Aqua Metals (AQMS) 10-Q 2016 Q2 Quarterly report

Exhibit 10.5

CREDIT AGREEMENT

BETWEEN

AQUA METALS, INC.
(“Borrower”)

AND

INTERSTATE EMERGING INVESTMENTS, LLC
(“Lender”)

May 18, 2016

TABLE OF CONTENTS

				Page
1.	Definitions and Shared Provisions			1
	1.1	Definitions		1
	1.2	Shared Provisions		14
2.	Amount and Terms of Loan			15
	2.1	Commitments to Lend; Convertible Term Note		15
	2.2	Use of Proceeds		15
	2.3	Interest and Fees Payable to Lender		15
		2.3.1	Interest Rates	15
		2.3.2	Maximum Rate	15
	2.4	Optional Prepayments by Borrower		16
	2.5	Optional Conversion by Lender		16
	2.6	Limitations on Conversions		17
	2.7	Adjustment of Conversion Price		18
	2.8	Fundamental Transactions		18
	2.9	Reservation of Shares		19
	2.10	Legends		19
	2.11	Noncircumvention		21
	2.12	Investor Rights Agreement		21
	2.13	Payment in Full Required on the Maturity Date		21
3.	Payments to Lender			22
	3.1	General Procedures		22
	3.2	Taxes		22
		3.2.1	Payments Free of Taxes	22
		3.2.2	Payments of Other Taxes by Borrower	23
		3.2.3	Indemnification by Borrower	23
		3.2.4	Evidence of Payments	23
		3.2.5	Survival	23
4.	Conditions Precedent			23
	4.1	Initial Loan		23
		4.1.1	Delivery of Documents	23
		4.1.2	No Other Encumbrances	23
		4.1.3	Closing Certificate	23
		4.1.4	Truth of All Representations and Warranties	23

		4.1.5	No Default	24
		4.1.6	No Material Adverse Change	24
		4.1.7	Governmental Requirements	24
	4.2	Advances Do Not Constitute a Waiver		25
5.	Representations and Warranties by Borrower			25
	5.1	Concerning Credit Parties and the Loan Documents		25
		5.1.1	Entity Status	25
		5.1.2	Authority	25
		5.1.3	Solvency	25
		5.1.4	Financial Matters	25
		5.1.5	Pending Legal Proceedings	25
		5.1.6	No Default or Violation	26
		5.1.7	Enforceability	26
		5.1.8	Approvals	26
		5.1.9	Payment of Taxes	26
		5.1.10	Principal Office	26
		5.1.11	ERISA	27
		5.1.12	Subsidiaries	27
		5.1.13	Indebtedness	27
		5.1.14	Status Under Certain Federal Statutes	27
		5.1.15	Environmental Matters	27
		5.1.16	Laws	28
	5.2	Accuracy of Other Statements Made to Lender		28
	5.3	Full Disclosure		28
	5.4	Title to Properties; Licenses		28
6.	Affirmative Covenants			28
	6.1	Financial Statements and Reports		28
		6.1.1	Fiscal Year End Statements	28
		6.1.2	Monthly Statements	29
		6.1.3	Quarterly Statements	29
		6.1.4	Officer’s Certificates	29
		6.1.5	Other Reports	29
		6.1.6	Other Information	29
	6.2	Taxes and Other Liens		29
	6.3	Maintenance		30
	6.4	Guaranties of Borrower’s Subsidiaries		30
	6.5	Further Assurances		30
	6.6	Reimbursement of Expenses		30
	6.7	Insurance		31

ii

		6.7.1	Property Insurance	31
		6.7.2	Other Insurance	31
		6.7.3	Other Requirements	31
		6.7.4	Failure of Borrower to Obtain Insurance	32
	6.8	Accounts and Records		32
	6.9	Other Information and Inspections		32
	6.10	Notice of Default and Certain Other Events		32
	6.11	Compliance with Loan Documents		32
	6.12	Operations and Properties		33
	6.13	Environmental Matters		33
		6.13.1	Compliance With Environmental Laws	33
		6.13.2	Notice of Environmental Problem	33
	6.14	Reno Plant Permits		33
7.	Negative Covenants			33
	7.1	Indebtedness		33
	7.2	Liens		34
	7.3	Contingent Liabilities		34
	7.4	Limitation on Mergers		34
	7.5	Limitation on Sales of Property		35
	7.6	Limitation on Distributions and Redemptions		35
	7.7	Limitation on Investments and New Businesses		35
	7.8	Limitation on Extensions of Credit		35
	7.9	Transactions with Affiliates		35
	7.10	Other Agreements		35
	7.11	Fiscal Year, Method of Accounting		35
	7.12	ERISA Plans		36
	7.13	Change of Principal Office		36
	7.14	Hedging Contracts		36
8.	Events of Default			36
	8.1	Nature of Event		36
		8.1.1	Monetary Default	36
		8.1.2	Breach of Covenants in Article 7	36
		8.1.3	Breach of Other Provisions of This Agreement	36
		8.1.4	Breach of Other Loan Documents	36
		8.1.5	Material Misrepresentation	36
		8.1.6	Institution of Certain Legal Proceedings	37
		8.1.7	Cross Default to Other Indebtedness	37
		8.1.8	Impairment of Loan Documents	38
		8.1.9	Change of Control	38
		8.1.10	Impairment of Liens	38

iii

	8.2	Acceleration		38
	8.3	Remedies		38
9.	Indemnity			39
	9.1	Agreement to Indemnify		39
		9.1.1	Agreement to Indemnify	39
		9.1.2	Due Date for Indemnity Payments	40
	9.2	Exceptions and Qualifications to Indemnity		40
10.	Provision to Satisfy Express Negligence Rule			40
11.	Miscellaneous			40
	11.1	Section 346 of the Texas Finance Code		40
	11.2	Limitation on Interest		40
	11.3	Bank Accounts, Offset		41
	11.4	Assignments, Participations		41
		11.4.1	Assignments	41
		11.4.2	Participations	42
		11.4.3	Distribution of Information	42
	11.5	Assignment by Borrower		42
	11.6	Confidentiality		42
	11.7	Termination, Limited Survival		43
	11.8	Rights of Third Parties		43
	11.9	Evidence of Satisfaction of Conditions		43
	11.10	Conflict with the Term Sheet		43
	11.11	Payments and Notices		43
	11.12	Other Terms and References		45
	11.13	Severability		46
	11.14	Paragraph Headings		46
	11.15	Time is of the Essence		46
	11.16	Negotiated Documents		46
	11.17	No Fiduciary Relationship, Etc.		46
	11.18	Cumulative Rights and Remedies		46
	11.19	No Implied Waiver		46
	11.20	Entire and Only Agreement; No Oral Amendments		47
	11.21	Binding Effect Upon Successors and Assigns		47
	11.22	Governing Law		47
	11.23	Agreement to Jurisdiction and Methods of Service of Process		47
	11.24	Execution in Counterparts; Delivery by Fax		48
	11.25	Waiver of Rights to Trial by Jury		48
	11.26	Waiver of Consequential Damages, Etc.		48

iv

Exhibits and Schedules

Exhibit A	Form of Convertible Term Note
Exhibit B	Form of Compliance Certificate

Disclosure Schedule

Security Schedule

v

CREDITAGREEMENT

ThisCREDIT AGREEMENT(this “Agreement”), dated as of May 18, 2016 (the “Effective Date”), is made by and between INTERSTATE EMERGING INVESTMENTS, LLC(“Lender”), a Delaware limited liability company, andAQUA METALS, INC.(“Borrower”), a Delaware corporation. In consideration of the mutual promises contained inthis Agreementand of other valuable consideration, the receipt and sufficiency of which areherebyacknowledged,BorrowerandLenderagree as follows:

1.Definitions and Shared Provisions.

1.1           Definitions. As used in this Agreement, each of the following terms has the meaning given to such term in this Section 1.1 or in the section, subsection or other parts of this Agreement referred to below:

“Affiliate” means, with respect 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, the Person in question. As used herein, the term “control” means the possession, direct or indirect, of the power to direct or cause the direction of the management and policies of a Person, whether through ownership of voting securities, by contract or otherwise.

“AMR” means Aqua Metals Reno, Inc., a Delaware corporation.

“Attorneys’ Fees” means the expenses and reasonable fees of counsel to the parties incurring the same, excluding costsorexpenses of in-house counsel (whetherornot accounted for as general overheadoradministrative expenses), but otherwiseincludingprinting, photostating, duplicating and other expenses, air freight charges, and fees billed for paralegals. Such term shall alsoincludeall such fees and expenses incurred with respect to appeals, arbitrations and bankruptcy proceedings, and whetherornot any manner of proceeding is brought with respect to the matter for which such fees and expenses were incurred.

“Authorized Officer” means with respect to the execution and delivery of any documentorany other action, any of the officers set forth in an officers’ certificate delivered toLenderwhich are designated therein as being authorized for such documentoraction.

“Bankruptcy Code” means the United States Bankruptcy Code, Title 11 U.S.C., as amended.

“Borrower” shall have the meaning assigned to such term in the preamblehereof.

“Borrowing” means a borrowing of newLoans.

“Business Day” means a day, other than a SaturdayorSunday, on which commercial banks are open for business with the public in Dallas, Texas.

“Cash Equivalents” meansInvestmentsin:

(a)          marketable obligations, maturing within 12 months after acquisition thereof, issued or unconditionally guaranteed by the United States of America or an instrumentality or agency thereof and entitled to the full faith and credit of the United States of America.

(b)          demand deposits, and time deposits (including certificates of deposit) maturing within 12 months from the date of deposit thereof, with any office of Lender or with a domestic office of any national or state bank or trust company which is organized under the Laws of the United States of America or any state therein, which has capital, surplus and undivided profits of at least $500,000,000, and whose long term certificates of deposit have an investment grade rating.

(c)          repurchase obligations with a term of not more than seven days for underlying securities of the types described in clause (a) above entered into with any commercial bank meeting the specifications of clause (b) above.

(d)          open market commercial paper, maturing within 270 days after acquisition thereof, which has an investment grade rating.

(e)          Investments in money market or other mutual funds substantially all of whose assets comprise securities of the types described in clauses (a) through (d) above.

“Change of Control” means any of the following shall occur:

(a)          the direct or indirect sale, transfer, conveyance or other disposition, in one or a series of related transactions, of the voting stock in Borrower, the result of which is that a Person becomes the beneficial owner, directly or indirectly, of more than 40% of the voting stock of Borrower, measured by voting power rather than number of shares,

(b)          the shares of Borrower cease to be publicly traded,

(c)          at any time after the Effective Date, individuals who were either directors of Borrower on Effective Date or directors approved (by recommendation, nomination, election or otherwise) by a majority of the directors cease to constitute a majority of the members of the board of directors of Borrower, or

(d)          a “change of control” or “change of ownership” (or any term substantially equivalent to any of the foregoing phrases in this clause (d)) (in each case, as such term or phrase is defined in any indenture or other agreement evidencing or relating to any Indebtedness) occurs.

“Closing Date”means the later of (a) the “Closing Date” as defined in the Stock Purchase Agreement by and between Borrower and Lender dated as of the date hereof or (b) the date which all of the conditions in Section 4.1 have been satisfied.

Credit Agreement – Page 2

“Collateral” means allpropertyof any kind which is subject to aLienin favor ofLender orwhich, under the terms of anySecurity Document, is purported to be subject to such aLien.

“Common Stock” means (i) Borrower’s shares of Common Stock, $0.001 par value per share, and (ii) any share capital into which such Common Stock shall have been changed or any share capital resulting from a reclassification of such Common Stock.

“Consolidated” refers to the consolidation of anyPerson, in accordance withGAAP, with its properly consolidated subsidiaries. Referenceshereinto aPerson’sConsolidatedfinancial statements, financial position, financial condition,liabilities, etc. refer to the consolidated financial statements, financial position, financial condition,liabilities, etc. of suchPersonand its properly consolidated subsidiaries.

“Conversion Obligations” has the meaning given to such term in Section 2.5 ofthis Agreement.

“Convertible Security” means any stock, equity securities, debt securities or similar instruments that are convertible (directly or indirectly) into or exchangeable for Common Stock.

“ConvertibleTerm Note” means the convertible promissory note delivered by Borrower to Lender pursuant to Section 2.1 of this Agreement and all renewals, replacements, amendments, modifications and extensions thereof.

“Credit Agreement”or“this Agreement” means thisCredit Agreement, as from time to time supplemented, amendedorrestated.

“Credit Party” means any ofBorrowerand eachSubsidiaryofBorrower.

“Debtor Laws” means the Bankruptcy Code, and all other applicable liquidation, conservatorship, bankruptcy, moratorium, arrangement, receivership, insolvency, reorganizationorsimilarLawsfrom time to time in effect affecting the rights of creditors generally.

“Default” means anyEvent of Defaultand any default, eventorcondition which would, with the giving of any requisite notices and the passage of any requisite periods of time, constitute anEvent of Default.

“Default Rate” means, at the time in question with respect to any amount (includinganyLoan) owed toLenderunderthis Agreement orotherLoan Documents, the rate per annum equal to three percent (3%) above theFixed Interest Ratethen in effect; provided, in each case that theDefault Rateshall never exceed theMaximum Rate.

“Disclosure Schedule” means theDisclosure Scheduleattached tothis Agreement.

“Distribution” means (a) any dividendorother distribution made by aCredit Partyonorin respect of Equity in suchCredit Party orany otherCredit Party(includingany optionorwarrant to buy such Equity),or(b) any payment made by aCredit Partyto purchase, redeem, acquireorretire any Equity in suchCredit Party orany otherCredit Party(includingany such optionorwarrant).

Credit Agreement – Page 3

“Eligible Market” means The New York Stock Exchange, Inc., the NYSE MKT, The Nasdaq Stock Market, the NASDAQ Global Select Market or the Nasdaq Capital Market.

“Environmental Laws” means any and allLawsrelating to (a) the protection of the environment, (b) emissions, dischargesorreleases of pollutants, contaminants, chemicalsorhazardousortoxic substancesorwastes into the environmentincludingambient air, surface water, ground waterorland,or(c) the manufacture, processing,distribution, use, treatment, storage, disposal, transportorhandling of pollutants, contaminants, chemicalsorindustrial, toxicorhazardous substancesorwastesorthe clean-uporother remediation thereof.

“Equity” in any Person means any share of capital stock issued by such Person, any general or limited partnership interest, profits interest, capital interest, membership interest, or other equity interest in such Person, any option, warrant or any other right to acquire any share of capital stock or any partnership, profits, capital, membership or other equity interest in such Person, and any other voting security issued by such Person.

“ERISA” means theEmployee Retirement Income Security Act of 1974, as amended from time to time, together with the regulations from time to time promulgated with respect thereto.

“ERISA Affiliate” means anyPersonwho for purposes ofTitle IV of ERISAis a member ofBorrower’s controlled group,orunder common control withBorrower, within the meaning of Section 414 of theTax Code, and the regulations promulgated and rulings issued thereunder.

“ERISA Plan” means anyPlan or MultiEmployer Plan.

“ERISA Plan Funding Rules” means the rules in theTax Code and ERISA (and related regulations and other guidance)regarding minimum funding standards and minimum required contributions toERISA Plansas set forth in Sections 412, 430 and 436 of theTax Codeand Sections 302 and 303 ofERISA(and as set forth in Section 412 of theTax Codeand Section 302 ofERISAfor periods prior to the effective date of thePension Protection Act of 2006).

“ERISA Termination Event” means (a) the occurrence with respect to anyERISA Planof (1) a reportable event described in Sections 4043(c) (5)or(6) ofERISA or(2) any other reportable event described in Section 4043(c) ofERISAother than a reportable event not subject to the provision for thirty-day notice to thePBGCpursuant to a waiver by thePBGCunder Section 4043(a) ofERISA,or(b) the withdrawal ofBorrower oranyERISA Affiliatefrom anERISA Planduring aplanyear in which it was a “substantial employer” as defined in Section 4001(a)(2) ofERISA ora cessation of operations that is treated as such a withdrawal under Section 4062(e) ofERISA,or(c) the filing of a notice of intent to terminate anyERISA Plan orthe treatment of anyERISA Planamendment as a termination under Section 4041 ofERISA,or(d) the institution of proceedings to terminate anyERISA Planby thePBGCunder Section 4042 ofERISA,or(e) any other eventorcondition which might constitute grounds under Section 4042 ofERISAfor the termination of,orthe appointment of a trustee to administer, anyERISA Plan,or(f) any failure by anyERISA Planto satisfy theERISA Plan Funding Rules, whetherornot waived,or(g) the filing pursuant toSection 412(c) of Tax Code orSection 302(c) ofERISAof an application for a waiver of the minimum funding standard with respect to anyERISA Plan, the failure to make by its due date a required installment under Section 430(j) of theTax Codewith respect to anyERISA Plan,or(h) a determination that anyERISA Planis,oris expected to be, an at-riskplan(as defined in Section 430 of theTax Code orSection 303 ofERISA) and the funding target attainment percentage (as defined in Section 430 of theTax Code orSection 303 ofERISA) for suchplanis,oris expected to be, less than 60 percent,or(i) the imposition of any liability under Title IV of ERISA, other than forPBGCpremiums due but not delinquent, upon anyERISA Affiliate.

Credit Agreement – Page 4

“Established Misconduct” means the gross negligence and willful misconduct of anIndemnified Partyas determined by a court competent jurisdiction by final and nonappeable judgment.

“Event of Default” means any of the events specified in Section 8.1hereof, provided that any requirement in connection with such event for the giving of noticeorthe lapse of time,orthe happening of any further condition, eventoract has been satisfied.

“Excluded Taxes” means any of the followingTaxesimposed onorwith respect toLender orrequired to be withheldordeducted from a payment toLender, (a)Taxesimposed onormeasured by net income (however denominated), franchiseTaxes, and branch profitsTaxes, in each case, (i) imposed as a result ofLenderbeing organized under the laws of,orhaving itsprincipaloffice located in, the jurisdiction imposing suchTax(orany political subdivision thereof)or(ii) that areOther Connection Taxes, (b) United States federal withholdingTaxesimposed on amounts payable toorfor the account ofLenderwith respect to aLoanpursuant to aLawin effect on the datehereof, and (c) any United States federal withholdingTaxesimposed underFATCA.

