Document:

ex10-8.htm

    
      
        Exhibit 10.8

        LETTER
LOAN AGREEMENT 

        May, 26
2009

      

      
        

         

        VERTEX
ENERGY, INC. 

        1331
Gemini, Suite 103 

        Houston,
TX 77058 

        Attn:
Benjamin P. Cowart

      

      
        

         

        Gentlemen:

      

      
         

        Pursuant
to our prior discussions, this Letter Loan Agreement will serve to set forth the
terms of the financing agreement by and between VERTEX ENERGY, INC., a Nevada
corporation ("Borrower") and REGIONS BANK, an Alabama state bank corporation
(the "Lender"):

      

      
         

        1. Loans. Subject to the
terms and conditions set forth in this Letter Loan Agreement (this "Loan
Agreement") and the other agreements, instruments, and documents executed and
delivered in connection herewith and pursuant hereto (collectively, together
with this Loan Agreement, referred to hereinafter as the "Loan Documents").
Lender and Borrower hereby agree as follows:

      

      
         

        (a) Borrowing Base Loan.
Lender agrees to lend to Borrower, and Borrower agrees to borrow from Lender,
from time to time, an amount (the "Borrowing Base") up to (i) 80% of the net
amount of Eligible Accounts (as defined below), plus (ii) 50% of the
net amount of Eligible Inventory (as defined below) up to a maximum of
$1,750,000.00; provided, however,
the total of such loan (the "Borrowing Base
Loan") shall not to exceed in the aggregate at any one time
$3,500,000.00. In the event that, at any time, the aggregate amount of
indebtedness outstanding shall exceed the Borrowing Base, Borrower agrees to
immediately repay to Lender the amount necessary to cause the outstanding
balance of the Borrowing Base Loan to be no more than the Borrowing Base.
Advances of the Borrowing Base Loan shall be utilized by Borrower solely for
working capital. Provided that Borrower shall comply with the covenants
contained in this Loan Agreement and the other Loan Documents, the Borrowing
Base Loan shall be extended to Borrower until three hundred sixty-four (364)
days after the date of this Loan Agreement (the "Borrowing Base Termination
Date"), at which time all sums advanced hereunder shall be due and
payable in full. Within the limits of this paragraph, Borrower may borrow, repay
and re-borrow hereunder in accordance with the terms of this Loan Agreement.
Borrower shall give Lender not less than 2 Business Days' prior notice of each
requested advance specifying (i) the aggregate amount of such requested advance,
and (ii) the requested date of such advance.

      

      
         

        As used
in this Loan Agreement, the term "Eligible Accounts"
shall mean an amount equal to the aggregate net invoice or ledger amount owing
on all trade accounts receivable for goods sold or leased or services rendered
in the ordinary course of business, upon which Borrower's right to receive
payment is absolute and not contingent upon the fulfillment of any condition
whatsoever and in which Lender has a perfected, first priority lien, after
deducting (without duplication): (a) each such account that is unpaid 90 days or
more after the original invoice date thereof, (b) the amount of all returns,
discounts, allowances, rebates, credits and adjustments to such accounts, (c)
that portion of any account which constitutes a pre-billing or a "billed
and hold," or a credit memo balance, service charge, or finance charge, together
with the amount of all contra accounts, setoffs, claims, defenses or
counterclaims asserted by or available to the account debtors, (d) all accounts
with respect to which goods are placed on consignment or subject to a guaranteed
sale or other terms by reason of which payment by the account debtor may be
conditional, (e) that portion of any account which represents interim or
progress billings, all accounts with respect to which a payment and/or
performance bond has been furnished, and that portion of any accounts billed for
or representing retainage, if any, until all prerequisites to the immediate
payment of such accounts have been satisfied, (f) all accounts owing by account
debtors for which there has been instituted a proceeding in bankruptcy or
reorganization under the United States Bankruptcy Code or other law, whether
state or federal, now or hereafter existing for relief of debtors, (g) all
accounts owing by affiliates, subsidiaries, or employees, (h) all accounts in
which the account debtor is any state or municipal government, a Native American
sovereign nation, the United States government, or any department, agency, or
instrumentality of the United States, except to the extent an acknowledgment of
assignment to Lender of such account in compliance with the Federal Assignment
of Claims Act and other applicable laws has been received by Lender, (i) all
accounts due by any account debtor whose principal place of business is located
outside the United States of America and its territories, unless covered by
credit insurance or a letter of credit acceptable to Lender, (j) all accounts
subject to any provisions prohibiting assignment or requiring notice of or
consent to such assignment, (k) unless otherwise agreed by Lender, that portion
of all account balances owing by any single account debtor which exceeds 35% of
the aggregate of all accounts owing by all account debtors, and (1) any other
accounts deemed unacceptable by Lender in its sole and absolute discretion;
provided, however, if more than 10% of the then balance owing by any single
account debtor does not qualify as an Eligible Account under the foregoing
provisions, then the aggregate amount of all accounts owing by such account
debtor shall be excluded from Eligible Accounts.

      

      
        
          
            
            

          

          
            
            

            
              

            

          

          
            
            

          

        

        As used
in this Loan Agreement, the term "Eligible Inventory"
shall mean the aggregate value of all inventory of raw materials and finished
goods (excluding work-in- process and packaging materials, supplies and any
advertising costs capitalized into inventory) then owned by, and in the
possession or under the control of, Borrower and held for sale or disposition in
the ordinary course of business, in which Lender has a perfected, first priority
lien valued at the lower of cost or market value. Eligible Inventory shall not
include (a) inventory which is damaged, defective, obsolete, or otherwise
unsaleable in the ordinary course of Borrower's business, (b) inventory which
has been returned or rejected, (c) inventory that has been shipped or delivered
to a customer on consignment, on a sale or return basis or on the basis of any
similar understanding, (d) inventory with respect to which a claim exists
disputing Borrower's title to or right to possession of such inventory, (e)
inventory that is not in good condition or does not comply with applicable laws,
rules, or regulations or the standards imposed by any governmental authority
with respect to its manufacture, use or sale, and (f) inventory that Lender, in
its sole discretion, has determined to be unmarketable.

      

      
         

        (b)         
$1.600.000.00
Loan. Lender agrees to lend to Borrower and Borrower agrees to borrow
from Lender, a single advance loan in an amount up to $1,600,000.00 (the "$1.600.000.00
Loan"). The $1,600,000.00 Loan proceeds will be funded on the date hereof
and used by Borrower to pay off the indebtedness evidenced by Regions Bank notes
01-4330000759-9001 and 01-4330001028-9001, the obligation to repay which has
been assumed by Borrower. Any amounts unadvanced under the $1,600,000.00 Loan on
the date hereof for such purpose shall not be available for subsequent advances.
Borrower may not repay and subsequently reborrow any portion of the
$1,600,000.00 Loan. The $1,600,000.00 Loan shall be due and payable on the day
that is three hundred sixty-four (364) days after the date of this Loan
Agreement (the "$1.600.000.00 Loan Maturity
Date").

      

      
         

        (c)           $500.000.00 Equipment
Guidance Line. Upon the request of Borrower pursuant to this clause (c),
Lender agrees to consider making loans to and/or entering into leases with
Borrower for the purchase by Borrower, or purchase by Lender and simultaneous
lease to Borrower, of equipment to be utilized by Borrower in the ordinary
course of its business (the "$500.000.00 Equipment
Guidance Line").   At no time may the sum of the aggregate
original principal amount of all loans under the $500,000.00 Equipment Guidance
Line and the aggregate purchase price to Lender of all leases entered into under
the $500,000.00 Equipment Guidance Line exceed $500,000.00.

      

      
        
          
            
            

          

          
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        (d)           Letter(s) of
Credit.   Provided that no Default (as defined below) or
Event of Default (as defined below) has occurred and is then existing, at the
written request of Borrower, delivered at least seven (7) Business Days before
the requested issuance date, Lender shall issue irrevocable commercial or
standby letter(s) of credit (the "Letter(s) of Credit"), for the account of
Borrower, subject to the following conditions:

      

      
         

        (i) The
aggregate face amount of all outstanding Letters of Credit (including the amount
of the requested Letter of Credit), plus the outstanding balance of the
Borrowing Base Loan, shall not exceed the lesser of (a) the Borrowing Base, or
(b) the principal amount of the Borrowing Base Loan.

      

      
         

        (ii)
Borrower shall pay an annual administrative fee for the issuance of each Letter
of Credit equal to the greater of $1,000.00, or 2.75% of the amount of the
Letter of Credit per annum (based upon the number of days the Letter of Credit
is to be outstanding) to compensate Lender for its ongoing obligations with
respect to the requested Letter of Credit.

         

      

      
        (iii) The
expiration date of the requested Letter of Credit shall not exceed the Borrowing
Base Termination Date.

      

      
         

        (iv)
Borrower shall have executed and delivered to Lender a letter of credit
application and all other documents required by Lender in connection with the
issuance of the Letter of Credit, each of which shall be in form and substance
satisfactory to Lender in its sole discretion.

      

      
         

        Without
limiting any of the foregoing, if, in any case, Borrower does not provide Lender
with funds in the amount and on the date necessary to settle Lender's obligation
under any draft drawn under any Letter of Credit, Lender shall make, and
Borrower shall accept, an advance by Lender to Borrower and/or Borrower under
the Borrowing Base Loan and this Loan Agreement as of the day and time such
drafts are paid by Lender and in the amount of the drafts so paid. In case of
any conflict between the terms of any letter of credit application with respect
to any Letter of Credit and the terms hereof, the terms of this Loan Agreement
shall control, except to the extent the letter of credit application states that
certain specified provisions thereof control, in which case those specified
provisions of the letter of credit application shall control.

      

      
         

        The
Borrowing Base Loan, $1,600,000.00 Loan and any loans, advances or leases
outstanding pursuant to the $500,000.00 Equipment Guidance Line are sometimes
referred to hereinafter collectively as the "Loans". The Loans shall be
evidenced by one or more promissory notes (herein collectively called, together
with any renewals, extensions and increases thereof, the "Notes") and, in the
case of leases under the $500,000.00 Equipment Guidance Line, leases between
Lender and Borrower, all in form and substance acceptable to Lender. Accrued and
unpaid interest on advances under the Borrowing Base Loan and
the $1,600,000.00 Loan shall be due and payable on the day that is one (1) month
after the date of this Loan Agreement, and on the same day of each succeeding
month. All outstanding principal of and accrued and unpaid interest on the
Borrowing Base Loan shall be due and payable on the Borrowing Base Termination
Date. All outstanding principal of and accrued and unpaid interest on the
$1,600,000.00 Loan shall be due and payable on the $1,600,000.00 Loan Maturity
Date. All payments under loans and/or leases entered into under the $500,000.00
Equipment Guidance Line shall be due at the times set forth in the documents
entered into in connection with such loan or lease.

