
at least 60 days prior to Borrowers’ fiscal year end forecasted financial
statements for the upcoming fiscal year, containing a projected balance sheet
and profit and loss statement on a consolidated and consolidating basis. 
Together with each monthly and annual financial statement, Borrowers
will deliver to Lender the certification of the chief financial or accounting
officer of Applied LNG in the form of Exhibit B attached hereto to the
effect that Borrowers are in compliance with the terms and conditions of this
Agreement, and setting forth in detail the calculation of all financial
covenants, or, if Borrowers are not in compliance, describing the nature of any
noncompliance and the steps Borrowers are taking or propose to take to remedy
the same.

(b)           Collateral Reports.  Concurrent with the execution of this
Agreement by Borrowers and concurrent with each request for a Revolving Loan
pursuant to Section 2(a), but no less frequently than as required by Item 27 of
the Schedule, Borrowers shall deliver to Lender a fully
completed Borrowing Base Certificate certified by the Chief Executive Officer
or Chief Financial Officer of Applied LNG as being true and correct.  Concurrent with the delivery of each such
Borrowing Base Certificate, Borrowers shall provide a written report to Lender
of all materially significant returns, disputes and claims, together with sales
and other reports relating to the Accounts and Inventory as required by
Lender.  Borrowers shall deliver to Lender
within ten (10) days after the end of each month a report, reflecting the
status as of the end of

 22
 

 

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

(c)           Guarantor Financials.  Within ninety days after each fiscal
year-end, Borrowers will cause each Guarantor and each other Obligor (other
than 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 as
possible of any Default, any receipt by any Borrower of notice from any
governmental authority that any Borrower has or may have violated any law, rule
or regulation applicable to any Borrower or the terms or conditions of any
permit or license any Borrower holds or is required to hold in connection with
the conduct of such Borrower’s business, any amendment to any Borrower’s
constituent documents and any change in any Borrower’s management or ownership,
and the commencement of any material litigation, claim or action against any
Borrower.

10.           Inspection Rights; Expenses; Etc.

(a)           Inspection.  Lender may examine and make copies of each
Borrower’s records, the Collateral and all other assets of each Borrower or any
portion thereof, wherever located, and may enter upon each Borrower’s premises
for such purposes, without notice, during business hours.  Borrowers will assist Lender in whatever way
necessary 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’s
option, perform any agreement of any Borrower hereunder which such Borrower
fails to perform and take any other action which Lender deems necessary for the
maintenance or preservation of any of the Collateral or Lender’s interest
therein, and Borrowers agree to reimburse Lender immediately on demand for all
of Lender’s expenses in connection with the foregoing (including, without being
limited to, reasonable fees and expenses of legal counsel), together with
interest thereon at the default rate of interest provided for herein from the
date any such expense is incurred until reimbursed by Borrowers.

(c)           Field Examinations; Inspections.  Lender shall have the right without hindrance
or 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 examinations
as more fully described on Item 28 of the Schedule.  Lender shall have full access to all records

 23
 

 

available to Borrowers
from any credit reporting service, bureau or similar service and shall have the
right to examine and make copies of any such records.  Lender may exhibit a copy of this Agreement
to such service and such service shall be entitled to rely on the provisions
hereof in providing access to Lender as provided herein.

11.           Rights of Setoff, Application of Payments, Etc.  Lender will be entitled to hold or set off
all sums and all other property of any Borrower at any time to any Borrower’s
credit or in Lender’s possession (or the possession of any of Lender’s
Affiliates) 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 and
directed to charge to Borrowers’ loan account as Revolving Loans the amounts of
any and all such Obligations.  Recourse
to the Collateral or other security for the Obligations will not at any time be
required and each Borrower hereby waives any right of marshalling that such
Borrower may have.  Each Borrower’s
obligation to pay or repay the Obligations is unconditional.  Borrowers agree that Lender may take such
action with regard to the custody and collection of Accounts assigned to Lender
as Lender may deem necessary.  Each
Borrower agrees that failure to take any action with regard to any given
Account will not be unreasonable until and unless Lender receives a written
request for specific action from Borrowers’ Agent with regard thereto and fails
to respond thereto within a commercially reasonable time.  Each Borrower irrevocably waives the right to
direct the application of any and all payments and collections at any time or times
hereafter received by Lender from or on behalf of any Borrower, and each
Borrower hereby irrevocably agrees that Lender shall have the continuing
exclusive right to apply and reapply any and all such payments and collections
received at any time or times hereafter by Lender or its agent against the
Obligations, in such manner and in such order as Lender may deem advisable.