“FATCA” means Sections 1471 through 1474 of theTax Code, as of the date ofthis Agreement(orany amendedorsuccessor version that is substantively comparable and not materially more onerous to comply with), any currentorfuture regulationsorofficial interpretations thereof and any agreements entered into pursuant to Section 1471(b)(1) of theTax Code.

“Financing Lease” means (i)any lease ofPropertyif the then present value of the minimum rental commitment thereunder should, in accordance withGAAP, be capitalized on a balance sheet of the lessee, and (ii)any other leaseobligationswhich are capitalized on a balance sheet of the lessee.

“Fiscal Quarter” means each period of 3 calendar months ending March 31, June 30, September 30 and December 31 of each year.

“Fiscal Year” means each period of twelve calendar months ending December 31 of each year.

“Fixed Interest Rate” means, as of any date, 11.00%, per annum, compounded on the first day of each month.

Credit Agreement – Page 5

“Fundamental Transaction” means that, after the Issuance Date, Borrower shall, directly or indirectly, in one or more related transactions, (i) consolidate or merge with or into another Person, (ii) sell, assign, transfer, convey or otherwise dispose of all or substantially all of the properties or assets of Borrower to another Person, (iii) allow another Person to make a purchase, tender or exchange offer that is accepted by the holders of more than 50% of the outstanding shares of Common Stock (not including any shares of Common Stock held by the Person or Persons making or party to, or associated or affiliated with the Persons making or party to, such purchase, tender or exchange offer), (iv) consummate a stock purchase agreement or other business combination (including, without limitation, a reorganization, recapitalization, spin-off or scheme of arrangement) with another Person whereby such other Person acquires more than 50% of the outstanding shares of Common Stock (not including any shares of Common Stock held by the other Person or other Persons making or party to, or associated or affiliated with the other Persons making or party to, such stock purchase agreement or other business combination immediately prior to such stock purchase or business combination), (v) reorganize, recapitalize or reclassify its Common Stock, or (vi) any “person” or “group” (as these terms are used for purposes of Sections 13(d) and 14(d) of the Exchange Act), other than Lender and its Affiliates or any Related Party thereof, is or shall become the “beneficial owner” (as defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of 50% of the aggregate ordinary voting power represented by issued and outstanding Common Stock (excluding any debt securities convertible into equity) normally entitled to vote in the election of directors (“Voting Stock”) of Borrower (or its successor by merger, consolidation or purchase of all or substantially all of its assets) (for purposes of this clause, such person or group shall be deemed to beneficially own any Voting Stock held by a Parent Entity) or 50% of the aggregate economic interests in Borrower (or its successor by merger, consolidation or purchase of all or substantially all of its assets).

“GAAP” means those generally accepted accounting principles and practices which are recognized as such by the Financial Accounting Standards Board (orany generally recognized successor) and which, in the case ofBorrowerand itsConsolidatedsubsidiaries, are applied for all periods after the datehereofin a manner consistent with the manner in which such principles and practices were applied to theInitial Financial Statements. If any change in any accounting principleorpractice is required by the Financial Accounting Standards Board (orany such successor) in order for such principleorpractice to continue as a generally accepted accounting principleorpractice, all reports and financial statements requiredhereunderwith respect toBorrowermay be prepared in accordance with such change, but all calculations and determinations to be madehereundermay be made in accordance with such change only after notice of such change is given toLenderandLenderagrees to such change insofar as it affects the accounting ofBorrower.

“Governmental Authority” means any nationorgovernment, any agency, department, stateorother political subdivision thereof and any entity exercising executive, legislative, judicial, regulatoryoradministrative functions oforpertaining to government.

“Governmental Requirement” means anyLaw, statute,code, ordinance, order, rule, regulation, judgment, decree, injunction, franchise, permit, certificate, license, authorizationorother directionorrequirement (including, without limitation, any of the foregoing which relate to environmental standardsorcontrols, energy regulations and occupational, safety and health standardsorcontrols) of any arbitrator, courtorotherGovernmental Authority, which exercises jurisdiction over anyCredit Party orany of itsProperty.

Credit Agreement – Page 6

“Guarantors” collectively, means AQUA METALS RENO, INC., a Delaware corporation, AQUA METALS OPERATIONS, INC., a Delaware corporation, and any Subsidiary of Borrower that now or hereafter executes and delivers a guaranty to Lender pursuant to Section 6.4, and each a “Guarantor”.

“Guaranty” means theGuarantyof even date herewith made by eachGuarantorunconditionally guaranteeing the payment of the Convertible TermNoteand the performance byBorrowerof itsobligationsunderthis Agreementand the otherLoan Documents.

“Guaranty Obligation” of anyPersonmeans any agreementorunderstanding of suchPersonpursuant to which suchPersonguarantees,orin effect guarantees, anyIndebtedness, lease, dividendsorotherobligations(the “Primary Obligations”) of any other Person (the “Primary Obligor”) in any manner, whether directlyorindirectly, contingentlyorabsolutely, in wholeorin part,includingwithout limitationthis Agreement:

(a)          to purchase such Primary Obligation or any Property constituting direct or indirect security therefor;

(b)          to advance or supply funds (a)for the purchase or payment of any such Primary Obligation, or (b)to maintain working capital or other balance sheet conditions of the Primary Obligor or otherwise to maintain the net worth or solvency of the Primary Obligor;

(c)          to purchase property, securities or services primarily for the purpose of assuring the owner of any such Primary Obligation of the ability of the Primary Obligor to make payment of such Primary Obligation; or

(d)          otherwise to assure or hold harmless the owner of any such Primary Obligation against loss in respect thereof;

provided, that “Guaranty Obligation” shall notincludeendorsements that are made in the ordinary course of business of negotiable instrumentsordocuments for depositorcollection. The amount of anyGuaranty Obligationshall be deemed to be the maximum amount for which the guarantor may be liable pursuant tothe agreementthat governs suchGuaranty Obligation, unless such maximum amount is not statedordeterminable, in which case the amount of such obligation shall be the maximum reasonably anticipated liability thereon, as determined by such guarantor in good faith.

“Hedging Contract” means (a) any agreement providing for options, swaps, floors, caps, collars, forward sales or forward purchases involving interest rates, commodities or commodity prices, equities, currencies, bonds, or indexes based on any of the foregoing, (b) any option, futures or forward contract traded on an exchange, and (c) any other derivative agreement or other similar agreement or arrangement.

Credit Agreement – Page 7

“Indebtedness” of any Person at a particular date means the sum (without duplication) at such date of (a) allindebtednessof suchPersonfor borrowed moneyorfor the deferred purchase price ofproperty orservicesorwhich is evidenced by anote, bond, debenture,orsimilar instrument, (b) allobligationsof suchPersonunder anyFinancing Lease, (c) allobligationsof suchPersonin respect of letters of credit, acceptances,orsimilarobligationsissuedorcreated for the account of suchPerson, (d) allGuaranty Obligationsof suchPerson in respect of any Indebtedness of any other Person, (e) allliabilitiessecured by anyLienon anyPropertyowned by suchPerson, whetherornot suchPersonhas assumedorotherwise become liable for the payment thereof, and (f) any liability of suchPersonin respect of unfunded vested benefits under aPlan or MultiEmployer Plan.

“Indemnified Parties” meansLender, itsAffiliatesand the directors, offices, employees, agents and advisors ofLenderand itsAffiliates.

“Indemnified Taxes” means (a)Taxes, other thanExcluded Taxes, imposed onorwith respect to any payment made byoron account of any obligation ofBorrowerunder anyLoan Documentand (b) to the extent not otherwise described in (a),Other Taxes.

“Initial Financial Statements” means (a) the annual auditedConsolidatedand consolidating balance sheet ofBorrowerdated as of December 31, 2015, which is the end ofBorrower’s most recent completeFiscal Year, and the related statements of income, stockholders’ equity and cash flows for theFiscal Yearending ended such date, and (b) the unauditedConsolidatedand consolidating quarterly balance sheet ofBorrowerforBorrower’s most recentFiscal Quarter.

“Insolvent” means with respect to anyPerson, that suchPerson(a) is insolvent (as such term is defined in theUnited States Bankruptcy Code,Title 11 U.S.C., as amended (the “Code”), and with all terms used inthis Sectionthat are defined in theCodehaving the meanings ascribed to those terms in the text and interpretive caselawapplicable to theCode),or(b) the sum of suchPerson’s debts,includingabsolute and contingentliabilities, theObligations orguarantees thereof, exceeds the value of suchPerson’s assets, at a fair valuation, and (c) suchPerson’s capital is unreasonably small for the business in which suchPersonis engaged and intends to be engaged. SuchPersonhas incurred (whether under theLoan Documents orotherwise),orintends to incur debts which will be beyond its ability to pay as such debts mature. In determining whether aPersonis “Insolvent” all rights of contribution of eachCredit Partyagainst otherCredit Partiesunder theGuaranty, atLaw, in equityorotherwise shall be taken into account.

“Interstate Group Members” means Interstate Battery System International, Inc. and its Subsidiaries.

“Investment” means any investment, made directlyorindirectly, in anyPerson oranyproperty, whether by purchase, acquisition of shares of capital stock,indebtedness orotherobligations orsecuritiesorby loan, advance, capital contributionorotherwise and whether made in cash, by the transfer ofproperty,orby any other means.

Credit Agreement – Page 8

“Issuance Date” means the earlier to occur of the date that (i) shares of Common Stock are issued by Borrower to Lender pursuant to the Stock Purchase Agreement or (ii) the Warrants are issued by Borrower to Lender hereunder.

“Law” means any statute, law, regulation, ordinance, rule, treaty, judgment, order, decree, permit, concession, franchise, license,this Agreement orother governmental restriction of the United Statesorany stateorpolitical subdivision thereoforof any foreign countryorany department, provinceorother political subdivision thereof. Any reference to aLawincludes any amendmentormodification to suchLaw, and all regulations, rulings, and otherLawspromulgated under suchLaw.

“Lender” means INTERSTATE EMERGING INVESTMENTS, LLC, a Delaware limited liability company.

“Liabilities” means, as to anyPerson, allindebtedness, liabilities andobligationsof suchPerson, whether maturedorunmatured, liquidatedorunliquidated, primaryorsecondary, directorindirect, absolute, fixedorcontingent, and whetherornot required to be considered pursuant toGAAP.

“Lien” means any mortgage, pledge, hypothecation, assignment, deposit arrangement, encumbrance, lien (whether statutoryorotherwise),orpreference, priorityorother security,Credit Agreement orpreferential arrangement of any kindornature whatsoever (including, without limitation, any conditional saleorother title retention, anyFinancing Leasehaving substantially the same economic effect as any of the foregoing, and the filing of any financing statement under theUCC orcomparableLawof any jurisdiction in respect of any of the foregoing) that secures an obligation owed to, or a claim by, a Person other than the owner of the Property.

“Loans” has the meaning given to such term in Section 2.1.

“Loan Documents” means the Convertible TermNote,this Agreement,theSecurity Documents, and any and all other agreements orinstruments noworhereafter executed byany Credit Partyand accepted byLenderto evidenceorsecure the paymentorperformance of anyorall of theObligations, as renewed, amendedorsupplemented from time to time.

“Losses” means the following: any and all losses,liabilities, damages (whether actual, consequential, punitiveorotherwise denominated), demands, claims, administrativeorlegal proceedings, actions, judgments, causes of action, assessments, fines, penalties, costs and expenses (including Attorneys’ Feesand the fees of outside accountants and environmental consultants), of any and every kindorcharacter, foreseeable and unforeseeable, liquidated and contingent, proximate and remote.

“Material Adverse Change” means a material adverse change from the state of affairs presented in theInitial Financial Statements,oras representedorwarranted toLenderin anyLoan Document orother document, to (a)Borrower’sConsolidatedfinancial condition, (b) the ability ofLenderto enforce any of theLoan Documents, (c) the ability of theCredit Parties (taken as a whole)to fulfill in a timely manner theirobligationsunder theLoan Documentsto which they are a party, (d) the business, operations orProperties(taken as a whole),or(e) the ability of Lender to realize on all or a material portion of theCollateral (other than as a result of an action taken or not taken that is solely in the control of Lender).

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“Material Adverse Effect” means any material adverse effect upon (a) Borrower’sConsolidatedfinancial condition, (b) the ability ofLenderto enforce any of theLoan Documents, (c) the ability of theCredit Parties (taken as a whole)to fulfill in a timely manner theirobligationsunder theLoan Documentsto which they are a party, (d) the business, operations orProperties(taken as a whole),or(e) the ability of Lender to realize on all or a material portion of theCollateral (other than as a result of an action taken or not taken that is solely in the control of Lender).

“Maturity Date” means the third anniversary of the Closing Date.

“Maximum Rate” means the maximum nonusurious rate of interest thatLenderis permitted underapplicable Lawto contract for, take, charge,orreceive with respect to theLoans.

“Multiemployer Plan” means anyplandescribed in Section 4001(a)(3) ofERISA.

“Obligations” means all present and futureIndebtedness, obligations andliabilitiesofany Credit PartytoLender, and all renewals and extensions thereof,orany part thereof, evidenced byorarising pursuant tothis Agreement orany otherLoan Document, regardless of whether suchIndebtedness, obligations andliabilitiesare direct, indirect, fixed, contingent, joint, severalorjoint and several.

“Optional Prepayment” has the meaning given to such term in Section 2.4 ofthis Agreement.

“Options” means any rights or options to subscribe for or purchase Common Stock or Convertible Securities.

“Organizational Documents” of any entity means the organizational documents pursuant to which such entity was created and is governed, such as articles of incorporation, bylaws, articles of organization, regulationsorpartnership. In the case of any trustee,Organizational Documentsmeans the trust,this Agreement orother documents which govern actions of the trustee in hisorher capacity as trustee.

“Other Connection Taxes” means, with respectLender,Taxesimposed as a result of a presentorformer connection betweenLenderand the jurisdiction imposing suchTax(other than connections arising fromLenderhaving executed, delivered, become a party to, performed itsobligationsunder, received payments under, receivedorperfected a security interest under, engaged in any other transaction pursuant toorenforced anyLoan Document,orsoldorassigned an interest in anyLoan or Loan Document).

“Other Taxes” means all presentorfuture stamp, courtordocumentary, intangible, recording, filingorsimilarTaxesthat arise from any payment made under, from the execution, delivery, performance, enforcementorregistration of, from the receiptorperfection of a security interest under,orotherwise with respect to, anyLoan Document, except any suchTaxesthat areOther Connection Taxesimposed with respect to an assignment.

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“Parent Entity” of a Person means an entity that, directly or indirectly, controls the applicable Person and whose common stock or equivalent equity security is quoted or listed on an Eligible Market, or, if there is more than one such Person or Parent Entity, the Person or Parent Entity with the largest public market capitalization as of the date of consummation of the Fundamental Transaction.

“PBGC” means the Pension Benefit Guaranty Corporation and any entity succeeding to anyorall of its functions underERISA.

“Permitted Investments” means (a) Cash Equivalents, (b)propertyused in the ordinary course of business of theCredit Parties, (c) current assets arising from the saleorlease of goods and services in the ordinary course of business by theCredit Parties orfrom sales permitted under Section 7.5 ofthis Agreement, (d)InvestmentsbyBorrowerin any of itsSubsidiarieswhich areGuarantors, (e) loans and advances to employees and officers of any Credit Party in the ordinary course of business for any business purpose in an aggregate amount not to exceed the Threshold Amount, and (f)acquisitionsoforcapital contributions toorotherInvestmentsin aPerson orproperty that has been consented to by Lender (such consent shall not be unreasonably withheld).

“Permitted Liens” means:

(a)          statutory Liens for taxes, assessments or other governmental charges or levies which are not yet delinquent or which are being contested in good faith by appropriate action and for which adequate reserves have been maintained in accordance with GAAP;

(b)          Liens imposed by law, such as landlords’, carriers', warehousemen's, materialmen’s and mechanics’ liens;

(c)          Liens arising out of judgments or awards against any Credit Party not giving rise to an Event of Default;

(d)          Liens arising from deposits made in connection with obtaining worker’s compensation or other unemployment insurance;

(e)          purported Liens evidenced by the filing of precautionary UCC financing statements relating solely to operating leases of personal property entered into in the ordinary course of business;

(f)          Liens in favor of customs and revenue authorities arising as a matter of law to secure payment of customs duties in connection with the importation of goods in the ordinary course of business;

(g)          Liens on cash deposits to secure the performance of tenders, statutory obligations, surety, stay, customs and appeals bonds, bids, insurance, leases, government contracts, trade contracts, performance and return of money bonds, letters of credit and other similar obligations (exclusive of obligations for the payment of borrowed money) entered into in the ordinary course of business;

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(h)          security deposits to public utilities or to any municipalities or governmental authority or other public authorities when required by such utility, municipality, governmental authority or other public authority in connection with the supply of services or utilities entered into in the ordinary course of business;

(i)          statutory or common law rights of setoff of depository banks with respect to funds of any Credit Party at such banks to secure fees and charges in connection with returned items or the standard fees and charges of such banks in connection with deposit accounts maintained by any Credit Party at such banks (but not any other debt or other obligations);

(j)          purchase money Liens or the interests of lessors under Financing Leases so long as (i) such Lien attaches only to the asset purchased or acquired and the proceeds thereof, and (ii) such Lien only secures the Indebtedness that was incurred to acquire the asset purchased or acquired.

(k)          Liens in favor Green Bank, N.A. to secured obligations under the Loan Agreement betweenGreen Bank, N.A. andAMRdated November 3, 2015, as amended, supplemented, restated or otherwise modified from time to time, provided that such Liens on the four kettles for use in lead recycling purchased with the Loans shall be subordinate to Lender’s Liens on such four kettles; and

(l)          Liens under the Security Documents.

“Person” means any individual, corporation, partnership, joint venture, association, joint stock company, limited liability company, trust, unincorporated organization,Governmental Authority,orany other form of entity.