      

      
        
          
            
            

          

          
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        2.         Interest.

      

      
         

        (a)           Borrowing Base
Loan.    The Borrowing Base Loan shall bear interest
at the greater of (i) five percent (5.00%) per annum or (ii) the Adjusted LIBO
Rate plus four percent (4.00%) per annum.

      

      
         

        (b)           $1.600.000.00 Loan.
The $ 1,600,000.00 Loan shall bear interest at the greater of (i) five percent
(5.00%) per annum or (ii) the Adjusted LIBO Rate plus one and one-half percent
(1.50%) per annum.

      

      
         

        (c)           $500.000.00 Equipment
Guidance Line.   All loans outstanding pursuant to the
$500,000.00 Equipment Guidance Line shall bear interest at the rate or rates
provided in the documentation evidencing such loans.

      

      
         

        (d)           Default
Rate.   Notwithstanding the foregoing, to the extent
permitted under applicable law, upon the occurrence of an Event of Default, and
after maturity, the Loans shall bear interest, after as well as before judgment,
at a rate per annum equal to five percent (5.00%) plus the rate otherwise
applicable to such Loans as provided in the preceding paragraphs of this
Section.

      

      
         

        (e)           Computation of
Interest. All interest hereunder shall be computed on the basis of a year
of 360 days, and shall be payable for the actual number of days elapsed
(including the first day but excluding the last day).   The
applicable Adjusted LIBO Rate shall be determined by Lender and such
determination shall be conclusive absent manifest error.

      

      
         

        (f)           Alternate Rate of
Interest.   If Lender determines (which determination
shall be conclusive absent manifest error) that (a) adequate and reasonable
means do not exist for ascertaining the Adjusted LIBO Rate, or (b) the Adjusted
LIBO Rate will not adequately and fairly reflect the cost to Lender of making or
maintaining the applicable Loans, then Lender shall determine a suitable
alternative for the Adjusted LIBO Rate and shall give notice thereof to Borrower
by telephone or telecopy as promptly as practicable thereafter, which
alternative shall remain in effect until Lender notifies Borrower that the
circumstances giving rise to such notice no longer exist.

      

      
         

        (g)           Increased Costs of Making or
Maintaining LIBOR Loans. If any Change in Law shall (i) impose, modify or
deem applicable any reserve, special deposit or similar requirement against
assets of, deposits with or for the account of, or credit extended by, Lender
(except any such reserve requirement reflected in the Adjusted LIBO Rate), or
(ii) impose on Lender or the London interbank market any other condition
affecting this Loan Agreement or the Loans, and the result of any of the
foregoing shall be to increase the cost to Lender of making or maintaining any
Loan (or of maintaining its obligation to make any such Loan) or to reduce the
amount of any sum received or receivable by Lender hereunder (whether of
principal, interest or otherwise), then

      

      
        
          
            
            

          

          
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        Borrower
will pay to Lender such additional amount or amounts as will compensate Lender
for such additional costs incurred or reduction suffered.

      

      
         

        (h) Capital Adequacy. If
Lender determines that any Change in Law regarding capital requirements has or
would have the effect of reducing the rate of return on Lender's capital or on
the capital of Lender's holding company, if any, as a consequence of this Loan
Agreement or the Loans made by Lender to a level below that which Lender or
Lender's holding company could have achieved but for such Change in Law (taking
into consideration Lender's policies and the policies of Lender's holding
company with respect to capital adequacy), then from time to time Borrower will
pay to Lender such additional amount or amounts as will compensate Lender or
Lender's holding company for any such reduction suffered.

      

      
         

        (i) Certificate of Amounts
Due. A certificate of Lender setting forth the amount or amounts
necessary to compensate Lender or its holding company, as the case may be, as
specified in paragraph (g) or (h) of this Section shall be delivered to Borrower
and shall be conclusive absent manifest error. Borrower shall pay Lender the
amount shown as due on any such certificate within 10 days after receipt
thereof.

      

      
         

        (j) Delay in Demand For
Compensation. Failure or delay on the part of Lender to demand
compensation pursuant to this Section shall not constitute a waiver of Lender's
right to demand such compensation.

      

      
         

        (k) No Deduction For
Taxes. Any and all payments by or on account of any obligation of
Borrower hereunder shall be made free and clear of and without deduction for any
taxes; provided that if Borrower shall be required to deduct any taxes from such
payments, then (i) the sum payable shall be increased as necessary so that after
making all required deductions (including deductions applicable to additional
sums payable under this paragraph) Lender receives an amount equal to the sum it
would have received had no such deductions been made, (ii) Borrower shall make
such deductions and (iii) Borrower shall pay the full amount deducted to the
relevant Governmental Authority in accordance with applicable
law.

      

      
         

        (1) Borrower Indemnity.
Borrower shall indemnify Lender, within 10 days after written demand therefor,
for the full amount of any taxes paid by Lender on or with respect to any
payment by or on account of any obligation of Borrower hereunder (including
taxes imposed or asserted on or attributable to amounts payable under this
Section) and any penalties, interest and reasonable expenses arising therefrom
or with respect thereto, whether or not such taxes were correctly or legally
imposed or asserted by the relevant Governmental Authority. A certificate as to
the amount of such payment or liability delivered to Borrower by Lender shall be
conclusive absent manifest error.

      

      
         

        (m) As
used in this Loan Agreement the following terms shall have the following
meanings:

      

      
         

        (i) "Adjusted LIBO Rate"
means (1) from the date of this Loan Agreement through May 31, 2009, 0.35375%
per annum and (2) for each month, commencing June, 2009, an interest rate per
annum (rounded upwards, if necessary, to the next 1/100 of 1%) equal to (a) the
LIBO Rate for the first day of such month multiplied by (b) the Statutory
Reserve Rate.

      

      
         

        (ii)
"Business Day"
means a day on which the office of Lender at which payments under this Loan
Agreement are to be made is open for business.

      

      
         

        (iii)
"Change in Law"
means (a) the adoption of any law, rule or regulation after the date of this
Loan Agreement, (b) any change in any law, rule or regulation or in the
interpretation or application thereof by any Governmental Authority after the
date of this Loan Agreement or (c) compliance by Lender with any request,
guideline or directive (whether or not having the force of law) of any
Governmental Authority made or issued after the date of this Loan
Agreement.

      

      
         

        (iv)
"Governmental
Authority" means the government of the United States of America, any
other nation or any political subdivision thereof, whether state or local, and
any agency, authority, instrumentality, regulatory body, court, central bank or
other entity exercising executive, legislative, judicial, taxing, regulatory or
administrative powers or functions of or pertaining to
government.

      

      
         

        (v) "LIBO
Rate" means, for any day, the rate for deposits in U.S. dollars for a one month
period which appears on Telerate Page 3750 as of 11:00 a.m., London, England
time on the day (the "Pricing Date") that is two LIBOR Business Days preceding
such day, as such rate is published on the Business Day next following the
Pricing Date in the Money Market Section of the Wall Street Journal. If such
rate cannot be so determined for any reason, Lender will request the principal
London office of at least two banks to provide a quotation of its rate for
deposits in U.S. dollars for a one moth period commencing two LIBOR Business
Days after the date of such request and the LIBO Rate will be the arithmetic
mean of such quotations.

      

      
         

        (vi)
"LIBOR Business
Day" means a day on which the office of Lender at which payments under
this Loan Agreement are to be made is open for business and on which dealings in
U.S. dollar deposits are carried out in the London interbank
market.

      

      
         

        (vii)
"Statutory Reserve
Rate" means a fraction (expressed as a decimal), the numerator of which
is the number one and the denominator of which is the number one minus the
aggregate of the maximum reserve percentages (including any marginal, special,
emergency or supplemental reserves) expressed as a decimal established by the
Board of Governors of the Federal Reserve System of the United States of America
to which Lender is subject for eurocurrency funding (currently referred to as
"Eurocurrency Liabilities" in Regulation D of such Board of Governors). Such
reserve percentages shall include those imposed pursuant to such Regulation D.
Loans shall be deemed to constitute eurocurrency funding and to be subject to
such reserve requirements without benefit of or credit for proration, exemptions
or offsets that may be available from time to time to Lender under such
Regulation D or any comparable regulation. The Statutory Reserve Rate shall be
adjusted automatically on and as of the effective date of any change in any
reserve percentage.

      

      
         

        3. Collateral. As
collateral and security for the Loans, and any and all other indebtedness or
obligations from time to time owing by Borrower to Lender, Borrower shall grant,
or cause the owner thereof to grant, to Lender, its successors and assigns, a
lien and security interest (which shall be a first and prior lien and security
interest therein), in and to the following described property, together with any
and all products and proceeds thereof (collectively, the
"Collateral"):

      

      
         

        (a) Personal Property.
All of Borrower's present and future accounts, inventory, equipment, fixtures,
chattel paper, documents, instruments, investment property, general intangibles
and other personal property.

        
          
            
            

          

          
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        (b)       Certificates of
Deposit. One or more certificates of deposit, aggregating at least
$1,600,000.00 in face value, issued by Bank to Borrower.

      

      
         

        4.           Commitment Fee: Unused
Fee.

      

      
         

        (a)           On
the date hereof, Borrower shall pay to Lender commitment fees of $ 17,500.00 in
connection with the Borrowing Base Loan and $4,000.00 in connection with the
$1,600,000.00 Loan.   The commitment fees are in addition to all
principal, interest, attorney's fees, and other amounts which may become due
from Borrower to Lender on or in connection with the Loans. Commitment fees with
respect to loans and leases under the $500,000.00 Equipment Guidance Line, and
payment terms thereof, shall be determined at the time the documents evidencing
such loan or lease are executed.

      

      
         

        (b)           Borrower
shall pay to Lender an unused fee equal to the product of (i) the daily average
amount of the Unused Revolver Commitment times (ii) a per annum percentage equal
to 0.35%. Such unused fee shall accrue from and including the date of this Loan
Agreement to and including the Borrowing Base Termination
Date.  Unused fees shall be determined quarterly in arrears and shall
be payable on the last day of each calendar quarter and on the Borrowing Base
Termination Date, provided that should the Borrowing Base Loan be terminated at
any time prior to the Borrowing Base Termination Date for any reason, the entire
accrued and unpaid unused fee shall be paid on the date of such
termination.   As used herein, the term "Unused Revolver
Commitment" means, at
any date, an amount equal to $3,500,000.00 less the outstanding principal amount
of the Borrowing Base Loan on such date.

      

      
         

        5.           Collateral
Documents.   Prior to or contemporaneously with the
closing of the Loans, Borrower shall deliver, or cause to be delivered, to
Lender, in addition to the Notes, the following agreements, documents and
instruments (sometimes collectively referred to hereinafter as the "Collateral
Documents"):

      

      
         

        (a)           Security
Agreement in the form required by Lender.

