Document:

ex10-1.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 10.1

SECURED PROMISSORY NOTE

 

	
$13,858,066.67

	
Houston, Texas

May 2, 2014

 

FOR VALUE RECEIVED, the undersigned, OMEGA REFINING, LLC, a Delaware limited liability company ("Omega"), and BANGO REFINING NV, LLC, a Delaware limited liability company ("Bango Refining" and together with Omega, individually, "Borrower" and collectively, "Borrowers"), jointly and severally, hereby promise to pay to the order of VERTEX REFINING NV, LLC, a Nevada limited liability company ("Lender"), the principal sum of THIRTEEN MILLION EIGHT HUNDRED FIFTY-EIGHT THOUSAND SIXTY-SIX and 67/00 Dollars ($13,858,066.67) or such lesser amounts as are shown to be outstanding on the records of Lender, plus interest thereon as set forth below, on or before the dates set forth in     section 3.1, to the account of Lender, at 1331 Gemini Street #250, Houston, Texas 77058, or at such other place as the holder hereof may appoint, in accordance with the terms set forth below. Capitalized terms used herein but not otherwise defined herein shall have the meanings given in the Purchase Agreement (as defined below).

 

1.           Definitions.  As used in this Note, the following terms shall have the following meanings:

 

"BBB Loan Agreement" means the Second Amended and Restated Term Loan Credit Agreement dated as of the date hereof by and among Borrower, Holdings and BBB Funding.

 

"BBB Funding" means BBB Funding, LLC, a Delaware limited liability company.

 

"Bankruptcy Default" means any Event of Default described in sections 6.1(k), 6.1(l) or 6.1(m).

 

"Base Rate" means the per annum interest rate equal to nine and one half of one percent (9.50%).

 

"Business Day" means any day other than a Saturday, Sunday or other day on which banks in Houston, Texas are required to close.

 

"CDG Report" means that certain cash flow projection dated May 1, 2014 a copy of which has been provided to Lender.

 

"Collateral Assignment" means the Assignment of Proceeds from Insurance Proceeds as Collateral Security dated May 2, 2014 from Borrowers in favor of Lender.

 

"Control Agreement" means the Deposit Account Control Agreement dated as of May 2, 2014 by and among Bango Refining, Lender and Wells Fargo Bank, National Association, as amended restated, supplemented or otherwise modified from time to time.

 

"Deed of Trust" means the Leasehold Deed of Trust, Security Agreement, Assignment of Leases and Rents and Fixture Filing dated as of May 2, 2014 from Bango Refining in favor of Western Nevada Title Company for the benefit of Lender, as amended restated, supplemented or otherwise modified from time to time.

 

  

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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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"Default Rate" means the per annum interest rate equal to eighteen percent (18.00%).

 

"Dollars" or "$" means the lawful currency of the United States.

 

"Event of Default" means the occurrence of any of the events described in Section 6.1 of this Note, and the expiration of all applicable notice and cure rights, as set forth therin, without any duplication of such cure period.

 

"Guaranty" means the Guaranty Agreement dated as of the date hereof from Omega Holdings Company LLC, a Delaware limited liability company ("Holdings"), to and for the benefit of Lender, as amended restated, supplemented or otherwise modified from time to time.

 

"Pledge Agreement" means the Pledge Agreement dated as of the date hereof from the Borrowers to and for the benefit of Lender, as amended restated, supplemented or otherwise modified from time to time.

 

"Purchase Agreement" means that certain Asset Purchase Agreement (as amended) dated as of March 17, 2014 by and among Vertex Energy, Inc., a Nevada corporation and an indirect owner of 100% of the issued and outstanding membership interest of Lender ("Vertex"), Vertex Refining LA, LLC, a Louisiana limited liability company and an indirectly owned subsidiary of Vertex ("Louisiana Buyer"), Lender (Lender and Louisiana Buyer, individually a "Buyer" and collectively, the "Buyers"), Omega and Bango Refining, as sellers, and Holdings.

 

"Subordinated Indebtedness" means indebtedness of any Borrower or Holdings, the payment and performance of which is subordinated to the payment and performance of the indebtedness, obligations, liabilities, fees, costs and expenses under this Note or any other indebtedness, obligations and liabilities of any Borrower or Holdings to Lender, in a manner acceptable to Lender in its sole and absolute discretion.

 

"Section 9.20 Loan" is defined in Section 2.1(b).

 

2.           Credit Facility; Borrowing Procedure; Interest Rate.

 

2.1           Purchase Price Loan; Section 9.20 Loan.

 

(a)           Purchase Price Loan.  Borrowers acknowledge that the Purchase Price is allocated 66.67% to the Purchased Assets and Business of Omega and 33.33% to the Purchased Assets and Business of Bango Refining.  Accordingly, the Borrowers agree that the amount by which the Closing Cash Payment made to Borrowers plus the portion of the Closing Stock Consideration issued at the Initial Closing (as defined in the Purchase Agreement) exceeds Omega's portion of the Purchase Price (excluding for this purpose any of the Contingent Payments) shall constitute a loan to Borrowers (the "Purchase Price Loan").  Borrowers acknowledge and agree that the Purchase Price Loan amount is $7,558,066.67.  The Purchase Price Loan shall be disbursed in accordance with the Funds Flow Statement and any portion of the Closing Cash Payment representing Purchase Price Loan proceeds payable to Borrowers shall be deposited into Bango Refining account number #***, which is subject to the springing control of Lender pursuant to the Control Agreement.  Once repaid or satisfied at the Second Closing, the Purchase Price Loan may not be reborrowed.

 

(b)           Section 9.20 Loan.  Borrowers and Lender agree that capital expenditure loans may be made by Lender to Borrowers as described in Section 9.20 of the Purchase

 

  

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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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Agreement (the "Section 9.20 Loan") subject to the mutual agreement of the Borrowers and Lender as provided in Section 9.20 of the Purchase Agreement and in an aggregate amount not to exceed $1,000,000; provided that (i) Lender shall not be required to make the Section 9.20 Loan to any Borrower prior to June 16, 2014, (ii) Borrowers may only use the proceeds of the Section 9.20 Loan for capital expenditures as set forth in Section 9.20 of the Purchase Agreement, (iii) no Event of Default shall have occurred or result from the disbursement of the Section 9.20 Loan and (iv) each of the representations and warranties set forth herein that survive the Initial Closing and/or apply to Bango subsequent to the Initial Closing shall be true and correct in all respects except for changes attributable to the transactions contemplated by the Initial Closing or hereunder.  Once repaid or satisfied at the Second Closing, the Section 9.20 Loan may not be reborrowed.  As provided in Section 9.20 of the Purchase Agreement, any Section 9.20 Loan shall be subject to terms to be mutually agreed (including, without limitation, as to the amount of any such loans) to assist in the purchase of a fuel stripper and fuel scrubber and nothing in this Section 2.1(b) is intended to constitute a firm commitment to make such loans or otherwise increase the Lender's obligation under Section 9.20 of the Purchase Agreement.

 

2.2           UMO Credit.  (a) Borrowers acknowledge that, pursuant to section 5.02(a)(iv) of the Purchase Agreement, Omega has elected to have $750,000.00 of the difference between the estimate of the used motor oil Inventory as of the Effective Time of the Initial Closing and the applicable Inventory Target deferred and constitute the Deferred Inventory Payment.  (b) Bango Refining may elect to have up to $1,400,000 of the difference between the estimate of the used motor oil Inventory as of the Effective Time of the Second Closing and the applicable Inventory Target deferred as set forth herein (such amount together with the Deferred Inventory Payment, "UMO Credit").