“Plan” means any employee benefitorother plan establishedormaintained,orto which contributions have been made, byBorrower oranyERISA Affiliate of Borrowerduring the preceding six years and which is covered by Title IV of ERISAorSection 412 of theTax Code, other than aMultiemployer Plan.

“Prepayment Premium” has the meaning given to such term in Section 2.4 ofthis Agreement.

“Principal Market” means the Nasdaq Capital Market; provided, however, that in the event that Borrower’s Common Stock is ever listed or traded on the Nasdaq Global Market, the Nasdaq Global Select Market, the New York Stock Exchange, the NYSE Amex, or the OTC Bulletin Board (it being understood that as used herein “OTC Bulletin Board” shall also mean any successor or comparable market quotation system or exchange to the OTC Bulletin Board such as the OTCQB operated by the OTC Markets Group, Inc.), then the “Principal Market” shall mean such other market or exchange on which Borrower’s Common Stock is then listed or traded.

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“Property” means any interest in any kind of propertyorasset, whether real, personalormixed,ortangibleorintangible.

“Regulation U” meansRegulation Uissued by the Board of Governors of the Federal Reserve System as in effect from time to time.

“Regulatory Change” means either: (1) the introduction oforany change after the date ofthis Agreement(includingany change by way of impositionorincrease of reserve requirements included in the calculation of the interest rate used to calculate interest accruing under the Convertible TermNote) in anyLawapplicable toLender oritsAffiliates,orin the generally accepted interpretation by the institutional lending community of any suchLaw,orin the interpretation of any suchLawasserted by any regulator, courtorotherGovernmental Authority;or(2) the compliance byLender orits affiliates with any new guideline, requestordirective after such date from any central bankorotherGovernmental Authority(whetherornot having the force ofLaw); provided that notwithstanding anythinghereinto the contrary, (a) the Dodd-Frank Wall Street Reform andConsumer Protection Actand all requests, rules, guidelinesordirectives thereunderorissued in connection therewith and (b) all requests, rules, guidelinesordirectives promulgated by the Bank for International Settlements, the Basel Committee on Banking Supervision (orany successororsimilar authority)orthe United Statesorforeign regulatory authorities, in each case pursuant to Basel III, shall in each case be deemed to be a “Regulatory Change”, regardless of the date enacted, adoptedorissued.

“Related Party” means, with respect to any specified Person, such Person’s affiliates and the respective directors, officers, employees, agents and advisors of such Person and such Person’s affiliates.

“Reno Plant” means AMR’s lead recycling plant located or to be constructed on real property with an address of 2500 Peru Drive, Reno, Nevada that has been pledged as Collateral pursuant to the Security Documents.

“Security Documents” means the instruments listed in theSecurity Scheduleand all other security agreements, deeds of trust, mortgages, chattel mortgages, pledges, guaranties, subordination agreements, intercreditor agreements, financing statements, continuation statements, extension agreements and other agreementsorinstruments now, heretofore,orhereafter delivered by anyCredit PartytoLenderin connection with agreementorany transaction contemplatedherebyto secureorguarantee the payment of any part of theObligations orthe performance of any Credit Party’s other duties andobligationsunder theLoan Documents.

“Security Schedule” means theSecurity Scheduleattached tothis Agreement.

“Share Issue Price” means $7.12.

“Stock Purchase Agreement” means that certain Stock Purchase Agreement, dated May 18, 2016, by and between Borrower and Lender.

“Subsidiary” means, with respect to anyPerson, any corporation, association, partnership, joint venture,orother businessorcorporate entity, enterpriseororganization which is directlyorindirectly (through oneormore intermediaries) controlled byorowned fifty 50%ormore by suchPerson.

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“Successor Entity” means the Person formed by, resulting from or surviving any Fundamental Transaction or the Person with which such Fundamental Transaction shall have been entered into.

“Tax Code” means theInternal Revenue Code of 1986, as amended.

“Taxes” means all presentorfuture taxes, levies, imposts, duties, deductions, withholdings (includingbackup withholding), assessments, feesorother charges imposed by anyGovernmental Authority,includingany interest, additions to taxorpenalties applicable thereto.

“Term Commitment Amount” means $5,000,000.

“Threshold Amount” means $250,000.

“Trading Day” means any day on which the Common Stock is traded on the Principal Market, or, if the Principal Market is not the principal trading market for the Common Stock, then on the principal securities exchange or securities market on which the Common Stock is then traded including any day on which the Principal Market is open for trading for a period of time less than the customary time.

“UCC” means theTexas Uniform Commercial Code, as the same may hereafter be amended.

“Unfunded Benefit Liabilities” means, with respect to anyERISA Plan, the amount (if any) by which the present value of all benefitliabilities(within the meaning of Section 4001(a)(16) ofERISA) under theERISA Planexceeds the market value of all assets of theERISA Planavailable to pay such benefitliabilities, as determined on the most recent valuation date of theERISA Planand in accordance with the provisions ofERISAfor calculating the potential liability ofBorrower oranyERISA AffiliateofBorrowerunder Title IV of ERISA.

“Warrant Owner” means INTERSTATE EMERGING INVESTMENTS, LLC and its permitted assigns.

“Warrants” means the warrants to purchase shares of Common Stock that are issued by Borrower to Warrant Owner hereunder, substantially in the form of Exhibits C-1 and C-2, and all warrants issued upon transfer, exchange or in replacement of any of the foregoing.

“Warrant Shares” means shares of Common Stock issuable to the Warrant Owner upon exercise of all or any portion of either of the Warrants.

1.2           Shared Provisions.LenderandBorrowerintend thatthis Agreementand otherLoan Documentsshare consistent notice requirements and other important provisions. Those shared provisions comprise Section 11.11 through 11.26, which will apply to and govern boththis Agreementand otherLoan Documents.

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2.Amount and Terms ofLoan.

2.1           Commitments to Lend; Convertible Term Note; Warrants. Subject to the terms and conditionshereof, including the issuance of the Warrants by Borrower to Lender,Lenderagrees to make a single advance toBorrower(hereincalled “Loans”) in an amount equal to the Term Commitment Amount on the Closing Date.

2.1.1           The obligation ofBorrowerto repay toLenderthe aggregate amount of allLoansmade byLender, together with interest accruing in connection therewith, will be evidenced by a single convertible promissorynote(hereincalled the “ConvertibleTerm Note”) in the form attached asExhibit A with appropriate insertions. The amount ofprincipalowing on the ConvertibleTerm Noteat any given time shall be the aggregate amount of allLoanstheretofore made byLenderminus all payments ofprincipaltheretofore received byLenderon such ConvertibleTerm Note and minus all principal amounts on such Convertible Term Note converted into shares of Common Stock. No portion of anyLoanwhich has been repaid or converted may be reborrowed.

2.2           Use of Proceeds. Borrower shall use all Loans to purchase four kettles for use in lead recycling and for start up costs, expansion costs and working capital for the Reno Plant. In no event will the funds from anyLoanbe used directlyorindirectly by anyPersonfor personal, family, householdoragricultural purposesorfor the purpose, whether immediate, incidentalorultimate, of purchasing, acquiringorcarrying any “margin stock” (as such term is defined inRegulation Upromulgated by the Board of Governors of the Federal Reserve System)orto extend credit to others directlyorindirectly for the purpose of purchasingorcarrying any such margin stock.Borrowerrepresents and warrants thatBorroweris not engaged principally,oras one ofBorrower’s important activities, in the business of extending credit to others for the purpose of purchasingorcarrying such margin stock.

2.3           Interest and Fees Payable toLender.

2.3.1           Interest Rates. Subject to the limitations set forth in Section 11.2, (1) eachLoanwill bear interest on each day outstanding at theFixed Interest Ratein effect on such day, and (2) notwithstanding the foregoing, after maturity and when anyEvent of Defaulthas occurred and is continuing, at Lender’s election by written notice to the Borrower, allLoanswill bear interest on each day outstanding at the applicableDefault Rate, and all past due payments ofprincipal, interest and fees then due and payable toLenderwill also bear interest at theDefault Rate.

2.3.2           Maximum Rate. Notwithstanding the foregoing:(1)theObligationswill never bear interest in excess of theMaximum Rate, and (2) if at any time the rate at which interest payable on the Convertible TermNoteis limited to theMaximum Rate(by reason of the preceding clause (1), Section 11.2 orthe references to theMaximum Ratein the definitions set forth in Section 1.1), the Convertible TermNotewill bear interest at theMaximum Rateand will continue to bear interest at theMaximum Rateuntil such time as the total amount of interest accrued on the Convertible TermNoteequals the total interest that would have accrued on the Convertible TermNotehad the interest not been limited to theMaximum Rate.

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2.4           Optional Prepayments by Borrower. Upon at least five (5) Business Days’ notice to Lender, on or after the one year anniversary of the Closing Date,Borrowermay (subject to Lender’s conversion right), prepay the Convertible TermNote, in wholeorin part, so long as the aggregate amounts of all partial prepayments ofprincipalon the Convertible TermNoteequals $25,000orany higher integral multiple of $1,000, and each prepayment ofprincipalunder this section must be accompanied by all interest then accrued and unpaid on theprincipalso prepaid and the Prepayment Premium (such payment of principal, interest and Prepayment Premium, the “Optional Prepayment”). Any payment or conversion in respect of theprincipalof theLoans, due to the request of Borrower,made on or prior to eighteen (18) months after the Closing Dateshall be accompanied by a prepayment or conversion premium equal toten percent (10%)of theprincipalof theLoansprepaid or converted (“Prepayment Premium”). In lieu of accepting the Optional Prepayment, Lender shall have the rights, in its sole and absolute discretion, upon at least one (1) Business Day’s notice to Borrower before the Optional Prepayment, to convert the Optional Prepayment into that number of common shares of Borrower (as appropriately adjusted in the event of any equity dividend, equity split, combination, reorganization, recapitalization, reclassification or other similar event since the Closing Date) equal to the quotient obtained by dividing (i) the amount of the Optional Prepayment by (ii) the Share Issue Price. No fractional common shares shall be issued and the value of any fractional shares shall be paid by Borrower to Lender in cash concurrently with any conversion. As promptly as practicable after the conversion of the Optional Prepayment and the issuance of shares of Common Stock for such conversion, Borrower (at its expense) will issue to Lender and credit such shares of Common Stock to book-entry accounts maintained by Borrower’s transfer agent for the Common Stock (the “Transfer Agent”). Anyprincipal orinterest prepaid or converted pursuant to this section will be in addition to, and not in lieu of, all payments otherwise required to be paid under theLoan Documentsat the time of such prepayment or conversion.

2.5           Optional Conversion by Lender. Upon at least one (1) Business Day’s notice to Borrower,Lendershall have the right, in its sole and absolute discretion, at any time to convert any outstanding principal of any Loan (such Obligations to be converted, the “Conversion Obligations”) into that number of common shares of Borrower (as appropriately adjusted in the event of any equity dividend, equity split, combination, reorganization, recapitalization, reclassification or other similar event since the Closing Date) equal to the quotient obtained by dividing (i) the amount of the Conversion Obligations by (ii) the Share Issue Price (such price as may be adjusted from time to time, the “Conversion Price”). No fractional common shares shall be issued and the value of any fractional shares shall be paid by Borrower to Lender in cash concurrently with any conversion. As promptly as practicable after the conversion of the Conversion Obligations and the issuance of shares of Common Stock for such conversion, Borrower (at its expense) will issue to Lender and credit such shares of Common Stock to book-entry accounts maintained by the Transfer Agent.

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2.6           Limitations on Conversions. Notwithstanding anything contained elsewhere in this Agreement to the contrary, Borrower shall not effect any conversion of Conversion Obligations, and Lender shall not have the right to convert any Conversion Obligations, to the extent that after giving effect to such issuance after conversion, Lender (together with Lender’s Affiliates, and any other persons acting as a group together with Lender or any of Lender’s Affiliates), would beneficially own in excess of 19.99% of the outstanding shares of Common Stock (the maximum amount of shares of Common Stock issuable in compliance with the foregoing limitation, the “Beneficial Ownership Cap”). For purposes of the foregoing sentence, the number of shares of Common Stock beneficially owned by Lender and its Affiliates shall include the number of shares of Common Stock issuable upon conversion of the Conversion Obligations with respect to which such determination is being made, but shall exclude the number of shares of Common Stock that would be issuable upon (i) exercise of the remaining, nonexercised portion of each of the Warrants beneficially owned by Lender or any of its Affiliates and (ii) exercise or conversion of the unexercised or nonconverted portion of any other securities of Borrower (including, without limitation, any other securities of Borrower or its subsidiaries which would entitle the holder thereof to acquire at any time shares of Common Stock) subject to a limitation on conversion or exercise analogous to the limitation contained herein beneficially owned by Lender or any of its Affiliates. Except as set forth in the preceding sentence, for purposes of this Section 2.6, beneficial ownership shall be calculated in accordance with Section 13(d) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), and the rules and regulations promulgated thereunder. In addition, for purposes of this Section 2.6, “group” has the meaning set forth in Section 13(d) of the Exchange Act and the rules and regulations promulgated thereunder. Notwithstanding anything contained elsewhere in this Agreement to the contrary, Borrower shall not effect any conversion of Conversion Obligations, and Lender shall not have the right to convert and Conversion Obligations, to the extent that after giving effect to such issuance after conversion, the cumulative aggregate of all exercises or conversions as a whole under the Convertible Term Note and each of the Warrants, as the case may be, together with the issuance of 702,247 shares of Common Stock pursuant to the Stock Purchase Agreement, would result in the issuance of shares of Common Stock (including, for the avoidance of doubt, any Warrant Shares issued under either of the Warrants and shares of Common Stock under this Agreement) that (i) have, or will have upon issuance, voting power in excess of 19.99% of the voting power of the Common Stock outstanding immediately before the Issuance Date or (ii) represent, or will represent upon issuance, in excess of 19.99% of the number of shares of Common Stock outstanding immediately before the Issuance Date (the maximum amount of shares of Common Stock issuable in compliance with the foregoing limitations (i) and (ii), the “Total Issuance Cap”). The term “Cap” as used herein refers to either the Beneficial Ownership Cap or the Total Issuance Cap, whichever may be applicable. To the extent that any limitation contained in this Section 2.6 applies, the determination of whether the Conversion Obligations are convertible (in relation to other securities owned by Lender together with any Affiliates) and of which portion of the Conversion Obligations is convertible shall be in the sole discretion of Lender, and the conversion of Conversion Obligations shall be deemed to be Lender’s determination of whether Conversion Obligations are convertible (in relation to other securities owned by Lender together with any Affiliates) and of which portion of Conversion Obligations is convertible. For purposes of this Section 2.6, in determining the number of outstanding shares of Common Stock, Lender may rely on the number of outstanding shares of Common Stock as reflected in (i) Borrower’s most recent Form 10-K, Form 10-Q, Current Report on Form 8-K or other public filing with the United States Securities and Exchange Commission, as the case may be, (ii) a more recent public announcement by Borrower or (iii) a more recent notice by Borrower or Borrower’s Transfer Agent to Lender setting forth the number of shares of Common Stock then outstanding. Upon the request of Lender, Borrower shall promptly, and in any event within one Trading Day of such request, confirm to Lender the number shares of Common Stock then outstanding.

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2.7           Adjustment of Conversion Price.

The Conversion Price shall be adjusted from time to time as follows:

2.7.1           Adjustment upon Subdivision or Combination of Shares of Common Stock. If Borrower at any time on or after the Issuance Date subdivides (by any stock split, stock dividend, recapitalization or otherwise) one or more classes of its outstanding shares of Common Stock into a greater number of shares, the Conversion Price in effect immediately prior to such subdivision will be proportionately reduced. If Borrower at any time on or after the Issuance Date combines (by combination, reverse stock split or otherwise) one or more classes of its outstanding shares of Common Stock into a smaller number of shares, the Conversion Price in effect immediately prior to such combination will be proportionately increased. Any adjustment under this Section 2.7.1 shall become effective at the close of business on the date the subdivision or combination becomes effective.

2.7.2           Par Value. Notwithstanding anything to the contrary in this Agreement, in no event shall the Conversion Price be reduced below the par value of Borrower’s Common Stock.

2.8           Fundamental Transactions.

2.8.1           If, at any time while Conversion Obligations are outstanding, there occurs any Fundamental Transaction (including, without limitation, one pursuant to which holders of shares of Common Stock are entitled to receive securities or other assets with respect to or in exchange for shares of Common Stock), then the Holder shall have the right thereafter to receive, upon conversion of the Conversion Obligations, in lieu of the shares of the Common Stock (or other securities, cash, assets or other property purchasable upon the conversion of the Conversion Obligations prior to such Fundamental Transaction), the same amount and kind of shares of stock, securities, cash, assets or any other property whatsoever (including warrants or other purchase or subscription rights), if any, that Lender would have been entitled to receive upon the consummation of such Fundamental Transaction had the Conversion Obligations been converted immediately prior to the record date for such Fundamental Transaction, as adjusted in accordance with the provisions of this Agreement. Upon the occurrence of any Fundamental Transaction, the Successor Entity, if any, shall succeed to, and be substituted for (so that from and after the date of such Fundamental Transaction, the provisions of this Agreement and the Convertible Term Note referring to the “Borrower” shall refer instead to the Successor Entity), and may exercise every right and power of Borrower and shall assume all of the obligations of Borrower under this Agreement and the Convertible Term Note with the same effect as if such Successor Entity had been named as Borrower herein. The provisions of this Section shall apply similarly and equally to successive Fundamental Transactions and any adjustment under this Section 2.8 shall be without duplication for any adjustment or distribution made under Section 2.7.

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2.8.2           In the event that Borrower at any time grants, issues or sells any Options, Convertible Securities or rights to purchase stock, warrants, securities or other property pro rata to the record holders of any class of shares of Common Stock (the “Purchase Rights”) Lender will be entitled to acquire, upon the terms applicable to such Purchase Rights, the aggregate Purchase Rights which Lender could have acquired if Lender had held the number of shares of Common Stock acquirable upon complete conversion of the Conversion Obligations (without regard to any limitations on the conversion of Conversion Obligations), immediately before the record date for the grant, issuance or sale of such Purchase Rights, or, if no such record date is established, the date as of which the record holders of shares of Common Stock are determined for the grant, issuance or sale of such Purchase Rights.