      

      
         

        (b)           Lockbox
Agreement in the form required by Lender.

      

      
         

        (c)           Subordination
Agreements executed by such persons, and in such form, as required by
Lender.

      

      
         

        (d)           Such
UCC-1 financing statements as may be required by Lender.

      

      
         

        (e)           A
Notice of Final Agreement.

      

      
         

        (f)           
Resolutions of Borrower, in the form required by Lender authorizing Borrower to
enter into the transactions contemplated under this Loan Agreement and the other
Loan Documents.

      

      
         

        (g)           Such
other agreements, instruments, documents, and certificates as may be requested
by Lender to evidence the Loans and to grant and perfect a lien and security
interest in the Collateral.

      

      
         

        6.            
Representations and
Warranties.   Borrower hereby represents and warrants, and
upon each request for an advance under the Loans (if any), further represents
and warrants, as follows:

      

      
        
          
            
            

          

          
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        (a)           Corporate Existence.
Borrower is a Nevada corporation, duly organized, validly existing, and is in
good standing under the laws of the state of its formation and is duly qualified
and in good standing under the laws of the State of Texas and all other states
where it is doing business, and has all requisite power and authority to execute
and deliver this Loan Agreement and the other Loan Documents.

      

      
         

        (b)           Authorization.      The   execution,   delivery,   and  performance   of
this   Loan Agreement and all of the other Loan Documents have
been duly authorized by all necessary action of Borrower, and constitute legal,
valid and binding obligations of Borrower, enforceable in accordance with their
respective terms, except as limited by bankruptcy, insolvency or similar laws of
general application relating to the enforcement of creditors' rights and except
to the extent specific remedies may generally be limited by equitable
principles.

      

      
         

        (c)           Authority. The
execution, delivery and performance of this Loan Agreement and the other Loan
Documents, and the consummation of the transactions contemplated hereby and
thereby, do not conflict with, result in a violation of, or constitute a default
under (i) any provision of Borrower's governing agreements or instruments, or
(ii) any law, governmental regulation, court decree, or order applicable to
Borrower, or require the consent, approval or authorization of any third
party.

      

      
         

        (d)           Financial
Condition.    Each financial statement supplied by or
on behalf of Borrower to Lender was prepared in accordance with generally
accepted accounting principles, consistently applied, in effect on the date such
statements were prepared and truly discloses and fairly presents the financial
condition as of the date of each such statement, and there has been no material
adverse change in such financial condition or results of operations subsequent
to the date of the most recent financial statement supplied to
Lender.

      

      
         

        (e)           Litigation.    There
are no actions, suits or proceedings pending or, to the knowledge of Borrower,
threatened against or affecting Borrower or the properties of Borrower, before
any court or governmental department, commission or board, which, if determined
adversely to Borrower, (i) would subject Borrower to any liability not fully
covered by insurance, or (ii) would have a material adverse effect on the
financial condition, properties, or operations of Borrower, or its ability to
perform its obligations under this Loan Agreement.

      

      
         

        (f)           Tax
Returns.   Borrower has filed all federal, state and local
tax reports and returns, if any, required by any law or regulation to be filed
by it and has either duly paid all taxes, duties and charges, if any, indicated
due on the basis of such returns and reports, except those being contested in
good faith by appropriate proceeding, or made adequate provision for the payment
thereof, and the assessment of any material amount of additional taxes in excess
of those paid and reported is not reasonably expected.

      

      
         

        (g)           No Material
Changes.   There is no fact known that has not been
disclosed to Lender in writing which may result in any material adverse change
in Borrower's business, properties or operations. No certificate or statement
herewith or heretofore delivered to Lender in connection herewith, or in
connection with any transaction contemplated hereby, contains any untrue
statement of a material fact or fails to state any material fact necessary to
keep the statements contained therein from being misleading. Borrower is not in
default and no event or circumstance has occurred which, except for the passage
of time or the giving of notice, or both, would constitute a default under any
loan or credit agreement, mortgage, deed of trust, security agreement or other
agreement or instrument.   Since the date of the last financial
statements delivered to Lender, neither the business nor the assets or
properties of Borrower have been materially
and adversely affected as a result of any fire, explosion, earthquake, flood,
drought, windstorm, accident, strike or other labor disturbance, embargo,
requisition, or taking of property or cancellation of contracts, permits or
concessions by any domestic or foreign government or any agency thereof or by
acts of God.

      

      
        
          
            
            

          

          
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        (h) Ownership of Assets.
Borrower owns all of the assets reflected on its most recent balance sheet free
and clear of all liens, security interests or other encumbrances, except as
previously disclosed in writing to Lender.

      

      
         

        (i) Governmental
Authority. Borrower, (i) is not in violation of any law, judgment,
decree, order, ordinance, or governmental rule or regulation, or (ii) has not
failed to obtain any license, permit, franchise or other governmental
authorization necessary to the ownership of any assets or properties or the
conduct of business.

      

      
         

        (j) Principal Office. The
principal office of Borrower, as well as the place at which Borrower keeps its
books and records, is the address to which this Loan Agreement is
addressed.

      

      
         

        7.           Representation in Request
for Advance.   Each request for an advance hereunder shall
constitute, a representation and warranty by Borrower that, as of the date of
such request, (a) all of the representations and warranties of Borrower
contained in this Loan Agreement and the other Loan Documents are true and
correct, and (b) no Default or Event of Default has occurred and is continuing,
or would result from the requested advance.  All representations and
warranties made by Borrower in this Loan Agreement shall survive delivery of the
Loan Documents and the making of the Loans.

      

      
         

        8.           Conditions Precedent to the
Loans. Any obligation of Lender to make the Loans shall be subject to the
complete and continuing satisfaction, on or before the date hereof, of the
following conditions precedent:

      

       

      
        (a)           Loan
Documents.   Borrower and any other person or entity
required to do so shall have executed and delivered to Lender the Loan Documents
to which they are a party and any and all other documents reasonably required or
requested by Lender to give effect to the transactions contemplated by this Loan
Agreement, all in form and substance satisfactory to Lender and its
counsel.

      

      
         

        (b)           Legal Opinion. If
requested, Lender shall have received the favorable opinion, in form and
substance satisfactory to it, of counsel to Borrower, with respect to (i) the
matters set forth in paragraphs 6(a), (b), (c) and (e) hereof, (ii) to the
effect that the Loans are not usurious, and (iii) such other matters as Lender
or its counsel may reasonably request.

      

      
         

        (c)           Additional
Agreements.    Lender shall have received such other
agreements, instruments, documents and certificates incidental and appropriate
to the transaction provided for herein as Lender or its counsel may reasonably
request.

      

      
         

        9.           Conditions Precedent to
Future Advances.   Lender's obligation to make any advance
under this Loan Agreement and the other Loan Documents shall be, in addition to
the conditions precedent set forth in Section 8 hereof, subject to the
additional conditions precedent that, as of the date of such advance and after
giving effect thereto, (a) all representations and warranties made to Lender by
Borrower in this Loan Agreement and the other Loan Documents shall be true and
correct, as of and as if made on such date; (b) no material adverse change in
Borrower's financial condition since the effective date of the most recent
financial statements furnished to Lender by Borrower shall have occurred and be
continuing; and (c) Lender has received a Request for Advance from Borrower,
such request for an advance
on the Borrowing Base Loan to be in the form of Exhibit "A", or such other form
acceptable to Lender.

      

      
        
          
            
            

          

          
            -8-

            
              

            

          

          
            
            

          

        

        10. Affirmative
Covenants. Until the Loans and all other obligations and liabilities of
Borrower under this Loan Agreement and the other Loan Documents are fully paid
and satisfied, Borrower agrees and covenants that it will, unless Lender shall
otherwise consent in writing:

      

      
         

        (a)           Accounts and
Records.    Maintain its books and records in
accordance with generally accepted accounting principles, applied on a
consistent basis, and permit Lender to examine, audit and make and take away
copies or reproductions of Borrower's books and records, at all reasonable
times.

      

      
         

        (b)           Payments of
Obligations. Pay and discharge when due all of its indebtedness and
obligations, including without limitation, all assessments, taxes, governmental
charges, levies and liens, of every kind and nature, imposed upon Borrower or
its properties, income, or profits, prior to the date on which penalties would
attach, and all lawful claims that, if unpaid, might become a lien or charge
upon any of Borrower's properties, income, or profits; provided, however,
Borrower will not be required to pay and discharge any such assessment, tax
charge, levy, lien or claim as long as (i) the legality of the same shall be
contested in good faith by appropriate judicial, administrative or other legal
proceedings, and (ii) Borrower shall have established on its books adequate
reserves with respect to such contested assessment, tax, charge, levy, lien or
claim in accordance with generally accepted accounting principles, consistently
applied.

      

      
         

        (c)           Compliance with Laws.
Conduct its business in an orderly and efficient manner consistent with good
business practices, and perform and comply with all statutes, rules, regulations
and/or ordinances imposed by any governmental unit upon Borrower and its
businesses and operations.

      

      
         

        (d)           Insurance.    Maintain
insurance, including but not limited to, fire insurance, comprehensive property
damage, public liability, worker's compensation, business interruption, and
other insurance necessary or required by Lender. On the date hereof, and at
other times upon request of Lender, Borrower will furnish or cause to be
furnished to Lender from time to time a Certificate of Insurance describing the
insurance coverages maintained by Borrower, in form and substance satisfactory
to Lender, and if requested will furnish Lender with copies of the applicable
policies.

      

      
         

        (e)           Right of
Inspection.   Permit such persons as Lender may designate
to visit its properties and installations and examine, audit and make and take
away copies of its books and records, as Lender may reasonably desire, including
field audits to be conducted at Borrower's expense as Lender deems
necessary.

      

      
         

        (f)           Cure of Defect.
Promptly cure any defects in the execution and delivery of any of the other Loan
Documents and all other instruments executed in connection with this
transaction.

      

      
         

        (g)           Additional
Documentation.   Execute and deliver, or cause to be
executed and delivered, any and all other agreements, instruments or documents
which Lender may reasonably request in order to give effect to the transactions
contemplated under this Loan Agreement and the other Loan
Documents.

      

      
        
          
          

        

        
          -9-

          
            

          

        

        
          
          

        

      

      
        (h) Legal Existence. Do
or cause to be done all things necessary to preserve and keep in full force and
effect each Borrower's existence in good standing.

      

      
         

        (i) Maintenance of
Assets. Maintain all of its material assets, both real and personal, used
in the conduct of its business, in good condition, repair and working order, and
supplied with all necessary equipment, and cause to be made all necessary
repairs, renewals, replacements and improvements thereof and thereto, so that
the business carried on in connection therewith may be properly and
advantageously conducted at all times.