 

2.3           The Draw Loans.  Subject to the terms and conditions hereof, Lender agrees to make a loan in a single advance of $3,150,000.00 (the "Draw Loan") to Borrowers; provided that (a) Lender shall not be required to make any Draw Loans to any Borrower prior to June 16, 2014, (b) the maximum amount of the Draw Loan made by Lender to Borrowers shall not exceed $3,150,000.00, (c) Borrowers may only use the proceeds of Draw Loans to satisfy accounts payable and other obligations of Borrowers set forth in the CDG Report, and otherwise as approved by Lender in its reasonable discretion, (d) Borrowers shall have received, in the aggregate, $1,500,000.00 in loans from BBB Funding pursuant to the BBB Loan Agreement, which loan proceeds shall have been funded after the date of this Note (the "BBB Indebtedness"), (e) no Event of Default shall have occurred or result from the disbursement of such Draw Loan and (f) each of the representations and warranties set forth herein that survive the Initial Closing and/or apply to Bango subsequent to the Initial Closing shall be true and correct in all respects except for changes attributable to the transactions contemplated by the Initial Closing or hereunder.   Once repaid, the Draw Loan may not be reborrowed.

 

2.4           Borrowing Procedure.  Borrowers shall give written notice (or telephonic notice followed immediately by written notice) to Lender of the proposed borrowing date of the Draw Loan not later than 10:00 a.m. Houston, Texas time, the day before the proposed borrowing date.  The notice shall be effective upon receipt by Lender, shall be irrevocable, shall specify the date and borrowing of the Draw Loan.  Not later than 2:00 p.m. Houston, Texas time, on the date of a proposed borrowing, Lender shall fund the requested Draw Loan on the borrowing date, by (a) depositing such amount into Bango Refining account number #*** or (b) directly paying (by check or by wire transfer) the creditor of Borrowers designated for such proceeds.  The borrowing of the Draw Loan shall be on a Business Day.

 

  

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2.5           Interest Rate; Default Rate.

 

(a)           Interest Rate.  The Purchase Price Loan and the Section 9.20 Loan shall bear interest until such loan is paid in full.  The Purchase Price Loan and the Section 9.20 Loan shall bear interest for the period commencing on the date hereof and ending on October 30, 2014 at the short-term federal rate as published by the Internal Revenue Service from time to time, which as of the date hereof was 0.33% per annum, changing when the short-term applicable federal rate changes.  On an after October 30, 2014, the Purchase Price Loan and the Section 9.20 Loan shall bear interest at a rate equal to the Base Rate, which interest shall be payable by Borrowers to Lender on the last Business Day of each month commencing October 31, 2014, with a full and final payment of all accrued and unpaid interest on the Purchase Price Loan and the Section 9.20 Loan due on March 31, 2015.  The then outstanding amount of UMO Credit shall bear interest from the date hereof until the UMO Credit is paid in full.  The then outstanding amount of UMO Credit shall bear interest at the Base Rate which interest shall be payable by Borrowers to Lender on the last Business Day of each month commencing on May 31, 2014, with a full and final payment of all accrued and unpaid interest on the UMO Credit due on March 31, 2015.  The Draw Loan shall bear interest from the date the Draw Loan is made until the Draw Loan is repaid in full.  The Draw Loan shall bear interest at the rate equal to the Base Rate, which interest shall be payable by Borrowers to Lender on the last Business Day of each month commencing on May 31, 2014, with a full and final payment of all accrued and unpaid interest on the Draw Loan due on March 31, 2015.  For the avoidance of doubt, in the event any of the Purchase Price Loan, the UMO Credit or any Draw Loan is not paid on its respective maturity date, such loan shall continue to accrue interest until paid in full.

 

(b)           Default Rate.   Notwithstanding the foregoing, upon the occurrence and during the continuance of an Event of Default (other than a Bankruptcy Default), the unpaid principal balance of this Note and any due and unpaid interest shall, upon written notice from Lender to Borrowers, bear interest at the annual rate equal to the Default Rate, payable upon demand.  On and after the date of the earlier to occur of (i) March 31, 2015 or (ii) the occurrence of a Bankruptcy Default, the unpaid principal balance of this Note and all accrued interest thereon shall automatically bear interest at the Default Rate, payable upon demand.

 

2.6           Calculation of Interest.  Interest shall be calculated on the basis of a 360 day year, and shall be payable for the actual number of days elapsed.

 

2.7           Maximum Rate of Interest.  Notwithstanding any term of this Note, nothing herein or therein contained shall be deemed to require Borrowers to pay or be liable for the payment of interest upon the unpaid principal balance of this Note in excess of the maximum legal rate of interest (if there be any maximum) allowable under the laws of the State of Delaware.  If for any reason interest in excess of the amount as limited in the foregoing sentence shall have been paid hereunder, whether by reason of acceleration of this Note, payment of any penalty or premium, or otherwise, then and in that event, any such excess interest shall constitute and be treated as a payment of principal hereunder and shall operate to reduce the principal balance of this Note by the amount of such excess, or if in excess of the then principal balance of this Note, such excess shall be refunded.

 

3.           Payments.

 

3.1           Principal.  The principal amount of the Purchase Price Loan and the Section 9.20 Loan shall be due and payable in full on the earlier of (i) March 31, 2015 and (ii) the date of the consummation of the Second Closing; provided that both the Purchase Price Loan and the Section

 

  

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9.20 Loan, including accrued and unpaid interest thereon, shall be deemed to be paid in full upon consummation of the Second Closing.  The unpaid principal amount of the UMO Credit shall be paid in full on March 31, 2015.  The unpaid principal amount of the Draw Loan shall be paid in full on March 31, 2015.

 

3.2           Interest.  In addition to the principal payment set forth above, Borrowers jointly and severally promise to pay interest on the unpaid principal balance of this Note at the rates and on the dates set forth in section 2.5.  All accrued and unpaid interest shall be due and payable in full on March 31, 2015.

 

3.3           Prepayments.  This Note may be prepaid in whole or in part at any time without prepayment fees or premiums.  All prepayments shall be applied first, to all fees, expenses and other amounts due from Borrower to Lender pursuant to the terms of this Note, other than accrued and unpaid interest on the unpaid principal balance of this Note, second, to accrued and unpaid interest on the unpaid principal balance of this Note and third, to the unpaid principal balance of this Note.

 

3.4           Application of Payments.  If an Event of Default has occurred and is continuing, all amounts received by Lender (whether via payment from Borrower, constituting proceeds of collateral or otherwise) shall be applied by Lender to the obligations, liabilities and indebtedness of Borrower to Lender in any manner determined by Lender in its sole discretion.

 

4.           Representations and Warranties.  Each Borrower represents and warrants to Lender as follows:

 

4.1           Organization; Power.  Each Borrower and Holdings is duly organized and validly existing under the laws of its jurisdiction of organization.  Each Borrower and Holdings is duly qualified to do business in every jurisdiction in which the nature of its business or the ownership of its properties requires such qualification.  Each Borrower and Holdings has the power to own its properties and carry on such its business as currently being conducted.

 

4.2           Authorization and Binding Effect.  The execution and delivery by each Borrower and Holdings, as applicable, of this Note and the other agreements, documents and instruments related hereto to which such Borrower or Holdings is a party, and the performance by such Borrower and Holdings of their respective obligations thereunder:  (a) are within its power, (b) have been duly authorized by proper action on the part of the governing body of such Borrower and Holdings, (c) are not in violation of any law, rule or regulation, the organizational or charter documents of such Borrower or Holdings, or the terms of any agreement, restriction or undertaking to which such Borrower or Holdings is a party or by which such Borrower or Holdings is bound and (d) do not require the approval or consent of the holders of the equity interests of such Borrower or Holdings, any governmental authority or any other person or entity, other than those obtained and in full force and effect.  This Note and the agreements, documents and instruments related hereto to which any Borrower and Holdings is a party, when executed and delivered, will constitute the valid and binding obligations of such Borrower and Holdings enforceable in accordance with their terms, except as limited by bankruptcy, insolvency or similar laws of general application affecting the enforcement of creditors' rights and except to the extent that general principles of equity might affect the specific enforcement of this Note or such agreements, documents or instruments.

 

  

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4.3           Purchase Agreement.  On the date hereof and on the date any loan is made hereunder, each Borrower and Holdings remakes all of the representations and warranties applicable to it under the Purchase Agreement as if such representations and warranties were set forth herein in their entirety together with those provisions in the Purchase Agreement, and the schedules and exhibits thereto, referenced therein.

 

4.4           Margin Stock. No Borrower nor Holdings is engaged principally, or as one of such Borrower's or Holdings' important activities, in the business of extending credit for the purpose of purchasing or carrying margin stock.