2.9           Reservation of Shares. Borrower covenants that it will at all times reserve and keep available out of the aggregate of its authorized but unissued and otherwise unreserved Common Stock, solely for the purpose of enabling it to issue shares of Common Stock upon conversion of the Conversion Obligations as herein provided, the number of shares of Common Stock which are then issuable and deliverable upon the conversion of all Conversion Obligations, free from preemptive or any other contingent purchase rights of Persons other than Lender (taking into account the adjustments and restrictions in Section 2.7 and 2.8). Such reservation shall comply with the provisions of Section 2.4 and 2.5. Borrower covenants that all shares of Common Stock so issuable and deliverable shall, upon issuance in accordance with the terms hereof, be duly and validly authorized, issued and fully paid and nonassessable. Borrower will take all such actions as may be necessary to assure that such shares of Common Stock may be issued as provided herein without violation of any applicable law or regulation, or of any requirements of any securities exchange or automated quotation system upon which the Common Stock may be listed. If, notwithstanding the foregoing, and not in limitation thereof, at any time while the Convertible Term Note remains outstanding Borrower does not have a sufficient number of authorized and unreserved shares of Common Stock to satisfy its obligation to reserve for issuance upon Conversion of the Conversion Obligations at least a number of shares of Common Stock equal to the maximum number of shares of Common Stock as shall from time to time be necessary to effect the conversion of all Conversion Obligations (without regard to any limitations on conversion contained herein) (the “Required Reserve Amount”) (an “Authorized Share Failure”), then Borrower shall immediately take all action necessary to increase Borrower’s authorized shares of Common Stock to an amount sufficient to allow Borrower to reserve the Required Reserve Amount for all Conversion Obligations. Without limiting the generality of the foregoing sentence, as soon as practicable after the date of the occurrence of an Authorized Share Failure, but in no event later than sixty (60) days after the occurrence of such Authorized Share Failure, Borrower shall hold a meeting of its stockholders for the approval of an increase in the number of authorized shares of Common Stock. In connection with such meeting, Borrower shall provide each stockholder with a proxy statement and shall use its best efforts to solicit its stockholders’ approval of such increase in authorized shares of Common Stock and to cause its board of directors to recommend to the stockholders that they approve such proposal.

2.10         Legends. Lender understands that the Convertible Term Note and the shares of Common Stock issuable and deliverable upon conversion of the Conversion Obligations have not been registered pursuant to the provisions of the Securities Act of 1933, as amended (the “Securities Act”), and the Convertible Term Note and shares of Common Stock issuable and deliverable upon conversion of the Conversion Obligations will bear the following restrictive legend (in addition to any legend required under applicable state securities laws):

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THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR UNDER ANY STATE SECURITIES OR BLUE SKY LAWS. THE SECURITIES ARE SUBJECT TO RESTRICTIONS ON TRANSFERABILITY AND RESALE AND MAY NOT BE OFFERED, SOLD, PLEDGED, HYPOTHECATED OR OTHERWISE TRANSFERRED EXCEPT AS PERMITTED UNDER THE SECURITIES ACT AND APPLICABLE STATE SECURITIES OR BLUE SKY LAWS, PURSUANT TO REGISTRATION OR EXEMPTION THEREFROM. THE COMPANY MAY REQUIRE AN OPINION OF COUNSEL IN FORM AND SUBSTANCE REASONABLY SATISFACTORY TO THE COMPANY TO THE EFFECT THAT ANY PROPOSED TRANSFER IS IN COMPLIANCE WITH THE SECURITIES ACT AND ANY APPLICABLE STATE SECURITIES OR BLUE SKY LAWS.

Borrower, at its sole cost, shall remove the legend described in Section 2.10 (or instruct the Transfer Agent to so remove such legend) from the certificates evidencing the Convertible Term Note and shares of Common Stock issuable and deliverable upon conversion of the Conversion Obligations, as applicable, if (A) such shares of Common Stock issuable and deliverable upon conversion of the Conversion Obligations are sold pursuant to an effective registration statement under the Securities Act, (B) such Convertible Term Note or shares of Common Stock issuable and deliverable upon conversion of the Conversion Obligations, as applicable, are sold or transferred pursuant to Rule 144 (if the transferor is not an Affiliate of Borrower), or (C) such Convertible Term Note or shares of Common Stock issuable and deliverable upon conversion of the Conversion Obligations, as applicable, are eligible for sale under Rule 144, without the requirement for Borrower to be in compliance with the current public information required under Rule 144(c)(1) (or Rule 144(i)(2), if applicable) as to such securities and without volume or manner of sale restrictions. In connection with a sale of the Convertible Term Note or shares of Common Stock issuable and deliverable upon conversion of the Conversion Obligations, as applicable, by Lender in reliance on Rule 144, Lender or its broker shall deliver to the Transfer Agent and Borrower a customary broker representation letter providing to the Transfer Agent and Borrower any information Borrower deems reasonably necessary to determine that the sale of the Convertible Term Note or shares of Common Stock issuable and deliverable upon conversion of the Conversion Obligations, as applicable, is made in compliance with Rule 144, including, where and as may be appropriate, a certification that Lender is not an Affiliate of Borrower and regarding the length of time the Convertible Term Note or shares of Common Stock issuable and deliverable upon conversion of the Conversion Obligations, as applicable, have been held. Upon receipt of such representation letter, Borrower shall promptly remove the legend refereed to in this Section 2.10 from the Convertible Term Note or direct its Transfer Agent to remove the legend referred to in this Section 2.10 from the shares of Common Stock issuable and deliverable upon conversion of the Conversion Obligations from the appropriate book-entry accounts maintained by the Transfer Agent, in each case within two (2) Business Days, and Borrower shall bear all costs associated therewith. If Lender is not an Affiliate of Borrower and has held the Convertible Term Note or shares of Common Stock issuable and deliverable upon conversion of the Conversion Obligations, as applicable, for at least one year, if the book-entry account of such shares of Common Stock issuable and deliverable upon conversion of the Conversion Obligations or certificate for the Convertible Term Note still bears the legend referred to in this Section 2.10, Borrower agrees, upon request of Lender, to take all steps necessary to effect the removal of the legend described in this Section 2.10 within two (2) Business Days from the appropriate book-entry accounts maintained by the Transfer Agent or the Convertible Term Note, and Borrower shall bear all costs associated therewith, regardless of whether the request is made in connection with a sale or otherwise, so long Lender provides to Borrower any information Borrower deems reasonably necessary to determine that the legend is no longer required under the Securities Act or applicable state laws, including (if there is no such registration statement), where and as may be appropriate, a certification that such holder is not an Affiliate of Borrower and regarding the length of time the Convertible Term Note or shares of Common Stock issuable and deliverable upon conversion of the Conversion Obligations, as applicable, have been held.

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2.11         Noncircumvention. Borrower hereby covenants and agrees that Borrower will not, by amendment of its Certificate of Incorporation, Bylaws or through any reorganization, transfer of assets, consolidation, merger, scheme of arrangement, dissolution, issue or sale of securities or any other voluntary action, avoid or seek to avoid the observance or performance of any of the terms of this Agreement, and will at all times in good faith carry out all the provisions of this Agreement and take all action as may be required to protect the rights of Lender.  Without limiting the generality of the foregoing, Borrower (i) shall not increase the par value of any shares of Common Stock receivable upon the conversion of the Conversion Obligations above the Conversion Price then in effect, (ii) shall use all reasonable efforts to take all such actions as may be necessary or appropriate in order that Borrower may validly and legally issue fully paid and nonassessable shares of Common Stock upon the conversion of the Conversion Obligations and (iii) shall, so long as any of Conversion Obligations are outstanding, take all action necessary to reserve and keep available out of its authorized and unissued shares of Common Stock, solely for the purpose of effecting the conversion of the Conversion Obligations, the Required Reserve Amount. If Borrower is restricted by the Principal Market from issuing and delivering the lesser of the (i) Beneficial Ownership Cap or (ii) Total Issuance Cap, then Borrower shall use its best efforts to obtain the approval of the requisite holders of the issued and outstanding voting capital stock of Borrower required by the listing requirements of the Principal Market.

2.12         Investor Rights Agreement. The shares of Common Stock issuable upon conversion of the Conversion Obligations shall be subject to the terms and conditions of that certain Investor Rights Agreement and Lender shall be entitled to all of the rights and subject to all of the obligations under such Investor Rights Agreement. The shares of Common Stock issuable upon conversion of the Conversion Obligations shall be deemed “Registrable Securities” as defined in such Investor Rights Agreement.

2.13         Payment in Full Required on theMaturity Date. Any accrued, unpaid interest, all outstandingprincipalof anyLoan, and all other outstanding Obligationswill be finally due and payable on theMaturity Date.

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3.Payments toLender.

3.1           General Procedures.Borrowermust make each payment owed by it toLenderunder the Loans orLoan Documentsin lawful money of the United States of America without set-off, deductionorcounterclaim and in immediately available funds. Each such payment must be received byLendernot later than 5:00 p.m., Dallas, Texas time, on the date such payment first becomes due. Any payment received byLenderafter such time will be deemed to have been made on the next followingBusiness Day. Should any such payment become due and payable on a day other than aBusiness Day, the maturity of such payment will be extended to the next succeedingBusiness Day, and, in the case of a payment ofprincipal orpast due interest, interest will accrue and be payable thereon for the period of such extension. Each payment under the Loans or aLoan Documentwill be payable at the place provided therein and, if no specific place of payment is provided, will be payable at the place of payment of the Convertible TermNote.Lenderwill apply money or common stock of Borrower received by Lender on account of theObligationsas follows, except as may otherwise beexpresslyauthorized by otherLoan Documents:

3.1.1           first, for the payment of allObligationswhich are then due (and if such money is insufficient to pay all suchObligations, first to any reimbursements dueLenderunder other provisions ofthis Agreement includingSection 9.1 and then to the partial payment of all otherObligationsthen due in proportion to the amounts thereof);

3.1.2           then for the payment of accrued interestorother amounts owing under theLoan Documents(other thanprincipalon the Convertible TermNote), in such order asLenderdeems appropriate; and

3.1.3           last for the prepayment ofprincipalon the Convertible TermNote, applied against the outstandingLoansin such order asLenderdeems appropriate.

Without limiting the foregoing, all payments or common stock conversions applied toprincipal orinterest on the Convertible TermNoteshall be applied first to any interest then due and payable, then toprincipalthen due and payable, then to prepayprincipalofLoansin such order asLenderdeems appropriate.

3.2           Taxes.For the purposes ofthis Section 3.2, the term “applicable Law” includesFATCA.

3.2.1           Payments Free ofTaxes. Any and all payments byoron account of any obligation ofBorrower hereunder orunder any otherLoan Documentshall be made free and clear of and without reductionorwithholding for anyTaxes, except as required byapplicable Law. If anyapplicable Law(as determined in the good faith discretion ofBorrower) requires the deductionorwithholding of anyTaxfrom any such payment byBorrower, then (i)Borrowershall be entitled to make such deductionorwithholding and shall timely pay the full amount deductedorwithheld to the relevantGovernmental Authorityin accordance withapplicable Lawand, (ii) if suchTaxis anIndemnified Tax, then the sum payable byBorrowershall be increased as necessary so that after such deductionorwithholding has been made (includingsuch deductions and withholdings applicable to additional sums payable underthis Section)Lenderreceives an amount equal to the sum it would have received had no such deductionorwithholding been made.

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3.2.2           Payments ofOther TaxesbyBorrower. Without limiting the provisions of subsection3.2.1above,Borrowershall timely pay to the relevantGovernmental Authorityin accordance withapplicable Law,orat the option ofLendertimely reimburse it for the payment of, anyOther Taxes.

3.2.3           Indemnification byBorrower.Borrowershall indemnifyLenderwithin 10 days after demand therefor, for the full amount of anyIndemnified Taxes(including Indemnified Taxesimposedorasserted onorattributable to amounts payable underthis Section) payableorpaid byLender orrequired to be withheldordeducted from a payment toLenderand any reasonable expenses arising therefromorwith respect thereto, whetherornot suchIndemnified Taxeswere correctlyorlegally imposedorasserted by the relevantGovernmental Authority. A certificate as to the amount of such paymentorliability delivered toBorrowerbyLendershall be conclusive absent manifest error.

3.2.4           Evidence of Payments. As soon as practicable after any payment ofTaxesbyBorrowerto a Governmental Authority pursuant tothis Section 3.2, Borrowershall deliver toLenderthe originalora certified copy of a receipt issued by suchGovernmental Authorityevidencing such payment, a copy of the return reporting such paymentorother evidence of such payment reasonably satisfactory toLender.

3.2.5           Survival. Each party’s obligations underthis Section 3.2shall survive any assignment of rights byLenderand the repayment, satisfactionordischarge of all obligations under anyLoan Document.

4.Conditions Precedent.

4.1           InitialLoan. The obligation ofLenderto fund theLoan hereunderwill be subject to the following requirements and conditions:

4.1.1           Delivery of Documents.Borrowershall have delivered toLenderthe following documents (each after having been duly executed and delivered in form and substance satisfactory toLenderand, with the exception of the Convertible TermNote, all instruments evidencing the Warrants,and theOrganizational Documents, each in a sufficient number of originals counterparts thatLenderand its counsel may have a fully executed original of each document):

4.1.1.1           this Agreement;

4.1.1.2           the Convertible TermNote;

4.1.1.3           all instruments evidencing the Warrants;

4.1.1.4           theSecurity Documents;

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4.1.1.5           copies ofOrganizational Documents of each Credit Partyand such resolutions, consents, certificates, legal opinions and other evidence asLendershall request (includingcertificates, consents and opinions described in any pre-closing document list previously provided toBorrowerbyLender or Lender’s counsel) to confirm that theLoan Documentshave all been duly executed and constitute valid, binding documents, enforceable against each Credit Partyin accordance with their respective terms;

4.1.1.6           a certificate of the SecretaryorAssistant Secretaryorother Authorized Officer ofeach Credit Partysetting forth (i) resolutions of its board of directorsormanagers authorizing the execution, delivery, and performance of theLoan Documentsto which it is a party and identifying the officers authorized to sign such instruments, (ii) specimen signatures of the officers so authorized, and (iii) formation documents ofsuch Credit Partycertified by the appropriate Secretary of State as of a recent date, and (iv) other organizational documents of such Credit Party, certified as being accurate and complete;

4.1.1.7           the Initial Financial Statements; and

4.1.1.8           a certificate executed by the president, chief executive officer, chief operating officer, treasurer or chief financial officer of Borrower certifying that true, correct and complete copies of the Initial Financial Statements have been delivered to Lender.

4.1.2           No Other Encumbrances. NoPersonholds anyLien orother chargeorencumbrance in, againstorto any of theCollateralother than PermittedLiens.

4.1.3           Closing Certificate. Borrower has delivered a certificate of an Authorized Officer of Borrower certifying that all the applicable conditions set forth in Sections4.1are satisfied.

4.1.4           Truth of All Representations and Warranties. The representations and warranties of eachCredit Partycontained inthis Agreement oranySecurity Documentare true and correct on and as of the date of the funding theLoans(other than those representations and warranties which are by theirexpressterms limited to the date of theagreementin which they are initially made).

4.1.5           NoDefault. NoDefaultshall exist on the date of the funding theLoans; nor will anyDefaultresult from theLoans orfrom the applications of the proceeds thereof.

4.1.6           NoMaterial Adverse Change. NoMaterial Adverse Changeshall have occurred.

4.1.7           Governmental Requirements. The making of theLoansshall not be prohibited by anyGovernmental Requirement.

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4.2           Advances Do Not Constitute a Waiver. No disbursement ofLoanproceeds byLender,whenBorrowerhas failed to satisfy any of the conditions in Section 4.1, will precludeLenderfrom thereafter declaring the failure to be aDefault.

5.Representations and Warranties byBorrower.

Without limiting other representations and warranties made toLenderbyBorrower orotherCredit Parties,Borrowerrepresents and warrants toLenderas follows, in each case with the understanding that all representations and warranties made toLender herein orin the otherLoan Documentswill survive delivery ofthis Agreement, the Convertible TermNoteand the funding of theLoansand that any investigation at any time made byoron behalf ofLenderwill not diminish the right ofLenderto rely upon the following representations and warranties:

5.1           ConcerningCredit Partiesand the Loan Documents.

5.1.1           Entity Status. EachCredit Partyis a corporation, limited liability companyorlimited partnership duly organized, validly existing and, as applicable, in good standing under the laws of the state in which it is organized.

5.1.2           Authority. The Organizational Documents of eachCredit Partypermit the execution, delivery and performance of theLoan Documentsby suchCredit Party, and all actions and approvals necessary to bindBorrowerunder theLoan Documentshave been taken and obtained. Without limiting the foregoing, each of theLoan Documentswill be binding uponBorrowerwhen signed on behalf ofBorrowerby anAuthorized Officer.Borrowerhas all requisite power and all governmental certificates of authority, licenses, permits and qualifications to carry on its business as now conducted and contemplated to be conducted and to engage in the transactions contemplated by theLoan Documents.

5.1.3           Solvency.Each Credit Partyis not “Insolvent” onthe Closing Date.

5.1.4           Financial Matters.Credit Partieshas heretofore delivered toLendertrue, correct and complete copies of theInitial Financial Statements. TheInitial Financial Statementsfairly presentBorrower’sConsolidatedfinancial position at the respective dateordates thereof and theConsolidatedresults ofBorrower’s operations for the respective periodorperiods thereof. Since the date of the annualInitial Financial StatementsnoMaterial Adverse Changehas occurred, except as reflected in Section 5.1.4 of theDisclosure Schedule. AllInitial Financial Statementswere prepared in accordance withGAAP. NoCredit Partyhas any outstandingLiabilitiesof any kind (includingcontingent obligations, tax assessments, and unusual forwardorlong-term commitments) which are, in the aggregate, material toBorrower ormaterial with respect toBorrower’sConsolidatedfinancial condition and not shown in theInitial Financial Statements ordisclosed in Section 5.1.4 of theDisclosure Schedule.