12.           Attorney-in-Fact.  Each Borrower hereby appoints and constitutes
Lender 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 that
come into Lender’s possession and to deposit or otherwise collect the same;
(ii) to send verifications of accounts to Customers; and (iii) to execute in
such Borrower’s name any financing statements, affidavits and notices with
regard to any and all Lien rights; and (b) while any Default exists, (i) to
receive, open, and dispose of all mail addressed to such Borrower; (ii) to notify
the postal authorities to change the address and delivery of mail addressed to
such Borrower to such address as Lender may designate; (iii) to sign such
Borrower’s name on any invoice or bill of lading relating to the Collateral, on
drafts against Customers, and notices to Customers; and (iv) to do all other
acts and things necessary to carry out this Agreement.  All acts of said attorney-in-fact are hereby
authorized, ratified and approved, and said attorney-in-fact will not be liable
for any errors or mistake of fact or law. 
This power, being coupled with an interest, is irrevocable while any of
the Obligations remain unpaid or Lender has any commitment to Borrowers under
this 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 amount
payable on any of the Obligations or breach of any covenant or failure to
perform any agreement or failure to meet any of any Borrower’s or any other
Obligor’s obligations contained herein, in any other Loan

 24
 

 

Document or in any
agreement out of which any of the Obligations arose; (ii) non-payment when due
of the premium on any insurance policy required to be maintained hereunder; (iii)
any statement, representation, or warranty made in writing in this Agreement or
in any other writing or statement at any time furnished or made by any Borrower
or any other Obligor to Lender proves to have been untrue in any material
respect as of the date furnished or made; (iv) any Borrower’s default under any
other agreement for borrowed money or any other agreement involving more than
the amount set forth on Item 29 of the Schedule; (v)
suspension of the operation of any Borrower’s present business; (vi) any
Obligor becomes insolvent or unable to pay its debts as they mature, or admits
in writing that it is insolvent or unable to pay its debts, makes an assignment
for the benefit of creditors, makes a conveyance fraudulent as to creditors
under any state or federal law, or a proceeding is instituted by or against any
Obligor alleging that such Obligor is insolvent or unable to pay debts as they
mature, or a petition under any provision of Title 11 of the United States
Code, as amended, is filed by or against any Obligor; (vii) entry of any
judgment 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 tax
Lien against the property of any Obligor, in each case which remains undischarged
for 10 days after such entry or filing; (viii) death of any Obligor who was a
natural person, or death or withdrawal of any partner of any Obligor which is a
partnership, or dissolution, merger, or consolidation of any Obligor which is a
corporation, partnership or limited liability company; (ix) transfer of a
substantial part (determined by market value) of the property of any Obligor;
(x) sale, transfer or exchange, either directly or indirectly, of a controlling
membership interest, stock interest or other equity ownership interest of any
Obligor (without limiting the generality of the foregoing, a Default shall
exist if Apollo Resources shall cease to own, directly or indirectly, less than
100% of the membership interests or capital stock of any Borrower or cease to
have direct or indirect voting control of any Borrower; (xi) termination,
unenforceability or withdrawal of any guaranty or validity guaranty for the
Obligations, or failure of any Obligor to perform any of its obligations under
such a guaranty or validity guaranty or assertion by any Obligor that it has no
liability or obligation under such a guaranty or validity guaranty; (xii)
appointment of a receiver for any of the Collateral or for any other property
in which any Borrower has an interest; (xiii) seizure of any Collateral by any
Person other than Lender; (xiv) any person identified on Item 31 of
the Schedule shall for any reason cease to hold the office of
the applicable Borrower set forth opposite such person’s name on Item 31 of
the Schedule (or any such person shall cease to perform the
duties associated with office listed for such person) and a replacement
satisfactory to Lender shall not be appointed within 60 days; (xv) the
occurrence of any act, omission, event or circumstance which has or could
reasonably be expected to have a materially adverse effect on any Borrower or
any other Obligor; (xvi) payment by any Borrower on any Subordinated Debt in
violation of the applicable subordination agreement; or (xvii) the Pension Benefit
Guaranty Corporation or the Department of Labor commences proceedings under
ERISA 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, if
any, 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 or
nature to be, and thereupon the same will immediately become, due and payable
in full; and, in the event of a

 25
 

 

Default described under
clause (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 of
letters of credit and acceptances issued or guaranteed by Lender or any
Affiliate of Lender which have not been drawn upon or matured, which funds will
be used to reimburse Lender or such Affiliate of Lender upon drawing under any
letter of credit or maturity of any acceptance.