 

4.5           Regulated Entities. No Borrower nor Holdings is an "investment company" or a company controlled by an "investment company" within the meaning of the Investment Company Act of 1940, as amended. No Borrower nor Holdings is subject to any law, rule or regulation limiting its ability to incur indebtedness.

 

4.6           Solvency.  (a)  The then fair saleable value of the property of each Borrower and Holdings is (i) greater than such Borrower's or Holdings' total liabilities and (ii) not less than the amount that will be required to pay the probable liabilities on such Borrower's and Holdings' then existing debts as they become absolute and matured considering all financing alternatives and potential asset sales reasonably available to such Borrower.  (b) The capital of each Borrower and Holdings is not unreasonably small in relation to its business or any contemplated or undertaken transaction.  (c)  No Borrower nor Holdings intends 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.  (d)  Each Borrower and Holdings is "solvent" within the meaning given that term and similar terms under applicable laws relating to fraudulent transfers and conveyances.

 

4.7           Schedule of Payables; Accuracy of Information.  All outstanding payables and other Liabilities of each Borrower and Holdings as of the date hereof are set forth in the CDG Report attached hereto as Schedule 4.5(a).  Schedule 4.5(b) is a true, correct and complete copy of the cash flow analysis (the "Cash Flow Analysis") of the Borrowers and Holdings for the period from April 30, 2014 through August 29, 2014, prepared by CDG Group, LLC ("CDG").  The Cash Flow Analysis was prepared in good faith and utilized reasonable assumptions at the time made and due care in the preparation thereof.  The CDG Report and the Cash Flow Analysis furnished by the any Borrower or Holdings to Lender is true, correct and complete in all material respects as of the date furnished and does not contain any untrue statement of a material fact or omit to state a material fact necessary to make such information not misleading.

 

5.           Covenants.  Until the principal amount of this Note, all accrued and unpaid interest thereon and all other obligations, liabilities, fees, costs and expenses of any Borrower to Lender is paid in full, each Borrower shall:

 

5.1           CDG.  Continue, or cause Holdings to continue, to retain, at their own expense, CDG in the same role and with the same duties and responsibilities that CDG has on the date hereof for a period ending with the second full calendar month following the Second Closing.  CDG shall provide to Lender by the end of the third Business Day of each week, a 13-week cash flow forecast for Borrowers (broken down on a week-by-week basis and otherwise in form and content acceptable to Lender in its sole discretion) and Borrowers shall, or cause Holdings to, make available to Lender, CDG for a telephone conference with Lender, at times mutually agreeable to CDG and Lender, but in any event no less frequently than weekly, to discuss the condition and

 

  

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performance (financial or otherwise) of Borrowers and Holdings.  Continue, and cause Holdings to continue, to pay all payables and other liabilities as set forth in the Cash Flow Analysis, as updated by the most recent cash flow forecast approved by Lender in writing, and otherwise on a consistent basis in accordance with past practices.

 

5.2           Insurance Consultant.  Continue, or cause Holdings to continue, to retain, at their own expense, Auslander & Associates (the "Insurance Consultant") as Borrowers' insurance consultants and the Insurance Consultant shall continue to assist Borrowers in maximizing and expediting the insurance recoveries related to the facility in Fallon, Nevada.

 

5.3           Compliance with Loan Documents.  Timely comply, and cause Holdings to timely comply, with all of its obligations under this Note, the Pledge Agreement, the Control Agreement, the Collateral Assignment, the Guaranty and the Deed of Trust, as applicable.

 

5.4           Notices.  Promptly, and in any event within 3 Business Days after any Borrower or Holdings becomes aware of the applicable event, notify Lender in writing of:

 

(a)           any default or Event of Default;

 

(b)           any notice given, or any action taken with respect to a claimed default, by any holder of any other indebtedness issued or assumed by any Borrower or Holdings, or the lessor under any lease as to which any Borrower or Holdings is the lessee or under any agreement under which any such indebtedness was issued or secured;

 

(c)           the commencement or nonfrivolous threat of, or any material development in, any action, suit, arbitration or other proceeding affecting any Borrower or Holdings which, if adversely determined, could reasonably be expected to have a Material Adverse Effect;

 

(d)           any payment being made by any insurance carrier of any Borrower or Holdings, or any delay or change in the contemplated schedule of any insurance payments;

 

(e)           any change or delay from the Cash Flow Analysis (or most recent cash flow forecast delivered pursuant to section 5.1 and accepted by Lender) in the payment of payables and other obligations as set forth therein and any change in the liabilities of the Borrowers from such cash flow forecast including, without limitation, any liabilities not described on such cash flow forecast and any increase in the liabilities described on such cash flow forecast;

 

(f)           the occurrence of any event which has resulted in or could reasonably be expected to result in a Material Adverse Effect; and

 

(g)           any condition or event which would make any warranty contained in Section 4 inaccurate in any material respect.

 

Each notice under this section 5.4 shall be accompanied by a written statement by an officer of Borrowers setting forth details of the occurrence referred to therein, stating what action the any affected Borrower proposes to take with respect thereto and at what time and accompanied by all documents and correspondences from and to third parties relating to the occurrence referred to therein.

 

  

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5.5           BBB Covenants.  Each provision set forth in Articles III, V and VI of the BBB Loan Agreement is hereby incorporated by reference herein together with the definitions included in each such provision with the same effect as if fully set forth herein, in each case, as in effect on the date hereof (without for the avoidance of doubt giving affect to any subsequent amendment or waiver of or consent to departure from such provisions) mutatis mutandis with all references to "Lender" under the BBB Loan Agreement being deemed to refer to Lender and all references to "Holdings" being deemed to refer to Holdings.  Notwithstanding Section 6.08(b)(i) of the BBB Loan Agreement, no prepayment of the indebtedness outstanding under the BBB Loan Agreement shall be permitted prior to the final payment of all amounts outstanding under this Note, except as contemplated by the subordination agreement related thereto.

 

5.6           Reports.  Promptly, and in any event within 3 Business Days of receipt by any Borrower or Holdings of the same, furnish to Lender:

 

(a)           a copy of any and all notices and communications to and from any insurance carrier of any Borrower or Holdings;

 

(b)           a copy of any report furnished to any Borrower or Holdings by the Insurance Consultant, and if requested by Lender a copy of all insurance policies carried by any Borrower or Holdings; and

 

(c)           any amendment to any architectural, construction contract, plans and specifications or other agreements, documents and instrument related to the construction and of Bango Refining's facility in Fallon, Nevada (collectively, the "Construction Contracts").

 

5.7           Restricted Payments.  Not make, or permit Holdings to pay any salary or compensation to any officer or director of such Borrower that also owns equity interests of any Borrower; provided that Borrowers may pay a monthly salary to Richard A. Silverberg in an amount not to exceed $6,250 per month.

 

6.           Events of Default, Acceleration and Remedies.

 

6.1           Events of Default.  The occurrence of any of the following shall constitute an Event of Default under this Note:

 

(a)           Borrowers fail to pay all or any portion of the principal under this Note when the same becomes due and payable, whether at a stated payment date, prepayment date or by acceleration; or

 

(b)           Borrowers fail to pay any interest or any other amount due hereunder, or Borrowers or Holdings fail to pay any other amount due from any Borrower or Holdings to Lender or its affiliates when the same becomes due and payable, whether at a stated payment date, prepayment date or by acceleration, and such failure continues for a period of 15 days; or

 

(c)           any Borrower fails to comply with any term, covenant or agreement contained in this Note or in any agreement, document or instrument related hereto (including, without limitation, the Pledge Agreement, the Collateral Assignment, the Deed of Trust and the Control Agreement), other than any such failure described in (a) or (b) above, and such failure continues for a period of 30 days; or

 

  

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(d)           Holdings terminates the Guaranty or Holdings fails to comply with any term, covenant or agreement contained in the Guaranty and such failure continues for a period of 15 days; or

 

(e)           any breach, termination, default or event of default under any Construction Contracts that remains uncured for a period of 15 days; or

 