5.1.5           Pending Legal Proceedings. Except as disclosed in theInitial Financial Reports orin Section 5.1.5 of theDisclosure Schedule, there are no judicialoradministrative investigations, actions, suitsorproceedings pending,orto the knowledge ofBorrowerthreatened, againstoraffecting anyCredit Party, the adverse determination of which could constitute aMaterial Adverse Effect,orinvolving the validityorenforceabilityorpriority of any of theLoan Documents, byorbefore any courtorother Governmental Authority; and noCredit Partyis in default with respect to any order, writ, injunction, decreeordemand of any courtorotherGovernmental Authoritythat could have aMaterial Adverse Effect.

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5.1.6           NoDefault orViolation. The execution and performance of theLoan Documentsby the Credit Partiesdoes not and will not contraveneorresult in a breach ofordefault under any otheragreementto which any of the Credit Partiesis a partyorby which anyPropertyof the Credit Partiesis bound. Such execution and performance by theCredit Partiesdo not contravene any law, order, decree, ruleorregulation to which any of theCredit Partiesis subject. Further, such execution and performance by theCredit Partieswill not result in the creationorimposition of (orthe obligation to createorimpose) any lien, chargeorencumbrance on,orsecurity interest in, theCredit Parties’Propertypursuant to the provisions of any such otheragreement.

5.1.7           Enforceability. TheLoan Documentsconstitute the legal, valid and binding obligations of theCredit Partiesenforceable in accordance with their terms, subject to the effect of bankruptcy, insolvency, reorganization, receivership and other similar laws affecting the rights of creditors generally and subject to general principles of equity, regardless of whether considered in a proceeding in equity or at Law.

5.1.8           Approvals. Without limiting the generality of the foregoing, other than consents and approvals previously obtained and actions previously taken, neither the execution and delivery of theLoan Documentsby theCredit Parties, nor the consummation by theCredit Partiesof any of the transactions contemplatedhereby orthereby, requires the consentorapproval of, the giving of notice to,orthe registration, recordingorfiling of any document with,orthe taking of any other action in respect of, anyGovernmental Authoritywhich has jurisdiction over theCredit Parties orany of theirProperty, except for (a) the filing of theUCCfinancing statements, mortgages and other similar filings to perfect the interest ofLenderin theCollateral, and (b) such other consents, approvals, notices, registrations, filingsoraction as may be required in the ordinary course of the business of theCredit Partiesin connection with its performance of its obligations under theLoan Documents.

5.1.9           Payment ofTaxes. AllTaxreturns required to be filed by the Credit Partiesin any jurisdiction have been filed (or currently effective extensions of time for filing have been obtained) and all materialTaxesimposed upon the Credit Parties orupon any of their properties, incomeorfranchises have been paid prior to the time that suchTaxescould give rise to aLienthereon, unless protested in good faith by appropriate proceedings and with respect to which reserves in conformity withGAAPhave been established on the books ofthe Credit Parties.

5.1.10         Principal Office. Theprincipaloffice, chief executive office andprincipalplace of business ofBorroweris at the notice address set forth forBorrowerin Section 11.11.

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5.1.11         ERISA. NeitherBorrowernor anyERISA Affiliatecurrently maintains, contributes to, is required to contribute toorhas any liability, whether absoluteorcontingent, with respect to anyERISA Plan. With respect to all other employee benefit plans maintainedorcontributed to byBorrower oranyERISA Affiliate,Borrower orthe applicableERISA Affiliateis in compliance withERISA, theTax Codeand other applicableLawswith respect to such employee benefit plans. There are no pendingor, to the best knowledge ofBorrower, threatened claims, actionsorlawsuits with respect to any employee benefit plan of anyCredit Partythat could reasonably be expected to have aMaterial Adverse Change, and there has been no prohibited transactionorviolation of the fiduciary responsibility rules with respect to any employee benefit plan of anyCredit Partythat has resultedorcould reasonably be expected to result in aMaterial Adverse Change. NeitherBorrowernor any otherERISA Affiliateis obligated to provide benefits to any retired employees (ortheir dependents) under any employee welfare benefits plan (as defined in Section 3(1) ofERISA) other than as required byapplicable Law. NeitherBorrowernor any otherERISA Affiliatehas engaged in a transaction that could be subject to Section 4069orSection 4212(c) ofERISA.

5.1.12         Subsidiaries.Borrower does not presently have any Subsidiary or own any stock in any other corporation or association except those (if any) listed in Section 5.1.12 of the Disclosure Schedule. Further, neither Borrower nor any other Credit Party is a member of any general or limited partnership, limited liability company, joint venture or association of any type whatsoever except those (if any) listed in Section 5.1.12 of the Disclosure Schedule. As to any Subsidiaries of Borrower listed in the Disclosure Schedule, Borrower owns, directly or indirectly, the Equity in those Subsidiaries that are indicated in Section 5.1.12 of the Disclosure Schedule.

5.1.13         Indebtedness. NeitherBorrowernor any otherCredit Partyhas anyindebtednessoutstanding other than theIndebtednesspermitted by Section 7.1.

5.1.14         Status Under Certain Federal Statutes.Borroweris not (a) an “investment company,”ora company “controlled” by an “investment company,” within the meaning of theInvestment Company Act of 1940, as amendedor(b) subject to federalorstate regulation as a utility.

5.1.15         Environmental Matters. In the ordinary course of theCredit Parties’ business, theCredit Partiescarefully consider the effect ofEnvironmental Lawsand identify and evaluate potential risks presented to theCredit Partiesand theirProperty because of Environmental Laws. NoCredit Partyhas received any written notice to the effect that itsProperty oroperations fail to comply in any material way withEnvironmental Laws orare the subject of any federalorstate investigation evaluating whether any remedial action is needed to respond to a release of any toxicorhazardous wasteorsubstance into the environment, which failure to complyorremedial action could reasonably be expected to have aMaterial Adverse Effecton the businessorfinancial condition of theCredit Parties, taken as a whole,oron the ability ofBorrowerto perform theObligations.

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5.1.16         Laws. Credit Parties are conducting their businesses in material compliance with all applicable Laws, and have, and are in material compliance with, all licenses and permits required under any such Laws.

5.2           Accuracy of Other Statements Made to Lender. No statement made toLenderin the otherLoan Documents orin any certificates, consentsorlegal opinions delivered toLenderbyorat the directionorrequest ofBorrower orotherCredit Partiesin connection with the transactions contemplated inthis Agreement orthe otherLoan Documents(includingcertificates, consents and opinions described in any pre-closing document list previously provided toBorrowerbyLender or Lender’s counsel) contains an untrue statement of a material factoromits a material fact necessary to make the statements containedhereinand therein (when taken in their entireties) not misleading.

5.3           Full Disclosure. There is no material fact thatBorrowerhas not disclosed toLenderwhich could materially adversely affect the properties, business,or financialcondition of theCredit Parties (taken as a whole), orwhich could materially adversely affect the Lender’s ability to realize on all or a material portion of theCollateral.

5.4           Title to Properties; Licenses. EachCredit Partyhas good and defensible title to all of theCollateralowned by it and to all of its other materialProperties, free and clear of allLiens, encumbrances,oradverse claims other thanPermitted Liensand free and clear of all material impediments to the use of such properties and assets in suchCredit Party’s business. EachCredit Partypossesses all licenses, permits, franchises, patents, copyrights, trademarks and trade names, and other intellectual property (orotherwise possesses the right to use such intellectual property without violation of the rights of any otherPerson) which are necessary to carry out its business as presently conducted and as presently proposed to be conducted hereafter, and noCredit Partyis in violation in any material respect of the terms under which it possesses such intellectual propertyorthe right to use such intellectual property.

6.Affirmative Covenants.

Borrowermust, and will cause otherCredit Partiesto, comply with the covenants contained in this Article 6at all times from the datehereofand for so long as any part of theObligationsis outstanding, except to the extent (if any) such compliance isexpresslyand specifically waived byLenderfrom time to time in writing.

6.1           Financial Statementsand Reports.Borrowershall furnish toLenderthe following, all in form and detail reasonably satisfactory toLender:

6.1.1           Fiscal Year End Statements. Promptly after becoming available, and in any event within 120 days after the close of eachFiscal Year,Borrower’sConsolidatedbalance sheet as of the end of suchFiscal Year, and the relatedConsolidatedstatements of income, stockholders’ equity and cash flows ofBorrowerfor suchFiscal Year, setting forth in each case in comparative form the corresponding figures for the precedingFiscal Year, accompanied by the related unqualified report of independent certified public accountants reasonably acceptable toLenderto the effect that such statements have been prepared in accordance withGAAPapplied on a basis consistent with prior periods except for such changes in such principles with which the independent public accountants shall have concurred;

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6.1.2           Monthly Statements. For each calendar month, commencing with the calendar month ending May 31, 2016 until the calendar month ending April 30, 2017, promptly after becoming available, and in any event within 45 days after the end of each suchcalendar month,includingthe last calendar monthin eachFiscal Year, aConsolidatedbalance sheet ofBorroweras of the end of such calendar monthand the relatedConsolidatedstatements of income and cash flows ofBorrowerfor such calendar monthand the period from the first day of the then currentFiscal Yearthrough the end of such calendar month, certified by the treasurer, chief financial officerorother executive officer ofBorrower orof manager ofBorrowerto have been prepared in accordance withGAAPapplied on a basis consistent with prior periods;

6.1.3           Quarterly Statements. For each Fiscal Quarter, commencing with the Fiscal Quarter ending June 30, 2017 and for all Fiscal Quarters thereafter, promptly after becoming available, and in any event within 45 days after the end of each suchFiscal Quarter,includingthe last Fiscal Quarterin eachFiscal Year, aConsolidatedbalance sheet ofBorroweras of the end of such Fiscal Quarterand the relatedConsolidatedstatements of income and cash flows ofBorrowerfor such Fiscal Quarterand the period from the first day of the then currentFiscal Yearthrough the end of such Fiscal Quarter, certified by the treasurer, chief financial officerorother executive officer ofBorrower orof manager ofBorrowerto have been prepared in accordance withGAAPapplied on a basis consistent with prior periods;

6.1.4           Officer’s Certificates. Together with each set of monthly statements described in Section6.1.2, with each set of quarterly statements described in Section 6.1.3and with each set of annual statements described in Section6.1.1, a completedCompliance Certificatein the form ofExhibit B hereto, executed by the president, chief executive officer, treasurer,orchief financial officer ofBorrower;

6.1.5           Other Reports. Promptly upon receipt thereof, a copy of each other report submitted toBorrowerby independent accountants in connection with any annual, interimorspecial audit of the books ofBorrower; and

6.1.6           Other Information. Promptly after receipt of a request fromLender, such other information concerning the business, properties, production, operationsorfinancial condition of anyCredit PartyasLendermay reasonably request.

6.2           Taxes and Other Liens. EachCredit Partyshall pay and discharge promptly allTaxesimposed upon itorupon its incomeorupon any of itsPropertyas well as all claims of any kind (includingclaims for labor, materials, supplies and rent); provided, however, eachCredit Partyshall not be required to pay any suchTax or claimif the amount, applicabilityorvalidity thereof shall currently be contested in good faith by appropriate proceedings diligently conducted byoron behalf of suchCredit Partyand if suchCredit Partyshall have set up reserves therefor adequate underGAAP.

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6.3           Maintenance. EachCredit Partyshall(a)maintain its corporate existence, rights and franchises;(b)observe and comply in all material respects with allGovernmental Requirements (including without limitation ERISA, theTax Code, andother applicableLawswith respect to employee benefit plans); and(c)maintain itsProperties(and anyPropertiesleased byorconsigned to itorheld under title retentionorconditional sales contracts) material to the conduct of its business in good working condition, ordinary wear and tear excepted.

6.4           Guaranties of Borrower’s Subsidiaries.Each Subsidiary of Borrower now existing or created, acquired or coming into existence after the date hereof shall, promptly and in any event within 30 days after it has become a Subsidiary of Borrower, execute and deliver to Lender an absolute and unconditional guaranty of the timely repayment of the Obligations and the due and punctual performance of the obligations of Borrower hereunder, which guaranty shall be satisfactory to Lender in form and substance. Each Subsidiary of Borrower existing on the date hereof shall duly execute and deliver such a guaranty prior to the making of any Loan hereunder. Borrower will cause each of its Subsidiaries to deliver to Lender, simultaneously with its delivery of such a guaranty, written evidence satisfactory to Lender and its counsel that such Subsidiary has taken all company action necessary to duly approve and authorize its execution, delivery and performance of such guaranty and any other documents that it is required to execute.

6.5           Further Assurances.Borrowershall, within 10Business Daysafter the request ofLender, cure any defects in the execution and delivery of the Convertible TermNote,this Agreement orany of the other Loan Documents and eachCredit Partyshall, at its expense, promptly execute and deliver toLendersuch other and further documents, agreements and instruments in compliance withoraccomplishment of the covenants and agreements of eachCredit Partyinthis Agreementand in the otherLoan Documents orto further evidence and more fully describe the collateral intended as security for the Convertible TermNote,as Lender may reasonably request.

6.6           Reimbursement of Expenses.Borrowershall pay(a)all reasonable legal fees incurred byLender or Warrant Ownerin connection with the preparation, negotiation, syndication, execution and delivery ofthis Agreement, the Convertible TermNote, the Warrantsand the otherLoan Documentsand any amendments, consentsorwaivers executed in connection therewith,(b)all fees, chargesortaxes for the recordingorfiling of theSecurity Documents, all reasonable out-of-pocket expenses ofLender or Warrant Ownerin connection with the administration ofthis Agreement, the Convertible TermNote, the Warrantsand the otherLoan Documents,including reasonablefees for inspections and audits and courier expenses incurred in connection with theCollateral,(c)all amounts expended, advancedorincurred byLender or Warrant Ownerto satisfy any obligation ofBorrowerunderthis Agreement orany of the otherLoan Documents orto collect the Convertible TermNote or to enforce performance of the Warrants,orto protect, preserve, exerciseorenforce the rights ofLenderunderthis Agreement orany of the otherLoan Documents orto collect the Convertible TermNote or to enforce performance of the Warrants,orto protect, preserve, exerciseorenforce the rights ofLender or Warrant Ownerunderthis Agreement orany of the otherLoan Documents,(d)all reasonable out-of-pocket costs and expenses (including reasonablefees and disbursements of attorneys and other experts employedorretained by suchPerson) incurred in connection with, arising out of,orin any way related to (i) consulting during aDefaultwith respect to (A) the protection, preservation, exerciseorenforcement of any of its rights in, underorrelated to theCollateral ortheLoan Documents or(B) the performance of any of its obligations underorrelated to theLoan Documents,or(ii) protecting, preserving, exercisingorenforcing during aDefaultany of its rights in, underorrelated to theCollateral ortheLoan Documents, each of(a)through(d)shallincludeall collateral liquidation costs, court costs, reasonable attorneys’ fees (including, without limitation, for trial, appealorother proceedings), reasonable fees of auditors and accountants, and investigation expenses reasonably incurred byLender or Warrant Ownerin connection with any such matters, together with interest at the post-maturity rate specified in the Convertible TermNoteon each item specified in clause(a) through (d)from 30 days after the date of written demandorrequest for reimbursement until the date of reimbursement.

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6.7           Insurance.

6.7.1           PropertyInsurance. EachCredit Partywill keeporcause to be kept (at its own expense) insured by financially sound and reputable insurers itsProperties(including Collateral) in such amounts, against such risks, in such form and with such financially sound and reputable insurers as shall be reasonably satisfactory toLenderfrom time to time.Borrowerwill cause the insurance policies covering anyCollateralto be modifiedorendorsed as necessary to (a) name the appropriateCredit PartyandLenderas insured parties thereunder (without any representationorwarranty byorobligation uponLender) as their interests may appear with regard to liability policies, (b) provide for payments of losses toLenderas its interests may appear notwithstanding any action, inactionorbreach of representationorwarranty by anyCredit Party, (c) prevent any expiration, cancellationorsignificant reduction of the coverage provided by such policies without at least 30 days prior notice toLender, (d) satisfy any other insurance requirements specified in any applicableSecurity Document, and (e) provide for coverage against “all risks”includingfire, casualty and any other hazards normally insured against, in the amount of the full replacement value (less a reasonably deductible not to exceed amounts customary in the industry for similarly situated businesses and properties) of theCollateralinsured.

6.7.2           Other Insurance. EachCredit Partyshall at all times maintain insurance against its liability for injury to personsorproperty as shall be reasonably satisfactory toLenderfrom time to time, which insurance shall be by financially sound and reputable insurers.

6.7.3           Other Requirements. EachCredit Partywill, if so requested byLender, deliver toLenderoriginalorduplicate policies of the insurance required bythis Agreementand, as often asLendermay reasonably request, a report of a reputable insurance broker attesting to the satisfaction of these insurance requirements. Upon and during the continuance of an Event of Default,Lenderisherebyauthorized to enforce payment under all such insurance policies maintained by anyCredit Partywith respect to theCollateraland to compromise and settle any claims thereunder, in its own nameorin the name of oneormoreCredit Parties.

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6.7.4           Failure ofBorrowerto Obtain Insurance. IfBorrowerfails to obtain any insuranceorto provide confirmation of the insurance as required bythis Agreement orthe other Loan Documents,Lenderwill be entitled, but not required, to obtain the insurance and, without limitingLender’s other remedies under the circumstances,Lendermay requireBorrowerto reimburseLenderfor any cost of the insurance and to pay interest on the cost computed at theDefault Ratefrom the date the cost was paid byLenderuntil the date it is reimbursed byBorrower.

6.8           Accounts and Records. EachCredit Partyshall keep books of record and account in which full, true and correct entries will be made of all dealingsortransactions in relation to its business and activities, in accordance withGAAP. EachCredit Partyshall maintain and implement administrative and operating procedures and keep and maintain all documents, books, records, computer tapes and other information reasonably necessaryoradvisable for the performance by eachCredit Partyof its obligations underthis Agreement.

