Annual Report (10-k)

For the Years Ended December 31,

Basic Earnings per Share:

Unvested Stock Options (1)

Exchange of Aly Operating Redeemable Preferred Stock (2)

United States

Securities and Exchange Commission

Washington, D. C. 20549

Form 10-K

x Annual Report Pursuant to Section 13 or 15 (d) of the Securities Exchange Act of 1934 for the Period Ended December 31, 2014

¨ Transition Report Pursuant to Section 13 or 15 (d) of the Securities Exchange Act of 1934 for the Transition Period From _____________to _____________

Commission File Number 33-92894

ALY ENERGY SERVICES, INC.

(Exact name of registrant as specified in its charter)

Delaware		75-2440201
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)

3 Riverway, Suite 920 Houston, TX		77056
(Address of Principal Executive Offices)		(Zip Code)

(713)-333-4000
(Registrant’s Telephone Number, including area code.)

Securities registered pursuant to Section 12(b) of the Act:

Title of Each Class		Names of Each Exchange on which Registered
Common Stock, $0.001 par value per share		None

Securities registered pursuant to Section 12(g) of the Act:

None

Indicate by check mark if the registrant is a well-known seasoned issuer as defined in Rule 405 of the Securities Act. Yes ¨  No x

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes ¨  No x

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to the filing requirements for at least the past 90 days. Yes x No ¨

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes x No ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See definitions of "large accelerated filer," "accelerated filer" and "smaller reporting company" in Rule 12b-2 of the Exchange Act.

Large accelerated filer	¨	Accelerated filer	¨
Non-accelerated filer	¨	Smaller reporting company	x
(Do not check if a smaller reporting company)

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ¨  No x

The aggregate market value of common stock held by non-affiliates of the registrant was approximately $28.7 million as of June 30, 2014, the last business day of the registrant’s most recently completed second fiscal quarter, based upon the closing sales price of the registrant’s common stock on that date.

At March 31, 2015, the registrant had 111,220,287 shares of common stock, $0.001 par value, outstanding.

Documents Incorporated by Reference: None

INDEX

ALY ENERGY SERVICES, INC.

PART I

Item 1.	Business

Item 1A.	Risk Factors

Item 1B.	Unresolved Staff Comments

Item 2.	Properties

Item 3.	Legal Proceedings

Item 4.	Mine Safety Disclosures

PART II

Item 5.	Market for Registrant’s Common Equity Related Stockholder Matters and Issuer Purchases of Equity Securities

Item 6.	Selected Financial Data

Item 7.	Management’s Discussion and Analysis of Financial Condition and Results of Operations

Item 7A.	Quantitative and Qualitative Disclosures About Market Risk

Item 8.	Financial Statements and Supplementary Data

Item 9.	Changes In and Disagreements With Accountants on Accounting and Financial Disclosure

Item 9A.	Controls and Procedures

Item 9B.	Other Information

PART III

Item 10.	Directors, Executive Officers and Corporate Governance

Item 11.	Executive Compensation

Item 12.	Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters

Item 13.	Certain Relationships and Related Transactions and Director Independence

Item 14.	Principal Accounting Fees and Services

PART IV

Item 15.	Exhibits, Financial Statement Schedules

SIGNATURES

PART I

CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

This Current Report on Form 10-K (this “Report”) contains certain forward-looking statements. Forward-looking statements give our current expectations or forecasts of future events. You can identify these statements by the fact that they do not relate strictly to historical or current facts. Forward-looking statements are generally identifiable by use of the words “may,” “will,” “anticipate,” “estimate,” “plans,” “potential,” “projects,” “continuing,” “expects,” “we believe,” “we intend,” or the negative of these words or other variations on these words or comparable terminology. These statements may be found in Item 1A of this Report under “Risk Factors” and in Item 7 of this report under “Management's Discussion and Analysis of Financial Condition and Results of Operations”, as well as in this Report generally, and include statements with respect to, among others:

	·	projected operating or financial results, including any accretion/dilution to earnings and cash flow;
	·	any plans to obtain financing to fund future acquisitions;
	·	prospects for services and expected activity in potential and existing areas of operations;
	·	the effects of competition in areas of operations;
	·	the outlook of oil and gas prices;
	·	the current economic conditions and expected trends in the industry we serve;
	·	the amount, nature and timing of capital expenditures, including future development costs, and availability of capital resources to fund the merger and subsequent capital expenditures;
	·	future financial condition or results of operations and future revenues and expenses; and
	·	business strategy and other plans and objectives for future operations.

Factors that could cause actual results to differ materially from those contemplated by the forward-looking statements include, among others, the following factors:

	·	general economic and business conditions;
	·	prices of crude oil and natural gas and industry expectations about future prices;
	·	the business opportunities (or lack thereof) that may be presented to our company and may be pursued; and
	·	changes in laws and regulations.

Should one or more of the factors, risks or uncertainties described above materialize (or the other consequences of such a development worsen), or should underlying assumptions prove incorrect, actual results and plans could differ materially from those expressed in any forward-looking statements. You are cautioned not to place undue reliance on these statements, which speak only as of the date of this Report.

Item 1. Business

On July 17, 2012, Munawar “Micki” Hidayatallah founded and incorporated Aly Operating Inc. (“Aly Operating”), formerly Aly Energy Services Inc., in Delaware with the strategic objective of creating an oilfield manufacturing, distribution and services company that serves exploration and production companies from well planning to plug and abandonment. We have grown our business both through organic growth resulting from investment in existing operations and through the acquisition of existing businesses operating in our industry.

We provide a variety of oilfield services to owners and operators of oil and gas wells. Generally, these services fall within the following three categories:

	·	Surface rental equipment
	·	Solids control systems
	·	Directional drilling and measurement-while-drilling (“MWD”) services

Since 2012, we have completed three acquisitions: the acquisition of Austin Chalk Petroleum Services Corp. (“Austin Chalk”) in October 2012, the acquisition of United Centrifuge LLC (“United”) and the leased fixed assets associated with that business in April 2014, and the acquisition of Evolution Guidance Systems Inc. (“Evolution”) in July 2014. Subsequent to the acquisition of each of these businesses, we have made significant investments to expand their operations and capitalize on organic growth opportunities in existing and expansion markets. We emphasize opportunities to bundle product offerings and to cross sell services across markets and product lines which we believe increases client retention and the utilization of our equipment.

During 2014, our growth strategy consisted of the following elements, focused on pursuing organic growth and acquiring existing businesses:

	·	Increase inventory of rental products currently being offered
	·	Add products and services
	·	Expand into new geographic markets · Customer base diversification

Acquisition of Austin Chalk

On October 26, 2012, Aly Operating acquired all of the stock of Austin Chalk Petroleum Services Corp. (“Austin Chalk”) for a total purchase price of $22.5 million. Total consideration included $17.9 million cash (net of cash acquired of approximately $58,000), a payable of $0.8 million and the issuance of 4.0 million shares of redeemable preferred stock at Aly Operating (“Aly Operating Redeemable Preferred Stock”), $0.01 par value, at fair value of $3.8 million.

Austin Chalk was founded in 2001 as a provider of high performance, explosion-resistant rental equipment and quality assurance services for land-based horizontal drilling. Austin Chalk currently offers a robust inventory of surface rental equipment as well as roustabout services which include the rig-up and rig-down of equipment and the hauling of equipment to and from the customer's location.

Share Exchange

On May 14, 2013, Preferred Voice, Inc. (“Preferred Voice”) and Aly Operating entered into a Share Exchange Agreement (the “Exchange Agreement”). Preferred Voice was incorporated in 1992 and began operations in 1994 as a traditional 1+ long-distance reseller. Preferred Voice maintained operations in the telecommunications space through January 2012 at which time it discontinued all operations. From and after that date, Preferred Voice was deemed to be a “shell company” (as such term is defined in Rule 12b-2 under the Securities Exchange Act of 1934 (the “Exchange Act”)).

Prior to the execution and delivery of the Exchange Agreement, the Preferred Voice’s board of directors’ approved the Exchange Agreement and the transactions contemplated thereby. Similarly, the board of directors of Aly Operating approved the Exchange Agreement.

Pursuant to the Exchange Agreement, the holders of common stock of Aly Operating surrendered all of their shares in exchange for approximately 68 million newly issued shares of common stock of Preferred Voice (the “Share Exchange”), representing approximately 92% of the outstanding common stock of Preferred Voice after giving effect to the Share Exchange. Shares were exchanged at the ratio of 19.91 shares of Preferred Voice common stock for each one share of Aly Operating common stock.

Immediately after the execution and delivery of the Exchange Agreement, Preferred Voice amended its certificate of incorporation to change the name of Preferred Voice to Aly Energy Services, Inc. (“Aly Energy” or the “Company”) and Aly Operating amended its certificate of incorporation to change the name of Aly Energy Services Inc. to Aly Operating, Inc.

For financial accounting purposes, this acquisition (referred to as the “Merger”) was a reverse acquisition of Preferred Voice by Aly Operating under the acquisition method of accounting and was treated as a recapitalization with Aly Operating as the accounting acquirer. Accordingly, the consolidated financial statements have been prepared to give retroactive effect of the Merger completed on May 14, 2013 and represent the operations of Aly Operating.

Acquisition of United

On April 15, 2014, Aly Energy acquired the equity interests of United Centrifuge, LLC (“United”) as well as certain assets used in United’s business that were owned by related parties of United (collectively the “United Acquisition”). In connection with the United Acquisition, United merged with and into Aly Centrifuge Inc. (“Aly Centrifuge”), a wholly-owned subsidiary of Aly Energy. United operates within the solids control and fluids management sectors of the oilfield services and rental equipment industry, offering its customers the option of renting centrifuges and auxiliary solids control equipment without personnel or the option of paying for a full-service solids control package which includes operators on-site 24 hours a day. United owns centrifuges which are differentiated from the competition due to the ability to remove the rotating assembly from a centrifuge within 45 minutes while on the rig site minimizing customer down time.

Total consideration for the United Acquisition of $24.5 million included $15.1 million cash, net of cash acquired of approximately $0.6 million, the issuance of 5,000 shares of redeemable preferred stock at Aly Centrifuge (“Aly Centrifuge Redeemable Preferred Stock”), $0.01 par value, at a fair value of $5.1 million, contingent consideration of up to $5.0 million in aggregate over 3 years at a fair value of $3.5 million, and a payable of $0.8 million. The contingent consideration consists of up to three future cash payments to the sellers in an amount equal to 5% of the gross revenues of the business acquired for each of the 12 month periods ending on March 31, 2015, 2016 and 2017.

Acquisition of Evolution

On July 1, 2014, Aly Energy acquired all of the issued and outstanding stock of Evolution Guidance Systems Inc. (“Evolution”), which specializes in providing Measurement-While-Drilling (“MWD”) services. Total consideration was approximately $2.0 million, consisting of the issuance of 3,000,000 shares of Common Stock at an estimated fair value of $1.7 million and a payable of $0.3 million. Subsequent to the acquisition, Aly Energy expanded the Evolution service offering by adding full package directional drilling services. In addition, Aly Energy has invested in the in-house fabrication of MWD kits which we believe provide a technological advantage over other MWD kits on the market.

Products and Services

We are a provider of surface rental equipment, solids control systems, and directional drilling and MWD services. Our equipment and services are primarily designed for and used in land-based horizontal drilling. Our equipment includes mud circulating tanks (400 and 500 barrel capacity) and auxiliary equipment, portable mud mixing plants, containment systems, centrifuges and auxiliary solids control equipment, and MWD kits. In conjunction with the rental of some of our skimming systems, solids control packages and MWD kits, we also provide personnel at the customer’s well site to operate our equipment. We also provide personnel to rig-up/rig-down and haul our equipment to and from the customer's location.

Rental Products

Mud Circulating Tanks (“MCTs”): Aly Energy currently has approximately 108 vertical 400-barrel MCTs and 139 500-barrel MCTs. Aly Energy developed its vertical 400-barrel MCTs as an innovative solution that minimizes location size which we believe is an increasingly attractive feature for customers. The majority of our 500-barrel MCTs are highly mobile with rounded bottoms and customized jet-lines to ensure more consistent mud and easier cleanout at the completion of a job. MCTs are typically rented with auxiliary equipment such as diesel or electric mud pumps, hoses, wood mats, and containment.

Mud Mixing Plants (“MMPs”) : Aly Energy owns 12 MMPs ranging in size from 60-barrel capacity to 400-barrel capacity. We believe that the large 400-barrel capacity MMPs, which are designed and fabricated in-house, are a unique product which offers significant advantages to our customers.

Containment Systems: Containment systems consist of berms and plastic linings constructed to ensure that all products and chemicals present on the well site, particularly those which might be environmentally undesirable if spilled, are contained. We believe the demand for containment systems will continue to increase as environmental regulations tighten.

Centrifuges: Aly Energy provides three different centrifuges to meet varying client specifications: SS800, SS1000 LHF-HP, and SS2000. We purchase our centrifuges from United Oilfield Inc. with whom we have a supply agreement which, among other things, grants us exclusivity within the United States to the use of centrifuges manufactured by United Oilfield Inc. for the oilfield services industry. We believe our centrifuges provide a competitive advantage because the rotating assembly within the centrifuge can be removed and replaced with 45 minutes on the well site if it fails which reduces customer down time. Certain customers rent full solids control packages from us which typically include 2 centrifuges and auxiliary equipment, such as shakers, vertical dryers, waste removal units, and various tanks.

MWD Kits: Our MWD kits provide highly accurate data while remaining stable over a wide temperature range and have a mean-time- between-failure rate which we believe is significantly greater than current industry standards. We manufacture our MWD kits in-house which provides us with the ability to modify our kits to meet the specific downhole conditions of each job in a cost effective manner. We believe the capabilities of and the technology associated with our MWD kits is similar to large competitors and we are typically able to offer our kits at discounted pricing due to our cost structure.

Service Offerings Which Include Personnel

Solids Control Services: When a customer’s solids control design and drilling operations are complex, we provide operators on- site 24 hours a day at an additional day rate.

Directional Drilling and MWD Services: Beginning late in the third quarter of 2014, we began to offer full directional drilling packages which include both equipment, such as downhole motors and MWD kits, and operators, both experienced directional drillers and MWD operators, at one package day rate.

Hauling of Equipment and Rig-Up/Rig- Down Services: We offer hauling of our rental equipment to the well site and rig-up/rig-down of such equipment.

Fabricating Capabilities

Aly Energy fabricates certain equipment in its rental fleet, including 400-barrel MCTs, MMPs, and MWD kits. Fabrication takes place in our facilities in Giddings, Texas and in Houston, Texas. Items fabricated in-house are typically unique and we believe our ability to fabricate such products in-house provides us with cost efficiencies that result in a competitive advantage.

Geographic Markets

We service the Permian Basin (in Texas and New Mexico), Eagle Ford Shale, Utica Shale, Marcellus Shale, Woodford Shale, Granite Wash, Mississippian Lime, and Tuscaloosa Marine Shale.

Competition

We experience significant competition in our business. The markets in which we operate are highly fragmented and there are a large number of companies that offer rental equipment and services which overlap with our offerings.

Customers

Aly Energy provides equipment and services to several well- known, established operators, such as Pioneer Natural Resources, Continental Resources, Inc., Devon Energy Corporation and Cabot Oil & Gas Corporation.

For the year ended December 31, 2014, our top three customers represented approximately 29.3% of total revenues, which was a significant decrease from the year ended December 31, 2013 when a substantial portion of the Company’s revenues was derived from two customers with revenues totaling approximately 48.1% of total revenues.

Safety

Our record and reputation for safety is important to all aspects of our business. In the energy services industry, an important competitive factor in establishing and maintaining long-term customer relationships is having an experienced, skilled and well-trained work force. In recent years, many of our larger customers have placed an added emphasis on the safety records and quality management systems of their contractors.

We commit substantial resources toward employee safety and quality management. We believe that our policies and procedures provide a solid framework to ensure our operations minimize the hazards inherent in our work and meet regulatory requirements and customer demands.

Employees

Aly Energy currently employs approximately 210 individuals. The corporate cost center employs seven individuals, including the chief executive officer, the chief operating officer and the chief financial officer, approximately 155 individuals work primarily in the field, and the remaining employees provide selling, general, and administrative services.

Item 1A. Risk Factors

Risks Related to Our Business

Our business depends on domestic drilling activity and spending by the oil and natural gas industry in the United States. Our business has been and may continue to be adversely affected by industry conditions that are beyond our control.

We depend on our customers’ willingness to make expenditures to explore for and to develop and produce oil and natural gas in the United States. Our customers’ willingness to undertake these activities depends largely upon prevailing industry conditions that are influenced by numerous factors over which management has no control, such as:

	·	domestic and worldwide economic conditions;

	·	the supply of and demand for oil and natural gas;

	·	long lead times associated with acquiring equipment and shortages of qualified personnel;

	·	the level of prices, and expectations about future prices, of oil and natural gas;

	·	the cost of exploring for, developing, producing and delivering oil and natural gas;

	·	the expected rates of declining current production;

	·	the discovery rates of new oil and natural gas reserves;

	·	available pipeline, storage and other transportation capacity;

	·	federal, state and local regulation of exploration and drilling activities;

	·	weather conditions, including hurricanes that can affect oil and natural gas operations over a wide area;

	·	political instability in oil and natural gas producing countries;

	·	technical advances affecting energy consumption;

	·	the price and availability of alternative fuels;

	·	the ability of oil and natural gas producers to raise equity capital and debt financing; and

	·	merger and divestiture activity among oil and natural gas producers.

Current and anticipated oil and natural gas prices and the related level of drilling activity and general production spending in the areas in which we have operations primarily influence the demand for our services. The level of oil and natural gas exploration and production activity in the United States is volatile and this volatility could have a material adverse effect on the level of activity by our customers. A reduction by our customers of activity levels may cause a decline in the demand for our services or adversely affect the prices that we can charge or collect for our services. In addition, any prolonged substantial reduction in oil and natural gas prices would likely affect oil and natural gas production levels and, therefore, affect demand for the services we provide. Moreover, a decrease in the development rate of oil and natural gas reserves in our market areas, whether due to increased governmental regulation of or limitations on exploration and drilling activity or other factors, may also have an adverse impact on our business, even in an environment of stronger oil and natural gas prices.

During the second half of 2014, oil prices declined dramatically resulting in a reduction in rig count. The downward trend in both oil prices and rig count has continued during 2015. We believe many oil and gas companies, including our customers, have reduced their drilling-related capital budgets for 2015 and will continue to seek price reductions from oilfield service providers. We anticipate oil and gas prices will remain volatile which will impact demand for our products and services and the prices we may charge customers for them. We are uncertain as to the impact the current market conditions will have on our future operations and financial results.

Competition within the oilfield services industry may adversely affect our ability to market our services.

The oilfield services industry is competitive and fragmented and includes numerous small companies capable of competing in our markets on a local basis as well as several large companies that possess substantially greater financial and other resources than us. Some of our competitors hold significant market share in the markets in which we operate, which may make it difficult for us to successfully commercialize competing products and services. Our larger competitors’ greater resources could allow them to compete more effectively than us. Our competitors may offer products and services at a relatively low cost. Our operations may be adversely affected if our current competitors or new market entrants introduce new products or services with better features, performance, prices or other characteristics, or that better address environmental concerns, than our products and services. Competitive pressures, excess capacity in our industry or other factors also may result in significant price competition that could have a material adverse effect on our results of operations and financial condition.

Increased prices charged by manufacturers of our products and/or interruptions in deliveries of products could adversely affect our profitability, margins, and revenues.

We depend upon a limited number of suppliers for the supply of raw materials and equipment. Increased prices charged by our manufacturers could materially and adversely impact our results of operations. In addition, interruptions or a work stoppage by our manufacturers could adversely affect our operations until arrangements with alternate suppliers could be made, which new arrangements may be more costly.

We may not be able to grow successfully through future acquisitions or to integrate the businesses we do acquire effectively.

Our business strategy includes growth through the acquisition of other businesses. However, we may not be able to identify attractive acquisition opportunities or successfully acquire identified targets on terms favorable to us. Competition for acquisition opportunities is substantial and may escalate, increasing our cost of making future acquisitions or causing us to refrain from making acquisitions. In addition, we may not be successful in integrating future acquisitions into our existing operations, which may result in unforeseen operational difficulties, diminished financial performance or our inability to report financial results and may require a disproportionate amount of our management’s attention. If we fail to manage future acquisitions effectively, our results of operations could be adversely affected. Our growth has placed, and is expected to continue to place, significant demands on our personnel, management and other resources. We must continue to improve our operational, financial, management and legal/compliance information systems to keep pace with the growth of our business.

Acquisitions that we complete could present a number of risks, including but not limited to:

	·	incorrect assumptions regarding the future results of acquired operations or assets or expected cost reductions or other synergies expected to be realized as a result of acquiring operations or assets;

	·	failure to integrate the operations or management of any acquired operations or assets successfully and timely;

	·	possible adverse effects on our operating results during the integration process;

	·	potential loss of key employees and customers of the acquired companies;

	·	potential lack of experience operating in a geographic market of the acquired business;

	·	an increase in our expenses and working capital requirements;

	·	the possible inability to achieve the intended objectives of the business combination; and

	·	the diversion of management’s attention from existing operations or other priorities.

We are vulnerable to the potential difficulties associated with rapid growth and expansion.

We intend to grow at a significant pace over the next several years through organic growth and acquisitions of other businesses. We believe that our future success depends on our ability to manage such growth and the demands from increased responsibility on our management. The following factors could present difficulties to us:

	·	lack of sufficient executive-level personnel;

	·	increased administrative burden;

	·	increased organizational challenges common to large, expansive operations; and

	·	long lead times associated with acquiring equipment.

Our operating results could be adversely affected if we do not successfully manage these potential difficulties.

We may require additional capital in the future, which may not be available to us, or the terms of such financings may negatively impact our business.

Our growth strategy requires significant capital for both organic growth and growth through acquisitions. We may need to raise additional funds through debt or equity financings. Adequate funds may not be available when needed or may not be available on favorable terms. If funding is insufficient at any time in the future, we may be unable fund acquisitions, take advantage of business opportunities or respond to competitive pressures, any of which could materially and adversely affect our business. In addition, existing and future debt service requirements or financial covenants may impose a significant burden on us, which may adversely affect our results of operations and financial condition. We are and may be required to meet or maintain certain financial ratios, which could limit our flexibility and adversely affect our business. Our future capital requirements will primarily depend on the frequency, timing, size and success of future acquisitions, but, given the current market conditions, we may also require capital in the near-term to grow our existing business organically, to support our ongoing operations, and to service our debt.

Our operating history may not be sufficient for investors to evaluate our business and prospects.

The historical financial information included in this document is not necessarily indicative of future results. We have a limited operating history. In addition, we have grown significantly over the last few years. This may make it more difficult for investors to evaluate our business and prospects and to forecast our future operating results. Our future results will depend on our ability to efficiently manage our operations and execute our business strategy.

We depend on significant customers for a substantial portion of our revenues.

We derive a significant amount of our revenues from exploration and production companies and drilling contractors that are active in our markets. For the year ended December 31, 2014, our top three customers accounted for approximately 29.3% of total revenues. If we fail to continue to perform services for a number of our large existing customers or incur price reductions required in order to retain the business of key customers, our business and operations could be adversely affected. Moreover, if any of these customers fails to remain competitive in their respective markets, encounters financial or operational problems or consolidates with a third party, our revenues and profitability may decline.

We are subject to the credit risk of our customers.

We provide credit to our customers in the normal course of business and generally do not require collateral in extending such credit. This exposure, coupled with material instances of default, could have an adverse effect on our business, financial condition, results of operations and cash flows. In addition, we may need to undertake collection efforts that could cause our business from certain customers to decline, or the collection of certain receivables could become impossible, requiring us to write them off.

If we are unable to attract and retain senior management, qualified sales personnel, and a sufficient number of field personnel, our operations, financial condition and prospects will be materially adversely affected.

Our future success depends in part on the contributions of our management team and key sales personnel and our ability to attract and retain qualified new personnel as we grow our business. There is significant competition in our industry for qualified personnel and we cannot assure you that we will be able to retain our key senior managerial and sales personnel or that we will be able to attract, integrate and retain other such personnel that we may require in the future. If we are unable to attract and retain key personnel in the future, our business, operations, financial condition, results of operations and prospects could be materially adversely affected.

The delivery of our services and products requires field personnel who can perform physically demanding work. As a result of the volatility in the energy service industry and the demanding nature of the work, workers may choose to pursue employment in fields that offer a different work environment. Our ability to be productive and profitable will depend upon our ability to employ and retain workers. In addition, our ability to expand our operations depends in part on our ability to increase the size of our labor force. The demand for field personnel in our geographic area of operations is high and the supply is limited. A significant increase in the wages paid by competing employers could result in a reduction of our labor force, increases in the wage rates that we pay, or both. If either of these events were to occur, our capacity and profitability could be diminished and our growth potential could be impaired.

Our operations are subject to hazards inherent in the oil and natural gas industry.

The operational risks inherent in our industry could expose us to substantial liability for personal injury, wrongful death, property damage, loss of oil and natural gas production, pollution and other environmental damages. The frequency and severity of such incidents will affect our operating costs, insurability and relationships with customers, employees and regulators. In particular, our customers may elect not to retain our services if they view our safety record as unacceptable, which could cause us to lose customers and substantial revenues.

We do not have insurance against all foreseeable risks, either because insurance is not available or because of the high premium costs. We evaluate certain of our risks and insurance coverage annually. After carefully weighing the costs, risks, and benefits of retaining versus insuring various risks, we occasionally opt to retain certain risks not covered by our insurance policies. The occurrence of an event not fully insured against, or the failure of an insurer to meet its insurance obligations, could result in substantial losses. In addition, we may not be able to maintain adequate insurance in the future at rates we consider reasonable, and there can be no assurance that insurance will be available to cover any or all of these risks, or, even if available, that it will be adequate or that insurance premiums or other costs will not rise significantly in the future, so as to make such insurance costs prohibitive. In addition, our insurance is subject to coverage limits and some policies exclude coverage for damages resulting from environmental contamination.

We are subject to federal, state and local regulation regarding issues of health, safety and protection of the environment. Under these regulations, we may become liable for penalties, damages or costs of remediation. Any changes in laws and government regulations could increase our costs of doing business.

Our operations and the operations of our customers are subject to extensive and frequently changing regulation. More stringent legislation or regulation or taxation of natural gas drilling activity could directly curtail such activity or increase the cost of drilling, resulting in reduced levels of drilling activity and therefore reduced demand for our services. Numerous federal, state and local departments and agencies are authorized by statute to issue, and have issued, rules and regulations binding upon participants in the oil and gas industry. Our operations and the markets in which we participate are affected by these laws and regulations and may be affected by changes to such laws and regulations, which may cause us to incur materially increased operating costs or realize materially lower revenues, or both.

Laws protecting the environment generally have become more stringent over time and are expected to continue to do so, which could lead to material increases in costs for future environmental compliance and remediation. The modification or interpretation of existing laws or regulations, or the adoption of new laws or regulations, could curtail exploratory or developmental drilling for oil and natural gas and could limit well site services opportunities. Additionally, environmental groups have advocated increased regulation in certain areas in which we currently operate or in which we may operate in the future. These initiatives could lead to more stringent permitting requirements, increased regulation, possible enforcement actions against the regulated community, and a moratorium or delays on permitting, which could adversely affect our well site service opportunities.

Some environmental laws and regulations may impose strict liability, which means that in some situations we could be exposed to liability as a result of our conduct that was lawful at the time it occurred as a result of conduct of, or conditions caused by, prior operators or other third parties. Clean-up costs and other damages arising as a result of environmental laws, and costs associated with changes in environmental laws and regulations could be substantial and could have a material adverse effect on our financial condition. We maintain insurance against some risks associated with underground contamination that may occur as a result of well site service activities. However, this insurance is limited to activities at the well site, and this insurance may not continue to be available or may not be available at premium levels that justify its purchase. The occurrence of a significant event not fully insured or indemnified against could have a material adverse effect on our financial condition and operations.

Increased regulation of hydraulic fracturing could result in reductions or delays in oil and gas production by our customers, which could adversely impact our revenues.

A significant portion of our customers’ oil and gas production is developed from unconventional sources, such as shales, that require hydraulic fracturing as part of the completion process. Hydraulic fracturing involves the injection of water, sand and chemicals under pressure into the formation to stimulate gas production. We do not engage in any hydraulic fracturing activities although many of our customers do. If additional levels of regulation and permits were required through the adoption of new laws and regulations at the federal or state level that could lead to delays, increased operating costs and prohibitions for our customers, such regulations could reduce demand for our services and materially adversely affect our results of operations.

Climate change legislation, regulatory initiatives and litigation could result in increased operating costs and reduced demand for the services we provide.

In recent years, the U.S. Congress has considered legislation to restrict or regulate emissions of greenhouse gases, or GHGs, such as carbon dioxide and methane that may be contributing to global warming. In addition, almost half of the states, either individually or through multi-state regional initiatives, have begun to address GHG emissions, primarily through the planned development of emission inventories or regional GHG cap and trade programs.

Although it is not possible at this time to accurately estimate how potential future laws or regulations addressing GHG emissions would impact our business, either directly or indirectly, any future federal or state laws or implementing regulations that may be adopted to address GHG emissions could require us to incur increased operating costs and could adversely affect demand for the natural gas our customers extract using our services. Moreover, incentives to conserve energy or use alternative energy sources could reduce demand for oil and natural gas, resulting in a decrease in demand for our services. We cannot predict with any certainty at this time how these possibilities may affect our operations.

Delays in obtaining permits by our customers for their operations or by us for our operations could impair our business.

Our customers’ operations require permits from various governmental agencies, including the federal government, state agencies and local municipalities. The ease of obtaining the necessary permits depends on the type of operation and the state in which the operation will take place. As with all governmental permit processes, permits may not be issued in a timely fashion, or at all. As a result, the operations of our customers may be interrupted or suspended for long periods of time, which could cause us to lose revenues and have a material adverse effect on our results of operation.

We may be subject to litigation, which, if adversely determined, could result in substantial losses.

We may be, from time to time, during the ordinary course of business, subject to various litigation claims and legal disputes, including contract, lease, employment, and regulatory claims. Certain litigation claims may not be covered entirely or at all by our insurance policies or our insurance carriers may seek to deny coverage or impose significant deductibles. In addition, litigation claims can be expensive to defend and may divert our attention from the operations of our business. Further, litigation, even if without merit, can attract adverse media attention. As a result, litigation can have a material adverse effect on our business, financial condition, results of operations, and cash flows and, because we cannot predict the outcome of any action, it is possible that adverse judgments or settlements could significantly reduce our earnings or result in losses.

Governmental taxation policies could adversely affect our business, financial condition, and results of operations.

Substantive changes in federal and state tax laws could materially and adversely affect our results of operations. In addition, the final determination of our income tax liabilities involves the interpretation of various federal and state laws and regulations, as well as the significant use of estimates and assumptions regarding the scope of past, current and future operations and results achieved and the timing and nature of income earned and expenditures incurred. Changes in the operating environment, including changes in or interpretation of tax law and currency/repatriation controls, could affect the determination of our income tax liabilities for a tax year.

If we fail to maintain an effective system of internal control over financial reporting, we may be unable to accurately report our financial results or prevent fraud, and investor confidence in our company and the market price of our common stock may be adversely affected.

Our reporting obligations as a public company place a significant strain on our management, operational and financial resources and systems. We may experience difficulty in maintaining management, legal and financial controls, collecting financial data and preparing financial statements, books of account and corporate records and instituting business practices required for us as a publicly traded and reporting company. It may be difficult to design and implement effective internal control over financial reporting for combined operations following the addition of other businesses which we may acquire in the future. In addition, differences in existing controls of acquired businesses may result in weaknesses that require remediation when internal controls over financial reporting are combined.

As directed by Section 404 of the Sarbanes-Oxley Act of 2002, we will be required to include a report from management on the effectiveness of our internal control over financial reporting in our annual reports once we cease to be a “smaller reporting company” under applicable SEC rules. At such time, our management may conclude that our internal control over financial reporting is not effective. This conclusion could adversely impact the market price of our common stock due to a loss of investor confidence in the reliability of our reporting processes.

Risks Related to Debt

Our indebtedness, which is currently collateralized by substantially all of our assets, could restrict our operations and make us more vulnerable to adverse economic conditions.

As of December 31, 2014, the Company owed approximately $26.3 million under our secured credit facility.

Our current and future indebtedness could have important consequences. For example, it could:

	·	Impair our ability to make investments and obtain additional financing for working capital, capital expenditures, acquisitions or other general corporate purposes;

	·	Limit our ability to use operating cash flow in other areas of our business because we must dedicate a substantial portion of these funds to make principal and interest payments on our indebtedness;

	·	Make us more vulnerable to a downturn in our business, our industry or the economy in general as a substantial portion of our operating cash flow will be required to make principal and interest payments on our indebtedness, making it more difficult to react to changes in our business and in industry and market conditions; or,

	·	Put us at a competitive disadvantage to competitors that have less debt.

If we are unable to generate sufficient cash flow or are otherwise unable to obtain the funds required to make principal and interest payments on our indebtedness or if we otherwise fail to comply with the various debt service covenants and/or reporting covenants in our credit agreement, we could be in default under the terms of our credit facility.

In the event of a default, the lender under our credit facility could elect to declare all the funds borrowed under those instruments to be due and payable together with accrued and unpaid interest, terminate their commitments there-under and we or one or more of our subsidiaries could be forced into bankruptcy or liquidation. Any of the foregoing consequences could restrict our ability to grow our business and cause the value of our common stock to decline.

We may be unable to meet the obligations of various financial covenants that are contained in the terms of our credit facility with our principal lender, Wells Fargo Bank, National Association (“Wells Fargo”).

The Company’s agreements with Wells Fargo impose various obligations and financial covenants on the Company. The outstanding amount under the Amended and Restated Credit Agreement, entered into with Wells Fargo in April 2014, is due in full in April 2017. The credit agreement with Wells Fargo has a variable interest rate and is collateralized by substantially all of the assets of the Company and its subsidiaries.

Further, the agreement with Wells Fargo imposes various financial covenants on the Company, including maintaining a minimum fixed charge coverage ratio and a maximum leverage ratio. Wells Fargo can also elect to limit the Company’s ability to incur additional debt or operating lease obligations, or pay certain other indebtedness of the company. If the Company is unable to comply with its obligations and covenants under the credit agreement and it declares an event of default, all of its obligations to Wells Fargo could be immediately due.

Although the Company has obtained waivers of financial covenants or modifications to our credit agreements in the past when we have failed to meet specific provisions, there can be no assurance that we will be able to obtain these waivers or modifications in the future.

The variable rate indebtedness with Wells Fargo subjects us to interest rate risk, which could cause our debt service obligations to increase significantly.

The Company’s borrowings through Wells Fargo bear interest at variable rates, exposing the Company to interest rate risk. The Company has decided not to hedge against the interest rate risk associated with the borrowings under its credit facility. As such, our debt service obligations could increase significantly in the event of large increases in interest rates.

Our debt obligations, which may increase in the future, may reduce our financial and operating flexibility.

As of December 31, 2014, we had borrowed approximately $26.3 million under our credit facility and have approximately $5.0 million of borrowing capacity available under this facility. Although the Company plans to utilize cash flow from operations during the first half of 2015 to reduce our outstanding borrowings, we may incur substantial additional indebtedness in the future, or cash flow from operations may not be adequate to service our debt service obligations. If the Company is unable to reduce debt as planned or new debt or other liabilities are added to our current debt levels, the related risks that we now face would increase.

A high level of indebtedness subjects us to a number of adverse risks. In particular, a high level of indebtedness may make it more likely that a reduction in the borrowing base of our credit facility following a periodic redetermination could require us to repay a portion of outstanding borrowings, may impair our ability to obtain additional financing in the future, and increases the risk that we may default on our debt obligations. In addition, we may be required to devote a significant portion of our cash flows to servicing our debt and we are subject to interest rate risk under our credit facility, which bears interest at a variable rate. Any increase in our interest rates could have an adverse impact on our financial condition, results of operations and growth prospects.

Risks Related to Ownership of our Common Stock

We may issue additional capital in the future, which could substantially dilute or otherwise adversely affect rights of holders of our common stock.

We may need to raise significant additional funds through equity financings for operational expansion, execution of our acquisition strategy, to repay debt, or to remain in compliance with the financial covenants under our credit agreement. We issued an aggregate of 20,182,743 additional shares of common stock during 2014. Holders of our common stock could experience substantial dilution if we issue additional capital stock in the future. Our future capital requirements will primarily depend on the frequency, timing, size and success of our acquisitions and growth opportunities identified by our business units. We may also elect to raise equity to strengthen the company’s balance sheet in light of the continued volatility in oil and gas prices and such offerings may be at prices significantly below the price of equity issuances in 2014 which may result in significant dilution for the existing holders of our common stock.

Future offerings of debt securities and preferred stock, which would rank senior to our common stock upon liquidation, may adversely affect the market value of our common stock.

In the future, we may, from time to time, attempt to increase our capital resources by making offerings of debt or additional offerings of equity securities, including commercial paper, medium-term notes, senior or subordinated notes and classes of preferred stock. Upon liquidation, holders of our debt securities and preferred stock and lenders with respect to other borrowings will receive a distribution of our available assets prior to the holders of our common stock. Because our decision to issue securities in any future offering will depend on market conditions and other factors beyond our control, we cannot predict or estimate the amount, timing or nature of our future offerings. Thus, holders of our common stock bear the risk that our future offerings may reduce the market value of our common stock.

Delaware law contains provisions that could discourage acquisition bids or merger proposals, which may adversely affect the market price of our common stock.

Delaware law prohibits us from engaging in any business combination with any “interested stockholder,” meaning generally that a stockholder who beneficially owns more than 15% of our common stock cannot acquire us for a period of three years from the date this person became an interested stockholder, unless various conditions are met, such as approval of the transaction by our board of directors. These provisions could limit the price that potential acquirers might be willing to pay in the future for shares of our common stock.

Because we have no current plans to pay dividends on our common stock, investors must look solely to stock appreciation for a return on their investment in us.

We do not anticipate paying any cash dividends on our common stock in the foreseeable future. We currently intend to retain all future earnings to fund the development and growth of our business. Any payment of future dividends will be at the discretion of our board of directors and will depend on, among other things, our earnings, financial condition, capital requirements, level of indebtedness, statutory and contractual restrictions applying to the payment of dividends and other considerations that the board of directors deems relevant. For example, our credit agreement with Wells Fargo limits our ability to pay dividends. Investors may need to rely on sales of their common stock after price appreciation, which may never occur, as the only way to realize a return on their investment. Investors seeking cash dividends should not purchase our common stock.

Because our common stock is subject to the “penny stock” rules, brokers cannot generally solicit the purchase of our common stock, which adversely affects its liquidity and market price.

The SEC has adopted regulations, which generally define “penny stock” to be an equity security that has a market price of less than $5.00 per share, subject to specific exemptions. The market price of our common stock on the Over-The-Counter Bulletin Board (“Bulletin Board”) is substantially less than $5.00 per share and therefore we are considered a “penny stock” according to SEC rules. This designation requires any broker-dealer selling these securities to disclose certain information concerning the transaction, obtain a written agreement from the purchaser and determine that the purchaser is reasonably suitable to purchase the securities. These rules limit the ability of broker-dealers to solicit purchases of our common stock and therefore reduce the liquidity of the public market for our shares.

Moreover, as a result of apparent regulatory pressure from the SEC and the Financial Industry Regulatory Authority, a growing number of broker-dealers decline to permit investors to purchase and sell or otherwise make it difficult to sell shares of penny stocks. This may have a depressive effect upon our common stock price.

Our stock has very limited daily trading volume.

Though our stock is quoted on the Bulletin Board, our average daily trading volume during 2014 was 7,315 shares. It is also not uncommon for our stock to not to have any daily trading volume or to experience significant changes in price on small trading volume.

During 2013 we completed a reverse merger into a public shell company. The shares issued in connection with the merger (approximately 92% of shares outstanding after giving effect to the merger) were “restricted securities” as defined by the securities regulation and were not eligible for sale in the public markets (i) unless a registration statement was filed underlying the securities (which was not undertaken by the company); or (ii) after twelve months from the date such restricted securities were issued. Consequently, only shares representing approximately 6.1 million shares were eligible to trade in the open market through May 13, 2014. Management and directors hold approximately 39.2% of shares outstanding and may be further limited in their ability to conduct open market transactions even if the shares held by them are no longer deemed restricted securities and are eligible for sale in the open market. Additionally, the equity financings conducted by the company in 2013, 2014, and 2015 have all been conducted pursuant to private placement offerings of unregistered securities which subjects the security holders to a six month hold period before shares are eligible for sale in the open market and such offerings have been effected at prices significantly above the company’s current price.

The company’s ability to increase daily trading volume is limited, and the lack of daily trading volume may have a material effect on the price at which our common stock trades on the Bulletin Board.

Due to factors beyond our control, our stock price may be volatile.

Any of the following factors could affect the market price of our common stock:

	·	Actual or anticipated variations in our results of operations;

	·	Our failure to meet financial analysts’ performance expectations;

	·	Changes in earnings estimates;

	·	Short selling activities; or

Changes in market valuations of similar companies.

Item 1B: Unresolved Staff Comments

None.

Item 2. Properties

Our corporate headquarters are located in an office building in Houston, Texas, consisting of approximately 2,291 square feet of office space under a lease that expires in January, 2020. This facility accommodates our executive offices.

We lease facilities and administrative offices in the various geographic areas in which we operate. As of March 31, 2015 we leased properties in Texas, Pennsylvania and Ohio.

We believe that our existing facilities are suitable and adequate and that we have sufficient capacity to meet our current anticipated needs.

Location	Type of Facility	Size	Lease or Owned	Expiration of Lease
3 Riverway, Suite 920 Houston, TX 77056	Corporate office	2,291 sq. ft.	Leased	January 31, 2020

1080 Private Rd 7703 Giddings, TX 78942	Administrative offices, fabrication/repair shop, equipment yard	6.5 acres, 3,600 sq. ft. office space, 5,000 sq. ft. shop	Leased	December 31, 2017

6126 PR 902 Celina, TX 75009	Fabrication/repair shop, equipment yard	1,813 sq. ft. office space, 5,518 sq. ft. shop	Leased	July 31, 2018

202 South Coleman Prosper, TX 75078	Administrative offices	3,052 sq. ft.	Leased	August 31, 2018

792 McCollum Rd. Montrose, PA 18801	Administrative offices, equipment yard	Small acreage site	Leased	August 31, 2015

2299 Performance Way Columbus, OH 43207	Equipment yard	Small acreage site	Leased	October 31, 2015

15110 Northwest Freeway Houston, TX 77040	Administrative offices, fabrication/repair shop	6,150 sq. ft.	Month to Month	N/A

State Hwy. 85 West/CR 4715 Dilley, TX 78017	Administrative offices, fabrication/repair shop, equipment yard	5.5 acres, 400 sq. ft. building space	Leased	May 9, 2016

202 East 43rd. San Angelo, TX 76903	Administrative offices, equipment yard	2.25 acres, 1,000 sq. ft. of office space	Leased	May 31, 2015

Item 3. Legal Proceedings

In November 2014, Kenneth Slusher filed a lawsuit on behalf of himself and others in the U.S. District Court, Southern District of Texas, based on the Fair Labor Standards Act (“FLSA”), alleging that he and others were not paid overtime wages for the prior three years. Aly Centrifuge was served with this lawsuit in March 2015 and has answered the complaint.

In February 2015, Michael Mallett filed a similar lawsuit against Aly Centrifuge in the U.S. District Court, Western District of Texas. Aly Centrifuge answered this complaint in February 2015. The plaintiff’s attorney in the Slusher lawsuit has filed a motion to intervene and transfer the Mallett lawsuit to Houston, which motion is pending.

Based upon information known to date, the range of estimated loss if the plaintiffs were to prevail on their claims is currently estimated not to exceed $250,000 in damages, exclusive of attorneys’ fees. We intend to vigorously defend any assertions related to the above lawsuits. Due to the inherent uncertainties of the lawsuit at this time, we cannot accurately predict the ultimate outcome of the matter.

We are subject to various other legal proceedings and claims incidental to or arising in the ordinary course of our business. While many of these matters involve inherent uncertainty, we believe that the liability, if any, ultimately incurred with respect to such proceedings and claims will not have a material adverse effect on our consolidated financial position as a whole or on our liquidity, capital resources or results of operations. We will continue to evaluate proceedings and claims involving us on a quarter-by-quarter basis and will establish and adjust any reserves as appropriate to reflect our assessment of the then-current status of the matters.

Item 4. Mine Safety Disclosures

Not Applicable.

PART II

Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities

Market Information

Our common stock has been listed on the OTCQB under the symbol “ALYE” since May 23, 2013 prior to which it was listed on the OTC Electronic Bulletin Board under the symbol “PRFV”. The following table indicates the quarterly high and low bid price for our common stock on the OTCQB from January 1, 2014 through December 31, 2014, after the Share Exchange for the period from May 15, 2013 through December 31, 2013, and prior to the Share Exchange for the period from January 1, 2013 through May 14, 2013. Such inter-dealer quotations do not necessarily represent actual transactions and do not reflect retail mark-ups, markdowns or commissions.

Fiscal Year 2014	High		Low

4th Quarter (October 1 - December 31, 2014)	$	0.99	$	0.60
3rd Quarter (July 1 - September 30, 2014)	$	0.95	$	0.60
2nd Quarter (April 1 - June 30, 2014)	$	0.80	$	0.23
1st Quarter (January 1 - March 31, 2014)	$	0.46	$	0.19

Fiscal Year 2013 (Post Share Exchange)	High		Low

4th Quarter (October 1 - December 31, 2013)	$	0.48	$	0.18
3rd Quarter (July 1 - September 30, 2013)	$	0.60	$	0.18
2nd Quarter Post-Share Exchange (May 15 - June 30, 2013)	$	0.75	$	0.12

Fiscal Year 2013 (Pre Share Exchange)	High		Low

2nd Quarter Pre-Share Exchange (April 1 - May 14, 2013)	$	0.09	$	0.09
1st Quarter (January 1 - March 31, 2013)	$	0.10	$	0.04

As of March 27, 2015, the last reported sales price of our common stock on the OTCQB was $0.29 per share.

Holders

The number of holders of record of our common stock as of March 27, 2015 was 77. This number does not include an undetermined number of stockholders whose stock is held in “street” or “nominee” name.

Dividends

In the past, we have not distributed earnings to our common stockholders. Our board of directors will make any future decisions regarding dividends. We currently intend to retain and use any future earnings for the development and expansion of our business and do not anticipate paying any cash dividends in the foreseeable future. Our board of directors has complete discretion on whether to pay dividends. Even if our board of directors decides to pay dividends, the form, frequency and amount will depend upon our future operations and earnings, capital requirements and surplus, general financial condition, contractual restrictions and other factors that the board of directors may deem relevant. For example, our credit agreement with Wells Fargo limits our ability to pay dividends.

Recent Sales of Unregistered Securities

During the year ended December 31, 2014, we issued an aggregate of 17,182,743 shares of common stock to 14 investors at a weighted average price of $0.55 per share. The proceeds are being used for growth capital expenditures and general working capital requirements.

On January 12, 2015, we issued 1,000,000 shares of our common stock in a private placement at a price of $0.55 per share for gross proceeds of approximately $0.6 million.

We agreed to issue 1,584,250 and 64,364 shares of our common stock during the year ended December 31, 2014 and the three months ended March 31, 2015, respectively, to one of our directors in respect of his arrangement of certain of these issuances of common stock. As of December 31, 2014, we have not issued any of these shares to our director, but the obligation to issue 1,584,250 shares in the amount of $0.6 million is recognized on the balance sheet as accounts payable - affiliates.

On July 1, 2014, in connection with the acquisition of Evolution, we issued 3,000,000 million shares of common stock to the sellers of Evolution.

Equity Repurchases

We have not repurchased any of our equity securities during the past two years.

Item 6. Selected Financial Data

As a smaller reporting company, we are not required to provide the information required by this Item.

Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations

The following discussion and analysis of our financial condition and results of operations is intended to assist you in understanding our business and results of operations together with our present financial condition. This section should be read in conjunction with the audited consolidated financial statements and the related notes thereto included elsewhere in this Form 10-K.

As used in the subsequent discussion, “we”, “our”, and “us” refers to Aly Operating prior to the Merger transaction on May 14, 2013 and to Aly Energy thereafter. For the purposes of discussing and reporting financial information, we do not distinguish between Aly Energy and Aly Operating because the impact of the inclusion of Aly Energy, a “shell company” (as such term is defined in Rule 12b-2 under Exchange Act) prior to the Share Exchange (described in Note 1 to the consolidated financial statements in this Form 10-K), on the consolidated financial statements is immaterial.

Beginning on April 16, 2014, our financial results include the financial results of the business acquired in the United Acquisition. Beginning on July 1, 2014, our financial results include the financial results of Evolution.

This section contains forward-looking statements that involve risks and uncertainties. Our actual results may differ materially from those discussed in any forward-looking statement because of various factors, including, without limitation, those described in the sections titled “Cautionary Note Regarding Forward-Looking Statements” and Part I, Item 1A “Risk Factors” of this Form 10-K.

History and General Description of Our Business

Inception of Aly Operating

On July 17, 2012, Munawar “Micki” Hidayatallah founded and incorporated Aly Operating Inc. (“Aly Operating”), formerly Aly Energy Services Inc., in Delaware with the strategic objective of creating an oilfield manufacturing, distribution and services company that serves exploration and production companies from well planning to plug and abandonment. We intend to grow our business both through organic growth resulting from investment in existing operations and through the acquisition of existing businesses operating in our industry.

Acquisition of Austin Chalk

On October 26, 2012, Aly Operating acquired all of the stock of Austin Chalk Petroleum Services Corp. (“Austin Chalk”) for a total purchase price of $22.5 million. Total consideration included $17.9 million cash (net of cash acquired of approximately $58,000), a payable of $0.8 million and the issuance of 4.0 million shares of Aly Operating Redeemable Preferred Stock, $0.01 par value, at fair value of $3.8 million.

Share Exchange

On May 14, 2013, Aly Operating and Preferred Voice, Inc. (“Preferred Voice”) entered into a Share Exchange Agreement (the “Exchange Agreement”), pursuant to which the holders of common stock of Aly Operating surrendered all of their shares in exchange for approximately 68 million newly issued shares of common stock of Preferred Voice (the “Share Exchange”), representing approximately 92% of the outstanding common stock of Preferred Voice after giving effect to the Share Exchange. Shares were exchanged at the ratio of 19.91 shares of Preferred Voice common stock for each one share of Aly Operating common stock.

Acquisition of United Centrifuge

Acquisition of Evolution

On July 1, 2014, Aly Energy acquired all of the issued and outstanding stock of Evolution, which specializes in providing MWD services, for total consideration of approximately $2.0 million consisting of the issuance of 3,000,000 shares of Common Stock at an estimated fair value of $1.7 million and a payable of $0.3 million. Subsequent to the acquisition, Aly Energy expanded the Evolution service offering by adding full package directional drilling services. In addition, Aly Energy has invested in the in-house fabrication of MWD kits which we believe provide a technological advantage over other MWD kits on the market.

Overview of Our Business

We are a provider of surface rental equipment, solids control systems, and directional drilling services, including MWD services. Our equipment and services are primarily designed for and used in land-based horizontal drilling. Our equipment includes mud circulating tanks (400 and 500 barrel capacity), mud pumps (diesel and electric), live oil skimming systems with mud gas separators, flare lines with flare stacks, containment systems with stairs, portable mud mixing plants, centrifuges, shakers/vertical dryers, and MWD kits. We also provide personnel at the customer’s well site to operate our equipment in certain product lines, such as skimming systems, centrifuges, downhole drilling motors and MWD kits, and we provide personnel to rig- up/rig-down and haul our equipment to and from the customer's location. We service the Permian Basin (in Texas and New Mexico), Eagle Ford Shale, Utica Shale, Marcellus Shale, Woodford Shale, Granite Wash, Mississippian Lime, and Tuscaloosa Marine Shale. Our primary operating yards, shop and repair facilities, and division management are located in Giddings, Texas, San Angelo, Texas, Prosper, Texas, and Houston, Texas.

We derive the majority of our operating revenues from day rates or hourly rates charged for the rental of our equipment and for the services provided by our personnel. The price we charge for our services depends on both the level of activity within the geographic area in which we operate and also the competitive environment.

Our operating costs do not fluctuate in direct proportion to changes in revenues. Our operating expenses consist of both fixed and variable costs. Although most variable costs are highly correlated with revenues and activity, certain variable costs, such as sub- rental equipment expenses and third party trucking expenses, can be reduced as a percentage of revenues by our investment in new rental and transportation equipment.

Industry Trends and Outlook

We operate in the commodity-driven, cyclical oil and gas industry. Since the beginning of 2011 and through mid-2014, the industry operated in an environment where crude oil prices largely avoided this cycle. During the fourth quarter of 2014, crude oil prices significantly declined due to continued growth in U.S. oil production, weakened outlooks for the global economy and continued strong international crude oil supply, especially from OPEC’s unexpected decision to maintain oil production levels. As a result of the weaker crude oil price environment, many crude oil development prospects are or are becoming less economical for many operators, leading to an expected downturn in demand for our products and services and an overall weaker demand for oilfield services.

We experienced reductions in both the pricing and the utilization of our equipment in the fourth quarter of 2014 and we continue to experience such reductions in 2015. Although we have implemented significant cost control efforts in 2015, including headcount reductions and field wage reductions, we may not be able to mitigate the negative impact of the current market conditions on our operations.

We believe we will face significant challenges in 2015, primarily due to anticipated continued volatility in oil and gas prices, and these challenges may have a significant negative impact on our operations, financial results and ability to access capital in 2015 and beyond.

Results of Operations

Our results of operations depend on the demand for our services and our ability to provide high quality equipment and service to satisfy that demand while maintaining an efficient cost structure.

Our results of operations for the year ended December 31, 2014 compared to the year ended December 31, 2013 were significantly impacted by the inclusion of the results of United Centrifuge and Evolution, which were acquired on April 16, 2014 and July 1, 2014, respectively. In addition, steady demand for our services in our existing markets and strong demand for our services in our new geographic markets had a positive impact on the results of our legacy business.

Results for the Year Ended December 31, 2014 Compared to the Year Ended December 31, 2013

The following table summarizes the change in the results of operations of the Company for the year ended December 31, 2014 when compared to the year ended December 31, 2013. The year ended December 31, 2014 includes the financial results of both United and Evolution (the “Acquisitions”) beginning on April 16, 2014 and July 1, 2014, respectively (in thousands):

	For the Years Ended December 31,
	2014			2013


Revenues	$	42,504		$	18,418
Expenses:
Operating Expenses		23,351			9,875
Depreciation and Amortization		4,959			2,389
Selling, General and Administrative Expenses		5,752			2,399
Corporate Expenses		2,506			1,826

Total Expenses		36,568			16,489

Operating Income		5,936			1,929

Other Expense
Interest Expense		1,033			460
Amortization of Deferred Loan Costs		284			169

Total Other Expense		1,317			629

Income Before Income Taxes		4,619			1,300

Income Tax Expense		2,006			640

Net Income		2,613			660

Preferred Stock Dividends		467			209
Accretion of Preferred Stock, Net		(57	)		37

Net Income Available to Common Shareholders	$	2,203		$	414

Our revenues for the year ended December 31, 2014 were $42.5 million, an increase of 130.8%, compared to $18.4 million for the year ended December 31, 2013. The Acquisitions contributed $18.2 million in revenues during the year ended December 31, 2014. The remaining increase in revenues was due to strong demand for our mud circulating tanks and diesel mud pumps, particularly in the Permian Basin where we began operating in the third quarter of 2013, partially offset by a decline in pricing and demand for our live oil skimming systems. Our revenues generated from the hauling, rig-up/rig-down, and cleaning of our equipment increased to $9.8 million for the year ended December 31, 2014 from $7.1 million for the year ended December 31, 2013 while remaining consistent as a percentage of total revenue due to the strong correlation of the revenue generated by these services to our rental revenues and overall level of activity.

Our operating expenses for the year ended December 31, 2014 increased to $23.4 million, or 54.9% of revenues, compared to $9.9 million, or 53.6% of revenues, for the year ended December 31, 2013. The increase is primarily due to the inclusion of $10.7 million of direct costs from the Acquisitions during the year ended December 31, 2014. The remaining increase is primarily due to increased third-party expenses incurred, typically to sub-rent equipment, haul equipment, and clean equipment, in order to meet the increase in customer demand.

Depreciation and amortization expense increased 107.6% to $5.0 million for the year ended December 31, 2014 compared to $2.4 million for the year ended December 31, 2013. The increase is due primarily to the inclusion of depreciation expense and amortization expense associated with the Acquisitions. Excluding the impact of the Acquisitions, depreciation expense increased during the year ended December 31, 2014 when compared to the year ended December 31, 2013 primarily due to a larger fixed asset base throughout 2014, partially offset by a change in the estimated useful lives of certain types of equipment which became effective on July 1, 2014. Additional detail on the change in accounting estimate is included in Note 2 to the consolidated financial statements of this Form 10-K.

Selling, general and administrative expense increased 139.8% to $5.8 million for the year ended December 31, 2014 compared to $2.4 million for the year ended December 31, 2013. The $3.4 million increase is primarily due to the inclusion of $2.3 million of selling, general and administrative expenses associated with the Acquisitions. The remaining increase is due to increased payroll expense and related burden resulting from the expanding scope of operations and the strengthening of infrastructure to enable efficient growth partially offset by a non-cash adjustment to the fair value of a contingent payment liability.

Corporate expense increased to $2.5 million for the year ended December 31, 2014 compared to $1.8 million for the year ended December 31, 2013 primarily due to the addition of personnel to support the increased size of the organization resulting from the Acquisitions. Corporate expense consisted primarily of payroll for corporate employees (including approximately $0 and $76,000 of stock compensation expense for the years ended December 31, 2014 and 2013, respectively) and legal and professional fees, including audit and accounting fees. During the years ended December 31, 2014 and 2013, legal and professional fees included fees which were non- recurring in nature, primarily related to the Acquisitions and the Share Exchange, of approximately $0.2 million and $0.3 million, respectively.

Interest expense and amortization of deferred loan costs was $1.3 million for the year ended December 31, 2014 compared to approximately $0.6 million for the year ended December 31, 2013. The increase in interest expense and amortization of loan costs for the year ended December 31, 2014 primarily relates to the expansion of our credit facility to $35.0 million in April 2014 from $18.5 million and the additional borrowing incurred in connection with capital investments during the year ended December 31, 2014 to expand our operations. We also incurred additional interest expense related to various capital leases and equipment loans entered into during the year ended December 31, 2014.

Our income tax expense for the year ended December 31, 2014, was $2.0 million, or 43.4% of our income before income taxes, compared to income tax expense of $0.6 million for the year ended December 31, 2013, or 49.2% of our income before income taxes. Income tax expense includes state income tax which is primarily revenue-based and disproportionately increases income tax expense as a percentage of income before income taxes.

Non-GAAP Financial Measures

We disclose and discuss EBITDA as non-GAAP financial measure in our public releases, including quarterly earnings releases, investor conference calls and other filings with the Securities and Exchange Commission.

We define EBITDA as earnings (net income) before interest, income taxes, depreciation and amortization. Our measure of EBITDA may not be comparable to similarly titled measures presented by other companies. Other companies may calculate EBITDA differently than we do, which may limit its usefulness as a comparative measure.

We also make certain adjustments to EBITDA for (i) non- recurring expenses, primarily professional fees related to acquisitions, and (ii) non-cash charges, such as bad debt expense, share-based compensation expense, and the changes in fair value of our liability for contingent payments, to derive a normalized EBITDA run-rate excluding additional non- recurring costs and non-cash expenses (“Adjusted EBITDA”), which we believe is a useful measure of operating results and the underlying cash generating capability of our business.

Because EBITDA and Adjusted EBITDA are not measures of financial performance calculated in accordance with GAAP, these metrics should not be considered in isolation or as a substitute for operating income, net income or loss, cash flows provided by operating, investing and financing activities, or other income or cash flow statement data prepared in accordance with GAAP.

EBITDA and Adjusted EBITDA are widely used by investors and other users of our financial statements as supplemental financial measures that, when viewed with our GAAP results and the accompanying reconciliation, we believe provides additional information that is useful to gain an understanding of the factors and trends affecting our ability to service debt, pay deferred taxes and fund growth and maintenance capital expenditures. We also believe the disclosure of EBITDA and Adjusted EBITDA helps investors meaningfully evaluate and compare our cash flow generating capacity from quarter to quarter and year to year.

EBITDA and Adjusted EBITDA are also financial metrics used by management (i) as supplemental internal measures for planning and forecasting overall expectations and for evaluating actual results against such expectations; (ii) as a significant criteria for annual incentive cash compensation paid to our executive officers and management; (iii) as a reference point to compare to the EBITDA of other companies when evaluating potential acquisitions; and (iv) as an assessment of our ability to service existing fixed charges and incur additional indebtedness.

The following table provides the detailed components of EBITDA and Adjusted EBITDA as we define that term for the years ended December 31, 2014 and 2013, respectively (in thousands):

	For the Years Ended December 31,
	2014			2013

Components of EBITDA:

Net Income	$	2,613		$	660

Non-GAAP Adjustments:

Depreciation and Amortization		4,959			2,389
Interest Expense, Net		1,317			629
Income Tax Expense		2,006			640

EBITDA	$	10,895		$	4,318

Adjustments to EBITDA:

Stock-Based Compensation Expense		-			76
Bad Debt Expense		122			113
Fair Value Adjustments to Contingent Payment Liability		(408	)		-
Non-Recurring Expenses		311			295
Adjusted EBITDA	$	10,920		$	4,802

Set forth below are the material limitations associated with using EBITDA and Adjusted EBITDA as non-GAAP financial measures compared to cash flows provided by operating activities.

•	EBITDA and Adjusted EBITDA do not reflect the future growth and maintenance capital expenditures,

•	EBITDA and Adjusted EBITDA do not reflect the interest, future principal payments and other financing-related charges necessary to service the debt that we have incurred to finance acquisitions and invest in our fixed asset base,

•	EBITDA and Adjusted EBITDA do not reflect the deferred income taxes that we will eventually have to pay, and

•	EBITDA and Adjusted EBITDA do not reflect changes in our net working capital position.

Management compensates for the above-described limitations in using EBITDA and Adjusted EBITDA as non-GAAP financial measures by only using EBITDA and Adjusted EBITDA to supplement our GAAP results.

Liquidity and Capital Resources

Our on-going capital requirements arise primarily from our need to acquire equipment in order to increase our existing rental fleet and to expand product and service offerings, to service our debt, and to fund our working capital requirements. Our sources of liquidity have been internal cash flows from operations, borrowings under our credit facility, equipment financings, and proceeds from the sale of equity.

We believe that we will have the ability to provide for our operational needs, our planned capital expenditures, estimated contingencies and possible investments in 2015 through projected operating cash flow and our credit facilities. However, we anticipate that continued volatility in oil and gas prices during 2015 will affect our operations, financial results, and ability to access sources of capital. Should our projected cash flow and credit facilities not be sufficient, we may reduce capital expenditures and future investments and/or consider the issuance of debt and/or equity securities.

The net cash provided by or used in our operating, investing, and financing activities during the years ended December 31, 2014 and 2013 is summarized below (in thousands).

		For the Years Ended December 31,
		2014			2013
Cash Provided By/(Used In):
	Operating Activities	$	4,131		$	3,988
	Investing Activities		(27,805	)		(8,658	)
	Financing Activities		24,284			4,450
Change in Cash and Cash Equivalents		$	610		$	(220	)

Operating Activities

For the year ended December 31, 2014, we generated $4.1 million of cash from operating activities. Our net income for the period was $2.6 million. Non-cash additions to net income totaled $6.8 million consisting of an aggregate of $5.2 million in depreciation, amortization of intangibles, amortization of deferred loan costs, $1.8 million in deferred taxes, and $0.1 million of bad debt expense, partially offset by a $0.4 million fair value adjustment to a contingent payment liability.

During the year ended December 31, 2014, changes in working capital used $5.2 million in cash. Cash was provided by a net increase in payables and accrued expenses of $1.3 million offset by an increase in accounts receivable and unbilled receivables of approximately $5.7 million, due primarily to an increase in revenues in connection with both our legacy business and the Acquisitions and, to a lesser extent, an increase in length of time between the issuance of invoices and collecting payment. Changes in other current assets resulted in an additional use of cash of $0.8 million.

For the year ended December 31, 2013, we generated $4.0 million of cash from operating activities. Our net income for this period was $0.7 million. Non-cash additions to net income totaled $3.5 million consisting primarily of $2.6 million of depreciation, amortization of intangibles and amortization of deferred loan costs.

During the year ended December 31, 2013, changes in working capital used $0.2 million in cash. Cash was primarily provided by a decrease in accounts receivable and unbilled receivables of $0.2 million and an increase of $0.5 million in accounts payable offset by a decrease in accounts payable - affiliate of $0.8 million.

Investing Activities

During the year ended December 31, 2014, we used $27.8 million in investing activities of which $15.1 million was the cash purchase price, net of cash acquired, associated with the United Acquisition. We used $12.9 million of cash to invest in machinery and equipment during the period, including $4.0 million for the cash portion of consideration for the Saskatchewan Equipment Purchase, approximately $1.8 million for the fabrication of 5 new MWD kits, approximately $0.7 million in vertical dryers which was a new rental offering in 2014, and $0.6 million in the fabrication of our unique 400 bbl mud mixing plants.

During the year ended December 31, 2013, we used $8.7 million in investing activities, all consisting of the purchase or fabrication of capital assets, partially offset by $0.3 million of cash acquired from the reverse merger with Preferred Voice.

Financing Activities

During the year ended December 31, 2014, financing activities generated $24.3 million of cash. Net borrowings of $15.4 million during the period resulted from the expansion of our credit facility to finance the United Acquisition. We also issued common equity during the period raising $9.4 million in net proceeds through private placements of our Common Stock. Payment of deferred financing costs used $0.5 million of cash during the period.

During the year ended December 31, 2013, financing activities generated $4.5 million in cash, consisting of $2.3 million of net borrowings under our credit facilities, payment of $0.2 million of deferred loan costs, and proceeds from an equity raise of $2.4 million.

On October 26, 2012, simultaneous with the acquisition of Austin Chalk, we entered into a credit agreement and obtained debt financing of $8.3 million (before deferred loan costs of $0.5 million). The credit facility included an $8.3 million term loan facility with a maturity date of October 26, 2016 and a revolving credit facility up to the lesser of (i) the borrowing base and (ii) $5.0 million with a maturity date of October 26, 2016.

On April 19, 2013, we entered into Amendment No. 1 to the credit agreement in order to, among other things, provide for a $5.0 million delayed draw term loan to be added to the credit facility for the purpose of financing capital expenditures. We were permitted to draw on the delayed draw term loan from time to time up until December 31, 2013 in order to fund up to 80% of the cost of capital expenditures subject to a $5.0 million limit on aggregate borrowings.

On April 15, 2014, in connection with the United Acquisition, we entered into an Amended and Restated Credit Agreement with a maturity date of April 30, 2017. The new agreement increased the size of our credit facility to $30.0 million, consisting of a $25.0 million term loan and a revolving credit facility and swing line with a maximum availability of $5.0 million. Proceeds of the term loan were used to repay indebtedness of approximately $9.9 million under the previous credit facility and to fund the cash portion of the purchase price of the United Acquisition.

On November 26, 2014, we entered into Amendment No. 1 to the Amended and Restated Credit Agreement in order to, among other things, provide for a $5.0 million delayed draw term loan to be added to the credit facility for the purpose of financing capital expenditures. We were permitted to draw on the delayed draw term loan from time to time up until May 26, 2015 in order to fund up to 80% of the cost of capital expenditures subject to a $5.0 million limit on aggregate borrowings. As of December 31, 2014, we had borrowed $5.0 million under the delayed draw term loan and we have no further availability under the delayed draw term loan.

The obligations under the agreement are guaranteed by all of the Company’s subsidiaries and secured by substantially all of the assets of the Company and its subsidiaries. The credit agreement contains customary events of default and covenants including restrictions on the ability of the Company and its subsidiaries to incur additional indebtedness, make capital expenditures, pay dividends or make other distributions, grant liens and sell assets. The borrowing base for the revolving credit facility is determined monthly based upon our receivables.

