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ex10-5.htm

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MATERIAL BELOW MARKED BY AN “***” HAS BEEN OMITTED PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT. THIS ENTIRE EXHIBIT INCLUDING THE OMITTED CONFIDENTIAL INFORMATION HAS BEEN FILED SEPARATELY WITH THE COMMISSION.

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EXHIBIT 10.5

Reference is made to the Intercreditor Agreement, dated as of May 2, 2014, among BANK OF AMERICA, N.A., as the Revolving Lender (as defined therein), GOLDMAN SACHS BANK USA, as the Term Loan Administrative Agent (as defined therein), VERTEX ENERGY, INC., a Nevada corporation (“Holdings”), VERTEX ENERGY OPERATING, LLC, a Texas limited liability company, and the subsidiaries of Holdings named therein (as amended, modified, restated, amended and restated or supplemented from time to time, the “Intercreditor Agreement”).  Each Person that benefits from the security hereunder, by accepting the benefits of the security provided hereby, (i) consents (or is deemed to consent), to the subordination of Liens provided for in the Intercreditor Agreement, (ii) agrees (or is deemed to agree) that it will be bound by, and will take no actions contrary to, the provisions of the Intercreditor Agreement, (iii) authorizes (or is deemed to authorize) the Term Loan Administrative Agent on behalf of such Person to enter into, and perform under, the Intercreditor Agreement and (iv) acknowledges (or is deemed to acknowledge) that a copy of the Intercreditor Agreement was delivered, or made available, to such Person.

Notwithstanding any other provision contained herein, this Agreement, the Liens created hereby and the rights, remedies, duties and obligations provided for herein are subject in all respects to the provisions of the Intercreditor Agreement. In the event of any conflict or inconsistency between the provisions of this Agreement and the Intercreditor Agreement, the provisions of the Intercreditor Agreement shall control.

PLEDGE AND SECURITY AGREEMENT

 

dated as of May 2, 2014

 

between

 

EACH OF THE GRANTORS PARTY HERETO

 

and

 

GOLDMAN SACHS BANK USA,

as Collateral Agent

 

  

  

  

 

TABLE OF CONTENTS

 

	  	  	
PAGE

	  	  	  
	  	  	  
	
SECTION 1. DEFINITIONS; GRANT OF SECURITY.

	
1

	
1.1

	
General Definitions

	
1

	
1.2

	
Definitions; Interpretation

	
7

	
SECTION 2. GRANT OF SECURITY.

	
8

	
2.1

	
Grant of Security

	
8

	
2.2

	
Certain Limited Exclusions

	
9

	
SECTION 3. SECURITY FOR OBLIGATIONS; GRANTORS REMAIN LIABLE.

	
9

	
3.1

	
Security for Obligations

	
9

	
3.2

	
Continuing Liability Under Collateral

	
9

	
SECTION 4. REPRESENTATIONS AND WARRANTIES AND COVENANTS.

	
9

	
4.1

	
Generally.

	
9

	
4.2

	
Equipment and Inventory

	
12

	
4.3

	
Receivables

	
14

	
4.4

	
Investment Related Property

	
16

	
4.5

	
Material Contracts

	
22

	
4.6

	
Letter of Credit Rights

	
23

	
4.7

	
Intellectual Property.

	
23

	
4.8

	
Commercial Tort Claims

	
26

	
SECTION 5. ACCESS; RIGHT OF INSPECTION AND FURTHER ASSURANCES; ADDITIONAL GRANTORS.

	
27

	
5.1

	
Access; Right of Inspection

	
27

	
5.2

	
Further Assurances

	
27

	
5.3

	
Additional Grantors

	
28

	
SECTION 6. COLLATERAL AGENT APPOINTED ATTORNEY-IN-FACT.

	
28

	
6.1

	
Power of Attorney

	
28

	
6.2

	
No Duty on the Part of Collateral Agent or Secured Parties

	
29

	
SECTION 7. REMEDIES.

	
29

	
7.1

	
Generally.

	
29

	
7.2

	
Application of Proceeds

	
31

	
7.3

	
Sales on Credit

	
31

	
7.4

	
Deposit Accounts.

	
31

	
7.5

	
Investment Related Property.

	
31

	
7.6

	
Intellectual Property.

	
32

	
7.7

	
Cash Proceeds

	
34

	
SECTION 8. COLLATERAL AGENT.

	
34

	
SECTION 9. CONTINUING SECURITY INTEREST; TRANSFER OF LOANS.

	
35

 

  

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SECTION 10. STANDARD OF CARE; COLLATERAL AGENT MAY PERFORM.

	
35

	
SECTION 11. MISCELLANEOUS.

	
36

SCHEDULE 4.1 — GENERAL INFORMATION

SCHEDULE 4.2  — LOCATION OF EQUIPMENT AND INVENTORY

SCHEDULE 4.4 — INVESTMENT RELATED PROPERTY

SCHEDULE 4.5 ­— MATERIAL CONTRACTS

SCHEDULE 4.6 — DESCRIPTION OF LETTERS OF CREDIT

SCHEDULE 4.7 — INTELLECTUAL PROPERTY - EXCEPTIONS

SCHEDULE 4.8 — COMMERCIAL TORT CLAIMS

EXHIBIT A — PLEDGE SUPPLEMENT

EXHIBIT B — UNCERTIFICATED SECURITIES CONTROL AGREEMENT

EXHIBIT C — SECURITIES ACCOUNT CONTROL AGREEMENT

EXHIBIT D — DEPOSIT ACCOUNT CONTROL AGREEMENT

EXHIBIT E — TRADEMARK SECURITY AGREEMENT

EXHIBIT F — COPYRIGHT SECURITY AGREEMENT

EXHIBIT G — PATENT SECURITY AGREEMENT

 

  

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This PLEDGE AND SECURITY AGREEMENT, dated as of May 2, 2014 (this “Agreement”), between EACH OF THE UNDERSIGNED, whether as an original signatory hereto or as an Additional Grantor (as herein defined) (each, a “Grantor”), and GOLDMAN SACHS BANK USA, as collateral agent for the Secured Parties (as herein defined) (in such capacity as collateral agent, the “Collateral Agent”).

 

RECITALS:

 

WHEREAS, reference is made to that certain Credit and Guaranty Agreement, dated as of the date hereof (as it may be amended, restated, supplemented or otherwise modified from time to time, the “Credit Agreement”), by and among VERTEX ENERGY OPERATING, LLC, a Texas limited liability company (“Company”), VERTEX ENERGY, INC., a Nevada corporation (“Holdings”) and CERTAIN OTHER SUBSIDIARIES OF HOLDINGS, as Guarantors, the lenders party thereto from time to time (the “Lenders”), and GOLDMAN SACHS BANK USA (“GSB”), as Administrative Agent, Collateral Agent and Lead Arranger;

 

WHEREAS, subject to the terms and conditions of the Credit Agreement, certain Grantors may enter into one or more Interest Rate Agreements with one or more Lender Counterparties;

 

WHEREAS, in consideration of the extensions of credit and other accommodations of Lenders and Lender Counterparties as set forth in the Credit Agreement and the Interest Rate Agreements, respectively, each Grantor has agreed to secure such Grantor’s obligations under the Credit Documents and the Interest Rate Agreements as set forth herein; and

 

NOW, THEREFORE, in consideration of the premises and the agreements, provisions and covenants herein contained, each Grantor and the Collateral Agent agree as follows:

 

 

SECTION 1.   DEFINITIONS; GRANT OF SECURITY.

 

1.1           General Definitions.   In this Agreement, the following terms shall have the following meanings:

 

“Account Debtor” shall mean each Person who is obligated on a Receivable or any Supporting Obligation related thereto.

 

“Accounts” shall mean all “accounts” as defined in Article 9 of the UCC.

 

“Additional Grantors” shall have the meaning assigned in Section 5.3.

 

“Agreement” shall have the meaning set forth in the preamble.

 

“Assigned Agreements” shall mean all agreements and contracts to which such Grantor is a party as of the date hereof, or to which such Grantor becomes a party after the date hereof, including, without limitation, each Material Contract, as each such agreement may be amended, supplemented or otherwise modified from time to time.

 

 “Cash Proceeds” shall have the meaning assigned in Section 7.7.

 

  

  

  

 

“Chattel Paper” shall mean all “chattel paper” as defined in Article 9 of the UCC, including, without limitation, “electronic chattel paper” or “tangible chattel paper”, as each term is defined in Article 9 of the UCC.

 

“Collateral” shall have the meaning assigned in Section 2.1.

 

“Collateral Account” shall mean any account established by the Collateral Agent.

 

“Collateral Agent” shall have the meaning set forth in the preamble.

 

“Collateral Records” shall mean books, records, ledger cards, files, correspondence, customer lists, blueprints, technical specifications, manuals, computer software, computer printouts, tapes, disks and related data processing software and similar items that at any time evidence or contain information relating to any of the Collateral or are otherwise necessary or helpful in the collection thereof or realization thereupon.

 

“Collateral Support” shall mean all property (real or personal) assigned, hypothecated or otherwise securing any Collateral and shall include any security agreement or other agreement granting a lien or security interest in such real or personal property.

 

“Commercial Tort Claims” shall mean all “commercial tort claims” as defined in Article 9 of the UCC, including, without limitation, all commercial tort claims listed on Schedule 4.8 (as such schedule may be amended or supplemented from time to time).

 

“Commodities Accounts” (i) shall mean all “commodity accounts” as defined in Article 9 of the UCC and (ii) shall include, without limitation, all of the accounts listed on Schedule 4.4 under the heading “Commodities Accounts” (as such schedule may be amended or supplemented from time to time).

 

“Company” shall have the meaning set forth in the recitals.

 

“Copyright Licenses” shall mean any and all agreements providing for the granting of any right in or to Copyrights (whether such Grantor is licensee or licensor thereunder) including, without limitation, each agreement referred to in Schedule 4.7(B) (as such schedule may be amended or supplemented from time to time).

 

“Copyrights” shall mean all United States, and foreign copyrights (including Community designs), including but not limited to copyrights in software and databases, and all Mask Works (as defined under 17 U.S.C. 901 of the U.S. Copyright Act), whether registered or unregistered, and, with respect to any and all of the foregoing: (i) all registrations and applications therefor including, without limitation, the registrations and applications referred to in Schedule 4.7(A) (as such schedule may be amended or supplemented from time to time), (ii) all extensions and renewals thereof, (iii) all rights corresponding thereto throughout the world, (iv) all rights to sue for past, present and future infringements thereof, and (v) all Proceeds of the foregoing, including, without limitation, licenses, royalties, income, payments, claims, damages and proceeds of suit.

 

“Credit Agreement” shall have the meaning set forth in the recitals.

 

  

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 “Deposit Accounts” (i) shall mean all “deposit accounts” as defined in Article 9 of the UCC and (ii) shall include, without limitation, all of the accounts listed on Schedule 4.4 under the heading “Deposit Accounts” (as such schedule may be amended or supplemented from time to time).

 

“Documents” shall mean all “documents” as defined in Article 9 of the UCC.

 

“Equipment” shall mean:  (i) all “equipment” as defined in Article 9 of the UCC, (ii) all machinery, manufacturing equipment, data processing equipment, computers, office equipment, furnishings, furniture, appliances, fixtures and tools (in each case, regardless of whether characterized as equipment under the UCC) and (iii) all accessions or additions thereto, all parts thereof, whether or not at any time of determination incorporated or installed therein or attached thereto, and all replacements therefor, wherever located, now or hereafter existing, including any fixtures.

 

 “General Intangibles” (i) shall mean all “general intangibles” as defined in Article 9 of the UCC, including “payment intangibles” also as defined in Article 9 of the UCC and (ii) shall include, without limitation, all interest rate or currency protection or hedging arrangements, all tax refunds, all licenses, permits, concessions and authorizations, all Assigned Agreements and all Intellectual Property (in each case, regardless of whether characterized as general intangibles under the UCC).

 

“Goods” (i) shall mean all “goods” as defined in Article 9 of the UCC and (ii) shall include, without limitation, all Inventory and Equipment (in each case, regardless of whether characterized as goods under the UCC).

 

“Grantors” shall have the meaning set forth in the preamble.

 

 “Indemnitee” shall mean the Collateral Agent, and its and its Affiliates’ officers, partners, directors, trustees, employees, agents.

 

“Instruments” shall mean all “instruments” as defined in Article 9 of the UCC.

 

“Insurance” shall mean (i) all insurance policies covering any or all of the Collateral (regardless of whether the Collateral Agent is the loss payee thereof) and (ii) any key man life insurance policies.

 

“Intellectual Property” shall mean, collectively, the Copyrights, the Copyright Licenses, the Patents, the Patent Licenses, the Trademarks, the Trademark Licenses, the Trade Secrets, and the Trade Secret Licenses.

 

“Inventory” shall mean (i) all “inventory” as defined in Article 9 of the UCC and (ii) all goods held for sale or lease or to be furnished under contracts of service or so leased or furnished, all raw materials, work in process, finished goods, and materials used or consumed in the manufacture, packing, shipping, advertising, selling, leasing, furnishing or production of such inventory or otherwise used or consumed in any Grantor’s business; all goods in which any Grantor has an interest in mass or a joint or other interest or right of any kind; and all goods which are returned to or repossessed by any Grantor, all computer programs embedded in any goods and all accessions thereto and products thereof (in each case, regardless of whether characterized as inventory under the UCC).

 

  

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“Investment Accounts” shall mean the Collateral Account, Securities Accounts, Commodities Accounts and Deposit Accounts.

 

“Investment Related Property” shall mean:  (i) all “investment property” (as such term is defined in Article 9 of the UCC) and (ii) all of the following (regardless of whether classified as investment property under the UCC): all Pledged Equity Interests, Pledged Debt, the Investment Accounts and certificates of deposit.

 

“Lender” shall have the meaning set forth in the recitals.

 

 “Letter of Credit Right” shall mean “letter-of-credit right” as defined in Article 9 of the UCC.

 

“Lien” shall mean (i) any lien, mortgage, pledge, assignment, security interest, charge or encumbrance of any kind (including any agreement to give any of the foregoing, any conditional sale or other title retention agreement, and any lease in the nature thereof) and any option, trust or other preferential arrangement having the practical effect of any of the foregoing and (ii) in the case of Pledged Equity Interests,  any purchase option, call or similar right of a third party with respect to such Pledged Equity Interests.

 

“Money” shall mean “money” as defined in the UCC.

 

“Non-Assignable Contract” shall mean any agreement, contract or license to which any Grantor is a party that by its terms purports to restrict or prevent the assignment or granting of a security interest therein (either by its terms or by any federal or state statutory prohibition or otherwise irrespective of whether such prohibition or restriction is enforceable under Section 9-406 through 409 of the UCC).

 

 “Patent Licenses” shall mean all agreements providing for the granting of any right in or to Patents (whether such Grantor is licensee or licensor thereunder) including, without limitation, each agreement referred to in Schedule 4.7(D) (as such schedule may be amended or supplemented from time to time).

 

“Patents” shall mean all United States and foreign patents and certificates of invention, or similar industrial property rights, and applications for any of the foregoing, including, but not limited to: (i) each patent and patent application referred to in Schedule 4.7(C) hereto (as such schedule may be amended or supplemented from time to time), (ii) all reissues, divisions, continuations, continuations-in-part, extensions, renewals, and reexaminations thereof, (iii) all rights corresponding thereto throughout the world, (iv) all inventions and improvements described therein, (v) all rights to sue for past, present and future infringements thereof, (vi) all licenses, claims, damages, and proceeds of suit arising therefrom, and (vii) all Proceeds of the foregoing, including, without limitation, licenses, royalties, income, payments, claims, damages, and proceeds of suit.

 

“Person” shall mean and include natural persons, corporations, limited partnerships, general partnerships, limited liability companies, limited liability partnerships, joint stock companies, joint ventures, associations, companies, trusts, banks, trust companies, land trusts, business trusts or other organizations, whether or not legal entities, and governmental authorities.

 

  

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“Pledge Supplement” shall mean any supplement to this agreement in substantially the form of Exhibit A.

 

“Pledged Debt” shall mean all Indebtedness owed to such Grantor, including, without limitation, all Indebtedness described on Schedule 4.4(A) under the heading “Pledged Debt” (as such schedule may be amended or supplemented from time to time), issued by the obligors named therein, the instruments evidencing such Indebtedness, and all interest, cash, instruments and other property or proceeds from time to time received, receivable or otherwise distributed in respect of or in exchange for any or all of such Indebtedness.

 

“Pledged Equity Interests” shall mean all Pledged Stock, Pledged LLC Interests, Pledged Partnership Interests and Pledged Trust Interests.

 

“Pledged LLC Interests” shall mean all interests in any limited liability company including, without limitation, all limited liability company interests listed on Schedule 4.4(A) under the heading “Pledged LLC Interests” (as such schedule may be amended or supplemented from time to time) and the certificates, if any, representing such limited liability company interests and any interest of such Grantor on the books and records of such limited liability company or on the books and records of any securities intermediary pertaining to such interest and all dividends, distributions, cash, warrants, rights, options, instruments, securities and other property or proceeds from time to time received, receivable or otherwise distributed in respect of or in exchange for any or all of such limited liability company interests.

 

“Pledged Partnership Interests” shall mean all interests in any general partnership, limited partnership, limited liability partnership or other partnership including, without limitation, all partnership interests listed on Schedule 4.4(A) under the heading “Pledged Partnership Interests” (as such schedule may be amended or supplemented from time to time) and the certificates, if any, representing such partnership interests and any interest of such Grantor on the books and records of such partnership or on the books and records of any securities intermediary pertaining to such interest and all dividends, distributions, cash, warrants, rights, options, instruments, securities and other property or proceeds from time to time received, receivable or otherwise distributed in respect of or in exchange for any or all of such partnership interests.

 

“Pledged Stock” shall mean all shares of capital stock owned by such Grantor, including, without limitation, all shares of capital stock described on Schedule 4.4(A) under the heading “Pledged Stock” (as such schedule may be amended or supplemented from time to time), and the certificates, if any, representing such shares and any interest of such Grantor in the entries on the books of the issuer of such shares or on the books of any securities intermediary pertaining to such shares, and all dividends, distributions, cash, warrants, rights, options, instruments, securities and other property or proceeds from time to time received, receivable or otherwise distributed in respect of or in exchange for any or all of such shares.

 

“Pledged Trust Interests” shall mean all interests in a Delaware business trust or other trust including, without limitation, all trust interests listed on Schedule 4.4(A) under the heading “Pledged Trust Interests” (as such schedule may be amended or supplemented from time to time) and the certificates, if any, representing such trust interests and any interest of such Grantor on the books and records of such trust or on the books and records of any securities intermediary pertaining to such interest and all dividends, distributions, cash, warrants, rights, options, instruments, securities and other property or proceeds from time to time received, 

 

  

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receivable or otherwise distributed in respect of or in exchange for any or all of such trust interests.

 

“Proceeds” shall mean:  (i) all “proceeds” as defined in Article 9 of the UCC, (ii) payments or distributions made with respect to any Investment Related Property and (iii) whatever is receivable or received when Collateral or proceeds are sold, exchanged, collected or otherwise disposed of, whether such disposition is voluntary or involuntary.

 

“Receivables” shall mean all rights to payment, whether or not earned by performance, for goods or other property sold, leased, licensed, assigned or otherwise disposed of, or services rendered or to be rendered, including, without limitation all such rights constituting or evidenced by any Account, Chattel Paper, Instrument, General Intangible or Investment Related Property, together with all of Grantor’s rights, if any, in any goods or other property giving rise to such right to payment and all Collateral Support and Supporting Obligations related thereto and all Receivables Records.

 

“Receivables Records” shall mean (i) all original copies of all documents, instruments or other writings or electronic records or other Records evidencing the Receivables, (ii) all books, correspondence, credit or other files, Records, ledger sheets or cards, invoices, and other papers relating to Receivables, including, without limitation, all tapes, cards, computer tapes, computer discs, computer runs, record keeping systems and other papers and documents relating to the Receivables, whether in the possession or under the control of Grantor or any computer bureau or agent from time to time acting for Grantor or otherwise, (iii) all evidences of the filing of financing statements and the registration of other instruments in connection therewith, and amendments, supplements or other modifications thereto, notices to other creditors or secured parties, and certificates, acknowledgments, or other writings, including, without limitation, lien search reports, from filing or other registration officers, (iv) all credit information, reports and memoranda relating thereto and (v) all other written or nonwritten forms of information related in any way to the foregoing or any Receivable.

 

“Record” shall have the meaning specified in Article 9 of the UCC.

 

“Secured Obligations” shall have the meaning assigned in Section 3.1.

 

“Secured Parties” shall mean the Agents, Lenders and the Lender Counterparties and shall include, without limitation, all former Agents, Lenders and Lender Counterparties to the extent that any Obligations owing to such Persons were incurred while such Persons were Agents, Lenders or Lender Counterparties and such Obligations have not been paid or satisfied in full.

 

“Securities” shall mean any stock, shares, partnership interests, voting trust certificates, certificates of interest or participation in any profit-sharing agreement or arrangement, options, warrants, bonds, debentures, notes, or other evidences of indebtedness, secured or unsecured, convertible, subordinated or otherwise, or in general any instruments commonly known as “securities” or any certificates of interest, shares or participations in temporary or interim certificates for the purchase or acquisition of, or any right to subscribe to, purchase or acquire, any of the foregoing.

 

“Securities Accounts” (i) shall mean all “securities accounts” as defined in Article 8 of the UCC and (ii) shall include, without limitation, all of the accounts listed on 

 

  

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Schedule 4.4(A) under the heading “Securities Accounts” (as such schedule may be amended or supplemented from time to time).

 

“Supporting Obligation” shall mean all “supporting obligations” as defined in Article 9 of the UCC.

 

“Tax Code” shall mean the United States Internal Revenue Code of 1986, as amended from time to time.

 

“Trademark Licenses” shall mean any and all agreements providing for the granting of any right in or to Trademarks (whether such Grantor is licensee or licensor thereunder) including, without limitation, each agreement referred to in Schedule 4.7(F) (as such schedule may be amended or supplemented from time to time).

 

“Trademarks” shall mean all United States, and foreign trademarks, trade names, corporate names, company names, business names, fictitious business names, Internet domain names, service marks, certification marks, collective marks, logos, other source or business identifiers, designs and general intangibles of a like nature, all registrations and applications for any of the foregoing including, but not limited to: (i) the registrations and applications referred to in Schedule 4.7(E) (as such schedule may be amended or supplemented from time to time), (ii) all extensions or renewals of any of the foregoing, (iii) all of the goodwill of the business connected with the use of and symbolized by the foregoing, (iv) the right to sue for past, present and future infringement or dilution of any of the foregoing or for any injury to goodwill, and (v) all Proceeds of the foregoing, including, without limitation, licenses, royalties, income, payments, claims, damages, and proceeds of suit.

 

“Trade Secret Licenses” shall mean any and all agreements providing for the granting of any right in or to Trade Secrets (whether such Grantor is licensee or licensor thereunder) including, without limitation, each agreement referred to in Schedule 4.7(G) (as such schedule may be amended or supplemented from time to time).

 

“Trade Secrets” shall mean all trade secrets and all other confidential or proprietary information and know-how whether or not such Trade Secret has been reduced to a writing or other tangible form, including all documents and things embodying, incorporating, or referring in any way to such Trade Secret, including but not limited to: (i) the right to sue for past, present and future misappropriation or other violation of any Trade Secret, and (ii) all Proceeds of the foregoing, including, without limitation, licenses, royalties, income, payments, claims, damages, and proceeds of suit.

 

“UCC” shall mean the Uniform Commercial Code as in effect from time to time in the State of New York or, when the context implies, the Uniform Commercial Code as in effect from time to time in any other applicable jurisdiction.

 

“United States” shall mean the United States of America.

 

1.2           Definitions; Interpretation.  All capitalized terms used herein (including the preamble and recitals hereto) and not otherwise defined herein shall have the meanings ascribed thereto in the Credit Agreement or, if not defined therein, in the UCC.  References to “Sections,” “Exhibits” and “Schedules” shall be to Sections, Exhibits and Schedules, as the case may be, of this Agreement unless otherwise specifically provided.  Section headings in this Agreement are included herein for convenience of reference only and shall not constitute a part of this

 

  

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Agreement for any other purpose or be given any substantive effect.  Any of the terms defined herein may, unless the context otherwise requires, be used in the singular or the plural, depending on the reference.  The use herein of the word “include” or “including”, when following any general statement, term or matter, shall not be construed to limit such statement, term or matter to the specific items or matters set forth immediately following such word or to similar items or matters, whether or not nonlimiting language (such as “without limitation” or “but not limited to” or words of similar import) is used with reference thereto, but rather shall be deemed to refer to all other items or matters that fall within the broadest possible scope of such general statement, term or matter.  If any conflict or inconsistency exists between this Agreement and the Credit Agreement, the Credit Agreement shall govern.  All references herein to provisions of the UCC shall include all successor provisions under any subsequent version or amendment to any Article of the UCC.

 

SECTION 2.   GRANT OF SECURITY.

 

2.1           Grant of Security.  Each Grantor hereby grants to the Collateral Agent a security interest in and continuing lien on all of such Grantor’s right, title and interest in, to and under all personal property of such Grantor including, but not limited to the following, in each case whether now owned or existing or hereafter acquired or arising and wherever located (all of which being hereinafter collectively referred to as the “Collateral”):

 

(a)           Accounts;

 

(b)           Chattel Paper;

 

(c)           Documents;

 

(d)           General Intangibles;

 

(e)           Goods;

 

(f)           Instruments;

 

(g)           Insurance;

 

(h)           Intellectual Property;

 

(i)           Investment Related Property;

 

(j)           Letter of Credit Rights;

 

(k)           Money;

 

(l)           Receivables and Receivable Records;

 

(m)           Commercial Tort Claims;

 

(n)           to the extent not otherwise included above, all Collateral Records, Collateral Support and Supporting Obligations relating to any of the foregoing; and

 

  

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(o)           to the extent not otherwise included above, all Proceeds, products, accessions, rents and profits of or in respect of any of the foregoing.

 

2.2           Certain Limited Exclusions.  Notwithstanding anything herein to the contrary, in no event shall the Collateral include or the security interest granted under Section 2.1 hereof attach to any lease, license, contract, property rights or agreement to which any Grantor is a party or any of its rights or interests thereunder if and for so long as the grant of such security interest shall constitute or result in (i) the abandonment, invalidation or unenforceability of any right, title or interest of any Grantor therein or (ii) in a breach or termination pursuant to the terms of, or a default under, any such lease, license, contract property rights or agreement (other than to the extent that any such term would be rendered ineffective pursuant to Sections 9-406, 9-407, 9-408 or 9-409 of the UCC (or any successor provision or provisions) of any relevant jurisdiction or any other applicable law (including the Bankruptcy Code) or principles of equity), provided however that the Collateral shall include and such security interest shall attach immediately at such time as the condition causing such abandonment, invalidation or unenforceability shall be remedied and to the extent severable, shall attach immediately to any portion of such Lease, license, contract, property rights or agreement that does not result in any of the consequences specified in (i) or (ii) above.

 

 

SECTION 3.   SECURITY FOR OBLIGATIONS; GRANTORS REMAIN LIABLE.

 

3.1           Security for Obligations.  This Agreement secures, and the Collateral is collateral security for, the prompt and complete payment or performance in full when due, whether at stated maturity, by required prepayment, declaration, acceleration, demand or otherwise (including the payment of amounts that would become due but for the operation of the automatic stay under Section 362(a) of the Bankruptcy Code, 11 U.S.C. §362(a) (and any successor provision thereof)), of all Obligations with respect to every Grantor (the “Secured Obligations”).

 

3.2           Continuing Liability Under Collateral.  Notwithstanding anything herein to the contrary, (i) each Grantor shall remain liable for all obligations under the Collateral and nothing contained herein is intended or shall be a delegation of duties to the Collateral Agent or any Secured Party, (ii) each Grantor shall remain liable under each of the agreements included in the Collateral, including, without limitation, any agreements relating to Pledged Partnership Interests or Pledged LLC Interests, to perform all of the obligations undertaken by it thereunder all in accordance with and pursuant to the terms and provisions thereof and neither the Collateral Agent nor any Secured Party shall have any obligation or liability under any of such agreements by reason of or arising out of this Agreement or any other document related thereto nor shall the Collateral Agent nor any Secured Party have any obligation to make any inquiry as to the nature or sufficiency of any payment received by it or have any obligation to take any action to collect or enforce any rights under any agreement included in the Collateral, including, without limitation, any agreements relating to Pledged Partnership Interests or Pledged LLC Interests, and (iii) the exercise by the Collateral Agent of any of its rights hereunder shall not release any Grantor from any of its duties or obligations under the contracts and agreements included in the Collateral.

 

 

SECTION 4.   REPRESENTATIONS AND WARRANTIES AND COVENANTS.

 

4.1           Generally.

 

(a)           Representations and Warranties.  Each Grantor hereby represents and warrants on the Closing Date that:

 

  

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(i)                 it owns the Collateral purported to be owned by it or otherwise has the rights it purports to have in each item of Collateral and, as to all Collateral whether now existing or hereafter acquired, will continue to own or have such rights in each item of the Collateral, in each case free and clear of any and all Liens, rights or claims of all other Persons other than Permitted Liens;

 

(ii)                 it has indicated on Schedule 4.1(A)(as such schedule may be amended or supplemented from time to time): (w) the type of organization of such Grantor, (x) the jurisdiction of organization of such Grantor, (y) its organizational identification number and (z) the jurisdiction where the chief executive office or its sole place of business is (or the principal residence if such Grantor is a natural person), and for the one-year period preceding the date hereof has been, located;

 

(iii)                 the full legal name of such Grantor is as set forth on Schedule 4.1(A) and it has not done in the last five (5) years, and does not do, business under any other name (including any trade-name or fictitious business name) except for those names set forth on Schedule 4.1(B) (as such schedule may be amended or supplemented from time to time);

 

(iv)                 except as provided on Schedule 4.1(C), it has not changed its name, jurisdiction of organization, chief executive office or sole place of business (or principal residence if such Grantor is a natural person) or its corporate structure in any way (e.g., by merger, consolidation, change in corporate form or otherwise) within the past five (5) years;

 

(v)                 it has not within the last five (5) years become bound (whether as a result of merger or otherwise) as debtor under a security agreement entered into by another Person, which has not heretofore been terminated;

 

(vi)                 [Reserved];

 

(vii)                 (u) upon the filing of all UCC financing statements naming each Grantor as “debtor” and the Collateral Agent as “secured party” and describing the Collateral in the filing offices set forth opposite such Grantor’s name on Schedule 4.1(E) hereof (as such schedule may be amended or supplemented from time to time) and other filings delivered by each Grantor, (v) upon delivery of all Instruments, Chattel Paper and certificated Pledged Equity Interests and Pledged Debt, (w) upon sufficient identification of Commercial Tort Claims, (x) upon execution of a control agreement establishing the Collateral Agent’s “control” (within the meaning of Section 8-106, 9-106 or 9-104 of the UCC, as applicable) with respect to any Investment Account, (y) upon consent of the issuer with respect to Letter of Credit Rights, and (z) to the extent not subject to Article 9 of the UCC, upon recordation of the security interests granted hereunder in Patents, Trademarks and Copyrights in the applicable intellectual property registries, including but not limited to the United States Patent and Trademark Office and the United States Copyright Office, the security interests granted to the Collateral Agent hereunder constitute valid and perfected first priority Liens (subject in the case of priority only to Permitted Liens and to the rights of the United States government (including any agency or department thereof) with respect to United States government Receivables) on all of the Collateral;

 

  

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(viii)                 all actions and consents, including all filings, notices, registrations and recordings necessary or desirable for the exercise by the Collateral Agent of the voting or other rights provided for in this Agreement or the exercise of remedies in respect of the Collateral have been made or obtained;

 

(ix)                 other than the financing statements filed in favor of the Collateral Agent, no effective UCC financing statement, fixture filing or other instrument similar in effect under any applicable law covering all or any part of the Collateral is on file in any filing or recording office except for (x) financing statements for which proper termination statements have been delivered to the Collateral Agent for filing and (y) financing statements filed in connection with Permitted Liens;

 

(x)                 no authorization, approval or other action by, and no notice to or filing with, any Governmental Authority or regulatory body is required for either (i) the pledge or grant by any Grantor of the Liens purported to be created in favor of the Collateral Agent hereunder or (ii) the exercise by Collateral Agent of any rights or remedies in respect of any Collateral (whether specifically granted or created hereunder or created or provided for by applicable law), except (A) for the filings contemplated by clause (vii) above and (B) as may be required, in connection with the disposition of any Investment Related Property, by laws generally affecting the offering and sale of Securities;

 

(xi)                 all information supplied by any Grantor with respect to any of the Collateral (in each case taken as a whole with respect to any particular Collateral) is accurate and complete in all material respects;

 

(xii)                 none of the Collateral constitutes, or is the Proceeds of, “farm products” (as defined in the UCC);

 

(xiii)                 it does not own any “as extracted collateral” (as defined in the UCC) or any timber to be cut;

 

(xiv)                 Except as described on Schedule 4.1(D), such Grantor has not become bound as a debtor, either by contract or by operation of law, by a security agreement previously entered into by another Person; and

 

(xv)                 Such Grantor has been duly organized  as an entity of the type as set forth opposite such Grantor’s name on Schedule 4.1(A) solely under the laws of the jurisdiction as set forth opposite such Grantor’s name on Schedule 4.1(A) and remains duly existing as such.  Such Grantor has not filed any certificates of domestication, transfer or continuance in any other jurisdiction.

 

(b)           Covenants and Agreements.  Each Grantor hereby covenants and agrees that:

 

(i)                 except for the security interest created by this Agreement, it shall not create or suffer to exist any Lien upon or with respect to any of the Collateral, except Permitted Liens, and such Grantor shall defend the Collateral against all Persons at any time claiming any interest therein;

 

  

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(ii)                 it shall not produce, use or permit any Collateral to be used unlawfully or in violation of any provision of this Agreement or any applicable statute, regulation or ordinance or any policy of insurance covering the Collateral;

 

(iii)                 it shall not change such Grantor’s name, identity, corporate structure (e.g., by merger, consolidation, change in corporate form or otherwise) principal place of business (or principal residence if such Grantor is a natural person), chief executive office, type of organization or jurisdiction of organization or establish any trade names unless it shall have (a) notified the Collateral Agent in writing, by executing and delivering to the Collateral Agent a completed Pledge Supplement, substantially in the form of Exhibit A attached hereto, together with all Supplements to Schedules thereto, at least thirty (30) days prior to any such change or establishment, identifying such new proposed name, identity, corporate structure, principal place of business (or principal residence if such Grantor is a natural person), chief executive office, jurisdiction of organization or trade name and providing such other information in connection therewith as the Collateral Agent may reasonably request and (b) taken all actions necessary or advisable to maintain the continuous validity, perfection and the same or better priority of the Collateral Agent’s security interest in the Collateral intended to be granted and agreed to hereby;

 

(iv)                 if the Collateral Agent or any Secured Party gives value to enable Grantor to acquire rights in or the use of any Collateral, it shall use such value for such purposes and such Grantor further agrees that repayment of any Obligation shall apply on a “first-in, first-out” basis so that the portion of the value used to acquire rights in any Collateral shall be paid in the chronological order such Grantor acquired rights therein;

 

(v)                 it shall pay promptly when due all property and other taxes, assessments and governmental charges or levies imposed upon, and all claims (including claims for labor, materials and supplies) against, the Collateral, except to the extent the validity thereof is being contested in good faith; provided, such Grantor shall in any event pay such taxes, assessments, charges, levies or claims not later than five (5) days prior to the date of any proposed sale under any judgment, writ or warrant of attachment entered or filed against such Grantor or any of the Collateral as a result of the failure to make such payment;

 

(vi)                 upon such Grantor or any officer of such Grantor obtaining knowledge thereof, it shall promptly notify the Collateral Agent in writing of any event that may have a Material Adverse Effect on the value of the Collateral or any portion thereof, the ability of any Grantor or the Collateral Agent to dispose of the Collateral or any portion thereof, or the rights and remedies of the Collateral Agent in relation thereto, including, without limitation, the levy of any legal process against the Collateral or any portion thereof;

 

(vii)                 it shall not take or permit any action which could impair the Collateral Agent’s rights in the Collateral; and

 

(viii)                 it shall not sell, transfer or assign (by operation of law or otherwise) any Collateral except as otherwise in accordance with the Credit Agreement.

 

4.2           Equipment and Inventory.

 

  

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(a)           Representations and Warranties.  Each Grantor represents and warrants on the Closing Date that:

 

(i)                 [reserved];

 

(ii)                 any Goods now or hereafter produced by any Grantor included in the Collateral have been and will be produced in compliance with the requirements of the Fair Labor Standards Act, as amended; and

 

(iii)                 except as set forth on Schedule 4.2 hereof, none of the Inventory or Equipment is in the possession of an issuer of a negotiable document (as defined in Section 7-104 of the UCC) therefor or otherwise in the possession of a bailee or a warehouseman.

 

(b)           Covenants and Agreements.  Each Grantor covenants and agrees that:

 

(i)                 it shall keep the Equipment, Inventory and any Documents evidencing any Equipment and Inventory in the locations specified on Schedule 4.2 (as such schedule may be amended or supplemented from time to time) unless it shall have (a) notified the Collateral Agent in writing, by executing and delivering to the Collateral Agent a completed Pledge Supplement, substantially in the form of Exhibit A attached hereto, together with all Supplements to Schedules thereto, at least thirty (30) days prior to any change in locations, identifying such new locations and providing such other information in connection therewith as the Collateral Agent may reasonably request and (b) taken all actions necessary or advisable to maintain the continuous validity, perfection and the same or better priority of the Collateral Agent’s security interest in the Collateral intended to be granted and agreed to hereby, or to enable the Collateral Agent to exercise and enforce its rights and remedies hereunder, with respect to such Equipment and Inventory;

 

(ii)                 it shall keep correct and accurate records of the Inventory, as is customarily maintained under similar circumstances by Persons of established reputation engaged in similar business, and in any event in conformity with GAAP;

 

(iii)                 it shall not deliver any Document evidencing any Equipment and Inventory to any Person other than the issuer of such Document  to claim the Goods evidenced therefor, the ABL Agent (with respect to Inventory) or the Collateral Agent;

 

(iv)                 if any Equipment or Inventory is in possession or control of any third party (other than the ABL Agent), each Grantor shall join with the Collateral Agent in notifying the third party of the Collateral Agent’s security interest and obtaining an acknowledgment from the third party that it is holding the Equipment and Inventory for the benefit of the Collateral Agent; and

 

(v)                 with respect to any item of Equipment which is covered by a certificate of title under a statute of any jurisdiction under the law of which indication of a security interest on such certificate is required as a condition of perfection thereof, upon the reasonable request of the Collateral Agent, each Grantor shall (A) provide information with respect to any such Equipment, (B) execute and file with the registrar of motor vehicles or other appropriate authority in such jurisdiction an application or other document requesting the notation or other indication of the security interest created 

 

  

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hereunder on such certificate of title, and (C) deliver to the Collateral Agent copies of all such applications or other documents filed and copies of all such certificates of title issued indicating the security interest created hereunder in the items of Equipment covered thereby.

 

4.3           Receivables.

 

(a)           Representations and Warranties.  Each Grantor represents and warrants on the Closing Date that:

 

(i)                 each Receivable (a) is and will be the legal, valid and binding obligation of the Account Debtor in respect thereof, representing an unsatisfied obligation of such Account Debtor, (b) is and will be enforceable in accordance with its terms, (c) is not and will not be subject to any setoffs, defenses, taxes, counterclaims (except with respect to refunds, returns and allowances in the ordinary course of business with respect to damaged merchandise) and (d) is and will be in compliance in all  material respects with all applicable laws, whether federal, state, local or foreign;

 

(ii)                 none of the Account Debtors in respect of any Receivable is the government of the United States, any agency or instrumentality thereof, any state or municipality or any foreign sovereign.  No Receivable requires the consent of the Account Debtor in respect thereof in connection with the pledge hereunder, except any consent which has been obtained;

 

(iii)                 no Receivable is evidenced by, or constitutes, an Instrument or Chattel Paper which has not been delivered to, or otherwise subjected to the control of, the Collateral Agent to the extent required by, and in accordance with Section 4.3(c); and

 

(iv)                 each Grantor has delivered to the Collateral Agent a complete and correct copy of each standard form of document under which a Receivable may arise.

 

(b)           Covenants and Agreements:  Each Grantor hereby covenants and agrees that:

 

(i)                 it shall keep and maintain at its own cost and expense satisfactory and complete records of the Receivables, including, but not limited to, the originals of all documentation with respect to all Receivables and records of all payments received and all credits granted on the Receivables, all merchandise returned and all other dealings therewith;

 

(ii)                 it shall mark conspicuously, in form and manner reasonably satisfactory to the Collateral Agent, all Chattel Paper, Instruments and other evidence of Receivables (other than any delivered to the Collateral Agent or ABL Agent), as well as the Receivables Records with an appropriate reference to the fact that the Collateral Agent has a second priority security interest therein;

 

(iii)                 it shall perform in all material respects all of its obligations with respect to the Receivables;

 

  

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(iv)                 except as permitted by the Credit Agreement, it shall not amend, modify, terminate or waive any provision of any Receivable in any manner which could reasonably be expected to have a material adverse effect on the value of such Receivable as Collateral.  Other than in the ordinary course of business as generally conducted by it on and prior to the date hereof, and except as consented to by the Administrative Agent or as otherwise provided in subsection (v) below, following an Event of Default, such Grantor shall not (w) grant any extension or renewal of the time of payment of any Receivable, (x) compromise or settle any dispute, claim or legal proceeding with respect to any Receivable for less than the total unpaid balance thereof, (y) release, wholly or partially, any Person liable for the payment thereof, or (z) allow any credit or discount thereon;

 

(v)                 except as otherwise provided in this subsection, each Grantor shall continue to collect all amounts due or to become due to such Grantor under the Receivables and any Supporting Obligation and diligently exercise each material right it may have under any Receivable any Supporting Obligation or Collateral Support, in each case, at its own expense, and in connection with such collections and exercise, such Grantor shall take such action as such Grantor or the Collateral Agent may deem necessary or advisable.  Notwithstanding the foregoing, the Collateral Agent shall have the right at any time to notify, or require any Grantor to notify, any Account Debtor of the Collateral Agent’s security interest in the Receivables and any Supporting Obligation and, in addition, at any time following the occurrence and during the continuation of an Event of Default, the Collateral Agent may:  (1) direct the Account Debtors under any Receivables to make payment of all amounts due or to become due to such Grantor thereunder directly to the Collateral Agent; (2) notify, or require any Grantor to notify, each Person maintaining a lockbox or similar arrangement to which Account Debtors under any Receivables have been directed to make payment to remit all amounts representing collections on checks and other payment items from time to time sent to or deposited in such lockbox or other arrangement directly to the Collateral Agent; and (3) enforce, at the expense of such Grantor, collection of any such Receivables and to adjust, settle or compromise the amount or payment thereof, in the same manner and to the same extent as such Grantor might have done.  If the Collateral Agent notifies any Grantor that it has elected to collect the Receivables in accordance with the preceding sentence, any payments of Receivables received by such Grantor shall be forthwith (and in any event within two (2) Business Days) deposited by such Grantor in the exact form received, duly indorsed by such Grantor to the Collateral Agent if required, in the Collateral Account maintained under the sole dominion and control of the Collateral Agent, and until so turned over, all amounts and proceeds (including checks and other instruments) received by such Grantor in respect of the Receivables, any Supporting Obligation or Collateral Support shall be received in trust for the benefit of the Collateral Agent hereunder and shall be segregated from other funds of such Grantor and such Grantor shall not adjust, settle or compromise the amount or payment of any Receivable, or release wholly or partly any Account Debtor or obligor thereof, or allow any credit or discount thereon; and

 

(vi)                 it shall use its best efforts to keep in full force and effect any Supporting Obligation or Collateral Support relating to any Receivable.

 

(c)           Delivery and Control of Receivables.  Subject to Section 12, with respect to any Receivables in excess of $25,000 individually or $50,000 in the aggregate that is evidenced by, or constitutes, Chattel Paper or Instruments, each Grantor shall cause each originally executed copy thereof to be delivered to the Collateral Agent (or its agent or designee)

 

  

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appropriately indorsed to the Collateral Agent or indorsed in blank:  (i) with respect to any such Receivables in existence on the date hereof, on or prior to the date hereof and (ii) with respect to any such Receivables hereafter arising, within ten (10) days of such Grantor acquiring rights therein.  With respect to any Receivables in excess of $25,000 individually or $50,000 in the aggregate which would constitute "electronic chattel paper" under Article 9 of the UCC, each Grantor shall take all steps necessary to give the Collateral Agent control over such Receivables (within the meaning of Section 9-105 of the UCC):  (i) with respect to any such Receivables in existence on the date hereof, on or prior to the date hereof and (ii) with respect to any such Receivables hereafter arising, within ten (10) days of such Grantor acquiring rights therein.  Any Receivable not otherwise required to be delivered or subjected to the control of the Collateral Agent in accordance with this subsection (c) shall be delivered or subjected to such control upon request of the Collateral Agent.

 

4.4           Investment Related Property.

 

4.4.1           Investment Related Property Generally

 

(a)           Covenants and Agreements.  Each Grantor hereby covenants and agrees that:

 

(i)                 in the event it acquires rights in any Investment Related Property after the date hereof, it shall deliver to the Collateral Agent a completed Pledge Supplement, substantially in the form of Exhibit A attached hereto, together with all Supplements to Schedules thereto, reflecting such new Investment Related Property and all other Investment Related Property.  Notwithstanding the foregoing, it is understood and agreed that the security interest of the Collateral Agent shall attach to all Investment Related Property immediately upon any Grantor’s acquisition of rights therein and shall not be affected by the failure of any Grantor to deliver a supplement to Schedule 4.4 as required hereby;

 

(ii)                 except as provided in the next sentence, in the event such Grantor receives any dividends, interest or distributions on any Investment Related Property, or any securities or other property upon the merger, consolidation, liquidation or dissolution of any issuer of any Investment Related Property, then (a) such dividends, interest or distributions and securities or other property shall be included in the definition of Collateral without further action and (b) such Grantor shall immediately take all steps, if any, necessary or advisable to ensure the validity, perfection, priority and, if applicable, control of the Collateral Agent over such Investment Related Property (including, without limitation, delivery thereof to the Collateral Agent) and pending any such action such Grantor shall be deemed to hold such dividends, interest, distributions, securities or other property in trust for the benefit of the Collateral Agent and shall segregate such dividends, distributions, Securities or other property from all other property of such Grantor.  Notwithstanding the foregoing, so long as no Event of Default shall have occurred and be continuing, the Collateral Agent authorizes each Grantor to retain all ordinary cash dividends and distributions paid in the normal course of the business of the issuer and all scheduled payments of interest;

 

(iii)                 each Grantor consents to the grant by each other Grantor of a Security Interest in all Investment Related Property to the Collateral Agent.

 

(b)           Delivery and Control.

 

  

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(i)                 Each Grantor agrees that with respect to any Investment Related Property in which it currently has rights it shall comply with the provisions of this Section 4.4.1(b) on or before the Credit Date and with respect to any Investment Related Property hereafter acquired by such Grantor it shall comply with the provisions of this Section 4.4.1(b) immediately upon acquiring rights therein, in each case in form and substance satisfactory to the Collateral Agent.  With respect to any Investment Related Property that is represented by a certificate or that is an “instrument” (other than any Investment Related Property credited to a Securities Account) it shall cause such certificate or instrument to be delivered to the Collateral Agent, indorsed in blank by an “effective indorsement” (as defined in Section 8-107 of the UCC), regardless of whether such certificate constitutes a “certificated security” for purposes of the UCC.  With respect to any Investment Related Property that is an “uncertificated security” for purposes of the UCC  (other than any “uncertificated securities” credited to a Securities Account), it shall cause the issuer of such uncertificated security to either (i) register the Collateral Agent as the registered owner thereof on the books and records of the issuer or (ii) execute an agreement substantially in the form of Exhibit B hereto, pursuant to which such issuer agrees to comply with the Collateral Agent’s instructions with respect to such uncertificated security without further consent by such Grantor.

 

(c)           Voting and Distributions.

 

(i)                 So long as the Collateral Agent has not provided notice as provided in Section 4.4.1(c)(ii) below:

 

	
  

	
(1)

	
except as otherwise provided under the covenants and agreements relating to investment related property in this Agreement or elsewhere herein or in the Credit Agreement, each Grantor shall be entitled to exercise or refrain from exercising any and all voting and other consensual rights pertaining to the Investment Related Property or any part thereof for any purpose not inconsistent with the terms of this Agreement or the Credit Agreement; provided, no Grantor shall exercise or refrain from exercising any such right if the Collateral Agent shall have notified such Grantor that, in the Collateral Agent’s reasonable judgment, such action would have a Material Adverse Effect on the value of the Investment Related Property or any part thereof; and provided further, such Grantor shall give the Collateral Agent at least five (5) Business Days prior written notice of the manner in which it intends to exercise, or the reasons for refraining from exercising, any such right; it being understood, however, that neither the voting by such Grantor of any Pledged Stock for, or such Grantor’s consent to, the election of directors (or similar governing body) at a regularly scheduled annual or other meeting of stockholders or with respect to incidental matters at any such meeting, nor such Grantor’s consent to or approval of any action otherwise permitted under this Agreement and the Credit Agreement, shall be deemed inconsistent with the terms of this Agreement or the Credit Agreement within the meaning of this Section 4.4(c)(i)(1), and no notice of any such voting or consent need be given to the Collateral Agent; and

 

	
  

	
(2)

	
the Collateral Agent shall promptly execute and deliver (or cause to be executed and delivered) to each Grantor all proxies, and other instruments as such Grantor may from time to time reasonably request for the purpose of enabling such Grantor to exercise the voting and other consensual rights when and to the extent which it is entitled to exercise pursuant to clause (1) above;

 

  

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(ii)                 If an Event of Default has occurred and is continuing, then upon notice from the Collateral Agent to the Grantors:

 

	
  

	
(A)

	
all rights of each Grantor to exercise or refrain from exercising the voting and other consensual rights which it would otherwise be entitled to exercise pursuant hereto shall cease and all such rights shall thereupon become vested in the Collateral Agent who shall thereupon have the sole right to exercise such voting and other consensual rights; and

	
  

	
(B)

	
in order to permit the Collateral Agent to exercise the voting and other consensual rights which it may be entitled to exercise pursuant hereto and to receive all dividends and other distributions which it may be entitled to receive hereunder: (1) each Grantor shall promptly execute and deliver (or cause to be executed and delivered) to the Collateral Agent all proxies, dividend payment orders and other instruments as the Collateral Agent may from time to time reasonably request and (2) each Grantor acknowledges that the Collateral Agent may utilize the power of attorney set forth in Section 6.1.