6.9           Other Information and Inspections.Borrowerwill furnish toLenderany information whichLendermay from time to time reasonably request in writing concerning any covenant, provisionorcondition of theLoan Documents, any Collateralorany matter in connection with the businesses and operations of Borrower or each Credit Party. Each Credit Party will permit representatives appointed byLender(includingindependent accountants, auditors, agents, attorneys, appraisers and any otherPersons) to visit and inspect during normal business hours upon reasonable prior notice, any of its property,includingits books of account, other books and records, and any facilitiesorother business assets, and to make extra copies therefrom and photocopies and photographs thereof, and to write down and record any information such representatives obtain, and will permitLender orits representatives to investigate and verify the accuracy of the information furnished toLenderin connection with theLoan Documentsand to discuss all such matters with its officers, employees and representatives to the extent Lender reasonably deems necessary in relation to the Collateral and this Agreement; provided, however, that while no Event of Default exists, no more than four such visits or inspections shall be conducted during any Fiscal Year.

6.10         Notice of Default and Certain Other Events.Borrowerwill promptly notifyLenderupon(a)the occurrence of anyDefault or Material Adverse Change;(b)the commencement oforany determination made in any legalorregulatory proceeding that involves aCredit Partyand that, if concluded adversely to suchCredit Party orupheld, could have aMaterial Adverse Effect;or (c)receipt of any written notice from,orthe taking of any other action by, the holder of any promissorynote, debentureorother evidence ofIndebtednessof anyCredit Party in excess of the Threshold Amountwith respect to any claimed defaultorany accelerationorthreat of acceleration of suchIndebtedness. Further, with each such notice toLender,Borrowerwillincludea detailed statement by a responsible officer ofBorrowerdescribing in reasonable detail, to the knowledge ofBorrower, the nature and reasons for the eventsorcircumstances that caused such notice to be required and what actionBorroweris takingorproposes to take with respect thereto.

6.11         Compliance withLoan Documents. EachCredit Partyshall promptly comply with any and all covenants and provisions ofthis Agreement, the Convertible TermNoteand the otherLoan Documentsto be complied with by suchCredit Party.

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6.12         Operations andProperties. EachCredit Partymust comply with all materialLaws, regulations and guidelines applicable to it.

6.13         Environmental Matters.

6.13.1         Compliance WithEnvironmental Laws. EachCredit Partywill comply in all material respects with allEnvironmental Lawsnoworhereafter applicable to suchCredit Partyand shall obtain, atorprior to the time required by applicableEnvironmental Laws, all environmental, health and safety permits, licenses and other authorizations necessary for its operations and will maintain such authorizations in full force and effect.

6.13.2         Notice of Environmental Problem.Borrowerwill promptly furnish toLenderall written notices of violation, orders, claims, citations, complaints, penalty assessments, suitsorother proceedings received byBorrower,orof which it has notice, pendingorthreatened in writing againstBorrower, by any Governmental Authority with respect to any alleged violation ofornon-compliance with anyEnvironmental Laws orany permits, licensesorauthorizations in connection with its ownershiporuse of its propertiesorthe operation of its business.

6.14         Reno Plant Permits.By January 9, 2017, the Credit Parties shall have obtained allgovernmental certificates of authority, licenses, permits and qualifications necessary for the operation of the Reno Plant.

7.Negative Covenants.

Borrowermust, and will cause otherCredit Partiesto, comply with the covenants contained in this Article 7at all times from the datehereofand for so long as any part of theObligationsis outstanding, except to the extent (if any) such compliance isexpresslyand specifically waived byLenderfrom time to time in writing.

7.1           Indebtedness. NoCredit Partywill in any manner oweorbe liable forIndebtednessexcept:

7.1.1           theObligations;

7.1.2           obligations under arms-length operating leases entered into the ordinary course of suchCredit Party’s business with lessors who are notAffiliatesofBorrower orareCredit Parties;

7.1.3           trade payables and other short term liabilities incurred in the ordinary course of suchCredit Party’s business in arm’s length transactions with otherCredit Parties orwith parties who are notAffiliatesofBorrower, which are not greater than ninety (90) days past the date of invoiceordelinquentorwhich are being contested in good faith by appropriate action and for which adequate reserves have been maintained in accordance withGAAP;

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7.1.4           Indebtedness owed by such Credit Party to another Credit Party which is subordinated to the Obligations upon terms and conditions satisfactory to Lender in its sole and absolute discretion;

7.1.5           Indebtedness owed by Credit Parties to Green Bank, N.A. in connection with the Loan Agreement betweenGreen Bank, N.A. andAqua Metals Reno, Inc.dated November 3, 2015, provided that the principal amount of such Indebtedness does not exceed $10,000,000;

7.1.6           Indebtedness outstanding on the date hereof and listed on Section 7.1.6 of the Disclosure Schedule and any refinancings, refundings, renewals or extensions thereof; provided that the amount of such Indebtedness is not increased at the time of such refinancing, refunding, renewal or extension;

7.1.7           Indebtedness of such Credit Party with respect to surety, appeal, indemnity, performance, or other similar bonds incurred in the ordinary course of business;

7.1.8           Indebtedness owing to any Person providing property, casualty, liability or other insurance to Credit Parties, so long as the amount of such Indebtedness does not exceed the amount of the unpaid cost of, and shall be incurred only to defer the cost of, such insurance for the year in which such Indebtedness is incurred and such Indebtedness is outstanding only during such year;

7.1.9           Indebtedness incurred in the ordinary course of business in respect of credit cards, credit card processing services, debit cards, stored value cards, or purchase cards (including so-called “procurement cards” or “P-cards”);

7.1.10         Indebtedness arising from endorsement of instruments or other payment items for deposit; and

7.1.11         otherIndebtednessnot described in the preceding Sections7.1.1through Section7.1.10which do not in the aggregate (taking into account all suchIndebtednessof allCredit Parties) exceed the Threshold at any one time outstanding.

7.2           Liens. NoCredit Partyshall grant, create, incur, assume, permitorsuffer to exist anyLienupon any of the Collateralother thanPermitted Liens.

7.3           ContingentLiabilities. EachCredit Partywill not directlyorindirectly make, create, incur, assume, permit to exist, increase, reneworextend anyGuaranty Obligationother than(a)any guaranty ofIndebtednessowed toLender, (b) Guaranty Obligations of the permitted Indebtedness described in Section 7.1,and(b)the continuation of any existing guaranties listed in Section 7.3 of theDisclosure Schedule.

7.4           Limitation on Mergers. NoCredit Partywill mergeorconsolidate withorinto any otherPersonexcept (a) that anySubsidiaryofBorrowermay be merged intoorconsolidated withanotherSubsidiaryofBorrower, so long as the surviving business entity assumes and remains bound by any guaranty of theObligations and Security Documentsexecuted by eitherSubsidiary,or (b) Borrower may merge with another Person so longasBorroweris the surviving business entity.

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7.5           Limitation on Sales ofProperty. NoCredit Partywill sell, transfer, lease, exchange, alienateordispose of any of its material assetsorproperties that are Collateralorany material interest therein, except, to the extent not otherwise forbidden under theSecurity Documents:

7.5.1           equipment which is worthlessorobsoleteorwhich is replaced by equipment of equal suitability and value;

7.5.2           inventory which is sold in the ordinary course of business on ordinary trade terms;

7.5.3           capital stock of any ofBorrower’sSubsidiarieswhich is transferred toBorrower ora wholly ownedSubsidiaryofBorrower; and

7.5.4           licenses of Borrower’s intellectual property and proprietary rights.

7.6           Limitation onDistributionsand Redemptions. Without the written consent of Lender, noCredit Partywill declareormake anyDistribution.

7.7           Limitation onInvestmentsand New Businesses. NoCredit Partywill (a) engage directlyorindirectly in any businessorconduct any operations except in connection with or incidental to its present businesses and operations or (b) make any acquisitions oforcapital contributions toorotherInvestmentsin anyPerson orproperty, other thanPermitted Investments.

7.8           Limitation on Extensions of Credit. Except forPermitted Investments, noCredit Partywill extend credit, make advancesormakeloansother thannormal and prudent extensions of credit to customers buying goods and services in the ordinary course of business, which extensions shall not be for longer periods than those extended by similar businesses operated in a normal and prudent manner.

7.9           Transactions withAffiliates. Other than as disclosed in Section 7.9 of theDisclosure Schedule, noCredit Partywill engage in any material transaction with any of itsAffiliateson terms which are less favorable to it than those which would have been obtainable at the time in arm’s-length dealing withPersonsother than suchAffiliates, provided that such restriction shall not apply to transactions involving onlyBorrowerand its wholly ownedSubsidiaries.

7.10         OtherAgreements. NoCredit Partywill enter intoorotherwise become bound by anyagreementother than theLoan Documentsthat prohibitsorlimits the amount of dividends, distributions,or loansthat it may receiveormakeorthat prohibit itorany otherCredit Partyfrom grantingLienson any of its assets toLender.

7.11         Fiscal Year, Method of Accounting. NoCredit Partyshall change itsFiscal Year ormake any material change in its method of accounting.

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7.12         ERISA Plans. NoCredit Partyshall adoptoragree to maintainorcontribute toorparticipate in anyERISA Plan. NoERISA Affiliatewill incur any obligation to contribute to anyMultiemployer Plan orany plan subject to Section 4064 ofERISA.Borrowershall promptly notifyLenderin writing in the event anyERISA Affiliateadoptsorelects to participate in anERISA Plan.

7.13         Change of Principal Office. NoCredit Partyshall move itsprincipaloffice, executive officeor principalplace of business from the address set forth in Section 11.11.2 without prior written notice toLender.

7.14         Hedging Contracts. No Credit Party will be a party to or in any manner be liable on any Hedging Contract except for Hedging Contracts that are entered into by such Credit Party in the ordinary course of business for the purpose of directly mitigating risks associated with liabilities, commitments, investments, assets or property held or reasonably anticipated by such Credit Party, and not for purposes of speculation or taking a “market view”.

8.Events of Default.

8.1           Nature of Event.AnEvent of Defaultshall exist if any oneormore of the following occurs:

8.1.1           MonetaryDefault.Borrowerfails to make any payment ofprincipaloforinterest on the Convertible TermNote,orpayment of any fee, expenseorother amount duehereunder, under the Convertible TermNote,orunder any otherLoan Document, onorbefore the date such payment is due.

8.1.2           Breach of Covenants in Article7.Defaultis made in the due observanceorperformance by anyCredit Partyof any covenant set forth in Article 7 ofthis Agreement.

8.1.3           Breach of Other Provisions of ThisAgreement.Defaultis made in the due observanceorperformance by anyCredit Partyof any of the covenantsoragreements contained inthis Agreementother than those described in subsection 8.1.1 orsubsection8.1.2and such default continues unremedied for a period of 30 days after notice thereof is given byLendertoBorrower.

8.1.4           Breach of Other Loan Documents. AnyCredit Partydefaults in the due observanceorperformance of any of the covenantsoragreements contained in any otherLoan Documentto which it is a party, and (unless such default otherwise constitutes aDefaultpursuant to other provisions ofthis Section 8.1)such default continues unremedied beyond the expiration of any applicable grace period which may beexpresslyallowed under such otherLoan Document.

8.1.5           Material Misrepresentation. Any material statement, warrantyorrepresentation byoron behalf of anyCredit Partycontained inthis Agreement, the Convertible TermNote orany otherLoan Documentto which it is a party,orin any officer’s certificateorother writing furnished in connection withthis Agreement, proves to have been incorrectormisleading in any material respect as of the date madeordeemed made.

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8.1.6           Institution of Certain Legal Proceedings. AnyCredit Party:

8.1.6.1           suffers the entry against it of a judgment, decreeororder for relief by a court of competent jurisdiction in an involuntary proceeding commenced under any applicable bankruptcy, insolvencyorother similar Law of any jurisdiction noworhereafter in effect,includingthe federalBankruptcy Code, as from time to time amended,orhas any such proceeding commenced against it which remains undismissed for a period of 60 days;or

8.1.6.2           commences a voluntary case under any applicable bankruptcy, insolvencyorsimilar Law noworhereafter in effect,includingthe federal Bankruptcy Code, as from time to time amended;orapplies fororconsents to the entry of an order for relief in an involuntary case under any such Law;ormakes a general assignment for the benefit of creditors;orfails generally to pay (oradmits in writing its inability to pay) its debts as such debts become due;ortakes corporateorother action to authorize any of the foregoing;or

8.1.6.3           suffers the appointment ofortaking possession by a receiver, liquidator, assignee, custodian, trustee, sequestratororsimilar official of allora substantial part of its assetsorof any part of theCollateralin a proceeding brought againstorinitiated by it, and such appointmentortaking possession is neither made ineffective nor discharged within 60 days after the making thereof,orsuch appointmentortaking possession is at any time consented to, requested by,oracquiesced to by it;or

8.1.6.4           suffers the entry against it of a final judgment for the payment of money in excess of theThreshold Amount(not covered by insurance satisfactory toLenderin its reasonable discretion), unless the same is discharged within 30 days after the date of entry thereoforan appealorappropriate proceeding for review thereof is taken within such period and a stay of execution pending such appeal is obtained;or

8.1.6.5           suffers a writorwarrant of attachmentorany similar process to be issued by any court against allorany substantial part of its assetsorany part of theCollateral.

8.1.7           CrossDefaultto OtherIndebtedness. AnyCredit Partyfails to make when dueorwithin any applicable grace period any payment on anyIndebtedness(other than theObligations) with an unpaidprincipalbalance greater than theThreshold Amount;orany eventorcondition occurs under any provision contained in anyagreementunder which suchIndebtednessis governed, evidencedorsecured (orany other material breachordefault under such obligationor agreementoccurs) if the effect thereof is to causeorpermit the holderortrustee of such obligation to cause such obligation to become due prior to its stated maturity;orany such obligation becomes due (other than by regularly scheduled payments) prior to its stated maturity;orany of the foregoing occurs with respect to any oneormore items ofIndebtednessof anyCredit Partywith unpaidprincipalbalances exceeding, in the aggregate, theThreshold Amount.

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8.1.8           Impairment ofLoan Documents. ThisAgreement, the Convertible TermNote, orany otherLoan Documentshall for any reason cease to be in full force and effect,orbe declared null and voidorunenforceable in wholeorin part as the result of any action initiated by anyPersonother thanLender;orthe validityorenforceability of any such document shall be challengedordenied by anyCredit Partyother than by reason of illegality.

8.1.9           Change of Control. AChange of Controloccurs.

8.1.10         Impairment of Liens. Any Lien granted pursuant to the Security Documents shall for any reason cease to be in full force and effect,orbe declared null and voidorunenforceable in wholeorin part as the result of any action initiated by anyPersonother thanLender;orthe validityorenforceability of any such Lien shall be challengedordenied by any Credit Partyother than by reason of illegality.

8.2           Acceleration. Upon the occurrence and during the continuance of anEvent of Default,Lendermay declare the entireprincipaland all interest accrued on the Convertible TermNoteto be, and the Convertible TermNote, together with allObligations, shall thereupon become, forthwith due and payable, without any presentment, demand, protest, notice of protest and nonpayment, notice of accelerationorof intent to accelerateorother notice of any kind, all of whichherebyareexpresslywaived. Notwithstanding the foregoing, if anEvent of Defaultspecified in subsections 8.1.6.1, 8.1.6.2or8.1.6.3 occurs with respect toBorrower, the Convertible TermNoteand all otherObligationsshall become automatically and immediately due and payable, both as toprincipaland interest, without any action byLenderand without presentment, demand, protest, notice of protest and nonpayment, notice of accelerationorof intent to accelerate,orany other notice of any kind, all of which arehereby expresslywaived, anything containedherein, in the Convertible TermNoteto the contrary notwithstanding.

8.3           Remedies. Upon the occurrence and during the continuance of anyEvent of Default,Lendershall at its option be entitled to proceed to exercise any of the following remedies:

8.3.1           Borroweragrees that the occurrence of suchEvent of Defaultshall constitute a default and an event of default under each of theLoan Documents, because of whichLenderwill be entitled (i) to exercise any of the various remedies provided in theLoan Documents,includingthe acceleration of theindebtednessevidenced by the Convertible TermNoteand the foreclosure of the lien and security interests granted and conveyed by theSecurity Documents, and (ii) cumulatively to exercise all other rights, options and privileges provided by Law.

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8.3.2           Without limiting the generality of the foregoing, upon the occurrence and during the continuance of an Event of Default, if the Lender is ever a financial institution,Lendershall have the right at any time and from time to time, without notice toBorrower(any such notice beingexpresslywaived), to set-off and apply any and all deposits (generalorspecial, timeordemand, provisionalorfinal) at any time held, and any otherIndebtednessat any time owing byLendertoorfor the creditorthe account ofBorrower, against any and all of theObligationsofBorrowerevidenced by the Convertible TermNote, irrespective of whetherornotLendershall have made any demand underthis Agreement orthe Convertible TermNoteand although suchObligationsmay be unmatured.Lenderagrees to notifyBorrowerpromptly after any such set-off and application, provided that the failure to give such notice shall not affect the validity of such set-off and application. The rights ofLenderunderthis subsectionare in addition to any other rights and remedies (includingother rights of set-off) whichLendermay have under other provisions ofthis Agreement orthe otherLoan Documents orotherwise.

9.Indemnity.

9.1           Agreementto Indemnify.Subject only to the exceptions and qualifications listed in Section 9.2below:

9.1.1           Agreementto Indemnify.Borrowershall pay, reimburse, indemnify, defend, protect and hold harmlessLenderand all otherIndemnified Partiesfrom and against allLossesasserted againstorincurredorsuffered by any of them at any time and from time to time by reason of, in connection with, arising out of (directlyorindirectly),orin any way related to any of the following:

9.1.1.1           theLoan orany disbursement of the proceeds of theLoan;

9.1.1.2           the negotiation, administrationorenforcement of any of theLoan Documents orthe exercise of rightsorremedies thereunder;

9.1.1.3           any breach by any party other thanLenderof any of theLoan Documents orof any other certificatesoragreements executed pursuant toorin connection with theLoan Documents;

9.1.1.4           theCollateral;

9.1.1.5           any failure of theCollateral or Borroweritself to comply withapplicable Law; and

9.1.1.6           any actual or alleged presence or Release of Hazardous Materials (as such terms are defined in the Stock Purchase Agreement) on or from any property owned or operated by the Borrower or any of its Subsidiaries, or any environmental liability related in any way to Borrower or any of its Subsidiaries.