The Company is required to satisfy certain financial and reporting covenants in conjunction with our debt facilities. Our financial covenants include requirements to maintain (i) a consolidated funded debt to EBITDA ratio of not more than 2.75 to 1.00 for the fiscal quarter ended December 31, 2014 and not more than 2.50 to 1.00 for any fiscal quarter ended on or after March 31, 2015, and (ii) a fixed charge coverage ratio of not less than 1.5 to 1.0. We were in compliance with all of our covenants as of December 31, 2014.

Borrowings under the credit facility bear interest, at our option, at the base rate or LIBOR. The annual interest rate on each base rate borrowing is (i) the greatest of Wells Fargo’s Prime Rate, the Federal Funds Rate plus 0.5% and the one-month LIBOR rate on such day plus 1.00%, plus (ii) a margin between 2.50% and 3.50% (depending on the then current leverage ratio). The interest rate on each LIBOR loan will be the LIBOR rate for the applicable interest period plus a margin between 3.50% and 4.50% (depending on the then-current leverage ratio). For the years ended December 31, 2014 and 2013, interest rates on our borrowings under the credit facility ranged from 3.75% to 4.75% and 3.67% to 4.05%, respectively.

Borrowings under the term loan are repayable in quarterly principal payments of $1.3 million with a balloon payment of the remaining outstanding borrowings on April 30, 2017 and borrowings under the delayed draw term loan are repayable in quarterly principal payments of $0.3 million beginning on June 30, 2015 with a balloon payment of the remaining outstanding borrowings on April 30, 2017. For the year ended December 31, 2013, borrowings under the term loan facility were repayable quarterly in an amount of $0.4 million and there were no required repayments of borrowings under the delayed draw term facility.

At December 31, 2014, there was $21.3 million and $5.0 million of outstanding borrowings under the term loan and the delayed draw term loan, respectively, and no borrowings under the revolving credit facility. At December 31, 2013, there was $6.2 million of outstanding borrowings under the term loan, $4.4 million of outstanding borrowings under the delayed draw term loan, and no borrowings under the revolving credit facility. As of December 31, 2014, we had a borrowing base of $5.0 million under the revolving credit facility that could be borrowed against if necessary. The borrowing base, recalculated monthly, is determined by the balance and aging of our accounts receivable and may decrease subject to a decline in revenue resulting from the current market conditions.

Subordinated Note Payable

On August 15, 2014, we issued a Subordinated Note Payable in connection with the Saskatchewan Equipment Purchase. The Subordinated Note Payable, in the principal amount of $2.0 million, required repayment in four quarterly principal payments of $0.5 million, beginning on March 31, 2015 and ending on the maturity date of December 31, 2015, bearing interest at a rate of 5% per annum on the unpaid principal balance.

On March 18, 2015, the Subordinated Note Payable was amended to extend the final maturity date to June 30, 2017 and to increase the interest rate to 10% per annum. Subsequent to a an aggregate principal and interest payment of approximately $0.6 million on March 31, 2015, all remaining payments of interest and principal will be paid in amounts determined by the Company’s board of directors after reviewing then current market conditions and projected operations subject to approval of the Company’s lenders. The Subordinated Note Payable is generally subordinated in right of payment to the Company’s indebtedness to its lenders.

Equipment Financing and Capital Leases

The Company finances the purchase of certain vehicles and equipment using long-term equipment loans. Repayment occurs over the term of the loan, typically three to five years, in equal monthly installments which include principal and interest. At December 31, 2014 and 2013, we had $0.7 million and $0.0 million outstanding under equipment loans, respectively.

The Company leases certain vehicles and equipment, with the intent to purchase, under non-cancelable capital leases. Some of these leases have end of term lease provisions structured as a Terminal Rental Adjustment Clause (“TRAC”). At the expiration of the lease terms, the equipment will be sold to either the Company or a third party. The proceeds of the sale shall be retained by Wells Fargo Equipment Finance, Inc. (“WFEFI”) until it has recovered 20% of the original equipment cost plus all costs and expenses and unpaid amounts owed by the Company (“Lessor’s Balance”). If the net proceeds are less than the Lessor’s Balance, the Company will be responsible for the shortfall as a terminal rent adjustment. If the net proceeds exceed the Lessor’s Balance, the Company shall receive such excess as an adjustment to rent. The terms of these leases range from three to five years with varying payment dates throughout each month. At December 31, 2014 and 2013, we had $1.3 million and $0.8 million outstanding under capital leases, respectively.

The following table summarizes, as of December 31, 2014, our obligations and commitments to make future payments under our long-term debt and operating leases (in thousands):

	Total		Less than 1 Year		1-3 Years		3-5 Years		More than 5 Years

Contractual Obligations
Long-Term Debt	$	28,250	$	6,250	$	22,000	$	-	$	-
Interest on Long-Term Debt ⁽¹⁾		2,704		1,286		1,418		-		-
Equipment Loans and Capital Leases ⁽²⁾		2,133		585		1,125		423		-
Operating Leases		1,102		371		527		199		5
Other Contractual Obligations ⁽³⁾		3,651		882		2,549		220		-

Total	$	37,840	$	9,374	$	27,619	$	842	$	5

(1)	Interest payments on credit facility and subordinated note calculated at 4.75% and 10.0% per annum, respectively.
(2)	Capital lease amounts include approximately $0.2 million in interest payments.
(3)	Includes payment obligations associated with the acqisition of United for contingent consideration and equipment purchase obligations.

Critical Accounting Policies

We have identified the policies below as critical to our business operations and the understanding of our results of operations. For a detailed discussion on the application of these and other accounting policies, see Note 2 in the Notes to the Consolidated Financial Statements included elsewhere in this document. Our preparation of the consolidated financial statements requires us to make estimates and assumptions that effect the reported amount of assets and liabilities, disclosure of contingent assets and liabilities at the date of our consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. There can be no assurance that actual results will not differ from those estimates.

Revenue Recognition: The Company generates revenues primarily from renting equipment at per-day rates. In connection with certain of its solids control and skimming operations and in connection with its newly acquired directional drilling and MWD operations, the Company also provides personnel to operate its equipment at the customer’s location at per-day or per-hour rates. In addition, the Company may provide equipment transportation and rig-up/rig-down services to the customer at flat rates per job or at an hourly rate. Revenue is recognized when it is realized or realizable and earned and when collectability is reasonably assured.

Accounts Receivable, Unbilled Receivables and Allowance for Doubtful Accounts: Accounts receivable and unbilled receivables are stated at the amount which has been or will be billed to customers. Once billed, customer payments are typically due within 30 days. The Company provides an allowance for doubtful accounts which is based upon a review of outstanding receivables, historical collection information and existing economic conditions. Provisions for doubtful accounts are recorded when it is deemed probable that the customer will not make the required payments. At December 31, 2014 and 2013, the allowance for doubtful accounts was approximately $0.2 million and $90,000, respectively.

Property, Plant and Equipment: Property, plant and equipment are recorded at cost less accumulated depreciation and amortization. Maintenance and repairs, which do not improve or extend the life of the related assets, are charged to expense when incurred. Refurbishments and renewals are capitalized when the value of the equipment is enhanced for an extended period. When property and equipment are sold or otherwise disposed of, the asset account and related accumulated depreciation account are relieved, and any gain or loss is included in operating income.

The cost of property and equipment currently in service is depreciated, on a straight-line basis, over the estimated useful lives of the related assets, which range from one to 20 years. A residual value of 20% is used for asset types deemed to have a salvage value. Typically, these assets contain a large amount of iron in their construction.

Impairment of Long-Lived Assets: Long-lived assets, which include property, plant and equipment and intangible assets with finite lives, are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. An impairment loss is recorded in the period in which it is determined that the carrying amount is not recoverable. The determination of recoverability is made based upon the estimated undiscounted future net cash flows, excluding interest expense. The impairment loss is determined by comparing the fair value with the carrying value of the related assets.

Goodwill and Intangible Assets: The carrying amount of goodwill is tested annually for impairment in the fourth quarter and whenever events or circumstances indicate its carrying value may not be recoverable. Impairment testing is conducted for Aly Energy at the reporting unit level which is one level below our reporting segment level.

Our detailed impairment testing involves comparing the fair value of our reporting units to their respective carrying values, including goodwill. Fair value reflects the price a market participant would be willing to pay in a potential sale of the Company. If the fair value exceeds carrying value, then it is concluded that no goodwill impairment has occurred. If the carrying value of the Company exceeds its fair value, a second step is required to measure possible goodwill impairment loss. The second step includes valuing the tangible and intangible assets and liabilities of the Company as if the Company had been acquired in a business combination. Then, the implied fair value of the Company’s goodwill is compared to the carrying value of that goodwill. If the carrying value of the Company’s goodwill exceeds the implied fair value of the goodwill, we recognize an impairment loss in an amount equal to the excess, not to exceed the carrying value.

Our detailed impairment analysis involves the use of discounted cash flow models. Significant management judgment is necessary to evaluate the impact of operating and macroeconomic changes on Aly Energy. Critical assumptions include projected revenue growth, gross profit margins, selling, general and administrative expenses, working capital fluctuations, capital expenditures, discount rates and terminal growth rates. We use the capital asset pricing model to estimate the discount rates used in the discounted cash flow models.

The annual goodwill impairment testing has been completed for the Company during the fourth quarter and, as the fair value of the Company was in excess of its carrying value, it has been determined that our goodwill is not impaired.

We have approximately $10.5 million of intangible assets, net of $2.1 million of amortization as of December 31, 2014. Our intangible assets have useful lives ranging from two to ten years and each intangible asset is amortized on a straight-line basis over the course of its useful life.

Income Taxes: The Company accounts for income taxes utilizing the asset and liability method. Under this method, deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized as income or expense in the period that includes the enactment date.

The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the periods in which those temporary differences become deductible. In assessing the likelihood and extent that deferred tax assets will be realized, consideration is given to projected future taxable income and tax planning strategies. A valuation allowance is recorded when, in the opinion of management, it is more-likely-than-not that some portion or all of the deferred tax assets will not be realized.

The Company recognizes the financial statement effects of a tax position when it is more-likely-than-not, based on the technical merits, that the position will be sustained upon examination. A tax position that meets the more-likely-than-not recognition threshold is measured as the largest amount of tax benefit that is greater than 50% likely of being realized upon ultimate settlement with a taxing authority. Previously recognized tax positions are reversed in the first period in which it is no longer more-likely-than-not that the tax position would be sustained upon examination.

Recently Issued Accounting Standards

For a discussion of new accounting standards, see Note 2 in the Notes to the Consolidated Financial Statements included elsewhere in this document.

Off-Balance Sheet Arrangements

We have no off-balance sheet arrangements, other than normal operating leases and employee contracts, that have or are likely to have a current or future material effect on our financial condition, changes in financial condition, revenues, expenses, results of operations, liquidity, capital expenditures, or capital resources.

Item 7A. Quantitative and Qualitative Disclosures About Market Risk

As a smaller reporting company, we are not required to provide the information required by this Item.

Item 8. Financial Statements and Supplementary Data

Index to Consolidated Financial Statements

Management’s Report on Internal Control Over Financial Reporting

Reports of Independent Registered Public Accounting Firms

Consolidated Balance Sheets as of December 31, 2014 and 2013

Consolidated Statements of Income for the Years Ended December 31, 2014 and 2013

Consolidated Statements of Changes in Stockholders’ Equity for the Years Ended December 31, 2014 and 2013

Consolidated Statements of Cash Flows for the Years Ended December 31, 2014 and 2013

Notes to Consolidated Financial Statements

F-1

MANAGEMENT’S REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING

Management of the Company is responsible for establishing and maintaining adequate internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) of the Exchange Act). Internal control over financial reporting is a process designed by, or under the supervision of, the Company’s principal executive and principal financial officers, or persons performing similar functions, and effected by the Company’s board of directors, management and other personnel, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles in the United States and includes those policies and procedures that (i) pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and dispositions of the assets of the Company; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the Company are being made only in accordance with authorizations of management and directors of the Company; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the Company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Therefore, even those systems determined to be effective can provide only reasonable assurance with respect to financial statement preparation and presentation. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

Management with the participation of the Company’s principal executive and financial officers assessed the effectiveness of the Company’s internal control over financial reporting as of December 31, 2014 using the framework and criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) in Internal Control — Integrated Framework (2013). Management’s assessment included an evaluation of the design of internal control over financial reporting and testing of the operational effectiveness of its internal control over financial reporting. Based on this assessment, management has concluded that the Company maintained effective internal control over financial reporting as of December 31, 2014.

/s/ Munawar H. Hidayatallah

Munawar H. Hidayatallah

Chairman and Chief Executive Officer

(Principal Executive Officer)

March 31, 2015

/s/ Alya Hidayatallah

Alya Hidayatallah

Chief Financial Officer

(Principal Financial Officer)

March 31, 2015

F-2

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

Board of Directors and Stockholders

Aly Energy Services, Inc.

Houston, Texas

We have audited the accompanying consolidated balance sheet of Aly Energy Services, Inc. and Subsidiaries (collectively the “Company”) as of December 31, 2014 and the related consolidated statements of income, changes in stockholders’ equity, and cash flows for the year then ended. These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these consolidated financial statements based on our audit.

We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audit included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the consolidated financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Aly Energy Services, Inc. and Subsidiaries at December 31, 2014, and the results of their operations and their cash flows for the year then ended, in conformity with accounting principles generally accepted in the United States of America.

/s/ BDO USA, LLP

Houston, Texas

March 31, 2015

F-3

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and Stockholders of

Aly Energy Services, Inc.

We have audited the accompanying consolidated balance sheet of Aly Energy Services, Inc. and Subsidiaries (the “Company”) as of December 31, 2013, and the related consolidated statements of income, changes in stockholders’ equity, and cash flows for the year then ended. The Company’s management is responsible for these consolidated financial statements. Our responsibility is to express an opinion on these consolidated financial statements based on our audit.

We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audit included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the consolidated financial position of the Company as of December 31, 2013, and the consolidated results of their operations and their cash flows for the year then ended, in conformity with accounting principles generally accepted in the United States of America.

/s/ UHY, LLP

Houston, Texas

April 10, 2014

F-4

ALY ENERGY SERVICES, INC.

CONSOLIDATED BALANCE SHEETS

(in thousands, except shares)

			December 31, 2014			December 31, 2013

Assets
	Current Assets
		Cash and Cash Equivalents	$	2,050		$	1,440
		Accounts Receivable, Net of Allowance for Doubtful Accounts of $178 and $90, Respectively		11,053			3,327
		Unbilled Receivables		2,479			882
		Inventory		431			43
		Deferred Tax Assets		57			-
		Prepaid Expenses and Other Current Assets		757			279

	Total Current Assets			16,827			5,971

	Property and Equipment, Net			56,484			21,423

	Intangible Assets, Net			10,475			4,121
	Goodwill			11,407			8,834
	Deferred Loan Costs, Net			768			515
	Deferred Tax Assets			774			131
	Other Assets			12			17

Total Assets			$	96,747		$	41,012

Liabilities and Stockholders' Equity
	Current Liabilities
		Accounts Payable	$	4,628		$	1,131
		Accounts Payable - Affiliates		590			-
		Accrued Expenses		2,453			964
		Deferred Tax Liabilities		58			277
		Current Portion of Long-Term Debt		6,758			2,881
		Current Portion of Contingent Payment Liability		876			-

	Total Current Liabilities			15,363			5,253

	Long-Term Debt, Net of Current Portion			23,455			8,532
	Deferred Tax Liabilities			12,910			6,945
	Contingent Payment Liability, Net of Current Portion			2,233			-
	Other Long-Term Liabilities			28			35

	Total Liabilities			53,989			20,765

	Commitments and Contingencies (See Note 6)

	Aly Operating Redeemable Preferred Stock, $0.01 par value, 4,000,000 shares authorized, issued and outstanding at December 31, 2014 and 2013			4,382			4,132
	Aly Centrifuge Redeemable Preferred Stock, $0.01 par value, 15,000 shares authorized, 9,252 shares issued and outstanding as of December 31, 2014 and 0 shares authorized, issued and outstanding as of December 31, 2013			9,584			-

				13,966			4,132

	Stockholders' Equity
		Common Stock, $0.001 par value, 200,000,000 shares authorized, 110,224,787 issued and 110,220,287 outstanding as of December 31, 2014 and 100,000,000 shares authorized, 90,042,044 issued and 90,037,544 outstanding as of December 31, 2013		112			92
		Treasury Stock, 4,500 shares at Cost		(2	)		(2	)
		Additional Paid-In-Capital		24,811			14,767
		Retained Earnings		3,871			1,258

	Total Stockholders' Equity			28,792			16,115

Total Liabilities and Stockholders' Equity			$	96,747		$	41,012

The accompanying notes are an integral part of these consolidated financial statement

F-5

ALY ENERGY SERVICES, INC.

CONSOLIDATED STATEMENTS OF INCOME

(in thousands, except shares and per share data)

	For the Years Ended December 31,
	2014			2013

Revenues	$	42,504		$	18,418
Expenses:
Operating Expenses		23,351			9,875
Depreciation and Amortization		4,959			2,389
Selling, General and Administrative Expenses		8,258			4,225

Total Expenses		36,568			16,489

Operating Income		5,936			1,929

Interest Expense, Net		1,317			629

Income Before Income Tax		4,619			1,300

Income Tax Expense		2,006			640

Net Income		2,613			660

Preferred Stock Dividends		467			209
Accretion of Preferred Stock, Net		(57	)		37

Net Income Available to Common Stockholders	$	2,203		$	414

Basic Net Income per Common Share	$	0.02		$	0.01
Diluted Net Income per Common Share	$	0.02		$	0.01

Basic Average Common Shares Outstanding		103,104,082			72,129,439
Diluted Average Common Shares Outstanding		110,352,607			72,129,439

The accompanying notes are an integral part of these consolidated financial statement

F-6

ALY ENERGY SERVICES, INC.

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY

(in thousands, except shares)

	Shares of Common Stock
	Issued		Outstanding		In Treasury		Common Stock		Additional Paid-In-Capital			Treasury Stock			Retained Earnings/ (Accumulated Deficit)			Total

Balance at January 1, 2013		6,130,184		6,125,684		4,500	$	6	$	20,482		$	(2	)	$	(20,220	)	$	266
Reverse Merger Transaction		67,967,763		67,967,763		-		68		(7,889	)		-			20,818			12,997
Equity Offering		15,744,997		15,744,997		-		16		2,346			-			-			2,362
Stock-Based Compensation		199,100		199,100		-		2		74			-			-			76
Preferred Stock Dividends		-		-		-		-		(209	)		-			-			(209	)
Accretion of Preferred Stock, Net		-		-		-		-		(37	)		-			-			(37	)
Net Income		-		-		-		-		-			-			660			660

Balance at December 31, 2013		90,042,044		90,037,544		4,500	$	92	$	14,767		$	(2	)	$	1,258		$	16,115

Issuance of Common Stock, Net		17,182,743		17,182,743		-		17		8,807			-			-			8,824
Issuance of Common Stock (Evolution)		3,000,000		3,000,000		-		3		1,647			-			-			1,650
Preferred Stock Dividends		-		-		-		-		(467	)		-			-			(467	)
Accretion of Preferred Stock, Net		-		-		-		-		57			-			-			57
Net Income		-		-		-		-		-			-			2,613			2,613

Balance at December 31, 2014		110,224,787		110,220,287		4,500	$	112	$	24,811		$	(2	)	$	3,871		$	28,792

The accompanying notes are an integral part of these consolidated financial statement

F-7

ALY ENERGY SERVICES, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands)

			For the Years Ended December 31,
			2014			2013

Cash Flows from Operating Activities
	Net Income		$	2,613		$	660
	Adjustments to Reconcile Net Income to Net Cash Provided by Operating Activities
		Depreciation and Amortization of Property and Equipment		3,450			1,867
		Amortization of Deferred Loan Costs		284			169
		Amortization of Intangible Assets		1,509			522
		Stock-Based Compensation Expense		-			76
		Bad Debt Expense		122			113
		Fair Value Adjustments to Contingent Payment Liability		(408	)		-
		Loss on Disposal of Asset		16			-
		Deferred Taxes		1,786			744
	Changes in Operating Assets and Liabilities, Net of Effects of Business Acquisition
		Accounts Receivable		(4,205	)		1,052
		Unbilled Receivables		(1,540	)		(882	)
		Inventory		(388	)		(43	)
		Prepaid Expenses and Other Assets		(458	)		4
		Accounts Payable		1,489			499
		Accounts Payable - Affiliates		(1,161	)		(761	)
		Accrued Expenses and Other Liabilities		1,022			(32	)

Net Cash Provided by Operating Activities				4,131			3,988

Cash Flows from Investing Activities
	Purchase of Property and Equipment			(12,909	)		(8,924	)
	Net Cash Paid for Acquisition of United			(15,063	)		-
	Net Cash Acquired from Acquisition of Evolution			167			-
	Net Cash Acquired from Reverse Merger			-			266

Net Cash Used in Investing Activities				(27,805	)		(8,658	)

Cash Flows from Financing Activities
	Proceeds from Issuance of Common Stock, Net of Transaction Cost			9,433			2,362
	Proceeds on Borrowing on Debt			34,304			6,725
	Repayment of Debt			(18,921	)		(4,473	)
	Payment of Deferred Loan Costs			(532	)		(164	)

Net Cash Provided By Financing Activities				24,284			4,450

Net Increase/(Decrease) in Cash and Cash Equivalents				610			(220	)

Cash and Cash Equivalents, Beginning of Year				1,440			1,660
Cash and Cash Equivalents, End of Year			$	2,050		$	1,440

The accompanying notes are an integral part of these consolidated financial statement

F-8

ALY ENERGY SERVICES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1 – NATURE OF OPERATIONS

Aly Operating Inc. (“Aly Operating”), formerly Aly Energy Services Inc., was incorporated in Delaware on July 17, 2012, for the purpose of creating an oilfield manufacturing, distribution and services company that serves exploration and production companies from well planning to plug and abandonment.

On October 26, 2012, Aly Operating acquired all of the stock of Austin Chalk Petroleum Services Corp. (“Austin Chalk”). Austin Chalk provides surface rental equipment as well as roustabout services which include the rig-up and rig-down of equipment and the hauling of equipment to and from the customer's location.

On July 1, 2014, the Company acquired all of the issued and outstanding stock of Evolution Guidance Systems Inc. (“Evolution”), an operator of Measurement-While-Drilling (“MWD”) downhole tools.

The Company, which has three wholly-owned subsidiaries, Aly Operating, Aly Centrifuge and Evolution, operates as one business segment which services customers within the United States.

F-9

ALY ENERGY SERVICES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation and Principles of Consolidation: The consolidated financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America (“U.S. GAAP”) and include the accounts of Aly Energy and its subsidiaries on the consolidated balance sheets as of December 31, 2014 and 2013 and the related consolidated statements of income, stockholders’ equity, and cash flows for the years then ended. All significant intercompany transactions and account balances have been eliminated upon consolidation.

Revenue Recognition: The Company generates revenues primarily from renting equipment at per-day rates. In connection with certain of its solids control and skimming operations and in connection with its newly acquired directional drilling and MWD operations, the Company also provides personnel to operate its equipment at the customer’s location at per-day or per-hour rates. In addition, the Company may provide equipment transportation and rig-up/rig-down services to the customer at flat rates per job or at an hourly rate. Revenue is recognized when it is realized or realizable and earned and when collectability is reasonably assured.

Cash and Cash Equivalents: For purposes of the consolidated statement of cash flows, cash is defined as cash on-hand and balances in operating bank accounts. The Company considers all highly liquid investments purchased with an original maturity of three months or less to be cash equivalents. The Company had no cash equivalents as of December 31, 2014 and 2013.

Accounts Receivable, Unbilled Receivables and Allowance for Doubtful Accounts: Accounts receivable and unbilled receivables are stated at the amount which has been or will be billed to customers. Once billed, customer payments are typically due within 30 days. The Company provides an allowance for doubtful accounts based upon a review of outstanding receivables, historical collection information and existing economic conditions. Provisions for doubtful accounts are recorded when it is deemed probable that the customer will not make the required payments. At December 31, 2014 and 2013, the allowance for doubtful accounts was approximately $0.2 million and $90,000, respectively.

Fair Value of Financial Instruments: Financial instruments consist of cash and cash equivalents, accounts receivable, unbilled receivables, accounts payable, accrued expenses, and a liability for contingent payments. The carrying values of cash and cash equivalents, accounts receivable, unbilled receivables, accounts payable, and accrued expenses approximate fair value due to their short-term nature.

The Company measures its liability for contingent payments at fair value on a recurring basis. Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability (i.e., exit price) in an orderly transaction between market participants at the measurement date. Additionally, the Company is required to provide disclosure and categorize assets and liabilities measured at fair value into one of three different levels depending on the assumptions (i.e., inputs) used in the valuation. Level 1 provides the most reliable measure of fair value while Level 3 generally requires significant management judgment. Financial assets and liabilities are classified in their entirety based on the lowest level of input significant to the fair value measurement. The fair value hierarchy is defined as follows:

Level 1—Valuations are based on unadjusted quoted prices in active markets for identical assets or liabilities.

Level 2—Valuations are based on quoted prices for similar assets or liabilities in active markets, or quoted prices in markets that are not active for which significant inputs are observable, either directly or indirectly.

Level 3—Valuations are based on prices or valuation techniques that require inputs that are both unobservable and significant to the overall fair value measurement. Inputs reflect management’s best estimate of what market participants would use in valuing the asset or liability at the measurement date.

F-10

ALY ENERGY SERVICES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The Company’s liability for contingent payments represents the fair value of estimated additional cash payments related to the United Acquisition. The payments are subject to the achievement of certain financial performance goals. The fair value of the liability for contingent payments represents the present value of required payments based upon the Company’s internal model and projections. Cash payments are due on May 31, 2015, 2016, and 2017.

The following table provides a roll forward of the fair value of our liability for contingent payments which includes Level 3 measurements (in thousands):

	For the Years Ended
	December 31,
	2014			2013

Fair Value, Beginning of Period	$	-		$	-

Additions		3,517			-
Changes in Fair Value		(408	)		-
Payments		-			-

Fair Value, End of Period	$	3,109		$	-

Property, Plant and Equipment: Property, plant and equipment are recorded at cost less accumulated depreciation and amortization. Maintenance and repairs, which do not improve or extend the life of the related assets, are charged to expense when incurred. Refurbishments and renewals are capitalized when the value of the equipment is enhanced for an extended period. When property and equipment are sold or otherwise disposed of, the asset account and related accumulated depreciation account are relieved, and any gain or loss is included in operating income.

	Estimated Useful Lives	December 31, 2014			December 31, 2013

Machinery and Equipment	1-20 years	$	55,353		$	19,527
Vehicles, Trucks & Trailers	5-7 years		5,243			3,795
Office Furniture, Fixtures and Equipment	3-7 years		366			93
Leasehold Improvements	Remaining Term of Lease		180			48

			61,142			23,463
Less: Accumulated Depreciation and Amortization			(5,615	)		(2,185	)

			55,527			21,278
Assets Not Yet Placed In Service			957			145

Property and Equipment, Net		$	56,484		$	21,423

F-11

ALY ENERGY SERVICES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

On August 15, 2014, we completed a bulk equipment purchase (the “Saskatchewan Equipment Purchase”), consisting of centrifuges, shakers, service vehicles and other associated equipment, for total consideration of $10.3 million.

In connection with its periodic review of the estimated useful lives of property, plant and equipment, the Company determined that the economic useful life of certain assets it expects to use is longer than the remaining originally estimated useful lives. The Company completed its evaluation in the third quarter of 2014 and revised its estimated useful lives as follows:

	-	A change in useful life from a historical estimate of 7 years to a revised estimate of 12 years for machinery and equipment, including containment berms, cellar pumps, centrifugal mud pumps, electric mud pumps, electric transfer pumps, floating pumps, light towers and water meters;

	-	A change in useful life from its historical estimate of 12 years to a revised estimate of 20 years for machinery and equipment, including tanks, flare lines, gas busters, mixing tanks, pipe racks, skimming systems, catwalks and containment stairs ; and,

	-	A change in useful life from its historical estimate of 5 years to a revised estimate of 7 years for trucks and trailers.

In determining the change in estimated useful lives, the Company, with input from management and operations, considered its experience with using these types of equipment. The Company concluded that, with proper maintenance, the types of equipment listed above still operate effectively up to the revised estimates for useful lives. Under the accounting standard related to changes in accounting estimates, the change in the estimated useful lives of certain of the Company’s property, plant and equipment was accounted for as a change in accounting estimate on a prospective basis effective July 1, 2014. The change in estimated useful lives of certain of the Company’s property, plant and equipment resulted in less depreciation expense than would have otherwise been recorded and, ultimately, resulted in an increase in net income for the year ended December 31, 2014 above what would have otherwise been recorded. The impact of the change in estimate is shown below (in thousands, except per share amounts):

	For the Year Ended December 31, 2014

Increase in Net Income	$	389

Basic Net Income per Common Share	$	0.00
Diluted Net Income per Common Share	$	0.00

Depreciation and amortization expense for the years ended December 31, 2014 and 2013 was approximately $3.5 million and $1.9 million, respectively.

Impairment of Long-Lived Assets: Long-lived assets, which include property, plant and equipment and intangible assets with finite lives, are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. An impairment loss is recorded in the period in which it is determined that the carrying amount is not recoverable. The determination of recoverability is made based upon the estimated undiscounted future net cash flows, excluding interest expense. The impairment loss is determined by comparing the fair value with the carrying value of the related assets. The Company recorded no impairment for the years ended December 31, 2014 and 2013.

Goodwill: The carrying amount of goodwill is tested annually for impairment in the fourth quarter and whenever events or circumstances indicate its carrying value may not be recoverable. Impairment testing is conducted at the reporting unit level which is one level below our reporting segment level.

F-12

ALY ENERGY SERVICES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The annual goodwill impairment testing has been completed for the Company during the fourth quarter and, as the fair value of the Company was in excess of its carrying value, the Company has determined that goodwill is not impaired.

	For the Years Ended
	December 31,
	2014		2013

Beginning Balance	$	8,834	$	8,834

Acquisitions		2,573		-
Disposals and Impairments		-		-

Ending Balance	$	11,407	$	8,834

Intangible Assets: Intangible assets consist of the following (in thousands):

	Estimated Useful Lives	December 31, 2014			December 31, 2013

Customer Relationships	2-10 years	$	5,441		$	3,141
Trade Name	4-10 years		2,355			1,098
Non-Compete	4-5 years		2,586			491
Sales Contract	4 years		524			-
Supply Agreement	4 years		1,686			-

			12,592			4,730
Less: Accumulated Amortization			(2,117	)		(609	)
Intangible Assets, Net		$	10,475		$	4,121

Total amortization expense for the years ended December 31, 2014 and 2013 was approximately $1.5 million and $0.5 million, respectively.

F-13

ALY ENERGY SERVICES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Estimated amortization expense for the next five years and thereafter is as follows (in thousands):

Year Ending December 31,
2015	$	2,061
2016		1,983
2017		1,967
2018		1,114
2019		750
Thereafter		2,600
	$	10,475

Deferred Loan Costs: Costs incurred to obtain financing are capitalized and amortized on a straight-line basis over the term of the loan, which approximates the effective interest method. These costs are classified within interest expense on the accompanying consolidated statements of income and are approximately $0.3 million and $0.2 million for the years ended December 31, 2014 and 2013, respectively.

Estimated future amortization expense relating to deferred loan costs is as follows (in thousands):

Year Ending December 31,
2015	$	329
2016		329
2017		110
	$	768

Deferred loan costs and accumulated amortization were approximately $1.3 million and $0.5 million, respectively, as of December 31, 2014. Deferred loan costs and accumulated amortization were $0.7 million and $0.2 million, respectively, as of December 31, 2013.

Income Taxes: The Company accounts for income taxes utilizing the asset and liability method. Under this method, deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized as income or expense in the period that includes the enactment date.

F-14

ALY ENERGY SERVICES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Income tax related interest and penalties, if applicable, are recorded as a component of the provision for income tax expense. However, there were no amounts recognized relating to interest and penalties in the consolidated statements of income for the years ended December 31, 2014 and 2013. The Company had no uncertain tax positions as of December 31, 2014.

Use of Estimates: The preparation of consolidated financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that effect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements, and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

Reclassifications. Certain reclassifications, including a reclassification of a significant portion of payroll expense and other direct expenses from selling, general and administrative expenses to operating expenses, have been made to prior period consolidated financial statements to conform to the current period presentations. These reclassifications had no effect on the consolidated financial position, results of operations or cash flows of the Company.

Recent Accounting Pronouncements: In May 2014, the FASB issued Accounting Standards Update No. 2014-09, Revenue from Contracts with Customers (ASU 2014-09), which supersedes nearly all existing revenue recognition guidance under U.S. GAAP. The core principle of ASU 2014-09 is to recognize revenues when promised goods or services are transferred to customers in an amount that reflects the consideration to which an entity expects to be entitled for those goods or services. ASU 2014-09 defines a five step process to achieve this core principle and, in doing so, more judgment and estimates may be required within the revenue recognition process than are required under existing U.S. GAAP. The standard is effective for annual periods beginning after December 15, 2016, and interim periods therein, using either of the following transition methods: (i) a full retrospective approach reflecting the application of the standard in each prior reporting period with the option to elect certain practical expedients, or (ii) a retrospective approach with the cumulative effect of initially adopting ASU 2014-09 recognized at the date of adoption (which includes additional footnote disclosures). Early adoption is not permitted. The Company is still evaluating the impact, if any, from this guidance and has not yet selected a method of transition.

In June 2014, the FASB issued Accounting Standards Update No. 2014-12, Compensation — Stock Compensation (Topic 718), Accounting for Share-Based Payments When the Terms of an Award Provide That a Performance Target Could Be Achieved after the Requisite Service Period (a consensus of the FASB Emerging Issues Task Force) (ASU 2014-12). The guidance applies to all reporting entities that grant their employees share-based payments in which the terms of the award provide that a performance target that affects vesting could be achieved after the requisite service period. The amendments require that a performance target that affects vesting and that could be achieved after the requisite service period is treated as a performance condition. For all entities, the amendments in this Update are effective for annual periods and interim periods within those annual periods beginning after December 15, 2015. Earlier adoption is permitted. The effective date is the same for both public business entities and all other entities. The adoption of this guidance is not expected to have a material impact on the Company’s consolidated financial statements.

NOTE 3 – BUSINESS COMBINATION

United Acquisition

On April 15, 2014, Aly Energy acquired the equity interests of United as well as certain assets used in United’s business that were owned by related parties of United. The acquisition expanded Aly Energy’s service offering by adding solids control services and expanded Aly Energy’s geographical footprint into the Northeast. Total consideration for the United Acquisition was approximately $24.5 million, comprised of the following (in thousands):

F-15

ALY ENERGY SERVICES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Cash Consideration Paid, Net of Cash Acquired	$	15,063
Fair Value of Aly Centrifuge Redeemable Preferred Stock Issued		5,101
Fair Value of Contingent Consideration		3,517
Accounts Payable - Affiliates		821
Total Consideration	$	24,502

The cash portion of the consideration was $15.1 million, net of cash acquired of $0.6 million. Redeemable preferred stock issued as consideration in the United Acquisition (“Aly Centrifuge Redeemable Preferred Stock”) consists of 5,000 shares with an estimated fair value of $5.1 million (Note 9). The contingent consideration consists of up to three future cash payments to the sellers in an amount equal to 5% of the gross revenues of the business acquired for each of the 12 month periods ending on March 31, 2015, 2016 and 2017; provided, however, that the aggregate contingent consideration will not exceed $5.0 million.

The business combination was accounted for using the acquisition method of accounting and the purchase price was allocated to the net assets acquired at their estimated fair value. The preliminary purchase price was allocated to the net assets acquired upon their estimated fair value as follows (in thousands):

Current Assets	$	2,981
Property and Equipment		18,170
Intangible Assets		6,105
Goodwill		2,309

Total Assets Acquired		29,565

Liabilities Assumed		2,401
Deferred Tax Liabilities		2,662

Total Liabilities Assumed		5,063

Net Assets Acquired	$	24,502

Goodwill, which is not deductible for tax purposes, has a total value of $2.3 million primarily attributable to the rapid growth opportunities that the acquisition could provide to Aly Energy’s existing operations through geographic expansion and opportunities to cross-sell and bundle other product offerings of Aly Energy. Other intangible assets have a total value of $6.1 million with a weighted average amortization period of 7 years. Other intangible assets consist of customer relationships of $2.2 million, amortizable over 10 years, trade name of $1.1 million, amortizable over 10 years, a non-compete agreement of $1.1 million, amortizable over 4 years, and a supply agreement of $1.7 million, amortizable over 4 years. Included within liabilities assumed is $0.3 million of capital leases.

In the June 30, 2014 and September 30, 2014 condensed consolidated financial statements, the initial accounting for the business combination was not completed pending tax to book reconciliations. The amounts of the adjustments to the provisional values are recognized during the year ended December 31, 2014. Therefore, the Company discloses that the June 30, 2014 and September 30, 2014 comparative data is retrospectively adjusted to increase the value of goodwill by approximately $0.3 million and to increase deferred tax liabilities by approximately $0.3 million.

F-16

ALY ENERGY SERVICES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

We incurred approximately $0.1 million of transaction costs associated with the United Acquisition, primarily consisting of professional services fees, which are included in selling, general and administrative expenses during the year ended December 31, 2014. Selling, general and administrative expenses also include approximately $22,000 of expense related to working capital adjustments and approximately $41,000 of expense related to settlements of pre-acquisition claims.

During the year ended December 31, 2014, the United Acquisition contributed $12.6 million in revenues to the consolidated financial results of the Company. The United Acquisition contributed approximately $1.1 million of net income available to common stockholders, prior to any allocation of the Company’s financing costs and corporate expenses, to the consolidated financial results of the Company during the year ended December 31, 2014.

Pro Forma Combined Financial Information

The following unaudited pro forma combined financial information reflects the consolidated statements of income of the Company as if the United Acquisition had occurred as of January 1, 2013. The pro forma information includes adjustments primarily related to the elimination of a revenue sharing arrangement, depreciation expense on fixed assets acquired, amortization of intangible assets acquired, interest expense associated with the expansion of the credit facility to finance the United Acquisition, and the dividends and amortization associated with the issuance of the Aly Centrifuge Redeemable Preferred Stock. The pro forma combined financial information is not necessarily indicative of the results of operations as they would have been had the transaction been effected on the assumed date (in thousands, except per share data):

(Unaudited)
	For the Years Ended
	December 31,
	2014		2013

Revenues	$	47,285	$	30,733

Net Income Available to Common Stockholders	$	2,543	$	2,140

Basic and Diluted Net Income per Common Share	$	0.02	$	0.03

Evolution Acquisition

On July 1, 2014, Aly Energy acquired all of the issued and outstanding stock of Evolution. The acquisition expanded Aly Energy’s service offering by adding MWD services. Total consideration was approximately $2.0 million, comprised of the following (in thousands):

Fair Value of Common Stock Issued	$	1,650
Accounts Payable - Affiliates		340
Total Consideration	$	1,990

F-17

ALY ENERGY SERVICES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Common Stock issued as consideration for the acquisition of Evolution consists of 3,000,000 shares with an estimated fair value of $1.7 million as of the date of the acquisition. At closing, 1,000,000 shares of Common Stock were subject to a 6-month holdback for general indemnification purposes pursuant to the purchase agreement. As of December 31, 2014, all shares have been released to the sellers and no further cash payments are due to the sellers.

Current Assets	$	902
Property and Equipment		62
Intangible Assets		1,758
Goodwill		264
Total Assets Acquired		2,986
Liabilities Assumed		398
Deferred Tax Liabilities		598
Total Liabilities Assumed		996
Net Assets Acquired	$	1,990

Goodwill, which is not tax deductible, has a value of $0.3 million and is primarily attributable to the cross-selling opportunities that Evolution could provide to the existing Aly Energy operations. Other intangible assets have a total value of $1.8 million with a weighted average amortization period of 4 years. Other intangible assets consist of customer relationships of $0.1 million, amortizable over 1.5 years, trade name of $0.2 million, amortizable over 4.5 years, a sales contract of $0.5 million, amortizable over 3.5 years, and a non-compete agreement of $1.0 million, amortizable over 4 years.

We incurred approximately $30,000 of transaction costs associated with the acquisition of Evolution, primarily consisting of professional services fees, which are included in selling, general and administrative expenses during the year ended December 31, 2014.

During the year ended December 31, 2014, Evolution contributed $5.6 million of revenues to the consolidated financial results of the Company. Subsequent to the date of acquisition, Evolution generated a net loss of approximately $0.3 million, prior to any allocation of the Company’s financing costs and corporate expenses, which is included in the consolidated financial results of the Company during the year ended December 31, 2014.

NOTE 4 – LONG-TERM DEBT

Long-term debt consists of the following (in thousands):

	December 31,			December 31,
	2014			2013
Credit Facility
Term Loan	$	21,250		$	6,188
Delayed Draw Term Loan		5,000			4,375
Subordinated Note Payable		2,000			-
Equipment Financing and Capital Leases		1,963			850
		30,213			11,413
Less: Current Portion		(6,758	)		(2,881	)
Long-Term Debt, Net of Current Portion	$	23,455		$	8,532

F-18

ALY ENERGY SERVICES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Credit Facility: Term Loan, Delayed Draw Term Loan, and Revolving Credit Facility

On April 19, 2013, we entered into Amendment No.1 to the credit agreement in order to, among other things, provide for a $5.0 million delayed draw term loan to be added to the credit facility for the purpose of financing capital expenditures. We were permitted to draw on the delayed draw term loan from time to time up until December 31, 2013 in order to fund up to 80% of the cost of capital expenditures subject to a $5.0 million limit on aggregate borrowings.

LIBOR rate for the applicable interest period plus a margin between 3.50% and 4.50% (depending on the then-current leverage ratio). For the years ended December 31, 2014 and 2013, interest rates on our borrowings under the credit facility ranged from 3.75% to 4.75% and 3.67% to 4.05%, respectively.

F-19

ALY ENERGY SERVICES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

As of December 31, 2014, we had a borrowing base of $5.0 million under the revolving credit facility that could be borrowed against if necessary. The borrowing base, recalculated monthly, is determined by the balance and aging of our accounts receivable and may decrease subject to a decline in revenue resulting from the current market conditions.

Subordinated Note Payable

Future maturities of long-term debt, including the term loan, the delayed draw term loan, and the subordinated note payable, as of December 31, 2014 are as follows (in thousands):

Year Ending December 31,
2015	$	6,250
2016		6,000
2017		16,000
	$	28,250

Equipment Financing and Capital Leases

F-20

ALY ENERGY SERVICES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Payments under capital leases for the next five years are as follows (in thousands):

Year Ending December 31,
2015	$	585
2016		585
2017		540
2018		389
2019		34
Total Payments		2,133
Less: Amount Representing Interest		(170	)
Present Value of Minimum Lease Payments		1,963
Less: Current Portion of Capital Leases		(508	)
	$	1,455

NOTE 5 – SIGNIFICANT CUSTOMERS

During the year ended December 31, 2014, approximately $12.3 million or 29.3% of the Company’s revenues were derived from three customers. Amounts due from these customers included in accounts receivable and unbilled receivables at December 31, 2014 are approximately $2.7 million.

During the year ended December 31, 2013, a substantial portion of the Company’s revenues was derived from two customers with revenues totaling approximately $8.8 million or 48.1% of total revenues. Amounts from these customers included in accounts receivable and unbilled receivables on the balance sheet at December 31, 2013 are approximately $1.4 million.

NOTE 6 – COMMITMENTS AND CONTINGENCIES

Litigation

The Company is subject to certain claims arising in the ordinary course of business. Management does not believe that any claims will have a material adverse effect on the Company’s financial position or results of operations.

F-21

ALY ENERGY SERVICES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Operating Leases

The Company leases certain property and equipment under non-cancelable operating leases. The term of the operating leases generally range from one to five years.

Lease expense under all operating leases totaled approximately $0.3 million and $0.1 million for the years ended December 31, 2014 and 2013, respectively. As of December 31, 2014, the future minimum lease payments under non-cancelable operating leases were as follows (in thousands):

Year Ending December 31,
2015	$	371
2016		277
2017		250
2018		138
2019		61
2020		5
Total	$	1,102

NOTE 7 – RELATED PARTY TRANSACTIONS

Rent expense paid to an affiliate was approximately $66,000 and $57,000 for the years ended December 31, 2014 and 2013, respectively. In 2014, we extended the lease term by an additional three year period until December 31, 2017, with rent at a rate of $69,000 per year.

During the year ended December 31, 2014, we agreed to issue 1,584,250 shares of our common stock to one of our directors in respect of his arrangement of transactions to raise equity from non-U.S. investors for Aly Energy. As of December 31, 2014, we have not issued these shares to our director, but the obligation in the amount of $0.6 million is recognized on the consolidated balance sheet in accounts payable - affiliates.

NOTE 8 – INCOME TAXES

The provision for income taxes consists of the following (in thousands):

	For the Years Ended December 31,
	2014		2013
Current Provision:
Federal	$	-	$	(228	)
State		208		123
Total Current Provision		208		(105	)
Deferred Benefit:
Federal		1,650		745
State		148		-
Total Deferred Benefit		1,798		745
Provision for Income Taxes	$	2,006	$	640

F-22

ALY ENERGY SERVICES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The following table reconciles the statutory tax rates to the Company’s effective tax rate:

	For the Years Ended December 31,
	2014			2013
Federal Statutory Rate		34.00	%		34.00	%
State Taxes, Net of Federal Benefit		5.86	%		6.26	%
Permanent Differences		3.83	%		8.12	%
Other		(0.25	%)		0.81	%
Effective Income Tax Rate		43.44	%		49.19	%

The Company’s deferred tax assets and liabilities consist of the following (in thousands):

	December 31,		December 31,
	2014		2013
Deferred Tax Assets:
Allowance for Doubtful Accounts	$	57	$	-
Current Deferred Tax Assets		57		-
Net Operating Loss		646		111
Foreign Tax Credit		81		-
Start-Up Costs		21		20
State Net Operating Loss, Net of Federal Benefit		9		-
Charitable Contributions and Other		17		-
Non-Current Deferred Tax Assets		774		131
Total Deferred Tax Assets		831		131
Deferred Tax Liabilities:
Cash to Accrual Adjustment		-		194
Prepaid Assets		58		83
Current Deferred Tax Liabilities		58		277
Property and Equipment		9,728		5,544
Intangibles		3,182		1,401
Non-Current Deferred Tax Liabilities		12,910		6,945
Total Deferred Tax Liabilities		12,968		7,222
Net Deferred Tax Liabilities	$	12,137	$	7,091

F-23

ALY ENERGY SERVICES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The Company has identified its major taxing jurisdictions as the United States of America and Texas. The Company’s U.S. federal income tax returns for the tax years 2011 and forward remain open to examination under the applicable federal statute of limitations provisions. The Company’s Texas franchise tax returns for the tax years 2010 and forward remain open to examination under Texas statute of limitations provisions. None of the Company’s federal or state income tax returns are currently under examination by the Internal Revenue Service (“IRS”) or state authorities.

The Company is primarily subject to the Texas Franchise Tax, which is determined by applying a tax rate to a base that considers both revenues and expenses and therefore has the characteristics of an income tax.

NOTE 9 – REDEEMABLE PREFERRED STOCK

Two of the Company’s subsidiaries have redeemable preferred stock outstanding as of December 31, 2014. Aly Operating issued redeemable preferred stock in connection with the acquisition of Austin Chalk (“Aly Operating Redeemable Preferred Stock”) and Aly Centrifuge issued the Aly Centrifuge Redeemable Preferred Stock in connection with the United Acquisition.

Aly Operating Redeemable Preferred Stock

As part of the acquisition of Austin Chalk, Aly Operating agreed to issue up to 4 million shares of Aly Operating Redeemable Preferred Stock, with a par value of $0.01, to the seller, with a fair value and liquidation value of $3.8 million and $4.0 million, respectively. The preferred stock was valued as of the date of acquisition by discounting the sum of (i) the liquidation value at issuance and (ii) the future cumulative accrued dividends as of the date of optional redemption for a lack of marketability. The first tranche of 2 million shares was issued on December 31, 2012 and the second tranche of 2 million shares was issued on March 31, 2013.

The Aly Operating Redeemable Preferred Stock is entitled to a cumulative paid- in-kind dividend of 5% per year on its liquidation preference, compounded quarterly. Aly Operating is not required to pay cash dividends.

The holder of the Aly Operating Redeemable Preferred Stock and Aly Operating can, at either’s option, require the other party to redeem the preferred stock for cash on the fourth anniversary of the closing date of the sale or October 26, 2016. However, there is no requirement for either party to redeem the preferred stock.

The rights of the preferred stock also include the right to exchange into shares of Company common stock or to redeem the preferred stock for cash should the Company transact a liquidity event, as defined in the agreement, or if the Company transacts an initial public offering, as defined in the agreement. The conversion ratio, determined by a calculation defined in the agreement of which the components include trailing twelve month financial performance and magnitude of investment in new equipment, is undeterminable until the Aly Operating Redeemable Preferred Stock becomes exchangeable into common shares.

The Aly Operating Redeemable Preferred Stock is classified outside of permanent equity in the Company’s consolidated balance sheet because the settlement provisions provide the holder the option to require Aly Operating to redeem the Aly Operating Redeemable Preferred Stock at the liquidation price plus any accrued dividends.

F-24

ALY ENERGY SERVICES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The following table describes the changes in Aly Operating Redeemable Preferred Stock (in thousands, except for shares):

			Number of
	Carrying Value		Outstanding		Liquidation
	of Aly		Aly Operating		Value of Aly
	Operating		Redeemable		Operating
	Redeemable		Preferred		Redeemable
	Preferred Stock		Shares		Preferred Stock

January 1, 2013	$	1,943		2,000,000	$	4,036
Issuance		1,943		2,000,000		-
Accrued Dividends		209		-		209
Accretion		37		-		-
December 31, 2013		4,132		4,000,000		4,245
Accrued Dividends		213		-		213
Accretion		37		-		-
December 31, 2014	$	4,382		4,000,000	$	4,458

Aly Centrifuge Redeemable Preferred Stock

On April 15, 2014, as part of the United Acquisition, Aly Centrifuge issued 5,000 shares of Aly Centrifuge Redeemable Preferred Stock, with a par value of $0.01, to the sellers in the transaction, with a fair value and liquidation value of $5.1 million and $5.0 million, respectively. The preferred stock was valued as of the date of acquisition by discounting the sum of (i) the value of the preferred stock without a conversion option using the option pricing method and (ii) the value of the conversion option using the Black-Scholes option pricing model for a lack of marketability. As of December 31, 2014, 1,000 shares of Aly Centrifuge Redeemable Preferred Stock remain subject to an 18-month holdback for general indemnification purposes pursuant to the purchase agreement.

On August 15, 2014, in connection with the Saskatchewan Equipment Purchase, Aly Centrifuge issued an additional 4,000 shares of Aly Centrifuge Redeemable Preferred Stock, with a par value of $0.01, to the sellers in the transaction, with a fair value and liquidation value of $4.3 million and $4.0 million, respectively. The preferred stock was valued as of the date of the equipment purchase by discounting the sum of (i) the value of the preferred stock without a conversion option using the option pricing method and (ii) the value of the conversion option using the Black-Scholes option pricing model for a lack of marketability.

The Aly Centrifuge Redeemable Preferred Stock is entitled to a cumulative paid-in-kind dividend of 5% per year on its liquidation preference, compounded quarterly. During the year ended December 31, 2014, Aly Centrifuge issued 252 shares as paid-in-kind dividends. Aly Centrifuge is not required to pay cash dividends.

The holder of the Aly Centrifuge Redeemable Preferred Stock and Aly Centrifuge can, at either’s option, require the other party to redeem the preferred stock for cash on or after December 31, 2016. However, there is no requirement for either party to redeem the preferred stock.

Aly Centrifuge Redeemable Preferred Stock also includes the right to exchange into shares of Company common stock on any date, from time to time, at the option of the holder, into the number of shares equal to the quotient of (i) the sum of (A) the liquidation preference plus (B) an amount per share equal to accrued but unpaid dividends not previously added to the liquidation preference on such share of preferred stock, divided by (ii) 1,000, and (iii) multiplied by the exchange rate in effect at such time. The exchange rate currently in effect is 1,428.57 or $0.70 per share of Company common stock.

F-25

ALY ENERGY SERVICES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The Aly Centrifuge Redeemable Preferred Stock is classified outside of permanent equity in the Company’s consolidated balance sheet because the settlement provisions provide the holder the option to require Aly Centrifuge to redeem the Aly Centrifuge Redeemable Preferred Stock at the liquidation price plus any accrued dividends.

The following table describes the changes in the Aly Centrifuge Redeemable Preferred Stock (in thousands, except for shares, and per share amounts):

				Number of
	Carrying Value			Outstanding		Liquidation
	of Aly			Aly Centrifuge		Value of Aly
	Centrifuge			Redeemable		Centrifuge
	Redeemable			Preferred		Redeemable
	Preferred Stock			Shares		Preferred Stock
January 1, 2014	$	-			-	$	-
Issuance		9,424			9,000		9,000
Accrued Dividends		254			252		254
Amortization		(94	)		-		-
December 31, 2014	$	9,584			9,252	$	9,254

NOTE 10 – EARNINGS PER SHARE

Basic earnings per share is based on the weighted average number of shares of common stock (“Common Shares”) outstanding during the applicable period. Diluted earnings per share is computed based on the weighted average number of common shares outstanding during the period plus, when their effect is dilutive, incremental shares consisting of shares subject to outstanding stock options and restricted stock or other convertible instruments, as appropriate.

F-26

ALY ENERGY SERVICES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The calculations of basic and diluted earnings per share are shown below:

	For the Years Ended December 31,
	2014			2013
Numerator:
Net Income	$	2,613		$	660
Less: Aly Operating Redeemable Preferred Stock Dividends (1)		213			209
Less: Aly Operating Redeemable Preferred Stock Accretion (1)		37			37
Numerator for Diluted Earnings per Share		2,363			414
Less: Aly Centrifuge Redeemable Preferred Stock Dividends		254			-
Less: Aly Centrifuge Redeemable Preferred Stock Amortization		(94	)		-
Numerator for Basic Earnings per Share	$	2,203		$	414
Denominator:
Weighted Average Shares Used in Basic Earnings per Share		103,104,082			72,129,439
Effect of Dilutive Shares:
Aly Centrifuge Redeemable Preferred Stock		7,248,525			-
Weighted Average Shares Used in Diluted Earnings per Share		110,352,607			72,129,439
Basic Earnings per Share	$	0.02		$	0.01
Diluted Earnings per Share	$	0.02		$	0.01

(1) The exchange of Aly Operating Redeemable Preferred Stock into Common Shares is not considered within the calculation of the numerator or denominator of diluted earnings per share because, as of December 31, 2014 and 2013, the Aly Operating Redeemable Preferred Stock was not exchangeable into Common Shares.

The denominator calculated for the year ended December 31, 2013 applies a conversion rate of 19.91 per Common Share throughout the period to reflect the impact of the Merger as if it had occurred at the beginning of the period.

Securities excluded from the computation of basic and diluted earnings per share are shown below:

(1) The stock options vest upon the occurrence of certain events as defined in the Omnibus Incentive Plan.

(2) The Aly Operating Redeemable Preferred Stock becomes exchangeable upon the occurrence of certain events, as defined in the Aly Operating Redeemable Preferred Stock Agreement. Upon occurrence of such events, the Aly Operating Redeemable Preferred Stock may, at the holder's option, be converted into Common Shares. The conversion ratio, determined by a calculation defined in the agreement of which the components include trailing twelve month financial performance and magnitude of investment in new equipment, is undeterminable until the Aly Operating Redeemable Preferred Stock becomes exchangeable into Common Shares.

F-27

ALY ENERGY SERVICES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

As of December 31, 2014, the stock options were unvested and the Aly Operating Redeemable Preferred Stock was not exchangeable into Common Shares.

NOTE 11 – STOCK-BASED COMPENSATION

Share-Based Payments

The Company issued no Common Shares and 199,100 Common Shares during the years ended December 31, 2014 and 2013, respectively, as part of compensation to an officer of the Company. The Company recognized share-based compensation expense of approximately $0 and $76,000 for the years ended December 31, 2014 and 2013, respectively.

Stock Options

The Company has a stock-based compensation plan available to grant incentive stock options, non-qualified stock options and restricted stock to employees and non-employee members of the Board of Directors.

The Omnibus Incentive Plan (the “Plan”) was approved by the Board of Directors on May 2, 2013. On May 2, 2013, the Company granted 6,769,400 Common Shares under the Plan which was the maximum number authorized. As of December 31, 2014, options to purchase 6,769,400 Common Shares under the Plan were outstanding. We did not issue any stock options during the year ended December 31, 2014.

The option contract term is 10 years and the exercise price is $0.20. The options vest and are exercisable if a “Liquidity Event” occurs and certain conditions are met. A Liquidity Event is defined as an IPO or a change of control, as defined in the plan. Pursuant to the plan, an IPO is defined as an underwritten public offering of shares. If the first Liquidity Event is an IPO, then the options vest and are exercisable immediately if the IPO is effected at a price of $0.40 per share or greater. If the IPO is effected at a price less than $0.40 per share, but the stock price post-IPO reaches $0.40 per share during the six month period immediately following the IPO, then the options vest and are exercisable. If the IPO is effected at a price less than $0.40 per share and the share price does not reach $0.40 per share prior to the sixth month anniversary of the IPO, the options do not vest and expire. If the first Liquidity Event to occur is a change of control, then the options vest if the change of control takes place at a price of at least $0.40 per share. If such change in control occurs at a price less than $0.40 per share, the options do not vest and expire.

The fair value of each option award granted under the Plan is estimated on the date of grant using the Monte Carlo simulation method. The same Monte Carlo simulation method is used to determine the derived service period of five years. In addition, expected volatilities have been based on comparable public company data, with consideration given to the Company’s limited historical data. The Company makes estimates with respect to employee termination and forfeiture rates of the options within the valuation model. The risk-free rate is based on the approximate U.S. Treasury yield rate in effect at the time of grant. For options granted prior to the Company’s acquisition of Preferred Voice, which closed on May 14, 2013, the calculation of the Company’s stock price involved the use of different valuation techniques, including a combination of an income and/or market approach. Determination of the fair value was a matter of judgment and often involved the use of significant estimates and assumptions. The following table presents the assumptions used in determining the fair value of options awarded on May 14, 2013:

F-28

ALY ENERGY SERVICES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Expected Volatility	80.0		%
Expected Forfeiture Rate		0.0	%
Risk-Free Interest Rate		1.66	%
Fair Value of Company Stock	$	0.171

At December 31, 2014, there is approximately $0.5 million of total unrecognized compensation cost related to non-vested stock option awards. Such amount will be recognized in the future upon occurrence of a Liquidity Event that results in a vesting of the options. No options vested during the years ended December 31, 2014 and 2013 as no vesting events occurred during the years then ended.

NOTE 12 – STOCKHOLDERS’ EQUITY

On January 12, 2015, we issued 1,000,000 shares of our common stock in a private placement at a price of $0.55 per share for gross proceeds of approximately $0.6 million.

On July 1, 2014, in connection with the acquisition of Evolution, we issued 3,000,000 million shares of common stock to the sellers of Evolution.

NOTE 13 – SUPPLEMENTAL CASH FLOW INFORMATION

Supplemental cash flows and non-cash investing and financing activities are as follows (in thousands):

F-29

ALY ENERGY SERVICES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

	For the Years Ended December 31,
	2014			2013
Supplemental Disclosure of Cash Flow Information
Cash Paid for Interest	$	808		$	467
Cash Paid for State and Federal Income Taxes		133			106
Non-Cash Investing Activities in Connection with Acquisition of United
Issuance of Aly Centrifuge Preferred Stock	$	5,101		$	-
Issuance of Liability for Contingent Payments		3,517			-
Accounts Payable - Affiliates		821			-
Non-Cash Investing Activities in Connection with Acquisition of Evolution
Issuance of Common Stock	$	1,650		$	-
Accounts Payable - Affiliates		340			-
Non-Cash Investing Activities in Connection with Saskatchewan Equipment Purchase
Issuance of Aly Centrifuge Preferred Stock	$	4,323		$	-
Issuance of Subordinated Note Payable		2,000			-
Non-Cash Investing and Financing Activities
Purchase of Equipment through Equipment Financing and Capital Lease Obligations	$	1,086		$	910
Accretion of Preferred Stock Liquidation Preference, Net		(57	)		37
Paid-in-Kind Dividends on Preferred Stock		467			209
Common Shares Issued for Transaction Cost of Equity Raise		590			-

NOTE 14 – SUBSEQUENT EVENTS

New Member of Board of Directors

On March 3, 2015, the board of directors expanded the size of the board of directors from six to seven persons and elected Mr. Timothy J. Pirie to fill the vacancy created thereby.

Private Placement

On January 12, 2015, we issued 1,000,000 shares of our common stock in a private placement at a price of $0.55 per share for gross proceeds of approximately $0.6 million.

We agreed to issue 64,364 shares of our common stock to one of our directors in respect of his arrangement of this transaction.

F-30

ALY ENERGY SERVICES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 15 – QUARTERLY FINANCIAL DATA (unaudited)

Summarized quarterly financial data for the years ended December 31, 2014 and 2013 are presented below (in thousands, except per share amounts):

	Quarters Ended
	March 31,		June 30,			September 30,		December 31,
	2014		2014			2014		2014
Revenues	$	5,282	$	9,078		$	13,491	$	14,653
Operating Income		922		1,365			2,109		1,540
Net Income Before Income Taxes		752		1,020			1,733		1,114
Net Income		460		546			1,112		495
Net Income Available to Common Stockholders		398		442			1,005		358
Net Income per Common Share
Basic	$	0.00	$	0.00		$	0.01	$	0.01
Diluted	$	0.00	$	0.00		$	0.01	$	0.01

	Quarters Ended
	March 31,		June 30,			September 30,		December 31,
	2013		2013			2013		2013
Revenues	$	4,397	$	4,793			4,372	$	4,856
Operating Income		641		348			390		550
Net Income Before Income Taxes		522		202			208		368
Net Income		397		51			101		111
Net Income/(Loss) Available to Common Stockholders		338		(10	)		39		47
Net Income/(Loss) per Common Share
Basic	$	0.01	$	(0.00	)		0.00	$	0.00
Diluted		0.01		(0.00	)		0.00		0.00

F-31

Item 9. Changes In and Disagreements With Accountants on Accounting and Financial Disclosure

None.

Item 9A. Controls and Procedures

Evaluation of disclosure controls and procedures: The Chief Executive Officer and Chief Financial Officer, of the Company have evaluated the effectiveness of the Company’s disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”)) as of the end of the quarter covered by this Annual Report on Form 10-K. Based on that evaluation, the Chief Executive Officer and Chief Financial Officer of the Company have concluded that the Company’s disclosure controls and procedures as of the end of the year covered by this Annual Report on Form 10-K are effective as defined in Rule 13a-15(e) and Rule 15d-15(e) under the Exchange Act.

Management is responsible for establishing and maintaining adequate internal control over financial reporting. The Company’s internal control over financial reporting is a process designed under the supervision of its Chief Executive Officer and Chief Financial Officer to provide reasonable assurance regarding the reliability of financial reporting and the preparation of the Company’s financial statements for external purposes in accordance with generally accepted accounting principles. As of December 31, 2014, management of the Company conducted an evaluation of the effectiveness of the Company's internal control over financial reporting based on the Internal Control-Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission. Based on that evaluation, the Company's management concluded that its internal control over financial reporting was effective as of December 31, 2014.

Changes in Internal Controls over Financial Reporting: There have been no changes in our system of internal control over financial reporting (as such term is defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) during the year ended December 31, 2014 that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

This Annual Report does not include an attestation report of our independent registered public accounting firm regarding internal control over financial reporting due to an exemption provided by the Dodd-Frank Wall Street Reform and Consumer Protection Act (the “Dodd-Frank Act”) enacted into law in July 2010. The Dodd-Frank Act provides smaller public companies and debt-only issuers with a permanent exemption from the requirement to obtain an external audit on the effectiveness of internal financial reporting controls provided in Section 404(b) of the Sarbanes-Oxley Act. Aly Energy is a smaller reporting company and is eligible for this exemption under the Dodd-Frank Act.

Item 9B. Other Information.

None.

PART III

Item 10. Directors, Executive Officers and Corporate Governance

The table below sets forth information about our directors and executive officers:

Name	Age	Position

Munawar H. Hidayatallah	70	Chairman and Chief Executive Officer
Mark Patterson	56	President and Chief Operating Officer
Alya Hidayatallah	39	Chief Financial Officer
Kurt Chew	52	President, Austin Chalk Petroleum Services Corp.
Myles Bowman	42	President, Aly Centrifuge, Inc.
Thor Eckmann	55	Chief Executive Officer, Evolution Guidance Systems, Inc.
Henry Iwunze	39	Chief Operating Officer, Evolution Guidance Systems, Inc.
Ali H M Afdhal	70	Director
Kouros Sariri	59	Director
Saeed M. Sheikh	78	Director
Nadine C. Smith	57	Director
Timothy J. Pirie	49	Director
Zane Tankel	75	Director

Munawar H. “Micki” Hidayatallah has served on the board of directors of Aly Operating since it was founded in July 2012 and has served as a director of Aly Energy since the Share Exchange. Mr. Hidayatallah founded Aly Operating in 2012 and has served as its Chairman and Chief Executive Officer since such date and also served as its Chief Financial Officer during 2012. From 2001 to 2011, he served as chairman, Chief Executive Officer and a director of Allis-Chalmers Energy Inc. (“Allis-Chalmers”), where he was responsible for the overall management of the company. From 2004 to 2010, Allis-Chalmers’ revenues increased by more than tenfold (from $47.7 million to $659.7 million) and market capitalization increased by over seven times (from $72.2 million to $565.4 million). In February 2011, Archer Ltd. acquired Allis-Chalmers for $1.1 billion. Mr. Hidayatallah began his career at a major conglomerate in Pakistan with holdings in publishing, hotels, progressive manufacturing of automobiles and trading. During that time, Mr. Hidayatallah served as a senior executive and a member of the board of directors. In 1972, Mr. Hidayatallah came to the United States and undertook several successful entrepreneurial ventures through opportunistic purchases in areas such as cement processing, hotel and resorts, vending and cafeteria management and franchising and distribution of dairy products. From 1982 to 1994, he served as president and chief executive Officer of Crescott Inc., a holding company with interests in financial services, food processing and franchising, as well as President and Chief Executive Officer of its subsidiary, Beverly Hills Securities Company. In 1994, Mr. Hidayatallah was appointed Executive Vice President of Corporate Development and member of the board of directors of IRI International Corporation (“IRI”) and in 1997 was appointed Chief Financial Officer. IRI was a manufacturer and distributor of oil rigs, workover rigs, fishing tools, top drives and other ancillary products. As Chief Financial Officer, Mr. Hidayatallah oversaw IRI’s initial public offering and listing on the New York Stock Exchange. Mr. Hidayatallah remained in that position until 2000, when National Oilwell Varco, Inc. acquired IRI. In 2000, Mr. Hidayatallah formed OilQuip Rentals, Inc., which acquired Mountain Compressed Air Inc. as a platform acquisition and then merged with Allis- Chalmers in 2001. Mr. Hidayatallah is a qualified chartered accountant and serves as a director and as Chairman of the Audit Committee of Stewart & Stevenson LLC.

Mark Patterson has served as our President, Chief Operating Officer and Secretary since the Share Exchange and has served as President and Chief Operating Officer of Aly Operating since its inception. He worked with Mr. Hidayatallah at Allis- Chalmers as the President of the Rental Division and as a member of the Executive Team as Senior Vice President of the Rental Services Segment from 2008 to 2011. During his tenure at Allis-Chalmers, Mr. Patterson directed and managed the complete merger and reorganization of the Rental Services Division. Mr. Patterson was responsible for integrating and expanding Allis-Chalmers’ product fleet and geographical presence in North America, specifically in the Marcellus Shale, and internationally. As a result of his efforts, Allis-Chalmers expanded into new and additional international markets such as Colombia and Brazil. Mr. Patterson also opened a new service facility through a joint venture in the Kingdom of Saudi Arabia, where he served as a member of the board of directors. Additionally, Mr. Patterson was instrumental in facilitating the acquisition of American Well Control by Allis-Chalmers, and the integration of American Well Control into Allis-Chalmers’ Rental Segment. The successful merger and integration of American Well Control marked the first manufacturing company bought by Allis-Chalmers. Mr. Patterson’s 35 years of experience includes sales, business development, division and segment management, mergers, acquisitions, joint venture creation, and consulting, both domestically and internationally.

