EXHIBIT 10.12
NOTE PURCHASE AGREEMENT
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NOTE PURCHASE AGREEMENT, dated as of March 11, 2003, by and among
Greka AM, Inc., a Colorado corporation, as borrower ("Greka AM"), Greka Energy
Corporation, a Colorado corporation ("Greka Energy") and each of the entities
listed as a guarantor on the signature pages hereto, as guarantors (Greka Energy
and each such entity, each a "Guarantor" and collectively, the "Guarantors";
Greka AM and each Guarantor individually, a "Credit Party" and collectively, the
"Credit Parties"), and each of the entities listed as a purchaser on the
signature pages hereto (individually, a "Purchaser" and collectively, the
"Purchasers") and Guggenheim Investment Management, LLC, as collateral agent
(the "Collateral Agent").
W I T N E S S E T H :
- - - - - - - - - -
WHEREAS, Greka AM has agreed to issue and sell to the Purchasers, and
the Purchasers have agreed to purchase from Greka AM, upon the terms and
conditions hereinafter provided, secured Floating Rate Senior Notes in the
aggregate principal amount of $13,500,000 in the form of Exhibit A-1 hereto
(collectively, the "Floating Rate Senior Notes") and secured Fixed Rate Senior
Notes in the aggregate principal amount of $6,500,000 in the form of Exhibit A-2
hereto (collectively, the "Fixed Rate Senior Notes" and together with the
Floating Rate Senior Notes, the "Notes");
NOW, THEREFORE, in consideration of the premises and the covenants
hereinafter contained, it is agreed as follows:
1. DEFINITIONS
"Additional Documents" shall have the meaning set forth in Section
3.5.
"Affiliate" shall mean, with respect to any Person, (i) each Person
that, directly or indirectly, owns or controls, whether beneficially, or as a
trustee, guardian or other fiduciary, 5% or more of the Stock having ordinary
voting power in the election of directors of such Person, (ii) each Person that
controls, is controlled by or is under common control with such Person or any
Affiliate of such Person, (iii) each of such Person's officers, directors, joint
venturers and partners, (iv) any trust or beneficiary of a trust of which such
Person is the sole trustee or (v) any lineal descendants, ancestors, spouse or
former spouses (as part of a marital dissolution) of such Person (or any trust
for the benefit of such Person). For the purpose of this definition, "control"
of a Person shall mean the possession, directly or indirectly, of the power to
direct or cause the direction of its management or policies, whether through the
ownership of voting securities, by contract or otherwise.
"Agreement" shall mean this Note Purchase Agreement including all
amendments, modifications and supplements hereto and any appendices, exhibits
and schedules hereto or thereto, and shall refer to the Agreement as the same
may be in effect at the time such reference becomes operative.
"Applicable Law" shall mean, in respect of any Person, all provisions
of constitutions, statutes, rules, regulations and orders of governmental bodies
or regulatory agencies applicable to such person, including, without limiting
the foregoing, zoning ordinances and all Environmental Laws, and all orders,
decisions, judgments and decrees of all courts and arbitrators in proceedings or
actions to which the Person in question is a party or by which it is bound.
"Balance Sheet" shall have the meaning set forth in Section 5.7(a)
hereof.
"Bank of Texas Debt" shall mean all principal of and premium, if any,
and interest on, and all other amounts owing in respect of Indebtedness of Greka
AM to the Bank of Texas, N.A., including under the Bank of Texas Loan Documents.
"Bank of Texas Loan Documents" shall mean the Loan Agreement dated
March 1, 2001 between Greka AM, Greka Energy, as guarantor and the Bank of
Texas, N.A., as amended, and all other agreements, documents and instruments
evidencing the Bank of Texas Debt and any Liens in respect thereof.
"Bankruptcy Code" shall mean the United States Bankruptcy Code, as in
effect from time to time.
"Business Day" shall mean any day that is not a Saturday, a Sunday or
a day on which banks are required or permitted to be closed in the State of New
York.
"Capital Expenditures" shall mean all cash payments for any fixed
assets or improvements or for replacements, substitutions or additions thereto,
that have a useful life of more than one year and which are required to be
capitalized under GAAP.
"Capital Lease" shall mean, with respect to any Person, any lease of
any property (whether real, personal or mixed) by such Person as lessee that, in
accordance with GAAP, either would be required to be classified and accounted
for as a capital lease on a balance sheet of such Person or otherwise be
disclosed as a capital lease in a note to such balance sheet, other than, in the
case of any Credit Party or a Subsidiary of any Credit Party, any such lease
under which such Credit Party or such Subsidiary is the lessor.
"Capitalized Lease Obligation" shall mean, with respect to any Capital
Lease, the amount of the obligation of the lessee thereunder that, in accordance
with GAAP, would appear on a balance sheet of such lessee in respect of such
Capital Lease or otherwise be disclosed in a note to such balance sheet.
"Cash Equivalents" shall mean (i) marketable direct obligations issued
or unconditionally guaranteed by the United States of America or any agency
thereof maturing within one year from the date of acquisition thereof; (ii)
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commercial paper maturing no more than one year from the date of creation
thereof and at the time of their acquisition having the highest rating
obtainable from either Standard & Poor's Corporation or Xxxxx'x Investors
Service, Inc.; and (iii) certificates of deposit, maturing not more than one
year from the date of creation thereof, issued by commercial banks incorporated
under the laws of the United States of America, each having combined capital,
surplus and undivided profits of not less than $200,000,000 and having a rating
of "A" or better by a nationally recognized rating agency.
"Change of Control" shall mean any of the following: (a) any person or
group of persons (within the meaning of the Exchange Act) shall have acquired
beneficial ownership (within the meaning of Rule 13d-3 promulgated by the SEC
under the Exchange Act) of 30% or more of the issued and outstanding shares of
Common Stock of Greka Energy; (b) any Credit Party shall be a party to a merger
or consolidation in which such Credit Party is not the survivor or in which such
Credit Party's stockholders immediately prior thereto own less than a majority
of the outstanding voting stock of the survivor; (c) any Credit Party shall have
sold, leased or otherwise transferred all or substantially all of its assets; or
(d) Greka Energy shall fail to have beneficial ownership (within the meaning of
Rule 13d-3 promulgated by the SEC under the Exchange Act) of all of the issued
and outstanding shares of Common Stock of Greka AM or any Guarantor.
"Charges" shall mean all federal, state, county, city, municipal,
local, foreign or other governmental (including, without limitation, PBGC) taxes
at the time due and payable, levies, assessments, charges, liens, claims or
encumbrances upon or relating to (i) any Credit Party's or any of its
Subsidiaries' employees, payroll, income or gross receipts, (ii) any Credit
Party's or any of its Subsidiaries' ownership or use of any of its assets, or
(iii) any other aspect of any Credit Party's or any of its Subsidiaries'
business.
"Closing" shall have the meaning set forth in Section 2.2 hereof.
"Closing Date" shall have the meaning set forth in Section 2.2 hereof.
"Closing Fee" shall mean a fee in an amount equal to 4.25% of the
aggregate principal amount of the Notes purchased by the Purchasers at the
Closing, payable by Greka AM to the Collateral Agent.
"COBRA" shall have the meaning set forth in Section 5.19(m) hereof.
"Code" shall mean the New York Uniform Commercial Code, as in effect
from time to time.
"Collateral" shall mean, collectively, the Greka AM Collateral and the
Guarantor Collateral.
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"Collateral Access Agreement" shall mean a landlord waiver, bailee
letter, or acknowledgement agreement of any lessor, warehouseman, processor,
consignee, or other Person in possession of, having a Lien upon, or having
rights or interests in the Inventory, in each case, in form and substance
satisfactory to the Required Holders.
