Line of Credit, Guarantee and Security Agreement, dated as of May 3, 2019 (as amended and restated as of May 9, 2019 and May 10, 2019), among Pilot Travel Centers LLC, Nixon Product Storage, LLC and the other loan parties hereto

 

 

THIS LINE OF CREDIT, GUARANTEE AND SECURITY AGREEMENT (as amended, modified or supplemented from time to time, this “Agreement”) made as of May 3, 2019 (as amended as of May 9, 2019 and May 10, 2019) by and among Pilot Travel Centers LLC, a Delaware limited liability company (the “Lender”), Nixon Product Storage, LLC, a Delaware limited liability company (the “Borrower”), Lazarus Refining & Marketing, LLC, a Delaware limited liability company (“LR&M” and, together with the Borrower, the “Grantors”), Lazarus Energy Holdings LLC, a Delaware limited liability company (“Lazarus”), Lazarus Energy LLC, a Delaware limited liability company (“Lazarus Energy”), Blue Dolphin Energy Company, a Delaware corporation (“Blue Dolphin” or “Pledgor”) and any other Loan Parties (as defined below) from time to time a party hereto.

WHEREAS, Borrower may request advances from Lender under a line of credit, and the parties wish to provide for the terms and conditions upon which such advances, if made by Lender, shall be made; and

WHEREAS, the Guarantors (as defined below) desire to guarantee the Obligations (as defined below) of the Loan Parties (as defined below), and the Grantors desire to grant to the Lender a security interest in the Collateral (as defined below) to secure any and all Obligations.

NOW, THEREFORE, in consideration of any Loan (including any Loan by renewal or extension) hereafter made to Borrower by Lender and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged by Borrower, the parties agree as follows:

When used herein the following terms shall have the following meanings:

“Account” has the meaning ascribed to such term in the UCC.

“Account Debtor” has the meaning ascribed to such term in the UCC.

“Affiliate” of any Person means (a) any other Person which directly or indirectly through one or more intermediaries controls, is controlled by, or is under common control with, such Person, (b) any other Person which beneficially owns or holds twenty percent (20%) or more of the voting control or Equity Interests of such Person, (c) any other Person of which twenty percent (20%) or more of the voting control or Equity Interest of which is beneficially owned or held by such Person, or (d) any officer or director of such Person.

“Affiliate Funding Transactions” means (a) any extension of credit by any Loan Party (other than Borrower) to, and any corresponding payment by any Loan Party (other than Borrower) in exchange for such credit on account of, any Affiliate (or the ordinary-course repayment of such credit to such Loan Party) to fund the ordinary course of business operations, or administrative or capital expenditures required in connection with ordinary course of business operations, of such Affiliate consistent with past practice or (b) otherwise expressly consented to by the Lender (which consent may be provided by email).

“Agreement” has the meaning assigned in the introductory paragraph hereof.

“AML Laws” means all laws, rules, and regulations of any jurisdiction applicable to any Loan Party or their Subsidiaries from time to time concerning or relating to anti-money laundering.

“Anti-Corruption Laws” means all laws, rules, and regulations of any jurisdiction applicable to any Loan Party or their Subsidiaries from time to time concerning or relating to bribery or corruption.

“Anti-Terrorism Laws” means any of the following: (a) the Anti-Terrorism Order; (b) the Terrorism Sanctions Regulations (Title 31 Part 595 of the U.S. Code of Federal Regulations); (c) the Terrorism List Governments Sanctions Regulations (Title 31 Part 596 of the U.S. Code of Federal Regulations); (d) the Foreign Terrorist Organizations Sanctions Regulations (Title 31 Part 597 of the U.S. Code of Federal Regulations); (e) the PATRIOT Act; and (f) any regulations promulgated pursuant thereto.

“Anti-Terrorism Order” means Section 1 of Executive Order 13224 of September 24, 2001, Blocking Property and Prohibiting Transactions With Persons Who Commit, Threaten to Commit, or Support Terrorism (Title 12, Part 595 of the U.S. Code of Federal Regulations).

“Asset Sale” means any sale, lease, transfer or other disposition of property or series of related sales, leases, transfers or other dispositions of property, in each case, constituting Collateral by any of the Loan Parties and their Subsidiaries that yields Net Cash Proceeds to any of the Loan Parties and their Subsidiaries.

“Assignee” has the meaning set forth in Section 12.1.1 hereof.

“Blue Dolphin” has the meaning assigned in the introductory paragraph hereof.

“Blue Dolphin Parent Guarantee” has the meaning assigned in Section 11.1 hereof.

“Borrower” has the meaning assigned in the introductory paragraph hereof.

“Borrowing” means a borrowing of an advance hereunder.

“Business Day” means any day other than Saturday, Sunday or a day on which banks in New York, New York, or Houston, Texas, are authorized or required to close.

“Cadence Bank Account” has the meaning set forth in Section 7.16 hereof.

“Change in Law” means the occurrence, after the date of this Agreement, of any of the following: (a) the adoption or taking effect of any law, rule, regulation or treaty, (b) any change in any law, rule, regulation or treaty or in the administration, interpretation, implementation or application thereof by any Governmental Authority, or (c) the making or issuance of any request, rule guideline or directive (whether or not having the force of law) by any Governmental Authority.

“Chattel Paper” has the meaning ascribed to such term in the UCC.

“Closing Date” has the meaning set forth in Section 11.1 hereof.

“Code” means the Internal Revenue Code of 1986, as amended from time to time.

“Collateral” means (a) the “Pledged Collateral” as defined in the Pledge Agreement, (b) all of the property of the Grantors described in Section 4.1 hereof, and (c) all other real or personal property of any Loan Party or any other Person, now or hereafter pledged to Lender to secure, either directly or indirectly, repayment of any of the Obligations.

“Collection Accounts” means each deposit account or securities account maintained, in each case in the name of a Grantor at a bank or other financial institution pursuant to a control agreement in form and substance satisfactory to the Lender for the purpose of receiving Collections and each other deposit account or securities account maintained in Borrower’s name.

“Collections” means, with respect to any Receivable that is Collateral, all funds that are received by a Grantor in payment of any amounts owed in respect of such Receivable (including purchase price, finance charges, interest and all other charges and all proceeds of any drawing under any letter of credit with respect to such Receivable), or applied to amounts owed in respect of such Receivable (including insurance payments and net proceeds of the sale or other disposition of repossessed goods or other collateral or property of the related obligor or any other Person directly or indirectly liable for the payment of such Receivable and available to be applied thereon).

“Commercial Tort Claims” has the meaning ascribed to such term in the UCC.

“Commitment Period” means the period commencing on the date when the Lender has received a copy of a commitment executed by the Borrower and a proposed lender, subject only to customary and usual conditions, for a loan for the purpose of refinancing all of the Obligations, which commitment is in form and substance reasonably satisfactory to Lender and is provided by a proposed lender reasonably believed to be capable of providing such refinancing prior to the Maturity Date on the terms in the commitment letter and ending on the first to occur of (i) the termination, withdrawal, repudiation, or similar action of such commitment letter by either party thereto, (ii) termination of the commitment period set forth in such commitment letter, (iii) the failure by the Borrower to meet any condition set forth in such commitment letter, (iv) the one hundred and fifty (150th) day following the date of such commitment letter, (v) the Lender having a reasonable belief that the proposed loan will not be provided by the proposed lender in accordance with the terms of the commitment letter, or (vi) a failure by any Loan Parties to comply with Section 7.13.

“Commodity Transaction Documents” means (a) the Crude Supply Agreement, (b) the Jet Fuel Master Agreement, (c) the Crude Storage Lease, (d) the Jet Storage Lease, (e) the Blue Dolphin Parent Guarantee, (f) the Jet Inventory Purchase and Sale Agreements, (g) the NPS Exclusivity Letter, and (h) the crude sale agreement (reference number NP519750001) dated April 30, 2019 by and among the Lender and the Borrower.

“Connection Income Taxes” means Other Connection Taxes that are imposed on or measured by net income (however denominated) or that are franchise Taxes or branch profits Taxes.

“Consent and Assignment Agreement (Storage Tank Lease)” has the meaning specified in Section 11.1 hereof.

“Consent and Assignment Agreement (Haltermann MSA)” has the meaning specified in Section 11.1 hereof.

“Covenant Party” has the meaning specified in Section 8 hereof.

“Crude Storage Lease” has the meaning specified in Section 11.1 hereof.

“Crude Supply Agreement” has the meaning specified in Section 11.1 hereof.

“Debt” of any Person means, without duplication, (a) all indebtedness of such Person for borrowed money, (b) all indebtedness of such Person for the deferred purchase price of property or services, (c) all obligations of such Person evidenced by notes, bonds, debentures or other similar instruments, (d) all indebtedness of such Person created or arising under any conditional sale or other title retention agreement with respect to property acquired by such Person (even though the rights and remedies of the seller or lender under such agreement in the event of default are limited to repossession or sale of such property), (e) all obligations of such Person as lessee under capitalized leases, (f) all reimbursement obligations, whether contingent or otherwise, of such Person under acceptance, letter of credit or similar facilities, (g) all mandatory obligations of such Person to purchase, redeem, retire, defease or otherwise make any payment in cash in respect of any disqualified capital stock in such Person or any other Person or any warrants, rights or options to acquire such disqualified capital stock, valued at the greater of its voluntary or involuntary liquidation preference plus accrued and unpaid dividends, (h) all obligations of such Person in respect of hedge agreements, valued at the agreement value thereof, (i) all guarantee obligations of such Person, and (j) all indebtedness and other payment obligations referred to in clauses (a) through (i) above of another Person secured by (or for which the holder of such Debt has an existing right, contingent or otherwise, to be secured by) any lien on property (including, without limitation, accounts and contract rights) owned by such Person, even though such Person has not assumed or become liable for the payment of such indebtedness or other payment obligations.

“Default” means any event or condition which upon notice, lapse of time or both would constitute an Event of Default.

“Deposit Account” has the meaning ascribed to such term in the UCC.

“Documents” has the meaning ascribed to such term in the UCC.

“Electronic Chattel Paper” has the meaning ascribed to such term in the UCC.

“Employee Benefit Plan” means any employee benefit plan as defined in Section 3(3) of ERISA.

“Environmental Laws” means all federal, state, district, local and foreign laws, rules, regulations, ordinances, and consent decrees relating to health, safety, hazardous substances, pollution and environmental matters, as now or at any time hereafter in effect, applicable to a Loan Party’s business or facilities owned or operated by a Loan Party, including laws relating to emissions, discharges, releases or threatened releases of pollutants, contamination, chemicals, or hazardous, toxic or dangerous substances, materials or wastes into the environment (including, without limitation, ambient air, surface water, ground water, land surface or subsurface strata) or otherwise relating to the generation, manufacture, processing, distribution, use, treatment, storage, disposal, transport or handling of Hazardous Materials.