Alya H. Hidayatallah became Chief Financial Officer of Aly Operating in January 2013 and has served as our Chief Financial Officer since the Share Exchange. Previously, from 2005 through 2012, she served as Director of Planning and Budgeting at Allis-Chalmers, which was acquired in 2011 and subsequently named Archer. From 2000 until 2004, Ms. Hidayatallah was an investment banker in the Financial Restructuring Group of Houlihan Lokey Howard & Zukin. Ms. Hidayatallah graduated summa cum laude with a degree in Business Economics from the University of California at Los Angeles in 1997. Ms. Hidayatallah is Mr. Hidayatallah’s daughter.

Kurt Chew has 35 years of experience in creating companies and servicing the oil & gas industry. He founded Austin Chalk in 2001 and, subsequent to the sale of Austin Chalk to Aly Operating in 2012, he has continued to manage Austin Chalk on a daily basis. In 2005, Mr. Chew co-founded B.E.G. Liquid Mud, LLC, which specialized in pre-mixed liquid drilling mud. Mr. Chew utilized his fabricating experience to design and build the liquid mud plants. B.E.G. Liquid Mud Services was acquired by Omni Energy Services in 2008. Mr. Chew also co-founded Worldwide Deepwater Solutions, LLC in 2009. WDS continues to offer experienced technical support services in project management, drilling and completions operations and asset integrity management services, both internationally and domestically.

Myles Bowman Jr. is the President of Aly Centrifuge Inc., a U.S. based solids control and closed loop system company. Myles has had the opportunity over the past several years to build an extensive list of oilfield client relationships throughout the U.S. For six years, starting in 2006, Myles held the position of Contracts Manager for Patterson-UTI Drilling Company. In 2012, Myles joined the United Centrifuge International team as Vice President of U. S. Development where he led their expansion into the U.S. market. Under Myles’ leadership, United Centrifuge USA, LLC experienced continual growth each quarter. In April of 2014 Aly Energy Services acquired United Centrifuge USA and changed their name to Aly Centrifuge.

Thor Eckmann has served as CEO of the Company’s Evolution Guidance Systems Inc. subsidiary since 2014 and has over 35 years in OFS operations. Mr. Eckmann brings a wealth of knowledge in international, domestic, offshore and onshore operations and technical and executive sales. Mr. Eckmann served as Technical & Executive Sales Consultant with Allis-Chalmers energy in 2007 where he brought in $15 million per year. Previous to his career in sales, he served as Drilling Superintendent for Pioneer and Technical Advisor for Apache. Mr. Eckmann co-founded Evolution in 2012.

Henry Iwunze has spent his entire career in the MWD/LWD sector of the oil and gas industry. Mr. Iwunze started his career as a Mobile Field Engineer working in the oilfields of West Africa. Working closely with the crop of engineers who developed and built the GE-Tensor MWD tools in 2003, he quickly became the resident expert for GE-Tensor MWD in parts of West Africa where it was tough to get foreign expatriates. This positioned him for the field testing and commercialization of GE resistivity tools in 2004 and 2005. Mr. Iwunze worked with Halliburton Energy Services in their integration of Sperry Sun LWD into the Drillog Petro-Dynamics fleet of MWD/LWD tools. He then served as MWD Coordinator with Pinpoint Drilling and Directional Services USA. Allis-Chalmers hired him to improve her MWD tools first as an MWD Engineering Specialist and later as the company’s MWD Operations Manager nationwide. Between 2012 and early 2014, Mr. Iwunze was a member of the core R&D team for Realtime Oilfield Technology (a down-hole drilling tools Research and Development company). Mr. Iwunze co-founded Evolution Guidance Systems in 2012 and subsequent to the sale of Evolution Guidance Systems to Aly Energy Services in 2014, he has continued to manage Evolution Guidance Systems (now Aly Directional) on a daily basis as her Chief Operating Officer. Mr. Iwunze graduated with a double major in Electronics and Computer Engineer from the Federal University of Technology, Owerri Nigeria.

Ali H M Afdhal joined the board of directors of Aly Operating in October 2012 and has served as our non-executive Vice Chairman of the Board and a director since the Share Exchange. Since 2001, he has operated and managed his family's international property portfolio and agricultural interests. He also served as a director of Allis-Chalmers from 2006 to 2009. Mr. Afdhal is a graduate of the Institute of Chartered Accountants in England and Wales.

Kouros Sariri joined the board of directors of Aly Operating in October 2012, and has served as our director since the Share Exchange. Mr. Sariri is the founder and CEO of Frequency Management International (“FMI”) Inc. Founded in 2003, FMI is a manufacturer of high reliability & extreme environment electronic components used in advanced electronic system applications. In 2003, Mr. Sariri also founded Chronos Technology (merged with FMI) which serves in a Research and Development capacity, conducting advanced research for NASA and DOE in the area of extreme environment electronic solutions and the related manufacturing processes. Innovations envisioned and introduced by Mr. Sariri have been used in commercial satellites and scientific/robotic space missions as well as in numerous oil, gas and geothermal fields worldwide. FMI is a globally recognized brand for the high reliability solutions used successfully in LWD, MWD, wire- line and digital oilfield systems. Mr. Sariri was the Vice President of Engineering and Manufacturing at OE Waves (2001-2002), an optoelectronic technology startup associated with the California Institute of Technology & NASA, specializing in patented optical and RF signal generation used in advanced radar and communications systems. From 1987 to 2000, Mr. Sariri served as the Senior Applications Engineer, Engineering Manager, Executive Vice President and President at Q-Tech Corp., a manufacturer of electronic components. Mr. Sariri holds B.S. and M.S. degrees in Electrical Engineering from the University of California, Los Angeles (UCLA) and an MBA from the Anderson School of Management at UCLA.

Saeed M. Sheikh joined the board of directors of Aly Operating in October 2012 and has served as our director since the Share Exchange. He founded Star Trading & Marine, Inc., a transportation and shipping company, in 1973 and has served as its President since inception. In October 2013, Mr. Sheikh was appointed to serve as Ambassador at Large for the Government of Pakistan. In 1991, Mr. Sheikh was appointed to serve as the Honorary Consul General of Pakistan in Baltimore, Maryland. He served in this capacity from 1991 until 1993 and then again from 1997 until 1999. Mr. Sheikh served as Executive Vice President of Crescent Marine Co, Inc. from 1969 until 1973, where he was responsible for all ship chartering functions. In 1964, Mr. Sheikh moved to the United States from Pakistan to serve as a Commercial Officer in the Embassy of Pakistan. Mr. Sheikh graduated from the Halley College of Commerce in Lahore, Pakistan.

Nadine C. Smith joined the board of directors of Aly Operating in October 2012 and has served as our director and Chairman of the Audit Committee since the Share Exchange. Over the past twenty-five years Ms. Smith has been a founding shareholder and acted in executive and advisory capacities to development stage companies in a variety of industries, several of which have become NYSE listed companies with market capitalizations exceeding several billion dollars. Ms. Smith conducts her professional activities through SRQ Capital LLC, which she founded. Her experience in the energy sector began in 1980 as an investment banker advising oil and gas companies on merger and acquisition transactions, and she has been active as an investor, Board member and executive management of oil and gas exploration and oilfield services companies for thirty-five years. Ms. Smith began her post-graduate career as an investment banker in the Merger and Acquistions Group of The First Boston Corporation and as a management consultant with McKinsey & Company. Ms. Smith has previously served as a director and on the Audit, Compensation, and Corporate Governance Committees of a number of public companies including Patterson-UTI Energy Inc., Gran Tierra Energy Inc., American Retirement Corporation (currently Brookdale Senior Living, Inc.), La Cortez Energy, Inc. Frac Water Systems, Inc. (currently Peak Pharmaceuticals), WaferGen Bio-systems, Inc., and Loreto Resources Corporation. Ms. Smith is presently a special advisor to the Board of Directors of Innerpoint Energy Corporation, a privately held company commercializing a transformative waste-to-energy renewable technology platform. Ms. Smith holds a B.S. in economics from Smith College and an MBA from Yale University.

Timothy J. Pirie has over twenty five years oilfield experience. He was a founder and director of Dalen Drilling Services Ltd, a Directional Drilling service company. Mr. Pirie’s role in the company was Vice President of Business Development & General Manager, responsible for overall running of the company. Dalen was acquired in 2003 by Weatherford International. In 2003, he founded United Oilfield International, a Canadian solids control equipment& service provider with operations in Canada, United States and Peru and remained as President and Director from its inception until 2014 when the company was acquired by Aly Energy Services. He founded Canadian Nitrogen Services in 2005 and has been President and Director since its inception. It is a Canadian based N2 pumping service utilizing membrane technology with operations in Canada, United States and Saudi Arabia. In 2013 was a founder of Decisive Dividend Corporation, a publicly traded Canadian corporation. Mr. Pirie is also a Founder and Director of a privately held engineering / construction company currently working on E&P projects in the Middle East and a Founder of Petro Toro Inc., a Peruvian focused Oil & Gas Exploration Company. He is currently a Director at Aberdeen Hall Preparatory School, Kelowna, BC.

Zane Tankel has served on the board of directors of Aly Energy since October 2012, and has served as our director since the Share Exchange. Mr. Tankel is the Chairman and CEO of Apple-Metro, Inc., a multi-unit operator of family restaurants in the New York metropolitan area, which he co-founded in 1994. Mr. Tankel was a director of Morton’s Restaurant Group, Inc., a New York Stock Exchange company, from February 2006 until February 2012, and a director of Allis-Chalmers Energy Inc. from February 2007 until February 2011, as well as the Caribbean Restaurant Group, the San Juan, Puerto Rico based owner/operator of Burger King restaurants in and around the Caribbean. Mr. Tankel has served on its board from 2006 to present. Prior to 1994, he served as the founder/president and CEO of Collier Graphics Services (from 1964 to 1990), and founder/partner of a music management company (American Entertainment Management, from 1975 to 1982) and a public relations company (Sage Communications, from 1982 to 1986). Mr. Tankel is a graduate of the University of Pennsylvania’s Wharton School of Business.

Board Committees and Charters

Audit Committee: The Audit Committee consists of one member, Nadine C. Smith, who is independent in accordance with the independence standards for audit committees under the NYSE Mkt listing rules. Our board of directors has determined that Ms. Smith is an “audit committee financial expert” as defined in the SEC rules. Our board of directors has adopted a written Audit Committee Charter and a copy may be obtained, at no cost, from the Company’s investor relations website (www.alyenergy.com), by writing or by telephoning the Company at: Aly Energy Services, Inc., 3 Riverway, Suite 920, Houston, Texas 77056, 713-333-4000, Attn: Secretary.

Compensation Committee: The Compensation Committee consists of one member, Zane Tankel, who is independent in accordance with the independence standards for compensation committees under the NYSE Mkt listing rules. Our board of directors has adopted a written Compensation Committee Charter and a copy may be obtained, at no cost, from the Company’s investor relations website at (www.alyenergy.com), by writing or by telephoning the Company at: Aly Energy Services, Inc., 3 Riverway, Suite 920, Houston, Texas 77056, 713-333-4000, Attn: Secretary.

Nominating Committee: Our board of directors has not appointed a Nominating Committee.

Code of Ethics

The Board of Directors has adopted a code of business ethics that applies to its directors, officers and management employees generally. A copy of this code of business ethics may be obtained, at no cost, from the Company’s investor relations website (www.alyenergy.com), by writing or by telephoning the Company at: Aly Energy Services, Inc., 3 Riverway, Suite 920, Houston, Texas 77056, 713-333-4000, Attn: Secretary.

Stockholder Communications

We do not have a formal policy regarding communications with our board of directors; however, stockholders may communicate with the board of directors by writing to us at: Aly Energy Services, Inc. 3 Riverway, Suite 920, Houston, Texas 77056, Attention: Chief Financial Officer. Stockholders who would like their submission directed to a member of the board of directors may so specify and the communication will be forwarded, as appropriate.

Board Structure

We have chosen to combine the Chief Executive Officer and Chairman of the board of directors’ positions. We believe that this board of directors’ leadership structure is the most appropriate for us. Because we are a small company, it is more efficient to have the leadership of the board of directors in the same hands as the Chief Executive Officer. The challenges faced by us at this stage – obtaining financing and implementing our business and marketing plan – are most efficiently dealt with by one person who is familiar with both the operational aspects as well as the strategic aspects of our business.

Board Assessment of Risk

The Board of Directors has an active role, as a whole and also at the committee level, in overseeing management of our risks. The Board of Directors regularly receives reports from senior management on areas of material risk to our Company, including our credit, liquidity, operational and legal and regulatory risks. Pursuant to its charter, the Audit Committee reviews our major financial risk exposures and the steps management has taken to monitor and control such exposures, and it also meets periodically with management to discuss policies with respect to risk assessment and risk management. In addition, the Compensation Committee oversees the management of risks relating to our executive and non-executive compensation plans and arrangements. While each committee oversees certain risks and the management of such risks, the entire Board of Directors is regularly informed through committee reports about such risks.

Board Diversity

While we do not have a formal policy on diversity, our board of directors considers diversity to include the skill set, background, reputation, type and length of business experience of our board of directors members as well as a particular nominee’s contributions to that mix. Our board of directors believes that diversity brings a variety of ideas, judgments and considerations that benefit our stockholders and us. Although there are many other factors, the board of directors seeks individuals with experience in operating growing businesses.

Item 11. Executive Compensation

Executive Compensation

The following table summarizes the overall compensation earned over each of the past two fiscal years ending December 31, 2014 by each person who served as our principal executive officer or principal financial officer during fiscal 2014 and our two most highly compensated other executive officers as of December 31, 2014 (collectively the “Named Executive Officers”).

Summary Compensation Table
	Year	Salary		Bonus		All Other Compensation			Total
		$		$		$			$
Name and Principal Position
Micki Hidayatallah	2014	$	420,000	$	85,000	$	50,000	(1)	$	555,000
Chairman and Chief Executive Officer	2013		396,154		–		50,000	(1)		446,154

Mark Patterson	2014		250,000		50,000		3,000	(2)		303,000
President and Chief Operating Officer	2013		203,077		11,000		74,897	(2)		288,974

Alya Hidayatallah	2014		200,000		40,000		–			240,000
Chief Financial Officer	2013		200,000		–		–			200,000

Kurt Chew	2014		231,000		88,000		9,000	(3)		328,000
President, Austin Chalk Petroleum Services, Inc.	2013		226,000		–		–			226,000

(1)	Per contractual agreement, the Company pays for Mr. Hidayatallah's commute from Los Angeles, California to Houston, Texas. The annual expense covered by the Company is approximately $50,000.
(2)	Mr. Patterson is entitled to a car allowance of $186 per month, representing the personal use portion of the monthly lease payments for his company car. Mr. Patterson received $74,897 in 2013 in stock compensation, which amounts are reflected in “All Other Compensation” in the table.
(3)	Mr. Chew is entitled to a car allowance of $750 per month.

Executive Employment Agreements

Aly Operating

Each of the Employment Agreements described below was entered into by Aly Operating prior to the Share Exchange. We assumed each agreement effective with the closing of the Share Exchange.

Effective May 2013, Aly Operating entered into an employment agreement with Mr. Hidayatallah to serve as our Chairman and Chief Executive Officer. The term of the agreement expires December 31, 2016. Mr. Hidayatallah is paid a base salary of $420,000 per year and is eligible to receive an annual performance bonus based upon the achievement of pre-established performance milestones. The bonus will range from 80% to 120% of base salary if pre-established performance milestones are met. No bonus will be payable in such periods if we do not achieve at least 90% of the EBITDA (earnings before interest, taxes, depreciation and amortization) forecast approved by the board of directors of Aly Energy for the applicable year. Mr. Hidayatallah also received 50% of the shares allocated to the management team in the equity compensation plan that was adopted in May 2013. The employment agreement restricts Mr. Hidayatallah from competing with us for a two-year period after termination of his employment.

Effective February 2013, Aly Operating entered into an employment agreement with Mr. Patterson to serve as our President and Chief Operating Officer. The term of the agreement expires December 31, 2016. In 2013, Mr. Patterson was paid a base salary of $210,000 per year in 2013 which increased to $250,000 per year effective January 1, 2014. In 2013, Mr. Patterson received 199,100 shares of Aly Energy common stock as additional compensation. Mr. Patterson is eligible to receive an annual performance bonus ranging from 40% to 80% of base salary based upon the achievement of pre-established performance milestones. No bonus will be payable in such periods if we do not achieve at least 90% of the EBITDA forecast approved by the board of directors of Aly Energy for the applicable year. Mr. Patterson received 20% of the shares allocated to the management team in the equity compensation plan that was adopted in May 2013. The employment agreement restricts Mr. Patterson from competing with us for a two-year period after termination of his employment.

Effective February 2013, Aly Energy entered into an employment agreement with Ms. Hidayatallah to serve as our Chief Financial Officer. The term of the agreement expires December 31, 2016. Ms. Hidayatallah is paid a base salary of $200,000 per year and is eligible to receive an annual performance bonus based upon the achievement of pre-established performance milestones. The bonus will range from 40% to 80% of base salary if pre-established performance milestones are met. No bonus will be payable in such periods if we do not achieve at least 90% of the EBITDA forecast approved by the board of directors of Aly Energy for the applicable year. Ms. Hidayatallah received 5% of the shares allocated to the management team in the equity compensation plan that was adopted in May 2013. The employment agreement restricts Ms. Hidayatallah from competing with us for a two-year period after termination of her employment.

Austin Chalk

Effective October 2012, Austin Chalk entered into an employment agreement with Kurt Chew to serve as its President. The term of the agreement expires October 26, 2015. Mr. Chew is paid a base salary of $220,000 per year and is eligible to receive an annual performance bonus of between 40% to 100% of base salary based upon the achievement of goals set by the Compensation Committee of the board of directors. The employment agreement restricts Mr. Chew from competing with us for a two-year period after termination of his employment.

Termination Provisions

Each of Munawar Hidayatallah, Mark Patterson and Alya Hidayatallah will receive 24 months of base salary, and Mr. Chew will receive 12 months of base salary, upon their respective resignation with good reason or dismissal without cause. They will not be entitled to severance payments in connection with a termination of their employment upon death, disability, dismissal with cause, a change of control or the non-renewal of their employment at the board of directors’ discretion.

“Good reason” in the above agreements generally includes the material diminution of the executives’ duties, any material reduction in base salary and the relocation of the geographical location where the executive performs services.

“Cause” in the above agreements means that employee (a) has engaged in gross negligence, gross incompetence or willful misconduct in the performance of employee’s duties with respect to Aly Energy or any of its affiliates, (b) has refused without proper legal reason to perform employee’s duties and responsibilities to Aly Energy or any of its affiliates, (c) has breached any provision of the agreement, (d) has materially breached any provision of any written agreement or corporate policy or code of conduct established by Aly Energy or any of its affiliates (and as amended from time to time), (e) has engaged in conduct that is materially injurious to Aly Energy or any of its affiliates, (f) has disclosed without specific authorization from Aly Energy confidential information of Aly Energy or any of its affiliates that is injurious to any such entity, (g) has committed an act of theft, fraud, embezzlement, misappropriation or breach of a fiduciary duty to Aly Energy or any of its affiliates or (h) has been convicted of (or pleaded no contest to) a crime involving fraud, dishonesty or moral turpitude or any felony.

Director Compensation

During the year ended December 31, 2014, Aly Energy compensated each of its independent directors in the amount of $10,000 for their service during the year. Beginning in the first quarter of 2015, Aly Energy will compensate each of its independent directors in the amount of $20,000 for their service during each calendar year.

During the year ended December 31, 2013, Aly Operating granted stock options to its directors in the amount of $0.5 million, as provided in “Adoption of Equity Awards Plan” below. Aly Operating did not compensate its directors for their service in fiscal 2013 in any other form.

Adoption of Equity Awards Plan

In May 2013, Aly Operating adopted the Aly Energy Services Inc. Omnibus Incentive Plan (the “Plan”) and reserved 6,769,400 shares of common stock under the Plan for grants of awards, including stock options. At the time of adoption of the Plan, all of the shares reserved under the Plan were granted in the form of stock options to various executives and directors of Aly Operating, which converted to stock options of Aly Energy common stock in connection with the Share Exchange, as follows:

	Number of Options Held
Individual
Micki Hidayatallah		3,384,700
Mark Patterson		1,353,880
Alya Hidayatallah		796,400
Nadine C. Smith		398,200
Ali Afdhal		167,244
Allen Morton (1)		167,244
Kouros Sariri		167,244
Zane Tankel		167,244
Saeed M. Sheikh		167,244

____________

(1) Allen Morton resigned from our Board in December 2013.

The stock options have a ten year term and will vest and become exercisable only if (i) a Change in Control (as defined in the Plan) occurs and the per share price of the common stock is at least $0.40 per share (or $8.00 per share prior to the Share Exchange) in the Change in Control or (ii) an Initial Public Offering (as defined in the Plan) occurs and the per share price of the common stock is at least $0.40 per share (or $8.00 per share prior to the Share Exchange) at any time during the six month period following the Initial Public Offering. The exercise price of the stock options is $0.20 per share.

Aly Energy intends to adopt a stock incentive plan providing for approximately 10% of the fully diluted shares of Aly energy to be available for equity awards to employees and directors.

Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters

Security Ownership of Certain Beneficial Owners and Management

The following table sets forth information regarding beneficial ownership of our common stock as of March 27, 2015 by (i) each person or group who is known by us to beneficially own more than 10% of our common stock; (ii) each director; (iii) each of the Named Executive Officers and (iv) all such executive officers and directors as a group. Except as indicated in the footnotes to this table, the persons named in the table to our knowledge have sole voting and investment power with respect to all shares of securities shown as beneficially owned by them. Each of our executive officers and directors may be contacted at 3 Riverway, Suite 920, Houston, Texas 77056. The information in this table is based upon 126,086,955 common shares which is comprised of 111,220,287 shares of common stock outstanding as of March 31, 2015, 1,648,614 shares of common stock issuable to a director as of March 31, 2015, and 13,218,055 shares of common stock issuable as if all of the outstanding shares of the Aly Centrifuge Redeemable Preferred Stock were converted into common shares.

	Common Stock
	Number of Shares Beneficially Owned		Percent of Class
Name
J. Steven Emerson (1)		17,692,914		14.0	%
Cydas Investments Ltd. (2)		14,449,052		11.5	%
Munawar Hidayatallah (3)		11,520,072		9.1	%
Nezam Afdhal (4)		7,224,526		5.7	%
Zane Tankel		5,644,166		4.5	%
Kouros Sariri (5)		2,889,809		2.3	%
Kurt Chew (6)		2,666,667		2.1	%
Tim Pirie (7)		2,610,712		2.1	%
Saeed M. Sheikh		2,456,339		1.9	%
Ali Afdhal (8)		1,648,614		1.3	%
Nadine C. Smith		1,444,905		1.1	%
Mark Patterson		199,100		0.2	%
Alya Hidayatallah		0		0.0	%
All Directors and Officers as a Group		49,402,148		39.2	%

_____________

(1)	Includes 10,669,857 shares held in Mr. Emerson’s retirement accounts, 500,000 shares held in the Emerson Foundation and 3,194,600 shares held by Emerson Partners. Mr. Emerson’s address is c/o TR Winston, 1522 Ensley Avenue, Los Angeles, California 90024.
(2)	Consists of shares held of record by Cydas Investments Ltd. which is owned equally by Ali Afdhal's daughter (Laily Shirazi) and brother (Muhsin Afdhal). Mr. Ali Afdhal disclaims any beneficial ownership in the shares of common stock owned by Cydas Investments Ltd. The address for Cydas Investments Ltd. is PO Box 437, 13 Castle Street, St. Heller, Jersey, JE4 0ZE, Channel Islands.
(3)	Consists of 2,565,072 shares held in a trust of which Mr. Hidayatallah is the trustee and the remainder held jointly by Mr. Hidayatallah and his spouse.
(4)	Ali Afdhal and Nezam Afdhal are brothers. Ali Afdhal disclaims any beneficial ownership in the shares of common stock owned by his brother. Nezam Afdhal’s address is 59 Pier 7, Charlestown, Massachusetts 02129.
(5)	Consists of 816,589 shares held in Mr. Sariri’s retirement account, 550,591 shares held in Mr. Sariri’s spouse’s retirement account, and the remainder held jointly by Mr. Sariri and his spouse.
(6)	Mr. Chew's common shares exclude shares of common stock issuable upon conversion of Aly Operating Redeemable Preferred Stock. Aly Operating Redeemable Preferred Stock is not currently eligible for conversion and the conversion rate is undeterminable until such date that the stock is eligible for conversion.
(7)	Reflects the common shares which would be owned by Mr. Pirie if he converted his holdings of the Aly Centrifuge Redeemable Preferred Stock.
(8)	Reflects shares issuable to Mr. Afdhal in connection with his arrangement of certain equity issuances in 2014 and 2015.

Item 13. Certain Relationships and Related Transactions and Director Independence

Purchase of United

On April 15, 2014, we acquired the equity interests of United Centrifuge, LLC (“United”) as well as certain assets used in United’s business that were owned by related parties of United (collectively the “United Acquisition”). The sellers include Tim Pirie, one of our directors, and Myles Bowman, President of Aly Centrifuge. Total consideration for the United Acquisition of $24.5 million included $15.1 million cash, net of cash acquired of approximately $0.6 million, the issuance of 5,000 shares of redeemable preferred stock at Aly Centrifuge (“Aly Centrifuge Redeemable Preferred Stock”), $0.01 par value, at a fair value of $5.1 million, contingent consideration of up to $5.0 million in aggregate over 3 years at a fair value of $3.5 million, and a payable of $0.8 million. The contingent consideration consists of up to three future cash payments to the sellers in an amount equal to 5% of the gross revenues of the business acquired for each of the 12 month periods ending on March 31, 2015, 2016 and 2017. On September 19, 2014, in accordance with the terms of the United Acquisition purchase agreement, a cash payment of approximately $0.8 million was made to the sellers of United.

Purchase of Evolution

On July 1, 2014, we acquired all of the issued and outstanding stock of Evolution Guidance Systems Inc. (“Evolution”). Total consideration was approximately $2.0 million, consisting of the issuance of 3,000,000 shares of Common Stock at an estimated fair value of $1.7 million and a payable of $0.3 million. Thor Eckmann and Henry Iwunze, the sellers of Evolution, currently serve as the Chief Executive Officer of Evolution and the Chief Operating Officer of Evolution, respectively. On October 28, 2014, in accordance with the terms of the Evolution purchase agreement, a cash payment of approximately $0.3 million was made to Messrs. Eckmann and Iwunze.

Share-Based Transaction Fees

We agreed to issue 1,584,250 shares of our common stock to one of our directors in respect of his arrangement of certain transactions to raise equity from non- U.S. investors for Aly Energy. As of December 31, 2014, we had not issued these shares to our director, but the obligation in the amount of $0.6 million is recognized on the balance sheet as accounts payable - affiliates.

Lease Agreement with Kurt Chew, President of Austin Chalk

Austin Chalk leases certain of its facilities from Kurt Chew LLC, a limited liability company owned by Kurt Chew. Rent paid to Kurt Chew LLC was approximately $66,000 and $57,000 during the years ended December 31, 2014 and 2013, respectively. Austin Chalk extended the lease term by an additional three year period until December 31, 2017, with rent at a rate of $69,000 per year.

Director Independence

On March 3, 2015, we added Tim Pirie as a director and we now have seven directors serving on our board. We had six members throughout the year ended December 31, 2014. Using the definition of independence set forth in the rules of the NYSE Mkt, all of our directors except Mr. Hidayatallah and Mr. Afdhal are independent.

Item 14. Principal Accountant Fees and Services

Our independent auditors for the year ending December 31, 2014, BDO USA, LLP (“BDO”) have no direct or indirect interest in the Company and were the Company’s Independent Registered Public Accounting Firm from December 1, 2014. Prior to such date, our independent auditors were UHY LLP (“UHY”). The Texas practice of UHY was acquired by BDO on December 1, 2014 and upon closing of the transaction the company terminated UHY as its auditor and engaged BDO to perform the 2014 audit.

The following table sets forth the estimated fees paid for services provided by BDO for the year ended December 31, 2014:

	Year Ended December 31, 2014		Year Ended December 31, 2013
Audit Fees (1)	$	135,000	$	-
Audit-Related Fees (2)		-		-
Tax Fees (3)		-		-

(1) Includes fees paid to UHY for their audit and quarterly reviews.

(2) Includes fees for services related to accounting and acquisition audit fees.

(3) Includes fees for services related to tax compliance, preparation and tax examination assistance.

The following table sets forth the estimated fees paid for services provided by UHY for the year ended December 31, 2014:

	Year Ended December 31, 2014		Year Ended December 31, 2013

Audit Fees (1)	$	82,500	$	228,050
Audit-Related Fees (2)		171,325		-
Tax Fees (3)		-		-

(1) Includes fees paid to UHY for their audit and quarterly reviews.

(2) Includes fees for services related to accounting and acquisition audit fees.

(3) Includes fees for services related to tax compliance, preparation and tax examination assistance.

Our Audit Committee established a policy whereby the outside auditors are required to seek pre-approval of all audit services by providing a description of the services to be performed. For the year ended December 31, 2014, 100% of all audit services were pre-approved by the Audit Committee, which concluded that the provision of such services by BDO and UHY was compatible with the maintenance of that firm’s independence in the conduct of its auditing functions.

PART IV

Item 1. Exhibits

Exhibit Number
Exhibit Number		Exhibit Description

2.1		Share Exchange Agreement, dated May 14, 2013, by and among Preferred Voice, Inc., Aly Energy Services, Inc. and the stockholders of Aly Energy Services, Inc. (1)
2.2		Stock Purchase Agreement, dated as of September 27, 2012, by and between Aly Energy Services, Inc. and Kurt Chew (1)
3.1		Certificate of Incorporation, filed on August 3, 1992 with the Secretary of State of Delaware (1)
3.2		Certificate of Amendment, filed on May 2, 1994 with the Secretary of State of Delaware (1)
3.3		Certificate of Amendment, filed on March 21, 1995 with the Secretary of State of Delaware (1)
3.4		Certificate of Amendment, filed on July 27, 1995 with the Secretary of State of Delaware (1)
3.5		Certificate of Amendment, filed on March 7, 1997 with the Secretary of State of Delaware (1)
3.6		Certificate of Amendment, filed on April 27, 2007 with the Secretary of State of Delaware (1)
3.7		Certificate of Amendment, filed on May 14, 2013 with the Secretary of State of Delaware (1)
3.8		Certificate of Amendment, filed on April 10, 2014 with the Secretary of State of Delaware (2)
3.9		Bylaws of the Registrant (1)
4.1		Aly Energy Services, Inc. Investor Agreement dated October 26, 2012(1)
4.2		Amended and Restated Credit Agreement, dated as of April 15, 2014, by and among Aly Energy Services, Inc., Wells Fargo Bank, National Association and the lenders named therein (2)
4.3		Amendment No. 1 to Amended and Restated Credit Agreement, dated as of November 26, 2014 (4)
10.1		Employment Agreement, dated February 13, 2013, by and between Aly Energy Services, Inc. and Munawar Hidayatallah (1)
10.2		Employment Agreement, dated February 12, 2013, by and between Aly Energy Services, Inc. and Mark Patterson (1)
10.3		Employment Agreement, dated February 12, 2013, by and between Aly Energy Services, Inc. and Alya Hidayatallah (1)
10.4		Employment Agreement, dated February 12, 2013, by and between Aly Energy Services, Inc. and Kurt Chew (1)
10.5		Amended and Restated Lease Agreement, dated October 25, 2012, by and between Kurt Chew, LLC and Austin Chalk Petroleum Corp.(1)
10.6		Aly Energy Services, Inc. Omnibus Incentive Plan (1)
10.7		Form of Stock Option Agreement under Aly Energy Services, Inc. Omnibus Incentive Plan(1)
10.8		Asset Purchase, Stock Purchase and Merger Agreement, dated April 11, 2014, relating to United Centrifuge USA, LLC (2)
21.1		List of Subsidiaries (4)
31.1		Certification of Chief Executive Officer (4)
31.2		Certification of Chief Financial Officer (4)
32.1		Certification of Chief Executive Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (4)
32.2		Certification of Chief Financial Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (4)
101.INS **		XBRL Instance Document
101.SCH **		XBRL Taxonomy Extension Schema Document
101.CAL **		XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF **		XBRL Taxonomy Extension Definition Linkbase Document
101.LAB **		XBRL Taxonomy Extension Label Linkbase Document
101.PRE **		XBRL Taxonomy Extension Presentation Linkbase Document

_____________

** XBRL (Extensible Business Reporting Language) information is furnished and not filed or a part of a registration statement or prospectus for purposes of Sections 11 or 12 of the Securities Act of 1933, as amended, is deemed not filed for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, and otherwise is not subject to liability under these sections.

(1) Filed as exhibit to Report on Form 8-K, dated May 15, 2013

(2) Filed as exhibit to Report on Form 8-K, dated April 16, 2014

(3) Filed as exhibit to Report on Form 8-K/A, dated July 31, 2013

(4) Filed herewith

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

	ALY ENERGY SERVICES, INC.

Date: March 31, 2015	By:	/s/ Munawar H. Hidayatallah
		Munawar H. Hidayatallah
		Chairman and Chief Executive Officer
		(Principal Executive Officer)

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant in the capacities and on the dates indicated.

Signature	Title	Date

/s/ Munawar H. Hidayatallah	Chairman and Chief Executive Officer (principal executive officer)	March 31, 2015
Munawar H. Hidayatallah

/s/ Alya Hidayatallah	Chief Financial Officer, (principal financial andaccounting office)	March 31, 2015
Alya Hidayatallah

/s/ Ali H M Afdhal	Director	March 31, 2015
Ali H M Afdhal

/s/ Kouros Sariri	Director	March 31, 2015
Kouros Sariri

/s/ Saeed M. Sheikh	Director	March 31, 2015
Saeed M. Sheikh

/s/ Nadine C. Smith	Director	March 31, 2015
Nadine C. Smith

/s/ Zane Tankel	Director	March 31, 2015
Zane Tankel

/s/ Timothy J. Pirie	Director	March 31, 2015
Timothy J. Pirie

EXHIBIT 4.3

AGREEMENT AND AMENDMENT NO. 1

TO AMENDED AND RESTATED CREDIT AGREEMENT

This Agreement and Amendment No. 1 to the Amended and Restated Credit Agreement (this “Agreement”) dated as of November 26, 2014 (the “Effective Date”) is among Aly Energy Services, Inc., a Delaware corporation (the “Borrower”), each subsidiary of the Borrower party hereto (each, a “Guarantor” and collectively, the “Guarantors”), Wells Fargo Bank, National Association, as administrative agent (in such capacity, the “Administrative Agent”), issuing lender (in such capacity, the “Issuing Lender”) swing line lender (in such capacity, the “Swing Line Lender”), and the Lenders (as defined below).

INTRODUCTION

A. The Borrower, the Administrative Agent, the Issuing Lender, the Swing Line Lender and the lenders party thereto from time to time (the “Lenders”) are parties to that certain Credit Agreement (the “Credit Agreement”) dated as of April 15, 2014.

B. The Borrower has requested that the Lenders make available an additional term loan facility in an aggregate amount not to exceed $5,000,000, the proceeds of which will be used to fund capital expenditures (the “CapEx Facility”).

C. To accommodate and provide for the CapEx Facility, the parties hereto wish to amend certain provisions of the Credit Agreement as set forth below.

THEREFORE, the Borrower, the Administrative Agent, the Issuing Lender, the Swing Line Lender and the other parties hereto hereby agree as follows:

Section 1. Defined Terms; Other Definitional Provisions. As used in this Agreement, each of the terms defined in the opening paragraph and the Recitals above shall have the meanings assigned to such terms therein. Each term defined in the Credit Agreement and used herein without definition shall have the meaning assigned to such term in the Credit Agreement, unless expressly provided to the contrary. Article, Section, Schedule, and Exhibit references are to Articles and Sections of and Schedules and Exhibits to this Agreement, unless otherwise specified. The words “hereof”, “herein”, and “hereunder” and words of similar import when used in this Agreement shall refer to this Agreement as a whole and not to any particular provision of this Agreement. The term “including” means “including, without limitation,”. Paragraph headings have been inserted in this Agreement as a matter of convenience for reference only and it is agreed that such paragraph headings are not a part of this Agreement and shall not be used in the interpretation of any provision of this Agreement.

Section 2. Amendments to Credit Agreement.

(a) The Credit Agreement is amended to read in its entirety as set forth on Annex I.

(b) The Credit Agreement is amended by deleting Schedules I and II in their entirety and replacing them with the new Schedules I and II attached hereto.

(d) The Credit Agreement is amended by adding the new Exhibit E-3 attached hereto.

(e) The Credit Agreement is amended by adding the new Exhibit H-4 attached hereto.

Section 3. Representations and Warranties. Each Credit Party hereby represents and warrants that: (a) the representations and warranties contained in the Credit Agreement, as amended hereby, and after giving effect to any amendments to the schedules thereto set forth herein, and the representations and warranties contained in the other Credit Documents, as amended hereby, and after giving effect to any amendments to the schedules thereto set forth herein, are true and correct in all material respects on and as of the Effective Date as if made on as and as of such date except to the extent that any such representation or warranty expressly relates solely to an earlier date, in which case such representation or warranty is true and correct in all material respects as of such earlier date (except that such materiality qualifiers shall not be applicable to the extent any representations and warranties are already qualified or modified by materiality in the text thereof); (b) no Default has occurred and is continuing; (c) the execution, delivery and performance of this Agreement are within the corporate or limited liability company power and authority of such Credit Party and have been duly authorized by appropriate corporate or limited liability company action and proceedings; (d) this Agreement constitutes the legal, valid, and binding obligation of such Credit Party enforceable in accordance with its terms, except as limited by applicable bankruptcy, insolvency, reorganization, moratorium, or similar laws affecting the rights of creditors generally and general principles of equity; (e) there are no governmental or other third party consents, licenses and approvals required in connection with the execution, delivery, performance, validity and enforceability of this Agreement; and (v) the Liens under the Credit Documents are valid and subsisting and secure the Credit Parties' obligations under such Credit Documents.

Section 4. Conditions to Effectiveness. This Agreement shall become effective on the Effective Date and enforceable against the parties hereto upon the occurrence of the following conditions precedent:

(a) Documentation. The Administrative Agent shall have received the following, duly executed by all the parties thereto, in form and substance reasonably satisfactory to the Administrative Agent:

(i.) this Agreement and new Notes reflecting the revised Commitments and outstanding Term Advances as set forth in the Credit Agreement attached hereto;

(ii.) a new fee letter among the Borrower and the Administrative Agent (the “CapEx Fee Letter”);

(iii.) a certificate from a Responsible Officer of the Borrower dated as of the Effective Date stating that as of such date (A) all representations and warranties set forth in this Agreement are true and correct in all material respects, (B) no Default has occurred and is continuing; and (C) all conditions precedent set forth in this Section 4 have been met;

(iv.) a secretary’s certificate from each Credit Party certifying such Person’s (A) updated officers’ incumbency or that the officers’ incumbency certified at the closing of the Credit Agreement have not been amended and are still valid, (B) authorizing resolutions for this Agreement, and (C) updated organizational documents or that organizational documents certified at the closing of the Credit Agreement have not been amended, supplemented or otherwise modified and are still valid and in full force and effect;

(v.) certificates of good standing for each Credit Party in the state in which it is organized, which certificate shall be (A) dated a date not earlier than 30 days prior to the date hereof or (B) otherwise effective on the date hereof;

(vi.) a customary legal opinion of Hallett & Perrin, P.C. as outside counsel to the Credit Parties in form and substance reasonably acceptable to the Administrative Agent; and

(vii.) such other documents, governmental certificates, agreements, and lien searches as the Administrative Agent or any Lender may reasonably request.

(b) Payment of Fees. The Borrower shall have paid the fees and expenses required to be paid as of or on the Effective Date by Section 9.1 of the Credit Agreement or any other provision of a Credit Document, including the CapEx Fee Letter.

(d) USA Patriot Act. The Administrative Agent shall have received all documentation and other information that is required by regulatory authorities under applicable “know your customer” and anti-money-laundering rules and regulations, including, without limitation, the Patriot Act

Section 5. Acknowledgments and Agreements.

(a) Each Credit Party acknowledges that on the date hereof all outstanding Obligations are payable in accordance with their terms and each Credit Party waives any defense, offset, counterclaim or recoupment, in each case existing on the date hereof, with respect to such Obligations. Each Credit Party, Administrative Agent, Issuing Lender and each other party hereto does hereby adopt, ratify, and confirm the Credit Agreement, as amended hereby, and acknowledges and agrees that the Credit Agreement, as amended hereby, is and remains in full force and effect, and each Credit Party acknowledges and agrees that its respective liabilities and obligations under the Credit Agreement, as amended hereby, and the Guaranty are not impaired in any respect by this Agreement.

(b) The Administrative Agent and the Lenders hereby expressly reserve all of their rights, remedies, and claims under the Credit Documents. Nothing in this Agreement shall constitute a waiver or relinquishment of (i) any Default or Event of Default under any of the Credit Documents, (ii) any of the agreements, terms or conditions contained in any of the Credit Documents, (iii) any rights or remedies of the Administrative Agent or any Lender with respect to the Credit Documents, or (iv) the rights of the Administrative Agent or any Lender to collect the full amounts owing to them under the Credit Documents.

(c) From and after the Effective Date, all references to the Credit Agreement and the Credit Documents shall mean the Credit Agreement and such Credit Documents as amended by this Agreement. This Agreement is a Credit Document for the purposes of the provisions of the other Credit Documents. Without limiting the foregoing, any breach of representations, warranties, and covenants under this Agreement shall be a Default or Event of Default, as applicable, under the Credit Agreement.

Section 6. Reaffirmation of the Guaranty. Each Credit Party hereby ratifies, confirms, acknowledges and agrees that its obligations under the Guaranty are in full force and effect and that such Credit Party continues to unconditionally and irrevocably guarantee the full and punctual payment, when due, whether at stated maturity or earlier by acceleration or otherwise, all of the Guaranteed Obligations (as defined in the Guaranty), as such Guaranteed Obligations may have been amended, extended and increased by this Agreement, and its execution and delivery of this Agreement does not indicate or establish an approval or consent requirement by such Credit Party under the Guaranty in connection with the execution and delivery of amendments, consents or waivers to the Credit Agreement, the Notes or any of the other Credit Documents.

Section 7. Counterparts.This Agreement may be signed in any number of counterparts, each of which shall be an original and all of which, taken together, constitute a single instrument. This Agreement may be executed by facsimile signature and all such signatures shall be effective as originals.

Section 8. Successors and Assigns. This Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective successors and assigns permitted pursuant to the Credit Agreement.

Section 9. Invalidity. In the event that any one or more of the provisions contained in this Agreement shall for any reason be held invalid, illegal or unenforceable in any respect, such invalidity, illegality or unenforceability shall not affect any other provision of this Agreement.

Section 10. Governing Law. This Agreement shall be deemed to be a contract made under and shall be governed by and construed in accordance with the laws of the State of New York without regard to conflicts of laws principles (other than Sections 5-1401 and 5-1402 of the General Obligations Law of the State of New York).

Section 11. Entire Agreement. This Agreement, the Credit Agreement as amended by this Agreement, the Notes, and the other Credit Documents constitute the entire understanding among the parties hereto with respect to the subject matter hereof and supersede any prior agreements, written or oral, with respect thereto.

THERE ARE NO UNWRITTEN ORAL AGREEMENTS AMONG THE PARTIES.

[The remainder of this page has been left blank intentionally.]

EXECUTED to be effective as of the date first above written.

BORROWER:

ALY ENERGY SERVICES, INC.

/S/ MUNAWAR H. HIDAYATALLAH

Munawar H. Hidayatallah

Chairman of the Board and Chief Executive Officer

GUARANTORS:

ALY OPERATING, INC.

ALY CENTRIFUGE INC.

Each by:

/S/ MUNAWAR H. HIDAYATALLAH

Munawar H. Hidayatallah

Chairman of the Board and Chief Executive Officer

AUSTIN CHALK PETROLEUM SERVICES CORP.

EVOLUTION GUIDANCE SYSTEMS INC.

Each by:

/S/ ALYA HIDAYATALLAH

Alya Hidayatallah

Chief Financial Officer

ADMINISTRATIVE AGENT/LENDERS:

WELLS FARGO BANK, NATIONAL ASSOCIATION

as Administrative Agent, Issuing Lender, Swing Line Lender,

a Revolving Lender, a CapEx Lender, and a Term Lender

By: /S/ DONALD W. HERRICK, JR.

Name: Donald W. Herrick, Jr.

Title: Director

Annex I

Conformed Credit Agreement

AMENDED AND RESTATED CREDIT AGREEMENT

dated as of April 15, 2014

Among

ALY ENERGY SERVICES, INC.,

as Borrower,

WELLS FARGO BANK, NATIONAL ASSOCIATION,

as Administrative Agent, Issuing Lender and Swing Line Lender,

and

THE LENDERS NAMED HEREIN,

as Lenders

$35,000,000

ARTICLE 1		DEFINITIONS AND ACCOUNTING TERMS	1
	Section 1.1	Certain Defined Terms	1
	Section 1.2	Computation of Time Periods	37
	Section 1.3	Accounting Terms; Changes in GAAP	37
	Section 1.4	Classes and Types of Advances	37
	Section 1.5	Miscellaneous	37
	ARTICLE 2	CREDIT FACILITIES	38
	Section 2.1	Revolving Term and CapEx Commitments	38
	Section 2.2	Letters of Credit	41
	Section 2.3	Advances	48
	Section 2.4	Prepayments	55
	Section 2.5	Repayment	57
	Section 2.6	Fees	58
	Section 2.7	Interest	59
	Section 2.8	Illegality	60
	Section 2.9	Breakage Costs	61
	Section 2.10	Increased Costs	61
	Section 2.11	Payments and Computations	63
	Section 2.12	Taxes	64
	Section 2.13	Mitigation Obligations; Replacement of Lenders	68
	Section 2.14	Defaulting Lender	70
ARTICLE 3		CONDITIONS OF LENDING	73
	Section 3.1	Conditions Precedent to Initial Borrowings and the Initial Letter of Credit	73
	Section 3.2	Conditions Precedent to Each Borrowing and to Each Issuance, Extension or Renewal of a Letter of Credit	76
	Section 3.3	Conditions Precedent to Effectiveness of Revolving Facility	77
	Section 3.4	Conditions Precedent to Each CapEx Borrowing	78
	Section 3.5	Determinations Under Sections 3.1, 3.2, 3.3 and 3.4	78
ARTICLE 4		REPRESENTATIONS AND WARRANTIES	78
	Section 4.1	Organization	78
	Section 4.2	Authorization	78
	Section 4.3	Enforceability	79
	Section 4.4	Financial Condition	79
	Section 4.5	Ownership and Liens; Real Property	80
	Section 4.6	True and Complete Disclosure	80
	Section 4.7	Litigation	80
	Section 4.8	Compliance with Agreements	80
	Section 4.9	Pension Plans	81
	Section 4.10	Environmental Condition	81
	Section 4.11	Subsidiaries	82
	Section 4.12	Investment Company Act	82
	Section 4.13	Taxes	82
	Section 4.14	Permits, Licenses, etc	83
	Section 4.15	Use of Proceeds	83
	Section 4.16	Condition of Property; Casualties	83
	Section 4.17	Insurance	83
	Section 4.18	Security Interest	83
	Section 4.19	OFAC; Anti-Terrorism	83
	Section 4.20	Solvency	84
	Section 4.21	Material Agreements	84

ARTICLE 5		AFFIRMATIVE COVENANTS	84
	Section 5.1	Organization	84
	Section 5.2	Reporting	84
	Section 5.3	Insurance	88
	Section 5.4	Compliance with Laws	89
	Section 5.5	Taxes	89
	Section 5.6	New Subsidiaries	89
	Section 5.7	Security	89
	Section 5.8	Deposit Accounts	90
	Section 5.9	Records; Inspection	90
	Section 5.10	Maintenance and Operation of Property	90
	Section 5.11	Certificates of Title	90
	Section 5.12	Appraisal Reports; Field Audits	91
	Section 5.13	Material Contracts	91
	Section 5.14	Further Assurances; Cure of Title Defects	91
	Section 5.15	Post-Closing	92
ARTICLE 6		NEGATIVE COVENANTS	92
	Section 6.1	Debt	92
	Section 6.2	Liens	93
	Section 6.3	Investments	95
	Section 6.4	Acquisitions	96
	Section 6.5	Agreements Restricting Liens	96
	Section 6.6	Use of Proceeds; Use of Letters of Credit	96
	Section 6.7	Corporate Actions; Accounting Changes	96
	Section 6.8	Sale of Assets	97
	Section 6.9	Restricted Payments	97
	Section 6.10	Affiliate Transactions	97
	Section 6.11	Line of Business	98
	Section 6.12	Hazardous Materials	98
	Section 6.13	Compliance with ERISA	98
	Section 6.14	Sale and Leaseback Transactions	99
	Section 6.15	Limitation on Hedging	99
	Section 6.16	Leverage Ratio	99
	Section 6.17	Fixed Charge Coverage Ratio	99
	Section 6.18	Capital Expenditures	100
	Section 6.19	[Reserved]	100
	Section 6.20	Landlord Agreements	100
	Section 6.21	[Reserved]	100
	Section 6.22	Operating Leases	100
	Section 6.23	Prepayment of Certain Debt and Other Obligations	100
	Section 6.24	Material Agreements	101
ARTICLE 7		DEFAULT AND REMEDIES	101
	Section 7.1	Events of Default	101
	Section 7.2	Optional Acceleration of Maturity	103
	Section 7.3	Automatic Acceleration of Maturity	104
	Section 7.4	Set-off	104
	Section 7.5	Remedies Cumulative, No Waiver	105
	Section 7.6	Application of Payments	105

ARTICLE 8		THE ADMINISTRATIVE AGENT AND ISSUING LENDER	107
	Section 8.1	Appointment and Authority	107
	Section 8.2	Rights as a Lender	107
	Section 8.3	Exculpatory Provisions	108
	Section 8.4	Reliance by Administrative Agent, Swing Line Lender and Issuing Lender	109
	Section 8.5	Delegation of Duties	109
	Section 8.6	Resignation of Administrative Agent or Issuing Lender	110
	Section 8.7	Non-Reliance on Administrative Agent and Other Lenders	111
	Section 8.8	No Other Duties, etc	112
	Section 8.9	Indemnification	112
	Section 8.10	Administrative Agent May File Proofs of Claim	113
	Section 8.11	Collateral and Guaranty Matters	114
ARTICLE 9		MISCELLANEOUS	115
	Section 9.1	Costs and Expenses	115
	Section 9.2	Indemnification; Waiver of Damages	115
	Section 9.3	Waivers and Amendments	117
	Section 9.4	Severability	118
	Section 9.5	Survival of Representations and Obligations	118
	Section 9.6	Binding Effect	119
	Section 9.7	Successors and Assigns	119
	Section 9.8	Confidentiality	123
	Section 9.9	Notices, Etc	124
	Section 9.10	Usury Not Intended	125
	Section 9.11	Usury Recapture	126
	Section 9.12	Payments Set Aside	126
	Section 9.13	Governing Law; Service of Process	126
	Section 9.14	Submission to Jurisdiction	127
	Section 9.15	Electronic Execution of Assignments	127
	Section 9.16	Execution in Counterparts	127
	Section 9.17	Waiver of Jury	127
	Section 9.18	USA Patriot Act	128
	Section 9.19	Confirmation of Flood Policies and Procedures	128
	Section 9.20	Keepwell	128
	Section 9.21	Amendment and Restatement	128
	Section 9.22	Integration	129

SCHEDULES:
Schedule I	–	Pricing Schedule
Schedule II	–	Commitments, Contact Information
Schedule III	–	Additional Conditions and Requirements for New Subsidiaries
Schedule IV	–	Additional Conditions Precedent for CapEx Borrowings for Equipment
Schedule 3.1	–	Owned and Leased Real Properties
Schedule 3.1(q)	–	Certificates of Title to be Delivered Post-Closing
Schedule 4.1	–	Organizational Information
Schedule 4.7	–	Litigation
Schedule 4.10	–	Environmental Matters
Schedule 4.11	–	Subsidiaries
Schedule 4.21	–	Material Agreements
Schedule 6.3	–	Investments
Schedule 6.10	–	Affiliate Transactions

EXHIBITS:
Exhibit A	–	Form of Assignment and Acceptance
Exhibit B	–	Form of Borrowing Base Certificate
Exhibit C	–	Form of Compliance Certificate
Exhibit D	–	Form of Amended and Restated Guaranty
Exhibit E-1	–	Form of Notice of Revolving Borrowing
Exhibit E-2	–	Form of Notice of Term Borrowing
Exhibit E-3	–	Form of Notice of CapEx Borrowing
Exhibit F	–	Form of Notice of Continuation or Conversion
Exhibit G	–	Form of Amended and Restated Pledge and Security Agreement
Exhibit H-1	–	Form of Revolving Note
Exhibit H-2	–	Form of Term Note
Exhibit H-3	–	Form of Swing Line Note
Exhibit H-4	–	Form of CapEx Note
Exhibit I-1	–	Form of U.S. Tax Compliance Certificate
Exhibit I-2	–	Form of U.S. Tax Compliance Certificate
Exhibit I-3	–	Form of U.S. Tax Compliance Certificate
Exhibit I-4	–	Form of U.S. Tax Compliance Certificate

AMENDED AND RESTATED CREDIT AGREEMENT

This AMENDED AND RESTATED CREDIT AGREEMENT dated as of April 15, 2014 (this “Agreement”) is among Aly Energy Services, Inc., a Delaware corporation (the “Borrower”), the Lenders (as defined below) and Wells Fargo Bank, National Association as Administrative Agent (as defined below) for the Lenders, as Issuing Lender (as defined below) and as Swing Line Lender (as defined below).

R E C I T A L S

A. The Borrower has assumed the obligations of the Existing Borrower (as defined below) under the Existing Credit Agreement (as defined below) and desires to amend and restate the Existing Credit Agreement pursuant to this Agreement. The Borrower has also requested that the Lenders provide certain loans to and extensions of credit on behalf of the Borrower pursuant to this Agreement.

B. In consideration of the mutual covenants and agreements herein contained and of the loans, extensions of credit and commitments hereinafter referred to, the parties hereto agree as follows:

ARTICLE 1
DEFINITIONS AND ACCOUNTING TERMS

Section 1.1 Certain Defined Terms. The following terms shall have the following meanings (unless otherwise indicated, such meanings to be equally applicable to both the singular and plural forms of the terms defined):

“Acceptable Letter of Credit Maturity Date” has the meaning assigned to it in Section 2.2(a)(ii) of this Agreement.

“Acceptable Security Interest” means a security interest which (a) exists in favor of the Administrative Agent for its benefit and the ratable benefit of the Secured Parties, (b) is superior to all other security interests (other than the Permitted Liens), (c) secures the Secured Obligations, (d) is enforceable against the Credit Party which created such security interest and (e) is perfected.

“Account Control Agreement” shall mean, as to any deposit account of any Credit Party held with a bank, an agreement or agreements in form and substance reasonably acceptable to the Administrative Agent, among the Credit Party owning such deposit account, the Administrative Agent and such other bank governing such deposit account.

“Account Debtor” shall mean an account debtor as defined in the Uniform Commercial Code, as in effect in the State of New York.

“Acquisition” means the purchase by any Credit Party of (a) all or substantially all of the assets of a Person, (b) substantially all of the equity interests of a Person, or (c) any business, division or enterprise, including the purchase of associated assets or operations or the Equity Interests of a Person and for the avoidance of doubt, excludes purchases of equipment only with no other tangible or intangible property associated with such equipment purchase unless such purchase of equipment involves all or substantially all the assets of the seller.

“Adjusted Base Rate” means, for any day, the fluctuating rate per annum of interest equal to the greatest of (a) the Federal Funds Rate in effect on such day plus 0.50%, (b) the Prime Rate in effect on such day, and (c) a rate determined by the Administrative Agent to be the Daily One-Month LIBOR plus 1.00%. Any change in the Adjusted Base Rate due to a change in the Prime Rate, Daily One-Month LIBOR or the Federal Funds Rate shall be effective on the effective date of such change in the Prime Rate, Daily One-Month LIBOR or the Federal Funds Rate, respectively.

“Administrative Agent” means Wells Fargo in its capacity as agent for the Lenders pursuant to Article 8 and any successor agent pursuant to Section 8.6.

“Administrative Questionnaire” means an Administrative Questionnaire in a form supplied by the Administrative Agent.

“Advance” means any advance by a Lender or the Swing Line Lender to the Borrower as a part of a Borrowing.

“Affiliate” means, as to any Person, any other Person that, directly or indirectly, through one or more intermediaries, controls, is controlled by, or is under common control with, such Person or any Subsidiary of such Person. The term “control” (including the terms “controlled by” or “under common control with”) means the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of a Person, whether through ownership, by contract, or otherwise.

“Agreement” has the meaning specified in the introductory paragraph hereto.

“Aly Centrifuge” means Aly Centrifuge Inc., a Delaware corporation.

“Aly Operating” means Aly Operating, Inc., a Delaware corporation (f/k/a Aly Energy Services Inc.).

“Amendment No. 1” means that certain Assignment and Amendment No. 1 to the Amended and Restated Credit Agreement dated as of the Amendment No. 1 Effective Date among the parties hereto which amends this Agreement.

“Amendment No. 1 Effective Date” means November [__], 2014.

“Applicable Margin” means, at any time with respect to each Type of Advance, the Letters of Credit and the Commitment Fees, the percentage rate per annum which is applicable at such time with respect to such Advance, Letter of Credit or Commitment Fees as set forth in Schedule I and subject to further adjustments as set forth in Section 2.7(d).

“Asset Sale” means (a) any sale, transfer, or other disposition of any Property, by any Credit Party and (b) any issuance or sale of any Equity Interests of any Subsidiary of the Borrower, in each case, to any Person other than a Credit Party; provided that, any sale, transfer or other disposition of Property from one Credit Party to another Credit Party as permitted under Section 6.8(b) and the sale of inventory or equipment in the ordinary course as permitted under Section 6.8(a) shall not constitute an “Asset Sale” for purposes of this Agreement.

“Assignment and Acceptance” means an assignment and acceptance executed by a Lender and an Eligible Assignee and accepted by the Administrative Agent, in substantially the same form as Exhibit A or any other form approved by the Administrative Agent.

“Assumption Agreement” means the Assignment and Assumption by and between the Borrower and the Existing Borrower dated as of even date herewith pursuant to which the Borrower assumed all obligations of the Existing Borrower under the Existing Credit Agreement.

“Austin Chalk Corp.” means Austin Chalk Petroleum Services Corp., a Texas corporation.

“AutoBorrow Agreement” means any agreement providing for automatic borrowing services between the Borrower and the Swing Line Lender.

“Banking Services” means each and any of the following bank services: (a) commercial credit cards, (b) stored value cards and (c) treasury management services (including, without limitation, controlled disbursement, automated clearinghouse transactions, return items, overdrafts and interstate depository network services).

“Banking Services Obligations” means any and all obligations of the Borrower or any other Credit Party to any Banking Services Provider, whether absolute or contingent and howsoever and whensoever created, arising, evidenced or acquired (including all renewals, extensions and modifications thereof and substitutions therefor) in connection with Banking Services.

“Banking Services Provider” means any Lender (other than a Defaulting Lender) or Affiliate of a Lender (other than a Defaulting Lender) that provides Banking Services to the Borrower or any Subsidiary.

“Base Rate Advance” means an Advance which bears interest based upon the Adjusted Base Rate.

“BHP” means BHP Billiton Limited, together with any of its Affiliates.

“Blockers” means Canadian Nitrogen Services USA, Inc. and United Centrifuge, Inc., (USA).

“Borrower” means Aly Energy Services, Inc., a Delaware corporation (f/k/a Preferred Voice, Inc.).

“Borrowing” means a Revolving Borrowing, a Swing Line Borrowing, a Term Borrowing or a CapEx Borrowing.

“Borrowing Base” means, without duplication, the sum of (a) 80% of an amount equal to the Eligible Receivables plus (b) 50% of the value of Eligible Inventory valued at the lower of actual or fair market value in accordance with GAAP, in each case, determined as of the date of the Borrowing Base Certificate then most recently delivered pursuant to this Agreement minus (c) the Reserves; provided that (i) in no event shall the amount determined under clause (b) exceed 50% of the total amount of the Borrowing Base and (ii) notwithstanding the foregoing rates, the Lender may from time to time modify the percentage set forth in this definition if it determines, in its reasonable judgment, that such advance rate should be reduced based upon a Field Exam pursuant to Section 5.10 or a Field Audit pursuant to Section 5.12. Any change in the Borrowing Base shall be effective as of the date of the Borrowing Base Certificate then most recently delivered pursuant to this Agreement; provided that, should the Borrower fail to deliver the Administrative Agent and the Lenders the Borrowing Base Certificate as required under Section 5.2(e), the Administrative Agent may nonetheless redetermine the Borrowing Base from time-to-time thereafter in its sole discretion until the Administrative Agent and the Lenders receive the required Borrowing Base Certificate, whereupon the Administrative Agent shall redetermine the Borrowing Base based on such Borrowing Base Certificate and the other terms hereof. Anything to the contrary contained herein notwithstanding, the Lender shall, upon not less 30 days’ prior written notice to the Borrower, have the right (but not the obligation), in the exercise of its reasonable judgment, to establish and increase or decrease Reserves against the Borrowing Base. The amount of any Reserve established by the Lender shall have a reasonable relationship to the event, condition, other circumstance, or fact that is the basis for such reserve and shall not be duplicative of any other reserve established and currently maintained. Furthermore, the event, condition, circumstance or fact addressed in such reserve shall not be an event, condition, circumstance or fact otherwise addressed by the Lender in a change to any criteria for Eligible Inventory or Eligible Receivable then in effect.

“Borrowing Base Certificate” means a certificate executed by a Responsible Officer of the Borrower in the form of the attached Exhibit B and including the following: (a) accounts receivable and accounts payable aging reports for each Credit Party with grand totals and (b) all other information as reasonably requested by the Administrative Agent.

“Borrowing Base Deficiency” means the excess, if any, of (a) the Revolving Outstandings over (b) the lesser of (i) aggregate amount of Revolving Commitments, and (ii) the Borrowing Base then in effect.

“Business Day” means a day (a) other than a Saturday, Sunday, or other day on which the Administrative Agent is authorized to close under the laws of, or is in fact closed in, New York or Texas, and (b) if the applicable Business Day relates to any Eurodollar Advances, on which dealings are carried on by commercial banks in the London interbank market.

“CapEx Advance” means any advance by a CapEx Lender to the Borrower as part of a CapEx Borrowing.

“CapEx Basket Amount” means $10,000,000 for fiscal year 2014 and $7,500,000 for each fiscal year thereafter.

“CapEx Borrowing” means a Borrowing consisting of simultaneous CapEx Advances of the same Type made by each CapEx Lender pursuant to Section 2.1(b)(ii) or Converted by each CapEx Lender to CapEx Advances of a different Type pursuant to Section 2.3(b).

“CapEx Commitment” means, for each CapEx Lender, the obligation of such CapEx Lender to advance to the Borrower the amount set opposite such CapEx Lender’s name on Schedule II as its CapEx Commitment, or if such CapEx Lender has entered into any Assignment and Acceptance, set forth for such CapEx Lender as its CapEx Commitment in the Register; provided that, after the CapEx Commitment Termination Date, the CapEx Commitment for each CapEx Lender shall be zero. The aggregate CapEx Commitments as of the Amendment No. 1 Effective Date is equal to $5,000,000.00

“CapEx Commitment Termination Date” means [insert six month anniversary of Amendment No. 1 Effective Date].

“CapEx Facility” means the term loan facility described in Section 2.1(b)(ii).

CapEx Lenders” means Lenders having a CapEx Commitment or if such CapEx Commitments have been terminated, Lenders that are owed CapEx Advances.

“CapEx Maturity Date” means the earlier of (a) April 30, 2017, and (b) acceleration of the CapEx Advances pursuant to Article 7.

“CapEx Note” means a promissory note made by the Borrower payable to the order of a CapEx Lender in the amount of such CapEx Lender’s CapEx Commitment, in substantially the same form as Exhibit H-4, evidencing indebtedness of the Borrower to such CapEx Lender resulting from the CapEx Advances owing to such Lender.

“Capital Expenditures” for any Person and period of its determination means, without duplication, the aggregate of all expenditures and costs (whether paid in cash or accrued as liabilities during that period and including that portion of payments under Capital Leases that are capitalized on the balance sheet of such Person) of such Person during such period that, in conformity with GAAP, are required to be included in or reflected by the property, plant, or equipment or similar fixed asset accounts reflected in the balance sheet of such Person.

“Capital Leases” means, for any Person, subject to Section 1.3(c), any lease of any Property by such Person as lessee which would, in accordance with GAAP, be required to be classified and accounted for as a capital lease on the balance sheet of such Person.

“Cash Collateralize” means, to deposit in a Cash Collateral Account, pledge and deposit with or deliver to the Administrative Agent, for the benefit of one or more of the Issuing Lender, Swing Line Lender or Lenders, as collateral for Letter of Credit Obligations or obligations of Lenders to fund participations in respect of Letter of Credit Obligations or Swing Line Advances, cash or deposit account balances or, if the Administrative Agent, the Swing Line Lender and the Issuing Lender shall agree in their sole discretion, other credit support, in each case pursuant to documentation in form and substance satisfactory to the Administrative Agent, the Swing Line Lender and the Issuing Lender. “Cash Collateral” shall have a meaning correlative to the foregoing and shall include the proceeds of such cash collateral and other credit support.

“Cash Collateral Account” means a cash collateral account pledged to the Administrative Agent containing cash deposited pursuant to the terms hereof.

“Casualty Event” means the damage, destruction or condemnation, including by process of eminent domain or any transfer or disposition of property in lieu of condemnation, as the case may be, of property of any Person.

“Centrifuge Acquisition” means the purchase by the Borrower from the Sellers of United Centrifuge and the merger of United Centrifuge into Aly Centrifuge, with Aly Centrifuge being the sole survivor, all pursuant to the Centrifuge Acquisition Agreement.

“Centrifuge Acquisition Agreement” means that certain Asset Purchase Agreement, Stock Purchase Agreement and Merger Agreement between the Borrower, Aly Centrifuge, United Centrifuge, and the Sellers dated April 11, 2014.

“Centrifuge Acquisition Documents” means the Centrifuge Acquisition Agreement and all agreements, assignments, deeds, conveyances, certificates and other documents and instruments now or hereafter executed and delivered by the Borrower pursuant to the Centrifuge Acquisition Agreement or in connection with the Centrifuge Acquisition.

“CERCLA” means the Comprehensive Environmental Response, Compensation, and Liability Act of 1980 (42 U.S.C. §§ 9601 et seq.), as amended, together with any analogous state and local counterparts or equivalents, and all rules and regulations and requirements thereunder in each case as now or hereafter in effect.

“Certificated Equipment” means any equipment the ownership of which is evidenced by, or under applicable Legal Requirement, is required to be evidenced by, a certificate of title.

“Change in Control” means the occurrence of any of the following events:

(a) the Borrower ceases to directly or indirectly own 100% of the Voting Securities of any Subsidiary, including Aly Centrifuge, Aly Operating and Austin Chalk Corp., other than as a result of a sale of assets or merger permitted under Section 6.07;

(b) during any period of two consecutive calendar quarters, individuals who at the beginning of such period were members of the Borrower’s board of directors cease for any reason to constitute a majority of the directors of the Borrower then in office unless (i) such new directors were elected by a majority of the directors of the Borrower who constituted the board of directors of the Borrower at the beginning of such period (or by directors so elected) or by the stockholders pursuant to the nomination of the existing directors, or (ii) the reason for such directors failing to constitute a majority is a result of retirement by directors due to age, death or disability;

(c) any “person” or “group” (as such terms are used in Sections 13(d) and 14(d) of the Securities Exchange Act of 1934, but excluding any employee benefit plan of such person or its subsidiaries, and any person or entity acting in its capacity as trustee, agent or other fiduciary or administrator of any such plan), other than one or more Permitted Holders, becomes the “beneficial owner” (as defined in Rules 13d-3 and 13d-5 under the Securities Exchange Act of 1934, except that a person or group shall be deemed to have “beneficial ownership” of all securities that such person or group has the right to acquire, whether such right is exercisable immediately or only after the passage of time (such right, an “option right”)), directly or indirectly, of more than 35% of the Equity Interests in the Borrower entitled to vote for members of the board of directors or equivalent governing body of the Borrower, determined on a fully-diluted basis (and taking into account all such Equity Interests that a person or group has the right to acquire pursuant to any option right); or

(d) two or more of the Key Individuals shall cease to be actively engaged in the executive management of the Borrower and each such Key Individual is not replaced with an individual reasonably acceptable to the Administrative Agent who has comparable qualifications within one hundred twenty (120) days after such Person ceases to be so actively engaged.