"Collateral Agent" shall have the meaning set forth in the first
paragraph of this Agreement.
"Collateral Documents" shall mean the Guaranty, the Pledge Agreement
and the Mortgages.
"Collections" shall mean all cash, checks, notes, instruments, and
other items of payment (including insurance proceeds, proceeds of cash sales,
rental proceeds and tax refunds) of the Credit Parties.
"Common Stock" shall mean the common stock, no par value, of Greka
Energy.
"Compensation" shall mean, with respect to any Person, all payments
and accruals commonly considered to be compensation, including, without
limitation, all wages, salary, deferred payment arrangements, bonus payments and
accruals, profit sharing arrangements, payments in respect of stock option or
phantom stock option or similar arrangements, stock appreciation rights or
similar rights, incentive payments, pension or employment benefit contributions
or similar payments, made to or accrued for the account of such Person or
otherwise for the direct or indirect benefit of such Person.
"Consolidated Net Interest Expense" shall mean, with respect to any
Person for any period, gross interest expense of such Person and its
Subsidiaries for such period determined in conformity with GAAP (including,
without limitation, interest expense paid to Affiliates of such Person), less
the sum of interest income and non-cash accretion expense and non-cash
amortization for debt origination cost for such period, each determined on a
consolidated basis and in accordance with GAAP for such Person and its
Subsidiaries.
"Credit Party" shall have the meaning set forth in the first paragraph
of this Agreement.
"Crude Run" shall mean, for any month, the number of average barrels
of crude oil throughput at the Santa Xxxxx refinery per calendar day during such
month.
"Customer" shall mean and includes the account debtor with respect to
any Receivable, the prospective purchaser of goods, services or both with
respect to any contract or contract right, and/or any party who enters into or
proposes to enter into any contract or other arrangement with Greka Energy or
its Subsidiaries, pursuant to which Greka Energy or its Subsidiaries is to
deliver any personal property or perform any services.
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"Default" shall mean any event which, with the passage of time or
notice or both, would, unless cured or waived, become an Event of Default.
"Dispute" shall mean any claim asserted for nonpayment of Receivables,
including, without limitation, any alleged defense, counterclaim, offset,
dispute or other claim (real or merely asserted) whether arising from or
relating to the sale of goods or rendition of services or arising from or
relating to any other transaction or occurrence.
"EBITDA" shall mean, with respect to any Person for any period, the
result of (i) such Person's and its Subsidiaries' consolidated net earnings (or
loss), minus (ii) the aggregate amount of all extraordinary gains of such Person
and its Subsidiaries for such period, plus (iii) the aggregate amount of all
extraordinary losses, non-cash and non-recurring expenses, interest expense,
income taxes, and depreciation and amortization of such Person and its
Subsidiaries for such period, as determined in accordance with GAAP.
"Environmental Actions" shall mean any complaint, summons, citation,
notice, directive, order, claim, litigation, investigation, judicial or
administrative proceeding, judgment, letter, or other communication from any
Governmental Authority, or any third party involving violations of Environmental
Laws or releases of Hazardous Materials from (a) any assets, properties, or
businesses of any Credit Party or any predecessor in interest, (b) from
adjoining properties or businesses, or (c) from or onto any facilities which
received Hazardous Materials generated by any Credit Party or any predecessor in
interest.
"Environmental Complaint" shall have the meaning set forth in Section
6.1(j).
"Environmental Law" shall mean any applicable federal, state,
provincial, foreign or local statute, law, rule, regulation, ordinance, code,
binding and enforceable guideline, binding and enforceable written policy or
rule of common law now or hereafter in effect and in each case as amended, or
any judicial or administrative interpretation thereof, including any judicial or
administrative order, consent decree or judgment, to the extent binding on
Credit Parties, relating to the environment, natural resources, employee health
and safety, or Hazardous Materials, including, but not limited to, the
Comprehensive Environmental Response Compensation and Liability Act, 42
X.X.X.xx. 9601 et seq., the Resource Conservation and Recovery Act, 42.
U.S.C.ss.6901 et seq.; the Federal Water Pollution Control Act, 33 U.S.C.ss.1251
et seq.; the Toxic Substances Control Act, 15 X.X.X.xx. 2601 et seq.; the Clean
Air Act, 42 U.S.C.ss.7401 et seq.; the Safe Drinking Water Act, 42 U.S.C.ss.3803
et seq.; the Oil Pollution Act of 1990, 33 U.S.C.ss.2701 et seq.; the Emergency
Planning and the Community Right-to-Know Act of 1986, 42 U.S.C.ss.11001 et seq.;
the Hazardous Material Transportation Act, 49 U.S.C.ss.1801 et seq.; and the
Occupational Safety and Health Act, 29 X.X.X.xx. 651 et seq.; any state and
local or foreign counterparts or equivalents, in each case as amended from time
to time.
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"Environmental Liabilities and Costs" shall mean all liabilities,
obligations, responsibilities, remedial actions, losses, damages, punitive
damages, consequential damages, treble damages, costs and expenses (including,
without limitation, all fees, disbursements and expenses of counsel, experts and
consultants and costs of investigation and feasibility studies), fines,
penalties, sanctions and interest incurred as a result of any claim, suit,
action or demand by any person or entity, whether based in contract, tort,
implied or express warranty, strict liability, criminal or civil statute or
common law (including, without limitation, any thereof arising under any
Environmental Law, permit, order or agreement with any Governmental Authority)
and which relate to any health or safety condition regulated under any
Environmental Law or in connection with any other environmental matter or spill
or the presence of or Release of a Hazardous Material or threatened Release of
any Hazardous Material.
"Environmental Lien" shall mean any Lien in favor of any Governmental
Authority for Environmental Liabilities and Costs.
"Equipment" shall mean all of Credit Parties' now owned or hereafter
acquired right, title, and interest with respect to equipment, machinery,
machine tools, motors, furniture, furnishings, fixtures, vehicles (including
motor vehicles), tools, parts, goods (other than consumer goods, farm products,
or Inventory), wherever located, including all attachments, accessories,
accessions, replacements, substitutions, additions, and improvements to any of
the foregoing.
"ERISA" shall mean the Employee Retirement Income Security Act of 1974
(or any successor legislation thereto), as amended from time to time and any
regulations promulgated thereunder.
"ERISA Affiliate" shall mean, with respect to any Credit Party, any
trade or business (whether or not incorporated) under common control with such
Credit Party and which, together with such Credit Party, are treated as a single
employer within the meaning of Sections 414(b), (c), (m) or (o) of the IRC,
excluding the Purchasers and each other person which would not be an ERISA
Affiliate if the Purchasers did not own any issued and outstanding shares of
Stock of such Credit Party.
"Event of Default" shall have the meaning set forth in Section 8.1
hereof.
"Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended, and all rules and regulations promulgated thereunder.
"Facility" shall have the meaning set forth in Section 5.10(a) hereof.
"Fair Market Value" shall mean, with respect to any asset or property
of a Person, the price which could be negotiated in an arm's-length free market
transaction, for cash, between a willing seller and a willing and able buyer,
neither of whom is under undue pressure or compulsion to complete the
transaction.
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"Financial Subordinated Debt" shall mean any Indebtedness of Santa
Xxxxx permitted to be incurred under the GESPA which is subordinated to the
obligations under the GESPA upon terms and conditions satisfactory to the
required holders under the GESPA in their sole discretion.
"Fiscal Year" shall mean the twelve-month period ending December 31.