“Equipment” has the meaning ascribed to such term in the UCC.

“ERISA” means the Employee Retirement Income Security Act of 1974, as amended, modified or restated from time to time.

“ERISA Affiliate” means any trade or business (whether or not incorporated) that together with any Loan Party or its Subsidiaries is or, at any relevant time, was treated as a single employer under Section 414 of the Code or Section 4001 of ERISA.

“Event of Default” has the meaning specified in Section 9 hereof.

“Excluded Taxes” means with respect to any payment under any Loan Document to Lender (a) taxes based upon, or measured by, Lender's overall net income (including franchise taxes imposed in lieu of such taxes), but only to the extent such taxes are imposed by a taxing authority (i) in a jurisdiction in which Lender is organized, (ii) in a jurisdiction which Lender's principal office is located, or (iii) in a jurisdiction in which Lender's lending office (or branch) in respect of which payments under this Agreement are made is located; (b) branch profits taxes (x) imposed by the United States and (y) that are Other Connection Taxes; (c) any United States federal withholding taxes that would not have been imposed but for the failure of the Lender to comply with Section 2.13(d) hereof; or (d) United States federal taxes imposed by FATCA.

“Existing Indebtedness” means the Debt described and listed on Schedule 1.01, which shall describe whether such Debt is secured and the assets subject to a security interest in the benefit of Persons other than the Lender.

“FATCA” means (a) Sections 1471 through 1474 of the Code (or successor statutes that are substantially comparable and not materially more onerous to comply with) and any current or future regulations or official interpretations thereof, (b) any treaty, law, regulation or other official guidance enacted in any other jurisdiction which facilitates the implementation of the preceding clause (a), and (c) any applicable intergovernmental agreements with respect to clause (a) entered into with the United States Government or any governmental or taxation authority under any other jurisdiction.

“Equity Interests” means, as to any Person, all of the shares of capital stock of (or other ownership or profit interests in) such Person, all of the warrants, options or other rights for the purchase or acquisition from such Person of shares of capital stock of (or other ownership or profit interests in) such Person, all of the securities convertible into or exchangeable for shares of capital stock of (or other ownership or profit interests in) such Person or warrants, rights or options for the purchase or acquisition from such Person of such shares (or such other interests), and all of the other ownership or profit interests in such Person (including partnership, member or trust interests therein), whether voting or nonvoting, and whether or not such shares, warrants, options, rights or other interests are outstanding on any date of determination.

“Fiscal Year” means each twelve (12) month accounting period of Borrower, which ends on December 31 of each year.

“Fixtures” has the meaning ascribed to such term in the UCC.

“GAAP” means generally accepted accounting principles set forth from time to time in the opinions and pronouncements of the Accounting Principles Board and the American Institute of Certified Public Accountants and statements and pronouncements of the Financial Accounting Standards Board (or agencies with similar functions of comparable stature and authority within the U.S. accounting profession) and the Securities and Exchange Commission, which are applicable to the circumstances as of the date of determination.

“GEL Tex” has the meaning specified in Section 11.1 hereof.

“GEL Tex Settlement Agreement” has the meaning specified in Section 11.1 hereof.

“General Intangibles” has the meaning ascribed to such term in the UCC.

“Goods” has the meaning ascribed to such term in the UCC.

“Governmental Authority” means any applicable federal, state, local or foreign court or governmental agency, authority, instrumentality or regulatory body having jurisdiction over a Person.

“Grantors” has the meaning assigned in the introductory paragraph hereof.

“Green Bank Account” has the meaning set forth in Section 7.16 hereof.

 “Guaranteed Obligations” has the meaning specified in Section 3.1 hereof.

“Guarantors” means Blue Dolphin, LR&M, Lazarus, Lazarus Energy, and all future Subsidiaries of the Borrower, Lazarus Energy and LR&M.

“Guaranty Beneficiaries” has the meaning specified in Section 3.1 hereof.

“Hazardous Materials” means any hazardous, toxic or dangerous substance, materials and wastes, including, without limitation, hydrocarbons (including naturally occurring or man-made petroleum and hydrocarbons), flammable explosives, asbestos, urea formaldehyde insulation, radioactive materials, biological substances, polychlorinated biphenyls, pesticides, herbicides and any other kind and/or type of pollutants or contaminants (including, without limitation, materials which include hazardous constituents), sewage, sludge, industrial slag, solvents and/or any other similar substances, materials, or wastes and including any other substances, materials or wastes that are or become regulated under any Environmental Law (including, without limitation any that are or become classified as hazardous or toxic under any Environmental Law).

“Indemnified Liabilities” has the meaning specified in Section 12.3 hereof.

“Indemnified Taxes” means (a) Taxes, other than Excluded Taxes, imposed on or with respect to any payment made by, or on account of, a Loan Party under a Loan Document, and (b) to the extent not otherwise described in (a), Other Taxes.

“Instruments” has the meaning ascribed to such term in the UCC.

“Interest Payment Date” means, (a) the second day of each calendar month, commencing with the first such date to occur at least fifteen days after the date hereof, (b) the Maturity Date, and (c) the date of any prepayment.

“Inventory” has the meaning ascribed to such term in the UCC.

“Investment Property” has the meaning ascribed to such term in the UCC.

“Jet Fuel Master Agreement” has the meaning specified in Section 11.1 hereof.

“Jet Inventory Purchase and Sale Agreements” has the meaning specified in Section 11.1 hereof.

“Jet Storage Lease” has the meaning specified in Section 11.1 hereof.

“Lazarus” has the meaning assigned in the introductory paragraph hereof.

“Lazarus Energy” has the meaning assigned in the introductory paragraph hereof.

“Lender” has the meaning assigned in the introductory paragraph hereof.

“Lender Party” has the meaning set forth in Section 12.3 hereof.

“Line of Credit” has the meaning given to such term in Section 2.1 hereof.

“Loan Documents” means (a) this Agreement, (b) the Pledge Agreement, (c) the Consent and Assignment Agreement (Storage Tank Lease), (d) the Consent and Assignment Agreement (Haltermann MSA), and (e) each document, agreement or certificate executed by a Loan Party and delivered to the Lender in connection with or pursuant to any of the foregoing, as each of the same may be amended, modified or supplemented from time to time.

“Loan Party” means the Borrower, the Pledgor, each Grantor and each Guarantor.

“Loans” has the meaning given to such term in Section 2.2 hereof.

“LR&M” has the meaning assigned in the introductory paragraph hereof.

“LR&M Receivables” means Receivables owed to LR&M arising from or in connection with any lease of tank 66 (which tank, for the avoidance of doubt, is being leased by LR&M to Pilot Thomas Logistics LLC (f/k/a Western Petroleum LLC and Thomas Petroleum LLC) as of the date hereof).

“Material Adverse Effect” means (a) a material adverse change in, or a material adverse effect on, the business, property, assets, operations or prospects of any of (x) the Borrower, (y) the Refinery Assets taken as a whole, or (z) the Loan Parties taken as a whole, (b) a material impairment of the ability of either (x) the Borrower or (y) the Loan Parties taken as a whole to perform their obligations under this Agreement and the other Loan Documents, (c) a material adverse effect upon the Collateral, or (d) a material impairment of the enforceability or priority of Lender's liens upon the Collateral or the legality, validity, binding effect or enforceability of the Loan Documents. Except during a Commitment Period, the occurrence of a “Material Adverse Effect” shall be determined by the Lender in its sole discretion, exercised in good faith.

“Maturity Date” means May 3, 2020, subject to the proviso in Section 11.1.

“Maximum Liability” has the meaning set forth in Section 3.11 hereof.

“Multiemployer Plan” means a “multiemployer plan” as defined in Section 4001(a)(3) of ERISA.

“Net Cash Proceeds” means, with respect to any Asset Sale or Recovery Event, the excess, if any, of (i) the sum of cash and cash equivalents received in connection with such Asset Sale or Recovery Event (including any cash or cash equivalents received by way of deferred payment pursuant to, or by monetization of, a note receivable or otherwise, but only as and when so received) over (ii) the sum of (A)  the reasonable and customary out-of-pocket costs, fees (including investment banking fees, attorneys’ fees and accountants’ fees), commissions, premiums and expenses incurred by any of the Loan Parties or their Subsidiaries and (B) the amount of any reasonable reserve established in accordance with GAAP against any adjustment to the sale price or any liabilities.

“Notice of Borrowing” has the meaning set forth in Section 2.3 hereof.

“NPS Exclusivity Letter” has the meaning specified in Section 11.1 hereof.

“NPS Note” means Intercompany Note made by Borrower in favor of Lazarus Energy, effective as of June 1, 2018.

“Obligations” means any and all obligations, liabilities and indebtedness of each Loan Party to Lender or to any Affiliate of Lender of any and every kind and nature, howsoever created, arising or evidenced and howsoever owned, held or acquired, whether now or hereafter existing, whether now due or to become due, whether primary, secondary, direct, indirect, absolute, contingent or otherwise, whether several, joint or joint and several, arising under any Loan Document.

 “Other Connection Taxes” means Taxes imposed as a result of a present or former connection between the Lender and the jurisdiction imposing such Tax (other than connections arising from the Lender having executed, delivered, become a party to, performed its obligations under, received payments under, received or perfected a security interest under, engaged in any other transaction pursuant to or enforced any Loan Document, or sold or assigned an interest in any Loan or Loan Document).

“Other Taxes” means all present or future stamp, court or documentary, intangible, excise, value added, transfer, recording, filing or similar Taxes that arise from any payment made under, from the execution, delivery, performance, enforcement or registration of, from the receipt or perfection of a security interest under, or otherwise with respect to, any Loan Document.

“Outside Date” has the meaning set forth in Section 11.1 hereof.

“Parent” means any Person now or at any time or times hereafter owning or controlling (alone or with any other Person) at least a majority of the issued and outstanding equity of a Loan Party.

“Participant” has the meaning specified in Section 12.1.2 hereof.

“Participant Register” has the meaning specified in Section 12.1.2 hereof.

“PATRIOT Act” means the Uniting and Strengthening America by Providing Appropriate Tools Required to Intercept and Obstruct Terrorism Act of 2001, Pub. L.107-56, signed into law October 26, 2001.

“Pension Plan” means any Employee Benefit Plan, other than a Multiemployer Plan, subject to the provisions of Section 302 or Title IV of ERISA or Section 412 of the Code.

