Document:

qpsa_ex101.htm

 

EXHIBIT 10.1

NOTE PURCHASE AGREEMENT

 

This Note Purchase Agreement, dated as of September 20, 2010 (this “Agreement”), is entered into by and between Hollywood Creations, Inc., a Delaware corporation (the “Company”), and Quepasa Corporation, a Nevada corporation (the “Investor”).

 

RECITALS

 

A.           On the terms and subject to the conditions set forth herein, the Investor is willing to purchase from the Company, and the Company is willing to sell to such Investor, convertible promissory notes (each a “Note” and, collectively, the “Notes”) in the principal amounts set forth in Section 2(a) below.

 

B.           Capitalized terms not otherwise defined herein shall have the meaning set forth in the form of Note attached hereto as Exhibit A.

 

AGREEMENT

 

NOW THEREFORE, in consideration of the foregoing, and the representations, warranties, and conditions set forth below, the parties hereto, intending to be legally bound, hereby agree as follows:

 

1.           Authorization and Sale of the Notes.

 

(a)      Authorization.  As of the First Tranche Closing (as defined below) the Company will have authorized the issuance and sale, pursuant to the terms of this Agreement, of the Notes.

 

(b)      Issuance of Notes.  Subject to all of the terms and conditions hereof, the Company agrees to issue and sell to the Investor, and the Investor agrees to purchase, the Notes, each in the form of Exhibit A hereto, in the principal amounts set forth in Section 2(a) below.

 

2.           Closing Mechanics.

 

(a)      Tranches.  The sale and purchase of the Notes shall take place in three tranches.  The first tranche (the “First Tranche”) shall consist of the sale of a Note (the “First Tranche Note”) in the aggregate principal amount of Two Hundred Sixteen Thousand Six Hundred Sixty Six Dollars and Sixty Seven Cents ($216,666.67).  Subject to Section 2(c) below, the second tranche (the “Second Tranche”) shall consist of the sale of a Note (the “Second Tranche Note”) in the aggregate principal amount of Two Hundred Sixteen Thousand Six Hundred Sixty Six Dollars and Sixty Seven Cents ($216,666.67).  Subject to Section 2(d) below, the third tranche (the “Third Tranche”) shall consist of the sale of a Note (the “Third Tranche Note”) in the aggregate principal amount of Two Hundred Sixteen Thousand Six Hundred Sixty Six Dollars and Sixty Seven Cents ($216,666.67).

 

(b)      First Tranche Closing.  The closing of the First Tranche (the “First Tranche Closing”) shall be held at such place and time as the Company and the Investor may determine (the “First Tranche Closing Date”).  At the First Tranche Closing, the Company will deliver to the Investor the First Tranche Note, against receipt by the Company of the corresponding purchase price of Two Hundred Sixteen Thousand Six Hundred Sixty Six Dollars and Sixty Seven Cents ($216,666.67).  The First Tranche Note will be promptly registered in the Investor’s name in the Company’s records.

 

  

  

  

 

(c)      Second Tranche Closing.  Following the completion of the Second Tranche Milestone set forth in Schedule I, within ten (10) days of a request in writing (a “Funding Notice”) from the Chief Executive Officer of the Company or another authorized representative of the Company to the Investor, the Company shall issue and sell and the Investor shall purchase the Second Tranche Note (the “Second Tranche Closing”); provided, however, that the Investor shall not be obligated to purchase the Second Tranche Note if an Event of Default has occurred or would result from the Second Tranche Closing.  At the Second Tranche Closing, the Company will deliver to the Investor the Second Tranche Note, against receipt by the Company of the corresponding purchase price of Two Hundred Sixteen Thousand Six Hundred Sixty Six Dollars and Sixty Seven Cents ($216,666.67).  The Second Tranche Note will be promptly registered in the Investor’s name in the Company’s records.  The Second Tranche Closing shall take place at such date, time and place as shall be approved by the Company in its sole discretion provided that the Investor may deliver funds by wire transfer and any required documents by overnight courier (the “Second Tranche Closing Date”). Notwithstanding the foregoing, following the First Tranche Closing, the Company and the Investor shall jointly develop additional specifications for the first two games, as well as any future games developed under this Agreement so that the games include social sharing tools.

 

(d)      Third Tranche Closing.  Following the completion of the Third Tranche Milestone set forth in Schedule I, within ten (10) days of a Funding Notice from the Chief Executive Officer of the Company or another authorized representative of the Company to the Investor, the Company shall issue and sell and the Investor shall purchase the Third Tranche Note (the “Third Tranche Closing”); provided, however, that the Investor shall not be obligated to purchase the Third Tranche Note if an Event of Default has occurred or would result from the Third Tranche Closing.  At the Third Tranche Closing, the Company will deliver to the Investor the Third Tranche Note, against receipt by the Company of the corresponding purchase price of Two Hundred Sixteen Thousand Six Hundred Sixty Six Dollars and Sixty Seven Cents ($216,666.67).  The Third Tranche Note will be promptly registered in the Investor’s name in the Company’s records.  The Third Tranche Closing shall take place at such date, time and place as shall be approved by the Company in its sole discretion (the “Third Tranche Closing Date”).

 

(e)      Put. In the event that at least 60 but not more than 120 days have elapsed from the completion of the Second Tranche Milestone and/or the Third Tranche Milestone, as the case may be, and in either or both events the Company has not delivered a funding Notice to the Investor, the Investor  may deliver a notice of intent to lend $216,666.67  to the Company in which case all of the provisions of Section 2(c) or 2(d) (except for the reference to a Funding Notice) as well as other provisions of this Agreement shall apply.

 

(f)      Use of Proceeds.  The proceeds of the sale and issuance of the Notes shall be used for general corporate purposes, including development of skill-based wagering titles as contemplated by Schedule I.

 

(g)       Payments.  The Company will make all cash payments due under the Notes in immediately available funds by 1:00 p.m. Pacific time on the date such payment is due at the address for such purpose set forth on the signature pages hereto, or at such other address, or in such other manner, as an Investor or other registered holder of a Note may from time to time direct in writing.

 

(h)       Reservation of Stock.  Following the date hereof and prior to conversion of the Notes, the Company will use its best efforts to promptly take such corporate action as may, in the opinion of its counsel, be necessary to increase its authorized but unissued shares to such number of shares as shall be sufficient for effectuating the actions contemplated hereby.

 

  

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(i)       Right of the Investor Not to Fund.  Notwithstanding anything in this Agreement to the contrary, the Investor may elect to not consummate the Second Tranche Closing  and/or the Third Tranche Funding and make further loans, as the case may be by giving written notice to the Company within seven (7) days after the Funding Notice referred to in Section 2(c) or (d), as applicable.  In such event, the Investor shall have no liability to the Company.  If the Investor declines to consummate the Second Tranche Closing and the Company and the Investor have agreed upon the additional specifications outlined in Section 2(b), the First Tranche Note shall be deemed paid in full. If, however, the Company and the Investor have not, acting reasonably and in good faith, agreed upon the additional specifications outlined in Section 2(b), the Note shall remain payable according to its terms.  If the Investor declines to consummate the Third Tranche Closing, the First Tranche Note and the Second Tranche Note shall be payable according to their terms.

 

(j)      Definitions.  Each of the First Tranche Closing, the Second Tranche Closing and the Third Tranche Closing are referred to herein as a “Closing”.  Each of the First Tranche Closing Date, the Second Tranche Closing Date and the Third Tranche Closing Date are referred to herein as a “Closing Date”.

 

3.           Representations and Warranties of the Company.  The Company represents and warrants to the Investor that:

 

(a)           Due Incorporation, Qualification, etc.  The Company (i) is a corporation duly organized, validly existing and in good standing under the laws of the State of Delaware; (ii) has the power and authority to own, lease and operate its properties and carry on its business as now conducted; and (iii) is duly qualified, licensed to do business and in good standing as a foreign corporation in each jurisdiction where the failure to be so qualified or licensed, individually or in the aggregate, could reasonably be expected to have a material adverse effect on the Company or its business or the Company’s ability to perform in any material respect on a timely basis its material obligations under any Transaction Document (a “Material Adverse Effect”).

 

(b)           Authority.  The execution, delivery and performance by the Company of each Transaction Document to be executed by the Company and the consummation of the transactions contemplated thereby (i) are within the power of the Company and (ii), subject to Section 2(h), have been duly authorized by all necessary actions on the part of the Company and its officers, directors and stockholders.

 

(c)           Enforceability.  Each Transaction Document executed, or to be executed, by the Company has been, or will be, duly executed and delivered by the Company and constitutes, or will constitute, a legal, valid and binding obligation of the Company, enforceable against the Company in accordance with its terms, except as limited by bankruptcy, insolvency or other laws of general application relating to or affecting the enforcement of creditors’ rights generally and general principles of equity.

 

(d)           Non-Contravention.  The execution and delivery by the Company of the Transaction Documents executed by the Company and the performance and consummation of the transactions contemplated thereby do not and will not (i) violate the Company’s certificate of incorporation or bylaws (as amended, the “Charter Documents”) or any material judgment, order, writ, decree, statute, rule or regulation applicable to the Company; (ii) violate any provision of, or result in the breach or the acceleration of, or entitle any other Person to accelerate (whether after the giving of notice or lapse of time or both), any material mortgage, indenture, agreement, instrument or contract to which the Company is a party or by which it is bound; or (iii) result in the creation or imposition of any Lien upon any property, asset or revenue of the Company or the suspension, revocation, impairment, forfeiture, or nonrenewal of any material permit, license, authorization or approval applicable to the Company, its business or operations, or any of its assets or properties.

 

 

  

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(e)           Duly Issued; Nonassessable.  The Notes, when issued, sold and delivered in accordance with the terms of this Agreement and the Notes for the consideration provided for herein and therein, will be duly and validly issued, fully paid and nonassessable, and free from all taxes, liens and charges with respect to the issue thereof.  The shares of capital stock issuable upon conversion of the Notes, when issued upon such conversion in accordance with the Notes, will be duly authorized and validly issued, fully paid and nonassessable, and free from all taxes, liens and charges with respect to the issue thereof, with the Investor being entitled to all rights accorded to a holder of such capital stock.

 

(f)           Subsidiaries.  Each of the Company’s subsidiaries is duly organized, validly existing and in good standing (where such concept exists in the applicable jurisdiction) under the laws of its jurisdiction of organization and is in good standing under such laws and has the power and authority to own, lease and operate its properties and carry on its business as now conducted.  None of the Company’s subsidiaries owns or leases property or engages in any activity in any jurisdiction that might require its qualification to do business as a foreign corporation in such jurisdiction and in which the failure to qualify as such would have a Material Adverse Effect.

 

(g)           Approvals.  Subject to Section 2(h), no consent, approval, order or authorization of, or registration, declaration or filing with, any governmental authority or other Person (including, without limitation, the shareholders of any Person) is required in connection with the execution and delivery of the Transaction Documents executed by the Company and the performance and consummation of the transactions contemplated thereby, other than such as have been obtained and remain in full force and effect and other than such qualifications or filings under applicable securities laws as may be required in connection with the transactions contemplated by this Agreement.