 

4.4.2           Pledged Equity Interests

 

(a)           Representations and Warranties.  Each Grantor hereby represents and warrants on the Closing Date that:

 

(i)                 Schedule 4.4(A) (as such schedule may be amended or supplemented from time to time) sets forth under the headings “Pledged Stock, “Pledged LLC Interests,” “Pledged Partnership Interests” and “Pledged Trust Interests,” respectively, all of the Pledged Stock, Pledged LLC Interests, Pledged Partnership Interests and Pledged Trust Interests owned by any Grantor and such Pledged Equity Interests constitute the percentage of issued and outstanding shares of stock, percentage of membership interests, percentage of partnership interests or percentage of beneficial interest of the respective issuers thereof indicated on such Schedule;

 

(ii)                 except as set forth on Schedule 4.4(B), it has not acquired any equity interests of another entity or substantially all the assets of another entity within the past five (5) years;

 

(iii)                 it is the record and beneficial owner of the Pledged Equity Interests free of all Liens, rights or claims of other Persons other than Permitted Liens and there are no outstanding warrants, options or other rights to purchase, or shareholder, voting trust or similar agreements outstanding with respect to, or property that is convertible into, or that requires the issuance or sale of, any Pledged Equity Interests;

 

(iv)                 without limiting the generality of Section 4.1(a)(v), no consent of any Person including any other general or limited partner, any other member of a limited liability company, any other shareholder or any other trust beneficiary is necessary or desirable in connection with the creation, perfection or first priority status of the security interest of the Collateral Agent in any Pledged Equity Interests or the exercise by the Collateral Agent of the voting or other rights provided for in this Agreement or the exercise of remedies in respect thereof;

 

  

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(v)                 none of the Pledged LLC Interests nor Pledged Partnership Interests are or represent interests in issuers that: (a) are registered as investment companies or (b) are dealt in or traded on securities exchanges or markets; and

 

(vi)                 except as otherwise set forth on Schedule 4.4(C), all of the Pledged LLC Interests and Pledged Partnership Interests are or represent interests in issuers that have opted to be treated as securities under the uniform commercial code of any jurisdiction.

 

(b)           Covenants and Agreements.  Each Grantor hereby covenants and agrees that:

 

(i)                 without the prior written consent of the Collateral Agent, it shall not vote to enable or take any other action to: (a) amend or terminate any partnership agreement, limited liability company agreement, certificate of incorporation, by-laws or other organizational documents in any way that materially changes the rights of such Grantor with respect to any Investment Related Property or adversely affects the validity, perfection or priority of the Collateral Agent’s security interest, (b) permit any issuer of any Pledged Equity Interest to issue any additional stock, partnership interests, limited liability company interests or other equity interests of any nature or to issue securities convertible into or granting the right of purchase or exchange for any stock or other equity interest of any nature of such issuer, (c) other than as permitted under the Credit Agreement, permit any issuer of any Pledged Equity Interest to dispose of all or a material portion of their assets, (d) waive any default under or breach of any terms of organizational document relating to the issuer of any Pledged Equity Interest or the terms of any Pledged Debt, or (e) cause any issuer of any Pledged Partnership Interests or Pledged LLC Interests which are not securities (for purposes of the UCC) on the date hereof to elect or otherwise take any action to cause such Pledged Partnership Interests or Pledged LLC Interests to be treated as securities for purposes of the UCC; provided, however, notwithstanding the foregoing, if any issuer of any Pledged Partnership Interests or Pledged LLC Interests takes any such action in violation of the foregoing in this clause (e), such Grantor shall promptly notify the Collateral Agent in writing of any such election or action and, in such event, shall take all steps necessary or advisable to establish the Collateral Agent’s “control” thereof;

 

(ii)                 it shall comply in all material respects with all of its obligations under any partnership agreement or limited liability company agreement relating to Pledged Partnership Interests or Pledged LLC Interests and shall enforce all of its rights with respect to any Investment Related Property;

 

(iii)                 without the prior written consent of the Collateral Agent, it shall not permit any issuer of any Pledged Equity Interest to merge or consolidate unless (i) such issuer creates a security interest that is perfected by a filed financing statement (that is not effective solely under section 9-508 of the UCC) in collateral in which such new debtor has or acquires rights, and (ii) all the outstanding capital stock or other equity interests of the surviving or resulting corporation, limited liability company, partnership or other entity is, upon such merger or consolidation, pledged hereunder and no cash, securities or other property is distributed in respect of the outstanding equity interests of any other constituent Grantor; and

 

  

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(iv)                 each Grantor consents to the grant by each other Grantor of a security interest in all Investment Related Property to the Collateral Agent and, without limiting the foregoing, consents to the transfer of any Pledged Partnership Interest and any Pledged LLC Interest to the Collateral Agent or its nominee following an Event of Default and to the substitution of the Collateral Agent or its nominee as a partner in any partnership or as a member in any limited liability company with all the rights and powers related thereto.

 

4.4.3           Pledged Debt

 

(a)           Representations and Warranties.  Each Grantor hereby represents and warrants on the Closing Date that:

 

(i)                 Schedule 4.4 (as such schedule may be amended or supplemented from time to time) sets forth under the heading “Pledged Debt” all of the Pledged Debt owned by any Grantor and all of such Pledged Debt has been duly authorized, authenticated or issued, and delivered and is the legal, valid and binding obligation of the issuers thereof and is not in default and constitutes all of the issued and outstanding inter-company Indebtedness;

 

(b)           Covenants and Agreements.  Each Grantor hereby covenants and agrees that:

 

(i)                 it shall notify the Collateral Agent of any default under any Pledged Debt that has caused, either in any individual case or in the aggregate, a Material Adverse Effect.

 

4.4.4           Investment Accounts

 

(a)           Representations and Warranties. Each Grantor hereby represents and warrants on the Closing Date that:

 

(i)                 Schedule 4.4 hereto (as such schedule may be amended or supplemented from time to time) sets forth under the headings “Securities Accounts” and “Commodities Accounts,” respectively, all of the Securities Accounts and Commodities Accounts in which each Grantor has an interest.  Each Grantor is the sole entitlement holder of each such Securities Account and Commodity Account, and such Grantor has not consented to, and is not otherwise aware of, any Person (other than the Collateral Agent pursuant hereto) having “control” (within the meanings of Sections 8-106 and 9-106 of the UCC) over, or any other interest in, any such Securities Account or Commodity Account or securities or other property credited thereto;

 

(ii)                 Schedule 4.4 hereto (as such schedule may be amended or supplemented from time to time) sets forth under the headings “Deposit Accounts” all of the Deposit Accounts in which each Grantor has an interest.  Each Grantor is the sole account holder of each such Deposit Account and such Grantor has not consented to, and is not otherwise aware of, any Person (other than the Collateral Agent pursuant hereto and the ABL Agent) having either sole dominion and control (within the meaning of common law) or “control” (within the meanings of Section 9-104 of the UCC) over, or any other interest in, any such Deposit Account or any money or other property deposited therein; and

 

  

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(iii)                 Each Grantor has taken all actions necessary or desirable, including those specified in Section 4.4.4(c), to: (a) establish Collateral Agent’s “control” (within the meanings of Sections 8-106 and 9-106 of the UCC) over any portion of the Investment Related Property constituting Certificated Securities, Uncertificated Securities, Securities Accounts, Securities Entitlements or Commodities Accounts (each as defined in the UCC); (b) establish the Collateral Agent’s “control” (within the meaning of Section 9-104 of the UCC) over all Deposit Accounts; and (c) deliver all Instruments to the Collateral Agent.

 

(b)           Covenant and Agreement.  Each Grantor hereby covenants and agrees with the  Collateral Agent and each other Secured Party that it shall not close or terminate any Investment Account without the prior consent of the Collateral Agent and unless a successor or replacement account has been established with the consent of the Collateral Agent with respect to which successor or replacement account a control agreement has been entered into by the appropriate Grantor, Collateral Agent and securities intermediary or depository institution at which such successor or replacement account is to be maintained in accordance with the provisions of Section 4.4.4(c).

 

(c)           Delivery and Control

 

(i)                 With respect to any Investment Related Property consisting of Securities Accounts or Securities Entitlements, it shall cause the securities intermediary maintaining such Securities Account or Securities Entitlement to enter into an agreement substantially in the form of Exhibit C hereto (or otherwise acceptable to the Collateral Agent) pursuant to which it shall agree to comply with the Collateral Agent’s “entitlement orders” without further consent by such Grantor.  With respect to any Investment Related Property that is a “Deposit Account,” it shall cause the depositary institution maintaining such account to enter into an agreement substantially in the form of Exhibit D hereto (or otherwise acceptable to the Collateral Agent), pursuant to which the Collateral Agent shall have both sole dominion and control over such Deposit Account (within the meaning of the common law) and “control” (within the meaning of Section 9-104 of the UCC) over such Deposit Account.  Each Grantor shall have entered into such control agreement or agreements with respect to: (i) any Securities Accounts, Securities Entitlements or Deposit Accounts that exist on the Credit Date, as of or prior to the Credit Date and (ii) any Securities Accounts, Securities Entitlements or Deposit Accounts that are created or acquired after the Credit Date, as of or prior to the deposit or transfer of any such Securities Entitlements or funds, whether constituting moneys or investments, into such Securities Accounts or Deposit Accounts.

 

In addition to the foregoing, if any issuer of any Investment Related Property is located in a jurisdiction outside of the United States, each Grantor shall take such additional actions, including, without limitation, causing the issuer to register the pledge on its books and records or making such filings or recordings, in each case as may be necessary or advisable,  under the laws of such issuer’s jurisdiction to insure the validity, perfection and priority of the security interest of the Collateral Agent.   Upon the occurrence of an Event of Default, the Collateral Agent shall have the right, without notice to any Grantor, to transfer all or any portion of the Investment Related Property to its name or the name of its nominee or agent.  In addition, the Collateral Agent shall have the right at any time, without notice to any Grantor, to exchange any certificates or instruments representing any Investment Related Property for certificates or instruments of smaller or larger denominations.

  

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4.5           Material Contracts.

 

(a)           Representations and Warranties.  Each Grantor hereby represents and warrants on the Closing Date that:

 

(i)                 Schedule 4.5 (as such schedule may be amended or supplemented from time to time) sets forth all of the Material Contracts to which such Grantor has rights;

 

(ii)                 the Material Contracts, true and complete copies (including any amendments or supplements thereof) of which have been furnished to the Collateral Agent, have been duly authorized, executed and delivered by all parties thereto, are in full force and effect and are binding upon and enforceable against all parties thereto in accordance with their respective terms.  There exists no default under any Material Contract by any party thereto and neither such Grantor, nor to its best knowledge, any other Person party thereto is likely to become in default thereunder and no Person party thereto has any defenses, counterclaims or right of set-off with respect to any Material Contract.  Each Person party to a Material Contract (other than any Grantor) has executed and delivered to the applicable Grantor a consent to the assignment of such Material Contract to the Collateral Agent pursuant to this Agreement; and

 

(iii)                 no Material Contract prohibits assignment or requires consent of or notice to any Person in connection with the assignment to the Collateral Agent hereunder, except such as has been given or made.

 

(b)           Covenants and Agreements.  Each Grantor hereby covenants and agrees that:

 

(i)                 in addition to any rights under the Section of this Agreement relating to Receivables, the Collateral Agent may at any time notify, or require any Grantor to so notify, the counterparty on any Material Contract of the security interest of the Collateral Agent therein.  In addition, after the occurrence and during the continuance of an Event of Default, the Collateral Agent may upon written notice to the applicable Grantor, notify, or require any Grantor to notify, the counterparty to make all payments under the Material Contracts directly to the Collateral Agent;

 

(ii)                 each Grantor shall deliver promptly to the Collateral Agent a copy of each material demand, notice or document received by it relating in any way to any Material Contract;

 

(iii)                 each Grantor shall deliver promptly to the Collateral Agent, and in any event within ten (10) Business Days, after (1) any Material Contract of such Grantor is terminated or amended in a manner that is materially adverse to such Grantor or (2) any new Material Contract is entered into by such Grantor, a written statement describing such event, with copies of such material amendments or new contracts, delivered to the Collateral Agent (to the extent such delivery is permitted by the terms of any such Material Contract, provided, no prohibition on delivery shall be effective if it were bargained for by such Grantor with the intent of avoiding compliance with this Section 4.5(b)(iii)), and an explanation of any actions being taken with respect thereto;

 

  

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(iv)                 it shall perform in all material respects all of its obligations with respect to the Material Contracts;

 

(v)                 it shall promptly and diligently exercise each material right (except the right of termination) it may have under any Material Contract, any Supporting Obligation or Collateral Support, in each case, at its own expense, and in connection with such collections and exercise, such Grantor shall take such action as such Grantor or the Collateral Agent may deem necessary or advisable;

 

(vi)                 it shall use its best efforts to keep in full force and effect any Supporting Obligation or Collateral Support relating to any Material Contract; and

 

(vii)                 each Grantor shall, within thirty (30) days of the date hereof with respect to any Non-Assignable Contract in effect on the date hereof and within thirty (30) days after entering into any Non-Assignable Contract after the Closing Date, request in writing the consent of the counterparty or counterparties to the Non-Assignable Contract pursuant to the terms of such Non-Assignable Contract or applicable law to the assignment or granting of a security interest in such Non-Assignable Contract to Secured Party and use its best efforts to obtain such consent as soon as practicable thereafter.

 

4.6           Letter of Credit Rights.

 

(a)           Representations and Warranties.  Each Grantor hereby represents and warrants on the Closing Date that:

 

(i)                 all material letters of credit to which such Grantor has rights is listed on Schedule 4.6 (as such schedule may be amended or supplemented from time to time) hereto; and

 

(ii)                 it has obtained the consent of each issuer of any material letter of credit to the assignment of the proceeds of the letter of credit to the Collateral Agent.

 

(b)           Covenants and Agreements.  Each Grantor hereby covenants and agrees that with respect to any material letter of credit hereafter arising it shall obtain the consent of the issuer thereof to the assignment of the proceeds of the letter of credit to the Collateral Agent and shall deliver to the Collateral Agent a completed Pledge Supplement, substantially in the form of Exhibit A attached hereto, together with all Supplements to Schedules thereto.

 

4.7           Intellectual Property.

 

(a)           Representations and Warranties.  Except as disclosed in Schedule 4.7(H) (as such schedule may be amended or supplemented from time to time), each Grantor hereby represents and warrants, on the Closing Date and on each Credit Date, that:

 

(i)                 Schedule 4.7 (as such schedule may be amended or supplemented from time to time) sets forth a true and complete list of (i) all United States, state and foreign registrations of and applications for Patents, Trademarks, and Copyrights owned by each Grantor and (ii) all Patent Licenses, Trademark Licenses, Trade Secret Licenses and Copyright Licenses material to the business of such Grantor;

 

  

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(ii)                 it is the sole and exclusive owner of the entire right, title, and interest in and to all Intellectual Property listed on Schedule 4.7 (as such schedule may be amended or supplemented from time to time), and owns or has the valid right to use all other Intellectual Property used in or necessary to conduct its business, free and clear of all Liens, claims, encumbrances and licenses, except for Permitted Liens and the licenses set forth on Schedule 4.7(B), (D), (F) and (G) (as each may be amended or supplemented from time to time);

 

(iii)                 all Intellectual Property is subsisting and has not been adjudged invalid or unenforceable, in whole or in part, and each Grantor has performed all acts and has paid all renewal, maintenance, and other fees and taxes required to maintain each and every registration and application of Copyrights, Patents and Trademarks in full force and effect;

 

(iv)                 all Intellectual Property is valid and enforceable; no holding, decision, or judgment has been rendered in any action or proceeding before any court or administrative authority challenging the validity of, such Grantor’s right to register, or such Grantor’s rights to own or use, any Intellectual Property and no such action or proceeding is pending or, to the best of such Grantor’s knowledge, threatened;

 

(v)                 all registrations and applications for Copyrights, Patents and Trademarks are standing in the name of each Grantor, and none of the Trademarks, Patents, Copyrights or Trade Secrets has been licensed by any Grantor to any Affiliate or third party, except as disclosed in Schedule 4.7(B), (D), (F), or (G) (as each may be amended or supplemented from time to time);

 

(vi)                 each Grantor has been using appropriate statutory notice of registration in connection with its use of registered Trademarks, proper marking practices in connection with the use of Patents, and appropriate notice of copyright in connection with the publication of Copyrights material to the business of such Grantor;

 

(vii)                 each Grantor uses adequate standards of quality in the manufacture, distribution, and sale of all products sold and in the provision of all services rendered under or in connection with all Trademark Collateral and has taken all action necessary to insure that all licensees of  the Trademark Collateral owned by such Grantor use such adequate standards of quality;

 

(viii)                 the conduct of such Grantor’s business does not infringe upon or otherwise violate any trademark, patent, copyright, trade secret or other intellectual property right owned or controlled by a third party; no claim has been made that the use of any Intellectual Property owned or used by Grantor (or any of its respective licensees) violates the asserted rights of any third party;

 

(ix)                 to the best of each Grantor’s knowledge, no third party is infringing upon or otherwise violating any rights in any Intellectual Property owned or used by such Grantor, or any of its respective licensees;

 

(x)                 no settlement or consents, covenants not to sue, nonassertion assurances, or releases  have been entered into by Grantor or to which Grantor is bound that adversely affect Grantor’s rights to own or use any Intellectual Property; and

 

  

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(xi)                 each Grantor has not made a previous assignment, sale, transfer or agreement constituting a present or future assignment, sale, transfer or agreement of any Intellectual Property that has not been terminated or released.  There is no effective financing statement or other document or instrument now executed, or on file or recorded in any public office, granting a security interest in or otherwise encumbering any part of the Intellectual Property, other than in favor of the Collateral Agent.

 

(b)           Covenants and Agreements.  Each Grantor hereby covenants and agrees as follows:

 

(i)                 it shall not do any act or omit to do any act whereby any of the Intellectual Property which is material to the business of Grantor may lapse, or become abandoned, dedicated to the public, or unenforceable, or which would adversely affect the validity, grant, or enforceability of the security interest granted therein;

 

(ii)                 it shall not, with respect to any Trademarks which are material to the business of any Grantor, cease the use of any of such Trademarks or fail to maintain the level of the quality of products sold and services rendered under any of such Trademark at a level at least substantially consistent with the quality of such products and services as of the date hereof, and each Grantor shall take all steps necessary to insure that licensees of such Trademarks use such consistent standards of quality;

 

(iii)                 it shall, within thirty (30) days of the creation or acquisition of any copyrightable work which is material to the business of Grantor, apply to register the Copyright in the United States Copyright Office;

 

(iv)                 it shall promptly notify the Collateral Agent if it knows or has reason to know that any item of the Intellectual Property that is material to the business of any Grantor may become (a) abandoned or dedicated to the public or placed in the public domain, (b) invalid or unenforceable, or (c) subject to any adverse determination or development (including the institution of proceedings) in any action or proceeding in the United States Patent and Trademark Office, the United States Copyright Office, any state registry, any foreign counterpart of the foregoing, or any court;

 

(v)                 it shall take all reasonable steps in the United States Patent and Trademark Office, the United States Copyright Office, any state registry or any foreign counterpart of the foregoing, to pursue any application and maintain any registration of each Trademark, Patent, and Copyright owned by any Grantor and material to its business which is now or shall become included in the Intellectual Property including, but not limited to, those items on Schedule 4.7(A), (C) and (E) (as each may be amended or supplemented from time to time);

 

(vi)                 in the event that any Intellectual Property owned by or exclusively licensed to any Grantor is infringed, misappropriated, or diluted by a third party, such Grantor shall promptly take all reasonable actions to stop such infringement, misappropriation,  or dilution and protect its rights in such Intellectual Property including, but not limited to, the initiation of a suit for injunctive relief and to recover damages;

 

  

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(vii)                 it shall promptly (but in no event more than thirty (30) days after any Grantor obtains knowledge thereof) report to the Collateral Agent (i) the filing of any application to register any Intellectual Property with the United States Patent and Trademark Office, the United States Copyright Office, or any state registry or foreign counterpart of the foregoing (whether such application is filed by such Grantor or through any agent, employee, licensee, or designee thereof) and (ii) the registration of any Intellectual Property by any such office, in each case by executing and delivering to the Collateral Agent a completed Pledge Supplement, substantially in the form of Exhibit A attached hereto, together with all Supplements to Schedules thereto;

 

(viii)                 it shall, promptly upon the reasonable request of the Collateral Agent, execute and deliver to the Collateral Agent any document required to acknowledge, confirm, register, record, or perfect the Collateral Agent’s interest in any part of the Intellectual Property, whether now owned or hereafter acquired;

 

(ix)                 except with the prior consent of the Collateral Agent or as permitted under the Credit Agreement, each Grantor shall not execute, and there will not be on file in any public office, any financing statement or other document or instruments, except financing statements or other documents or instruments filed or to be filed in favor of the Collateral Agent and each Grantor shall not sell, assign, transfer, license, grant any option, or create or suffer to exist any Lien upon or with respect to the Intellectual Property, except for the Lien created by and under this Agreement and the other Credit Documents;

 

(x)                 it shall hereafter use best efforts so as not to permit the inclusion in any contract to which it hereafter becomes a party of any provision that could or might in any way materially impair or prevent the creation of a security interest in, or the assignment of, such Grantor’s rights and interests in any property included within the definitions of any Intellectual Property acquired under such contracts;

 

(xi)                 it shall take all steps reasonably necessary to protect the secrecy of all Trade Secrets, including, without limitation, entering into confidentiality agreements with employees and labeling and restricting access to secret information and documents;

 

(xii)                 it shall use proper statutory notice in connection with its use of any of the Intellectual Property; and

 

(xiii)                 it shall continue to collect, at its own expense, all amounts due or to become due to such Grantor in respect of the Intellectual Property or any portion thereof.  In connection with such collections, each Grantor may take (and, at the Collateral Agent’s reasonable direction, shall take) such action as such Grantor or the Collateral Agent may deem reasonably necessary or advisable to enforce collection of such amounts.  Notwithstanding the foregoing, the Collateral Agent shall have the right at any time, to notify, or require any Grantor to notify, any obligors with respect to any such amounts of the existence of the security interest created hereby.

 

4.8           Commercial Tort Claims

 

(a)           Representations and Warranties.  Each Grantor hereby represents and warrants, on the Closing Date and on each Credit Date, that Schedule 4.8 (as such schedule may 

 

  

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be amended or supplemented from time to time) sets forth all Commercial Tort Claims of each Grantor in excess of $50,000 individually or $100,000 in the aggregate; and

 

(b)           Covenants and Agreements.  Each Grantor hereby covenants and agrees that with respect to any Commercial Tort Claim in excess of $50,000 individually or $100,000 in the aggregate hereafter arising it shall deliver to the Collateral Agent a completed Pledge Supplement, substantially in the form of Exhibit A attached hereto, together with all Supplements to Schedules thereto, identifying such new Commercial Tort Claims.

 

SECTION 5.   ACCESS; RIGHT OF INSPECTION AND FURTHER ASSURANCES; ADDITIONAL GRANTORS.

5.1           Access; Right of Inspection.  The Collateral Agent shall at all times upon reasonable prior notice have full and free access during normal business hours to all the books, correspondence and records of each Grantor, and the Collateral Agent and its representatives may examine the same, take extracts therefrom and make photocopies thereof, and each Grantor agrees to render to the Collateral Agent, at such Grantor’s cost and expense, such clerical and other assistance as may be reasonably requested with regard thereto.  The Collateral Agent and its representatives shall at all times upon reasonable prior notice also have the right to enter any premises of each Grantor and inspect any property of each Grantor where any of the Collateral of such Grantor granted pursuant to this Agreement is located for the purpose of inspecting the same, observing its use or otherwise protecting its interests therein.

 

5.2           Further Assurances.

 

(a)           Each Grantor agrees that from time to time, at the expense of such Grantor, that it shall promptly execute and deliver all further instruments and documents, and take all further action, that may be necessary or desirable, or that the Collateral Agent may reasonably request, in order to create and/or maintain the validity, perfection or priority of and protect any security interest granted hereby or to enable the Collateral Agent to exercise and enforce its rights and remedies hereunder with respect to any Collateral. Without limiting the generality of the foregoing, each Grantor shall:

 

(i)                 file such financing or continuation statements, or amendments thereto, and execute and deliver such other agreements, instruments, endorsements, powers of attorney or notices, as may be necessary or desirable, or as the Collateral Agent may reasonably request, in order to perfect and preserve the security interests granted or purported to be granted hereby;

 

(ii)                 take all actions necessary to ensure the recordation of appropriate evidence of the liens and security interest granted hereunder in the Intellectual Property with any intellectual property registry in which said Intellectual Property is registered or in which an application for registration is pending including, without limitation, the United States Patent and Trademark Office, the United States Copyright Office, the various Secretaries of State, and the foreign counterparts on any of the foregoing;

 

(iii)                 at any reasonable time, upon  reasonable prior notice and request by the Collateral Agent, assemble the Collateral and allow inspection of the Collateral by the Collateral Agent, or persons designated by the Collateral Agent; and

 

  

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(iv)                 at the Collateral Agent’s request, appear in and defend any action or proceeding that may affect such Grantor’s title to or the Collateral Agent’s security interest in all or any part of the Collateral.

 

(b)           Each Grantor hereby authorizes the Collateral Agent to file a Record or Records, including, without limitation, financing or continuation statements, and amendments thereto, in any jurisdictions and with any filing offices as the Collateral Agent may determine, in its sole discretion, are necessary or advisable to perfect the security interest granted to the Collateral Agent herein.  Such financing statements may describe the Collateral in the same manner as described herein or may contain an indication or description of collateral that describes such property in any other manner as the Collateral Agent may determine, in its sole discretion, is necessary, advisable or prudent to ensure the perfection of the security interest in the Collateral granted to the Collateral Agent herein, including, without limitation, describing such property as “all assets” or “all personal property, whether now owned or hereafter acquired.”  Each Grantor shall furnish to the Collateral Agent from time to time statements and schedules further identifying and describing the Collateral and such other reports in connection with the Collateral as the Collateral Agent may reasonably request, all in reasonable detail.

 

(c)           Each Grantor hereby authorizes the Collateral Agent to modify this Agreement after obtaining such Grantor’s approval of or signature to such modification by amending Schedule 4.7 (as such schedule may be amended or supplemented from time to time) to include reference to any right, title or interest in any existing Intellectual Property or any Intellectual Property acquired or developed by any Grantor after the execution hereof or to delete any reference to any right, title or interest in any Intellectual Property in which any Grantor no longer has or claims any right, title or interest.

 

5.3           Additional Grantors.  From time to time subsequent to the date hereof, additional Persons may become parties hereto as additional Grantors (each, an “Additional Grantor”), by executing a Counterpart Agreement.  Upon delivery of any such counterpart agreement to the Collateral Agent, notice of which is hereby waived by Grantors, each Additional Grantor shall be a Grantor and shall be as fully a party hereto as if Additional Grantor were an original signatory hereto.  Each Grantor expressly agrees that its obligations arising hereunder shall not be affected or diminished by the addition or release of any other Grantor hereunder, nor by any election of Collateral Agent not to cause any Subsidiary of Company to become an Additional Grantor hereunder.  This Agreement shall be fully effective as to any Grantor that is or becomes a party hereto regardless of whether any other Person becomes or fails to become or ceases to be a Grantor hereunder.

 

SECTION 6.   COLLATERAL AGENT APPOINTED ATTORNEY-IN-FACT.

 

6.1           Power of Attorney.           Each Grantor hereby irrevocably appoints the Collateral Agent (such appointment being coupled with an interest) as such Grantor’s attorney-in-fact, with full authority in the place and stead of such Grantor and in the name of such Grantor, the Collateral Agent or otherwise, from time to time in the Collateral Agent’s discretion to take any action and to execute any instrument that the Collateral Agent may deem reasonably necessary or advisable to accomplish the purposes of this Agreement, including, without limitation, the following:

 

(a)           upon the occurrence and during the continuance of any Event of Default, to obtain and adjust insurance required to be maintained by such Grantor or paid to the Collateral Agent pursuant to the Credit Agreement;

 

  

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(b)           upon the occurrence and during the continuance of any Event of Default, to ask for, demand, collect, sue for, recover, compound, receive and give acquittance and receipts for moneys due and to become due under or in respect of any of the Collateral;

 

(c)           upon the occurrence and during the continuance of any Event of Default, to receive, endorse and collect any drafts or other instruments, documents and chattel paper in connection with clause (b) above;

 

(d)           upon the occurrence and during the continuance of any Event of Default, to file any claims or take any action or institute any proceedings that the Collateral Agent may deem necessary or desirable for the collection of any of the Collateral or otherwise to enforce the rights of the Collateral Agent with respect to any of the Collateral;

 

(e)           to prepare and file any UCC financing statements against such Grantor as debtor;

 

(f)           to prepare, sign, and file for recordation in any intellectual property registry, appropriate evidence of the lien and security interest granted herein in the Intellectual Property in the name of such Grantor as debtor;

 

(g)           to take or cause to be taken all actions necessary to perform or comply or cause performance or compliance with the terms of this Agreement, including, without limitation, access to pay or discharge taxes or Liens (other than Permitted Liens) levied or placed upon or threatened against the Collateral, the legality or validity thereof and the amounts necessary to discharge the same to be determined by the Collateral Agent in its sole discretion, any such payments made by the Collateral Agent to become obligations of such Grantor to the Collateral Agent, due and payable immediately without demand; and

 

(h)           generally to sell, transfer, pledge, make any agreement with respect to or otherwise deal with any of the Collateral as fully and completely as though the Collateral Agent were the absolute owner thereof for all purposes, and to do, at the Collateral Agent’s option and such Grantor’s expense, at any time or from time to time, all acts and things that the Collateral Agent deems reasonably necessary to protect, preserve or realize upon the Collateral and the Collateral Agent’s security interest therein in order to effect the intent of this Agreement, all as fully and effectively as such Grantor might do.

 

6.2           No Duty on the Part of Collateral Agent or Secured Parties.   The powers conferred on the Collateral Agent hereunder are solely to protect the interests of the Secured Parties in the Collateral and shall not impose any duty upon the Collateral Agent or any Secured Party to exercise any such powers.  The Collateral Agent and the Secured Parties shall be accountable only for amounts that they actually receive as a result of the exercise of such powers, and neither they nor any of their officers, directors, employees or agents shall be responsible to any Grantor for any act or failure to act hereunder, except for their own gross negligence or willful misconduct.

 

SECTION 7.   REMEDIES.

 

7.1           Generally.

 

(a)           If any Event of Default shall have occurred and be continuing, the Collateral Agent may exercise in respect of the Collateral, in addition to all other rights and 

 

  

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remedies provided for herein or otherwise available to it at law or in equity, all the rights and remedies of the Collateral Agent on default under the UCC (whether or not the UCC applies to the affected Collateral) to collect, enforce or satisfy any Secured Obligations then owing, whether by acceleration or otherwise, and also may pursue any of the following separately, successively or simultaneously:

 

(i)                 require any Grantor to, and each Grantor hereby agrees that it shall at its expense and promptly upon request of the Collateral Agent forthwith, assemble all or part of the Collateral as directed by the Collateral Agent and make it available to the Collateral Agent at a place to be designated by the Collateral Agent that is reasonably convenient to both parties;

 

(ii)                 enter onto the property where any Collateral is located and take possession thereof with or without judicial process;

 

(iii)                 prior to the disposition of the Collateral, store, process, repair or recondition the Collateral or otherwise prepare the Collateral for disposition in any manner to the extent the Collateral Agent deems appropriate; and

 

(iv)                 without notice except as specified below or under the UCC, sell, assign, lease, license (on an exclusive or nonexclusive basis) or otherwise dispose of the Collateral or any part thereof in one or more parcels at public or private sale, at any of the Collateral Agent’s offices or elsewhere, for cash, on credit or for future delivery, at such time or times and at such price or prices and upon such other terms as the Collateral Agent may deem commercially reasonable.

 

(b)           The Collateral Agent or any Secured Party may be the purchaser of any or all of the Collateral at any public or private (to the extent to the portion of the Collateral being privately sold is of a kind that is customarily sold on a recognized market or the subject of widely distributed standard price quotations) sale in accordance with the UCC and the Collateral Agent, as collateral agent for and representative of the Secured Parties, shall be entitled, for the purpose of bidding and making settlement or payment of the purchase price for all or any portion of the Collateral sold at any such sale made in accordance with the UCC, to use and apply any of the Secured Obligations as a credit on account of the purchase price for any Collateral payable by the Collateral Agent at such sale.  Each purchaser at any such sale shall hold the property sold absolutely free from any claim or right on the part of any Grantor, and each Grantor hereby waives (to the extent permitted by applicable law) all rights of redemption, stay and/or appraisal which it now has or may at any time in the future have under any rule of law or statute now existing or hereafter enacted.  Each Grantor agrees that, to the extent notice of sale shall be required by law, at least ten (10) days notice to such Grantor of the time and place of any public sale or the time after which any private sale is to be made shall constitute reasonable notification.  The Collateral Agent shall not be obligated to make any sale of Collateral regardless of notice of sale having been given.  The Collateral Agent may adjourn any public or private sale from time to time by announcement at the time and place fixed therefor, and such sale may, without further notice, be made at the time and place to which it was so adjourned.  Each Grantor agrees that it would not be commercially unreasonable for the Collateral Agent to dispose of the Collateral or any portion thereof by using Internet sites that provide for the auction of assets of the types included in the Collateral or that have the reasonable capability of doing so, or that match buyers and sellers of assets.  Each Grantor hereby waives any claims against the Collateral Agent arising by reason of the fact that the price at which any Collateral may have been sold at such a private sale was less than the price which might have been obtained at a public sale, even if the Collateral 

 

  

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Agent accepts the first offer received and does not offer such Collateral to more than one offeree.  If the proceeds of any sale or other disposition of the Collateral are insufficient to pay all the Secured Obligations, Grantors shall be liable for the deficiency and the fees of any attorneys employed by the Collateral Agent to collect such deficiency.  Each Grantor further agrees that a breach of any of the covenants contained in this Section will cause irreparable injury to the Collateral Agent, that the Collateral Agent has no adequate remedy at law in respect of such breach and, as a consequence, that each and every covenant contained in this Section shall be specifically enforceable against such Grantor, and such Grantor hereby waives and agrees not to assert any defenses against an action for specific performance of such covenants except for a defense that no default has occurred giving rise to the Secured Obligations becoming due and payable prior to their stated maturities. Nothing in this Section shall in any way alter the rights of the Collateral Agent hereunder.

 

(c)           The Collateral Agent may sell the Collateral without giving any warranties as to the Collateral.  The Collateral Agent may specifically disclaim or modify any warranties of title or the like.  This procedure will not be considered to adversely affect the commercial reasonableness of any sale of the Collateral.

 

(d)            The Collateral Agent shall have no obligation to marshal any of the Collateral.

 

7.2           Application of Proceeds.  Except as expressly provided elsewhere in this Agreement, all proceeds received by the Collateral Agent in respect of any sale, any collection from, or other realization upon all or any part of the Collateral shall be applied in full or in part by the Collateral Agent against the Secured Obligations as set forth in Section 2.14(h) of the Credit Agreement.

 

7.3           Sales on Credit.  If Collateral Agent sells any of the Collateral upon credit, Grantor will be credited only with payments actually made by purchaser and received by Collateral Agent and applied to indebtedness of the purchaser.  In the event the purchaser fails to pay for the Collateral, Collateral Agent may resell the Collateral and Grantor shall be credited with proceeds of the sale.

 

7.4           Deposit Accounts.

 

If any Event of Default shall have occurred and be continuing, the Collateral Agent may apply the balance from any Deposit Account or instruct the bank at which any Deposit Account is maintained to pay the balance of any Deposit Account to or for the benefit of the Collateral Agent.

 

7.5           Investment Related Property.

 

Each Grantor recognizes that, by reason of certain prohibitions contained in the Securities Act and applicable state securities laws, the Collateral Agent may be compelled, with respect to any sale of all or any part of the Investment Related Property conducted without prior registration or qualification of such Investment Related Property under the Securities Act and/or such state securities laws, to limit purchasers to those who will agree, among other things, to acquire the Investment Related Property for their own account, for investment and not with a view to the distribution or resale thereof.  Each Grantor acknowledges that any such private sale may be at prices and on terms less favorable than those obtainable through a public sale without such restrictions (including a public offering made pursuant to a registration statement under the 

 

  

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Securities Act) and, notwithstanding such circumstances, each Grantor agrees that any such private sale shall be deemed to have been made in a commercially reasonable manner and that the Collateral Agent shall have no obligation to engage in public sales and no obligation to delay the sale of any Investment Related Property for the period of time necessary to permit the issuer thereof to register it for a form of public sale requiring registration under the Securities Act or under applicable state securities laws, even if such issuer would, or should, agree to so register it.  If the Collateral Agent determines to exercise its right to sell any or all of the Investment Related Property, upon written request, each Grantor shall and shall cause each issuer of any Pledged Stock to be sold hereunder, each partnership and each limited liability company from time to time to furnish to the Collateral Agent all such information as the Collateral Agent may request in order to determine the number and nature of interest, shares or other instruments included in the Investment Related Property which may be sold by the Collateral Agent in exempt transactions under the Securities Act and the rules and regulations of the Securities and Exchange Commission thereunder, as the same are from time to time in effect.

 

7.6           Intellectual Property.

 

(a)           Anything contained herein to the contrary notwithstanding, upon the occurrence and during the continuation of an Event of Default:

 

(i)                 the Collateral Agent shall have the right (but not the obligation) to bring suit or otherwise commence any action or proceeding in the name of any Grantor, the Collateral Agent or otherwise, in the Collateral Agent’s sole discretion, to enforce any Intellectual Property, in which event such Grantor shall, at the request of the Collateral Agent, do any and all lawful acts and execute any and all documents required by the Collateral Agent in aid of such enforcement and such Grantor shall promptly, upon demand, reimburse and indemnify the Collateral Agent as provided in Section 10 hereof in connection with the exercise of its rights under this Section, and, to the extent that the Collateral Agent shall elect not to bring suit to enforce any Intellectual Property as provided in this Section, each Grantor agrees to use all reasonable measures, whether by action, suit, proceeding or otherwise, to prevent the infringement or other violation of any of such Grantor’s rights in the Intellectual Property by others and for that purpose agrees to diligently maintain any action, suit or proceeding against any Person so infringing as shall be necessary to prevent such infringement or violation;

 

(ii)                 upon written demand from the Collateral Agent, each Grantor shall grant, assign, convey or otherwise transfer to the Collateral Agent or such Collateral Agent’s designee all of such Grantor’s right, title and interest in and to the Intellectual Property and shall execute and deliver to the Collateral Agent such documents as are necessary or appropriate to carry out the intent and purposes of this Agreement;

 

(iii)                 each Grantor agrees that such an assignment and/or recording shall be applied to reduce the Secured Obligations outstanding only to the extent that the Collateral Agent (or any Secured Party) receives cash proceeds in respect of the sale of, or other realization upon, the Intellectual Property;

 

(iv)                 within five (5) Business Days after written notice from the Collateral Agent, each Grantor shall make available to the Collateral Agent, to the extent within such Grantor’s power and authority, such personnel in such Grantor’s employ on the date of such Event of Default as the Collateral Agent may reasonably designate, by 

 

  

32

  

name, title or job responsibility, to permit such Grantor to continue, directly or indirectly, to produce, advertise and sell the products and services sold or delivered by such Grantor under or in connection with the Trademarks, Trademark Licenses, such persons to be available to perform their prior functions on the Collateral Agent’s behalf and to be compensated by the Collateral Agent at such Grantor’s expense on a per diem, pro-rata basis consistent with the salary and benefit structure applicable to each as of the date of such Event of Default; and

 

(v)                 the Collateral Agent shall have the right to notify, or require each Grantor to notify, any obligors with respect to amounts due or to become due to such Grantor in respect of the Intellectual Property, of the existence of the security interest created herein, to direct such obligors to make payment of all such amounts directly to the Collateral Agent, and, upon such notification and at the expense of such Grantor, to enforce collection of any such amounts and to adjust, settle or compromise the amount or payment thereof, in the same manner and to the same extent as such Grantor might have done;

 

	
  

	
(1)

	
all amounts and proceeds (including checks and other instruments) received by Grantor in respect of amounts due to such Grantor in respect of the Collateral or any portion thereof shall be received in trust for the benefit of the Collateral Agent hereunder, shall be segregated from other funds of such Grantor and shall be forthwith paid over or delivered to the Collateral Agent in the same form as so received (with any necessary endorsement) to be held as cash Collateral and applied as provided by Section 7.7 hereof; and

 

	
  

	
(2)

	
Grantor shall not adjust, settle or compromise the amount or payment of any such amount or release wholly or partly any obligor with respect thereto or allow any credit or discount thereon.

 

(b)           If (i) an Event of Default shall have occurred and, by reason of cure, waiver, modification, amendment or otherwise, no longer be continuing, (ii) no other Event of Default shall have occurred and be continuing, (iii) an assignment or other transfer to the Collateral Agent of any rights, title and interests in and to the Intellectual Property shall have been previously made and shall have become absolute and effective, and (iv) the Secured Obligations shall not have become immediately due and payable, upon the written request of any Grantor, the Collateral Agent shall promptly execute and deliver to such Grantor, at such Grantor’s sole cost and expense, such assignments or other transfer as may be necessary to reassign to such Grantor any such rights, title and interests as may have been assigned to the Collateral Agent as aforesaid, subject to any disposition thereof that may have been made by the Collateral Agent; provided, after giving effect to such reassignment, the Collateral Agent’s security interest granted pursuant hereto, as well as all other rights and remedies of the Collateral Agent granted hereunder, shall continue to be in full force and effect; and provided further, the rights, title and interests so reassigned shall be free and clear of any other Liens granted by or on behalf of the Collateral Agent and the Secured Parties.

 

(c)           Solely for the purpose of enabling the Collateral Agent to exercise rights and remedies under this Section 7 and at such time as the Collateral Agent shall be lawfully entitled to exercise such rights and remedies, each Grantor hereby grants to the Collateral Agent, to the extent it has the right to do so, an irrevocable, nonexclusive license (exercisable without payment of royalty or other compensation to such Grantor), subject, in the case of Trademarks, to sufficient rights to quality control and inspection in favor of such Grantor to avoid the risk of 

 

  

33

  

invalidation of said Trademarks, to use, operate under, license, or sublicense any Intellectual Property  now owned or hereafter acquired by such Grantor, and wherever the same may be located.

 

7.7           Cash Proceeds.  In addition to the rights of the Collateral Agent specified in Section 4.3 with respect to payments of Receivables, all proceeds of any Collateral received by any Grantor consisting of cash, checks and other non-cash items (collectively, “Cash Proceeds”) shall be held by such Grantor in trust for the Collateral Agent, segregated from other funds of such Grantor, and shall, forthwith upon receipt by such Grantor, unless otherwise provided pursuant to Section 4.4(a)(ii), be turned over to the Collateral Agent (or ABL Agent as provided in the Intercreditor Agreement) in the exact form received by such Grantor (duly indorsed by such Grantor to the Collateral Agent or ABL Agent, if required) and held by the Collateral Agent or ABL Agent, as applicable.  Any Cash Proceeds received by the Collateral Agent (whether from a Grantor or otherwise):  (i) if no Event of Default shall have occurred and be continuing, shall be held by the Collateral Agent for the ratable benefit of the Secured Parties, as collateral security for the Secured Obligations (whether matured or unmatured) and (ii) if an Event of Default shall have occurred and be continuing, may, in the sole discretion of the Collateral Agent, (A) be held by the Collateral Agent for the ratable benefit of the Secured Parties, as collateral security for the Secured Obligations (whether matured or unmatured) and/or (B) then or at any time thereafter may be applied by the Collateral Agent against the Secured Obligations then due and owing.

 

SECTION 8.   COLLATERAL AGENT.

 

The Collateral Agent has been appointed to act as Collateral Agent hereunder by Lenders and, by their acceptance of the benefits hereof, the other Secured Parties. The Collateral Agent shall be obligated, and shall have the right hereunder, to make demands, to give notices, to exercise or refrain from exercising any rights, and to take or refrain from taking any action (including, without limitation, the release or substitution of Collateral), solely in accordance with this Agreement and the Credit Agreement; provided, the Collateral Agent shall, after payment in full of all Obligations under the Credit Agreement and the other Credit Documents, exercise, or refrain from exercising, any remedies provided for herein in accordance with the instructions of the holders of a majority of the aggregate notional amount (or, with respect to any Interest Rate Agreement that has been terminated in accordance with its terms, the amount then due and payable (exclusive of expenses and similar payments but including any early termination payments then due) under such Interest Rate Agreement) under all Interest Rate Agreements.  In furtherance of the foregoing provisions of this Section, each Secured Party, by its acceptance of the benefits hereof, agrees that it shall have no right individually to realize upon any of the Collateral hereunder, it being understood and agreed by such Secured Party that all rights and remedies hereunder may be exercised solely by the Collateral Agent for the benefit of Secured Parties in accordance with the terms of this Section. Collateral Agent may resign at any time by giving thirty (30) days’ prior written notice thereof to Lenders and the Grantors, and Collateral Agent may be removed at any time with or without cause by an instrument or concurrent instruments in writing delivered to the Grantors and Collateral Agent signed by the Requisite Lenders.  Upon any such notice of resignation or any such removal, Requisite Lenders shall have the right, upon five (5) Business Days’ notice to the Administrative Agent, to appoint a successor Collateral Agent.  Upon the acceptance of any appointment as Collateral Agent hereunder by a successor Collateral Agent, that successor Collateral Agent shall thereupon succeed to and become vested with all the rights, powers, privileges and duties of the retiring or removed Collateral Agent under this Agreement, and the retiring or removed Collateral Agent under this Agreement shall promptly (i) transfer to such successor Collateral Agent all sums, Securities and 

 

  

34

  

other items of Collateral held hereunder, together with all records and other documents necessary or appropriate in connection with the performance of the duties of the successor Collateral Agent under this Agreement, and (ii) execute and deliver to such successor Collateral Agent or otherwise authorize the filing of such amendments to financing statements, and take such other actions, as may be necessary or appropriate in connection with the assignment to such successor Collateral Agent of the security interests created hereunder, whereupon such retiring or removed Collateral Agent shall be discharged from its duties and obligations under this Agreement.  After any retiring or removed Collateral Agent’s resignation or removal hereunder as the Collateral Agent, the provisions of this Agreement shall inure to its benefit as to any actions taken or omitted to be taken by it under this Agreement while it was the Collateral Agent hereunder.

 

SECTION 9.   CONTINUING SECURITY INTEREST; TRANSFER OF LOANS.

 

This Agreement shall create a continuing security interest in the Collateral and shall remain in full force and effect until the payment in full of all Secured Obligations, the cancellation or termination of the Term Loan Commitment, be binding upon each Grantor, its successors and assigns, and inure, together with the rights and remedies of the Collateral Agent hereunder, to the benefit of the Collateral Agent and its successors, transferees and assigns.  Without limiting the generality of the foregoing, but subject to the terms of the Credit Agreement, any Lender may assign or otherwise transfer any Term Loan held by it to any other Person, and such other Person shall thereupon become vested with all the benefits in respect thereof granted to Lenders herein or otherwise.  Upon the payment in full of all Secured Obligations, and the cancellation or termination of the Term Loan Commitment, the security interest granted hereby shall automatically terminate hereunder and of record and all rights to the Collateral shall revert to Grantors.  Upon any such termination the Collateral Agent shall, at Grantors’ expense, execute and deliver to Grantors or otherwise authorize the filing of such documents as Grantors shall reasonably request, including financing statement amendments to evidence such termination.  Upon any disposition of property permitted by the Credit Agreement, the Liens granted herein shall be deemed to be automatically released and such property shall automatically revert to the applicable Grantor with no further action on the part of any Person.  The Collateral Agent shall, at Grantor’s expense, execute and deliver or otherwise authorize the filing of such documents as Grantors shall reasonably request, in form and substance reasonably satisfactory to the Collateral Agent, including financing statement amendments to evidence such release.

 

SECTION 10.   STANDARD OF CARE; COLLATERAL AGENT MAY PERFORM.

 

The powers conferred on the Collateral Agent hereunder are solely to protect its interest in the Collateral and shall not impose any duty upon it to exercise any such powers.  Except for the exercise of reasonable care in the custody of any Collateral in its possession and the accounting for moneys actually received by it hereunder, the Collateral Agent shall have no duty as to any Collateral or as to the taking of any necessary steps to preserve rights against prior parties or any other rights pertaining to any Collateral.  The Collateral Agent shall be deemed to have exercised reasonable care in the custody and preservation of Collateral in its possession if such Collateral is accorded treatment substantially equal to that which the Collateral Agent accords its own property.  Neither the Collateral Agent nor any of its directors, officers, employees or agents shall be liable for failure to demand, collect or realize upon all or any part of the Collateral or for any delay in doing so or shall be under any obligation to sell or otherwise dispose of any Collateral upon the request of any Grantor or otherwise.  If any Grantor fails to perform any agreement contained herein, the Collateral Agent may itself perform, or cause performance of, such agreement, and the expenses of the Collateral Agent incurred in connection therewith shall be payable by each Grantor under Section 10.2 of the Credit Agreement.

 

  

35

  

 

SECTION 11.   MISCELLANEOUS.

 

Any notice required or permitted to be given under this Agreement shall be given in accordance with Section 10.1 of the Credit Agreement.  No failure or delay on the part of the Collateral Agent in the exercise of any power, right or privilege hereunder or under any other Credit Document shall impair such power, right or privilege or be construed to be a waiver of any default or acquiescence therein, nor shall any single or partial exercise of any such power, right or privilege preclude other or further exercise thereof or of any other power, right or privilege.  All rights and remedies existing under this Agreement and the other Credit Documents are cumulative to, and not exclusive of, any rights or remedies otherwise available.  In case any provision in or obligation under this Agreement shall be invalid, illegal or unenforceable in any jurisdiction, the validity, legality and enforceability of the remaining provisions or obligations, or of such provision or obligation in any other jurisdiction, shall not in any way be affected or impaired thereby.  All covenants hereunder shall be given independent effect so that if a particular action or condition is not permitted by any of such covenants, the fact that it would be permitted by an exception to, or would otherwise be within the limitations of, another covenant shall not avoid the occurrence of a Default or an Event of Default if such action is taken or condition exists.  This Agreement shall be binding upon and inure to the benefit of the Collateral Agent and Grantors and their respective successors and assigns.  No Grantor shall, without the prior written consent of the Collateral Agent given in accordance with the Credit Agreement, assign any right, duty or obligation hereunder.  This Agreement and the other Credit Documents embody the entire agreement and understanding between Grantors and the Collateral Agent and supersede all prior agreements and understandings between such parties relating to the subject matter hereof and thereof.  Accordingly, the Credit Documents may not be contradicted by evidence of prior, contemporaneous or subsequent oral agreements of the parties.  There are no unwritten oral agreements between the parties.  This Agreement may be executed in one or more counterparts and by different parties hereto in separate counterparts, each of which when so executed and delivered shall be deemed an original, but all such counterparts together shall constitute but one and the same instrument; signature pages may be detached from multiple separate counterparts and attached to a single counterpart so that all signature pages are physically attached to the same document.

 

THIS AGREEMENT AND THE RIGHTS AND OBLIGATIONS OF THE PARTIES HEREUNDER SHALL BE GOVERNED BY, AND SHALL BE CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK, WITHOUT REGARD TO ITS CONFLICTS OF LAW PROVISIONS (OTHER THAN SECTION 5-1401 AND SECTION 5-1402 OF THE NEW YORK GENERAL OBLIGATION LAWS).

 

SECTION 12.   INTERCREDITOR AGREEMENT.