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

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

(iv)          Lender may (A)
exercise any of its remedies under any other Loan Document, (B) apply any cash
collateral to the Obligations (without limiting the foregoing, Lender may
instruct any bank or other financial institution holding any cash, certificate
of 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 connection
with this Agreement or any other Loan Document and apply the proceeds thereof
to the Obligations, in each case without demand or notice to any Borrower or
any other Person.

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

(vi)          Lender may
ship, 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 of
one or more contracts or transactions, for cash or on terms.  It is not necessary that the Collateral be
present at any such sale.

(vii)         Lender may, without
regard to any waste, adequacy of the security or solvency of Borrower, apply
for appointment of a receiver of the Collateral, to which appointment Borrower
hereby consents, whether or not foreclosure proceedings have been commenced
hereunder or under any other Loan Documents and whether or not a foreclosure
sale has occurred;

(viii)        Lender may,
without notice to any Borrower except as expressly provided herein, at Lender’s
option, exercise any of the remedies available to Lender as a secured party
under 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 the
sale or other disposition of the Collateral, except with Lender’s prior written
consent, and to assemble at Borrowers’ expense all the Collateral at a
convenient place acceptable to Lender. 
Lender may charge to Borrowers’ loan account as Revolving Loans and
Borrowers will pay Lender upon

 26
 

 

demand all costs and
expenses, including reasonable attorneys’ fees (including fees of attorneys
that are regular salaried employees of Lender or any of its Affiliates), in
connection with:  (A) the liquidation of
any Collateral; (B) obtaining or enforcing payment of the Obligations; (C) the
settlement, adjustment, compromise, or litigation of Customer disputes; or (D)
the prosecution or defense of any action or proceeding either against Lender or
against any Borrower concerning any matter growing out of or in connection with
this 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, Borrowers
will repay to Lender the amount of tax so paid by Lender.  Borrowers agree that Lender may apply any
proceeds from disposition of the Collateral first to satisfy obligations
secured by Liens prior to Lender’s security interest.  Borrowers will remain liable and will pay on
demand any deficiencies arising upon the liquidation of any Collateral held by
Lender.

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

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

(e)           Remedies Cumulative.  Lender’s rights and remedies under this
Agreement and all other Loan Documents shall be cumulative.  Lender shall have all other rights and
remedies not inconsistent herewith as provided under the UCC, by law, or in
equity.  No exercise by Lender of one
right or remedy shall be deemed an election, and no waiver by Lender of any
default 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 to
defend, indemnify, and hold harmless Lender and Lender’s members, managers,
officers, directors, employees, Affiliates, representatives, attorneys and
agents (each an “Indemnified Person”) from and against any and all
penalties, fines, liabilities, damages, costs, or expenses of whatever kind or
nature asserted against any such Indemnified Person, arising out of, or in any
way related to this Agreement or any other Loan Document, or the transactions
contemplated hereby or thereby, including by reason of the violation of any law
or regulation relating to the protection of the environment or the presence,
generation, disposal, release, or threatened release of any hazardous materials
in connection with any Borrower’s business on, at or from any property at any
time 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, Borrowers
represent and warrant that there has been no loan broker or investment banker
involved in connection with the transactions contemplated hereby, and Borrowers
agree to indemnify and hold Lender harmless from any claim of

 27
 

 

compensation payable to
any loan broker or investment banker in connection with the transactions
contemplated hereby.