“Permitted Liens” means (a) statutory liens of landlords, carriers, warehousemen, processors, mechanics, materialmen or suppliers incurred in the ordinary course of business and securing amounts not yet due or declared to be due by the claimant thereunder or amounts which are being contested in good faith and by appropriate proceedings and for which the applicable Loan Party has maintained adequate reserves; (b) liens or security interests in favor of Lender; (c) liens for taxes, assessments and governmental charges not yet due and payable or which are being contested in good faith and by appropriate proceedings and the applicable Loan Party is in compliance with clauses (i) and (iii) of Section 7.8 hereof; (d) zoning restrictions and easements, licenses, covenants and other restrictions affecting the use of real property that do not individually or in the aggregate have a material and adverse effect on the applicable Loan Party’s ability to use such real property for its intended purpose in connection with such Loan Party’s business; (e) liens in connection with purchase money indebtedness and capitalized leases otherwise permitted under this Agreement, provided, that such liens attach only to the assets the purchase of which was financed by such purchase money indebtedness or which are the subject of such capitalized leases; (f) liens set forth on Schedule 6.4; and (g) liens specifically permitted by Lender in writing.

“Permitted Tax Distribution” means, for any taxable period or portion thereof in which Lazarus is a pass through entity for federal income tax purposes, payments and distributions which are distributed to the direct or indirect members of Lazarus on or prior to each estimated payment date as well as each other applicable due date to enable such holders to timely make payments of federal, state and local taxes for such taxable period that are imposed with respect to the income of Lazarus allocated to such holders not to exceed the product of (a) the net taxable income of Lazarus for such period, and (b) the highest applicable marginal U.S. federal, state and local tax rates applicable to an individual resident in Houston, Texas; provided that the amount of such distribution shall be decreased by (i) the amount of any taxable losses allocated to such direct or indirect members in prior taxable periods in respect of Lazarus, and (ii) to the extent the amount distributed to such direct or indirect members of Lazarus in any prior taxable period exceeded the actual tax liability for such member attributable to that taxable period.

“Person” means any individual, sole proprietorship, partnership, joint venture, trust, unincorporated organization, association, corporation, limited liability company, institution, entity, party or foreign or United States government (whether federal, state, county, city, municipal or otherwise), including, without limitation, any instrumentality, division, agency, body or department thereof.

“Pledge Agreement” means the Pledge Agreement, substantially in the form of Exhibit D, by Pledgor in favor of the Lender.

“Pledgor” has the meaning assigned in the introductory paragraph hereof.

“Proceeds” has the meaning ascribed to such term in the UCC.

“Receivable” means any right to payment from a Person, whether constituting an “account,” “chattel paper,” “payment intangible,” “instrument” or “general intangible” (each, as defined in the UCC), arising from the sale of goods and/or provision of services, and includes, without limitation, the obligation of the obligor thereon to pay any finance charges, fees and other charges with respect thereto, including, without limitation, with respect to any unbilled receivables, 100% of the amount to be or thereafter invoiced.

“Recovery Event” means any settlement of or payment in respect of any property or casualty insurance claim or any condemnation proceeding relating to any asset of a Loan Party or any of its Subsidiaries constituting Collateral.

“Refinery Assets” means a certain 15,000 BPD crude oil and condensate processing facility located in Nixon, TX, including associated real and personal property such as the pipeline infrastructure, crude oil, feedstock and refined product storage tanks and truck racks (or, in each case, contracts granting rights to use the same) and other assets and any other personal and real property owned by Lazarus that is appurtenant to or necessary for the commercial operation of such processing facility.

“Register” has the meaning set forth in Section 12.1.1 hereof.

“Reinvestment Event” shall mean any Asset Sale permitted under Section 8.4 or Recovery Event in respect of which a Loan Party has delivered a Reinvestment Notice.

“Reinvestment Notice” shall mean a written notice to the Lender executed by an authorized officer of a Loan Party stating that no Event of Default has occurred and is continuing or would result therefrom and that such Loan Party (directly or indirectly through a Subsidiary) intends and expects to use all or a specified portion of the Net Cash Proceeds of a Reinvestment Event to acquire or repair assets (in the case of any Asset Sale pursuant to Section 8.4 hereof) or long-term assets (in the case of any Recovery Event), in each case useful in its business.

“Related Party Agreements” has the meaning specified in Section 11.1 hereof.

“Related Security” means, with respect to any Receivable that is Collateral, (a) any goods (including returned goods), and documentation of title evidencing the shipment or storage of any goods (including returned goods), the sale of which gave rise to such Receivable, (b) all instruments and chattel paper that may evidence such Receivable, (c) all other security interests or liens in favor of Grantor and property subject thereto from time to time purporting to secure payment of such Receivable, whether pursuant to a contract related to such Receivable or otherwise, together with all UCC financing statements or similar filings relating thereto, (d) to the extent applicable to such Receivable, all rights, interests and claims under the contracts relating to such Receivable, and all guaranties, indemnities, insurance and other agreements (including the related contract), Supporting Obligations or arrangements of whatever character from time to time supporting or securing payment of such Receivable or otherwise relating to such Receivable, whether pursuant to the contract or other arrangement related to such Receivable or otherwise and (e) all proceeds of such Receivable or Related Security with respect thereto.

“Restricted Payment” means any dividend or other distribution (whether in cash, securities or other property) with respect to any Equity Interest of any Person, or any payment (whether in cash, securities or other property), including any sinking fund or similar deposit, on account of the purchase, redemption, retirement, acquisition, cancellation or termination of any such Equity Interest, or on account of any return of capital to such Person’s shareholders, partners or members (or the equivalent Persons thereof); provided that, for the avoidance of doubt, ordinary-course payments under Affiliate Funding Transactions are not Restricted Payments.

“Sanctioned Country” means, at any time, a country or territory which is, or whose government is, the subject or target of any Sanctions broadly restricting or prohibiting dealings with such country, territory or government (currently, Cuba, Iran, Crimea, North Korea, and Syria).

“Sanctioned Person” means, at any time, any Person with whom dealings are restricted or prohibited under Sanctions, including (a) any Person listed in any Sanctions-related list of designated Persons maintained by the United States (including by the Office of Foreign Assets Control of the U.S. Department of the Treasury, the U.S. Department of State, or the U.S. Department of Commerce), the United Nations Security Council, the European Union or any of its member states, Her Majesty’s Treasury, Switzerland or any other relevant authority, (b) any Person located, organized or resident in, or any Governmental Authority or governmental instrumentality of, a Sanctioned Country or (c) any Person 25% or more directly or indirectly owned by, controlled by, or acting for the benefit or on behalf of, any Person described in clauses (a) or (b) hereof.

“Sanctions” means economic or financial sanctions or trade embargoes or restrictive measures enacted, imposed, administered or enforced from time to time by (a) the U.S. government, including those administered by the Office of Foreign Assets Control of the U.S. Department of the Treasury, the U.S. Department of State, or the U.S. Department of Commerce; (b) the United Nations Security Council; (c) the European Union or any of its member states; (d) Her Majesty’s Treasury; (e) the Australian Department of Foreign Affairs and Trade, (f) Switzerland; or (g) any other relevant authority.

“Subsidiary” means with respect to any Person, a corporation of which such Person owns, directly or indirectly, more than fifty percent (50%) of the outstanding capital stock having ordinary voting power to elect a majority of the board of directors of such corporation (irrespective of whether at the time stock of any other class of such corporation shall have or might have voting power by reason of the happening of any contingency) and any partnership, joint venture or limited liability company of which more than fifty percent (50%) of the outstanding Equity Interests are at the time, directly or indirectly, owned by such Person or any partnership of which such Person is a general partner. Unless the context otherwise requires, each reference to Subsidiaries herein shall be a reference to Subsidiaries of Borrower.

“Supporting Obligations” has the meaning set forth in the UCC.

“Tangible Chattel Paper” has the meaning ascribed to such term in the UCC.

“Taxes” shall mean any and all present and future taxes, duties, levies, imposts, deductions, assessments, charges or withholdings (including backup withholding) and any and all liabilities (including interest and penalties and other additions to taxes) with respect to the foregoing.

“Termination Date” shall be the date on which the Borrower shall have repaid all of the Obligations (other than unasserted contingent obligations) and this Agreement (including the Lender’s commitment to make Loans hereunder) has terminated.

“UCC” means the Uniform Commercial Code as in effect from time to time in the State of New York or any other state the laws of which are required to be applied in connection with the creation or perfection of the security interest granted hereunder.

“USA Patriot Act” has the meaning set forth in Section 12.2 hereof.

“Veritex” has the meaning set forth in Section 11.1 hereof.

“Veritex Release Date” has the meaning set forth in Section 7.15.

Subject to the terms and conditions of this Agreement and the other Loan Documents, and relying upon the representations and warranties herein set forth, Lender hereby establishes a line of credit to Borrower in an aggregate principal amount of up to twelve million eight hundred thousand Dollars ($12,800,000.00) (the “Line of Credit”).

Subject to the terms and conditions of this Agreement and the other Loan Documents, and relying upon the representations and warranties herein set forth, (a) on the date hereof, notwithstanding that the Closing Date has not yet occurred, Lender shall make an advance to the Borrower in an aggregate principal amount of $3,300,000, (b) on May 9, 2019 notwithstanding that the Closing Date has not yet occurred, Lender shall make an advance to the Borrower in an aggregate principal amount of $1,200,000 and (c) from time to time after the Closing Date until the later of (i) the twentieth (20th) Business Day following the Closing Date and (ii) such later date as Lender may in its sole discretion agree from time to time, Lender shall make advances to the Borrower in an aggregate principal amount, when taken together with the advances contemplated by the foregoing clauses (a) and (b), up to the amount of the Line of Credit specified in Section 2.1 (such advances, collectively, the “Loans”); provided that each advance hereunder shall be in an amount not less than one million Dollars ($1,000,000). Amounts repaid with respect to the Loans may not be reborrowed.

Borrower shall give written notice (each such written notice, a “Notice of Borrowing”) substantially in the form of Exhibit B to Lender of each proposed Borrowing not later than 11:00 A.M., New York time, one Business Day prior to the proposed date of such Borrowing. Each such notice shall be effective upon receipt by Lender, shall be irrevocable, and shall specify the date and amount of such proposed Borrowing, which shall be a Business Day. Borrower shall be deemed to have duly provided a Notice of Borrowing (and, for the avoidance of doubt, made the representations, warranties and certifications set forth therein) in respect of (a) the advance on the date hereof contemplated by Section 2.2(a), (b) the advance contemplated by Section 2.2(b) on the date thereof and (c) each date and for each respective amount that, in each case, is set forth in Schedule 2.3.

The Lender shall make each advance to be made by it hereunder (other than the advance on the date hereof and the advance contemplated by Section 2.2(b) on the date thereof) on the applicable Borrowing date by wire transfer of immediately available funds by 2:00 P.M., New York time.