 

 Notwithstanding anything herein to the contrary, the lien and security interest granted to the Collateral Agent pursuant to or in connection with this Agreement, and the exercise of any right or remedy by the Collateral Agent hereunder are subject to the provisions of the Intercreditor Agreement.  In the event of any conflict between this Agreement and the Intercreditor Agreement, the Intercreditor Agreement shall control.  Without limiting the foregoing, any requirement under this Agreement to deliver Chattel Paper or other Collateral to the Collateral Agent shall be deemed satisfied if and to the extent that such Collateral is delivered to the ABL Agent in accordance with the ABL Credit Agreement and the Intercreditor Agreement, any requirement to pay proceeds of any Receivables or Inventory to or at the direction of the Collateral Agent or Required Lenders shall be deemed satisfied if and to the 

 

  

36

  

extent that such proceeds are paid to or at the direction of the ABL Agent in accordance with the Intercreditor Agreement and any power of attorney granted hereunder shall be subject to and exercised in accordance with the Intercreditor Agreement.

 

 

 

 

 

  

37

  

IN WITNESS WHEREOF, each Grantor and the Collateral Agent have caused this Agreement to be duly executed and delivered by their respective officers thereunto duly authorized as of the date first written above.

 

	
VERTEX ENERGY OPERATING, LLC

	  
	  
	
By: /s/ Benjamin P. Cowart

	
        Name: Benjamin P. Cowart

	
        Title: President & Chief Executive Officer

	  
	  
	
VERTEX ENERGY, INC.

	  
	  
	
By: /s/ Benjamin P. Cowart

	
        Name: Benjamin P. Cowart

	
        Title: President & Chief Executive Officer

	  
	  
	
VERTEX ACQUISITION SUB, LLC

	  
	  
	
By: /s/ Benjamin P. Cowart

	
        Name:Benjamin P. Cowart

	
        Title: President & Chief Executive Officer

	  
	  
	
VERTEX MERGER SUB, LLC

	  
	  
	
By: /s/ Benjamin P. Cowart

	
        Name: Benjamin P. Cowart

	
        Title: President & Chief Executive Officer

	  
	  
	
VERTEX REFINING NV, LLC

	  
	  
	
By: /s/ Benjamin P. Cowart

	
        Name: Benjamin P. Cowart

	
        Title: President & Chief Executive Officer

	  
	  
	
VERTEX REFINING LA, LLC

	  
	  
	
By: /s/ Benjamin P. Cowart

	
        Name: Benjamin P. Cowart

	
        Title: President & Chief Executive Officer

  

38

  

	
CEDAR MARINE TERMINALS, LP

	  
	  
	
By: /s/ Benjamin P. Cowart

	
        Name: Benjamin P. Cowart

	
        Title: President & Chief Executive Officer

	  
	  
	
 CROSSROAD CARRIERS, L.P.

	  
	  
	
By: /s/ Benjamin P. Cowart

	
        Name: Benjamin P. Cowart

	
        Title: President & Chief Executive Officer

	  
	  
	
VERTEX RECOVERY, L.P.

	  
	  
	
By: /s/ Benjamin P. Cowart

	
        Name: Benjamin P. Cowart

	
        Title: President & Chief Executive Officer

	  
	  
	
H & H OIL, LP.

	  
	  
	
By: /s/ Benjamin P. Cowart

	
        Name: Benjamin P. Cowart

	
        Title: President & Chief Executive Officer

	  
	
VERTEX II GP, LLC

	  
	  
	
By: /s/ Benjamin P. Cowart

	
        Name: Benjamin P. Cowart

	
        Title: President & Chief Executive Officer

	  
	
GOLDEN STATE LUBRICANTS WORKS, LLC

	  
	  
	
By: /s/ Benjamin P. Cowart

	
        Name: Benjamin P. Cowart

	
        Title: President & Chief Executive Officer

  

39

  

 

	
GOLDMAN SACHS BANK USA as the Collateral Agent

	  
	  
	
By: /s/ Stephen W. Hipp                                                     

	
        Name: Stephen W. Hipp

	
        Title: Authorized Signatory

 

  

40

  

SCHEDULE 4.1

TO PLEDGE AND SECURITY AGREEMENT

GENERAL INFORMATION

 

	
(A)

	
Full Legal Name, Type of Organization, Jurisdiction of Organization, Chief Executive Office/Sole Place of Business (or Residence if Grantor is a Natural Person) and Organizational Identification Number of each Grantor:

	
Full Legal Name

	
Type of Organization

	
Jurisdiction of Organization

	
Chief Executive

Office/Sole Place of Business (or Residence if Grantor is a Natural Person)*

	
Organization I.D.#

	
Vertex Energy, Inc.

	
Corporation

	
Nevada

	
Texas

	
NV20081229119

	
Vertex Energy Operating, LLC

	
Limited liability company

	
Texas

	
Texas

	
801959969

	
Vertex Refining NV, LLC

	
Limited liability company

	
Nevada

	
Texas

	
N20141170447

	
Vertex Refining LA, LLC

	
Limited liability company

	
Louisiana

	
Texas

	
41456232K

	
Vertex II GP, LLC

	
Limited liability company

	
Nevada

	
Texas

	
NV20121491058

	
Vertex Merger Sub, LLC

	
Limited liability company

	
California

	
Texas

	
200814410055

	
Vertex Acquisition Sub, LLC

	
Limited liability company

	
Nevada

	
Texas

	
NV20111698674

	
Cedar Marine Terminals, LP

	
Limited partnership

	
Texas

	
Texas

	
0800533829

	
Crossroad Carriers, L.P.

	
Limited partnership

	
Texas

	
Texas

	
0800854831

	
Vertex Recovery, L.P.

	
Limited partnership

	
Texas

	
Texas

	
0800095940

	
H & H Oil, L.P.

	
Limited partnership

	
Texas

	
Texas

	
0800848980

	
Golden State Lubricants Works, LLC

	
Limited liability company

	
Delaware

	
Texas

	
4940256

*The Chief Executive Office for all Grantors is 1331 Gemini Street, Suite 250, Houston, Texas 77058.

 

	
(B)

	
Other Names (including any Trade-Name or Fictitious Business Name) under which each Grantor has conducted business for the past five (5) years:

	
 

Full Legal Name

	
Trade Name or Fictitious Business Name

	
Vertex Recovery, L.P.

	
Vertex Recovery

	
H & H Oil, L.P.

	
H & H Oil

	
Cedar Marine Terminals, LP

	
CMT

	
Crossroad Carriers, L.P.

	
Crossroad Carriers

  

SCHEDULE A-1-1

  

	
(C)

	
Changes in Name, Jurisdiction of Organization, Chief Executive Office or Sole Place of Business (or Principal Residence if Grantor is a Natural Person) and Corporate Structure within past five (5) years:

	
 

Name of Grantor

	
 

Date of Change

	
 

Description of Change

	
Vertex Acquisition Sub, LLC

	
July 26, 2012

	
Changed name from Vertex Merger Sub, LLC to Vertex Acquisition Sub, LLC

	
Vertex Energy, Inc.

	
July 1, 2009

	
Moved from 1331 Gemini Street, Suite 103, Houston, TX 77058 to its current chief executive office at 1331 Gemini Street, Suite 250, Houston, TX 77058

(D)           Agreements pursuant to which any Grantor is found as debtor within past five (5) years:

	
Name of Grantor

	
 

Description of Agreement

	
None.

	  

 

(E)           Financing Statements:

	
 

Name of Grantor

	
 

Filing Jurisdiction(s)

	
Vertex Energy, Inc.

	
Nevada

	
Vertex Energy Operating, LLC

	
Texas

	
Vertex Refining NV, LLC

	
Nevada

	
Vertex Refining LA, LLC

	
Louisiana

	
Vertex II GP, LLC

	
Nevada

	
Vertex Merger Sub, LLC

	
California

	
Vertex Acquisition Sub, LLC

	
Nevada

	
Cedar Marine Terminals, LP

	
Texas

	
Crossroads Carriers, L.P.

	
Texas

	
Vertex Recovery, L.P.

	
Texas

	
H & H Oil, L.P.

	
Texas

	
Golden State Lubricants Works, LLC

	
Delaware

  

SCHEDULE A-1-2

  

SCHEDULE 4.2

TO PLEDGE AND SECURITY AGREEMENT

	
 

Name of Grantor

	
 

Location of Equipment, Inventory and Documents

	
Vertex Energy, Inc.

	
1331 Gemini Street, Suite 250, Houston, TX 77058

	
Cedar Marine Terminals, LP

	
200 Atlantic Pipeline Rd., Baytown, TX 77520

	
H & H Oil, L.P.

	
20909 FM 685, Pflugerville, TX 78660

	
H & H Oil, L.P.

	
7311 Decker Drive, Baytown, TX 77520

	
H & H Oil, L.P.

	
7941 Recycle Drive, Corpus Christi, TX 78409

	
H & H Oil, L.P.

	
11626 Old Corpus Christi Hwy, San Antonio, TX 78223

	
Vertex Refining LA, LLC

	
5000 River Road, Marrero, LA 70072

	
Vertex Refining LA, LLC

	
278 E. Ravenna Road, Myrtle Grove, LA 70037

	
Golden State Lubricants Works, LLC

	
1134 Manor Street, Oildale, CA 93308

 

  

SCHEDULE 4.2-1

  

SCHEDULE 4.4

TO PLEDGE AND SECURITY AGREEMENT

INVESTMENT RELATED PROPERTY

 

(A)           Pledged Stock:   None.

 

Pledged LLC Interests:

	
 

Grantor

	
 

Limited Liability Company

	
 

Certificated (Y/N)

	
 

Certificate No. (if any)

	
 

No. of Pledged Units

	
 

% of Outstanding LLC Interests of the Limited Liability Company

	
 

Vertex Energy Operating, LLC

	
 

E-Source Holdings, LLC

	
No

 

	
N/A

 

	
N/A

 

	
70%

 

	
Vertex Energy Operating, LLC

	
Vertex Refining NV, LLC

	
No

	
N/A

	
N/A

	
100%

	
Vertex Energy Operating, LLC

	
Vertex Refining LA, LLC

	
No

	
N/A

	
N/A

	
100%

	
Vertex Energy Operating, LLC

	
Vertex II GP, LLC

	
No

	
N/A

	
N/A

	
100%

	
Vertex Energy Operating, LLC

	
Vertex Merger Sub, LLC

	
No

	
N/A

	
N/A

	
100%

	
Vertex Energy Operating, LLC

	
Vertex Acquisition Sub, LLC

	
No

	
N/A

	
N/A

	
100%

	
Vertex Refining NV, LLC

	
Golden State Lubricants Works, LLC

	
No

	
N/A

	
N/A

	
100%

Pledged Partnership Interests:

	
 

Grantor

	
 

Partnership

	
 

Type of Partnership Interests (e.g., general or limited)

	
 

Certificated (Y/N)

	
 

Certificate No.

(if any)

	
 

% of Outstanding Partnership Interests of the Partnership

	
Vertex Acquisition Sub, LLC

	
Cedar Marine Terminals, LP

	
Partnership Interests

 

	
 

No

	
N/A

 

	
100%

 

	
Vertex Acquisition Sub, LLC

	
Crossroad Carriers, L.P.

 

	
Partnership Interests

 

	
No

	
N/A

	
100%

	
Vertex Acquisition Sub, LLC

	
Vertex Recovery, L.P.

	
Partnership Interests

 

	
No

	
N/A

	
100%

	
Vertex Recovery, L.P.

	
H & H Oil, L.P.

	
Partnership Interests

 

	
No

	
N/A

	
100%

Pledged Trust Interests:  None.

  

SCHEDULE 4-4-1

  

Pledged Debt:

	
Grantor

	
Issuer

	
Original Principal Amount

	
Outstanding Principal Balance

	
Issue Date

	
Maturity Date

	
Vertex Refining NV, LLC

	
Omega Refining, LLC, Bango Refining NV, LLC & Omega Holdings Company LLC

	
$13,858,066.67

	
$13,858,066.67

	
May 2, 2014

	
March 31, 2015

	
Vertex Refining LA, LLC

	
Omega Refining, LLC, Bango Refining NV, LLC & Omega Holdings Company LLC

	
$13,858,066.67

	
$13,858,066.67

	
May 2, 2014

	
March 31, 2015

	
Vertex Energy, Inc., Vertex Energy Operating, LLC, Vertex Acquisition Sub, LLC, Vertex Merger Sub, LLC, Vertex Refining NV, LLC, Vertex Refining LA, LLC, Cedar Marine Terminals, LP, Crossroads Carriers, L.P., Vertex Recovery, L.P., H & H Oil, L. P., Vertex II GP, LLC, Golden State Lubricants Works, LLC

	
Vertex Energy, Inc., Vertex Energy Operating, LLC, Vertex Acquisition Sub, LLC, Vertex Merger Sub, LLC, Vertex Refining NV, LLC, Vertex Refining LA, LLC, Cedar Marine Terminals, LP, Crossroads Carriers, L.P., Vertex Recovery, L.P., H & H Oil, L. P., Vertex II GP, LLC, Golden State Lubricants Works, LLC

	
Amount of advances made by each Payee, as the case may be, from time to time outstanding

	
Amount of advances made by each Payee, as the case may be, from time to time outstanding

	
May 2, 2014

	
Demand note

Securities Account:  None.

 

Commodities Accounts:  None.

 

  

SCHEDULE 4-4-2

  

**************************************************

MATERIAL BELOW MARKED BY AN “***” HAS BEEN OMITTED PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT.  THIS ENTIRE EXHIBIT INCLUDING THE OMITTED CONFIDENTIAL INFORMATION HAS BEEN FILED SEPARATELY WITH THE COMMISSION.

**************************************************

 

Deposit Accounts:

	
 

Grantor

	
 

Name of Depositary Bank

	
 

Account Number

	
 

Account Name

	
 

Vertex Energy, Inc.

	
 

Bank of America

	
 

***

	
 

Checking

	
 

Vertex Energy, Inc.

	
 

Bank of America

	
 

***

	
PFO

	
 

Vertex Energy, Inc.

	
Amegy Bank

	
***

	
Business Checking

 

(B)

	
Name of Grantor

	
Date of Acquisition

	
Description of Acquisition

	
Vertex Energy, Inc.

	
August 31, 2012

	
Acquired 100% of the outstanding membership interests of Vertex Acquisition Sub, LLC from Vertex Holdings, L.P. and B&S Cowart Family L.P..

	
Vertex Energy, Inc.

	
October 1, 2013

	
Acquired 33.34% of the outstanding membership interests of E-Source Holdings, LLC from Kevin Ellis.

	
Vertex Energy, Inc.

	
October 1, 2013

	
Acquired 16.67% of the outstanding membership interests of E-Source Holdings, LLC from Tony Broussard

	
Vertex Energy, Inc.

	
January 1, 2014

	
Acquired an additional 19% of the outstanding membership interests of E-Source Holdings, LLC from BBP Landtex Group, LLC.

(C)

	
Name of Grantor

	
Name of Issuer of Pledged LLC Interest/Pledged Partnership Interest

	None.	  

 

  

SCHEDULE 4-4-3

  

SCHEDULE 4.5

TO PLEDGE AND SECURITY AGREEMENT

	
Name of Grantor

	
Description of Material Contract

	
All Grantors

	
Related Agreements, as defined in the Credit Agreement

	
Vertex Energy Operating, LLC

	
Third Amended Company Agreement for E-Source Holdings, LLC dated effective as of January 1, 2014 between Vertex Energy Operating, LLC (as successor in interest to Vertex Energy, Inc.) and BBP Landtex Group, LLC

	
Vertex Energy Operating, LLC

	
Tolling Agreement dated July 1, 2012 between Vertex Energy, Inc. and KMTEX LLC, as amended by First Amendment dated November 1, 2013

	
Vertex Energy, Inc.

	
Master Lease Agreement No. 253640900000 dated February 27, 2013 between Vertex Energy, Inc. and Banc of America Leasing & Capital, LLC and Schedule No. 001 dated April 22, 2013

	
Vertex Acquisition Sub, LLC

	
Lease Agreement dated May 9, 2009 between Cole Gemini, Ltd. and Vertex Energy Acquisition Sub, LLC (successor in interest to Vertex Holdings L.P.), as amended by First Amendment to Office Lease Agreement dated June 8, 2012

	
Cedar Marine Terminals, LP

	
Lease Agreement dated July 25, 1997 between CP Terminal, LLC and Cedar Marine Terminals, LP (as successor in interest to TRW Trading, Inc.), as amended by Amendment No. 1 dated February 22, 2002, Amendment No. 2 dated December 19, 2005, Third Amendment to Lease Agreement dated August 6, 2012 and Fourth Amendment to Lease Agreement dated May 10, 2013

	
Vertex Refining LA, LLC

	
Land Lease dated April 30, 2008 between Magellan Terminals Holdings, L.P. (f/k/a Marrero Terminal LLC) and Vertex Refining LA, LLC (as successor in interest to Omega Refining, LLC), as amended by First Amendment to Land Lease dated October 29, 2009 and Second Amendment to Land Lease dated March 11, 2011

	
Vertex Refining LA, LLC

	
Commercial Lease dated May 25, 2012 between Plaquemines Holdings, LLC and Vertex Refining LA, LLC (as successor in interest to Omega Refining, LLC), as amended by First Amendment to Commercial Lease dated May 2013

	
Vertex Refining LA, LLC

	
Schedule No. 004 dated May 15, 2012, as amended by Amendment No. 1 dated September 28, 2012, to Master Lease Agreement No. MEF0659 dated March 3, 2009 between Pacific Western Equipment Finance and Vertex Refining LA, LLC (as successor in interest to Omega Refining, LLC)

	
Vertex Energy, Inc.

	
Unit Purchase Agreement dated August 14, 2012 among Vertex Energy, Inc., Vertex Acquisition Sub, LLC, Vertex Holdings, L.P. and B & S Cowart Family L.P.

	
Vertex Energy, Inc.

	
Limited Liability Membership Purchase Agreement dated effective October 1, 2013 among Kevin Ellis, Vertex Energy, Inc. and E-Source Holdings, LLC

	
Vertex Refining LA, LLC

	
Terminaling Services Agreement dated May 1, 2008 between Magellan Terminals Holdings, L.P. (f/k/a Marrero Terminal LLC) and Vertex Refining LA, LLC (as successor in interest to Omega Refining, LLC

	
Vertex Refining LA, LLC

	
Operation and Maintenance Agreement dated November 3, 2010 between Magellan Terminals Holdings, L.P. (f/k/a Marrero Terminal, LLC) and Vertex Refining LA, LLC (as successor in interest to Omega Refining, LLC

	
Vertex Energy, Inc.

	
Joint Marketing Agreement dated April 10, 2011 between Rio Energy International, Inc. and Vertex Energy, Inc.

 

  

SCHEDULE 4.5-1

  

SCHEDULE 4.6

TO PLEDGE AND SECURITY AGREEMENT

Name of Grantor                                                                           Description of Letters of Credit

None.

  

SCHEDULE 4.6-1

  

SCHEDULE 4.7

TO PLEDGE AND SECURITY AGREEMENT

INTELLECTUAL PROPERTY

 

(A)           Copyrights: None.

 

(B)           Copyright Licenses: None.

 

(C)           Patents:

 

	
Document No.

	
Document Title

	
Credit Party

	
Applicable Dates

	
US Patent No. 5,306,419

	
Used Lubricating Oil Reclaiming

	
Vertex Refining LA, LLC

	
Patent issued on April 26, 1994 from an application filed on August 5, 1993

	
US Patent No. 5,447,628

	
Reconstituting Lubricating Oil

	
Vertex Refining LA, LLC

	
Patent issued on September 5, 1995 from an application filed on November 15, 1993

	
US Patent No. 6,203,606

	
Performance Grade Asphalt and Methods

	
Vertex Refining LA, LLC

	
Patent issued on March 20, 2001 from an application filed on November 20, 1998

	
U.S. Patent No. 8,613,838

	
System for Making a Usable Hydrocarbon Product from Used Oil

	
Vertex Energy Operating, LLC

	
Patent issued on December 24, 2013 from application filed on July 28, 2010.

	
U.S. Patent No. 8,398,847

	
Method for Making a Usable Hydrocarbon Product from Used Oil

	
Vertex Energy Operating, LLC

	
Patent issued on March 19, 2013 from application filed on July 28, 2010.

(D)           Patent Licenses:

Contract Agreement dated October 14, 2011 between Sequoia Global, Inc. and Vertex Refining LA, LLC (as successor in interest to Omega Refining, LLC)

(E)           Trademarks: None.

 

(F)           Trademark Licenses:

 

Contract Agreement dated October 14, 2011 between Sequoia Global, Inc. and Vertex Refining LA, LLC (as successor in interest to Omega Refining, LLC)

 

(G)           Trade Secret Licenses:

 

Contract Agreement dated October 14, 2011 between Sequoia Global, Inc. and Vertex Refining LA, LLC (as successor in interest to Omega Refining, LLC)

(H)           Intellectual Property Exceptions: None.

 

  

SCHEDULE 4.7-1

  

SCHEDULE 4.8

TO PLEDGE AND SECURITY AGREEMENT

	
Name of Grantor

	
 

Commercial Tort Claims

None.

  

SCHEDULE 4.8-1

  

EXHIBIT A

TO PLEDGE AND SECURITY AGREEMENT

PLEDGE SUPPLEMENT

 

This PLEDGE SUPPLEMENT, dated [mm/dd/yy], is delivered by [NAME OF GRANTOR] a [NAME OF STATE OF INCORPORATION] [Corporation] (the “Grantor”) pursuant to the Pledge and Security Agreement, dated as of May 2, 2014 (as it may be from time to time amended, restated, modified or supplemented, the “Security Agreement”), among VERTEX ENERGY, INC., VERTEX ENERGY OPERATING, LLC, the other Grantors named therein, and GOLDMAN SACHS BANK USA, as the Collateral Agent.  Capitalized terms used herein not otherwise defined herein shall have the meanings ascribed thereto in the Security Agreement.

 

Grantor hereby confirms the grant to the Collateral Agent set forth in the Security Agreement of, and does hereby grant to the Collateral Agent, a security interest in all of Grantor’s right, title and interest in and to all Collateral to secure the Secured Obligations, in each case whether now or hereafter existing or in which Grantor now has or hereafter acquires an interest and wherever the same may be located.  Grantor represents and warrants that the attached Supplements to Schedules accurately and completely set forth all additional information required pursuant to the Security Agreement and hereby agrees that such Supplements to Schedules shall constitute part of the Schedules to the Security Agreement.

 

IN WITNESS WHEREOF, Grantor has caused this Pledge Supplement to be duly executed and delivered by its duly authorized officer as of [mm/dd/yy].

 

 

	
[NAME OF GRANTOR]

	  
	  
	
By:_____________________________

	
Name:

	
Title:

 

  

EXHIBIT A-1

  

SUPPLEMENT TO SCHEDULE 4.1

TO PLEDGE AND SECURITY AGREEMENT

Additional Information:

	
(A)

	
Full Legal Name, Type of Organization, Jurisdiction of Organization, Chief Executive Office/Sole Place of Business (or Residence if Grantor is a Natural Person) and Organizational Identification Number of each Grantor:

 

	
 

Full Legal Name

	
 

Type of Organization

	
 

Jurisdiction of Organization

	
 

Chief Executive

Office/Sole Place of Business (or Residence if Grantor 

is a Natural Person)

	
 

Organization I.D.#

	
(B)

	
Other Names (including any Trade-Name or Fictitious Business Name) under which each Grantor has conducted business for the past five (5) years:

	
 

Full Legal Name

	
 

Trade Name or Fictitious Business Name

	
(C)

	
Changes in Name, Jurisdiction of Organization, Chief Executive Office or Sole Place of Business (or Principal Residence if Grantor is a Natural Person) and Corporate Structure within past five (5) years:

	
 

Name of Grantor

	
 

Date of Change

	
 

Description of Change

(D)           Agreements pursuant to which any Grantor is found as debtor within past five (5) years:

	
 

Name of Grantor

	
 

Description of Agreement

(E)           Financing Statements:

 

 

  

EXHIBIT A-2

  

	
 

Name of Grantor

	
 

Filing Jurisdiction(s)

 

 

 

 

  

EXHIBIT A-3

  

SUPPLEMENT TO SCHEDULE 4.2

TO PLEDGE AND SECURITY AGREEMENT

Additional Information:

Name of Grantor                                                                           Location of Equipment and Inventory

 

 

  

EXHIBIT A-4

  

SUPPLEMENT TO SCHEDULE 4.4

TO PLEDGE AND SECURITY AGREEMENT

Additional Information:

 

(A)

Pledged Stock:

Pledged Partnership Interests:

Pledged LLC Interests:

Pledged Trust Interests:

Pledged Debt:

Securities Account:

Commodities Accounts:

Deposit Accounts:

 

(B)

 

	
 

Name of Grantor

	
 

Date of Acquisition

	
 

Description of Acquisition

 

(C)

	
Name of Grantor

	
Name of Issuer of Pledged LLC Interest/Pledged Partnership Interest

	  	  

 

 

  

EXHIBIT A-5

  

SUPPLEMENT TO SCHEDULE 4.5

TO PLEDGE AND SECURITY AGREEMENT

Additional Information:

Name of Grantor                                                                           Description of Material Contract

  

EXHIBIT A-6

  

SUPPLEMENT TO SCHEDULE 4.6

TO PLEDGE AND SECURITY AGREEMENT

Additional Information:

Name of Grantor                                                                           Description of Letters of Credit

  

EXHIBIT A-7

  

SUPPLEMENT TO SCHEDULE 4.7

TO PLEDGE AND SECURITY AGREEMENT

Additional Information:

(A)           Copyrights

(B)           Copyright Licenses

(C)           Patents

(D)           Patent Licenses

(E)           Trademarks

(F)           Trademark Licenses

(G)           Trade Secret Licenses

(H)           Intellectual Property Exceptions

 

 

  

EXHIBIT A-8

  

SUPPLEMENT TO SCHEDULE 4.8

TO PLEDGE AND SECURITY AGREEMENT

Additional Information:

	
 

Name of Grantor

	
 

Commercial Tort Claims

	  	  

 

 

  

EXHIBIT A-9

  

EXHIBIT B

TO PLEDGE AND SECURITY AGREEMENT

UNCERTIFICATED SECURITIES CONTROL AGREEMENT

 

This Uncertificated Securities Control Agreement dated as of _________, 20__ among ________________ (the “Pledgor”), __________, as collateral agent for the Secured Parties, (the “Collateral Agent”) and ____________, a ________corporation (the “Issuer”).  Capitalized terms used but not defined herein shall have the meaning assigned in the Pledge and Security Agreement dated as of May 2, 2014 among the Pledgor, the other Grantors party thereto and the Collateral Agent (the “Security Agreement”).  All references herein to the “UCC” shall mean the Uniform Commercial Code as in effect in the State of New York.

 

Section 1.  Registered Ownership of Shares.  The Issuer hereby confirms and agrees that as of the date hereof the Pledgor is the registered owner of __________ shares of the Issuer’s [common] stock (the “Pledged Shares”) and the Issuer shall not change the registered owner of the Pledged Shares without the prior written consent of the Collateral Agent.

 

Section 2.  Instructions.  If at any time the Issuer shall receive instructions originated by the Collateral Agent relating to the Pledged Shares, the Issuer shall comply with such instructions without further consent by the Pledgor or any other person.

 

Section 3.  Additional Representations and Warranties of the Issuer.  The Issuer hereby represents and warrants to the Collateral Agent:

 

(a)  It has not entered into, and until the termination of this agreement will not enter into, any agreement with any other person relating the Pledged Shares pursuant to which it has agreed to comply with instructions issued by such other person; and

 

(b)  It has not entered into, and until the termination of this agreement will not enter into, any agreement with the Pledgor or the Collateral Agent purporting to limit or condition the obligation of the Issuer to comply with Instructions as set forth in Section 2 hereof.

 

(c)  Except for the claims and interest of the Collateral Agent and of the Pledgor in the Pledged Shares, the Issuer does not know of any claim to, or interest in, the Pledged Shares.  If any person asserts any lien, encumbrance or adverse claim (including any writ, garnishment, judgment, warrant of attachment, execution or similar process) against the Pledged Shares, the Issuer will promptly notify the Collateral Agent and the Pledgor thereof.

 

(d)  This Uncertificated Securities Control Agreement is the valid and legally binding obligation of the Issuer.

 

Section 4.  Choice of Law.  This Agreement shall be governed by the laws of the State of New York.

 

Section 5.   Conflict with Other Agreements.  In the event of any conflict between this Agreement (or any portion thereof) and any other agreement now existing or hereafter entered into, the terms of this Agreement shall prevail.  No amendment or modification of this Agreement 

 

  

EXHBIT B-1

  

or waiver of any right hereunder shall be binding on any party hereto unless it is in writing and is signed by all of the parties hereto.

 

Section 6.  Voting Rights.  Until such time as the Collateral Agent shall otherwise instruct the Issuer in writing, the Pledgor shall have the right to vote the Pledged Shares.

 

Section 7.  Successors; Assignment.  The terms of this Agreement shall be binding upon, and shall inure to the benefit of, the parties hereto and their respective corporate successors or heirs and personal representatives who obtain such rights solely by operation of law.  The Collateral Agent may assign its rights hereunder only with the express written consent of the Issuer and by sending written notice of such assignment to the Pledgor.

 

Section 8. Indemnification of Issuer.  The Pledgor and the Collateral Agent hereby agree that (a) the Issuer is released from any and all liabilities to the Pledgor and the Collateral Agent arising from the terms of this Agreement and the compliance of the Issuer with the terms hereof, except to the extent that such liabilities arise from the Issuer’s negligence and (b) the Pledgor, its successors and assigns shall at all times indemnify and save harmless the Issuer from and against any and all claims, actions and suits of others arising out of the terms of this Agreement or the compliance of the Issuer with the terms hereof, except to the extent that such arises from the Issuer’s negligence, and from and against any and all liabilities, losses, damages, costs, charges, counsel fees and other expenses of every nature and character arising by reason of the same, until the termination of this Agreement.

 

Section 9.  Notices.  Any notice, request or other communication required or permitted to be given under this Agreement shall be in writing and deemed to have been properly given when delivered in person, or when sent by telecopy or other electronic means and electronic confirmation of error free receipt is received or two (2) days after being sent by certified or registered United States mail, return receipt requested, postage prepaid, addressed to the party at the address set forth below.

 

Pledgor:      [INSERT ADDRESS]

              Attention:

              Telecopier:

 

Collateral Agent:        [INSERT ADDRESS]

              Attention:

              Telecopier:

 

Issuer:                           [INSERT ADDRESS]

              Attention:

            Telecopier:

 

Any party may change its address for notices in the manner set forth above.

 

Section 10.  Termination.  The obligations of the Issuer to the Collateral Agent pursuant to this Control Agreement shall continue in effect until the security interests of the Collateral Agent in the Pledged Shares have been terminated pursuant to the terms of the Security Agreement and the Collateral Agent has notified the Issuer of such termination in writing.  The Collateral Agent agrees to provide Notice of Termination in substantially the form of Exhibit A hereto to the Issuer upon the request of the Pledgor on or after the termination of the Collateral Agent’s security interest in the Pledged Shares pursuant to the terms of the Security Agreement.  

 

  

EXHBIT B-2

  

The termination of this Control Agreement shall not terminate the Pledged Shares or alter the obligations of the Issuer to the Pledgor pursuant to any other agreement with respect to the Pledged Shares.

 

Section 11.  Counterparts.  This Agreement may be executed in any number of counterparts, all of which shall constitute one and the same instrument, and any party hereto may execute this Agreement by signing and delivering one or more counterparts.

 

 

	
[NAME OF PLEDGOR]

	  
	  
	
By:                                          

	
Name:

	
Title:

	  
	  
	  
	
[NAME OF COLLATERAL AGENT],

	
  as Collateral Agent

	  
	  
	
By:                                          

	
Name:

	
Title:

	  
	  
	  
	
[NAME OF ISSUER]

	  
	  
	
By:                                          

	
Name:

	
Title:

  

EXHBIT B-3

  

Exhibit A

[Letterhead of Collateral Agent]

 

[Date]

 

[Name and Address of Issuer]

Attention:                                           

Re:  Termination of Control Agreement

You are hereby notified that the Uncertificated Securities Control Agreement between you, [the Pledgor] (the “Pledgor”) and the undersigned (a copy of which is attached) is terminated and you have no further obligations to the undersigned pursuant to such Agreement.  Notwithstanding any previous instructions to you, you are hereby instructed to accept all future directions with respect to Pledged Shares (as defined in the Uncertificated Control Agreement) from the Pledgor.  This notice terminates any obligations you may have to the undersigned with respect to the Pledged Shares, however nothing contained in this notice shall alter any obligations which you may otherwise owe to the Pledgor pursuant to any other agreement.

 

You are instructed to deliver a copy of this notice by facsimile transmission to the Pledgor.

 

	
Very truly yours,

	  
	  
	
GOLDMAN SACHS BANK USA,

	
  as Collateral Agent

	  
	
By:                                                     

	
Name:

	
Title:

  

EXHIBIT B-A-1

  

EXHIBIT C

TO PLEDGE AND SECURITY AGREEMENT

SECURITIES ACCOUNT CONTROL AGREEMENT

 

 

This Securities Account Control Agreement dated as of _________, 20__ (this “Agreement”) among ____________________________ (the “Debtor”), ________________________, as collateral agent for the Secured Parties (the “Collateral Agent”) and ____________, in its capacity as a “securities intermediary” as defined in Section 8-102 of the UCC (in such capacity, the “Securities Intermediary”).  Capitalized terms used but not defined herein shall have the meaning assigned thereto in the Pledge and Security Agreement, dated as of May 2, 2014, among the Debtor, the other Grantors party thereto and the Collateral Agent (as amended, restated, supplemented or otherwise modified from time to time, the “Security Agreement”).  All references herein to the “UCC” shall mean the Uniform Commercial Code as in effect in the State of New York.

 

Section 1.  Establishment of Securities Account.  The Securities Intermediary hereby confirms and agrees that:

 

(a)           The Securities Intermediary has established account number [IDENTIFY ACCOUNT NUMBER] in the name “[IDENTIFY EXACT TITLE OF ACCOUNT]” (such account and any successor account, the “Securities Account”) and the Securities Intermediary shall not change the name or account number of the Securities Account without the prior written consent of the Collateral Agent;

 

(b)           All securities or other property underlying any financial assets credited to the Securities Account shall be registered in the name of the Securities Intermediary, indorsed to the Securities Intermediary or in blank or credited to another securities account maintained in the name of the Securities Intermediary and in no case will any financial asset credited to the Securities Account be registered in the name of the Debtor, payable to the order of the Debtor or specially indorsed to the Debtor except to the extent the foregoing have been specially indorsed to the Securities Intermediary or in blank;

 

(c)           All property delivered to the Securities Intermediary pursuant to the Security Agreement will be promptly credited to the Securities Account; and

 

(d)           The Securities Account is a “securities account” within the meaning of Section 8-501 of the UCC.

 

Section 2.  “Financial Assets” Election.  The Securities Intermediary hereby agrees that each item of property (including, without limitation, any  investment property, financial asset, security, instrument, general intangible or cash) credited to the Securities Account shall be treated as a “financial asset” within the meaning of Section 8-102(a)(9) of the UCC.

 

Section 3.  Control of the Securities Account.  If at any time the Securities Intermediary shall receive any order from the Collateral Agent directing transfer or redemption of 

 

  

EXHIBIT C-1

  

any financial asset relating to the Securities Account, the Securities Intermediary shall comply with such entitlement order without further consent by the Debtor or any other person.  If the Debtor is otherwise entitled to issue entitlement orders and such orders conflict with any entitlement order issued by the Collateral Agent, the Securities Intermediary shall follow the orders issued by the Collateral Agent.

 

Section 4.  Subordination of Lien; Waiver of Set-Off.  In the event that the Securities Intermediary has or subsequently obtains by agreement, by operation of law or otherwise a security interest in the Securities Account or any security entitlement credited thereto, the Securities Intermediary hereby agrees that such security interest shall be subordinate to the security interest of the Collateral Agent.  The financial assets and other items deposited to the Securities Account will not be subject to deduction, set-off, banker’s lien, or any other right in favor of any person other than the Collateral Agent (except that the Securities Intermediary may set off (i) all amounts due to the Securities Intermediary in respect of customary fees and expenses for the routine maintenance and operation of the Securities Account and (ii) the face amount of any checks which have been credited to such Securities Account but are subsequently returned unpaid because of uncollected or insufficient funds).

 

Section 5.  Choice of Law.  This Agreement and the Securities Account shall each be governed by the laws of the State of New York.  Regardless of any provision in any other agreement, for purposes of the UCC, New York shall be deemed to be the Securities Intermediary’s jurisdiction (within the meaning of Section 8-110 of the UCC) and the Securities Account (as well as the securities entitlements related thereto) shall be governed by the laws of the State of New York.

 

Section 6.  Conflict with Other Agreements.

 

(a)           In the event of any conflict between this Agreement (or any portion thereof) and any other agreement now existing or hereafter entered into, the terms of this Agreement shall prevail;

 

(b)           No amendment or modification of this Agreement or waiver of any right hereunder shall be binding on any party hereto unless it is in writing and is signed by all of the parties hereto;

 

(c)           The Securities Intermediary hereby confirms and agrees that:

 

(i)  There are no other control agreements entered into between the Securities Intermediary and the Debtor with respect to the Securities Account;

 

(ii)  It has not entered into, and until the termination of this Agreement, will not enter into, any agreement with any other person relating to the Securities Account and/or any financial assets credited thereto pursuant to which it has agreed to comply with entitlement orders (as defined in Section 8-102(a)(8) of the UCC) of such other person; and

 

(iii) It has not entered into, and until the termination of this Agreement, will not enter into, any agreement with the Debtor or the Collateral Agent purporting to limit or condition the obligation of the Securities Intermediary to comply with entitlement orders as set forth in Section 3 hereof.

 

  

EXHIBIT C-2

  

Section 7.  Adverse Claims.  Except for the claims and interest of the Collateral Agent and of the Debtor in the Securities Account, the Securities Intermediary does not know of any claim to, or interest in, the Securities Account or in any “financial asset” (as defined in Section 8-102(a) of the UCC) credited thereto.  If any person asserts any lien, encumbrance or adverse claim (including any writ, garnishment, judgment, warrant of attachment, execution or similar process) against the Securities Account or in any financial asset carried therein, the Securities Intermediary will promptly notify the Collateral Agent and the Debtor thereof.

 

Section 8.  Maintenance of Securities Account.  In addition to, and not in lieu of, the obligation of the Securities Intermediary to honor entitlement orders as agreed in Section 3 hereof, the Securities Intermediary agrees to maintain the Securities Account as follows:

 

(a)           Notice of Sole Control.  If at any time the Collateral Agent delivers to the Securities Intermediary a Notice of Sole Control in substantially the form set forth in Exhibit A hereto, the Securities Intermediary agrees that after receipt of such notice, it will take all instruction with respect to the Securities Account solely from the Collateral Agent.

 

(b)           Voting Rights.  Until such time as the Securities Intermediary receives a Notice of Sole Control pursuant to subsection (a) of this Section 8, the Debtor shall direct the Securities Intermediary with respect to the voting of any financial assets credited to the Securities Account.

 

(c)           Permitted Investments.  Until such time as the Securities Intermediary receives a Notice of Sole Control signed by the Collateral Agent, the Debtor shall direct the Securities Intermediary with respect to the selection of investments to be made for the Securities Account; provided, however, that the Securities Intermediary shall not honor any instruction to purchase any investments other than investments of a type described on Exhibit B hereto.

 

(d)           Statements and Confirmations.  The Securities Intermediary will promptly send copies of all statements, confirmations and other correspondence concerning the Securities Account and/or any financial assets credited thereto simultaneously to each of the Debtor and the Collateral Agent at the address for each set forth in Section 12 of this Agreement.

 

(e)           Tax Reporting.  All items of income, gain, expense and loss recognized in the Securities Account shall be reported to the Internal Revenue Service and all state and local taxing authorities under the name and taxpayer identification number of the Debtor.

 

Section 9.  Representations, Warranties and Covenants of the Securities Intermediary.  The Securities Intermediary hereby makes the following representations, warranties and covenants:

 

(a)           The Securities Account has been established as set forth in Section 1 above and such Securities Account will be maintained in the manner set forth herein until termination of this Agreement; and

 

(b)           This Agreement is the valid and legally binding obligation of the Securities Intermediary.

 

Section 10  Indemnification of Securities Intermediary.  The Debtor and the Collateral Agent hereby agree that (a) the Securities Intermediary is released from any and all liabilities to the Debtor and the Collateral Agent arising from the terms of this Agreement and the compliance of the Securities Intermediary with the terms hereof, except to the extent that such liabilities arise 

 

  

EXHIBIT C-3

  

from the Securities Intermediary’s negligence and (b) the Debtor, its successors and assigns shall at all times indemnify and save harmless the Securities Intermediary from and against any and all claims, actions and suits of others arising out of the terms of this Agreement or the compliance of the Securities Intermediary with the terms hereof, except to the extent that such arises from the Securities Intermediary’s negligence, and from and against any and all liabilities, losses, damages, costs, charges, counsel fees and other expenses of every nature and character arising by reason of the same, until the termination of this Agreement.

 

Section 11.  Successors; Assignment.  The terms of this Agreement shall be binding upon, and shall inure to the benefit of, the parties hereto and their respective corporate successors or heirs and personal representatives who obtain such rights solely by operation of law.  The Collateral Agent may assign its rights hereunder only with the express written consent of the Securities Intermediary and by sending written notice of such assignment to the Debtor.

 

Section 12.  Notices.   Any notice, request or other communication required or permitted to be given under this Agreement shall be in writing and deemed to have been properly given when delivered in person, or when sent by telecopy or other electronic means and electronic confirmation of error free receipt is received or two (2) days after being sent by certified or registered United States mail, return receipt requested, postage prepaid, addressed to the party at the address set forth below.

 

	
Debtor:

	
[INSERT ADDRESS]

	  	
Attention:

	  	
Telecopier:

	 	 
	
Collateral Agent:

	
[INSERT ADDRESS]

	  	
Attention:

	  	
Telecopier:

	 	 
	
Securities Intermediary:

	
[INSERT ADDRESS]

	  	
Attention:

	  	
Telecopier:

 

Any party may change its address for notices in the manner set forth above.

 

Section 13.  Termination.  The obligations of the Securities Intermediary to the Collateral Agent pursuant to this Agreement shall continue in effect until the security interest of the Collateral Agent in the Securities Account has been terminated pursuant to the terms of the Security Agreement and the Collateral Agent has notified the Securities Intermediary of such termination in writing.  The Collateral Agent agrees to provide Notice of Termination in substantially the form of Exhibit C hereto to the Securities Intermediary upon the request of the Debtor on or after the termination of the Collateral Agent’s security interest in the Securities Account pursuant to the terms of the Security Agreement.  The termination of this Agreement shall not terminate the Securities Account or alter the obligations of the Securities Intermediary to the Debtor pursuant to any other agreement with respect to the Securities Account.

 

Section 14.  Counterparts.  This Agreement may be executed in any number of counterparts, all of which shall constitute one and the same instrument, and any party hereto may execute this Agreement by signing and delivering one or more counterparts.

 

  

EXHIBIT C-4

  

IN WITNESS WHEREOF, the parties hereto have caused this Securities Account Control Agreement to be executed as of the date first above written by their respective officers thereunto duly authorized.

 

	
[DEBTOR]

	  
	  
	
By:                                          

	
Name:

	
Title:

	  
	  
	
GOLDMAN SACHS BANK USA,

	
  as Collateral Agent

	  
	  
	
By:                                          

	
Name:

	
Title:

	  
	  
	  
	
[NAME OF SECURITIES INTERMEDIARY],

	
  as Securities Intermediary

	  
	  
	
By:                                          

	
Name:

	
Title:

 

  

EXHIBIT C-5

  

EXHIBIT A

TO SECURITIES ACCOUNT CONTROL AGREEMENT

[Letterhead of Collateral Agent]

 

[Date]

 

[Name and Address of Securities Intermediary]

Attention:

Re:  Notice of Sole Control

Ladies and Gentlemen:

As referenced in the Securities Account Control Agreement dated as of _______, 20__ among [NAME OF THE DEBTOR] (the “Debtor”), you and the undersigned (a copy of which is attached), we hereby give you notice of our sole control over securities account number ____________ (the “Securities Account”) and all financial assets credited thereto.  You are hereby instructed not to accept any direction, instructions or entitlement orders with respect to the Securities Account or the financial assets credited thereto from any person other than the undersigned, unless otherwise ordered by a court of competent jurisdiction.

 

You are instructed to deliver a copy of this notice by facsimile transmission to the Debtor.

 

	
Very truly yours,

	  
	  
	
GOLDMAN SACHS BANK USA,

	
  as Collateral Agent

	  
	
By:                                                     

	
Name:

	
Title:

cc:  [NAME OF THE DEBTOR]

 

  

EXHIBIT C-A-1

  

EXHIBIT B

TO SECURITIES ACCOUNT CONTROL AGREEMENT

Permitted Investments

 

[TO COME]

 

  

EXHIBIT C-B-1

  

EXHIBIT C

TO SECURITIES ACCOUNT CONTROL AGREEMENT

[Letterhead of the Collateral Agent]

 

 

[Date]

 

 [Name and Address of Securities Intermediary]

Attention:

Re:  Termination of Securities Account Control Agreement

You are hereby notified that the Securities Account Control Agreement dated as of _______, 20__ among you, [NAME OF THE DEBTOR] (the “Debtor”)  and the undersigned (a copy of which is attached) is terminated and you have no further obligations to the undersigned pursuant to such Agreement.  Notwithstanding any previous instructions to you, you are hereby instructed to accept all future directions with respect to account number(s)                from the Debtor.  This notice terminates any obligations you may have to the undersigned with respect to such account, however nothing contained in this notice shall alter any obligations which you may otherwise owe to the Debtor pursuant to any other agreement.

 

You are instructed to deliver a copy of this notice by facsimile transmission to the Debtor.

 

	
Very truly yours,

	  
	  
	
GOLDMAN SACHS BANK USA,

	
  as Collateral Agent

	  
	
By:                                                     

	
Name:

	
Title:

  

EXHIBIT C-C-1

  

EXHIBIT D

TO PLEDGE AND SECURITY AGREEMENT

DEPOSIT ACCOUNT CONTROL AGREEMENT

 

This Deposit Account Control Agreement dated as of _________, 20__ (this “Agreement”) among ___________ (the “Debtor”), ___________, as collateral agent for the Secured Parties (the “Collateral Agent”) and ____________, in its capacity as a “bank” as defined in Section 9-102 of the UCC (in such capacity, the “Financial Institution”).  Capitalized terms used but not defined herein shall have the meaning assigned thereto in the Pledge and Security Agreement, dated [as of the date hereof], between the Debtor, the other Grantors party thereto and the Collateral Agent (as amended, restated, supplemented or otherwise modified from time to time, the “Security Agreement”).  All references herein to the “UCC” shall mean the Uniform Commercial Code as in effect in the State of New York.

 

Section 1.  Establishment of Deposit Account.  The Financial Institution hereby confirms and agrees that:

 

(a)  The Financial Institution has established account number [IDENTIFY ACCOUNT NUMBER] in the name “[IDENTIFY EXACT TITLE OF ACCOUNT]” (such account and any successor account, the “Deposit Account”) and the Financial Institution shall not change the name or account number of the Deposit Account without the prior written consent of the Collateral Agent and, prior to delivery of a Notice of Sole Control in substantially the form set forth in Exhibit A hereto, the Debtor; and

 

(b)  The Deposit Account is a “deposit account” within the meaning of Section 9-102(a)(29) of the UCC.

 

Section 2.  Control of the Deposit Account.  If at any time the Financial Institution shall receive any instructions originated by the Collateral Agent directing the disposition of funds in the Deposit Account, the Financial Institution shall comply with such instructions without further consent by the Debtor or any other person.  The Financial Institution hereby acknowledges that it has received notice of the security interest of the Collateral Agent in the Deposit Account and hereby acknowledges and consents to such lien.  If the Debtor is otherwise entitled to issue instructions and such instructions conflict with any instructions issued the Collateral Agent, the Financial Institution shall follow the instructions issued by the Collateral Agent.

 

Section 3.  Subordination of Lien; Waiver of Set-Off.  In the event that the Financial Institution has or subsequently obtains by agreement, by operation of law or otherwise a security interest in the Deposit Account or any funds credited thereto, the Financial Institution hereby agrees that such security interest shall be subordinate to the security interest of the Collateral Agent.  Money and other items credited to the Deposit Account will not be subject to deduction, set-off, banker’s lien, or any other right in favor of any person other than the Collateral Agent (except that the Financial Institution may set off (i) all amounts due to the Financial Institution in respect of customary fees and expenses for the routine maintenance and operation of the Deposit Account and (ii) the face amount of any checks which have been credited to such Deposit Account but are subsequently returned unpaid because of uncollected or insufficient funds).

 

  

EXHIBIT D-1

  

Section 4.  Choice of Law.  This Agreement and the Deposit Account shall each be governed by the laws of the State of New York.  Regardless of any provision in any other agreement, for purposes of the UCC, New York shall be deemed to be the Financial Institution’s jurisdiction (within the meaning of Section 9-304 of the UCC) and the Deposit Account shall be governed by the laws of the State of New York.

 

Section 5.  Conflict with Other Agreements.

 

(a)  In the event of any conflict between this Agreement (or any portion thereof) and any other agreement now existing or hereafter entered into, the terms of this Agreement shall prevail;

 

(b)  No amendment or modification of this Agreement or waiver of any right hereunder shall be binding on any party hereto unless it is in writing and is signed by all of the parties hereto; and

 

(c)  The Financial Institution hereby confirms and agrees that:

 

(i)           There are no other agreements entered into between the Financial Institution and the Debtor with respect to the Deposit Account [other than ____________]; and

 

(ii)           It has not entered into, and until the termination of this Agreement, will not enter into, any agreement with any other person relating the Deposit Account and/or any funds credited thereto pursuant to which it has agreed to comply with instructions originated by such persons as contemplated by Section 9-104 of the UCC.

 

Section 6.  Adverse Claims.  The Financial Institution does not know of any liens, claims or encumbrances relating to the Deposit Account.  If any person asserts any lien, encumbrance or adverse claim (including any writ, garnishment, judgment, warrant of attachment, execution or similar process) against the Deposit Account, the Financial Institution will promptly notify the Collateral Agent and the Debtor thereof.

 

Section 7.  Maintenance of Deposit Account.  In addition to, and not in lieu of, the obligation of the Financial Institution to honor instructions as set forth in Section 2 hereof, the Financial Institution agrees to maintain the Deposit Account as follows:

 

(a)  Notice of Sole Control.  If at any time the Collateral Agent delivers to the Financial Institution a Notice of Sole Control in substantially the form set forth in Exhibit A hereto, the Financial Institution agrees that after receipt of such notice, it will take all instruction with respect to the Deposit Account solely from the Collateral Agent.

 

(b)  Statements and Confirmations.  The Financial Institution will promptly send copies of all statements, confirmations and other correspondence concerning the Deposit Account simultaneously to each of the Debtor and the Collateral Agent at the address for each set forth in Section 11 of this Agreement; and

 

(c)  Tax Reporting.  All interest, if any, relating to the Deposit Account, shall be reported to the Internal Revenue Service and all state and local taxing authorities under the name and taxpayer identification number of the Debtor.