 

(h)           No Violation or Default.  Subject to Section 3(h) of the Disclosure Schedule, none of the Company or the Company’s subsidiaries is in violation of or in default with respect to (i) their Charter Documents or other organizational documents or any material judgment, order, writ, decree, statute, rule or regulation applicable to such Person, or (ii) any material mortgage, indenture, agreement, instrument or contract to which such Person is a party or by which it is bound (nor is there any waiver in effect which, if not in effect, would result in such a violation or default), in either case as such would have a Material Adverse Effect.

 

(i)           Litigation.  Subject to Section 3(i) of the Disclosure Schedule, there are no actions (including, without limitation, derivative actions), suits, proceedings or investigations pending or, to the knowledge of the Company, overtly threatened against the Company or the Company’s subsidiaries at law or in equity in any court or before any other governmental authority that (i) if adversely determined would (alone or in the aggregate) result in a material liability or (ii) seeks to enjoin, either directly or indirectly, the execution, delivery or performance by the Company of the Transaction Documents or the transactions contemplated thereby.

 

(j)           Title.  Subject to Section 3(j) of the Disclosure Schedule, the Company and the Company’s subsidiaries own and have good and marketable title in fee simple absolute to, or a valid leasehold interest in, all their respective real properties and good title to their other respective assets and properties that are material to the business of the Company and the Company’s subsidiaries, in each case free and clear of all liens, encumbrances and defects.

 

  

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(k)           Intellectual Property.  The Company owns, or has the right to use pursuant to written license agreements, sufficient legal rights to all patents, trademarks, service marks, trade names, copyrights, trade secrets, licenses, information, processes and other intellectual property rights necessary for its business as now conducted and as proposed to be conducted, without any conflict with, or infringement of the rights of, others. The Company and its subsidiaries do not have any knowledge of any infringement by the Company or its subsidiaries of any material trademark, trade name rights, patents, patent rights, copyrights, inventions, licenses, service names, service marks, service mark registrations, trade secret or other similar rights of others, or of any such development of similar or identical trade secrets or technical information by others and there is no action or proceeding being made or brought against, or to the Company’s knowledge, claim, action or proceeding being threatened against, the Company or its subsidiaries regarding trademark, trade name, patents, patent rights, invention, copyright, license, service names, service marks, service mark registrations, trade secret or other infringement, which could reasonably be expected to have a Material Adverse Effect.

 

(l)           Financial Statements.  The Company was recently formed, is in the early stages of its development, and has not prepared any financial statements.

 

(m)           Equity Securities.  The Company’s total authorized and issued capitalization as of the date hereof is as set forth in Section 3(m) of the Disclosure Schedule.  The equity securities (“Equity Securities”) of the Company have the respective rights, preferences and privileges set forth in the Company’s Charter Documents in effect on the date hereof.  All of the outstanding Equity Securities of the Company have been duly authorized and are validly issued, fully paid and nonassessable.  Except as expressly referenced herein or as set forth in Section 3(m) of the Disclosure Schedule, there are as of the date of this Agreement no options, warrants or rights to purchase Equity Securities of the Company authorized, issued or outstanding, and the Company is not obligated in any other manner to issue shares of its Equity Securities.  Except as set forth in Section 3(m) of the Disclosure Schedule, there are no restrictions on the transfer of Equity Securities of the Company, other than those imposed by the Company’s Charter Documents as of the date hereof, or relevant state and federal securities laws, and no holder of any Equity Security of the Company or other Person is entitled to preemptive or similar statutory or contractual rights, either arising pursuant to any agreement or instrument to which the Company is a party or that are otherwise binding upon the Company.  The offer and sale of all Equity Securities of the Company issued before the Closing Date complied with or were exempt from registration or qualification under all applicable federal and state securities laws.  Except as expressly referenced herein or as set forth in Section 3(m) of the Disclosure Schedule, no Person has the right to demand or other rights to cause the Company to file any registration statement under the Securities Act of 1933, as amended (the “Securities Act”), relating to any Equity Securities of the Company presently outstanding or that may be subsequently issued, or any right to participate in any such registration statement.

 

(n)           Accuracy of Information Furnished.  None of the Transaction Documents and none of the other certificates, statements or information furnished to the Investors by or on behalf of the Company or the Company’s subsidiaries in connection with the Transaction Documents or the transactions contemplated thereby contain any untrue statement of a material fact or omits or will omit to state a material fact necessary to make the statements therein, in light of the circumstances under which they were made, not misleading.

(o)           Tax Status.  The Company and each of its subsidiaries has made or filed all federal and state income and all other material tax returns, reports and declarations required by any jurisdiction to which it is subject (unless and only to the extent that the Company and each of its subsidiaries has set aside on its books provisions reasonably adequate for the payment of all unpaid and unreported taxes) and has paid all taxes and other governmental assessments and charges that are material in amount, shown or determined to be due on such returns, reports and declarations, except those being contested in good faith and has set aside on its books provision reasonably adequate for the payment of all taxes for periods subsequent to the periods to which such returns, reports or declarations apply.  There are no unpaid taxes in any material amount claimed to be due by the taxing authority of any jurisdiction, and the officers of the Company know of no basis for any such claim.

 

  

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(p)           No Financial Advisor, Placement Agent, Broker or Finder.  The Company represents and warrants to the Investor that it has not engaged any financial advisor, placement agent, broker or finder in connection with the transactions contemplated hereby.    The Company shall be responsible for the payment of any fees or commissions, if any, of any financial advisor, placement agent, broker or finder relating to or arising out of the transactions contemplated hereby.  The Company shall pay, and hold the Investor harmless against, any liability, loss or expense (including, without limitation, attorneys' fees and out of pocket expenses) arising in connection with any such claim.

 

4.           Representations and Warranties of the Investor.  The Investor represents and warrants to the Company upon the acquisition of a Note as follows:

 

(a)           Binding Obligation.  The Investor has full legal capacity, power and authority to execute and deliver this Agreement and to perform its obligations hereunder.  This Agreement and the Transaction Documents constitute valid and binding obligations of the Investor, enforceable in accordance with their terms, except as limited by bankruptcy, insolvency or other laws of general application relating to or affecting the enforcement of creditors’ rights generally and general principles of equity.

 

(b)           Securities Law Compliance.  The Investor has been advised that the Notes and the underlying securities have not been registered under the Securities Act, or any state securities laws and, therefore, cannot be resold unless they are registered under the Securities Act and applicable state securities laws or unless an exemption from such registration requirements is available. The Investor is aware that the Company is under no obligation to effect any such registration with respect to the Notes or the underlying securities or to file for or comply with any exemption from registration.  The Investor has not been formed solely for the purpose of making this investment and is purchasing the Notes to be acquired by the Investor hereunder for its own account for investment, not as a nominee or agent, and not with a view to, or for resale in connection with, the distribution thereof, and the Investor has no present intention of selling, granting any participation in, or otherwise distributing the same. The Investor has such knowledge and experience in financial and business matters that the Investor is capable of evaluating the merits and risks of such investment, is able to incur a complete loss of such investment without impairing the Investor’s financial condition and is able to bear the economic risk of such investment for an indefinite period of time.  The residency of the Investor (or, in the case of a partnership or corporation, such entity’s principal place of business) is correctly set forth beneath the Investor’s name on the signature pages hereto.

 

(c)           Access to Information.  The Investor acknowledges that the Company has given the Investor access to the corporate records and accounts of the Company and to all information in its possession relating to the Company, has made its officers and representatives available for interview by the Investor, and has furnished the Investor with all documents and other information required for the Investor to make an informed decision with respect to the purchase of the Notes.  The foregoing, however, does not limit or modify the representations or warranties of the Company in Section 2 hereof or the right of the Investor to rely thereon.

 

  

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        5.           Conditions to Closing of the Investor.  The Investor’s obligations at each Closing are subject to the fulfillment, on or prior to the Closing Date, of all of the following conditions, any of which may be waived in whole or in part by the Investor by written notice to the Company:

 

(a)           Representations and Warranties.  The representations and warranties made by the Company in Section 3 hereof shall have been true and correct in all material respects when made, and shall be true and correct in all material respects on each Closing Date.

 

(b)           Covenants.  All covenants, agreements and conditions contained in this Agreement to be performed by the Company on or prior to each Closing shall have been performed or complied with in all material respects.

 

(c)           Governmental Approvals and Filings.  Except for any notices required or permitted to be filed after each Closing Date with certain federal and state securities commissions, the Company shall have obtained all governmental approvals required in connection with the lawful sale and issuance of the Note.

 

(d)           Legal Requirements.  At each Closing, the sale and issuance by the Company and the purchase by the Investor, of the Notes shall be legally permitted by all laws and regulations to which the Investor or the Company are subject.

 

(e)           Proceedings and Documents.  All corporate and other proceedings in connection with the transactions contemplated at each Closing and all documents and instruments incident to such transactions shall be reasonably satisfactory in substance and form to the Investor.

 

(f)           Transaction Documents.  The Company shall have duly executed and delivered to the Investor the following documents:

 

(i)      this Agreement; and

 

(ii)      the applicable Note.

 

(g)           Corporate Documents.  The Company shall have delivered to the Investor each of the following:

 

(i)      Only with respect to the First Tranche Closing, a certificate of the Secretary of the Company, dated the Closing Date, certifying (a) that the Certificate of Incorporation of the Company, certified as of a recent date by the Secretary of State of the State of Delaware and attached thereto, is in full force and effect and has not been amended, supplemented, revoked or repealed since the date of such certification; (b) that attached thereto is a true and correct copy of the Bylaws of the Company as in effect on the Closing Date; and (c) that attached thereto are true and correct copies of resolutions duly adopted by the Board of Directors of the Company and continuing in effect, which authorize the execution, delivery and performance by the Company of this Agreement and the Notes and the consummation of the transactions contemplated hereby and thereby; and

 

(ii)      Only with respect to the First Tranche Closing, a Certificate of Good Standing or comparable certificate as to the Company, certified as of a recent date prior to the Closing Date by the Secretary of State of Delaware.

 

  

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               (h)      Purchase Price.  The Investor shall have delivered to the Company the Purchase Price in respect of the Note being purchased by the Investor referenced in Section 2(b) hereof.

 

6.           Conditions to Obligations of the Company.  The Company’s obligation to issue and sell the Notes at the Closing is subject to the fulfillment, on or prior to the Closing Date, of the following conditions, any of which may be waived in whole or in part by the Company by written notice to the Investor:

 

(a)           Representations and Warranties.  The representations and warranties made by the Investor in Section 4 hereof shall be true and correct when made, and shall be true and correct on each  Closing Date.

 

(b)           Governmental Approvals and Filings.  Except for any notices required or permitted to be filed after the Closing Date with certain federal and state securities commissions, the Company shall have obtained all governmental approvals required in connection with the lawful sale and issuance of the Notes.

 

(c)           Legal Requirements.  At the Closing, the sale and issuance by the Company and the purchase by the Investor, of the Notes shall be legally permitted by all laws and regulations to which the Investor or the Company are subject.

 

(d)           Purchase Price.  Each Investor shall have delivered to the Company the Purchase Price in respect of the Note being purchased by the Investor referenced in Section 2(b) hereof.