(f)           any Borrower or Holdings (i) fails to pay when due any other indebtedness (including, without limitation, any capital lease obligations, Subordinated Indebtedness or the BBB Indebtedness) or contingent obligation issued or assumed by such Borrower or Holdings or (ii) fails to comply with the terms of any agreement executed in connection with such indebtedness or contingent obligation and such default continues beyond any applicable cure period if the effect of such failure is (y) to cause, or permit the holder or holders of such indebtedness or the beneficiary or beneficiaries of such indebtedness (or a trustee or agent on behalf of such holder or holders or beneficiary or beneficiaries) to cause, such indebtedness to be declared to be due and payable prior to its stated maturity or (z) to cause such contingent obligation to become payable or cash collateral in respect thereof to be demanded; or

 

(g)           a default or event of default shall exist under the BBB Loan Agreement or any other agreement, document or instrument evidencing the BBB Indebtedness; or

 

(h)           a final judgment, decree or arbitration award is entered against any Borrower or Holdings which could reasonably be expected to have a Material Adverse Effect; or

 

(i)           any collateral document, including, without limitation, the Pledge Agreement, Control Agreement, Collateral Assignment and Deed of Trust, shall for any reason fail to create a valid and perfected first priority security interest, except for a liens and security interests securing the BBB Indebtedness; provided that such lien and security interest does not exceed $1,500,000, in the aggregate, in any collateral purported to be covered thereby or any such collateral document shall fail to remain in full force or effect or any action shall be taken to discontinue or to assert the invalidity or unenforceability of any such collateral document, or any Borrower or Holdings shall fail to comply with any of the terms or provisions of any such collateral document to which it is a party; or

 

(j)           there shall occur an event that could reasonably be expected to have material adverse effect on (i) the collateral securing the obligations evidenced by this Note, or the validity or priority of Lender's security interest and lien on such collateral or (ii) the rights of or benefits available to Lender under this Note or any agreement, document or instrument related hereto; and in each case such material adverse effect continues for a period of 30 days (each a "Material Adverse Effect"); or

 

(k)           any Borrower or Holdings becomes insolvent, dissolves, liquidates or fails generally to pay its debts as they become due; or

 

(l)           the taking of action by any Borrower or Holdings to become the subject of proceedings under the United States Bankruptcy Code; or the execution by any Borrower or Holdings of a petition to become a debtor under the United States Bankruptcy Code; or the entry of an order for relief under the United States Bankruptcy Code against any Borrower or Holdings; or any Borrower or Holdings making an assignment for the benefit of creditors; or any Borrower or

 

  

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Holdings consenting to the appointment of a custodian, receiver, trustee or other officer with similar powers for it, or for any substantial part of its property; or adjudicating of any Borrower or Holdings as insolvent; or

 

(m)           if any governmental authority of competent jurisdiction shall enter an order appointing, without consent of any Borrower or Holdings, as applicable, a custodian, receiver, trustee or other officer with similar powers with respect to such Borrower or Holdings, or with respect to any substantial part of their respective property, or if an order for relief relating to such Borrower or Holdings shall be entered in any case or proceeding for liquidation or reorganization or otherwise to take advantage of any bankruptcy or insolvency law of any jurisdiction, or ordering the dissolution, winding-up or liquidation of such Borrower or Holdings, or if any petition for any such relief shall be filed against such Borrower or Holdings and such petition shall not be dismissed or stayed within 60 days.

 

6.2           Acceleration.  Upon the occurrence of:

 

(a)           any Bankruptcy Default, (i) the commitment of Lender to make Draw Loans pursuant to this Note shall automatically terminate and (ii) the unpaid principal balance of this Note and all accrued and unpaid interest thereon automatically shall mature and become due and payable, and

 

(b)           any other Event of Default, and expiration of any applicable notice and/or cure rights (without duplication of any cure periods set forth in any such Event of Default), Lender, at any time, at its option, and without notice or demand, may take any one or all of the following actions:

 

(i)           terminate its commitment to make Draw Loans to Borrower pursuant to this Note; or

 

(ii)           declare the unpaid principal balance of this Note and all accrued and unpaid interest thereon, to be due and payable, whereupon such amounts immediately shall mature and become due and payable,

 

all without presentment, protest or notice, all of which hereby are waived.

 

6.3           Remedies.  Upon the occurrence of any Event of Default, Lender, at its option, may enforce or cause to be enforced any of the rights or remedies accorded to Lender in this Note, the Deed of Trust, the Pledge Agreement, the Control Agreement, the Collateral Assignment or any other agreement, document or instrument between any Borrower, any Lender, or in equity or law, by virtue of statute or otherwise.

 

7.           Security.

 

7.1           Security Interest.  In order to secure the indebtedness, obligations, liabilities, fees, costs and expenses under this Note, each Borrower hereby grants to Lender a security interest in, and lien on, all equipment, fixtures, inventory, documents, general intangibles (including any membership interests, trademarks, patents, copyrights and other intellectual property), accounts, deposit accounts (unless a security interest would render a nontaxable account taxable), contract rights, chattel paper (including tangible chattel paper and electronic chattel paper), financial assets,

 

  

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good (together with all embedded software, accessions, additions, attachments, improvements, substitutions and replacements thereto and therefor), instruments, letter of credit rights, investment property (including commodity accounts, commodity contracts, securities (whether certificated securities or uncertificated securities), security entitlements, security accounts, money now owned or hereafter acquired by any Borrower, insurance policies and the right to any payment thereunder, and all proceeds of insurance policies, together with all books, records, writings, data bases, information and other property relating to, used or useful in connection with, or evidencing, embodying, incorporating or referring to any of the foregoing, all claims and insurance proceeds now existing and all claims and insurance proceeds arising out of the loss, nonconformity or any interference with the use of, or any defect or infringement of rights in, or damage to, any of the foregoing, and all proceeds, products, offspring, rents, issues, profits and returns of and from, and all distributions on and rights arising out of, any of the foregoing.

 

7.2           Representations.  Each Borrower's jurisdiction of organization is the State of Delaware.  Each Borrower's place of business or, if more than one, its chief executive office, and the place where Borrower keeps its records concerning accounts is 211 Violet Street, Unit 100, Golden, Colorado  80401.

 

7.3           Authorization to File Financing Statement.  Each Borrower hereby authorizes Lender to file one or more financing or continuation statements, mortgages or other security agreements, and amendments thereto, relative to all or any part of the collateral described above without the signature of any Borrower.

 

7.4           Organizational Changes.  No Borrower shall change its name, organizational type, jurisdiction of organization, chief executive officer or principal place of business without providing Lender at least 30 days prior written notice.

 

8.           Miscellaneous.

 

8.1           Expenses.  Borrowers jointly and severally agree that Borrowers shall be responsible for, and hereby agree to pay and indemnify Lender for, all out-of-pocket expenses incurred by Lender in connection with the enforcement of this Note, including the actual out-of-pocket fees and expenses of Lender's legal counsel.  The obligations of Borrower under this section 8.1 will survive payment of the Note.

 

8.2           Waivers.  Each Borrower hereby waives presentment for payment, protest and demand and notice of protest, demand, dishonor, nonpayment, intent to accelerate and acceleration of this Note, and expressly agrees that this Note, or any payment hereunder, may be extended from time to time without in any way affecting the liability of any Borrower.

 

8.3           Modifications.  This Note may only be amended by an instrument in writing signed by the party against whom enforcement of the change or amendment is sought.

 

8.4           Successors and Assigns.  This Note shall be binding upon each Borrower and upon such Borrower's successors and assigns, and shall inure to the benefit Lender and its successors and assigns.  This Note may not be assigned by any Borrower nor may any Borrower delegate its duties under this Note without Lender's prior written consent and any such purported assignment or delegation of duties shall be null and void.  Lender may freely assign this Note without Borrowers' consent.

 

  

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8.5           Severability.  In the event that any provision of this Note is deemed to be invalid by reason of the operation of any law or by reason of the interpretation placed thereon by any governmental authority, the validity, legality and enforceability of the remaining terms and provisions of this Note shall not in any way be affected or impaired thereby, all of which shall remain in full force and effect, and the affected term or provision shall be modified to the minimum extent permitted by law so as to achieve most fully the intention of this Note.