Subsequent changes of the fiscal year of any Credit Party shall not change the
term "Fiscal Year" unless the Required Holders shall consent in writing to such
changes.
"Fixed Charge Coverage Ratio" shall mean, for any period, the ratio of
(i) Santa Maria's EBITDA for such period, to (ii) the sum of (A) all principal
of Indebtedness of Santa Xxxxx scheduled to be paid or prepaid during such
period (not including prepayments of revolving advances under the GMAC Loan
Agreement unless such prepayments are accompanied by a reduction of the
revolving commitment thereunder and not including the final scheduled payment of
the GMAC Debt or the GESPA Debt at its maturity date), plus (B) Consolidated Net
Interest Expense of Santa Xxxxx for such period, plus (C) all amounts paid or
payable by Santa Xxxxx on Capitalized Lease Obligations having a scheduled due
date during such period plus (D) all cash amounts paid in respect of Capital
Expenditures of Santa Xxxxx during such period.
"Fixed Rate Senior Notes" shall have the meaning set forth in the
Recitals.
"Floating Rate Senior Notes" shall have the meaning set forth in the
Recitals.
"GAAP" shall mean generally accepted accounting principles in the
United States of America as in effect from time to time, except that for
purposes of the financial covenants contained in Section 6.2(t) hereof, GAAP
shall be as in effect on the date of the most recent Financials and shall be
applied in a manner consistent therewith.
"General Intangibles" shall mean all of the Credit Parties' now owned
or hereafter acquired right, title, and interest with respect to "general
intangibles" as that term is defined in the Code (including payment intangibles,
contract rights, rights to payment, proprietary rights, rights arising under
common law, statutes, or regulations, choses or things in action, goodwill,
patents, trade names, trademarks, servicemarks, copyrights, blueprints,
drawings, purchase orders, customer lists, monies due or recoverable from
pension funds, route lists, rights to payment and other rights under any royalty
or licensing arrangements, infringement claims, computer programs, information
contained on computer disks or tapes, software, literature, reports, catalogs,
money, deposit accounts, insurance premium rebates, tax refunds, and tax refund
claims), and any and all supporting obligations in respect thereof.
"GESPA" shall mean the Securities Purchase Agreement, dated as of June
26, 2002, by and among Greka Energy, as borrower, each of the entities listed as
a guarantor on the signature pages thereto, as guarantors, and each of the
entities listed as a purchaser on the signature pages thereto and Guggenheim
Investment Management, LLC as collateral agent, as amended from time to time.
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"GESPA Debt" shall mean all principal of and premium, if any, and
interest on, and all other amounts owing in respect of Indebtedness of Greka
Energy and certain Guarantors outstanding under the GESPA not exceeding
$44,500,000 in aggregate principal amount.
"GESPA Guarantors" shall mean each of the entities listed as
guarantors on the signature pages of the GESPA.
"GMAC Debt" shall mean all principal of and premium, if any, and
interest on, and all other amounts owing in respect of Indebtedness of Greka
Energy and certain Guarantors outstanding under the GMAC Loan Agreement not
exceeding $10,000,000 in aggregate principal amount.
"GMAC Loan Agreement" shall mean that certain First Amended and
Restated Loan and Security Agreement dated as of November 30, 1999 by and among
certain Guarantors and GMAC Commercial Credit LLC, as amended.
"Governmental Authority" shall mean any nation or government, any
state or other political subdivision thereof, and any agency, department or
other entity exercising executive, legislative, judicial, regulatory or
administrative functions of or pertaining to government.
"Greka AM" shall have the meaning set forth in the first paragraph of
this Agreement.
"Greka AM Collateral" shall mean all of Greka AM's now or hereafter
acquired right, title, and interest in and to each of the following:
(a) Receivables,
(b) Inventory,
(c) Deposit Accounts,
(d) Documents,
(e) General Intangibles,
(f) Instruments,
(g) Investment Property,
(h) Chattel Paper,
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(i) Oil and Gas Properties,
(j) Equipment,
(k) all goods and personal property of Greka AM, whether tangible or
intangible and wherever located,
(l) all books and records pertaining to the property described in this
definition of "Greka AM Collateral" and
(m) the proceeds and products, whether tangible or intangible of any
of the foregoing, including proceeds of insurance covering any or all of the
foregoing, and any and all tangible or intangible property resulting from the
sale, exchange, collection, or other disposition of any of the foregoing, or any
portion thereof or interest therein, and the proceeds thereof. All capitalized
terms used in this definition and not defined in this Agreement shall have the
respective meanings assigned to such terms in the Code.
"Greka Energy" shall have the meaning set forth in the first paragraph
of this Agreement.
"Guaranteed Indebtedness" shall mean, as to any Person, any obligation
of such Person guaranteeing any Indebtedness, lease, dividend, or other
obligation ("primary obligations") of any other Person (the "primary obligor")
in any manner including, without limitation, any obligation or arrangement of
such Person (a) to purchase or repurchase any such primary obligation, (b) to
advance or supply funds (i) for the purchase or payment of any such primary
obligation or (ii) to maintain working capital or equity capital of the primary
obligor or otherwise to maintain the net worth or solvency or any balance sheet
condition of the primary obligor, (c) to purchase property, securities or
services primarily for the purpose of assuring the owner of any such primary
obligation of the ability of the primary obligor to make payment of such primary
obligation, or (d) to indemnify the owner of such primary obligation against
loss in respect thereof.
"Guarantor" shall have the meaning set forth in the first paragraph of
this Agreement.
"Guarantor Collateral" shall mean all of each Guarantor's now or
hereafter acquired right, title, and interest in and to each of the following
(but excluding the Santa Xxxxx Collateral):
(a) Receivables,
(b) Inventory,
(c) Deposit Accounts,
(d) Documents,
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(e) General Intangibles,
(f) Instruments,
(g) Investment Property,
(h) Chattel Paper,
(i) Oil and Gas Properties,
(j) Equipment,
(k) all goods and personal property of such Guarantor, whether
tangible or intangible and wherever located,
(l) all books and records pertaining to the property described in this
definition of "Guarantor Collateral" and
(m) the proceeds and products, whether tangible or intangible of any
of the foregoing, including proceeds of insurance covering any or all of the
foregoing, and any and all tangible or intangible property resulting from the
sale, exchange, collection, or other disposition of any of the foregoing, or any
portion thereof or interest therein, and the proceeds thereof. All capitalized
terms used in this definition and not defined in this Agreement shall have the
respective meanings assigned to such terms in the Code.
"Guaranty" shall mean that certain Guaranty, dated as of the Closing
Date, executed by the Guarantors in favor of the Collateral Agent, for the
benefit of the Purchasers, in the form of Exhibit B attached hereto.
"Hazardous Discharge" shall have the meaning set forth in Section
6.1(j).
"Hazardous Material" shall mean any substance, material or waste,
whether solid, liquid or gaseous, that is classified, characterized or otherwise
regulated as hazardous, toxic, pollutant, contaminant or words of similar
meaning or effect under the Environmental Laws and shall include, without
limitation, any asbestos, polychlorinated biphenyls, radioactive substances,
methane, petroleum and petroleum products or wastes.