15.           General Provisions.

(a)           Notices.  Except as specifically provided in this
Agreement or in any of the other Loan Documents, all notices and communications
hereunder and thereunder will be in writing or by telephone subsequently
confirmed in writing.  Notices in writing
will be delivered personally or sent by overnight courier service, by certified
or registered mail, postage pre-paid, or by facsimile transmission and will be
deemed received, in the case of personal delivery, when delivered; in the case
of overnight courier service, on the next Business Day after delivery to such
service; in the case of mailing, on the fourth Business Day after mailing; and,
in the case of facsimile transmission, upon transmittal if confirmed by the
sender’s facsimile device; provided that in the case of notices to
Lender, Lender will be charged with knowledge of the contents thereof only when
such notice is actually received by Lender. 
A telephonic notice to Lender as understood by Lender will be deemed to
be the controlling and proper notice in the event of a discrepancy with or failure
to receive a confirming written notice. 
Notices to Lender or Borrowers will be sent to the addresses set forth
on Item 32
of the Schedule, or any other address for Borrowers or Lender of
which the other is notified by like notice.

(b)           No Waiver.  No waiver hereunder will be valid unless in
writing signed by Lender and then only to the extent therein stated.  No delay or failure on Lender’s part in the
exercise of any right or remedy hereunder will operate as a waiver thereof or
of 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 this
Agreement will be interpreted in such manner as to be effective and valid under
applicable law, but if any provision of this Agreement will be prohibited by or
invalid under applicable law, such provision will be ineffective to the extent
of such prohibition or invalidity, without invalidating the remainder of such
provision or the remaining provisions of this Agreement.

(e)           Successors and Assigns.  Each Borrower’s and Lender’s rights and
obligations hereunder will inure to the benefit of such Person’s respective
successors and assigns, provided that Borrowers acknowledge and agree
that without Lender’s prior written consent, which may be withheld for any
reason or no reason, no Borrower may assign such Borrower’s rights or
obligations or any part thereof hereunder to any other Person.  Notwithstanding anything herein to the
contrary, Lender may, without the consent of any Obligor, grant a security
interest in, sell or assign, grant or sell participations or otherwise transfer
all or any portion of its rights and obligations hereunder to one or more
Persons.

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

 28
 

 

Oklahoma state court
sitting in Oklahoma City, Oklahoma in any action, suit or other proceeding arising
out of or relating to this Agreement or any of the other Loan Documents, and
each Borrower irrevocably agrees that all claims and demands in respect of any
such action, suit or proceeding may be heard and determined in any such court
and irrevocably waives any objection it may now or hereafter have as to the
venue of any such action, suit or proceeding brought in any such court or that
such court is an inconvenient forum. 
Each Borrower hereby waives personal service of any and all process upon
it and consents that all such service of process may be made by registered mail
(return receipt requested) directed to Borrowers at Borrowers’ address for
notices pursuant to this Agreement, and service so made shall be deemed to be
completed five (5) days after the same shall have been so deposited in the
United States mails.  Nothing herein
shall limit the right of Lender to bring proceedings against any Borrower or
one or more Affiliates of any Borrower in the courts of any other
jurisdiction.  Any judicial proceeding
commenced by any Borrower against Lender or any other holder of any
Obligations, 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 a
United States Federal Court sitting in or with direct jurisdiction over the
Western District of Oklahoma or any Oklahoma state court sitting in Oklahoma
City, Oklahoma.  Nothing in this
Agreement shall be deemed or operate to affect the right of Lender to serve
legal process in any other manner permitted by law or to preclude the
enforcement by Lender of any judgment or order obtained in such forum or the
taking of any action under this Agreement to enforce same in any other
appropriate forum or jurisdiction.

(g)           Waiver of Jury Trial.  TO THE FULLEST EXTENT PERMITTED BY APPLICABLE
LAW, BORROWERS AND LENDER HEREBY IRREVOCABLY AND EXPRESSLY WAIVE ALL RIGHT TO A
TRIAL BY JURY IN ANY ACTION, PROCEEDING, OR COUNTERCLAIM (WHETHER BASED UPON
CONTRACT, TORT, OR OTHERWISE) ARISING OUT OF OR RELATING TO THIS AGREEMENT, ANY
OTHER LOAN DOCUMENT, THE OBLIGATIONS OR ANY OF THE TRANSACTIONS CONTEMPLATED
HEREBY OR THEREBY OR ANY PARTY’S ACTIONS IN THE NEGOTIATION, ADMINISTRATION, OR
ENFORCEMENT HEREOF OR THEREOF.  EACH
BORROWER AND LENDER ACKNOWLEDGE THAT SUCH WAIVER IS MADE WITH FULL KNOWLEDGE
AND UNDERSTANDING OF THE NATURE OF THE RIGHTS AND BENEFITS WAIVED HEREBY, AND
WITH THE BENEFIT OF ADVICE OF COUNSEL OF ITS CHOOSING.