 

  

EXHIBIT D-2

  

Section 8.   Representations, Warranties and Covenants of the Financial Institution.  The Financial Institution hereby makes the following representations, warranties and covenants:

 

(a)  The Deposit Account has been established as set forth in Section 1 and such Deposit Account will be maintained in the manner set forth herein until termination of this Agreement; and

 

(b)  This Agreement is the valid and legally binding obligation of the Financial Institution.

 

Section 9.   Indemnification of Financial Institution.  The Debtor and the Collateral Agent hereby agree that (a) the Financial Institution is released from any and all liabilities to the Debtor and the Collateral Agent arising from the terms of this Agreement and the compliance of the Financial Institution with the terms hereof, except to the extent that such liabilities arise from the Financial Institution’s negligence and (b) the Debtor, its successors and assigns shall at all times indemnify and save harmless the Financial Institution from and against any and all claims, actions and suits of others arising out of the terms of this Agreement or the compliance of the Financial Institution with the terms hereof, except to the extent that such arises from the Financial Institution’s negligence, and from and against any and all liabilities, losses, damages, costs, charges, counsel fees and other expenses of every nature and character arising by reason of the same, until the termination of this Agreement.

 

Section 10.  Successors; Assignment.  The terms of this Agreement shall be binding upon, and shall inure to the benefit of, the parties hereto and their respective corporate successors or heirs and personal representatives who obtain such rights solely by operation of law.  The Collateral Agent may assign its rights hereunder only with the express written consent of the Financial Institution and by sending written notice of such assignment to the Debtor.

 

Section 11  Notices.   Any notice, request or other communication required or permitted to be given under this Agreement shall be in writing and deemed to have been properly given when delivered in person, or when sent by telecopy or other electronic means and electronic confirmation of error free receipt is received or two (2) days after being sent by certified or registered United States mail, return receipt requested, postage prepaid, addressed to the party at the address set forth below.

 

 

	
Debtor:

	
[INSERT ADDRESS]

	  	
Attention:

	  	
Telecopier:

	 	 
	
Collateral Agent:

	
[INSERT ADDRESS]

	  	
Attention:

	  	
Telecopier:

	 	 
	
Securities Intermediary:

	
[INSERT ADDRESS]

	  	
Attention:

	  	
Telecopier:

 

Any party may change its address for notices in the manner set forth above.

 

Section 12.  Termination.  The obligations of the Financial Institution to the Collateral Agent pursuant to this Agreement shall continue in effect until the security interest of the 

 

  

EXHIBIT D-3

  

Collateral Agent in the Deposit Account has been terminated pursuant to the terms of the Security Agreement and the Collateral Agent has notified the Financial Institution of such termination in writing.  The Collateral Agent agrees to provide Notice of Termination in substantially the form of Exhibit A hereto to the Financial Institution upon the request of the Debtor on or after the termination of the Collateral Agent’s security interest in the Deposit Account pursuant to the terms of the Security Agreement.  The termination of this Agreement shall not terminate the Deposit Account or alter the obligations of the Financial Institution to the Debtor pursuant to any other agreement with respect to the Deposit Account.

 

Section 13.  Counterparts.  This Agreement may be executed in any number of counterparts, all of which shall constitute one and the same instrument, and any party hereto may execute this Agreement by signing and delivering one or more counterparts.

 

        IN WITNESS WHEREOF, the parties hereto have caused this Deposit Account Control Agreement to be executed as of the date first above written by their respective officers thereunto duly authorized.

 

 

 

	
[DEBTOR]

	  
	  
	
By:                                          

	
Name:

	
Title:

	  
	  
	
GOLDMAN SACHS BANK USA,

	
as Collateral Agent

	  
	  
	
By:                                          

	
Name:

	
Title:

	  
	  
	  
	
[NAME OF FINANCIAL INSTITUTION],

	
as Financial Institution

	  
	  
	
By:                                          

	
Name:

	
Title:

 

  

EXHIBIT D-4

  

EXHIBIT A

TO DEPOSIT ACCOUNT CONTROL AGREEMENT

[Letterhead of Collateral Agent]

 

[Date]

 

[Name and Address of Financial Institution]

Attention:

Re:  Notice of Sole Control

Ladies and Gentlemen:

As referenced in the Deposit Account Control Agreement dated as of _______, 20__ among [NAME OF THE DEBTOR] (the “Debtor”), you and the undersigned (a copy of which is attached), we hereby give you notice of our sole control over deposit account number ____________ (the “Deposit Account”) and all financial assets credited thereto.  You are hereby instructed not to accept any direction, instructions or entitlement orders with respect to the Deposit Account or the financial assets credited thereto from any person other than the undersigned, unless otherwise ordered by a court of competent jurisdiction.

 

You are instructed to deliver a copy of this notice by facsimile transmission to the Debtor.

 

 

	
Very truly yours,

	  
	  
	
GOLDMAN SACHS BANK USA,

	
  as Collateral Agent

	  
	
By:                                                     

	
Name:

	
Title:

cc:  [NAME OF THE DEBTOR]

 

  

EXHIBIT D-A-1

  

EXHIBIT B

TO DEPOSIT ACCOUNT CONTROL AGREEMENT

[Letterhead of the Collateral Agent]

 

[Date]

 

[Name and Address of Financial Institution]

Attention:

Re:  Termination of Deposit Account Control Agreement

You are hereby notified that the Deposit Account Control Agreement dated as of __________, 20__ among [NAME OF THE DEBTOR] (the “Debtor”), you and the undersigned (a copy of which is attached) is terminated and you have no further obligations to the undersigned pursuant to such Agreement.  Notwithstanding any previous instructions to you, you are hereby instructed to accept all future directions with respect to account number(s)                from the Debtor.  This notice terminates any obligations you may have to the undersigned with respect to such account, however nothing contained in this notice shall alter any obligations which you may otherwise owe to the Debtor pursuant to any other agreement.

 

You are instructed to deliver a copy of this notice by facsimile transmission to the Debtor.

 

 

	
Very truly yours,

	  
	  
	
GOLDMAN SACHS BANK USA,

	
  as Collateral Agent

	  
	
By:                                                     

	
Name:

	
Title:

  

EXHIBIT D-B-1

  

EXHIBIT E

TO PLEDGE AND SECURITY AGREEMENT

TRADEMARK SECURITY AGREEMENT

This TRADEMARK SECURITY AGREEMENT, dated as of [_____, 20__] (this “Trademark Security Agreement), by [NAME], a [STATE] [TYPE OF ORGANIZATION] and [NAME], a [STATE] [TYPE OF ORGANIZATION] (each a “Grantor” and together the “Grantors”), in favor of GOLDMAN SACHS BANK USA, in its capacity as Collateral Agent (the “Collateral Agent”) for the Secured Parties.

 

W I T N E S S E T H:

 

WHEREAS, pursuant to that certain Credit and Guaranty Agreement, dated as of May 2, 2014, by and among Vertex Energy, Inc., a Nevada corporation (“Holdings”), Vertex Energy Operating, LLC, a Texas limited liability company (“Company”), certain other Subsidiaries of Holdings party thereto from time to time, as Guarantors, the Lenders party thereto from time to time and Goldman Sachs Bank USA, as Administrative Agent, Collateral Agent and Lead Arranger (including all annexes, exhibits or schedules thereto, as from time to time amended, restated, replaced, supplemented or otherwise modified, the “Credit Agreement”), Lenders and Lender Counterparties have agreed to make the Term Loan and certain financial accommodations to Company;

 

WHEREAS, Lenders and Lender Counterparties are willing to make the Term Loan and certain financial accommodations as provided for in the Credit Agreement, but only upon the condition, among others, that Grantors shall have executed and delivered to Collateral Agent, for itself and the ratable benefit of Secured Parties, that certain Pledge and Security Agreement, dated as of May 2, 2014 (including all annexes, exhibits or schedules thereto, as from time to time amended, restated, supplemented or otherwise modified, the “Security Agreement”);

 

WHEREAS, pursuant to the Security Agreement, Grantors are required to execute and deliver to Collateral Agent, for itself and the ratable benefit of the Secured Parties, this Trademark Security Agreement;

 

NOW, THEREFORE, in consideration of the premises and mutual covenants herein contained and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, Grantors hereby agree as follows:

 

	
  

	
1.

	
DEFINED TERMS.  All capitalized terms used but not otherwise defined herein have the meanings given to them in the Security Agreement.

 

	
  

	
2.

	
GRANT OF SECURITY INTEREST IN TRADEMARK COLLATERAL.  Grantors hereby grant to Collateral Agent, on behalf of itself and the Secured Parties, a continuing first priority security interest in all of Grantors’ right, title and interest in, to and under the following, whether presently existing or hereafter created or acquired (collectively, the “Trademark Collateral”):

 

(a)      all of its Trademarks and Trademark Licenses to which it is a party including those referred to on Schedule I hereto;

 

(b)      all reissues, continuations or extensions of the foregoing;

 

  

EXHIBIT E-1

  

(c)      all goodwill of the business connected with the use of, and symbolized by, each Trademark and each Trademark License; and

 

(d)      all products and proceeds of the foregoing, including, without limitation, any claim by either Grantor against third parties for past, present or future (i) infringement or dilution of any Trademark or Trademark licensed under any Trademark License or (ii) injury to the goodwill associated with any Trademark or any Trademark licensed under any Trademark License.

 

	
  

	
3.

	
SECURITY AGREEMENT.  Each Grantor hereby acknowledges and affirms that the rights and remedies of Collateral Agent with respect to the security interest in the Trademark Collateral made and granted hereby are more fully set forth in the Security Agreement.

 

	
  

	
4.

	
COUNTERPARTS.  This Trademark Security Agreement may be executed in any number of counterparts and by different parties in separate counterparts, each of which when so executed shall be deemed to be an original and all of which taken together shall constitute one and the same agreement.  Signature pages may be detached from multiple separate counterparts and attached to a single counterpart.

 

	
  

	
5.

	
GOVERNING LAW.  This Trademark Security Agreement and the rights and obligations of the parties hereto shall be governed by, and construed and interpreted in accordance with, the law of the State of New York.

 

[Remainder of Page Intentionally Left Blank]

 

 

  

EXHIBIT E-2

  

IN WITNESS WHEREOF, Grantors have caused this Trademark Security Agreement to be executed and delivered by its duly authorized officer as of the date first set forth above.

 

	
[NAME OF GRANTOR]

	  
	
By:                                                     

	
Name:                                                     

	
Title:                                                     

	  
	  
	
[NAME OF GRANTOR]

	  
	  
	
By:                                                     

	
Name:                                                     

	
Title:                                                     

  

EXHIBIT E-3

  

ACCEPTED AND ACKNOWLEDGED BY:

GOLDMAN SACHS BANK USA,

as Collateral Agent

By:                                                                

Name:

Title:

 

 

  

EXHIBIT E-4

  

 

SCHEDULE I

 

to

 

TRADEMARK SECURITY AGREEMENT

 

 

TRADEMARK  REGISTRATIONS

 

	
 

TRADEMARK

	
 

OWNER

	
 

REGISTRATION NO.

	
 

REGISTRATION DATE

 

 

  

EXHIBIT E-5

  

EXHIBIT F

TO PLEDGE AND SECURITY AGREEMENT

COPYRIGHT SECURITY AGREEMENT

This COPYRIGHT SECURITY AGREEMENT, dated as of _____, 20__ (this “Copyright Security Agreement”), by [NAME], a [STATE] [TYPE OF ORGANIZATION] and [NAME], a [STATE] [TYPE OF ORGANIZATION] (each a “Grantor” and together the “Grantors”), in favor of GOLDMAN SACHS BANK USA, in its capacity as Collateral Agent (the “Collateral Agent”) for the Secured Parties.

 

W I T N E S S E T H:

 

WHEREAS, pursuant to that certain Credit and Guaranty Agreement, dated as of May 2, 2014, by and among Vertex Energy, Inc., a Nevada corporation (“Holdings”), Vertex Energy Operating, LLC, a Texas limited liability company (“Company”), certain other Subsidiaries of Holdings party thereto from time to time, as Guarantors, the Lenders party thereto from time to time and Goldman Sachs Bank USA, as Administrative Agent, Collateral Agent and Lead Arranger (including all annexes, exhibits or schedules thereto, as from time to time amended, restated, replaced, supplemented or otherwise modified, the “Credit Agreement”), Lenders and Lender Counterparties have agreed to make the Term Loan and certain financial accommodations to Company;

 

WHEREAS, Lenders and Lender Counterparties are willing to make the Term Loan and certain financial accommodations as provided for in the Credit Agreement, but only upon the condition, among others, that Grantors shall have executed and delivered to Collateral Agent, for itself and the ratable benefit of the Secured Parties, that certain Pledge and Security Agreement, dated as of May 2, 2014 (including all annexes, exhibits or schedules thereto, as from time to time amended, restated, supplemented or otherwise modified, the “Security Agreement”);

 

WHEREAS, pursuant to the Security Agreement, Grantors are required to execute and deliver to Collateral Agent, for itself and the ratable benefit of Secured Parties, this Copyright Security Agreement;

 

NOW, THEREFORE, in consideration of the premises and mutual covenants herein contained and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, Grantors hereby agree as follows:

 

	
  

	
1.

	
DEFINED TERMS.  All capitalized terms used but not otherwise defined herein have the meanings given to them in the Security Agreement.

 

	
  

	
2.

	
GRANT OF SECURITY INTEREST IN COPYRIGHT COLLATERAL.  Grantors hereby grant to Collateral Agent, on behalf of itself and the Secured Parties, a continuing first priority security interest in all of Grantors’ right, title and interest in, to and under the following, whether presently existing or hereafter created or acquired (collectively, the “Copyright Collateral”):

 

  

EXHIBIT F-1

  

(a)      all of its Copyrights and all Copyright Licenses providing for the grant by or to such Grantor of any right under any Copyright, including, without limitation, those referred to on Schedule 1 hereto;

 

(b)      all renewals, reversions and extensions of the foregoing; and

 

(c)      all income, royalties, products and  proceeds of the foregoing, including, without limitation, all rights to sue and recover at law or in equity for any past, present and future infringement, misappropriation, dilution, violation or other impairment thereof.

 

	
  

	
3.

	
SECURITY AGREEMENT.  Each Grantor hereby acknowledges and affirms that the rights and remedies of Collateral Agent with respect to the security interest in the Copyright Collateral made and granted hereby are more fully set forth in the Security Agreement.

 

	
  

	
4.

	
COUNTERPARTS.  This Copyright Security Agreement may be executed in any number of counterparts and by different parties in separate counterparts, each of which when so executed shall be deemed to be an original and all of which taken together shall constitute one and the same agreement.  Signature pages may be detached from multiple separate counterparts and attached to a single counterpart.

 

	
  

	
5.

	
GOVERNING LAW.  This Copyright Security Agreement and the rights and obligations of the parties hereto shall be governed by, and construed and interpreted in accordance with, the law of the State of New York.

 

[Remainder of Page Intentionally Left Blank]

  

EXHIBIT F-2

  

IN WITNESS WHEREOF, Grantors have caused this Copyright Security Agreement to be executed and delivered by its duly authorized officer as of the date first set forth above.

 

 

	
[NAME OF GRANTOR]

	  
	
By:                                                     

	
Name:                                                     

	
Title:                                                     

	  
	  
	
[NAME OF GRANTOR]

	  
	  
	
By:                                                     

	
Name:                                                     

	
Title:                                                     

                                          

  

EXHIBIT F-3

  

ACCEPTED AND ACKNOWLEDGED BY:

GOLDMAN SACHS BANK USA,

as Collateral Agent

By:           

Name:

Title:

  

EXHIBIT F-4

  

SCHEDULE I

 

to

 

COPYRIGHT SECURITY AGREEMENT

 

 

COPYRIGHT REGISTRATIONS

 

	
 

COPYRIGHT

	
 

OWNER

	
 

REGISTRATION NO.

	
 

REGISTRATION DATE

 

 

  

EXHIBIT F-5

  

EXHIBIT G

TO PLEDGE AND SECURITY AGREEMENT

PATENT SECURITY AGREEMENT

This PATENT SECURITY AGREEMENT, dated as of _____, 20__ (this “Patent Security Agreement”), by [NAME], a [STATE] [TYPE OF ORGANIZATION] and [NAME], a [STATE] [TYPE OF ORGANIZATION] (each a “Grantor” and together the “Grantors”), in favor of GOLDMAN SACHS BANK USA, in its capacity as Collateral Agent (the “Collateral Agent”) for the Secured Parties.

 

W I T N E S S E T H:

 

WHEREAS, pursuant to that certain Credit and Guaranty Agreement, dated as of May 2, 2014, by and among Vertex Energy, Inc., a Nevada corporation (“Holdings”), Vertex Energy Operating, LLC, a Texas limited liability company (“Company”), certain other Subsidiaries of Holdings party thereto from time to time, as Guarantors, the Lenders party thereto from time to time and Goldman Sachs Bank USA, as Administrative Agent, Collateral Agent and Lead Arranger (including all annexes, exhibits or schedules thereto, as from time to time amended, restated, replaced, supplemented or otherwise modified, the “Credit Agreement”), Lenders and Lender Counterparties have agreed to make the Term Loan and certain financial accommodations to Company;

 

WHEREAS, Lenders and Lender Counterparties are willing to make the Term Loan and certain financial accommodations as provided for in the Credit Agreement, but only upon the condition, among others, that Grantors shall have executed and delivered to Collateral Agent, for itself and the ratable benefit of the Secured Parties, that certain Pledge and Security Agreement, dated as of May 2, 2014 (including all annexes, exhibits or schedules thereto, as from time to time amended, restated, supplemented or otherwise modified, the “Security Agreement”);

 

WHEREAS, pursuant to the Security Agreement, Grantors are required to execute and deliver to Collateral Agent, for itself and the ratable benefit of the Secured Parties, this Patent Security Agreement;

 

NOW, THEREFORE, in consideration of the premises and mutual covenants herein contained and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, Grantors hereby agree as follows:

 

	
  

	
1.

	
DEFINED TERMS.  All capitalized terms used but not otherwise defined herein have the meanings given to them in the Security Agreement.

 

	
  

	
2.

	
GRANT OF SECURITY INTEREST IN PATENT COLLATERAL.  Grantors hereby grant to Collateral Agent, on behalf of itself and the Secured Parties, a continuing first priority security interest in all of Grantors’ right, title and interest in, to and under the following, whether presently existing or hereafter created or acquired (collectively, the “Patent Collateral”):

 

  

EXHIBIT G-1

  

(a)      all of its Patents and all Patent Licenses providing for the grant by or to such Grantor of any right under any Patent, including, without limitation, those referred to on Schedule I hereto;

 

(b)      all reissues, reexaminations, continuations, continuations-in-part, divisionals, renewals and extensions of the foregoing; and

 

(c)      all income, royalties, proceeds and Liabilities at any time due or payable or asserted under and with respect to any of the foregoing, including, without limitation, all rights to sue and recover at law or in equity for any past, present and future infringement, misappropriation, dilution, violation or other impairment thereof.

 

	
  

	
3.

	
SECURITY AGREEMENT.  Each Grantor hereby acknowledges and affirms that the rights and remedies of Collateral Agent with respect to the security interest in the Patent Collateral made and granted hereby are more fully set forth in the Security Agreement.

 

	
  

	
4.

	
COUNTERPARTS.  This Patent Security Agreement may be executed in any number of counterparts and by different parties in separate counterparts, each of which when so executed shall be deemed to be an original and all of which taken together shall constitute one and the same agreement.  Signature pages may be detached from multiple separate counterparts and attached to a single counterpart.

 

	
  

	
5.

	
GOVERNING LAW.  This Patent Security Agreement and the rights and obligations of the parties hereto shall be governed by, and construed and interpreted in accordance with, the law of the State of New York.

 

[Remainder of Page Intentionally Left Blank]

  

EXHIBIT G-2

  

IN WITNESS WHEREOF, Grantors have caused this Patent Security Agreement to be executed and delivered by its duly authorized officer as of the date first set forth above.

 

[NAME OF GRANTOR]

 

By:                                                      

Name:

Title:

 

[NAME OF GRANTOR]

 

By:                                                      

Name:

Title:

  

EXHIBIT G-3

  

ACCEPTED AND ACKNOWLEDGED BY:

GOLDMAN SACHS BANK USA,

as Collateral Agent

By:                                                                

Name:

Title:

  

EXHIBIT G-4

  

SCHEDULE I

 

to

 

PATENT SECURITY AGREEMENT

 

 

PATENT REGISTRATIONS

 

	
 

PATENT

	
 

OWNER

	
 

REGISTRATION NO.

	
 

REGISTRATION DATE

 

 

EXHIBIT G-5ex10-6.htm

**************************************************

MATERIAL BELOW MARKED BY AN “***” HAS BEEN OMITTED PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT.  THIS ENTIRE EXHIBIT INCLUDING THE OMITTED CONFIDENTIAL INFORMATION HAS BEEN FILED SEPARATELY WITH THE COMMISSION.

**************************************************

 

EXHIBIT 10.6

 

AMENDED AND RESTATED CREDIT AGREEMENT

 

among

 

VERTEX ENERGY, INC.,

and

VERTEX ENERGY OPERATING, LLC

as Borrowers

 

and

 

 

BANK OF AMERICA, N.A.,

Lender

 

 

As of May 2, 2014

 

  

 

  

TABLE OF CONTENTS

 

	  	  	
Page

	
SECTION 1

	
DEFINITIONS AND TERMS

	
1

	
1.1

	
Definitions

	
1

	
1.2

	
Interpretive Provisions

	
24

	
1.3

	
Accounting Terms

	
25

	
1.4

	
References to Documents

	
25

	
1.5

	
Time

	
25

	 	 	 
	
SECTION 2

	
LOAN COMMITMENTS

	
25

	
2.1

	
Revolving Credit Facility

	
25

	
2.2

	
Loan Procedure

	
25

	
2.3

	
Prepayments

	
26

	
2.4

	
LC Facility

	
27

	
2.5

	
Increase in Revolving Facility

	
30

	 	 	 
	
SECTION 3

	
TERMS OF PAYMENT

	
30

	
3.1

	
Notes and Payments

	
30

	
3.2

	
Revolving Credit Facility

	
30

	
3.3

	
Order of Application

	
31

	
3.4

	
Interest

	
31

	
3.5

	
Interest Calculations

	
31

	
3.6

	
Maximum Rate

	
32

	
3.7

	
Set-Off

	
32

	
3.8

	
Debit Account

	
32

	 	 	 
	
SECTION 4

	
FEES

	
33

	
4.1

	
Treatment of Fees

	
33

	
4.2

	
Commitment Fee

	
33

	
4.3

	
Closing Fee

	
33

	
4.4

	
LC Fees

	
33

	 	 	 
	
SECTION 5

	
CONDITIONS PRECEDENT

	
33

	
5.1

	
Conditions to Initial Credit Extension

	
33

	
5.2

	
Conditions to all Credit Extensions

	
34

	
5.3

	
Conditions to all LIBOR Loans

	
34

	
5.4

	
No Waiver

	
34

	 	 	 
	
SECTION 6

	
SECURITY AND GUARANTIES

	
34

	
6.1

	
Collateral

	
34

	
6.2

	
Financing Statements

	
34

	
6.3

	
Guaranties

	
34

	
6.4

	
Reserves

	
35

	 	 	 
	
SECTION 7

	
REPRESENTATIONS AND WARRANTIES

	
35

	
7.1

	
Existence, Good Standing, and Authority to do Business

	
35

	
7.2

	
Subsidiaries

	
35

 

  

i

  

 

	
7.3

	
Authorization, Compliance, and No Default

	
35

	
7.4

	
Enforceability

	
35

	
7.5

	
Litigation

	
35

	
7.6

	
Taxes

	
35

	
7.7

	
Environmental Matters

	
35

	
7.8

	
Ownership of Assets; Intellectual Property

	
36

	
7.9

	
Liens

	
36

	
7.10

	
Debt

	
36

	
7.11

	
Insurance

	
36

	
7.12

	
Place of Business; Real Property

	
36

	
7.13

	
Purpose of Credit Facilities

	
36

	
7.14

	
Trade Names

	
36

	
7.15

	
Transactions with Affiliates

	
36

	
7.16

	
Financial Information

	
36

	
7.17

	
Material Contracts and Funded Debt

	
37

	
7.18

	
ERISA

	
37

	
7.19

	
Government Sanctions

	
37

	
7.20

	
Solvency

	
38

	  	  	  
	
SECTION 8

	
AFFIRMATIVE COVENANTS

	
38

	
8.1

	
Items to be Furnished

	
38

	
8.2

	
Books, Records and Inspections

	
39

	
8.3

	
Taxes

	
39

	
8.4

	
Compliance with Laws

	
40

	
8.5

	
Maintenance of Existence, Assets, and Business

	
40

	
8.6

	
Insurance

	
40

	
8.7

	
Environmental Laws

	
40

	
8.8

	
ERISA

	
40

	
8.9

	
Use of Proceeds

	
40

	
8.10

	
Application of Insurance and Eminent Domain Proceeds

	
40

	
8.11

	
New Subsidiaries

	
41

	
8.12

	
Expenses

	
41

	
8.13

	
Primary Depositary Institution

	
41

	
8.14

	
Further Assurances

	
41

	
8.15

	
Keepwell

	
41

	
8.16

	
Equity Raise

	
42

	
8.17

	
Miscellaneous Business Covenants

	
42

	  	  	  
	
SECTION 9

	
NEGATIVE COVENANTS

	
42

	
9.1

	
Debt

	
42

	
9.2

	
Liens

	
43

	
9.3

	
Compliance

	
43

	
9.4

	
Loans and Investments

	
43

	
9.5

	
Dividends

	
43

	
9.6

	
Acquisition, Mergers, and Dissolutions

	
43

	
9.7

	
Assignment

	
44

	
9.8

	
Fiscal Year and Accounting Methods

	
44

	
9.9

	
Sale of Assets

	
44

	
9.10

	
New Businesses

	
44

	
9.11

	
Transactions with Affiliates

	
44

 

  

ii

  

	
9.12

	
Payroll Taxes

	
44

	
9.13

	
Prepayment of Debt

	
44

	
9.14

	
Purchase Agreement

	
45

	  	  	  
	
SECTION 10

	
FINANCIAL COVENANTS

	
45

	
10.1

	
Fixed Charge Coverage Ratio

	
45

	
10.2

	
Leverage Ratio

	
45

	
10.3

	
Consolidated Adjusted EBITDA

	
45

	
10.4

	
Minimum Consolidated Liquidity

	
46

	
10.5

	
Certain Calculations

	
46

	  	  	  
	
SECTION 11

	
EVENTS OF DEFAULT

	
46

	
11.1

	
Payment of Obligation

	
46

	
11.2

	
Covenants

	
46

	
11.3

	
Debtor Relief

	
47

	
11.4

	
Judgments

	
47

	
11.5

	
False Information; Misrepresentation

	
47

	
11.6

	
Default Under Other Agreements

	
47

	
11.7

	
Validity and Enforceability of Loan Documents

	
47

	
11.8

	
Hedge Agreement

	
47

	
11.9

	
Change of Management or Control

	
48

	
11.10

	
Material Adverse Effect

	
48

	
11.11

	
LCs

	
48

	
11.12

	
Default under the Subject Leases

	
48

	
11.13

	
Default under GS Term Loan Agreement

	
48

	  	  	  
	
SECTION 12

	
RIGHTS AND REMEDIES

	
48

	
12.1

	
Remedies Upon Event of Default

	
48

	
12.2

	
Waivers

	
48

	
12.3

	
No Waiver

	
48

	
12.4

	
Performance by Lender

	
49

	
12.5

	
Cash Collateral

	
49

	
12.6

	
Cumulative Rights

	
49

	  	  	  
	
SECTION 13

	
MISCELLANEOUS

	
49

	
13.1

	
Governing Law

	
49

	
13.2

	
Invalid Provisions

	
49

	
13.3

	
Multiple Counterparts and Electronic Signatures

	
49

	
13.4

	
Notice

	
49

	
13.5

	
Binding Effect; Survival

	
50

	
13.6

	
Amendments; Amendment and Restatement of Original Credit Agreement

	
50

	
13.7

	
Participants

	
50

	
13.8

	
Discharge Only Upon Payment in Full; Reinstatement in Certain Circumstances

	
50

	
13.9

	
Arbitration; Waiver of Jury Trial

	
50

	
13.10

	
Indemnity

	
52

	
13.11

	
Indemnity Regarding Hazardous Materials

	
52

	
13.12

	
Joint and Several Liability

	
53

	
13.13

	
Borrower Representative

	
54

	
13.14

	
USA Patriot Act Notice

	
54

 

  

iii

  

	
13.15

	
Entirety

	
54

  

iv

  

 

SCHEDULES AND EXHIBITS

 

 

	
SCHEDULE 1

	  	
Parties, Addresses, and Wiring Information

	
SCHEDULE 2

	  	
Existing Debt and Liens

	
SCHEDULE 5

	  	
Conditions Precedent

	
SCHEDULE 7.2

	  	
Subsidiaries

	
SCHEDULE 7.5

	  	
Litigation

	
SCHEDULE 7.7

	  	
Environmental

	
SCHEDULE 7.12

	  	
Place of Business

	
SCHEDULE 7.14

	  	
Trade Names

	
SCHEDULE 7.15

	  	
Transactions with Affiliates

	
SCHEDULE 7.17

	  	
Material Contracts

	  	  	  
	
EXHIBIT A

	  	
Revolving Note

	
EXHIBIT B

	  	
Loan Request

	
EXHIBIT C

	  	
Borrowing Base Certificate

	
EXHIBIT D

	  	
Compliance Certificate

	
EXHIBIT E

	  	
Pledge and Security Agreement

	
EXHIBIT F

	  	
Guaranty

 

 

 

  

v

  

AMENDED AND RESTATED CREDIT AGREEMENT

 

THIS AMENDED AND RESTATED CREDIT AGREEMENT is entered into as of May 2, 2014, among VERTEX ENERGY, INC., a Nevada corporation (“Holdings”), VERTEX ENERGY OPERATING, LLC, a Texas limited liability company (“Vertex-Operating” and together with Holdings, “Borrowers” and each individually a “Borrower”), and BANK OF AMERICA, N.A. (“Lender”).

 

RECITALS

 

A.          Borrowers have requested that Lender extend credit to Borrowers in the maximum principal amount of up to $20,000,000 in the form of a revolving credit facility, subject to increase in accordance with the terms of this Agreement.

 

B.           Lender is willing to extend the requested credit on the terms and conditions of this Agreement.

 

C.           Holdings and Lender previously entered into that certain Credit Agreement dated August 31, 2012, as amended prior to the date hereof (the “Original Credit Agreement”), and the parties desire to amend and restate the Original Credit Agreement in its entirety.

 

Accordingly, Borrowers and Lender agree as follow:

 

SECTION 1   DEFINITIONS AND TERMS.

 

1.1           Definitions.  As used in the Loan Documents:

 

Acquisition means any transaction or series of related transactions for the purpose of or resulting, directly or indirectly, in (a) the acquisition of all or substantially all of the assets of a Person, or of any business or division of a Person, (b) the acquisition of the Equity Interests of any Person (other than a Person that is a Subsidiary), or otherwise causing any Person to become a Subsidiary, or (c) a merger or consolidation or any other combination with another Person (other than a Person that is a Subsidiary) provided that Holdings, Vertex-Operating or a Subsidiary of a Borrower is the surviving entity.

 

Affiliate means as to any Person, any other Person that directly or indirectly controls, or is controlled by, or is under common control with, that Person.  For purposes of this definition (a) “control,” “controlled by,” and “under common control with” mean possession, directly or indirectly, of power to direct (or cause the direction of) management or policies of a Person, whether through ownership of voting interests or other ownership interests, by contract, or otherwise, and (b) the term “Affiliate” includes each officer and director of any Company, and each of the following as “Affiliates” of the others:  (i) each Guarantor; (ii) each Borrower; (iii) each Company; and (iv) E-Source.

 

Agreement means this Amended and Restated Credit Agreement, and all exhibits and schedules to this Agreement, in each case as amended, supplemented, or restated from time to time.

 

Applicable Margin means, for any day, the rate per annum set forth below opposite the applicable Level then in effect (based on the Leverage Ratio), it being understood that the Applicable Margin for (a) Revolving Loans that are Base Rate Loans shall be the percentage set forth under the column “Base Rate”, (b) Revolving Loans that are LIBOR Loans shall be the percentage set forth under the column “LIBOR”, and (c) the Commitment Fee shall be the percentage set forth under the column “Commitment Fee”:

 

  

1

  

 

	
 

 

Level

	
 

Leverage Ratio

	
LIBOR

	
Base Rate

	
 

Commitment

 Fee

	
1

	
Greater than 3.00 to 1.0

 

	
3.00%

	
2.00%

	
0.35%

	
2

	
Less than or equal to 3.00 to 1.0 and greater than 2.50 to 1.0

	
2.75%

	
1.75%

	
0.25%

	
3

	
Less than or equal to 2.50 to 1.0

	
2.35%

	
1.35%

	
0.25%

Any increase or decrease in the Applicable Margin resulting from a change in the Leverage Ratio shall become effective as of the first Business Day immediately following the date a Compliance Certificate is delivered pursuant to Section 8.1(c); provided, however, that if a Compliance Certificate is not delivered when due in accordance with such Section, then, Level 1 shall apply, in each case as of the first Business Day after the date on which such Compliance Certificate was required to have been delivered and in each case shall remain in effect until the first Business Day following the date on which such Compliance Certificate is delivered.  In addition, at all times while the Default Rate is in effect, the highest rate set forth in each column of the Applicable Margin shall apply.

Notwithstanding anything to the contrary contained in this definition, (a) the determination of the Applicable Margin for any period shall be subject to the provisions of Section 3.4(d), and (b) the initial Applicable Margin shall be established at Level 1 until the first Business Day immediately following the date a Compliance Certificate is delivered to Lender pursuant to Section 8.1(c) for the fiscal quarter ending December 31, 2014.  Any adjustment in the Applicable Margin shall be applicable to all Credit Extensions then existing or subsequently made or issued.

Auto-Renewal LC is defined in Section 2.4(a)(iv).

 

Bango Acquisition means the acquisition by Vertex-NV of certain assets of Bango Refining in accordance with the terms set forth in the Purchase Agreement on the Closing Date.

 

Bango Refining means Bango Refining NV, LLC, a Delaware limited liability company.

 

Bank of America means Bank of America, N.A., and its successors.

 

Bank Product Provider means Lender or any Affiliate of Lender.

 

Bank Products means any one or more of the following types or services or facilities provided to Borrowers by a Bank Product Provider:  (a) credit cards and stored value cards, (b) Cash Management Agreements and similar or related services, including (i) the automated clearinghouse transfer of funds for the account of Borrowers pursuant to agreement or overdraft for any accounts of Borrowers maintained with Lender or any Bank Product Provider and (ii) controlled disbursement services, and (c) Hedge Agreements if and to the extent permitted hereunder.  Any of the foregoing shall only be included in the definition of the term “Bank Products” to the extent that the Bank Product Provider has been approved by Lender in writing.

 

Base Rate  means, for any day, a fluctuating rate per annum equal to Prime Rate.

 

Base Rate Loan means a Loan bearing interest based on the Base Rate.

 

Borrower has the meaning given such term in the Preamble to this Agreement.

 

  

2

  

Borrowing Base means, when determined, an amount equal to the total of (a) 80% of Eligible Accounts, plus (b) 65% of Eligible Inventory, minus (c) any Reserves established by Lender and in effect at such time, in each case as shown on the most recent Borrowing Base Certificate.  Inventory will be valued at the lower of average cost or market as set out in the Current Financials.

 

Borrowing Base Certificate means a certificate substantially in the form of Exhibit C which is signed by a Responsible Officer of each Borrower.

 

Borrower Representative means Holdings.

 

Business Day means any day other than a Saturday, Sunday or other day on which commercial banks are authorized to close under the Laws of, or are in fact closed in, the state where Lender’s Office is located.

 

Capital Lease means, as applied to any Person, any lease of any property (whether real, personal or mixed) by that Person (i) as lessee that, in conformity with GAAP, is or should be accounted for as a capital lease on the balance sheet of that Person or (ii) as lessee which is a transaction of a type commonly known as a “synthetic lease”) (i.e., a transaction that is treated as an operating lease for accounting purposes but with respect to which payments of rent are intended to be treated as payments of principal and interest on a loan for Federal income tax purposes.

 

Cash Collateralize means to pledge and deposit with or deliver to Lender, as collateral for the LC Exposure, cash or deposit account balances pursuant to documentation in Proper Form.

 

Cash Management Agreement means one or more treasury management, cash management, or lockbox agreements (or a combination of such agreements) entered into by one or more of the Companies and Lender under which amounts paid to Borrowers are automatically deposited into Borrowers’ accounts with Lender and such accounts are swept or debited via ACH transactions and amounts are automatically invested overnight or are repaid under the Revolving Credit Facility, as such agreements may be amended or replaced from time to time.

 

CFTC means the Commodity Futures Trading Commission

 

Chambers County Leasehold Property means that certain real property leased by CMT pursuant to the CMT Lease and having an address commonly known as 200 Atlantic Pipeline Road, Baytown, Chambers County, Texas  77520.

 

Change of Control means (a) Benjamin P. Cowart ceases to own and control at least 20% of the Equity Interests of Holdings, (b) Holdings at any time ceases to own and control 100% of the Equity Interests of Vertex-Operating, (c) any Company ceases to own 100% of the Equity Interests of VAS, Vertex-II, VMS, Vertex-NV and Vertex-LA (d) VAS at any time ceases to own 100% of the Equity Interests of CMT, Crossroad Carriers, Vertex-Recovery, or H&H, (e) any Company ceases to be the sole general partner of CMT, Crossroad Carriers, Vertex-Recovery, or H&H, (f) following the Omega Acquisition, Vertex-NV or any other Company ceases to own 100% of the Equity Interests of GSLW, or (g) “any “change of control” or similar event under the GS Term Loan Agreement shall occur.

 

Change of Management means Benjamin P. Cowart ceases to be actively involved in the day-to-day management or operation of Borrowers and their respective Subsidiaries, unless within 60 days an interim or permanent successor reasonably acceptable Lender is appointed.

 

  

3

  

Churchill County Leasehold Property means that certain real property to be leased by Vertex-NV following the Bango Acquisition and the assignment of the Vertex-NV Lease and having an address commonly known as 33311 Bango Road, Fallon, Churchill County, Nevada 89406.

 

Closing Date means May 2, 2014.

 

CMT means Cedar Marine Terminals, L.P., a Texas limited partnership.

 

CMT Lease means that certain Lease Agreement dated as of July 25, 1997, between CP Terminal, LLC, as landlord, and TRW Trading, Inc., as tenant, to which CMT has succeeded as tenant, and as renewed, extended, modified, or supplemented from time to time.

 

Collateral is defined in Section 6.1.

 

Commitment means Lender’s obligation and commitment to make Loans and LC Credit Extensions under the Revolving Credit Facility up to the Revolving Committed Amount.

 

Commodity Exchange Act means the Commodity Exchange Act (7 U.S.C. § 1 et seq.), as amended, and all related rules, regulations and published interpretations.

 

Company or Companies means, at any time, Vertex-Operating, Holdings and each of their respective direct and indirect Subsidiaries that is a Guarantor.  For purposes of clarity, E-Source is not a Company.  On the Closing Date, Vertex-NV will be a “Company” in accordance with this defined term.  However, at any time that Vertex-NV is not required to be a Guarantor and has been released from its guarantee and the Liens granted in its assets to secure the Obligations have been terminated as provided in Section 6.1 and Section 6.3, Vertex-NV shall not be a “Company” and, among other things, its assets shall not be used in determining Eligible Accounts and Eligible Inventory under the Borrowing Base, and its results of operations shall not be used in calculating and measuring compliance with the financial covenants in Section 10.

 

Compliance Certificate means a certificate substantially in the form of Exhibit D signed by a Responsible Officer of each Borrower.

 

Consolidated Adjusted EBITDA means, for any period, an amount determined for Holdings and its Subsidiaries on a consolidated basis equal to (a)  the sum, without duplication, of the amounts for such period of (i) Consolidated Net Income, plus (ii) Consolidated Interest Expense, plus (iii) provisions for taxes based on income, plus (iv) total depreciation expense, plus (v) total amortization expense, plus (vi) to the extent deducted in determining Consolidated Net Income, Transaction Costs, plus (vii) other non-cash items reducing Consolidated Net Income (excluding any such non-cash item to the extent that it represents an accrual or reserve for potential cash items in any future period or amortization of a prepaid cash item that was paid in a prior period), plus (viii) to the extent deducted in determining Consolidated Net Income, retention bonuses paid on or prior to December 31, 2014 in an aggregate amount not to exceed $650,500  minus (b) the sum, without duplication of the amounts for such period of (i) other non-cash items increasing Consolidated Net Income for such period (excluding any such non-cash item to the extent it represents the reversal of an accrual or reserve for potential cash item in any prior period), plus (ii) interest income, plus (iii) other income.  For the avoidance of doubt, the provisions of Section 10.5 shall apply for purposes of calculating Consolidated Adjusted EBITDA with respect to the acquisition of Equity Interests of E-Source prior to the Closing Date, the Omega Acquisition and any other Permitted Acquisitions that occur after the Closing Date, measuring the foregoing components of Consolidated Adjusted EBITDA as if such acquisitions occurred on the first day of the applicable period.

 

  

4

  

Consolidated Capital Expenditures means, for any period, the aggregate of all expenditures of Holdings and its Subsidiaries during such period determined on a consolidated basis that, in accordance with GAAP, are or should be included in “purchase of property and equipment or which should otherwise be capitalized” or similar items reflected in the consolidated statement of cash flows of the Companies.

 

Consolidated Cash Interest Expense means, for any period, Consolidated Interest Expense for such period based upon GAAP, excluding any paid-in-kind interest, amortization of deferred financing costs, and any realized or unrealized gains or losses attributable to Hedge Agreements.

 

Consolidated Fixed Charges means, for any period, the sum, without duplication of the amounts determined for Holdings and its Subsidiaries on a consolidated basis equal to (i) Consolidated Cash Interest Expense, (ii) scheduled payments of principal on Consolidated Total Debt, (iii) Consolidated Capital Expenditures, and (iv) the current portion of taxes provided for with respect to such period in accordance with GAAP.

 

Consolidated Interest Expense means, for any period, total interest expense (including that portion attributable to Capital Leases in accordance with GAAP and capitalized interest) of Holdings and its Subsidiaries on a consolidated basis with respect to all outstanding Consolidated Total Debt, including all commissions, discounts and other fees and charges owed with respect to letters of credit and net costs under Hedge Agreements, but excluding, however, any amounts referred to in Section 4 payable on or before the Closing Date.

 

Consolidated Liquidity means, as of any date, an amount determined for Holdings and its Subsidiaries on a consolidated basis equal to the sum of (a) cash-on-hand of Holdings and its Subsidiaries held in one or more Controlled Accounts as of such date (provided that such cash shall be included without being held in Controlled Accounts until Controlled Accounts are required to be in place), but excluding funds in the Vertex Refining Cash Collateral Account plus (b) the excess of the Revolving Credit Limit over the Revolving Credit Exposure.

 

Consolidated Net Income means, for any period, (a) the net income (or loss) of Holdings and its Subsidiaries on a consolidated basis for such period taken as a single accounting period determined in conformity with GAAP, minus (b) the sum, without duplication, of (i) the income (or loss) of any Person (other than a Company) in which any other Person (other than a Subsidiary of Holdings) has a joint interest, plus (ii) the income (or loss) of any Person accrued prior to the date it becomes a Subsidiary of Holdings or is merged into or consolidated with any Company or that Person’s assets are acquired by any Company, plus (iii) income of any Subsidiary of Holdings to the extent that the declaration or payment of dividends or similar distributions by that Subsidiary of that income is not at the time permitted by operation of the terms of its charter or any agreement, instrument, judgment, decree, order, statute, rule or governmental regulation applicable to that Subsidiary, plus (iv) any gains or losses attributable to Dispositions or returned surplus assets of any Employee Plan, plus (v) the minority interest of any Person (other than Holdings or any of its Subsidiaries) in the income (or loss) of any Subsidiary of Holdings in which such Person has a joint interest, including, without limitation, E-Source, (vi) (to the extent not included in (i) through (v) above) any net extraordinary gains or net extraordinary losses.

 

Consolidated Total Debt means, as at any date of determination, the aggregate amount of all Indebtedness of Holdings and its Subsidiaries determined on a consolidated basis in accordance with GAAP, including, without limitation, the Loans, all Capital Leases, all outstanding Indebtedness under the GS Term Loan Agreement but excluding all “earn-out” obligations and other deferred payment obligations with respect to any acquisition if and to the extent that such obligations are either (x) subject to an Earnout Subordination Agreement or (y) payable by Holdings and its Subsidiaries solely with shares of common stock of Holdings.

 

  

5

  

Controlled Account means a deposit account of a Company which is subject to the control of the Lender, in accordance with the terms of the Pledge and Security Agreement and the Intercreditor Agreement.

 

Credit Extension means a Loan or an LC Credit Extension.

 

Crossroad Carriers means Crossroad Carriers, L.P., a Texas limited partnership.

 

Current Financials means, when determined, the consolidated financial statements of Borrowers and the other Companies most recently delivered to Lender pursuant to Section 8.1.

 

Debt means, without duplication, for any Person (a) all indebtedness for borrowed money; (b) that portion of obligations with respect to Capital Leases that is properly classified as a liability on a balance sheet in conformity with GAAP; (c) notes payable and drafts accepted representing extensions of credit whether or not representing obligations for borrowed money; (d) any obligation owed for all or any part of the deferred purchase price of property or services including, without limitation, any “earn-out” obligation (excluding any such obligations incurred under ERISA); (e) all indebtedness secured by any Lien on any property or asset owned or held by that Person regardless of whether the indebtedness secured thereby shall have been assumed by that Person or is nonrecourse to the credit of that Person; (f) the face amount of any letter of credit issued for the account of that Person or as to which that Person is otherwise liable for reimbursement of drawings; (g) the direct or indirect guaranty, endorsement (otherwise than for collection or deposit in the ordinary course of business), co-making, discounting with recourse or sale with recourse by such Person of the obligation of another; (h) any obligation of such Person the primary purpose or intent of which is to provide assurance to an obligee that the obligation of the obligor thereof will be paid or discharged, or any agreement relating thereto will be complied with, or the holders thereof will be protected (in whole or in part) against loss in respect thereof; (i) any liability of such Person for an obligation of another through any agreement (contingent or otherwise) (i) to purchase, repurchase or otherwise acquire such obligation or any security therefor, or to provide funds for the payment or discharge of such obligation (whether in the form of loans, advances, stock purchases, capital contributions or otherwise) or (ii) to maintain the solvency or any balance sheet item, level of income or financial condition of another if, in the case of any agreement described under subclauses (i) or (ii) of this clause (i), the primary purpose or intent thereof is as described in clause (h) above; and (j) all obligations of such Person in respect of any exchange traded or over the counter derivative transaction, including, without limitation, any Hedge Agreement, whether entered into for hedging or speculative purposes.

 

Debtor Relief Laws means Title 11 of the United States Code and all other applicable liquidation, conservatorship, bankruptcy, fraudulent transfer, assignment for the benefit of creditors, moratorium, rearrangement, receivership, insolvency, reorganization, suspension of payments, or similar debtor relief Laws of the United States or other applicable jurisdictions from time to time in effect and affecting the rights of creditors generally.

 

Deed of Trust means (a) that certain Deed of Trust, Assignment of Rents and Leases, Security Agreement and Fixture Filing dated as of the date hereof, executed by VAS, as grantor, to PRLAP, Inc., as trustee, for the benefit of Lender, with respect to the Harris County Property, (b) that that certain Deed of Trust, Assignment of Rents and Leases, Security Agreement and Fixture Filing dated as of the date hereof, executed by Vertex-Recovery, as grantor, to PRLAP, Inc., as trustee, for the benefit of Lender, with respect to the Nueces County Property, (c) that certain Deed of Trust, Assignment of Rents and Leases, Security Agreement and Fixture Filing dated as of the date hereof, executed by VAS, as grantor, to PRLAP, Inc., as trustee, for the benefit of Lender, with respect to the Travis County Property, (d) that certain Leasehold Deed of Trust, Assignment of Rents and Leases, Security Agreement and Fixture Filing dated as of the date hereof, executed by CMT, as grantor, to PRLAP, Inc., as trustee, for the benefit of

 

  

6

  

Lender, with respect to the Chambers County Leasehold Property, (e) that certain Leasehold Mortgage to Secure Present and Future Indebtedness, Assignment of Leases and Rents, and Security Agreement dated as of the date hereof, executed by Vertex-LA, as mortgagor, for the benefit of Lender, as mortgagee, with respect to the Jefferson Parish Leasehold Property and the  Plaquemines Parish Leasehold Property, (f) following the consummation of the Bango Acquisition, that certain Leasehold Deed of Trust, Assignment of Rents and Leases, Security Agreement and Fixture Filing, executed by Vertex-NV, as grantor, to PRLAP, Inc., as trustee, for the benefit of Lender, with respect to the Churchill County Leasehold Property, and (g) each other deed of trust or mortgage in form and substance reasonably acceptable to Lender, and executed by any Company, as grantor, for the benefit of Lender, to secure the Obligation.

 

Default means the occurrence of any event or the existence of any circumstance that would, with the giving of notice or lapse of time or both, become an Event of Default.

 

Default Rate means, from day to day, an annual rate of interest equal to the lesser of (a) the Base Rate plus 4%, and (b) the Maximum Rate.

 

Disposition means the sale, lease, transfer, conveyance, assignment, license, or other disposition (including any sale and leaseback transaction) of any asset by any Person, including any sale, assignment, transfer, conveyance, or other disposition, with or without recourse, of any notes or accounts receivable or any rights and claims associated therewith.

 

Dollar, Dollars or $ mean lawful money of the U.S.

 

Earnout Subordination Agreements means (a) that certain Subordination Agreement, dated as of the date hereof, by and between, Vertex Holdings, L.P., the Companies, Term Loan Agent and Lender and (b) any other subordination agreement with respect to earnout obligations entered into by the Lender and any other Person after the Closing Date.

 

Eligibility Date shall mean, with respect to each Borrower, each Guarantor, and each Hedge Agreement, the date on which this Agreement or any other Loan Document becomes effective with respect to such Hedge Agreement (for the avoidance of doubt, the Eligibility Date shall be the Effective Date of such Hedge Agreement if this Agreement or any other Loan Document is then in effect with respect to Borrower or any Guarantor, and otherwise it shall be the Effective Date of this Agreement and/or such other Loan Documents to which such Borrower or Guarantor is a party).  For purposes of this defined term, “Effective Date” means the date indicated in a document or agreement to be the date on which such document or agreement becomes effective, or, if there is no such indication, the date of execution of such document or agreement.