“Change in Law” means the occurrence, after the date of this Agreement (or with respect to any Lender, if later, the date on which such Lender becomes a Lender), 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; provided that notwithstanding anything herein to the contrary, (x) the Dodd-Frank Wall Street Reform and Consumer Protection Act and all requests, rules, guidelines or directives made or issued by any Governmental Authority thereunder or issued in connection therewith and (y) all requests, rules, guidelines or directives promulgated by the Bank for International Settlements, the Basel Committee on Banking Supervision (or any successor or similar authority) or the United States or foreign regulatory authorities, in each case pursuant to Basel III, shall in each case be deemed to be a “Change in Law”, regardless of the date enacted, adopted or issued.

“Class” has the meaning set forth in Section 1.4.

“Closing Date” means April 15, 2014.

“Code” means the Internal Revenue Code of 1986, as amended, and the regulations and published interpretations thereof.

“Collateral” means all property of the Credit Parties which is “Collateral” or “Mortgaged Property” (as defined in each of the Mortgages or the Security Agreement, as applicable) or similar terms used in the Security Documents.

“Commitment Fees” means the fees required under Section 2.6(a).

“Commitments” means, as to any Lender, its Revolving Commitment, its Term Commitment, and its CapEx Commitment, in each case, if applicable.

“Compliance Certificate” means a compliance certificate executed by the chief executive officer or chief financial officer of the Borrower in substantially the same form as Exhibit C.

“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.

“Controlled Group” means all members of a controlled group of corporations and all businesses (whether or not incorporated) under common control which, together with the Borrower or any Subsidiary, are treated as a single employer under Section 414 of the Code.

“Convert,” “Conversion,” and “Converted” each refers to a conversion of Advances of one Type into Advances of another Type pursuant to Section 2.3(b).

“Credit Documents” means this Agreement, the Notes, the Letters of Credit, the Letter of Credit Applications, the Guaranties, the Notices of Borrowing, the Notices of Conversion, the Security Documents, any AutoBorrow Agreement, the Fee Letter, and each other agreement, instrument, or document executed at any time in connection with this Agreement.

“Credit Extension” means an Advance or a Letter of Credit Extension.

“Credit Parties” means the Borrower and the Guarantors.

“Daily One-Month LIBOR” means, for any day, the rate of interest equal to the Eurodollar Rate then in effect for delivery for a one (1) month period.

“Debt” means, for any Person, without duplication: (a) indebtedness of such Person for borrowed money, including the face amount of any letters of credit supporting the repayment of indebtedness for borrowed money issued for the account of such Person; (b) to the extent not covered under clause (a) above, obligations under letters of credit and agreements relating to the issuance of letters of credit or acceptance financing, including Letters of Credit; (c) obligations of such Person evidenced by bonds, debentures, notes or other similar instruments, or upon which interest payments are customarily made; (d) obligations of such Person under conditional sale or other title retention agreements relating to any Properties purchased by such Person (other than customary reservations or retentions of title under agreements with suppliers entered into in the ordinary course of business); (e) obligations of such Person to pay the deferred purchase price of property or services (including, without limitation, any contingent obligations or other similar obligations associated with such purchase, and including obligations that are non-recourse to the credit of such Person but are secured by the assets of such Person but excluding trade payables incurred in the ordinary course of such Person’s business which are either (i) not more than 90 days past due or (ii) subject to a good faith dispute); (f) obligations of such Person as lessee under Capital Leases and obligations of such Person in respect of Synthetic Leases; (g) obligations of such Person under any Hedging Arrangement (except that such obligations shall not constitute Debt for purposes of the calculations for compliance under Sections 6.16 and 6.17); (h) all obligations of such Person to mandatorily purchase, redeem, retire, defease or otherwise make any payment in respect of any Equity Interest in such Person or any other Person on a date certain or upon the occurrence of certain events or conditions; (i) the Debt of any partnership or unincorporated joint venture in which such Person is a general partner or a joint venturer, but only to the extent to which there is recourse to such Person for the payment of such Debt; (j) obligations of such Person under direct or indirect guaranties in respect of, and obligations (contingent or otherwise) of such Person to purchase or otherwise acquire, or otherwise to assure a creditor against loss in respect of, indebtedness or obligations of others of the kinds referred to in clauses (a) through (i) above; (k) indebtedness or obligations of others of the kinds referred to in clauses (a) through (j) secured by any Lien on or in respect of any Property of such Person provided that, solely in the case of liabilities of any Person not a Subsidiary or the Borrower secured by such a Lien, the amount of such Debt shall be deemed to the lesser of (i) the net book value of the property so encumbered and (ii) the amount of such liabilities, and (l) all liabilities of such Person in respect of unfunded vested benefits under any Plan.

“Debt Funded Capital Expenditure” means Capital Expenditures to the extent funded with proceeds from Permitted Debt.

“Debt Incurrence” means any issuance or sale by the Borrower or any of its Subsidiaries of any Debt after the Closing Date other than Permitted Debt.

“Debt Incurrence Proceeds” means, with respect to any Debt Incurrence, all cash and cash equivalent investments received by the Borrower or any of its Subsidiaries from such Debt Incurrence after payment of, or provision for, all underwriter fees and expenses, original issued discount, SEC and blue sky fees, printing costs, fees and expenses of accountants, lawyers and other professional advisors, brokerage commissions and other reasonable out-of-pocket fees and expenses actually incurred in connection with such Debt Incurrence; provided that, an original issued discount shall not reduce the amount of such Debt Incurrence Proceeds unless such discount is due and payable at or immediately following the closing of such Debt Incurrence and such discount has not already been taken into account to reduce the amount of proceeds received by the Borrower or such Subsidiary from such Debt Incurrence.

“Debtor Relief Laws” means (a) the Bankruptcy Code of the United States of America, and (b) all other liquidation, conservatorship, bankruptcy, assignment for the benefit of creditors, moratorium, rearrangement, receivership, insolvency, reorganization, or similar debtor relief laws of the United States or other applicable jurisdictions from time to time in effect.

“Default” means (a) an Event of Default or (b) any event or condition which with notice or lapse of time or both would, unless cured or waived, become an Event of Default.

“Default Rate” means a per annum rate equal to (a) in the case of principal of any Advance, 2.00% plus the rate otherwise applicable to such Advance as provided in Sections 2.7(a), (b), (c) or (d), (b) in the case of any other Obligation other than Letter of Credit Fees, 2.00% plus the non-default rate applicable to Base Rate Advances as provided in Section 2.7(a) or (d), and (c) when used with respect to Letter of Credit Fees, a rate equal to the Applicable Margin for Eurodollar Advances plus 2.00% per annum.

“Defaulting Lender” means, subject to Section 2.14(b), any Lender that (a) (except, with regards to the funding of Swing Line Advances, the Swing Line Lender) has failed to (i) fund all or any portion of its Advances within two Business Days of the date such Advances were required to be funded hereunder unless such Lender notifies the Administrative Agent and the Borrower in writing that such failure is the result of such Lender’s good faith determination that one or more conditions precedent to funding (each of which conditions precedent, together with any applicable default, shall be specifically identified in such writing) has not been satisfied, or (ii) pay to the Administrative Agent, the Issuing Lender, the Swing Line Lender or any other Lender any other amount required to be paid by it hereunder (including in respect of its participation in Letters of Credit or Swing Line Advances) within two Business Days of the date when due, (b) ) (except, with regards to the funding of Swing Line Advances, the Swing Line Lender) has notified the Borrower, the Administrative Agent or the Issuing Lender or the Swing Line Lender in writing, or has made a public statement to the effect, that it does not intend to comply with its funding obligations hereunder or generally under other agreements in which it commits to extend credit (unless such writing or public statement relates to such Lender’s obligation to fund an Advance hereunder and states that such position is based on such Lender’s good faith determination that a condition precedent to funding (which condition precedent, together with any applicable default, shall be specifically identified in such writing or public statement) cannot be satisfied), (c) has failed, within three Business Days after written request by the Administrative Agent or the Borrower, to confirm in writing to the Administrative Agent and the Borrower that it will comply with its prospective funding obligations hereunder (provided that such Lender shall cease to be a Defaulting Lender pursuant to this clause (c) upon receipt of such written confirmation by the Administrative Agent and the Borrower in form and substance satisfactory to the Administrative Agent and the Borrower), or (d) has, or has a direct or indirect parent company that has, (i) become the subject of a proceeding under any Debtor Relief Law, or (ii) had appointed for it a receiver, custodian, conservator, trustee, administrator, assignee for the benefit of creditors or similar Person charged with reorganization or liquidation of its business or assets, including the Federal Deposit Insurance Corporation or any other state or federal regulatory authority acting in such a capacity; provided that a Lender shall not be a Defaulting Lender solely by virtue of the ownership or acquisition of any equity interest in that Lender or any direct or indirect parent company thereof by a Governmental Authority so long as such ownership interest does not result in or provide such Lender with immunity from the jurisdiction of courts within the United States or from the enforcement of judgments or writs of attachment on its assets or permit such Lender (or such Governmental Authority) to reject, repudiate, disavow or disaffirm any contracts or agreements made with such Lender. Any determination by the Administrative Agent that a Lender is a Defaulting Lender under any one or more of clauses (a) through (d) above shall be conclusive and binding absent manifest error, and such Lender shall be deemed to be a Defaulting Lender (subject to Section 2.14(b)) upon delivery of written notice of such determination to the Borrower, the Issuing Lender, the Swing Line Lender and each Lender.

“Dollars” and “$” means lawful money of the United States of America.

“Domestic Subsidiary” means, with respect to any Person, any of its Subsidiaries that (a) is incorporated or organized under the laws of the United States, any State thereof or the District of Columbia, (b) could provide a guarantee without any material adverse federal income tax consequence of the Borrower (by constituting an investment of earnings in United States property under Section 956 (or any successor provision) of the Code, triggering an increase in the gross income of the Borrower pursuant to Section 951 (or a successor provision) of the Code without corresponding credits or other offsets), or (c) any Foreign Subsidiary that is disregarded for tax purposes so long as each Person who, directly or indirectly, holds the Equity Interests of such Foreign Subsidiary is the Borrower, is a Domestic Subsidiary, or is a Foreign Subsidiary disregarded for U.S. Federal income tax purposes.

“EBITDA” means for the Borrower and its Subsidiaries, on a consolidated basis for any period, the sum of (a) Net Income for such period, plus (b) without duplication and to the extent deducted in determining such Net Income (i) depreciation and amortization for such period, plus (ii) Interest Expense for such period, plus (iii) Income Tax Expense for such period, plus (iv) non-cash charges plus (v) fees and expenses accrued under, or incurred in connection with, the closing of the Credit Documents and other Transactions in an amount not to exceed $750,000, minus (c) to the extent included in determining Net Income, all non-cash items of income; provided that such EBITDA shall be subject to pro forma adjustments for acquisitions and asset sales assuming that such transactions had occurred on the first day of the determination period, which adjustments shall be made in a manner, and subject to supporting documentation, acceptable to the Administrative Agent.

“Eligible Assignee” means any Person that meets the requirements to be an assignee under Section 9.7(b)(iii), (v) and (vi) (subject to such consents, if any, as may be required under Section 9.7(b)(iii)).

“Eligible Inventory” means at any time Inventory that is ready and available to be sold without requiring any additional processing and then owned by, and in the possession of, any Credit Party (or in the possession of a third party lessor or landlord that is party to a collateral access agreement or landlord waiver agreement with the Administrative Agent on terms reasonably satisfactory to the Administrative Agent), and held for sale or disposition in the ordinary course of the Credit Parties’ business and in which the Administrative Agent has an Acceptable Security Interest but specifically excluding Inventory which meets any of the following conditions or descriptions:

(a) Inventory with respect to which a claim exists disputing applicable Credit Party’s title to or right to possession;

(b) obsolete or slow moving Inventory;

(c) rejected, spoiled or damaged Inventory, or Inventory otherwise not readily saleable or usable in its present state for the use for which it was processed or purchased;

(d) Inventory that the Administrative Agent has determined (in its reasonable credit judgment) to be unmarketable;

(e) Inventory that has been shipped or delivered to a customer on consignment, on a sale or return basis, or on the basis of any similar understanding;

(f) Inventory which is in transit (other than Inventory in transit between locations of Credit Parties so long as a Credit Party maintains sole control and possession of such Inventory while it is in transit);

(g) Inventory held for lease;

(h) Inventory which is located on premises owned or operated by the customer that is to purchase such Inventory or which is located on premises leased by a Credit Party that is not subject to a landlord lien waiver or subordination reasonably acceptable to the Administrative Agent;

(i) Inventory that is not in good condition or does not comply with any Legal Requirement or the standards imposed by any Governmental Authority with respect to its manufacture, use, or sale;

(j) Inventory that is bill and hold goods or deferred shipment;

(k) Inventory evidenced by any negotiable or non-negotiable document of title;

(l) Inventory produced in violation of the Fair Labor Standards Act or that is subject to the “hot goods” provisions contained in Title 29 U.S.C. §215;

(m) Inventory that is subject to any agreement which would, in any material respect, restrict the Lender’s ability to sell or otherwise dispose of such Inventory;

(n) Inventory that is located in a jurisdiction outside the United States or in any territory or possession of the United States that has not adopted Article 9 of the Uniform Commercial Code;

(o) Inventory that is subject to any third party’s rights (including Permitted Liens) which would be superior to the lien and rights of the Administrative Agent created under the Credit Documents;

(p) Inventory that has been reflected on any Credit Party’s books for more than one year; and

(q) Inventory that is otherwise deemed ineligible by the Administrative Agent in its reasonable discretion.

Inventory which is at any time Eligible Inventory but which subsequently fails to meet any of the foregoing requirements shall forthwith cease to be Eligible Inventory until such time as the foregoing requirements are met with respect to such Inventory. Notwithstanding the foregoing, the Administrative Agent may, from time to time, and upon not less than 30 days’ prior written notice to the Borrower, in the exercise of its reasonable judgment, change the criteria for Eligible Inventory based on either: (A) an event, condition or other circumstance arising after the Closing Date, or (B) an event, condition or other circumstance existing on the Closing Date to the extent the Administrative Agent has no written notice thereof from the Borrower prior to the Closing Date, in either case under clause (A) or (B) which adversely affects (other than in a de minimus manner) or, in the Administrative Agent’s reasonable judgment, could reasonably be expected to adversely affect (other than in a de minimus manner), the Inventory as determined by Administrative Agent.

“Eligible Receivables” means, as to the Borrower and its consolidated Subsidiaries, on a consolidated basis and without duplication, all Receivables of such Person, in each case reflected on its books in accordance with GAAP which conform to the representations and warranties in Article 4 hereof and in the Security Documents to the extent such provisions are applicable to the Receivables, and each of which meets all of the following criteria on the date of any determination:

(a) such Receivable is subject to an Acceptable Security Interest;

(b) such Credit Party has good and marketable title to such Receivable,

(c) such Receivable has been billed substantially in accordance with customary billing practices of such Credit Party in effect on the Closing Date and such Receivable is not unpaid for more than 90 days from the date of the invoice;

(d) such Receivable was created in the ordinary course of business of any Credit Party from the performance by such Credit Party of services which have been fully and satisfactorily performed (and not a progress billing or contingent upon any further performance), or from the absolute sale on open account (and not on consignment, on approval or on a “sale or return” basis) by such Credit Party of goods (i) in which such Credit Party had sole and complete ownership and (ii) which have been shipped or delivered to the Account Debtor, and such Credit Party has possession of shipping or delivery receipts evidencing such shipment or delivery;

(e) such Receivable represents a legal, valid and binding payment obligation of the Account Debtor thereof enforceable in accordance with its terms and arises from an enforceable contract;

(f) such Receivable is owed by an Account Debtor that the Credit Parties deem to be creditworthy and is not owed by an Account Debtor which has, (i) applied for, suffered, or consented to the appointment of any receiver, custodian, trustee, or liquidator of its assets, (ii) has had possession of all or a material part of its property taken by any receiver, custodian, trustee or liquidator, (iii) filed, or had filed against it, any request or petition for liquidation, reorganization, arrangement, adjustment of debts, adjudication as bankrupt, winding-up, or voluntary or involuntary case under any state, federal or foreign bankruptcy laws, (iv) has admitted in writing its inability to, or is generally unable to, pay its debts as they become due, (v) become insolvent, or (vi) ceased operation of its business;

(g) the Account Debtor on such Receivable is not a Credit Party, an Affiliate of a Credit Party, nor a director, officer or employee of a Credit Party or of an Affiliate of a Credit Party;

(h) such Receivable is evidenced by an invoice and not by any chattel paper, promissory note or other instrument;

(i) such Receivable is not due from an Account Debtor from whom on the date of determination more than 20% of its aggregate Receivables owed to any Credit Party are more than 90 days past the invoice date;

(j) such Receivable, together with all other Receivables due from the same Account Debtor does not comprise more than 25% of the aggregate Eligible Receivables (provided, however, that the amount of any such Receivable excluded pursuant to this clause (j) shall only be the amount by which Eligible Receivables due from such Account Debtor exceed 25% of the aggregate Eligible Receivables and provided further that all Receivables due from BHP shall be included notwithstanding anything to the contrary contained in this clause (j) so long as BHP is rated at least A1 by Moody’s or A+ by S&P);

(k) such Receivable is not subject to any set-off, counterclaim, defense, allowance or adjustment and there has been no dispute, objection or complaint by the Account Debtor concerning its liability for such Receivable or a claim for any such set-off, counterclaim, defense, allowance or adjustment by the Account Debtor thereof (provided, however, that the amount of any such Receivable excluded pursuant to this clause (k) shall only be only the amount of such set-off, counterclaim, allowance or adjustment or claimed set-off, counterclaim, allowance or adjustment);

(l) such Receivable is owed in Dollars and is due from an Account Debtor that is organized under the laws of the U.S. or any state of the U.S.;

(m) such Receivable is not due from the United States government, or any department, agency, public corporation, or instrumentality thereof, unless the Federal Assignment of Claims Act of 1940, as amended (31 U.S.C. § 3727 et seq. and 41 U.S.C. § 15 et seq.), and any other steps necessary to perfect the Lien of the Administrative Agent in such Receivable has been complied with to the Administrative Agent’s satisfaction;

(n) such Receivable is not owed by an Account Debtor located in any jurisdiction which requires filing of a “Notice of Business Activities Report” or other similar report or requires any Credit Party to qualify to do business in order to permit such Credit Party to seek judicial enforcement in such jurisdiction of payment of such Receivable, unless such Credit Party has filed such report or qualified to do business in such jurisdiction;

(o) such Receivable is not the result of (i) a credit balance relating to a Receivable more than 90 days past the invoice date, (ii) work-in-progress, (iii) finance or service charges, or (iv) payments of interest;

(p) such Receivable has not been written off the books of any Credit Party or otherwise designated as uncollectible by any Credit Party;

(q) such Receivable is not subject to any reduction thereof, other than discounts and adjustments given in the ordinary course of business and deducted from such Receivable;

(r) such Receivable is not a newly created Receivable resulting from the unpaid portion of a partially paid Receivable;

(s) such Receivable is not subject to any third party’s rights (including Permitted Liens) which would be superior to the lien and rights of Administrative Agent created under the Credit Documents; and

(t) such Receivable is not otherwise deemed ineligible by the Administrative Agent in its reasonable credit judgment, including such Receivable from any Account Debtor that does not have a satisfactory credit standing (as determined in the reasonable discretion of the Administrative Agent).

In the event that a Receivable which was previously an Eligible Receivable ceases to be an Eligible Receivable hereunder, the Borrower shall notify the Administrative Agent thereof at the time of submission to the Administrative Agent of the next Borrowing Base Certificate. In determining the amount of an Eligible Receivable, the face amount of such Receivable shall be reduced by, without duplication, to the extent not reflected in such face amount, (i) the amount of all accrued and actual discounts, claims, credits or credits pending, promotional program allowances, price adjustments, finance charges or other allowances, payables or obligations to the Account Debtor (including any amount that any Credit Party may be obligated to rebate to an Account Debtor pursuant to the terms of any agreement or understanding (written or oral)), (ii) all taxes, duties or other governmental charges included in such Receivable, and (iii) the aggregate amount of all cash received in respect of such Receivable but not yet applied by any Credit Party to reduce the amount of such Receivable. Notwithstanding the foregoing, the Administrative Agent may, from time to time, and upon not less than 30 days’ prior written notice to the Borrower, in the exercise of its reasonable judgment, change the criteria for Eligible Receivables based on either: (A) an event, condition or other circumstance arising after the Closing Date, or (B) an event, condition or other circumstance existing on the Closing Date to the extent the Lender has no written notice thereof from the Borrower prior to the Closing Date or is not otherwise reflected in any appraisals, reports or other similar written information received by the Administrative Agent in connection with this Agreement prior to the Closing Date, in either case under clause (A) or (B) which adversely affects (other than in a de minimus manner) or, in the Administrative Agent’s reasonable judgment, could reasonably be expected to adversely affect (other than in de minimus manner), the Receivables as determined by the Administrative Agent.

“Environment” or “Environmental” shall have the meanings set forth in 42 U.S.C. 9601(8) (1988).

“Environmental Claim” means any third party (including any governmental agency and employees) action, lawsuit, claim, demand, regulatory action or proceeding, order, decree, consent agreement or written notice of potential or actual responsibility or violation (including claims or proceedings under the Occupational Safety and Health Acts or similar Legal Requirements relating to health or safety of employees) that seeks to impose liability under any Environmental Law.

“Environmental Law” means all federal, state, and local laws, rules, regulations, ordinances, orders, decisions, agreements, and other Legal Requirements, including common law theories, now or hereafter in effect and relating to, or in connection with the Environment, health, or safety, including without limitation CERCLA, relating to (a) pollution, contamination, injury, destruction, loss, protection, cleanup, reclamation or restoration of the air, surface water, groundwater, land surface or subsurface strata, or other natural resources; (b) solid, gaseous or liquid waste generation, treatment, processing, recycling, reclamation, cleanup, storage, disposal or transportation; (c) exposure to Hazardous Substances, Hazardous Waste, other pollutants, contaminants, hazardous, medical infections, or toxic substances, materials or wastes; (d) the safety or health of employees; or (e) the manufacture, processing, handling, transportation, distribution in commerce, use, storage or disposal of hazardous, medical infections, or toxic substances, materials or wastes.

“Environmental Permit” means any permit, license, order, approval, registration or other authorization under Environmental Law.

“Equity Funded Capital Expenditures” means Capital Expenditures that are fully funded solely with Equity Issuance Proceeds.

“Equity Interest” means with respect to any Person, any shares, interests, participation, or other equivalents (however designated) of corporate stock, membership interests or partnership interests (or any other ownership interests) of such Person.

“Equity Issuance” means any issuance of equity securities or any other Equity Interests (including any preferred equity securities) by the Borrower or any of its Subsidiaries other than equity securities issued (i) to the Borrower or one of its Subsidiaries, (ii) the Preferred Equity Investment, and (iii) pursuant to employee or director and officer unit option or restricted unit plans in the ordinary course of business.

“Equity Issuance Proceeds” means, with respect to any Equity Issuance, all cash and cash equivalent investments received by the Borrower or any of its Subsidiaries from such Equity Issuance (other than from any other Credit Party) after payment of, or provision for, all underwriter fees and expenses, SEC and blue sky fees, printing costs, fees and expenses of accountants, lawyers and other professional advisors, brokerage commissions and other reasonable out-of-pocket fees and expenses actually incurred in connection with such Equity Issuance.

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

“Eurocurrency Liabilities” has the meaning assigned to that term in Regulation D of the Federal Reserve Board as in effect from time to time.

“Eurodollar Advance” means an Advance that bears interest based upon the Eurodollar Rate (other than Advances that bear interest based upon the Daily One Month LIBOR).

“Eurodollar Base Rate” means (a) in determining Eurodollar Rate for purposes of the “Daily One Month LIBOR”, the rate per annum for Dollar deposits quoted by the Administrative Agent for the purpose of calculating effective rates of interest for loans making reference to the “Daily One-Month LIBOR” or the “LIBOR Market Index Rate” or other words of similar import, as the inter-bank offered rate in effect from time to time for delivery of funds for one (1) month in amounts approximately equal to the principal amount of the applicable Advances; provided that, the Administrative Agent may base its quotation of the inter-bank offered rate upon the rates appearing on Reuters Reference LIBOR01 page, Bloomberg L.P.’s page BBAM, or such other screen rates offered to the inter-bank market, in any case, as the Administrative Agent in its reasonable discretion deems appropriate, and (b) in determining Eurodollar Rate for all other purposes, the rate per annum (rounded upward to the nearest whole multiple of 1/100 of 1%) equal to the interest rate per annum set forth on the Reuters Reference LIBOR01 page (or on any successor or substitute page of such service, or any successor to or substitute for such service, as determined by the Administrative Agent from time to time for purposes of providing quotations of interest rates applicable to dollar deposits in the London interbank market) as the London Interbank Offered Rate, for deposits in Dollars at 11:00 a.m. (London, England time) two Business Days before the first day of the applicable Interest Period and for a period equal to such Interest Period; provided that, if such quotation is not available for any reason, then for purposes of this clause (b), Eurodollar Base Rate shall then be the rate determined by the Administrative Agent to be the rate at which deposits in Dollars for delivery on the first day of such Interest Period in immediately available funds in the approximate amount of the Advances being made, continued or Converted by the Lenders and with a term equivalent to such Interest Period would be offered by the Administrative Agent’s London Branch (or other branch or Affiliate of the Administrative Agent, or in the event that the Administrative Agent does not have a London branch, the London branch of a Lender chosen by the Administrative Agent) to major banks in the London or other offshore inter-bank market for Dollars at their request at approximately 11:00 a.m. (London time) two Business Days prior to the commencement of such Interest Period.

“Eurodollar Rate” means a rate per annum determined by the Administrative Agent pursuant to the following formula:

Eurodollar Rate =

Eurodollar Base Rate

1.00 – Eurodollar Reserve Percentage

Where,

“Eurodollar Reserve Percentage” means, as of any day, the reserve percentage (expressed as a decimal, carried out to five decimal places) in effect on such day, whether or not applicable to any Lender, under regulations issued from time to time by the Federal Reserve Board for determining the maximum reserve requirement (including any emergency, supplemental or other marginal reserve requirement) with respect to liabilities or assets consisting of or including Eurocurrency Liabilities. The Eurodollar Rate for each outstanding Advance shall be adjusted automatically as of the effective date of any change in the Eurodollar Reserve Percentage.

“Event of Default” has the meaning specified in Section 7.1.

“Excluded Certificated Equipment” means, as of the date of determination, any Certificated Equipment owned by the Borrower or any Subsidiary that is subject to the senior rights of any third party, including a Permitted Lien of the type described under Section 6.2(e).

“Excluded Equity Issuance” means (a) an Equity Issuance to management or employees of a Credit Party under any employee stock option or stock purchase plan or other employee benefits plan in existence from time to time, and (b) an Equity Issuance by a Credit Party to another Credit Party.

“Excluded Property” has the meaning given such term in the Security Agreement.

“Excluded Swap Obligations” means, with respect to any Credit Party other than the Borrower, any Swap Obligation if, and to the extent that, all or a portion of the guarantee of such Credit Party of, or the grant by such Credit Party of a security interest to secure, such Swap Obligation (or any guarantee thereof) is or becomes illegal under the Commodity Exchange Act or any rule, regulation or order of the Commodity Futures Trading Commission (or the application or official interpretation of any thereof) by virtue of such Credit Party’s failure for any reason to constitute an “eligible contract participant” as defined in the Commodity Exchange Act and the regulations thereunder at the time the guarantee of such Credit Party or the grant of such security interest becomes effective with respect to such Swap Obligation. If a Swap Obligation arises under a master agreement governing more than one swap, such exclusion shall apply only to the portion of such Swap Obligation that is attributable to swaps for which such guarantee or security interest is or becomes illegal.

“Excluded Taxes” means any of the following Taxes imposed on or with respect to a Recipient or required to be withheld or deducted from a payment to a Recipient, (a) Taxes imposed on or measured by net income (however denominated), franchise Taxes, and branch profits Taxes, in each case, (i) imposed as a result of such Recipient being organized under the laws of, or having its principal office or, in the case of any Lender, its applicable lending office located in, the jurisdiction imposing such Tax (or any political subdivision thereof) or (ii) that are Other Connection Taxes, (b) in the case of a Lender, U.S. federal withholding Taxes imposed on amounts payable to or for the account of such Lender with respect to an applicable interest in an Advance or Commitment pursuant to a law in effect on the date on which (i) such Lender acquires such interest in the Advance or Commitment (other than pursuant to an assignment request by the Borrower under Section 2.13 or reallocation pursuant to Section 2.14) or (ii) such Lender changes its lending office, except in each case to the extent that, pursuant to Section 2.12, additional amounts with respect to such Taxes were payable either to such Lender’s assignor immediately before such Lender became a party hereto or to such Lender immediately before it changed its lending office, (c) Taxes attributable to such Recipient’s failure to comply with Section 2.12(g), and (d) any U.S. federal withholding Taxes imposed under FATCA.

“Existing Borrower” means Aly Operating in its capacity as borrower under the Existing Credit Agreement.

“Existing Credit Agreement” means the Credit Agreement dated as of October 26, 2012 among the Existing Borrower, the Administrative Agent, the Issuing Lender, the Swing Line Lender and the Existing Lenders, as amended or supplemented to the date hereof.

“Existing Credit Documents” means (a) the Existing Credit Agreement and (b) all deeds of trust, mortgages, security agreements, and other documents, instruments or agreements executed and delivered in connection therewith by any Credit Party, or any predecessor in interest to any Credit Party, in each case, as amended or supplemented to the date hereof.

“Existing Indebtedness” means all Debt outstanding under the Existing Credit Documents on the date hereof.

“Existing Lenders” means the Persons party to the Existing Credit Agreement as “Lenders” thereunder.

“Extraordinary Receipts” means any proceeds of insurance, including any insurance proceeds resulting from a Casualty Event, property insurance proceeds, and life insurance proceeds, and any other extraordinary cash receipts, including any award or other compensation as a result of a Casualty Event and any settlement or other litigation proceeds.

“Facility” means the Revolving Facility, the Term Facility or the CapEx Facility.

“FATCA” means Sections 1471 through 1474 of the Code, as of the date of this Agreement (or any amended or successor version that is substantively comparable and not materially more onerous to comply with) and any current or future regulations or official interpretations thereof.

“Federal Funds Rate” means, for any day, the rate per annum equal to the weighted average of the rates on overnight Federal funds transactions with members of the Federal Reserve System arranged by Federal funds brokers on such day, as published by the Federal Reserve Bank of New York on the Business Day immediately succeeding such day; provided that (a) if such day is not a Business Day, the Federal Funds Rate for such day shall be such rate on such transactions on the next preceding Business Day as so published on the next succeeding Business Day and (b) if no such rate is so published on such next succeeding Business Day, the Federal Funds Rate for such day shall be the average rate charged to the Administrative Agent (in its individual capacity) on such day on such transactions as determined by the Administrative Agent.

“Federal Reserve Board” means the Board of Governors of the Federal Reserve System or any of its successors.

“Fee Letter” means that certain Fee Letter dated as April 15, 2014, by and between the Borrower and Wells Fargo.

“Field Audit” means an audit, verification and inspection of the books and records, accounts receivable and inventory of the Borrower and its Subsidiaries, conducted by the Administrative Agent or any other Person selected by the Administrative Agent.

“Field Exam” means a field inspection of the books, records and asset value of the Properties of the Borrower and its Subsidiaries, conducted by the Administrative Agent or any other Person selected by the Administrative Agent.

“Financial Statements” means, for any period, the consolidated financial statements of the Borrower and its Subsidiaries, including statements of income, retained earnings, changes in equity and cash flow for such period as well as a balance sheet as of the end of such period, all prepared in accordance with GAAP.

“First Tier Foreign Subsidiary” means any Foreign Subsidiary the Equity Interests of which are held directly by the Borrower or a Domestic Subsidiary.

“Fixed Charge Coverage Ratio” means, for each fiscal quarter, the ratio of (a) the amount equal to (i) EBITDA for the four-fiscal quarter period then ended minus (ii) the sum of (A) cash taxes paid by the Credit Parties during such four-fiscal quarter period plus (B) Maintenance Capital Expenditures paid during such four-fiscal quarter period; to (b) Interest Expense for such four-fiscal quarter period plus scheduled principal payments of Funded Debt required during such four-fiscal quarter period, including scheduled principal payments of Advances (but excluding payments of Swing Line Advances).

“Flood Laws” shall have the meaning set forth in Section 9.19.

“Foreign Lender” means, with respect to the Borrower, any Lender that is organized under the laws of a jurisdiction other than that in which the Borrower is resident for tax purposes. For purposes of this definition, the United States, each State thereof and the District of Columbia shall be deemed to constitute a single jurisdiction.

“Foreign Subsidiary” means any Subsidiary of a Person that is not a Domestic Subsidiary.

“Fronting Exposure” means, at any time there is a Defaulting Lender, (a) with respect to the Issuing Lender, such Defaulting Lender’s Revolving Pro Rata Share of the outstanding Letter of Credit Exposure other than Letter of Credit Exposure as to which such Defaulting Lender’s participation obligation has been funded by it, reallocated to other Lenders or Cash Collateralized in accordance with the terms hereof, and (b) with respect to the Swing Line Lender, such Defaulting Lender’s Revolving Pro Rata Share of outstanding Swing Line Advances other than Swing Line Advances as to which such Defaulting Lender’s participation obligation has been funded by it or reallocated to other Lenders or Cash Collateralized in accordance with the terms hereof.

“Fund” means any Person (other than a natural Person) that is (or will be) engaged in making, purchasing, holding or otherwise investing in commercial loans and similar extensions of credit in the ordinary course of its activities.

“Funded Debt” of any Credit Party means, at any time, without duplication, Debt of such Credit Party (a) of the type described in clauses (a), (b), (c), (f), and (h) of the definition of “Debt”; provided that Debt with respect to letters of credit referred to in clause (b) of such definition shall be considered “Funded Debt” regardless of whether such letters of credit are drawn or funded, (b) of the type described in clause (i) of the definition of “Debt”; provided that such Debt would otherwise qualify as “Funded Debt” under this definition, or (c) of the type described in clauses (j) or (k) of the definition of “Debt” to the extent that such guaranty covers, or such Lien secures, Debt of the type described in clause (a) or clause (b) of this definition of “Funded Debt”.

“GAAP” means United States of America generally accepted accounting principles as in effect from time to time, applied on a basis consistent with the requirements of Section 1.3.

“Governmental Authority” means the government of the United States of America or any other nation, or of any political subdivision thereof, whether state or local, and any agency, authority, instrumentality, regulatory body, court, central bank or other entity exercising executive, legislative, judicial, taxing, regulatory or administrative powers or functions of or pertaining to government (including any supra-national bodies such as the European Union or the European Central Bank).

“Guarantors” means any Person that now or hereafter executes a Guaranty, including (a) the Subsidiaries of the Borrower listed on Schedule 4.11, (b) Austin Chalk Corp., (c) Aly Operating, (d) Aly Centrifuge, and (e) each Subsidiary that becomes a guarantor of all or a portion of the Obligations and which has entered into either a joinder agreement substantially in the form attached to the Guaranty or a new Guaranty, in each case, other than those released from their obligations under such Guaranties in accordance with the terms and provisions of the Credit Documents.

“Guaranty” means the Amended and Restated Guaranty Agreement executed by the Credit Parties in substantially the same form as Exhibit D.

“Hazardous Substance” means any substance or material identified as such pursuant to CERCLA and those regulated under any other Environmental Law, including without limitation pollutants, contaminants, petroleum, petroleum products, radionuclides, and radioactive materials.

“Hazardous Waste” means any substance or material regulated or designated as such pursuant to any Environmental Law, including without limitation, pollutants, contaminants, flammable substances and materials, explosives, radioactive materials, oil, petroleum and petroleum products, chemical liquids and solids, polychlorinated biphenyls, asbestos, toxic substances, and similar substances and materials.

“Hedging Arrangement” means a hedge, call, swap, collar, floor, cap, option, forward sale or purchase or other contract or similar arrangement (including any obligations to purchase or sell any commodity or security at a future date for a specific price) which is entered into to reduce or eliminate or otherwise protect against the risk of fluctuations in prices or rates, including interest rates, foreign exchange rates, commodity prices and securities prices.

“Income Tax Expense” means for Borrower and its Subsidiaries, on a consolidated basis for any period, all state and federal income taxes (including without limitation franchise taxes) paid or due to be paid during such period.

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

“Interest Expense” means, for any period and with respect to any Person, total cash interest expense, letter of credit fees and other fees and expenses incurred by such Person in connection with any Debt (including but not limited to Debt under this Agreement) for such period, whether paid or accrued (including that attributable to obligations which have been or should be, in accordance with GAAP, recorded as Capital Leases), including, without limitation, all commissions, discounts, and other fees and charges owed with respect to letters of credit and bankers’ acceptance financing, fees owed with respect to the Secured Obligations, and net costs under Hedging Arrangements entered into addressing interest rates, all as determined in conformity with GAAP.

“Interest Period” means for each Eurodollar Advance comprising part of the same Borrowing, the period commencing on the date of such Eurodollar Advance is made or deemed made and ending on the last day of the period selected by the Borrower pursuant to the provisions below and Section 2.3, and thereafter, each subsequent period commencing on the day following the last day of the immediately preceding Interest Period and ending on the last day of the period selected by the Borrower pursuant to the provisions below and Section 2.3. The duration of each such Interest Period shall be one, three, or six months, in each case as the Borrower may select, provided that:

(a) the Borrower shall select Interest Periods so that it is not necessary to repay any portion of any Term Advance or CapEx Advance prior to the last day of the applicable Interest Period in order to make a mandatory scheduled repayment required pursuant to Section 2.5(b);

(b) Interest Periods commencing on the same date for Advances comprising part of the same Borrowing shall be of the same duration;

(c) whenever the last day of any Interest Period would otherwise occur on a day other than a Business Day, the last day of such Interest Period shall be extended to occur on the next succeeding Business Day, provided that if such extension would cause the last day of such Interest Period to occur in the next following calendar month, the last day of such Interest Period shall occur on the next preceding Business Day;

(d) any Interest Period which begins on the last Business Day of a calendar month (or on a day for which there is no numerically corresponding day in the calendar month at the end of such Interest Period) shall end on the last Business Day of the calendar month in which it would have ended if there were a numerically corresponding day in such calendar month; and

(e) the Borrower may not select any Interest Period for any Advance which ends after the Term Maturity Date, CapEx Maturity Date, or the Revolving Maturity Date, as applicable.

“Inventory” of any Person means all inventory (as defined in the Uniform Commercial Code, as in effect in the State of New York) now owned or hereafter acquired by such Person, wherever located and whether or not in transit, which is held for sale; provided, that Inventory shall not include raw materials or supplies or materials consumed in the business of such Person or, subject to clause (b) below, work in progress; and provided further that (a) purchased items (including plain end tubulars) shall be considered Inventory and not raw materials if such purchased items could be resold in their existing condition as finished goods without requiring further modification, and (b) items that are work in progress shall be considered Inventory if such items could be sold in their existing condition as goods.

“IRS” means the United States Internal Revenue Service.

“Issuing Lender” means Wells Fargo in its capacity as the issuer of Letters of Credit for the account of any Credit Party pursuant to the terms of this Agreement, and its successors in such capacity.

“Key Individuals” means (a) Mark Patterson, (b) Munawar H. Hidayatallah, (c) Kurt Chew and (d) any individual acceptable to the Administrative Agent that has replaced any of the foregoing persons in a comparable executive or officer position.

“Key Employment Agreements” means the employment agreements for the Key Individuals.

“Legal Requirement” means any law, statute, ordinance, decree, code, act, requirement, order, judgment, rule, regulation (or official interpretation of any of the foregoing) of, and the terms of any license or permit issued by, any Governmental Authority, including, but not limited to, Regulations T, U and X, whether now or hereafter in effect.

“Lender Insolvency Event” means that (a) a Lender or its Lender Parent Company is insolvent, or is generally unable to pay its debts as they become due, or admits in writing its inability to pay its debts as they become due, or makes a general assignment for the benefit of its creditors, or (b) such Lender or its Lender Parent Company is the subject of a bankruptcy, insolvency, reorganization, liquidation or similar proceeding, or a receiver, trustee, conservator, intervenor or sequestrator or the like has been appointed for such Lender or its Lender Parent Company, or such Lender or its Lender Parent Company has taken any action in furtherance of or indicating its consent to or acquiescence in any such proceeding or appointment; provided, that a Lender Insolvency Event shall not be triggered solely as the result of the acquisition or maintenance of an ownership interest in such Lender or its Lender Parent Company by a Governmental Authority or an instrumentality thereof so long as such ownership interest does not result in or provide such Lender with immunity from the jurisdiction of courts within the United States or from the enforcement of judgments or writs of attachment on its assets or permit such Lender (or such Governmental Authority) to reject, repudiate, disavow or disaffirm any contracts or agreements made with such Lender.

“Lender Parent Company” means, with respect to a Lender, the bank holding company (as defined in Federal Reserve Board Regulation Y), if any, of such Lender, and/or any Person owning, beneficially or of record, directly or indirectly, a majority of the shares of such Lender.

“Lender Parties” means Lenders, the Issuing Lender, the Swing Line Lender and the Administrative Agent.

“Lenders” means the Persons listed on the signature pages hereto as Lenders, any other Person that shall have become a Lender hereto pursuant to Section 2.13, and any other Person that shall have become a Lender hereto pursuant to an Assignment and Acceptance, but in any event, excluding any such Person that ceases to be a party hereto pursuant to an Assignment and Acceptance. Unless the context otherwise requires, the term “Lenders” includes the Revolving Lenders, the Swing Line Lender and the Term Lenders.

“Lending Office” means, as to any Lender, the office or offices of such Lender described as such in such Lender’s Administrative Questionnaire, or such other office or offices as a Lender may from time to time notify the Borrower and the Administrative Agent.

“Letter of Credit” means any standby or commercial letter of credit issued by the Issuing Lender for the account of a Credit Party pursuant to the terms of this Agreement, in such form as may be agreed by the Borrower and the Issuing Lender.

“Letter of Credit Application” means the Issuing Lender’s standard form letter of credit application for standby or commercial letters of credit which has been executed by the Borrower and accepted by the Issuing Lender in connection with the issuance of a Letter of Credit.

“Letter of Credit Documents” means all Letters of Credit, Letter of Credit Applications, the Letter of Credit Reimbursement Agreements, and amendments thereof, and agreements, documents, and instruments entered into in connection therewith or relating thereto.

“Letter of Credit Extension” means, with respect to any Letter of Credit, the issuance thereof, extension of the expiry date thereof, or the increase of the amount thereof.

“Letter of Credit Exposure” means, at the date of its determination by the Administrative Agent, the aggregate outstanding undrawn amount of Letters of Credit plus the aggregate unpaid amount of all of the Borrower’s payment obligations under drawn Letters of Credit.

“Letter of Credit Maximum Amount” means $1,000,000; provided that, on and after the Revolving Maturity Date, the Letter of Credit Maximum Amount shall be zero.

“Letter of Credit Obligations” means any obligations of the Borrower under this Agreement in connection with the Letters of Credit.

“Letter of Credit Reimbursement Agreement” means the Issuing Lender’s standard form letter of credit reimbursement agreement (with such modifications thereto as may be agreed between the Borrower and the Issuing Lender) for standby or commercial letters of credit which has been executed by the Borrower and accepted by such Issuing Lender in connection with the issuance of a Letter of Credit.

“Leverage Ratio” means, for each fiscal quarter, the ratio of (a) the consolidated Funded Debt of the Borrower as of the last day of such fiscal quarter to (b) EBITDA for the four-fiscal quarter period then ended.

“Lien” means any mortgage, lien, pledge, charge, deed of trust, security interest, or encumbrance to secure or provide for the payment of any obligation of any Person, whether arising by contract, operation of law, or otherwise (including the interest of a vendor or lessor under any conditional sale agreement, Capital Lease, or other title retention agreement).

“Liquid Investments” means (a) readily marketable direct full faith and credit obligations of the United States of America or obligations unconditionally guaranteed by the full faith and credit of the United States of America; (b) commercial paper issued by (i) any Lender or any Affiliate of any Lender or (ii) any commercial banking institutions or corporations rated at least P-1 by Moody’s or A-1 by S&P; (c) certificates of deposit, time deposits, and bankers’ acceptances issued by (i) any of the Lenders or (ii) any other commercial banking institution which is a member of the Federal Reserve System and has a combined capital and surplus and undivided profits of not less than $250,000,000 and rated Aa by Moody’s or AA by S&P; (d) repurchase agreements which are entered into with any of the Lenders or any commercial banking institutions described in clause (c) and which are secured by readily marketable direct full faith and credit obligations of the government of the United States of America or any agency thereof; (e) investments in any money market fund which holds investments substantially of the type described in the foregoing clauses (a) through (d); (f) readily and immediately available cash held in any money market account maintained with any Lender; provided that, such money market accounts and the funds therein shall be unencumbered and free and clear of all Liens and other third party rights other than a Lien in favor of the Administrative Agent pursuant to the Security Documents and Liens of the type described in Section 6.2(g); and (g) other investments made through the Administrative Agent or its Affiliates and approved by the Administrative Agent. All the Liquid Investments described in clauses (a) through (d) above shall have maturities of not more than 365 days from the date of issue.

“Maintenance Capital Expenditure” means Capital Expenditures made by any Credit Party related to extending the life of, or maintaining the working condition of, existing assets. The term “Maintenance Capital Expenditures” does not include capital spending for new assets or expansion or enhancement of existing assets (so-called “growth capital expenditures”).

“Majority CapEx Lenders” means (a) other than as provided in clauses (b) and (c) below, CapEx Lenders holding greater than 50% of the sum of (i) the aggregate unfunded CapEx Commitments at such time plus (ii) the aggregate unpaid principal amount of the CapEx Notes, (b) at any time when there are only two CapEx Lenders, both CapEx Lenders, and (c) at any time when there is only one CapEx Lender, such CapEx Lender; provided that, in any event, if there are two or more CapEx Lenders, the CapEx Commitment of, and the portion of the CapEx Advances held or deemed held by, any Defaulting Lender shall be excluded for purposes of making a determination of Majority CapEx Lenders unless all CapEx Lenders are Defaulting Lenders.

“Majority Lenders” means (a) other than as provided in clauses (b) and (c) below, Lenders holding greater than 50% of the aggregate Maximum Exposure Amount, (b) at any time when there are only two Lenders, both Lenders, and (c) at any time when there is only one Lender, such Lender; provided that,

(i) with respect to amendments, waivers or consents relating to Section 2.1(a) and Section 2.1(c)(i), “Majority Lenders” means the Majority Revolving Lenders;

(ii) with respect to amendments, waivers or consents relating to Section 2.1(b)(i) and Section 2.1(c)(ii)(A), “Majority Lenders” means the Majority Term Lenders;

(iii) with respect to amendments, waivers or consents relating to Section 2.1(b)(ii) and Section 2.1(c)(ii)(B), “Majority Lenders” means the Majority CapEx Lenders;

(iv) with respect to Section 2.3(c)(v), “Majority Lenders” means Lenders that would be required to fund more than 50% of the Eurodollar Advances comprising such requested Borrowing;

(v) with respect to Section 7.2(a)(i), 7.2(b) and 7.3(b), “Majority Lenders” means the Majority Revolving Lenders; and

(vi) in any event, if there are two or more Lenders, the Commitments of, and the portion of the Advances and Letter of Credit Exposure held or deemed held by, any Defaulting Lender shall be excluded for purposes of making a determination of Majority Lenders unless all Lenders are Defaulting Lenders.

“Majority Revolving Lenders” means (a) other than as provided in clause (b) and (c) below, Revolving Lenders holding greater than 50% of the sum of (i) the aggregate unfunded Revolving Commitments at such time plus (ii) the aggregate unpaid principal amount of the Revolving Notes (with the aggregate amount of each Lender’s risk participation and funded participation in the Letter of Credit Exposure (including any such Letter of Credit Exposure that has been reallocated pursuant to Section 2.14) and Swing Line Advances being deemed as unpaid principal under such Lender’s Revolving Note); (b) at any time when there are only two Revolving Lenders, both Revolving Lenders, and (c) at any time when there is only one Revolving Lender, such Revolving Lender; provided that, in any event, if there are two or more Lenders, the Commitment of, and the portion of the Advances and Letter of Credit Exposure held or deemed held by, any Defaulting Lender shall be excluded for purposes of making a determination of Majority Revolving Lenders unless all Revolving Lenders are Defaulting Lenders.

“Majority Term Lenders” means (a) other than as provided in clauses (b) and (c) below, Term Lenders holding greater than 50% of the sum of (i) the aggregate unfunded Term Commitments at such time plus (ii) the aggregate unpaid principal amount of the Term Notes, (b) at any time when there are only two Term Lenders, both Term Lenders, and (c) at any time when there is only one Term Lender, such Term Lender; provided that, in any event, if there are two or more Term Lenders, the Term Commitment of, and the portion of the Term Advances held or deemed held by, any Defaulting Lender shall be excluded for purposes of making a determination of Majority Term Lenders unless all Term Lenders are Defaulting Lenders.

“Material Adverse Change” means a material adverse change in, or a material adverse effect on, (a) the operations, business, assets, properties, liabilities (actual or contingent) or condition (financial or otherwise) of the Borrower and its Subsidiaries, taken as a whole; (b) the rights and remedies of the Administrative Agent or any Lender under any Credit Document; (c) of the ability of the Credit Parties, taken as a whole, to perform their obligations under any Credit Document to which they are a party or (d) the legality, validity, binding effect or enforceability against any Credit Party of any Credit Document to which it is a party.

“Material Agreements” means the agreements set forth in Schedule 4.21, and all amendments, supplements, and restatements thereof.

“Maximum Exposure Amount” means, at any time for each Lender, the sum of (a) the unfunded Revolving Commitment held by such Lender at such time; plus (b) the aggregate unpaid principal amount of the Revolving Note held by such Lender at such time, (with the aggregate amount of such Lender’s risk participation and funded participation in the Letter of Credit Exposure (including any such Letter of Credit Exposure that has been reallocated pursuant to Section 2.14) and Swing Line Advances being deemed as unpaid principal under such Lender’s Revolving Note); plus (c) the aggregate unpaid principal amount of the Term Note held by such Lender at such time; (d) the aggregate unpaid principal amount of the CapEx Note held by such Lender at such time; plus (e) the unfunded Term Commitment held by such Lender at such time; plus (f) the unfunded CapEx Commitment held by such Lender at such time.

“Maximum Rate” means the maximum nonusurious interest rate under applicable law.

“Minimum Collateral Amount” means, at any time, (a) with respect to Cash Collateral consisting of cash or deposit account balances, an amount equal to the sum of (i) 105% of the Fronting Exposure of the Issuing Lender with respect to Letters of Credit issued and outstanding at such time and (ii) 100% of the Fronting Exposure of the Swing Line Lender with respect to Swing Line Sublimit Amount, and (b) otherwise, an amount determined by the Administrative Agent and the Issuing Lender in their sole discretion.

“Moody’s” means Moody’s Investors Service, Inc. and any successor thereto which is a nationally recognized statistical rating organization.

“Mortgage” means each mortgage or deed of trust in form acceptable to the Administrative Agent executed by any Credit Party to secure all or a portion of the Secured Obligations.

“Multiemployer Plan” means a “multiemployer plan” as defined in Section 4001(a)(3) of ERISA to which the Borrower or any member of the Controlled Group is making or accruing an obligation to make contributions.

“Net Cash Proceeds” means with respect to any sale, transfer, or other disposition of any Property belonging to any Person (including the sale or transfer of stock or other Equity Interest and property insurance proceeds) all cash and Liquid Investments received from such sale, transfer or other disposition after (a) payment of, or provision for, all brokerage commissions and other reasonable out-of-pocket fees and expenses actually incurred; (b) payment of any outstanding obligations relating to such Property paid in connection with any such sale, transfer, or other disposition; (c) the amount of reserves recorded in accordance with GAAP for indemnity or similar obligations of such Person and its Affiliates directly related to such sale, transfer or other disposition and (d) in the case of an Asset Sale, all income taxes and other taxes assessed by a Governmental Authority as a result of such transaction.

“Net Invoiced Costs” means, as to the purchase of any equipment by a Credit Party, (a) the invoice cost for such equipment as set forth in a written invoice provided by the seller of such equipment to the applicable Credit Party minus (b) to the extent included or otherwise reflected in the invoice cost described in preceding clause (a), all fees and expenses over and above the actual purchase price of the equipment incurred by a Credit Party, including but not limited to, delivery fees, interest charges, finance fees, and other closing fees and expenses.

“Net Income” means, for any period and with respect to any Person, the net income for such period for such Person after taxes as determined in accordance with GAAP, including any cash net gain but excluding, however, (a) extraordinary items, including (i) any net non-cash gain or loss during such period arising from the sale, exchange, retirement or other disposition of capital assets (such term to include all fixed assets and all securities) other than in the ordinary course of business, and (ii) any write-up or write-down of assets and (b) the cumulative effect of any change in GAAP.

“NOLV” means with respect to any fixed assets of any Credit Party permanently located in the United States of America and any machinery, parts, equipment and other fixed assets acquired by a Credit Party the net orderly liquidation value thereof (taking into account any loss, destruction, damage, condemnation, seizure or taking, by exercise of the power of eminent domain or otherwise, confiscation, or the requisition, of such Property and after taking into account all soft costs associated with the liquidation thereof, including but not limited to, delivery fees, interest charges, finance fees, taxes, installation fees and professional fees) as established by a written appraisal conducted by an industry recognized third party appraiser acceptable to the Administrative Agent.

“Non-Consenting Lender” means any Lender that does not approve any consent, waiver or amendment that (i) requires unanimous approval or approval of all affected Lenders in accordance with the terms of Section 9.3 and (ii) has been approved by the Majority Lenders.

“Non-Defaulting Lender” means any Lender that is not a Defaulting Lender at such time.

“Notes” means the Revolving Notes, the Swing Line Note, the CapEx Notes and the Term Notes.

“Notice of Borrowing” means a Notice of Revolving Borrowing, a Notice of Term Borrowing, or a Notice of CapEx Borrowing.

“Notice of Continuation or Conversion” means a notice of continuation or conversion signed by the Borrower in substantially the same form as Exhibit F.

“Notice of CapEx Borrowing” means a Notice of Borrowing signed by the Borrower in substantially the same form as Exhibit E-3.

“Notice of Revolving Borrowing” means a Notice of Borrowing signed by the Borrower in substantially the same form as Exhibit E-1.

“Notice of Term Borrowing” means a Notice of Borrowing signed by the Borrower in substantially the same form as Exhibit E-2.

“Obligations” means all principal, interest (including post-petition interest), fees, reimbursements, indemnifications, and other amounts now or hereafter owed by any of the Credit Parties to the Lenders, the Swing Line Lender, the Issuing Lender, or the Administrative Agent under this Agreement and the other Credit Documents, including, the Letter of Credit Obligations, and any increases, extensions, and rearrangements of those obligations under any amendments, supplements, and other modifications of the Credit Documents.

“OFAC” means The Office of Foreign Assets Control of the U.S. Department of the Treasury.

“Other Connection Taxes” means, with respect to any Recipient, Taxes imposed as a result of a present or former connection between such Recipient and the jurisdiction imposing such Tax (other than connections arising from such Recipient 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 Credit Document, or sold or assigned an interest in any Advance or Credit Document).

“Other Taxes” means all present or future stamp, court or documentary, intangible, 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 Credit Document, except any such Taxes that are Other Connection Taxes imposed with respect to an assignment (other than an assignment made pursuant to Section 2.13).

“Participant” has the meaning assigned to such term in clause (d) of Section 9.7.

“Participant Register” has the meaning specified in clause (d) of Section 9.7.

“Patriot Act” means the USA Patriot Act (Title III of Pub. L. 107-56 (signed into law October 26, 2001)).

“PBGC” means the Pension Benefit Guaranty Corporation or any entity succeeding to any or all of its functions under ERISA.

“Permitted Asset Sale” means any Asset Sale that is permitted under Section 6.8.

“Permitted Debt” has the meaning set forth in Section 6.1.

“Permitted Holders” means (1) the members of the board of directors of the Borrower and Aly Operating, (2) the officers of the Borrower and Aly Operating, and (3) all of the holders of Equity Interest in Aly Operating prior to giving effect to that certain Share Exchange Agreement dated as of May 14, 2013.

“Permitted Investments” has the meaning set forth in Section 6.3.

“Permitted Liens” has the meaning set forth in Section 6.2.

“Person” means an individual, partnership, corporation (including a business trust), joint stock company, trust, limited liability company, limited liability partnership, unincorporated association, joint venture, Governmental Authority, or other entity, or a government or any political subdivision or agency thereof, or any trustee, receiver, custodian, or similar official.

“Plan” means an employee benefit plan (other than a Multiemployer Plan) maintained for employees of the Borrower or any member of the Controlled Group and covered by Title IV of ERISA or subject to the minimum funding standards under Section 412 of the Code.

“Preferred Equity” means 5,000 shares of preferred stock of Aly Centrifuge issued to certain of the Sellers pursuant to the Centrifuge Acquisition Agreement, which shares are exchangeable for shares of common stock of the Borrower.

“Preferred Equity Investment” means the issuance of the Preferred Equity on terms reasonably acceptable to the Administrative Agent.

“Prime Rate” means the per annum rate of interest established from time to time by the Administrative Agent at its principal office in Houston as its prime rate, which rate may not be the lowest rate of interest charged by such Lender to its customers.

“Property” of any Person means any property or assets (whether real, personal, or mixed, tangible or intangible) of such Person.

“Qualified ECP Guarantor” means, in respect of any Swap Obligation, each Credit Party that has total assets exceeding $10,000,000 at the time the relevant Guarantee or grant of the relevant security interest becomes effective with respect to such Swap Obligation or such other person as constitutes an “eligible contract participant” under the Commodity Exchange Act or any regulations promulgated thereunder and can cause another person to qualify as an “eligible contract participant” at such time by entering into a keepwell under Section 1a(18)(A)(v)(II) of the Commodity Exchange Act.

“Recipient” means (a) the Administrative Agent, (b) any Lender and (c) the Issuing Lender, as applicable, in each case, in its capacity as such.

“Receivables” of any Person means, at any date of determination thereof, the unpaid portion of the obligation, as stated on the respective invoice or other writing of a customer of such Person in respect of goods sold or services rendered by such Person.

“Register” has the meaning set forth in Section 9.7(c).

“Regulations T, U, and X” means Regulations T, U, and X of the Federal Reserve Board, as each is from time to time in effect, and all official rulings and interpretations thereunder or thereof. Each of Regulations T, U, or X may be referred to individually as Regulation T, Regulation U, or Regulation X herein.

“Related Parties” means, with respect to any Person, such Person’s Affiliates and the partners, directors, officers, employees, agents, trustees, administrators, managers, and advisors of such Person and of such Person’s Affiliates.

“Release” shall have the meaning set forth in CERCLA or under any other applicable Environmental Law.

“Reserves” means, as of any date of determination, those reserves that the Administrative Agent deems necessary or appropriate, in its reasonable judgment and subject to the limitations in the last sentence of the definition of “Borrowing Base”, to establish and maintain with respect to the Borrowing Base.

“Reportable Event” means any of the events set forth in Section 4043(c) of ERISA (other than any such event not subject to the provision for 30-day notice to the PBGC under the regulations issued under such section).

“Response” shall have the meaning set forth in CERCLA or under any other applicable Environmental Law.

“Responsible Officer” means (a) with respect to any Person that is a corporation, such Person’s Chief Executive Officer, President, Chief Financial Officer, Chief Operating Officer, or Vice President, and if such Person is managed by its sole shareholder, then a Responsible Officer of such Person’s sole shareholder, (b) with respect to any Person that is a limited liability company, if such Person has officers, then such Person’s Chief Executive Officer, President, Chief Financial Officer, Vice President, and if such Person is managed by members, then a Responsible Officer of such Person’s managing member, and if such Person is managed by managers, then a manager (if such manager is an individual) or a Responsible Officer of such manager (if such manager is an entity), and (c) with respect to any Person that is a general partnership, limited partnership or a limited liability partnership, the Responsible Officer of such Person’s general partner or partners.

“Restricted Payment” means, with respect to any Person, (a) any direct or indirect dividend or distribution (whether in cash, securities or other Property) or any direct or indirect payment of any kind or character (whether in cash, securities or other Property) made in connection with the Equity Interest of such Person, including those dividends, distributions and payments made in consideration for or otherwise in connection with any retirement, purchase, redemption or other acquisition of any Equity Interest of such Person, or of any options, warrants or rights to purchase or acquire any such Equity Interest of such Person or (b) principal or interest payments (in cash, Property or otherwise) on, or redemptions of, subordinated debt of such Person; provided that the term “Restricted Payment” shall not include any (i) dividend or distribution payable solely in common Equity Interests of such Person or warrants, options or other rights to purchase common Equity Interests or (ii) with respect to the Preferred Equity only, the dividend payable thereon in additional Preferred Equity pursuant to the terms thereof.

“Revolving Advance” means any advance by a Lender to the Borrower as part of a Revolving Borrowing.

“Revolving Borrowing” means a Borrowing consisting of simultaneous Revolving Advances of the same Type made by the Revolving Lenders pursuant to Section 2.1(a) or Converted by each Revolving Lender to Revolving Advances of a different Type pursuant to Section 2.3(b).

“Revolving Commitment” means, for each Revolving Lender, the obligation of such Revolving Lender to advance to the Borrower the amount set opposite such Revolving Lender’s name on Schedule II as its Revolving Commitment and to acquire participations in Letters of Credit and Swing Line Borrowings hereunder, or if such Revolving Lender has entered into any Assignment and Acceptance, set forth for such Revolving Lender as its Revolving Commitment in the Register, as such amount may be reduced pursuant to Section 2.1(c)(i); provided that, after the Revolving Maturity Date, the Revolving Commitment for each Lender shall be zero. The initial aggregate Revolving Commitment on the date hereof is $5,000,000.

“Revolving Facility” means, collectively, (a) the revolving credit facility described in Section 2.1(a), (b) the Swing Line subfacility provided by the Swing Line Lender described in Section 2.3(g) and (c) the letter of credit subfacility provided by the Issuing Lender described in Section 2.2.

“Revolving Lenders” means Lenders having a Revolving Commitment or, if such Revolving Commitments have been terminated, Lenders that are owed Revolving Advances.

“Revolving Maturity Date” means the earlier of (a) April 30, 2017 and (b) the earlier termination in whole of the Revolving Commitments pursuant to Section 2.1(c)(i) or Article 7.

“Revolving Note” means a promissory note of the Borrower payable to the order of a Lender in the amount of such Lender’s Revolving Commitment, in substantially the same form as Exhibit H-1, evidencing indebtedness of the Borrower to such Lender resulting from Revolving Advances owing to such Lender.

“Revolving Outstandings” means, as of any date of determination, the sum of (a) the aggregate outstanding amount of all Revolving Advances plus (b) the Letter of Credit Exposure plus (c) the aggregate outstanding amount of all Swing Line Advances.

“Revolving Pro Rata Share” means, at any time with respect to any Revolving Lender, (i) the ratio (expressed as a percentage) of such Lender’s Revolving Commitment at such time to the aggregate Revolving Commitments at such time, or (ii) if all of the Revolving Commitments have been terminated, the ratio (expressed as a percentage) of such Lender’s aggregate outstanding Revolving Advances at such time to the total aggregate outstanding Revolving Advances at such time.

“S&P” means Standard & Poor’s Rating Agency Group, a division of McGraw-Hill Companies, Inc., or any successor thereof which is a national credit rating organization.

“Sanctioned Entity” means (a) a country or a government of a country, (b) an agency of the government of a country, (c) an organization directly or indirectly controlled by a country or its government, (d) a Person resident in a country, in each case, that is subject to a country sanctions program administered and enforced by OFAC.

“Sanctioned Person” means a person named on the list of Specially Designated Nationals maintained by OFAC.

“SEC” means, the United States Securities and Exchange Commission, or any Governmental Authority succeeding to the functions of such Commission.

“Secured Obligations” means (a) the Obligations, (b) the Banking Services Obligations, and (c) all obligations of any of the Credit Parties owing to Swap Counterparties under any Hedging Arrangements; provided that, (i) when any Swap Counterparty assigns or otherwise transfers any interest held by it under any Hedging Arrangement to any other Person pursuant to the terms of such agreement, the obligations thereunder shall constitute Secured Obligations only if such assignee or transferee is also then a Lender or an Affiliate of a Lender and (ii) if a Swap Counterparty ceases to be a Lender hereunder or an Affiliate of a Lender hereunder, obligations owing to such Swap Counterparty shall be included as Secured Obligations only to the extent such obligations arose from transactions under such individual Hedging Arrangement entered into prior to the date hereof or at the time such Swap Counterparty was a Lender hereunder or an Affiliate of a Lender hereunder, without giving effect to any extension, increases, or modifications thereof which are made after such Swap Counterparty ceases to be a Lender hereunder or an Affiliate of a Lender hereunder (and excluding any transactions thereafter entered into under any master agreement between such parties); provided, however that “Secured Obligations” shall not include the Excluded Swap Obligations.

“Secured Parties” means the Administrative Agent, the Issuing Lender, the Lenders, the Swap Counterparties and Banking Services Providers.

“Security Agreement” means the Amended and Restated Pledge and Security Agreement among the Credit Parties and the Administrative Agent in substantially the same form as Exhibit G.

“Security Documents” means, collectively, the Mortgages, Security Agreement, and any and all other instruments, documents or agreements, including Account Control Agreements, now or hereafter executed by any Credit Party or any other Person to secure the Secured Obligations.

“Sellers” means United Oilfield, Inc., an Alberta Limited Corporation, Canadian Nitrogen Services Ltd., an Alberta Limited Corporation, 1211296 Alberta Inc., an Alberta Limited Corporation, Jorge Rivera, and Myles Bowman.

“Solvent” means, as to any Person, on the date of any determination (a) the fair value of the Property of such Person is greater than the total amount of debts and other liabilities (including without limitation, contingent liabilities) of such Person, (b) the present fair salable value of the assets of such Person is not less than the amount that will be required to pay the probable liability of such Person on its debts and other liabilities (including, without limitation, contingent liabilities) as they become absolute and matured, (c) such Person is able to realize upon its assets and pay its debts and other liabilities (including, without limitation, contingent liabilities) as they mature in the normal course of business, (d) such Person does not intend to, and does not believe that it will, incur debts or liabilities (including, without limitation, contingent liabilities) beyond such Person’s ability to pay as such debts and liabilities mature, (e) such Person is not engaged in, and is not about to engage in, business or a transaction for which such Person’s Property would constitute unreasonably small capital, and (f) such Person has not transferred, concealed or removed any Property with intent to hinder, delay or defraud any creditor of such Person.

“Specified Information” has the meaning assigned to it in Section 9.8 of this Agreement.

“Subsidiary” means, with respect to any Person (the “holder”) at any date, any corporation, limited liability company, partnership, association or other entity the accounts of which would be consolidated with those of the holder in the holder’s consolidated financial statements if such financial statements were prepared in accordance with GAAP as of such date, as well as any other corporation, limited liability company, partnership, association or other entity, a majority of whose outstanding Voting Securities shall at any time be owned by the holder or one more Subsidiaries of the holder; provided that neither Blocker shall be considered a Subsidiary of any Credit Party for purposes of the Credit Documents. Unless expressly provided otherwise, all references herein and in any other Credit Document to any “Subsidiary” or “Subsidiaries” means a Subsidiary or Subsidiaries of the Borrower.

“Swap Counterparty” means a Lender or an Affiliate of a Lender that has entered into a Hedging Arrangement with a Credit Party as permitted by the terms of this Agreement.

“Swap Obligation” means, with respect to any Credit Party other than the Borrower, any obligation to pay or perform under any agreement, contract or transaction that constitutes a “swap” within the meaning of section 1a(47) of the Commodity Exchange Act.