The Borrower hereby unconditionally promises to pay to the Lender the outstanding principal amount of the Loans on the Maturity Date. To the extent not previously paid, the outstanding balance of the Loans shall be due and payable on the Maturity Date, together with accrued and unpaid interest thereon.

Subject to the provisions of Section 2.7 below, the outstanding principal amount of the Loans shall bear interest (computed on the basis of the actual number of days elapsed over a year of three hundred sixty (360) days) at a rate of twelve percent (12%) per annum. Interest on the Loans shall be payable on each Interest Payment Date.

If any Event of Default has occurred and is continuing, then to the extent permitted by law all amounts outstanding under this Agreement and the other Loan Documents shall bear interest (after as well as before judgment), immediately upon the occurrence and during the continuance of such Event of Default, payable on demand, at a rate of fourteen percent (14%) per annum (and not for the avoidance of doubt at the rate set forth in Section 2.6); provided, however, that immediately upon and after the date that such Event of Default is cured, waived or no longer continuing, the interest rate shall revert to the interest rate specified in Section 2.6.

The Borrower shall make each payment (including principal of or interest on any Borrowing or any fees or other amounts) required hereunder and under any other Loan Document not later than 2:00 p.m., New York time, on the date when due in immediately available Dollars, without setoff, defense or counterclaim. Any amounts received after such time on any date may, in the discretion of the Lender, be deemed to have been received on the next succeeding Business Day for purposes of calculating interest thereon. Each such payment shall be made to the Lender at the account designated in writing by an authorized officer of the Lender. Except as otherwise expressly provided herein, whenever any payment (including principal of or interest on any Borrowing or any fees or other amounts) hereunder or under any other Loan Document shall become due, or otherwise would occur, on a day that is not a Business Day, such payment may be made on the next succeeding Business Day, and such extension of time shall in such case be included in the computation of interest or fees, if applicable, unless such next succeeding Business Day would fall in the next calendar month, in which case payment will be made on the next preceding Business Day.

Upon at least three (3) days’ prior written notice to the Lender, the Borrower may prepay a portion or all of the Loans, together with accrued and unpaid interest thereon and all other amounts payable by the Borrower under this Agreement, without premium or penalty.

Any prepayment under this section shall be applied first, to payment of that portion of the Obligations constituting fees, indemnities, costs and expenses payable to Lender hereunder, second, to payment of that portion of the Obligations constituting accrued but unpaid interest, third, to payment of that portion of the Obligations constituting unpaid principal of the Loans and, fourth, to payment of any other Obligations due.

The Borrower agrees to pay to the Lender on the date hereof the following amounts which amount shall be paid from the proceeds of the first Loan: (a) a commitment fee in the amount of one hundred thousand Dollars ($100,000) and (b) all expenses contemplated by Section 2.12(a)(i) incurred through the date hereof.

Lender shall record in its records, the date and amount of each advance made by Lender hereunder, and each repayment thereof. The aggregate unpaid principal amount so recorded shall be rebuttably presumptive evidence of the principal amount of the Loans owing and unpaid. The failure to so record any such amount or any error in so recording any such amount shall not, however, limit or otherwise affect the Obligations of Borrower hereunder to repay the principal amount of the Loans hereunder, together with all interest accruing thereon. The Lender shall provide the Borrower with the foregoing books and records upon reasonable request.

Regardless of whether the Loan Documents are executed and delivered, Borrower agrees to reimburse Lender for (a) all reasonable, documented out-of-pocket costs and expenses incurred by Lender in connection with the (i) preparation, due diligence, development, consummation and administration of any of the Loan Documents including, without limitation, attorney’s fees and other expenses of internal and external legal counsel, independent engineers, investigators or other consultants to the Lender, Uniform Commercial Code and other public record searches and filings, overnight courier, other express or messenger delivery, appraisal costs, surveys, title insurance and environmental audit or review costs; and (ii) administration of this Agreement or any other Loan Document (including, without limitation, any costs and expenses of any third party provider engaged by Lender for such purposes) and (b) all costs and expenses incurred by Lender (including, without limitation, any costs and expenses of any third party provider engaged by Lender for such purposes) in connection with the (i) collection, protection or enforcement of any of Lender’s rights in or to the Collateral; (ii) collection of any Obligations; and (iii) enforcement of any of Lender's remedies under this Agreement or any other Loan Document.

It is the intent of the parties that the rate of interest and other charges to Borrower under this Agreement and the other Loan Documents shall be lawful; therefore, if for any reason the interest or other charges payable under this Agreement are found by a court of competent jurisdiction, in a final determination, to exceed the limit which Lender may lawfully charge Borrower, then the obligation to pay interest and other charges shall automatically be reduced to such limit and, if any amount in excess of such limit shall have been paid, then such amount shall be refunded to such Borrower.

Notwithstanding any other provision of this Agreement, if any Change in Law shall make it unlawful for the Lender to make or maintain any Loan, if such law shall mandate, then, upon notice from the Lender to the Borrower, the Borrower shall prepay such Loans, together with accrued and unpaid interest thereon and all other amounts payable by the Borrower under this Agreement on or before such date as shall be mandated by such law.

Each Guarantor jointly and severally hereby irrevocably and unconditionally guarantees to the Lender, and its successors and permitted assignees (the “Guaranty Beneficiaries”) the due and punctual payment in full of all Obligations when the same shall become due, whether at stated maturity, by required prepayment, declaration, acceleration, demand or otherwise (including amounts that would become due but for the operation of the automatic stay under Section 362(a) of the Bankruptcy Code, 11 USC. § 362(a), collectively, the “Guaranteed Obligations”).

Each Guarantor hereby jointly and severally agrees in furtherance of the foregoing and not in limitation of any other right which any Guaranty Beneficiaries may have at law or in equity against any Guarantor by virtue hereof, that upon the failure of the Borrower to pay any of the Guaranteed Obligations when and as the same shall become due (or, in the case of any extension of time of payment or renewal of any of the Guaranteed Obligations, in accordance with the terms of such extension or renewal), whether at stated maturity, by required prepayment, declaration, acceleration, demand or otherwise (including amounts that would become due but for the operation of the automatic stay under Section 362(a) of the Bankruptcy Code, 11 USC. § 362(a)), each Guarantor will, upon demand, pay, or cause to be paid, in cash, to the Guaranty Beneficiaries, an amount equal to the sum of the unpaid principal amount of all Guaranteed Obligations then due as aforesaid, accrued and unpaid interest on such Guaranteed Obligations (including interest which, but for the Borrower’s becoming the subject of a proceeding under any debtor relief law, would have accrued on such Guaranteed Obligations, whether or not a claim is allowed against the Borrower for such interest in such proceeding) and all other Guaranteed Obligations then owed to Guaranty Beneficiaries as aforesaid.

Each Guarantor agrees that its obligations hereunder are irrevocable, absolute, independent and unconditional and shall not be affected by any circumstance which constitutes a legal or equitable discharge of a guarantor or surety other than payment in full of the Guaranteed Obligations. In furtherance of the foregoing and without limiting the generality thereof, each Guarantor agrees as follows:

Each Guarantor hereby waives, for the benefit of the Guaranty Beneficiaries:

Until the Termination Date, each Guarantor hereby waives any claim, right or remedy, direct or indirect, that such Guarantor now has or may hereafter have against the Borrower or any of its assets in connection with this Guaranty or the performance by such Guarantor of its obligations hereunder, in each case whether such claim, right or remedy arises in equity, under contract, by statute, under common law or otherwise and including:

Any Debt of the Borrower now or hereafter held by any Guarantor is hereby subordinated in right of payment to the Guaranteed Obligations, and any such indebtedness collected or received by such Guarantor after an Event of Default has occurred and is continuing shall be held in trust for the Guaranty Beneficiaries and shall forthwith be paid over to the Guaranty Beneficiaries to be credited and applied against the Guaranteed Obligations but without affecting, impairing or limiting in any manner the liability of such Guarantor under any other provision hereof.

This Guaranty is a continuing guaranty and shall remain in effect until the Termination Date. Each Guarantor hereby irrevocably waives any right to revoke this Guaranty as to future transactions giving rise to any Guaranteed Obligations.

It is not necessary for any Guaranty Beneficiaries to inquire into the capacity or powers of the Borrower or the officers, members of the Board of Directors or any agents acting or purporting to act on behalf of any of them.

Any advance under the Line of Credit may be made to the Borrower or continued from time to time, without notice to or authorization from any Guarantor regardless of the financial or other condition of the Borrower at the time of any such grant. No Guaranty Beneficiaries shall have any obligation to disclose or discuss with any Guarantor its assessment, or any Guarantor’s assessment, of the financial condition of the Borrower. Each Guarantor has adequate means to obtain information from the Borrower on a continuing basis concerning the financial condition of the Borrower and its ability to perform its obligations under the Loan Documents, and each Guarantor assumes the responsibility for being and keeping informed of the financial condition of the Borrower and of all circumstances bearing upon the risk of nonpayment of the Guaranteed Obligations. Each Guarantor hereby waives and relinquishes any duty on the part of any Beneficiaries to disclose any matter, fact or thing relating to the business, operations or conditions of the Borrower now known or hereafter known by any Guaranty Beneficiaries.

It is the desire and intent of the Guarantors and the Guaranty Beneficiaries that this Guaranty shall be enforced against each Guarantor to the fullest extent permissible under the laws and public policies applied in each jurisdiction in which enforcement is sought. The provisions of this Guaranty are severable, and in any action or proceeding involving any state corporate law, or any state, Federal or foreign bankruptcy, insolvency, reorganization or other law affecting the rights of creditors generally, if the obligations of any Guarantor under this Guaranty would otherwise be held or determined to be avoidable, invalid or unenforceable on account of the amount of such Guarantor’s liability under this Guaranty, then, notwithstanding any other provision of this Guaranty to the contrary, the amount of such liability shall, without any further action by the Guarantor Subsidiaries or the Guaranty Beneficiaries, be automatically limited and reduced to the highest amount that is valid and enforceable as determined in such action or proceeding (such highest amount determined hereunder being the Guarantor’s “Maximum Liability”). Each Guarantor agrees that the Guaranteed Obligations may at any time and from time to time exceed the Maximum Liability of Guarantor without impairing this Guaranty or affecting the rights and remedies of the Guaranty Beneficiaries hereunder; provided, nothing in this sentence shall be construed to increase any Guarantor’s obligations hereunder beyond its Maximum Liability.