 

7.           Post-Closing Covenants.

 

(a)           Website Modifications.  The Investor shall make reasonable modifications to the Quepasa.com site to maximize usage of Company-designed game titles referred to in Schedule I at the requests of the Company from time to time.

 

(b)           Advice of Counsel.  The Company shall seek the advice of counsel to ensure the legality of the Company-designed game titles referred to in Schedule I in all U.S. jurisdictions on an ongoing basis.  Prior to the Second Tranche Closing and at least one time during each year, the Company shall deliver to the Investor a survey summarizing the applicable laws, rule and regulations, administrative or other interpretations and case law from all 50 U.S. states relating to the legality of the such game titles (the “Survey”).  Furthermore, the Company shall deliver the Survey to the Investor at least five (5) business days before the first U.S. release of such game titles.

 

(c)           Indemnity.  To the extent permitted by law, the Company will indemnify and hold harmless the Investor against any Damages, and the Company will pay to the Investor any legal or other expenses reasonably incurred thereby in connection with investigating or defending any claim or proceeding from which Damages may result, as such expenses are incurred.  Unless the law firm representing the Investor reasonably concludes that the cost of defense is expected to exceed the cost of settlement, no consent of the Company shall be required; provided, however, in no event shall the aggregate amounts payable by the Company by way of indemnity or contribution hereunder exceed the greater of (i) the aggregate outstanding principal amount of the Notes plus all accrued and unpaid interest thereon or (ii) the gross revenues paid to or owed to the Company from operation of the games it develops for quepasa.com.  “Damages” means any loss, damage, or liability (joint or several) to which the Investor may become subject under U.S. federal or state law, insofar as such loss, damage, or liability (or any action in respect thereof) arises out of or is based upon any violation or alleged violation of U.S. federal or state law related to online skill-based wagering games and the Company-designed game titles referred to in Schedule I.  The failure of the Company to pay any sum due under this Section 7(d) within ten (10) business days of receipt of related invoices shall constitute a material breach of this Agreement.  In such case, the Investor may, at its sole election, settle the claim and recover all costs, including the costs of the settlement, from the Company.

 

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8.           Miscellaneous.

 

(a)           Waivers and Amendments.  Except to the extent specifically set forth herein, any provision of this Agreement may be amended, waived or modified only upon the written consent of the Company and the Investor.

 

(b)           Governing Law.  This Agreement and all actions arising out of or in connection with this Agreement shall be governed by and construed in accordance with the laws of the State of Delaware, without regard to the conflicts of law provisions of the State of Delaware or of any other state.

 

(c)           Survival.  The representations, warranties, covenants and agreements made herein shall survive the execution and delivery of this Agreement for a period of two (2) years from the applicable Closing Date; provided, however, (i)  the covenant set forth in Section 2(h) shall survive the applicable Closing Date until the later of the date (x) the Notes are converted in full or (y) the Notes are paid in full, (ii) the representations and warranties set forth in Sections 3(a) – (g) and (m) and (p) shall survive indefinitely and (iii) the representations, warranties, covenants and/or agreements set forth in Section 3(o) and Sections 7 and 8 shall survive for the applicable statute of limitations.

 

(d)           Successors and Assigns.  Subject to the restrictions on transfer described in Sections 8(e) and 8(f) below, the rights and obligations of the Company and the Investor shall be binding upon and benefit the successors, assigns, heirs, administrators and transferees of the parties.

 

(e)           Registration, Transfer and Replacement of the Notes.  The Notes issuable under this Agreement shall be registered notes.  The Company will keep, at its principal executive office, books for the registration and registration of transfer of the Notes.  Prior to presentation of any Note for registration of transfer, the Company shall treat the Person in whose name such Note is registered as the owner and holder of such Note for all purposes whatsoever, whether or not such Note shall be overdue, and the Company shall not be affected by notice to the contrary.  Subject to any restrictions on or conditions to transfer set forth in any Note, the holder of any Note, at its option, may in person or by duly authorized attorney surrender the same for exchange at the Company’s chief executive office, and promptly thereafter and at the Company’s expense, except as provided below, receive in exchange therefor one or more new Note(s), each in the principal requested by such holder, dated the date to which interest shall have been paid on the Note so surrendered or, if no interest shall have yet been so paid, dated the date of the Note so surrendered and registered in the name of such Person or Persons as shall have been designated in writing by such holder or its attorney for the same principal amount as the then unpaid principal amount of the Note so surrendered.  Upon receipt by the Company of evidence reasonably satisfactory to it of the ownership of and the loss, theft, destruction or mutilation of any Note and (a) in the case of loss, theft or destruction, of indemnity reasonably satisfactory to it; or (b) in the case of mutilation, upon surrender thereof, the Company, at its expense, will execute and deliver in lieu thereof a new Note executed in the same manner as the Note being replaced, in the same principal amount as the unpaid principal amount of such Note and dated the date to which interest shall have been paid on such Note or, if no interest shall have yet been so paid, dated the date of such Note.

 

  

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(f)           Assignment by the Company.  The rights, interests or obligations hereunder may not be assigned, by operation of law or otherwise, in whole or in part, by the Company without the prior written consent of the Investor.

 

(g)           Entire Agreement.  This Agreement together with the other Transaction Documents constitute and contain the entire agreement among the Company and the Investor and supersede any and all prior agreements, negotiations, correspondence, understandings and communications among the parties, whether written or oral, respecting the subject matter hereof.

 

(h)           Notices.  All notices, requests, demands, consents, instructions or other communications required or permitted hereunder shall in writing and faxed, mailed or delivered to each party as follows: (i) if to the Investor, at the Investor’s address, facsimile number or e-mail address set forth on the signature pages hereto, or at such other address as such Investor shall have furnished the Company in writing, or (ii) if to the Company, at c/o Caine T. Moss, Esq., Goodwin Procter LLP, 135 Commonwealth Drive, Menlo Park, CA 94025, or at such other address as the Company shall have furnished to the Investor in writing, with a copy to Caine T. Moss, Esq., Goodwin Procter LLP, 135 Commonwealth Drive, Menlo Park, CA 94025.  All such notices and communications will be deemed effectively given the earlier of (i) when received; (ii) when delivered personally; (iii) one (1) business day after being delivered by facsimile (with receipt of appropriate confirmation) or e-mail; (iv) one (1) business day after being deposited with an overnight courier service of recognized standing; or (v) four (4) days after being deposited in the U.S. mail, first class with postage prepaid.

 

(i)           Expenses.  The Company and each Investor will bear their respective fees and expenses in connection with the preparation, execution and delivery of this Agreement and the other Transaction Documents; provided, however, that at the First Tranche Closing the Company shall pay the reasonable and documented fees and expenses incurred by counsel to the Investor, up to a maximum amount of Ten Thousand Dollars ($10,000).

 

(j)           Separability of Agreements; Severability of this Agreement.  If any provision of this Agreement shall be judicially determined to be invalid, illegal or unenforceable, the validity, legality and enforceability of the remaining provisions shall not in any way be affected or impaired thereby.

 

(k)           Counterparts.  This Agreement may be executed in one or more counterparts, each of which will be deemed an original, but all of which together will constitute one and the same agreement. Facsimile copies of signed signature pages will be deemed binding originals.

 

(l)           Waiver of Conflicts.  The Investor acknowledges that Goodwin Procter LLP (“Goodwin”) may in the future represent the Investor in matters unrelated to the transactions contemplated by this Agreement (the “Financing”).  The applicable rules of professional conduct require that Goodwin inform the parties hereunder of this representation and obtain their consent.  Goodwin has acted as counsel to the Company and has negotiated the terms of the Financing solely on behalf of the Company.  The Company and each Investor hereby: (a) acknowledge that they have had an opportunity to ask for and have obtained information relevant to such representation; (b) acknowledge that with respect to the Financing, Goodwin has represented solely the Company, and not the Investor or any affiliate of the Investor; (c) and gives its informed consent to Goodwin’s representation of the Company in the Financing.

 

(m)           Further Assurances.  From and after the date of this Agreement, upon the request of any Investor or the Company, the Company and the Investor shall execute and deliver such instruments, documents or other writings as may be reasonably necessary or desirable to confirm and carry out and to effectuate fully the intent and purposes of this Agreement.

 

  

10

  

 

(n)           Attorneys’ Fees.  In the event that there is any controversy or claim arising out of or relating to this Agreement, or to the interpretation, breach or enforcement thereof, and any action or proceeding is commenced to enforce the provisions of this Agreement, the prevailing party shall be entitled to reasonable attorneys’ fees, costs and expenses (including such fees and costs incurred in proceedings undertaken to establish both entitlement to fees and establishing the amount of fees to be recovered, sometimes referred to as “fees on fees”).  Should a party take an appeal, the prevailing party shall recover attorney’s fees and costs on the appeal, unless the outcome of the appeal is a remand for new trial, in which case the party that ultimately prevails shall recover attorney’s fees and costs for all proceedings including any appeal.  The attorney’s fees incurred in third party actions shall be recoverable by the Investor as damages against the Company if the Company has failed to indemnify the Investor as set forth above.

 

(o)           Exclusive Jurisdiction and Venue. Any action brought by either party against the other concerning the transactions contemplated by this Agreement shall be brought only in the state or federal courts of Florida and venue shall be in the County of Palm Beach or appropriate federal district and division.  The parties to this Agreement hereby irrevocably waive any objection to jurisdiction and venue of any action instituted hereunder and shall not assert any defense based on lack of jurisdiction or venue or based upon forum non conveniens.

 

(Signature Page Follows)

 

  

11

  

 

 

The parties have caused this Agreement to be duly executed and delivered by their proper and duly authorized officers as of the date and year first written above.

 

 

	 	COMPANY:	 
	 	 	 
	 	Hollywood Creations, Inc.	 
	 	
a Delaware corporation

	 
	 	 	 	 
	
 

	
By: 

	/s/ Malcolm Barnes	 
	 	 	Name: Malcolm Barnes	 
	 	 	Title: Chief Executive Officer	 
	 	 	 	 
	 	 	 	 
	 	INVESTOR:	 
	 	 	 	 
	 	Quepasa Corporation	 
	 	a Nevada corporation	 
	 	 	 	 
	 	By:	/s/ Michael Matte	 
	 	 	Name: Michael Matte	 
	 	 	Title: Chief Financial Officer	 
	 	 	 	 

 

	 	Address:	 
	 	 	324 Datura Street, Ste. 114	 
	 	 	West Palm Beach, FL 33401	 
	 	 	Tel: 561-366-1249	 
	 	 	E-mail: mike.matte@quepasacorp.com	 
	 	 	Attn: Mike Matteex10-1.htm

Exhibit 10.1

 

                 

 

 

 

LOAN AGREEMENT

This Agreement dated as of September 16, 2010, is between Bank of America, N.A. {the "Bank") and Vertex Energy, Inc. (the "Borrower").

1.  DEFINITIONS

In addition to the terms which are defined elsewhere in this Agreement, the following terms have the meanings indicated for the purposes of this Agreement:

1 .1  "Borrowing Base" means the sum of:

 

(a) 80% of the balance due on Acceptable Receivables; and

 

(b) 50% of the value of Acceptable Inventory.