“Swap Termination Value” means, in respect of any one or more Hedging Arrangements, after taking into account the effect of any legally enforceable netting agreement relating to such Hedging Arrangements, (a) for any date on or after the date such Hedging Arrangements have been closed out and termination value(s) determined in accordance therewith, such termination value(s), and (b) for any date prior to the date referenced in clause (a), the amount(s) determined as the mark-to-market value(s) for such Hedging Arrangements, as determined based upon one or more mid-market or other readily available quotations provided by any recognized dealer in such Hedging Arrangements (which may include a Lender or any Affiliate of a Lender).

“Swing Line Advance” means an advance by the Swing Line Lender to the Borrower as part of a Swing Line Borrowing.

“Swing Line Borrowing” means the Borrowing consisting of a Swing Line Advance made by the Swing Line Lender pursuant to Section 2.3(g) or, if an AutoBorrow Agreement is in effect, any transfer of funds pursuant to such AutoBorrow Agreement.

“Swing Line Lender” means Wells Fargo.

“Swing Line Note” means the promissory note made by the Borrower payable to the order of the Swing Line Lender evidencing the indebtedness of the Borrower to the Swing Line Lender resulting from Swing Line Advances in substantially the same form as Exhibit H-3.

“Swing Line Payment Date” means (a) if an AutoBorrow Agreement is in effect, the earliest to occur of (i) the date required by such AutoBorrow Agreement, (ii) (1) so long as no Event of Default has occurred and is continuing, three (3) Business Days after demand is made by the Swing Line Lender or (2) if an Event of Default has occurred and is continuing, demand is made by the Swing Line Lender, and (iii) the Revolving Maturity Date, or (b) if an AutoBorrow Agreement is not in effect, the earlier to occur of (i) three (3) Business Days after demand is made by the Swing Line Lender if no Default exists, and otherwise upon demand by the Swing Line Lender and (ii) the Revolving Maturity Date.

“Swing Line Sublimit Amount” means $1,000,000; provided that, on and after the Revolving Maturity Date, the Swing Line Sublimit Amount shall be zero.

“Synthetic Lease” means any synthetic lease, tax retention operating lease, off-balance sheet loan or similar off-balance sheet financing product where such transaction is considered borrowed money indebtedness for tax purposes but is classified as an operating lease under GAAP.

“Tax Group” has the meaning assigned to it in Section 4.13 of this Agreement.

“Taxes” means all present or future taxes, levies, imposts, duties, deductions, withholdings (including backup withholding), assessments, fees or other charges imposed by any Governmental Authority, including any interest, additions to tax or penalties applicable thereto.

“Term Advance” means any advance by a Term Lender to the Borrower as part of a Term Borrowing.

“Term Borrowing” means a Borrowing consisting of simultaneous Term Advances of the same Type made by each Term Lender pursuant to Section 2.1(b) or Converted by each Term Lender to Term Advances of a different Type pursuant to Section 2.3(b).

“Term Commitment” means, for each Term Lender, the obligation of such Term Lender to advance to the Borrower the amount set opposite such Term Lender’s name on Schedule II as its Term Commitment, or if such Term Lender has entered into any Assignment and Acceptance, set forth for such Term Lender as its Term Commitment in the Register; provided that, on the making of the Term Advances on the Closing Date, the Term Commitment for each Term Lender shall be zero. The aggregate Term Commitments on the date hereof is equal to $25,000,000.00, of which $9,876,563 shall be deemed to refinance the Existing Indebtedness.

“Term Facility” means the term loan facility described in Section 2.1(b)(i).

“Term Lenders” means Lenders having a Term Commitment or if such Term Commitments have been terminated, Lenders that are owed Term Advances.

“Term Maturity Date” means the earlier of (a) April 30, 2017, and (b) acceleration of the Term Advances pursuant to Article 7.

“Term Note” means a promissory note made by the Borrower payable to the order of a Term Lender in the amount of such Term Lender’s Term Commitment, in substantially the same form as Exhibit H-2, evidencing indebtedness of the Borrower to such Term Lender resulting from the Term Advances owing to such Lender.

“Termination Event” means (a) a Reportable Event with respect to a Plan, (b) the withdrawal of the Borrower or any member of the Controlled Group from a Plan during a plan year in which it was a “substantial employer” as defined in Section 4001(a)(2) of ERISA, (c) the filing of a notice of intent to terminate a Plan or the treatment of a Plan amendment as a termination under Section 4041(c) of ERISA, (d) the institution of proceedings to terminate a Plan by the PBGC, or (e) any other event or condition which constitutes grounds under Section 4042 of ERISA for the termination of, or the appointment of a trustee to administer, any Plan.

“Transactions” means, collectively, (a) the initial borrowings and other extensions of credit under this Agreement, (b) the Centrifuge Acquisition, (c) the refinancing of the Existing Credit Agreement, and (d) the payment of fees, commissions and expenses in connection with each of the foregoing.

“Type” has the meaning set forth in Section 1.4.

“U.S. Person” means any Person that is a “United States person” as defined in Section 7701(a)(30) of the Code.

“U.S. Tax Compliance Certificate” has the meaning assigned to such term in paragraph (g) of Section 2.12.

“United Centrifuge” means United Centrifuge USA, LLC, a Texas limited liability company.

“Voting Securities” means (a) with respect to any corporation, capital stock of the corporation having general voting power under ordinary circumstances to elect directors of such corporation (irrespective of whether at the time stock of any other class or classes shall have or might have special voting power or rights by reason of the happening of any contingency), (b) with respect to any partnership, any partnership interest or other ownership interest having general voting power to elect the general partner or other management of the partnership or other Person, and (c) with respect to any limited liability company, membership certificates or interests having general voting power under ordinary circumstances to elect managers or directors of such limited liability company.

“Wells Fargo” means Wells Fargo Bank, National Association.

“Withholding Agent” means any Credit Party and the Administrative Agent.

Section 1.2 Computation of Time Periods. In this Agreement in the computation of periods of time from a specified date to a later specified date, the word “from” means “from and including” and the words “to” and “until” each means “to but excluding”.

Section 1.3 Accounting Terms; Changes in GAAP.

(a) All accounting terms not specifically defined in this Agreement shall be construed in accordance with GAAP applied on a consistent basis with those applied in the preparation of the financial statements referred to in Section 4.4.

(b) Unless otherwise indicated, all financial statements of the Borrower, all calculations for compliance with covenants in this Agreement, all determinations of the Applicable Margin, and all calculations of any amounts to be calculated under the definitions in Section 1.1 shall be based upon the consolidated accounts of the Borrower and its Subsidiaries in accordance with GAAP and consistent with the principles of consolidation applied in preparing the financial statements referred to in Section 4.4.

(c) If at any time any change in GAAP or in the application thereof would affect the computation of any financial ratio or requirement set forth in any Credit Document, and either the Borrower or the Majority Lenders shall so request, the Administrative Agent, the Lenders and the Borrower shall negotiate in good faith to amend such ratio or requirement to preserve the original intent thereof in light of such change in GAAP or in the application thereof (subject to the approval of the Majority Lenders); provided that, until so amended, (i) such ratio or requirement shall continue to be computed in accordance with GAAP or in the application thereof prior to such change therein and (ii) the Borrower shall provide to the Administrative Agent and the Lenders financial statements and other documents required under this Agreement or as reasonably requested hereunder setting forth a reconciliation between calculations of such ratio or requirement made before and after giving effect to such change in GAAP.

Section 1.4 Classes and Types of Advances. Advances are distinguished by “Class” and “Type”. The “Class” of an Advance refers to the determination of whether such Advance is a Revolving Advance, a Term Advance, a CapEx Advance or a Swing Line Advance. The “Type” of an Advance refers to the determination of whether such Advance is a Base Rate Advance or a Eurodollar Advance.

Section 1.5 Miscellaneous. The definitions of terms herein shall apply equally to the singular and plural forms of the terms defined. Whenever the context may require, any pronoun shall include the corresponding masculine, feminine and neuter forms. The words “include,” “includes” and “including” shall be deemed to be followed by the phrase “without limitation.” The word “will” shall be construed to have the same meaning and effect as the word “shall.” Unless the context requires otherwise (a) any definition of or reference to any agreement, instrument or other document herein shall be construed as referring to such agreement, instrument or other document as from time to time amended, supplemented or otherwise modified (subject to any restrictions on such amendments, supplements or modifications set forth herein), (b) any reference herein to any Person shall be construed to include such Person’s successors and assigns, (c) the words “herein,” “hereof” and “hereunder,” and words of similar import, shall be construed to refer to this Agreement in its entirety and not to any particular provision hereof, (d) all references herein to Articles, Sections, Exhibits and Schedules shall be construed to refer to Articles and Sections of, and Exhibits and Schedules to, this Agreement, (e) any reference to any law or regulation herein shall, unless otherwise specified, refer to such law or regulation as amended, modified or supplemented from time to time, and (f) the words “asset” and “property” shall be construed to have the same meaning and effect and to refer to any and all tangible and intangible assets and properties, including cash, securities, accounts and contract rights.

ARTICLE 2

CREDIT FACILITIES

Section 2.1 Revolving Term and CapEx Commitments.

(a) Revolving Commitment. Each Lender severally agrees, on the terms and conditions set forth in this Agreement, to make Revolving Advances to the Borrower from time to time on any Business Day during the period from April 15, 2014 until the Revolving Maturity Date; provided that after giving effect to such Revolving Advances, the Revolving Outstandings shall not exceed the lesser of (i) the Borrowing Base in effect at such time and (ii) the aggregate Revolving Commitments in effect at such time. Each Revolving Borrowing shall (A) if comprised of Base Rate Advances be in an aggregate amount not less than $250,000 and in integral multiples of $50,000 in excess thereof, (B) if comprised of Eurodollar Advances be in an aggregate amount not less than $250,000 and in integral multiples of $50,000 in excess thereof, and (C) consist of Revolving Advances of the same Type made on the same day by the Revolving Lenders ratably according to their respective Revolving Commitments. Within the limits of each Lender’s Revolving Commitment, the Borrower may from time to time borrow, prepay pursuant to Section 2.4, and reborrow Revolving Advances under this Section 2.1(a).

(b) Term Commitment and CapEx Commitment.

(i) Term Commitment. Each Lender severally agrees, on the terms and conditions set forth in this Agreement, to make to the Borrower on the Closing Date, a Term Advance in an amount equal to such Lender’s Term Commitment less an amount equal to such Lender’s pro rata share of $9,876,563, which shall be deemed to refinance such Lender’s pro rata share of the Existing Indebtedness. The Borrower may not reborrow any Term Advance once it has been repaid.

(ii) CapEx Commitment. Each Lender severally agrees, on the terms and conditions set forth in this Agreement, to make CapEx Advances to the Borrower from time to time on any Business Day until the CapEx Commitment Termination Date; provided that after giving effect to such CapEx Advances, the sum of the aggregate outstanding amount of all CapEx Advances shall not exceed the aggregate CapEx Commitments in effect at such time. Each CapEx Borrowing (A) shall consist of CapEx Advances of the same Type made on the same day by the CapEx Lenders ratably according to their respective CapEx Commitments, (B) if the proceeds thereof are to be applied to fund or refinance the purchase of equipment from a vendor selling such equipment as part of its inventory, shall not exceed 80% of the Net Invoiced Cost of such equipment, and (C) if the proceeds thereof are to be applied to fund or refinance the purchase of equipment from a Person other than a vendor selling such equipment as part of its inventory, shall not exceed 80% of the NOLV of such equipment. The Borrower may not reborrow any CapEx Advances that have been repaid.

(i) Revolving Commitments. The Borrower shall have the right, upon at least three Business Days’ irrevocable notice to the Administrative Agent, to terminate in whole or reduce in part the unused portion of the Revolving Commitments; provided that each partial reduction shall be in a minimum amount of $1,000,000 and in integral multiples of $1,000,000 in excess thereof. Each such notice delivered by the Borrower pursuant to this Section 2.1(c)(i) shall be irrevocable; provided that a notice of termination in whole of the Revolving Commitments may state that such notice is conditioned upon the effectiveness of other credit facilities or the closing of one or more securities offerings, in which case such notice may be revoked by the Borrower (by notice to the Administrative Agent on or prior to the specified effective date) if such condition is not satisfied. Any reduction or termination of the Commitments pursuant to this Section 2.1(c)(i) shall be applied ratably to each Lender’s Revolving Commitment and shall be permanent, with no obligation of the Lenders to reinstate such Revolving Commitments, and the applicable Commitment Fees shall thereafter be computed on the basis of the Revolving Commitments, as so reduced.

(ii) Term Commitment and CapEx Commitment.

(A) Term Commitment. On the making of the Term Advances on the Closing Date, the Lender’s Term Commitment shall be reduced to zero. Such reduction of the Term Commitment pursuant to this Section 2.1(c)(ii) shall be permanent, with no obligation of any Lender to reinstate such Term Commitment.

(B) CapEx Commitment. The Borrower shall have the right, upon at least three Business Days’ irrevocable notice to the Administrative Agent, to terminate in whole or reduce in part the CapEx Commitments; provided that each partial reduction shall be in a minimum amount of $1,000,000 and in integral multiples of $1,000,000 in excess thereof. Furthermore, on the CapEx Commitment Termination Date, each Lender’s CapEx Commitment shall be reduced to zero. Any reduction or termination of the CapEx Commitments pursuant to this Section 2.1(c)(ii)(B) shall be applied ratably to each Lender’s CapEx Commitment and shall be permanent, with no obligation of the Lenders to reinstate such CapEx Commitments, and the applicable Commitment Fees shall thereafter be computed on the basis of the CapEx Commitments, as so reduced.

(iii) Defaulting Lender. At any time when a Lender is then a Defaulting Lender, the Borrower, at the Borrower’s election, may elect to terminate such Defaulting Lender’s Revolving Commitment hereunder or such Defaulting Lender’s CapEx Commitment; provided that (A) such termination must be of the Defaulting Lender’s entire Revolving Commitment or CapEx Commitment, (B) the Non-Defaulting Lenders shall each have the option to accept an assignment of the Defaulting Lender’s Revolving Commitment or CapEx Commitment pursuant to Section 2.13 in lieu of a termination of Commitments pursuant to this Section 2.1(c)(iii), (C) to the extent that the Non-Defaulting Lenders do not take an assignment as provided in the immediately preceding clause (B), the Borrower shall pay all amounts owed by the Borrower to such Defaulting Lender in such Defaulting Lender’s capacity as a Revolving Lender under this Agreement and under the other Credit Documents (including principal of and interest on the Revolving Advances owed to such Defaulting Lender, accrued Commitment Fees (subject to Section 2.6(a)), and letter of credit fees but specifically excluding any amounts owing under Section 2.9 as result of such repayment of such Advances) and shall deposit with the Administrative Agent into the Cash Collateral Account cash collateral in the amount equal to such Defaulting Lender’s ratable share of the Letter of Credit Exposure (other than any such Letter of Credit Exposure that has been reallocated pursuant to Section 2.14), (D) if any CapEx Commitment is being terminated pursuant to this clause (iii), the Borrower shall pay all amounts owed by the Borrower to such Defaulting Lender in such Lender’s capacity as a CapEx Lender under this Agreement and under the other Credit Documents (including principal of and interest on the CapEx Advances owed to such Defaulting Lender, and accrued Commitment Fees (subject to Section 2.6(a)) but specifically excluding any amounts owing under Section 2.9 as result of such payment of such Advances), (E) a Defaulting Lender’s Revolving Commitment and unused CapEx Commitment may be terminated by the Borrower under this Section 2.1(c)(iii) if and only if at such time, the Borrower has elected, or is then electing, to terminate the Revolving Commitments and the unused CapEx Commitments of all then existing Defaulting Lenders, and (F) such termination shall not be permitted if an Event of Default has occurred and is continuing. Upon written notice to the Defaulting Lender and Administrative Agent of the Borrower’s election to terminate a Defaulting Lender’s Revolving Commitment and CapEx Commitment pursuant to this clause (iii) and the payment and deposit of amounts required to be made by the Borrower under clause (C) above, (1) such Defaulting Lender shall cease to be a “Revolving Lender” or a “CapEx Lender”, as applicable, hereunder for all purposes except that such Lender’s rights and obligations as a Revolving Lender or a CapEx Lender, as applicable, under Sections 2.10, 2.12, 8.9 and 9.1 shall continue with respect to events and occurrences occurring before or concurrently with its ceasing to be a “Revolving Lender” or “CapEx Lender”, as applicable, hereunder, (2) such Defaulting Lender’s Revolving Commitment and CapEx Commitment shall be deemed terminated, and (3) such Defaulting Lender shall be relieved of its obligations hereunder as a “Revolving Lender” and a “CapEx Lender”, as applicable, except as to its obligations under Section 8.9 shall continue with respect to events and occurrences occurring before or concurrently with its ceasing to be a “Revolving Lender” or a “CapEx Lender”, as applicable, hereunder, provided that, any such termination will not be deemed to be a waiver or release of any claim that the Borrower, the Administrative Agent, the Swing Line Lender, the Issuing Lender or any Lender may have against such Defaulting Lender. Notwithstanding anything herein to the contrary, (x) the termination of commitments, rights and obligations provided for in this clause (iii) shall not affect rights and obligations that a Lender may have in its capacity as a Term Lender, (y) if no CapEx Commitment is then being terminated pursuant to this clause (iii), the termination of commitments, rights and obligations provided for in this clause (iii) shall not affect rights and obligations that a Lender may have in its capacity as a CapEx Lender, and (z) any termination of a Defaulting Lender’s Revolving Commitment pursuant to this clause (iii) must occur concurrently with a termination of such Defaulting Lender’s unused CapEx Commitment, if any. Notwithstanding anything herein to the contrary, the Non-Defaulting Lenders’ option to take an assignment as provided in Section 2.1(c)(iii)(B) may be exercised by a Non-Defaulting Lender in its sole and absolute discretion and nothing contained herein shall obligate any Non-Defaulting Lender to take any such assignment.

(d) Notes. The indebtedness of the Borrower to each Revolving Lender resulting (i) from Revolving Advances owing to such Revolving Lender shall be evidenced by a Revolving Note, (ii) from Term Advances owing to such Term Lender made pursuant to Section 2.1(b)(i) shall be evidenced by a Term Note (iii) from Swing Line Advances owing to the Swing Line Lender, as set forth in Section 2.3(g) below, shall be evidenced by a Swing Line Note, and (iv) from CapEx Advances owing to such CapEx Lender made pursuant to Section 2.1(b)(ii) shall be evidenced by a CapEx Note.

Section 2.2 Letters of Credit

(a) Commitment for Letters of Credit. Subject to the terms and conditions set forth in this Agreement, the Issuing Lender agrees, in reliance upon the agreements of the other Lenders set forth in this Section 2.2, from time to time on any Business Day during the period from April 15, 2014 until the Revolving Maturity Date, to issue, increase or extend the expiration date of, Letters of Credit for the account of any Credit Party, provided that no Letter of Credit will be issued, increased, or extended:

(i) if such issuance, increase, or extension would cause the Letter of Credit Exposure to exceed the lesser of (A) the Letter of Credit Maximum Amount and (B) an amount equal to (1) the lesser of the Borrowing Base and the aggregate Revolving Commitments, in either case, in effect at such time minus (2) the sum of the aggregate outstanding amount of all Revolving Advances and all Swing Line Advances;

(ii) unless such Letter of Credit has an expiration date not later than the earlier of (A) one year after its issuance or extension and (B) five Business Days prior to the Revolving Maturity Date (an “Acceptable Letter of Credit Maturity Date”); provided that, (1) if the Revolving Commitments are terminated in whole pursuant to Section 2.1(c)(i), the Borrower shall either (A) deposit into the Cash Collateral Account cash in an amount equal to 105% of the Letter of Credit Exposure for the Letters of Credit which have an expiry date beyond the date the Revolving Commitments are terminated or (B) provide a replacement letter of credit (or other security) reasonably acceptable to the Administrative Agent and the Issuing Lender in an amount equal to 105% of the Letter of Credit Exposure, and (2) any such Letter of Credit with a one-year tenor may expressly provide for an automatic extension of one additional year so long as such Letter of Credit expressly allows the Issuing Lender, at its sole discretion, to elect not to provide such extension; provided that, in any event, such automatic extension may not result in an expiration date that occurs after the fifth Business Day prior to the Revolving Maturity Date;

(iii) unless such Letter of Credit is (A) a standby letter of credit not supporting the repayment of indebtedness for borrowed money of any Person, or (B) with the consent of the Issuing Lender, a commercial letter of credit;

(iv) unless such Letter of Credit is in form and substance acceptable to the Issuing Lender in its sole discretion;

(v) unless the Borrower has delivered to the Issuing Lender a completed and executed Letter of Credit Application and a Letter of Credit Reimbursement Agreement;

(vi) unless such Letter of Credit is governed by (A) the Uniform Customs and Practice for Documentary Credits (2007 Revision), International Chamber of Commerce Publication No. 600, or (B) the International Standby Practices (ISP98), International Chamber of Commerce Publication No. 590, in either case, including any subsequent revisions thereof approved by a Congress of the International Chamber of Commerce and adhered to by the Issuing Lender;

(vii) if any order, judgment or decree of any Governmental Authority or arbitrator shall by its terms purport to enjoin or restrain the Issuing Lender from issuing, increasing or extending such Letter of Credit, or any Legal Requirement applicable to the Issuing Lender or any request or directive (whether or not having the force of law) from any Governmental Authority with jurisdiction over the Issuing Lender shall prohibit, or request that the Issuing Lender refrain from, the issuance, increase or extension of letters of credit generally or such Letter of Credit in particular or shall impose upon the Issuing Lender with respect to such Letter of Credit any restriction, reserve or capital requirement (for which the Issuing Lender is not otherwise compensated hereunder) not in effect on the Closing Date, or shall impose upon the Issuing Lender any unreimbursed loss, cost or expense which was not applicable on the Closing Date and which the Issuing Lender in good faith deems material to it;

(viii) if the issuance, increase or extension of such Letter of Credit would violate one or more policies of the Issuing Lender applicable to letters of credit generally;

(ix) if Letter of Credit is to be denominated in a currency other than Dollars;

(x) if such Letter of Credit supports the obligations of any Person in respect of (x) a lease of real property, or (y) an employment contract if the Issuing Lender reasonably determines that the Borrower’s obligation to reimburse any draws under such Letter of Credit may be limited; or

(xi) any Revolving Lender is at such time a Defaulting Lender hereunder, unless such Defaulting Lender’s Fronting Exposure as to Letters of Credit has been fully reallocated or Cash Collateralized pursuant to Section 2.14 below or the Issuing Lender has entered into other satisfactory arrangements with the Borrower or such Lender to eliminate the Issuing Lender’s risk with respect to such Lender.

(b) Requesting Letters of Credit. Each Letter of Credit shall be issued, increased or extended pursuant to a Letter of Credit Application given by the Borrower to the Administrative Agent and the Issuing Lender by facsimile or other writing not later than 11:00 a.m. (Houston, Texas time) on the third Business Day before the proposed date of issuance, increase or extension for the Letter of Credit. Each Letter of Credit Application shall be fully completed and shall specify the information required therein. Each Letter of Credit Application shall be irrevocable and binding on the Borrower. Subject to the terms and conditions hereof, the Issuing Lender shall before 2:00 p.m. (Houston, Texas time) on the date of such Letter of Credit Application issue, increase or extend such Letter of Credit to the beneficiary of such Letter of Credit.

(i) With respect to any Letter of Credit, in accordance with the related Letter of Credit Application, the Borrower agrees to pay on demand to the Administrative Agent on behalf of the Issuing Lender an amount equal to any amount paid by the Issuing Lender under such Letter of Credit. Upon the Issuing Lender’s demand for payment of any amount paid by the Issuing Lender under any Letter of Credit, the Borrower may, with a written notice, request that the Borrower’s obligations to reimburse the Issuing Lender thereunder be satisfied with the proceeds of a Revolving Advance in the same amount (notwithstanding any minimum size or increment limitations on individual Revolving Advances). If the Borrower does not make such request and does not otherwise make the payments demanded by the Issuing Lender as required under this Agreement or the Letter of Credit Application, then the Borrower shall be deemed for all purposes of this Agreement to have requested such a Revolving Advance in the same amount and the transfer of the proceeds thereof to satisfy the Borrower’s obligations to the Issuing Lender, and the Borrower hereby unconditionally and irrevocably authorizes, empowers, and directs the Lenders to make such Revolving Advance, to transfer the proceeds thereof to the Issuing Lender in satisfaction of such obligations, and to record and otherwise treat such payments as a Revolving Advance to the Borrower. The Administrative Agent and each Lender may record and otherwise treat the making of such Revolving Borrowings as the making of a Revolving Borrowing to the Borrower under this Agreement as if requested by the Borrower. Nothing herein is intended to release any of the Borrower’s obligations under any Letter of Credit Application, but only to provide an additional method of payment therefor. The making of any Revolving Borrowing under this Section 2.2(c) shall not constitute a cure or waiver of any Default, other than the payment Default which is satisfied by the application of the amounts deemed advanced hereunder, caused by the Borrower’s failure to comply with the provisions of this Agreement or the Letter of Credit Application.

(ii) Each Lender (including the Lender acting as Issuing Lender) shall, upon notice from the Administrative Agent that the Borrower has requested or is deemed to have requested a Revolving Advance pursuant to Section 2.3 and regardless of whether (A) the conditions in Section 3.2 have been met, (B) such notice complies with Section 2.3, or (C) a Default exists, make funds available to the Administrative Agent for the account of the Issuing Lender in an amount equal to such Lender’s Revolving Pro Rata Share of the amount of such Revolving Advance not later than 1:00 p.m. on the Business Day specified in such notice by the Administrative Agent, whereupon each Lender that so makes funds available shall be deemed to have made a Revolving Advance to the Borrower in such amount. The Administrative Agent shall remit the funds so received to the Issuing Lender.

(iii) If any such Lender shall not have so made its Revolving Advance available to the Administrative Agent pursuant to this Section 2.2, then (x) the unpaid Letter of Credit Obligations then due from the Borrower shall bear interest at the Default Rate and such interest shall be payable as provided in Section 2.7(d) and (y) to the extent the Borrower has not paid such interest or is not required to pay such interest, then such Lender agrees to pay interest thereon for each day from such date until the date such amount is paid at the lesser of (A) the Federal Funds Rate for such day for the first three days and thereafter the interest rate applicable to the Revolving Advance and (B) the Maximum Rate. Whenever, at any time after the Administrative Agent has received from any Lender such Lender’s Revolving Advance, the Administrative Agent receives any payment on account thereof, the Administrative Agent will pay to such Lender its participating interest in such amount (appropriately adjusted, in the case of interest payments, to reflect the period of time during which such Lender’s Revolving Advance was outstanding and funded), which payment shall be subject to repayment by such Lender if such payment received by the Administrative Agent is required to be returned. Each Lender’s obligation to make the Revolving Advance pursuant to this Section 2.2 shall be absolute and unconditional and shall not be affected by any circumstance, including (1) any set-off, counterclaim, recoupment, defense or other right which such Lender or any other Person may have against the Issuing Lender, the Administrative Agent or any other Person for any reason whatsoever; (2) the occurrence or continuance of a Default or the termination of the Commitments; (3) any breach of this Agreement by any Credit Party or any other Lender; or (4) any other circumstance, happening or event whatsoever, whether or not similar to any of the foregoing.

(iv) If at any time, the Revolving Commitments shall have expired or shall have been terminated while any Letter of Credit Exposure is outstanding, each Revolving Lender, at the sole option of the Issuing Lender, shall fund its participation in such Letters of Credit in an amount equal to such Lender’s Revolving Pro Rata Share of the unpaid amount of the Borrower’s payment obligations under drawn Letters of Credit. The Issuing Lender shall notify the Administrative Agent, and in turn, the Administrative Agent shall notify each such Lender of the amount of such participation, and such Lender will transfer to the Administrative Agent for the account of the Issuing Lender on the next Business Day following such notice, in immediately available funds, the amount of such participation. At any time after the Issuing Lender has made a payment under any Letter of Credit and has received from any Lender funding of its participation in respect of such payment in accordance with this clause (iv), if the Administrative Agent receives for the account of the Issuing Lender any payment in respect of the related Letter of Credit Exposure or interest thereon (whether directly from the Borrower or otherwise, including proceeds of cash collateral applied thereto by the Administrative Agent), the Administrative Agent shall distribute to such Lender its Revolving Pro Rata Share thereof in the same funds as those received by the Administrative Agent.

(d) Participations. Upon the date of the issuance or increase of a Letter of Credit, the Issuing Lender shall be deemed to have sold to each other Lender and each other Lender shall have been deemed to have purchased from the Issuing Lender a participation in the related Letter of Credit Obligations equal to such Lender’s Revolving Pro Rata Share at such date and such sale and purchase shall otherwise be in accordance with the terms of this Agreement. The Issuing Lender shall promptly notify each such participant Lender by facsimile, telephone, or electronic mail (with a PDF of the notification) of each Letter of Credit issued or increased and the actual dollar amount of such Lender’s participation in such Letter of Credit.

(e) Obligations Unconditional. The obligations of the Borrower under this Agreement in respect of each Letter of Credit shall be unconditional and irrevocable, and shall be paid strictly in accordance with the terms of this Agreement under all circumstances, notwithstanding the following circumstances:

(i) any lack of validity or enforceability of any Letter of Credit Documents;

(ii) any amendment or waiver of or any consent to departure from any Letter of Credit Documents;

(iii) the existence of any claim, set-off, defense (other than payment or reimbursement in full of such obligations) or other right which any Credit Party may have at any time against any beneficiary or transferee of such Letter of Credit (or any Persons for whom any such beneficiary or any such transferee may be acting), the Issuing Lender, any Lender or any other person or entity, whether in connection with this Agreement, the transactions contemplated in this Agreement or in any Letter of Credit Documents or any unrelated transaction;

(iv) any statement or any other document presented under such Letter of Credit proving to be forged, fraudulent, invalid or insufficient in any respect or any statement therein being untrue or inaccurate in any respect to the extent the Issuing Lender would not be liable therefor pursuant to the following paragraph (g);

(v) payment by the Issuing Lender under such Letter of Credit against presentation of a draft or certificate which does not comply with the terms of such Letter of Credit; or

(vi) any other circumstance or happening whatsoever, whether or not similar to any of the foregoing;

provided, however, that nothing contained in this paragraph (e) shall be deemed to constitute a waiver of any remedies of the Borrower in connection with the Letters of Credit.

(f) Prepayments of Letters of Credit. In the event that any Letter of Credit shall be outstanding or shall be drawn and not reimbursed on or prior to the Acceptable Letter of Credit Maturity Date, the Borrower shall pay to the Administrative Agent an amount equal to 105% of the Letter of Credit Exposure allocable to such Letter of Credit, such amount to be due and payable on the Acceptable Letter of Credit Maturity Date, and to be held in the Cash Collateral Account and applied in accordance with paragraph (h) below.

(g) Liability of Issuing Lender. The Borrower assumes all risks of the acts or omissions of any beneficiary or transferee of any Letter of Credit with respect to its use of such Letter of Credit. Neither the Issuing Lender nor any of its officers or directors shall be liable or responsible for:

(i) the use which may be made of any Letter of Credit or any acts or omissions of any beneficiary or transferee in connection therewith;

(ii) the validity, sufficiency or genuineness of documents, or of any endorsement thereon, even if such documents should prove to be in any or all respects invalid, insufficient, fraudulent or forged;

(iii) payment by the Issuing Lender against presentation of documents which do not comply with the terms of a Letter of Credit, including failure of any documents to bear any reference or adequate reference to the relevant Letter of Credit; or

(iv) any other circumstances whatsoever in making or failing to make payment under any Letter of Credit (including the Issuing Lender’s own negligence),

except that the Borrower shall have a claim against the Issuing Lender, and the Issuing Lender shall be liable to, and shall promptly pay to, the Borrower, to the extent of any direct, as opposed to consequential, damages suffered by the Borrower which the Borrower proves were caused by the Issuing Lender’s willful misconduct or gross negligence (as determined in a final, non-appealable judgment of a court of competent jurisdiction) in determining whether documents presented under a Letter of Credit comply with the terms of such Letter of Credit. In furtherance and not in limitation of the foregoing, the Issuing Lender may accept documents that appear on their face to be in order, without responsibility for further investigation, regardless of any notice or information to the contrary.

(h) Cash Collateral Account.

(i) If the Borrower is required to deposit funds in the Cash Collateral Account pursuant to Sections 2.2(g), 2.4(c), 2.14, 7.2(b) or 7.3(b) or any other provision under this Agreement, then the Borrower and the Administrative Agent shall establish the Cash Collateral Account and the Borrower shall execute any documents and agreements, including the Administrative Agent’s standard form assignment of deposit accounts, that the Administrative Agent requests in connection therewith to establish the Cash Collateral Account and grant the Administrative Agent a first priority, perfected Lien in such account and the funds therein. The Borrower hereby pledges to the Administrative Agent and grants the Administrative Agent a security interest in the Cash Collateral Account, whenever established, all funds held in the Cash Collateral Account from time to time, and all proceeds thereof as security for the payment of the Secured Obligations. The Borrower hereby agrees to take such actions as the Administrative Agent may reasonably request to maintain a first priority security interest in all the Cash Collateral Account and such Cash Collateral as security for the Secured Obligations and as security for the Defaulting Lenders’ obligation to fund participations in respect of Letter of Credit Exposure, to be applied pursuant to Section 2.2(i)(ii) below.

(ii) Funds held in the Cash Collateral Account shall be held as cash collateral for obligations with respect to Letters of Credit and promptly applied by the Administrative Agent at the request of the Issuing Lender to any reimbursement or other obligations under Letters of Credit that exist or occur. To the extent that any surplus funds are held in the Cash Collateral Account above the Letter of Credit Exposure during the existence of an Event of Default the Administrative Agent may (A) hold such surplus funds in the Cash Collateral Account as cash collateral for the Secured Obligations or (B) apply such surplus funds to any Secured Obligations in any manner directed by the Majority Lenders. If no Default exists, then at the Borrower’s written request, the Administrative Agent shall release any surplus funds held in the Cash Collateral Account above the sum of (x) 105% of the Letter of Credit Exposure and (y) all Defaulting Lenders’ Revolving Pro Rata Share of outstanding Swing Line Advances other than Swing Line Advances as to which such Defaulting Lender’s participation obligation has been funded by it or reallocated to other Lenders.

(iii) Funds held in the Cash Collateral Account may be invested in Liquid Investments maintained with, and under the sole dominion and control of, the Administrative Agent or in another investment if mutually agreed upon by the Borrower and the Administrative Agent, but the Administrative Agent shall have no obligation to make any investment of the funds therein. The Administrative Agent shall exercise reasonable care in the custody and preservation of any funds held in the Cash Collateral Account and shall be deemed to have exercised such care if such funds are accorded treatment substantially equivalent to that which the Administrative Agent accords its own property, it being understood that the Administrative Agent shall not have any responsibility for taking any necessary steps to preserve rights against any parties with respect to any such funds.

(i) Defaulting Lender. At any time that there shall exist a Defaulting Lender, within one Business Day following the written request of the Administrative Agent or the Issuing Lender (with a copy to the Administrative Agent) the Borrower shall Cash Collateralize the Issuing Lender’s Fronting Exposure with respect to such Defaulting Lender (determined after giving effect to Section 2.14(a)(iv) and any Cash Collateral provided by such Defaulting Lender) in an amount not less than the Minimum Collateral Amount.

(i) Grant of Security Interest by Defaulting Lender; Agreement to Provide Cash Collateral. To the extent cash collateral is provided by any Defaulting Lender, such Defaulting Lender hereby grants to the Administrative Agent, for the benefit of the Issuing Lender, and agrees to maintain, a first priority security interest in all such Cash Collateral as security for such Defaulting Lender’s obligation to fund participations in respect of Letter of Credit Obligations, to be applied pursuant to clause (ii) below. Such Defaulting Lender shall execute any documents and agreements, including the Administrative Agent’s standard form assignment of deposit accounts, that the Administrative Agent requests in connection therewith to establish such cash collateral account and to grant the Administrative Agent a first priority security interest in such account and the funds therein. If at any time the Administrative Agent determines that Cash Collateral is subject to any right or claim of any Person other than the Administrative Agent and the Issuing Lender as herein provided, or that the total amount of such Cash Collateral is less than the Minimum Collateral Amount, the Borrower will, promptly upon demand by the Administrative Agent, pay or provide to the Administrative Agent additional Cash Collateral in an amount sufficient to eliminate such deficiency (after giving effect to any Cash Collateral provided by the Defaulting Lender).

(ii) Application. Notwithstanding anything to the contrary contained in this Agreement, Cash Collateral provided under this Section 2.2(i) or Section 2.14 in respect of Letters of Credit shall be applied to the satisfaction of the Defaulting Lender’s obligation to fund participations in respect of Letter of Credit Exposure (including, as to Cash Collateral provided by a Defaulting Lender, any interest accrued on such obligation) for which the Cash Collateral was so provided, prior to any other application of such property as may otherwise be provided for herein.

(iii) Termination of Requirement. Cash Collateral (or the appropriate portion thereof) provided to reduce the Issuing Lender’s Fronting Exposure shall no longer be required to be held as Cash Collateral pursuant to this Section 2.2(i) following the elimination of the applicable Fronting Exposure (including by the termination of Defaulting Lender status of the applicable Lender); provided that, subject to Section 2.14, the Person providing Cash Collateral and the Issuing Lender may agree that Cash Collateral shall be held to support future anticipated Fronting Exposure or other obligations; and provided further that to the extent that such Cash Collateral was provided by the Borrower, such Cash Collateral shall remain subject to the security interest granted pursuant to the Credit Documents.

(j) Letters of Credit Issued for Guarantors or any Subsidiary. Notwithstanding that a Letter of Credit issued or outstanding hereunder has been issued in support of any obligations of, or has been issued for the account of, a Guarantor or any Subsidiary, the Borrower shall be obligated to reimburse the Issuing Lender hereunder for any and all drawings under such Letter of Credit issued hereunder by the Issuing Lender. The Borrower hereby acknowledges that the issuance of Letters of Credit for the account of any Guarantor, the Borrower or any Subsidiary inures to the benefit of the Borrower, and that the Borrower’s business (indirectly or directly) derives substantial benefits from the businesses of such other Persons.

Section 2.3 Advances.

(a) Notice. Each Borrowing (other than (x) the Borrowings to be made on the Closing Date and (y) Swing Line Borrowings which shall be governed by clause (g) below), shall be made pursuant to the applicable Notice of Borrowing given by the Borrower to the Administrative Agent not later than (i) 11:00 a.m. (Houston, Texas time) on the third Business Day before the date of the proposed Borrowing, in the case of a Eurodollar Advance or (ii) 11:00 a.m. (Houston, Texas time) on the Business Day before the date of the proposed Borrowing (or, so long as the Administrative Agent is the only Lender under this Agreement, 11:00 a.m. (Houston, Texas time) on the date of the Proposed Borrowing), in the case of a Base Rate Advance, by the Borrower to the Administrative Agent, which shall give to each Lender prompt notice of such proposed Borrowing, by facsimile or by electronic mail. The Borrowings to be made on the Closing Date shall be made pursuant to the applicable Notices of Borrowing given not later than 11:00 a.m. (Houston, Texas time) on the Closing Date by the Borrower to the Administrative Agent, which shall give to each Lender prompt notice of such proposed Borrowing, by facsimile or by electronic mail. Each Notice of Borrowing shall be by facsimile or by electronic mail (with a PDF file of the executed Notice of Borrowing attached), specifying (i) the requested date of such Borrowing, (ii) the requested Type and Class of Advances comprising such Borrowing, (iii) the aggregate amount of such Borrowing, and (iv) if such Borrowing is to be comprised of Eurodollar Advances, the requested Interest Period for each such Advance; provided that, and all Borrowings to be made on the Closing Date shall consist only of Base Rate Advance which may, subject to the terms of this Agreement, be thereafter Converted into Eurodollar Advances. In the case of a proposed Borrowing comprised of Eurodollar Advances, the Administrative Agent shall promptly notify each Lender of the applicable interest rate under Section 2.7(b). Each Lender shall, before 12:00 noon (Houston, Texas time) on the date of such Borrowing, make available for the account of its applicable Lending Office to the Administrative Agent at its address referred to in Section 9.9, or such other location as the Administrative Agent may specify by notice to the Lenders, in same day funds, such Lender’s pro rata share of such Borrowing. After the Administrative Agent’s receipt of such funds and upon fulfillment of the applicable conditions set forth in Article 3, the Administrative Agent will make such funds available to the Borrower at its account with the Administrative Agent or as otherwise directed by the Borrower with written notice to the Administrative Agent.

(b) Conversions and Continuations. In order to elect to Convert or continue a CapEx Advance, Term Advance or a Revolving Advance under this paragraph, the Borrower shall deliver an irrevocable Notice of Continuation or Conversion to the Administrative Agent at the Administrative Agent’s office no later than 11:00 a.m. (Houston, Texas time) (i) on the Business Day before the date of the proposed conversion date in the case of a Conversion to a Base Rate Advance and (ii) at least three Business Days in advance of the proposed Conversion or continuation date in the case of a Conversion to, or a continuation of, a Eurodollar Advance. Each such Notice of Conversion or Continuation shall be in writing sent by facsimile or by electronic mail as an attachment thereto, specifying (i) the requested Conversion or continuation date (which shall be a Business Day), (ii) the amount, Type, and Class of the Advance to be Converted or continued, (iii) whether a Conversion or continuation is requested and, if a Conversion, into what Type of Advance, and (iv) in the case of a Conversion to, or a continuation of, a Eurodollar Advance, the requested Interest Period. Promptly after receipt of a Notice of Continuation or Conversion under this paragraph, the Administrative Agent shall provide each Lender with a copy thereof and, in the case of a Conversion to or a Continuation of a Eurodollar Advance, notify each Lender of the applicable interest rate under Section 2.7(b). The portion of Advances comprising part of the same Borrowing that are Converted to Advances of another Type shall constitute a new Borrowing.

(i) at no time shall there be more than five Interest Periods applicable to outstanding Eurodollar Advances;

(ii) the Borrower may not select Eurodollar Advances for any Borrowing at any time when a Default has occurred and is continuing;

(iii) if any Lender shall, at least one Business Day before the date of any requested Borrowing, notify the Administrative Agent that the introduction of or any change in or in the interpretation of any Legal Requirement makes it unlawful, or that any central bank or other Governmental Authority asserts that it is unlawful, for such Lender or its applicable Lending Office to perform its obligations under this Agreement to make Eurodollar Advances or to fund or maintain Eurodollar Advances, (A) the obligation of such Lender to make such Eurodollar Advance as part of the requested Borrowing or for any subsequent Borrowing shall be suspended until such Lender shall notify the Borrower that the circumstances causing such suspension no longer exist and such Lender’s portion of such requested Borrowing or any subsequent Borrowing of Eurodollar Advances shall be made in the form of a Base Rate Advance, and (B) such Lender agrees to use commercially reasonable efforts (consistent with its internal policies and legal and regulatory restrictions) to designate a different Lending Office if the making of such designation would avoid the effect of this paragraph and would not, in the reasonable judgment of such Lender, be otherwise disadvantageous to such Lender;

(iv) if the Administrative Agent is unable to determine the Eurodollar Rate for Eurodollar Advances comprising any requested Borrowing, the right of the Borrower to select Eurodollar Advances for such Borrowing or for any subsequent Borrowing shall be suspended until the Administrative Agent shall notify the Borrower and the Lenders that the circumstances causing such suspension no longer exist, and each Advance comprising such Borrowing shall be a Base Rate Advance;

(v) if the Majority Lenders shall, at least one Business Day before the date of any requested Borrowing, notify the Administrative Agent that the Eurodollar Rate for Eurodollar Advances comprising such Borrowing will not adequately reflect the cost to such Lenders of making or funding their respective Eurodollar Advances, as the case may be, for such Borrowing, the right of the Borrower to select Eurodollar Advances for such Borrowing or for any subsequent Borrowing shall be suspended until the Administrative Agent shall notify the Borrower and the Lenders that the circumstances causing such suspension no longer exist, and each Advance comprising such Borrowing shall be a Base Rate Advance; and

(vi) if the Borrower shall fail to select the duration of any Interest Period for any Eurodollar Advances, or fail to deliver a timely Notice of Continuation with respect thereto, in accordance with the provisions contained in the definition of Interest Period in Section 1.1 and paragraph (b) above, the Administrative Agent will forthwith so notify the Borrower and the Lenders and such Advances will be made available to the Borrower on the date of such Borrowing as Base Rate Advances or, if an existing Advance, Convert into Base Rate Advances.

(d) Notices Irrevocable. Each Notice of Borrowing and Notice of Continuation or Conversion delivered by the Borrower hereunder, including its deemed request for borrowing made under Section 2.2(c), shall be irrevocable and binding on the Borrower.

(e) Funding by Lenders; Administrative Agent Reliance. Unless the Administrative Agent shall have received notice from a Lender before the date of any Term Borrowing, CapEx Borrowing or Revolving Borrowing that such Lender will not make available to the Administrative Agent such Lender’s applicable pro rata share of any Borrowing, the Administrative Agent may assume that such Lender has made its applicable pro rata share of such Borrowing available to the Administrative Agent on the date of such Borrowing in accordance with Section 2.3(a), and the Administrative Agent may, in reliance upon such assumption, make available to the Borrower on such date a corresponding amount. If and to the extent that such Lender shall not have so made its applicable pro rata share of such Borrowing available to the Administrative Agent, such Lender and the Borrower severally agree to immediately repay to the Administrative Agent on demand such corresponding amount, together with interest on such amount, for each day from the date such amount is made available to the Borrower until the date such amount is repaid to the Administrative Agent, at (i) in the case of the Borrower, the interest rate applicable on such day to Advances comprising such Borrowing and (ii) in the case of such Lender, the lesser of (A) the greater of the Federal Funds Rate and a rate determined by the Administrative Agent in accordance with banking industry rules on interbank compensation and (B) the Maximum Rate. If such Lender shall repay to the Administrative Agent such corresponding amount and interest as provided above, such corresponding amount so repaid shall constitute such Lender’s Advance as part of such Borrowing for purposes of this Agreement even though not made on the same day as the other Advances comprising such Borrowing.

(f) Payments by Borrower; Presumptions by Administrative Agent. Unless the Administrative Agent shall have received notice from the Borrower prior to the date on which any payment is due to the Administrative Agent for the account of the Lenders or the Issuing Lender hereunder that the Borrower will not make such payment, the Administrative Agent may assume that the Borrower has made such payment on such date in accordance herewith and may, in reliance upon such assumption, distribute to the Lenders or the Issuing Lender, as the case may be, the amount due. In such event, if the Borrower has not in fact made such payment, then each of the Lenders or the Issuing Lender, as the case may be, severally agrees to repay to the Administrative Agent forthwith on demand the amount so distributed to such Lender or Issuing Lender, with interest thereon, for each day from and including the date such amount is distributed to it to but excluding the date of payment to the Administrative Agent, at the lesser of (i) the greater of the Federal Funds Rate and a rate determined by the Administrative Agent in accordance with banking industry rules on interbank compensation and (ii) the Maximum Rate.

(g) Swing Line Advances.

(i) Facility. On the terms and conditions set forth in this Agreement, and if an AutoBorrow Agreement is in effect, subject to the terms and conditions of such AutoBorrow Agreement, the Swing Line Lender may, in its sole discretion, from time-to-time on any Business Day during the period from April 15, 2014 until the last Business Day occurring before the Revolving Maturity Date, make Swing Line Advances under the Swing Line Note to the Borrower which shall be due and payable on the Swing Line Payment Date (except that no Swing Line Advance may mature after the Revolving Maturity Date), and in an aggregate outstanding principal amount not to exceed the Swing Line Sublimit Amount at any time; provided that (A) after giving effect to such Swing Line Advance, the Revolving Outstandings shall not exceed the aggregate Revolving Commitments in effect at such time; (B) no Swing Line Advance shall be made by the Swing Line Lender if the conditions set forth in Section 3.2 have not been met as of the date of such Swing Line Advance, it being agreed by the Borrower that the giving of the applicable Notice of Revolving Borrowing and the acceptance by the Borrower of the proceeds of such Swing Line Advance shall constitute a representation and warranty by the Borrower that on the date of such Swing Line Advance such conditions have been met; (C) only if an AutoBorrow Agreement is not in effect, each Swing Line Advance shall be in an aggregate amount not less than $100,000 and in integral multiples of $50,000 in excess thereof; and (D) if an AutoBorrow Agreement is in effect, such additional terms and conditions of such AutoBorrow Agreement shall have been satisfied, and in the event that any of the terms of this Section 2.3(g)(i) conflict with such AutoBorrow Agreement, the terms of the AutoBorrow Agreement shall govern and control. The indebtedness of the Borrower to the Swing Line Lender resulting from Swing Line Advances shall be evidenced by the Swing Line Note. No Lender shall have any rights or obligations under any AutoBorrow Agreement, but each Lender shall have the obligation to purchase and fund risk participations in the Swing Line Advances and to refinance Swing Line Advances as provided below.

(ii) Prepayment. Within the limits expressed in this Agreement, amounts advanced pursuant to Section 2.3(g)(i) may from time to time be borrowed, prepaid without penalty, and reborrowed. If the aggregate outstanding principal amount of the Swing Line Advances ever exceeds the Swing Line Sublimit Amount, the Borrower shall prepay to the Swing Line Lender outstanding principal of the Swing Line Advances such that such excess is eliminated. If an AutoBorrow Agreement is in effect, each prepayment of a Swing Line Borrowing shall be made as provided in such AutoBorrow Agreement.

(iii) Reimbursements for Swing Line Obligations.

(A) With respect to the Swing Line Advances and the interest, premium, fees, and other amounts owed by the Borrower to the Swing Line Lender in connection with the Swing Line Advances, the Borrower agrees to pay to the Swing Line Lender such amounts when due and payable to the Swing Line Lender under the terms of this Agreement and, if an AutoBorrow Agreement is in effect, in accordance with the terms of such AutoBorrow Agreement. If the Borrower does not pay to the Swing Line Lender any such amounts when due and payable to the Swing Line Lender, the Swing Line Lender may upon notice to the Administrative Agent request the satisfaction of such obligation by the making of a Revolving Borrowing in the amount of any such amounts not paid when due and payable. Upon such request, the Borrower shall be deemed to have requested the making of a Revolving Borrowing in the amount of such obligation and the transfer of the proceeds thereof to the Swing Line Lender. The Administrative Agent shall promptly forward notice of such Revolving Borrowing to the Borrower and the Lenders, and each Lender shall, regardless of whether (A) the conditions in Section 3.2 have been met, (B) such notice complies with Section 2.3(a), or (C) a Default exists, make available such Lender’s ratable share of such Revolving Borrowing to the Administrative Agent, and the Administrative Agent shall promptly deliver the proceeds thereof to the Swing Line Lender for application to such amounts owed to the Swing Line Lender. The Borrower hereby unconditionally and irrevocably authorizes, empowers, and directs the Swing Line Lender to make such requests for Revolving Borrowings on behalf of the Borrower, and for the Lenders to make Revolving Advances to the Administrative Agent for the benefit of the Swing Line Lender in satisfaction of such obligations. The Administrative Agent and each Lender may record and otherwise treat the making of such Revolving Borrowings as the making of a Revolving Borrowing to the Borrower under this Agreement as if requested by the Borrower. Nothing herein is intended to release the Borrower’s obligations under the Swing Line Note, but only to provide an additional method of payment therefor. The making of any Revolving Borrowing under this Section 2.3(g)(iii)(A) shall not constitute a cure or waiver of any Default or Event of Default, other than the payment Default or Event of Default which is satisfied by the application of the amounts deemed advanced hereunder, caused by the Borrower’s failure to comply with the provisions of this Agreement or the Swing Line Note.

(B) If at any time, the Revolving Commitments shall have expired or be terminated while any Swing Line Advance is outstanding, each Lender, at the sole option of the Swing Line Lender, shall either (A) notwithstanding the expiration or termination of the Revolving Commitments, make a Revolving Advance as a Base Rate Advance, or (B) be deemed, without further action by any Person, to have purchased from the Swing Line Lender a participation in such Swing Line Advance, in either case in an amount equal to the product of such Lender’s Revolving Pro Rata Share times the outstanding aggregate principal balance of the Swing Line Advances. The Administrative Agent shall notify each such Lender of the amount of such Revolving Advance or participation, and such Lender will transfer to the Administrative Agent for the account of the Swing Line Lender on the next Business Day following such notice, in immediately available funds, the amount of such Revolving Advance or participation.

(C) If any such Lender shall not have so made its Revolving Advance or its percentage participation available to the Administrative Agent pursuant to this Section 2.3(g), such Lender agrees to pay interest thereon for each day from the date Administrative Agent delivers notice to such Lender pursuant to Section 2.3(g)(iii)(A) or (B) until the date such amount is paid at a per annum rate equal to the lesser of (A) the Federal Funds Rate for such day and for the first three days after such date and thereafter the interest rate applicable to the Revolving Advance and (B) the Maximum Rate. Whenever, at any time after the Administrative Agent has received from any Lender such Lender’s Revolving Advance or participating interest in a Swing Line Advance, the Administrative Agent receives any payment on account thereof, the Administrative Agent will pay to such Lender its participating interest in such amount (appropriately adjusted, in the case of interest payments, to reflect the period of time during which such Lender’s Revolving Advance or participating interest was outstanding and funded), which payment shall be subject to repayment by such Lender if such payment received by the Administrative Agent is required to be returned. Each Lender’s obligation to make the Revolving Advance or to purchase such participating interests pursuant to this Section 2.3(g) shall be absolute and unconditional and shall not be affected by any circumstance, including (1) any set-off, counterclaim, recoupment, defense or other right which such Lender or any other Person may have against the Swing Line Lender, the Administrative Agent or any other Person for any reason whatsoever; (2) the occurrence or continuance of a Default or the termination of any Commitments; (3) any breach of this Agreement by the Borrower or any other Lender; or (4) any other circumstance, happening or event whatsoever, whether or not similar to any of the foregoing. Each Swing Line Advance, once so participated by any Lender, shall cease to be a Swing Line Advance with respect to that amount for purposes of this Agreement, but shall continue to be Revolving Advances.

(iv) Method of Borrowing. If an AutoBorrow Agreement is in effect, each Swing Line Borrowing shall be made as provided in such AutoBorrow Agreement. Otherwise, and except as provided in the clause (c) above, each request for a Swing Line Advance shall be made pursuant to telephone notice to the Swing Line Lender given no later than 1:00 p.m. (Houston, Texas time) on the date of the proposed Swing Line Advance, promptly confirmed by a completed and executed Notice of Revolving Borrowing sent via facsimile, facsimile or, unless otherwise required by the Administrative Agent or Swing Line Lender prior to such delivery, electronic mail (PDF), to the Administrative Agent and the Swing Line Lender. The Swing Line Lender will promptly make the Swing Line Advance available to the Borrower at the Borrower’s account with the Swing Line Lender.

(v) Interest for Account of Swing Line Lender. Swing Line Lender shall be responsible for invoicing the Borrower for interest on the Swing Line Advances (provided that any failure of the Swing Line Lender to provide such invoice shall not release the Borrower from its obligation to pay such interest). Until each Lender funds its Revolving Advance or risk participation pursuant to clause (iii) above, interest in respect of Lender’s Revolving Pro Rata Share of the Swing Line Advances shall be solely for the account of the Swing Line Lender.

(vi) Payments Directly to Swing Line Lender. The Borrower shall make all payments of principal and interest in respect of the Swing Line Advances directly to the Swing Line Lender.

(vii) Discretionary Nature of the Swing Line Facility. Notwithstanding any terms to the contrary contained herein or in any AutoBorrow Agreement, the swing line facility provided herein or in any AutoBorrow Agreement (i) is an uncommitted facility and the Swing Line Lender may, but shall not be obligated to, make Swing Line Advances, and (ii) may be terminated at any time by the Swing Line Lender upon written notice to the Borrower.

Section 2.4 Prepayments.

(a) Right to Prepay; Ratable Prepayment. The Borrower shall have no right to prepay any principal amount of any Advance except as provided in this Section 2.4 and, with respect to Swing Line Advances, Section 2.3(g)(ii), and all notices given pursuant to this Section 2.4 shall be irrevocable (except as described in clause (b) of this Section 2.4) and binding upon the Borrower. Each payment of any Advance pursuant to this Section 2.4 shall be made in a manner such that all Advances comprising part of the same Borrowing are paid in whole or ratably in part other than Advances owing to a Defaulting Lender as provided in Section 2.14.

(b) Optional. The Borrower may elect to prepay any of the Advances without penalty or premium except as set forth in Section 2.9 and after giving by 11:00 a.m. (Houston, Texas time) (i) in the case of Eurodollar Advances, at least three Business Days’ or (ii) in case of Base Rate Advances, same Business Day’s prior written notice to the Administrative Agent stating the proposed date and aggregate principal amount of such prepayment; provided that, if a notice of prepayment is given in connection with a conditional notice of termination of the Commitments as contemplated by Section 2.1(b), then such notice of prepayment may be revoked if such notice of termination is revoked in accordance with Section 2.1(b). If any such notice is given, the Borrower shall prepay Advances comprising part of the same Borrowing in whole or ratably in part in an aggregate principal amount equal to the amount specified in such notice, together with accrued interest to the date of such prepayment on the principal amount prepaid and amounts, if any, required to be paid pursuant to Section 2.9 as a result of such prepayment being made on such date; provided that (A) each optional prepayment of Eurodollar Advances shall be in a minimum amount not less than $1,000,000 and in multiple integrals of $500,000 in excess thereof (B) each optional prepayment of Base Rate Advances shall be in a minimum amount not less than $500,000 and in multiple integrals of $100,000 in excess thereof, and (C) only if an AutoBorrow Agreement is not in effect, each optional prepayment of Swing Line Advances shall be in a minimum amount not less than $250,000 and in multiple integrals of $50,000 in excess thereof. If an AutoBorrow Agreement is in effect, each prepayment of Swing Line Advances shall be made as provided in such AutoBorrow Agreement.

(i) On any date that a Borrowing Base Deficiency exists as stated in the Borrowing Base Certificate delivered pursuant to Section 5.2(e) or as notified to the Borrower by the Administrative Agent (with such calculation set forth in reasonable detail which shall be conclusive absent manifest error), the Borrower shall, within three Business Days, to the extent of such deficiency, first prepay to the Swing Line Lender the outstanding principal amount of the Swing Line Advances, second prepay to the Lenders on a pro rata basis the outstanding principal amount of the Revolving Advances, and third make deposits with the Administrative Agent into the Cash Collateral Account to provide Cash Collateral in the amount of such excess (if any) for the Letter of Credit Exposure.

(ii) If the Borrower or any Subsidiary receives Debt Incurrence Proceeds other than those resulting from Permitted Debt, then not later than three Business Days following the receipt of such proceeds, the Borrower shall prepay the Term Advances and the CapEx Advances in an amount equal to 100% of such Debt Incurrence Proceeds.

(iii) If the Borrower or any Subsidiary receives Equity Issuance Proceeds (other than Equity Issuance Proceeds from an Excluded Equity Issuance) or receives cash capital contributions on account of then existing Equity Interests of the Borrower, then not later than three Business Days following the receipt of such proceeds, the Borrower shall prepay the Term Advances and the CapEx Advances in an amount equal to 100% of such Equity Issuance Proceeds or contribution; provided that, (A) if no Default exists or would arise therefrom, then such Equity Issuance Proceeds or contributions shall not be required to be so applied on such date to the extent that Borrower shall have notified the Administrative Agent in writing on or prior to such date stating that such proceeds or contributions are reasonably expected to be reinvested in Capital Expenditures not prohibited under Section 6.18, Investments permitted by Section 6.3(c), or Acquisitions permitted under Section 6.4 within 180 days following the date the Borrower or such Subsidiary received such proceeds or contribution (which written notice shall set forth the estimates of the amounts to be so expended); and (B) if all or any portion of such proceeds and contributions are not reinvested within such 180-day period as provided in clause (A) above, then 100% of such unused portion shall be applied on the last day of such period as a mandatory prepayment of the Term Advances and the CapEx Advances.

(iv) If the Borrower or any Subsidiary completes an Asset Sale which is not a Permitted Asset Sale, then the Borrower shall, no later than three Business Days following the completion such Asset Sale, prepay the Term Advances and the CapEx Advances in an amount equal to 100% of the Net Cash Proceeds generated from such Asset Sale.

(v) If the Borrower or any Subsidiary completes a Permitted Asset Sale which is permitted under Section 6.8(d) or (e) and the Net Cash Proceeds thereof exceeds $50,000 individually or $250,000 when aggregated with all such Permitted Asset Sales completed from the date hereof through and including the date of such Permitted Asset Sale, then the Borrower shall, no later than three Business Days following the completion such Asset Sale, prepay the Term Advances and the CapEx Advances in an amount equal to 100% of the Net Cash Proceeds generated from such Asset Sale in excess of such $50,000 (or such $250,000, if applicable); provided that, (A) if no Default exists or would arise therefrom, then such proceeds shall not be required to be so applied on such date to the extent that Borrower shall have notified the Administrative Agent in writing on or prior to such date stating that such Net Cash Proceeds are reasonably expected to be reinvested in fixed or capital assets of any Credit Party within 180 days following the date of such Asset Sale (which officers’ certificate shall set forth the estimates of the proceeds to be so expended); and (B) if all or any portion of such Net Cash Proceeds are not reinvested within such 180-day period as provided in clause (A) above, then 100% of such unused portion shall be applied on the last day of such period as a mandatory prepayment of the Term Advances and the CapEx Advances.

(vi) If the Borrower or any Subsidiary receives any Extraordinary Receipts (whether from a single event or related series of events and whether as one payment or a series of payments) in excess of $50,000 individually or $250,000 when aggregated with all such Extraordinary Receipts received from the date hereof through and including the date of determination, then the Borrower shall, no later than three Business Days following the receipt of such Extraordinary Receipts, prepay the Term Advances and the CapEx Advances in an amount equal to 100% of the amount of such Extraordinary Receipts in excess of such $50,000 (or such $250,000, if applicable); provided that, (A) if no Default exists or would arise therefrom, then such Extraordinary Receipts shall not be required to be so applied on such date to the extent that Borrower shall have notified the Administrative Agent in writing on or prior to such date stating that such Extraordinary Receipts are reasonably expected to be reinvested in fixed or capital assets of any Credit Party within 180 days following the date the Borrower or such Subsidiary received such Extraordinary Receipts (which written notice shall set forth the estimates of the amounts to be so expended); (B) if all or any portion of such Extraordinary Receipts are not reinvested within such 180-day period as provided in clause (A) above, then 100% of such unused portion shall be applied on the last day of such period as a mandatory prepayment of the Term Advances and the CapEx Advances; and (C) if an Event of Default exists and such Extraordinary Receipts are insurance proceeds, the Borrower shall turn such proceeds over to the Administrative Agent in accordance with Section 5.3(d).

(d) Interest; Costs. Each prepayment pursuant to this Section 2.4 shall be accompanied by accrued interest on the amount prepaid to the date of such prepayment and amounts, if any, required to be paid pursuant to Section 2.9 as a result of such prepayment being made on such date.

(e) Application of Prepayments. Each mandatory prepayment of an Advance required by Section 2.4(c)(ii) – (vi) shall be applied to the Term Advances and the CapEx Advances until such time as the Term Advances and the CapEx Advances are repaid in full and on a pro rata basis to the scheduled principal installments thereof and otherwise as follows: (i) at any time prior to the CapEx Commitment Termination Date, first to the Term Advances, and if the Term Advances have been repaid, then to the CapEx Advances, and (ii) at any time from and after the CapEx Commitment Termination Date, pro rata between the Term Advances and the CapEx Advances.

Section 2.5 Repayment.

(a) Revolving Advances. The Borrower shall pay to the Administrative Agent for the ratable benefit of each Revolving Lender the aggregate outstanding principal amount of the Revolving Advances on the Revolving Maturity Date.

(b) Term Advances. The Borrower shall pay to the Administrative Agent for the ratable benefit of each Term Lender the aggregate outstanding principal amount of the Term Advances in quarterly installments each equal to $1,250,000 (which is equal to five percent (5%) of $25,000,000). Such quarterly installments shall be due and payable on each March 31^st, June 30^th, September 30^th, and December 31^st, commencing with June 30, 2014, and a final installment of the remaining, unpaid principal balance of the Term Advances payable on the Term Maturity Date.

(d) CapEx Advances. The Borrower shall pay to the Administrative Agent for the ratable benefit of each CapEx Lender the aggregate outstanding principal amount of the CapEx Advances in quarterly installments each equal to five percent (5%) of the aggregate CapEx Advances outstanding on the CapEx Commitment Termination Date (after giving effect the CapEx Advances, if any, made on the CapEx Commitment Termination Date). Such quarterly installments shall be due and payable on each March 31^st, June 30^th, September 30^th, and December 31^st, commencing with the first such payment date occurring after the CapEx Commitment Termination Date, and a final installment of the remaining unpaid principal balance of the CapEx Advances payable on the CapEx Maturity Date.

Section 2.6 Fees.

(a) Commitment Fees.

(i) Revolving Commitments. The Borrower agrees to pay to the Administrative Agent for the account of each Revolving Lender a commitment fee equal to the Applicable Margin for Commitment Fees for such period on the average daily amount by which (i) such Lender’s Revolving Commitment exceeds (ii) the sum of such Lender’s outstanding Revolving Advances plus such Lender’s Revolving Pro Rata Share of the Letter of Credit Exposure; provided that, no such commitment fee shall accrue on the Revolving Commitment of a Defaulting Lender during the period such Lender remains a Defaulting Lender. Such Commitment Fee is due quarterly in arrears on March 31^st, June 30^th, September 30^th, and December 31^st of each year, commencing on June 30, 2014 and on the Revolving Maturity Date. For the avoidance of doubt and for purposes of this Section 2.6(a)(i) only, outstanding Swing Line Advances shall not reduce the amount of unused Revolving Commitment.

(ii) CapEx Commitments. The Borrower agrees to pay to the Administrative Agent for the account of each CapEx Lender a commitment fee equal to the Applicable Margin for Commitment Fees on the average daily amount by which (i) such Lender’s CapEx Commitment exceeds (ii) the sum of such Lender’s outstanding CapEx Advances; provided that, (A) no such commitment fee shall accrue on the CapEx Commitment of a Defaulting Lender during the period such Lender remains a Defaulting Lender and (B) no such commitment fee shall accrue after the CapEx Commitment Termination Date. Such Commitment Fee is due quarterly in arrears on March 31^st, June 30^th, September 30^th, and December 31^st of each year, commencing on December 31, 2014, and on the CapEx Commitment Termination Date.

(b) Fees for Letters of Credit. The Borrower agrees to pay the following:

(i) Subject to Section 2.14, to the Administrative Agent for the pro rata benefit of the Revolving Lenders a per annum letter of credit fee for each Letter of Credit issued hereunder, for the period such Letter of Credit is to be outstanding, in an amount equal to the greater of (A) the Applicable Margin then in effect for Eurodollar Advances per annum on the face amount of such Letter of Credit and (B) $750 per Letter of Credit. Such fee shall be due and payable quarterly in arrears March 31^st, June 30^th, September 30^th, and December 31^st of each year, and on the Revolving Maturity Date.

(ii) To the Issuing Lender, a fronting fee for each Letter of Credit equal to the greater of (A) 0.25% per annum on the face amount of such Letter of Credit and (B) $750. Such fee shall be due and payable quarterly in arrears on March 31^st, June 30^th, September 30^th, and December 31^st of each year, and on the Revolving Maturity Date.

(iii) To the Issuing Lender such other usual and customary fees associated with any transfers, amendments, drawings, negotiations or reissuances of any Letters of Credit. Such fees shall be due and payable as requested by the Issuing Lender in accordance with the Issuing Lender’s then current fee policy.

The Borrower shall have no right to any refund of letter of credit fees previously paid by the Borrower, including any refund claimed because any Letter of Credit is canceled prior to its expiration date.

(c) Administrative Agent Fee. The Borrower agrees to pay the fees to the Administrative Agent as set forth in the Fee Letter.

Section 2.7 Interest.

(a) Base Rate Advances. Each Base Rate Advance shall bear interest at the Adjusted Base Rate in effect from time to time plus the Applicable Margin for Base Rate Advances in effect from time to time. The Borrower shall pay to the Administrative Agent for the ratable account of each Lender all accrued but unpaid interest on such Lender’s Base Rate Advances, quarterly in arrears, on each March 31^st, June 30^th, September 30^th, and December 31^stcommencing on June 30, 2014, and on the Revolving Maturity Date, the CapEx Maturity Date or the Term Maturity Date, as applicable.