 

Eligible Accounts means an account or account receivable of any Company in which Lender holds a first-priority perfected security interest and which satisfies all of the following requirements:

 

(a)          it has not been outstanding more than 90 days after the relevant invoice date;

 

(b)          it has not been outstanding more than 60 days after the date it became due and payable;

 

(c)          it arises from the sale or lease of goods or from services rendered, such goods have been shipped or delivered to the account debtor under such account or such services have been fully performed and have been accepted by the account debtor, and such Company’s full right to payment for all sums due from such account debtor with respect to such account shall have been earned and then be due and payable;

 

  

7

  

(d)          it is a valid and legally enforceable obligation of the account debtor thereunder according to its express terms, and is not subject to any offset, counterclaim, crossclaim, or other defense on the part of such account debtor denying liability thereunder in whole or in part;

 

(e)          it is not subject to any mortgage, lien, security interest, right of a surety under a performance bond or otherwise or similar adverse rights or interests whatsoever other than the security interests granted to Lender under the Loan Documents;

 

(f)           it is evidenced by an invoice dated the date of shipment (in the case of goods sold or leased) or the date of performance (in the case of services rendered) and having payment terms acceptable to Lender, and is not evidenced by an instrument, note, draft, title retention and lien instrument, security agreement, acceptance, conditional sales contract, chattel mortgage or chattel paper and, if requested by Lender, a copy of such invoice shall have been delivered to and received by Lender;

 

(g)          it is not owed by an account debtor which is an Affiliate of any Company;

 

(h)          it does not constitute, require or provide for progress billings, retainages or deferred payments under a contract not fully performed;

 

(i)           it does not constitute, in whole or in part, interest or finance charges on outstanding balances, any amount received as a down payment or prepayment or other principal reduction or similar payment, any chargebacks or contra amounts or accounts;

 

(j)           it is an account with respect to which no return, repossession, rejection, cancellation, or repudiation shall have occurred or have been threatened;

 

(k)          it is an account with respect to which such Company continues to be in full conformity with the representations, warranties and covenants of such Company made with respect thereto;

 

(l)           it is not subject to any sales terms, trial terms, sales-or-return terms, consignment terms, guaranteed sales or performance terms, minimum sales terms, C.O.D. terms, cash terms, or similar terms or conditions;

 

(m)         it is not owed by an account debtor which is a Foreign Person;

 

(n)          it is not an account subject, in whole or in part, to any “bill and hold” or similar arrangement pursuant to which the invoice is delivered prior to the actual delivery of the sold or leased goods or the performance of the services;

 

(o)          it is not an account owed by the United States Government or any other Governmental Authority unless such account arises from a government contract that is a United States Government contract in Proper Form and such Company and Lender have completed and executed all forms and documents necessary to assign  such Company’s right, title and interest in such contract and all accounts and other rights arising thereunder to Lender in compliance with the Federal Assignment of Claims Act of 1940, as amended;

 

(p)          it is not owed by an account debtor with respect to which thirty percent (30%) or more of such account debtor’s total accounts owing to the Companies would not be deemed to be Eligible Accounts under clause (a) or (b) above;

 

  

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(q)          it is not owed by an account debtor whose aggregate account balance with such Company exceeds twenty-five percent (25%) of the total value of such Company’s total Accounts, provided that, such accounts shall be excluded from the definition of Eligible Account only to the extent to which such accounts exceed twenty-five percent (25%) of the accounts of such Company;

 

(r)           it is not owed by an account debtor which is subject to any Debtor Relief Law or whose obligations with respect to which Lender, acting in its discretion, shall have notified the applicable Company in writing are not deemed to constitute an Eligible Account; and

 

(s)          prior to the occurrence of the Vertex-NV Ring Fence Termination Date with respect to the accounts of Vertex-NV only, it is an account that Lender has determined, in its sole discretion, should be excluded.

 

The amount of Eligible Accounts owed by an account debtor to such Company shall be reduced by the amount of all “contra accounts” and other obligations owed by any Company to such account debtor.  Accounts which are at any time Eligible Accounts, but which subsequently fail to meet any of the foregoing requirements shall, at such time, cease to be Eligible Accounts. Borrowers and Lender acknowledge and agree that (i) at the time any account becomes subject to a security interest in favor of Lender, said account shall be a good and valid account representing an undisputed, bona fide Debt incurred by the account debtor named therein, for merchandise held subject to delivery instructions or theretofore shipped or delivered pursuant to a contract of sale, or for services theretofore performed by such Company with or for said account debtor, (ii) there shall be no set-offs, counterclaims, or disputes against any such account except as indicated in some written list, statement or invoice furnished to Lender with reference thereto, (iii) one or more of the Companies shall be the lawful owner of all such accounts and shall have good right to subject the same to a security interest in favor of Lender, and (iv) no such account shall be sold, assigned, or transferred to any Person other than Lender or in any way encumbered except to Lender, and such Company shall defend the same against the lawful claims and demands of all persons other than Lender.  If any account shall be in violation of (A) the immediately preceding sentence or (B) any of the requirements to be an Eligible Account, it shall not be deemed an Eligible Account for purposes of this Agreement.

 

Eligible Contract Participant shall mean an “eligible contract participant” as defined in the Commodity Exchange Act and regulations thereunder.

 

Eligible Inventory means any Company’s finished-goods inventory in which Lender holds a first-priority perfected security interest and which satisfies all of the following requirements:

 

(a)          it is not private label or styled type or otherwise subject to special marketing conditions or marketability limitations judged by Lender, in its sole discretion, to be unacceptable;

 

(b)          it is not parts, supplies, raw materials, nor work in process, nor does it include any shipping or packaging materials;

 

(c)          it is not materials or supplies used or to be used, or consumed or to be consumed, in the normal course of business of such Company;

 

(d)          it is new and unused;

 

(e)          it is owned by such Company and is not subject to any Lien or security interest whatsoever other than the Liens or security interests granted to Lender under the Loan Documents or a

 

  

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Lien or security interest which has been subordinated to Liens or security interests granted under the Loan Documents, on terms acceptable to Lender;

 

(f)           it is held for sale in the normal and ordinary course of such Company’s business;

 

(g)          it is located at one of such Company’s places of business as set forth on Schedule 7.12;

 

(h)          it is not located on any leased premises unless Lender has a signed landlord waiver or landlord subordination agreement from the relevant landlord in Proper Form;

 

(i)           it is not of a type of inventory that is subject to any recall, class action litigation, governmental action, order, inquiry or investigation;

 

(j)           it is not on consignment, has not been shipped on a sale or return basis, and no warehouse receipt or document of title is or shall have been issued in respect of such inventory;

 

(k)          it is not inventory that Lender, in its reasonable discretion, has determined to be unmarketable or unacceptable;

 

(l)           it is not an item, type, or class of inventory which is Slow Moving; and

 

(m)         prior to the occurrence of the Vertex-NV Ring Fence Termination Date, it is inventory of Vertex-NV that Lender has determined, in its sole discretion, should be excluded.

 

The value of all Eligible Inventory shall be determined on the basis of any and all factors and criteria as Lender (in its sole discretion) shall deem appropriate, including, without limitation, that unless Lender shall determine that some other basis is more appropriate, such value shall be determined on the basis of the lower of cost, book or market value, net of all handling charges, taxes, assessments, insurance, warranty, interest, finance and other charges.

 

Eminent Domain Event means any Governmental Authority or any Person acting under a Governmental Authority institutes proceedings to condemn, seize or appropriate all or part of any asset of a Company.

 

Eminent Domain Proceeds means all amounts received by any Company as a result of any Eminent Domain Event.

 

Employee Plan means a pension, profit-sharing, or stock bonus plan intended to qualify under Section 401(a) of the Tax Code, maintained or contributed to by any Borrower or any ERISA Affiliate, including any multiemployer plan within the meaning of Section 4001(a)(3) of ERISA.

 

Environmental Law means any Law that relates to the pollution or protection of the environment, the release of any materials into the environment, including those related to Hazardous Materials, air emissions and discharges to waste or public systems, or to health and safety.

 

Equity Interests means, with respect to any Person, all of the shares of capital stock of (or other ownership or profit interests in) such Person, all of the warrants, options or other rights for the purchase or acquisition from such Person of shares of capital stock of (or other ownership or profit interests in) such Person, all of the securities convertible into or exchangeable for shares of capital stock of (or other ownership or profit interests in) such Person or warrants, rights or options for the purchase or acquisition from such Person of such shares (or such other interests), and all of the other ownership or profit interests

 

  

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in such Person (including partnership, member or trust interests therein), whether voting or nonvoting, and whether or not such shares, warrants, options, rights or other interests are outstanding on any date of determination.

 

ERISA means the Employee Retirement Income Security Act of 1974, as amended, and its related rules, regulations, and published interpretations.

 

ERISA Affiliate means any trade or business (whether or not incorporated) under common control with any Borrower within the meaning of Section 414(b) or (c) of the Tax Code (including any multiemployer plan within the meaning of Section 4001(a)(3) of ERISA).

 

E-Source means E-Source Holdings, LLC, a Texas limited liability company.

 

Event of Default is defined in Section 11.

 

Excluded Hedge Liabilities means with respect to Borrowers and any Guarantor, each of its Hedge Liabilities if, and only to the extent that, all or any portion of this Agreement or any other Loan Document that relates to such Hedge Liabilities is or becomes illegal under the Commodity Exchange Act, or any rule, regulation or order of the CFTC, solely by virtue of such Borrower’s or such Guarantor’s failure to qualify as an Eligible Contract Participant on the Eligibility Date for such Hedge Agreement. Notwithstanding anything to the contrary contained in the foregoing or in any other provision of this Agreement or any other Loan Document, the foregoing is subject to the following provisos: (a) if any Hedge Liabilities arise under a master agreement governing more than one Hedge Agreement, this definition shall apply only to the portion of such Hedge Liabilities that is attributable to Hedge Agreements for which such guaranty or security interest is or becomes illegal under the Commodity Exchange Act, or any rule, regulations or order of the CFTC, solely as a result of the failure by such Borrower or such Guarantor for any reason to qualify as an Eligible Contract Participant on the Eligibility Date for such Hedge Agreement; (b) if a guarantee of any Hedge Liabilities would cause such obligation to be an Excluded Hedge Liability but the grant of a security interest would not cause such obligation to be an Excluded Hedge Liability, such Hedge Liabilities shall constitute an Excluded Hedge Liability for purposes of the guaranty but not for purposes of the grant of the security interest; and (c) if there is more than one Borrower or Guarantor executing this Agreement or the other Loan Documents and any Hedge Liabilities would be Excluded Hedge Liabilities with respect to one or more of such Persons, but not all of them, the definition of Excluded Hedge Liability with respect to each such Person shall only be deemed applicable to (i) the particular Hedge Liabilities that constitute Excluded Hedge Liabilities with respect to such Person, and (ii) the particular Person with respect to which such Hedge Liabilities constitute Excluded Hedge Liabilities.

 

Fee Letter means that certain fee letter dated as of the date hereof between Borrowers and Lender, as amended, restated, or supplemented from time to time.

 

Fixed Charge Coverage Ratio means the ratio as of the last day of (i) for the fiscal quarter ending June 30, 2014, of (a) Consolidated Adjusted EBITDA for the six months ended June 30, 2014, to (b) Consolidated Fixed Charges for the six months ended June 30, 2014, (ii) for the fiscal quarter ending September 30, 2014, of (a) Consolidated Adjusted EBITDA for the nine months ended September 30, 2014, to (b) Consolidated Fixed Charges for the nine months ended September 30, 2014, (iii) for the fiscal quarter ending December 31, 2014, (a) Consolidated Adjusted EBITDA for the twelve months ended December 31, 2014, to (b) Consolidated Fixed Charges for the twelve months ended December 31, 2014, and (iv) any other fiscal quarter of (a) Consolidated Adjusted EBITDA for the twelve-month period then ended, to (b) Consolidated Fixed Charges for the twelve-month period then ended.

 

  

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Foreign Person means (a) a natural person who does not reside in the U.S., or (b) any Person (other than a natural person) that is not organized and validly existing under the laws of the U.S. or a state within the U.S.

 

Funded Debt means, when determined, (a) all Debt of the Companies for borrowed money (whether as a direct obligor on a promissory note, a reimbursement obligor on a letter of credit, a guarantor, or otherwise), and (b) all Capital Lease obligations of the Companies.

 

GAAP means generally accepted accounting principles in the U.S. set out in the opinions and pronouncements of the of the Accounting Principles Board of the American Institute of Certified Public Accountants and the Financial Accounting Standards Board as in effect from time to time.

 

GSLW means Golden State Lubricants Works, LLC, a Delaware limited liability company.

 

Governmental Authority means any nation or government, any state or other political subdivision thereof, any agency, authority, instrumentality, regulatory body, court, administrative tribunal, central bank or other entity exercising executive, legislative, judicial, taxing, regulatory or administrative powers or functions of, or pertaining to, any government or any court, in each case whether associated with a state of the United States, the United States, or foreign entity or government.

 

Governmental Authorization means any permit, license, authorization, plan, directive, consent order or consent decree of or from any Governmental Authority.

 

GS Term Loan Agreement means that certain Credit and Guaranty Agreement dated May 2, 2014, by and among Holdings, Vertex-Operating, as borrower, certain other direct and indirect subsidiaries of Holdings, as guarantors, the lenders party thereto, and Goldman Sachs Bank USA, as administrative agent, as amended, supplemented, or restated from time to time.

 

Guarantor means each of, and Guarantors means all of CMT, Crossroad Carriers, H&H Oil, VAS, Vertex-II, Vertex-LA, Vertex-NV, Vertex-Recovery, VMS, GSLW (following the closing of the Purchase Agreement), each other Subsidiary of each Borrower (excluding E-Source), and each other Person executing a Guaranty.

 

Guaranty means a guaranty substantially in the form of Exhibit F.

 

H&H Oil means H & H Oil, L. P., a Texas limited partnership.

 

Harris County Property means that certain real property owned by VAS and having an address commonly known as 7311 Decker Drive, Baytown, Harris County, Texas  77520.

 

Hazardous Materials means (a) any explosive or radioactive substance or waste, all hazardous or toxic substances, waste, or other pollutants, and any other substance the presence of which requires removal, remediation or investigation under any applicable Environmental Law, (b) any substance that is defined or classified as a hazardous waste, hazardous material, pollutant, contaminant, or toxic or hazardous substance under any applicable Environmental Law, or (c) petroleum, petroleum distillates, petroleum products, oil, polychlorinated biphenyls, radon gas, infectious medical wastes, and asbestos or asbestos-containing materials.

 

Hedge Agreement means a Hedge Transaction which is provided by Lender or an Affiliate of Lender and is (a) documented on a form of master agreement published by the International Hedge Agreements and Derivatives Association, Inc., any International Foreign Exchange Master Agreement, or

 

  

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other reasonable and customary manner, (b) provides for the method of calculating the reimbursable amount of the provider’s credit exposure in a reasonable and customary manner, and (c) is entered into for hedging (rather than speculative purposes).

 

Hedge Liabilities means, with respect to any Hedge Agreement (a) the Hedge Termination Value for such Hedge Agreement, (b) any other liabilities owed by Borrowers, any Guarantor, or one of their respective Subsidiaries, to the provider under any Hedge Agreement, or (c) any obligation to pay or perform under any Hedge Agreement that constitutes a “swap” within the meaning of Section 1a(47) of the Commodity Exchange Act.  The Hedge Liabilities shall, for purposes of this Agreement and all other Loan Documents be “Obligations” of such Person and of each Borrower and Guarantor, be guaranteed obligations under any Guaranty and secured obligations under any Security Document executed by any Guarantor, as applicable, and otherwise treated as Obligations for purposes of the other Loan Documents, except to the extent constituting Excluded Hedge Liabilities of such Person.

 

Hedge Termination Value means, in respect of any one or more Hedge Agreements, after taking into account the effect of any legally enforceable netting agreement relating to such Hedge Agreements, (a) for any date on or after the date such Hedge Agreements have been closed out and termination value(s) determined in accordance therewith, such termination value(s), and (b) for any date prior to the date referenced in clause (a), the amount(s) determined as the mark-to-market value(s) for such Hedge Agreements, as determined based upon one or more mid-market or other readily available quotations provided by any recognized dealer in such Hedge Agreements (which may include Lender or any Affiliate of Lender).

 

Hedge Transaction means any (and all) rate swap transactions, basis swaps, credit derivative transactions, forward rate transactions, commodity swaps, commodity options, forward commodity contracts, equity or equity index swaps or options, bond or bond price or bond index swaps or options or forward bond or forward bond price or forward bond index transactions, interest rate options, forward foreign exchange transactions, cap transactions, floor transactions, collar transactions, currency swap transactions, cross-currency rate swap transactions, currency options, spot contracts, or any other similar transactions or any combination of any of the foregoing (including any options to enter into any of the foregoing).

 

Honor Date is defined in Section 2.4(b).

 

Insurance Proceeds means all cash and non-cash proceeds in respect of any insurance policy maintained by any Company under the terms of this Agreement, excluding (a) any key man life insurance, and (b) provided no Default or Event of Default then exists or would result therefrom, any business interruption insurance proceeds.

 

Intercreditor Agreement means that certain Intercreditor Agreement dated May 2, 2014, by and among Lender, Term Loan Agent, and each of the Companies party thereto, as amended, supplemented, or restated from time to time.

 

Jefferson Parish Leasehold Property means that certain real property leased by Vertex-LA pursuant to the Vertex-LA Jefferson Parish Lease and having an address commonly known as 5000 River Road, Marrero, Jefferson Parish, Louisiana  70072.

 

Laws means, collectively, all international, foreign, Federal, state and local statutes, treaties, rules, guidelines, regulations, ordinances, codes and administrative or judicial precedents or authorities, including the interpretation or administration thereof by any Governmental Authority charged with the enforcement, interpretation or administration thereof, and all applicable administrative orders, requests,

 

  

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licenses, authorizations and permits of, and agreements with, any Governmental Authority (whether or not such orders, requests, licenses, authorizations, permits or agreements have the force of law).

 

LC means each documentary, standby, or direct pay letter of credit issued by Lender for the account of any Company on or after the Closing Date under the terms of this Agreement and the applicable LC Application.

 

LC Application means an application and agreement for the issuance or amendment of an LC in the form from time to time in use by Lender.

 

LC Borrowing means an LC Credit Extension resulting from a drawing under any LC which has not been reimbursed or refinanced as a Loan under the Revolving Credit Facility.

 

LC Credit Extension means, with respect to any LC, the issuance, extension of the expiry date, amendment, renewal, or increase of the amount of such LC.

 

LC Credit Extension Date means the date on which an LC Credit Extension occurs.

 

LC Exposure means, when determined and without duplication, the sum of (a) the aggregate undrawn maximum face amount of each LC at such time, plus (b) the aggregate unpaid obligations of the Companies to reimburse Lender for amounts paid by Lender under LCs (including all LC Borrowings and excluding any Loans to fund such reimbursement obligations under Section 2.4).

 

LC Facility means a subfacility for the issuance of LCs, as described in Section 2.4.

 

LC Sublimit means $1,000,000.

 

LC Termination Date means the date that is 180 days beyond the Revolving Credit Termination Date.

 

Lender’s Office means Lender’s address, and, as appropriate, account as set out on Schedule 1, or such other address or account of which Lender may from time to time notify Borrowers in writing.

 

Leverage Ratio means, as of any date of determination, the ratio of (i) Consolidated Total Debt as of such date, to (ii) Consolidated Adjusted EBITDA for the period of twelve consecutive months ending on such date.

 

LIBOR means a daily fluctuating rate of interest which can change on each banking day.  The rate will be adjusted on each banking day to equal the London Interbank Offered Rate (or a comparable or successor rate which is approved by the Lender) for U.S. Dollar deposits for delivery on the date in question for a one month term beginning on that date.  Lender will use the London Interbank Offered Rate as published by Bloomberg (or other commercially available source providing quotations of such rate as selected by the Lender from time to time) as determined at approximately 11:00 a.m. London time two (2) London Banking Days prior to the date in question, as adjusted from time to time in the Lender’s sole discretion for reserve requirements, deposit insurance assessment rates and other regulatory costs.  If such rate is not available at such time for any reason, then the rate will be determined by such alternate method as reasonably selected by Lender.  A “London Banking Day” is a day on which banks in London are open for business and dealing in offshore dollars.

 

LIBOR Loan means a Loan that bears interest at a rate based on LIBOR.

 

  

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Lien means any lien (statutory or other), mortgage, security interest, financing statement, collateral assignment, pledge, assignment, charge, hypothecation, deposit arrangement, or preference, priority or other security interest or preferential arrangement of any kind or nature whatsoever (including any conditional sale or other title retention agreement, and any financing lease having substantially the same economic effect as any of the foregoing), or encumbrance of any kind, and any other right of or arrangement with any creditor (whether based on common law, constitutional provision, statute or contract) to have its claim satisfied out of any property or assets, or their proceeds, before the claims of the general creditors of the owner of the property or assets.

 

Litigation means any action by or before any Governmental Authority, arbitrator, or arbitration panel.

 

Loan means any amount disbursed by Lender to, or on behalf of, any Company under the Loan Documents, whether such amount constitutes an original disbursement of funds or the financing of an LC reimbursement obligation, or a disbursement in in accordance with, and to satisfy the obligations of any Company under, any Loan Document.

 

Loan Documents means (a) this Agreement, certificates and requests delivered under this Agreement, and exhibits and schedules to this Agreement, (b) the Note, (c) all Guaranties, (d) the Security Documents, (e) all agreements, documents and instruments related to Bank Products (including all Hedge Agreements and all Cash Management Agreements), (f) all LCs and LC Applications, (g) any Subordination Agreement, (h) all other agreements, documents, and instruments in favor of Lender ever delivered in connection with or under this Agreement, and (i) all renewals, extensions, amendments, modifications, supplements, restatements, and replacements of, or substitutions for, any of the foregoing.

 

Loan Request means a request substantially in the form of Exhibit B or in such other form as may be acceptable to Lender.

 

Material Adverse Effect means any circumstance or event that, individually or collectively with other circumstances or events, could reasonably be expected to result in (a) impairment of the ability of any Company to perform any of its payment or other material obligations under any Loan Document when due or as required therein, (b) impairment of the ability of Lender to enforce any Company’s material obligations, or Lender’ rights, under any Loan Document, (c) a material adverse effect upon the legality, validity, binding effect or enforceability against any Company of any Loan Document to which it is a party, or (d) a material and adverse change in, or a material adverse effect upon, the operations, business, properties, liabilities (actual or contingent), condition (financial or otherwise), or prospects of the Companies taken as a whole.

 

Material Contract means, for any Person, any agreement to which that Person is a party (other than the Loan Documents) for which breach, nonperformance, cancellation or failure to renew could reasonably be expected to have a Material Adverse Effect, together with the Related Agreements and those contracts and arrangements listed on Schedule 7.17.

 

Maximum Amount and Maximum Rate respectively mean the maximum non-usurious amount and the maximum non-usurious rate of interest that, under applicable Law, Lender is permitted to contract for, charge, take, reserve or receive on the Obligation.

 

Moody’s means Moody’s Investors Service, Inc. and any successor thereto.

 

Net Proceeds means, with respect to (a) any Disposition of any asset by any Person, the aggregate amount of cash and non-cash proceeds from such Disposition received by, or paid to or for the account of,

 

  

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such Person, net of customary and reasonable out-of-pocket costs, fees, and expenses, (b) the issuance of Funded Debt (including Subordinated Debt), Equity Interests, or similar instruments, the cash and non-cash proceeds received from such issuance or incurrence, net of attorneys’ fees, investment banking fees, accountants fees, underwriting discounts and commissions, legal fees, and other customary fees and expenses actually incurred in connection with such issuance, (c) insurance proceeds, the aggregate amount of such cash proceeds received by, or paid to or for the account of, such Person, net of customary and reasonable legal fees, out-of-pocket costs, fees, and expenses, and (d) eminent domain or condemnation proceeds, the aggregate amount of such cash proceeds received by, or paid to or for the account of, such Person, net of customary and reasonable legal fees, out-of-pocket costs, fees, and expenses.  Non-cash proceeds include any proceeds received by way of deferred payment of principal pursuant to a note, installment receivable, purchase price adjustment receivable, or otherwise, but only as and when received.

 

Non-Qualifying Party means any Borrower or any Guarantor that on the Eligibility Date fails for any reason to qualify as an Eligible Contract Participant.

 

Non-renewal Notice Date is defined in Section 2.4(a)(iv).

 

Note means the Revolving Note.

 

Nueces County Property means that certain real property owned by Vertex-Recovery and having an address commonly known as 7941 Recycle Road, Corpus Christi, Nueces County, Texas 78409.

 

Obligation means all present and future Debt, liabilities and obligations (including the Loans, the LC Exposure, the obligations under any Bank Products, the Hedge Liabilities (other than Excluded Hedge Liabilities) and indemnity obligations), whether direct or indirect (including those acquired by assumption), absolute or contingent, due or to become due, and all renewals, increases and extensions thereof, or any part thereof, now or in the future owed to Lender by any Company under any Loan Document, together with all interest accruing thereon, reasonable fees, costs and expenses payable under the Loan Documents or in connection with the enforcement of rights under the Loan Documents, including (a) fees and expenses under Section 8.12, and (b) interest and fees that accrue after the commencement by or against any Company or any Affiliate thereof of any proceeding under any Debtor Relief Law naming such Person as the debtor in such proceeding, regardless of whether such interest and fees are allowed claims in such proceeding.

 

Omega Acquisition means the acquisition by Vertex-Operating and Vertex-LA of certain assets under the Purchase Agreement.

 

Omega/Bango Financing Documents means the notes, loan agreements, security agreements, mortgages and related documents evidencing loans and advances by Vertex-NV to Omega Refining and Bango Refining.

 

Omega Holdings means Omega Holdings Company, LLC, a Delaware limited liability company.

 

Omega Refining means Omega Refining, LLC, a Delaware limited liability company.

 

Organizational Documents means (a) with respect to any corporation, its certificate or articles of incorporation or organization, as amended, and its by-laws, as amended, (b) with respect to any limited partnership, its certificate of limited partnership, as amended, and its partnership agreement, as amended, (c) with respect to any general partnership, its partnership agreement, as amended, and (d) with respect to any limited liability company, its articles of organization or certificate of formation, as amended, and its

 

  

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operating agreement or limited liability company agreement, as amended.  In the event any term or condition of this Agreement or any other Loan Document requires any Organizational Document to be certified by a secretary of state or similar governmental official, the reference to any such “Organizational Document” shall only be to a document of a type customarily certified by such governmental official.

 

PBGC means Pension Benefit Guaranty Corporation, or any successor thereof, established under ERISA.

 

Permitted Acquisition means any Acquisition occurring after the Closing Date by any Company with respect to which all of the following conditions shall have been satisfied:

 

(a)          the total consideration for all Acquisitions occurring after the Closing Date (including, but not limited to consideration paid for the Bango Acquisition) does not exceed $10,000,000 in aggregate;

 

(b)          if a new Subsidiary is formed or acquired as a result of or in connection with the Acquisition, the Companies shall have complied with the requirements of Section 8.11 hereof in connection therewith;

 

(c)          immediately prior to and after giving effect to the Acquisition, no Default or Event of Default shall exist, including with respect to the financial covenants contained in Section 10 hereof on a pro forma basis as of the last day of the fiscal quarter most recently ended,

 

(d)          all transactions in connection therewith shall be consummated, in all material respects, in accordance with all applicable laws and in conformity with all applicable Governmental Authorizations;

 

(e)          in the case of the acquisition of Equity Interests, all of the Equity Interests (except for any such securities in the nature of directors’ qualifying shares required pursuant to applicable law) acquired or otherwise issued by such Person or any newly formed Subsidiary in connection with such acquisition shall be owned 100% by Holdings or a Guarantor;

 

(f)           Borrower Representative shall have delivered to Lender (i) at least 30 Business Days  prior to such proposed acquisition (except such notice may be delivered not less than 10 Business Days prior to the Bango Acquisition), a Compliance Certificate evidencing compliance with Section 10 as required under clause (c) above, together with all relevant financial and business information with respect to such acquired assets, including, without limitation, the aggregate consideration for such acquisition and any other information required to demonstrate compliance with Section 10;

 

(g)          any Person or assets or division as acquired in accordance herewith (y) shall be in the same business or lines of business in which Holdings and its Subsidiaries are engaged as of the Closing Date and (z) for the four quarter period most recently ended prior to the date of such acquisition, shall have generated earnings before income taxes, depreciation, and amortization during such period that shall exceed the amount of capital expenditures related to such Person or assets or division during such period (calculated in substantially the same manner as Consolidated Adjusted EBITDA and Consolidated Capital Expenditures are calculated); provided, however, clause (z) shall not apply to the consummation of the Bango Acquisition; and

 

(h)          the Acquisition shall have been approved by the board of directors or other governing body or controlling Person of the Person acquired or the Person from whom such assets or division is acquired.

 

  

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Permitted Bango/Omega Transaction means loans made by Vertex-NV to Omega Refining and Bango Refining, and guaranteed by Omega Holdings in an aggregate amount not to exceed $6,000,000 to the extent:

 

(a)          such loans are evidenced by that certain Secured Promissory Note, dated as of the Closing Date, issued by Omega Refining and Bango Refining in favor of Vertex-NV;

 

(b)          such loans are made on the terms set forth in the Purchase Agreement and such Secured Promissory Note;

 

(c)          such loans are secured by a first priority Lien on all assets of Omega Refining and Bango Refining, except that (i) the Liens in the Equity Interests of Holdings issued to the Sellers on the date that the Omega Acquisition is consummated may be subordinated to Liens in up to 116,145 shares of capital stock of Holdings securing loans advanced by FCC Environmental, LLC, (ii)  the Liens in the Equity Interests of Holdings issued to the Sellers on the date that the Omega Acquisition is consummated may be subordinated to Liens in up to 183,855 shares of capital stock of Holdings securing loans advanced by Thermo Fluids, Inc., and (iii) the Liens in the collateral insurance proceeds with respect to the facility located on the Churchill County Leasehold Property may be to Liens securing up to $1,500,000 of loans advanced by BBB Funding, LLC after the Closing Date to Bango Refining (the “BBB Post Close Loans”); provided that (i) Vertex-NV has a second priority Lien in such casualty insurance proceeds and (ii) BBB Funding, LLC is obligated to fund the full $1,500,000 of BBB Post Close Loans before any draw loans are made pursuant to the Omega/Bango Financing Documents;

 

(d)          the loans owed to BBB Funding, LLC in an aggregate principal amount not to exceed $6,500,000 may be secured by a second priority Lien in the assets of Bango Refining prior to the Bango Acquisition and by a first priority Lien on the Equity Interests of Holdings issued to the Sellers on the date that the Omega Acquisition is consummated;

 

(e)          the Omega/Bango Financing Documents have all been pledged to Lender pursuant to the Pledge and Security Agreement and all related collateral has been collaterally assigned to Lender, including delivery of such UCC amendments and collateral assignments of mortgages or deeds of trust as Lender shall request subject to the Intercreditor Agreement;

 

(f)           Vertex-NV shall have required Omega Refining and Bango Refining to institute cash management provisions and control accounts with respect to account collateral in a manner reasonably satisfactory to Lender;

 

(g)          all loans, notes and advances by BBB Funding, LLC, Thermo Fluids, Inc., and FCC Environmental, LLC shall be unsecured and subordinated to all loans, advances and other liabilities owned by Omega Holdings or its Subsidiaries to any other creditors (excluding for this purpose the accrual of any salaries to officers and employees in the ordinary course of business), including without limitation, the loans made by Vertex-NV to Omega Refining and Bango Refining in a manner satisfactory to Lender, except to the extent set forth in clause (c);

 

(h)          BBB Funding, LLC, Thermo Fluids, Inc., and FCC Environmental, LLC shall have executed and delivered to Borrowers releases of Holdings, its Subsidiaries and their creditors from all existing and future claims that it may have related to any of its loans, advanced or other investments in the Sellers or in Holdings or any of its Subsidiaries, as well as the transactions contemplated hereby or by the Related Agreements, in form and substance satisfactory to Lender; and

 

  

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(i)           subject to compliance with the preceding clauses (a) – (h), all purchase price and used motor oil loans may be made on the Closing Date and following the Closing Date no additional loans shall be funded to Omega Refining or Bango Refining unless and until the Post Close Equity Raise shall have occurred.

 

Permitted Debt means:

 

(a) the Obligation;

 

(b) Debt incurred by Borrowers or any of their Subsidiaries under the GS Term Loan Agreement not to exceed the sum of (i) $40,000,000 minus (ii) the amount of principal payments applied to reduce the outstanding principal amount of the term loans under the GS Term Loan Agreement, plus (iii) any payments in kind made by capitalizing such amount to the then outstanding principal amount of the term loans under the GS Term Loan Agreement, or issuing new promissory notes in relation thereto, plus (iv) $10,000,000;

 

(c) Debt arising from endorsing negotiable instruments for collection in the ordinary course of business;

 

(d) purchase money Debt, Capital Lease obligations or other Debt incurred in the ordinary course of business which, in the aggregate, does not exceed $2,000,000 in the aggregate principal outstanding at any time for all Companies;

 

(e) Debt among the Companies and guaranties by any Company of Permitted Debt;

 

(f) Debt existing on the Closing Date and described on Schedule 2;

 

(g) indemnities arising under agreements entered into by any Company in the ordinary course of business; and

 

(h) trade payables, Tax liabilities and other current liabilities incurred in the ordinary course of business.

 

Permitted Investments means (a) marketable obligations (i) issued or directly and unconditionally guaranteed as to interest and principal by the U.S., (ii) backed by the full faith and credit of the U.S. (and investments in mutual funds investing primarily in those obligations) and (iii) marketable obligations issued by any state of the U.S. or any political subdivision thereof of any such state or any public instrumentality thereof, in each case maturing within one year after such date and having, at the time of the acquisition thereof, a rating of at least "A-2" from S&P or at least "P-2" from Moody's, (b) certificates of deposit or banker’s acceptances that are fully insured by the Federal Deposit Insurance Corporation or are issued by commercial banks having combined capital, surplus, and undivided profits of not less than $100,000,000 (as shown on its most recently published statement of condition), (c) cash or cash equivalents, (d) eurodollar time deposits or investments managed by Lender, (e) commercial paper and similar obligations rated “P-2” or better by Moody’s or “A-2” or better by S&P, (f) investments in securities purchased by any Company under repurchase obligations pursuant to which arrangements are made with selling financial institutions (being a financial institution having unimpaired capital and surplus of not less than $500,000,000 and with a rating of “A-1” by S&P or “P-1” by Moody’s) for such financial institutions to repurchase such securities within 30 days from the date of purchase by such Company, and other similar short term investments made in connection with the Company’s cash management practices, (g) non-cash proceeds from dispositions permitted under Section 9.9, (h) investments by any Borrower in its wholly-owned Subsidiaries which are Guarantors, (i) the Permitted

 

  

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Bango/Omega Transaction, (j) investments made solely from the proceeds of the Vertex Refining Cash Collateral Account, in accordance with terms of the GS Term Loan Agreement as in effect on the Closing Date, (k) investments by Holdings in Vertex-NV so long as such investments are made solely from the Net Proceeds of the issuance of Equity Interests by Holdings, and (l) investments made by any Company after the Closing Date in an aggregate amount not to exceed at any time $100,000; provided that this subsection (l) shall not be available for Permitted Acquisitions or any investment in E-Source or, prior to the Vertex-NV Ring Fence Termination Date, Vertex-NV.  Notwithstanding the foregoing, at no time following the closing of the Bango Acquisition and prior to the Vertex-NV Ring Fence Termination Date shall any Company encumber any of its properties to secure Debt of Vertex-NV.

 

Permitted Liens means (a) Liens securing the Obligation, (b) Liens on Collateral securing Debt under the GS Term Loan Agreement, but only to the extent such Liens are subject to the terms of the Intercreditor Agreement, (c) Liens existing on the Closing Date and described on Schedule 2, (d) Liens which secure purchase money Debt and Capital Lease obligations permitted under clause (d) of the definition of Permitted Debt, (e) easements, rights-of-way, encumbrances and other restrictions on the use of real property which do not materially impair the use thereof, (f) Liens for Taxes; provided that, (i) no amounts are due and payable and no Lien has been filed or agreed to, or (ii)  the validity or amount thereof is being contested in good faith by lawful proceedings diligently conducted, and reserve or other provision required by GAAP has been made, (g) judgments and attachments permitted by Section 11.4, (h) pledges or deposits made to secure payment of workers’ compensation, unemployment insurance or other forms of governmental insurance or benefits or to participate in any fund in connection with workers’ compensation, unemployment insurance, pensions or other social security programs, (i) good-faith pledges or deposits made in the ordinary course of business to secure (j) performance of bids, tenders, trade contracts (other than for the repayment of borrowed money) or leases, (ii) statutory obligations, or (iii) surety or appeal bonds, or indemnity, performance or other similar bonds, which, in the aggregate under this clause (j), do not exceed $100,000 at any time, (k) rights of offset or statutory banker’s Lien arising in the ordinary course of business in favor of commercial banks; provided that, any such Lien shall only extend to deposits and property in possession of such commercial bank and its Affiliates, and (l) Liens (other than for Taxes) imposed by operation of law (including Liens of mechanics, materialmen, warehousemen, carriers and landlords and similar Liens); provided that, (i) the validity or amount thereof is being contested in good faith by lawful proceedings diligently conducted, (ii) reserve or other provision required by GAAP has been made, and (iii) within 60 days after the entry thereof, levy and execution thereon have been (and continue to be) stayed or payment thereof is covered in full by insurance (subject to the customary deductible).

 

Person means any individual, partnership, limited partnership, corporation, limited liability company, business trust, joint stock company, trust, unincorporated association, joint venture, syndicate, Governmental Authority or other entity or organization of whatever nature.

 

Plaquemines Parish Leasehold Property means that certain real property leased by Vertex-LA pursuant to the Vertex-LA Plaquemines Parish Lease and having an address commonly known as 278 E. Ravenna Road, Belle Chasse, Plaquemines Parish, Louisiana 70037.

 

Pledge and Security Agreement means the Pledge and Security Agreement in substantially the form of Exhibit E, and executed by each Company, as debtor, and by Lender, as secured party, granting Lender a Lien on, and security interest in, among other things, such Company’s accounts receivable, equity interests, inventory, equipment, goods, general intangibles, intellectual property, chattel paper, instruments, and documents.

 

Post Close Equity Raise has the meaning set forth in Section 8.16.

 

  

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Prime Rate means the rate of interest publicly announced from time to time by Lender as its Prime Rate.  The Prime Rate is set by Lender based on various factors, including Lender’s costs and desired return, general economic conditions and other factors, and is used as a reference point for pricing some loans.  Lender may price loans to its customers at, above, or below the Prime Rate.  Any change in the Prime Rate shall take effect at the opening of business on the day specified in the public announcement of a change in Lender’s Prime Rate.  The Prime Rate is not necessarily the lowest rate charged by Lender on its loans and is set by Lender in its sole discretion.

 

Proper Form means in form and substance satisfactory to Lender and its legal counsel.

 

Purchase Agreement means that certain Asset Purchase Agreement dated March 17, 2014, as amended by that certain First Amendment to Asset Purchase Agreement dated as of April 14, 2014 and that certain Second Amendment to Asset Purchase Agreement dated as of the Closing Date, among Holdings, Vertex-LA, and Vertex-NV, as buyers; Omega Refining and Bango Refining, as sellers; and Omega Holdings, as equity owner.

 

Qualified ECP Loan Party means any Borrower or any Guarantor that on the Eligibility Date is (a) a corporation, partnership, proprietorship, organization, trust, or other entity other than a “commodity pool” as defined in Section 1a(10) of the Commodity Exchange Act and CFTC regulations thereunder that has total assets exceeding $10,000,000, or (b) an Eligible Contract Participant that can cause another person to qualify as an Eligible Contract Participant on the Eligibility Date under Section 1a(18)(A)(v)(II) of the Commodity Exchange Act by entering into or otherwise providing a “letter of credit or keepwell, support, or other agreement” for purposes of Section 1a(18)(A)(v)(II) of the Commodity Exchange Act.

 

Related Agreements means, collectively, the Purchase Agreement, the GS Term Loan Agreement, the Omega/Bango Financing Documents, the Tolling Agreement and all other material agreements executed in connection with the foregoing.

 

Representatives means representatives, officers, directors, employees, consultants, contractors, attorneys of Lender.

 

Reserves means reserves established from time to time by Lender in its reasonable credit judgment against Eligible Inventory, Eligible Accounts, or the Borrowing Base.  Without limiting the generality of the foregoing, Reserves established to ensure the payment of accrued interest expense, Taxes, Debt rent for locations without landlord waivers or warehouseman’s agreements shall be deemed to be an exercise of Lender’s reasonable credit judgment as will any Slow Moving Reserve in respect of inventory.

 

Responsible Officer means, with respect to each Company, the president, chief executive officer, chief financial officer, treasurer, controller, chief accounting officer, or chief operating officer of such Company.

 

Restricted NV Intercompany Transactions means upon satisfaction of each of the following conditions (a) the Bango Acquisition has been consummated and the Vertex-NV Ring Fence Termination Date has not yet occurred, (b) Borrowers have delivered the financial statements to the Lender for at least three full fiscal months ending after the Bango Acquisition, (c) the EBITDA of Vertex-NV for each of the three most recently ended fiscal months for which financial statements have been delivered pursuant to the preceding clause is positive, (d) no Default or Event of Default has occurred and is continuing or would result therefrom, and (e) Vertex-NV is a Guarantor and its guarantee and security agreement is in full force and effect, any of the following permissible actions:

 

  

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(i) Vertex-NV may guarantee the Debt under the GS Term Loan Agreement in accordance with the terms of the GS Term Loan Agreement as in effect on the Closing Date, and (ii) Holdings and its Subsidiaries may make intercompany loans to Vertex-NV and Vertex-NV may borrow such intercompany loans, provided that the aggregate amount of does not exceed $2,000,000 at any time;

 

provided that, the foregoing permissible actions shall only be permissible if and to the extent such actions are also permitted under the last paragraph of Section 6.1 of the GS Term Loan Agreement as in effect on the Closing Date.

 

Revolving Committed Amount means $20,000,000.

 

Revolving Credit Exposure means, when determined the sum of (a) the Revolving Principal Amount, plus (b) the LC Exposure.

 

Revolving Credit Facility is defined in Section 2.1.

 

Revolving Credit Limit means the lesser of (a) the Revolving Committed Amount and (b) the Borrowing Base.

 

Revolving Credit Termination Date means the earlier of (a) May 2, 2017, or (b) the effective date that Lender’s Commitment to make Credit Extensions under the Revolving Credit Facility under this Agreement is otherwise canceled or terminated in accordance with Section 12 of this Agreement or otherwise.

 

Revolving Note means a promissory note substantially in the form of Exhibit A, executed by Borrowers and made payable to Lender and all renewals, extensions, modifications, amendments, supplements, restatements, and replacements of, or substitutions for, that promissory note.

 

Revolving Principal Amount means, when determined, the outstanding principal balance of the Revolving Note.

 

S&P means Standard & Poor’s Ratings Group (a division of The McGraw-Hill Companies, Inc.).

 

Security Documents means the Pledge and Security Agreement, Deeds of Trusts, and all documents executed in connection therewith to create or perfect a Lien on the Collateral.

 

Sellers means Omega Refining and Bango Refining.

 

Slow Moving means inventory that turns less than once each 365 days.

 

Solvent means, with respect to any Company, that as of the date of determination, both (a) (i) the sum of such Company’s debt (including contingent liabilities) does not exceed the present fair saleable value of such Company’s present assets; (ii) such Company’s capital is not unreasonably small in relation to its business as contemplated on the Closing Date and reflected in any projections or with respect to any transaction contemplated or undertaken after the Closing Date; and (iii) such Person has not incurred and does not intend to incur, or believe (nor should it reasonably believe) that it will incur, debts beyond its ability to pay such debts as they become due (whether at maturity or otherwise); and (b) such Person is “solvent” within the meaning given that term and similar terms under applicable laws relating to fraudulent transfers and conveyances.  For purposes of this definition, the amount of any contingent liability at any time shall be computed as the amount that, in light of all of the facts and circumstances existing at such time, represents the amount that can reasonably be expected to become an actual or

 

  

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matured liability (irrespective of whether such contingent liabilities meet the criteria for accrual under Statement of Financial Accounting Standard No.5).

 

Subject Leases means the CMT Lease, the Vertex-LA Jefferson Parish Lease, the Vertex-LA Plaquemines Parish Lease, and following assignment of the Vertex-NV Lease to Vertex-NV, the Vertex-NV Lease.

 

Subordinated Debt means Debt which is contractually subordinated in right of payment, collection, enforcement and lien rights to the prior payment in full of the Obligation on terms satisfactory to Lender.

 

Subordination Agreement means the Earnout Subordination Agreements and each other subordination agreement in Proper Form (but excluding the Intercreditor Agreement).

 

Subsidiary of a Person means a corporation, partnership, joint venture, limited liability company or other business entity of which a majority of the Voting Interests are at the time beneficially owned, or the management of which is otherwise controlled, directly, or indirectly through one or more intermediaries, or both, by such Person.  Unless otherwise specified, all references in this Agreement or the Loan Documents to a “Subsidiary” or to “Subsidiaries” shall refer to a Subsidiary or to Subsidiaries of Borrower.

 

Tax Code means the Internal Revenue Code of 1986, as amended, and related rules, regulations and published interpretations.

 

Taxes means, for any Person, taxes, assessments or other governmental charges or levies imposed upon that Person, its income, or any of its properties, franchises or assets.

 

Term Loan Agent means Goldman Sachs Bank USA, in its capacity as administrative agent under the GS Term Loan Agreement.

 

Tolling Agreement means that certain Tolling Agreement dated May 2, 2014, by and between Vertex-Operating and Bango Refining, with respect to used motor oil.

 

Transaction Costs means the fees, costs and expenses payable by any Company on or before the Closing Date in connection with the transactions contemplated by the Loan Documents, the Related Agreements and any Permitted Acquisitions, to the extent approved in writing by Lender and which shall include, without limitation, all costs and expenses incurred in connection with the transactions contemplated by the Related Agreements which have been approved by Lender on the Closing Date.

 

Travis County Property means that certain real property owned by VAS and having an address commonly known as 20909 FM 685, Pflugerville, Travis County, Texas 77660.

 

UCC means the Uniform Commercial Code, as adopted in Texas and as amended from time to time.

 

Unreimbursed Amount is defined in Section 2.4(b)(i).

 

U.S. means United States of America.

 

VAS means Vertex Acquisition Sub, LLC, a Nevada limited liability company.

 

  

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Vertex-II means Vertex II GP, LLC, a Nevada limited liability company.

 

Vertex-LA means Vertex Refining LA, LLC, a Louisiana limited liability company.

 

Vertex-LA Jefferson Parish Lease means that certain Land Lease Agreement dated as of April 30, 2008, between Marrero Terminal, LLC, a Delaware limited liability company, as landlord, and Omega Refining, as tenant, to which Vertex-LA has succeeded as tenant, and as renewed, extended, modified, or supplemented from time to time.

 

Vertex-LA Plaquemines Parish Lease means that certain Commercial Lease Agreement dated as of May 25, 2012, between Plaquemines Holdings, LLC, a Louisiana limited liability company, as landlord, and Omega Refining, LLC, a Delaware limited liability company, as tenant, to which Vertex-LA has succeeded as tenant, and as renewed, extended, modified, or supplemented from time to time.

 

Vertex-NV means Vertex Refining NV, LLC, a Nevada limited liability company.

 

Vertex-NV Lease means that certain Lease with Option for Membership Interest Purchase dated as of August 4, 2010, between Bango Oil, LLC, a Nevada limited liability company, as landlord, and Bango Refining NV, LLC, a Delaware limited liability company, as tenant, to which Vertex-NV will succeed as tenant, and as renewed, extended, modified, or supplemented from time to time.

 

Vertex-NV Ring Fence Termination Date means “Vertex NV Ring Fence Termination Date” as defined in the GS Term Loan Agreement as in effect on the Closing Date.

 

Vertex-Recovery means Vertex Recovery, L.P., a Texas limited partnership.

 

Vertex Refining Cash Collateral Account has the meaning set forth in Section 8.16.

 

VMS means Vertex Merger Sub, LLC, a California limited liability company.

 

Voting Interests of any Person means the Equity Interests of such Person having ordinary voting power for the election of directors (or other governing body).

 

1.2           Interpretive Provisions.

 

(a)           Terms used but not defined in this Agreement, but which are defined in the UCC, have the meaning given them in the UCC.

 

(b)           The meanings of words and defined terms are equally applicable to the singular and plural forms of the defined terms and words.  Defined terms in respect of one gender include each other gender where appropriate.  Derivatives of defined terms have corresponding meanings.

 

(c)           Any conflict or ambiguity between this Agreement and any other Loan Document is controlled by the terms and provisions of this Agreement.

 

(d)           The headings and captions used in this Agreement and the other Loan Documents are for convenience only and will not be deemed to limit, amplify or modify the terms of this Agreement or the Loan Documents.

 

(e)           Article, Section, Exhibit and Schedule references are to the Loan Document in which such reference appears, unless otherwise indicated.

 

  

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(f)           In the computation of periods of time from a specified date to a later specified date, the word “from” means “from and including;” the words “to” and “until” each mean “to but excluding;” and the word “through” means “to and including.”

 

(g)           The words “herein,” “hereto,” “hereof” and “hereunder” and words of similar import when used in any Loan Document shall refer to such Loan Document as a whole and not to any particular provision of such Loan Document.

 

(h)           The term “including” is by way of example and not limitation.

 

1.3           Accounting Terms.  All accounting terms not specifically or completely defined in this Agreement shall be construed in conformity with, and all financial data (including financial ratios and other financial calculations) required to be submitted pursuant to this Agreement shall be prepared in conformity with, GAAP, with all accounting principles being consistently applied from period to period and on a basis consistent with the most recent audited consolidated financial statements of Borrowers and its Subsidiaries.  While any Borrower has any Subsidiaries, all accounting and financial terms and financial calculations (including the calculation of all financial covenants, ratios, and related definitions) in respect of Borrowers or any Company are on a consolidated and consolidating basis for all Companies, unless otherwise indicated.

 

(a)           If at any time any change in GAAP would affect the computation of any financial ratio or requirement set out in any Loan Document, and either the Borrowers or Lender shall so request, Lender and the Borrowers shall negotiate in good faith to amend such ratio or requirement to preserve the original intent thereof in light of such change in GAAP (subject to the approval of Lender); provided that, until so amended, (i) such ratio or requirement shall continue to be computed in accordance with GAAP as in effect prior to such change and (ii) the Borrowers shall provide to Lender financial statements and other documents required under this Agreement or as reasonably requested hereunder setting forth a reconciliation between calculations of such ratio or requirement made before and after giving effect to such change in GAAP.

 

1.4           References to Documents.  Unless otherwise expressly provided in this Agreement, (a) references to corporate formation or governance documents, contractual agreements (including this Agreement and the Loan Documents) and other contractual instruments shall be deemed to include all subsequent amendments, restatements, extensions, supplements and other modifications thereto, but only to the extent that such amendments, restatements, extensions, supplements and other modifications are not prohibited by any Loan Document, and (b) references to any Law shall include all statutory and regulatory provisions consolidating, amending, replacing, supplementing or interpreting such Law.

 

1.5           Time.  Unless otherwise indicated, all time references (e.g., 11:00 a.m.) are to Central time (daylight or standard, as applicable).

 

SECTION 2    LOAN COMMITMENTS.