In determining the value of Acceptable Inventory to be included in the Borrowing Base, the Bank wilt use the lowest of (i) the Borrower's cost, (ii) the Borrower's estimated market value, or (iii) the Bank's independent determination of the resale value of such inventory in such quantities and on such terms as the Bank deems appropriate.

 

After calculating the Borrowing Base as provided above, the Bank may deduct such reserves as the Bank may establish from time to time in its reasonable credit judgment, including, without limitation, reserves for rent at leased locations subject to statutory or contractual landlord's liens, inventory shrinkage, dilution, customs charges, warehousemen's or bailees' charges, liabilities to growers of agricultural products which are entitled to lien rights under the federal Perishable Agricultural Commodities Act or any applicable state law, and the amount of estimated maximum exposure, as determined by the Bank from time to time, under any interest rate contracts which the Borrower enters Into with the Bank (including interest rate swaps, caps, floors, options thereon, combinations thereof, or similar contracts).

 

1 .2      "Acceptable Receivable" means an account receivable which satisfies the following requirements:

(a) The account has resulted from the sale of goods by the Borrower in the ordinary course of the Borrower's business and without any further obligation on the part of the Borrower to service, repair, or maintain any such goods sold other than pursuant to any applicable warranty.

(b) There are no conditions which must be satisfied before the Borrower is entitled to receive payment of the account. Accounts arising from COD sates, consignments or guaranteed sales are not acceptable.

(c) The debtor upon the account does not claim any defense to payment of the account, whether well founded or otherwise.

(d) The account balance does not include the amount of any counterclaims or offsets which have been or may be asserted against the Borrower by the account debtor (including offsets for any "contra accounts" owed by the Borrower to the account debtor for goods purchased by the Borrower or for services performed for the Borrower). To the extent any counterclaims, offsets, or contra accounts exist in favor of the debtor, such amounts shall be deducted from the account balance.

(e) The account represents a genuine obligation of the debtor for goods sold to and accepted by the debtor. To the extent any credit balances exist in favor of the debtor, such credit balances shall be deducted from the account balance.

(f) The account balance does not include the amount of any finance or service charges payable by the account debtor. To the extent any finance charges or service charges are included, such amounts shall be deducted from the account balance.

 

Ref #: 1000420713 : - Vertex Energy, inc.

Standard Loan Agreement

 

  

  

  

(g) The Borrower has sent an invoice to the debtor in the amount of the account.

 

(h) The Borrower is not prohibited by the laws of the state where the account debtor is located from bringing an action in the courts of that state to enforce the debtor's obligation to pay the account. The Borrower has taken all appropriate actions to ensure access to the courts of the state where the account debtor is located, including, where necessary, the filing of a Notice of Business Activities Report or other similar filing with the applicable state agency or the qualification by the Borrower as a foreign corporation authorized to transact business in such state.

 

(i)  The account is owned by the Borrower free of any title defects or any liens or interests of others except the security interest in favor of the Bank.

 

(j)  The debtor upon the account is not any of the following;

 

	
  

	
(i)         An employee, affiliate, parent or subsidiary of the Borrower, or an entity which has common officers or directors with the Borrower.

 

	
  

	
(ii)        The U.S. government or any agency or department of the U.S. government unless the Bank agrees in writing to accept the obligation, the Borrower complies with the procedures in the Federal Assignment of Claims Act of 1940 (41 U.S.C. §15} with respect to the obligation, and the underlying contract expressly provides that neither the U.S. government nor any agency or department thereof shall have the right of set-off against the Borrower.

 

	
  

	
(iii)        Any state, county, city, town or municipality,

 

	
  

	
(iv)        Any person or entity located in a foreign country,

 

(k) The account is not in default. An account will be considered in default if any of the following occur:

 

	
  

	
(i)         The account is not paid within thirty (30) days from its invoice date or ten (10) days from its due date, whichever occurs first;

 

	
  

	
(ii)        The debtor obligated upon the account suspends business, makes a general assignment for the benefit of creditors, or fails to pay its debts generally as they come due; or

 

	
  

	
(iii)       Any petition is filed by or against the debtor obligated upon the account under any bankruptcy law or any other law or laws for the relief of debtors.

 

	
  

	
(I)         The account is not the obligation of a debtor who is in default (as defined above) on 30% or more of the accounts upon which such debtor is obligated.

 

	
  

	
(m)      The account does not arise from the sale of goods which remain in the Borrower's possession or under the Borrower's control.

 

	
  

	
(n)        The account is not evidenced by a promissory note or chattel paper, nor is the account debtor obligated to the Borrower under any other obligation which is evidenced by a promissory note.

(o)        The account is otherwise acceptable to the Bank.

 

1.3       "Acceptable inventory" means inventory which satisfies the following requirements:

 

(a) The inventory is owned by the Borrower free of any title defects or any liens or interests of others except the security interest in favor of the Bank. This does not prohibit any statutory liens which may exist in favor of the growers of agricultural products which are purchased by the Borrower.

 

(b) The inventory is located at locations which the Borrower has disclosed to the Bank and which are acceptable to the Bank. If the inventory is covered by a negotiable document of title (such as a warehouse receipt) that document must be delivered to the Bank. Inventory which is in transit is not acceptable.

(c) The inventory is held for sale or use in the ordinary course of the Borrower's business and is of good and merchantable quality. Display items, work-in-process, parts, samples, and packing and shipping materials are not acceptable, inventory which is obsolete, unsalable, damaged, defective, used, discontinued or slow-moving, or which has been returned by the buyer, is not acceptable.

 

Ref #: 1000420713 : - Vertex Energy, Inc.

Standard Loan Agreement

  

  

  

(d) The inventory is covered by insurance as required in the "Covenants" section of this Agreement.

 

(e) The inventory has not been manufactured to the specifications of a particular account debtor.

(f) The inventory is not subject to any licensing agreements which would prohibit or restrict in any way the ability of the Bank to sell the Inventory to third parties.

 

(g) The inventory has been produced in compliance with the requirements of the U.S. Fair Labor Standards Act (29 U.S.C. §§201 et seq.).

(h)The inventory is not placed on consignment.

 

(i)The inventory is otherwise acceptable to the Bank.

1.4  "Credit Limit" means the amount of Three Million Five Hundred Thousand and 00/100 Dollars ($3,500,000.00).

 

2.  FACILITY NO. 1: LINE OF CREDIT AMOUNT AND TERMS

 

2.1  Line of Credit Amount.

 

(a) During the availability period described below, the Bank will provide a line of credit to the Borrower. The amount of the line of credit (the "Facility No. 1 Commitment") is equal to the lesser of (i) the Credit Limit or (ii) the Borrowing Base.

 

(b) This is a revolving line of credit. During the availability period, the Borrower may repay principal amounts and reborrowthem.

 

(c) The Borrower agrees not to permit the principal balance outstanding to exceed the Facility No. 1 Commitment. If the Borrower exceeds this limit, the Borrower will immediately pay the excess to the Bank upon the Bank's demand.

 

2.2  Availability Period, The line of credit is available between the date of this Agreement and September 16, 2011, or such earlier date as the availability may terminate as provided in this Agreement (the "Facility No. 1 Expiration Date"). The availability period for this line of credit will be considered renewed if and only if the Bank has sent to the Borrower a written notice of renewal for the line of credit (the "Renewal Notice"). If this line of credit is renewed, it will continue to be subject to all the terms and conditions set forth in this Agreement except as modified by the Renewal Notice. The Borrower specifically understands and agrees that the interest rate applicable to this line of credit may be increased upon renewal and that the new interest rate will apply to the entire outstanding principal balance of the line of credit. If this line of credit is renewed, the term "Expiration Date" shall mean the date set forth in the Renewal Notice as the Expiration Date and the same process for renewal will apply to any subsequent renewal of this line of credit. A renewal fee may be charged at the Bank's option, if so, the amount will be specified in the Renewal Notice.

2.3  Conditions to Availability of Credit. In addition to the items required to be delivered to the Bank under the paragraph entitled "Financial Information" in the "Covenants" section of this Agreement, the Borrower will promptly deliver the following to the Bank at such times as may be requested by the Bank:

(a) A borrowing certificate, in form and detail satisfactory to the Bank, setting forth the Acceptable Receivables and the Acceptable Inventory on which the requested extension of credit is to be based.

 

(b) Copies of the Invoices or the record of invoices from the Borrower's sales journal for such Acceptable Receivables and a listing of the names and addresses of the debtors obligated thereunder.

(c) Copies of the delivery receipts, purchase orders, shipping instructions, bills of lading and other documentation pertaining to such Acceptable Receivables.

(d) Copies of the cash receipts journal pertaining to the borrowing certificate.

 

Ref#: 1000420713 : -Vertex Energy, Inc.

Standard Loan Agreement

  

  

  

2.4   Repayment Terms.

(a) The Borrower will pay interest on October 16, 2010, and then on the same day of each month thereafter until payment in full of any principal outstanding under this facility.

 

(b) The Borrower will repay in full any principal, interest or other charges outstanding under this facility no later than the Facility No. 1 Expiration Dale.

2.5  Interest Rate.

(a) The interest rate is a rate per year equal to the BBA LIBOR Daily Floating Rate plus 3.00 percentage point(s).

(b) The BBA LIBOR Daily Floating Rate is a fluctuating rate of interest which can change on each banking day. The rate will be adjusted on each banking day to equal the British Bankers Association LIBOR Rate ("BBA LIBOR") for U.S. Dollar deposits for delivery on the date in question for a one month term beginning on that date. The Bank will use the BBA LIBOR Rate as published by Reuters (or other commercially available source providing quotations of BBA LIBOR as selected by the Bank 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 theBank'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 the Bank. A "London Banking Day" is a day on which banks In London are open for business and dealing in offshore dollars.

2.6  Letters of Credit.

(a) During the availability period, at the request of the Borrower, the Bank will issue:

 

	
  

	
(i) standby letters of credit with a maximum maturity of three hundred sixty-five (365) days but not to extend more than three hundred sixty-five (365) days beyond the Facility No. 1 Expiration Date. The standby letters of credit may include a provision providing that the maturity date will be automatically extended each year for an additional year unless the Bank gives written notice to the contrary.

 

(b) The amount of the letters of credit outstanding at any one time (including the drawn and unreimbursed amounts of the letters of credit) may not exceed Three Million Five Hundred Thousand and 00/100 Dollars ($3,500,000.00).

 

(c) In calculating the principal amount outstanding under the Facility No. 1 Commitment, the calculation shall include the amount of any letters of credit outstanding, including amounts drawn on any letters of credit and not yet reimbursed.

(d) The Borrower agrees:

 

	
  

	
(i) Any sum drawn under a letter of credit may, at the option of the Bank, be added to the principal amount outstanding under this Agreement. The amount will bear interest and be due as described elsewhere in this Agreement.

 

	
  

	
(ii)  If there is a default under this Agreement, to immediately prepay and make the Bank whole for any outstanding letters of credit.

 

	
  

	
(iii) The issuance of any letter of credit and any amendment to a letter of credit is subject to the Bank's written approval and must be in form and content satisfactory to the Bank and in favor of a beneficiary acceptable to the Bank.

 

	
  

	
(iv) To sign the Bank's form Application and Agreement for Commercial Letter of Credit or Application and Agreement for Standby Letter of Credit, as applicable.