 

8.6           Time of the Essence.  Time for the performance of the obligations under this Note is of the essence.

 

8.7           Security.  The obligations, liabilities and indebtedness of Borrowers under this Note are secured by the collateral described in section 7, the Pledge Agreement, the Control Agreement, the Collateral Assignment and the Deed of Trust.  The obligations, liabilities and indebtedness of Borrowers under this Note are guarantied by Holdings pursuant to the Guaranty.

 

8.8           Payments. Principal and interest due and payable under this Note shall be paid by to Lender at 1331 Gemini Street #250, Houston, Texas 77058, or at such other address as may be specified in a written notice to Borrowers by Lender (other any other payment office designated to Borrowers by Lender in writing), in Dollars in funds immediately available.  If any payment on this Note is due on a Saturday, Sunday or a bank or legal holiday, such payment shall be made on the next succeeding business day.

 

8.9           Exercise of Remedies.  No delay or omission on the part of Lender in the exercise of any right or remedy under this Note shall operate as a waiver thereof, and no partial exercise of any right or remedy, acceptance of a past due installment or other indulgences granted from time to time shall be construed as a novation of this Note or precludes other or further exercise thereof or the exercise of any other rights or remedy.

 

8.10           No Dilution or Impairment.  No Borrower shall through any reorganization, transfer of assets, merger, dissolution, issue or sale of securities or any other voluntary action, avoid or seek to avoid the observance or performance of any of the terms to be observed or performed hereunder by Borrower but will at all times in good faith assist in the carrying out of all the provisions of this Note and in the taking of all such action as may be necessary or appropriate in order to protect the conversion and other rights of the holders of the note against impairment.

 

8.11           Notices.  Except as otherwise provided in section 2.4, all notices provided for herein shall be in writing and shall comply with Section 12.04 of the Purchase Agreement and be sent in accordance with the provisions thereof.

 

8.12           Setoff.  As security for payment of indebtedness, obligations, liabilities, fees, costs and expenses under this Note, each Borrower grants to Lender a security interest in and lien on the Closing Stock Consideration delivered to Sellers or the Equity Owner at the Second Closing, including the shares of Vertex Common Stock being deposited into the Escrow Account at the Second Closing (the "Pledged Shares").  The grant of security interest in the Pledged Shares pursuant to this section 8.12 is in addition to the pledge and grant of security interest in the Pledged Shares pursuant to the Pledge Agreement.  Each Borrower agrees that Lender may, at any time after the occurrence of an Event of Default, without prior notice, set off against the Pledged Shares or any portion of the Contingent Payments due Sellers under the terms of the Purchase Agreement, irrespective of whether Lender shall have made demand under this Agreement.  Any shares of Vertex

 

  

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Common Stock that are surrendered to or offset by Vertex or Buyers in accordance with this section 8.12 shall be valued for all purposes at the Share Reference Price.  Nothwithstanding anything contained in this section 8.12, Lender agrees that prior to exercising its right of setoff hereunder, Borrowers shall have 45 days from the date of the occurrence of an Event of Default to sell the Pledged Shares; provided that all proceeds received by Borrowers from the sale of the Pledged Shares shall be used by Borrowers to satisfy its obligations hereunder.

 

8.13           Governing Law.  This Agreement is being delivered in and shall be deemed to be a contract governed by the laws of the State of Delaware and shall be interpreted and the rights and obligations of the parties hereunder enforced in accordance with the internal laws of that state without regard to the principles of conflicts of laws.

 

8.14           Incorporation by Reference.  The provisions of sections 12.06 and 12.07 of the Purchase Agreement are incorporated herein by this reference as if set forth herein in their entirety.

 

8.15           Limitation of Liability.  EACH BORROWER HEREBY WAIVES ANY RIGHT ANY OF THEM MAY HAVE TO CLAIM OR RECOVER FROM THE OTHER PARTY ANY SPECIAL, EXEMPLARY, PUNITIVE OR CONSEQUENTIAL DAMAGES OR ANY DAMAGES, OF WHATEVER NATURE, OTHER THAN ACTUAL DAMAGES.

 

 [remainder of page intentionally left blank; signature page follows]

 

  

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IN WITNESS WHEREOF, Borrower has executed this Secured Promissory Note as of the date first written on the first page hereof.

 

	
BANGO REFINING NV, LLC

	  
	
By: /s/ James P. Gregory

	
      Name:  James P. Gregory

	
      Title:  Manager

	  
	
OMEGA REFINING, LLC

	  
	
By: /s/ Richard A. Silverberg

	
     Name:  Richard A. Silverberg

	
     Title:  Manager

Acknowledged, agreed and accepted.

 

VERTEX REFINING NV, LLC

By: /s/ Benjamin P. Cowart

Name:  Benjamin P. Cowart

Title:  President and Chief Executive Officer

 

 

 

Signature Page to Secured Promissory Noteex10-2.htm

EXHIBIT 10.2

 

GUARANTY

 

THIS GUARANTY is entered into as of May 2, 2014 from OMEGA HOLDINGS COMPANY LLC, a Delaware limited liability company ("Guarantor"), in favor of VERTEX REFINING NV, LLC, a Nevada limited liability company ("Lender").

 

RECITALS

 

A.           Guarantor desires to induce Lender to make loans and extend credit to Omega Refining, LLC, a Delaware limited liability company ("Omega"), Bango Refining NV, LLC, a Delaware limited liability company ("Bango Refining" and together with Omega, individually and collectively, as the context requires, "Borrower").

 

B.           Lender is willing to extend credit to Borrower conditioned upon, among other things, Guarantor's execution of this Guaranty.

 

NOW, THEREFORE, in consideration of the premises and for other good and valuable consideration, the parties hereto agree as follows:

 

Article I

Definitions

 

Section 1.1                      The following terms shall have the following meanings unless the context expressly requires otherwise:

 

(a)           "BBB Loan Agreement" means the Second Amended and Restated Term Loan Credit Agreement dated as of the date hereof by and among Borrower, Guarantor and BBB Funding.

 

(b)           "BBB Funding" means BBB Funding, LLC, a Delaware limited liability company.

 

(c)           "Collateral" means (i) any and all property and things of value in or against which a deed of trust lien, mortgage lien, other lien, and/or security interest has been granted or may in the future be granted to secure to Lender repayment and performance of  all or a portion of the Guaranteed Obligations; (ii) any and all property and things of value now held or which may in the future be held by or for the benefit of Lender as security for or for application to all or a portion of the Guaranteed Obligations; and (iii) any and all property and things of value assigned to or which may in the future be assigned to or for the benefit of Lender as security for or for application to all or a portion of the Guaranteed Obligations.

 

(d)           "Guaranteed Obligations" means (i) the indebtedness, obligations, liabilities, fees, costs and expenses under that certain Secured Promissory Note dated the date hereof (the "Note") issued by Borrower in the principal amount of $13,858,066.67, payable to the order of Lender; and (ii) the receivable which arises from the sale by Lender and its affiliates of used motor oil to Borrower in the amount of $2,207,034.87.

 

(e)           "Guaranty" means this Guaranty, as it may be amended and/or restated from time to time hereafter.

 

  

 

  

(f)           "Other Guarantor" means any and all Persons who now or in the future guarantee to Lender all or any portion of the Guaranteed Obligations including.

 

(g)           "Person" means any individual, corporation, partnership, joint venture, association, joint stock company, trust, unincorporated organization, government, or any agency or political subdivision thereof, or any other form of entity.

 

Article II

Representations and Warranties

 

To induce Lender to accept this Guaranty and to cause Lender to extend credit from time to time to Borrower, Guarantor hereby represents and warrants to Lender the following:

 

Section 2.1                      Organization; Power.  Guarantor is duly organized and validly existing under the laws of its jurisdiction of organization.  Guarantor is duly qualified to do business in every jurisdiction in which the nature of its business or the ownership of its properties requires such qualification.  Guarantor has the power to own its properties and carry on such its business as currently being conducted.