 

2.1           Revolving Credit Facility.  Subject to the terms and conditions of this Agreement, Lender agrees to make a loan to Borrowers in an amount not to exceed the Revolving Committed Amount in one or more Loans from time to time, which Borrowers may borrow, repay, and reborrow under this Agreement (collectively, the “Revolving Credit Facility”).

 

2.2           Loan Procedure.

 

(a)           Subject to compliance with Section 5, Borrower Representative may request a

 

  

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Loan under the Revolving Credit Facility by submitting a Loan Request to Lender.  A Loan Request is irrevocable and binding on Borrowers.  Each Loan Request must be received by Lender no later than 11:00 a.m. on the proposed Loan Date.  Each Loan Date must be a Business Day, and each Loan Date under the Revolving Credit Facility must occur before the Revolving Credit Termination Date.  Each Loan under the Revolving Credit Facility is subject to the following conditions:

 

(i)           each Loan (unless the remaining amount under clause (ii) below is less) must be in an amount not less than $50,000 or a greater integral multiple of $10,000;

 

(ii)           no Loan may exceed an amount equal to the excess of the Revolving Credit Limit over the Revolving Credit Exposure; and

 

(iii)           after giving effect to any Loan, the Revolving Credit Exposure may not exceed the Revolving Credit Limit.

 

(b)           Each Loan under the Revolving Credit Facility will be deposited by Lender into Borrowers’ account with Lender set out on Schedule 1.

 

(c)           From time to time, Lender may provide certain treasury or cash management services to Borrowers under which Borrowers incur Loans under the Revolving Credit Facility.  While a Cash Management Agreement is in effect, Borrowers may repay the Revolving Principal Amount under the terms of the Cash Management Agreement without notice.  Each Borrower hereby authorizes Lender to honor all checks or other drafts received against the accounts subject to the Cash Management Agreement.  Loans borrowed under the terms of any Cash Management Agreement between Borrowers and Lender shall be borrowed as LIBOR Loans.

 

2.3           Prepayments.

 

(a)           Borrowers may voluntarily prepay all or any part of the Revolving Principal Amount at any time, without premium or penalty, subject to the following conditions:

 

(i)           Lender must receive Borrower Representative’s written or telephonic prepayment notice by 2:00 p.m. at least one Business Day preceding the proposed prepayment date;

 

(ii)           Borrower Representative’s prepayment notice shall (A) specify the prepayment date, (B) specify the amount of the Loan to be prepaid, and (C) constitute an irrevocable and binding obligation of Borrowers to make a prepayment in such amount on the designated prepayment date; and

 

(iii)           except as otherwise provided in clause (iv) below, each partial prepayment must be in a minimum amount of not less than (A) $50,000 or in a greater integral multiple of $10,000, or (B) if less than the requested minimum amount, the outstanding balance of the Revolving Principal Amount.

 

(b)           If the Revolving Credit Exposure at any time exceeds the Revolving Credit Limit, then Borrowers shall promptly prepay the Revolving Principal Amount (or if no Revolving Principal Amount is outstanding, Cash Collateralize the LC Exposure), in at least the amount of that excess, together with all accrued and unpaid interest on the principal amount so prepaid.

 

  

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(c)           On the date such amounts are received by, or for the account of, any Borrower (or the applicable Company), the following amounts shall be paid to Lender in the form received with any endorsement or assignment and shall be applied to the Revolving Principal Amount in accordance with this Section 2.3: (i) 100% of the Net Proceeds from the Disposition of inventory and delinquent accounts receivable, (ii) 100% of Eminent Domain Proceeds or Insurance Proceeds required to be paid to Lender under Section 8.10, and (iii) 100% of the Net Proceeds from the issuance of Equity Interests by any Borrower; provided that no mandatory prepayment of the Revolving Principal Amount shall be required after the Closing Date (a) if such Net Proceeds are required to be deposited into the Vertex Refining Cash Collateral Account and are used by Borrowers as permitted under Section 5.14(b) of the GS Term Loan Agreement as in effect on the Closing Date, (b) if such Net Proceeds are used in accordance with terms of Section 2.13(c) of the GS Term Loan Agreement as in effect on the Closing Date, or (c) pursuant to any employee stock or stock option compensation plan that is adopted by the Board of Directors of Holdings. The non-cash portion of all Net Proceeds Lender is entitled to receive under this Section 2.3 shall be pledged to Lender concurrently with the applicable Disposition.

 

(d)           Unless otherwise specified in this Agreement, prepayments under this Section 2.3 shall be applied first, to Cash Collateralize all LC Exposure, and second, to repay the Loans under the Revolving Credit Facility (with the proceeds being applied in accordance with Section 3.3), without a corresponding reduction in the Revolving Committed Amount.

 

(e)           After proper application of all proceeds under this Section 2.3, the excess proceeds, if any, shall be payable to Borrowers.

 

2.4           LC Facility.

 

(a)           The LC Commitment.

 

(i)           Subject to the terms and conditions set out in this Agreement, Lender agrees, from time to time on any Business Day during the period from the Closing Date until the Revolving Credit Termination Date, to issue LCs for the account of any Borrower or any Company or make any other LC Credit Extension, provided that, Lender shall not be obligated to make any LC Credit Extension if, as of the LC Credit Extension Date, (A) the Revolving Credit Exposure would exceed the Revolving Credit Limit (after giving effect to such LC Credit Extension), (B) the LC Exposure would exceed the LC Sublimit (after giving effect to such LC Credit Extension), (C) the expiry date of such requested LC would occur after the LC Termination Date, unless Lender has approved such expiry date, (D) the LC is to be denominated in a currency other than Dollars, (E) any Litigation shall by its terms purport to enjoin or restrain Lender from making such LC Credit Extension, (F) the beneficiary of such LC does not accept the LC or any proposed amendment to, or renewal of, such LC, or (G) a Default or Event of Default exists.

 

(ii)           Each LC Credit Extension shall be made upon the request of Borrower Representative delivered to Lender in the form of an LC Application, appropriately completed and signed by a Responsible Officer of Borrower Representative.  Such LC Application must be received by Lender not later than 11:00 a.m. at least four (4) Business Days prior to the proposed LC Credit Extension Date.

 

(A)           In the case of a request for an initial issuance of an LC, such LC Application shall specify in form and detail satisfactory to Lender (1) the

 

  

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proposed issuance date of the requested LC (which shall be a Business Day), (2) the amount of the requested LC, (3) the expiry date of the requested LC, (4) the name and address of the beneficiary of the requested LC, (5) the documents to be presented by such beneficiary in case of any drawing under the requested LC, (6) the full text of any certificate to be presented by such beneficiary in case of any drawing under the requested LC, and (7) such other matters as Lender may reasonably require.

 

(B)           In the case of a request for an amendment of any outstanding LC, such LC Application shall specify in form and detail satisfactory to Lender (1) the LC to be amended, (2) the proposed date of the amendment (which shall be a Business Day), (3) the nature of the proposed amendment, and (4) such other matters as Lender may reasonably require.

 

(iii)           Promptly after receipt of any LC Application, Lender will confirm that the requested LC Credit Extension is permitted in accordance with the terms of this Agreement, then, subject to the terms and conditions hereof, Lender shall, on the requested date, issue an LC for the account of such requesting Borrower or enter into the applicable amendment, as the case may be, in each case in accordance with Lender’s usual and customary business practices.

 

(iv)           If Borrower Representative so requests in any applicable LC Application, Lender may, in its sole and absolute discretion, agree to issue an LC that has automatic renewal provisions (each, an “Auto-Renewal LC”); provided that, any such Auto-Renewal LC must permit Lender to prevent any such renewal at least once in each twelve-month period (commencing with the date of issuance of such LC) by giving prior notice to the beneficiary thereof not later than a day (the “Nonrenewal Notice Date”) in each such twelve-month period to be agreed upon at the time such LC is issued.  Unless otherwise directed by Lender, Borrower Representative shall not be required to make a specific request to Lender for any such renewal.  Lender may elect not to renew any auto-renewal LC for any reason, including, (A) Lender has reasonably determined that it would have no obligation at such time to issue such LC in its renewed form under the terms hereof (by reason of the provisions of Section 2.4(a)(i) or otherwise), or (B) it has received notice (which may be by telephone or in writing) on or before the day that is two (2) Business Days before the Nonrenewal Notice Date (1) that beneficiary has elected not to permit such renewal or (2) that one or more of the applicable conditions specified in Section 5 is not then satisfied.

 

(b)           Drawings and Reimbursements.

 

(i)           Upon receipt from the beneficiary of any LC of any notice of a drawing under such LC, Lender shall notify Borrower Representative thereof.  Not later than 11:00 a.m. on the date of any payment by Lender under an LC (each such date, an “Honor Date”), Borrowers shall reimburse Lender in an amount equal to the amount of such drawing.  If Borrowers fail to so reimburse Lender by such time, Borrowers shall be deemed to have requested a Loan under the Revolving Credit Facility to be disbursed on the Honor Date in an amount equal to the amount of the unreimbursed drawing (the “Unreimbursed Amount”), without regard to the minimum and multiples specified in Section 2.2 for the principal amount of Loans, but subject to the conditions set out in Section 5 (other than the delivery of a Loan Request).  Any notice given by Lender pursuant to this Section 2.4(b)(i) may be given by telephone if immediately confirmed in

 

  

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writing; provided that, the lack of such an immediate confirmation shall not affect the conclusiveness or binding effect of such notice.

 

(ii)           With respect to any Unreimbursed Amount that is not fully refinanced by a Loan because the conditions set out in Section 5 cannot be satisfied, there are not sufficient available funds under the Revolving Credit Facility, or for any other reason, Borrowers shall be deemed to have incurred from Lender an LC Borrowing in the amount of the Unreimbursed Amount that is not so refinanced, which LC Borrowing shall be due and payable on demand (together with interest) and shall bear interest at the Default Rate.

 

(c)           Obligations Absolute.  The obligation of Borrowers to reimburse Lender for each drawing under each LC and to repay each LC Borrowing shall be absolute, unconditional and irrevocable, and shall be paid strictly in accordance with the terms of this Agreement under all circumstances.  Borrower Representative shall promptly examine a copy of each LC and each amendment thereto that is delivered to it and, in the event of any claim of noncompliance with Borrower Representative’s instructions or other irregularity, Borrower Representative will immediately notify Lender.  Borrowers shall be conclusively deemed to have waived any such claim against Lender and its correspondents unless such notice is given as aforesaid.

 

(d)           Cash Collateral.  Upon the request of Lender, (i) if Lender has honored any full or partial drawing request under any LC and such drawing has resulted in an LC Borrowing, or (ii) if, as of the Revolving Credit Termination Date, any LC for any reason remains outstanding and partially or wholly undrawn, Borrowers shall immediately Cash Collateralize the then outstanding LC Exposure in an amount equal to 105% of such LC Exposure determined as of the date of such LC Borrowing or the Revolving Credit Termination Date, as the case may be).  If LCs are to be outstanding after the Revolving Credit Termination Date, not later than ten (10) Business Days prior to the Revolving Credit Termination Date, Borrowers shall Cash Collateralize the LC Exposure for each such LC as provided in this Section 2.4(d).  Borrowers hereby grant to Lender a security interest in and Lien upon all such cash, deposit accounts and all balances therein and all proceeds of the foregoing.  All such Cash Collateral shall be maintained in blocked, non-interest bearing deposit accounts at Lender.

 

(e)           Applicability of ISP98 and UCP.  Unless otherwise expressly agreed by Lender and Borrowers when an LC Credit Extension is made, (i) the rules of the “International Standby Practices 1998” published by the Institute of International Banking Law & Practice (or such later version thereof as may be in effect at the time of issuance) shall apply to each standby LC, and (ii) the rules of the Uniform Customs and Practice for Documentary Credits, as most recently published by the International Chamber of Commerce (the “ICC”) at the time of issuance (including the ICC decision published by the Commission on Banking Technique and Practice on April 6, 1998, regarding the European single currency (euro)) shall apply to each documentary LC.

 

(f)           Provisions Regarding Electronic Issuance of Letters of Credit.  Lender may adopt procedures pursuant to which Borrower Representative may request the issuance of LCs by electronic means and Lender may issue LCs based on such electronic requests.  Such procedures may include the entering by Borrowers into the LC Applications electronically.  All the procedures, actions and documents referred to in the two preceding sentences are referred to as “Electronic Applications”.  Borrowers hold Lender harmless with respect to actions taken by Lender based upon Electronic Applications.  Borrowers further agree to be bound by all the terms and provisions contained in the LC Applications, including, without limitation, the terms and

 

  

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provisions of the LC Applications contained on the reverse side of the paper copies thereof, including the release and indemnification provisions contained therein.

 

2.5           Increase in Revolving Facility.

 

(a)           Request for Increase.  Provided there exists no Default or Event of Default, upon notice to the Lender, Borrowers may from time to time, request an increase in the Revolving Credit Facility by an amount (for all such requests) not exceeding $10,000,000; provided that (i) any such request for an increase shall be in a minimum amount of $3,000,000, and (ii) Borrowers may make a maximum of three (3) such requests.  At the time of sending such notice, Borrower Representative shall specify the time period within which Lender is requested to respond (which shall in no event be less than ten (10) Business Days from the date of delivery of such notice to the Lender).

(b)           Lender Election to Increase.  Lender shall notify the Borrower Representative within such time period whether or not it agrees to increase the Revolving Committed Amount.  If Lender does not respond within such time period, Lender shall be deemed to have declined to increase the Revolving Committed Amount.

(c)           Effective Date and Allocations.  If the Revolving Credit Facility is increased in accordance with this Section 2.5, Lender and Borrowers shall determine the effective date (the “Revolving Increase Effective Date”).

(d)           Conditions to Effectiveness of Increase.  As a condition precedent to such increase, Borrowers shall deliver to the Lender a certificate of each Company dated as of the Revolving Increase Effective Date signed by a Responsible Officer of each Company (i) certifying and attaching the resolutions adopted by such Company approving or consenting to such increase, and (ii) in the case of the Borrowers, certifying that, before and after giving effect to such increase, (A) the representations and warranties contained in Section 7 and the other Loan Documents are true and correct, on and as of the Revolving Increase Effective Date, and (B) no Default or Event of Default exists.

 

SECTION 3    TERMS OF PAYMENT.

 

3.1           Notes and Payments.

 

(a)           The Loans under the Revolving Credit Facility shall be evidenced by the Revolving Note.

 

(b)           Borrowers must make each payment on the Obligation, without offset, counterclaim or deduction to Lender’s Office, in funds that will be available for immediate use by Lender by 12:00 noon on the day due.  Payments received after such time (and payments received on a day which is not a Business Day) will be deemed received on the next Business Day but interest shall continue to accrue during such period.

 

3.2           Revolving Credit Facility.

 

(a)           Accrued interest on the Revolving Principal Amount is due and payable monthly in arrears on the last day of each month and on the Revolving Credit Termination Date.

 

  

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(b)           The Revolving Principal Amount, all accrued and unpaid interest thereon, and all of the Obligation in respect of the Revolving Credit Facility are due and payable on the Revolving Credit Termination Date.

 

3.3           Order of Application.

 

(a)           All payments and prepayments shall be applied as specified in this Agreement and, if not specified, shall be applied in the following order: (i) to all fees, expenses, late charges, collection costs, and other charges, costs and expenses for which Lender has not been paid or reimbursed under the Loan Documents; (ii) to accrued and unpaid interest on the Revolving Principal Amount; and (iii)  to the remaining Obligation in the order and manner Lender deems appropriate in its sole discretion.

 

(b)           All proceeds from the exercise of any rights shall be applied at Lender’s discretion among principal, interest, fees, expenses, late charges, collection costs, and other charges, costs and expenses, for which Lender has not been paid or reimbursed under the Loan Documents.

 

3.4           Interest.

 

(a)           Except as otherwise provided in this Agreement, Loans under the Revolving Credit Facility shall accrue interest at an annual rate equal to the lesser of (i) at Borrowers’ option (A) for a Base Rate Loan, the sum of the Base Rate plus the Applicable Margin for Base Rate Loans, or (B) for a LIBOR Loan, the sum of LIBOR plus the Applicable Margin for LIBOR Loans, and (ii) the Maximum Rate.

 

(b)           Each change in LIBOR Rate, the Base Rate or the Maximum Rate is effective as of the effective date of such change without notice to any Borrower or any other Person.

 

(c)           To the extent permitted by Law, while an Event of Default exists, the Obligation shall accrue interest at the lesser of (i) the Default Rate and (ii) the Maximum Rate until such Event of Default is waived or cured.  Subject to Section 3.6, if an Event of Default exists, Lender may, in its sole discretion, to the extent permitted by Law, add accrued and unpaid interest to the Revolving Principal Amount and such amount will accrue interest until paid at the applicable interest rate.

 

(d)           If, as a result of any restatement of or other adjustment to the financial statements of Holdings and its Subsidiaries or for any other reason, the Borrowers, or the Lender determines that (i) the Leverage Ratio as calculated by the Borrowers as of any applicable date was inaccurate and (ii) a proper calculation of the Leverage Ratio would have resulted in higher pricing for such period, the Borrowers shall immediately and retroactively be obligated to pay to Lender, promptly on demand by Lender, an amount equal to the excess of the amount of interest and fees that should have been paid for such period over the amount of interest and fees actually paid for such period.  This paragraph shall not limit the rights of Lender under any provision of this Agreement to payment of the Obligation at the Default Rate or under Section 11.  The Borrowers’ obligations under this paragraph shall survive the termination of the Commitment and the repayment of the Obligation hereunder.

 

3.5           Interest Calculations.  Interest on Loans will be calculated on the basis of actual number of days elapsed (including the first day but excluding the last day), but computed as if each calendar year consisted of 360 days (unless computation would result in an interest rate in excess of the Maximum

 

  

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**************************************************

MATERIAL BELOW MARKED BY AN “***” HAS BEEN OMITTED PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT. THIS ENTIRE EXHIBIT INCLUDING THE OMITTED CONFIDENTIAL INFORMATION HAS BEEN FILED SEPARATELY WITH THE COMMISSION.

**************************************************

 

Rate, in which event the computation is made on the basis of a year of 365 or 366 days, as the case may be).  All interest rate determinations and calculations by Lender are conclusive and binding, absent manifest error.

 

3.6           Maximum Rate.  It is the intention of the parties to comply with applicable usury laws.  The parties agree that the total amount of interest contracted for, charged, collected or received by Lender under this Agreement shall not exceed the Maximum Rate.  To the extent, if any, that Chapter 303 of the Texas Finance Code (the “Finance Code”) is relevant to Lender for purposes of determining the Maximum Rate, the parties elect to determine the Maximum Rate under the Finance Code pursuant to the “weekly ceiling” from time to time in effect, as referred to and defined in § 303.001-303.016 of the Finance Code; subject, however, to any right Lender subsequently may have under applicable law to change the method of determining the Maximum Rate.  Notwithstanding any contrary provisions contained herein, (a) the Maximum Rate shall be calculated on the basis of the actual number of days elapsed over a year of 365 or 366 days, as the case may be; (b) in determining whether the interest hereunder exceeds interest at the Maximum Rate, the total amount of interest shall be spread throughout the entire term of this Agreement until its payment in full; (c) if at any time the interest rate chargeable under this Agreement would exceed the Maximum Rate, thereby causing the interest payable under this Agreement to be limited to the Maximum Rate, then any subsequent reductions in the interest rate(s) shall not reduce the rate of interest charged under this Agreement below the Maximum Rate until the total amount of interest accrued from and after the date of this Agreement equals the amount of interest which would have accrued if the interest rate(s) had at all times been in effect; (d) if Lender ever charges or receives anything of value which is deemed to be interest under applicable Texas law, and if the occurrence of any event, including acceleration of maturity of obligations owing to Lender, should cause such interest to exceed the maximum lawful amount, any amount which exceeds interest at the Maximum Rate shall be applied to the reduction of the unpaid principal balance under this Agreement or any other indebtedness owed to Lender by Borrowers, and if this Agreement and such other indebtedness are paid in full, any remaining excess shall be paid to Borrowers; and (e) Chapter 346 of the Finance Code shall not be applicable to this Agreement or the indebtedness outstanding hereunder.

 

3.7           Set-Off.  Upon the occurrence and during the continuance of an Event of Default under this Agreement, (a) each Borrower hereby authorizes Lender, at any time and from time to time, without notice, which is hereby expressly waived by each Borrower, and whether or not Lender shall have declared any credit subject hereto to be due and payable in accordance with the terms hereof, to set off against, and to appropriate and apply to the payment of, the Obligation (whether matured or unmatured, fixed or contingent, liquidated or unliquidated), any and all amounts owing by Lender to such Borrower (whether payable in U.S. dollars or any other currency, whether matured or unmatured, and in the case of deposits, whether general or special (except trust and escrow accounts), time or demand and however evidenced), and (b) pending any such action, to the extent necessary, to hold such amounts as collateral to secure such Obligation and to return as unpaid for insufficient funds any and all checks and other items drawn against any deposits so held as Lender, in its sole discretion, may elect.  Each Borrower hereby grants to Lender a security interest in all deposits and accounts maintained with Lender to secure the payment of all Obligation of the Borrower to Lender under this Agreement and all agreements, instruments and documents related to this Agreement.

 

3.8             Debit Account.  Each Borrower agrees that interest and principal payments and any fees will be deducted automatically on the due date from Holdings’ account number *** or such other accounts of either Borrower with Lender as designated in writing by such Borrower.  This authorization shall not affect the obligation of Borrowers to pay such sums when due, without notice, if there are insufficient funds in such account to make such payment in full on the due date thereof, or if Lender fails to debit such account.

 

  

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SECTION 4     FEES.

 

4.1           Treatment of Fees.  To the extent permitted by Law, the fees described in this Section 4 (a) do not constitute compensation for the use, detention, or forbearance of money, (b) are in addition to, and not in lieu of, interest and expenses otherwise described in this Agreement or in any other Loan Document, (c) are payable in accordance with Section 3.1, (d) are non-refundable, (e) accrue interest, if not paid when due, at the Default Rate, and (f) are calculated on the basis of actual number of days elapsed (including the first day but excluding the last day), but computed as if each calendar year consisted of 360 days (unless computation would result in an interest rate in excess of the Maximum Rate, in which event the computation is made on the basis of a year of 365 or 366 days, as the case may be).  The fees described in this Section 4 are in all events subject to the provisions of Section 3.6.

 

4.2           Commitment Fee.  Borrowers shall pay to Lender a fee (the “Commitment Fee”) equal to the Applicable Margin multiplied by the actual daily amount by which the Revolving Committed Amount exceeds the Revolving Credit Exposure.  The Commitment Fee shall be due and payable quarterly in arrears on the last day of each March, June, September, and December, beginning June 30, 2014, and continuing until the Revolving Credit Termination Date.

 

4.3           Closing Fee.  On the Closing Date, Borrowers shall pay to Lender all fees due and payable in accordance with the Fee Letter.  Such fees shall be fully earned when paid and shall not be refundable for any reason whatsoever.

 

4.4           LC Fees.

 

(a)           Borrowers shall pay to Lender (i) an LC fee for each documentary LC equal to the greater of (A) 2.00% per annum multiplied by the daily maximum amount available to be drawn under such LC (whether or not such maximum amount is then in effect under such LC), and (B) $500, and (ii) an LC fee for each standby LC equal to the greater of (A) 2.00% multiplied by the daily maximum amount available to be drawn under such LC (whether or not such maximum amount is then in effect under such LC), and (B) $500.

 

(b)           Such LC fees shall be computed on the date of issuance, shall be due and payable in advance on the date of issuance (and, for each Auto-Renewal LC, on the date of each such renewal), and are nonrefundable.

 

(c)           In addition, Borrowers shall pay directly to Lender all other customary issuance, presentation, amendment and other processing fees, and other standard costs and charges, of Lender relating to letters of credit as from time to time in effect.  Such customary fees and standard costs and charges are due and payable on demand and are nonrefundable.

 

SECTION 5    CONDITIONS PRECEDENT.

 

5.1           Conditions to Initial Credit Extension.  This Agreement will become effective once all parties have executed and delivered this Agreement. Lender will not be obligated to make the initial Credit Extension on the Closing Date until (a) Lender has received all of the items described on Schedule 5, each in Proper Form, including, but not limited to, payment of all fees due and payable under Section 4.3, (b) Borrowers have established (and thereafter maintains) with Lender a Cash Management Agreement acceptable to Borrowers and Lender, (c) all conditions to closing the Omega Acquisition under the Purchase Agreement have been satisfied, (d) all conditions to closing the Permitted Bango/Omega Transaction (except those related solely to closing the Bango Acquisition) have been satisfied, and (e) all conditions to closing the GS Term Loan Agreement have been satisfied.

 

  

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5.2           Conditions to all Credit Extensions.  Lender will not be obligated to make any Credit Extension unless:  (a) Lender has timely received a Loan Request; (b) all of the representations and warranties of the Companies in the Loan Documents are true and correct in all material respects (except to the extent that the representations and warranties speak to a specific date); (c) Lender has received and continues to maintain evidence of insurance as set out in Section 8.6 (including certificates and endorsements); (d) no Material Adverse Effect exists; and (e) no Default or Event of Default exists or will result from such Credit Extension (whether a funding, issuance, amendment or renewal).  Each Loan Request delivered to Lender constitutes the representation and warranty by the Companies that the statements in clauses (b), (c), (d), and (e) above are true and correct in all material respects.

 

5.3           Conditions to all LIBOR Loans.  Lender will have no obligation to make or continue a LIBOR Loan if any of the following described events has occurred and is continuing:  (a) Dollar deposits are not available in the London inter-bank market; or (b) LIBOR does not accurately reflect Lender’s cost with respect to any LIBOR Loan.  If either of the foregoing conditions exists, then the applicable rate of interest on the Loans will be determined by such alternate method as reasonably selected by Lender.

 

5.4           No Waiver.  Each condition precedent in this Agreement (including matters listed on Schedule 5) is material to the transactions contemplated by this Agreement, and time is of the essence with respect to each condition precedent.  Lender may make any Credit Extension without all conditions being satisfied, but such Credit Extension shall not be deemed a waiver of any condition precedent for any subsequent Credit Extension.

 

SECTION 6    SECURITY AND GUARANTIES.

 

6.1           Collateral.  The complete payment and performance of the Obligation shall be secured by all of the items and types of property (collectively, the “Collateral”) described as “Collateral” in each Pledge and Security Agreement and Deed of Trust.  Vertex-Operating, Holdings and each of their respective direct and indirect wholly-owned Subsidiaries (for the avoidance of doubt, other than E-Source and other than Vertex-NV upon its release from its guarantee as provided in the last sentence of Section 6.3) shall execute all applicable Security Documents necessary to pledge all of the Collateral it owns, within ten (10) Business Days after such Subsidiary is created or acquired.

 

6.2           Financing Statements.  Each Company hereby authorizes Lender to file, and agrees to execute, in Proper Form, if requested, financing statements, continuation statements, or termination statements, or take other action reasonably requested by Lender relating to the Collateral, including any Lien search required by Lender.

 

6.3           Guaranties.  Each direct and indirect subsidiary of Vertex-Operating or Holdings (other than E-Source other than Vertex-NV upon its release from its guarantee as provided in the last sentence of this Section 6.3) shall guaranty the complete payment and performance of the Obligation (including the Revolving Credit Facility, LCs, and any Bank Products) by executing and delivering a Guaranty to Lender on the Closing Date or, with respect to such Subsidiary, within 10 Business Days after such Subsidiary is created or acquired.  Concurrent with the consummation of the Bango Acquisition in accordance with the Purchase Agreement and the GS Term Loan Agreement as in effect on the Closing Date, and so long as (a) Vertex-NV is simultaneously released from its guarantee under the GS Term Loan Agreement, and (b) the liens on the property of Vertex-NV are terminated as provided in Section 7.12 of the GS Term Loan Agreement as in effect on the Closing Date, then upon the request of Borrowers, Vertex-NV shall be released from the Guaranty and the Liens granted by Vertex-NV to secure the Obligations shall be discharged and released by Lender.  In no event shall any Subsidiary of Vertex-Operating or Holdings guarantee the GS Term Loan Agreement without simultaneously becoming a Guarantor.

 

  

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6.4           Reserves.  Upon 7 days prior notice to Borrower Representative, Lender shall have the right to establish, modify, increase, decrease or eliminate Reserves against Eligible Accounts, Eligible Inventory, and the Borrowing Base from time to time in its reasonable credit judgment.  In addition upon 7 days prior notice to Borrower Representative, Lender reserves the right, at any time and from time to time after the Closing Date, to adjust any of the criteria set out in the definitions of “Eligible Accounts” or “Eligible Inventory” or to establish new criteria in its reasonable credit judgment.

 

SECTION 7    REPRESENTATIONS AND WARRANTIES.

 

Each Borrower represents and warrants to Lender as follows:

 

7.1           Existence, Good Standing, and Authority to do Business.  Holdings is a corporation duly organized, validly existing, and in good standing under the Laws of the jurisdiction in which it is organized.  Vertex-Operating is a limited liability company duly organized, validly existing, and in good standing under the Laws of the jurisdiction in which it is organized.  Each other Company is duly organized, validly existing, and in good standing under the laws of the jurisdiction in which it is organized.  In each state in which each Company does business, it is properly licensed, in good standing, and, where required, in compliance with fictitious name statutes.

 

7.2           Subsidiaries.  Except as disclosed on Schedule 7.2, no Borrower has any Subsidiaries.

 

7.3           Authorization, Compliance, and No Default.  The execution and delivery by each Company of the Loan Documents to which it is a party and each Company’s performance of its obligations under the Loan Documents are within such Company’s powers, have been duly authorized, do not conflict with any of its Organizational Documents, and do not conflict with any Law, agreement, or obligation by which such Company is bound.

 

7.4           Enforceability.  Each Loan Document has been executed and delivered by each Company which is a party to it, and the Loan Documents are enforceable against each Company in accordance with their respective terms, except as enforceability may be limited by applicable Debtor Relief Laws and general principles of equity.

 

7.5           Litigation.  Except as disclosed on Schedule 7.5, no Company is subject to, or aware of the threat of, any Litigation involving any Company which, (a) purports to affect or pertain to this Agreement, any other Loan Document, or any of the transactions contemplated by the Loan Documents, or (b) if determined adversely to any Company could reasonably be expected to result in a Material Adverse Effect.

 

7.6           Taxes.  All Tax returns of each Company required to be filed have been timely filed (or extensions have been granted) and all Taxes imposed upon any Company that are due and payable have been paid before delinquency, other than Taxes which are being contested in good faith by lawful proceedings diligently conducted, against which reserve or other provision required by GAAP has been made.

 

7.7           Environmental Matters.  Except as disclosed in Schedule 7.7, no facility of any Company is used for, or to the knowledge of any Company has been used for, storage, treatment, or disposal of any Hazardous Materials in violation of any applicable Environmental Law, other than violations that individually or collectively would not constitute a Material Adverse Effect.  No Company knows of any environmental condition or circumstance adversely affecting its assets, properties, or operations that could reasonably be expected to result in a Material Adverse Effect.

 

  

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7.8           Ownership of Assets; Intellectual Property.  Each Company has (a) indefeasible title to its real property, (b) a vested leasehold interest in all of its leased property, and (c) good and marketable title to its personal property, all as reflected on the Current Financials (except for property that has been disposed of as permitted by Section 9.9).  Each Company is conducting its business without infringement or claim of infringement of any license, patent, copyright, service mark, trademark, trade name, trade secret or other intellectual property right of others, other than any infringements or claims that, if successfully asserted against or determined adversely to any Company, could not, individually or collectively, reasonably be expected to result in a Material Adverse Effect.

 

7.9           Liens.  No Lien exists on any asset of any Company, other than Permitted Liens.

 

7.10         Debt.  No Company is an obligor on any Debt, other than Permitted Debt.

 

7.11         Insurance.  The Companies maintain the insurance required under Section 8.6.

 

7.12         Place of Business; Real Property.  The location of each Company’s place of business or chief executive office is set out on Schedule 7.12.  The books and records of each Company are located at its place of business or chief executive office.  All of each Company’s inventory (other than inventory on consignment, in transit, or in the possession of a Person under the terms of a contract with a Company) is at one or more of the locations set out on Schedule 7.12.  Except as described on Schedule 7.12, no Company has any ownership, leasehold, or other interest in real estate.

 

7.13         Purpose of Credit Facilities.  Borrowers will use the proceeds of the Revolving Credit Facility (a) to consummate the Omega Acquisition, (b) to pay Transaction Costs related to the consummation of this Agreement and the Related Agreements, and (c) for working capital and other general corporate purposes. No part of the proceeds of the Revolving Credit Facility will be used, directly or indirectly, for a purpose under Regulation U of the Board of Governors of the Federal Reserve, or for a purpose that violates any Law.

 

7.14         Trade Names.  Except as disclosed on Schedule 7.14, no Company has used or transacted business under any other corporate or trade name in the five-year period preceding the Closing Date (including names of all Persons with which any Company has merged or consolidated, or from which any Company has acquired all or substantially all of such Person’s assets).

 

7.15         Transactions with Affiliates.  Except as disclosed on Schedule 7.15, no Company is a party to an agreement or transaction with any of its Affiliates (excluding other Companies, except that unless and until the Vertex-NV Ring Fence Termination Date has occurred, Vertex-NV shall not enter into any transaction with Holdings or its Subsidiaries unless such transaction is subject to and in accordance with a master shared services agreement approved in writing by Lender or otherwise approved in writing by Lender), other than (a) transactions in the ordinary course of business and upon fair and reasonable terms not materially less favorable than it could obtain or could become entitled to in an arm’s-length transaction with a Person that was not its Affiliate, and (b) permissible transactions which constitute Restricted NV Intercompany Transactions.

 

7.16         Financial Information.  Each material fact or condition relating to the Loan Documents or the Companies’ financial condition, business, property, or prospects has been disclosed to Lender in writing.  All financial and other information supplied to Lender is sufficiently complete to give Lender accurate knowledge of each Company’s financial condition, including all material contingent liabilities.  Since the date of the most recent financial statement provided to Lender, there has been no occurrence which has caused a Material Adverse Effect.

 

  

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7.17         Material Contracts and Funded Debt.  No Company is a party to any Material Contract, other than the Loan Documents, the Related Agreements and the Material Contracts described on attached Schedule 7.17.  No Company has breached or is in default under any Material Contract or Funded Debt obligation.

 

7.18         ERISA.

 

(a)           Each Employee Plan (i) (other than a multiemployer plan) is in compliance in all material respects with the applicable provisions of ERISA, the Tax Code and other federal or state law, (ii) has received a favorable determination letter from the IRS and to the best knowledge of Borrowers, nothing has occurred which would cause the loss of such qualification.

 

(b)           Each Borrower has fulfilled its obligations, if any, under the minimum funding standards of ERISA and the Tax Code with respect to each Employee Plan, and has not incurred any liability with respect to any Employee Plan under Title IV of ERISA.

 

(c)           There are no claims, actions, or Litigation (including by any Governmental Authority), and there has been no prohibited transaction or violation of the fiduciary responsibility rules, with respect to any Employee Plan which is or could reasonably be expected to be a Material Adverse Effect.

 

(d)           With respect to any Employee Plan subject to Title IV of ERISA: (i) no reportable event has occurred under Section 4043(c) of ERISA for which the PBGC requires 30 day notice; (ii) no action by any Borrower or any ERISA Affiliate to terminate or withdraw from any Employee Plan has been taken and no notice of intent to terminate any Employee Plan has been filed under Section 4041 of ERISA; and (iii) no termination proceeding has been commenced with respect to an Employee Plan under Section 4042 of ERISA, and no event has occurred or condition exists which might constitute grounds for the commencement of such a proceeding.

 

7.19         Government Sanctions.

 

(a)           Each Borrower represents that no Company, nor any of its affiliated entities, including in the case of any Company that is not a natural person, subsidiaries nor, to the knowledge of each Borrower, any owner, trustee, director, officer, employee, agent, affiliate or representative of any Company is an individual or entity currently the subject of any sanctions administered or enforced by the United States Government, including, without limitation, the U.S. Department of Treasury’s Office of Foreign Assets Control, the United Nations Security Council, the European Union, Her Majesty’s Treasury, or other relevant sanctions authority (collectively, “Sanctions”), nor any Borrower or any Company located, organized or resident in a country or territory that is the subject of Sanctions.

 

(b)           Each Borrower represents and covenants that it will not, directly or indirectly, use the proceeds of the credit provided under this Agreement, or lend, contribute or otherwise make available such proceeds to any subsidiary, joint venture partner or other Person, to fund any activities of or business with any Person, or in any country or territory, that, at the time of such funding, is the subject of Sanctions, or in any other manner that will result in a violation by any Person (including any Person participating in the transaction, whether as underwriter, advisor, investor or otherwise) of Sanctions.

 

  

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7.20         Solvency.  Each Company is and, upon the incurrence of any Credit Extension by such Company on any date on which this representation and warranty is made, will be, Solvent.

 

SECTION 8    AFFIRMATIVE COVENANTS.  So long as Lender is committed to make any Credit Extension under this Agreement, and thereafter until the Obligation is paid in full, each Borrower agrees as follows, and agrees to cause each Company to comply with the following:

 

8.1           Items to be Furnished.  Borrowers shall cause the following to be furnished to Lender:

 

(a)           Promptly after preparation, and no later than 120 days after the last day of each fiscal year of Holdings, audited financial statements (including statements of income, statements of retained earnings and cash flows and a balance sheet) showing the consolidated financial condition and results of operations of the Companies as of, and for the year ended on, that last day, setting out, in each case, in comparative form the figures for the previous fiscal year and accompanied by:

 

(i)           the unqualified opinion of LLB & Associates Ltd., LLP, or a firm of nationally or regionally recognized independent certified public accountants satisfactory to Lender, based on an audit using generally accepted auditing standards, that the financial statements were prepared in accordance with GAAP and present fairly, in all material respects, the consolidated financial condition and results of operations of Companies, and

 

(ii)           a Compliance Certificate executed by a Responsible Officer of each Borrower with respect to such financial statements to be delivered under this clause (a), calculating and certifying as to the Companies’ compliance with the financial covenants set forth in Section 10 of this Agreement.

 

(b)           Promptly after preparation, and no later than 45 days after each fiscal quarter of Borrowers, unaudited financial statements (including statements of income, statements of retained earnings and cash flows and a balance sheet) showing the consolidated financial condition and results of operations of the Companies (and the consolidating financial statements of Vertex-NV) for the prior quarter and for the period from the beginning of the current fiscal year to the last day of such quarter.

 

(c)           Within 45 days after the end of each fiscal quarter of Borrowers, a Compliance Certificate executed by a Responsible Officer of each Borrower with respect to the financial covenants set forth in Section 10 hereof, together with calculations of such financial covenants.

 

(d)           Promptly after preparation, and in any event within 30 days after the end of each month, the consolidated balance sheet of Holdings and its Subsidiaries and consolidating balance sheet of Vertex-NV, in each case as at the end of such month and the related consolidated statements of income, consolidated statements of stockholders’ equity and consolidated statements of cash flows of Holdings and its Subsidiaries and consolidating statements of income and cash flows of Vertex-NV, in each case for such month and for the period from the beginning of the then current fiscal year to the end of such month, which are identical in form and substance to the monthly financial reports required to be delivered to the Term Loan Agent under the GS Term Loan Agreement;

 

(e)           Promptly after preparation, and no later than 20 days after the last day of each month (or more often as Lender shall request), (i) a Borrowing Base Certificate as of the last day

 

  

38

  

of such month certifying as to the Companies’ Borrowing Base, and (ii) all supporting information for the calculation of the Borrowing Base, including supporting schedules, inventory listings, accounts payable, accounts receivable agings and such other information as Lender may reasonably request.

 

(f)           The Companies will permit Lender to conduct and complete, by a third party satisfactory to Lender, a field examination regarding all accounts receivable and inventory of the Companies, in form and substance satisfactory to Lender and, so long as no Event of Default exists, up to two times per calendar year at the sole cost and expense of the Borrowers; provided that, at any time an Event of Default exists, Lender may order or require any additional field examinations to be conducted at its discretion and at the Borrowers’ sole cost and expense (and any such field examination ordered by Lender when an Event of Default exists shall not count toward the two times per calendar year limitation).

 

(g)           Notice, within 5 days after any Company receives notice of, or otherwise becomes aware of, (i) the institution of any Litigation involving any Company for which the monetary amount at issue is greater than $100,000, individually, or $250,000 in the aggregate, (ii) any liability or alleged liability under any Environmental Law arising out of, or directly affecting, the properties or operations of such Company, (iii) any substantial dispute with any Governmental Authority, (iv) the incurrence of any material contingent Debt, and (v) a Default or Event of Default, specifying the nature thereof and what action each Company has taken, is taking, or proposes to take.

 

(h)           Concurrently with the occurrence of (i) such change, notify Lender of any change in the name, legal structure, place of business, or chief executive office of any Company, or (ii) any acquisition or creation of a Subsidiary by any Company, notify Lender that any Person has become a Subsidiary of such Company.

 

(h)           Promptly upon reasonable request by Lender, information and documents not otherwise required to be furnished under the Loan Documents respecting the business affairs, assets and liabilities of the Companies.

 

(i)           Promptly deliver a copy of each item delivered by any Company pursuant to Section 5.1 of the GS Term Loan Agreement.

 

8.2           Books, Records and Inspections.  Each Company shall maintain books, records, and accounts necessary to prepare the financial statements required by Section 8.1.  Upon reasonable notice to Borrower Representative, each Company shall allow Lender (or its Representatives) during business hours or at other reasonable times to inspect each Company’s properties and examine, audit, and make copies of books and records.  If any of the Companies’ properties, books or records are in the possession of a third party, the applicable Company shall authorize that third party to permit Lender or its Representatives to have access to perform inspections or audits and to respond to Lender’s requests for information concerning such properties, books and records.  Lender may discuss, from time to time, any of the Companies’ affairs, conditions and finances with its directors, officers, and certified public accountants.

 

8.3           Taxes.  Each Company will promptly pay when due any and all Taxes, other than Taxes which are being contested in good faith by lawful proceedings diligently conducted, against which reserve or other provision required by GAAP has been made, and in respect of which levy and execution of any Lien are stayed.

 

  

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8.4           Compliance with Laws.  Each Company shall comply in all material respects of the requirements of all Laws (including fictitious or trade name statutes) and all orders, writs, injunctions and decrees applicable to it or its business or property, except in such instances in which (a) such requirement is deemed contested in good faith by lawful proceedings diligently conducted, against which reserve or other provision required by GAAP has been made, and (b) the failure to comply would not result in a Material Adverse Effect.

 

8.5           Maintenance of Existence, Assets, and Business.  Except as otherwise permitted by Section 9.6, each Company will (a) maintain its existence and good standing in its state of organization and its authority to transact business and good standing in all other jurisdictions where the nature and extent of its business and properties require due qualification and good standing, (b) maintain all licenses, permits and franchises necessary for its business where failure to do so is a Material Adverse Effect, and (c) keep all of its assets that are useful in and necessary to its business in good working order and condition (ordinary wear and tear excepted) and make all necessary repairs and replacements.

 

8.6           Insurance.  Each Company shall maintain (a) insurance satisfactory to Lender as to amount, nature and carrier covering property damage (including loss of use and occupancy) to any of the Companies’ properties, business interruption insurance, public liability insurance including coverage for contractual liability, product liability and workers’ compensation, and any other insurance which is usual for the Companies’ business.  Each policy shall provide for at least thirty (30) days’ prior notice to Lender of any cancellation thereof, and (b) insurance policies covering the tangible property comprising the Collateral.  Each insurance policy must be for the full replacement cost of the Collateral and include a replacement cost endorsement in an amount acceptable to Lender.  The insurance must be issued by an insurance company acceptable to Lender and must include a lender’s loss payable endorsement in favor of Lender in a form acceptable to Lender.  Upon Lender’s request, Borrowers shall deliver to Lender a copy of each insurance policy, or, if permitted by Lender, a certificate of insurance listing all insurance in force.

 

8.7           Environmental Laws.  Each Company shall conduct its business so as to comply with all applicable Environmental Laws, shall promptly take corrective action to remedy any violation of any Environmental Law, and shall immediately notify Lender of any claims or demands by any Governmental Authority or Person with respect to any Environmental Law or Hazardous Materials.

 

8.8           ERISA.  Promptly during each year (a) pay contributions adequate to meet at least the minimum funding standards under ERISA with respect to each and every Employee Plan, (b) file each annual report required to be filed pursuant to ERISA in connection with each Employee Plan for each year, and (c) notify Lender within ten (10) days of the occurrence of any reportable event under Section 4043(c) of ERISA that might constitute grounds for termination of any capital Employee Plan by the Pension Benefit Guaranty Corporation or for the appointment by the appropriate United States District Court of a trustee to administer any Employee Plan.

 

8.9           Use of Proceeds.  Borrowers shall use the proceeds of the Revolving Credit Facility only for the purposes represented and warranted in this Agreement.

 

8.10         Application of Insurance and Eminent Domain Proceeds.

 

(a)           Lender and each Company agree (i) to cause all Insurance Proceeds received as a result of a loss or casualty of Revolving Credit Priority Collateral (such term is used herein as defined in the Intercreditor Agreement) to be paid by the insurers directly to Lender (as loss payee), and (ii) to cause all Eminent Domain Proceeds arising from and received as a result of an

 

  

40

  

Eminent Domain Event in respect of Revolving Credit Priority Collateral, to be paid by the condemning Governmental Authority directly to Lender.

 

(b)           If any Insurance Proceeds or Eminent Domain Proceeds described in Section 8.10(a) are paid to any Company, such Insurance Proceeds or Eminent Domain Proceeds shall be received only in trust for Lender, shall be segregated from other funds of the Companies and shall promptly be paid over to Lender in the same form as received (with any necessary endorsement).

 

(c)           Notwithstanding anything to the contrary in this Section 8.10, reimbursement under any liability insurance maintained by any Company may be paid directly to the Person who incurred the liability, cost, or expense covered by such insurance.

 

(d)           Any Eminent Domain Proceeds or Insurance Proceeds shall be applied to the repayment of the Revolving Principal Amount and to Cash Collateralize the LC Exposure in accordance with Section 2.3, with the excess, if any, payable to Borrowers.

 

8.11         New Subsidiaries.  Each Company shall promptly cause each newly created or acquired Subsidiary to comply with Section 6.

 

8.12         Expenses.  Borrowers shall promptly pay upon demand (a) all reasonable costs, fees and expenses paid or incurred by Lender (including those incurred under Section 6) in connection with the negotiation, preparation, delivery and execution of any Loan Document, and any related or subsequent amendment, waiver, or consent (including in each case, the reasonable fees and expenses of Lender’s counsel), (b) all due diligence, closing, and post-closing costs including filing fees, recording costs, lien searches, corporate due diligence, third-party expenses, appraisals (if required), title insurance (if required), environmental surveys, annual field audits, and other related due diligence, closing and post-closing costs and expenses, and (c) all costs, fees and expenses of Lender incurred in connection with the enforcement of the Loan Documents or the exercise of any rights arising under the Loan Documents or the negotiation, workout, or restructure and any action taken in connection with any Debtor Relief Laws (including in each case, the reasonable fees and expenses of Lender’s counsel), all of which shall be a part of the Obligation and shall accrue interest, if not paid upon demand, at the Default Rate until repaid.

 

8.13         Primary Depositary Institution.  Borrowers shall establish and maintain with Lender all of Borrowers’ primary depositary and treasury management accounts.

 

8.14         Further Assurances.  Each Company shall take such action as Lender may reasonably request to carry out the intent of this Agreement and the terms of the Loan Documents (including to perfect and protect its security interests and Liens), including executing, acknowledging, authorizing, delivering or recording or filing additional instruments or documents.  Because each Company agrees that Lender’s remedies at Law for failure of any Company to comply with the provisions of this Section 8.14 would be inadequate and that failure would not be adequately compensable in damages, each Company agrees that the covenants of this Section 8.14 may be specifically enforced.

 

8.15         Keepwell. If it is a Qualified ECP Loan Party, then jointly and severally, together with each other Qualified ECP Loan Party, hereby absolutely unconditionally and irrevocably (a) guarantees the prompt payment and performance of all Hedge Liabilities owing by each Non-Qualifying Party (it being understood and agreed that this guarantee is a guaranty of payment and not of collection), and (b) undertakes to provide such funds or other support as may be needed from time to time by any Non-Qualifying Party to honor all of such Non-Qualifying Party’s obligations under this Agreement or any other Loan Document in respect of Hedge Liabilities (provided that, each Qualified ECP Loan Party shall

 

  

41

  

only be liable under this Section 8.15 for the maximum amount of such liability that can be hereby incurred without rendering its obligations under this Section 8.15, or otherwise under this Agreement or any other Loan Document, voidable under applicable Law, including fraudulent conveyance or fraudulent transfer Laws, and not for any greater amount).  The obligations of each Qualified ECP Loan Party under this Section 8.15 shall remain in full force and effect until payment in full of the Obligation and termination of this Agreement and the other Loan Documents.  Each Qualified ECP Loan Party intends that this Section 8.15 constitute, and this Section 8.15 shall be deemed to constitute, a guarantee of the obligations of, and a “keepwell, support, or other agreement” for the benefit of Borrowers and Guarantors for all purposes of Section 1a(18(A)(v)(II) of the Commodity Exchange Act.

 

8.16         Equity Raise.  Holdings shall issue shares of its common stock after the Closing Date and no later than the earlier of (x) June 30, 2014 and (y) the date that any Company makes any investment in Bango Refining after the Closing Date, the net proceeds of which to Holdings are at least $10,000,000 (the “Post Close Equity Raise”).  Holdings shall immediately deposit the net cash proceeds from the Post Close Equity Raise into a deposit account in the name of Vertex-Operating in which Lender has a second priority Lien (and in which the lenders under the GS Term Loan Agreement may have a first priority Lien) (the “Vertex Refining Cash Collateral Account”).  Vertex-Operating will not withdraw funds from the Vertex Refining Cash Collateral Account, except in accordance with terms of the GS Term Loan Agreement as in effect on the Closing Date.

 

8.17         Miscellaneous Business Covenants.  Unless otherwise consented to by Lender:

 

(a)           Non-Consolidation.  Holdings will and will cause each of its Subsidiaries to:  (i)  maintain entity records and books of account separate from those of any other entity which is an Affiliate of such entity; (ii) not commingle its funds or assets with those of any other entity which is an Affiliate of such entity; and (iii) provide that its board of directors or other analogous governing body will hold all appropriate meetings to authorize and approve such entity’s actions, which meetings will be separate from those of other entities.  Holdings will cause each Company not to commingle their funds or assets with those of Vertex-NV, which shall maintain separate books and records, assets and funds for all purposes, unless and until the Vertex-NV Ring Fence Termination Date occurs.

 

(b)           Communication with Accountants. Each Company authorizes Lender to communicate directly with such Company’s independent certified public accountants and authorizes and shall instruct those accountants to communicate (including the delivery of audit drafts and letters to management) with Lender information relating to any Company with respect to the business, results of operations and financial condition of any Company; provided however, that Lender, as the case may be, shall provide such Company with notice at least two (2) Business Days prior to first initiating any such communication.

 

(c)           Activities of Management.  Each member of the senior management team of each Company shall devote all or substantially all of his or her professional working time, attention, and energies to the management of the businesses of the Company.