      

      
         

        (j) Notice of Matters.
Promptly inform Lender of (i) any and all material or adverse changes in its
financial condition, (ii) all claims which could materially affect its financial
condition, (iii) after the commencement thereof, notify Lender of all actions,
suits, and proceedings before any court or any governmental department,
commission, or board, and (iv) of the creation, occurrence, or assumption of any
actual or contingent liabilities not permitted under this Loan
Agreement.

      

      
         

        (k) Primary Depository
Relationship: Lockbox. Borrower shall establish and maintain its primary
operating account(s) with Lender. Borrower agrees to deposit all proceeds of the
Collateral into a Lockbox Account maintained with Lender. In furtherance and not
in limitation of the foregoing, Borrower shall (a) execute a Lockbox Agreement
with Lender, (b) notify, or cause to be notified, all obligors of any Collateral
to forward all remittances to the Lockbox Account in accordance with such
Lockbox Agreement and (c) pay all costs of such Lockbox Account, including set
up and administration thereof.

      

      
         

        (1) Subordination
Agreements. All indebtedness of Borrower to any affiliate of Borrower (or
any person related to any affiliate of Borrower) shall be subordinated to the
Loans and all other indebtedness of Borrower to Lender in a manner satisfactory
to Lender. Any indebtedness of Borrower so subordinated is referred to herein as
"Subordinated
Debt".

      

      
         

        (m) Methods of Payment.
All payments due on the Loans shall be made pursuant to an automatic debit
process linked to Borrower's accounts with Lender.

      

      
         

        11. Financial Covenants.
Until the Loans and all obligations and liabilities of Borrower under this Loan
Agreement and the other Loan Documents are fully paid and satisfied, Borrower,
and Guarantor to the extent that the stated action or information specifically
relates to the Guarantor, agrees and covenants that it will maintain the
following financial covenants unless Lender shall otherwise consent in
writing:

      

      
         

        (a)           Minimum Tangible Net
Worth.  Borrower shall maintain, as of the end of each month, a
Tangible Net Worth of at least $1,500,000.00, increasing by 50% of Borrower's
net income for each fiscal year, commencing with respect to fiscal year
2009.

      

      
         

        (b)           Liabilities/Tangible Net
Worth Ratio.  Borrower will maintain, as of the end of each
month, a ratio of (i) total liabilities (excluding any Subordinated Debt) to
(ii) Tangible Net Worth of not greater than 4.0 to 1.0.

      

      
         

        (c)           Debt Service Coverage
Ratio.   Borrower will maintain, as of the end of each
month, commencing the end of the month in which the first anniversary of this
Loan Agreement occurs, a ratio of (a) EBITDA for the preceding twelve (12)
months to (b) CMLTD plus interest expense for the preceding twelve (12) months
of not less than 1.5 to 1.0.

      

      
        
          
            
            

          

          
            -10-

            
              

            

          

          
            
            

          

        

                                            

      

      
        (d)           Funded Bank Debt
Ratio. Borrower will maintain, as of the end of each month, a ratio of
(a) Funded Bank Debt as of the last day of such month to (b) EBITDA for the
preceding twelve (12) months (annualized for the first twelve (12) months for
which this ratio is tested) of not greater than 3.5 to 1.0.

      

      
         

        (e)           Minimum
Liquidity.   Borrower shall maintain, as of the end of
each month, unencumbered liquid assets (as reasonably determined by Lender) of
at least $1,500,000.00.

      

      
         

        As used
herein, (a) the term "CMLTD" means that portion of Borrower's long term debt and
capital leases maturing or scheduled to be paid in the prior period, (b) the
term "Tangible Net
Worth" means the total assets bearing on the asset side of a balance
sheet of Borrower, in accordance with GAAP, less the sum of (i) total debt and
(ii) the sum of the aggregate amount owing from any officers, stockholders or
other affiliates of Borrower and (iii) the aggregate amount of any intangible
assets of Borrower, including goodwill, franchises, licenses, patents,
trademarks, trade names, copyrights, service marks and brand names, (c) the term
"EBITDA" means net income before tax, interest expense (net of capitalized
interest expense), depreciation expense, and amortization expense and (d) the
term "Funded Bank
Debt" means all indebtedness of Borrower to Lender or any other bank,
savings bank, investment bank, insurance company, equity fund, hedge fund or
other financial institution, including without limitation the Loans. Unless
otherwise specified, all accounting and financial terms and covenants set forth
above are to be determined according to generally accepted accounting
principles, consistently applied ("GAAP").

      

      
         

        12.         
Negative
Covenants. Until the Loans and all other obligations and liabilities of
Borrower under this Loan Agreement and the other Loan Documents are fully paid
and satisfied, Borrower will not, without the prior written consent of
Lender:

      

      
         

        (a)           Nature of Business: Change
of Management or Operation.   Make any material change in
the nature of its business as carried on as of the date hereof, including, but
not limited to, any material change in the management or operation of its
business.

      

      
         

        (b)           Liquidations: Mergers:
Consolidations. Liquidate, merge, or consolidate with or into any other
entity.

      

      
         

        (c)           Acquisition of Stock or
Other Assets.   Purchase or otherwise acquire all or
substantially all the assets of, or any capital stock or other equity interest
in, any other entity.

      

      
         

        (d)           Sale of
Assets.    Sell, transfer or otherwise dispose of any
of its assets or properties, other than in the ordinary course of
business.

      

      
         

        (e)           Liens.  Create,
incur, assume or permit to exist any lien or encumbrance on any of its assets or
properties, including the Collateral, whether voluntary or
involuntary.

      

      
         

        (f)           Transfer of
Ownership.    Permit the sale or other transfer of
any ownership interest in Borrower.

      

      
         

        (g)          Indebtedness.  Borrower
shall not create, incur, or assume any indebtedness for borrowed money or issue
or assume any other note, debenture, bond or other evidences of indebtedness,
including any capital lease obligations, other than (i) borrowings from Lender,
or (ii) other indebtedness or obligations outstanding which do not at any time
exceed $500,000.00 in the aggregate.

      

      
         

      

      
        (h)         
Loans. Borrower
shall not make any loan to any person or entity, including any of its directors,
officers, employees, stockholders, or any investments or ventures associated
therewith, or guarantee any indebtedness or obligation of any other person or
entity.

      

      
         

        (i)          
Capital
Expenditures. Borrower will not make capital expenditures (other than
through the $500,000.00 Equipment Guidance Line) in excess of $350,000.00 during
any fiscal year, unless such expenditures has an immediate accretive impact
effect to Borrower. The Borrowing Base Loan shall not be used for capital
expenditures.

      

      
         

           
(j)            Distributions.
Borrower shall not make or pay any dividends or other distributions to its
shareholders.

      

      
         

        (k)         
Government
Regulation. Borrower shall not (a) be or become subject at any time to
any law, regulation, or list of any government agency (including, without
limitation, the U.S. Office of Foreign Asset Control list) that prohibits or
limits Lender from making any advance or extension of credit to Borrower or from
otherwise conducting business with Borrower, or (b) fail to provide documentary
and other evidence of Borrower's identity as may be requested by Lender at any
time to enable Lender to verify Borrower's identity or to comply with any
applicable law or regulation, including, without limitation, Section 326 of the
USA Patriot Act of 2001, 31 U.S.C. Section 5318.

      

      
         

        13.         
Reporting
Requirements. Until the Loans and all other obligations and liabilities
of Borrower under this Loan Agreement and the other Loan Documents are fully
paid and satisfied, Borrower will, unless Lender shall otherwise consent in
writing, furnish to Lender:

      

      
         

        (a)          Defaults and Events of
Default. As soon as possible and in any event within five (5) days after
the occurrence of each Default or Event of Default, the statement of Borrower
setting forth the details of such Default or Event of Default and the action
which Borrower proposes to take with respect thereto.

      

      
         

        (b)          Borrower's Monthly
Reports. As soon as available and in any event within thirty (30) days
after the end of each month, (1) consolidated and consolidating financial
statements of Borrower as of the end of such month, which financial statements
shall contain a balance sheet and income statement, certified as true and
correct in all material respects by the President or Chief Financial Officer of
Borrower, (2) a current aging analysis of Borrower's accounts receivable and
accounts payable and list of Borrower's inventory by location and type (to
include the following: raw materials, work in progress, and finished goods), (3)
a Borrowing Base Certificate in the form attached as Exhibit "B" and (4) a
Compliance Certificate in the form attached as Exhibit
"C".

      

      
         

        (c)          Borrower's Annual
Reports. As soon as available and in any event within ninety (90) days
after the end of each fiscal year of Borrower, consolidated and consolidating
financial statements of Borrower as of the end of such year, which financial
statements shall contain a balance sheet and income statement, certified by
independent public accountants satisfactory to Lender, with such certification
to be free of exceptions and qualifications not acceptable to
Lender.

      

      
         

        (d)          SEC
Filings.  Promptly after the same become publicly available,
copies of all periodic and other reports, proxy statements and other materials
filed with the Securities and Exchange Commission, or any Governmental Authority
succeeding to any or all functions of said

      

      
         

        (a)          
Securities
and Exchange Commission, or with any national securities exchange, or
distributed by Borrower to its shareholders generally, as the case may
be.

      

      
         

        (e)           Tax Returns. As soon
as available and in any event within 60 days of the filing thereof, a copy of
all tax returns filed by Borrower with the Internal Revenue Service and in the
event of an extension, verification of the extension
filing.

      

      
         

        (f)           Right  to   Additional   Information.      Furnish  Lender  with   such   additional
information and statements, lists of assets and liabilities, tax returns, and
other reports with respect to its financial condition and business operations as
Lender may request from time to time.

      

      
         

        (g)          Governmental
Action.  Promptly after the commencement thereof, notice of all
actions, suits and proceedings before any court or any governmental department,
commission, or board affecting Borrower or any of its
properties.

      

      
        
          
            
            

          

          
            -11-

            
              

            

          

          
            
            

          

        

        (h)         
Evidence of Payment of
Obligations.   Upon demand of Lender, evidence of payment
of all assessments, taxes, charges, levies, liens, and claims against its
properties.

      

      
         

        All
references to a preceding period shall mean the period ending as of the end of
the month, quarter or fiscal year for which the applicable report is delivered.
All references to a period immediately following shall mean the period beginning
on the first day of the month, quarter or fiscal year following the end of the
period for which the applicable report is delivered. All financial reports
furnished to Lender pursuant to this Loan Agreement shall be prepared in such
form and such detail as shall be satisfactory to Lender and shall be prepared on
the same basis as those prepared in prior years, and duly certified by the
President or Chief Financial Officer of Borrower as being true and correct in
all material aspects.

      

      
         

        14. Events of Default.
Each of the following shall constitute an "Event of Default"
under this Loan Agreement, and the occurrence of any of the following which
would, with the giving of notice, the passage of time, or both, constitute an
Event of Default, shall constitute a "Default" under this
Agreement:

      

      
         

        (a)           Any
default in the payment when due of any part of the principal of, or interest on,
the Notes or any other indebtedness or obligation from time to time owing by
Borrower to Lender, and the same is not cured within ten (10) days following
delivery of written notice thereof from Lender to
Borrower.