(b) Eurodollar Advances. Each Eurodollar Advance shall bear interest during its Interest Period at a rate per annum equal to the Eurodollar Rate for such Interest Period plus the Applicable Margin for Eurodollar Advances for such period. The Borrower shall pay to the Administrative Agent for the ratable account of each Lender all accrued but unpaid interest on each of such Lender’s Eurodollar Advances on the last day of the Interest Period therefor (provided that for Eurodollar Advances with six month Interest Periods, accrued but unpaid interest shall also be due on the day three months from the first day of such Interest Period), on the date any Eurodollar Advance is repaid, and on the Revolving Maturity Date, the CapEx Maturity Date or the Term Maturity Date, as applicable.

(c) Swing Line Advances. The Swing Line Advances shall bear interest at the Adjusted Base Rate plus the Applicable Margin for Base Rate Advances or such other per annum rate to be agreed to between the Borrower and the Swing Line Lender. The Borrower shall pay all accrued but unpaid interest on each Swing Line Advance to the Swing Line Lender, quarterly in arrears, on each March 31, June 30, September 30, and December 31 commencing on June 30, 2014, and on the Maturity Date or such dates as otherwise agreed to between the Swing Line Lender and the Borrower.

(d) Retroactive Adjustments of Applicable Margin. In the event that any financial statement or Compliance Certificate delivered pursuant to Section 5.2 is shown to be inaccurate (regardless of whether this Agreement or the Commitments are in effect when such inaccuracy is discovered), and such inaccuracy, if corrected, would have led to the application of a higher Applicable Margin for any period (an “Applicable Period”) than the Applicable Margin applied for such Applicable Period, then (i) the Borrower shall immediately deliver to the Administrative Agent a corrected Compliance Certificate for such Applicable Period, (ii) the Applicable Margin shall be determined as if the higher Applicable Margin that would have applied were applicable for such Applicable Period (and in any event at Level I, as set forth in Schedule I, if the inaccuracy was the result of dishonesty, fraud or willful misconduct), and (iii) the Borrower shall immediately, without further action by the Administrative Agent, any Lender or any Issuing Lender, pay to the Administrative Agent for the account of the applicable Lenders, the accrued additional interest owing as a result of such increased Applicable Margin for such Applicable Period. This Section 2.7(d) shall not limit the rights of the Administrative Agent and Lenders with respect to the Default Rate of interest as set forth in Section 2.7(e) or Article 7. The Borrower’s obligations under this Section 2.7(d) shall survive the termination of the Commitments and the repayment of all other Obligations hereunder.

(e) Default Rate. Notwithstanding the foregoing, (i) upon the occurrence and during the continuance of an Event of Default under Section 7.1(a) or Section 7.1(g), all Obligations shall bear interest, after as well as before judgment, at the Default Rate and (ii) upon the occurrence and during the continuance of any Event of Default (including under Section 7.1(a) or Section 7.1(g)), upon the request of the Majority Lenders, all Obligations shall bear interest, after as well as before judgment, at the Default Rate. Interest accrued pursuant to this Section 2.7(e) and all interest accrued but unpaid on or after the Revolving Maturity Date and the Term Maturity Date, as applicable, shall be due and payable on demand.

Section 2.8 Illegality. If any Lender shall notify the Borrower that the introduction of or any change in or in the interpretation of any Legal Requirement makes it unlawful, or that any central bank or other Governmental Authority asserts that it is unlawful, for such Lender or its applicable Lending Office to perform its obligations under this Agreement to make, maintain, or fund any Eurodollar Advances of such Lender then outstanding hereunder, (a) the Borrower shall, no later than 11:00 a.m. (Houston, Texas, time) (i) if not prohibited by law, on the last day of the Interest Period for each outstanding Eurodollar Advance or (ii) if required by such notice, on the second Business Day following its receipt of such notice, prepay all of the Eurodollar Advances of such Lender then outstanding, together with accrued interest on the principal amount prepaid to the date of such prepayment and amounts, if any, required to be paid pursuant to Section 2.9 as a result of such prepayment being made on such date, (b) such Lender shall simultaneously make a Base Rate Advance to the Borrower on such date in an amount equal to the aggregate principal amount of the Eurodollar Advances prepaid to such Lender, and (c) the right of the Borrower to select Eurodollar Advances from such Lender for any subsequent Borrowing shall be suspended until such Lender shall notify the Borrower that the circumstances causing such suspension no longer exist. Each Lender agrees to use commercially reasonable efforts (consistent with its internal policies and legal and regulatory restrictions) to designate a different Lending Office if the making of such designation would avoid the effect of this paragraph and would not, in the reasonable judgment of such Lender, be otherwise disadvantageous to such Lender.

Section 2.9 Breakage Costs. Upon demand of any Lender (with a copy to the Administrative Agent) from time to time, the Borrower shall promptly compensate such Lender for and hold such Lender harmless from any loss, cost or expense incurred by it as a result of:

(a) any continuation, conversion, payment or prepayment (including any deemed payment or repayment and any reallocated repayment to Non-Defaulting Lenders provided for in Section 2.11(a) or Section 2.14) of any Eurodollar Advance on a day other than the last day of the Interest Period for such Advance (whether voluntary, mandatory, automatic, by reason of acceleration, or otherwise);

(b) any failure by the Borrower (for a reason other than the failure of such Lender to make an Advance) to prepay, borrow, continue or Convert any Eurodollar Advance on the date or in the amount notified by the Borrower; or

(c) any assignment of an Eurodollar Advance on a day other than the last day of the Interest Period therefor as a result of a request by the Borrower pursuant to Section 2.13;

including any loss of anticipated profits, any foreign exchange losses and any loss or expense arising from the liquidation or reemployment of funds obtained by it to maintain such Advance, from fees payable to terminate the deposits from which such funds were obtained or from the performance of any foreign exchange contract. The Borrower shall also pay any customary administrative fees charged by such Lender in connection with the foregoing. For purposes of calculating amounts payable by the Borrower to the Lenders under this Section 2.9, the requesting Lender shall be deemed to have funded the Eurodollar Advances made by it at the Eurodollar Base Rate used in determining the Eurodollar Rate for such Advance by a matching deposit or other borrowing in the offshore interbank market for Dollars for a comparable amount and for a comparable period, whether or not such Eurodollar Advance was in fact so funded.

Section 2.10 Increased Costs.

(a) Increased Costs Generally. If any Change in Law shall:

(i) impose, modify, or deem applicable any reserve, special deposit, compulsory loan, insurance charge, or similar requirement against assets of, deposits with or for the account of, or credit extended or participated in by, financial institutions generally, including any Lender (or its applicable Lending Office) (except any reserve requirement included in the Eurodollar Reserve Percentage) or the Issuing Lender;

(ii) subject any Recipient to any Taxes (other than (A) Indemnified Taxes, (B) Taxes described in clauses (b) through (d) of the definition of Excluded Taxes and (C) Connection Income Taxes) on its loans, loan principal, letters of credit, commitments or other obligations, or its deposits, reserves, other liabilities or capital attributable thereto; or

(iii) impose on financial institutions generally, including any Lender (or its applicable Lending Office) or on the London interbank market any other condition, cost or expense (other than Taxes) affecting this Agreement or Advances made by such Lender or any Letter of Credit or participation therein;

and the result of any of the foregoing shall be to increase the cost to such Lender (or its applicable Lending Office) or such other Recipient of making, Converting to, continuing or maintaining any loan or of maintaining its obligation to make or accept and purchase any such loan, or to increase the cost to such Lender, the Issuing Lender or such other Recipient of participating in, issuing or maintaining any Letter of Credit (or of maintaining its obligation to participate in or to issue any Letter of Credit), or to reduce the amount of any sum received or receivable by such Lender (or its applicable Lending Office), the Issuing Lender or such other Recipient hereunder (whether of principal, interest or any other amount) then, upon request of such Lender, the Issuing Lender or such other Recipient, the Borrower will pay to such Lender within three Business Days after written demand made by such Lender, the Issuing Lender or such other Recipient, as the case may be, such additional amount or amounts as will compensate such Lender, the Issuing Lender or such other Recipient, as the case may be, for such additional costs incurred or reduction suffered.

(b) Capital Requirements. If any Lender or Issuing Lender determines that any Change in Law affecting such Lender or Issuing Lender or any Lending Office of such Lender or such Lender’s or Issuing Lender’s holding company, if any, regarding capital or liquidity requirements has or would have the effect of reducing the rate of return on such Lender’s or Issuing Lender’s capital or on the capital of financial institutions generally, including such Lender’s or Issuing Lender’s holding company or any corporation controlling such Lender or the Issuing Lender, if any, as a consequence of this Agreement, the Commitments of such Lender or the Advances made by, or participations in Letters of Credit or Swing Line Advances held by, such Lender, or the Letters of Credit issued by the Issuing Lender, to a level below that which such Lender, the Issuing Lender, the corporation controlling such Lender or the Issuing Lender, or such Lender’s or Issuing Lender’s holding company could have achieved but for such Change in Law (taking into consideration such Lender’s or Issuing Lender’s policies, the policies of the corporation controlling such Lender or the Issuing Lender, and the policies of such Lender’s or Issuing Lender’s holding company with respect to capital adequacy), then from time to time within three Business Days after written demand by such Lender or the Issuing Lender, as the case may be, the Borrower shall pay to such Lender or Issuing Lender, such additional amount or amounts as will compensate such Lender or the Issuing Lender, the corporation controlling such Lender or the Issuing Lender, or such Lender’s or Issuing Lender’s holding company for any such reduction suffered.

(c) Mitigation. Each Lender shall promptly notify the Borrower and the Administrative Agent of any event of which it has knowledge, occurring after the Closing Date, which will entitle such Lender to compensation pursuant to this Section 2.10 and will designate a different Lending Office if such designation will avoid the need for, or reduce the amount of, such compensation and will not, in the reasonable judgment of such Lender, be otherwise disadvantageous to it. Any Lender claiming compensation under this Section 2.10 shall furnish to the Borrower and the Administrative Agent a statement setting forth the additional amount or amounts to be paid to it hereunder which shall be determined by such Lender in good faith and which shall be conclusive in the absence of manifest error. In determining such amount, such Lender may use any reasonable averaging and attribution methods. The Borrower shall pay such Lender or Issuing Lender, as the case may be, the amount shown as due on any such certificate within 10 days after receipt thereof.

(d) Delay in Requests. Failure or delay on the part of any Lender or Issuing Lender to demand compensation pursuant to this Section 2.10 shall not constitute a waiver of such Lender’s or such Issuing Lender’s right to demand such compensation, provided that the Borrower shall not be required to compensate a Lender or Issuing Lender pursuant to this Section 2.10 for any increased costs incurred or reductions suffered more than 180 days prior to the date that such Lender or Issuing Lender, as the case may be, notifies the Borrower and the Administrative Agent of the Change in Law giving rise to such increased costs or reductions and of such Lender’s or Issuing Lender’s intention to claim compensation therefor (except that, if the Change in Law giving rise to such increased costs or reductions is retroactive, then the 180-day period referred to above shall be extended to include the period of retroactive effect thereof).

Section 2.11 Payments and Computations.

(a) Payments. All payments of principal, interest, and other amounts to be made by the Borrower under this Agreement and other Credit Documents shall be made to the Administrative Agent in Dollars and in immediately available funds, without setoff, deduction, or counterclaim.

(b) Payment Procedures. The Borrower shall make each payment under this Agreement not later than 11:00 a.m. (Houston, Texas time) on the day when due in Dollars to the Administrative Agent at the location referred to in the Notes (or such other location as the Administrative Agent shall designate in writing to the Borrower) in same day funds. The Administrative Agent will promptly thereafter, and in any event prior to the close of business on the day any timely payment is made, cause to be distributed like funds relating to the payment of principal, interest or fees ratably (other than amounts payable solely to the Administrative Agent or a specific Lender pursuant to Sections 2.8, 2.9, 2.10, 2.12, 2.13, and 9.2 and such other provisions herein which expressly provide for payments to a specific Lender, but after taking into account payments effected pursuant to Section 9.1) in accordance with each Lender’s applicable pro rata share to the Lenders for the account of their respective applicable Lending Offices, and like funds relating to the payment of any other amount payable to any Lender to such Lender for the account of its applicable Lending Office, in each case to be applied in accordance with the terms of this Agreement. Upon receipt of other amounts due solely to the Administrative Agent, the Issuing Lender, the Swing Line Lender or a specific Lender, the Administrative Agent shall distribute such amounts to the appropriate party to be applied in accordance with the terms of this Agreement.

(c) Non-Business Day Payments. Whenever any payment shall be stated to be due on a day other than a Business Day, such payment shall be made on the next succeeding Business Day, and such extension of time shall in such case be included in the computation of payment of interest or fees, as the case may be; provided that if such extension would cause payment of interest on or principal of Eurodollar Advances to be made in the next following calendar month, such payment shall be made on the next preceding Business Day.

(d) Computations. All computations of interest for Base Rate Advances shall be made by the Administrative Agent on the basis of a year of 365/366 days and all computations of all other interest and fees shall be made by the Administrative Agent on the basis of a year of 360 days, in each case for the actual number of days (including the first day, but excluding the last day) occurring in the period for which such interest or fees are payable. Each determination by the Administrative Agent of an amount of interest or fees shall be conclusive and binding for all purposes, absent manifest error.

(e) Sharing of Payments by Lenders. If any Lender shall, by exercising any right of setoff or counterclaim or otherwise, obtain payment in respect of any principal of or interest on any of its Advances or other Obligations hereunder resulting in such Lender receiving payment of a proportion of the aggregate amount of its Advances and accrued interest thereon or other such Obligations greater than its pro rata share thereof as provided herein, then the Lender receiving such greater proportion shall (a) notify the Administrative Agent of such fact, and (b) purchase (for cash at face value) participations in the Advances and such other Obligations of the other Lenders, or make such other adjustments as shall be equitable, so that the benefit of all such payments shall be shared by the Lenders ratably in accordance with the aggregate amount of principal of and accrued interest on their respective Advances and other Obligations owing them; provided that:

(i) if any such participations are purchased and all or any portion of the payment giving rise thereto is recovered, such participations shall be rescinded and the purchase price restored to the extent of such recovery, without interest; and

(ii) the provisions of this paragraph shall not be construed to apply to (x) any payment made by the Borrower pursuant to and in accordance with the express terms of this Agreement (including the application of funds arising from the existence of a Defaulting Lender), or (y) any payment obtained by a Lender as consideration for the assignment of or sale of a participation in any of its Advances or participations in Letter of Credit Exposure to any assignee or participant, other than to the Borrower or any Subsidiary, or any Affiliate of any of the foregoing (as to which the provisions of this paragraph shall apply).

Each Credit Party consents to the foregoing and agrees, to the extent it may effectively do so under applicable Legal Requirement, that any Lender acquiring a participation pursuant to the foregoing arrangements may exercise against each Credit Party rights of setoff and counterclaim with respect to such participation as fully as if such Lender were a direct creditor of each Credit Party in the amount of such participation.

Section 2.12 Taxes.

(a) Issuing Lender. For purposes of this Section 2.12, the term “Lender” includes any Issuing Lender.

(b) Payments Free of Taxes. Any and all payments to a Recipient by or on account of any obligation of any Credit Party under any Credit Document shall be made without deduction or withholding for any Taxes, except as required by applicable Legal Requirement. If any applicable Legal Requirement (as determined in the good faith discretion of an applicable Withholding Agent) requires the deduction or withholding of any Tax from any such payment by a Withholding Agent, then the applicable Withholding Agent shall be entitled to make such deduction or withholding and shall timely pay the full amount deducted or withheld to the relevant Governmental Authority in accordance with applicable Legal Requirement and, if such Tax is an Indemnified Tax, then the sum payable by the applicable Credit Party shall be increased as necessary so that after such deduction or withholding for Indemnified Taxes has been made (including such deductions and withholdings applicable to additional sums payable under this Section) the applicable Recipient receives an amount equal to the sum it would have received had no such deduction or withholding for Indemnified Taxes been made.

(c) Payment of Other Taxes by Credit Parties. The Credit Parties shall timely pay to the relevant Governmental Authority in accordance with applicable Legal Requirement, or at the option of the Administrative Agent timely reimburse it for the payment of, any Other Taxes.

(d) Indemnification by Credit Parties. The Credit Parties shall jointly and severally indemnify each Recipient, within 10 days after written demand therefor, for the full amount of any Indemnified Taxes (including Indemnified Taxes imposed or asserted on or attributable to amounts payable under this Section) payable or paid by such Recipient or required to be withheld or deducted from a payment to such Recipient and any reasonable expenses arising therefrom or with respect thereto, whether or not such Indemnified Taxes were correctly or legally imposed or asserted by the relevant Governmental Authority. A certificate as to the amount of such payment or liability delivered to the Borrower by a Lender (with a copy to the Administrative Agent), or by the Administrative Agent on its own behalf or on behalf of a Lender, shall be conclusive absent manifest error.

(e) Indemnification by the Lenders. Each Lender shall severally indemnify the Administrative Agent, within 10 days after demand therefor, for (i) any Indemnified Taxes attributable to such Lender (but only to the extent that any Credit Party has not already indemnified the Administrative Agent for such Indemnified Taxes and without limiting the obligation of the Credit Parties to do so), (ii) any Taxes attributable to such Lender’s failure to comply with the provisions of Section 9.7(d) relating to the maintenance of a Participant Register and (iii) any Excluded Taxes attributable to such Lender, in each case, that are payable or paid by the Administrative Agent in connection with any Credit Document, and any reasonable expenses arising therefrom or with respect thereto, whether or not such Taxes were correctly or legally imposed or asserted by the relevant Governmental Authority. A certificate as to the amount of such payment or liability delivered to any Lender by the Administrative Agent shall be conclusive absent manifest error. Each Lender hereby authorizes the Administrative Agent to set off and apply any and all amounts at any time owing to such Lender under any Credit Document or otherwise payable by the Administrative Agent to the Lender from any other source against any amount due to the Administrative Agent under this paragraph (e).

(f) Evidence of Payments. As soon as practicable after any payment of Taxes by any Credit Party to a Governmental Authority pursuant to this Section 2.12, such Credit Party shall deliver to the Administrative Agent the original or a certified copy of a receipt issued by such Governmental Authority evidencing such payment, a copy of the return reporting such payment or other evidence of such payment reasonably satisfactory to the Administrative Agent.

(g) Status of Lenders.

(i) Any Lender that is entitled to an exemption from or reduction of withholding Tax with respect to payments made under any Credit Document shall deliver to the Borrower and the Administrative Agent, at the time or times reasonably requested by the Borrower or the Administrative Agent, such properly completed and executed documentation reasonably requested by the Borrower or the Administrative Agent as will permit such payments to be made without withholding or at a reduced rate of withholding. In addition, any Lender, if reasonably requested by the Borrower or the Administrative Agent, shall deliver such other documentation prescribed by applicable Legal Requirement or reasonably requested by the Borrower or the Administrative Agent as will enable the Borrower or the Administrative Agent to determine whether or not such Lender is subject to backup withholding or information reporting requirements. Notwithstanding anything to the contrary in the preceding two sentences, the completion, execution and submission of such documentation (other than such documentation set forth in Section 2.12(g)(ii)(A), and (ii)(B) below) shall not be required if in the Lender’s reasonable judgment such completion, execution or submission would subject such Lender to any material unreimbursed cost or expense or would materially prejudice the legal or commercial position of such Lender.

(ii) Without limiting the generality of the foregoing,

(A) any Lender that is a U.S. Person shall deliver to the Borrower and the Administrative Agent on or prior to the date on which such Lender becomes a Lender under this Agreement (and from time to time thereafter upon the reasonable request of the Borrower or the Administrative Agent), properly completed and executed originals of IRS Form W-9 certifying that such Lender is exempt from U.S. federal backup withholding tax;

(B) any Foreign Lender shall, to the extent it is legally entitled to do so, deliver to the Borrower and the Administrative Agent (in such number of copies as shall be requested by the recipient) on or prior to the date on which such Foreign Lender becomes a Lender under this Agreement (and from time to time thereafter upon the reasonable request of the Borrower or the Administrative Agent), whichever of the following is applicable: (i) in the case of a Foreign Lender claiming the benefits of an income tax treaty to which the United States is a party (x) with respect to payments of interest under any Credit Document, properly completed and executed originals of IRS Form W-8BEN establishing an exemption from, or reduction of, U.S. federal withholding Tax pursuant to the “interest” article of such tax treaty and (y) with respect to any other applicable payments under any Credit Document, properly completed and executed IRS Form W-8BEN establishing an exemption from, or reduction of, U.S. federal withholding Tax pursuant to the “business profits” or “other income” article of such tax treaty; (ii) properly completed and executed originals of IRS Form W-8ECI; (iii) in the case of a Foreign Lender claiming the benefits of the exemption for portfolio interest under Section 881(c) of the Code, (x) a certificate substantially in the form of Exhibit I-1 to the effect that such Foreign Lender is not a “bank” within the meaning of Section 881(c)(3)(A) of the Code, a “10 percent shareholder” of the Borrower within the meaning of Section 881(c)(3)(B) of the Code, or a “controlled foreign corporation” described in Section 881(c)(3)(C) of the Code (a “U.S. Tax Compliance Certificate”) and (y) properly completed and executed originals of IRS Form W-8BEN; or (iv) to the extent a Foreign Lender is not the beneficial owner, properly completed and executed originals of IRS Form W-8IMY, accompanied by properly completed and executed originals of IRS Form W-8ECI, IRS Form W-8BEN, a U.S. Tax Compliance Certificate substantially in the form of Exhibit I-2 or Exhibit I-3, IRS Form W-9, and/or other certification documents from each beneficial owner, as applicable; provided that if the Foreign Lender is a partnership and one or more direct or indirect partners of such Foreign Lender are claiming the portfolio interest exemption, such Foreign Lender may provide a U.S. Tax Compliance Certificate substantially in the form of Exhibit I-4 on behalf of each such direct and indirect partner;

(C) any Foreign Lender shall, to the extent it is legally entitled to do so, deliver to the Borrower and the Administrative Agent (in such number of copies as shall be requested by the recipient) on or prior to the date on which such Foreign Lender becomes a Lender under this Agreement (and from time to time thereafter upon the reasonable request of the Borrower or the Administrative Agent), executed originals of any other form prescribed by applicable Legal Requirement as a basis for claiming exemption from or a reduction in U.S. federal withholding Tax, duly completed, together with such supplementary documentation as may be prescribed by applicable Legal Requirement to permit the Borrower or the Administrative Agent to determine the withholding or deduction required to be made; and

(D) if a payment made to a Lender under any Credit Document would be subject to U.S. federal withholding Tax imposed by FATCA if such Lender were to fail to comply with the applicable reporting requirements of FATCA (including those contained in Section 1471(b) or 1472(b) of the Code, as applicable), such Lender shall deliver to the Borrower and the Administrative Agent at the time or times prescribed by Legal Requirement and at such time or times reasonably requested by the Borrower or the Administrative Agent such documentation prescribed by applicable Legal Requirement (including as prescribed by Section 1471(b)(3)(C)(i) of the Code) and such additional documentation reasonably requested by the Borrower or the Administrative Agent as may be necessary for the Borrower and the Administrative Agent to comply with their obligations under FATCA and to determine that such Lender has complied with such Lender’s obligations under FATCA or to determine the amount to deduct and withhold from such payment. Solely for purposes of this clause (D), “FATCA” shall include any amendments made to FATCA after the date of this Agreement.

Each Lender agrees that if any form or certification it previously delivered expires or becomes obsolete or inaccurate in any respect, it shall update such form or certification or promptly notify the Borrower and the Administrative Agent in writing of its legal inability to do so.

(h) Treatment of Certain Refunds. If any party determines, in its sole discretion, that it has received a refund of any Taxes as to which it has been indemnified pursuant to this Section 2.12 (including by the payment of additional amounts pursuant to this Section 2.12), it shall pay to the indemnifying party an amount equal to such refund (but only to the extent of indemnity payments made under this Section with respect to the Taxes giving rise to such refund), net of all out-of-pocket expenses (including Taxes) of such indemnified party and without interest (other than any interest paid by the relevant Governmental Authority with respect to such refund). Such indemnifying party, upon the request of such indemnified party, shall repay to such indemnified party the amount paid over pursuant to this paragraph (h) (plus any penalties, interest or other charges imposed by the relevant Governmental Authority) in the event that such indemnified party is required to repay such refund to such Governmental Authority. Notwithstanding anything to the contrary in this paragraph (h), in no event will the indemnified party be required to pay any amount to an indemnifying party pursuant to this paragraph (h) the payment of which would place the indemnified party in a less favorable net after-Tax position than the indemnified party would have been in if the indemnification payments or additional amounts giving rise to such refund had never been paid. This paragraph shall not be construed to require any indemnified party to make available its Tax returns (or any other information relating to its Taxes that it deems confidential) to the indemnifying party or any other Person.

(i) Survival. Each party’s obligations under this Section 2.12 shall survive the resignation or replacement of the Administrative Agent or any assignment of rights by, or the replacement of, a Lender, the termination of the Commitments and the repayment, satisfaction or discharge of all obligations under any Credit Document.

Section 2.13 Mitigation Obligations; Replacement of Lenders.

(a) Designation of a Different Lending Office. If any Lender requests compensation under Section 2.10, or requires the Borrower or any Guarantor to pay any Indemnified Taxes or additional amounts to any Lender or any Governmental Authority for the account of any Lender pursuant to Section 2.12, then such Lender shall (at the request of the Borrower) use reasonable efforts to designate a different lending office for funding or booking its Advances hereunder or to assign its rights and obligations hereunder to another of its offices, branches or affiliates, if, in the reasonable judgment of such Lender, such designation or assignment (i) would eliminate or reduce amounts payable pursuant to Section 2.10 or 2.12, as the case may be, in the future, and (ii) would not subject such Lender to any unreimbursed cost or expense and would not otherwise be disadvantageous to such Lender. The Borrower hereby agrees to pay all reasonable costs and expenses incurred by any Lender in connection with any such designation or assignment.

(b) Replacement Lender. If any Lender requests compensation under Section 2.10, or if the Borrower or any Guarantor is required to pay any Indemnified Taxes or additional amounts to any Lender or any Governmental Authority for the account of any Lender pursuant to Section 2.12 and, in each case, such Lender has declined or is unable to designate a different lending office in accordance with Section 2.13(a), or if any Lender is a Defaulting Lender or a Non-Consenting Lender, then the Borrower may, at its sole expense and effort (and in the case of a Defaulting Lender, the Administrative Agent may) upon notice to such Lender and the Administrative Agent, require such Lender to assign and delegate, without recourse (in accordance with and subject to the restrictions contained in, and consents required by, Section 9.7), all of its interests, rights (other than its existing rights to payments pursuant to Section 2.10 or Section 2.12) and obligations under this Agreement and the related Credit Documents to an Eligible Assignee that shall assume such obligations (which assignee may be another Lender, if a Lender accepts such assignment); provided that:

(i) as to assignments required by the Borrower, the Borrower shall have paid to the Administrative Agent the assignment fee (if any) specified in Section 9.7, unless such fee has been waived by the Administrative Agent;

(ii) such Lender shall have received payment of an amount equal to the outstanding principal of its applicable Advances and participations in outstanding Letter of Credit Obligations, accrued interest thereon, accrued fees and all other amounts payable to it hereunder and under the other Credit Documents (including any amounts under Section 2.9) from the assignee (to the extent of such outstanding principal and accrued interest and fees) or the Borrower (in the case of all other amounts);

(iii) in the case of any such assignment resulting from a claim for compensation under Section 2.10 or payments required to be made pursuant to Section 2.12, such assignment will result in a reduction in such compensation or payments thereafter;

(iv) such assignment does not conflict with applicable Legal Requirement;

(v) with respect to a Non-Consenting Lender, the proposed amendment, modification, waiver, consent or release with respect to this Agreement or any other Credit Document has been approved by the Majority Lenders and such agreement, amendment, waiver, consent or release can be effected as a result of such assignment (and, if applicable, one or more other assignments) contemplated by this Section; and

(vi) if such Lender is being replaced solely as a result of it being a Defaulting Lender, then such Lender may only be replaced in its capacity as a Revolving Lender and, if it has any unused CapEx Commitment, in its capacity as a CapEx Lender but, in any event, if its CapEx Commitment is fully funded, then not in its capacity as a CapEx Lender.

A Lender shall not be required to make any such assignment or delegation if, prior thereto, as a result of a waiver by such Lender or otherwise, the circumstances entitling the Borrower or the Administrative Agent to require such assignment and delegation cease to apply. Solely for purposes of effecting any assignment involving a Defaulting Lender under this Section 2.13 and to the extent permitted under applicable Legal Requirements, each Lender hereby designates and appoints the Administrative Agent as true and lawful agent and attorney-in-fact, with full power and authority, for and on behalf of and in the name of such Lender to execute, acknowledge and deliver the Assignment and Acceptance required hereunder if such Lender is a Defaulting Lender and such Lender shall be bound thereby as fully and effectively as if such Lender had personally executed, acknowledged and delivered the same. In lieu of the Borrower or the Administrative Agent replacing a Defaulting Lender as provided in this Section 2.13, the Borrower may terminate such Defaulting Lender’s applicable Commitment as provided in Section 2.1(c)(iii).

Section 2.14 Defaulting Lender.

(a) Defaulting Lender Adjustments. Notwithstanding anything to the contrary contained in this Agreement, if any Lender becomes a Defaulting Lender, then, until such time as such Lender is no longer a Defaulting Lender, to the extent permitted by applicable Legal Requirement:

(i) Waivers and Amendments. Such Defaulting Lender’s right to approve or disapprove any amendment, waiver or consent with respect to this Agreement shall be restricted as set forth in the definition of Majority Lenders.

(ii) Defaulting Lender Waterfall. Any payment of principal, interest, fees or other amounts received by the Administrative Agent for the account of such Defaulting Lender (whether voluntary or mandatory, at maturity, pursuant to Article 8 or otherwise) or received by the Administrative Agent from a Defaulting Lender pursuant to Section 7.4 shall be applied at such time or times as may be determined by the Administrative Agent as follows: first, to the payment of any amounts owing by such Defaulting Lender to the Administrative Agent hereunder; second, to the payment on a pro rata basis of any amounts owing by such Defaulting Lender to the Issuing Lender or Swing Line Lender hereunder; third, to Cash Collateralize the Issuing Lender’s Fronting Exposure with respect to such Defaulting Lender in accordance with Section 2.2(i) and the Swing Line Lender’s Fronting Exposure, if any, with respect to such Defaulting Lender; fourth, as the Borrower may request (so long as no Default or Event of Default exists), to the funding of any Advance hereunder in respect of which such Defaulting Lender has failed to fund its portion thereof as required by this Agreement, as determined by the Administrative Agent; fifth, if so determined by the Administrative Agent and the Borrower, to be held in a deposit account and released pro rata in order to (x) satisfy such Defaulting Lender’s current or potential future funding obligations with respect to Advances under this Agreement and (y) Cash Collateralize the Issuing Lender’s future Fronting Exposure with respect to such Defaulting Lender with respect to future Letters of Credit issued under this Agreement, in accordance with Section 2.2(i) and the Swing Line Lender’s Fronting Exposure with respect to such Defaulting Lender with respect to future Swing Line Advances; sixth, to the payment of any amounts owing to the Lenders, the Issuing Lender or the Swing Line Lender as a result of any judgment of a court of competent jurisdiction obtained by any Lender, the Issuing Lender or the Swing Line Lender against such Defaulting Lender as a result of such Defaulting Lender’s breach of its obligations under this Agreement; seventh, so long as no Default or Event of Default exists, to the payment of any amounts owing to the Borrower as a result of any judgment of a court of competent jurisdiction obtained by the Borrower against such Defaulting Lender as a result of such Defaulting Lender’s breach of its obligations under this Agreement; and eighth, to such Defaulting Lender or as otherwise directed by a court of competent jurisdiction; provided that if (x) such payment is a payment of the principal amount of any Advances or Letter of Credit Obligations in respect of which such Defaulting Lender has not fully funded its appropriate share, and (y) such Advances were made or the related Letters of Credit were issued at a time when the conditions set forth in Section 3.2 were satisfied or waived, such payment shall be applied solely to pay the Advances of, and Letter of Credit Obligations owed to, all Non-Defaulting Lenders on the applicable pro rata basis prior to being applied to the payment of any Advances of, or Letter of Credit Obligations owed to, such Defaulting Lender until such time as all Advances and funded and unfunded participations in Letter of Credit Obligations and Swing Line Advances are held by the Revolving Lenders pro rata in accordance with the applicable Commitments without giving effect to Section 2.14(a)(iv). Any payments, prepayments or other amounts paid or payable to a Defaulting Lender that are applied (or held) to pay amounts owed by a Defaulting Lender or to post Cash Collateral pursuant to this Section 2.14(a)(ii) shall be deemed paid to and redirected by such Defaulting Lender, and each Lender irrevocably consents hereto.

(iii) Certain Fees.

(A) No Defaulting Lender shall be entitled to receive any Commitment Fee for any period during which that Lender is a Defaulting Lender (and the Borrower shall not be required to pay any such fee that otherwise would have been required to have been paid to that Defaulting Lender).

(B) Each Defaulting Lender shall be entitled to receive fees under Section 2.6(b)(i) for any period during which that Lender is a Defaulting Lender only to the extent allocable to its Revolving Pro Rata Share of the stated amount of Letters of Credit for which it has provided Cash Collateral pursuant to Section 2.2(i).

(C) With respect to any fee under Section 2.6(b)(i) not required to be paid to any Defaulting Lender pursuant to clause (A) or (B) above, the Borrower shall (x) pay to each Non-Defaulting Lender that portion of any such fee otherwise payable to such Defaulting Lender with respect to such Defaulting Lender’s participation in Letter of Credit Exposure that has been reallocated to such Non-Defaulting Lender pursuant to clause (iv) below, (y) pay to the Issuing Lender the amount of any such fee otherwise payable to such Defaulting Lender to the extent allocable to the Issuing Lender’s Fronting Exposure to such Defaulting Lender, and (z) not be required to pay the remaining amount of any such fee.

(iv) Reallocation of Participations to Reduce Fronting Exposure. All or any part of such Defaulting Lender’s participation in Letter of Credit Exposure and Swing Line Advances shall be reallocated among the Non-Defaulting Lenders in accordance with their respective Revolving Pro Rata Share (calculated without regard to such Defaulting Lender’s Commitment) but only to the extent that (x) the conditions set forth in Section 3.2 are satisfied at the time of such reallocation (and, unless the Borrower shall have otherwise notified the Administrative Agent at such time, the Borrower shall be deemed to have represented and warranted that such conditions are satisfied at such time), and (y) such reallocation does not cause the aggregate Revolving Outstandings of any Non-Defaulting Lender to exceed such Non-Defaulting Lender’s Revolving Commitment. No reallocation hereunder shall constitute a waiver or release of any claim of any party hereunder against a Defaulting Lender arising from that Lender having become a Defaulting Lender, including any claim of a Non-Defaulting Lender as a result of such Non-Defaulting Lender’s increased exposure following such reallocation.

(v) Cash Collateral, Repayment of Swing Line Advances. If the reallocation described in clause (iv) above cannot, or can only partially, be effected, the Borrower shall, without prejudice to any right or remedy available to it hereunder or under Legal Requirement, (x) first, prepay Swing Line Advances in an amount equal to the Swing Line Lender’s Fronting Exposure and (y) second, Cash Collateralize the Issuing Lender’s Fronting Exposure in accordance with the procedures set forth in Section 2.2(i).

(b) Defaulting Lender Cure. If the Borrower, the Administrative Agent, the Swing Line Lender and the Issuing Lender agree in writing that a Lender is no longer a Defaulting Lender, the Administrative Agent will so notify the parties hereto, whereupon as of the effective date specified in such notice and subject to any conditions set forth therein (which may include arrangements with respect to any Cash Collateral), that Lender will, to the extent applicable, purchase at par that portion of outstanding Revolving Advances or the Term Advances, as applicable, of the other Lenders or take such other actions as the Administrative Agent may determine to be necessary to cause the Advances and funded and unfunded participations in Letters of Credit and Swing Line Advances to be held pro rata by the Lenders in accordance with their respective Commitments (without giving effect to Section 2.14(a)(iv), whereupon such Lender will cease to be a Defaulting Lender; provided that no adjustments will be made retroactively with respect to fees accrued or payments made by or on behalf of the Borrower while that Lender was a Defaulting Lender; and provided, further, that except to the extent otherwise expressly agreed by the affected parties, no change hereunder from Defaulting Lender to Lender will constitute a waiver or release of any claim of any party hereunder arising from that Lender’s having been a Defaulting Lender. Notwithstanding the above, the Borrower’s and the Administrative Agent’s right to replace a Defaulting Lender pursuant to this Agreement shall be in addition to, and not in lieu of, all other rights and remedies available to the Borrower or the Administrative Agent against such Defaulting Lender under this Agreement, at law, in equity or by statute.

(c) Letters of Credit. So long as any Lender is a Defaulting Lender, the Issuing Lender shall not be required to issue, extend, renew or increase any Letter of Credit unless it is satisfied that it will have no Fronting Exposure after giving effect thereto.

(d) Swing Line Advances. So long as any Lender is a Defaulting Lender, the Swing Line Lender shall not be required to make any Swing Line Advances unless it is satisfied that it will have no Fronting Exposure after giving effect thereto.

ARTICLE 3
CONDITIONS OF LENDING

Section 3.1 Conditions Precedent to Initial Borrowings and the Initial Letter of Credit. The obligations of each Lender to make the initial Advance and an initial Letter of Credit, shall be subject to the conditions precedent that:

(a) Documentation. The Administrative Agent shall have received the following, duly executed by all the parties thereto, in form and substance reasonably satisfactory to the Administrative Agent and the Lenders:

(i) this Agreement and all attached Exhibits and Schedules and the Notes, if requested by the applicable Lenders, payable to the order of each applicable Lender;

(ii) the Guaranty executed by all Subsidiaries existing on the Closing Date, including Aly Operating, Austin Chalk Corp., and Aly Centrifuge;

(iii) the Security Agreement executed by each Credit Party, together with appropriate UCC-1 financing statements, if any, necessary or desirable for filing with the appropriate authorities and any other documents, agreements, or instruments as the Administrative Agent may request which are necessary to create, perfect or maintain an Acceptable Security Interest in the Collateral described in the Security Agreement;

(iv) certificates of insurance naming the Administrative Agent as loss payee or additional insured, as applicable, with respect to all insurance policies required by Section 5.3;

(v) a certificate from an authorized officer of the Borrower dated as of the Closing Date stating that as of such date (A) all representations and warranties of the Borrower set forth in this Agreement are true and correct, (B) no Default has occurred and is continuing; and (C) all conditions precedent set forth in this Section 3.1 have been met (with the assumption that, as to any conditions precedent that are subject to the satisfaction, or at the request of, the Administrative Agent or the Lenders, the Administrative Agent and the Lenders are satisfied and have made all necessary or desired requests);

(vi) a secretary’s certificate from each Credit Party certifying such Person’s (A) officers’ incumbency, (B) authorizing resolutions, (C) organizational documents, and (D) governmental approvals, if any, required to be obtained by such Credit Party with respect to the Credit Documents to which such Person is a party;

(vii) certificates of good standing for each Credit Party in each state in which each such Person is organized or qualified to do business, which certificate shall be (A) dated a date not earlier than 30 days prior to Closing Date or (B) otherwise effective on the Closing Date;

(viii) a legal opinion of Hallett & Perrin, P.C. as outside counsel to the Credit Parties in form and substance reasonably acceptable to the Administrative Agent;

(ix) copies, certified by a Responsible Officer of the Borrower, of the Centrifuge Acquisition Agreement and other Centrifuge Acquisition Documents, and all exhibits and schedules thereto, together with all amendments, modifications or waivers thereto in effect as of the date of this Agreement;

(x) the Assumption Agreement executed by the Borrower and the Existing Borrower; and

(xi) such other documents, governmental certificates, agreements, and lien searches as the Administrative Agent or any Lender may reasonably request.

(b) Consents; Authorization; Conflicts. The Borrower shall have received any consents, permits, licenses and approvals required to be obtained in accordance with applicable Legal Requirement, or in accordance with any document, agreement, instrument or arrangement to which any Credit Party is a party, in connection with the execution, delivery, performance, validity and enforceability of this Agreement and the other Credit Documents. In addition, the Credit Parties shall have all such material consents, licenses and approvals required in connection with their continued operation, and such approvals shall be in full force and effect, and all applicable waiting periods shall have expired without any action being taken or threatened by any competent authority which would restrain, prevent or otherwise impose adverse conditions on this Agreement and the actions contemplated hereby.

(c) Representations and Warranties. The representations and warranties contained in Article 4 and in each other Credit Document shall be true and correct on and as of the Closing Date, after giving effect to the Transactions.

(d) Fee Letter; Payment of Fees. The Borrower shall have paid the fees and expenses required to be paid as of the Closing Date in the Fee Letter and such fees and expenses required to be paid as of the Closing Date pursuant to Sections 2.6(c) and 9.1 or any other provision of a Credit Document; provided that, as to legal expenses, to the extent the Borrower has received an invoice therefor at or before 12:00 p.m., Eastern time, one Business Day prior to the Closing Date.

(e) Other Proceedings. No action, suit, investigation or other proceeding (including without limitation, the enactment or promulgation of a statute or rule) by or before any arbitrator or any Governmental Authority shall be pending or, to the knowledge of the Borrower, threatened, and no preliminary or permanent injunction or order by a state or federal court shall have been entered (i) in connection with this Agreement, any other Credit Document, or any transaction contemplated hereby or thereby or (ii) which, in the judgment of the Administrative Agent, could reasonably be expected to result in a Material Adverse Change.

(f) Material Adverse Change. Since December 31, 2013, there shall not have occurred any event, development or circumstance that has or could reasonably be expected to result in a Material Adverse Change.

(g) No Default. No Default shall have occurred and be continuing.

(h) Solvency. The Administrative Agent shall have received a certificate in form and substance reasonably satisfactory to the Administrative Agent from a senior financial officer or such other officer acceptable to the Administrative Agent of the Borrower and each Guarantor certifying that, before and after giving effect to the Transactions, (i) the Borrower is solvent on an individual basis, and (ii) that the Borrower and each such other Guarantor are solvent on a consolidated basis (assuming with respect to each Guarantor, that the fraudulent conveyance savings language contained in the Guaranty applicable to such Guarantor will be given full effect).

(i) Delivery of Financial Statements. The Administrative Agent shall have received true and correct copies of (i) the Financial Statements referred to in Section 4.4, including the certificates described therein, (ii) projections prepared by management of balance sheets, income statements and cash flow statements of the Borrower and its Subsidiaries, covering the first four full years after the Closing Date, such projections shall be quarterly for the first full year after the Closing Date and annually thereafter (and which projections shall not be inconsistent with information previously provided to the Lender) and (iii) a pro forma balance sheet of the Borrower and its consolidated Subsidiaries as of the Closing Date calculated giving pro forma effect to the Transactions.

(j) USA Patriot Act. The Administrative Agent shall have received all documentation and other information requested by it that is required by regulatory authorities under applicable “know your customer” and anti-money-laundering rules and regulations, including, without limitation, the Patriot Act.

(k) Capital Structure. The equity, capital and ownership structure and the equityholder arrangements of the Borrower and its Subsidiaries (and all agreements relating thereto) will be reasonably satisfactory to the Administrative Agent.

(l) Due Diligence. The Administrative Agent shall have completed and be satisfied in its sole discretion with the corporate (or other organizational), environmental and financial due diligence of the Credit Parties and their Affiliates.

(m) Landlord Agreements. The Administrative Agent shall have received lien waivers or subordination agreements in form and substance satisfactory to the Administrative Agent to the extent required by Section 6.20 (other than for the lease of Austin Chalk with B&L Storage located in San Angelo, Texas).

(n) Deposit Account. The Borrower (and any Subsidiary thereof listed on the schedules to any Security Document as being in existence on the Closing Date) shall open a deposit account with the Administrative Agent, which shall be its primary deposit account, and which account shall be maintained throughout the term of this Agreement.

(o) Certificates of Title. For each piece of Certificated Equipment (other than (i) the Certificated Equipment listed on Schedule 3.1(q) hereto and (ii) Excluded Certificated Equipment) owned by the Borrower or any Subsidiary, the Administrative Agent shall have received the original certificate of title to such equipment and such other documents, agreements or instruments as the Administrative Agent may request which are required in order to evidence the Administrative Agent’s first priority lien on the certificate of title for such Certificated Equipment.

(p) Liens. The Administrative Agent shall have received evidence satisfactory to it that there are no Liens encumbering any of the Credit Parties’ respective Property other than Permitted Liens.

(q) Material Agreements. The Administrative Agent shall have received true and complete copies of the Material Agreements (and certified as such by the Borrower) and the Administrative Agent shall be satisfied with the terms thereof.

(r) Centrifuge Acquisition. All conditions to the consummation and effectiveness of the Centrifuge Acquisition (other than the payment of the purchase price) shall have been satisfied or waived. Furthermore, the Administrative Agent shall have received (i) payoff letters, if any, in form and substance reasonably satisfactory to the Administrative Agent covering all debt secured by liens (other than those which would constitute Permitted Liens hereunder) that encumber any of the properties being purchased by Borrower under the Centrifuge Acquisition and (ii) UCC financing statement terminations, deed of trust and mortgage lien releases and other evidence reasonably required by the Administrative Agent shall have been delivered to the Administrative Agent such that, subject only to appropriate filing or recording thereof, all liens (other than those which would constitute Permitted Liens hereunder) encumbering the Centrifuge Properties to be acquired by Borrower have been terminated or released.

(s) Preferred Equity Investments. The Administrative Agent shall have received evidence satisfactory to it that the Preferred Equity Investment was consummated on terms and subject to the conditions set forth in the Centrifuge Acquisition Agreement and that the Preferred Equity Investment was otherwise on terms reasonably acceptable to the Administrative Agent.

Section 3.2 Conditions Precedent to Each Borrowing and to Each Issuance, Extension or Renewal of a Letter of Credit. The obligation of each Lender to make an Advance on the occasion of each Borrowing (including the initial Borrowing), the obligation of each Issuing Lender to issue, increase, renew or extend a Letter of Credit (including the deemed issuance of Letters of Credit) and of any reallocation of Letter of Credit Exposure provided in Section 2.14, shall be subject to the further conditions precedent that on the date of such Borrowing or such issuance, increase, renewal or extension:

(a) Representations and Warranties. As of the date of the making of any Advance or issuance, increase, renewal or extension of any Letter of Credit or the reallocation of the Letter of Credit Exposure, the representations and warranties made by any Credit Party contained in the Credit Documents shall be true and correct in all material respects (except that such materiality qualifier shall not be applicable to any representations and warranties that already are qualified or modified by materiality in the text thereof) on such date, except that any representation and warranty which by its terms is made as of a specified date shall be required to be true and correct only as of such specified date and each request for the making of any Advance or issuance, increase, renewal or extension of any Letter of Credit and the making of such Advance or the issuance, increase, renewal or extension of such Letter of Credit shall be deemed to be a reaffirmation of such representations and warranties. Each of: (i) the giving of the applicable Notice of Borrowing or Letter of Credit Application, (ii) the acceptance by the Borrower of the proceeds of such Borrowing, (iii) the issuance, increase, or extension of such Letter of Credit, and (iv) the reallocation of the Letter of Credit Exposure, shall constitute a representation and warranty by the Borrower that on the date of such Borrowing, such issuance, increase, or extension of such Letter of Credit or such reallocation, as applicable, that the foregoing condition precedent has been met.

(b) Event of Default. As of the date of the making of any Advance, the issuance, increase, renewal or extension of any Letter of Credit, or the reallocation of the Letter of Credit Exposure, as applicable, no Default or Event of Default shall exist, and the making of such Advance or issuance, increase, renewal or extension of such Letter of Credit, or the relocation of the Letter of Credit Exposure would not cause a Default or Event of Default. Each of: (i) the giving of the applicable Notice of Borrowing or Letter of Credit Application, (ii) the acceptance by the Borrower of the proceeds of such Borrowing, (iii) the issuance, increase, or extension of such Letter of Credit, and (iv) the reallocation of the Letter of Credit Exposure, shall constitute a representation and warranty by the Borrower that on the date of such Borrowing, such issuance, increase, or extension of such Letter of Credit or such reallocation, as applicable, that the foregoing condition precedent has been met.

Section 3.3 Conditions Precedent to Effectiveness of Revolving Facility. The obligation of each Lender to make the initial Advance under the Revolving Facility and an initial Letter of Credit, shall be subject to the further conditions precedent that:

(a) Borrowing Base Certificate. The Administrative Agent shall have received a completed Borrowing Base Certificate duly executed by a financial officer of the Borrower, setting forth the calculation of the initial Borrowing Base as of the last day of the month preceding the date of the initial Advance under the Revolving Facility or the initial Letter of Credit.

(b) Appraisal Report. The Administrative Agent shall have received a written appraisal conducted by an industry recognized third party appraiser acceptable to the Administrative Agent stating, among other things, a detailed NOLV for machinery, parts, equipment and other fixed assets, of the Credit Parties, together with a specified procedures letter from such appraiser satisfactory to the Administrative Agent in its sole discretion.

(c) Collateral Lists; Aging Reports; Miscellaneous Due Diligence. The Administrative Agent shall have received or completed, and be satisfied with the result of, (i) an aging report of the Credit Parties’ Receivables which are included in the initial Borrowing Base calculated under the Borrowing Base Certificate delivered pursuant to clause (k) above, (ii) an aging report of the Credit Parties’ accounts payable, (iii) a listing of the Credit Parties’ fixed assets, (iv) a completed Schedule 3.1 which shall list all real property owned or leased by the Credit Parties and including a notation as to all locations where any equipment or inventory of any Credit Party is kept, and (v) a list of the top ten customers of the Credit Parties.

Section 3.4 Conditions Precedent to Each CapEx Borrowing. The obligation of each CapEx Lender to make a CapEx Advance on the occasion of each CapEx Borrowing shall be subject to the further conditions precedent set forth in Schedule IV.

Section 3.5 Determinations Under Sections 3.1, 3.2, 3.3 and 3.4. For purposes of determining compliance with the conditions specified in Sections 3.1, 3.2, 3.3 and 3.4 each Lender shall be deemed to have consented to, approved or accepted or to be satisfied with each document or other matter required thereunder to be consented to or approved by or acceptable or satisfactory to the Lenders unless an officer of the Administrative Agent responsible for the transactions contemplated by the Credit Documents shall have received written notice from such Lender prior to the Borrowings hereunder specifying its objection thereto and such Lender shall not have made available to the Administrative Agent such Lender’s ratable portion of such Borrowings.

ARTICLE 4
REPRESENTATIONS AND WARRANTIES

Each Credit Party hereto represents and warrants as follows:

Section 4.1 Organization. Each Credit Party is duly and validly organized and existing and in good standing under the laws of its jurisdiction of incorporation or formation. Each Credit Party is authorized to do business and is in good standing in all jurisdictions in which such qualifications or authorizations are necessary except where the failure to be so qualified or authorized could not reasonably be expected to result in a Material Adverse Change. As of the Closing Date, each Credit Party’s type of organization and jurisdiction of incorporation or formation are set forth on Schedule 4.1.

Section 4.2 Authorization. The execution, delivery, and performance by each Credit Party of each Credit Document to which such Credit Party is a party and the consummation of the transactions contemplated thereby (a) are within such Credit Party’s powers, (b) have been duly authorized by all necessary corporate, limited liability company or partnership action, (c) do not contravene such Credit Party’s articles or certificate of incorporation or bylaws, partnership or limited liability company agreement, (d) do not contravene any law or any contractual restriction applicable to such Credit Party, (e) do not result in or require the creation or imposition of any Lien on the Property of such Credit Party prohibited by this Agreement, and (f) do not require any authorization or approval or other action by, or any notice or filing with, any Governmental Authority other than those that have been obtained. At the time of each Advance or the issuance, renewal, extension or increase of each Letter of Credit, such Advance and the use of the proceeds of such Advance or the issuance, renewal, extension or increase of such Letter of Credit are within the Borrower’s corporate powers, have been duly authorized by all necessary action and do not contravene (i) the Borrower’s certificate of incorporation or bylaws, or (ii) any Legal Requirement or any contractual restriction binding on the Borrower, will not result in or require the creation or imposition of any Lien on the Property of the Borrower prohibited by this Agreement, and do not require any authorization or approval or other action by, or any notice or filing with, any Governmental Authority other than those that have been obtained or provided.

Section 4.3 Enforceability. The Credit Documents have each been duly executed and delivered by each Credit Party that is a party thereto and each Credit Document constitutes the legal, valid, and binding obligation of each Credit Party that is a party thereto enforceable against such Credit Party in accordance with its terms, except as limited by applicable bankruptcy, insolvency, reorganization, moratorium, or similar laws at the time in effect affecting the rights of creditors generally and by general principles of equity whether applied by a court of law or equity.

Section 4.4 Financial Condition.

(a) The Borrower has delivered to the Administrative Agent (i) a consolidated and consolidating balance sheet of the Borrower and its Subsidiaries as at the end of the fiscal year ended December 31, 2013, and the related consolidated and consolidating statements of income or operations, shareholders’ equity and cash flows for such fiscal year, setting forth in each case in comparative form the figures for the previous fiscal year, all in reasonable detail and prepared in accordance with GAAP, such consolidated statements to be audited and accompanied by a report and opinion of an independent certified public accountant of nationally or regionally recognized standing reasonably acceptable to the Administrative Agent, which report and opinion shall be prepared in accordance with generally accepted auditing standards and shall not be subject to any “going concern” or like qualification or exception or any qualification or exception as to the scope of such audit, and such consolidating statements to be certified by the chief executive officer or chief financial officer of the Borrower, to the effect that (A) such statements fairly present, in all material respects, the financial condition, results of operations, shareholders’ equity and cash flows of the Borrower and its Subsidiaries in accordance with GAAP, and (B) there were no material contingent obligations, liabilities for taxes, unusual forward or long-term commitments, or unrealized or anticipated losses of the Borrower and its Subsidiaries, except as disclosed therein and adequate reserves for such items have been made in accordance with GAAP, (ii) a copy of the management discussion and analysis with respect to such financial statements, and (iii) a duly completed Compliance Certificate signed by the chief financial officer, treasurer, controller, or manager of finance of the Borrower, setting forth the calculations of, among other things, the Leverage Ratio, the Fixed Charge Coverage Ratio, and Capital Expenditures, in each case, as of the fiscal year ended December 31, 2013.

(b) The Borrower has delivered to the Administrative Agent consolidated unaudited financial statements for United Centrifuge and its Subsidiaries for the fiscal year 2013. The financial statements referred to in the preceding sentence fairly present, in all material respects, the financial condition of United Centrifuge and its Subsidiaries on the date thereof and the results of their operations and cash flows for the periods then ended and have been prepared in accordance with GAAP, subject only to normal year-end audit adjustments and the absence of footnotes. As of the date of the aforementioned financial statements, there were no material contingent obligations, liabilities for taxes, unusual forward or long term commitments, or unrealized or anticipated losses of the applicable Persons, except as disclosed therein and adequate reserves for such items have been made in accordance with GAAP.

(c) Since the Closing Date, after giving pro forma effect to the Transactions, no event or circumstance that could reasonably be expected to cause a Material Adverse Change has occurred.

Section 4.5 Ownership and Liens; Real Property. Each Credit Party (a) has good and marketable title to, or a valid and subsisting leasehold interest in, all of its real Property, and good title to all of its personal Property, used in its business, and (b) none of the Property owned by the Borrower or a Subsidiary of the Borrower is subject to any Lien except Permitted Liens. As of the Closing Date, the Borrower and its Subsidiaries neither own nor lease any real property other than that listed on Schedule 3.1 and all equipment (other than office equipment and equipment located on jobsites, in transit or off location for servicing, repairs or modifications) owned by the Borrower and its Subsidiaries is located at the fee owned or leased real property listed on Schedule 3.1.

Section 4.6 True and Complete Disclosure. None of the written factual information (whether delivered before or after the date of this Agreement) prepared by or on behalf of the Borrower and its Subsidiaries and furnished to the Administrative Agent or the Lenders for purposes of or in connection with this Agreement, any other Credit Document or any transaction contemplated hereby or thereby (other than projections, estimates, and budgets) contains any material misstatement of fact or omits to state any material fact necessary to make the statements therein not misleading. There is no fact known to any Responsible Officer of any Credit Party on the date of this Agreement that has not been disclosed to the Administrative Agent that could reasonably be expected to result in a Material Adverse Change. All projections, estimates, budgets, and pro forma financial information furnished by the Borrower or any of its Subsidiaries (or on behalf of the Borrower or any such Subsidiary), were prepared on the basis of assumptions, data, information, tests, or conditions (including current and reasonably foreseeable business conditions) believed to be reasonable at the time such projections, estimates, and pro forma financial information were furnished.

Section 4.7 Litigation. Except as otherwise provided in Schedule 4.7, there are no actions, suits, or proceedings by or before any Governmental Authority pending or, to any Credit Party’s knowledge, threatened against the Borrower or any Subsidiary, at law, in equity, or in admiralty which could reasonably be expected to result in a Material Adverse Change. Additionally, except as disclosed in writing to the Administrative Agent and the Lenders, there is no pending or, to the knowledge of any Credit Party, threatened action or proceeding instituted against the Borrower or any Subsidiary which seeks to adjudicate the Borrower or any Subsidiary as bankrupt or insolvent, or seeking liquidation, winding up, reorganization, arrangement, adjustment, protection, relief, or composition of it or its debts under any Debtor Relief Law, or seeking the entry of an order for relief or the appointment of a receiver, trustee or other similar official for it or for any substantial part of its Property.

Section 4.8 Compliance with Agreements.

(a) Neither the Borrower nor any of its Subsidiaries is a party to any indenture, loan or credit agreement or any lease or any other types of agreement or instrument or subject to any charter or corporate restriction or provision of applicable Legal Requirement the performance of or compliance with which could reasonably be expected to cause a Material Adverse Change. Neither the Borrower nor any of its Subsidiaries is in default under, or has received a notice of default under, any contract, agreement, lease or any other document or instrument to which the Borrower or its Subsidiaries is a party which is continuing and which, if not cured, could reasonably be expected to cause a Material Adverse Change.

(b) No Default has occurred and is continuing.

Section 4.9 Pension Plans. (a) Except for matters that could not reasonably be expected to result in a Material Adverse Change, all Plans are in compliance with all applicable provisions of ERISA, (b) no Termination Event has occurred with respect to any Plan that would result in an Event of Default under Section 7.1(i), and, except for matters that could not reasonably be expected to result in a Material Adverse Change, each Plan has complied with and been administered in accordance with applicable provisions of ERISA and the Code, (c) no “accumulated funding deficiency” (as defined in Section 302 of ERISA) has occurred, and for plan years after December 31, 2007, no unpaid minimum required contribution exists, and there has been no excise tax imposed under Section 4971 of the Code, (d) to the knowledge of Credit Parties, no Reportable Event has occurred with respect to any Multiemployer Plan, and each Multiemployer Plan has complied with and been administered in accordance with applicable provisions of ERISA and the Code, (e) the present value of all benefits vested under each Plan (based on the assumptions used to fund such Plan) did not, as of the last annual valuation date applicable thereto, exceed the value of the assets of such Plan allocable to such vested benefits in an amount that could reasonably be expected to result in a Material Adverse Change, (f) neither the Borrower nor any member of the Controlled Group has had a complete or partial withdrawal from any Multiemployer Plan for which there is any unsatisfied withdrawal liability that could reasonably be expected to result in a Material Adverse Change or an Event of Default under Section 7.1(j), and (g) except for matters that could not reasonably result in a Material Adverse Change, as of the most recent valuation date applicable thereto, neither the Borrower nor any member of the Controlled Group would become subject to any liability under ERISA if the Borrower or any Subsidiary has received notice that any Multiemployer Plan is insolvent or in reorganization. Based upon GAAP existing as of the date of this Agreement and current factual circumstances, no Credit Party has any reason to believe that the annual cost during the term of this Agreement to the Borrower or any Subsidiary for post-retirement benefits to be provided to the current and former employees of the Borrower or any Subsidiary under Plans that are welfare benefit plans (as defined in Section 3(1) of ERISA) could, in the aggregate, reasonably be expected to cause a Material Adverse Change.

Section 4.10 Environmental Condition.

(a) Permits, Etc. Each Credit Party (i) has obtained all material Environmental Permits necessary for the ownership and operation of its Properties and the conduct of its businesses; (ii) has at all times been and is in material compliance with all terms and conditions of such Environmental Permits and with all other material requirements of applicable Environmental Laws; (iii) except as set forth in Schedule 4.10 has not received written notice of any material violation or alleged material violation of any Environmental Law or Environmental Permit; and (iv) is not subject to any actual or contingent Environmental Claim which could reasonably be expected to result in a Material Adverse Change.

(b) Certain Liabilities. To the Credit Parties’ best knowledge, none of the present or previously owned or operated Property of any Credit Party or of any Subsidiary thereof, wherever located, (i) has been placed on or proposed to be placed on the National Priorities List, the Comprehensive Environmental Response Compensation Liability Information System list, or their state or local analogs, or have been otherwise investigated, designated, listed, or identified as a potential site for removal, remediation, cleanup, closure, restoration, reclamation, or other Response activity under any Environmental Laws; (ii) is subject to a Lien, arising under or in connection with any Environmental Laws, that attaches to any revenues or to any Property owned or operated by any Credit Party, wherever located, which could reasonably be expected to cause a Material Adverse Change; or (iii) has been the site of any Release of Hazardous Substances or Hazardous Wastes from present or past operations which has caused at the site or at any third-party site any condition that has resulted in or could reasonably be expected to result in the need for Response that could cause a Material Adverse Change.

(c) Certain Actions. Without limiting the foregoing, (i) all necessary material notices have been properly filed, and no further action is required under current applicable Environmental Law as to each Response or other restoration or remedial project undertaken by the Borrower, any of its Subsidiaries or any of the Borrower’s or such Subsidiary’s former Subsidiaries on any of their presently or formerly owned or operated Property and (ii) the present and, to the Credit Parties’ best knowledge, future liability, if any, of the Borrower or of any Subsidiary which could reasonably be expected to arise in connection with requirements under Environmental Laws will not result in a Material Adverse Change.

Section 4.11 Subsidiaries. As of the Closing Date, the Borrower has no Subsidiaries other than those listed on Schedule 4.11.

Section 4.12 Investment Company Act. Neither the Borrower nor any Subsidiary is an “investment company” or a company “controlled” by an “investment company” within the meaning of the Investment Company Act of 1940, as amended.

Section 4.13 Taxes. Proper and accurate (in all material respects), federal, state, local and foreign tax returns, reports and statements required to have been filed (after giving effect to any extension granted in the time for filing) by the Borrower and each Subsidiary or any member of the Affiliated Group as defined under Section 1504 of the Code (hereafter collectively called the “Tax Group”) have been filed with the appropriate Governmental Authorities, and all taxes (which are material in amount) and other impositions due and payable by any member of the Tax Group have been timely paid prior to the date on which any fine, penalty, interest, late charge or loss may be added thereto for non-payment thereof except where contested in good faith by appropriate proceeding and for which adequate reserves have been established in compliance with GAAP. None of the Property owned by the Borrower or any other member of the Tax Group is Property which the Borrower or any member of the Tax Group is required to treat as being owned by any other Person pursuant to the provisions of Section 168(f)(8) of the Code. Proper and accurate amounts have been withheld by the Borrower and all other members of the Tax Group from their employees for all periods to comply in all material respects with the tax, social security and unemployment withholding provisions of applicable federal, state, local and foreign law.

Section 4.14 Permits, Licenses, etc. Each of the Borrower and its Subsidiaries possesses all permits, licenses, patents, patent rights or licenses, trademarks, trademark rights, trade names rights, and copyrights which are material to the conduct of its business. Each of the Borrower and its Subsidiaries manages and operates its business in accordance with all applicable Legal Requirements except where the failure to so manage or operate could not reasonably be expected to result in a Material Adverse Change; provided that this Section 4.14 does not apply with respect to Environmental Permits.

Section 4.15 Use of Proceeds. The proceeds of the Advances will be used by the Borrower for the purposes described in Section 6.6. No Credit Party is engaged in the business of extending credit for the purpose of purchasing or carrying margin stock (within the meaning of Regulation U). No proceeds of any Advance will be used to purchase or carry any margin stock in violation of Regulation T, U or X.

Section 4.16 Condition of Property; Casualties. The material Properties used or to be used in the continuing operations of the Borrower and each Subsidiary, are in good working order and condition, normal wear and tear excepted. Neither the business nor the material Properties of the Borrower or any Subsidiary has been affected as a result of any fire, explosion, earthquake, flood, drought, windstorm, accident, strike or other labor disturbance, embargo, requisition or taking of such Property or cancellation of contracts, permits or concessions by a Governmental Authority, riot, activities of armed forces or acts of God or of any public enemy, which effect could reasonably be expected to cause a Material Adverse Change. After giving effect to the Centrifuge Acquisition, the Blockers own no Properties.

Section 4.17 Insurance. Each of the Borrower and its Subsidiaries carry insurance (which may be carried by the Borrower on a consolidated basis) with reputable insurers in respect of such of their respective Properties, in such amounts and against such risks as is customarily maintained by other Persons of similar size engaged in similar businesses.

Section 4.18 Security Interest. Each Credit Party has authorized the filing of financing statements sufficient when filed to perfect the Lien created by the Security Documents. When such financing statements are filed in the offices noted therein, the Administrative Agent will have a valid and perfected security interest in all Collateral that is capable of being perfected by filing financing statements.

Section 4.19 OFAC; Anti-Terrorism. Neither the Borrower nor any Subsidiary of the Borrower is in violation of any of the country or list based economic and trade sanctions administered and enforced by OFAC. Neither the Borrower nor any Subsidiary of the Borrower (a) is a Sanctioned Person or a Sanctioned Entity, (b) has its assets located in Sanctioned Entities, or (c) derives revenues from investments in, or transactions with Sanctioned Persons or Sanctioned Entities. No proceeds of any Advance will be used to fund any operations in, finance any investments or activities in, or make any payments to, a Sanctioned Person or a Sanctioned Entity.

Section 4.20 Solvency. Before and after giving effect to the making of each Advance and the issuance, increase, or amendment of each Letter of Credit, the Credit Parties are, when taken as a whole, Solvent.

Section 4.21 Material Agreements. Other than the Credit Documents, Schedule 4.21 sets forth a complete and correct list of all material agreements in effect or to be in effect as of the Closing Date.

ARTICLE 5
AFFIRMATIVE COVENANTS

So long as any Obligation shall remain unpaid, any Lender shall have any Commitment hereunder, or there shall exist any Letter of Credit Exposure, each Credit Party agrees to comply with the following covenants.

Section 5.1 Organization. Each Credit Party shall, and shall cause each of its respective Subsidiaries to, (i) preserve and maintain its (a) partnership, limited liability company or corporate existence and (b) material rights, franchises and privileges in the jurisdiction of its organization, and (ii) qualify and remain qualified as a foreign business entity in each jurisdiction in which qualification is necessary in view of its business and operations or the ownership of its Properties and where failure to qualify could reasonably be expected to cause a Material Adverse Change; provided, however, that nothing herein contained shall prevent any transaction permitted by Section 6.7 or Section 6.8.

Section 5.2 Reporting.