 

Section 2.2                      Authorization and Binding Effect.  The execution and delivery by Guarantor, of this Guaranty and the other agreements, documents and instruments related hereto to which Guarantor is a party, and the performance by Guarantor of its obligations thereunder:  (a) are within its power, (b) have been duly authorized by proper action on the part of the governing body of Guarantor, (c) are not in violation of any law, rule or regulation, the organizational or charter documents of Guarantor, or the terms of any agreement, restriction or undertaking to which Guarantor is a party or by which Guarantor is bound and (d) do not require the approval or consent of the holders of the equity interests of Guarantor, any governmental authority or any other person or entity, other than those obtained and in full force and effect.  This Guaranty and the agreements, documents and instruments related hereto to which any Guarantor is a party, when executed and delivered, will constitute the valid and binding obligations of Guarantor enforceable in accordance with their terms, except as limited by bankruptcy, insolvency or similar laws of general application affecting the enforcement of creditors' rights and except to the extent that general principles of equity might affect the specific enforcement of this Guaranty or such agreements, documents or instruments.

 

Section 2.3                      Solvency.  (a) The then fair saleable value of the property of Guarantor is (i) greater than Guarantor's total liabilities and (ii) not less than the amount that will be required to pay the probable liabilities on Guarantor's then existing debts as they become absolute and matured considering all financing alternatives and potential asset sales reasonably available to Guarantor.  (b) The capital of Guarantor is not unreasonably small in relation to its business or any contemplated or undertaken transaction.  (c)  Guarantor 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.  (d)  Guarantor is "solvent" within the meaning given that term and similar terms under applicable laws relating to fraudulent transfers and conveyances.

 

Section 2.4                      Schedule of Payables; Accuracy of Information.  All outstanding payables and other Liabilities of Guarantor as of the date hereof are set forth on Schedule 4.4(a) attached to the Note.  Schedule 4.4(b) of the Note is a true, correct and complete copy of the cash flow analysis (the "Cash Flow Analysis") of Borrower and Guarantor for the period from April 15, 2014 through

 

  

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August 29, 2014, prepared by CDG Group, LLC ("CDG").  The Cash Flow Analysis was prepared in good faith and utilized reasonable assumptions at the time made and due care in the preparation thereof.  All information furnished by Guarantor to Lender is true, correct and complete in all material respects as of the date furnished and does not contain any untrue statement of a material fact or omit to state a material fact necessary to make such information not misleading.

 

Section 2.5                      In Furtherance of Business Purposes.  The extension of credit to Borrower by Lender is a direct financial benefit to Guarantor and the execution of this Guaranty is made in furtherance of the business purposes of Guarantor.

 

Section 2.6                      BBB Covenants.  Each provision set forth in Articles III, V and VI of the BBB Loan Agreement is hereby incorporated by reference herein together with the definitions included in each such provision with the same effect as if fully set forth herein, in each case, as in effect on the date hereof (without for the avoidance of doubt giving affect to any subsequent amendment or waiver of or consent to departure from such provisions) mutatis mutandis with all references to "Lender" under the BBB Loan Agreement being deemed to refer to Lender and all references to "Holdings" being deemed to refer to Guarantor.  Notwithstanding Section 6.08(b)(i) of the BBB Loan Agreement, no prepayment of the indebtedness outstanding under the BBB Loan Agreement shall be permitted prior to the final payment of all amounts outstanding under this Note, except as contemplated by the subordination agreement related thereto.

 

Article III

Covenants and Agreements

 

Section 3.1                      Guarantee of Payment.

 

(a)           Guarantor hereby irrevocably and unconditionally guarantees to Lender the full and timely payment and performance of the Guaranteed Obligations.

 

(b)           All payments by Guarantor shall be paid in lawful money of the United States of America.

 

(c)           Each and every default in payment of the Guaranteed Obligations shall give rise to a separate cause of action hereunder, and separate suits may be brought hereunder by Lender as each cause of action arises.

 

(d)           Guarantor shall pay on demand to Lender all costs and expenses (including legal fees) incurred by Lender in the protection, interpretation, and enforcement of any of its rights or in the pursuance of any of its remedies in respect of the Guaranteed Obligations or this Guaranty.

 

Section 3.2                      Obligations Continuing and Unconditional.  The obligations of Guarantor under this Guaranty are continuing, absolute and unconditional and shall remain in full force and effect until the entire principal of and interest and expenses on the Guaranteed Obligations shall have been paid in full and discharged, and such obligations shall not be affected, modified or impaired by any state of facts or the happening from time to time of any event whatsoever, including, without limitation, any of the following, whether or not with notice to or the consent of Guarantor:

 

  

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(a)           the invalidity, irregularity, illegality or unenforceability of, or any defect in, any instrument, document, agreement or contract evidencing or comprising the Guaranteed Obligations;

 

(b)           any present or future law or order of any government or of any agency thereof purporting to reduce, amend or otherwise affect the Guaranteed Obligations or any other obligation of Borrower or any other obligor or to vary any terms of payment;

 

(c)           any claim of immunity or defense (other than full and final payment of the Guaranteed Obligations) on behalf of Borrower or any other obligor;

 

(d)           the waiver, compromise, settlement, release or termination of any of the Guaranteed Obligations or the release of any Collateral or any Other Guarantor;

 

(e)           the failure to give notice to Guarantor of the occurrence of any event of default or breach of any of the Guaranteed Obligations or the breach of any provisions hereunder;

 

(f)           the extension of the time for payment of any principal of or interest or premium on any of the Guaranteed Obligations or of the time for performance of any other obligations, covenants or agreements under or arising out of the Guaranteed Obligations;

 

(g)           the modification or amendment (whether material or otherwise) of any obligation, instrument, contract, covenant or agreement set forth in, evidencing, or comprising any part of the Guaranteed Obligations;

 

(h)           the taking of, or the omission to take, any of the actions referred to in this Guaranty or in any of the instruments, documents, agreements, and contracts evidencing or comprising the Guaranteed Obligations;

 

(i)           any failure, omission or delay on the part of Lender or any other Person to enforce, assert or exercise any right, power or remedy conferred on Lender or such other Person in the Guaranty or the Guaranteed Obligations;

 

(j)           the voluntary or involuntary liquidation of, dissolution of, sale or other disposition of all or substantially all the assets of, cessation of business of, marshalling of assets and liabilities of, receivership of, financial decline of, insolvency of, bankruptcy of, assignment for the benefit of creditors of, reorganization of, arrangement of, composition with creditors or readjustment of, or other similar proceedings affecting, Borrower or any of its assets or any allegation or contest of the validity of the Guaranteed Obligations or this Guaranty, or the disaffirmance or attempted disaffirmance of the Guaranteed Obligations or this Guaranty, in any such proceedings;

 

(k)           the default or failure of Guarantor fully to perform any of its obligations set forth in this Guaranty;

 

(l)           the failure of any other Person to guarantee any or all of the Guaranteed Obligations;

 

  

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(m)           the failure of Lender to take or perfect a lien, security interest, or any other interest in any Collateral, or the failure by Lender to give notice to Guarantor of any foreclosure or other sale of the Collateral by Lender;

 

(n)           the release by Lender of any Collateral or determination by Lender not to assert a claim against or proceed against Borrower, any Collateral or any Other Guarantor;

 

(o)           Lender's compromise or settlement with or without release of any other Person liable for any of the Guaranteed Obligations;

 

(p)           Lender's failure to file suit against Borrower (regardless whether Borrower is becoming insolvent, is believed to be about to leave the state, or any other circumstance);

 

(q)           Lender's acceleration of any or all of the Guaranteed Obligations;

 

(r)           the renewal, extension, or amendment of any of the Guaranteed Obligations;

 

(s)           Lender's failure to exercise diligence in the collection of the Guaranteed Obligations; or

 

(t)           to the extent permitted by law, any event or action that would, in the absence of this paragraph, result in the release or discharge of Guarantor from the performance or observance of any obligation, covenant or agreement contained in this Guaranty.

 

Section 3.3                      Waivers by Guarantor.