 

	
  

	
(v) To pay any issuance and/or other fees that the Bank notifies the Borrower will be charged for issuing and processing letters of credit for the Borrower.

 

	
  

	
(vi) To allow the Bank to automatically charge its checking account for applicable fees, discounts, and other charges.

 

Ref #: 1000420713 : - Vertex Energy, inc.

Standard Loan Agreement

 

  

  

  

	
  

	
(vii) To pay the Bank a non-refundable fee equal to 2% per annum of the outstanding undrawn amount of each standby letter of credit, payable quarterly in advance, calculated on the basis of the face amount outstanding on the day the fee is calculated,

3.  COLLATERAL

3.1 Personal Property. The personal property listed below now owned or owned in the future by the parties listed below will secure the Borrower's obligations to the Bank under this Agreement. The collateral is further defined In security agreement(s) executed by the owners of the collateral

(a) Equipment owned by the Borrower.

 

(b) Inventory owned by the Borrower.

 

(c) Receivables owned by the Borrower.

 

4.  FEES AND EXPENSES

 

4.1   Fees,

 

	
(a)  Unused Commitment Fee. The Borrower agrees to pay a fee on any difference between the Facility No, 1 Commitment and the amount of credit it actually uses, determined by the daily amount of credit outstanding during the specified period. The fee will be calculated at 0.5% per year.

 

This fee is due on December 16, 2010, and on the same day of each following quarter until the expiration of the availability period.

 

(b) Waiver Fee. If the Bank, at its discretion, agrees to waive or amend any terms of this Agreement, the Borrower will, at the Bank's option, pay the Bank a fee for each waiver or amendment in an amount advised by the Bank at the time the Borrower requests the waiver or amendment. Nothing in this paragraph shall imply that the Bank is obligated to agree to any waiver or amendment requested by the Borrower. The Bank may impose additional requirements as a condition to any waiver or amendment.

 

(c) Late Fee. To the extent permitted by law, the Borrower agrees to pay a late fee in an amount not to exceed four percent (4%) of any payment that is more than fifteen (15) days late. The imposition and payment of a late fee shall not constitute a waiver of the Bank's rights with respect to the default.

4.2 Expenses. The Borrower agrees to immediately repay the Bank for expenses that include, but are not limited to, filing, recording and search fees, appraisal fees, title report fees, and documentation fees.

4.3 Reimbursement Costs.

(a) The Borrower agrees to reimburse the Bank for any expenses it incurs in the preparation of this Agreement and any agreement or instrument required by this Agreement. Expenses include, but are not limited to, reasonable attorneys' fees, including any allocated costs of the Bank's in-house counsel to the extent permitted by applicable law.

(b) The Borrower agrees to reimburse the Bank for the cost of periodic field examinations of the Borrower's books, records and collateral, and appraisals of the collateral, at such intervals as the Bank may reasonably require. The actions described in this paragraph may be performed by employees of the Bank or by independent appraisers.

5. DISBURSEMENTS, PAYMENTS AND COSTS

 

5.1 Disbursements and Payments.

 

	
(a)       Each payment by the Borrower will be made in U.S. Dollars and immediately available funds by debit to a deposit account as described in this Agreement or otherwise authorized by the Borrower. For payments not made by direct debit, payments will be made by mail to the address shown on the Borrower's statement or at one of the Bank's banking centers in the United States, or by such other method as may be permitted by the Bank.

 

Ref #: 1000420713 : -Vertex Energy. Inc.

Standard Loan Agreement

  

  

  

(b) The Bank may honor instructions for advances or repayments given by the Borrower (if an individual), or by any one of the individuals authorized to sign loan agreements on behalf of the Borrower, or any other individual designated by any one of authorized signers (each an "Authorized Individual"),

(c) For any payment under this Agreement made by debit to a deposit account, the Borrower will maintain sufficient immediately available funds in the deposit account to cover each debit. If there are insufficient immediately available funds in the deposit account on the date the Bank enters such debit authorized by this Agreement, the Bank may reverse the debit.

(d) Each disbursement by the Bank and each payment by the Borrower will be evidenced by records kept by the Bank. In addition, the Bank may, at its discretion, require the Borrower to sign one or more promissory notes.

(e) Prior to the date each payment of principal and interest and any fees from the Borrower becomes due (the "Due Date"), the Bank will mail to the Borrower a statement of the amounts that will be due on that Due Date (the "Billed Amount"). The calculations in the bill will be made on the assumption that no new extensions of credit or payments will be made between the date of the billing statement and the Due Date, and that there will be no changes in the applicable interest rate. If the Billed Amount differs from the actual amount due on the Due Date (the "Accrued Amount"), the discrepancy will be treated as follows:

 

	
  

	
(i)         If the Billed Amount is less than the Accrued Amount, the Billed Amount for the following Due Date will be increased by the amount of the discrepancy. The Borrower will not be in default by reason of any such discrepancy.

 

	
  

	
(ii)        If the Billed Amount is more than the Accrued Amount, the Billed Amount for the following Due Date will be decreased by the amount of the discrepancy.

 

Regardless of any such discrepancy, interest will continue to accrue based on the actual amount of principal outstanding without compounding. The Bank will not pay the Borrower interest on any overpayment.

 

5.2 Telephone and Telefax Authorization.

 

(a) The Bank may honor telephone or telefax instructions for advances or repayments given, or purported to be given, by any one of the Authorized Individuals.

(b) Advances will be deposited in and repayments will be withdrawn from account number TX-488032919202 owned by Vertex Energy, inc. or such other of the Borrower's accounts with the Bank as designated in writing by the Borrower.

 

(c) The Borrower will indemnify and hold the Bank harmless from all liability, loss, and costs in connection with any act resulting from telephone or telefax instructions the Bank reasonably believes are made by any Authorized Individual. This paragraph will survive this Agreement's termination, and will benefit the Bank and its officers, employees, and agents.

5.3  Direct Debit.

(a) The Borrower agrees that on the Due Date the Bank will debit the Billed Amount from deposit account number TX-488032919202 owned by Vertex Energy, Inc. or such other of the Borrower's accounts with the Bank as designated in writing by the Borrower (the "Designated Account"),

(b) The Borrower may terminate this direct debit arrangement at any time by sending written notice to the Bank at the address specified at the end of this Agreement, if the Borrower terminates this arrangement, then the principal amount outstanding under this Agreement will at the option of the Bank bear interest at a rate per annum which is 0.5 percentage point(s) higher than the rate of interest otherwise provided under this Agreement.

5.4  Banking Days. Unless otherwise provided in this Agreement, a banking day is a day other than a Saturday, Sunday or other day on which commercial banks are authorized to close, or are in fact closed, in the state where the Bank's lending office is located, and, if such day relates to amounts bearing interest at an offshore rate (if any), means any such day on which dealings in dollar deposits are conducted among banks in the offshore dollar interbank market. All payments and disbursements which would be due on a day which is not a banking day will be due on the next banking day. All payments received on a day which is not a banking day will be applied to the credit on the next banking day.

 

Ref #: 1000420713 : - Vertex Energy, inc.

Standard Loan Agreement

  

  

  

5.5 Interest Calculation. Except as otherwise stated in this Agreement, all interest and fees, if any, will be computed on the basis of a 360-day year and the actual number of days elapsed. This results in more interest or a higher fee than if a 365-day year is used. Installments of principal which are not paid when due under this Agreement shall continue to bear interest until paid.

5.6 Default Rate. Upon the occurrence of any default or after maturity or after judgment has been rendered on any obligation under this Agreement, all amounts outstanding under this Agreement, including any interest, fees, or costs which are not paid when due, will at the option of the Bank bear interest at a rate which is 6.0 percentage point(s) higher than the rate of interest otherwise provided under this Agreement. This may result in compounding of interest. This will not constitute a waiver of any default.

5.7 Overdrafts. At the Bank's sole option in each instance, the Bank may do one of the following:

(a) The Bank may make advances under this Agreement to prevent or cover an overdraft on any account of the Borrower with the Bank. Each such advance will accrue interest from the date of the advance or the date on which the account is overdrawn, whichever occurs first, at the interest rate described in this Agreement. The Bank may make such advances even if the advances may cause any credit limit under this Agreement to be exceeded.

(b) The Bank may reduce the amount of credit otherwise available under this Agreement by the amount of any overdraft on any account of the Borrower with the Bank.

This paragraph shall not be deemed to authorize the Borrower to create overdrafts on any of the Borrower's accounts with the Bank.

5.8 Payments in Kind. If the Bank requires delivery in kind of the proceeds of collection of the Borrower's accounts receivable, such proceeds shall be credited to interest, principal, and other sums owed to the Bank under this Agreement in the order and proportion determined by the Bank in its sole discretion. All such credits will be conditioned upon collection and any returned items may, at the Bank's option, be charged to the Borrower.

6. CONDITIONS

 

Before the Bank is required to extend any credit to the Borrower under this Agreement, it must receive any documents and other items it may reasonably require, in form and content acceptable to the Bank, including any items specifically listed below.

 

6.1 Authorizations. If the Borrower or any guarantor is anything other than a natural person, evidence that the execution, delivery and performance by the Borrower and/or such guarantor of this Agreement and any instrument or agreement required under this Agreement have been duly authorized,

6.2 Governing Documents. If required by the Bank, a copy of the Borrower's organizational documents,

 

6.3 Guaranties. Guaranties signed by Cedar Marine Terminals, LP ("Cedar Marine Terminals, LP").

6.4 Security Agreements. Signed original security agreements covering the personal property collateral which the Bank requires.

6.5 Perfection and Evidence of Priority. Evidence that the security interests and liens in favor of the Bank are valid, enforceable, properly perfected in a manner acceptable to the Bank and prior to all others' rights and interests, except those the Bank consents to in writing. All title documents for motor vehicles which are part of the collateral must show the Bank's interest.

6.6 Repayment of Other Credit Agreement. Evidence that the existing Line of Credit with Regions Bank has been or will be repaid and cancelled on or before the first disbursement under this Agreement,

6.7 Good Standing. Certificates of good standing for the Borrower from its state of formation and from any other state in which the Borrower is required to qualify to conduct its business.

6.8 Landlord Agreement. For any personal property collateral located on real property which is subject to a mortgage or deed of trust or which is not owned by the Borrower (or the grantor of the security interest) an agreement from the owner of the real property and the holder of any such mortgage or deed of trust,

Ref#: 1000420713 : -Vertex Energy, Inc.

Standard Loan Agreement

  

  

  

6.9 insurance. Evidence of insurance coverage, as required in the "Covenants" section of this Agreement.

6.10 Appraisals. Appraisals prepared by appraisers acceptable to the Bank with respect to the liquidation value of the Borrower's inventory.

6.11 Environmental Information. A completed Bank form Environmental Questionnaire.

 

7. REPRESENTATIONS AND WARRANTIES

When the Borrower signs this Agreement, and until the Bank is repaid in full, the Borrower makes the following representations and warranties. Each request for an extension of credit constitutes a renewal of these representations and warranties as of the date of the request:

7.1 Formation. If the Borrower is anything other than a natural person, it is duly formed and existing under the laws of the state or other Jurisdiction where organized.