Borrower’s obligations underthis Section 9.1will survive any terminationorexpiration ofthis Agreement, and this indemnity shall apply whetherornot anyIndemnified Partyshall also be indemnified as to the applicableLossby any otherPersonand whetherornot theLossarisesoraccrues prior to theEffective Date.

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9.1.2           Due Date for Indemnity Payments. Any amount to be paid byBorrowerunderthis Section 9.1 shall be due 10 days after a notice requesting such payment is given toBorrower.

9.2           Exceptions and Qualifications to Indemnity.Lenderacknowledges and agrees that nothing in the preceding Section 9.1shall require or be construed to requireBorrowerto payorreimburse anyLossesincurredorsuffered by anyIndemnified Partythat result from or are proximately caused by (and attributed by any applicable principles of comparative fault to) theEstablished Misconductof thatIndemnified Party.

10.Provision to Satisfy Express Negligence Rule.

EVERY INDEMNITY AND RELEASE PROVIDED IN THISAGREEMENTAND THE OTHER LOAN DOCUMENTS FOR THE BENEFIT OFLENDEROR OTHER INDEMNIFIED PARTIES,INCLUDINGTHE INDEMNITY SET FORTH IN THE ARTICLE 9, SHALL APPLY EVEN IF AND WHEN THE SUBJECT MATTER OF THE INDEMNITY OR RELEASE ARISES OUT OF OR RESULTS FROM THE ORDINARY NEGLIGENCE OR STRICT LIABILITY, BUT NOT GROSS NEGLIGENCE, OFLENDEROR ANOTHER INDEMNIFIED PARTY.

11.Miscellaneous.

Without limiting the covenants ofBorrowerin the other Loan Documents,Borrowercovenants withLenderas follows:

11.1         Section 346 of the Texas Finance Code. Section 346 of theTexas Finance Code (which regulates certain revolving loan accounts and revolving tri-party accounts)shall not apply tothis Agreement orthe otherLoan Documents.

11.2         Limitation on Interest.Lender, eachCredit Partyand any other parties to theLoan Documentsintend to contract in strict compliance with applicable usuryLawfrom time to time in effect. In furtherance thereof suchPersonsstipulate and agree that none of the terms and provisions contained in theLoan Documentsshall ever be construed to create a contract to pay, for the use, forbearanceordetention of money, interest in excess of the maximum amount of interest permitted to be charged byapplicable Lawfrom time to time in effect. Neither eachCredit Partynor any presentorfuture guarantors, endorsers,orotherPersonshereafter becoming liable for payment of anyObligationshall ever be liable for unearned interest thereonorshall ever be required to pay interest thereon in excess of the maximum amount that may be lawfully charged underapplicable Lawfrom time to time in effect, and the provisions of this section shall control over all other provisions of theLoan Documentswhich may be in conflictorapparent conflict herewith.Lender expresslydisavows any intention to chargeorcollect excessive unearned interestorfinance charges in the event the maturity of anyObligationis accelerated. If(a)the maturity of anyObligationis accelerated for any reason,(b)anyObligationis prepaid and as a result any amounts held to constitute interest are determined to be in excess of the legal maximum,or (c) Lender orany other holder of anyorall of theObligationsshall otherwise collect moneys which are determined to constitute interest which would otherwise increase the interest on anyorall of theObligationsto an amount in excess of that permitted to be charged byapplicable Lawthen in effect, then all such sums determined to constitute interest in excess of such legal limit shall, without penalty, be promptly applied to reduce the then outstandingprincipalof the relatedObligations or, atLender’sorsuch holder’s option, promptly returned to eachCredit Party orthe other payor thereof upon such determination. In determining whetherornot the interest paidorpayable, under any specific circumstance, exceeds the maximum amount permitted underapplicable Law,Lenderand eachCredit Party(and any other payors thereof) shall to the greatest extent permitted underapplicable Law,(i)characterize any non-principalpayment as an expense, feeorpremium rather than as interest,(ii)exclude voluntary prepayments and the effects thereof, and(iii)amortize, prorate, allocate, and spread the total amount of interest throughout the entire contemplated term of the instruments evidencing theObligationsin accordance with the amounts outstanding from time to time thereunder and the maximum legal rate of interest from time to time in effect underapplicable Lawin order to lawfully charge the maximum amount of interest permitted underapplicable Law. In the eventapplicable Lawprovides for an interest ceiling under Section 303 of theTexas Finance Code, that ceiling shall be the weekly ceiling.

Credit Agreement – Page 40

11.3         Bank Accounts, Offset. To secure the repayment of theObligationseachCredit Party herebygrants toLenderand to each financial institution which hereafter acquires a participationorother interest in theLoan or the Convertible Term Note(in this section called a “Participant”) a security interest, a lien, and a right of offset, each of which shall be in addition to all other interests, liens, and rights ofLender oranyParticipantat common law, under theLoan Documents,orotherwise, and each of which shall be upon and against(a)any and all moneys, securitiesorotherProperty(and the proceeds therefrom) of anyCredit Partynoworhereafter heldorreceived byorin transit tosuch financial institution Participantfromorfor the account anyCredit Party, whether for safekeeping, custody pledge, transmission, collectionorotherwise,(b)any and all deposits (generalorspecial, timeordemand, provisionalorfinal) of anyCredit Partywith such financial institutionParticipant, and(c)any other credits and claims of anyCredit Partyat any time existing against such financial institutionParticipant,includingclaims under certificates of deposit. Upon the occurrence of any Event ofDefault, each financial institutionParticipantisherebyauthorized to offset, appropriate, and apply, at any time and from time to time, without prior notice toBorrower, any and all items hereinabove referred to against theObligationsthen due and payable.

11.4         Assignments, Participations.

11.4.1           Assignments.Lendershall have the right to sell, assignortransfer allorany part of the Convertible TermNote,Loanand rights and the associated rights and Obligations under allLoan Documentsto oneormore financial institutions or Interstate Group Members, and the assignee, transfereeorrecipient shall have, to the extent of such sale, assignment,ortransfer, the same rights, benefits and obligations ofLender. Within 5Business Daysafter any such assignment, the assignee shall notifyBorrowerof the outstandingprincipalbalance of the Convertible TermNotepayable to assignee andBorrowershall execute and deliver to assignee a new Convertible TermNoteevidencing such assignee’s assignedLoanand, if the assignorLenderhas retained a portion of itsLoan, replacement Convertible Term Notein theprincipalamount of theLoanretained by the assignorLender(such replacement Convertible TermNoteto be in exchange for, but not in payment of, the original Convertible TermNoteheld by suchLender).

Credit Agreement – Page 41

11.4.2           Participations.Lendershall have the right to grant participations in allorany part of the Convertible TermNote,Loanand the associated rights and obligations under allLoan Documentsto oneormore financial institutions or Interstate Group Members.

11.4.3           Distributionof Information. It is understood and agreed thatLendermay provide to assignees and participants and prospective assignees and participants financial information and reports and data concerningBorrower’s properties and operations which was provided toLenderpursuant tothis Agreement, provided that such assignees and participants agree in writing to keep such information, reports and data confidential in accordance with the same terms as stated in Section 11.6 hereof or such other terms as Borrower may approve in writing in its sole and absolute discretion.

11.5         Assignment byBorrower. Notwithstanding anything to the contrary inthis Agreement,Borrowershall have no right to assign its rights underthis Agreement orthe otherLoan Documents orits rights to the proceeds of theLoanwithout the written consent ofLender, in its sole and absolute discretion,in each case, and any such assignmentorpurported assignment without consent shall, atLender’s option, relieveLenderfrom all further obligationshereunderand shall constitute anEvent of Defaultunderthis Agreement.

11.6         Confidentiality.Lenderagrees to keep confidential any information furnished or made available to it by any Credit Party pursuant to any Loan Document, except that nothing herein or in any of the other Loan Documents shall prevent Lender from disclosing such information or any other information (a) to any officer, director, employee, agent, or advisor of Lender or Affiliate of Lender, (b) to any other Person if reasonably incidental to the administration of the credit facility provided herein, (c) as required by any Law; provided that (x) prior to any disclosure under this clause (c), the disclosing party agrees to provide Borrower with prior notice thereof, to the extent that the disclosing party is permitted to provide such prior notice to Borrower pursuant to the terms of the applicable Law and (y) any disclosure under this clause (c) shall be limited to the portion of the confidential information as may be required by such Law, (d) upon the order of any administrative agency so long as such administrative agency is informed of the confidential nature of such information, (e) upon the request or demand of any court or tribunal pursuant to any subpoena or other legal process, provided, that, (x) prior to any disclosure under this clause (e) the disclosing party agrees to provide Borrower with prior written notice thereof, to the extent that the disclosing party is permitted to provide such prior written notice to Borrower pursuant to the terms of the subpoena or other legal process and (y) any disclosure under this clause (e) shall be limited to the portion of the confidential information as may be required by such court or tribunal pursuant to such subpoena or other legal process, (f) that is or becomes available to the public other than as a result of a disclosure by Lender or any Indemnified Party prohibited by this Agreement, (g) in connection with any litigation to which such Lender or any of its Affiliates may be a party involving parties hereto which such litigation involves claims related to the rights or duties of such parties under this Agreement or the other Loan Documents; provided, that, prior to any disclosure to any Person (other than any Credit Party, Lender, any of their respective Affiliates, or their respective counsel) under this clause (g) with respect to litigation involving any Person (other than Borrower, Lender, any of their respective Affiliates, or their respective counsel), the disclosing party agrees to provide Borrower with prior written notice thereof, (h) if (and only to the extent) necessary in connection with the exercise of any secured creditor remedy under this Agreement or any other Loan Document, (i) subject to provisions substantially similar to those contained in this section, to any actual or proposed participant or assignee that is a financial institution or an Interstate Group Member or that has been approved in writing by Borrower, and (j) if the disclosure is authorized by other express provisions of this Agreement or any other Loan Document.

Credit Agreement – Page 42

11.7         Termination, Limited Survival. In its sole and absolute discretionBorrowermay at any time that noObligationsare owing elect in a notice delivered toLenderto terminatethis Agreement. Upon receipt byLenderof such a notice, if noObligationsare then owing,this Agreementand all otherLoan Documentsshall thereupon be terminated and the parties thereto released from all prospective obligations thereunder. Notwithstanding the foregoingoranythinghereinto the contrary, any waiversoradmissions made by anyPersonin anyLoan Documents, anyObligations, and any obligations which anyPersonmay have to indemnifyorcompensateLendershall survive any termination ofthis Agreement orany otherLoan Document. At the request and expense ofBorrower,Lendershall prepare and execute all necessary instruments to reflect and effect such termination of suchLoan Documents.

11.8         Rights of Third Parties. All conditions to the obligations ofLenderunderthis Agreement,includingthe obligation to disburse proceeds ofLoan, are imposed solely and exclusively for the benefit ofLenderand its successors and permitted assigns and no other person shall have standing to require satisfaction of such conditionsorbe entitled to assume thatLenderwill make disbursementsorrefuse to make disbursements in the absence of strict compliance with anyorall of such condition. Further, no other person shall, under any circumstances, be deemed to be a beneficiary of such conditions, any and all of which may be freely waived in wholeorin part byLenderat any time if in its sole discretion it deems it desirable to do so.

11.9         Evidence of Satisfaction of Conditions. Any condition ofthis Agreementwhich requires the submission of evidence of the existenceornonexistence of a specified factorfacts implies as a condition the existenceornonexistence, as the case may be, of such factorfacts, andLendershall, at all times, be able to establish to its satisfaction and in its reasonable discretion such existenceornonexistence.

11.10         Conflict with the Term Sheet. ThisAgreementand the otherLoan Documentsare intended to supersede theTerm Sheet, except to the extent (if any) that other provisions ofthis Agreement expresslyincorporate termsorconditions of the Term Sheet by reference.

11.11         Payments and Notices. Any provision of theLoan Documents orofapplicable Lawwith reference to the sending, mailingordelivery of any noticeordemand underthis Agreement orwith reference to the making of any payment required under theLoan Documents, shall be deemed to be complied with when and if the following steps are taken:

11.11.1         Manner of Payment.All payments on the Convertible TermNoteand other amounts required to be paid byBorrowertoLendershall be paid toLenderin immediately available funds by wire transfer to the account designated byLender.

Credit Agreement – Page 43

11.11.2         Notice Requirements.Except in the case of notices and other communicationsexpresslypermitted to be given by telephone (and except as provided in subsection 11.11.3below), all notices and other communications provided forhereinshall be in writing and shall be delivered by handorovernight courier service, mailed by certifiedorregistered mailorsent by facsimile as follows and all notices and other communicationsexpresslypermittedhereunderto be given by telephone shall be made to the applicable telephone number, as follows:

Address of Lender:

INTERSTATE EMERGING INVESTMENTS, LLC

12770 Merit Drive, Suite 1000

Dallas, Texas 75251

Attention: Kelvin F. Sellers

Fax: (972) 455-6051

Email: kelvin.sellers@ibsa.com

Address of Borrower:

AQUA METALS, INC.

1010 Atlantic Avenue

Alameda, California 94501

Attention: Stephen R. Clarke

Email: Steve.Clarke@aquametals.com

Notices sent by hand or overnight courier service, or mailed by certified or registered mail, shall be deemed to have been given when received; notices sent by facsimile shall be deemed to have been given when sent (except that, if not given during normal business hours for the recipient, shall be deemed to have been given at the opening of business on the next business day for the recipient). Notices delivered through electronic communications, to the extent provided in subsection 11.11.3 below, shall be effective as provided in said subsection 11.11.3. Any party hereto may change its address or facsimile number for notices and other communications hereunder by notice to the other party hereto

11.11.3         Electronic Communications.Notices and other communications toLendermay be deliveredorfurnished by electronic communication (includinge-mail and Internetorintranet websites) pursuant to procedures approved byLender.Lender or Borrower orany otherCredit Partymay, in its discretion, agree to accept notices and other communications to ithereunderby electronic communications pursuant to procedures approved by it, provided that approval of such procedures may be limited to particular noticesorcommunications.

Credit Agreement – Page 44

UnlessLenderotherwise prescribes,(i)notices and other communications sent to an e-mail address shall be deemed received upon the sender’s receipt of an acknowledgement from the intended recipient (such as by the “return receipt requested” function, as available, return e-mailorother written acknowledgement), and(ii)noticesorcommunications posted to an Internetorintranet website shall be deemed received upon the deemed receipt by the intended recipient, at its e-mail address as described in the foregoing clause(i), of notification that such noticeorcommunication is available and identifying the website address therefor; provided that, for both clauses(i)and(ii)above, if such notice, emailorother communication is not sent during the normal business hours of the recipient, such noticeorcommunication shall be deemed to have been sent at the opening of business on the nextbusiness dayfor the recipient.

11.12         Other Terms and References.

11.12.1         As used in any of theLoan Documents, a capitalized term that is not defined in such documentorin this Agreement, but that is defined in another of theLoan Documents, shall have the meaning ascribed to it in such other document, unless a contrary intent is clear from the context in which such term is used.

11.12.2         Words of any gender used in theLoan Documentsshall be held and construed toincludeany other gender, and words in the singular number shall be held toincludethe plural and vice versa, unless the context otherwise requires.

11.12.3         References in any of theLoan Documents to Paragraphs, subparagraphs, Articles, Sections, subsectionsorother subdivisions shall refer to the corresponding Paragraphs, subparagraphs, Articles, Sections, subsectionsorsubdivisions of such document, unless specific reference is made to another documentorinstrument.

11.12.4         References in any of theLoan Documentsto any Schedule orExhibit shall refer to the corresponding Schedule orExhibit attached to such document, which shall be made a part thereof by such reference.

11.12.5         All capitalized terms used in theLoan Documentswhich refer to other documents shall be deemed to refer to such other documents as they may be renewed, extended, supplemented, amendedorotherwise modified from time to time, provided such documents are not renewed, extendedormodified in breach of any provision contained in any of theLoan Documents.

11.12.6         All accounting terms used but not specifically defined in theLoan Documentsshall be construed in accordance withGAAP.

11.12.7         The words “this Agreement”, “herein”, “hereof”, “hereby”, “hereunder” and words of similar import when used in any of theLoan Documentsrefer to such document taken as a whole and not to any particular subdivision thereof unlessexpresslyso limited. The phrases “this Paragraph”, “this subparagraph”, “this Section”, “this subsection” and similar phrases used in theLoan Documentsrefer only to the Paragraph, subparagraph, Section, subsectionorother subdivision described in which the phrase occurs.

11.12.8         As used in theLoan Documentsthe word “or” is not exclusive.

Credit Agreement – Page 45

11.12.9         The word “express” will be construed as if followed by “and unambiguous”, and the word “expressly” will be construed as if followed by “and unambiguously”.

11.12.10         The words “include”, “including” and similar terms shall be construed as if followed by “, without limitation to,” and the rule ofejusdem generis shall not be applied to limit the generality of a term in any of theLoan Documentswhen followed by specific examples.

11.13         Severability. If any termorprovision of any of theLoan Documents orthe application of it shall to any extent be held by a court to be invalid and unenforceable, the remainder of theLoan Documents,orthe application of such termorprovision other than to the extent to which it is invalidorunenforceable, shall not be affected.

11.14         Paragraph Headings. The paragraph and section headings contained in theLoan Documentsare for convenience only and shall in no way enlargeorlimit the scopeormeaning of the various and several provisionshereof.

11.15         Time is of the Essence. Time is of the essence as to allobligationscreated by and notices requiredorpermitted by theLoan Documents.