(h)           Waiver of Hearing.  EACH BORROWER HEREBY KNOWINGLY, INTENTIONALLY
AND VOLUNTARILY WAIVES ALL RIGHTS WHICH SUCH BORROWER HAS UNDER ANY APPLICABLE
LAW TO NOTICE AND TO A JUDICIAL HEARING PRIOR TO THE ISSUANCE OF A WRIT OF
POSSESSION ENTITLING LENDER, ITS SUCCESSORS AND ASSIGNS TO POSSESSION OF THE
COLLATERAL UPON A DEFAULT.  WITHOUT
LIMITING THE GENERALITY OF THE FOREGOING AND WITHOUT LIMITING ANY OTHER RIGHT
WHICH LENDER MAY HAVE, EACH BORROWER CONSENTS THAT, IF LENDER FILES A PETITION
FOR AN IMMEDIATE WRIT OF POSSESSION IN COMPLIANCE WITH APPLICABLE LAW AND THIS
WAIVER OR A COPY HEREOF IS ALLEGED IN SUCH PETITION AND ATTACHED THERETO, THE
COURT BEFORE WHICH SUCH PETITION IS FILED MAY DISPENSE WITH ALL RIGHTS AND
PROCEDURES HEREIN WAIVED AND MAY ISSUE

 29
 

 

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

(i)            Expenses.  Borrowers shall pay on demand all of Lender’s
costs and expenses in connection with underwriting and performing due diligence
with respect to the transactions contemplated hereby and the preparation,
reproduction, execution, delivery, administration and enforcement of this
Agreement, including the reasonable fees and out-of-pocket expenses of Lender’s
counsel, in each case whether incurred on, prior or subsequent to the Agreement
Date.  In addition, Borrowers shall pay
any and all stamp and other taxes and recording and filing fees payable in
connection with the execution and delivery of all other instruments and
documents to be delivered hereunder. 
Such amounts may be charged by Lender to Borrowers’ account as one or
more Revolving Loans hereunder.  All
provisions in this Agreement providing for the payment or reimbursement of
Lender’s attorneys’ fees and expenses include, without limitation, such fees
and expenses incurred pursuant to or in connection with proceedings brought
under 11 U.S.C., the Federal Bankruptcy Code.

(j)            Execution in Counterparts.  This Agreement may be executed in separate
counterparts, all of which shall constitute one and the same agreement.  Delivery of an executed counterpart of this
Agreement or any other Loan Document by facsimile shall be equally as effective
as delivery of an original executed counterpart of this Agreement or such other
Loan Document.  Any party delivering an
executed counterpart of this Agreement or any other Loan Document by facsimile
also shall deliver an original executed counterpart of this Agreement or such
other Loan Document, but the failure to deliver an original executed
counterpart shall not affect the validity, enforceability, and binding effect
of this Agreement or such other Loan Document. 
To the fullest extent permitted by applicable law, Borrower waives
notice of Lender’s acceptance of this Agreement and the other Loan Documents.

(k)           Entire Agreement.  This Agreement and the other Loan Documents
embody the entire agreement and understanding among Lender and Borrowers and
supersede all prior agreements and understandings relating to the subject
matter hereof.