7.2 Authorization. This Agreement, and any instrument or agreement required hereunder, are within the Borrower's powers, have been duly authorized, and do not conflict with any of its organizational papers.

 

7.3 Enforceable Agreement. This Agreement is a legal, valid and binding agreement of the Borrower, enforceable against the Borrower in accordance with its terms, and any instrument or agreement required hereunder, when executed and delivered, will be similarly legal, valid, binding and enforceable.

 

7.4 Good Standing. In each state in which the Borrower does business, it is properly licensed, in good standing, and, where required, in compliance with fictitious name statutes.

7.5 No Conflicts. This Agreement does not conflict with any law, agreement, or obligation by which the Borrower is bound.

7.6 Financial Information. All financial and other information that has been or will be supplied to the Bank is sufficiently complete to give the Bank accurate knowledge of the Borrower's (and any guarantor's) financial condition, including all material contingent liabilities. Since the date of the most recent financial statement provided to the Bank, there has been no material adverse change in the business condition (financial or otherwise), operations, properties or prospects of the Borrower (or any guarantor). If the Borrower is comprised of the trustees of a trust, the foregoing representations shall also pertain to the trustor(s) of the trust.

 

7.7 Lawsuits. There is no lawsuit, tax claim or other dispute pending or threatened against the Borrower which, if lost, would impair the Borrower's financial condition or ability to repay the loan, except as have been disclosed in writing to the Bank.

7.8 Collateral. All collateral required in this Agreement Is owned by the grantor of the security interest free of any title defects or any liens or interests of others, except those which have been approved by the Bank in writing.

7.9 Permits. Franchises. The Borrower possesses all permits, memberships, franchises, contracts and licenses required and all trademark rights, trade name rights, patent rights, copyrights and fictitious name rights necessary to enable it to conduct the business in which it is now engaged.

7.10 Other Obligations. The Borrower is not in default on any obligation for borrowed money, any purchase money obligation or any other material lease, commitment, contract, instrument or obligation, except as have been disclosed in writing to the Bank,

7.11 Tax Matters. The Borrower has no knowledge of any pending assessments or adjustments of its income tax for any year and all taxes due have been paid, except as have been disclosed in writing to the Bank.

7.12 No Event of Default. There is no event which is, or with notice or lapse of time or both would be, a default under this Agreement.

7.13 Insurance. The Borrower has obtained, and maintained in effect, the insurance coverage required in the "Covenants" section of this Agreement.

 

Ref#: 1000420713 : -Vertex Energy, Inc.

Standard Loan Agreement

  

  

  

7.14 Merchantable inventory; Compliance with FLSA. All inventory which is included in the Borrowing Base is of good and merchantable quality and free from defects, and has been produced in compliance with the requirements of the U.S. Fair Labor Standards Act (29 U.S.C. §§201 et seq.).

7.15 ERISA Plans.

(a) Each Plan (other than a multiemployer plan) is in compliance in all material respects with the applicable provisions of ERISA, the Code and other federal or state law. Each Plan has received a favorable determination letter from the IRS and to the best knowledge of the Borrower, nothing has occurred which would cause the loss of such qualification. The Borrower has fulfilled its obligations, if any, under the minimum funding standards of ERISA and the Code with respect to each Plan, and has not incurred any liability with respect to any Plan under Title IV of ERISA.

 

(b) There are no claims, lawsuits or actions (including by any governmental authority), and there has been no prohibited transaction or violation of the fiduciary responsibility rules, with respect to any Plan which has resulted or could reasonably be expected to result in a material adverse effect.

(c) With respect to any 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.

 

	
  

	
(it)        No action by the Borrower or any ERISA Affiliate to terminate or withdraw from any Plan has been taken and no notice of intent to terminate a Plan has been filed under Section 4041 of ERISA.

 

	
  

	
(iii)       No termination proceeding has been commenced with respect to a 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.

(d)  The following terms have the meanings indicated for purposes of this Agreement:

 

	
  

	

(i)        "Code" means the Internal Revenue Code of 1986, as amended from time to time.

 

	
  

	

(ii)        "ERISA" means the Employee Retirement Income Security Act of 1974, as amended from time to time.

 

	
  

	
(iii)       "ERISA Affiliate" means any trade or business (whether or not incorporated) under common control with the Borrower within the meaning of Section 414(b) or (c) of the Code.

 

	
  

	

(iv)       "PBGC" means the Pension Benefit Guaranty Corporation.

 

	
  

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

 

8.  COVENANTS

 

The Borrower agrees, so long as credit is available under this Agreement and until the Bank is repaid in full:

 

8.1  Use of Proceeds.

 

(a) To use the proceeds of Facility No. 1 only for working capital.

(b) The proceeds of the credit extended under this Loan Agreement may not be used directly or indirectly to purchase or carry any "margin stock" as that term is defined in Regulation U of the Board of Governors of the Federal Reserve System, or extend credit to or invest in other parties for the purpose of purchasing or carrying any such "margin stock," or to reduce or retire any indebtedness incurred for such purpose,

8.2 Financial Information. To provide the following financial information and statements in form and content acceptable to the Bank, and such additional information as requested by the Bank from time to time. The Bank reserves the right, upon written notice to the Borrower, to require the Borrower to deliver financial information and statements to the Bank more frequently than otherwise provided below, and to use such additional information and statements to measure any applicable financial covenants in this Agreement.

 

 

Ref #: 1000420713 : - Vertex Energy, Inc.

Standard Loan Agreement

  

  

  

(a) Within one hundred twenty (120) days of the fiscal year end, the annual financial statements of the Borrower, certified and dated by an authorized financial officer. These financial statements must be audited (with an opinion satisfactory to the Bank) by a Certified Public Accountant acceptable to the Bank. The statements shall be prepared on a consolidated basis.

(b) Within one hundred twenty (120) days of the fiscal year end, the annual financial statements of Cedar Marine Terminals, LP, certified and dated by an authorized financial officer. These financial statements may be company-prepared. The statements shall be prepared on a consolidated basis.

(c) Within forty-five (45) days of the period's end, quarterly financial statements of the Borrower, certified and dated by an authorized financial officer. These financial statements may be company-prepared. The statements shall be prepared on a consolidated basis.

 

(d) Within one hundred twenty (120) days of the end of each fiscal year and within forty-five (45) days of the end of each quarter, a compliance certificate of the Borrower signed by an authorized financial officer, and setting forth

 

(i) the information and computations (in sufficient detail) to establish compliance with all financial covenants at the end of the period covered by the financial statements then being furnished and (ii) whether there existed as of the date of such financial statements and whether there exists as of the date of the certificate, any default under this Agreement applicable to the party submitting the information and, if any such default exists, specifying the nature thereof and the action the party is taking and proposes to take with respect thereto.

(e) A detailed aging of the Borrower's receivables by invoice or a summary aging by account debtor, as specified by the Bank, within thirty (30) days after the end of each quarter.

(f) A borrowing certificate setting forth the amount of Acceptable Receivables and Acceptable Inventory as of the last day of each month within thirty (30) days after quarter end and, upon the Bank's request, copies of the invoices or the record of invoices from the Borrower's sales journal for such Acceptable Receivables, copies of the delivery receipts, purchase orders, shipping instructions, bills of lading and other documentation pertaining to such Acceptable Receivables, and copies of the cash receipts journal pertaining to the borrowing certificate.

 

(g) If the Bank requires the Borrower to deliver the proceeds of accounts receivable to the Bank upon collection by the Borrower, a schedule of the amounts so collected and delivered to the Bank.

 

	
(h)  An inventory listing within thirty (30) days after the end of each quarter. The listing must include a description of the inventory, its location and cost, and such other information as the Bank may require.

 

(i)  Promptly upon the Bank's request, such other books, records, statements, lists of property and accounts, budgets, forecasts or reports as to the Borrower and as to each guarantor of the Borrower's obligations to the Bank as the Bank may request.

 

8.3  Interest Coverage Ratio. To maintain on a consolidated basis an Interest Coverage Ratio of at least 1.5:1.0 to be measured quarterly and annually.

 

"Interest Coverage Ratio" means the ratio of EBIT to interest expense.

 

"EBIT" means net income, less income or plus loss from discontinued operations and extraordinary items, plus income taxes, plus interest expense. This ratio will be calculated at the end of each reporting period for which the Bank requires financial statements, using the results of the twelve-month period ending with that reporting period.

 

8.4 Bank as Principal Depository. To maintain the Bank or one of its affiliates as its principal depository bank, including for the maintenance of business, cash management, operating and administrative deposit accounts.

8.5 Other Debts. Not to have outstanding or incur any direct or contingent liabilities or tease obligations (other than those to the Bank), or become liable for the liabilities of others, without the Bank's written consent. This does not prohibit:

(a) Acquiring goods, supplies, or merchandise on normal trade credit.

(b) Endorsing negotiable instruments received in the usual course of business.

 

Ref #: 1000420713 : - Vertex Energy, Inc.

Standard Loan Agreement

  

  

  

(c) Obtaining surely bonds in the usual course of business.

(d) Liabilities, lines of credit and leases in existence on the date of this Agreement disclosed in writing to the Bank.

(e) Additional debts and lease obligations for the acquisition of fixed assets, to the extent permitted elsewhere in this Agreement.

8.6  Other Liens. Not to create, assume, or allow any security interest or lien (including judicial liens) on property the

 

Borrower now or later owns, except:

 

(a) Liens and security interests in favor of the Bank,

 

(b) Liens for taxes not yet due.

 

(c) Liens outstanding on the date of this Agreement disclosed in writing to the Bank.

 

(d) Additional purchase money security interests in assets acquired after the date of this Agreement,

8.7  Maintenance of Assets.

(a) Not to sell, assign, lease, transfer or otherwise dispose of any part of the Borrower's business or the Borrower's assets except in the ordinary course of the Borrower's business.

(b) Not to sell, assign, lease, transfer or otherwise dispose of any assets for less than fair market value, or enter into any agreement to do so.

(c) Not to enter into any sale and leaseback agreement covering any of its fixed assets.

 

(d) To maintain and preserve all rights, privileges, and franchises the Borrower now has.

 

(e) To make any repairs, renewals, or replacements to keep the Borrower's properties in good working condition.

8.8  Investments. Not to have any existing, or make any new, investments in any individual or entity, or make any capital contributions or other transfers of assets to any individual or entity, except for:

(a) Existing investments disclosed to the Bank in writing.

 

(b) Investments in the Borrower's current subsidiaries,

 

(c) Investments in any of the following:

 

	
  

	

(i)  certificates of deposit;

 

	
  

	

(ii) U.S. treasury bills and other obligations of the federal government;

 

	
  

	
(iii) readily marketable securities (including commercial paper, but excluding restricted stock and stock subject to the provisions of Rule 144 of the Securities and Exchange Commission).

 

8.9  Loans. Not to make any loans, advances or other extensions of credit to any individual or entity, except for:

 

(a) Existing extensions of credit disclosed to the Bank in writing.

 

(b) Extensions of credit to the Borrower's current subsidiaries.

 

(c) 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 non-affiliated entities.

8.10  Change of Management, Not to make any substantial change in the present executive or management personnel of the Borrower.

 

Ref #: 1000420713 : - Vertex Energy, Inc.