      

      
         

        (b)           The
failure of Borrower to maintain the insurance coverage as required by this Loan
Agreement or the Loan Documents, and the same is not cured within ten (10) days
following delivery of written notice thereof from Lender to
Borrower.

      

      
         

        (c)           Any
default, breach or failure in the performance of any term, condition, warranty,
agreement, or covenant of this Loan Agreement or any of the other Loan
Documents, and the same is not cured within thirty (30) days following delivery
of written notice thereof from Lender to Borrower; provided, however, if the
same may not be cured within such thirty (30) day period, and Borrower is taking
all reasonable actions in regard to curing same, Borrower shall be allowed a
reasonable time not to exceed an additional thirty (30) days to perform or take
such actions required to cure the same, and Borrower shall keep Lender advised
of the status of all actions being taken by Borrower.

      

      
         

      

      
        (d)           Any
representation or warranty set forth in this Loan Agreement or in any of the
other Loan Documents is false or untrue in any material respect when
made.

      

      
        
          
            
            

          

          
            -12-

            
              

            

          

          
            
            

          

        

        (e)           Any
event which results in or permits the acceleration of the maturity of any
indebtedness of Borrower to others under any agreement or
undertaking.

      

      
         

        (f)           Borrower
suspends the transaction of its business for any period of
time.

      

      
         

        (g)           If
Borrower or any Obligated Party (as defined below): (i) becomes insolvent, or
makes a transfer in fraud of creditors, or makes an assignment for the benefit
of creditors, or admits in writing its inability to pay its debts as they become
due; (ii) generally is not paying its debts as such debts become due; (iii) has
a receiver, trustee, or custodian appointed for, or take possession of, all or
substantially all of the assets of such party, either in a proceeding brought by
such party or in a proceeding brought against such party and such appointment is
not discharged or such possession is not terminated within sixty (60) days after
the effective date thereof or such party consents to or acquiesces in such
appointment or possession; (iv) files a petition for relief under the United
States Bankruptcy Code or any other present or future federal or state
insolvency, bankruptcy, or similar laws (all of the foregoing hereinafter
collectively called "Applicable Bankruptcy
Law") or an involuntary petition for relief is filed against such party
under any Applicable Bankruptcy Law and such involuntary petition is not
dismissed within sixty (60) days after the filing thereof, or an order for
relief naming such party is entered under any. Applicable Bankruptcy Law, or any
composition, rearrangement, extension, reorganization, or other relief of
debtors now or hereafter existing is requested or consented to by such party;
(v) fails to have discharged within a period of 30 days any attachment,
sequestration, or similar writ levied upon any property of such party; or (vi)
fails to pay within 30 days any final money judgment against such
party.   The term "Obligated Party" as
used herein, shall mean any party other than Borrower who secures, guaranties,
and/or is otherwise obligated to all or any portion of the indebtedness
evidenced by the Notes.

      

      
         

        (h) If
Borrower or any Obligated Party is an entity, the liquidation, dissolution,
merger, or consolidation of any such entity or, if Borrower or any Obligated
Party is an individual, the death or legal incapacity of any such
individual.

      

      
         

        (i) Any
material adverse change in the financial condition or results of operation of
Borrower since the effective date of any financial statement previously
furnished to Lender by Borrower has occurred and is
continuing.

      

      
         

        Notwithstanding
anything in this Loan Agreement, the Notes or any of the other Loan Documents to
the contrary, upon the occurrence of an Event of Default, Lender may take any of
the actions provided in Section 15 below and concurrently and automatically with
the occurrence of a Default or Event of Default, further advances on the Loans
shall cease until such Default or Event of Default is cured.

      

      
         

        15.           Remedies. Upon the
occurrence of any one or more of the foregoing Events of Default, the entire
unpaid balance of principal of the Notes, together with all accrued but unpaid
interest thereon, and all other indebtedness then owing by Borrower to Lender,
shall, at the option of Lender, become immediately due and payable without
further presentation, demand for payment, notice of intent to accelerate, notice
of acceleration or dishonor, protest or notice of protest of any kind, all of
which are expressly waived by Borrower.

      

      
         

        16.           Rights Cumulative.
All rights of Lender under the terms of this Loan Agreement shall be cumulative
of, and in addition to, the rights of Lender under any and all other agreements
between Borrower
and Lender (including, but not limited to, the other Loan Documents), and not in
substitution or diminution of any rights now or hereafter held by Lender under
the terms of any other agreement.

      

      
        
          
            
            

          

          
            -13-

            
              

            

          

          
            
            

          

        

        17.           Waiver and
Agreement.   Neither the failure nor any delay on the part
of Lender to exercise any right, power or privilege herein or under any of the
other Loan Documents shall operate as a waiver thereof, nor shall any single or
partial exercise of such right, power or privilege preclude any other or further
exercise thereof or the exercise of any other right, power or
privilege.   No waiver of any provision in this Loan Agreement or
in any of the other Loan Documents and no departure by Borrower therefrom shall
be effective unless the same shall be in writing and signed by Lender, and then
shall be effective only in the specific instance and for the purpose for which
given and to the extent specified in such writing.   No
modification or amendment to this Loan Agreement or to any of the other Loan
Documents shall be valid or effective unless the same is signed by the party
against whom it is sought to be enforced.

      

      
         

        18.           Maximum Interest
Rate. Regardless of any provision contained in this Loan Agreement, any
of the other Loan Documents, or any other document or instrument executed
pursuant hereto or thereto, Lender shall never be entitled to receive, collect,
charge or apply, as interest on the Loans contemplated hereunder, any amount in
excess of the highest lawful rate, and, in the event Lender ever receives,
collects, charges or applies as interest, any such excess, such amount which
would be excessive interest shall be deemed a partial prepayment of principal
and treated hereunder as such; and, if the principal debt of the Loans is paid
in full, any remaining excess shall forthwith be paid to Borrower. In
determining whether or not the interest paid or payable under any specific
contingency exceeds the highest lawful rate, Borrower and Lender shall, to the
maximum extent permitted under applicable law, (i) characterize any
non-principal payment as an expense, fee, or premium rather than as interest,
(ii) exclude voluntary prepayments and the effects thereof, and (iii) amortize,
prorate, allocate, and spread, in equal parts, the total amount of interest
throughout the entire contemplated term of the Loans so that the interest rate
is uniform throughout the entire term of the Loans; provided, that if the Loans
are paid and performed in full prior to the end of the full contemplated term
thereof, and if the interest received for the actual period of existence thereof
exceeds the highest lawful rate, Lender shall refund to Borrower or credit
against the principal debt of the Loans the amount of such excess and, in such
event, Lender shall not be subject to any penalties provided by any laws for
contracting for, charging, taking, reserving, or receiving interest in excess of
the highest lawful rate.

      

      
         

        19.           Notices. Except as
otherwise provided herein, all notices, demands, requests, and other
communications required or permitted hereunder shall be given in writing and
sent by (i) personal delivery, or (ii) expedited delivery service with proof of
delivery, or (iii) United States mail, postage prepaid, registered or certified
mail, return receipt requested, or (iv) facsimile (provided that such facsimile
is confirmed by expedited delivery service or by United States mail in the
manner previously described), addressed to the addressee at such party's address
contained in the Loan Documents, or to such other address as either party shall
have designated by written notice, sent in accordance with this paragraph at
least thirty (30) days prior to the date of the giving of such
notice.   Any such notice or communication shall be deemed to
have been given and received either at the time of personal delivery, or in the
case of mail, as of three (3) days after deposit in an official depository of
the United States mail, or in the case of delivery service or facsimile, upon
receipt.   To the extent actual receipt is required, rejection or
other refusal to accept or the inability to deliver because of changed address
of which no notice was received shall be deemed to be receipt of the notice,
demand, request or other communication sent.

      

      
         

        20.           Construction. This
Loan Agreement and the other Loan Documents have been executed and delivered in
the State of Texas, shall be governed by and construed in accordance with the
laws of the State of Texas, and shall be performable by the parties hereto in
Houston, Harris County, Texas.

      

      
        
          
          

        

        
          -14-

          
            

          

        

        
          
          

        

      

      
        21.           Arbitration.    All
disputes, claims and controversies between Borrower and Lender, whether
individual, joint, or class in nature, arising from the Loans, any document
executed in connection therewith or otherwise, including without limitation
contract and tort disputes, shall be arbitrated pursuant to the Rules of the
American Arbitration Association, upon request of either Borrower or Lender. No
act to take or dispose of any collateral securing the Loans shall constitute a
waiver of this agreement to arbitrate or be prohibited by this agreement to
arbitrate.   This includes, without limitation, obtaining
injunctive relief or a temporary restraining order; invoking a power of sale
under any deed of trust or mortgage; obtaining a writ of attachment or
imposition of a receiver; or exercising any rights relating to personal
property, including taking or disposing of such property with or without
judicial process pursuant to Article 9 of the Uniform Commercial
Code.    Any disputes, claims, or controversies concerning
the lawfulness or reasonableness of any act, or exercise of any right concerning
any collateral securing the Loans, including any claim to rescind, reform, or
otherwise modify any agreement relating to the collateral securing the Loans,
shall also be arbitrated, provided however that no arbitrator shall have the
right or the power to enjoin or restrain any act of any party. Judgment upon any
award rendered by any arbitrator may be entered in any court having
jurisdiction; provided, however, that nothing contained herein shall be deemed
to be a waiver by Lender of the protections afforded to it under 12 USC Section
91, Texas Finance Code Section 59.007, or any other protection provided banks by
the laws of Texas or the United States. The statutes of limitations, estoppel,
waiver, laches, and similar doctrines which would otherwise be applicable in an
action brought by a party shall be applicable in any arbitration proceeding, and
the commencement of an arbitration proceeding shall be deemed the commencement
of an action for these purposes.   The Federal Arbitration Act
shall apply to the construction, interpretation, and enforcement of this
agreement to arbitrate.   If the Federal Arbitration Act is
inapplicable to any such claim or controversy for any reason, such arbitration
shall be conducted pursuant to the Texas General Arbitration Act and in
accordance with this agreement to arbitrate and Commercial Arbitration Rules of
the American Arbitration Association.

      

      
         

        22.           Choice of Forum; Consent to
Service of Process and Jurisdiction.    Subject to
the provisions of Section 21 hereof, any suit, action or proceeding against
Borrower with respect to this Loan Agreement, the Notes or any judgment entered
by any court in respect thereof, may be brought in the courts of the State of
Texas, County of Harris, or in the United States courts located in the State of
Texas as Lender in its sole discretion may elect and Borrower hereby submits to
the non-exclusive jurisdiction of such courts for the purpose of any such suit,
action or proceeding.   Borrower hereby irrevocably waives any
objections which it may now or hereafter have to the laying of venue of an suit,
action or proceeding arising out of or relating to this Loan Agreement or the
Note brought in the courts located in the State of Texas, County of Harris, and
hereby further irrevocably waives any claim that any such suit, action or
proceeding brought in any such court has been brought in any inconvenient
forum.