"Indebtedness" of any Person shall mean (i) all indebtedness of such
Person for borrowed money or for the deferred purchase price of property or
services (including, without limitation, reimbursement and all other obligations
with respect to surety bonds, letters of credit and bankers' acceptances,
whether or not matured, but not including obligations to trade creditors
incurred in the ordinary course of business), (ii) all obligations evidenced by
notes, bonds, debentures or similar instruments, (iii) all indebtedness created
or arising under any conditional sale or other title retention agreements with
respect to property acquired by such Person (even though the rights and remedies
of the seller or lender under such agreement in the event of default are limited
to repossession or sale of such property), (iv) all Capital Lease Obligations,
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(v) all Guaranteed Indebtedness, (vi) all Indebtedness referred to in clause
(i), (ii), (iii), (iv) or (v) above secured by (or for which the holder of such
Indebtedness has an existing right, contingent or otherwise, to be secured by)
any Lien upon or in property (including, without limitation, accounts and
contract rights) owned by such Person, even though such Person has not assumed
or become liable for the payment of such Indebtedness, (vii) all liabilities
under Title IV of ERISA, and (viii) all indebtedness of such Person created or
arising under any conditional sale or other title retention agreement with
respect to property acquired by such Person (even though the rights and remedies
of the seller or lender under such agreement in the event of default are limited
to repossession or sale of such property), or pursuant to any sale-leaseback
transaction.
"Intercreditor Agreement" shall mean the Intercreditor Agreement,
dated as of the Closing Date, executed by the Collateral Agent, for the benefit
of the Purchasers and the collateral agent under the GESPA on behalf of the
holders of the GESPA Debt, in form and substance satisfactory to the Purchasers.
"Interest Coverage Ratio" shall mean, for any period, the ratio of
Greka Energy and its Subsidiaries' EBITDA during such period to the Consolidated
Net Interest Expense of Greka Energy and its Subsidiaries during such period.
"Interest Payment Date" shall have the meaning assigned to such term
in Section 2.7(a) hereof.
"Inventory" shall mean all Credit Parties' now owned or hereafter
acquired right, title, and interest with respect to inventory, including goods
held for sale or lease or to be furnished under a contract of service, goods
that are leased by a Credit Party as lessor, goods that are furnished by a
Credit Party under a contract of service, and raw materials, work in process, or
materials used or consumed in a Credit Party's business.
"Investment" shall mean, with respect to any Person, any investment by
such Person in any other Person (including Affiliates) in the form of loans,
guarantees, advances, or capital contributions (excluding (a) commission,
travel, and similar advances to officers and employees of such Person made in
the ordinary course of business, and (b) bona fide accounts arising from the
sale of goods or rendition of services in the ordinary course of business
consistent with past practice), purchases or other acquisitions for
consideration of Indebtedness or Stock, and any other items that are or would be
classified as investments on a balance sheet prepared in accordance with GAAP.
"IPH" shall mean International Publishing Holding Inc.
"IPH Debt" shall mean all principal of and premium, if any, and
interest on, and all other amounts owing in respect of Indebtedness of Greka AM
to IPH, including under the IPH Funding Loan Documents.
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"IPH Funding Loan Documents" shall mean the Loan and Security
Agreement dated October 1, 2002, as amended, between Greka AM and IPH and all
other agreements, documents and instruments evidencing the IPH Debt and any
Liens in respect thereof.
"IRC" shall mean the Internal Revenue Code of 1986, as amended, and
any successor thereto.
"IRS" shall mean the Internal Revenue Service, or any successor
thereto.
"LIBOR Business Day" means a Business Day on which banks in the City
of London are generally open for interbank or foreign exchange transactions.
"LIBOR Period" shall mean initially, the period commencing on the
Closing Date and ending on March 31, 2003 and thereafter, a period commencing on
the last day of the immediately preceding LIBOR Period and ending three months
thereafter; provided, that the foregoing provision relating to LIBOR Periods is
subject to the following:
(n) if any LIBOR Period would otherwise end on a day that is not a
LIBOR Business Day, such LIBOR Period shall be extended to the next succeeding
LIBOR Business Day unless the result of such extension would be to carry such
LIBOR Period into another calendar month in which event such LIBOR Period shall
end on the immediately preceding LIBOR Business Day;
(o) any LIBOR Period that would otherwise extend beyond the Maturity
Date shall end two LIBOR Business Days prior to such date; and
(p) any LIBOR Period that begins on the last LIBOR Business Day of a
calendar month (or on a day for which there is no numerically corresponding day
in the calendar month at the end of such LIBOR Period) shall end on the last
LIBOR Business Day of a calendar month.
"LIBOR Rate" means for each LIBOR Period, a rate of interest
determined by the Collateral Agent equal to:
(q) the offered rate for deposits in United States Dollars for the
applicable LIBOR Period that appears on Telerate Page 3750 as of 11:00 a.m.
(London time), on the second full LIBOR Business Day next preceding the first
day of such LIBOR Period (unless such date is not a Business Day, in which event
the next succeeding Business Day will be used); divided by
(r) a number equal to 1.0 minus the aggregate (but without
duplication) of the rates (expressed as a decimal fraction) of reserve
requirements in effect on the day that is two LIBOR Business Days prior to the
beginning of such LIBOR Period (including basic, supplemental, marginal and
emergency reserves under any regulations of the Federal Reserve Board or other
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Governmental Authority having jurisdiction with respect thereto, as now and from
time to time in effect) for Eurocurrency funding (currently referred to as
"Eurocurrency Liabilities", in Regulation D of the Federal Reserve Board that
are required to be maintained by a member bank of the Federal Reserve System.
If such interest rates shall cease to be available from Telerate News
Service, the LIBOR Rate shall be determined from such financial reporting
service or other information as shall be mutually acceptable to the Collateral
Agent and Greka AM.
"Lien" shall mean any mortgage or deed of trust, pledge,
hypothecation, assignment, deposit arrangement, lien, charge, claim, security
interest, easement or encumbrance, or preference, priority or other security
agreement or preferential arrangement of any kind or nature whatsoever
(including, without limitation, any title retention agreement, any financing
lease having substantially the same economic effect as any of the foregoing, and
the filing of, or agreement to give, any financing statement perfecting a
security interest as to assets owned by the relevant Person under the Uniform
Commercial Code or comparable law of any jurisdiction).
"Loan Documents" shall mean this Agreement, the Notes, the Collateral
Documents and all other agreements, instruments, documents and certificates,
including, without limitation, pledges, powers of attorney, consents,
assignments, contracts, notices, and all other written matter whether
heretofore, now or hereafter executed by or on behalf of any Credit Party, and
delivered to the Collateral Agent or the Purchasers in connection with this
Agreement or the transactions contemplated hereby.
"Material Adverse Effect" shall mean a material adverse effect on (i)
the business, assets, operations, prospects or financial or other condition of
the Credit Parties and their Subsidiaries, taken as a whole, or (ii) Greka AM's
or the Credit Parties', taken as a whole, ability to pay the Obligations in
accordance with the terms hereof and the other Loan Documents.
"Material Contracts" shall mean (i) all of each Credit Party's and its
Subsidiaries' contracts, agreements, leases or other instruments to which such
Credit Party or its Subsidiaries is a party or by which such Credit Party, its
Subsidiaries or their properties are bound, which involve annual payments by or
to such Credit Party or its Subsidiaries of more than $1,000,000 or which are
filed as exhibits to any filing with the SEC, (ii) all of each Credit Party's
and its Subsidiaries' loan agreements, credit agreements, indentures, mortgages,
deeds of trust, pledge and security agreements, factoring agreements,
conditional sales contracts, letters of credit or other debt instruments
involving principal amounts of more than $1,000,000, (iii) all material
operating or capital leases for equipment which involve annual payments by or to
such Credit Party or its Subsidiaries of more than $1,000,000 to which any
Credit Party or any of its Subsidiaries is a party, (iv) all non-competition and
similar agreements to which any Credit Party or any of its Subsidiaries is a
party, (v) all contracts for the employment of any officer or employee, (vi) all
consulting agreements, (vii) any guarantees by any Credit Party or any of its
Subsidiaries, (viii) all distributor and sales agency agreements and (ix) all
other material contracts not made in the ordinary course of business.