As security for the payment of the Loans made by Lender to the Borrower hereunder and for the payment, performance or other satisfaction of all other Obligations:

Lender, in its sole discretion, without waiving or releasing (i) any obligation, liability or duty of any Loan Party under this Agreement or the other Loan Documents or (ii) any Event of Default, may at any time or times hereafter, but shall not be obligated to, pay, acquire or accept an assignment of any security interest, lien, encumbrance or claim asserted by any Person in, upon or against the Collateral that is prohibited under Section 8.3, provided, that Lender may take such actions with respect to Permitted Liens only after the occurrence and during the continuance of an Event of Default. All sums paid by Lender in respect thereof and all costs, fees and expenses including, without limitation, reasonable attorney fees, all court costs and all other charges relating thereto incurred by Lender shall constitute Obligations, payable by Borrower to Lender on demand and, until paid, shall bear interest at the highest rate then applicable to Loans hereunder.

Immediately upon a Loan Party’s receipt of any portion of the Collateral worth in excess of fifty thousand dollars ($50,000) evidenced by an Instrument or Document, including, without limitation, any Tangible Chattel Paper or any Investment Property consisting of certificated securities, such Loan Party shall deliver the original thereof to Lender together with an appropriate endorsement or other specific evidence of assignment thereof to Lender (in form and substance acceptable to Lender). If an endorsement or assignment of any such items shall not be made for any reason, Lender is hereby irrevocably authorized, as such Loan Party’s attorney and agent-in-fact, to endorse or assign the same on such Loan Party’s behalf.

To the extent that a Loan Party obtains or maintains any Electronic Chattel Paper that is Collateral and worth in excess of fifty thousand dollars ($50,000), such Loan Party shall create, store and assign the record or records comprising the Electronic Chattel Paper in such a manner that (i) a single authoritative copy of the record or records exists which is unique, identifiable and except as otherwise provided in clauses (iv), (v) and (vi) below, unalterable, (ii) the authoritative copy identifies Lender as the assignee of the record or records, (iii) the authoritative copy is communicated to and maintained by the Lender or its designated custodian, (iv) copies or revisions that add or change an identified assignee of the authoritative copy can only be made with the participation of Lender, (v) each copy of the authoritative copy and any copy of a copy is readily identifiable as a copy that is not the authoritative copy and (vi) any revision of the authoritative copy is readily identifiable as an authorized or unauthorized revision.

Lender's obligations under this Agreement shall be in effect from the date hereof until the earlier of (i) the Maturity Date, (ii) the date that the Obligations are accelerated pursuant to Section 10.1, and (iii) the Termination Date. Upon the Termination Date, remaining Collateral shall automatically be released from the Lien of this Agreement and all rights to the Collateral shall revert to the Grantors and Pledgor. Upon such release or any such sale, transfer or disposition of Collateral or any part thereof, Lender shall, upon the request of the Grantors and Pledgor and at the sole expense of the Borrower, assign, transfer and deliver to the Grantors and/or Pledgor proper documents and instruments (including UCC-3 termination financing statements or releases) acknowledging the termination hereof or the release of such Collateral, as the case may be.

Each Loan Party hereby represents and warrants to Lender, which representations and warranties (whether appearing in this Section 6, elsewhere in this Agreement or in any other Loan Document) shall be true at the time of the date hereof (other than the representation in Section 6.5 that Blue Dolphin is in good standing in the State of Delaware), the date of the advance contemplated by Section 2.2(b) (other than the representation in Section 6.5 that Blue Dolphin is in good standing in the State of Delaware), and the Closing Date, and shall be remade by each applicable Loan Party at the time each Loan is made pursuant to this Agreement, provided, that representations and warranties made as of a particular date shall be true and correct as of such date:

The financial statements and other information delivered or to be delivered by any Loan Party to Lender at or prior to the date of this Agreement fairly present in all material respects the financial condition of each Loan Party, and there has been no material adverse change in the financial condition, the operations or any other status of any Loan Party since the date of the financial statements delivered to Lender most recently prior to the date of this Agreement. All written information now or heretofore furnished by each Loan Party to Lender is true and correct as of the date with respect to which such information was furnished.

The office where each Loan Party keeps its books, records and accounts (or copies thereof) concerning the Collateral, each Loan Party’s principal place of business and all of each Loan Party’s other places of business, locations of Collateral and post office boxes and locations of bank accounts are as set forth in Schedule 6.2 and at other locations within the continental United States of which Lender has been advised by a Loan Party in accordance with Section 7.2.1. The Collateral (except any part thereof which a Loan Party shall have advised Lender in writing consists of Collateral normally used in more than one state) is kept, or, in the case of vehicles, based, only at the addresses set forth on Schedule 6.2, and at other locations within the continental United States of which Lender has been advised by a Loan Party in writing in accordance with Section 7.2.1 hereof.

No Loan Party has made any loans or advances to any Affiliate or other Person except (i) Existing Indebtedness, (ii) advances authorized hereunder to employees, officers and directors of a Loan Party for travel and other expenses arising in the ordinary course of such Loan Party’s business and (iii) Affiliate Funding Transactions.

Each Loan Party is the lawful owner of all Collateral now purportedly owned or hereafter purportedly acquired by such Loan Party, free from all liens, claims, security interests and encumbrances whatsoever, whether voluntarily or involuntarily created and whether or not perfected, other than Permitted Liens.

The Borrower is a limited liability company, duly organized, validly existing and in good standing in the State of Delaware and its state organizational identification number is ###-###-####. Lazarus is a limited liability company, duly organized, validly existing and in good standing in the State of Delaware and its organizational identification number is ###-###-####. Blue Dolphin is a corporation, duly organized, validly existing and in good standing in the State of Delaware and its organizational identification number is ###-###-####. LR&M is a limited liability company, duly organized, validly existing and in good standing in the State of Delaware and its organizational identification number is ###-###-####. Each Loan Party is duly qualified and in good standing in all states where the nature and extent of the business transacted by it or the ownership of its assets makes such qualification necessary or, if such Loan Party is not so qualified, such Loan Party may cure any such failure without losing any of its rights, incurring any liens or material penalties, or otherwise affecting Lender's rights. Each Loan Party has the right and power and is duly authorized and empowered to enter into, execute and deliver this Agreement and the other Loan Documents and perform its obligations hereunder and thereunder. Each Loan Party’s execution, delivery and performance of this Agreement and the other Loan Documents does not conflict with the provisions of the organizational documents of such Loan Party, any statute, regulation, ordinance or rule of law, or any agreement, contract or other document which may now or hereafter be binding on such Loan Party, except for conflicts with agreements, contracts or other documents which would not have a Material Adverse Effect, and such Loan Party’s execution, delivery and performance of this Agreement and the other Loan Documents shall not result in the imposition of any lien or other encumbrance upon any of such Loan Party’s property (other than Permitted Liens) under any existing indenture, mortgage, deed of trust, loan or credit agreement or other agreement or instrument by which such Loan Party or any of its property may be bound or affected. If a Loan Party is a partnership or limited liability company, such Loan Party has not expressly elected to have its Equity Interests treated as “Securities” under and as defined in Article 8 of the Uniform Commercial Code.

Each Loan Party has obtained all governmental consents, franchises, certificates, licenses, authorizations, approvals and permits, the lack of which would have a Material Adverse Effect. Each Loan Party is in compliance in all material respects with all applicable federal, state, local and foreign statutes, orders, regulations, rules and ordinances (including, without limitation, Environmental Laws and statutes, orders, regulations, rules and ordinances relating to taxes, employer and employee contributions and similar items, securities, ERISA or employee health and safety) the failure to comply with which would have a Material Adverse Effect.

Except as set forth on Schedule 6.8 hereto or as permitted pursuant to Section 8.11 hereof, no Loan Party is conducting, permitting or suffering to be conducted, transactions with any Affiliate other than Affiliate Funding Transactions and transactions with Affiliates for the purchase or sale of Inventory or services in the ordinary course of business pursuant to terms that are no less favorable to such Loan Party than the terms upon which such transactions would have been made had they been made to or with a Person that is not an Affiliate.

Each Loan Party’s name has always been as set forth on the first page of this Agreement and no Loan Party uses any trade names, assumed names, fictitious names or division names in the operation of its business, except as set forth on Schedule 6.9 hereto.

Except for Permitted Liens, Borrower has good and indefeasible and merchantable title to and ownership of all of its Equipment. No Equipment is a Fixture to real estate unless such real estate is owned by a Loan Party and is subject to a mortgage in favor of Lender, or if such real estate is leased, is subject to a landlord's agreement in favor of Lender on terms acceptable to Lender, or an accession to other personal property unless such personal property is subject to a first priority lien in favor of Lender.

This Agreement and the other Loan Documents to which each Loan Party is a party are the legal, valid and binding obligations of such Loan Party and are enforceable against such Loan Party in accordance with their respective terms.

Borrower is and, upon the occurrence of the Settlement Payment Date (as defined in the GEL Tex Settlement Agreement), each other Loan Party is, after giving effect to the transactions contemplated hereby solvent, able to pay its debts as they become due, has capital sufficient to carry on its business, now owns property having a value both at fair valuation and at present fair saleable value greater than the amount required to pay its debts, and will not be rendered insolvent by the execution and delivery of this Agreement or any of the other Loan Documents or by completion of the transactions contemplated hereunder or thereunder.

As of the date hereof, except as set forth on Schedule 1.01 hereto, no Loan Party is obligated (directly or indirectly), for any loans or other indebtedness for borrowed money other than the Loans.

Except as set forth on Schedule 6.14 hereto, no Loan Party owns any margin securities. None of the proceeds of the Loans hereunder shall be used for the purpose of purchasing or carrying any margin securities or for the purpose of reducing or retiring any indebtedness which was originally incurred to purchase any margin securities or for any other purpose not permitted by Regulation U of the Board of Governors of the Federal Reserve System as in effect from time to time.

Except as set forth on Schedule 6.15 hereto, no Loan Party has any Parents, Subsidiaries or other Affiliates or divisions, nor is any Loan Party engaged in any joint venture or partnership with any other Person.

Schedule 6.16 includes all contracts, leases, commitments and other agreements to which the Borrower is a party. Except as set forth on Schedule 6.16, (i) (a) the Borrower is not in default under any material contract, lease or commitment to which it is a party or by which it is bound, and (b) no other Loan Party is in default under any material contract, lease or commitment to which it is a party or by which it is bound other than a default which would not have a Material Adverse Effect; and (ii) no Loan Party knows of any dispute regarding any contract, lease or commitment which would have a Material Adverse Effect.

There are no controversies pending or threatened between a Loan Party and any of its employees, agents or independent contractors other than employee grievances arising in the ordinary course of business which would not, in the aggregate, have a Material Adverse Effect, and each Loan Party is in compliance with all federal and state laws respecting employment and employment terms, conditions and practices except for such non-compliance which would not have a Material Adverse Effect.