(a) Annual Financial Reports. The Borrower shall provide, or shall cause to be provided, to the Administrative Agent, as soon as available, but in any event on or before 90 days after the end of each fiscal year of the Borrower (commencing with the fiscal year ending December 31, 2014), (i) a consolidated and consolidating balance sheet of the Borrower and its Subsidiaries as at the end of such fiscal year, and the related consolidated and consolidating statements of income or operations, shareholders’ equity and cash flows for such fiscal year, setting forth in each case in comparative form the figures for the previous fiscal year, all in reasonable detail and prepared in accordance with GAAP, such consolidated statements to be audited and accompanied by a report and opinion of an independent certified public accountant of nationally or regionally recognized standing reasonably acceptable to the Administrative Agent, which report and opinion shall be prepared in accordance with generally accepted auditing standards and shall not be subject to any “going concern” or like qualification or exception or any qualification or exception as to the scope of such audit, and such consolidating statements to be certified by the chief executive officer or chief financial officer of the Borrower, to the effect that (A) such statements fairly present, in all material respects, the financial condition, results of operations, shareholders’ equity and cash flows of the Borrower and its Subsidiaries in accordance with GAAP, and (B) there were no material contingent obligations, liabilities for taxes, unusual forward or long-term commitments, or unrealized or anticipated losses of the Borrower and its Subsidiaries, except as disclosed therein and adequate reserves for such items have been made in accordance with GAAP, and (ii) a copy of the management discussion and analysis with respect to such financial statements;

(b) Quarterly Financials. The Borrower shall provide, or shall cause to be provided, to the Administrative Agent, as soon as available, but in any event within 45 days after the end of each of the first three fiscal quarters of each fiscal year of the Borrower (commencing with the fiscal quarter ending March 31, 2014), (i) consolidated and consolidating balance sheet of the Borrower and its Subsidiaries as of the end of such fiscal quarter, and the related consolidated and consolidating statements of income or operations, shareholder’s equity and cash flows for such fiscal quarter and for the portion of the Borrower’s fiscal year then ended, setting forth in each case in comparative form the figures for the corresponding fiscal quarter of the previous fiscal year and the corresponding portion of the previous fiscal year, all in reasonable detail, such consolidated statements to be certified by the chief executive officer or the chief financial officer of the Borrower as (A) fairly presenting, in all material respects the financial condition, results of operations, shareholders’ equity and cash flows of the Borrower and its Subsidiaries in accordance with GAAP, subject only to normal year-end audit adjustments and the absence of footnotes, and (B) showing that there were no material contingent obligations, liabilities for taxes, unusual forward or long-term commitments, or unrealized or anticipated losses of the Borrower and its Subsidiaries, except as disclosed therein and adequate reserves for such items have been made in accordance with GAAP, and (ii) a copy of the management discussion and analysis with respect to such financial statements;

(c) Monthly Financials. The Borrower shall provide, or shall cause to be provided, to the Administrative Agent, as soon as available, but in any event within 30 days after the end of each calendar month (commencing with March 31, 2014), the consolidated balance sheet of the Borrower and its Subsidiaries as at the end of such month, and the related consolidated statements of income or operations, shareholders’ equity and cash flows for such month and for the portion of the Borrower’s fiscal year then ended, all in reasonable detail, such consolidated statements to be certified by the chief executive officer or chief financial officer of the Borrower as (i) fairly presenting the financial condition, results of operations, shareholders’ equity and cash flows of the Borrower and its Subsidiaries in accordance with GAAP, subject only to normal year-end audit adjustments and the absence of footnotes and (ii) showing that there were no material contingent obligations, liabilities for taxes, unusual forward or long-term commitments, or unrealized or anticipated losses of the Borrower and its Subsidiaries and adequate reserves for such items have been made in accordance with GAAP;

(d) Compliance Certificate. Concurrently with the delivery of the financial statements referred to in Section 5.2(a) and (b) above, the Borrower shall provide to the Administrative Agent a duly completed Compliance Certificate signed by the chief executive officer or chief financial officer of the Borrower.

(e) Borrowing Base Certificate. As soon as available and in any event within 30 days after the end of each calendar month, the Borrower shall provide to the Administrative Agent, a certificate of chief executive officer or chief financial officer of the Borrower calculating the Borrowing Base in the form of the Borrowing Base Certificate then in effect as of the end of such calendar month, including therein, among other things, a monthly accounts receivable aging and accounts payables aging report of the Credit Parties.

(f) Account Debtors. As soon as available and in any event within 30 days after the end of each fiscal year of the Borrower, the Borrower shall provide to the Administrative Agent a listing of all Account Debtors including physical addresses, contact names and phone numbers;

(g) Annual Budget. As soon as available and in any event within 60 days after the end of each fiscal year of the Borrower, the Borrower shall provide to the Administrative Agent an annual operating, capital and cash flow budget for the immediately following fiscal year and detailed on a monthly basis;

(h) Defaults. The Credit Parties shall provide to the Administrative Agent promptly, but in any event within five Business Days after a Responsible Officer of the Borrower obtains knowledge thereof, a notice of each Default or Event of Default, together with a statement of a Responsible Officer of the Borrower setting forth the details of such Default or Event of Default and the actions which the Credit Parties have taken and proposes to take with respect thereto;

(i) Other Creditors. The Credit Parties shall provide to the Administrative Agent promptly after the giving or receipt thereof, copies of any default notices given or received by the Borrower or by any of its Subsidiaries pursuant to the terms of any indenture, loan agreement, credit agreement, or similar agreement;

(j) Material Agreements. The Credit Parties shall provide to the Administrative Agent promptly after the giving or receipt thereof, copies of any default notices, demand for payment, termination notices or other material notices given or received by the Borrower or by any of its Subsidiaries pursuant to the terms of any Material Agreement;

(k) Litigation. The Credit Parties shall provide to the Administrative Agent promptly after the commencement thereof, notice of all actions, suits, and proceedings before any Governmental Authority, affecting the Borrower or any of its Subsidiaries or any of their respective assets that has a claim for damages in excess of $100,000 or that could otherwise result in a cost, expense or loss to the Borrower or any of its Subsidiaries in excess of $100,000;

(l) Environmental Notices. Promptly upon, and in any event no later than 15 days after, the receipt thereof, or the acquisition of knowledge thereof, by any Credit Party, the Credit Parties shall provide the Administrative Agent with a copy of any form of request, claim, complaint, order, notice, summons or citation received from any Governmental Authority or any other Person, (i) concerning violations or alleged violations of Environmental Laws, which seeks to impose liability therefore in excess of $100,000, (ii) concerning any action or omission on the part of any of the Credit Parties or any of their former Subsidiaries in connection with Hazardous Waste or Hazardous Substances which could reasonably result in the imposition of liability in excess of $100,000 or requiring that action be taken to respond to or clean up a Release of Hazardous Substances or Hazardous Waste into the environment and such action or clean-up could reasonably be expected to exceed $100,000, including without limitation any information request related to, or notice of, potential responsibility under CERCLA, or (iii) concerning the filing of a Lien upon, against or in connection with the Borrower, any Subsidiary, or any of their respective former Subsidiaries, or any of their material leased or owned Property, wherever located;

(m) Material Changes. The Credit Parties shall provide to the Administrative Agent prompt written notice of any event, development or circumstance that has given rise to or could reasonably be expected to give rise to a Material Adverse Change;

(n) Termination Events. As soon as possible and in any event (i) within 30 days after the Borrower or any member of the Controlled Group knows or has reason to know that any Termination Event described in clause (a) of the definition of Termination Event with respect to any Plan has occurred, and (ii) within 10 days after the Borrower or any member of the Controlled Group knows or has reason to know that any other Termination Event with respect to any Plan has occurred, the Credit Parties shall provide to the Administrative Agent a statement of an authorized officer of the Borrower describing such Termination Event and the action, if any, which the Borrower or any Affiliate of the Borrower proposes to take with respect thereto;

(o) Termination of Plans. Promptly and in any event within five Business Days after receipt by the Borrower or any member of the Controlled Group of a notice from the PBGC of the PBGC’s intention to terminate any Plan or to have a trustee appointed to administer any Plan, the Credit Parties shall provide to the Administrative Agent a copy of such notices;

(p) Other ERISA Notices. Promptly and in any event within five Business Days after receipt by the Borrower or any member of the Controlled Group of a notice from a Multiemployer Plan sponsor concerning the imposition or amount of withdrawal liability imposed on the Borrower or any member of the Controlled Group pursuant to Section 4202 of ERISA, the Credit Parties shall provide the Administrative Agent a copy of such notice;

(q) Other Governmental Notices. Promptly and in any event within five Business Days after receipt thereof by any Credit Party, the Credit Parties shall provide to the Administrative Agent a copy of any notice, summons, citation, or proceeding seeking to modify in any material respect, revoke, or suspend any material contract, license, permit, or agreement with any Governmental Authority;

(r) Disputes; etc. The Credit Parties shall provide to the Administrative Agent prompt written notice of (i) any claims or disputes affecting any Credit Party, which, if adversely determined, could reasonably be expected to cause a Material Adverse Change, or any material labor controversy of which any Credit Party has knowledge resulting in or reasonably considered to be likely to result in a strike against a Credit Party, (ii) to the knowledge of any Credit Party, any threatened claim, dispute, legal or arbitration proceedings, or proceedings before any Governmental Authority, which, if adversely determined, could reasonably be expected to cause a Material Adverse Change, and (iii) any claim, judgment, Lien or other encumbrance (other than a Permitted Lien) affecting any Property of a Credit Party, if the value of the claim, judgment, Lien, or other encumbrance affecting such Property shall exceed $100,000;

(s) Management Letters; Other Accounting Reports. Promptly upon receipt thereof, a copy of each other report or letter submitted to any Credit Party by independent accountants in connection with any annual, interim or special audit made by them of the books of the Borrower and its Subsidiaries, and a copy of any response by the Borrower or any Subsidiary of the Borrower, or the board of directors or managers (or other applicable governing body) of the Borrower or any Subsidiary, to such letter; and

(t) Other Information. Subject to the confidentiality provisions of Section 9.8, the Credit Parties shall provide to the Administrative Agent such other information respecting the business, operations, or Property of the Borrower or any Subsidiary, financial or otherwise, as any Lender through the Administrative Agent may reasonably request.

Section 5.3 Insurance.

(a) Each Credit Party shall, and shall cause each of its Subsidiaries to, carry and maintain all insurance in such amounts and against such risks as is customarily maintained by other Persons of similar size engaged in similar businesses and acceptable to the Administrative Agent and with reputable insurers reasonably acceptable to the Administrative Agent.

(b) Upon request of the Administrative Agent, the Borrower shall deliver copies of all policies of insurance or certificates thereof covering the property or business of the Credit Parties, and endorsements and renewals thereof, to the Administrative Agent. All policies of property insurance with respect to the Collateral either shall have attached thereto a lender’s loss payable endorsement in favor of the Administrative Agent for its benefit and the ratable benefit of the Secured Parties or name the Administrative Agent as loss payee for its benefit and the ratable benefit of the Secured Parties, in either case, in form reasonably satisfactory to the Administrative Agent, and all policies of liability insurance shall name the Administrative Agent for its benefit and the ratable benefit of the Secured Parties as an additional insured and shall provide for a waiver of subrogation in favor of the Administrative Agent for its benefit and the ratable benefit of the Secured Parties. All policies or certificates of insurance shall set forth the coverage, the limits of liability, the name of the carrier, the policy number, and the period of coverage. All such policies shall contain a provision that notwithstanding any contrary agreements between the Borrower, its Subsidiaries, and the applicable insurance company, such policies will not be canceled or allowed to lapse without renewal without at least 30 days’ (or such shorter period as may be accepted by the Administrative Agent) prior written notice to the Administrative Agent.

(c) Each Credit Party, upon request of the Administrative Agent, shall provide the Administrative Agent with all information required by the Administrative Agent to procure a flood determination certificate issued by the appropriate Governmental Authority or third party indicating whether any real property constituting Collateral is located in an area designated as a “flood hazard area” in any Flood Insurance Rate Map published by the Federal Emergency Management Agency (or any successor agency) and, if such property is designated to be located in a “flood hazard area”, each applicable Credit Party shall provide the Administrative Agent with evidence of (i) flood insurance on such property obtained by such Credit Party in such total amount as required by Regulation H of the Federal Reserve Board, and (ii) all official rulings and interpretations thereunder or thereof, and otherwise in compliance with the National Flood Insurance Program as set forth in the Flood Disaster Protection Act of 1973, as it may be amended from time to time.

(d) Notwithstanding Section 2.4(c)(vi) of this Agreement, after the occurrence and during the continuance of an Event of Default, all proceeds of insurance, including any casualty insurance proceeds, property insurance proceeds, proceeds from actions, and any other proceeds, shall be paid directly to the Administrative Agent and if necessary, assigned to the Administrative Agent, to be applied in accordance with Section 7.6 of this Agreement, whether or not the Secured Obligations are then due and payable.

(e) In the event that any insurance proceeds are paid to any Credit Party in violation of clause (d), such Credit Party shall hold the proceeds in trust for the Administrative Agent, segregate the proceeds from the other funds of such Credit Party, and promptly pay the proceeds to the Administrative Agent with any necessary endorsement. Upon the request of the Administrative Agent, each of the Borrower and its Subsidiaries shall execute and deliver to the Administrative Agent any additional assignments and other documents as may be necessary or desirable to enable the Administrative Agent to directly collect the proceeds as set forth herein.

Section 5.4 Compliance with Laws. Each Credit Party shall, and shall cause each of its Subsidiaries to, comply with all federal, state, and local laws and regulations (including Environmental Laws and the Patriot Act) that are applicable to the operations and Property of such Credit Party and to maintain all related permits necessary for the ownership and operation of such Credit Party’s Property and business, except in any case where the failure to so comply could not reasonably be expected to result in a Material Adverse Change.

Section 5.5 Taxes. Each Credit Party shall, and shall cause each of its Subsidiaries to pay and discharge all material taxes, assessments, and other charges and claims related thereto imposed on the Borrower or any of its Subsidiaries prior to the date on which penalties attach other than any tax, assessment, charge, or claim which is being contested in good faith and for which adequate reserves have been established in compliance with GAAP.

Section 5.6 New Subsidiaries. The Borrower shall deliver to the Administrative Agent each of the items set forth in Part A of Schedule III attached hereto with respect to each Subsidiary of the Borrower created after the Closing Date and within the time requirements set forth in Schedule III.

Section 5.7 Security. Each Credit Party agrees that at all times before the termination of the Commitments, payment in full of the Obligations (other than contingent obligations), the expiration or termination of all Letters of Credit (other than Letters of Credit as to which arrangements satisfactory to the Issuing Lender in its sole discretion have been made) and termination in full of the Commitments, the Administrative Agent shall have an Acceptable Security Interest in the Collateral to secure the performance and payment of the Secured Obligations. Each Credit Party shall, and shall cause each of its Subsidiaries to, grant to the Administrative Agent a Lien in any Property of such Credit Party or such Subsidiary now owned or hereafter acquired (other than leases of buildings or office space) promptly and to take such actions as may be required under the Security Documents to ensure that the Administrative Agent has an Acceptable Security Interest in such Property. Notwithstanding the foregoing, the Borrower shall, and shall cause each Subsidiary to take such actions, including execution and delivery of any Security Documents necessary to create, perfect and maintain an Acceptable Security Interest in favor of the Administrative Agent in the following Properties, whether now owned or hereafter acquired: (i) all Equity Interests issued by any Domestic Subsidiary and held by a Domestic Subsidiary or the Borrower; and (ii) 100% of Equity Interests issued by First Tier Foreign Subsidiaries which are owned by the Borrower or any Domestic Subsidiary but, in any event, no more than 66% of the outstanding Voting Securities issued by any First Tier Foreign Subsidiary.

Section 5.8 Deposit Accounts. Each Credit Party shall, and shall cause each of its Subsidiaries to (a) maintain their principal operating accounts and other deposit accounts with Wells Fargo, and (b) deposit all proceeds of Eligible Receivables which were considered in calculating the then effective Borrowing Base into one or more of such deposit accounts; provided that, the requirements of this Section 5.8 shall not apply to deposit accounts that are designated solely as accounts for, and are used solely for (i) payroll funding or employee benefits or (ii) petty cash in an amount not to exceed $50,000 in the aggregate.

Section 5.9 Records; Inspection. Each Credit Party shall, and shall cause each of its Subsidiaries to maintain proper, complete and consistent books of record with respect to such Person’s operations, affairs, and financial condition. From time to time upon reasonable prior notice, each Credit Party shall, and shall cause each of its Subsidiaries to, permit any Lender, at such reasonable times and intervals and to a reasonable extent and under the reasonable guidance of officers of or employees delegated by officers of such Credit Party or such Subsidiary, to, subject to any applicable confidentiality considerations, examine and copy the books and records of such Credit Party or such Subsidiary, to visit and inspect the Property of such Credit Party or such Subsidiary, and to discuss the business operations and Property of such Credit Party or such Subsidiary with the officers and directors thereof.

Section 5.10 Maintenance and Operation of Property. Each Credit Party shall, and shall cause each of its Subsidiaries to, maintain its owned, leased, or operated Property in good condition and repair in accordance with prudent industry standards, normal wear and tear excepted; and shall abstain from, and cause each of its Subsidiaries to abstain from, knowingly or willfully permitting the commission of waste or other injury, destruction, or loss of natural resources, or the occurrence of pollution, contamination, or any other condition in, on or about the owned or operated Property involving the Environment that could reasonably be expected to result in Response activities and that could reasonably be expected to result in a Material Adverse Change.

Section 5.11 Certificates of Title. For each item of Certificated Equipment (other than Excluded Certificated Equipment) purchased by a Credit Party, the Borrower shall deliver, within 30 days after the purchase thereof, a certificate of title for such equipment naming a Credit Party as the owner and shall, promptly upon request therefor by the Administrative Agent, provide such additional documents as may be required in order to name the Administrative Agent as the holder of the first lien thereon.

Section 5.12 Appraisal Reports; Field Audits.

(a) Field Audits. The Borrower shall, and shall cause each of its Subsidiaries to, permit the Administrative Agent or a third party selected by the Administrative Agent to, at any reasonable time, and from time to time on a semiannual basis upon the prior written request by the Administrative Agent, perform, at the Borrower’s sole reasonable cost and expense, Field Audits; provided that, if no Default has occurred and is continuing, the Borrower shall bear the costs of only two such Field Audits per fiscal year

(b) Appraisal of Fixed Assets. Within 30 days after each anniversary of the Closing Date, the Borrower shall, and shall cause each of its Subsidiaries to, permit the Administrative Agent or a third party selected by the Administrative Agent to perform, at the Borrower’s sole reasonable cost and expense, an appraisal of the machinery, parts, equipment and other fixed assets of the Credit Parties, stating, among other things, a detailed NOLV for such assets.

(c) Event of Default. If an Event of Default has occurred and is continuing, the Administrative Agent may perform any additional appraisals and audits, and all such appraisals and audits shall be performed at the Borrower’s sole cost and expense.

Section 5.13 Material Contracts. Each Credit Party shall, and shall cause each of its Subsidiaries to (a) perform and observe all the terms and provisions of each agreement listed on Schedule 4.21 to be performed or observed by it, (b) maintain each such agreement in full force and effect in accordance with its terms, (c) enforce each such agreement in accordance with its terms, and (d) upon request of the Administrative Agent, make to each other party to each such agreement such demands and requests for information and reports or for action as such Credit Party is entitled to make under such agreement, in each case to the extent that failure to do so would reasonably be expected to result in a Material Adverse Change. The Borrower shall provide notice to the Administrative Agent promptly, but in any event within five Business Days after the occurrence thereof, copies of any amendments, supplements or other modifications to such documents.

Section 5.14 Further Assurances; Cure of Title Defects. The Borrower shall, and shall cause each Subsidiary to, cure promptly any defects in the creation and issuance of the Notes and the execution and delivery of the Credit Documents and this Agreement. The Borrower and the Borrower hereby authorizes the Lenders or the Administrative Agent to file any financing statements without the signature of the Borrower or the Borrower to the extent permitted by applicable Legal Requirement in order to perfect or maintain the perfection of any security interest granted under any of the Credit Documents. The Borrower, at the Borrower’s expense, will, and will cause each Subsidiary to, promptly execute and deliver to the Administrative Agent upon reasonable request all such other documents, agreements and instruments to comply with or accomplish the covenants and agreements of the Borrower or any Subsidiary, as the case may be, in the Credit Documents and this Agreement, or to further evidence and more fully describe the collateral intended as security for the Notes, or to correct any omissions in the Security Documents, or to state more fully the security obligations set out herein or in any of the Security Documents, or to perfect, protect or preserve any Liens created pursuant to any of the Security Documents, or to make any recordings, to file any notices or obtain any consents, all as may be necessary or appropriate in connection therewith or to enable the Administrative Agent to exercise and enforce its rights and remedies with respect to any Collateral. Within 30 days (or such longer period as the Administrative Agent may determine in its sole discretion) after a request by the Administrative Agent to cure any title defects or exceptions which are not Permitted Liens raised by such information, the Borrower shall (i) cure such title defects or exceptions which are not Permitted Liens and (ii) deliver to the Administrative Agent satisfactory title evidence (including, to the extent requested, supplemental or new title opinions meeting the foregoing requirements) in form and substance acceptable to the Administrative Agent in its reasonable business judgment as to the Borrower’s and the Guarantors’ ownership of such Properties and the Administrative Agent’s Liens and security interests therein.

Section 5.15 Post-Closing.

(a) Certificates of Title. Within 30 days following the Closing Date (or such later date as the Administrative Agent may agree in its sole discretion), the Administrative Agent shall have received a certificate of title for each item of Certificated Equipment listed on Schedule 3.1(q) hereto.

(b) Blockers. On or before April 30, 2014, the Blockers shall be dissolved or terminated.

(c) Landlord Waivers. Within 30 days following the Closing Date (or such later date as the Administrative Agent may agree in its sole discretion), the Administrative Agent shall have received a lien waiver or subordination agreement in form and substance satisfactory to the Administrative Agent for the lease of Austin Chalk with B&L Storage located in San Angelo, Texas.

ARTICLE 6
NEGATIVE COVENANTS

Section 6.1 Debt. No Credit Party shall, nor shall it permit any of its Subsidiaries to, create, assume, incur, suffer to exist, or in any manner become liable, directly, indirectly, or contingently in respect of, any Debt other than the following (collectively, the “Permitted Debt”):

(a) the Obligations;

(b) intercompany Debt owed by any Credit Party to any other Credit Party; provided that, if applicable, such Debt as an investment is also permitted in Section 6.3;

(c) Debt in the form of accounts payable to trade creditors for goods or services and current operating liabilities (other than for borrowed money) which, in each case, is incurred in the ordinary course of business, as presently conducted and is not more than 90 days past due unless contested in good faith by appropriate proceedings and adequate reserves for such items have been made in accordance with GAAP regardless of whether such reserves are required thereunder;

(d) purchase money indebtedness or Capital Leases in an aggregate principal amount not to exceed $500,000 at any time; provided no Credit Party may enter into additional indebtedness of the type described in this clause (d) if a Default is continuing or incurring the additional indebtedness could reasonably be expected to cause a Default;

(e) Hedging Arrangements permitted under Section 6.15;

(f) Debt arising from the endorsement of instruments for collection in the ordinary course of business;

(g) unsecured Funded Debt not otherwise permitted under the preceding provisions of this Section 6.1; provided that, the aggregate principal amount thereof shall not exceed $500,000 at any time;

(h) Debt arising from the financing of insurance premiums of any Credit Party, so long as (i) such Debt shall not be in excess of the amount of the unpaid cost of, and shall be incurred only to defer the cost of, such insurance for the underlying term of such insurance policy, (ii) any unpaid amount of such Debt is fully cancelled upon termination of the underlying insurance policy, and (iii) the aggregate principal amount of Debt at any time outstanding pursuant to this clause (h) shall not exceed $100,000; and

(i) unsecured Debt to the extent such unsecured Debt would be an Investment permitted by Section 6.3;

(j) guarantees of primary obligations of any other Person; provided that the primary obligations so guaranteed are permitted by this Agreement; and

(k) . Debt in respect of performance bonds, bid bonds, appeal bonds, surety bonds and similar obligations, in each case provided in the ordinary course of business obligations in an aggregate amount not to exceed $100,000.

Section 6.2 Liens. No Credit Party shall, nor shall it permit any of its Subsidiaries to, create, assume, incur, or suffer to exist any Lien on the Property of any Credit Party or any Subsidiary, whether now owned or hereafter acquired, or assign any right to receive any income, other than the following (collectively, the “Permitted Liens”):

(a) Liens created pursuant to any Credit Document;

(b) Liens imposed by law, such as materialmen’s, mechanics’, carriers’, workmen’s and repairmen’s liens, and other similar liens arising in the ordinary course of business securing obligations which are not overdue for a period of more than 30 days or are being actively contested in good faith by appropriate procedures or proceedings and for which adequate reserves have been established in accordance with GAAP;

(c) Liens arising in the ordinary course of business out of pledges or deposits under workers compensation laws, unemployment insurance, old age pensions, or other social security or retirement benefits, or similar legislation to secure public or statutory obligations;

(d) Liens for taxes, assessment, or other governmental charges which are not yet due and payable or which are being actively contested in good faith by appropriate proceedings and adequate reserves for such items have been made in accordance with GAAP;

(e) Liens securing purchase money debt or Capital Lease obligations permitted under Section 6.1(d); provided that each such Lien encumbers only the Property purchased in connection with the creation of any such purchase money debt or the subject of any such Capital Lease, and all proceeds thereof (including insurance proceeds), and the amount secured thereby is not increased;

(f) encumbrances consisting of minor easements, zoning restrictions, or other restrictions on the use of real property that do not (individually or in the aggregate) materially affect the value of the assets encumbered thereby or materially impair the ability of any Credit Party to use such assets in its business, and none of which is violated in any material aspect by existing or proposed structures or land use;

(g) Liens arising solely by virtue of any statutory or common law provision relating to banker’s liens, rights of set-off or similar rights and remedies and burdening only deposit accounts or other funds maintained with a depositary institution;

(h) Liens on cash or securities pledged to secure performance of tenders, surety and appeal bonds, government contracts, performance and return of money bonds, bids, trade contracts, leases, statutory obligations, regulatory obligations and other obligations of a like nature incurred in the ordinary course of business;

(i) judgment and attachment Liens not giving rise to an Event of Default, provided that (i) any appropriate legal proceedings which may have been duly initiated for the review of such judgment shall not have been finally terminated or the period within which such proceeding may be initiated shall not have expired and (ii) no action to enforce such Lien has been commenced;

(j) Liens in favor a banking institution arising by operation of law encumbering deposits in accounts that are not subject to Account Control Agreements and that are not required to be subject to Account Control Agreements in accordance with the terms hereof held by such banking institution incurred in the ordinary course of business and which are within the general parameters customary in the banking industry;

(k) Liens in favor of insurers (or other Persons financing the payment of insurance premiums) securing Debt of the type described in and permitted under Section 6.1(h); provided that such Liens shall encumber only the insurance proceeds of the insurance financed thereby;

(l) any interest or title of a lessor, licensor, sublessor or sublicensor under any lease or license permitted by this Agreement retained in the Property being leased or licensed; and

(m) purported Liens evidenced by the filing of precautionary financing statements or similar filings relating solely to operating leases of personal property entered into by the Borrower or any of its Subsidiaries in the ordinary course of business; provided that such Liens shall encumber only the personal property subject to such operating lease.

Section 6.3 Investments. No Credit Party shall, nor shall it permit any of its Subsidiaries to, make or hold any direct or indirect investment in any Person, including capital contributions to the Person, investments in or the acquisition of the debt or equity securities of the Person, or any loans, guaranties, trade credit, or other extensions of credit to any Person, other than the following (collectively, the “Permitted Investments”):

(a) investments in the form of trade credit to customers of a Credit Party arising in the ordinary course of business and represented by accounts from such customers;

(b) Liquid Investments;

(c) loans, advances, or capital contributions to, or investments in, or purchases or commitments to purchase any stock or other securities or evidences of indebtedness of, or interests in, any Person existing on the Closing Date, in each case as specified in the attached Schedule 6.3 and made on or prior to the Closing Date; provided that, the respective amounts of such loans, advances, capital contributions, investments, purchases and commitments shall not be increased (other than appreciation);

(d) investments, loans, advances and equity contributions by a Credit Party in any other Credit Party;

(e) creation of any additional Subsidiaries domiciled in the U.S. in compliance with Section 5.6 and Schedule III;

(f) Capital Expenditures permitted under Section 6.18;

(g) guaranties permitted under Section 6.1;

(h) loans or advances to officers, directors and employees of Borrower and its Subsidiaries in the ordinary course of business up to a maximum of $150,000 in the aggregate at any one time outstanding;

(i) investments received in settlement of amounts due to any Credit Party or any of their respective Subsidiaries effected in the ordinary course of business or owing to any Credit Party or any of their respective Subsidiaries as a result of insolvency proceedings involving an Account Debtor or upon the foreclosure, deed in lieu of foreclosure, or enforcement of any Lien in favor of a Credit Party or its Subsidiaries; and

(j) other investments, loans, advances and equity contributions in an aggregate amount not exceeding $100,000 at any time outstanding.

Section 6.4 Acquisitions. No Credit Party shall, nor shall it permit any of its Subsidiaries to, make any Acquisition without the consent of the Majority Lenders.

Section 6.5 Agreements Restricting Liens. No Credit Party shall, nor shall it permit any of its Subsidiaries to, create, incur, assume or permit to exist any contract, agreement or understanding (other than (i) the Credit Documents, (ii) agreements governing Debt permitted by Sections 6.1(d), (e) and (h) to the extent such restrictions govern only the asset (and the proceeds thereof) financed pursuant to such Debt, (iii) any prohibition or limitation that exists pursuant to applicable requirements of a Governmental Authority, (iv) any prohibition or limitation that restricts subletting or assignment of leasehold interests contained in any lease governing a leasehold interest of Borrower or its Subsidiaries and customary provisions in other contracts restricting assignment thereof, (v) agreements entered into in connection with the sale of assets permitted by Section 6.8 to the extent such restrictions govern only the assets being sold and (vi) any prohibition or limitation that exists in any contract to which a Credit Party is a party on the date hereof so long as (x) such prohibition or limitation is generally applicable and does not specifically address any of the Debt or the Liens granted under the Credit Documents, and (y) the noncompliance of such prohibition or limitation would not reasonably be expected to be adverse to the Administrative Agent or the Lenders) which in any way prohibits or restricts the granting, conveying, creation or imposition of any Lien on any of its Property, whether now owned or hereafter acquired, to secure the Secured Obligations or restricts any Subsidiary from paying Restricted Payments to the Borrower, or which requires the consent of or notice to other Persons in connection therewith.

Section 6.6 Use of Proceeds; Use of Letters of Credit. No Credit Party shall, nor shall it permit any of its Subsidiaries to: (a) use the proceeds of the Revolving Advances, the Swing Line Advances, or the Letters of Credit for any purposes other than (i) working capital purposes of any Credit Party, (ii) finance Capital Expenditures, (iii) other general corporate purposes of any Credit Party (including payment of fees and expenses in connection with this Agreement and the other Credit Documents); or (b) use the proceeds of the Term Advances for any purposes other than (i) to pay the purchase price for the Centrifuge Acquisition, (ii) finance Capital Expenditures, (iii) working capital purposes of any Credit Party, (iv) to refinance the Existing Credit Agreement or (v) for other general corporate purposes of any Credit Party, including the payment of fees and expenses related to the closing of the Centrifuge Acquisition or the entering into of this Agreement and the other Credit Documents; or (c) use the proceeds of the CapEx Advances for any purpose other than to finance Capital Expenditures. No Credit Party shall, nor shall it permit any of its Subsidiaries to, use any part of the proceeds of Advances or Letters of Credit for any purpose which violates, or is inconsistent with, Regulations T, U, or X.

Section 6.7 Corporate Actions; Accounting Changes.

(a) No Credit Party shall, nor shall it permit any of its Subsidiaries to, merge or consolidate with or into any other Person, except that (i) any Credit Party may merge or be consolidated with or into any other Credit Party and (ii) a newly formed, wholly-owned Subsidiary of the Borrower may merge with another Person in order to consummate an Acquisition by merger permitted under Section 6.4 so long as such newly formed, wholly-owned Subsidiary is the surviving entity; provided that immediately after giving effect to any such proposed transaction no Default shall exist and, in the case of any such merger or consolidation involving the Borrower, the Borrower shall be the surviving entity.

(b) No Credit Party shall, nor shall it permit any of its Subsidiaries to, (i) without 30 days prior written notice to the Administrative Agent, change its name, change its state of incorporation, formation or organization, change its organizational identification number or reorganize in another jurisdiction, (ii) create or suffer to exist any Foreign Subsidiary , (iii) without prior written notice to, and prior consent of, the Administrative Agent, amend, supplement, modify or restate their articles or certificate of incorporation or formation, limited partnership agreement, bylaws, limited liability company agreements, or other equivalent organizational documents other than such amendment, supplement, modification or restatement which could not reasonably be expected to be adverse to the interests of the Administrative Agent and the Lenders in any material respect, (v) change its method of accounting employed in the preparation of the financial statements referred to in Section 4.4 or change the fiscal year end of the Borrower unless required to conform to GAAP or approved in writing by the Administrative Agent, or (vi) without prior written notice to the Administrative Agent, discontinue or change its address of its place of business, chief executive officer, or office where it keeps records concerning accounts, contract rights, and general intangibles.

Section 6.8 Sale of Assets. No Credit Party shall, nor shall it permit any of its Subsidiaries to, sell, convey, or otherwise transfer any of its assets except that (a) any Credit Party may sell inventory in the ordinary course of business, (b) any Credit Party may sell equipment in the ordinary course of business and consistent with past practices, (c) any Credit Party may sell, convey, dispose or otherwise transfer any of its assets to any other Credit Party; provided that the receiving Credit Party shall ratify, grant and confirm the Liens on such assets (and any other related Collateral) that are real property pursuant to documentation satisfactory to the Administrative Agent; (d) any Credit Party may sell, convey, dispose or otherwise transfer equipment that is obsolete or in need of replacement to third parties if (i) such Credit Party receives fair market value for such equipment, and (ii) 100% of the consideration received for such equipment is cash; (e) the Borrower and its Subsidiaries may sell, convey, dispose or otherwise transfer any Properties not otherwise permitted under the preceding clauses (a) – (d); provided that, the aggregate amount of all such sales, conveyance, dispositions and transfers shall not exceed $250,000 in any fiscal year; and (f) the Blockers may be dissolved on or before April 30, 2014.

Section 6.9 Restricted Payments. No Credit Party shall make, nor shall it permit any of its Subsidiaries to make any Restricted Payments except that so long as no Default exists or would result from the making of such Restricted Payment any Credit Party may make Restricted Payments to any other Credit Party.

Section 6.10 Affiliate Transactions. No Credit Party shall, nor shall it permit any of its Subsidiaries to, enter into or permit to exist any transaction or series of transactions (including, but not limited to, the purchase, sale, lease or exchange of Property, the making of any investment, the giving of any guaranty, the assumption of any obligation or the rendering of any service) with any of their Affiliates which are not Credit Parties unless such transaction or series of transactions is on terms no less favorable to the Borrower or any Subsidiary, as applicable, than those that could be obtained in a comparable arm’s length transaction with a Person that is not such an affiliate except the restrictions in this Section 6.10 shall not apply to: (a) the Restricted Payments permitted under Section 6.9, (b) Investments by a Credit Party in the form of Equity Interests in another Credit Party, (c) reasonable and customary director, officer and employee compensation (including bonuses), indemnification and other benefits (including retirement, health, stock option and other benefit plans), (d) transactions solely between or among Credit Parties and (e) the transactions described on Schedule 6.10 hereto.

Section 6.11 Line of Business. No Credit Party shall, and shall not permit any of its Subsidiaries to, change the character of the Borrower’s and its Subsidiaries collective business as conducted on the Closing Date, or engage in any type of business not reasonably related to the Borrower’s and its Subsidiaries collective business as presently and normally conducted.

Section 6.12 Hazardous Materials. No Credit Party (a) shall, nor shall it permit any of its Subsidiaries to, create, handle, transport, use, or dispose of any Hazardous Substance or Hazardous Waste, except in the ordinary course of its business and except in compliance with Environmental Law other than to the extent that such non-compliance could not, individually or in the aggregate, reasonably be expected to result in a Material Adverse Change or in any liability to the Lenders or the Administrative Agent, and (b) shall, nor shall it permit any of its Subsidiaries to, release any Hazardous Substance or Hazardous Waste into the environment and shall not permit any Credit Party’s or any Subsidiary’s Property to be subjected to any release of Hazardous Substance or Hazardous Waste, except in compliance with Environmental Law other than to the extent that such non-compliance could not, individually or in the aggregate, reasonably be expected to result in a Material Adverse Change or in any liability on the Lenders or the Administrative Agent.

Section 6.13 Compliance with ERISA. Except for matters that individually or in the aggregate could not reasonably be expected to cause a Material Adverse Change, no Credit Party shall, nor shall it permit any of its Subsidiaries to, directly or indirectly: (a) engage in any transaction in connection with which the Borrower or any Subsidiary of Borrower could be subjected to either a civil penalty assessed pursuant to Section 502(c), (i) or (l) of ERISA or a tax imposed by Chapter 43 of Subtitle D of the Code; (b) terminate, or permit any member of the Controlled Group to terminate, any Plan in a manner, or take any other action with respect to any Plan, which could result in any liability to the Borrower, any Subsidiary or any member of the Controlled Group to the PBGC; (c) fail to make, or permit any member of the Controlled Group to fail to make, full payment when due of all amounts which, under the provisions of any Plan, agreement relating thereto or applicable Legal Requirement, the Borrower, a Subsidiary or member of the Controlled Group is required to pay as contributions thereto; (d) permit to exist, or allow any Subsidiary or any member of the Controlled Group to permit to exist, any accumulated funding deficiency (or unpaid minimum required contribution for plan years after December 31, 2007) within the meaning of Section 302 of ERISA or section 412 of the Code, whether or not waived, with respect to any Plan; (e) permit, or allow any member of the Controlled Group to permit, the actuarial present value of the benefit liabilities (as “actuarial present value of the benefit liabilities” shall have the meaning specified in section 4041 of ERISA) under any Plan that is regulated under Title IV of ERISA to exceed the current value of the assets (computed on a plan termination basis in accordance with Title IV of ERISA) of such Plan allocable to such benefit liabilities; (f) contribute to or assume an obligation to contribute to, or permit any member of the Controlled Group to contribute to or assume an obligation to contribute to, any Multiemployer Plan; (g) acquire, or permit any member of the Controlled Group to acquire, an interest in any Person that causes such Person to become a member of the Controlled Group if such Person sponsors, maintains or contributes to, or at any time in the six-year period preceding such acquisition has sponsored, maintained, or contributed to, (1) any Multiemployer Plan, or (2) any other Plan that is subject to Title IV of ERISA under which the actuarial present value of the benefit liabilities under such Plan exceeds the current value of the assets (computed on a plan termination basis in accordance with Title IV of ERISA) of such Plan allocable to such benefit liabilities; (h) incur, or permit any member of the Controlled Group to incur, a liability to or on account of a Plan under sections 515, 4062, 4063, 4064, 4201 or 4204 of ERISA; or (i) contribute to or assume an obligation to contribute to any employee welfare benefit plan, as defined in section 3(1) of ERISA, including, without limitation, any such plan maintained to provide benefits to former employees of such entities, that may not be terminated by such entities in their sole discretion at any time without any liability.

Section 6.14 Sale and Leaseback Transactions. No Credit Party shall, nor shall it permit any of its Subsidiaries to, sell or transfer to a Person any Property, whether now owned or hereafter acquired, if at the time or thereafter the Borrower or a Subsidiary shall lease as lessee such Property or any part thereof or other Property which the Borrower or a Subsidiary intends to use for substantially the same purpose as the Property sold or transferred.

Section 6.15 Limitation on Hedging. No Credit Party shall, nor shall it permit any of its Subsidiaries to, (a) purchase, assume, or hold a speculative position in any commodities market or futures market or enter into any Hedging Arrangement for speculative purposes; or (b) be party to or otherwise enter into any Hedging Arrangement which (i) is entered into for reasons other than as a part of its normal business operations as a risk management strategy and/or hedge against changes resulting from market conditions related to the Borrower’s or its Subsidiaries’ operations, or (ii) obligates the Borrower or any of its Subsidiaries to any margin call requirements or otherwise requires the Borrower or any of its Subsidiaries to put up money, assets or other security (other than (x) unsecured letters of credit and (y) cash collateral to the extent required under applicable Legal Requirement).

Section 6.16 Leverage Ratio. Borrower shall not permit the Leverage Ratio (a) as of the fiscal quarter ending on March 31, 2014 to be more than 3.00 to 1.00, (b) as of each of the fiscal quarters ending June 30, 2014, September 30, 2014 and December 31, 2014, to be more than 2.75 to 1.00, and (c) as of each fiscal quarter ending on or after March 31, 2015 to be more than 2.50 to 1.00. For the avoidance of doubt, the calculation of the Leverage Ratio for the fiscal year ending December 31, 2013 and the fiscal quarter ending March 31, 2014 shall not include any EBITDA or Funded Debt of United Centrifuge.

Section 6.17 Fixed Charge Coverage Ratio. Borrower shall not permit the Fixed Charge Coverage Ratio as of each fiscal quarter ending on or after March 31, 2014 to be less than 1.50 to 1.00. For the avoidance of doubt, the calculation of the Fixed Charge Coverage Ratio for the fiscal year ending December 31, 2013 and the fiscal quarter ending March 31, 2014 shall not include any EBITDA, taxes, Maintenance Capital Expenditures, Interest Expenses or Funded Debt of United Centrifuge.

Section 6.18 Capital Expenditures. Borrower shall not, nor shall it permit any of its Subsidiaries to, cause the aggregate Capital Expenditures (other than Debt Funded Capital Expenditures and Equity Funded Capital Expenditures) expended by the Borrower or any of its Subsidiaries in each fiscal year to exceed the CapEx Basket Amount.

Section 6.19 [Reserved].

Section 6.20 Landlord Agreements. No Credit Party shall, nor shall it permit any of its Subsidiaries to (a) hold, store or otherwise maintain any equipment or inventory that is intended to constitute Collateral pursuant to the Security Documents at premises within the U.S. which are not owned by a Credit Party unless (i) such equipment is located at the job site under which such equipment is then currently under contract, (ii) such equipment or inventory is located at premises within the U.S. that are leased by a Credit Party and which either (A) such premises are covered by a lien waiver or subordination agreement in form and substance satisfactory to the Administrative Agent or (B) the value of equipment and inventory at such location is less than $100,000 in the aggregate amount, (iii) such equipment is office equipment, (iv) such equipment or inventory is in transit, or (v) such equipment is off location for servicing, repairs or modification, or (b) after the Closing Date, enter into any new verbal or written leases for premises with any Person who has not executed a lien waiver or subordination agreement in form and substance satisfactory to the Administrative Agent unless the equipment or inventory located on such premises would fall under any of the provisions in the foregoing clause (a).

Section 6.21 [Reserved].

Section 6.22 Operating Leases. No Credit Party shall, nor shall it permit any of its Subsidiaries to, enter into any lease that constitutes an operating lease under GAAP if the obligations of a Credit Party or such Subsidiary as lessee under such lease would cause its lease payments (excluding payments for taxes, insurance, and other non-rental expenses to the extent not included within the stated amount of the rental payments under such lease) in respect of all such leases entered into by the Borrower and its Subsidiaries to exceed $500,000 during any fiscal year of the Borrower.

Section 6.23 Prepayment of Certain Debt and Other Obligations. No Credit Party shall, nor shall it permit any of its Subsidiaries to, prepay, redeem, purchase, defease or otherwise satisfy prior to the scheduled maturity thereof in any manner, or make any payment in violation of the subordination terms of, any Debt, except (a) the prepayment of the Obligations in accordance with the terms of this Agreement, (b) regularly scheduled or required repayments or redemptions of Permitted Debt (other than subordinated debt) and refinancings and refundings of such Permitted Debt so long as such refinancings and refundings would otherwise comply with Section 6.1, (c) so long as no Event of Default exists or would result therefrom, other prepayments of Permitted Debt not described in the immediately preceding clauses (a) and (b), but specifically excluding any prepayments, redemptions, purchases, defeasance, or other satisfaction of subordinated debt.

Section 6.24 Material Agreements. No Credit Party shall terminate, amend, supplement or otherwise modify (a) any agreement listed on Schedule 4.21 without the prior written consent of the Administrative Agent, acting in its reasonable discretion, if such amendment, supplement or modification could reasonably be expected to be adverse in any material respect to the Administrative Agent or the Lenders, or (b) any Key Employment Agreement if the effect of such termination, amendment, supplement or modification would be to shorten the term of employment thereunder.

ARTICLE 7
DEFAULT AND REMEDIES

Section 7.1 Events of Default. The occurrence of any of the following events shall constitute an “Event of Default” under this Agreement and any other Credit Document:

(a) Payment Failure. Any Credit Party (i) fails to pay any principal when due under this Agreement or (ii) fails to pay, within three Business Days of when due, interest or any other amount due under this Agreement or any other Credit Document, including payments of fees, reimbursements, indemnifications and any amounts due under Section 2.4(c);

(b) False Representation or Warranties. Any representation or warranty made or deemed to be made by any Credit Party in this Agreement, in any other Credit Document or in any certificate delivered in connection with this Agreement or any other Credit Document is incorrect, false or otherwise misleading in any material respect (except that such materiality qualifier shall not be applicable to any representations and warranties that already are qualified or modified by materiality in the text thereof) at the time it was made or deemed made;

(c) Breach of Covenant. (i) Any breach by any Credit Party of any of the covenants in Section 5.2(d), Section 5.2(i), Section 5.3(a) regarding casualty insurance, or Article 6 of this Agreement or the corresponding covenants in any Guaranty or (ii) any breach by any Credit Party of any other covenant contained in this Agreement or any other Credit Document and such breach shall remain unremedied for a period of thirty days following the earlier of (A) the date on which Administrative Agent gave notice of such failure to the Borrower and (B) the date any officer of the Borrower or any Subsidiary acquires knowledge of such failure (such grace period to be applicable only in the event such Default can be remedied by corrective action of the Borrower or any Subsidiary);

(d) Guaranties. Any provisions in the Guaranties shall at any time (before its expiration according to its terms) and for any reason cease to be in full force and effect and valid and binding in accordance with their terms on the Guarantors party thereto or shall be contested by any Guarantor party thereto or any Guarantor shall deny it has any liability or obligation under such Guaranties; or any Credit Party shall cease to exist other than as expressly permitted by the terms of this Agreement;

(e) Security Documents. Any Security Document shall at any time and for any reason cease to create an Acceptable Security Interest in the Property purported to be subject to such agreement in accordance with the terms of such agreement (except to the extent caused by any intentional action or inaction of the Administrative Agent) or any material provisions thereof shall cease to be in full force and effect and valid and binding on the Credit Party that is a party thereto or any such Credit Party shall so state in writing (unless released or terminated pursuant to the terms of such Security Document

(f) Cross-Default. (i) The Borrower or any Subsidiary shall fail to pay any principal of or premium or interest on its Debt which is outstanding in a principal amount of at least $500,000 individually or when aggregated with all such Debt of the Borrower and the Subsidiaries so in default (but excluding Debt evidenced by the Notes) when the same becomes due and payable (whether by scheduled maturity, required prepayment, acceleration, demand or otherwise), and such failure shall continue after the applicable grace period, if any, specified in the agreement or instrument relating to such Debt; (ii) any other event shall occur or condition shall exist under any agreement or instrument relating to Debt which is outstanding in a principal amount of at least $500,000 individually or when aggregated with all such Debt of the Borrower and the Subsidiaries so in default (other than Debt evidenced by the Notes), and shall continue after the applicable grace period, if any, specified in such agreement or instrument, if the effect of such event or condition is to accelerate, or to permit the acceleration of, the maturity of such Debt prior to the stated maturity thereof; or (iii) any such Debt shall be declared to be due and payable, or required to be prepaid (other than by a regularly scheduled required prepayment); provided that, for purposes of this paragraph (f), the “principal amount” of the obligations in respect of Hedging Arrangements at any time shall be Swap Termination Value that would be required to be paid by a Borrower or Subsidiary if such Hedging Arrangements were terminated at such time;

(g) Bankruptcy and Insolvency. Any Credit Party (A) admits in writing its inability to pay its debts generally as they become due; makes an assignment for the benefit of its creditors; consents to or acquiesces in the appointment of a receiver, liquidator, fiscal agent, or trustee of itself or any of its Property; files a petition under bankruptcy or other laws for the relief of debtors; or consents to any reorganization, arrangement, workout, liquidation, dissolution, or similar relief under bankruptcy or other laws for the relief of debtors or (B) shall have had, without its consent: any court enter an order appointing a receiver, liquidator, fiscal agent, or trustee of itself or any of its Property; any petition filed against it seeking reorganization, arrangement, workout, liquidation, dissolution or similar relief under bankruptcy or other laws for the relief of debtors and such petition shall not be dismissed, stayed, or set aside for an aggregate of 60 days, whether or not consecutive;

(h) Settlements; Adverse Judgment. The Borrower or any of its Subsidiaries enters into a settlement of any claim against any of them when a suit has been filed or suffers final judgments against any of them since the date of this Agreement in an aggregate amount, less any insurance proceeds covering such settlements or judgments which are received or as to which the insurance carriers admit liability, greater than $500,000 and, in the case of final judgments, either (i) enforcement proceedings shall have been commenced by any creditor upon such judgments or (ii) there shall be any period of 60 consecutive days during which a stay of enforcement of such judgments, by reason of a pending appeal or otherwise, shall not be in effect;

(i) Termination Events. Any Termination Event with respect to a Plan shall have occurred, and, 30 days after notice thereof shall have been given to the Borrower by the Administrative Agent, such Termination Event shall not have been corrected and shall have created and caused to be continuing a material risk of Plan termination or liability for withdrawal from the Plan as a “substantial employer” (as defined in Section 4001(a)(2) of ERISA), which termination could reasonably be expect to result in a liability of, or liability for withdrawal could reasonably be expected to be, greater than $500,000;

(j) Plan Withdrawals. The Borrower or any other member of the Controlled Group as employer under a Multiemployer Plan shall have made a complete or partial withdrawal from such Multiemployer Plan and such withdrawing employer shall have incurred a withdrawal liability in an annual amount exceeding $500,000;

(k) Credit Documents. Any material provision of any Credit Document shall for any reason (other than in accordance with its terms) cease to be valid and binding on any Credit Party or any such Person shall so state in writing;

(l) Change in Control. The occurrence of a Change in Control; or

(m) Casualty. The occurrence of any loss, theft, substantial damage or destruction of Collateral the fair market value of which not fully covered by insurance (except for deductibles and allowing for the depreciated value of such Collateral) and/or cash collateral deposited by the Borrower in connection therewith, exceeds $500,000.

Section 7.2 Optional Acceleration of Maturity. If any Event of Default shall have occurred and be continuing, then, and in any such event,

(a) the Administrative Agent (i) shall at the request, or may with the consent, of the Majority Lenders, by notice to the Borrower, declare that the obligation of each Lender to make Advances and the obligation of the Issuing Lender to issue Letters of Credit shall be terminated, whereupon the same shall forthwith terminate, and (ii) shall at the request, or may with the consent, of the Majority Lenders, by notice to the Borrower, declare the Notes, all interest thereon, and all other amounts payable under this Agreement to be forthwith due and payable, whereupon the Notes, all such interest, and all such amounts shall become and be forthwith due and payable in full, without presentment, demand, protest or further notice of any kind (including, without limitation, any notice of intent to accelerate or notice of acceleration), all of which are hereby expressly waived by each of the Credit Parties,

(b) the Borrower shall, on demand of the Administrative Agent at the request or with the consent of the Majority Lenders, Cash Collateralize an amount of cash equal to the outstanding Letter of Credit Exposure as security for the Secured Obligations to the extent the Letter of Credit Exposure is not otherwise paid or Cash Collateralized at such time, and

(c) the Administrative Agent shall at the request of, or may with the consent of, the Majority Lenders proceed to enforce its rights and remedies under the Security Documents, the Guaranties, or any other Credit Document for the ratable benefit of the Secured Parties by appropriate proceedings.

Section 7.3 Automatic Acceleration of Maturity. If any Event of Default pursuant to Section 7.1(g) shall occur,

(a) the obligation of each Lender to make Advances and the obligation of the Issuing Lender to issue Letters of Credit shall immediately and automatically be terminated and the Notes, all interest on the Notes, and all other amounts payable under this Agreement shall immediately and automatically become and be due and payable in full, without presentment, demand, protest or any notice of any kind (including, without limitation, any notice of intent to accelerate or notice of acceleration), all of which are hereby expressly waived by each of the Credit Parties,

Section 7.4 Set-off. If an Event of Default shall have occurred and be continuing, the Administrative Agent, each Lender, the Issuing Lender, and each of their respective Affiliates is hereby authorized at any time and from time to time, to the fullest extent permitted by applicable Legal Requirement, to set off and apply any and all deposits (general or special, time or demand, provisional or final, in whatever currency) at any time held and other obligations (in whatever currency) at any time owing by the Administrative Agent, such Lender, the Issuing Lender or any such Affiliate to or for the credit or the account of any Credit Party against any and all of the obligations of such Credit Party now or hereafter existing under this Agreement or any other Credit Document to the Administrative Agent, such Lender or the Issuing Lender, irrespective of whether or not the Administrative Agent, such Lender or the Issuing Lender shall have made any demand under this Agreement or any other Credit Document and although such obligations of any Credit Party may be contingent or unmatured or are owed to a branch or office of the Administrative Agent, such Lender or such Issuing Lender different from the branch or office holding such deposit or obligated on such indebtedness; provided that in the event that any Defaulting Lender shall exercise any such right of setoff, (x) all amounts so set off shall be paid over immediately to the Administrative Agent for further application in accordance with the provisions of Section 2.14 and, pending such payment, shall be segregated by such Defaulting Lender from its other funds and deemed held in trust for the benefit of the Administrative Agent, the Issuing Lender, the Swing Line Lender and the Lenders, and (y) the Defaulting Lender shall provide promptly to the Administrative Agent a statement describing in reasonable detail the Obligations owing to such Defaulting Lender as to which it exercised such right of setoff. The rights of each Lender Party and its Affiliates under this Section 7.4 are in addition to other rights and remedies (including other rights of setoff) that such Lender or Affiliates may have. Each Lender Party agrees to notify the Borrower and the Administrative Agent promptly after any such setoff and application, provided that the failure to give such notice shall not affect the validity of such setoff and application..

Section 7.5 Remedies Cumulative, No Waiver. No right, power, or remedy conferred to any Lender in this Agreement or the Credit Documents, or now or hereafter existing at law, in equity, by statute, or otherwise shall be exclusive, and each such right, power, or remedy shall to the full extent permitted by law be cumulative and in addition to every other such right, power or remedy. No course of dealing and no delay in exercising any right, power, or remedy conferred to any Lender in this Agreement and the Credit Documents or now or hereafter existing at law, in equity, by statute, or otherwise shall operate as a waiver of or otherwise prejudice any such right, power, or remedy. Any Lender may cure any Event of Default without waiving the Event of Default. No notice to or demand upon the Borrower or any other Credit Party shall entitle the Borrower or any other Credit Party to similar notices or demands in the future.

Section 7.6 Application of Payments. Prior to an Event of Default, all payments made hereunder shall be applied by the Administrative Agent as directed by the Borrower, but subject to the terms of this Agreement, including the application of prepayments according to Section 2.4(e) and Section 2.11. During the existence of an Event of Default, and subject to Section 2.14, all payments and collections received by the Administrative Agent (other than as a result of the exercise of remedies against Collateral or against the Borrower or any Subsidiary) shall be applied to the Secured Obligations in accordance with Section 2.11 and otherwise in the following order:

a. to the payment of all costs and expenses incurred by the Administrative Agent (in its capacity as such hereunder or under any other Credit Document) in connection with this Agreement or any of the Secured Obligations, including all court costs and the fees and expenses of its agents and legal counsel, the repayment of all advances made by the Administrative Agent as secured party hereunder or under any other Credit Document on behalf of any Credit Party and any other costs or expenses incurred in connection with the exercise of any right or remedy hereunder or under any other Credit Document, in each case, to the extent required to be paid or reimbursed by a Lender, the Borrower or any other Credit Party pursuant to the terms of this Agreement or any other Credit Document;

b. to the payment of all accrued interest constituting part of the Obligations (the amounts so applied to be distributed ratably among the Secured Parties in accordance with the amounts of the Obligations owed to them on the date of any such distribution);

c. to the payment of any then due and owing principal constituting part of the Obligations (the amounts so applied to be distributed ratably among the Secured Parties in accordance with the principal amounts of the Obligations owed to them on the date of any such distribution);

d. to the payment of all accrued interest constituting part of the Secured Obligations (other than the Obligations), the amounts so applied to be distributed ratably among the Secured Parties that are owed such obligations in accordance with the amounts of such Secured Obligations owed to them on the date of any such distribution;

e. to the payment of any then due and owing principal constituting part of the Secured Obligations (other than the Obligations), the amounts so applied to be distributed ratably among the Secured Parties that are owed such obligations in accordance with the principal amounts of such Secured Obligations owed to them on the date of any such distribution;

f. to the payment of any then due and owing other amounts (including fees and expenses) constituting part of the Secured Obligations, the amounts so applied to be distributed ratably among the Secured Parties in accordance with such amounts owed to them on the date of any such distribution; and

g. to the Credit Parties, their successors or assigns, or as a court of competent jurisdiction may otherwise direct.

Excluded Swap Obligations with respect to any Guarantor shall not be paid with amounts received from such Guarantor or its assets, but appropriate adjustments shall be made with respect to payments from other Credit Parties to preserve the allocation to Secured Obligations otherwise set forth above in this Section.

Notwithstanding the foregoing, during the existence of an Event of Default, all payments and collections received by the Administrative Agent resulting from the exercise of remedies against Collateral or against the Borrower or any Subsidiary shall be applied to the Secured Obligations in accordance with Section 2.11 and otherwise in the following order:

b. to the payment of all accrued interest constituting part of the Secured Obligations (the amounts so applied to be distributed ratably among the Secured Parties in accordance with the amounts of the Secured Obligations owed to them on the date of any such distribution);

c. to the payment of any then due and owing principal constituting part of the Secured Obligations (the amounts so applied to be distributed ratably among the Secured Parties (including, to the extent applicable to any termination payments owing under Hedging Arrangements, the Swap Counterparties and to the extent applicable to Banking Services Obligations, the Lenders or their Affiliates that is owed such obligations) pro rata in accordance with the principal amounts of the Secured Obligations owed to them on the date of any such distribution), and when applied to make distributions by the Administrative Agent to pay the principal amount of the outstanding Borrowings, pro rata to the Lenders; provided that, the “principal amount” of the obligations in respect of Hedging Arrangements under this clause shall be the Swap Termination Value then due and owing by the Borrower Entities and the “principal amount” of the Banking Services Obligations shall mean all contractually obligated amount then due and owing by the Borrower Entities other than interest or fees

d. to the payment of any then due and owing other amounts (including fees and expenses) constituting part of the Secured Obligations, the amounts so applied to be distributed ratably among the Secured Parties in accordance with such amounts owed to them on the date of any such distribution; and

e. to the Credit Parties, their successors or assigns, or as a court of competent jurisdiction may otherwise direct.

ARTICLE 8
THE ADMINISTRATIVE AGENT AND ISSUING LENDER

Section 8.1 Appointment and Authority. Each Lender, the Swing Line Lender and the Issuing Lender hereby irrevocably (a) appoints Wells Fargo to act on its behalf as the Administrative Agent hereunder and under the other Credit Documents, and (b) authorizes the Administrative Agent to take such actions on its behalf and to exercise such powers as are delegated to the Administrative Agent by the terms hereof or thereof, together with such actions and powers as are reasonably incidental thereto. The provisions of this Article 8 are solely for the benefit of the Lender Parties, and neither the Borrower nor any other Credit Party shall have rights as a third party beneficiary of any of such provisions. It is understood and agreed that the use of the term “agent” herein or in any other Credit Document (or any other similar term) with reference to the Administrative Agent is not intended to connote any fiduciary or other implied (or express) obligations arising under agency doctrine of any applicable Legal Requirement. Instead such term is used as a matter of market custom, and is intended to create or reflect only an administrative relationship between contracting parties.

Section 8.2 Rights as a Lender. The Person serving as the Administrative Agent hereunder shall have the same rights and powers in its capacity as a Lender as any other Lender and may exercise the same as though it were not the Administrative Agent and the term “Lender” or “Lenders” shall, unless otherwise expressly indicated or unless the context otherwise requires, include the Person serving as the Administrative Agent hereunder in its individual capacity. Such Person and its Affiliates may accept deposits from, lend money to, own securities, act as the financial advisor or in any other advisory capacity for and generally engage in any kind of business with the Borrower or any other Subsidiary or other Affiliate thereof as if such Person were not the Administrative Agent hereunder and without any duty to account therefor to the Lenders. Wells Fargo (and any successor acting as Administrative Agent) and its Affiliates may accept fees and other consideration from the Borrower or any Affiliate of the Borrower for services in connection with this Agreement or otherwise without having to account for the same to the Lenders or the Issuing Lender.

Section 8.3 Exculpatory Provisions. The Administrative Agent (which term as used in this Section 8.3 shall include its Related Parties) shall not have any duties or obligations except those expressly set forth herein and in the other Credit Documents, and its duties hereunder shall be administrative in nature. Without limiting the generality of the foregoing, the Administrative Agent:

(a) shall not be subject to any fiduciary or other implied duties, regardless of whether a Default has occurred and is continuing;

(b) shall not have any duty to take any discretionary action or exercise any discretionary powers, except discretionary rights and powers expressly contemplated hereby or by the other Credit Documents that the Administrative Agent is required to exercise as directed in writing by the Majority Lenders (or such other number or percentage of the Lenders as shall be expressly provided for herein or in the other Credit Documents), provided that the Administrative Agent shall not be required to take any action that, in its opinion or the opinion of its counsel, may expose the Administrative Agent to liability or that is contrary to any Credit Document or applicable Legal Requirement, including for the avoidance of doubt any action that may be in violation of the automatic stay under any Debtor Relief Law or that may effect a forfeiture, modification or termination of property of a Defaulting Lender in violation of any Debtor Relief Law; and

(c) shall not, except as expressly set forth herein and in the other Credit Documents, have any duty to disclose, nor shall it be liable for the failure to disclose, any information relating to the Borrower, any other Credit Party or any of their respective Affiliates that is communicated to or obtained by the Person serving as the Administrative Agent or any of its Affiliates in any capacity.

The Administrative Agent shall not be liable for any action taken or not taken by it (i) with the consent or at the request of the Majority Lenders (or such other number or percentage of the Lenders as shall be necessary, or as the Administrative Agent shall believe in good faith shall be necessary, under the circumstances as provided in Sections 7.1 and 9.3) or (ii) in the absence of its own gross negligence or willful misconduct as determined by a court of competent jurisdiction by final and nonappealable judgment. The Administrative Agent shall not be deemed not to have knowledge of any Default unless and until notice describing such Default is given to the Administrative Agent in writing by the Borrower, a Lender, the Swing Line Lender or the Issuing Lender. In the event that the Administrative Agent receives such a notice of the occurrence of a Default, the Administrative Agent shall (subject to Section 9.3) take such action with respect to such Default or Event of Default as shall reasonably be directed by the Majority Lenders, provided that, unless and until the Administrative Agent shall have received such directions, the Administrative Agent may (but shall not be obligated to) take such action, or refrain from taking such action) with respect to such Default as it shall deem advisable in the best interest of the Lender Parties.

The Administrative Agent shall not be responsible for or have any duty to ascertain or inquire into (i) any recital, statement, warranty or representation (whether written or oral) made in or in connection with this Agreement or any other Credit Document, (ii) the contents of any certificate, report or other document delivered hereunder or thereunder or in connection herewith or therewith, (iii) the performance or observance of any of the covenants, agreements or other terms or conditions set forth herein or therein or the occurrence of any Default, (iv) the value, validity, enforceability, effectiveness, enforceability, sufficiency or genuineness of this Agreement, any other Credit Document or any other agreement, instrument or document, (v) the inspection of, or to inspect, the Property (including the books and records) of any Credit Party or any Subsidiary or Affiliate thereof, (vi) the satisfaction of any condition set forth in Article 3 or elsewhere herein, other than to confirm receipt of items expressly required to be delivered to the Administrative Agent, or (vii) any litigation or collection proceedings (or to initiate or conduct any such litigation or proceedings) under any Credit Document unless requested by the Majority Lenders in writing and its receives indemnification satisfactory to it from the Lenders.

Section 8.4 Reliance by Administrative Agent, Swing Line Lender and Issuing Lender. The Administrative Agent shall be entitled to rely upon, and shall not incur any liability for relying upon, any notice, request, certificate, consent, statement, instrument, document, writing or other communication (including any electronic message, Internet or intranet website posting or other distribution) believed by it to be genuine and to have been signed, sent or otherwise authenticated by the proper Person. The Administrative Agent also may rely upon any statement made to it orally or by telephone and believed by it to have been made by the proper Person, and shall not incur any liability for relying thereon. In determining compliance with any condition hereunder to the making of a Credit Extension or any Conversion or continuance of an Advance that by its terms must be fulfilled to the satisfaction of a Lender, the Swing Line Lender or the Issuing Lender, the Administrative Agent may presume that such condition is satisfactory to such Lender, the Swing Line Lender or Issuing Lender unless the Administrative Agent shall have received notice to the contrary from such Lender, the Swing Line Lender or Issuing Lender prior to the making of such Credit Extension or Conversion or continuance of an Advance. The Administrative Agent may consult with legal counsel (who may be counsel for the Borrower), independent accountants and other experts selected by it, and shall not be liable for any action taken or not taken by it in accordance with the advice of any such counsel, accountants or experts.

Section 8.5 Delegation of Duties. The Administrative Agent may perform any and all of its duties and exercise its rights and powers hereunder or under any other Credit Document by or through any one or more sub-agents appointed by the Administrative Agent. The Administrative Agent and any such sub-agent may perform any and all of its duties and exercise its rights and powers by or through their respective Related Parties. The exculpatory provisions of this Article 8 shall apply to any such sub-agent and to the Related Parties of the Administrative Agent and any such sub-agent, and shall apply to their respective activities in connection with the syndication of the credit facilities provided for herein as well as activities as Administrative Agent. The Administrative Agent shall not be responsible for the negligence or misconduct of any sub-agents except to the extent that a court of competent jurisdiction determines in a final and non-appealable judgment that the Administrative Agent acted with gross negligence or willful misconduct in the selection of such sub-agents.

Section 8.6 Resignation of Administrative Agent or Issuing Lender.

(a) The Administrative Agent and the Issuing Lender may at any time give notice of its resignation to the other Lender Parties and the Borrower. Upon receipt of any such notice of resignation, (i) the Majority Lenders shall have the right, with the prior written consent of the Borrower (which consent is not required if an Event of Default has occurred and is continuing and which consent shall not be unreasonably withheld or delayed), to appoint, as applicable, a successor Administrative Agent or a successor Issuing Lender, which shall be a Lender. If no such successor Administrative Agent or Issuing Lender shall have been so appointed and shall have accepted such appointment within 30 days after the retiring Administrative Agent or Issuing Lender gives notice of its resignation (or such earlier day as shall be agreed by the applicable Majority Lenders and, if no Event of Default exists, the Borrower) (the “Resignation Effective Date”), then the retiring Administrative Agent or the Issuing Lender, as applicable, may on behalf of the Lenders and the Issuing Lender, appoint a successor agent or issuing lender meeting the qualifications set forth above. Whether or not a successor has been appointed, such resignation by the Administrative Agent or the Issuing Lender shall become effective in accordance with such notice on the Resignation Effective Date.

(b) If the Person serving as Administrative Agent is a Defaulting Lender pursuant to clause (d) of the definition thereof, the Majority Lenders may, to the extent permitted by applicable Legal Requirement, by notice in writing to the Borrower and such Person remove such Person as Administrative Agent and, in consultation with the Borrower, appoint a successor. If no such successor shall have been so appointed by applicable Majority Lenders and shall have accepted such appointment within 30 days after such notice of removal is given (or such earlier day as shall be agreed by the applicable Majority Lenders and, if no Event of Default exists, the Borrower) (the “Removal Effective Date”), then such removal shall nonetheless become effective in accordance with such notice on the Removal Effective Date.