      

      
         

        23.           Invalid
Provisions.   If any provision of this Loan Agreement or
any of the other Loan Documents is held to be illegal, invalid or unenforceable
under present or future laws, such provision shall be fully severable and the
remaining provisions of this Loan Agreement or any of the other Loan Documents
shall remain in full force and effect and shall not be affected by the illegal,
invalid or unenforceable provision or by its
severance.    Furthermore, in lieu of each such illegal,
invalid or unenforceable provision, there shall be added as part of such Loan
Documents a provision mutually agreeable to Borrower and Lender as similar in
terms to such illegal, invalid or unenforceable provision as may be possible and
be legal, valid and enforceable. In the event Borrower and Lender are unable to
agree upon a provision to be added to the Loan Documents within a period of ten
(10) Business Days after a provision of the Loan Documents is held to be
illegal, invalid or unenforceable, then a provision acceptable to Lender as
similar in terms to the illegal, invalid and unenforceable provision as is
reasonably possible and be legal, valid and enforceable shall be added
automatically to such Loan Documents.  In either case, the effective
date of the added provision shall be the date upon which the prior provision was
held to be illegal, invalid or unenforceable.

      

      
        
          
          

        

        
          -15-

          
            

          

        

        
          
          

        

      

      
        24.           Expenses.  Borrower
shall pay all costs and expenses (including, without limitation, the reasonable
attorneys' fees of Lender's legal counsel) in connection with (i) the
preparation of this Loan Agreement and the other Loan Documents, and any and all
extensions, renewals, amendments, supplements, extensions or modifications
thereof, (ii) any action required in the course of administration of the Loans,
and (iii) any action in the enforcement of Lender's rights upon the occurrence
of a Default or Event of Default.

      

      
         

        25.           Binding Effect. This
Loan Agreement shall be binding upon and inure to the benefit of Borrower,
Lender and their respective heirs, successors, assigns and legal
representatives; provided however, that Borrower may not, without the prior
written consent of Lender, assign any rights, powers, duties or obligations
thereunder.

      

      
         

        26.           Assignments and
Participations by Lender. Lender may, at any time, without the consent of
Borrower, (a) assign to one or more assignees all or a portion of its rights and
obligations under this Loan Agreement (including all or a portion of its
commitment to make the Borrowing Base Loan and/or the advances thereunder then
owing to it) and (b) sell participations to any person in all or a portion of
Lender's rights and obligations under this Loan Agreement (including all or a
portion of its commitment to make the Borrowing Base Loan and/or the advances
thereunder then owing to it). From and after the effective date of any
assignment, the assignee shall be a party to this Loan Agreement and, to the
extent of the interest assigned to such assignee, shall have the rights and
obligations of Lender under this Agreement and Lender shall, to the extent of
the interest assigned by it to such assignee, be released from its obligations
under this Loan Agreement (and, in the case of an assignment covering all of
Lender's rights and obligations under this Agreement, Lender shall cease to be a
party hereto) but shall continue to be entitled to the benefits of all
indemnities, releases and waivers made by Borrower under this Agreement and the
other Loan Documents.

      

      
         

        27.           Offset. Borrower
hereby grants to Lender, upon the occurrence of a Default or Event of Default,
the right of offset, to secure repayment of the Notes, upon any and all moneys,
securities or other property of Borrower and the proceeds therefrom, now or
hereafter held or received by or in transit to Lender or any of its agents, from
or for the account of Borrower whether for safe keeping, custody, pledge,
transmission, collection or otherwise, and also upon any and all deposits
(general or special) and credits of Borrower, and any and all claims of Borrower
against Lender at any time existing.

      

      
         

        28.           Headings.   Section
headings are for convenience of reference only and shall in no way affect the
interpretation of this Loan Agreement.

      

      
         

        29.           Survival. All
representations and warranties made by Borrower in this Loan Agreement shall
survive delivery of the Notes and the making of the Loans.

      

      
         

        30.           No Third Party
Beneficiary.    The parties do not intend the
benefits of this Loan Agreement to inure to any third party, nor shall this Loan
Agreement be construed to make or render Lender liable to any materialman,
supplier, contractor, subcontractor, purchaser or lessee of any property owned
by  Borrower,  or for  debts  or
claims  accruing to  any  such
persons  against Borrower. Notwithstanding anything contained herein
or in the Notes, or in any other Loan Documents, or any conduct or course of
conduct by any or all of the parties hereto, before or after signing this Loan
Agreement or any of the other Loan Documents, neither this Loan Agreement nor
any other Loan Documents shall be construed as creating any right, claim or
cause of action against Lender, or any of its officers, directors, agents or
employees, in favor of any materialman, supplier, contractor, subcontractor,
purchaser or lessee of any property owned by Borrower, nor to any other person
or entity other than Borrower.

      

      
        
          
          

        

        
          -16-

          
            

          

        

        
          
          

        

      

      
        31.           Counterparts.    This
Loan Agreement may be separately executed in any number of counterparts, each of
which shall be an original, but all of which, taken together, shall be deemed to
constitute one and the same agreement.

      

      
         

        32.           Waiver of Special
Damages.  BORROWER WAIVES, TO THE MAXIMUM EXTENT NOT PROHIBITED
BY LAW, ANY RIGHT BORROWER MAY HAVE TO CLAIM OR RECOVER FROM LENDER IN ANY LEGAL
ACTION OR PROCEEDING ANY SPECIAL, EXEMPLARY, PUNITIVE, OR CONSEQUENTIAL
DAMAGES.

      

      
         

        33.           Jury    Waiver.        BORROWER    AND    LENDER    HEREBY    VOLUNTARILY,
KNOWINGLY, IRREVOCABLY AND UNCONDITIONALLY WAIVE ANY RIGHT TO HAVE A JURY
PARTICIPATE IN RESOLVING ANY DISPUTE (WHETHER BASED UPON CONTRACT, TORT OR
OTHERWISE) BETWEEN BORROWER AND LENDER ARISING OUT OF OR IN ANY WAY RELATED TO
THIS LOAN AGREEMENT OR ANY OTHER LOAN DOCUMENTS.   THIS PROVISION
IS A MATERIAL INDUCEMENT TO LENDER TO PROVIDE THE FINANCING DESCRIBED HEREIN OR
IN THE OTHER LOAN DOCUMENTS.

      

      
         

        34.           USA Patriot Act
Notification.    The following notification is
provided to Borrower pursuant to Section 326 of the USA Patriot Act of 2001, 31
U.S.C. Section 5318:

      

      
         

        IMPORTANT
INFORMATION ABOUT PROCEDURES FOR OPENING A NEW ACCOUNT. To help the government
fight the funding of terrorism and money laundering activities, Federal law
requires all financial institutions to obtain, verify, and record information
that identifies each person or entity that opens an account, including any
deposit account, treasury management account, loan, other extension of credit,
or other financial services product. What this means for Borrower: When Borrower
opens an account, if Borrower is an individual, Lender will ask for Borrower's
name, taxpayer identification number, residential address, date of birth, and
other information that will allow Lender to identify Borrower, and, if Borrower
is not an individual, Lender will ask for Borrower's name, taxpayer
identification number, business address, and other information that will allow
Lender to identify Borrower. Lender may also ask, if Borrower is an individual,
to see Borrower's driver's license or other identifying documents, and, if
Borrower is not an individual, to see Borrower's legal organizational documents
or other identifying documents.

      

      
        
          
            
              
                 

                35.           Entire Agreement.
THIS LOAN AGREEMENT REPRESENTS THE FINAL AGREEMENT BETWEEN THE PARTIES AND MAY
NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS, OR SUBSEQUENT ORAL
AGREEMENTS OF THE PARTIES. THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE
PARTIES.

              

            

          

        

      

      
        
          
            
            

          

          
            -17-

            
              

            

          

          
            
            

          

        

        If the
foregoing correctly sets forth our mutual agreement, please so acknowledge by
signing and returning the additional copy of this Loan Agreement enclosed
herewith.

         

      

      
        
          
            	
                    Address:

                  	
                    REGIONS
      BANK

                  
	
                    5005
      Woodway, Suite 110

                  	 
      
	
                    Houston,
      Texas 77056

                  	
                    By

                  
	 	

                    Name:

                  
	 	

                    Title:

                  

          

        

      

      
        

         

        ACCEPTED
this 26th day of May, 2009.

      

      
        

         

        BORROWER:

      

      
         

        VERTEX
ENERGY, INC.

      

      
        

         

        By: /s/ Benjamin P.
Cowart                                                                      

      

      
        Benjamin
P. Cowart, President

      

      
        

         

        List of
Attachments

      

      
        

         

        Exhibit
"A"      -      Form
of Request for Advance

      

      
        Exhibit
"B"       -      Form
of Borrowing Base Certificate

      

      
        Exhibit
"C"       -     
Form of Certificate of Compliance

        
          
            
            

          

          
            -18-

            
              

            

          

          
            
            

          

        

      

      
        EXHIBIT
"A" REQUEST FOR ADVANCE

      

      
        

         

        Dated     ,
200_

      

      
        

         

        In
accordance with the Letter Loan Agreement ("Loan Agreement") dated May,
2009,   between  REGIONS   BANK  ("Lender")   and  VERTEX  ENERGY,   INC.,   a  Nevada   corporation

      

      
        ("Borrower").
I,                   of
Borrower, hereby request on behalf of Borrower an advance on
the

      

      
        

         

        Borrowing
Base Loan in the amount of
$                     ,
and certify and warrant that the following schedule
accurately states the Borrowing Base as of the date hereof:

      

      
        

         

        1. 
Total Accounts Receivable as
of                                                                                                      

      

      
        2. 
Less:

      

      

      
        
          
            
              	
                      (A)

                    	
                      Accounts
      90 days past due

                    	
                      $

                    
	
                      (B)

                    	
                      Affiliate/Subsidiary
      Accounts

                    	
                      $

                    
	
                      (C)

                    	
                      Financially
      Distressed

                    	
                      $

                    
	
                      (D)

                    	
                      Foreign
      (No L/C)

                    	
                      $

                    
	
                      (E)

                    	
                      Governmental

                    	
                      $

                    
	
                      (F)

                    	
                      Concentrations

                    	
                      $

                    
	
                      (G)

                    	
                      Other
      Ineligible Accounts

                    	
                      $

                    

            

          

        

      

      
         

        3. Eligible
Accounts
Receivable         

                                                                                                                     

      

      
        4. 80%
of Line
3          

                                                                                    

      

      
        5. Total
Inventory as of

                                                                                              

      

      
        6. Less:

      

      

      
        (A) Conditionally
Shipped to
Customer        

      

      
        (B) Subject
to
claims                                                      

      

      
        (C) Other
Ineligible
Inventory                                                      

      

       

      
        7. Eligible
Inventory     

                                                                                         

      

      
        8. 50%
of Line 7, not to exceed Line 4    

                                                                                          

      

      
        9. Total
of Lines 4 and 8  

                                                                                            

      

      
        10. Loan
Balance this report        

                                                                                      

      

      
        11.
Outstanding Letters of
Credit       

                                                                                       

      

      
        12. Total
of Lines 10 and
11           

                                                                                   

      

      
        13.
Excess of line 9 over line
12                                                                                     

        EXHIBIT "A"

      

      
        
          
            
            

          

          
            -19-

            
              

            

          

          
            
            

          

        

         

      

      
        I further
certify and warrant that (i) as of the date of this Request, all of the
representations and warranties of Borrower contained in the Loan Agreement are
true and correct, (ii) all conditions precedent to this Request have been
satisfied, (iii) there has been no material adverse change in the financial
condition of Borrower from that shown by the last financial statements furnished
to Lender, (iv) no Default or Event of Default under the Loan Agreement is
existing on the date of this Request, (v) the foregoing report is true and
correct as of the date hereof, and (vi) the items mentioned herein constitute
Collateral in accordance with the terms of the Loan Agreement. The foregoing
defined terms have the meaning given to them in the Loan Agreement.