No Loan Party has generated, used, stored, treated, transported, manufactured, handled, produced or disposed of any Hazardous Materials, on or off its premises (whether or not owned by it) in any manner which at any time violates in any material respect any Environmental Law or any license, permit, certificate, approval or similar authorization thereunder and the operations of each Loan Party comply in all material respects with all Environmental Laws and all licenses, permits, certificates, approvals and similar authorizations thereunder. There has been no investigation, proceeding, complaint, order, directive, claim, citation or notice by any Governmental Authority or any other Person, nor is any pending or to the best of each Loan Party’s knowledge threatened with respect to any non-compliance with or violation of the requirements of any Environmental Law by a Loan Party or the release, spill or discharge, threatened or actual, of any Hazardous Materials or the generation, use, storage, treatment, transportation, manufacture, handling, production or disposal of any Hazardous Materials or any other environmental, health or safety matter, which affects the Loan Party or its business, operations or assets or any properties at which a Loan Party has transported, stored or disposed of any Hazardous Materials. No Loan Party has any material liability (contingent or otherwise) in connection with a release, spill or discharge, threatened or actual, of any Hazardous Materials or the generation, use, storage, treatment, transportation, manufacture, handling, production or disposal of any Hazardous Materials.

None of the Loan Parties nor any of their respective Subsidiaries sponsors, maintains, contributes to, or has any obligation to contribute to, and within the prior six (6) years has not sponsored, maintained, contributed to or had any obligation to contribute to, any Employee Benefit Plan. None of the Loan Parties nor any of their respective Subsidiaries has any liability (whether actual, contingent or otherwise) with respect to a Pension Plan or a Multiemployer Plan. No ERISA Affiliate of any Loan Party sponsors, maintains, contributes to, or has any liability (whether actual, contingent or otherwise) with respect to a Pension Plan, or has any obligation to contribute to or any liability (whether actual, contingent or otherwise) with respect to any Multiemployer Plan.

No Loan Party is an “investment company” or a company “controlled” by an “investment company” or a “subsidiary” of an “investment company” within the meaning of the Investment Company Act of 1940.

The Borrower and each other Loan Party has timely filed all federal and state income tax returns and other material tax returns and reports required by law to have been filed by it, and the Borrower and each other Loan Party and has paid all material Taxes and governmental charges due and owing, whether or not shown on any return or report, except for any such Taxes or charges which are being diligently contested in good faith by appropriate proceedings and for which adequate reserves in accordance with GAAP shall have been set aside on its books. Schedule 6.23 hereto sets forth the entity classification for United States federal income tax purposes of each Loan Party as of the date hereof.

Schedule 1.03 sets forth the Collection Accounts of each Grantor.

Until the Termination Date, unless Borrower obtains Lender’s prior written consent waiving or modifying any of Loan Parties’ covenants hereunder in any specific instance, each Loan Party covenants and agrees as follows:

Each Loan Party shall at all times keep accurate and complete books, records and accounts with respect to all of such Loan Party’s business activities, in accordance with sound accounting practices and GAAP consistently applied, and shall keep such books, records and accounts, and any copies thereof, only at the addresses indicated for such purpose on Schedule 6.2.

Each Loan Party shall:

All of the notices provided for in this section shall be provided by each Loan Party to Lender in writing in accordance with the provisions of Section 12.4 below.

Each Loan Party shall maintain all governmental consents, franchises, certificates, licenses, authorizations, approvals and permits, the lack of which would have a Material Adverse Effect and each Loan Party shall remain in compliance with all applicable federal, state, local and foreign statutes, orders, regulations, rules and ordinances (including, without limitation, Environmental Laws and statutes, orders, regulations, rules and ordinances relating to taxes, employer and employee contributions and similar items, securities, ERISA or employee health and safety) the failure with which to comply would have a Material Adverse Effect. Following any determination by Lender that there is non-compliance, or any condition which requires any action by or on behalf of such Loan Party in order to avoid non-compliance, with any Environmental Law, at Borrower’s expense cause an independent environmental engineer acceptable to Lender to conduct such tests of the relevant site(s) as are appropriate and prepare and deliver a report setting forth the results of such tests, a proposed plan for remediation and an estimate of the costs thereof.

Each Loan Party shall:

Each Loan Party shall keep the Collateral in good condition, repair and order and shall make all necessary repairs to the Equipment that is Collateral and replacements thereof so that the operating efficiency and the value thereof shall at all times be preserved and maintained in all material respects. Each Loan Party shall permit Lender to examine any of the Collateral at any time and wherever the Collateral may be located and, such Loan Party shall, immediately upon request therefor by Lender, deliver to Lender any and all evidence of ownership of any of the Equipment that is Collateral including, without limitation, certificates of title and applications of title. Each Loan Party shall, at the request of Lender, indicate on its records concerning the Collateral a notation, in form satisfactory to Lender, of the security interest of Lender hereunder.

All monies and other property obtained by Borrower from Lender pursuant to this Agreement shall be used solely for working capital purposes and for other business purposes of Borrower.

Each Loan Party shall file all required tax returns and pay all of its Taxes when due, subject to any extensions granted by the applicable taxing authority, including, without limitation, taxes imposed by federal, state or municipal agencies, and shall cause any liens for Taxes to be promptly released; provided, that each Loan Party shall have the right to contest the payment of such Taxes in good faith by appropriate proceedings so long as (i) the amount so contested is shown on such Loan Party’s financial statements, (ii) adequate reserves for such Taxes have been set aside in accordance with GAAP, and (iii)  the contesting of any such payment does not give rise to a lien for Taxes. If such Loan Party fails to pay any such Taxes and in the absence of any such contest by such Loan Party, Lender may (but shall be under no obligation to) advance and pay any sums required to pay any such Taxes and/or to secure the release of any lien therefor, and any sums so advanced by Lender shall constitute Loans hereunder, shall be payable by Borrower to Lender on demand, and, until paid, shall bear interest at the highest rate then applicable to Loans hereunder.

Each Loan Party shall maintain adequate licenses, patents, patent applications, copyrights, service marks, trademarks, trademark applications, tradestyles and trade names to continue its business as heretofore conducted by it or as hereafter conducted by it unless the failure to maintain any of the foregoing could not reasonably be expected to have a Material Adverse Effect.

Each Grantor shall notify Lender in writing thirty (30) days prior to opening any new Deposit Account or Securities Account and shall enter into a control agreement satisfactory to Lender for each such Deposit Account or Securities Account of any Grantor on or before the opening of such Deposit Account or Securities Account; provided, however, that no control agreement shall be required in respect of (i) any Deposit Account or Securities Account of LR&M if no obligor on LR&M Receivables will be directed to make payment of Collections to such account or (ii) the Green Bank Account.

During a Commitment Period, the Loan Parties shall provide Lender with (i) weekly updates regarding the status of negotiations regarding the applicable commitment and documentation of the refinancing contemplated thereby, (ii) subject to Lender’s execution of a nondisclosure agreement, if applicable, copies of all material communications regarding the commitment letter and the proposed loan set forth therein, and (iii) copies of any final term sheets and other related documents regarding such commitment or the financing contemplated thereby within five (5) business days of any Loan Party’s execution of such documents.

Lazarus Energy shall (a) pay all payments required under the GEL Tex Settlement Agreement when due and (b) promptly provide Lender with evidence of each such payment in a form satisfactory to Lender.

By June 1, 2019, all liens granted by LR&M to Veritex on the Collateral shall be released and LR&M shall provide evidence thereof satisfactory to the Lender (the date of such occurrence, the “Veritex Release Date”); provided that, if such liens are not released by June 1, 2019, LR&M may elect, in its sole discretion with notice to the Lender, to instead grant a perfected, first lien security interest in cash collateral in an amount of no less than $60,000 (which shall be “Collateral”) on such date; provided, further, that upon providing such perfected first lien security interest on such collateral, the definition for the term “LR&M Receivables” shall be deleted in its entirety and replaced with the following: ““LR&M Receivables” means nothing.”

(a) On or before May 17, 2019, Borrower shall transfer the entire balance of funds in or credited to the Borrower’s account at Green Bank with the account number 5501265168 as further described in Schedule 1.03 (the “Green Bank Account”) to the Borrower’s account at Cadence Bank, N.A., a national banking association, with the account number 5500212658 as further described in Schedule 1.03 (the “Cadence Bank Account”) and provide Lender with evidence thereof (satisfactory to Lender) on the date of such transfer, (b) after the transfer described in the preceding clause (a), if, at any time, funds are deposited in or credited to the Green Bank Account, Borrower shall promptly transfer such funds to the Cadence Bank Account and provide Lender with evidence thereof (satisfactory to Lender) on the date of such transfer, (c) on or before May 17, 2019, Borrower shall close the Green Bank Account and provide Lender with evidence of such closure (satisfactory to Lender) and (d) on each Business Day until Borrower has closed the Green Bank Account, Borrower shall provide an electronic screen capture image of the online balance statement for the Green Bank Account by email to the following address:  ***@***.

Until the Termination Date, unless Borrower obtains Lender’s prior written consent waiving or modifying any of Loan Party’s covenants hereunder in any specific instance (which consent may be provided by email), each Loan Party (other than Blue Dolphin) (each, a “Covenant Party”) agrees as follows:

No Covenant Party shall create, incur, assume or become obligated (directly or indirectly), for any Debt other than the Loans, except that Borrower and the other Covenant Parties may (i) maintain their present indebtedness listed on Schedule 1.01 hereto; (ii) incur unsecured indebtedness to trade creditors in the ordinary course of business; (iii) incur indebtedness under Affiliate Funding Transactions; (iv) incur purchase money indebtedness or capitalized lease obligations in the ordinary course of business in an aggregate principal amount not to exceed two million Dollars ($2,000,000); and (v) incur indebtedness under the Loan Documents.

No Covenant Party shall grant or permit to exist (voluntarily or involuntarily) any lien, claim, security interest or other encumbrance whatsoever on any of its assets (other than margin stock) other than Permitted Liens, and no Loan Party shall grant or permit to exist (voluntarily or involuntarily) any lien, claim, security interest or other encumbrance whatsoever on any Collateral other than Permitted Liens set forth in clauses (a) through (f) of the definition thereof and, until the Veritex Release Date, liens of Veritex on the LR&M Collateral granted by LR&M.

No Covenant Party shall (i) enter into any merger or consolidation; (ii) change the state of such Covenant Party’s organization or enter into any transaction which has the effect of changing such Covenant Party’s state of organization; (iii) sell, lease or otherwise dispose of any of its assets other than in the ordinary course of business or as permitted under Section 8.15 hereto; (iv) purchase the stock, other Equity Interests or all or a material portion of the assets of any Person or division of such Person; or (v) enter into any other transaction outside the ordinary course of such Covenant Party’s business, including, without limitation, any purchase, redemption or retirement of any shares of any class of its stock or any other Equity Interest, and any issuance of any shares of, or warrants or other rights to receive or purchase any shares of, any class of its stock or any other Equity Interest. No Covenant Party shall enter into any joint ventures or partnerships with any other Person.