 

SECTION 9    NEGATIVE COVENANTS.

 

So long as Lender is committed to make any Credit Extension under this Agreement, and thereafter until the Obligation is paid in full, each Borrower agrees as follows, and agrees to cause each Company to comply with the following:

 

9.1           Debt.  No Company may create, incur, or permit to exist, any Debt except Permitted

 

  

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Debt.  Furthermore, (a) following the closing of the Bango Acquisition and prior to the Vertex-NV Ring Fence Termination Date, no Company shall extend credit or intercompany loans to Vertex-NV or guarantee any Debt of Vertex-NV, other than in accordance with the restrictions set forth in the Restricted NV Intercompany Transactions, (b) from and after the Closing Date, no Company shall, nor shall it permit any of its Subsidiaries to, directly or indirectly, incur, assume or guaranty, or otherwise become directly or indirectly liable to pay any cash “earn-out” or other deferred cash purchase price obligations with respect to any Permitted Acquisitions or any investments described in clause (j) of the definition of Permitted Investments, and (c) no Company shall incur any “Swap Obligations” as defined in the GS Term Loan Agreement or Hedge Liabilities without the prior written consent of the Lender.

 

9.2           Liens.  No Company shall create, incur, or permit any Lien upon any of its assets, except Permitted Liens.  No Company shall enter into any agreement (other than the Loan Documents and the GS Term Loan Agreement) prohibiting the creation or assumption of any Lien upon its assets or revenues or prohibiting or restricting the ability of the Borrowers or any Company to amend or otherwise modify this Agreement or any other Loan Document.

 

9.3           Compliance.  No Company may violate the provisions of any Laws applicable to it, any agreement to which it is a party, or the provisions of its organizational documents, if such violations individually or collectively would constitute a Material Adverse Effect.  No Company will modify, repeal, replace or amend any provision of its organizational or governing documents in any manner which would be adverse to the interests of Lender.

 

9.4           Loans and Investments.

 

(a)           No Company may extend credit to any other Person, other than (i) extensions of credit among the Companies which have recourse liability for the Obligation, subject to the conditions set forth for Restricted NV Intercompany Transactions, (ii) extensions of credit in the nature of accounts receivable or notes receivable arising from the sale or lease of goods or services in the ordinary course of business to Persons which are not Affiliates, (iii) demand deposit accounts maintained in the ordinary course of business, (iv) expense accounts for employees in the ordinary course of business which do not, in the aggregate, at any time exceed $25,000, (v) extensions of credit that do not exceed an aggregate amount of $25,000 outstanding at any one time, and (vi) the purchase price loan made to Omega Refining on the Closing Date pursuant to the Purchase Agreement and Omega/Bango Financing Documents in effect on the Closing Date, and (vii) the Permitted Bango/Omega Transaction.

 

(b)           No Company may make any investment in, or purchase or commit to purchase any Equity Interests in, any other Person, other than Permitted Investments and Acquisitions permitted under Section 9.6(b) and (c).

 

9.5           Dividends.  No Company may (a) declare or make any dividend or other distribution (other than (i) dividends or distributions declared or made by such Company wholly in the form of its capital stock, or (ii) dividends or distributions by a Company to another Company), (b) retire, redeem, purchase, withdraw, or otherwise acquire any Equity Interests in such Company (including the purchase of warrants or other options to acquire such interests), or (c) declare or make any distribution of assets to the holders of its Equity Interests (in that capacity), whether in cash, assets, or in its obligations.  No Company may enter into or permit to exist any arrangement or agreement (other than this Agreement and the GS Term Loan Agreement) that prohibits it from paying dividends or making other distributions.

 

9.6           Acquisition, Mergers, and Dissolutions.

 

  

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(a)           Except as provided in this Section 9.6, no Company may (whether in one transaction or a series of transactions) (i) acquire all or any substantial portion of the stock issued by, equity interest in, Voting Interest in, or assets of, any other Person, (ii) merge or consolidate with any other Person without Lender’s consent, (iii) liquidate, wind up or dissolve (or suffer any liquidation or dissolution), (iv) suspend operations, or (v) create or acquire any Subsidiaries.

 

(b)           Any Company may merge or consolidate with, or acquire stock issued by, Equity Interests in, or assets of, another Company (and, in the case of such merger or consolidation or, in the case of the conveyance or distribution of all of such assets, the non-surviving or selling entity, as the case may be, may be liquidated, wound up or dissolved); provided that, if the surviving entity is a Guarantor it shall comply with Section 6 and if any Borrower is a party to such merger or consolidation, such Borrower must be the surviving entity, and provided further that, in no event shall any Company merge or consolidate with Vertex-NV.

 

(c)           The Companies may consummate the following Acquisitions: (i) the Omega Acquisition and (ii) Permitted Acquisitions.

 

9.7           Assignment.  No Company may assign or transfer any of its rights, duties or obligations under any of the Loan Documents.

 

9.8           Fiscal Year and Accounting Methods.  No Company may change its fiscal year or its method of accounting (other than immaterial changes in methods or as required by GAAP).

 

9.9           Sale of Assets.  No Company may make any Disposition or enter into any agreement to make any Disposition, except (a) Dispositions of obsolete or worn out assets in the ordinary course of business, (b) Dispositions of inventory in the ordinary course of business, (c) the Disposition of delinquent accounts receivable in the ordinary course of business for purposes of collection, (d) Dispositions of property by any Company to another Company or to a wholly-owned Subsidiary; provided that, if the transferor of such property is a Borrower or a Guarantor, the transferee thereof must either be a Borrower or a Guarantor and must comply with Section 6, and (e) to the extent permitted by Section 9.6.

 

9.10         New Businesses.  No Company may engage in any business except the business in which it is engaged as of the Closing Date.

 

9.11         Transactions with Affiliates.  Except as disclosed on Schedule 7.15, no Company may enter into any Material Contract or any material transaction with any of its Affiliates other than transactions in the ordinary course of business which are upon fair and reasonable terms not materially less favorable to such Company than such Company could obtain in an arms’ length transaction with a Person that was not an Affiliate; provided that, no Company shall make loans or advances to any of its Affiliates (other than extensions of credit among the Companies which have recourse liability for the Obligation and loans permitted pursuant to Section 9.4 hereof) at any time.

 

9.12         Payroll Taxes.  No Company may use any portion of the proceeds of any Loan to pay the wages of employees, unless a timely payment to or deposit with the appropriate Governmental Authority of all Taxes required to be deducted and withheld with respect to such wages is also made.

 

9.13         Prepayment of Debt.  No Company may voluntarily prepay principal of, or interest on, any Debt, other than the Obligation and the “Obligations” as defined in the GS Term Loan Agreement, if a Default or Event of Default exists or would result after giving effect to such payment.  No Company

 

  

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may prepay, repay, repurchase, redeem or defease Subordinated Debt prior to the irrevocable payment and performance in full of the Obligation without the prior written consent of Lender.

 

9.14         Purchase Agreement.  The Purchase Agreement shall not be amended, modified or supplemented after the Omega Acquisition, without the prior written consent of Lender.  No Company may make any Earnout Payment as defined in the Earnout Subordination Agreements, if an Event of Default exists at the time of such payment or would arise after giving effect to any such payment, or if such payment would violate the terms of the Earnout Subordination Agreements.  Borrowers shall provide notice to Lender prior to making any Earnout Payment as defined in the Earnout Subordination Agreements.

 

SECTION 10    FINANCIAL COVENANTS.  So long as Lender is committed to make any Credit Extension under this Agreement, and thereafter until the Obligation is paid in full, each Company agrees as follows:

 

10.1         Fixed Charge Coverage Ratio.  The Fixed Charge Coverage Ratio as of the last day of any fiscal quarter, beginning with the fiscal quarter ending June 30, 2014, shall not be less than 1.25 to 1.00.

 

10.2         Leverage Ratio.  The Leverage Ratio as of the last day of any fiscal quarter, beginning with the fiscal quarter ending December 31, 2014, shall not exceed the correlative ratio indicated:

 

 

	
Fiscal Quarter

	
Leverage

Ratio

	
For the fiscal quarter ending December 31, 2014

	
3.50 to 1.00

	
For each fiscal quarter ending March 31, 2015, and June 30, 2015

	
3.00 to 1.00

	
For each fiscal quarter ending September 31, 2015, December 31, 2015, March 31, 2016 and June 30, 2016

	
2.50 to 1.00

	
For the fiscal quarter ending September 30, 2016 and for each fiscal quarter thereafter

	
2.00 to 1.00

10.3         Consolidated Adjusted EBITDA.  The Consolidated Adjusted EBITDA as at the end of any fiscal quarter, beginning with the fiscal quarter ending June 30, 2014, for the periods indicated below, shall not be less than the correlative amount indicated:

 

	
Fiscal Quarter

	
Consolidated

Adjusted EBITDA

	
For the six months ending June 30, 2014

	
$4,500,000

 

 

  

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Fiscal Quarter

	
Consolidated

Adjusted EBITDA

	
For the nine months ending September 30, 2014

	
$8,000,000

	
For the twelve months ending December 31, 2014

	
$12,500,000

	
For the twelve months ending March 31, 2015

	
$13,500,000

	
For each twelve months ending June 30, 2015 and September 30, 2015

	
$14,000,000

	
For each twelve months ending December 31, 2015 and March 31, 2016

	
$14,500,000

	
For each twelve months ending June 30, 2016 and September 30, 2016

	
$15,000,000

	
For each twelve months ending December 31, 2016 and March 30, 2017

	
$15,500,000

10.4         Minimum Consolidated Liquidity.  The Consolidated Liquidity shall not be less than $3,000,000 at any time from and after the Closing Date.

 

10.5         Certain Calculations.  With respect to any period during which the acquisition of Equity Interest of the Omega Acquisition, a Permitted Acquisition or a Disposition permitted under this Agreement has occurred (each, a “Subject Transaction”), for purposes of determining compliance with the financial covenants set forth in this Section 10 (but not for purposes of determining the Applicable Margin), Consolidated Adjusted EBITDA and the components of Consolidated Fixed Charges shall be calculated with respect to such period on a pro forma basis (including pro forma adjustments approved by Lender in its sole discretion) using the historical audited financial statements of any business so acquired or to be acquired or sold or to be sold and the consolidated financial statements of Holdings and its Subsidiaries which shall be reformulated as if such Subject Transaction, and any indebtedness incurred or repaid in connection therewith, had been consum­mated or incurred or repaid at the beginning of such period (and assuming that such indebtedness bears interest during any portion of the applicable measurement period prior to the relevant acquisition at the weighted average of the interest rates applicable to outstanding Loans incurred during such period).

 

SECTION 11    EVENTS OF DEFAULT.  The term “Event of Default” means the occurrence of any one or more of the following events:

 

11.1         Payment of Obligation.  The failure of any Company to pay any part of the Obligation when and as required to be paid under the Loan Documents.

 

11.2         Covenants.  The failure of any Company to punctually and properly perform, observe and comply with:

 

  

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(a)           Any covenant, agreement, or condition contained in (i) Sections 6.1, 6.3, 8.2, 8.6, 8.8, 8.9, or 8.10, and such failure continues for 10 days or (ii) Sections 9 and 10, or,

 

(b)           Any other covenant, agreement, or condition contained in any Loan Document, (other than the covenants to pay the Obligation as set out in Section 11.1 above, the covenants in clause (a) preceding and as set out below in this Section 11), and such failure continues for 30 days.

 

11.3         Debtor Relief.  Any Company or any Guarantor (a) voluntarily seeks, consents to, or acquiesces in the benefit of any Debtor Relief Law, other than a voluntary liquidation or dissolution permitted by Section 9.6, (b) becomes a party to or is made the subject of any proceeding provided for by any Debtor Relief Law (other than as a creditor or claimant), and (i) the petition is not controverted within 10 days and is not dismissed within 60 days, or (ii) an order for relief is entered under Title 11 of the United States Code, (c) makes an assignment for the benefit of creditors, or (d) fails (or admits in writing its inability) to pay its debts generally as they become due.

 

11.4         Judgments.  There is entered against any Company or any Guarantor (a) a final non-appealable judgment or arbitration award for the payment of money in the amount exceeding $250,000 (individually or in the aggregate and net of applicable insurance if the insurer has accepted coverage) or (b) one or more non-monetary final non-appealable judgments that could be, or could reasonably be expected to be, individually or in the aggregate, a Material Adverse Effect, and, in either case enforcement of such judgment or award is not stayed.

 

11.5         False Information; Misrepresentation.  Any information given to Lender by any Company is false or any representation or warranty made to Lender by any Company or contained in any Loan Document at any time proves to have been incorrect in any material respect when made.

 

11.6         Default Under Other Agreements.

 

(a)           Any Company fails to pay when due (after any applicable grace period) any Debt which (individually or in the aggregate) exceeds $250,000, or any default exists under any agreement which permits any Person to cause any Debt which (individually or in the aggregate) exceeds $250,000 to become due and payable by any Company before its stated maturity.

 

(b)           Any Company breaches or defaults under any term, condition, provision, representation or warranty contained in any Material Contract, including any agreement with Lender (other than the Loan Documents), or in any Related Agreement (other than the GS Term Loan Agreement) and such Company fails for 5 Business Days to commence and thereafter diligently pursue a cure, if the effect of such breach or default is to cause or to permit the other parties to such Related Agreement or Material Contract, as the case may be, to terminate such Related Agreement or Material Contract.

 

11.7         Validity and Enforceability of Loan Documents.  Any Lien granted under any Security Document ceases to be a first priority Lien on the Companies’ assets.  Any Loan Document at any time after its execution and delivery (a) ceases to be in effect in any material respect or is declared by a Governmental Authority to be null and void, or (b) its validity or enforceability is contested by a Company or a Company denies that it has any further liability or obligations under any Loan Document.

 

11.8         Hedge Agreement.  Notwithstanding Section 11.2(b) above, (a) any Company breaches any provision of any Hedge Agreement and the breach is not cured or waived within any applicable grace period, or (b) any Hedge Agreement is terminated.

 

  

47

  

11.9         Change of Management or Control.  (a) A Change of Management occurs, or (b) a Change of Control occurs.

 

11.10       Material Adverse Effect.  A Material Adverse Effect exists.

 

11.11       LCs.  Lender is served with, or becomes subject to, a court order, injunction, or other process or decree restraining or seeking to restrain it from paying any amount under any LC and either (a) a drawing has occurred under the LC and the applicable Company has refused to reimburse Lender for payment or (b) the expiration date of the LC has occurred but the right of any beneficiary thereunder to draw under the LC has been extended past the expiration date in connection with the pendency of the related court action or proceeding and Borrowers have failed to Cash Collateralize the then existing LC Exposure.

 

11.12       Default under the Subject Leases.  A default under any of the Subject Leases occurs if the effect of such default is to cause, or to permit the other parties to such Subject Lease, to terminate such Subject Lease.

 

11.13       Default under GS Term Loan Agreement.  An event of default under or as defined in the GS Term Loan Agreement occurs.

 

SECTION 12    RIGHTS AND REMEDIES.

 

12.1         Remedies Upon Event of Default.

 

(a)           If an Event of Default exists under Section 11.3, the Commitment to extend credit under this Agreement automatically terminates and the unpaid balance of the Obligation automatically becomes due and payable without any action of any kind.

 

(b)           If an Event of Default exists, Lender may do any one or more of the following:  (i) if the maturity of the Obligation has not already been accelerated under Section 12.1(a), declare the unpaid balance of the Obligation immediately due and payable and to the extent permitted by applicable Law, the Obligation shall accrue interest at the Default Rate; (ii) terminate the commitment to extend credit under this Agreement; (iii) reduce any claim to judgment; (iv) exercise the rights of set-off or banker’s Lien under Section 3.7 to the extent of the full amount of the Obligation; and (v) exercise any and all other legal or equitable rights afforded by the Loan Documents, the Laws of the State of Texas, or any other applicable jurisdiction.

 

12.2         Waivers.  To the extent permitted by Law, each Company waives presentment and demand for payment, protest, notice of intention to accelerate, notice of acceleration and notice of protest and nonpayment, and agrees that its liability with respect to all or any part of the Obligation is not affected by any renewal or extension in the time of payment of all or any part of the Obligation, by any indulgence, or by any release or change in any security for the payment of all or any part of the Obligation.

 

12.3         No Waiver.  No waiver of any Event of Default shall be deemed to be a waiver of any other then-existing or subsequent Event of Default.  No delay or omission by Lender in exercising any right under the Loan Documents will impair that right or be construed as a waiver thereof or any acquiescence therein, nor will any single or partial exercise of any right preclude other or further exercise thereof or the exercise of any other right.  The acceptance by Lender of any partial payment shall not be deemed to be a waiver of any Event of Default then existing.

 

  

48

  

12.4         Performance by Lender.  If any covenant, duty or agreement of any Company is not performed in accordance with the terms of the Loan Documents, Lender may, but is not obligated to, perform or attempt to perform that covenant, duty or agreement on behalf of that Company (and any amount expended by Lender in its performance or attempted performance is payable on demand, becomes part of the Obligation, and bears interest at the Default Rate from the date of Lender’s expenditure until paid).

 

12.5         Cash Collateral.  If any Event of Default exists, Borrowers shall, if requested by Lender, immediately deposit with and pledge to Lender, cash or cash equivalent investments in an amount equal to the LC Exposure as security for the Obligation for so long as such Event of Default continues or until such Event of Default is waived by Lender.

 

12.6         Cumulative Rights.  All rights available to Lender under the Loan Documents are cumulative of, and in addition to, all other rights granted at law or in equity, whether or not the Obligation is due and payable and whether or not Lender has instituted any suit for collection, foreclosure, or other action in connection with the Loan Documents.

 

SECTION 13    MISCELLANEOUS.

 

13.1         Governing Law.  Each Loan Document must be construed, and its performance enforced, under Texas law (except if otherwise provided in such Loan Document).

 

13.2         Invalid Provisions.  If any provision of this Agreement or the other Loan Documents is held to be illegal, invalid or unenforceable, (a) the legality, validity and enforceability of the remaining provisions of this Agreement and the other Loan Documents shall not be affected or impaired thereby and (b) the parties shall engage in good faith negotiations to replace the illegal, invalid or unenforceable provisions with valid provisions the economic effect of which comes as close as possible to that of the illegal, invalid or unenforceable provisions.  The invalidity of a provision in a particular jurisdiction shall not invalidate or render unenforceable such provision in any other jurisdiction.

 

13.3         Multiple Counterparts and Electronic Signatures.  Each Loan Document may be executed in any number of counterparts with the same effect as if all signatories had signed the same document.  All counterparts must be construed together to constitute one and the same instrument.  Loan Documents may be transmitted and signed by facsimile or other electronic means and shall have the same effect as manually-signed originals and shall be binding on all Companies and Lender.

 

13.4         Notice.  Unless otherwise provided in this Agreement, all notices or consents required under this Agreement shall be personally delivered or sent by first class mail, postage prepaid, or by overnight courier, or sent by facsimile.  Notices and other communications shall be effective (a) if mailed, upon the earlier of receipt or five (5) days after deposit in the U.S. mail, first class, postage prepaid, (b) if faxed, when transmitted, or (c) if hand-delivered, by courier or otherwise (including telegram, lettergram or mailgram), when delivered.  Until changed by notice pursuant to this Agreement, the addresses and facsimile numbers for each party is set out on Schedule 1.  Lender shall be entitled to rely and act upon any notices (including telephonic Loan Requests permitted by Lender) purportedly given by or on behalf of Borrower Representative even if (i) such notices were not made in a manner specified in this Section 13.4, were incomplete or were not preceded or followed by any other form of notice specified in this Section 13.4, or (ii) the terms of the notice, as understood by the recipient, varied from any confirmation of the notice.  Borrowers shall indemnify Lender and its Affiliates and representatives from all losses, costs, expenses and liabilities resulting from the reliance by such Person on each notice purportedly given by or on behalf of Borrowers.  All telephonic notices to and other communications with

 

  

49

  

Lender may be recorded by Lender, and each of the parties to this Agreement hereby consents to such recording.

 

13.5         Binding Effect; Survival.  This Agreement is binding upon, and inures to the benefit of, the parties hereto and their respective successors and permitted assigns.  Unless otherwise provided, all covenants, agreements, indemnities, representations and warranties made in any of the Loan Documents survive and continue in effect as long as the Commitment is in effect or the Obligation is outstanding.

 

13.6         Amendments; Amendment and Restatement of Original Credit Agreement.  The Loan Documents may be amended, modified, supplemented or be the subject of a waiver only by a writing executed by Lender and each Company party thereto.  This Agreement amends and restates, but does not extinguish and is not a novation or an accord and satisfaction of the indebtedness outstanding under the Original Credit Agreement, which indebtedness shall be deemed to be outstanding under this Agreement. Nothing in this Agreement shall be deemed to release or otherwise adversely affect any Lien, mortgage or security interest securing any indebtedness outstanding under the Original Credit Agreement or any rights of Lender under the Original Credit Agreement.  Borrowers hereby acknowledge and agree that all Liens securing the “Obligation” under, and as defined in, the Original Credit Agreement are hereby ratified, renewed, and extended to secure the Obligation.

 

13.7         Participants.  Lender may, at any time, sell to one or more Persons (each a “Participant”) participating interests in the Obligation; provided that, (i) Lender remains the holder of the Revolving Principal Amount, (ii) Lender’s obligations under this Agreement remain unchanged and Lender remains solely responsible for the performance of those obligations, and (iii) each Company continues to deal solely and directly with Lender regarding the Loan Documents.  Lender may furnish any information concerning the Companies in its possession from time to time to assignees and Participants (including prospective assignees and Participants).

 

13.8         Discharge Only Upon Payment in Full; Reinstatement in Certain Circumstances.  Each Company’s obligations under the Loan Documents remain in full force and effect until the Commitment is terminated and the Obligation is paid in full (except for provisions under the Loan Documents which by their terms expressly survive payment of the Obligation and termination of the Loan Documents).  If at any time any payment of the principal of or interest on the Note or any other amount payable by any Company or any other obligor on the Obligation under any Loan Document is rescinded or must be restored or returned upon the insolvency, bankruptcy or reorganization of any Borrower or otherwise, the obligations of each Company under the Loan Documents with respect to that payment shall be reinstated as though the payment had been due but not made at that time.

 

13.9         Arbitration; Waiver of Jury Trial.  This paragraph, including the subparagraphs below, is referred to as the “Dispute Resolution Provision.”  This Dispute Resolution Provision is a material inducement for the parties entering into this Agreement.

 

(a)           This Dispute Resolution Provision concerns the resolution of any controversies or claims between the parties, whether arising in contract, tort or by statute, including but not limited to controversies or claims that arise out of or relate to: (i) this Agreement (including any renewals, extensions or modifications); or (ii) any document related to this Agreement (collectively a “Claim”).  For the purposes of this Dispute Resolution Provision only, the term “parties” shall include any parent corporation, subsidiary or affiliate of Lender involved in the servicing, management or administration of any obligation described or evidenced by this Agreement.

 

  

50

  

(b)           At the request of any party to this agreement, any Claim shall be resolved by binding arbitration in accordance with the Federal Arbitration Act (Title 9, U.S. Code) (the “Act”).  The Act will apply even though this agreement provides that it is governed by the law of a specified state.

 

(c)           Arbitration proceedings will be determined in accordance with the Act, the then-current rules and procedures for the arbitration of financial services disputes of the American Arbitration Association or any successor thereof (“AAA”), and the terms of this Dispute Resolution Provision.  In the event of any inconsistency, the terms of this Dispute Resolution Provision shall control.  If AAA is unwilling or unable to (i) serve as the provider of arbitration or (ii) enforce any provision of this arbitration clause, Lender may designate another arbitration organization with similar procedures to serve as the provider of arbitration.

 

(d)           The arbitration shall be administered by AAA and conducted, unless otherwise required by law, in any U.S. state where real or tangible personal property collateral for this credit is located or if there is no such collateral, in the state specified in the governing law section of this agreement.  All Claims shall be determined by one arbitrator; however, if Claims exceed Five Million Dollars ($5,000,000), upon the request of any party, the Claims shall be decided by three arbitrators.  All arbitration hearings shall commence within ninety (90) days of the demand for arbitration and close within ninety (90) days of commencement and the award of the arbitrator(s) shall be issued within thirty (30) days of the close of the hearing.  However, the arbitrator(s), upon a showing of good cause, may extend the commencement of the hearing for up to an additional sixty (60) days.  The arbitrator(s) shall provide a concise written statement of reasons for the award.  The arbitration award may be submitted to any court having jurisdiction to be confirmed and have judgment entered and enforced.

 

(e)           The arbitrator(s) will give effect to statutes of limitation in determining any Claim and shall dismiss the arbitration if the Claim is barred under the applicable statutes of limitation.  For purposes of the application of any statutes of limitation, the service on AAA under applicable AAA rules of a notice of Claim is the equivalent of the filing of a lawsuit.  Any dispute concerning this arbitration provision or whether a Claim is arbitrable shall be determined by the arbitrator(s), except as set forth at subparagraph (h) of this Dispute Resolution Provision.  The arbitrator(s) shall have the power to award legal fees pursuant to the terms of this agreement.

 

(f)           This paragraph does not limit the right of any party to: (i) exercise self-help remedies, such as but not limited to, setoff; (ii) initiate judicial or non-judicial foreclosure against any real or personal property collateral; (iii) exercise any judicial or power of sale rights, or (iv) act in a court of law to obtain an interim remedy, such as but not limited to, injunctive relief, writ of possession or appointment of a receiver, or additional or supplementary remedies.

 

(g)           The filing of a court action is not intended to constitute a waiver of the right of any party, including the suing party, thereafter to require submittal of the Claim to arbitration.

 

(h)           Any arbitration or court trial (whether before a judge or jury) of any Claim will take place on an individual basis without resort to any form of class or representative action (the “Class Action Waiver”).  The Class Action Waiver precludes any party from participating in or being represented in any class or representative action regarding a Claim.  Regardless of anything else in this Dispute Resolution Provision, the validity and effect of the Class Action Waiver may be determined only by a court and not by an arbitrator.  The parties to this agreement acknowledge that the Class Action Waiver is material and essential to the arbitration of any disputes between the parties and is nonseverable from the agreement to arbitrate Claims. If the

 

  

51

  

Class Action Waiver is limited, voided or found unenforceable, then the parties’ agreement to arbitrate shall be null and void with respect to such proceeding, subject to the right to appeal the limitation or invalidation of the Class Action Waiver.  THE PARTIES ACKNOWLEDGE AND AGREE THAT UNDER NO CIRCUMSTANCES WILL A CLASS ACTION BE ARBITRATED.

 

(i)           By agreeing to binding arbitration, the parties irrevocably and voluntarily waive any right they may have to a trial by jury in respect of any Claim.  Furthermore, without intending in any way to limit this agreement to arbitrate, to the extent any Claim is not arbitrated, the parties irrevocably and voluntarily waive any right they may have to a trial by jury in respect of such Claim.  This waiver of jury trial shall remain in effect even if the Class Action Waiver is limited, voided or found unenforceable.  WHETHER THE CLAIM IS DECIDED BY ARBITRATION OR BY TRIAL BY A JUDGE, THE PARTIES AGREE AND UNDERSTAND THAT THE EFFECT OF THIS AGREEMENT IS THAT THEY ARE GIVING UP THE RIGHT TO TRIAL BY JURY TO THE EXTENT PERMITTED BY LAW.

 

13.10       Indemnity.  Whether or not the transactions contemplated by this Agreement are consummated, each Company shall indemnify and hold harmless Lender and its Affiliates and representatives (collectively the “Indemnitees”) from and against any and all liabilities, obligations, losses, damages, penalties, claims, demands, actions, judgments, suits, costs, expenses and disbursements (including fees and expenses of counsel) of any kind or nature whatsoever which may at any time be imposed on, incurred by or asserted against any such Indemnitee in any way relating to or arising out of or in connection with (a) the execution, delivery, enforcement, performance or administration of any Loan Document or any other agreement, letter or instrument delivered in connection with the transactions contemplated thereby or the consummation of the transactions contemplated thereby, (b) any Commitment, any Loan, or the use or proposed use of the proceeds therefrom, or (c) any actual or alleged presence or release of Hazardous Materials on or from any property currently or formerly owned or operated by any Borrower, any Subsidiary or any other Company, or any liability in respect of any Environmental Law related in any way to any Borrower, any Subsidiary or any other Company, or (d) any actual or prospective Litigation, claim, or investigation relating to any of the foregoing, whether based on contract, tort or any other theory (including any investigation of, preparation for, or defense of any pending or threatened claim, investigation, litigation or proceeding) and regardless of whether any Indemnitee is a party thereto (all the foregoing, collectively, the “Indemnified Liabilities”), in all cases, whether or not caused by or arising, in whole or in part, out of the negligence of the Indemnitee; provided that, such indemnity shall not, as to any Indemnitee, be available to the extent that such liabilities, obligations, losses, damages, penalties, claims, demands, actions, judgments, suits, costs, expenses or disbursements are determined by a court of competent jurisdiction by final and nonappealable judgment to have resulted from the gross negligence or willful misconduct of such Indemnitee.  All amounts due under this Section 13.10 shall be payable within ten (10) Business Days after demand.  The agreements in this Section 13.10 shall survive the resignation of Lender, the replacement of Lender, the termination of the Commitments hereunder and the repayment, satisfaction or discharge of the Obligation.

 

13.11       Indemnity Regarding Hazardous Materials.

 

In addition to Section 13.10, and not by way of limitation, each Borrower agrees to indemnify and hold Lender harmless from and against all liabilities, claims, actions, foreseeable and unforeseeable consequential damages, costs and expenses (including sums paid in settlement of claims and all consultant, expert and legal fees and expenses of the Lender’s counsel) or loss directly or indirectly arising out of or resulting from any of the following:

 

  

52

  

	
  

	
(a)

	
Any Hazardous Materials being present at any time, whether before, during or after any construction, in or around any part of the real property collateral securing this Agreement (the "Real Property"), or in the soil, groundwater or soil vapor on or under the Real Property, including those incurred in connection with any investigation of site conditions or any clean-up, remedial, removal or restoration work, or any resulting damages or injuries to the person or property of any third parties or to any natural resources.

 

	
  

	
(b)

	
Any use, generation, manufacture, production, storage, release, threatened release, discharge, disposal or presence of a Hazardous Materials.  This indemnity will apply whether the Hazardous Materials is on, under or about any Company’s property or operations or property leased to any Company, whether or not the property has been taken by Lender as collateral.

Upon demand by Lender, each Borrower will defend any investigation, action or proceeding alleging the presence of any Hazardous Materials in any such location, which affects the Real Property or which is brought or commenced against Lender, whether alone or together with the Borrowers or any other person, all at the Borrowers’ own cost and by counsel to be approved by Lender in the exercise of its reasonable judgment.  In the alternative, Lender may elect to conduct its own defense at the expense of the Borrowers.  Borrowers’ obligations to Lender under this Section, except the obligation to give notices to Lender, shall survive termination of this Agreement, repayment of the Obligation under this Agreement, and foreclosure of the deed of trust or mortgage encumbering the Real Property or similar proceedings.

 

13.12       Joint and Several Liability.

 

(a)           Each Borrower agrees that it is jointly and severally liable to Lender for the payment of all obligations arising under this Agreement, and that such liability is independent of the obligations of the other Borrower(s).  Each obligation, promise, covenant, representation and warranty in this Agreement shall be deemed to have been made by, and be binding upon, each Borrower, unless this Agreement expressly provides otherwise.  Lender may bring an action against any Borrower, whether an action is brought against the other Borrower(s).

 

(b)           Each Borrower agrees that any release which may be given by Lender to the other Borrower(s) or any guarantor will not release such Borrower from its obligations under this Agreement.

 

(c)           Each Borrower waives any right to assert against Lender any defense, setoff, counterclaim, or claims which such Borrower may have against the other Borrower(s) or any other party liable to Lender for the obligations of the Borrowers under this Agreement.

 

(d)           Each Borrower waives any defense by reason of any other Borrower’s or any other person's defense, disability, or release from liability.  Lender can exercise its rights against each Borrower even if any other Borrower or any other person no longer is liable because of a statute of limitations or for other reasons.

 

(e)           Each Borrower agrees that it is solely responsible for keeping itself informed as to the financial condition of the other Borrower(s) and of all circumstances which bear upon the risk of nonpayment.  Each Borrower waives any right it may have to require Lender to disclose to such Borrower any information which Lender may now or hereafter acquire concerning the financial condition of the other Borrower(s).

 

  

53

  

(f)           Each Borrower waives all rights to notices of default or nonperformance by any other Borrower under this Agreement.  Each Borrower further waives all rights to notices of the existence or the creation of new indebtedness by any other Borrower and all rights to any other notices to any party liable on any of the credit extended under this Agreement.

 

(g)           The Borrowers represent and warrant to Lender that each will derive benefit, directly and indirectly, from the collective administration and availability of credit under this Agreement.  The Borrowers agree that Lender will not be required to inquire as to the disposition by any Borrower of funds disbursed in accordance with the terms of this Agreement.

 

(h)           Until all obligations of the Borrowers to Lender under this Agreement have been paid in full and any commitments of Lender or facilities provided by Lender under this Agreement have been terminated, each Borrower waives any right of subrogation, reimbursement, indemnification and contribution (contractual, statutory or otherwise), which such Borrower may now or hereafter have against any other Borrower with respect to the indebtedness incurred under this Agreement.

 

(i)           Each Borrower waives any right to require Lender to proceed against any other Borrower or any other person; proceed against or exhaust any security; or pursue any other remedy.  Further, each Borrower consents to the taking of, or failure to take, any action which might in any manner or to any extent vary the risks of the Borrowers under this Agreement or which, but for this provision, might operate as a discharge of the Borrowers.

 

13.13       Borrower Representative.  Each Borrower hereby designates Borrower Representative as its representative and agent on its behalf for the purposes of issuing Loan Requests and LC Applications, delivering Borrowing Base Certificates, giving instructions with respect to the disbursement of the proceeds of the Loans and the issuance of LCs, giving and receiving all other notices and consents hereunder or under any of the other Loan Documents, and taking all other actions (including in respect of compliance with covenants) on behalf of any Borrower or Borrowers under the Loan Documents.  Borrower Representative hereby accepts such appointment.  Lender may regard any notice or other communication pursuant to any Loan Document from Borrower Representative as a notice or communication from all Borrowers, and may give any notice or communication required or permitted to be given to any Borrower or Borrowers hereunder to Borrower Representative on behalf of such Borrower or Borrowers.  Each Borrower agrees that each notice, election, representation and warranty, covenant, agreement and undertaking made on its behalf by Borrower Representative shall be deemed for all purposes to have been made by such Borrower and shall be binding upon and enforceable against such Borrower to the same extent as if the same had been made directly by such Borrower.

 

13.14       USA Patriot Act Notice.  Lender hereby notifies Borrowers that pursuant to the requirements of the USA Patriot Act (Title III of Pub. L. 107-56 (signed into law October 26, 2001)) (the “Patriot Act”), Lender is required to obtain, verify and record information that identifies Borrowers, which information includes the name and address of Borrowers and other information that will allow Lender to identify Borrowers in accordance with the Patriot Act.

 

13.15       Entirety.  The Loan Documents Represent the Final Agreement Between The parties and May Not Be Contradicted by Evidence of Prior, Contemporaneous, or Subsequent Oral Agreements by the Parties.  There Are No Unwritten Oral Agreements among the Parties.

 

[Signatures are on the following pages.]

 

  

54

  

EXECUTED as of the day and year set out in the Preamble.

	
BORROWERS:

	  
	
VERTEX ENERGY, INC.,

	
a Nevada corporation

	  
	  
	
By: /s/ Benjamin P. Cowart

	
        Benjamin P. Cowart

	
        Chief Executive Officer

	  
	  
	
VERTEX ENERGY OPERATING, LLC,

	
a Texas limited liability

	  
	  
	
By: /s/ Benjamin P. Cowart

	
       Benjamin P. Cowart

	
       Chief Executive Officer

Federal law requires Bank of America, N.A. to provide the following notice. The notice is not part of the foregoing agreement and may not be altered.  Please read the notice carefully.

USA PATRIOT ACT NOTICE

Federal law requires all financial institutions to obtain, verify and record information that identifies each person who opens an account or obtains a loan.  Lender will ask for each Borrower’s legal name, address, tax ID number or social security number and other identifying information.  Lender may also ask for additional information or documentation or take other actions reasonably necessary to verify the identity of each Borrower, guarantors or other related persons.

  

 

  

	
LENDER:

	  
	
BANK OF AMERICA, N.A.

	  
	  
	
By: /s/ Rebecca L. Hetzer

	
        Rebecca L. Hetzer

	
        Senior Vice President

  

 

  

 

SCHEDULE 1

Parties, Addresses, and Wiring Information

 

	
Borrowers and other Companies

	  	
Borrowers’ Wire Instructions

	
Vertex Energy, Inc.

	  	  	  
	
Vertex Energy Operating, LLC

	  	
Location of Account:

	
Bank of America

	
1331 Gemini, Suite 250

	  	
ABA No.:

	
111000025

	
Houston, Texas  77058

	  	
Account No.:

	
Please contact

	
Attn:  Benjamin P. Cowart

	  	  	
Rebecca L. Hetzer

	
Phone:

	
(713) 208-8736

	  	
(713) 247-6004

	
Fax:

	
(281) 486-0217

	  	
for account information.

	  	  	
For credit to:  Vertex Energy, Inc.

copy to:

Reinhart Boerner Van Deuren s.c.

100 North Water Street, Suite 1700

Milwaukee, Wisconsin 53202

Telephone No.: (414) 298-8227

Facsimile No.: (414) 298-8097

Attention:  Timothy Reardon

Lender’s Office

Bank of America, N.A.

700 Louisiana, 8th Floor

Houston, Texas 77002

Attn:      Rebecca L. Hetzer

Phone:   (713) 247-6004

Fax:         (804) 264-0127

copy to:

Porter Hedges LLP

1000 Main St., 36th Floor

Houston, Texas  77002

Attn:     Joyce K. Soliman

Phone:  (713) 226-6685

Fax:        (713) 226-6285

Schedule 1

  

  

  

SCHEDULE 2

 

Existing Debt and Liens

 

Master Lease Agreement No. MEF0659 dated March 3, 2009 between Pacific Western Equipment Finance and Vertex-LA (as successor in interest to Omega Refining, LLC) and the following schedules thereto: (a) Schedule No. 001 dated November 11, 2010, as amended by Amendment No. 1 dated December 20, 2010 (principal balance outstanding as of the Closing Date is $194,272.48), and (b) Schedule No. 004 dated May 15, 2012, as amended by Amendment No. 1 dated September 28, 2012 (principal balance outstanding as of the Closing Date is $685,844.80).

 

Guaranty dated May 2, 2014 by Holdings in favor of Omega Holdings Company LLC, Omega Refining, LLC and Bango Refining NV, LLC, guarantying obligations under contracts assumed in connection with the Omega Acquisition.

 

Guaranty dated May 2, 2014 by Holdings and Vertex-Operating in favor of Magellan Terminals Holdings, L.P. (“Magellan”) to guarantee Vertex-LA’s obligations under the Marrero Agreements (as defined in Schedule 7.17)

 

Guaranty dated May 2, 2014 by Vertex-Operating in favor of Plaquemines Holdings, LLC to guarantee Vertex-LA’s obligations under the Vertex-LA Plaquemines Parish Lease.

 

Pursuant to the Unit Purchase Agreement dated August 14, 2012 among Holdings, VAS, Vertex Holdings, L.P. ("VH") and B & S Cowart Family L.P., Holdings may be obligated to make specified earn-out payments to VH based on Holdings' achievement of specified EBITDA targets.

 

Pursuant to the Limited Liability Membership Purchase Agreement dated effective October 1, 2013 among Kevin Ellis, Holdings and E-Source, Holdings may be obligated to make specified earn-out payments to Mr. Ellis based on E-Source's achievement of specified net income targets.

 

Holdings:

 

	
Jurisdiction

	
Secured Party

	
Filing No. and Date

	
Collateral

	
Nevada Secretary of State

	
Bank of America Leasing & Capital, LLC

	
2013005448-2 - 3/1/13

2013005619-5 - Amend - 3/4/13

2013010495-8 - Amend - 4/24/13

	
Petroleum Process Production Equipment listed in Attached Master Lease Agreement

 

Pursuant to Article XXIV of that certain Tolling Agreement dated July 1, 2012 between Holdings and KMTEX LLC, as amended by First Amendment dated November 1, 2013, KMTEX LLC has an expressed contract lien upon all materials and products stored and handled under the terms of the agreement, or under any other agreements between Holdings and KMTEX LLC.

  

Schedule 2 - Page 1

  

H & H Oil:

	
Jurisdiction

	
Secured Party

	
Filing No. and Date

	
Collateral

	
Texas Secretary of State ("TX SOS")

	
Toyota Motor Credit Corporation

	
11-0011849378 - 4/20/11

	
Toyota forklift

	
TX SOS

	
Wells Fargo Equipment Finance, Inc.

	
14-0001563373 - 1/8/14

	
Leased equipment

 

 

Vertex-LA:

 

Any precautionary Liens arising with respect to that certain Master Lease Agreement No. MEF0659 dated March 3, 2009 between Pacific Western Equipment Finance and Vertex Refining LA, LLC (as successor in interest to Omega Refining, LLC) and the following schedules thereto: (a) Schedule No. 001 dated November 11, 2010, as amended by Amendment No. 1 dated December 20, (b) Schedule No. 003 dated January 20, 2012, as amended by Amendment No. 1 dated April 10, 2012, Amendment No. 2 dated June 20, 2012 and Amendment No. 3 dated March 27, 2013 and (c) Schedule No. 004 dated May 15, 2012, as amended by Amendment No. 1 dated September 28, 2012.

  

Schedule 2 - Page 2

  

SCHEDULE 5

 

Conditions Precedent

	
1.

	
Amended and Restated Credit Agreement

	
Schedule 1Parties, Addresses, and Wiring Information

	
Schedule 2    Existing Debt and Liens

	
Schedule 5            Conditions Precedent

	
Schedule 7.2         Subsidiaries

	
Schedule 7.5         Litigation

	
Schedule 7.7         Environmental Matters

	
Schedule 7.12       Place of Business

	
Schedule 7.14       Trade Names

	
Schedule 7.15       Transactions with Affiliates

	
Schedule 7.17       Material Agreements

	
Exhibit A               Revolving Note

	
Exhibit B                Loan Request

	
Exhibit C                Borrowing Base Certificate

	
Exhibit D                Compliance Certificate

	
Exhibit E                 Security Agreement

	
Exhibit F                 Corporate Guaranty

	
2.

	
Revolving Note ($20,000,000.00)

	
3.

	
Amended and Restated Guaranty

	
4.

	
Pledge and Security Agreement

	
5.

	
Intercreditor Agreement

	
6.

	
Earnout Subordination Agreement (Vertex Holdings, L.P.)

	
7.

	
Copy of Executed Unit Membership Purchase Agreement

	
8.

	
Assignment of Representations, Warranties, Covenants and Indemnities

 

 

Schedule 5 - Page 1

 

 

	
9.

	
Secretary’s Certificate of Holdings

	
-  Certified Articles of Incorporation

	
-  Bylaws

	
-  Resolutions

	
-  Incumbency

	
10.

	
Secretary’s Certificate of Vertex-Operating

-  Certified Certificate of Formation

-  Operating Agreement

-  Resolutions

-  Incumbency

	
11.

	
Secretary’s Certificate of VAS

	
-  Certified Articles of Organization

	
-  Operating Agreement

	
-  Resolutions

	
-  Incumbency

	
12.

	
Secretary’s Certificate of VMS

	
-  Certified Articles of Organization

	
-  Operating Agreement

	
-  Resolutions

	
-  Incumbency

	
13.

	
Partner’s Certificate of CMT

	  	
-  Certified Certificate of Formation

	  	
-  Limited Partnership Agreement

	  	
-  Resolutions

	  	
-  Incumbency

	
14.

	
Partner’s Certificate of Crossroad Carriers

	  	
-  Certified Certificate of Formation

	  	
-  Limited Partnership Agreement

	  	
-  Resolutions

	  	
-  Incumbency

	
15.

	
Partner’s Certificate of Vertex-Recovery

	  	
-  Certified Certificate of Formation

 

 

Schedule 5 - Page 2

 

 

	  	
-  Limited Partnership Agreement

	  	
-  Resolutions

	  	
-  Incumbency

	
16.

	
Partner’s Certificate of H&H Oil

	  	
-  Certified Certificate of Formation

	  	
-  Limited Partnership Agreement

	  	
-  Resolutions

	  	
-  Incumbency

	
17.

	
Secretary’s Certificate of Vertex-II

	  	
-  Certified Articles of Organization of Vertex-II

	  	
-  Limited Liability Company Agreement of Vertex-II

	  	
-  Resolutions

	  	
-  Incumbency

	
18.

	
Secretary’s Certificate of Vertex-LA

-  Certified Articles of Organization

-  Operating Agreement

-  Resolutions

-  Incumbency

	
19.

	
Secretary’s Certificate of Vertex-NV

-  Certified Articles of Organization

-  Operating Agreement

-  Resolutions

-  Incumbency

	
20.

	
Secretary’s Certificate of GSLW

-  Certified Articles of Organization

-  Operating Agreement

-  Resolutions

-  Incumbency

	
21.

	
Officer’s Closing Certificate (Initial Closing)

	
22.

	
Solvency Certificate

	
23.

	
Perfection Certificate

 

 

Schedule 5 - Page 3

 

 

	
24.

	
Legal Opinion of Counsel to Borrowers and Corporate Guarantors

	
-  Reinhart Boerner Van Deuren

-  Stone Pigman Walther Wittman L.L.C.

-  Dean Allcorn, Esq.

	
25.

	
Flow of Funds Memorandum

	
26.

	
Field Exam – Inventory

	
27.

	
Certificates of Existence/Good Standing/Authority

-  Holdings (Nevada)

-  Vertex-Operating (TX)

-  CMT (TX)

-  Crossroad Carriers (TX)

-  GSLW (Delaware)

-  H&H Oil

-  VAS (Nevada)

-  VMS (California)

-  Vertex-Recovery (TX)

-  Vertex-LA (Louisiana)

-  Vertex-NV (Nevada)

-  Vertex-II (Nevada)

	
28.

	
UCC Lien Searches

-  Holdings (Nevada)

-  Vertex-Operating (TX)

-  CMT (TX)

-  Crossroad Carriers (TX)

-  GSLW (Delaware)

-  H&H Oil

-  VAS (Nevada)

-  VMS (California)

-  Vertex-Recovery (TX)

-  Vertex-LA (Louisiana)

-  Vertex-NV (Nevada)

-  Vertex-II (Nevada)

 

 

Schedule 5 - Page 4

 

 

	
29.

	
UCC-1 Financing Statements

-  Holdings (Nevada)

-  Vertex-Operating (TX)

-  CMT (TX)

-  Crossroad Carriers (TX)

-  GSLW (Delaware)

-  H&H Oil

-  VAS (Nevada)

-  VMS (California)

-  Vertex-Recovery (TX)

-  Vertex-LA (Louisiana)

-  Vertex-NV (Nevada)

	
30.

	
Payoff Letters

-  Omega Capital Lease (Tetra Financial Corp.)

-  Bank of America – Term Loan

-  Big 4 Investments, LLC

-  Wells Fargo – Revolver

-  Guggenheim Corporate Funding, LLC – Term Loan

	
31.

	
UCC-3 Terminations

	
32.

	
Post-Closing Letter Agreement

	
33.

	
Fee Letter

	
34.

	
Loan Request

	
35.

	
Payment of Lender’s fees and expenses

	
36.

	
Due Diligence Review by Lender

	
37.

	
Insurance Certificates

	
a.  Liability

	
b.  Casualty

	
c.  Flood, Nueces County

	
38.

	
Endorsements to Insurance Policies

a.  Additional Insured Endorsement

b.  Loss Payable Endorsement

	
39.

	
Release of Liens – Lender

a.  Harris County

b.  Nueces County

c.  Travis County

d.  Chambers County

 

 

Schedule 5 - Page 5

 

 

	
40.

	
Deed of Trust (Harris County)

-  Harris County Property

	
41.

	
Deed of Trust (Nueces County)

-  Nueces County Property

	
42.

	
Deed of Trust (Travis County)

-  Travis County Property

	
43.

	
Leasehold Deed of Trust (Chambers County)

-  Chambers County Leasehold Property

	
44.

	
Copy of Ground Lease –  Chambers County Leasehold Property

	
45.

	
Consent to Chambers County Leasehold Deed of Trust

	
46.

	
Multiple Indebtedness Leasehold Mortgage to Secure Present and Future Indebtedness, Assignment of Leases and Rents and Security Agreement

-  Jefferson Parish Leasehold Property

-  Plaquemines Parish Leasehold Property

	
47.

	
Copies of Leases –

-  Jefferson Parish Leasehold Property

-  Plaquemines Parish Leasehold Property

	
48.

	
Consents to Multiple Indebtedness Leasehold Mortgages to Secure Present and Future Indebtedness, Assignment of Leases and Rents and Security Agreements

-  Jefferson Parish Leasehold Property

-  Plaquemines Parish Leasehold Property

	
49.

	
Surveys

	
a.  Harris County Property

	
b.  Nueces County Property

	
c.  Travis County Property

	
d.  Chambers County Leasehold Property

e.  Jefferson Parish Leasehold Property

f.  Plaquemines Parish Leasehold Property

	
50.

	
Environmental Reports

a.  Harris County Property

b.  Nueces County Property

c.  Travis County Property

d.  Chambers County Leasehold Property

e.  Jefferson Parish Leasehold Property

f.  Plaquemines Parish Leasehold Property

 

 

Schedule 5 - Page 6

 

 

	
51.

	
Flood Determinations

a.  Harris County Property

b.  Nueces County Property

c.  Travis County Property

d.  Chambers County Leasehold Property

e.  Jefferson Parish Leasehold Property

f.  Plaquemines Parish Leasehold Property

	
52.

	
Notice to Borrower in Special Flood Hazard Area (if applicable)

a.  Nueces County Property

	
53.

	
Title Commitment

a.  Harris County Property

b.  Nueces County Property

c.  Travis County Property

d.  Chambers County Leasehold Property

e.  Jefferson Parish Leasehold Property

f.  Plaquemines Parish Leasehold Property

	
54.

	
Instruction Letter to Title Companies

	
55.

	
Title Company Affidavits

	
56.

	
Invoices from Title Companies

	
57.

	
Intellectual Property Searches

	
58.