Standard Loan Agreement

 

  

  

  

8.11 Change of Ownership. Not to cause, permit, or suffer any change in capital ownership such that there is a

change of more than twenty-five percent (25%) in the direct or indirect capita! ownership of the Borrower.

8.12 Additional Negative Covenants. Not to, without the Bank's written consent:

(a) Enter into any consolidation, merger, or other combination, or become a partner in a partnership, a member of a joint venture, or a member of a limited liability company.

(b) Acquire or purchase a business or its assets.

 

(c) Engage in any business activities substantially different from the Borrower's present business.

 

(d) Liquidate or dissolve the Borrower's business.

 

8.13  Notices to Bank. To promptly notify the Bank in writing of:

 

(a)  Any substantial dispute between any governmental authority and the Borrower or any Obligor.

 

	
(b) Any event of default under this Agreement, or any event which, with notice or lapse of time or both, would constitute an event of default

 

(c) Any material adverse change in the Borrower's Obligor's business condition (financial or otherwise), operations, properties or prospects, or ability to repay the credit.

 

(d) Any change in the Borrower's or any Obligor's name, legal structure, principal residence (for an individual), state of registration (for a registered entity), place of business, or chief executive office if the Borrower or any Obligor has more than one place of business.

(e) Any actual contingent liabilities of the Borrower or any Obligor, and any such contingent liabilities which are reasonably foreseeable.

(f) For purposes of this Agreement, "Obligor" shall mean any guarantor, or any party pledging collateral to the Bank, or, if the Borrower is comprised of the trustees of a trust, any trustor.

 

8.14 Insurance.

 

(a) General Business Insurance. To maintain insurance satisfactory to the Bank as to amount, nature and carrier covering property damage (including loss of use and occupancy) to any of the Borrower's properties, business interruption insurance, public liability insurance including coverage for contractual liability, product liability and workers1 compensation, and any other insurance which is usual for the Borrower's business. Each policy shall provide for at least 30 days prior notice to the Bank of any cancellation thereof.

(b) Insurance Covering Collateral. To maintain all risk property damage insurance policies (including without limitation windstorm coverage, and hurricane coverage as applicable) 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. The insurance must be issued by an insurance company acceptable to the Bank and must include a lender's loss payable endorsement in favor of the Bank in a form acceptable to the Bank,

(c) Evidence of Insurance. Upon the request of the Bank, to deliver to the Bank a copy of each insurance policy, or, if permitted by the Bank, a certificate of insurance listing all insurance in force.

8.15 Compliance with Laws. To comply with the laws (including any fictitious or trade name statute), regulations, and orders of any government body with authority over the Borrower's business. The Bank shall have no obligation to maany advance to the Borrower except in compliance with all applicable laws and regulations and the Borrower shall fully cooperate with the Bank in complying with all such applicable laws and regulations.

8.16 ERISA Plans. Promptly during each year, to pay and cause any subsidiaries to pay contributions adequate to meet at least the minimum funding standards under ERISA with respect to each and every Plan; file each annual report required to be filed pursuant to ERISA in connection with each Plan for each year; and notify the Bank within ten (10) days of the occurrence of any Reportable Event that might constitute grounds for termination of any capital Plan by the Pension Benefit Guaranty Corporation or for the appointment by the appropriate United States District Court of a trustee to administer any Plan. "ERISA" means the Employee Retirement Income Security Act of 1974, as amended from time to time. Capitalized terms in this paragraph shall have the meanings defined within ERISA.

 

Ref#: 1000420713 : -Vertex Energy. Inc.

Standard Loan Agreement

  

  

  

8.17  ERISA Plans-Notices. With respect to a Plan subject to Title IV of ERISA, to give prompt written notice to the Bank of:

(a) The occurrence of any reportable event under Section 4043{c) of ERISA for which the PBGC requires 30-day notice.

 

(b) Any action by the Borrower or any ERISA Affiliate to terminate or withdraw from a Plan or the filing of any notice of intent to terminate under Section 4041 of ERISA.

(c) The commencement of any proceeding with respect to a Plan under Section 4042 of ERISA.

8.18 Books and Records. To maintain adequate books and records.

8.19 Audits. To allow the Bank and its agents to inspect the Borrower's properties and examine, audit, and make copies of books and records at any reasonable time. If any of the Borrower's properties, books or records are in the possession of a third party, the Borrower authorizes that third party to permit the Bank or its agents to have access to perform inspections or audits and to respond to the Bank's requests for information concerning such properties, books and records.

8.20 Perfection of Liens. To help the Bank perfect and protect its security interests and liens, and reimburse it for related costs it incurs to protect its security interests and liens.

8.21 Cooperation. To take any action reasonably requested by the Bank to carry out the intent of this Agreement.

 

9. HAZARDOUS SUBSTANCES

9.1 indemnity Regarding Hazardous Substances. The Borrower will indemnify and hold harmless the Bank from any loss or liability the Bank incurs in connection with or as a result of .this Agreement, which directly or indirectly arises out of the use, generation, manufacture, production, storage, release, threatened release, discharge, disposal or presence of a hazardous substance. This indemnity will apply whether the hazardous substance is on, under or about the Borrower's properly or operations or properly leased to the Borrower. The indemnity includes but is not limited to attorneys' fees (including the reasonable estimate of the allocated cost of in-house counsel and staff). The indemnity extends to the Bank, its parent, subsidiaries and all of their directors, officers, employees, agents, successors, attorneys and assigns.

9.2 Compliance Regarding Hazardous Substances. The Borrower represents and warrants that the Borrower has complied with all current and future laws, regulations and ordinances or other requirements of any governmental authority relating to or imposing liability or standards of conduct concerning protection of health or the environment or hazardous substances.

9.3 Notices Regarding Hazardous Substances. Until full repayment of the loan, the Borrower will promptly notify the Bank in writing of any threatened or pending investigation of the Borrower or its operations by any governmental agency under any current or future law, regulation or ordinance pertaining to any hazardous substance.

9.4 Site Visits. Observations and Testing. The Bank and its agents and representatives will have the right at any reasonable time, after giving reasonable notice to the Borrower, to enter and visit any locations where the collateral securing this Agreement (the "Collateral") is located for the purposes of observing the Collateral, taking and removing environmental samples, and conducting tests, The Borrower shall reimburse the Bank on demand for the costs of any such environmental investigation and testing. The Bank will make reasonable efforts during any site visit, observation or testing conducted pursuant this paragraph to avoid interfering with the Borrower's use of the Collateral. The Bank is under no duty to observe the Collateral or to conduct tests, and any such acts by the Bank will be solely for the purposes of protecting the Bank's security and preserving the Bank's rights under this Agreement. No site visit, observation or testing or any report or findings made as a result thereof ("Environmental Report") (i) will result in a waiver of any default of the Borrower; (ii) impose any liability on the Bank; or (iii) be a representation or warranty of any kind regarding the Collateral (including its condition or value or compliance with any laws) or the Environmental Report (including its accuracy or completeness). In the event the Bank has a duty or obligation under applicable laws, regulations or other requirements to disclose an Environmental Report to the Borrower or any other party, the Borrower authorizes the Bank to make such a disclosure. The Bank may also disclose an Environmental Report to any regulatory authority, and to any other parties as necessary or appropriate in the Bank's judgment. The Borrower understands and agrees that any Environmental Report or other information regarding a site visit, observation or testing that is disclosed to the Borrower by the Bank or its agents and representatives is to be evaluated {including any reporting or other disclosure obligations of the Borrower) by the Borrower without advice or assistance from the Bank.

 

Ref #: 1000420713 : - Vertex Energy, Inc.

Standard Loan Agreement

 

  

  

  

9.5 Definition of Hazardous Substances. "Hazardous substances" means any substance, material or waste that is or becomes designated or regulated as "toxic," "hazardous," "pollutant/1 or "contaminant" or a similar designation or regulation under any current or future federal, state or local law {whether under common law, statute, regulation or otherwise) or judicial or administrative interpretation of such, including without limitation petroleum or natural gas.

 

9.6 Continuing Obligation. The Borrower's obligations to the Bank under this Article, except the obligation to give notices to the Bank, shall survive termination of this Agreement and repayment of the Borrower's obligations to the Bank under this Agreement.

10. DEFAULT AND REMEDIES

If any of the following events of default occurs, the Bank may do one or more of the following: declare the Borrower in default, stop making any additional credit available to the Borrower, and require the Borrower to repay its entire debt immediately and without prior notice. If an event which, with notice or the passage of time, will constitute an event of default has occurred and is continuing, the Bank has no obligation to make advances or extend additional credit under this Agreement. In addition, if any event of default occurs, the Bank shall have all rights, powers and remedies available under any instruments and agreements required by or executed in connection with this Agreement, as well as all rights and remedies available at law or in equity. If an event of default occurs under the paragraph entitled "Bankruptcy," below, with respect to the Borrower, then the entire debt outstanding under this Agreement will automatically be due immediately,

10.1 Failure to Pay. The Borrower fails to make a payment under this Agreement when due.

10.2 Other Bank Agreements. Any default occurs under any other agreement the Borrower (or any Obligor) or any of the Borrower's related entities or affiliates has with the Bank or any affiliate of the Bank.

10.3 Cross-default. Any default occurs under any agreement in connection with any credit the Borrower (or any Obligor) or any of the Borrower's related entities or affiliates has obtained from anyone else or which the Borrower (or any Obligor) or any of the Borrower's related entities or affiliates has guaranteed.

10.4 False Information. The Borrower or any Obligor has given the Bank false or misleading information or representations.

10.5 Bankruptcy. The Borrower, any Obligor, or any general partner of the Borrower or of any Obligor files a bankruptcy petition, a bankruptcy petition is filed against any of the foregoing parties, or the Borrower, any Obligor, or any general partner of the Borrower or of any Obligor makes a general assignment for the benefit of creditors.

10.6 Receivers. A receiver or similar official is appointed for a substantial portion of the Borrower's or any Obligor's business, or the business is terminated, or, if any Obligor is anything other than a natural person, such Obligor is liquidated or dissolved.

10.7 Lien Priority. The Bank fails to have an enforceable first lien (except for any prior liens to which the Bank has consented in writing) on or security interest in any properly given as security for this Agreement (or any guaranty).

10.8 Judgments. Any judgments or arbitration awards are entered against the Borrower or any Obligor, or the Borrower or any Obligor enters into any settlement agreements with respect to any litigation or arbitration, in an aggregate amount of Two Hundred Fifty Thousand and 00/100 Dollars ($250,000.00) or more in excess of any insurance coverage.

10.9 Material Adverse Change. A material adverse change occurs, or is reasonably likely to occur, in the Borrower's (or any Obligor's) business condition (financial or otherwise), operations, properties or prospects, or ability to repay thecredit; or the Bank determines that it is insecure for any other reason.

 

10.10 Government Action. Any government authority takes action that the Bank believes materially adversely affects the Borrower's or any Obligor's financial condition or ability to repay.

 

Ref#: 1000420713 : -Vertex Energy, Inc.

Standard Loan Agreement

  

  

  

10.11 Default under Related Documents. Any default occurs under any guaranty, subordination agreement, security agreement, deed of trust, mortgage, or other document required by or delivered in connection with this Agreement or any such document is no longer in effect, or any guarantor purports to revoke or disavow the guaranty.