11.16         Negotiated Documents.Lender or Borrowerand their counsel have reviewed and revisedorrequested revisions to theLoan Documents, and the usual rule of construction that any ambiguities are to be resolved against the drafting party shall not apply to the constructionorinterpretation of theLoan Documents orany amendments to theLoan Documents.

11.17         No Fiduciary Relationship, Etc. Neither the execution of theLoan Documentsnor the administrationhereof orof other documents referencedherein, nor any other right, dutyorobligation created underorpursuant to theLoan Documentsis intended to beorto create any fiduciary relationship betweenLenderandBorrower.

11.18         Cumulative Rights and Remedies. All rights and remedies ofLenderunder any of theLoan Documentsshall be separate, distinct and cumulative and no single, partialorfull exercise of any rightorremedy shall exhaust the sameorprecludeLenderfrom thereafter exercising in fullorin part the same rightorremedyorfrom concurrentlyorthereafter exercising any other rightorremedy whichLendermay have under any of theLoan Documents oratLaw orin equity, and each and every such right and remedy may be exercised at any timeorfrom time to time asLenderbelieves to be appropriate in its sole and absolute discretion.

11.19         No Implied Waiver. The failure ofLenderto insist at any time upon the strict performance of any covenantoragreementorto exercise any option, right, powerorremedy contained in theLoan Documentsshall not be construed as a waiverora relinquishment of such option, right, powerorremedy for the future. The waiver oforredress for any breach of theLoan DocumentsbyBorrowershall not prevent a similar subsequent act from constituting a breach. Anyexpresswaiver byLenderof any provision of theLoan Documentsshall affect only the termorcondition specified in such waiver and only for the time and in the manner specifically stated in such waiver. No waiver byLenderof any provision of theLoan Documentsshall be effective unless expressed in writing and signed by thePersonto be bound by the waiver. A receipt byLenderof any payment with knowledge of a breach byBorrowerof any provision of theLoan Documentsshall not constitute a waiver of the breach.

Credit Agreement – Page 46

11.20         Entire and Only Agreement; No Oral Amendments. TheLoan Documentssupersede any prior negotiations and agreements betweenLenderandBorrowerconcerning theProperty, and no amendment, releaseortermination of any of theLoan Documentsshall be bindingorvalid unless expressed in a writing executed by all parties to be bound by such amendment, releaseortermination.

11.21         Binding Effect Upon Successors and Assigns. Whetherornot so expressed, whenever a party to any of theAgreementis namedorreferenced inthis Agreement, the successors and permitted assigns of such party shall be included, and all covenants and agreements contained inthis Agreementbyoron behalf ofBorrower or Lendershall bind and inure to the benefit of their respective successors and permitted assigns.

11.22         Governing Law. EXCEPT TO THE EXTENT THAT THE LAW OF ANOTHER JURISDICTION IS EXPRESSLY ELECTED IN A LOAN DOCUMENT,ThISAgreement, the CONVERTIBLE TERMNoteand the other Loan Documents shall be construed and enforced in accordance with and governed by thelawsof the State of Texas and the federal laws of the United States applicable within such state, without regard to conflict or choice of law rules that might require the application of thelawsof another jurisdiction.

11.23         Agreement to Jurisdiction and Methods of Service of Process.

11.23.1         Each ofLenderandBorrowerirrevocably submits to the jurisdiction of any Texasorfederal court sitting in Dallas County, Texas over any suitorproceeding arising out oforrelating tothis Agreement orany of the other Loan Documents, and bothLenderandBorrowerwaives and agrees not to assert, by way of motion, as a defenseorotherwise, that any such suitorproceeding brought in a court in Dallas County, Texas is brought in an inconvenient forumorthat the venue thereof is improper. Nothing herein or in any other Loan Document shall affect any right that Lender may otherwise have to bring any action or proceeding relating to this Agreement or any other Loan Document against any Credit Party or its properties in the courts of any jurisdiction.

11.23.2         Further, each ofLender andBorroweragrees and consents that service of process may be made upon it in any legal proceeding relating to thisAgreement orany of the otherLoan Documentsby any means allowed under TexasorfederalLaw. In addition to other permitted methods of service of process, unless disallowed by TexasorfederalLaw, service of process uponLender or Borrowerin any such proceeding may be made by certifiedorregistered mail, return receipt requested, directed toLender or Borrower, as the case may be, at the notice address specified in this Section, and service so made shall be complete 5 days after the same shall have been so mailed.

Credit Agreement – Page 47

11.23.3         Nothing inthis Sectionshall affect the right ofLender or Borrowerto serve legal process in any other manner permitted byLaw oraffect the right ofLender or Borrowerto bring any actionorproceeding against the other partyoritspropertyin the courts of any other jurisdictionorjurisdictions.

11.24         Execution in Counterparts; Delivery by Fax. To facilitate execution, each of theLoan Documentsmay be executed in multiple identical counterparts. It shall not be necessary that the signature of,oron behalf of, each party,orthat the signature of all persons required to bind any party, appear on each counterpart. All counterparts, taken together, shall collectively constitute a single instrument. But it shall not be necessary in making proof of any of theLoan Documentsto produceoraccount for more than a single counterpart containing the respective signatures of,oron behalf of, each of the parties to such document. Any signature page may be detached from one counterpart and then attached to a second counterpart with identical provisions without impairing the legal effect of the signatures on the signature page. Signing and sending a counterpart (ora signature page detached from the counterpart) by facsimileorother electronic means to another party will have the same legal effect as signing and delivering an original counterpart to the other party. A copy (includinga copy produced by facsimileorother electronic means) of any signature page that has been signed byoron behalf of a party to any of theLoan Documentsshall be as effective as the original signature page for the purpose of proving such party’sthis Agreementto be bound.

11.25         Waiver of Rights to Trial by Jury.BY ITS EXECUTION OFTHIS AGREEMENT, EACH OFBORROWERAND LENDER HEREBY WAIVES ITS RIGHTS TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF ACTION BASED UPON OR ARISING OUT OF THE LOAN DOCUMENTS OR ANY OF THEM OR ANY OTHER DOCUMENT OR DEALINGS BETWEEN THEM RELATING TO THELOANOR THEPROPERTY. The scope of this waiver is intended to be all-encompassing of any and all disputes that may be filed in any court and that relate to the subject matter of this transaction,includingcontract claims, tort claims, breach of duty claims, and all other commonlawand statutory claims. This waiver is a material inducement to each ofBorrowerandLenderas they enter into a business relationship; each has already relied on the waiver in entering into theLoan Documents; and each will continue to rely on the waiver in their related future dealings. BorrowerandLender, each having reviewed this waiver with its legal counsel, knowingly and voluntarily waives its jury trial rights following consultation with legal counsel. THIS WAIVER IS IRREVOCABLE, MEANING THAT IT MAY NOT BE MODIFIED EITHER ORALLY OR IN WRITING, AND THE WAIVER SHALL APPLY TO ANY SUBSEQUENT AMENDMENTS, RENEWALS, SUPPLEMENTS OR MODIFICATIONS TO EACH OF THELOAN DOCUMENTS. In the event of litigation,this Agreementmay be filed as a written consent to a trial by before a judge sitting without a jury.

11.26         Waiver of Consequential Damages, Etc. To the fullest extent permitted by applicable Law, Borrower shall not assert, and hereby waives, any claim against any Indemnified 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 Loan Document or any agreement or instrument contemplated hereby, the transactions contemplated hereby or thereby, any Loan, or the use of the proceeds thereof. No Indemnified Party shall be liable for any damages arising from the use by unintended recipients of any information or other materials distributed by it through telecommunications, electronic or other information transmission systems in connection with this Agreement or the other Loan Documents or the transactions contemplated hereby or thereby.

[Signature pages follow.]

Credit Agreement – Page 48

IN WITNESS WHEREOF,this Agreementis executed to be effective as of theEffective Date.

INTERSTATE EMERGING INVESTMENTS, LLC, as Lender
By: INTERSTATE BATTERIES, INC.,
its sole member
By:	/s/ William McDade
	Name:  William McDade
	Title:  CFO

Credit Agreement – Signature Page

AQUA METALS, INC., as Borrower
By:	/s/ Stephen R. Clarke
	Name: Stephen R. Clarke
	Title:  CEO

Credit Agreement – Signature Page

ExhibitA

Form of Convertible Term Note

CONVERTIBLE TERM NOTE

$5,000,000.00 Dallas, Texas [____ __], 2016

FORVALUE RECEIVED, the undersigned, AQUA METALS, INC., a Delaware corporation (hereincalled “Borrower”),herebypromises to pay to INTERSTATE EMERGING INVESTMENTS, LLC or its permitted assigns (hereincalled “Lender”), theprincipalsum of FIVE MILLION AND 00/100 Dollars ($5,000,000.00), together with interest on the unpaidprincipalbalance thereof as hereinafter set forth, bothprincipaland interest payable ashereinprovided in lawful money of the United States of America at the offices ofLenderunder theCredit Agreement,orat such other place as from time to time may be designated by the holder of this Convertible TermNote.

This Convertible TermNote(a) is issued and delivered under that certainCredit Agreementdated as of May 18, 2016 amongBorrowerandLender(herein, as from time to time supplemented, amendedorrestated, called the “Credit Agreement”), and is a “ConvertibleTerm Note” as defined therein,(b) is subject to the terms and provisions of theCredit Agreement, which contains provisions for payments and prepaymentshereunder, conversion of principal and interest hereunder into common stock of Borrower,and acceleration of the maturityhereofupon the happening of certain stated events, and(c) is secured by and entitled to the benefits of certain Security Documents (as identified and defined in theCredit Agreement). Payments on this Convertible TermNoteshall be made and applied as providedhereinand in theCredit Agreement. Reference isherebymade to theCredit Agreementfor a description of certain rights, limitations of rights, obligations and duties of the parties hereto and for the meanings assigned to terms used and not definedhereinand to theSecurity Documentsfor a description of the nature and extent of the security thereby provided and the rights of the parties thereto.

Unless earlier converted into common stock of Borrower, theprincipalamount of this Convertible TermNote, together with all interest accrued hereon, shall be due and payable in full on theMaturity Date and otherwise as provided in the Credit Agreement. Interest on this Convertible TermNoteshall be payable as provided in theCredit Agreement.

Notwithstanding the foregoing paragraph and all other provisions of this Convertible TermNote, in no event shall the interest payable hereon, whether beforeorafter maturity, exceed the maximum amount of interest which, under applicableLaw, may be contracted for, charged,orreceived on this Convertible TermNote, and this Convertible TermNoteisexpresslymade subject to the provisions of theCredit Agreementwhich more fully set out the limitations on how interest accrues hereon. In the event applicableLawprovides for an interest ceiling under Chapter 303 of theTexas Finance Code (the “Texas Finance Code”)as amended, for that day, the ceiling shall be the “weekly ceiling” as defined in theTexas Finance Codeand shall be used in this Convertible TermNotefor calculating theMaximum Rateand for all other purposes. The term “applicable law” as used in this Convertible TermNoteshall mean the Laws of the State of Texasorthe Laws of the United States, whichever Laws allow the greater interest, as such Laws now existormay be changedoramendedorcome into effect in the future.

If this Convertible TermNoteis placed in the hands of an attorney for collection after default,orif allorany part of theindebtednessrepresentedherebyis proved, establishedorcollected in any courtorin any bankruptcy, receivership, debtor relief, probateorother court proceedings,Borrowerand all endorsers, sureties and guarantors of this Convertible TermNotejointly and severally agree to pay reasonable attorneys’ fees and collection costs to the holderhereofin addition to theprincipaland interest payablehereunder.

Borrowerand all endorsers, sureties and guarantors of this Convertible TermNote herebyseverally waive demand, presentment, notice of demand and of dishonor and nonpayment of this Convertible TermNote, protest, notice of protest, notice of intention to accelerate the maturity of this Convertible TermNote, declarationornotice of acceleration of the maturity of this Convertible TermNote, diligence in collecting, the bringing of any suit against any party and any notice ofordefense on account of any extensions, renewals, partial paymentsorchanges in any manner oforin this Convertible TermNote orin any of its terms, provisions and covenants,orany releasesorsubstitutions of any security,orany delay, indulgenceorother act of any trusteeorany holderhereof, whether beforeorafter maturity.

This Convertible TermNoteand the rights and duties of the parties hereto shall be governed by theLawsof the State ofTexas(without regard to principles of conflicts of law), except to the extent the same are governed by applicable federalLaw.

THISConvertible TermNote IS SUBJECT TO THE TERMS AND CONDITIONS OF THAT CERTAIN INTERCREDITOR AGREEMENT BETWEEN LENDER AND GREEN BANK, N.A. DATED AS OF THE DATE HEREOF.

AQUA METALS, INC.
By:
	Name:
	Title:

Exhibit B

Form of Compliance Certificate

Exhibit B –Page 1

COMPLIANCE CERTIFICATE

Reference is made to that certainCredit Agreementdated as of May 18, 2016 (as amendedorsupplemented, the “Credit Agreement”), by and between AQUA METALS, INC. (“Borrower”), a Delaware corporation, and INTERSTATE EMERGING INVESTMENTS, LLC (“Lender”), whichCredit Agreementis in full force and effect on the datehereof. Terms that are defined in the Credit Agreement are usedhereinwith the meanings given them in theCredit Agreement.

This Certificate is furnished pursuant to Section 6.1.4 of theAgreement. Together herewithBorroweris furnishing toLender,Borrower’s *[audited/unaudited]financial statements (the “Financial Statements”) as at____________(the “Reporting Date”).Borrower herebyrepresents, warrants, and acknowledges toLenderthat:

(a)          the officer of Borrower signing this instrument is the duly elected, qualified and acting ____________ of Borrower and as such is Borrower’s [president/chief executive officer/ treasurer/chief financial officer];

(b)          the Financial Statements have been prepared in accordance with GAAP and present fairly [subject to year-end adjustments and the absence of footnotes] the financial position of Borrower on a Consolidated basis;

(c)          on the Reporting Date Borrower was, and on the date hereof Borrower is, in full compliance with the disclosure requirements of Section 6.10 of the Credit Agreement, and no Default otherwise existed on the Reporting Date or otherwise exists on the date of this instrument *[except for Default(s) under Section(s) ____________ of the Agreement, which *[is/are] more fully described on a schedule attached hereto]; and

(d)          *[unless otherwise disclosed on a schedule attached hereto,] the representations and warranties of the Credit Parties set forth in the Credit Agreement and the other Loan Documents are true and correct in all material respects (without duplication of any materiality qualifiers contained therein) on and as of the date hereof, with the same effect as though such representations and warranties had been made on and as of the date hereof, except for any such representation or warranty that expressly applies to a specified earlier date, in which case such representation or warranty shall have been true and correct in all material respects (without duplication of any materiality qualifiers contained therein) on and as of such earlier date.

The officer ofBorrowersigning this instrumentherebycertifies that he has reviewed theLoan Documentsand theFinancial Statementsand has otherwise undertaken such inquiry as is in his/her opinion necessary to enable him/her toexpressan informed opinion with respect to the above representations, warranties and acknowledgments ofBorrowerand, to the best of his/her knowledge, such representations, warranties, and acknowledgments are true, correct and complete.

Exhibit B –Page 2

IN WITNESS WHEREOF, this instrument is executed as of ____________, 20__.

AQUA METALS, INC.
By:
	Name:
	Title:

Exhibit B –Page 3

DISCLOSURE SCHEDULE

These Disclosure Schedules are made and given pursuant to the Credit Agreement dated as of May 18, 2016 (the “Agreement”), between Aqua Metals, Inc. (the “Company”) and Interstate Battery System International, Inc. (“Lender”). All capitalized terms used but not defined herein shall have the meanings given to them in the Agreement. The section numbers below correspond to the section numbers in the Agreement, and the disclosures in any section or subsection of these Disclosure Schedules shall qualify other sections and subsections to the extent such disclosure is apparent from a reading of the disclosure that such disclosure is applicable to such other sections and subsections.

Nothing in these Disclosure Schedules is intended to broaden the scope of any representation or warranty contained in the Agreement or to create any covenant. Inclusion of any item in these Disclosure Schedules (1) does not represent a determination that such item is material or establish a standard of materiality, (2) does not represent a determination that such item did not arise in the ordinary course of business, (3) does not represent a determination that the transactions contemplated by the Agreement require the consent of third parties, and (4) shall not constitute, or be deemed to be, an admission to any third party concerning such item. These Disclosure Schedule include brief descriptions or summaries of certain agreements and instruments, copies of all which have been made available to Purchaser. Such descriptions do not purport to be comprehensive, and are qualified in their entirety by reference to the text of the documents described, true and complete copies of which have been made available to Lender.

5.1.4       Financial Matters

The Company continues to make material capital expenditures in connection with the development of its recycling facility in McCarran, Nevada and the construction of its recycling modules.

The Company is negotiating a running change to the Contract for Construction dated September 22, 2015 between Aqua Metals, Reno, Inc. and Miles Construction.

5.1.5       Pending Legal Proceedings

None.

5.1.12     Subsidiaries

The subsidiaries of the Company are Aqua Metals Operations, Inc., a Delaware corporation, and Aqua Metals Reno, Inc., a Delaware corporation.

7.1.6       Indebtedness

Aqua Metals Reno, Inc. has entered into a Loan Agreement (“Green Bank Loan”) with Green Bank, N.A. pursuant to which Green Bank provided Aqua Metals Reno, Inc. with a loan in the amount of $10 million.

Disclosure Schedule

Various equipment leases with Thermal Fischer Scientific

7.3           Contingencies

The Green bank Loan has been guaranteed by Borrower and Aqua Metals Reno, Inc.

7.9           Transactions with Affiliates

None.

Disclosure Schedule

SECURITYSCHEDULE

1.          Guaranty by each Guarantor in favor of Lender dated as of the Closing Date.

2.          Security Agreement by AMR in favor of Lender dated as of the Closing Date.

3.          Deed of Trust, Security Agreement and Fixture Filing from AMR for the benefit of Lender dated as of the Closing Date.

4.          Intercreditor Agreement between Lender and GREEN BANK, N.A. dated as of the Closing Date.

Security Schedule –Page 1