No Covenant Party shall declare or pay, directly or indirectly, any Restricted Payment, or incur any obligation (contingent or otherwise) to do so, except that, so long as no Event of Default shall have occurred and be continuing at the time of payment thereof, Permitted Tax Distributions may be declared or paid.

No Covenant Party shall purchase or otherwise acquire, or contract to purchase or otherwise acquire, the obligations or stock of any Person, other than direct obligations of the United States, obligations insured by the Federal Deposit Insurance Corporation and obligations unconditionally guaranteed by the United States; nor shall Covenant Party lend or otherwise advance funds to any Person except for advances made to employees, officers and directors for travel and other expenses arising in the ordinary course of business and Affiliate Funding Transactions.

The Covenant Parties will not, and will not permit any of their Subsidiaries to, purchase, redeem, retire, or otherwise acquire for value, or set apart any money for a sinking, defeasance or other analogous fund for the purchase, redemption, retirement, or other acquisition of, or make any voluntary payment or prepayment of the principal of or interest on, or any other amount owning in respect of, any Debt that is subordinate to the Obligations, except for (a) regularly scheduled payments, prepayments, or redemptions of principal and interest in respect thereof required pursuant to the instruments evidencing such Debt, (b) extensions, renewals, and refinancings thereof permitted under Section 8.2 above, and (c) dispositions permitted under Section 8.15(a).

The Covenant Parties will not, directly or indirectly, enter into any arrangement providing for the sale or transfer of property, real or personal, used or useful in the business of any of the Covenant Parties, whether now owned or hereafter acquired, and thereafter rent or lease such property or other property that any of them intend to use for substantially the same purpose or purposes as the property sold or transferred.

No Covenant Party shall (i) amend its organizational documents or change its Fiscal Year or make any change in accounting treatment or reporting except as required by GAAP unless (w) such actions would not have a Material Adverse Effect; (x) such actions would not affect the obligations of such Covenant Party to Lender; (y) such actions would not adversely affect the interpretation of any of the terms of this Agreement or the other Loan Documents and (z) Lender has received ten (10) days prior written notice of such amendment or change or (ii) enter into a new line of business materially different from such Covenant Party’s current business. No Covenant Party shall change its entity classification for United States federal income tax purposes from that set forth on Schedule 6.23 without prior written notice to, and consent of, Lender.

Borrower shall not (i) permit any Equipment that is Collateral to become a Fixture to real property unless such real property is owned by Borrower and is subject to a mortgage in favor of Lender, or if such real estate is leased, is subject to a landlord's agreement in favor of Lender on terms acceptable to Lender, or (ii) permit any Equipment that is Collateral to become an accession to any other personal property unless such personal property is subject to a first priority lien in favor of Lender.

Except as set forth on Schedule 6.8 hereto or as permitted under Sections 6.3 or 8.5 hereof, no Covenant Party shall conduct, permit or suffer to be conducted, transactions with Affiliates other than Affiliate Funding Transactions, transactions for the purchase or sale of Inventory or services in the ordinary course of business pursuant to terms that are no less favorable to such Covenant Party than the terms upon which such transactions would have been made had they been made to or with a Person that is not an Affiliate or transfers of items to the Borrower for no consideration.

No Grantor shall settle or adjust any Account that is Collateral without the consent of Lender.

Borrower shall not pay any management or consulting fees to any Persons, or pay annual aggregate compensation, whether as salary, bonus or otherwise, to all directors or officers of such Borrower in excess of $70,000. The aggregate annual compensation amount(s) shall be adjusted each year for the net addition or loss of directors or officers.

Except as set forth on Schedule 8.14, no Covenant Party shall enter into any agreement prohibiting or otherwise restricting the creation or assumption of any lien in favor of the Lender upon the properties, revenues or assets of such Covenant Party, whether now owned or hereafter acquired, except restrictions existing by reason of:

The foregoing prohibitions shall not apply to restrictions contained in any Loan Document or Commodity Transaction Document.

No Covenant Party shall dispose of any of such Covenant Party’s assets (other than margin stock), including (i) Equity Interests and (ii) Receivables that are Collateral, to any Person in one transaction or a series of transactions, unless such disposition is:

No Loan Party shall, nor shall any Loan Party permit any of its Subsidiaries to, sponsor, maintain, contribute to, or incur any liability (whether actual, contingent or otherwise) with respect to any Employee Benefit Plan, including a Pension Plan or a Multiemployer Plan.  No Loan Party shall permit any ERISA Affiliate to sponsor, maintain, contribute to, or have any liability (whether actual, contingent or otherwise) with respect to a Pension Plan, or to have an obligation to contribute to or have any liability (whether actual, contingent or otherwise) with respect to a Multiemployer Plan.

The occurrence of any one or more of the following events shall constitute an “Event of Default” by Borrower hereunder:

The failure of any Loan Party to (i) pay any principal of or interest on the Loans when due in accordance with the terms hereof or (ii) pay any other amount payable hereunder or under any other Loan Document if such failure is not remedied within (x) during a Commitment Period, ten (10) Business Days and (y) otherwise, five (5) Business Days.

The failure of any Loan Party to perform, keep or observe any of the covenants, conditions, promises, agreements or obligations of such Loan Party under this Agreement or any of the other Loan Documents (a) set forth in Section 7.2, 7.5 7.10, 7.12, 7.13 or 7.14 of this Agreement or in Section 8 of this Agreement or (b) otherwise, if such failure is not remedied on or before (i) during a Commitment Period, fifteen (15) Business Days and (ii) otherwise, five (5) Business Days, in each case, after notice of such failure is given to Borrower; provided that any such failure by a Loan Party under subsections 7.2.1 and 7.2.3 of this Agreement shall not constitute an Event of Default hereunder until the fifteenth (15th) day following the occurrence thereof.

The failure of any Loan Party to perform, keep or observe (after any applicable notice and cure period) any of the covenants, conditions, promises, agreements or obligations of such Loan Party (other than a covenant not to incur liens on margin stock) under (a) any agreement with any Person other than the Loan Documents or the Commodity Transaction Documents if such failure could reasonably be expected to have a Material Adverse Effect and such failure is not remedied within (i) during a Commitment Period, fifteen (15) Business Days and (ii) otherwise, five (5) Business Days, in each case, after notice of such failure is given to Borrower, or (b) any Commodity Transaction Document and such failure is not remedied within five (5) Business Days after notice of such failure is given to Borrower.

The making or furnishing by any Loan Party to Lender of any representation, warranty, certificate, schedule, report or other communication within or in connection with this Agreement or the other Loan Documents or in connection with any other agreement between such Loan Party and Lender, which is untrue or misleading in any material respect as of the date made. Any Event of Default under this Section 9.4 shall be deemed cured at such time as the applicable representation, warranty, certificate, schedule, report or other communication becomes true in all respects if none of the Loan Parties or the Lender suffered any uncured harm as a result of the facts and circumstances that made the representation, warranty, certificate, schedule, report or other communication untrue or misleading.

The loss, theft, damage or destruction of any of the Collateral in an amount in excess of five hundred thousand Dollars ($500,000) in the aggregate for all such events during any Fiscal Year as determined by Lender in its sole discretion determined in good faith, or (except as permitted hereby) sale, lease or furnishing under a contract of service of, any of the Collateral.

The making or any attempt by any Person to make any levy, seizure or attachment upon any of the Collateral in excess of five hundred thousand Dollars ($500,000).

The commencement of any proceedings in bankruptcy by or against any Loan Party or for the liquidation or reorganization of any Loan Party, or alleging that such Loan Party is insolvent or unable to pay its debts as they mature, or for the readjustment or arrangement of any Loan Party 's debts, whether under the United States Bankruptcy Code or under any other law, whether state or federal, now or hereafter existing, for the relief of debtors, or the commencement of any analogous statutory or non-statutory proceedings involving any Loan Party; provided, however, that if such commencement of proceedings against such Loan Party is involuntary, such action shall not constitute an Event of Default unless such proceedings are not dismissed within forty-five (45) days after the commencement of such proceedings.

The appointment of a receiver or trustee for any Loan Party, for any of the Collateral or for any substantial part of any Loan Party’s assets or the institution of any proceedings for the dissolution, or the full or partial liquidation, or the merger or consolidation, of any Loan Party which is a corporation, limited liability company or a partnership; provided, however, that if such appointment or commencement of proceedings against such Loan Party is involuntary, such action shall not constitute an Event of Default unless such appointment is not revoked or such proceedings are not dismissed within forty-five (45) days after the commencement of such proceedings.

The entry of any judgments or orders aggregating in excess of five hundred thousand Dollars ($500,000) against any Loan Party which remains unsatisfied or undischarged and in effect for thirty (30) days after such entry without a stay of enforcement or execution.

The dissolution of any Loan Party.

The occurrence of an event of default under, or the revocation or termination of, any agreement, instrument or document executed and delivered by any Loan Party to Lender pursuant to which such Loan Party has guaranteed to Lender the payment of all or any of the Obligations or has granted Lender a security interest in or lien upon some or all of such Loan Party's real and/or personal property to secure the payment of all or any of the Obligations.

(a) The institution in any court of a criminal proceeding against any Loan Party which would have a Material Adverse Effect, (b) the indictment of any officer of a Loan Party, for any crime which would have a Material Adverse Effect or (c) the indictment of any Loan Party for any crime.

The failure of (i) Lazarus to own and have voting control of at least seventy-nine percent (79%) of the issued and outstanding voting Equity Interests of Blue Dolphin; (ii) Blue Dolphin to own and have voting control of one hundred percent (100%) of the issued and outstanding voting Equity Interests of each of the Borrower and LR&M; (iii) the Borrower to own and have voting control of at least one hundred percent (100%) of the issued and outstanding voting Equity Interests of each Subsidiary of the Borrower, if any; or (iv) LR&M to own and have voting control of at least one hundred percent (100%) of the issued and outstanding voting Equity Interests of each Subsidiary of LR&M, if any.

The occurrence and continuation of any Material Adverse Effect.

Upon the occurrence and during the continuance of an Event of Default described in Sections 9.7 or 9.8 hereof, all of the Obligations shall immediately and automatically become due and payable, without notice of any kind. Upon the occurrence and during the continuation of any other Event of Default, the Lender, by notice to the Borrower, may take any or all of the following actions, at the same or different times: (i) declare the Loans then outstanding to be forthwith due and payable in whole or in part, whereupon the principal of the Loans so declared to be due and payable, together with accrued interest thereon and any unpaid accrued fees and all other liabilities of the Borrower accrued hereunder and under any other Loan Document, shall become forthwith due and payable, without presentment, demand, protest or any other notice of any kind, all of which are hereby expressly waived by the Borrower, anything contained herein or in any other Loan Document to the contrary notwithstanding; and (ii) exercise any rights and remedies provided to the Lender under this Agreement, any other Loan Documents (subject to the restrictions referred to therein) or at law or at equity.