	
Patent Security Agreement

 

 

  

Schedule 5 - Page 7

  

SCHEDULE 7.2

Subsidiaries

	
Parent

	
Subsidiary

	
I/O Shares/Units

	
% Ownership

	
Entity Type

	
Jurisdiction of Incorporation

	
Vertex-Operating

	
VMS

	
1

	
100%

	
Limited Liability Company

	
California

	
Vertex-Operating

	
VAS

	
100,000

	
100%

	
Limited Liability Company

	
Nevada

	
Vertex-Operating

	
Vertex-II

	
N/A

	
100%

	
Limited Liability Company

	
Nevada

	
Vertex-Operating

	
Vertex-LA

	
N/A

	
100%

	
Limited Liability Company

	
Louisiana

	
Vertex-Operating

	
Vertex-NV

	
N/A

	
100%

	
Limited Liability Company

	
Nevada

	
Vertex-Operating

	
E-Source

	
N/A

	
70%

	
Limited Liability Company

	
Texas

	
Vertex-NV

	
Golden State Lubricants Works, LLC

	
N/A

	
100%

	
Limited Liability Company

	
Delaware

	
VAS

	
CMT

	
N/A

	
100%

	
Limited Partnership

	
Texas

	
VAS

	
Crossroad Carriers

	
N/A

	
100%

	
Limited Partnership

	
Texas

	
Vertex-Recovery

	
H&H Oil

	
N/A

	
100%

	
Limited Partnership

	
Texas

	
VAS

	
Vertex-Recovery

	
N/A

	
100%

	
Limited Partnership

	
Texas

	
Holdings

	
Vertex-Operating

	
N/A

	
100%

	
Limited Liability Company

	
Texas

Schedule 7.2

  

  

  

SCHEDULE 7.5

 

Litigation

 

Wunderlich Securities, Inc. (“Wunderlich”) has alleged that Holdings owes Wunderlich a fee related to Wunderlich's services in locating financing sources for the Omega Acquisition.  The parties have reached a settlement agreement in principle pursuant to which Holdings will pay Wunderlich $350,000 in exchange for Wunderlich's release of all claims related to this matter.   This settlement should be finalized in writing by not later than June 15, 2014.

 

 

Schedule 7.5

  

  

  

SCHEDULE 7.7

 

Environmental Matters

 

	
  

	
1.

	
Marrero Facility.  As indicated below, Omega Refining has demonstrated a prior pattern of non-compliance with respect to its discharge of wastewater from the Marrero, LA facility.  Any liabilities arising out of such instances are "Excluded Liabilities," as such term is defined in the Purchase Agreement.  Vertex-LA expects to operate the facility on a post-closing basis in compliance with applicable Environmental Law and does not anticipate continuing Omega Refining's pattern of non-compliance.  

 

	
  

	
a.

	
July 31, 2013 - Jefferson Parish Dept. of Environmental Affairs Notice of non-compliance letter regarding Discharge Permit No. JP-SC-0094-011402-M-11-2, exceedence of wastewater discharge limits for oil and grease at parking lot manhole.

 

	
  

	
b.

	
July 16, 2013 - Jefferson Parish Dept. of Environmental Affairs Notice of non-compliance regarding Discharge Permit No. JP-SC-0094-011402-M-11-2, exceedence of wastewater discharge limits for oil and grease on March 5-7, 2013, and exceedence of bis (2-ethylhexyl) phthalate on March 5-7, 2013.

 

	
  

	
c.

	
April 18, 2013 - Jefferson Parish Dept. of Environmental Affairs Compliance Order, Enforcement Tracking No. 2013-0001 regarding Discharge Permit No. JP-SC-0094-011402-M-11-2, samples taken on May 9, 2012 from manhole with diesel and oil contamination in two Parish lift stations, alleged violations: (i) lack of protection from accidental discharges; (ii) unauthorized discharge; (iii) improper discharges to sanitary sewer; (iv) general prohibition on discharge of pollutants to sewers; (v) prohibition on discharge of oils and grease; (vi) prohibition on discharge of noxious material; (vii) prohibition on discharge of solid or viscous wastes; (viii) prohibition on discharge of toxic substances; (ix) inaccurate discharge permit/application and (x) improper reporting.

 

	
  

	
d.

	
June 9, 2008 - The Marrero Facility lacks coverage under the Louisiana Pollutant Discharge Elimination System (LPDES) Multi-Sector General Permit for Storm Water Discharges Associated with Industrial Activities and has not drafted a Storm Water Pollution Prevention Plan to manage storm water discharges at the Marrero Facility to ensure compliance with applicable permit requirements.

 

 

 

Schedule 7.7

  

  

  

SCHEDULE 7.12

 

Place of Business

 

 

Companies:

 

Place of Business and Chief Executive Office of Companies:

 

1331 Gemini, Suite 250, Houston, TX 77058

 

Location of Books and Records of Companies:

 

1331 Gemini, Suite 250, Houston, TX 77058

 

Location of Assets for Companies (other than CMT, H&H Oil, and Vertex-LA) (including inventory, equipment and collateral that is or may be fixtures):

 

1331 Gemini, Suite 250, Houston, TX 77058

 

Location of Assets for CMT (including inventory, equipment and collateral that is or may be fixtures):

 

200 Atlantic Pipeline Road, Baytown, TX 77520

 

Location of Assets for H&H Oil (including inventory, equipment and collateral that is or may be fixtures):

 

H&H Oil Collection Yard: 20909 FM 685, Pflugerville, TX 78660

 

H&H Oil Collection Yard: 7311 Decker Drive, Baytown, TX 77523

 

H&H Oil Collection Yard: 7941 Recycle Drive, Corpus Christi, TX 78409

 

H&H Oil Storage Yard: 11626 Old Corpus Christi Hwy, San Antonio, TX 78223

 

Location of Assets for Vertex-LA (including inventory, equipment and collateral that is or may be fixtures):

 

Vertex-LA Used Oil Re-refinery: 5000 River Road, Marrero, LA 70072

 

Vertex-LA Used Oil Re-refinery: 278 E. Ravenna Road, Myrtle Grove, LA 70037

 

Real Property Owned by Companies (other than VAS and Vertex-Recovery):

 

None.

 

Real Property Owned by VAS:

 

7311 Decker Drive, Baytown, TX 78660

 

20909 FM 685, Pflugerville, TX 78660

 

  

Schedule 7.12-1

  

Real Property Owned by Vertex-Recovery:

 

7941 Recycle Drive, Corpus Christi, TX 78409

 

Real Property/Office Space Leased by Companies (other than Vertex-Operating, CMT, Vertex-LA, H&H Oil):

 

None.

 

Real Property/Office Space Leased by Vertex-Operating:

 

1331 Gemini, Suite 250, Houston, Texas 77058

 

Real Property/Office Space Leased by CMT:

 

200 Atlantic Pipeline Road, Baytown, TX 77520

 

Real Property/Office Space Leased by Vertex-LA:

 

5000 River Road, Marrero, LA 70072

 

278 E. Ravenna Road, Myrtle Grove, LA 70037

 

Real Property/Office Space Leased by GSLW:

 

1134 Manor Street, Oildale, CA 93308

 

Real Property/Office Space Leased by H&H Oil:

 

11626 Old Corpus Christi Hwy, San Antonio, TX 78223

 

  

Schedule 7.12-2

  

SCHEDULE 7.14

 

Trade Names

 

Vertex Recovery

H & H Oil

CMT

Crossroad Carriers

 

 

 

Schedule 7.14

  

  

  

SCHEDULE 7.15

 

Transactions with Affiliates

 

None.

 

 

 

Schedule 7.15

  

  

  

SCHEDULE 7.17

 

Material Contracts

 

1.           Related Agreements

 

	
2.

	
Third Amended Company Agreement for E-Source Holdings, LLC dated effective as of January 1, 2014 between Vertex Energy Operating, LLC (as successor in interest to Vertex Energy, Inc.) and BBP Landtex Group, LLC

 

	
3.

	
Tolling Agreement dated July 1, 2012 between Holdings and KMTEX LLC, as amended by First Amendment dated November 1, 2013

 

	
4.

	
Master Lease Agreement No. 253640900000 dated February 27, 2013 between Holdings and Banc of America Leasing & Capital, LLC and Schedule No. 001 dated April 22, 2013

 

	
5.

	
Lease Agreement dated May 9, 2009 between Cole Gemini, Ltd. and VAS (successor in interest to Vertex Holdings L.P.), as amended by First Amendment to Office Lease Agreement dated June 8, 2012

 

6.           CMT Lease

 

7.           Vertex-LA Jefferson Parish Lease

 

8.           Vertex-LA Plaquemines Parish Lease

 

	
9.

	
Schedule No. 004 dated May 15, 2012, as amended by Amendment No. 1 dated September 28, 2012, to Master Lease Agreement No. MEF0659 dated March 3, 2009 between Pacific Western Equipment Finance and Vertex-LA (as successor in interest to Omega Refining, LLC)

 

	
10.

	
Unit Purchase Agreement dated August 14, 2012 among Holdings, VAS, Vertex Holdings, L.P. and B & S Cowart Family L.P.

 

	
11.

	
Limited Liability Membership Purchase Agreement dated effective October 1, 2013 among Kevin Ellis, Holdings, and E-Source Holdings, LLC

 

	
12.

	
Terminaling Services Agreement dated May 1, 2008 between Magellan Terminals Holdings, L.P. (f/k/a Marrero Terminal LLC) (“Magellan”) and Vertex-LA (as successor in interest to Omega Refining, LLC (the “Marrero TSA”)

 

	
13.

	
Operation and Maintenance Agreement dated November 3, 2010 between Magellan and Vertex-LA (as successor in interest to Omega Refining, LLC (the “Marrero Operation Agreement,” and collectively with the Vertex-LA Jefferson Parish Lease, the “Marrero Agreements”)

 

	
14.

	
Joint Marketing Agreement dated April 10, 2011 between Rio Energy International, Inc. and Holdings

 

Schedule 7.17

  

  

  

 

EXHIBIT A

 

REVOLVING NOTE

 

	
$20,000,000

	
Houston, Texas

	
As of ______________

FOR VALUE RECEIVED, VERTEX ENERGY, INC., a Nevada corporation, and VERTEX ENERGY OPERATING, LLC, a Texas limited liability company (each, a “Borrower”, and collectively, the “Borrowers”), hereby promise to pay to the order of Bank of America, N.A. (“Lender”) on or before the Revolving Credit Termination Date, the principal amount of $20,000,000 or so much thereof as may then be outstanding under this note, together with interest, as described below.

 

This note has been executed and delivered under, and is subject to the terms of, the Amended and Restated Credit Agreement dated as of May 2, 2014 (as amended, supplemented or restated from time to time, the “Credit Agreement”), between Borrowers and Lender and is the “Revolving Note” referred to in the Credit Agreement.  Unless defined in this note, or the context requires otherwise, capitalized terms used in this note have the meanings given them in the Credit Agreement.  Reference is made to the Credit Agreement for provisions affecting this note regarding applicable interest rates, principal and interest payment dates, final maturity, voluntary and mandatory prepayments, acceleration of maturity, exercise of rights, payment of attorneys’ fees, court costs and other costs of collection, certain waivers by Borrowers and others now or hereafter obligated for payment of any sums due under this note, and security for the payment of this note.  This note is a Loan Document and, therefore, is subject to the applicable provisions of Section 13 of the Credit Agreement, all of which applicable provisions are incorporated into this note by reference as if set forth in this note verbatim.

 

Specific reference is made to Section 3.6 of the Credit Agreement for usury savings provisions.

 

The rights and obligations of Borrowers and Lender shall be determined solely from written agreements, documents, and instruments, and any prior oral agreements between Borrowers and Lender are superseded by and merged into such writings.  this note, the Credit Agreement and the other written loan documents executed by Borrowers and Lender (or by Borrowers for the benefit of Lender) represent the final agreement between Borrowers and Lender and may not be contradicted by evidence of prior, contemporaneous, or subsequent oral agreements by the parties.  there are no unwritten oral agreements between the parties.

 

This note must be construed — and its performance enforced — under Texas law.

 

This Revolving Note is issued in replacement (but is not a novation of) that certain Revolving Note dated August 31, 2012 and payable to the order of Bank of America, N.A., a national banking association in the principal amount of $10,000,000.

 

[Signatures are on the following page.]

 

 

Exhibit A

  

  

  

EXECUTED as of the date first written above.

 

	
BORROWERS:

	  
	
VERTEX ENERGY, INC.,

	
a Nevada corporation

	  
	  
	
By: ____________________________

	
Name: __________________________

	
Title: ___________________________

	  
	
VERTEX ENERGY OPERATING, LLC,

	
a Texas limited liability company

	  
	  
	
By: _____________________________

	
Name: ___________________________

	
Title: ____________________________

	  

 

 

 

 

 

Signature Page to Revolving Note

  

  

  

 

EXHIBIT B

 

LOAN REQUEST

 

_____________, 20____

 

Bank of America, N.A.

700 Louisiana, 8th Floor

Houston, Texas  77002

Attn:  Rebecca L. Hetzer

Reference is made to the Amended and Restated Credit Agreement dated as of May 2, 2014 (as amended, supplemented or restated from time to time, the “Credit Agreement”), between the undersigned and Bank of America, N.A. (“Lender”).  Capitalized terms used but not defined in this Loan Request shall have the meanings given them in the Credit Agreement.  The undersigned hereby gives you notice pursuant to Section 2.3 of the Credit Agreement that it requests a Loan under the Credit Agreement on the following terms:

 

(A)           Loan Date (a Business Day) ♦                                                                              

(B)           Principal Amount of Loan♦♦                                                                                 

(C)           Type of Loan♦♦♦                                                                                   

Borrowers hereby certify that the following statements are true and correct on the date of this Loan Request, and will be true and correct on the Loan Date specified above after giving effect to such Loan:  (a) all of the representations and warranties in the Loan Documents are true and correct in all material respects (except to the extent that they speak to a specific date); (b) no Material Adverse Effect exists; and (c) no Default or Event of Default exists.

 

[Signature is on the following page.]

 

 

_________________________

 

 ̈ Must be received by Lender no later than 11:00 a.m. on the proposed Loan Date.

 ̈ ̈ Each Loan under the Revolving Credit Facility must be an amount not less than $50,000 or a greater integral multiple of $10,000.

 ̈ ̈ ̈ Base Rate Loan or LIBOR Loan.

 

Exhibit B

  

  

  

 

	
Very truly yours,

	 
	
BORROWERS:

	  
	
VERTEX ENERGY, INC.,

	
a Nevada corporation

	  
	  
	
By: ____________________________

	
Name: __________________________

	
Title: ___________________________

	  
	
VERTEX ENERGY OPERATING, LLC,

	
a Texas limited liability company

	  
	  
	
By: _____________________________

	
Name: ___________________________

	
Title: ____________________________

	  

 

 

Signature Page to Loan Request

  

  

  

EXHIBIT C

 

BORROWING BASE CERTIFICATE

 

____________, 20___

Bank of America, N.A.

700 Louisiana, 8th Floor

Houston, Texas  77002

Attn: Rebecca L. Hetzer

 

This Borrowing Base Certificate is being delivered to Bank of America, N.A. (“Lender”) under the terms of that certain Amended and Restated Credit Agreement dated as of May 2, 2014 (as amended, restated, or supplemented from time to time, the “Credit Agreement”), between the undersigned and Lender.  Capitalized terms used but not defined in this Borrowing Base Certificate shall have the meanings given such terms in the Credit Agreement.

 

I certify that (a) I am a Responsible Officer of each Borrower on the date hereof; (b) no Default or Event of Default exists; (c) a review of the activities of the Companies during the [month] ended _____________ (the “Subject Period”) has been made under my supervision with a view to determine the amount of the current Borrowing Base; (d) the accounts receivable of each Company included in the Eligible Accounts, and the inventory of each Company included in the Eligible Inventory, meet all conditions to qualify as “Eligible Accounts,” “Eligible Inventory”, respectively, set out in the Credit Agreement and all the representations and warranties set out in the Credit Agreement with respect thereto are true and correct; (e) the information and calculation of the Borrowing Base on Schedule 1 attached hereto is true and correct as of the last day of the Subject Period; and (f) attached as Schedule 2 to this Borrowing Base Certificate is a schedule of the Companies’ accounts receivable aging report.

 

[Signatures are on the following page.]

Exhibit C

  

  

  

Executed as of the date first written above.

 

 

	
BORROWERS:

	  
	
VERTEX ENERGY, INC.,

	
a Nevada corporation

	  
	  
	
By: ____________________________

	
Name: __________________________

	
Title: ___________________________

	  
	
VERTEX ENERGY OPERATING, LLC,

	
a Texas limited liability company

	  
	  
	
By: _____________________________

	
Name: ___________________________

	
Title: ____________________________

	  

                    

Attachments:

Schedule 1 – Borrowing Base Calculation

Schedule 2 – Accounts Receivable Aging Report

Signature Page to Borrowing Base Certificate

  

  

  

SCHEDULE 1

TO

BORROWING BASE CERTIFICATE

Borrowing Base Calculation

[See attached]

 

Schedule 1 to Borrowing Base Certificate

  

  

  

SCHEDULE 2

TO

BORROWING BASE CERTIFICATE

Accounts Receivable Aging Report

 

 

[See attached]

 

 

Schedule 2 to Borrowing Base Certificate

  

  

  

EXHIBIT D

 

COMPLIANCE CERTIFICATE

 

FOR _________ ENDED ____________, 20___

 

Bank of America, N.A.

700 Louisiana, 8th Floor

Houston, Texas  77002

Attn: Rebecca L. Hetzer

Reference is made to the Amended and Restated Credit Agreement dated as of May 2, 2014 (as amended, supplemented or restated from time to time, the “Credit Agreement”), between Vertex Energy, Inc., a Nevada corporation, and Vertex Energy Operating, LLC, a Texas limited liability company (each, a “Borrower”, and collectively, the “Borrowers”), and Bank of America, N.A. (“Lender”).  Capitalized terms used but not defined in this Compliance Certificate shall have the meanings given such terms in the Credit Agreement.

 

This certificate is delivered pursuant to Section 8.1 of the Credit Agreement.

 

I certify to Lender that I am the __________________1 of each Borrower, on the date hereof and that:

 

1.           The financial statements attached to this Compliance Certificate were prepared in accordance with GAAP and present fairly, in all material respects, the financial position of the Companies as at the dates indicated and the statements of operations of the Companies for the periods indicated (the “Subject Period”).

 

2.           During the Subject Period, no Default has occurred which has not been cured or waived (except for any Defaults described on the attached Schedule 2).

 

3.           Evidence of compliance by the Companies with the financial covenants of Section 10 of the Credit Agreement as of the last day of the Subject Period is set out on the attached calculation work sheet attached as Schedule 1.

 

[Signatures are on the following page.]

 

 

 

 

 

________________________

 

1. Must be a Responsible Officer.

 

 

Exhibit D

  

  

  

 

 

	
Very truly yours,

	 
	
BORROWERS:

	  
	
VERTEX ENERGY, INC.,

	
a Nevada corporation

	  
	  
	
By: ____________________________

	
Name: __________________________

	
Title: ___________________________

	  
	
VERTEX ENERGY OPERATING, LLC,

	
a Texas limited liability company

	  
	  
	
By: _____________________________

	
Name: ___________________________

	
Title: ____________________________

	  

 

Attachments:

Schedule 1 – Financial Covenant Calculation Worksheet

Schedule 2 – Default Disclosures

 

Signature Page to Compliance Certificate

  

  

  

SCHEDULE 1

 

Financial Covenant Calculation Worksheet

 

 

[To Be Attached.]

 

Exhibit D – Schedule 1

  

  

  

SCHEDULE 2

 

Default Disclosures

 

 

Exhibit D – Schedule 2

  

  

  

EXHIBIT E

 

PLEDGE AND SECURITY AGREEMENT

 

 

[Attached.]

 

Exhibit E

  

  

  

EXHIBIT F

 

[AMENDED AND RESTATED] GUARANTY

 

This [Amended and Restated] Guaranty (as amended, supplemented, or restated, this “Guaranty”) is executed as of May 2, 2014, by CEDAR MARINE TERMINALS, LP, a Texas limited partnership (“CMT”), CROSSROAD CARRIERS, L.P., a Texas limited partnership (“Crossroad Carriers”), GOLDEN STATE LUBRICANTS WORKS, LLC, a Delaware limited liability company (“GSLW”), H & H OIL, L. P., a Texas limited partnership (“H&H Oil”), VERTEX ACQUISITION SUB, LLC, a Nevada limited liability company (“VAS”), VERTEX MERGER SUB, LLC, a California limited liability company (“VMS”), VERTEX RECOVERY, L.P., a Texas limited partnership (“Vertex-Recovery”), VERTEX REFINING LA, LLC, a Louisiana limited liability company (“Vertex-LA”), VERTEX REFINING NV, LLC, a Nevada limited liability company (“Vertex-NV”), and VERTEX II GP, LLC, a Nevada limited liability company (“Vertex-II” and together with CMT, Crossroads Carriers, GSLW, H&H Oil, VAS, VMS, Vertex-Recovery, Vertex-LA, and Vertex-NV, each a “Guarantor”, and collectively, the “Guarantors”) for the benefit of BANK OF AMERICA, N.A., as lender (“Lender”).

 

RECITALS

 

A.           Vertex Energy, Inc., a Nevada corporation, and Vertex Energy Operating, LLC, a Texas limited liability company (each, a “Borrower”, and collectively, the “Borrowers”), as borrowers, and Lender, as lender, have entered into that certain Amended and Restated Credit Agreement dated of even date herewith (as amended, supplemented or restated, the “Credit Agreement”), together with certain other Loan Documents.

 

B.           Each Guarantor is a direct or indirect subsidiary or an affiliate of Borrowers and expects to benefit, directly and indirectly, from Lender’s extending credit to Borrowers under the Credit Agreement.

 

C.           In each Guarantor’s judgment, the value of the consideration received and to be received by such Guarantor under the Loan Documents is reasonably worth at least as much as its liability and obligation under this Guaranty, and such liability and obligation may reasonably be expected to benefit such Guarantor directly or indirectly.

 

D.           It is expressly understood among Borrowers, Guarantors, and Lender that the execution and delivery of this Guaranty is a condition precedent to Lender’s obligations to extend credit under the Credit Agreement.

 

NOW, THEREFORE, for valuable consideration, the receipt and adequacy of which are hereby acknowledged, each Guarantor guarantees to Lender the prompt payment at maturity (by acceleration or otherwise), and at all times thereafter, of the Guaranteed Obligation, as follows:

 

1.           Definitions.  Each capitalized term used but not defined in this Guaranty shall have the meaning given that term in the Credit Agreement.  The following terms shall have the following meanings as used in this Guaranty:

 

Borrowers has the meaning given in Recital A and includes, without limitation, each Borrower’s successors and assigns, each Borrower as a debtor-in-possession, and any receiver, trustee, liquidator, conservator, custodian, or similar party hereafter appointed for any Borrower or for all or any portion of any Borrower’s assets pursuant to any liquidation, conservatorship,

 

  

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bankruptcy, moratorium, rearrangement, receivership, insolvency, reorganization, or similar Debtor Relief Law from time to time in effect.

 

Company Debt means all obligations of each Borrower to any Guarantor, whether direct, indirect, fixed, contingent, liquidated, unliquidated, joint, several, or joint and several, now existing or arising after the date of this Guaranty, due or to become due to any Guarantor, or held or to be held by any Guarantor, whether created directly or acquired by assignment or otherwise, and whether or not evidenced by written instrument including the obligation of each  Borrower to any Guarantor as a subrogee of the Lender or resulting from any Guarantor’s performance under this Guaranty.

 

Guaranteed Obligation means any and all existing and future indebtedness and liabilities of every kind, nature, and character, direct or indirect, absolute or contingent, liquidated or unliquidated, voluntary or involuntary, of Borrowers to the Lender arising under the Credit Agreement and the other Loan Documents, including, the Obligation (as defined in the Credit Agreement) and any premium and all interest (including, without limitation, interest accruing before and after maturity, before and after an Event of Default, and during the pendency of any bankruptcy, receivership, insolvency or other similar proceeding under any applicable Debtor Relief Law (regardless whether such interest is allowed in such proceeding)), and any and all costs, attorney and paralegal fees and expenses reasonably incurred by Lender (a) in connection with any waiver, amendment, consent or default under the Loan Documents, or (b) to enforce any Borrower’s, any Guarantor’s, or any other obligor’s payment of any portion of the Guaranteed Obligation.

 

Paid in Full or Payment in Full means that the Guaranteed Obligation is completely paid (including principal, interest, fees and expenses), and all commitments to lend or issue letters of credit under the Credit Agreement have terminated.

 

2.           Guaranty.  Each Guarantor hereby guarantees the prompt payment and performance of the Guaranteed Obligation when due (at the stated maturity, upon acceleration, or otherwise) and at all times thereafter.  This is an absolute, unconditional, irrevocable and continuing guaranty of payment (and not of collection) of the Guaranteed Obligation which will remain in effect until the Guaranteed Obligation is Paid in Full.  The circumstance that at any time or from time to time all or any portion of the Guaranteed Obligation may be paid in full shall not affect the Guarantors’ obligation with respect to the Guaranteed Obligation thereafter incurred.  No Guarantor may rescind or revoke its obligations to Lender under this Guaranty with respect to the Guaranteed Obligation.  At the Lender’s option, all payments under this Guaranty shall be made to the office of Lender and in U.S. Dollars.

 

3.           Default by any Borrower.  If an Event of Default exists, Guarantors shall pay the amount of the Guaranteed Obligation then due and payable to Lender on demand and without (a) further notice of dishonor to any Guarantor, (b) any prior notice to any Guarantor of the acceptance by Lender of this Guaranty, (c) any notice having been given to any Guarantor prior to such demand of the creating or incurring of such Debt, or (d) notice of intent to accelerate or notice of acceleration to any Guarantor or any Borrower.  To enforce such payment by Guarantors it shall not be necessary for Lender to first or contemporaneously institute suit or exhaust remedies against Borrowers or others liable on such Debt, or to enforce rights against any security or collateral ever given to secure such Debt.

 

4.           Amount of Guaranty and Consideration.  The Lender’s books and records showing the amount of the Guaranteed Obligation shall be admissible in evidence in any action or proceeding, and shall be binding upon the Guarantors and conclusive for the purpose of establishing the amount of the Guaranteed Obligation.  In consummating the transactions contemplated by the Credit Agreement,

 

  

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Guarantors do not intend to disturb, delay, hinder, or defraud either any of their present or future creditors.  Each Guarantor is familiar with, and has independently reviewed books and records regarding, the financial condition of each Borrower and is familiar with the value of the security and support for the payment and performance of the Guaranteed Obligation.  Based upon such examination, and taking into account the fairly discounted value of each Guarantor’s contingent obligations under this Guaranty and the value of the subrogation and contribution claims any Guarantor could make in connection with this Guaranty, and assuming each of the transactions contemplated by the Credit Agreement is consummated and Borrowers make full use of the credit facilities thereunder, the present realizable fair market value of the assets of each Guarantor exceeds the total obligations of each such Guarantor, and each Guarantor is able to realize upon its assets and pay its obligations as such obligations mature in the normal course of business.  Each Guarantor represents and warrants to Lender that the value of consideration received and to be received by it is reasonably worth at least as much as its liability under this Guaranty, and such liability may reasonably be expected to benefit each Guarantor, directly or indirectly.

 

5.           Avoidance Limitation.  The obligations of Guarantors under this Guaranty shall be limited to an aggregate amount equal to the largest amount that would not render its obligations under this Guaranty subject to avoidance under Section 548 of the U.S. Bankruptcy Code or any comparable provisions of any applicable state law.

 

6.           Liability for Other Debt of any Borrower.  If any Guarantor becomes liable for any Debt owing by any Borrower to Lender, by endorsement or otherwise, other than under this Guaranty, such liability shall not be impaired or affected by this Guaranty and the rights of Lender under this Guaranty shall be cumulative of any and all other rights that Lender may ever have against Guarantors.

 

7.           Subordination.  Each Guarantor hereby expressly subordinates all Company Debt to the Payment in Full of the Guaranteed Obligation.  Each Guarantor agrees not to receive or accept any payment from any Borrower with respect to the Company Debt at any time an Event of Default exists and, in the event any Guarantor receives any payment on the Company Debt in violation of the foregoing, such Guarantor shall hold any such payment for the benefit of Lender and promptly turn it over to Lender, in the form received (with any necessary endorsements), to be applied to the Guaranteed Obligation.  If Lender so requests, any such Company Debt shall be enforced and all amounts received by any Guarantor shall be received in trust for the Lender and the proceeds thereof shall be paid over to the Lender on account of the Guaranteed Obligation, but without reducing or affecting in any manner the liability of Guarantors under this Guaranty.

 

8.           Subrogation and Contribution.

 

(a)           Until the Guaranteed Obligation is Paid In Full, each Guarantor agrees that it will not assert, enforce, or otherwise exercise (i) any right of subrogation to any of the rights or liens of Lender or any other beneficiary against any Borrower or any other obligor on the Guaranteed Obligation or any Collateral or other security, or (ii) any right of recourse, reimbursement, subrogation, contribution, indemnification, or similar right against any Borrower or any other obligor or other guarantor on all or any part of the Guaranteed Obligation (whether such rights in clause (i) or clause (ii), or under clause (b) below, arise in equity, under contract, by statute, under common law, or otherwise).

 

(b)           To the extent that any Guarantor makes a payment (a “Guarantor Payment”) of all or any portion of the Guaranteed Obligation, then such Guarantor shall be entitled to contribution and indemnification from, and be reimbursed by, each of the other Guarantors in an amount, for each such Guarantor, equal to a fraction of such Guarantor Payment, the numerator of

 

  

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which is such Guarantor’s Allocable Amount and the denominator of which is the sum of the Allocable Amounts of all Guarantors.

 

(c)           As of any date of determination, the “Allocable Amount” of each Guarantor shall be equal to the maximum amount of liability which could be asserted against such Guarantor under this Guaranty with respect to the applicable Guarantor Payment without (i) rendering such Guarantor “insolvent”, (ii) leaving such Guarantor with unreasonably small capital, or (iii) leaving such Guarantor unable to pay its debts as they become due, in each case, under or within the meaning of any Debtor Relief Law.

 

9.           Enforceability of Guaranty; No Release.

 

(a)           This Guaranty shall not be affected by the genuineness, validity, regularity or enforceability of the Guaranteed Obligation or any instrument or agreement evidencing any part of the Guaranteed Obligation, or by the existence, validity, enforceability, perfection, or extent of any Collateral securing the Guaranteed Obligation, or by any fact or circumstance relating to the Guaranteed Obligation which might otherwise constitute a defense to the obligations of the Guarantors under this Guaranty.

 

(b)           Each Guarantor agrees that the Lender may, at any time and from time to time, and without notice to any Guarantor, make any agreement with the Borrowers or with any other Person or entity liable on any of the Guaranteed Obligation or providing collateral as security for the Guaranteed Obligation, for the extension, renewal, payment, compromise, discharge or release of the Guaranteed Obligation or any Collateral (in whole or in part), or for any modification or amendment of the terms thereof or of any instrument or agreement evidencing the Guaranteed Obligation or the provision of Collateral, all without in any way impairing, releasing, discharging or otherwise affecting the obligations of the Guarantors under this Guaranty.

 

(c)           Each Guarantor hereby agrees its obligations under the terms of this Guaranty shall not be released, discharged, diminished, impaired, reduced or otherwise adversely affected by any of the following: (a) Lender’s taking or accepting of any other security or guaranty for any or all of the Guaranteed Obligation; (b) any release, surrender, exchange, subordination or loss of any security at any time existing in connection with any or all of the Guaranteed Obligation; (c) any full or partial release of the liability of any other obligor on the Obligation; (d) the insolvency, becoming subject to any Debtor Relief Law, or lack of corporate power of any Borrower or any party at any time liable for the payment of any or all of the Guaranteed Obligation; (e) any renewal, extension or rearrangement of the payment of any or all of the Guaranteed Obligation, either with or without notice to or consent of any Guarantor, or any adjustment, indulgence, forbearance, or compromise that may be granted or given by Lender to any Borrower, any Guarantor, or any other obligor on the Obligation; (f) any neglect, delay, omission, failure or refusal of Lender to take or prosecute any action for the collection of all or any part of the Guaranteed Obligation or to foreclose or take or prosecute any action in connection with any instrument or agreement evidencing or securing any or all of the Guaranteed Obligation; (g) any failure of Lender to give any Guarantor notice of any of the foregoing it being understood that Lender shall not be required to give any Guarantor any notice of any kind under any circumstances with respect to or in connection with the Guaranteed Obligation, other than any notice expressly required to be given to Guarantors under this Guaranty; (h) the unenforceability of all or any part of the Guaranteed Obligation against any Borrower by reason of the fact that the Guaranteed Obligation (or the interest on the Guaranteed Obligation) exceeds the amount permitted by Law, the act of creating the Guaranteed Obligation, or any part thereof, is ultra vires, or the officers creating same exceeded their authority or violated their fiduciary

 

  

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duties in connection therewith; (i) any payment of the Obligation to Lender is held to constitute a preference under any Debtor Relief Law or if for any other reason Lender is required to refund such payment or make payment to someone else (and in each such instance this Guaranty shall be reinstated in an amount equal to such payment); or (j) any discharge, release, or other forgiveness of any Borrower’s personal liability for the payment of the Guaranteed Obligation.

 

10.           Exercise of Rights and Waiver.

 

(a)           No failure by Lender to exercise, and no delay in exercising, any right or remedy under this Guaranty shall operate as a waiver thereof.  The exercise by Lender of any right or remedy under this Guaranty under the Loan Documents, or other instrument, or at Law or in equity, shall not preclude the concurrent or subsequent exercise of any other right or remedy.  The remedies provided in this Guaranty are cumulative and not exclusive of any remedies provided by law or in equity.  The unenforceability or invalidity of any provision of this Guaranty shall not affect the enforceability or validity of any other provision herein.

 

(b)           The obligations of each Guarantor under this Guaranty are those of primary obligor, and not merely as surety, and are independent of the Guaranteed Obligation. Each Guarantor waives diligence by Lender and action on delinquency in respect of the Guaranteed Obligation or any part thereof, including any provisions of laws requiring Lender to exhaust any right or remedy or to take any action against Borrowers, any other Guarantor, or any other Person before enforcing this Guaranty against any Guarantor.  Each Guarantor hereby waives all rights by which it might be entitled to require suit on an accrued right of action in respect of any of the Guaranteed Obligation or require suit against any Borrower or others, whether arising pursuant to Section 43.002 of the Texas Civil Practice and Remedies Code (regarding Guarantors’ right to require Lender to sue any Borrower on accrued right of action following Guarantors’ written notice to Lender), Section 17.001 of the Texas Civil Practice and Remedies Code, as amended (allowing suit against Guarantor without suit against Borrowers, but precluding entry of judgment against Guarantors prior to entry of judgment against Borrowers), Rule 31 of the Texas Rules of Civil Procedure, as amended (requiring Lender to join Borrowers in any suit against Guarantors unless judgment has been previously entered against Borrowers), or otherwise.

 

(c)           Each Guarantor waives notice of acceptance of this Guaranty, notice of any loan to which it may apply, and waives presentment, demand for payment, protest, notice of dishonor or nonpayment of any loan, notice of intent to accelerate, notice of acceleration, and notice of any suit or notice of the taking of other action by Lender against any Borrower, any Guarantor, or any other person and any notice to any party liable thereon (including any Guarantor), without reducing or affecting in any manner the liability of the Guarantors under this Guaranty.

 

11.           Information.  Each Guarantor agrees to furnish promptly to the Lender any and all financial or other information regarding such Guarantor or its property as the Lender may reasonably request in writing.

 

12.           Stay of Acceleration.  In the event that acceleration of the time for payment of any of the Guaranteed Obligation is stayed, upon the insolvency, bankruptcy or reorganization of any Borrower or any other Person, or otherwise, all such amounts shall nonetheless be payable by Guarantors immediately upon demand by Lender.

 

13.           Expenses.  Each Guarantor shall pay on demand all out-of-pocket expenses (including reasonable attorneys’ fees and expenses) in any way relating to the enforcement or protection of the Lender’s rights under this Guaranty, including any incurred in the preservation, protection or enforcement

 

  

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of any rights of the Lender in any case commenced by or against any Guarantor under Title 11, United States Code or any similar or successor statute.  The obligations of the Guarantors under the preceding sentence shall survive termination of this Guaranty.

 

14.           Amendments.  No provision of this Guaranty may be waived, amended, supplemented or modified, except by a written instrument executed by Lender and Guarantors.

 

15.           Reliance and Duty to Remain Informed.  Each Guarantor confirms that it has executed and delivered this Guaranty after reviewing the terms and conditions of the Credit Agreement and the other Loan Documents and such other information as it has deemed appropriate in order to make its own credit analysis and decision to execute and deliver this Guaranty.  Each Guarantor confirms that it has made its own independent investigation with respect to each Borrower’s creditworthiness and is not executing and delivering this Guaranty in reliance on any representation or warranty by Lender as to such creditworthiness.  Each Guarantor expressly assumes all responsibilities to remain informed of the financial condition of each Borrower and any circumstances affecting (a) any Borrower’s ability to perform under the Loan Documents to which any Borrower is a party or (b) any collateral securing all or any part of the Guaranteed Obligation.

 

16.           Change in any Guarantor’s Status.  Should any Guarantor become insolvent, or fail to pay its debts generally as they become due, or voluntarily seek, consent to, or acquiesce in the benefit or benefits of any Debtor Relief Law or become a party to (or be made the subject of) any proceeding provided for by any Debtor Relief Law (other than as a creditor or claimant) that could suspend or otherwise adversely affect the rights of Lender granted under this Guaranty, then, in any such event, the Guaranteed Obligation shall be, as between Guarantors and Lender, a fully matured, due, and payable obligation of Guarantors to Lender (without regard to whether an Event of Default exists or whether the Guaranteed Obligation, or any part thereof is then due and owing by any Borrowers to Lender), payable in full by Guarantors to Lender upon demand, which shall be the estimated amount owing in respect of the contingent claim created under this Guaranty.

 

17.           Representations and Warranties.  Each Guarantor acknowledges that certain representations and warranties set out in the Credit Agreement are in respect of it, and each Guarantor reaffirms that each such representation and warranty is true and correct.

 

18.           Covenants.  Each Guarantor acknowledges that certain covenants set forth in the Credit Agreement are in respect of it or shall be imposed upon it, and each Guarantor covenants and agrees to promptly and properly perform, observe, and comply with each such covenant.

 

19.           INDEMNITY.  Each Guarantor shall indemnify, protect, and hold Lender and its parent, subsidiaries, directors, officers, employees, representatives, agents, successors, permitted assigns, and attorneys (collectively, the “indemnified parties”) harmless from and against any and all liabilities, obligations, losses, damages, penalties, actions, judgments, suits, claims, and proceedings and all costs, expenses (including, without limitation, all reasonable attorneys’ fees and legal expenses whether or not suit is brought), and reasonable disbursements of any kind or nature (the “indemnified liabilities”) that may at any time be imposed on, incurred by, or asserted against the indemnified parties, in any way relating to or arising out of (a) the direct or indirect result of the violation by any Borrower of any Environmental Law, (b) any Borrower’s generation, manufacture, production, storage, release, threatened release, discharge, disposal, or presence in connection with its properties of a Hazardous materials (including, without limitation, (i) all damages from any use, generation, manufacture, production, storage, release,

 

  

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threatened release, discharge, disposal, or presence, or (ii) the costs of any environmental investigation, monitoring, repair, cleanup, or detoxification and the preparation and implementation of any closure, remedial, or other plans), or (c) the Loan Documents or any of the transactions contemplated therein.  However, although each indemnified party shall be indemnified under the Loan Documents for its own ordinary negligence, no indemnified party has the right to be indemnified under the Loan Documents for its own fraud, gross negligence, or willful misconduct.  The provisions of and undertakings and indemnification set forth in this Section 19 shall survive the Payment in Full of the Guaranteed Obligation and termination of this Guaranty.

 

20.           Offset Claims.  The Guaranteed Obligation shall not be reduced, discharged or released because or by reason of any existing or future offset, claim or defense (except for the defense of Payment in Full of the Guaranteed Obligation) of any Borrower or any other party against Lender or against payment of the Guaranteed Obligation, whether such offset, claim, or defense arises in connection with the Guaranteed Obligation or otherwise.  Such claims and defenses include, without limitation, failure of consideration, breach of warranty, fraud, statute of frauds, bankruptcy, infancy, statute of limitations, lender liability, accord and satisfaction, and usury.

 

21.           Setoff.  If and to the extent any payment is not made when due under this Guaranty, Lender may setoff and charge from time to time any amounts so due against any or all of any Guarantor’s accounts or deposits with Lender.

 

22.           Binding Agreement.  This Guaranty is for the benefit of Lender and its successors and assigns.  Each Guarantor acknowledges that in the event of an assignment of the Guaranteed Obligation or any part thereof in accordance with the Credit Agreement, the rights and benefits under this Guaranty, to the extent applicable to the Debt so assigned, may be transferred with such Debt.  This Guaranty is binding on each Guarantor and its successors and permitted assigns, provided that no Guarantor may assign its rights or obligations under this Guaranty without the prior written consent of Lender (and any attempted assignment without such consent shall be void).

 

23.           Notices.  All notices required or permitted to be given under this Guaranty, if any, must be in writing and shall or may, as the case may be, be given in the same manner as notice is given under the Credit Agreement as follows:

 

If to Lender:

Bank of America, N.A.

700 Louisiana, 8th Floor

Houston, Texas  77002

Telephone No.: 713-247-6004

Facsimile No.: 804-264-0127

Attention:  Rebecca L. Hetzer

with a copy to:

Porter Hedges LLP

1000 Main Street, 36th Floor

Houston, Texas 77002

Telephone No.: 713-226-6685

Facsimile No.: 713-226-6285

  

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Attention:  Joyce K. Soliman

If to Borrowers:

Vertex Energy, Inc.

Vertex Energy Operating, LLC

1331 Gemini, Suite 250

Houston, Texas  77058

Telephone No.: (281) 486-4182

Facsimile No.: (281) 486-0217

Attention:  Chris Carlson

with a copy to:

Reinhart Boerner Van Deuren s.c.

1000 North Water Street, Suite 1700

Milwaukee, Wisconsin 53202

Telephone No.: (414) 298-8227

Facsimile No.: (414) 298-8097

Attention:  Timothy Reardon

If to Guarantors:

c/o Vertex Energy, Inc.

1331 Gemini, Suite 250

Houston, Texas  77058

Telephone No.: (281) 486-4182

Facsimile No.: (281) 486-0217

Attention:  Chris Carlson

with a copy to:

Reinhart Boerner Van Deuren s.c.

1000 North Water Street, Suite 1700

Milwaukee, Wisconsin 53202

Telephone No.: (414) 298-8227

Facsimile No.: (414) 298-8097

Attention:  Timothy Reardon

Subject to the terms of the Credit Agreement, by giving at least 30 days written notice, any party to this Guaranty shall have the right from time to time and at any time while this Guaranty is in effect to change its addresses or fax numbers and each shall have the right to specify a different address or fax number within the United States of America.  Nothing in this Section 23 shall be construed to require any notice to any Guarantor not otherwise expressly required in this Guaranty.

 

24.           Termination.  Subject to Section 25 regarding reinstatement, this Guaranty shall terminate and be released upon the earlier occurrence of the date the Guaranteed Obligation is Paid In Full.

 

  

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25.           Reinstatement.  Notwithstanding anything in this Guaranty to the contrary, this Guaranty shall continue to be effective or be reinstated, as the case may be, if at any time any payment of any portion of the Guaranteed Obligation is revoked, terminated, rescinded or reduced or must otherwise be restored or returned upon the insolvency, bankruptcy or reorganization of any Borrower or any other Person or otherwise, as if such payment had not been made and whether or not the Lender is in possession of or has released this Guaranty and regardless of any prior revocation, rescission, termination or reduction.

 

26.           Governing Law.  THIS GUARANTY IS TO BE CONSTRUED — AND ITS PERFORMANCE ENFORCED — UNDER TEXAS LAW.

 

27.           Arbitration; Waiver of Jury Trial.  This paragraph, including the subparagraphs below, is referred to as the “Dispute Resolution Provision.”  This Dispute Resolution Provision is a material inducement for the parties entering into this Guaranty.

 

(a)           This Dispute Resolution Provision concerns the resolution of any controversies or claims between the parties, whether arising in contract, tort or by statute, including but not limited to controversies or claims that arise out of or relate to: (i) this Guaranty (including any renewals, extensions or modifications); or (ii) any document related to this Guaranty (collectively a “Claim”).  For the purposes of this Dispute Resolution Provision only, the term “parties” shall include any parent corporation, subsidiary or affiliate of Lender involved in the servicing, management or administration of any obligation described or evidenced by this Guaranty.

 

(b)           At the request of any party to this agreement, any Claim shall be resolved by binding arbitration in accordance with the Federal Arbitration Act (Title 9, U.S. Code) (the “Act”).  The Act will apply even though this agreement provides that it is governed by the law of a specified state.

 

(c)           Arbitration proceedings will be determined in accordance with the Act, the then-current rules and procedures for the arbitration of financial services disputes of the American Arbitration Association or any successor thereof (“AAA”), and the terms of this Dispute Resolution Provision.  In the event of any inconsistency, the terms of this Dispute Resolution Provision shall control.  If AAA is unwilling or unable to (i) serve as the provider of arbitration or (ii) enforce any provision of this arbitration clause, Lender may designate another arbitration organization with similar procedures to serve as the provider of arbitration.

 

(d)           The arbitration shall be administered by AAA and conducted, unless otherwise required by law, in any U.S. state where real or tangible personal property collateral for this credit is located or if there is no such collateral, in the state specified in the governing law section of this agreement.  All Claims shall be determined by one arbitrator; however, if Claims exceed Five Million Dollars ($5,000,000), upon the request of any party, the Claims shall be decided by three arbitrators.  All arbitration hearings shall commence within ninety (90) days of the demand for arbitration and close within ninety (90) days of commencement and the award of the arbitrator(s) shall be issued within thirty (30) days of the close of the hearing.  However, the arbitrator(s), upon a showing of good cause, may extend the commencement of the hearing for up to an additional sixty (60) days.  The arbitrator(s) shall provide a concise written statement of reasons for the award.  The arbitration award may be submitted to any court having jurisdiction to be confirmed and have judgment entered and enforced.

 

(e)           The arbitrator(s) will give effect to statutes of limitation in determining any Claim and shall dismiss the arbitration if the Claim is barred under the applicable statutes of

 

  

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limitation. For purposes of the application of any statutes of limitation, the service on AAA under applicable AAA rules of a notice of Claim is the equivalent of the filing of a lawsuit.  Any dispute concerning this arbitration provision or whether a Claim is arbitrable shall be determined by the arbitrator(s), except as set forth at subparagraph (h) of this Dispute Resolution Provision.  The arbitrator(s) shall have the power to award legal fees pursuant to the terms of this agreement.

 

(f)           This paragraph does not limit the right of any party to: (i) exercise self-help remedies, such as but not limited to, setoff; (ii) initiate judicial or non-judicial foreclosure against any real or personal property collateral; (iii) exercise any judicial or power of sale rights, or (iv) act in a court of law to obtain an interim remedy, such as but not limited to, injunctive relief, writ of possession or appointment of a receiver, or additional or supplementary remedies.

 

(g)           The filing of a court action is not intended to constitute a waiver of the right of any party, including the suing party, thereafter to require submittal of the Claim to arbitration.

 

(h)           Any arbitration or court trial (whether before a judge or jury) of any Claim will take place on an individual basis without resort to any form of class or representative action (the “Class Action Waiver”).  The Class Action Waiver precludes any party from participating in or being represented in any class or representative action regarding a Claim.  Regardless of anything else in this Dispute Resolution Provision, the validity and effect of the Class Action Waiver may be determined only by a court and not by an arbitrator.  The parties to this agreement acknowledge that the Class Action Waiver is material and essential to the arbitration of any disputes between the parties and is nonseverable from the agreement to arbitrate Claims. If the Class Action Waiver is limited, voided or found unenforceable, then the parties’ agreement to arbitrate shall be null and void with respect to such proceeding, subject to the right to appeal the limitation or invalidation of the Class Action Waiver.  THE PARTIES ACKNOWLEDGE AND AGREE THAT UNDER NO CIRCUMSTANCES WILL A CLASS ACTION BE ARBITRATED.

 

(i)           By agreeing to binding arbitration, the parties irrevocably and voluntarily waive any right they may have to a trial by jury in respect of any Claim.  Furthermore, without intending in any way to limit this agreement to arbitrate, to the extent any Claim is not arbitrated, the parties irrevocably and voluntarily waive any right they may have to a trial by jury in respect of such Claim.  This waiver of jury trial shall remain in effect even if the Class Action Waiver is limited, voided or found unenforceable.  WHETHER THE CLAIM IS DECIDED BY ARBITRATION OR BY TRIAL BY A JUDGE, THE PARTIES AGREE AND UNDERSTAND THAT THE EFFECT OF THIS AGREEMENT IS THAT THEY ARE GIVING UP THE RIGHT TO TRIAL BY JURY TO THE EXTENT PERMITTED BY LAW.

 

28.           No Oral Agreements.  The Rights And Obligations Of The Parties Hereto Shall Be Determined Solely From Written Agreements, Documents, And Instruments, And Any Prior Oral Agreements Among The Parties Are Superseded By And Merged Into Such Writings.  This Guaranty (As Amended In Writing From Time To Time) The Credit Agreement, And The Other Written Loan Documents Executed By Borrowers, Lender, or Guarantors (Or By Borrowers Or Guarantors For The Benefit Of Lender) Represent The Final Agreement Among Borrowers, Guarantors, And Lender And May Not Be Contradicted By Evidence Of Prior, Contemporaneous, Or Subsequent Oral Agreements By The Parties.  There Are No Unwritten Oral Agreements Between The Parties.

 

  

Exhibit F - Page 10

  

29.           [Amendment and Restatement.  This Amended and Restated Corporate Guaranty amends and restates in its entirety that certain Corporate Guaranty dated as of August 31, 2012, executed by VAS, CMT, Crossroad Carriers, Vertex-Recovery, H&H Oil, and Vertex II in favor of Lender.]

 

[Signatures are on the following page.]

 

 

  

Exhibit F - Page 11

  

EXECUTED as of the date first written above.

 

	
GUARANTORS:

	  
	
GOLDEN STATE LUBRICANTS WORKS, LLC,

	
a Nevada limited liability company

	  
	  
	
By: _______________________

	
Name: _____________________

	
Title: ______________________

	  
	  
	
VERTEX ACQUISITION SUB, LLC,

	
a Nevada limited liability company

	  
	  
	
By: _______________________

	
Name: _____________________

	
Title: ______________________

	  
	  
	
VERTEX MERGER SUB, LLC,

	
a California limited liability company

	  
	  
	
By: _______________________

	
Name: _____________________

	
Title: ______________________

	  
	  
	
VERTEX REFINING LA, LLC,

	
a Louisiana limited liability company

	  
	  
	
By: _______________________

	
Name: _____________________

	
Title: ______________________

	  
	  
	
VERTEX REFINING NV, LLC,

	
a Nevada limited liability company

	  
	  
	
By: _______________________

	
Name: _____________________

	
Title: ______________________

 

 

Signature Page to [Amended and Restated] Guaranty

  

  

  

	
VERTEX II GP, LLC,

	
a Nevada limited liability company

	  
	  
	
By: _______________________

	
Name: _______________________

	
Title: _______________________

	  
	  
	
CEDAR MARINE TERMINALS, LP

	
CROSSROAD CARRIERS, L.P.

	
H & H OIL, L.P.

	
VERTEX RECOVERY, L.P.,

	
each a Texas limited partnership

	  
	
By:  Vertex II GP, LLC,                                                                          

	         a Nevada limited liability company,
	
         sole general partner of each of the above

	  
	  
	
By: _______________________

	
Name: _____________________                    

	
Title: ______________________                       

Signature Page to [Amended and Restated] Guaranty

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