13
"Maturity Date" shall mean March 11, 2005.
"Maximum Lawful Rate" shall have the meaning set forth in Section
2.7(e) hereof.
"Measurement Date" shall mean the date of the repayment in full of the
GESPA Debt.
"Mortgages" shall mean, collectively, the mortgages in favor of the
Collateral Agent dated as of the Closing Date for the properties described on
Schedule 1.
"Multiemployer Plan" shall mean a "multiemployer plan" as defined in
Section 4001(a)(3) of ERISA, and to which any Credit Party, any of its
Subsidiaries or any ERISA Affiliate is making, is obligated to make, has made or
been obligated to make, contributions on behalf of participants who are or were
employed by any of them.
"Notes" shall have the meaning set forth in the Recitals.
"Obligations" shall mean all amounts owing by the Credit Parties to
the Purchasers (and any of their respective assignees) pursuant to any of the
Loan Documents, including all principal, interest, fees, expenses, attorneys'
fees and any other sum payable by the Credit Parties under any of the Loan
Documents.
"Oil and Gas Properties" shall mean all of the Credit Parties' oil and
natural gas or other reserves and oil and gas rights located on or under or in
any manner related to the premises described in Schedule 1 hereto and any other
oil and natural gas or other reserves and oil and gas rights hereafter acquired
by any Credit Party.
"PBGC" shall mean the Pension Benefit Guaranty Corporation or any
successor thereto.
"Pension Plan" shall have the meaning set forth in Section 5.19(a)
hereof.
"Permitted Acquisitions" shall mean the acquisitions of one or more of
the oil and gas properties listed on Schedule 6.2(m) hereto.
"Permitted Indebtedness" shall mean, with respect to any Credit Party,
(i) taxes or assessments or other governmental charges or levies, either not yet
due and payable or to the extent that nonpayment thereof is permitted by the
terms of this Agreement or would not have a Material Adverse Effect; (ii)
obligations under workmen's compensation, unemployment insurance, social
security or public liability laws or similar legislation; (iii) bids, tenders,
contracts (other than contracts for the payment of money) or leases to which any
Credit Party or any of its Subsidiaries is a party as lessee made in the
ordinary course of business; (iv) public or statutory obligations of any Credit
14
Party or any of its Subsidiaries; (v) all deferred taxes; (vi) trade payables in
the ordinary course of business; and (vii) all unfunded pension fund and other
employee benefit plan obligations and liabilities but only to the extent
permitted to remain unfunded under applicable law.
"Permitted Liens" shall mean (a) Liens existing on the date hereof in
and to the Guarantor Collateral and securing the GESPA Debt, (b) Liens for
unpaid taxes that either (A) are not yet delinquent, (B) would not have a
Material Adverse Effect, or (C) do not constitute an Event of Default hereunder
and are the subject of Permitted Protests, (c) Liens set forth on Schedule 5.8,
(d) the interests of lessors under operating leases, (e) purchase money Liens or
the interests of lessors under Capital Leases to the extent that such Liens or
interests secure Permitted Purchase Money Indebtedness and so long as such Lien
attaches only to the asset purchased or acquired and the proceeds thereof, (f)
Liens arising by operation of law in favor of warehousemen, landlords, carriers,
mechanics, materialmen, laborers, or suppliers, incurred in the ordinary course
of Credit Parties' business and not in connection with the borrowing of money,
and which Liens either (A) are for sums not yet delinquent, or (B) are the
subject of Permitted Protests, (g) Liens arising from deposits made in
connection with obtaining worker's compensation or other unemployment insurance,
social security and other similar laws, (h) Liens or deposits to secure
performance of bids, tenders, or leases incurred in the ordinary course of
Credit Parties' business and not in connection with the borrowing of money, (i)
Liens granted as security for surety, performance or appeal bonds in connection
with obtaining such bonds in the ordinary course of Credit Parties' business,
(j) Liens resulting from any judgment or award that is not an Event of Default
hereunder, and (k) with respect to any real property, easements, exceptions,
reservations, encroachments, restrictions, rights of way, zoning restrictions
and other similar title policy exceptions or encumbrances that do not materially
interfere with or impair the use or operation thereof by Credit Parties.
"Permitted Protest" shall mean the right of the applicable Credit
Party to protest any Lien (other than any such Lien that secures the
Obligations), taxes (other than payroll taxes or taxes that are the subject of a
United States federal tax lien), or rental payment, provided that (a) a reserve
with respect to such obligation is established on the Books in such amount as is
required under GAAP, (b) any such protest is instituted promptly and prosecuted
diligently by the applicable Credit Party in good faith, and (c) the Required
Holders are satisfied in their reasonable discretion that, while any such
protest is pending, there will be no impairment of the enforceability, validity,
or priority of any of the Purchasers' Liens.
"Permitted Purchase Money Indebtedness" shall mean, as of any date of
determination, Purchase Money Indebtedness in an aggregate amount outstanding at
any one time not in excess of $3,000,000.
"Person" shall mean any individual, sole proprietorship,
partnership, limited liability company, joint venture, trust, unincorporated
organization, association, corporation, institution, public benefit corporation,
entity or government (whether federal, state, county, city, municipal or
otherwise, including, without limitation, any instrumentality, division, agency,
body or department thereof).
15
"Plan" shall have the meaning set forth in Section 5.19(a) hereof.
"Pledge Agreement" shall mean the Pledge Agreement, dated as of the
Closing Date, executed by Greka Energy, Greka Integrated, Saba Petroleum
Company, Windsor Energy US Corporation, Greka CA, Inc. and Xxxxxx Island Limited
Partnership in favor of the Collateral Agent, for the benefit of the Purchasers,
pledging such Persons' equity interests in the other Credit Parties.
"Purchase Money Indebtedness" shall mean Indebtedness (other than the
Obligations, the GMAC Debt and the GESPA Debt, but including Capitalized Lease
Obligations), incurred at the time of, or within 60 days after, the acquisition
of any fixed assets for the purpose of financing all or any part of the
acquisition cost thereof.
"Purchaser" shall have the meaning set forth in the first paragraph of
this Agreement and shall include any permitted assignee of a Note in accordance
with Section 11.1 hereof.
"Receivables" shall mean all of Credit Parties' now owned or hereafter
acquired accounts and contract rights, instruments, insurance proceeds,
documents, chattel paper, letters of credit and Credit Parties' rights to
receive payment thereunder, any and all rights to the payment or receipt of
money or other forms of consideration of any kind at any time now or hereafter
owing or to be owing to Credit Parties, all proceeds thereof and all files in
which Credit Parties has any interest whatsoever containing information
identifying or pertaining to any of Credit Parties' Receivables, together with
all of Credit Parties' rights to any merchandise which is represented thereby,
and all Credit Parties' rights, title, security and guaranties with respect to
each Receivable, including, without limitation, all rights of stoppage in
transit, replevin and reclamation and all rights as an unpaid vendor.
"Release" shall mean, with respect to any Person, any release, spill,
emission, leaking, pumping, injection, deposit, disposal, discharge, dispersal,
leaching or migration, in each case, of any Hazardous Material into the
environment or into or out of any property owned by such Person, including the
movement of Hazardous Material through or in the air, soil, surface water,
ground water or property.
"Remedial Action" shall mean all actions taken to (a) clean up,
remove, remediate, contain, treat, monitor, assess, evaluate, or in any way
address Hazardous Materials in the indoor or outdoor environment, (b) prevent or
minimize a release or threatened release of Hazardous Materials so they do not
migrate or endanger or threaten to endanger public health or welfare or the
indoor or outdoor environment, (c) perform any pre-remedial studies,
investigations, or post-remedial operation and maintenance activities, or (d)
conduct any other actions authorized by 42 U.S.C. ss. 9601.