Upon the occurrence and during the continuance of an Event of Default, Lender may exercise from time to time any rights and remedies available to it under the Uniform Commercial Code and any other applicable law in addition to, and not in lieu of, any rights and remedies expressly granted in this Agreement or in any of the other Loan Documents and all of Lender's rights and remedies shall be cumulative and non-exclusive to the extent permitted by law. In particular, but not by way of limitation of the foregoing, Lender may, without notice, demand or legal process of any kind, take possession of any or all of the Collateral (in addition to Collateral of which it already has possession), wherever it may be found, and for that purpose may pursue the same wherever it may be found, and may enter onto any of each Loan Party’s premises where any of the Collateral may be, and search for, take possession of, remove, keep and store any of the Collateral until the same shall be sold or otherwise disposed of, and Lender shall have the right to store the same at any of Loan Party’s premises without cost to Lender. At Lender's request, each Loan Party shall, at Borrower’s expense, assemble the Collateral and make it available to Lender at one or more places to be designated by Lender and reasonably convenient to Lender and Loan Parties. Each Loan Party recognizes that if a Loan Party fails to perform, observe or discharge any of its Obligations under this Agreement or the other Loan Documents, no remedy at law will provide adequate relief to Lender, and agrees that Lender shall be entitled to temporary and permanent injunctive relief in any such case without the necessity of proving actual damages. Any notification of intended disposition of any of the Collateral required by law will be deemed to be a reasonable authenticated notification of disposition if given at least ten (10) days prior to such disposition and such notice shall (i) describe Lender and such Loan Party, (ii) describe the Collateral that is the subject of the intended disposition, (iii) state the method of the intended disposition, (iv) state that such Loan Party is entitled to an accounting of the Obligations and state the charge, if any, for an accounting and (v) state the time and place of any public disposition or the time after which any private sale is to be made. Lender may disclaim any warranties that might arise in connection with the sale, lease or other disposition of the Collateral and has no obligation to provide any warranties at such time. Any Proceeds of any disposition by Lender of any of the Collateral may be applied by Lender to the payment of expenses in connection with the Collateral, including, without limitation, legal expenses and reasonable attorneys' fees, and any balance of such Proceeds and all other payments received by Lender during the continuance of an Event of Default may be applied by Lender toward the payment of such of the Obligations, and in such order of application, as Lender may from time to time elect.

The obligation of Lender to fund the Loans is subject to the satisfaction or waiver (each in form and substance satisfactory to the Lender in its sole discretion) of the following conditions precedent on or before the date falling one month after the date of this Agreement (the “Outside Date”) (and “Closing Date” is the first Business Day on or before the Outside Date on which all such conditions precedent have been satisfied or waived (in form and substance satisfactory to the Lender in its sole discretion), as applicable). If the conditions set forth in this Section 11.1 are not satisfied or waived (in form and substance satisfactory to the Lender in its sole discretion) by the Outside Date, then (x) the obligation of the Lender to fund the Loans shall not become effective, (y) the Lender's commitments under this Agreement shall automatically terminate without further action by any party hereto, and (z) the Maturity Date shall be deemed to be the Outside Date:

Lender (for itself and not on behalf of any other party) hereby notifies the Loan Parties that, pursuant to the requirements of the USA Patriot Act, Title III of Pub. L. 107-56, signed into law October 26, 2001 (the “USA Patriot Act”), it is required to obtain, verify and record information that identifies the Loan Parties, which information includes the name and address of the Loan Parties and other information that will allow Lender, as applicable, to identify the Loan Parties in accordance with the Act.

IN CONSIDERATION OF THE EXECUTION AND DELIVERY OF THIS AGREEMENT AND THE AGREEMENT TO EXTEND THE COMMITMENTS PROVIDED HEREUNDER, EACH LOAN PARTY HEREBY AGREES TO INDEMNIFY, EXONERATE AND HOLD LENDER AND EACH OF THE OFFICERS, DIRECTORS, EMPLOYEES, AFFILIATES AND AGENTS OF LENDER (EACH A “LENDER PARTY”) FREE AND HARMLESS FROM AND AGAINST ANY AND ALL ACTIONS, CAUSES OF ACTION, SUITS, LOSSES, LIABILITIES, TAXES, DAMAGES AND EXPENSES, INCLUDING ATTORNEY COSTS (COLLECTIVELY, THE “INDEMNIFIED LIABILITIES”), INCURRED BY LENDER PARTIES OR ANY OF THEM AS A RESULT OF, OR ARISING OUT OF, OR RELATING TO (A) ANY TENDER OFFER, MERGER, PURCHASE OF CAPITAL SECURITIES, PURCHASE OF ASSETS OR OTHER SIMILAR TRANSACTION FINANCED OR PROPOSED TO BE FINANCED IN WHOLE OR IN PART, DIRECTLY OR INDIRECTLY, WITH THE PROCEEDS OF ANY OF THE LOANS, (B) THE USE, HANDLING, RELEASE, EMISSION, DISCHARGE, TRANSPORTATION, STORAGE, TREATMENT OR DISPOSAL OF ANY HAZARDOUS MATERIAL AT ANY PROPERTY OWNED OR LEASED BY ANY LOAN PARTY, (C) ANY VIOLATION OF ANY ENVIRONMENTAL LAWS WITH RESPECT TO CONDITIONS AT ANY PROPERTY OWNED OR LEASED BY ANY LOAN PARTY OR THE OPERATIONS CONDUCTED THEREON, (D) THE INVESTIGATION, CLEANUP OR REMEDIATION OF OFFSITE LOCATIONS AT WHICH ANY LOAN PARTY OR THEIR RESPECTIVE PREDECESSORS ARE ALLEGED TO HAVE DIRECTLY OR INDIRECTLY DISPOSED OF HAZARDOUS MATERIALS OR (E) THE EXECUTION, DELIVERY, PERFORMANCE OR ENFORCEMENT OF THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT BY ANY OF LENDER PARTIES, EXCEPT FOR ANY SUCH INDEMNIFIED LIABILITIES ARISING ON ACCOUNT OF THE APPLICABLE LENDER PARTY’S GROSS NEGLIGENCE OR WILLFUL MISCONDUCT AS DETERMINED BY A FINAL, NONAPPEALABLE JUDGMENT BY A COURT OF COMPETENT JURISDICTION. IF AND TO THE EXTENT THAT THE FOREGOING UNDERTAKING MAY BE UNENFORCEABLE FOR ANY REASON, EACH LOAN PARTY HEREBY AGREES TO MAKE THE MAXIMUM CONTRIBUTION TO THE PAYMENT AND SATISFACTION OF EACH OF THE INDEMNIFIED LIABILITIES WHICH IS PERMISSIBLE UNDER APPLICABLE LAW. ALL OBLIGATIONS PROVIDED FOR IN THIS SECTION 12.3 SHALL SURVIVE REPAYMENT OF THE LOANS, CANCELLATION OF THE LOANS, ANY FORECLOSURE UNDER, OR ANY MODIFICATION, RELEASE OR DISCHARGE OF, ANY OR ALL OF THE COLLATERAL DOCUMENTS AND TERMINATION OF THIS AGREEMENT. NOTWITHSTANDING ANYTHING TO THE CONTRARY IN THE FOREGOING, THIS SECTION 12.3 SHALL NOT APPLY WITH RESPECT TO TAXES OTHER THAN ANY TAXES THAT REPRESENT LOSSES, CLAIMS, DAMAGES, ETC. ARISING FROM ANY NON-TAX CLAIM. The foregoing indemnity shall not require reimbursement of costs and expenses in connection with the execution and delivery of the Loan Documents and the ongoing ordinary course administration thereof, which amounts are subject to Section 2.12 hereof.

All written notices and other written communications with respect to this Agreement shall be sent by ordinary, certified or overnight mail, by telecopy or delivered in person, and in the case of Lender shall be sent to it at Pilot Travel Centers LLC, 20 Greenway Plaza, Suite 310, Houston, TX 77046, attention: Head of Commercial Credit and Finance (Jason Sohmer), email: ***@***, and in the case of Loan Parties shall be sent to it at its principal place of business set forth on Schedule 6.2 hereto or as otherwise directed by Borrower in writing. All notices shall be deemed received upon actual receipt thereof or refusal of delivery. Notwithstanding the foregoing, requests for written consent may be communicated by email to ***@***, or such other person or address that Lender may designate from time to time.

This Agreement and the other Loan Documents may not be modified, altered or amended except by an agreement in writing signed by each Loan Party who is a party to such Loan Document and Lender.

The headings of subdivisions in this Agreement are for convenience of reference only, and shall not govern the interpretation of any of the provisions of this Agreement.

Each Loan Party acknowledges and agrees that its appointment of Lender as its attorney and agent-in-fact for the purposes specified in this Agreement is an appointment coupled with an interest and shall be irrevocable until the Termination Date, provided that Lender shall have no rights in respect of such appointment except after the occurrence and during the continuance of an Event of Default.

This Agreement, any of the other Loan Documents, and any amendments, waivers, consents or supplements may be executed in any number of counterparts and by different parties hereto in separate counterparts, each of which, when so executed and delivered, shall be deemed an original, but all of which counterparts together shall constitute but one agreement.

Lender agrees to make available information regarding the Line of Credit as may be reasonably requested by the Loan Parties to facilitate a refinancing of the Loans.

Lender's failure, at any time or times hereafter, to require strict performance by any Loan Party of any provision of this Agreement or any of the other Loan Documents shall not waive, affect or diminish any right of Lender thereafter to demand strict compliance and performance therewith. Any suspension or waiver by Lender of an Event of Default under this Agreement or any default under any of the other Loan Documents shall not suspend, waive or affect any other Event of Default under this Agreement or any other default under any of the other Loan Documents, whether the same is prior or subsequent thereto and whether of the same or of a different kind or character. No delay on the part of Lender in the exercise of any right or remedy under this Agreement or any other loan Document shall preclude other or further exercise thereof or the exercise of any right or remedy. None of the undertakings, agreements, warranties, covenants and representations of Loan Parties contained in this Agreement or any of the other Loan Documents and no Event of Default under this Agreement or default under any of the other Loan Documents shall be deemed to have been suspended or waived by Lender unless such suspension or waiver is in writing, signed by a duly authorized officer of Lender and directed to Borrower specifying such suspension or waiver.

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

 

IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement as of the date first written above.