 

(a)           Guarantor hereby waives with respect to the Guaranteed Obligations and this Guaranty: diligence; presentment; demand of payment; filing of claims with a court in the event of bankruptcy of Borrower or any other Person liable in respect of the Guaranteed Obligations; any right to require Lender to proceed first against Borrower or any other Person; protest; notice of dishonor or nonpayment of any such liabilities; notice of the release of any Other Guarantor; notice of the release or sale of any Collateral; and any other notice and all demands whatsoever.  Guarantor hereby waives notice from Lender and the holders at any time or from time to time of the Guaranteed Obligations, of the issuance of the instruments evidencing the Guaranteed Obligations, and of acceptance of, or notice and proof of reliance on, the benefits of this Guaranty.

 

(b)           Guarantor hereby agrees that it shall have no right of subrogation, reimbursement or indemnity whatsoever and no right of recourse to or with respect to any assets or property of Borrower until payment in full of the Guaranteed Obligations.

 

(c)           The obligations of Guarantor hereunder shall not be discharged except by full and final payment and discharge of the Guaranteed Obligations.

 

Section 3.4                      Primary Liability of Guarantor.  This Guaranty constitutes a guarantee of payment and performance and not of collection.  Accordingly, Lender may enforce this Guaranty against Guarantor without first making demand or instituting collection proceedings upon the Guaranteed Obligations.  Guarantor's liability for the Guaranteed Obligations is hereby declared to be primary, and not secondary, and each document presently or hereafter executed by Borrower to evidence or secure an obligation to Lender is incorporated herein by reference and shall be fully

 

  

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enforceable against Guarantor.  Guarantor shall not be entitled to satisfy this Guaranty by contributing ratably with any Other Guarantor or otherwise paying less than the entire unpaid indebtedness comprising the Guaranteed Obligations.

 

Section 3.5                      Subordination.  Guarantor agrees that any presently existing or hereafter arising loan or extension of credit made by Guarantor to Borrower and any other presently existing or hereafter arising obligation of Borrower to Guarantor shall be subordinate to the Guaranteed Obligations as to both payment and collection.  Accordingly, Guarantor agrees not to accept any payment whatsoever from Borrower or to allow any payment by Borrower on Guarantor's behalf while any Guaranteed Obligations remain outstanding.  Guarantor agrees that in the event of a bankruptcy or other insolvency proceeding involving Borrower, Guarantor will timely file a claim for the amount of the subordinated debt, in form reasonably acceptable to Lender.  Guarantor agrees to pursue said claim with diligence.  The proceeds of such claim shall be delivered to Lender to the extent Guarantor owes any Lender amounts under this Guaranty.

 

Section 3.6                      Statute of Limitations.  Guarantor acknowledges that the statute of limitations applicable to this Guaranty shall begin to run only upon Lender's accrual of a cause of action against Guarantor hereunder caused by Guarantor's refusal to honor a demand for performance hereunder made by Lender in writing; provided, however, if, subsequent to the demand upon Guarantor, Lender reaches an agreement with Borrower on any terms causing Lender to forbear in the enforcement of its demand upon Guarantor, the statute of limitation shall be reinstated for its full duration until Lender subsequently again make demands upon Guarantor.

 

Section 3.7                      Recovery of Avoided Payments.  If any amount applied by Lender to the Guaranteed Obligations is subsequently challenged by a bankruptcy trustee or debtor in-possession or other Person as an avoidable transfer on the grounds that the payment constituted a preferential payment or a fraudulent conveyance under state law or the Bankruptcy Code or any successor statute thereto or on any other grounds, Lender may at its option and in its sole discretion, elect whether to contest such challenge.  If Lender contests the avoidance action, all costs of the proceeding, including Lender's attorneys' fees, will become part of the Guaranteed Obligations, and shall be due and payable by Guarantor on demand.  If the contested amount is successfully avoided, the avoided amount will become part of the Guaranteed Obligations hereunder and shall be due and payable by Guarantor on demand.  If Lender elects not to contest the avoidance action, Lender may tender the amount subject to the avoidance action to the bankruptcy court, trustee or debtor in possession and the amount so advanced shall become part of the Guaranteed Obligations hereunder, and shall be due and payable by Guarantor on demand.  Guarantor's obligation to reimburse Lender for amounts due under this section shall survive the purported cancellation hereof.

 

Section 3.8                      Changes in Financial Condition.  Guarantor covenants to give Lender prompt written notice of the creation or discovery of any material contingent liability or the occurrence of any material adverse change in the financial condition of Guarantor.

 

Section 3.9                      Pledge of Ownership Interest.  So long as the Guaranteed Obligations are outstanding, Guarantor hereby covenants not to encumber its ownership interest in Borrower.

 

  

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Article IV

Setoff Rights

In order to further secure the payment of the Guaranteed Obligations, Guarantor hereby grants Lender a right to setoff against all of Guarantor's joint or several presently owned or hereafter acquired monies, securities, deposits, instruments, and other Property presently or hereafter in the possession of Lender.  By placing Property in Lender's possession, Guarantor acknowledges that Guarantor voluntarily subjects the Property to Lender's rights hereunder.

 

Article V

Events Requiring Guarantor to Perform

 

Section 5.1                      Events.  Upon the occurrence of any of the following events, Guarantor shall immediately and without notice pay to Lender an amount equal to all Guaranteed Obligations, and Lender shall be entitled to enforce the provisions hereof, and to exercise any other rights, powers, and remedies provided hereunder.  Guarantor agrees that if any of the following events occurs, Guarantor shall pay to Lender an amount equal to all Guaranteed Obligations, regardless whether any of the Guaranteed Obligations themselves have been accelerated, are past due, or are in default:

 

(a)           an Event of Default (as such term is defined therein) occurs under the Note, or any other document evidencing the Guaranteed Obligations; or

 

(b)           except as set forth in clauses (c) and (d) below, Guarantor fails to perform or observe any agreement, covenant or provision contained in this Guaranty; or

 

(c)           subject to any applicable grace period or waiver prior to any due date, Guarantor fails to make any payment due on any of its debts, or any event shall occur or any condition shall exist with respect to any of its debts, the effect of which is to cause or to permit any trustee or any holder of such debt to cause (whether or not such holder or trustee elects to cause) any or all of such debt to become due prior to its stated maturity or its regularly scheduled dates of payment; or

 

(d)           any warranty, representation or other statement by or on behalf of Guarantor contained in this Guaranty is false or misleading in any material respect; or

 

(e)           a default or event of default shall exist under the BBB Loan Agreement or any other agreement, document or instrument evidencing the BBB Indebtedness (as defined in the Note); or

 

(f)           Guarantor becomes insolvent, dissolves, liquidates or fails generally to pay its debts as they become due; or

 

(g)           the taking of action by Guarantor to become the subject of proceedings under the United States Bankruptcy Code; or the execution by Guarantor of a petition to become a debtor under the United States Bankruptcy Code; or the entry of an order for relief under the United States Bankruptcy Code against Guarantor; or Guarantor making an assignment for the benefit of creditors; or Guarantor consenting to the appointment of a custodian, receiver, trustee or other officer with similar powers for it, or for any substantial part of its property; or adjudicating of Guarantor as insolvent; or

 

  

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(h)           if any governmental authority of competent jurisdiction shall enter an order appointing, without consent of Guarantor, a custodian, receiver, trustee or other officer with similar powers with respect to Guarantor, or with respect to any substantial part of its property, or if an order for relief relating to Guarantor shall be entered in any case or proceeding for liquidation or reorganization or otherwise to take advantage of any bankruptcy or insolvency law of any jurisdiction, or ordering the dissolution, winding-up or liquidation of Guarantor, or if any petition for any such relief shall be filed against Guarantor and such petition shall not be dismissed or stayed within 60 days; or

 

(i)           the occurrence of any event that would permit Lender to accelerate all or any part of the Guaranteed Obligations, but acceleration thereof is prevented by law, court order, or otherwise; or

 

(j)           Guarantor violates any of the covenants set forth in section 5 of the Note and such violation is not cured within 15 days of the occurrence thereof.

 

Section 5.2                      Remedies; Waiver, Etc.

 

(a)           No remedy herein conferred upon or reserved to Lender is intended to be exclusive of any other available remedy or remedies, but each and every remedy shall be cumulative and shall be in addition to every other remedy given under this Guaranty or now or hereafter existing at law or in equity or by statute or by contract.