16
"Required Holders" shall mean Persons who hold at least a majority of
the outstanding principal amount of the Notes.
"Retained Goods" shall have the meaning set forth in Section 3.3(e)
hereof.
"Retiree Welfare Plan" shall refer to any Welfare Plan providing for
continuing coverage or benefits for any participant or any beneficiary of a
participant after such participant's termination of employment, other than
continuation coverage provided pursuant to Section 4980B of the IRC and at the
sole expense of the participant or the beneficiary of the participant.
"Sanction/Embargo Programs" shall mean economic and other sanctions
and embargo program restrictions promulgated by the government of the United
States of America or any office or agency thereof including but not limited to
the President and the Office of Foreign Assets Control of the Treasury
Department, or either of them.
"Santa Xxxxx" shall mean Santa Xxxxx Refining Company.
"Santa Xxxxx Collateral" shall mean, collectively, all of Santa
Maria's now or hereafter acquired right, title, and interest in and to each of
the following:
(s) Inventory;
(t) Receivables;
(u) General Intangibles as they relate to Inventory and Receivables;
(v) all of its books, records, ledgercards, files, correspondence,
computer programs, tapes, disks and related data processing software (owned by
it or in which it has an interest) which at any time evidence or contain
information relating to (a), (b) and (c) above or are otherwise necessary or
helpful in the collection thereof or realization thereupon;
(w) all of its documents of title, policies and certificates of
insurance, securities, chattel paper, other documents or instruments evidencing
or pertaining to (a), (b) and (c) above; and
(x) all products and proceeds of (a), (b), (c), (d) and (e) above
(including, but not limited to, all claims to items referred to in (a), (b),
(c), (d) and (e) above) and all claims of Santa Xxxxx against third parties for
(x) (i) loss of, damage to, or destruction of, and (ii) payments due or to
become due under leases, rentals and hires of, any or all of (a), (b), (c), (d)
and (e) above and (y) proceeds payable under, or unearned premiums with respect
to, policies of insurance in whatever form.
"SEC" shall mean the U.S. Securities and Exchange Commission, or any
successor thereto.
17
"Securities Act" shall mean the Securities Act of 1933, as amended,
and all rules and regulations promulgated thereunder.
"Settlement Date" shall mean two (2) Business Days after the day on
which the applicable Receivable is actually collected.
"Solvent" shall mean, with respect to any Person, that the value of
the assets of such Person (both at fair value and present fair saleable value)
is, on the date of determination, greater than the total amount of liabilities
(including contingent and unliquidated liabilities) of such Person as of such
date and that, as of such date, such Person is able to pay all liabilities of
such Person as such liabilities mature and does not have unreasonably small
capital. In computing the amount of contingent or unliquidated liabilities at
any time, such liabilities will be computed at the amount which, in light of all
the facts and circumstances existing at such time, represents the amount that
can reasonably be expected to become an actual or matured liability.
"Stock" shall mean all shares, options, warrants, general or limited
partnership interests, limited liability company membership interest,
participations or other equivalents (regardless of how designated) of or in a
corporation, partnership, limited liability company or equivalent entity whether
voting or nonvoting, including, without limitation, common stock, preferred
stock, or any other "equity security" (as such term is defined in Rule 3a11-1 of
the General Rules and Regulations promulgated by the SEC under the Exchange
Act).
"Subsidiary" shall mean, with respect to any Person, (a) any
corporation of which an aggregate of more than 50% of the outstanding Stock
having ordinary voting power to elect a majority of the board of directors of
such corporation (irrespective of whether, at the time, Stock of any other class
or classes of such corporation shall have or might have voting power by reason
of the happening of any contingency) is at the time, directly or indirectly,
owned legally or beneficially by such Person and/or one or more Subsidiaries of
such Person, and (b) any partnership or other entity in which such Person and/or
one or more Subsidiaries of such Person shall have an interest (whether in the
form of voting or participation in profits or capital contribution) of more than
50%.
"Tangible Net Worth" shall mean, as at a particular date, (a) the
aggregate amount of all tangible assets of Santa Xxxxx as may be properly
classified as such in accordance with GAAP consistently applied excluding such
other assets as are properly classified as intangible assets under GAAP, less
(b) the aggregate amount of all liabilities of Santa Xxxxx.
"Tangible Net Worth Ratio" shall mean, as of any date, the ratio of
(a) the Total Liabilities as of such date to (b) the sum of (i) Tangible Net
Worth as of such date and (ii) Financial Subordinated Debt as of such date.
"Taxes" shall have the meaning set forth in Section 2.12(a) hereof.
18
"Total Debt" shall mean, as of any date, the GESPA Debt, the GMAC
Debt, the Indebtedness evidenced by the Notes and the Indebtedness described on
Schedule 6.2(a).
"Total Liabilities" shall mean, at any date, all obligations of Santa
Xxxxx which in conformity with GAAP would be included in determining total
liabilities as shown on the liabilities side of a balance sheet of Santa Xxxxx
at such date, and in any event includes all Indebtedness of Santa Xxxxx at such
date, whether or not the same would be so shown.
"Welfare Plan" shall mean any welfare plan, as defined in Section 3(1)
of ERISA, which is maintained or contributed to by any Credit Party, any of its
Subsidiaries or any ERISA Affiliate.
"Withdrawal Liability" shall mean, at any time, the aggregate amount
of the liabilities, if any, pursuant to Section 4201 of ERISA, and any increase
in contributions pursuant to Section 4243 of ERISA with respect to all
Multiemployer Plans.
References to this "Agreement" shall mean this Notes Purchase
Agreement, including all amendments, modifications and supplements and any
exhibits or schedules to any of the foregoing, and shall refer to the Agreement
as the same may be in effect at the time such reference becomes operative.
Any accounting term used in this Agreement shall have, unless
otherwise specifically provided herein, the meaning customarily given such term
in accordance with GAAP, and all financial computations hereunder shall be
computed, unless otherwise specifically provided herein, in accordance with GAAP
consistently applied. That certain terms or computations are explicitly modified
by the phrase "in accordance with GAAP" shall in no way be construed to limit
the foregoing. The words "herein," "hereof" and "hereunder" and other words of
similar import refer to this Agreement as a whole, including the Exhibits and
Schedules hereto, as the same may from time to time be amended, modified or
supplemented, and not to any particular section, subsection or clause contained
in this Agreement. Wherever from the context it appears appropriate, each term
stated in either the singular or plural shall include the singular and the
plural, and pronouns stated in the masculine, feminine or neuter gender shall
include the masculine, the feminine and the neuter.
2. PURCHASE OF SECURITIES
2.1 PURCHASE OF NOTES. Subject to the terms and conditions set forth
in this Agreement, the Purchasers agree, severally and not jointly, to purchase
from Greka AM, and Greka AM agrees to issue and sell to each such Purchaser, on
the Closing Date, the Floating Rate Senior Notes and the Fixed Rate Senior Notes
to be issued by Greka AM set forth opposite each such Purchaser's name on
Schedule A on the signature pages hereto. The aggregate principal amount of the
Notes to be purchased on the Closing Date, and the aggregate purchase price
therefor, shall be $20,000,000.