10.12 ERISA Plans. Any one or more of the following events occurs with respect to a Plan of the Borrower subject to Title IV of ERISA, provided such event or events could reasonably be expected, in the judgment of the Bank, to subject the Borrower to any tax, penalty or liability (or any combination of the foregoing) which, in the aggregate, could have a material adverse effect on the financial condition of the Borrower:

(a) A reportable event shall occur under Section 4043(c) of ERISA with respect to a Plan.

 

(b) Any Plan termination (or commencement of proceedings to terminate a Plan) or the full or partial withdrawal from a Plan by the Borrower or any ERISA Affiliate.

10.13 Other Breach Under Agreement. A default occurs under any other term or condition of this Agreement not specifically referred to in this Article. This includes any failure or anticipated failure by the Borrower (or any other party named in the Covenants section) to comply with the financial covenants set forth in this Agreement, whether such failure is evidenced by financial statements delivered to the Bank or is otherwise known to the Borrower or the Bank.

11. ENFORCING THIS AGREEMENT; MISCELLANEOUS

11.1 GAAP. Except as otherwise stated in this Agreement, all financial information provided to the Bank and all financial covenants will be made under generally accepted accounting principles, consistently applied.

 

11.2 Governing Law. This Agreement shall be governed by and construed in accordance with the laws of Texas. To the extent that the Bank has greater rights or remedies under federal law, whether as a national bank or otherwise, this paragraph shall not be deemed to deprive the Bank of such rights and remedies as may be available under federal law.

11.3 Successors and Assigns. This Agreement is binding on the Borrower's and the Bank's successors and assignees. The Borrower agrees that it may not assign this Agreement without the Bank's prior consent. The Bank may sell participations in or assign this loan, and may exchange information about the Borrower (including, without limitation, any information regarding any hazardous substances) with actual or potential participants or assignees. If a participation is sold or the loan is assigned, the purchaser will have the right of set-off against the Borrower.

11.4 Dispute Resolution Provision. 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 the Bank involved in the servicing, management or administration of any obligation described or evidenced by this agreement.

(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, the Bank 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 persona! 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. Ail 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) shal! be issued within thirty (30) days of the close of the hearing. However, the arbitrators), 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.

 

Ref#: 1000420713 : -Vertex Energy, Inc.

Standard Loan Agreement

  

  

  

 

(e) The arbitrator(s) will give effect to statutes of limitation in determining any Claim and may dismiss the arbitrationon the basis that the Claim is barred. 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 trial by a judge of any Claim will take place on an individual basis without resort to any form of class or representative action (the "Class Action Waiver"). 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.

 

11.5 Severabilitv: Waivers. If any part of this Agreement is not enforceable, the rest of the Agreement may be enforced, The Bank retains all rights, even if it makes a loan after default. If the Bank waives a default, it may enforce a later default. Any consent or waiver under this Agreement must be in writing.

 

11.6 Attorneys' Fees. The Borrower shall reimburse the Bank for any reasonable costs and attorneys' fees incurred by the Bank in connection with the enforcement or preservation of any rights or remedies under this Agreement and any other documents executed in connection with this Agreement, and in connection with any amendment, waiver, "workout" or restructuring under this Agreement. In the event of a lawsuit or arbitration proceeding, the prevailing party is entitled to recover costs and reasonable attorneys' fees incurred in connection with the lawsuit or arbitration proceeding, as determined by the court or arbitrator. In the event that any case is commenced by or against the Borrower under the Bankruptcy Code (Title 11, United States Code) or any similar or successor statute, the Bank is entitled to recover costs and reasonable attorneys' fees incurred by the Bank related to the preservation, protection, or enforcement of any rights of the Bank in such a case. As used in this paragraph, "attorneys' fees" includes the allocated costs of the Bank's in- house counsel.

11.7 Individual Liability.   If the Borrower is a partnership, the Bank may proceed against the business and non- business property of each general partner of the Borrower in enforcing this Agreement and other agreements relating to this loan.

11.8 Set-Off.

(a) In addition to any rights and remedies of the Bank provided by law, upon the occurrence and during the continuance of any event of default under this Agreement, the Bank is authorized, at any time, to set off and apply any and all Deposits of the Borrower or any Obligor held by the Bank against any and all Obligations owing to the Bank. The set-off may be made irrespective of whether or not the Bank shall have made demand under this Agreement or any guaranty, and although such Obligations may be contingent or unmatured or denominated in a currency different from that of the applicable Deposits.

Ref #: 1000420713 : - Vertex Energy, Inc.

Standard Loan Agreement

 

  

  

  

(b) The set-off may be made without prior notice to the Borrower or any other party, any such notice being waived by the Borrower (on its own behalf and on behalf of each Obligor) to the fullest extent permitted by law. The Bank agrees promptly to notify the Borrower after any such set-off and application; provided, however, that the failure to give such notice shall not affect the validity of such set-off and application.

(c) For the purposes of this paragraph, "Deposits" means any deposits {general or special, time or demand,provisional or final, individual or joint) and any instruments owned by the Borrower or any Obligor which come into the possession or custody or under the control of the Bank, "Obligations" means all obligations, now or hereafterexisting, of the Borrower to the Bank under this Agreement and under any other agreement or instrument executed in connection with this Agreement, and the obligations to the Bank of any Obligor.

11.9 One Agreement. This Agreement and any related security or other agreements required by this Agreement, collectively:

 

(a) represent the sum of the understandings and agreements between the Bank and the Borrower concerning this credit;

(b) replace any prior oral or written agreements between the Bank and the Borrower concerning this credit; and

(c) are intended by the Bank and the Borrower as the final, complete and exclusive statement of the terms agreed to by them.

In the event of any conflict between this Agreement and any other agreements required by this Agreement, this Agreement will prevail. Any reference in any related document to a "promissory note" or a "note" executed by the Borrower and dated as of the date of this Agreement shall be deemed to refer to this Agreement, as now in effect or as hereafter amended, renewed, or restated.

11.10 Disposition of Schedules and Reports. The Bank will not be obligated to return any schedules, invoices, statements, budgets, forecasts, reports or other papers delivered by the Borrower. The Bank will destroy or otherwise dispose of such materials at such time as the Bank, in its discretion, deems appropriate.

11.11 Returned Merchandise. Until the Bank exercises its rights to collect the accounts receivable as provided under any security agreement required under this Agreement, the Borrower may continue its present policies for returned merchandise and adjustments. Credit adjustments with respect to returned merchandise shall be made immediately upon receipt of the merchandise by the Borrower or upon such other disposition of the merchandise by the debtor in accordance with the Borrower's instructions. If a credit adjustment is made with respect to any Acceptable Receivable, the amount of such adjustment shall no longer be included in the amount of such Acceptable Receivable in computing the Borrowing Base.

11.12 Verification of Receivables. The Bank may at any time, either orally or in writing, request confirmation from any debtor of the current amount and status of the accounts receivable upon which such debtor is obligated.

 

11.13 Waiver of Confidentiality. The Borrower authorizes the Bank to discuss the Borrower's financial affairs and business operations with any accountants, auditors, business consultants, or other professional advisors employed by the Borrower, and authorizes such parties to disclose to the Bank such financial and business information or reports (including management letters) concerning the Borrower as the Bank may request.

11.14 Indemnification. The Borrower will indemnify and hold the Bank harmless from any loss, liability, damages, judgments, and costs of any kind relating to or arising directly or indirectly out of (a) this Agreement or any document required hereunder, (b) any credit extended or committed by the Bank to the Borrower hereunder, (c) any claim, whether well-founded or otherwise, that there has been a failure to comply with any law regulating the Borrower's sales or leases to or performance of services for debtors obligated upon the Borrower's accounts receivable and disclosures in connection therewith, and (d) any litigation or proceeding related to or arising out of this Agreement, any such document, any such credit, or any such claim. This indemnity includes but is not limited to attorneys' fees (including the allocated cost of in-house counsel). This indemnity extends to the Bank, its parent, subsidiaries and all of their directors, officers, employees, agents, successors, attorneys, and assigns. This indemnity will survive repayment of the Borrower's obligations to the Bank. All sums due to the Bank hereunder shall be obligations of the Borrower, due and payable immediately without demand.

 

Ref#: 1000420713 : -Vertex Energy, Inc.

Standard Loan Agreement

 

  

  

  

11.15 Notices. Unless otherwise provided in this Agreement or in another agreement between the Bank and the Borrower, all notices required under this Agreement shall be personally delivered or sent by first class mail, postage prepaid, or by overnight courier, to the addresses on the signature page of this Agreement, or sent by facsimile to the fax numbers listed on the signature page, or to such other addresses as the Bank and the Borrower may specify from time to time in writing. Notices and other communications shall be effective (i) if mailed, upon the earlier of receipt or five (5) days after deposit in the U.S. mail, first class, postage prepaid, (ii) if telecopied, when transmitted, or (iii) if hand- delivered, by courier or otherwise (including telegram, lettergram or mailgram), when delivered.

11.16 Headings. Article and paragraph headings are for reference only and shall not affect the interpretation or meaning of any provisions of this Agreement.

11.17 Counterparts. This Agreement may be executed in as many counterparts as necessary or convenient, and by the different parties on separate counterparts each of which, when so executed, shall be deemed an original but alt such counterparts shall constitute but one and the same agreement.

 

11.18 Borrower Information: Reporting to Credit Bureaus. The Borrower authorizes the Bank at any time to verify or check any information given by the Borrower to the Bank, check the Borrower's credit references, verify employment, and obtain credit reports. The Borrower agrees that the Bank shall have the right at all times to disclose and report to credit reporting agencies and credit rating agencies such information pertaining to the Borrower and/or all guarantors as is consistent with the Bank's policies and practices from time to time in effect.

This Agreement is executed as of the date stated at the top of the first page.

 

Bank:

Bank of America, N.A.

 

By: /s/ Joel Collins

Joel Collins, Officer

Authorized signer

Borrower:

Vertex Energy, Inc.

 

By:/s/ Benjamin P. Cowart

Benjamin P, Cowart, Chief Executive Officer

 

By: /s/ Chris Carlson

Chris Carlson, Vice President

 

	
Address where notices to Vertex Energy, Inc. are to be sent:

	
Address where notices to the Bank are to be sent:

	  	  
	
1331 Gemini Street Suite 103 

Houston, TX 77058-2729 US

	
Doc Retention - GCF MO1-800-08-11 

800 Market Street, 8th Floor 

St. Louis, MO 63101-2510

	  	  
	
Telephone:  2815389802

	Facsimile: (866) 255-9922
	
 

	  

 

 

 

 

  

Ref #: 1000420713 : - Vertex Energy, Inc.

Standard Loan Agreement                                                                           

 

  

  

  

Federal law requires Bank of America, N.A. (the "Bank") to provide the following notice. The notice is not part of the foregoing agreement or instrument and may not be altered. Please read the notice carefully.

 

(1)         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. The Bank will ask for the Borrower's legal name, address, tax ID number or social security number and other identifying information. The Bank may also ask for additional information or documentation or take other actions reasonably necessary to verify the identity of the Borrower, guarantors or other related persons.

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