         

      

      
        
          
            
              	 
      	
                      VERTEX
      ENERGY, INC.

                    
	 
      	
                      By:

                    
	 
      	
                      Benjamin
      P. Cowart,
President

                    

            

          

         

        
          
            
            

          

          
            -20-

            
              

            

          

          
            
            

          

        

        
          
          
EXHIBIT
"B" BORROWING BASE CERTIFICATE

      

      
        

         

        Dated       ,
200_

      

      
        

         

        In
accordance with the Letter Loan Agreement ("Loan Agreement") dated May,
2009,  between  REGIONS   BANK  ("Lender")   and  VERTEX  ENERGY,   INC.,   a  Nevada   corporation

      

      
        ("Borrower").
I,           of Borrower,
hereby certify and warrant that the following

      

      
        

         

        schedule
accurately states the Borrowing Base as of the date hereof.

      

      
        

         

        1. Total
Accounts Receivable as
of                                                                  

      

      
        2. Less:

      

      

      
        
          
            	
                    (A)

                  	
                    Accounts
      90 days past due

                  	
                    $

                  
	
                    (B)

                  	
                    Affiliate/Subsidiary
      Accounts

                  	
                    $

                  
	
                    (C)

                  	
                    Financially
      Distressed

                  	
                    $

                  
	
                    (D)

                  	
                    Foreign
      (No L/C)

                  	
                    $

                  
	
                    (E)

                  	
                    Governmental

                  	
                    $

                  
	
                    (F)

                  	
                    Concentrations

                  	
                    $

                  
	
                    (G)

                  	
                    Other
      Ineligible Accounts

                  	
                    $

                  

          

        

      
         

        3. Eligible
Accounts
Receivable                                                                                      

      

      
        4. 80% of
Line
3                                                                                      

      

      
        5. Total
Inventory as
of                                                                                      

      

      
        6.  Less:

      

      

      
        (A) Conditionally
Shipped to
Customer        

      

      
        (B)
Subject to
claims                                                      

      

      
        (C) Other
Ineligible
Inventory                                                      

      

      

      
        7. Eligible
Inventory                                                                                      

      

      
        8. 50% of
Line 7, not to exceed Line
4                                                                                      

      

      
        9. Total
of Lines 4 and
8                                                                                      

      

      
        
          
            
            

          

          
            -21-

            
              

            

          

          
            
            

          

        

         

      

      
        I further
certify and warrant that (i) as of the date of this Certificate, all of the
representations and warranties of Borrower contained in the Loan Agreement are
true and correct, (ii) there has been no material adverse change in the
financial condition of Borrower from that shown by the last financial statements
furnished to Lender, (iii) no Default or Event of Default under the Loan
Agreement is existing on the date of this Certificate, (iv) the foregoing report
is true and correct as of the date hereof, and (v) the items mentioned herein
constitute Collateral in accordance with the terms of the Loan Agreement. The
foregoing defined terms have the meaning given to them in the Loan
Agreement.

      

      
        

        
          
            
              
                
                  	 	VERTEX
      ENERGY, INC.
	 	 
	 	
                          By:

                        
	 
      	
                          Benjamin
      P. Cowart,
President

                        

                

              

            

          

        

      

      
        

         

         

      

      
         

        
          
            
            

          

          
            -22-

            
              

            

          

          
            
            

          

        

      

      
        EXHIBIT
"C" CERTIFICATE OF COMPLIANCE

      

      
        

         

        Dated          ,
200

      

      
        

         

        In
accordance with the Letter Loan Agreement ("Loan Agreement") dated May,
2009,

      

      
        between  REGIONS   BANK  ("Lender")   and  VERTEX  ENERGY,   INC.,   a  Nevada   corporation
("Borrower"). I,of Borrower, hereby certify and warrant that:

      

      
        

         

        
          	
                  1.

                	
                  Borrower
      is in full compliance with all of its obligations under the Loan Agreement
      as of the date hereof.

                

        

      

      
        

         

        2.           Borrower's
financial condition for the
fiscal      ending      is
as follows:

      

      
        

        
          
            
              
                
                  
                    
                      
                        
                          
                            
                              
                                
                                  
                                    	
                                            FINANCIAL COVENANT

                                          	
                                            REQUIRED RATIO
      OR AMOUNT

                                          	
                                            ACTUAL RATIO OR AMOUNT

                                             

                                          
	
                                            Minimum
      Tangible Net Worth

                                          	
                                            At
      least $1,500,000.00 and increasing
      by       

                                          	
                                            $                           
      

                                          
	 	      
                                            50%
      of net income

                                          	
                                             
      

                                          
	
                                            Liabilities/Tangible
      Net Worth

                                          	
                                            Not
      greater than 4.0 to 1.0

                                          	
                                            to
      1.0

                                          
	
                                            Debt
      Service Coverage Ratio

                                          	
                                            Not
      less than 1.5 to 1.0

                                          	
                                            to
      1.0

                                          
	
                                            Funded
      Bank Debt Ratio

                                          	
                                            Not
      greater than 3.5 to 1.0

                                          	
                                            to
      1.0

                                          
	
                                            Minimum
      Liquidity

                                          	
                                            Not
      less than $ 1,500,000.00

                                          	
                                            $                          
       

                                          

                                  

                                

                              

                            

                          

                        

                      

                    

                  

                

              

            

          

        

                

      

      
        The
foregoing defined terms have the meaning given to them in the Loan
Agreement.

      

      
        

      

      
        
          
            
              
                
                  	 	

                          VERTEX
      ENERGY, INC.

                        
	 	 
	 
      	
                          By:

                        
	 
      	
                          Benjamin
      P. Cowart,
President

                        

                

              

            

          

        

         

        
          
            
            

          

          
            -23-ex10-9.htm

    
      Exhibit 10.9

      REVOLVING LINE OF CREDIT PROMISSORY
NOTE

    

    
      

    

    
      	
              $3,500,000.00

            	
              May
      26, 2009

            

    

    
      

    

    
      

       

      FOR VALUE
RECEIVED, the undersigned, VERTEX ENERGY, INC., a Nevada corporation (the
"Maker", whether one or more, and if more than one, jointly and severally)
promises to pay to the order of REGIONS BANK (the "Payee", together with any and
all subsequent owners and holders of this Note), at its offices at 5005 Woodway,
Suite 110, Houston, Texas 77056, or such other place as Payee shall designate in
writing to Maker, which at the time of payment is legal tender of the United
States of America for payment of public and private debts, the principal sum of
$3,500,000.00, or so much thereof as may be advanced and outstanding hereunder,
together with interest thereon from and after date hereof until maturity at a
rate per annum which shall from day to day be equal to the lesser of (a) a
fluctuating rate per annum (the "Contract Rate") set forth in the hereinafter
defined Loan Agreement, or (b) the Maximum Rate (as hereinafter defined);
provided, however, if at any time the Contract Rate shall exceed the Maximum
Rate, thereby causing the interest rate on the principal of the Note to be
limited to the Maximum Rate, then notwithstanding any subsequent change in
either the Index Rate or the Maximum Rate that would otherwise reduce the
Contract Rate to less than the Maximum Rate, the rate of interest on the
principal of this Note shall remain equal to the Maximum Rate until the total
amount of interest accrued on the principal of this Note equals the amount of
interest which would have accrued on the principal of this Note if the Contract
Rate had at all times been in effect.

    

    
       

      It is
expressly understood, notwithstanding any provision herein to the contrary, that
this Note is a revolving line of credit note established pursuant to the terms
of a Letter Loan Agreement (the "Loan Agreement") of even date herewith, by and
between Maker and Payee. Subsequent and periodic advances in various increments
will be made to Maker pursuant to the Loan Agreement up to, but in no event to
exceed, the maximum of the face value hereof. The unpaid principal balance of
this Note at any time shall be the total amounts loaned or advanced hereunder by
Payee, less the amount of payments or prepayments of principal made hereon by or
for the account of Maker. It is contemplated that by reason of prepayments
hereon, there may be times when no indebtedness is owing hereunder; provided,
notwithstanding such occurrence, this Note shall remain valid and shall be in
full force and effect as to the advances made pursuant to and under the terms of
this Note subsequent to such occurrence. Each advance and each payment on
account of principal or interest shall be reflected by a notation made by Payee
in its records kept in the ordinary course of its business with regard to this
Note. The aggregate unpaid amount of advances reflected by the notations in such
records shall be deemed rebuttable presumptive evidence of the principal amount
owing under this Note, which amount Maker unconditionally promises to pay to the
order of Payee under the terms hereof. In the event that the unpaid principal
amount hereof at any time, for any reason, exceeds the maximum amount specified
in the Loan Agreement, Maker covenants and agrees to pay the excess principal
amount immediately upon demand and such excess principal amount shall in all
respects be deemed to be included among the advances made pursuant to the terms
of this Note and shall bear interest at the rate specified
above.

    

    
       

      Interest
only, accruing and to accrue on this Note, shall be due and payable as provided
in the Loan Agreement until three hundred sixty-four (364) days after the date
hereof, when the entire amount, principal and interest then remaining unpaid,
shall be due and payable.