19
2.2 CLOSING. The closing of the purchase and sale of the Notes (the
"Closing") shall take place on March 11, 2003 or such date and time as shall be
mutually agreed to by the parties hereto (the "Closing Date") at the offices of
Weil, Gotshal & Xxxxxx LLP, 000 Xxxxx Xxxxxx, Xxx Xxxx, Xxx Xxxx, or such other
place as shall be mutually agreed to by the parties hereto. On the Closing Date,
Greka AM will deliver to each Purchaser a Floating Rate Senior Note or a Fixed
Rate Senior Note, as applicable, each payable to such Purchaser against delivery
by such Purchaser of the applicable purchase price therefor (as set forth on
Schedule A hereto), by wire transfer of funds in such amount to the account of
Greka AM. On the Closing Date, Greka AM will also deliver to the Collateral
Agent the Closing Fee.
2.3 OPTIONAL PREPAYMENT. Greka AM shall have the right, on 10 days
prior notice to the Purchasers, to voluntarily prepay all or any portion (in
multiples of not less than $500,000 or the amount outstanding on the Notes on a
pro rata basis among each of the Notes) of the Notes. Each prepayment shall be
accompanied by the payment of the accrued and unpaid interest on the amount
being prepaid with respect to the Notes through the date of payment, plus a
prepayment premium equal to the principal amount prepaid on the Notes multiplied
by the following percentage:
If Prepaid During
the 6-Month Period
Ending on: Percentage
------------------- ----------
October 31, 2003 0.00%
April 30, 2004 1.00%
October 31, 2004 2.00%
If Prepaid at Anytime After
October 31, 2004 0%
2.4 INTENTIONALLY OMITTED.
2.5 REPAYMENT OF NOTES. Greka promises to repay the entire unpaid
principal amount of, and any unpaid and accrued interest on, the Notes on the
Maturity Date.
2.6 USE OF PROCEEDS. The proceeds of the purchase price hereunder at
the Closing shall be used solely (i) to repay the Bank of Texas Debt and the IPH
Debt, (ii) to pay related transaction costs and fees, (iii) for working capital
needs of Greka AM and (iv) to finance certain Capital Expenditures of the Credit
Parties permitted pursuant to Section 6.2(t).
20
2.7 INTEREST RATES AND INTEREST PAYMENTS.
(a) Floating Rate Senior Notes. Greka AM shall pay accrued interest on
the Floating Rate Senior Notes to each Purchaser of a Floating Rate Senior Note,
quarterly in arrears on the first day of each calendar quarter commencing on
April 1, 2003 through the date of repayment in full (each, an "Interest Payment
Date"), on such Purchaser's ratable share of the aggregate principal amount of
the Floating Rate Senior Notes. The Floating Rate Senior Notes will bear
interest on the outstanding principal amount thereof at a rate per annum equal
to the greater of (i) the LIBOR Rate plus 6.25% and (ii) 8.25%.
Interest on the Floating Rate Senior Notes will be computed on the
basis of a year of 360 days, composed of twelve 30-day months, and the actual
number of days elapsed.
(b) Fixed Rate Senior Notes. Greka AM shall pay accrued interest on
the Fixed Rate Senior Notes to each Purchaser of a Fixed Rate Senior Note,
quarterly in arrears on each Interest Payment Date, on such Purchaser's ratable
share of the aggregate principal amount of the Fixed Rate Senior Notes. The
Fixed Rate Senior Notes will bear interest on the outstanding principal amount
thereof at a rate per annum equal to 9.25%.
Interest on the Fixed Rate Senior Notes will be computed on the basis
of a year of 360 days, composed of twelve 30-day months, and the actual number
of days elapsed.
(c) If any payment on any Note becomes due and payable on a day other
than a Business Day, the maturity thereof shall be extended to the next
succeeding Business Day and, with respect to payments of principal, interest
thereon shall be payable at the then applicable rate for such Note during such
extension.
(d) So long as any Event of Default shall be continuing, the interest
rate applicable to the Notes shall each be increased by 2% per annum above the
rate of interest otherwise applicable to such Notes.
(e) Notwithstanding anything to the contrary set forth in this Section
2.7, if at any time until payment in full of the Notes, the interest rate
payable on any Notes exceeds the highest rate of interest permissible under any
law which a court of competent jurisdiction shall, in a final determination,
deem applicable hereto (the "Maximum Lawful Rate"), then in such event and so
long as the Maximum Lawful Rate would be so exceeded, the rate of interest
payable on such Notes shall be equal to the Maximum Lawful Rate; provided,
however, that if at any time thereafter the interest rate payable on such Notes
is less than the Maximum Lawful Rate, Greka AM shall continue to pay interest
thereunder at the Maximum Lawful Rate until such time as the total interest
received by the Purchasers is equal to the total interest which they would have
received had the interest rate on such Notes been (but for the operation of this
paragraph) the applicable interest rate payable since the Closing Date.
Thereafter, the interest rate payable on such Notes shall be the applicable
interest rate pursuant to clauses (a) through (d) above unless and until such
rate again exceeds the Maximum Lawful Rate, in which event this paragraph shall
21
again apply. In no event shall the total interest received by any Purchaser for
any Notes pursuant to the terms hereof exceed the amount which it could lawfully
have received for such Notes had the interest due hereunder for such Notes been
calculated for the full term thereof at the Maximum Lawful Rate. In the event
the Maximum Lawful Rate is calculated pursuant to this paragraph, such interest
shall be calculated at a daily rate equal to the Maximum Lawful Rate divided by
the number of days in the year in which such calculation is made. In the event
that a court of competent jurisdiction, notwithstanding the provisions of this
Section 2.7(f), shall make a final determination that a Purchaser has received
interest hereunder or under any of the Loan Documents in excess of the Maximum
Lawful Rate, such Purchaser shall, to the extent permitted by applicable law,
promptly apply such excess first to any interest due or accrued and not yet paid
under the Notes, then to the outstanding principal of the Notes, then to other
unpaid Obligations and thereafter shall refund any excess to Greka AM or as a
court of competent jurisdiction may otherwise order.
(f) In addition to all amounts required to be paid by the Greka AM
pursuant to this Section 2.7, Greka AM shall compensate each Purchaser, upon
demand, for all losses, expenses and liabilities (including any loss or expense
incurred by reason of the liquidation or reemployment of deposits or other funds
acquired by such Purchaser to fund or maintain such Purchaser's Floating Rate
Senior Notes that such Purchaser may sustain if for any reason any Floating Rate
Senior Note is prepaid on a date that is not the last day of the applicable
LIBOR Period or as a consequence of any failure by Greka AM to repay Floating
Rate Senior Notes when required by the terms hereof. The Purchasers making
demand for such compensation shall deliver to Greka AM concurrently with such
demand a written statement as to such losses, expenses and liabilities, and this
statement shall be conclusive as to the amount of compensation due to such
Purchaser, absent manifest error.
2.8 RECEIPT OF PAYMENTS. Greka AM shall make each payment under the
Notes not later than 5:00 P.M. (New York City time) on the day when due in
lawful money of the United States of America in immediately available funds to
each Purchaser's respective depository bank in the United States as designated
by such Purchaser from time to time for deposit in such Purchaser's depositary
account. For purposes only of computing interest under the Notes, all payments
shall be applied by each Purchaser to the Notes on the day payment has been
credited by such Purchaser's depository bank to such Purchaser's account in
immediately available funds.
2.9 APPLICATION OF PAYMENTS. All payments hereunder shall be applied
in the following order: (i) then due and payable or accrued interest payments on
the Notes; (ii) then due and payable fees and expenses; (iii) then outstanding
principal of the Notes; (iv) then other unpaid Obligations.