[REMAINDER OF PAGE
INTENTIONALLY LEFT BLANK]

 30

 

IN
WITNESS WHEREOF, Borrowers and Lender have executed this Agreement as of the
day 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

  

 

 

NOTARY
JURAT FOR EXECUTION OF

WRITTEN
OBLIGATIONS TO PAY MONEY

On this the    
day of April, 2006, before me, the undersigned, a Notary Public in and for the
State of Texas, County of                                   ,
Dennis McLaughlin personally
appeared, who is personally known to me or proved to me on the basis of
satisfactory evidence to be the (a) Chief Executive Officer of Applied LNG
Technologies USA, L.L.C., a Delaware limited liability company, (b) Chief
Executive 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 limited
liability company, and (e) Chief Executive Officer of Renewable Alternative
Fuels, LLC, a Delaware limited liability company, who, being by me first duly
sworn, stated that:

1.               He executed the foregoing Loan and Security
Agreement on behalf of such limited liability companies and such corporation
pursuant to their limited liability company agreements or by-laws or a
resolution of their members, managers and/or directors, said execution taking
place in the State of Texas, County of                                    ;
and

2.               He has this day delivered the foregoing Loan and
Security Agreement to FCC, LLC, d/b/a FIRST CAPITAL, at Oklahoma City, Oklahoma
via 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]

  	
   

  	
   

  

 

 

AFFIDAVIT
REGARDING DELIVERY

On this the    
day of April, 2006, before me, the undersigned, a Notary Public in and for the
State of Oklahoma, County of                                 ,
John A. Curtis personally appeared, personally known to me or proved to me on
the 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 has
received delivery of the foregoing Loan and Security Agreement on behalf of
FCC, 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 part
of 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”), ARIZONA
LNG, L.L.C., a Nevada limited liability company (“Arizona LNG”), FLEET
STAR, INC., a Delaware corporation (“Fleet Star”); ALTERNATIVE FUELS
TECHNOLOGIES, LLC, a Texas limited liability company (“Alternative Fuels”),
RENEWABLE ALTERNATIVE FUELS, LLC, a Delaware limited liability company (“Renewable
Alternative”; Applied LNG, Arizona LNG, Fleet Star, Alternative Fuels and
Renewable 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”).

 

1.             Borrowing
Base

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

(a)           the
lesser of:

(i)            the
Maximum Line Amount, and

(ii)           85% of the
dollar amount of Eligible Accounts;

minus

(b)           the
sum of:

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

(ii)                                  the
amount available to be drawn under, plus the amount of any unreimbursed draws
with 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’s
account.

2.             Accounts
Eligibility

(a)           Accounts Age:  Any Account with respect to which more
than 90 days have elapsed since the date of the original invoice therefor shall
not 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.             Permitted
Liens

Existing Liens and
financing statements:

Various
UCC financing statements with respect to equipment leased by one or more
Borrowers.

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

4.             Persons
Authorized 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 payments
with 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 Term
Loan over a period of five years from the Agreement Date.  In the event that any subsequent advance is
made with respect to the Term Loan, the monthly payment amount will be adjusted
in order to cause the new principal balance of the Term Loan to be fully amortized
over a period of five years from the Agreement Date.  Borrowers shall pay all accrued interest with
respect to the Term Loan on the first day of each calendar month, commencing
May 1, 2006, and Borrowers shall make a final payment of all outstanding principal
plus accrued interest with respect to the Term Loan on the earlier of (a) April
1, 2009, and (b) the termination of this Agreement (after which date Lender
shall have no obligation to disburse any portion of the Term Loan which has not
previously been advanced).

7.             Conditions
To Initial Loans

Items listed below
are required to be delivered, in form and substance satisfactory to Lender in
its sole discretion, as a condition to Lender’s obligation to fund the initial
Loans or extend the first financial accommodation to Borrowers under this
Agreement.

 2
 

 

Certified copy of
articles of organization, certificate of formation or certificate of
incorporation for each Borrower

Limited liability company
agreement or by-laws for each Borrower

Secretary’s certificate
as 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 Standing
Certificates (state of organization and all other states in which any Borrower
is qualified to do business)

Lien search results

Payoff letter from any
lender whose loans are to be refinanced from proceeds of loans made under this
Agreement

Lien termination
documents from existing lender, any other creditor whose filings are to be
terminated, etc.