(c) With effect from the Resignation Effective Date or the Removal Effective Date (as applicable) (i) the retiring or removed Administrative Agent or Issuing Lender, as applicable, shall be discharged from its duties and obligations as Administrative Agent and Issuing Lender hereunder and under the other Credit Documents (except that (y) in the case of any collateral security held by the Administrative Agent on behalf of the Lenders or the Issuing Lender under any of the Credit Documents, the retiring or removed Administrative Agent shall continue to hold such collateral security until such time as a successor Administrative Agent is appointed and (z) the retiring Issuing Lender shall remain the Issuing Lender with respect to any Letters of Credit outstanding on the effective date of its resignation and the provisions affecting the Issuing Lender with respect to such Letters of Credit shall inure to the benefit of the retiring Issuing Lender until the termination of all such Letters of Credit) and (ii) all payments, communications and determinations provided to be made by, to or through the retiring or removed Administrative Agent or Issuing Lender, as applicable, shall instead be made by or to each applicable class of Lenders, until such time as the Majority Lenders appoint a successor Administrative Agent or Issuing Lender as provided for above in this paragraph. Upon the acceptance of a successor’s appointment as Administrative Agent or Issuing Lender hereunder, such successor shall succeed to and become vested with all of the rights, powers, privileges and duties of the retiring or removed Administrative Agent or Issuing Lender, as applicable, and the retiring or removed Administrative Agent or Issuing Lender, as applicable, shall be discharged from all of its duties and obligations hereunder or under the other Credit Documents. The fees payable by the Borrower to a successor Administrative Agent or Issuing Lender, as applicable shall be the same as those payable to its predecessor unless otherwise agreed between the Borrower and such successor. After the retiring or removed Administrative Agent’s or Issuing Lender’s resignation or removal hereunder and under the other Credit Documents, the provisions of this Article 8 and Section 2.2(g), Section 8.9 and Sections 9.2(a) and (b) shall continue in effect for the benefit of such retiring or removed Administrative Agent and Issuing Lender, its sub agents and their respective Related Parties in respect of any actions taken or omitted to be taken by any of them while the retiring or removed Administrative Agent or Issuing Lender, as applicable, was acting as Administrative Agent or Issuing Lender.

(d) The Swing Line Lender may resign at any time by giving 30 days’ prior notice to the Administrative Agent, the Lenders and the Borrower. After the resignation of the Swing Line Lender hereunder, the retiring Swing Line Lender shall remain a party hereto and shall continue to have all the rights and obligations of the Swing Line Lender under this Agreement and the other Credit Documents with respect to Swing Line Advances made by it prior to such resignation, but shall not be required to make any additional Swing Line Advances. Upon such notice of resignation, the Borrower shall have the right to designate any other Lender as the Swing Line Lender with the consent of such Lender so long as operational matters related to the funding of Advances have been adequately addressed to the reasonable satisfaction of such new Swing Line Lender and the Administrative Agent (if such new Swing Line Lender and the Administrative Agent are not the same Person).

Section 8.7 Non-Reliance on Administrative Agent and Other Lenders. Each Lender Party acknowledges and agrees that it has, independently and without reliance upon the Administrative Agent or any other Lender Party or any of their Related Parties and based on such documents and information as it has deemed appropriate, made its own credit analysis and decision to enter into this Agreement. Each Lender Party also acknowledges and agrees that it will, independently and without reliance upon the Administrative Agent or any other Lender Party or any of their Related Parties, and based on such documents and information as it shall from time to time deem appropriate, continue to make its own decisions in taking or not taking action under or based upon this Agreement, any other Credit Document or any related agreement or any document furnished hereunder or thereunder. Except for notices, reports, and other documents and information expressly required to be furnished to the Lenders or the Issuing Lender by the Administrative Agent hereunder and for other information in the Administrative Agent’s possession which has been requested by a Lender and for which such Lender pays the Administrative Agent’s expenses in connection therewith, the Administrative Agent shall not have any duty or responsibility to provide any Lender or any Issuing Lender with any credit or other information concerning the affairs, financial condition, or business of any Credit Party or any of its Subsidiaries or Affiliates that may come into the possession of the Administrative Agent or any of its Affiliates.

Section 8.8 No Other Duties, etc. Anything herein to the contrary notwithstanding, none of the Joint Bookrunners, Co-Lead Arrangers, Syndication Agent and Co-Documentation Agents, as applicable, listed on the cover page hereof shall have any powers, duties or responsibilities under this Agreement or any of the other Credit Documents, except in its capacity, as applicable, as the Administrative Agent, a Lender or the Issuing Lender hereunder.

Section 8.9 Indemnification.

(a) INDEMNITY OF ADMINISTRATIVE AGENT. THE LENDERS SEVERALLY AGREE TO INDEMNIFY THE ADMINISTRATIVE AGENT AND EACH AFFILIATE THEREOF AND THEIR RESPECTIVE DIRECTORS, OFFICERS, EMPLOYEES, AND AGENTS (TO THE EXTENT NOT REIMBURSED BY THE BORROWER), ratably according to the respective principal amounts of the Advances then held by each of them (or if no principal of the Advances is at the time outstanding, ratably according to the respective Commitments held by each of them immediately prior to the termination, expiration or full reduction of each such Commitment), FROM AND AGAINST ANY AND ALL LIABILITIES, OBLIGATIONS, LOSSES, DAMAGES, PENALTIES, ACTIONS, JUDGMENTS, SUITS, COSTS, EXPENSES, OR DISBURSEMENTS OF ANY KIND OR NATURE WHATSOEVER WHICH MAY BE IMPOSED ON, INCURRED BY, OR ASSERTED AGAINST THE ADMINISTRATIVE AGENT IN ANY WAY RELATING TO OR ARISING OUT OF THIS AGREEMENT OR ANY ACTION TAKEN OR OMITTED BY THE ADMINISTRATIVE AGENT UNDER THIS AGREEMENT OR ANY OTHER CREDIT DOCUMENT (in all cases, whether or not caused by or arising, in whole or in part, out of the comparative, contributory or sole negligence of the Administrative agent), AND INCLUDING, WITHOUT LIMITATION, ENVIRONMENTAL LIABILITIES, PROVIDED THAT NO LENDER SHALL BE LIABLE FOR ANY PORTION OF SUCH LIABILITIES, OBLIGATIONS, LOSSES, DAMAGES, PENALTIES, ACTIONS, JUDGMENTS, SUITS, COSTS, EXPENSES, OR DISBURSEMENTS RESULTING FROM THE ADMINISTRATIVE AGENT’S GROSS NEGLIGENCE OR WILLFUL MISCONDUCT. WITHOUT LIMITATION OF THE FOREGOING, EACH LENDER AGREES TO REIMBURSE THE ADMINISTRATIVE AGENT PROMPTLY UPON DEMAND FOR ITS RATABLE SHARE (DETERMINED AS SET FORTH ABOVE IN THIS PARAGRAPH) OF ANY OUT-OF-POCKET EXPENSES (INCLUDING COUNSEL FEES) INCURRED BY THE ADMINISTRATIVE AGENT IN CONNECTION WITH THE PREPARATION, EXECUTION, DELIVERY, ADMINISTRATION, MODIFICATION, AMENDMENT, OR ENFORCEMENT (WHETHER THROUGH NEGOTIATIONS, LEGAL PROCEEDINGS, OR OTHERWISE) OF, OR LEGAL ADVICE IN RESPECT OF RIGHTS OR RESPONSIBILITIES UNDER, THIS AGREEMENT OR ANY OTHER CREDIT DOCUMENT, TO THE EXTENT THAT THE ADMINISTRATIVE AGENT IS NOT REIMBURSED FOR SUCH BY THE BORROWER.

(b) THE REVOLVING LENDERS SEVERALLY AGREE TO INDEMNIFY THE ISSUING LENDER AND EACH AFFILIATE THEREOF AND THEIR RESPECTIVE DIRECTORS, OFFICERS, EMPLOYEES, AND AGENTS (TO THE EXTENT NOT REIMBURSED BY THE BORROWER), ratably according to the respective principal amounts of the Revolving Advances then held by each of them (or if no principal of the Revolving Advances is at the time outstanding, ratably according to the respective amounts of the Revolving Commitments then held by each of them, or, if no such principal amounts are then outstanding and no Revolving Commitments are then existing, ratably according to the Revolving Commitments held by each of them immediately prior to the termination or expiration thereof), FROM AND AGAINST ANY AND ALL LIABILITIES, OBLIGATIONS, LOSSES, DAMAGES, PENALTIES, ACTIONS, JUDGMENTS, SUITS, COSTS, EXPENSES, OR DISBURSEMENTS OF ANY KIND OR NATURE WHATSOEVER WHICH MAY BE IMPOSED ON, INCURRED BY, OR ASSERTED AGAINST THE ISSUING LENDER IN ANY WAY RELATING TO OR ARISING OUT OF THIS AGREEMENT OR ANY ACTION TAKEN OR OMITTED BY THE ISSUING LENDER UNDER THIS AGREEMENT OR ANY OTHER CREDIT DOCUMENT (in all cases, whether or not caused by or arising, in whole or in part, out of the comparative, contributory or sole negligence of THE Issuing Lender), AND INCLUDING, WITHOUT LIMITATION, ENVIRONMENTAL LIABILITIES, PROVIDED THAT NO REVOLVING LENDER SHALL BE LIABLE FOR ANY PORTION OF SUCH LIABILITIES, OBLIGATIONS, LOSSES, DAMAGES, PENALTIES, ACTIONS, JUDGMENTS, SUITS, COSTS, EXPENSES, OR DISBURSEMENTS RESULTING FROM THE ISSUING LENDER’S GROSS NEGLIGENCE OR WILLFUL MISCONDUCT. WITHOUT LIMITATION OF THE FOREGOING, EACH REVOLVING LENDER AGREES TO REIMBURSE THE ISSUING LENDER PROMPTLY UPON DEMAND FOR ITS RATABLE SHARE (DETERMINED AS SET FORTH ABOVE IN THIS PARAGRAPH) OF ANY OUT-OF-POCKET EXPENSES (INCLUDING COUNSEL FEES) INCURRED BY THE ISSUING LENDER IN CONNECTION WITH THE PREPARATION, EXECUTION, DELIVERY, ADMINISTRATION, MODIFICATION, AMENDMENT, OR ENFORCEMENT (WHETHER THROUGH NEGOTIATIONS, LEGAL PROCEEDINGS, OR OTHERWISE) OF, OR LEGAL ADVICE IN RESPECT OF RIGHTS OR RESPONSIBILITIES UNDER, THIS AGREEMENT OR ANY OTHER CREDIT DOCUMENT, TO THE EXTENT THAT THE ISSUING LENDER IS NOT REIMBURSED FOR SUCH BY THE BORROWER.

Section 8.10 Administrative Agent May File Proofs of Claim. In case of the pendency of any proceeding under any Debtor Relief Law or any other judicial proceeding relative to any Credit Party, the Administrative Agent (irrespective of whether the principal of any Advance or Letter of Credit Obligation shall then be due and payable as herein expressed or by declaration or otherwise and irrespective of whether the Administrative Agent shall have made any demand on the Borrower) shall be entitled and empowered (but not obligated) by intervention in such proceeding or otherwise:

(a) to file and prove a claim for the whole amount of the principal and interest owing and unpaid in respect of the Advances, Letter of Credit Exposure and all other Obligations that are owing and unpaid and to file such other documents as may be necessary or advisable in order to have the claims of the Lenders, the Issuing Lender and the Administrative Agent (including any claim for the reasonable compensation, expenses, disbursements and advances of the Lenders, the Issuing Lender and the Administrative Agent and their respective agents and counsel and all other amounts due the Lenders, the Issuing Lender and the Administrative Agent under Section 2.2) allowed in such judicial proceeding; and

(b) to collect and receive any monies or other property payable or deliverable on any such claims and to distribute the same; and any custodian, receiver, assignee, trustee, liquidator, sequestrator or other similar official in any such judicial proceeding is hereby authorized by each Lender and Issuing Lender to make such payments to the Administrative Agent and, in the event that the Administrative Agent shall consent to the making of such payments directly to the Lenders and the Issuing Lender, to pay to the Administrative Agent any amount due for the reasonable compensation, expenses, disbursements and advances of the Administrative Agent and its agents and counsel, and any other amounts due the Administrative Agent under Section 2.6.

Section 8.11 Collateral and Guaranty Matters.

(a) The Administrative Agent is authorized on behalf of the Secured Parties, without the necessity of any notice to or further consent from such Secured Parties, from time to time, to take any actions with respect to any Collateral or Security Documents which may be necessary to perfect and maintain the Liens upon the Collateral granted pursuant to the Security Documents. The Administrative Agent is further authorized (but not obligated) on behalf of the Secured Parties, without the necessity of any notice to or further consent from the Secured Parties, from time to time, to take any action in exigent circumstances as may be reasonably necessary to preserve any rights or privileges of the Secured Parties under the Credit Documents or applicable Legal Requirements. By accepting the benefit of the Liens granted pursuant to the Security Documents, each Secured Party hereby agrees to the terms of this paragraph (a).

(b) The Lenders hereby, and any other Secured Party by accepting the benefit of the Liens granted pursuant to the Security Documents, irrevocably authorize the Administrative Agent to (i) release any Lien granted to or held by the Administrative Agent upon any Collateral (a) upon termination of the Commitments, termination of all Hedging Arrangements with Swap Counterparties (other than Hedging Agreements as to which arrangements satisfactory to the applicable counterparty in its sole discretion have been made), termination or expiration of all Letters of Credit (other than Letters of Credit as to which arrangements satisfactory to the Issuing Lender in its sole discretion have been made), and the payment in full of all outstanding Advances, Letter of Credit Obligations and all other Secured Obligations payable under this Agreement and under any other Credit Document (other than contingent indemnification obligations); (b) constituting property sold or to be sold or disposed of as part of or in connection with any disposition permitted under this Agreement or any other Credit Document; (c) constituting property in which no Credit Party owned an interest at the time the Lien was granted or at any time thereafter; or (d) constituting property leased to any Credit Party under a lease which has expired or has been terminated in a transaction permitted under this Agreement or is about to expire and which has not been, and is not intended by such Credit Party to be, renewed or extended; and (ii) release a Guarantor from its obligations under a Guaranty and any other applicable Credit Document if such Person ceases to be a Subsidiary as a result of a transaction permitted under this Agreement. Upon the request of the Administrative Agent at any time, the Secured Parties will confirm in writing the Administrative Agent’s authority to release particular types or items of Collateral pursuant to this Section 8.11.

(c) Notwithstanding anything contained in any of the Credit Documents to the contrary, the Credit Parties, the Administrative Agent, and each Secured Party hereby agree that no Secured Party shall have any right individually to realize upon any of the Collateral or to enforce the Guaranties, it being understood and agreed that all powers, rights and remedies hereunder and under the Security Documents may be exercised solely by Administrative Agent on behalf of the Secured Parties in accordance with the terms hereof and the other Credit Documents. By accepting the benefit of the Liens granted pursuant to the Security Documents, each Secured Party not party hereto hereby agrees to the terms of this paragraph (c).

ARTICLE 9
MISCELLANEOUS

Section 9.1 Costs and Expenses. The Borrower agrees to pay on demand:

(a) all reasonable out-of-pocket costs and expenses of the Administrative Agent (but not of other Lenders) in connection with the preparation, execution, delivery, administration, modification, and amendment of this Agreement, the Notes, and the other Credit Documents including costs associated with field examinations, appraisals subject to Section 5.12, and the reasonable fees, charges and disbursements of outside counsel for Administrative Agent (but not of other Lenders), with respect to advising the Administrative Agent as to its rights and responsibilities under this Agreement, and

(b) all out-of-pocket costs and expenses, if any, of the Administrative Agent and each Lender (including outside counsel fees, charges and disbursements of each Lender) in connection with the enforcement (whether through negotiations, legal proceedings, or otherwise) of this Agreement, the Notes, and the other Credit Documents.

Section 9.2 Indemnification; Waiver of Damages.

(a) INDEMNIFICATION. EACH CREDIT PARTY HERETO AGREES TO, JOINTLY AND SEVERALLY, INDEMNIFY AND HOLD HARMLESS THE ADMINISTRATIVE AGENT, THE ISSUING LENDER AND EACH LENDER AND EACH OF THEIR AFFILIATES AND THEIR RESPECTIVE OFFICERS, DIRECTORS, EMPLOYEES, AGENTS, AND ADVISORS (EACH, AN “INDEMNITEE”) FROM AND AGAINST ANY AND ALL CLAIMS, DAMAGES, LOSSES, LIABILITIES, COSTS, AND EXPENSES (INCLUDING, WITHOUT LIMITATION, REASONABLE ATTORNEYS’ FEES) THAT MAY BE INCURRED BY OR ASSERTED OR AWARDED AGAINST ANY INDEMNITEE, IN EACH CASE ARISING OUT OF OR IN CONNECTION WITH OR BY REASON OF (INCLUDING, WITHOUT LIMITATION, IN CONNECTION WITH ANY INVESTIGATION, LITIGATION, OR PROCEEDING OR PREPARATION OF DEFENSE IN CONNECTION THEREWITH) THE CREDIT DOCUMENTS, ANY OF THE TRANSACTIONS CONTEMPLATED HEREIN OR THE ACTUAL OR PROPOSED USE OF THE PROCEEDS OF THE ADVANCES, IN ALL CASES, WHETHER OR NOT CAUSED BY OR ARISING, IN WHOLE OR IN PART, OUT OF THE COMPARATIVE, CONTRIBUTORY OR SOLE NEGLIGENCE OF THE APPLICABLE INDEMNITEE,EXCEPT TO THE EXTENT SUCH CLAIM, DAMAGE, LOSS, LIABILITY, COST, OR EXPENSE IS FOUND IN A FINAL, NON-APPEALABLE JUDGMENT BY A COURT OF COMPETENT JURISDICTION TO HAVE RESULTED FROM SUCH INDEMNITEE’S GROSS NEGLIGENCE OR WILLFUL MISCONDUCT. IN THE CASE OF AN INVESTIGATION, LITIGATION OR OTHER PROCEEDING TO WHICH THE INDEMNITY IN THIS SECTION 9.2 APPLIES, SUCH INDEMNITY SHALL BE EFFECTIVE WHETHER OR NOT SUCH INVESTIGATION, LITIGATION OR PROCEEDING IS BROUGHT BY ANY CREDIT PARTY, ITS DIRECTORS, SHAREHOLDERS OR CREDITORS OR AN INDEMNITEE OR ANY OTHER PERSON OR ANY INDEMNITEE IS OTHERWISE A PARTY THERETO. No Credit Party shall, without the prior written consent of each Indemnitee affected thereby (which consent will not be unreasonably withheld), settle any threatened or pending claim or action that would give rise to the right of any Indemnitee to claim indemnification hereunder unless such settlement (x) includes a full and unconditional release of all liabilities arising out of such claim or action against such Indemnitee and (y) does not include any statement as to or an admission of fault, culpability or failure to act by or on behalf of any Indemnitee.

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(b) Waiver of Consequential Damages, Etc. To the fullest extent permitted by applicable Legal Requirement, no Credit Party shall assert, agrees not to assert, and hereby waives, any claim against any Indemnitee on any theory of liability, for special, indirect, consequential or punitive damages (as opposed to direct or actual damages) arising out of, in connection with, or as a result of, this Agreement, any other Credit Document or any agreement or instrument contemplated hereby, the transactions contemplated hereby or thereby, any Advance or Letter of Credit or the use of the proceeds thereof. To the fullest extent permitted by applicable Legal Requirement, no Lender Party shall assert, agrees not to assert, and hereby waives, any claim against any Credit Party on any theory of liability, for special, indirect, consequential or punitive damages (as opposed to direct or actual damages) arising out of, in connection with, or as a result of, this Agreement, any other Credit Document or any agreement or instrument contemplated hereby, the transactions contemplated hereby or thereby, any Advance or Letter of Credit or the use of the proceeds thereof. No Indemnitee referred to in subsection (a) above shall be liable for any damages arising from the use by unintended recipients of any information or other materials distributed to such unintended recipients by such Indemnitee through telecommunications, electronic or other information transmission systems in connection with this Agreement or the other Credit Documents or the transactions contemplated hereby or thereby other than for direct or actual damages resulting from the gross negligence or willful misconduct of such Indemnitee as determined by a final and nonappealable judgment of a court of competent jurisdiction.

(d) Survival. Without prejudice to the survival of any other agreement of the Credit Parties hereunder, the agreements and obligations of the Credit Parties contained in this Section 9.2 shall survive the termination of this Agreement, the termination of all Commitments, and the payment in full of the Advances and all other amounts payable under this Agreement.

Section 9.3 Waivers and Amendments. No amendment or waiver of any provision of this Agreement, the Notes, or any other Credit Document (other than the Fee Letter or any Autoborrow Agreement), nor consent to any departure by the Borrower or any Guarantor therefrom, shall in any event be effective unless the same shall be in writing and signed by the Majority Lenders and the Borrower, and then such waiver or consent shall be effective only in the specific instance and for the specific purpose for which given; provided that (subject to Section 2.14 with respect to any Defaulting Lender):

(a) no amendment, waiver, or consent shall, unless in writing and signed by all the Term Lenders and the Borrower, do any of the following: (i) reduce the principal of, or interest on, the Term Notes, (ii) postpone or extend any date fixed for any payment of principal of, or interest on, the Term Notes, including, without limitation, the Term Maturity Date, or (iii) change the number of Term Lenders which shall be required for the Term Lenders to take any action hereunder or under any other Credit Document;

(b) no amendment, waiver, or consent shall, unless in writing and signed by all the Revolving Lenders and the Borrower, do any of the following: (i) reduce the principal of, or interest on, the Revolving Notes, (ii) postpone or extend any date fixed for any payment of principal of, or interest on, the Revolving Notes, including, without limitation, the Revolving Maturity Date, or (iii) change the number of Revolving Lenders which shall be required for the Revolving Lenders to take any action hereunder or under any other Credit Document;

(c) no amendment, waiver, or consent shall, unless in writing and signed by all the CapEx Lenders and the Borrower, do any of the following: (i) reduce the principal of, or interest on, the CapEx Notes, (ii) postpone or extend any date fixed for any payment of principal of, or interest on, the CapEx Notes, including, without limitation, the CapEx Maturity Date, or (iii) change the number of CapEx Lenders which shall be required for the CapEx Lenders to take any action hereunder or under any other Credit Document;

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(d) no amendment, waiver, or consent shall, unless in writing and signed by all the Lenders and the Borrower, do any of the following: (i) waive any of the conditions specified in Section 3.1 or Section 3.2, (ii) reduce any fees or other amounts payable hereunder or under any other Credit Document (other than those specifically addressed above in this Section 9.3), (iii) increase the aggregate Commitments, (iv) postpone or extend any date fixed for any payment of any fees or other amounts payable hereunder (other than those otherwise specifically addressed in this Section 9.3), (v) other than as a result of acceleration pursuant to Article 7, change the Term Maturity Date or the CapEx Maturity Date to a date that is earlier than one day after the then effective Revolving Maturity Date, amend the amortization schedule thereof to increase the principal prepayment amounts, or otherwise change any provision hereof which would have the effect of increasing the aggregate amount of Term Advances or CapEx Advances that are required to be paid in any given year, (vi) amend Section 2.11(e), Section 7.6, this Section 9.3 or any other provision in any Credit Document which expressly requires the consent of, or action or waiver by, all of the Lenders, (vii) except as specifically provided in the Credit Documents and as a result of transactions permitted by the terms of this Agreement, release any Guarantor from its obligation under any Guaranty or release all or a material portion of the Collateral except as permitted under Section 8.11(b); (viii) amend the definitions of “Majority Lenders”, “Majority Revolving Lenders”, “Majority Term Lenders”, “Majority CapEx Lenders” or “Maximum Exposure Amount”; or (ix) amend the definitions of “Secured Parties”, “Secured Obligations” or “Collateral” in a manner adverse to any Secured Party;

(e) no Commitment of a Lender or any obligations of a Lender may be increased without such Lender’s written consent;

(f) no amendment, waiver, or consent shall, unless in writing and signed by the Majority Revolving Lenders, the Majority CapEx Lenders and the Majority Term Lenders adversely affect the interests, rights or obligations of the Revolving Lenders in a manner substantially different from the effect of such amendment, waiver or consent on the Term Lenders and the CapEx Lenders, it being understood that, if the amount of (i) the lesser of the Borrowing Base and the aggregate Revolving Commitments minus (ii) the Revolving Outstandings is greater than $0, any amendment, waiver or consent that has the effect of curing or waiving any Default shall require the consent of the Majority Revolving Lenders in addition to all other consents required hereunder;

(g) no amendment, waiver, or consent shall, unless in writing and signed by the Majority Revolving Lenders, the Majority CapEx Lenders and the Majority Term Lenders, adversely affect the interests, rights or obligations of the CapEx Lenders in a manner substantially different from the effect of such amendment, waiver or consent on the Revolving Lenders and the Term Lenders, it being understood that, if the amount of (i) the aggregate CapEx Commitments minus (ii) the outstanding principal amount of the CapEx Advances is greater than $0, any amendment, waiver or consent that has the effect of curing or waiving any Default shall require the consent of the Majority CapEx Lenders in addition to all other consents required hereunder;

(h) no amendment, waiver, or consent shall, unless in writing and signed by the Majority Revolving Lenders, the Majority CapEx Lenders and the Majority Term Lenders, adversely affect the interests, rights or obligations of the Term Lenders in a manner substantially different from the effect of such amendment, waiver or consent on the Revolving Lenders and the CapEx Lenders;

(i) no amendment, waiver, or consent shall, unless in writing and signed by the Administrative Agent in addition to the Lenders required above to take such action, affect the rights or duties of the Administrative Agent under this Agreement or any other Credit Document;

(j) no amendment, waiver or consent shall, unless in writing and signed by the Issuing Lender in addition to the Lenders required above to take such action, affect the rights or duties of such Issuing Lender under this Agreement or any other Credit Document; and

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(k) no amendment, waiver or consent shall, unless in writing and signed by the Swing Line Lender in addition to the Lenders required above to take such action, affect the rights or duties of the Swing Line Lender under this Agreement or any other Credit Document.

Section 9.4 Severability. In case one or more provisions of this Agreement or the other Credit Documents shall be invalid, illegal or unenforceable in any respect under any applicable Legal Requirement, the validity, legality, and enforceability of the remaining provisions contained herein or therein shall not be affected or impaired thereby.

Section 9.5 Survival of Representations and Obligations. All representations and warranties contained in this Agreement or made in writing by or on behalf of the Credit Parties in connection herewith shall survive the execution and delivery of this Agreement and the other Credit Documents, the making of the Advances or the issuance of any Letters of Credit and any investigation made by or on behalf of the Lenders, none of which investigations shall diminish any Lender’s right to rely on such representations and warranties. All obligations of the Borrower or any other Credit Party provided for in Sections 2.9, 2.10, 2.12(c), 9.1 and 9.2 and all of the obligations of the Lenders in Section 8.5 shall survive any termination of this Agreement and repayment in full of the Obligations.

Section 9.6 Binding Effect. This Agreement shall become effective when it shall have been executed by the Borrower and the Administrative Agent, and when the Administrative Agent shall have, as to each Lender, either received a counterpart hereof executed by such Lender or been notified by such Lender that such Lender has executed it and thereafter shall be binding upon and inure to the benefit of the Borrower, the Administrative Agent, and each Lender and their respective successors and assigns, except that neither the Borrower nor any other Credit Party shall have the right to assign its rights or delegate its duties under this Agreement or any interest in this Agreement without the prior written consent of each Lender.

Section 9.7 Successors and Assigns.

(a) Successors and Assigns Generally. The provisions of this Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective successors and assigns permitted hereby, except that neither the Borrower nor any other Credit Party may assign or otherwise transfer any of its rights or obligations hereunder without the prior written consent of the Administrative Agent and each Lender, and no Lender may assign or otherwise transfer any of its rights or obligations hereunder except (i) to an assignee in accordance with the provisions of paragraph (b) of this Section, (ii) by way of participation in accordance with the provisions of paragraph (d) of this Section, or (iii) by way of pledge or assignment of a security interest subject to the restrictions of paragraph (f) of this Section (and any other attempted assignment or transfer by any party hereto shall be null and void). Nothing in this Agreement, expressed or implied, shall be construed to confer upon any Person (other than the parties hereto, their respective successors and assigns permitted hereby, Participants to the extent provided in paragraph (d) of this Section and, to the extent expressly contemplated hereby, the Related Parties of each of the Administrative Agent and the Lenders) any legal or equitable right, remedy or claim under or by reason of this Agreement.

(b) Assignment by Lenders. Any Lender may at any time assign to one or more Eligible Assignees all or a portion of its rights and obligations under this Agreement (including all or a portion of its Commitment and the Advances at the time owing to it); provided that (in each case with respect to any Facility) any such assignment shall be subject to the following conditions:

(i) Minimum Amounts.

(A) in the case of an assignment of the entire remaining amount of the assigning Lender’s Commitment and/or the Advances at the time owing to it (in each case with respect to any Facility) or contemporaneous assignments to related Approved Funds that equal at least the amount specified in paragraph (b)(i)(B) of this Section in the aggregate or in the case of an assignment to a Lender, an Affiliate of a Lender or an Approved Fund, no minimum amount need be assigned; and

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(B) in any case not described in paragraph (b)(i)(A) of this Section, the aggregate amount of the Commitment (which for this purpose includes Advances outstanding thereunder) or, if the applicable Commitment is not then in effect, the principal outstanding balance of the Advances of the assigning Lender subject to each such assignment (determined as of the date the Assignment and Acceptance with respect to such assignment is delivered to the Administrative Agent or, if “Trade Date” is specified in the Assignment and Acceptance, as of the Trade Date) shall not be less than $5,000,000, unless each of the Administrative Agent and, so long as no as no Default or Event of Default has occurred and is continuing, the Borrower otherwise consents (each such consent not to be unreasonably withheld or delayed).

(ii) Proportionate Amounts. Each partial assignment shall be made as an assignment of a proportionate part of all the assigning Lender’s rights and obligations under this Agreement with respect to the Advance or the Commitment assigned, and, for the avoidance of doubt, no Lender shall assign all or any portion of its rights and obligations among separate Facilities on a non-pro rata basis.

(iii) Required Consents. No consent shall be required for any assignment except to the extent required by paragraph (b)(i)(B) of this Section and, in addition:

(A) the consent of the Borrower (such consent not to be unreasonably withheld or delayed) shall be required unless (x) an Event of Default has occurred and is continuing at the time of such assignment, or (y) such assignment is to a Lender or an Affiliate of a Lender; provided that the Borrower shall be deemed to have consented to any such assignment unless it shall object thereto by written notice to the Administrative Agent within 10 Business Days after having received notice thereof;

(B) the consent of the Administrative Agent (such consent not to be unreasonably withheld or delayed) shall be required for assignments in respect of (i) the Revolving Facility if such assignment is to a Person that is not a Lender with a Commitment in respect of such Facility, or (ii) any Term Advance or CapEx Advance to a Person who is not a Lender or an Affiliate of a Lender; and

(C) the consent of each Issuing Lender and Swing Line Lender shall be required for any assignment in respect of the Revolving Facility.

(iv) Assignment and Acceptance. The parties to each assignment shall execute and deliver to the Administrative Agent an Assignment and Acceptance, together with a processing and recordation fee of $3,500; provided that the Administrative Agent may, in its sole discretion, elect to waive such processing and recordation fee in the case of any assignment. The assignee, if it is not a Lender, shall deliver to the Administrative Agent an Administrative Questionnaire.

(v) No Assignment to Certain Persons. No such assignment shall be made to (A) the Borrower or any of the Borrower’s Affiliates or Subsidiaries or (B) to any Defaulting Lender or any of its Subsidiaries, or any Person who, upon becoming a Lender hereunder, would constitute any of the foregoing Persons described in this clause (B).

(vi) No Assignment to Natural Persons. No such assignment shall be made to a natural Person.

(vii) Certain Additional Payments. In connection with any assignment of rights and obligations of any Defaulting Lender hereunder, no such assignment shall be effective unless and until, in addition to the other conditions thereto set forth herein, the parties to the assignment shall make such additional payments to the Administrative Agent in an aggregate amount sufficient, upon distribution thereof as appropriate (which may be outright payment, purchases by the assignee of participations or subparticipations, or other compensating actions, including funding, with the consent of the Borrower and the Administrative Agent, the applicable pro rata share of Advances previously requested but not funded by the Defaulting Lender, to each of which the applicable assignee and assignor hereby irrevocably consent), to (x) pay and satisfy in full all payment liabilities then owed by such Defaulting Lender to the Administrative Agent, the Issuing Lender, the Swing Line Lender and each other Lender hereunder (and interest accrued thereon), and (y) acquire (and fund as appropriate) its full pro rata share of all Advances and participations in Letters of Credit and Swing Line Advances in accordance with its Revolving Pro Rata Share. Notwithstanding the foregoing, in the event that any assignment of rights and obligations of any Defaulting Lender hereunder shall become effective under applicable Legal Requirement without compliance with the provisions of this paragraph, then the assignee of such interest shall be deemed to be a Defaulting Lender for all purposes of this Agreement until such compliance occurs.

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Subject to acceptance and recording thereof by the Administrative Agent pursuant to paragraph (c) of this Section, from and after the effective date specified in each Assignment and Acceptance, the assignee thereunder shall be a party to this Agreement and, to the extent of the interest assigned by such Assignment and Acceptance, have the rights and obligations of a Lender under this Agreement, and the assigning Lender thereunder shall, to the extent of the interest assigned by such Assignment and Acceptance, be released from its obligations under this Agreement (and, in the case of an Assignment and Acceptance covering all of the assigning Lender’s rights and obligations under this Agreement, such Lender shall cease to be a party hereto) but shall continue to be entitled to the benefits of Sections 2.10, 9.1, 9.2 and 9.3 with respect to facts and circumstances occurring prior to the effective date of such assignment; provided, that except to the extent otherwise expressly agreed by the affected parties, no assignment by a Defaulting Lender will constitute a waiver or release of any claim of any party hereunder arising from that Lender’s having been a Defaulting Lender. Any assignment or transfer by a Lender of rights or obligations under this Agreement that does not comply with this paragraph shall be treated for purposes of this Agreement as a sale by such Lender of a participation in such rights and obligations in accordance with paragraph (d) of this Section.

(c) Register. The Administrative Agent, acting solely for this purpose as an agent of the Borrower, shall maintain at its address referred to in Section 9.9 a copy of each Assignment and Acceptance delivered to it and a register for the recordation of the names and addresses of the Lenders, and the Commitments of, and principal amounts (and stated interest) of the Advances owing to, each Lender pursuant to the terms hereof from time to time (the “Register”). The entries in the Register shall be conclusive and binding for all purposes, absent manifest error, and the Borrower, the Administrative Agent and the Lenders shall treat each Person whose name is recorded in the Register pursuant to the terms hereof as a Lender hereunder for all purposes of this Agreement. The Register shall be available for inspection by the Borrower and any Lender, at any reasonable time and from time to time upon reasonable prior notice. The Borrower hereby agrees that the Administrative Agent acting as its agent solely for the purpose set forth above in this clause (c), shall not subject the Administrative Agent to any fiduciary or other implied duties, all of which are hereby waived by the Borrower.

(d) Participations. Any Lender may at any time, without the consent of, or notice to, the Borrower or the Administrative Agent, sell participations to any Person (other than a natural Person or the Borrower or any of the Borrower’s Affiliates or Subsidiaries) (each, a “Participant”) in all or a portion of such Lender’s rights and/or obligations under this Agreement (including all or a portion of its Commitment and/or the Advances owing to it); provided that (i) such Lender’s obligations under this Agreement shall remain unchanged, (ii) such Lender shall remain solely responsible to the other parties hereto for the performance of such obligations, and (iii) the Borrower, the Administrative Agent, the Issuing Lender and Lenders shall continue to deal solely and directly with such Lender in connection with such Lender’s rights and obligations under this Agreement. For the avoidance of doubt, each Lender shall be responsible for the indemnity under Section 9.2(a) with respect to any payments made by such Lender to its Participant(s).

Any agreement or instrument pursuant to which a Lender sells such a participation shall provide that such Lender shall retain the sole right to enforce this Agreement and to approve any amendment, modification or waiver of any provision of this Agreement; provided that such agreement or instrument may provide that such Lender will not, without the consent of the Participant, agree to any amendment, modification or waiver described in clauses (a), (b), (c) or (d) of this Section 9.7 (that adversely affects such Participant). The Borrower agrees that each Participant shall be entitled to the benefits of Sections 2.9, 2.10 and 2.12 (subject to the requirements and limitations therein, including the requirements under Section 2.12(g) (it being understood that the documentation required under Section 2.12(g) shall be delivered to the participating Lender)) to the same extent as if it were a Lender and had acquired its interest by assignment pursuant to paragraph (b) of this Section; provided that such Participant (A) agrees to be subject to the provisions of Section 2.13 as if it were an assignee under paragraph (b) of this Section; and (B) shall not be entitled to receive any greater payment under Sections 2.10 or 2.12, with respect to any participation, than its participating Lender would have been entitled to receive, except to the extent such entitlement to receive a greater payment results from a Change in Law that occurs after the Participant acquired the applicable participation. Each Lender that sells a participation agrees, at the Borrower’s request and expense, to use reasonable efforts to cooperate with the Borrower to effectuate the provisions of Section 2.13 with respect to any Participant. To the extent permitted by law, each Participant also shall be entitled to the benefits of Section 7.4 as though it were a Lender; provided that such Participant agrees to be subject to Section 2.11(e) as though it were a Lender. Each Lender that sells a participation shall, acting solely for this purpose as an agent of the Borrower, maintain a register on which it enters the name and address of each Participant and the principal amounts (and stated interest) of each Participant’s interest in the Advances or other obligations under the Credit Documents (the “Participant Register”); provided that no Lender shall have any obligation to disclose all or any portion of the Participant Register (including the identity of any Participant or any information relating to a Participant’s interest in any commitments, loans, letters of credit or its other obligations under any Credit Document) to any Person except to the extent that such disclosure is necessary to establish that such commitment, loan, letter of credit or other obligation is in registered form under Section 5f.103-1(c) of the United States Treasury Regulations. The entries in the Participant Register shall be conclusive absent manifest error, and such Lender shall treat each Person whose name is recorded in the Participant Register as the owner of such participation for all purposes of this Agreement notwithstanding any notice to the contrary. For the avoidance of doubt, the Administrative Agent (in its capacity as Administrative Agent) shall have no responsibility for maintaining a Participant Register. The Borrower hereby agrees that each Lender acting as its agent solely for the purpose set forth above in this clause (d), shall not subject such Lender to any fiduciary or other implied duties, all of which are hereby waived by the Borrower.

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(e) Certain Pledges. Any Lender may at any time pledge or assign a security interest in all or any portion of its rights under this Agreement to secure obligations of such Lender, including any pledge or assignment to secure obligations to a Federal Reserve Bank; provided that no such pledge or assignment shall release such Lender from any of its obligations hereunder or substitute any such pledgee or assignee for such Lender as a party hereto.

Section 9.8 Confidentiality. The Administrative Agent, the Swing Line Lender, each Issuing Lender, and each Lender (each a “Lender Party”) agree to keep confidential any Specified Information furnished or made available to it by any Credit Party pursuant to this Agreement (including, without limitation, all such information in connection with the transactions contemplated hereby made available prior to the execution of this Agreement); provided that nothing herein shall prevent any Lender Party from disclosing such information (a) to any other Lender Party or any Affiliate of any Lender Party, or any officer, director, employee, agent, or advisor of any Lender Party or Affiliate of any Lender Party for purposes of administering, negotiating, considering, processing, implementing, syndicating, assigning, or evaluating the credit facilities provided herein and the transactions contemplated hereby (it being understood that the Persons to whom such disclosure is made will be informed of the confidential nature of such Specified Information and instructed to keep such Specified Information confidential), (b) as required by any Legal Requirement, (d) upon the order of any court or administrative agency, (e) upon the request or demand of any regulatory agency or authority, (f) that is or becomes available to the public or that is or becomes available to any Lender Party other than as a result of a disclosure by any other Lender Party prohibited by this Agreement, (g) in connection with any litigation relating to this Agreement or any other Credit Document to which such Lender Party or any of its Affiliates may be a party, (h) to the extent necessary in connection with the exercise of any right or remedy under this Agreement or any other Credit Document, and (i) to any actual or proposed participant or assignee, in each case, subject to provisions similar to those contained in this Section 9.8. “Specified Information” means all written information concerning the Borrower or any of its Subsidiaries or Affiliates that has been made available to the Lender Parties by the Borrower or any of its Subsidiaries or Affiliates (excluding (i) any such information that is available to such Lender Party on a non-confidential basis but including any information from a source which, to such Lender Party’s actual knowledge, has been disclosed by such source in violation of a duty of confidentiality to the Borrower or any of its Subsidiaries or Affiliates and (ii) any information that is or becomes generally available to the public other than as a result of disclosure by any other Lender Party prohibited by this Agreement). NOTWITHSTANDING ANYTHING TO THE CONTRARY CONTAINED HEREIN, nothing in this Agreement shall (a) restrict any Lender Party from providing information to any bank or other regulatory or governmental authorities, including the Federal Reserve Board and its supervisory staff; (b) require or permit any Lender Party to disclose to any Credit Party that any information will be or was provided to the Federal Reserve Board or any of its supervisory staff; or (c) require or permit any Lender Party to inform any Credit Party of a current or upcoming Federal Reserve Board examination or any nonpublic Federal Reserve Board supervisory initiative or action.

Section 9.9 Notices, Etc.

(a) All notices and other communications (other than Notices of Borrowing and Notices of Continuation or Conversion, which are governed by Article 2 of this Agreement) shall be in writing and hand delivered with written receipt, telecopied, sent by facsimile (with a hard copy sent as otherwise permitted in this Section 9.9), sent by a nationally recognized overnight courier, or sent by certified mail, return receipt requested as follows: if to a Credit Party, as specified on Schedule II, if to the Swing Line Lender, the Administrative Agent or the Issuing Lender, at its credit contact specified under its name on Schedule II, and if to any Lender at its credit contact specified in its Administrative Questionnaire. Each party may change its notice address by written notification to the other parties. All such notices and communications shall be effective when delivered, except that notices and communications to any Lender, the Swing Line Lender or the Issuing Lender pursuant to Article 2 shall not be effective until received and, in the case of facsimile, such receipt is confirmed by the Swing Line Lender, such Lender or Issuing Lender, as applicable, verbally or in writing.

(b) Platform.

(i) Each Credit Party agrees that the Administrative Agent may, but shall not be obligated to, make the Communications (as defined below) available to the Issuing Lender and the other Lenders by posting the Communications on Debt Domain, Intralinks, Syndtrak or a substantially similar electronic transmission system (the “Platform”).

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(ii) The Platform is provided “as is” and “as available.” The Agent Parties (as defined below) do not warrant the adequacy of the Platform and expressly disclaim liability for errors or omissions in the Communications. No warranty of any kind, express, implied or statutory, including, without limitation, any warranty of merchantability, fitness for a particular purpose, non-infringement of third-party rights or freedom from viruses or other code defects, is made by any Agent Party in connection with the Communications or the Platform. In no event shall the Administrative Agent or any of its Related Parties (collectively, the “Agent Parties”) have any liability to the Borrower or the other Credit Parties, any Lender or any other Person or entity for damages of any kind, including, without limitation, direct or indirect, special, incidental or consequential damages, losses or expenses (whether in tort, contract or otherwise) arising out of the Borrower’s, any Credit Party’s or the Administrative Agent’s transmission of communications through the Platform. “Communications” means, collectively, any notice, demand, communication, information, document or other material provided by or on behalf of any Credit Party pursuant to any Credit Document or the transactions contemplated therein which is distributed to the Administrative Agent, any Lender or any Issuing Lender by means of electronic communications pursuant to this Section, including through the Platform.

Section 9.10 Usury Not Intended. It is the intent of each Credit Party and each Lender in the execution and performance of this Agreement and the other Credit Documents to contract in strict compliance with applicable usury laws, including conflicts of law concepts, governing the Advances of each Lender including such applicable Legal Requirements of the State of New York, if any, and the United States of America from time to time in effect. In furtherance thereof, the Lenders and the Credit Parties stipulate and agree that none of the terms and provisions contained in this Agreement or the other Credit Documents shall ever be construed to create a contract to pay, as consideration for the use, forbearance or detention of money, interest at a rate in excess of the Maximum Rate and that for purposes of this Agreement “interest” shall include the aggregate of all charges which constitute interest under such laws that are contracted for, charged or received under this Agreement; and in the event that, notwithstanding the foregoing, under any circumstances the aggregate amounts taken, reserved, charged, received or paid on the Advances, include amounts which by applicable Legal Requirement are deemed interest which would exceed the Maximum Rate, then such excess shall be deemed to be a mistake and each Lender receiving same shall credit the same on the principal of its Notes (or if such Notes shall have been paid in full, refund said excess to the Borrower). In the event that the maturity of the Notes are accelerated by reason of any election of the holder thereof resulting from any Event of Default under this Agreement or otherwise, or in the event of any required or permitted prepayment, then such consideration that constitutes interest may never include more than the Maximum Rate, and excess interest, if any, provided for in this Agreement or otherwise shall be canceled automatically as of the date of such acceleration or prepayment and, if theretofore paid, shall be credited on the applicable Notes (or, if the applicable Notes shall have been paid in full, refunded to the Borrower of such interest). In determining whether or not the interest paid or payable under any specific contingencies exceeds the Maximum Rate, the Credit Parties and the Lenders shall to the maximum extent permitted under applicable Legal Requirement amortize, prorate, allocate and spread in equal parts during the period of the full stated term of the Notes all amounts considered to be interest under applicable Legal Requirement at any time contracted for, charged, received or reserved in connection with the Obligations. The provisions of this Section shall control over all other provisions of this Agreement or the other Credit Documents which may be in apparent conflict herewith.

Section 9.11 Usury Recapture. In the event the rate of interest chargeable under this Agreement at any time is greater than the Maximum Rate, the unpaid principal amount of the Advances shall bear interest at the Maximum Rate until the total amount of interest paid or accrued on the Advances equals the amount of interest which would have been paid or accrued on the Advances if the stated rates of interest set forth in this Agreement had at all times been in effect. In the event, upon payment in full of the Advances, the total amount of interest paid or accrued under the terms of this Agreement and the Advances is less than the total amount of interest which would have been paid or accrued if the rates of interest set forth in this Agreement had, at all times, been in effect, then the Borrower shall, to the extent permitted by applicable Legal Requirement, pay the Administrative Agent for the account of the Lenders an amount equal to the difference between (i) the lesser of (A) the amount of interest which would have been charged on its Advances if the Maximum Rate had, at all times, been in effect and (B) the amount of interest which would have accrued on its Advances if the rates of interest set forth in this Agreement had at all times been in effect and (ii) the amount of interest actually paid under this Agreement on its Advances. In the event the Lenders ever receive, collect or apply as interest any sum in excess of the Maximum Rate, such excess amount shall, to the extent permitted by law, be applied to the reduction of the principal balance of the Advances, and if no such principal is then outstanding, such excess or part thereof remaining shall be paid to the Borrower.

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Section 9.12 Payments Set Aside. To the extent that any payment by or on behalf of the Borrower is made to any Lender Party, or any Lender Party exercises its right of setoff, and such payment or the proceeds of such setoff or any part thereof is subsequently invalidated, declared to be fraudulent or preferential, set aside or required (including pursuant to any settlement entered into by any Lender Party in its discretion) to be repaid to a trustee, receiver or any other party, in connection with any proceeding under any Debtor Relief Law or otherwise, then (a) to the extent of such recovery, the obligation or part thereof originally intended to be satisfied shall be revived and continued in full force and effect as if such payment had not been made or such setoff had not occurred, and (b) each Lender Party severally agrees to pay to the Administrative Agent upon demand its applicable share (without duplication) of any amount so recovered from or repaid by the Administrative Agent, plus interest thereon from the date of such demand to the date such payment is made at a rate per annum equal to the Federal Funds Rate in effect from time to time, in the applicable currency of such recovery or payment. The obligations of the Lenders, the Swing Line Lender and the Issuing Lender under clause (b) of the preceding sentence shall survive the payment in full of the Obligations and the termination of this Agreement.

Section 9.13 Governing Law; Service of Process. This Agreement, the Notes and the other Credit Documents (unless otherwise expressly provided therein) shall be deemed a contract under, and shall be governed by, and construed and enforced in accordance with, the laws of the State of New York without regard to conflicts of laws principles (other than Sections 5-1401 and 5-1402 of the General Obligations Law of the State of New York). Each Letter of Credit shall be governed by either (i) the Uniform Customs and Practice for Documentary Credits (2007 Revision), International Chamber of Commerce Publication No. 600, or (ii) the International Standby Practices (ISP98), International Chamber of Commerce Publication No. 590, in either case, including any subsequent revisions thereof approved by a Congress of the International Chamber of Commerce and adhered to by the Issuing Lender. The Borrower hereby agrees that service of copies of the summons and complaint and any other process which may be served in any such action or proceeding may be made by mailing or delivering a copy of such process to the Borrower at the address set forth for the Borrower in this Agreement. Nothing in this Section shall affect the rights of any Lender to serve legal process in any other manner permitted by the law or affect the right of any Lender to bring any action or proceeding against the Borrower or its Property in the courts of any other jurisdiction.

Section 9.14 Submission to Jurisdiction. The parties hereto hereby agree that any suit or proceeding arising in respect of this Agreement or any other Credit Document, or any of the matters contemplated hereby or thereby will be tried exclusively in the U.S. District Court for the Southern District of New York or, if such court does not have subject matter jurisdiction, in any state court located in the City and County of New York, and the parties hereto hereby agree to submit to the exclusive jurisdiction of, and venue in, such court. Each of the parties hereto agrees that a final judgment in any such action or proceeding shall be conclusive and may be enforced in other jurisdictions by suit on the judgment or in any other manner provided by applicable Legal Requirement. The parties hereto hereby agree that service of any process, summons, notice or document by registered mail addressed to the applicable parties will be effective service of process against such party for any action or proceeding relating to any such dispute. Each party hereto hereby irrevocably and unconditionally waives, to the fullest extent permitted by applicable Legal Requirement, any objection that it may now or hereafter have to the laying of venue of any action or proceeding arising out of or relating to this Agreement in any court referred to in this Section 9.14. Each of the parties hereto hereby agrees that Sections 5-1401 and 5-1402 of the General Obligations Law of the State of New York shall apply to this Agreement and irrevocably waives, to the fullest extent permitted by applicable Legal Requirement, the defense of any inconvenient forum to the maintenance of such action or proceeding in any such court.

Section 9.15 Electronic Execution of Assignments. Electronic Execution of Assignments. The words “execution,” “signed,” “signature,” and words of like import in any Assignment and Acceptance shall be deemed to include electronic signatures or the keeping of records in electronic form, each of which shall be of the same legal effect, validity or enforceability as a manually executed signature or the use of a paper-based recordkeeping system, as the case may be, to the extent and as provided for in any applicable law, including the Federal Electronic Signatures in Global and National Commerce Act, the New York State Electronic Signatures and Records Act, or any other similar state laws based on the Uniform Electronic Transactions Act.

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Section 9.16 Execution in Counterparts. This Agreement may be executed in any number of counterparts and by different parties hereto in separate counterparts, each of which when so executed shall be deemed to be an original and all of which taken together shall constitute one and the same agreement.

Section 9.17 Waiver of Jury. THE BORROWER, THE LENDERS, THE ISSUING LENDER, AND THE ADMINISTRATIVE AGENT HEREBY ACKNOWLEDGE THAT THEY HAVE BEEN REPRESENTED BY AND HAVE CONSULTED WITH COUNSEL OF THEIR CHOICE, AND HEREBY KNOWINGLY, VOLUNTARILY, INTENTIONALLY, AND IRREVOCABLY WAIVE ANY AND ALL RIGHT TO TRIAL BY JURY IN RESPECT OF ANY LEGAL PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT, ANY OTHER CREDIT DOCUMENT, OR ANY OF THE TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY.

Section 9.18 USA Patriot Act. Each Lender that is subject to the Patriot Act and the Administrative Agent (for itself and not on behalf of any Lender) hereby notifies each Credit Party that pursuant to the requirements of the Patriot Act it is required to obtain, verify and record information that identifies such Credit Party, which information includes the name and address of such Credit Party and other information that will allow such Lender or the Administrative Agent, as applicable, to identify such Credit Party in accordance with the Patriot Act.

Section 9.19 Confirmation of Flood Policies and Procedures. Wells Fargo has adopted internal policies and procedures that address requirements placed on federally regulated lenders under the National Flood Insurance Reform Act of 1994 and related legislation (the “Flood Laws”). Wells Fargo, as administrative agent, will post on the applicable electronic platform (or otherwise distribute to each Lender) documents that it receives in connection with the Flood Laws; however, Wells Fargo reminds each Lender and Participant in the Facilities that, pursuant to the Flood Laws, each federally regulated Lender (whether acting as a Lender or Participant in the facilities) is responsible for assuring its own compliance with the flood insurance requirements.

Section 9.20 Keepwell. Each Qualified ECP Guarantor hereby jointly and severally absolutely, unconditionally and irrevocably undertakes to provide such funds or other support as may be needed from time to time by each other Credit Party to honor all of its obligations under this Agreement in respect of Swap Obligations (provided, however, that each Qualified ECP Guarantor shall only be liable under this Section 9.20 for the maximum amount of such liability that can be hereby incurred without rendering its obligations under this Section 9.20, or otherwise under this Agreement, voidable under applicable law relating to fraudulent conveyance or fraudulent transfer, and not for any greater amount). The obligations of each Qualified ECP Guarantor under this Section shall remain in full force and effect until the termination of all Commitments and payment in full of all Secured Obligations (other than contingent indemnification obligations) and the expiration or termination of all Letters of Credit (other than Letters of Credit as to which other arrangements satisfactory to the Administrative Agent and the Issuing Lender have been made). Each Qualified ECP Guarantor intends that this Section 9.20 constitute, and this Section 9.20 shall be deemed to constitute, a “keepwell, support, or other agreement” for the benefit of each other Credit Party for all purposes of Section 1a(18)(A)(v)(II) of the Commodity Exchange Act.

Section 9.21 Amendment and RestatementThis Agreement amends and restates in its entirety the Existing Credit Agreement, and from and after the date hereof, the terms and provisions of the Existing Credit Agreement shall be superseded by the terms and provisions of this Agreement. The Borrower and the Lenders hereby agree that (i) the Existing Indebtedness, all accrued and unpaid interest thereon, and all accrued and unpaid fees under the Existing Credit Documents shall be deemed to be Debt of the Borrower (and not of the "Borrower" under the Existing Credit Agreement) outstanding under and governed by this Agreement and, subject to the terms hereof, all outstanding Advances thereunder will be continued as Term Advances of the same type and interest period hereunder, and (ii) to the extent permitted by applicable law, all Liens securing the Existing Indebtedness shall continue in full force and effect to secure the Obligations. In connection with the restatement of the Existing Credit Agreement and the other Existing Credit Documents, each Lender that is also an Existing Lender hereby authorizes the Administrative Agent to execute and deliver the Assumption Agreement and such other documents necessary in the Administrative Agent’s discretion to effect the amendment and restatement of the Existing Credit Agreement and the Existing Credit Documents.

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Section 9.22 Integration. THIS WRITTEN AGREEMENT AND THE CREDIT DOCUMENTS, AS DEFINED IN THIS AGREEMENT, REPRESENT THE FINAL AGREEMENT AMONG THE PARTIES AND SUPERSEDE ALL PRIOR UNDERSTANDINGS AND AGREEMENTS, WHETHER WRITTEN OR ORAL, RELATING TO THE TRANSACTIONS PROVIDED FOR HEREIN AND THEREIN. ADDITIONALLY, THIS AGREEMENT AND THE CREDIT DOCUMENTS MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS, OR SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES.

In executing this agreement, each credit party hereto hereby warrants and represents it is not relying on any statement or representation other than those in this agreement and is relying upon its own judgment and advice of its attorneys.

[Remainder of this page intentionally left blank. Signature pages follow.]

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SCHEDULE I

Pricing Schedule

The Applicable Margin with respect to the Commitment Fee, Revolving Advances, Swing Line Advances (if applicable), CapEx Advances and the Term Advances shall be determined in accordance with the following table based on the Borrower’s Leverage Ratio as reflected in the Compliance Certificate delivered in connection with the Financial Statements most recently delivered pursuant to Section 5.2. Adjustments, if any, to such Applicable Margin shall be effective on the date the Administrative Agent receives the applicable Financial Statements and corresponding Compliance Certificate as required by the terms of this Agreement. Notwithstanding the foregoing, the Borrower shall be deemed to be at Level I until delivery of its Financial Statements and corresponding Compliance Certificate for the fiscal quarter ending December 31, 2014. If the Borrower fails to deliver the Financial Statements and corresponding Compliance Certificate to the Administrative Agent at the time required pursuant to Section 5.2, then effective as of the date such Financial Statements and Compliance Certificate were required to the delivered pursuant to Section 5.2, the Applicable Margin with respect to the Commitment Fee, Revolving Advances, Swing Line Advances (if applicable), CapEx Advances and Term Advances shall be determined at Level I and shall remain at such level until the date such Financial Statements and corresponding Compliance Certificate are so delivered by the Borrower. Notwithstanding anything to the contrary contained herein, the determination of the Applicable Margin for any period shall be subject to the provisions of Section 2.7(d). For the avoidance of doubt, the levels on the pricing grid set forth below are set forth from highest (Level I) to the lowest (Level III).

Applicable Margin	Leverage Ratio	Eurodollar Advances	Base Rate Advances	Commitment Fee
Level I	Is greater than or equal to 2.50	4.50%	3.50%	0.55%
Level II	Is greater than or equal to 1.50 but less than 2.50	4.00%	3.00%	0.50%
Level III	Is less than 1.50	3.50%	2.50%	0.45%

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SCHEDULE II

Commitments, Contact Information

ADMINISTRATIVE AGENT/ISSUING LENDER/SWING LINE LENDER
Wells Fargo Bank, National Association	Address: 1000 Louisiana Street 9^th Floor Houston, Texas 77002 Attn: Don Herrick Telephone: (713) 319-1372 Facsimile: (713) 739-1087
CREDIT PARTIES
Borrower/Guarantors (other than Austin Chalk)	Address: 3 Riverway, Suite 920 Houston, Texas 77056 Attn: Munawar H. Hidayatallah Telephone: (832 454-7394 Facsimile: (713) 333-4004
Austin Chalk	Address: 1080 Private Road 7703 P.O. Box 1110 Giddings, Texas 78942 Attn: Kurt Chew, Division President Telephone: (979) 542-3500 Facsimile: (979) 542-3520

Lender	Revolving Commitment	Term Advances Outstanding on Amendment No. 1 Effective Date	CapEx Commitment	Total
Wells Fargo Bank, National Association	$5,000,000.00	$22,500,000.00	$5,000,000.00	$32,500,000.00
Total:	$5,000,000.00	$22,500,000.00	$5,000,000.00	$32,500,000.00

SCHEDULE IV

Additional Conditions Precedent for CapEx Borrowings for Equipment

The Administrative Agent shall have received, at least five (5) Business Days prior to the date of the proposed CapEx Borrowing, a certificate executed by a Responsible Officer of the Borrower effective as of date of delivery and certifying and attaching thereto (i) an updated list of all leased properties upon which any equipment or inventory owned by a Credit Party is held or stored (other than such locations exempt from the landlord lien waiver requirement set forth in Section 6.20 of the Credit Agreement; (ii) if the equipment to be purchased is new equipment or used equipment purchased or to be purchased from a vendor selling equipment as inventory, (A) true and correct copies of the third party invoices reflecting the purchase price of such equipment; and (B) an accurate and complete written calculation of the Net Invoiced Costs for such equipment certified; and (iii) if such equipment is purchased or to be purchased from any Person other than a vendor selling equipment as inventory, a written appraisal conducted by an industry recognized third party appraiser acceptable to the Administrative Agent stating, among other things, a detailed NOLV for such equipment.

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EXHIBIT E-3

FORM OF NOTICE OF CAPEX BORROWING

___________, ___

Wells Fargo Bank, National Association, as Administrative Agent

1000 Louisiana Street

9^th Floor

Houston, Texas 77002

Attn: Don Herrick

Telephone: (713) 319-1372

Telecopy: (713) 739-1087

Ladies and Gentlemen:

(a) The undersigned, Aly Energy Services, Inc., a Delaware corporation (“Borrower”), refers to the Amended and Restated Credit Agreement dated as of April 15, 2014 (as the same may be amended, restated, amended and restated, supplemented or otherwise modified from time to time, the “Credit Agreement”, the defined terms of which are used in this Notice of CapEx Borrowing as defined therein unless otherwise defined in this Notice of CapEx Borrowing) among the Borrower, the lenders party thereto from time to time (the “Lenders”), and Wells Fargo Bank, National Association, as administrative agent, as issuing lender and as swing line lender, and hereby gives you irrevocable notice pursuant to Section 2.3(a) of the Credit Agreement that the undersigned hereby requests a CapEx Borrowing (the “Proposed Borrowing”), and in connection with that request sets forth below the information relating to such Proposed Borrowing as required by the Credit Agreement:

(a) The Business Day of the Proposed Borrowing is ____________, _____.

(b) The Proposed Borrowing will be composed of [Base Rate Advances] [Eurodollar Advances].

(d) [The Interest Period for each Eurodollar Advance made as part of the Proposed Borrowing is [one][three][six] month(s)].

113

The Borrower hereby certifies that the following statements are true on the date hereof, and will be true on the date of the Proposed Borrowing:

(i) the representations and warranties contained in the Credit Agreement, the Security Documents, the Guaranty and each of the other Credit Documents are true and correct in all material respects (except that such materiality qualifier shall not be applicable to any representations and warranties that already are qualified or modified by materiality in the text thereof), on and as of the date of the Proposed Borrowing, before and after giving effect to such Proposed Borrowing and to the application of the proceeds therefrom, as though made on the date of the Proposed Borrowing, except for those representations and warranties that are made as of a specified date, which shall be true and correct as such specified date; and

(ii) no Default has occurred and is continuing, or would result from such Proposed Borrowing or from the application of the proceeds therefrom.

Very truly yours,

aly energy services, inc.

By:_______________________________

Name:_____________________________

Title:______________________________

114

EXHIBIT H-4

CAPEX NOTE

$5,000,000.00

November 21, 2014

For value received, the undersigned ALY ENERGY SERVICES, INC., a Delaware corporation (“Borrower”), hereby promises to pay to the order of Wells Fargo Bank, National Association (“Payee”) the principal amount of Five Million and No/100 Dollars ($5,000,000.00) or, if less, the aggregate outstanding principal amount of the CapEx Advances (as defined in the Credit Agreement referred to below) made by the Payee (or predecessor in interest) to the Borrower, together with interest on the unpaid principal amount of the CapEx Advances from the date of such CapEx Advances until such principal amount is paid in full, at such interest rates, and at such times, as are specified in the Credit Agreement (as hereunder defined). The Borrower may make prepayments on this CapEx Note in accordance with the terms of the Credit Agreement.

This CapEx Note is one of the CapEx Notes referred to in, and is entitled to the benefits of, and is subject to the terms of, the Amended and Restated Credit Agreement dated as of April 15, 2014 (as the same may be amended, restated, amended and restated, supplemented or otherwise modified from time to time, the “Credit Agreement”), among the Borrower, the lenders party thereto (the “Lenders”), and Wells Fargo Bank, National Association, as administrative agent (the “Administrative Agent”) for the Lenders, as issuing lender and as swing line lender. Capitalized terms used in this CapEx Note that are defined in the Credit Agreement and not otherwise defined in this CapEx Note have the meanings assigned to such terms in the Credit Agreement. The Credit Agreement, among other things, (a) provides for the making of the CapEx Advances by the Payee to the Borrower in an aggregate amount not to exceed at any time outstanding the Dollar amount first above mentioned, the indebtedness of the Borrower resulting from each such CapEx Advance being evidenced by this CapEx Note, and (b) contains provisions for acceleration of the maturity of this CapEx Note upon the happening of certain events stated in the Credit Agreement and for optional and mandatory prepayments of principal prior to the maturity of this CapEx Note upon the terms and conditions specified in the Credit Agreement.

Both principal and interest are payable in lawful money of the United States of America to the Administrative Agent at the location or address specified by the Administrative Agent to the Borrower in same day funds. The Payee shall record payments of principal made under this CapEx Note, but no failure of the Payee to make such recordings shall affect the Borrower’s repayment obligations under this CapEx Note.

This CapEx Note is secured by the Security Documents and guaranteed pursuant to the terms of the Guaranty.

This CapEx Note is made expressly subject to the terms of Section 9.10 and Section 9.11 of the Credit Agreement.

Except as specifically provided in the Credit Agreement and the other Credit Documents, the Borrower hereby waives presentment, demand, protest, notice of intent to accelerate, notice of acceleration, and any other notice of any kind. No failure to exercise, and no delay in exercising, any rights hereunder on the part of the holder of this CapEx Note shall operate as a waiver of such rights.

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This CAPEX Note shall be deemed a contract under, and shall be governed by, and construed and enforced in accordance with, the laws of the State of New York without regard to conflicts of laws principles (other than Sections 5-1401 and 5-1402 of the General Obligations Law of the State of New York).

This CAPEX Note and the other CREDIT Documents represent the final agreement among the parties and SUPERSEDE ALL PRIOR UNDERSTANDINGS AND AGREEMENTS, WHETHER WRITTEN OR ORAL, RELATING TO THE TRANSACTIONS PROVIDED FOR HEREIN AND THEREIN. ADDITIONALLY, THIS CAPEX NOTE AND THE CREDIT DOCUMENTS may not be contradicted by evidence of prior, contemporaneous, or subsequent oral agreements of the parties.

ALY energy services, INC.

By: ___________________________________

Name:__________________________________

Title:___________________________________

116

EXHIBIT 21.1

List of Subsidiaries

Aly Operating, Inc. (Delaware)

Austin Chalk Petroleum Services Corp. (Delaware)

Aly Centrifuge Inc. (Delaware)

Evolution Guidance Systems, Inc. (Texas)

EXHIBIT 31.1

CERTIFICATION OF CHIEF EXECUTIVE OFFICER

I, Munawar H. Hidayatallah, certify that:

1.	I have reviewed this annual report on Form 10-K of Aly Energy Services, Inc.;

2.	Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this annual report;

3.	Based on my knowledge, the financial statements, and other financial information included in this annual report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this annual report.

4.	I am responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and I have:

	a.	designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this annual report is being prepared;

	b.	evaluated the effectiveness of the registrant's disclosure controls and procedures as of a date within 90 days prior to the filing date of this annual report (the "Evaluation Date"); and

	c.	presented in this annual report my conclusions about the effectiveness of the disclosure controls and procedures based on my evaluation as of the Evaluation Date;

5.	I have disclosed, based on my most recent evaluation, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent function):

	a.	all significant deficiencies in the design or operation of internal controls which could adversely affect the registrant's ability to record, process, summarize and report financial data and have identified for the registrant's auditors any material weaknesses in internal controls; and

	b.	any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal controls; and

I have indicated in this annual report whether or not there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses.

March 31, 2015	By:	/s/ Munawar H. Hidayatallah
		Munawar H. Hidayatallah Chief Executive Officer
		(Principal Executive Officer)

EXHIBIT 31.2

CERTIFICATION OF CHIEF FINANCIAL OFFICER

I, Alya Hidayatallah, certify that:

1.	I have reviewed this annual report on Form 10-K of Aly Energy Services, Inc.;

2.	Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this annual report;

3.	Based on my knowledge, the financial statements, and other financial information included in this annual report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this annual report.

4.	I am responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and I have:

	a.	designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this annual report is being prepared;

	b.	evaluated the effectiveness of the registrant's disclosure controls and procedures as of a date within 90 days prior to the filing date of this annual report (the "Evaluation Date"); and

	c.	presented in this annual report my conclusions about the effectiveness of the disclosure controls and procedures based on my evaluation as of the Evaluation Date;

5.	I have disclosed, based on my most recent evaluation, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent function):

	a.	all significant deficiencies in the design or operation of internal controls which could adversely affect the registrant's ability to record, process, summarize and report financial data and have identified for the registrant's auditors any material weaknesses in internal controls; and

	b.	any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal controls; and

March 31, 2015	By:	/s/ Alya Hidayatallah
		Alya Hidayatallah Chief Financial Officer
		(Principal Financial Officer)

EXHIBIT 32.1

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Annual Report of Aly Energy Services, Inc. (the "Company") on Form 10-K for the period ending December 31, 2014 as filed with the Securities and Exchange Commission on the date hereof (the "Report"), I, Munawar H. Hidayatallah, Principal Executive Officer of the Company, certify, pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002, that:

	(1)	The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

	(2)	The information contained in the Report fairly presents, in all material respects, the financial condition and result of operations of the Company.

March 31, 2015	By:	/s/ Munawar H. Hidayatallah
		Munawar H. Hidayatallah Principal Executive Officer

EXHIBIT 32.2

CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Annual Report of Aly Energy Services, Inc. (the "Company") on Form 10-K for the period ending December 31, 2014 as filed with the Securities and Exchange Commission on the date hereof (the "Report"), I, Alya Hidayatallah, Principal Financial Officer of the Company, certify, pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002, that:

	(1)	The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

	(2)	The information contained in the Report fairly presents, in all material respects, the financial condition and result of operations of the Company.