    

    
       

      If a
payment is 10 or more days late, Maker will pay a delinquency charge in an
amount equal to the greater of (i) 5.0% of the amount of the delinquent payment
up to the maximum amount of $1,500.00, or (ii) $25.00. All payments due under
this Note shall be made by Maker without offset or other reduction. Upon an
Event of Default (as defined in the Loan Agreement) and the expiration of any
notice and/or
cure period provided in the Loan Agreement, including failure to pay upon final
maturity, and acceleration of the principal balance of this Note, Payee, at its
option, may also, if permitted under Applicable Law (as defined below), do one
or both of the following: (a) increase the Contract Rate to the Maximum Rate (as
defined below), and (b) add any unpaid accrued interest to principal and such
sum will bear interest therefrom until paid at the rate provided in this Note
(including any increased Contract Rate).

    

    
      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

      If any
payment of principal or interest on this Note shall become due on a day which is
not a Business Day, such payment shall be made on the next succeeding Business
Day and such extension of time shall be included in the computing of interest in
connection with such payment. Any check, draft, money order or other instrument
given in payment of all or any portion of this Note may be accepted by Payee and
handled in collection in the customary manner, but the same shall not constitute
payment or diminish any rights of Payee except to the extent that actual cash
proceeds of such instrument are unconditionally received by
Payee.

    

    
       

      Unless
otherwise agreed in writing, or otherwise required by Applicable Law, interest
on this Note will be calculated on the unpaid principal balance to the date each
installment is paid and each installment payment will be applied first to unpaid
accrued interest, then to principal, and any remaining amount to any unpaid
collection costs, delinquency charges and other charges; provided, however, upon
delinquency or other Event of Default, Payee reserves the right to apply
installment payments among principal, interest, delinquency charges, collection
costs and other charges, at its discretion.

    

    
       

      Maker
shall have the privilege to prepay at any time, and from time to time, all or
any part of the principal amount of this Note, without notice, penalty or fee.
Except as expressly provided herein to the contrary, all prepayments on this
Note shall be applied in the following order of priority: (i) the payment or
reimbursement of any expenses, costs, or obligations (other than the outstanding
principal balance hereof and interest hereon) for which either Maker shall be
obligated or Payee shall be entitled pursuant to the provisions of this Note or
the other Security Instruments (as defined below), (ii) the payment of accrued
but unpaid interest hereon, and (iii) the payment of all or any portion of the
principal balance hereof then outstanding hereunder, in the inverse order of
maturity.

    

    
       

      Maker
agrees that upon the occurrence of an Event of Default, the holder of this Note
may, at its option, without further notice or demand except as provided in the
Loan Agreement, (i) declare the outstanding principal balance of and accrued but
unpaid interest on this Note at once due and payable, (ii) refuse to advance any
additional amounts under this Note, (iii) foreclose all liens securing payment
hereof, (iv) pursue any and all other rights, remedies, and recourses available
to the holder hereof, including but not limited to any such rights, remedies, or
recourses under any of the Security Instruments, or other loan documents, at law
or in equity, or (v) pursue any combination of the foregoing.

    

    
       

      All
makers, endorsers, sureties and guarantors hereof, as well as all other parties
to become liable on this Note, hereby severally: (i) except as specifically
provided in the Loan Agreement, waive notice of default, demand, notice of
intent of demand, presentment for payment, notice of non-payment, protest,
notice of protest, grace, notice of intent to accelerate maturity, notice of
acceleration of maturity, filing of suit, diligence in collection or enforcing
any of the security for this Note; (ii) agree that they are and shall be
jointly, severally, directly and primarily liable for the repayment of all sums
due and owing under this Note; (iii) consent to any and all renewals, extensions
and modification in the time of payment and to any other indulgence with respect
to this Note; (iv) agree that Payee shall not be required first to institute
suit or exhaust its remedies against Maker or others liable or to become liable
on this Note, or to enforce its rights against them or any security for this
Note; (v) agree to any substitution, subordination, exchange or release of any
security for this Note, or the release of any party primarily or secondarily
liable on this Note; and (vi) acknowledge that Payee has no duty of good faith
to Maker and that no fiduciary, trust or other special relationship exists
between Maker and Payee. Maker acknowledges and agrees that it may be
required to pay this Note in full without assistance from any other party, or
any collateral or security for this Note. Payee shall not be required to
mitigate damages, file suit, or take any action to foreclose, proceed against,
or exhaust any collateral or security in order to enforce the payment of this
Note.

    

    
      
        
          
          

        

        
          -2-

          
            

          

        

        
          
          

        

      

      Upon the
occurrence of an Event of Default, and if any action is taken by Payee to
enforce the terms and provisions of this Note, including, but not limited to,
this Note is placed in the hands of an attorney for collection, or suit is
brought on same, or the same is collected through any Probate, Bankruptcy Court,
or any judicial proceeding whatsoever, then Maker agrees and promises to pay
Payee's reasonable expenses and costs, including, but not limited to, attorney's
fees.

    

    
       

      It is
expressly provided and stipulated that notwithstanding any provision of this
Note or any other instrument evidencing or securing the loan evidenced hereby,
in no event shall the aggregate of all interest paid by Maker to Payee under
this Note ever exceed the Maximum Rate on the principal balance of this Note
from time to time advanced and remaining unpaid. In this connection, it is
expressly stipulated and agreed that it is the intent of Payee and Maker in the
execution and delivery of this Note to contract in strict compliance with
Applicable Law as defined below. In furtherance thereof, none of the terms of
this Note or any other instrument evidencing or securing the loan evidenced
hereby, shall ever be construed to create a contract to pay for the use,
forbearance or detention of money, at a rate in excess of the Maximum Rate
permitted to be charged of Maker under Applicable Law. Maker or any guarantors,
endorsers or other parties now or hereafter becoming liable for payment of this
Note shall never be liable for interest in excess of the Maximum Rate, and the
provision of this paragraph and the immediately succeeding paragraph shall
govern over all other provisions of this Note and any instruments evidencing or
securing the loan evidenced hereby, should such provisions be in apparent
conflict herewith.

    

    
       

      Specifically
and without limiting the generality of the foregoing paragraph, it is expressly
provided that:

    

    
       

      
        	
                 
      

              	
                (i)
      In the event of prepayment of the principal of this Note (if permitted
      hereunder) or the payment of the principal of this Note prior to the
      stated maturity date hereof resulting from acceleration of maturity of
      this Note, if the aggregate amounts of interest accruing hereon prior to
      such payment plus the amount of any interest accruing after maturity and
      plus any other amounts paid or accrued in connection with the loan
      evidenced hereby which by Applicable Law are deemed interest on the loan
      evidenced by this Note and which aggregate amount paid or accrued (if
      calculated in accordance with the provisions of this Note other than this
      paragraph) would exceed the Maximum Rate, then in such event the amount of
      such excess shall be credited, as of the date paid, toward the payment of
      principal of this Note so as to reduce the amount of the final payment of
      principal due on this Note;

              

      

    

    
       

      
        	
                 
      

              	
                (ii)
      If under any circumstance the aggregate amounts paid on the loan evidenced
      by this Note prior to and incident to the final payment hereof include
      amounts which by Applicable Law are deemed interest and which would exceed
      the Maximum Rate, Maker stipulates that such payment and collection will
      have been and will be deemed to have been the result of a mathematical
      error on the part of both Maker and Payee, and any excess shall be
      credited on the Note by Payee. If this Note shall have been paid in full,
      Payee shall promptly refund the amount of such excess (to the extent only
      of the excess of such interest payments above the Maximum Rate) upon the
      discovery of such error or notice thereof;
and

              

      

       

    

    
      
        	
                 
      

              	
                (iii)
      All amounts paid or agreed to be paid in connection with the indebtedness
      evidenced by this Note which would under Applicable Law be deemed interest
      shall, to the extent provided
      by Applicable Law, be amortized, prorated, allocated and spread throughout
      the full term of this
Note.

              

      

    

    
      
        
        

      

      
        -3-

        
          

        

      

      
        
        

      

    

    
      As
security for this Note and all indebtedness which may at any time be owing by
any Maker under this Note to Payee, each Maker hereby grants Payee a right of
setoff on any property of any Maker in its possession, including, without
limitation, that which it may hold for collection or safekeeping, and on any
money or accounts on deposit with Payee, and Payee may retain and apply the
property, money, securities or accounts to the payment of this Note or such
other indebtedness with or without notice to any Maker. This right of Payee is
in addition to any other right of setoff which Payee may have under Applicable
Law.

    

    
       

      As used
herein, the term "Applicable Law"
means that law in effect from time to time and applicable to this Note,
including the laws of the State of Texas and laws of the United States of
America.

    

    
       

      As used
herein, the term "Maximum Rate" means
the maximum lawful nonusurious rate of interest (if any) which under Applicable
Law Payee is permitted to charge Maker on this Note from time to time. It is
intended that Chapter 303 of the Texas Finance Code shall be included in the
laws of the State of Texas in determining Applicable Law; and for the purpose of
applying such provisions to this Note, the interest ceiling applicable to this
Note shall be the "weekly ceiling" from time to time in effect. If Applicable
Law does not provide for a maximum non-usurious rate of interest, the Maximum
Rate shall be 24% per annum.

    

    
       

      Except as
otherwise provided herein, all notices, demands, requests, and other
communications required or permitted hereunder shall be given in writing as
provided in the Loan Agreement.

    

    
       

      This Note
is secured by all security agreements, guaranty agreements, loan agreements,
collateral assignments, mortgages, deeds of trust and any other lien instruments
executed by Maker, or any other party as pledger, surety, or guarantor for
Maker, in favor of Payee, including those executed simultaneously herewith,
those previously executed and those hereafter executed (the "Security
Instruments"), including, but not limited to, the
following:

    

    
      
        
           

          
            	
                     
      

                  	
                    (i) Security
      Agreement of even date herewith, executed by Maker for the benefit of
      Payee, 

                     

                    (ii) Lockbox
      Agreement of even date herewith, executed by Maker and
    Payee.

                  

          

        

      

      
        
           

          
            	
                     
      

                  	
                    
                      (iii) Subordination
      Agreement of even date herewith, executed by Maker and Benjamin P. Cowart,
      for the benefit of
Payee.

                    

                  

          

        

        
           

        

      

    

    
       

    

    
      
        
          
          

        

        
          -4-

          
            

          

        

        
          
          

        

      

      Where
appropriate, any pertinent noun, verb or pronoun shall be construed and
interpreted to include both the proper number and gender. This Note shall not be
renewed, extended, or modified except by a written instrument evidencing the
same.

       

    

    
      
        
          
            	
                    Address:

                  	
                    VERTEX
      ENERGY, INC.

                  
	 	 
	
                    1331
      Gemini, Suite 103

                  	
                    By:
      /s/ Benjamin P.
      Cowart   

                  
	
                    Houston,
      TX 77058

                  	
                    Name:
      Benjamin P. Cowart

                  
	 
      	
                    Title:
      CEO

                  

          

        

      

    

    
      

      
        
          
          

        

        
          -5-

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