Landlord, warehouseman or
other bailee waivers

Guaranty of each
Guarantor

Financial statements

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

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

Borrowing Base
Certificate, together with schedules of Accounts and other supporting
documentation, in each case as of a date acceptable to Lender

Financing statements

Officer’s certificate as
to representations, warranties and no defaults

Solvency certificates

Opinion letter of
Borrowers’ and Guarantors’ legal counsel

All other items described
on the Schedule of Closing Documents previously delivered by Lender or Lender’s
counsel to Borrowers or Borrowers’ counsel

 3
 

 

8.             Termination
Date

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

9.             Interest
Margin:  1.50% with respect to
all Loans

10.          Default
Margin:  3.00%

11.          Fees

a.             Upon
execution 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 the
transactions contemplated hereby as provided elsewhere in this Agreement,
Borrowers agree to pay Lender a fee in the amount of $55,000, which will be
fully earned on the Agreement Date and non-refundable when paid.

b.             For
services performed by Lender in connection with Lender’s continuing
administration hereof, on each anniversary of the initial date of funding and
continuing so long as any Loan shall remain outstanding or this Agreement shall
not have been terminated, Borrowers shall pay to Lender a fee of in an amount
equal to the greater of (i) 0.50% of the Maximum Line Amount, and (ii) $15,000.

c.             In
consideration of the maintenance of Lender’s commitment hereunder, Borrowers
will pay Lender a monthly fee at the rate of 0.25% per annum of the difference
between (i) the Maximum Line Amount, minus $1,000,000, less (ii) the
average daily outstanding principal balance of Revolving Loans hereunder.  Such fee is payable monthly in arrears on the
first 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.             So
long as no interest is then unpaid, Borrowers may, at their option, prepay the
Obligations in full and terminate this Agreement after the first anniversary of
the initial date of funding by giving Lender irrevocable written notice of
their intention to make such prepayment and termination at least ninety (90)
days prior thereto, provided that, in order for notice of such termination by
Borrowers to become effective, Borrowers shall, on the date specified for such
prepayment, pay to Lender, in cash or by federal wire transfer, the total
amount of outstanding Obligations owed to the date of such prepayment, together
with the Term Loan Prepayment Fee and a prepayment fee of five percent (5%) of
the Maximum Line Amount.

e.             For
services performed by Lender in connection with Lender’s continuing
administration hereof, Borrowers will pay Lender a monthly fee of $2,500.  Such fee is payable on the first day of each
calendar month, beginning on the first such date following the initial date of
funding and shall also be due on the termination date of this Agreement for the
last month (or part thereof) of this Agreement.

 4
 

 

All of the foregoing fees
constitute compensation to Lender for services rendered and are not interest or
a charge for the use of money.  Each
installment of such fees shall be fully earned when due and payable and shall
not 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 Other
Persons:  Applied LNG has three
subsidiaries:  Fleet Star, Alternative
Fuels and Renewable Fuels.  Alternative
Fuels has one subsidiary, Alternative Dual Fuels, Inc. (“Dual Fuels”).  Borrowers represent and warrant that Dual
Fuels is an inactive subsidiary with no significant assets or liabilities, and
each Borrower, without limiting any other restrictions set forth in this
Agreement, agrees that it shall not transfer any money or other assets to Dual
Fuels or include any assets of Dual Fuels on any Borrowing Base Certificate.

14.          Pending Litigation:  None.

15.          Existing
Debt and Guarantees:  Applied LNG
owes $3,898,044.43 to Jack B. Kelly, Inc., a portion of which will be repaid from the initial
loans made hereunder.  Apollo Resources
and 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 of
their assets to secure such debt.

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

Prior
or Current Trade or Fictitious Names:  None.

Mergers
and Acquisitions:  None.

17.          Locations
of Offices and Collateral

Current
Chief Executive Office:

3001 Knox Street, Suite
403

Dallas, Texas  75205

 5
 

 

Other
Locations of Chief Executive Office in past five years:  None.

Other
Current Collateral Locations:

Neadle Moutain
Plant:  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, California
92337

Office
Management:  8101 W. 34th Ave., Amarillo, Texas 79121

18.          Ownership
Structure:

a.             Applied
LNG owns 100% of the outstanding common stock and membership interests of each
of Fleet Star, Alternative Fuels and Renewable Alternative.