 

(b)           No delay or omission to exercise any right or power accruing upon the occurrence of any of the events specified in section 5.1 hereunder shall impair any such right or power or shall be construed to be a waiver thereof, but any such right or power may be exercised from time to time and as often as may be deemed expedient.

 

(c)           To entitle Lender to exercise any remedy reserved to it in this Guaranty, it shall not be necessary to give any notice.

 

(d)           In the event any provision contained in this Guaranty should be breached by any party and thereafter duly waived by the other party so empowered to act, such waiver shall be limited to the particular breach so waived and shall not be deemed to waive any other breach hereunder.

 

(e)           No waiver, amendment, release or modification of this Guaranty shall be established by conduct, custom or course of dealing.

 

Article VI

Miscellaneous

 

Section 6.1                      Survival.  All warranties, representations, and covenants made by Guarantor herein shall be deemed to have been relied upon by Lender and the holder(s) from time to time of the Guaranteed Obligations and shall survive the delivery to Lender of this Guaranty regardless of any investigation made by Lender or the holder(s) from time to time of the Guaranteed Obligations.

 

Section 6.2                      Successors and Assigns.  This Guaranty shall inure to the benefit of and be binding upon the successors and assigns of each of the parties, except that Guarantor shall not assign any rights or delegate any obligation hereunder without the prior written consent of Lender.  Any

 

  

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attempted assignment or delegation without the required prior consent shall be void.  The provisions of this Guaranty are intended to be for the benefit of Lender and any other holder or holders of the Guaranteed Obligations.  Guarantor acknowledges that the Guaranteed Obligations and this Guaranty may be assigned or sold by Lender to one or more third parties.

 

Section 6.3                      No Partners; No Third Party Beneficiaries.  Nothing contained herein or in any related document shall be deemed to render Lender a partner of Borrower or Guarantor for any purpose.  This Guaranty and any documents securing the Guaranteed Obligations have been executed for the sole benefit of Lender as an inducement to cause Lender to extend credit to Borrower, and neither Guarantor nor any other third party is authorized to rely upon Lender's rights hereunder or to rely upon an assumption that Lender has or will exercise its rights under any document.

 

Section 6.4                      Notices.  All notices provided for herein shall be in writing and shall comply with the provisions of the Purchase Agreement (as defined in the Note) and be sent in accordance with the provisions thereof.

 

Section 6.5                      Partial Invalidity.  The invalidity or unenforceability of any one or more phrases, sentences, clauses or sections in this Guaranty shall not affect the validity or enforceability of the remaining portions of this Guaranty or any part thereof.

 

Section 6.6                      Indulgence Not Waiver.  Lender's indulgence in the existence of a default hereunder or any other departure from the terms of this Guaranty shall not prejudice Lender's rights to make demand and recover from Guarantor.

 

Section 6.7                      Amendment and Waiver in Writing.  No provision of this Guaranty can be amended or waived, except by a statement in writing signed by the party against which enforcement of the amendment or waiver is sought.

 

Section 6.8                      Entire Agreement; No Oral Representations Limiting Enforcement.  This Guaranty represents the entire agreement between the parties concerning the liability of Guarantor for the Guaranteed Obligations, and any previously made oral statements regarding Guarantor's liability for the Guaranteed Obligations are merged herein.  Without limiting the foregoing, Guarantor acknowledges that Lender has made no oral statements to Guarantor that could be construed as a waiver of Lender's right to enforce this Guaranty by all available legal means.

 

Section 6.9                      Costs of Collection Against Guarantor.  Guarantor agrees to pay on demand all reasonable costs of collection, including, without limitation, court costs, actual attorneys' fees and compensation for time spent by Lender's employees, that Lender may incur in enforcing the terms of this Guaranty or that may be incurred in any legal proceeding brought to construe, enforce, or apply this Guaranty.

 

Section 6.10                      Cumulative Remedies.  The remedies provided Lender in this Guaranty are not exclusive of any other remedies that may be available to Lender under any other document or at law or equity.

 

Section 6.11                      Applicable Law.  The validity, construction and enforcement of this Guaranty and all other documents executed with respect to the Guaranteed Obligations shall be determined according to the internal laws of the State of Delaware, applicable to contracts executed, delivered and performed entirely within that state without regard to the principles of conflict laws.

 

  

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Section 6.12                      Captions Not Controlling.  Captions and headings have been included in this Guaranty for the convenience of the parties, and shall not be construed as affecting the content of the respective paragraphs.

 

Section 6.13                      Guaranty Irrevocable.  Guarantor's guarantee of the Guaranteed Obligations is irrevocable, except that Guarantor may terminate its continuing obligation to guarantee new indebtedness of Borrower by providing written notice to Lender of such termination and obtaining written confirmation thereof by Lender.  No attempted or purported termination by Guarantor shall be effective unless receipt of the notice of termination is acknowledged by Lender thereof in writing.  Termination shall apply only to principal portions of the Guaranteed Obligations arising after Lender has confirmed in writing receipt of such notice of termination and shall apply only to such Guaranteed Obligations with respect to which Lender was not obligated to advance credit to Borrower prior to confirmation in writing of receipt of such notice of termination.  The notice of termination shall not relieve Guarantor of any of the Guaranteed Obligations:  (i) incurred by Borrower before delivery (and confirmation of receipt thereof) of the notice of termination; (ii) arising from and out of Lender's commitments and agreements to extend credit to Borrower made before delivery (and confirmation of receipt thereof) of the notice of termination; and (iii) consisting of accrued interest, actual attorney fees, premiums, and other costs, charges, and monies owing under or pursuant to any of the instruments, documents, agreements, or contracts evidencing or comprising any of the Guaranteed Obligations.  Termination of this Guaranty may constitute an event of default under the Guaranteed Obligations.

 

Section 6.14                      No Marshaling of Assets.  Lender may proceed against any Collateral and against parties liable therefor in such order as it may elect, and Guarantor shall not be entitled to require Lender to marshal assets.  The benefit of any rule of law or equity to the contrary is hereby expressly waived.

 

Section 6.15                      Bankruptcy, Etc. of Borrower.  Without limitation, Guarantor's obligations hereunder shall not be affected by:  (a) the filing of a petition in bankruptcy by or against Borrower under 11 U.S.C. § 101, etseq., or the appointment of a trustee, receiver, custodian, conservator, or other similar appointment over Borrower or any of Borrower's assets, whether under 11 U.S.C. § 101, etseq. any state's equivalent statutes or other statutory, administrative, or other laws, rules, or regulations; (b) any order, ruling, or action taken (by Lender, Borrower, or others) in any bankruptcy case initiated by or against Borrower or in any receivership, conservatorship, or other similar estate.  Lender may in its discretion modify any of the terms of the Guaranteed Obligations with any successor or assignee of Borrower or its Property including a debtor in possession or trustee in bankruptcy, receiver, custodian, conservator, or similar Person, without affecting Guarantor's obligations hereunder.  Any such debtor-in-possession, trustee, receiver, custodian, conservator, or other similarly appointed Person shall be deemed to be authorized to act on behalf of Borrower, and Guarantor authorizes Lender to deal with any such Person as if that Person were Borrower for purposes of this Guaranty.

 

Section 6.16                      Incorporation by Reference.  The provisions of sections 12.06 and 12.07 of the Purchase Agreement are incorporated herein by this reference as if set forth herein in their entirety.

 

Section 6.17                      Guarantor's Independent Decision.  Guarantor delivers this Guaranty based solely on its own independent investigation and determination, and Guarantor has not relied on any statement or representation of Lender or its agents with respect to any matter whatsoever.  Guarantor

 

  

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is in a position to and hereby assumes full responsibility for obtaining any additional information concerning the Guaranteed Obligations and Borrower.

 

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IN WITNESS WHEREOF, the undersigned has executed this Guaranty Agreement as of the date first written on the first page hereof.

 

	
GUARANTOR:

	  
	
OMEGA HOLDINGS COMPANY LLC

	  
	
By: /s/ Richard A. Silverberg

	
Name:  Richard A. Silverberg

	
Title:  Manager

 

 

 

 

Signature Page to Guaranty Agreement

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