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

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

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

19.          Owned
Real Property:  None.

Leased
Real Property (including legal name of landlord and monthly rent):

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

Warehousemen,
processors, consignees, bailees or other Persons in possession or control of
any Inventory or Equipment (include name, address where Inventory or Equipment
is 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 Golden
Spread Energy, and Applied LNG pays $0 per month to such Person in connection
with such arrangement;

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

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

 6
 

 

20.          Bank Accounts:

JP Morgan Chase:  704033745 / Checking

JP Morgan Chase:  2047351099 / Savings

Amarillo National
Bank:  60081914 / Checking

21.          Commercial
Tort Claims:  None.

22.          Financial Covenants:

(a)           Borrowers shall maintain, as of the last day of
each month from and after July 31, 2006, on a consolidated basis, a ratio of
Borrowers’ (i) net income (excluding extraordinary gains) before provision for
interest expense, taxes, depreciation and amortization, to (ii) interest
expense, plus payments of principal actually made or scheduled to be made with
respect to indebtedness (other than scheduled but unpaid payments on
Subordinated Debt and principal payments on Revolving Loans), plus payments
with respect to capitalized leases, plus taxes, plus dividends and
distributions, plus unfinanced capital expenditures, of at least 1.0 to 1.  Such ratio shall be calculated as of the end
of each month from and after July 31, 2006 and shall be measured (y) for each
test date from July 31, 2006 through and including May 31, 2007, for the period
from July 1, 2006 through and including such test date, and (z) for each test
date from and after June 30, 2007, for the twelve-month period ending on such
test 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.  As
used herein, “Tangible Net Worth” means, as of any date, the total
assets of Borrowers minus the total liabilities of Borrowers calculated in
conformity with GAAP, less all amounts due
from Borrowers’ Affiliates and the amount of all intangible items reflected
therein, including all unamortized debt discount and expense, unamortized
research and development expense, prepaid expenses, unamortized deferred
charges, goodwill, intellectual property, unamortized excess cost of invest­ments
in subsidiaries over equity at dates of acquisition, and all similar items
which should properly be treated as intangibles in accordance with GAAP.

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

23.          Permitted Purchase Money Debt:  $100,000

24.          Permitted
Capital Expenditures:  $250,000
during any fiscal year

25.          Maximum
Annual Increase in Officers’ Compensation: 
Ten percent (10%) per year over the base amount previously disclosed
by Borrowers to Lender.

26.          Annual
Financial Statements:  To be
audited and certified without qualification by an independent practicing certified
public accountant acceptable to Lender.

 7
 

 

27.          Borrowing
Base Certificates:  Borrowers
shall deliver to Lender a Borrowing Base Certificate no less frequently than
weekly by 10:30 a.m. central time prepared as of the close of business on the
immediately preceding Business Day.

28.          Field
Examinations:  In connection with
field examinations of the Collateral, Borrowers, Borrowers’ business and
Borrowers’ books and records, Borrowers agree to pay to Lender all of the out-of-pocket examination costs
and travel and other expenses incurred by such examiners.

29.          Cross
Default Amount:  $ 10,000

30.          Judgment
Cross Default Amount:  $ 10,000

31.          Change
of 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.          Notice
Addresses:

	
  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

 

EXHIBIT A

[Attach form of Borrowing Base
Certificate]

 

EXHIBIT B

FORM OF COMPLIANCE CERTIFICATE

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

                                     ,
200   

FCC, LLC, d/b/a
First Capital

3520 Northwest 58th Street

Oklahoma City, Oklahoma  73112

Attn.:  John A. Curtis, Senior Vice
President

The
undersigned, the                                               
of APPLIED LNG TECHNOLOGIES USA, L.L.C., a Delaware limited liability
company (“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 Agreement
dated as of April    , 2006 among Company, ARIZONA LNG,
L.L.C. (together with Company, “Borrowers”) and Lender (as amended
from time to time, the “Loan Agreement”). 
Capitalized terms used in this Certificate, unless otherwise defined
herein, shall have the meanings ascribed to them in the Loan Agreement.

No
Default exists on the date hereof, other than:                                                [if
none, so state].

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

Set
forth on Appendix 1 attached hereto is a true, accurate and complete
calculation with respect to the financial covenants of Borrowers under the Loan
Agreement.

	
   

  	
  Yours truly,

  
	
   

  	
   

  
	
   

  	
  APPLIED LNG
  TECHNOLOGIES USA,

  L.L.C.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
  Dennis
  McLaughlin, Chief Executive

  Officer

  

 

 

Appendix
1

	
  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

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00109-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00109-of-00352.parquet"}], [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00109-of-00352.parquet"}]]