2.10 SHARING OF PAYMENTS. If any holder of the Notes or a portion
thereof shall obtain any payment (whether voluntary, involuntary, through the
exercise of any right of set-off, or otherwise) on account of the Notes held by
it in excess of its ratable share of payments on account of the Notes, held by
all holders thereof, such holder shall forthwith purchase from each other holder
22
of Notes, as applicable, such participations in the Note held by it as shall be
necessary to cause such purchasing holder to share the excess payment ratably
with each other holder of Notes; provided, however, that if all or any portion
of such excess payment is thereafter recovered from such purchasing holder, such
purchase shall be rescinded and such holder shall repay to the purchasing holder
the purchase price to the extent of such recovery together with an amount equal
to such holder's ratable share (according to the proportion of (i) the amount of
such holder's required repayment to (ii) the total amount so recovered from the
purchasing holder) of any interest or other amount paid or payable by the
purchasing holder in respect of the total amount so recovered. Greka AM agrees
that any holder so purchasing a participation from another holder pursuant to
this Section 2.10 may, to the fullest extent permitted by law, exercise all its
rights of payment (including the right of set-off) with respect to such
participation as fully as if such holder were the direct creditor of Greka AM in
the amount of such participation. Greka AM further agrees to make all payments
on the Notes to all holders thereof on a pro rata basis, based on the principal
amount of the Notes held by each.
2.11 ACCESS. The Collateral Agent or, any of its officers, employees
and/or agents shall have the right, exercisable no more than once per fiscal
quarter upon 30 days' notice to Greka Energy (except that during the continuance
of an Event of Default, no such limit on the number of visits shall apply and
only 48 hours' notice shall be required with respect to visits of administrative
offices and only 7 days' notice shall be required with respect to visits of
operational sites) during normal business hours to visit and inspect the
properties and facilities of Greka Energy and its Subsidiaries, including,
without limitation, the Collateral, and to inspect, audit and make extracts from
all of Greka Energy and its Subsidiaries' records, files, corporate books and
books of account and to discuss the affairs, finances and accounts of Greka
Energy and its Subsidiaries with the principal officers of the respective
Person. The Collateral Agent and each other Person granted rights pursuant to
this Section agree to be escorted by a Greka Energy employee while on Greka
Energy's or any of its Subsidiaries' premises. Greka Energy shall deliver any
document or instrument reasonably necessary for the Collateral Agent or any
other Person granted rights pursuant to this Section, as such Person may
request, to obtain records from any service bureau maintaining records for Greka
Energy and its Subsidiaries. Greka Energy shall instruct its and its
Subsidiaries' banking and other financial institutions to make available to the
Collateral Agent and each other Person granted rights pursuant to this Section
such information and records as such Person may reasonably request. All
reasonable expenses incurred by the Collateral Agent or its agents in exercising
its respective rights pursuant to this Section 2.11 shall be paid by Greka AM.
Any Person exercising the rights pursuant to this Section 2.11 shall be subject
to the confidentiality obligation set forth in Section 11.15.
2.12 TAXES. (a) Any and all payments by Greka AM hereunder or under
the Notes shall be made, in accordance with this Section 2.12, free and clear of
and without deduction for any and all present or future taxes, levies, imposts,
deductions, charges or withholdings, and all liabilities with respect thereto,
excluding taxes imposed on or measured by the net income of the respective
23
Purchaser, by the jurisdiction under the laws of which such Purchaser is
organized or any political subdivision thereof (all such non-excluded taxes,
levies, imposts, deductions, charges, withholdings and liabilities being
hereinafter referred to as "Taxes"). If Greka AM shall be required by law to
deduct any Taxes from or in respect of any sum payable hereunder or under the
Notes to any Purchaser, (i) the sum payable shall be increased as may be
necessary so that after making all required deductions (including deductions
applicable to additional sums payable under this Section 2.12) such Purchaser
receives an amount equal to the sum it would have received had no such
deductions been made, (ii) Greka AM shall make such deductions, and (iii) Greka
AM shall pay the full amount deducted to the relevant taxing or other authority
in accordance with applicable law.
(b) In addition, Greka AM agrees to pay any present or future stamp or
documentary taxes or any other sales, transfer, exercise, mortgage recording or
property taxes, charges or similar levies that arise from any payment made
hereunder or under the Notes or from the execution, sale, transfer, delivery or
registration of, or otherwise with respect to, any of the Loan Documents
(hereinafter referred to as "Other Taxes").
(c) Greka AM shall indemnify each Purchaser for the full amount of
Taxes or Other Taxes (including without limitation, any Taxes or Other Taxes
imposed by any jurisdiction on amounts payable under this Section 2.12) paid by
such Purchaser and any liability (including penalties, interest and expenses)
arising therefrom or with respect thereto, whether or not such Taxes or Other
Taxes were correctly or legally asserted. This indemnification shall be made
within 30 days from the date such Purchaser makes written demand therefor.
(d) Within 30 days after the date of any payment of Taxes, Greka AM
shall furnish to each Purchaser the original or a certified copy of a receipt
evidencing payment thereof.
(e) Without prejudice to the survival of any other agreement of any
Credit Party hereunder, the agreements and obligations of Greka AM contained in
this Section 2.12 shall survive the payment in full of the Notes.
3. CREATION OF SECURITY INTEREST
3.1 SECURITY INTEREST. To secure the prompt payment to the Purchasers
of all Obligations, each Credit Party hereby assigns, pledges and grants to the
Collateral Agent, for the benefit of the Purchasers, a continuing security
interest in and to the Collateral, whether now owned or existing or hereafter
acquired or arising and wheresoever located (whether or not the same is subject
to Article 9 of the Code). All of the Credit Parties' ledger sheets, files,
records, books of account, business papers and documents relating to the
Collateral shall, until delivered to or removed by the Collateral Agent, be kept
by the Credit Parties in trust for the Collateral Agent until all Obligations
have been paid in full. Each confirmatory assignment schedule or other form of
assignment hereafter executed by any Credit Party shall be deemed to include the
foregoing grant, whether or not the same appears therein.
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3.2 REPRESENTATIONS CONCERNING THE COLLATERAL. The Credit Parties
represent and warrant:
(a) all Receivables (i) represent complete bona fide transactions
which require no further act under any circumstances on any Credit Party's part
to make such Receivables payable by the respective Customers, (ii) to the best
of the Credit Parties' knowledge, are not subject to any present, future or
contingent Disputes; and (iii) do not represent xxxx and hold sales, consignment
sales, guaranteed sales, sale or return or other similar understandings or
obligations of any Affiliate or Subsidiary of any Credit Party;
(b) the Credit Parties have no knowledge of any fact or circumstance
not disclosed to the Purchasers which would impair the validity or
collectibility of any Receivable other than Receivables not exceeding $500,000
in aggregate amount and that all documents in connection with each Receivable
are genuine; and
(c) in the event any amounts due and owing from any Customer to any
Credit Party on any Receivable shall become subject to any Dispute, or to any
other adjustment, such Credit Party agrees that it shall promptly provide the
Collateral Agent with notice thereof. The Credit Parties further agree that they
shall also notify the Collateral Agent promptly of all returns and credits in
respect of any Receivables, which notice shall specify the Receivables affected.
3.3 COVENANTS CONCERNING THE COLLATERAL. The Credit Parties covenant
that they shall:
(a) place notations upon their respective books of account and any
financial statement prepared by them to disclose the Collateral Agent's security
interest in the Collateral;
(b) defend the Collateral against the claims and demands of all
parties;
(c) not extend the payment terms of any Receivable without prompt
notice thereof to the Collateral Agent;
(d) perform all other steps reasonably requested by the Collateral
Agent to create and maintain in the Collateral Agent's favor, for the benefit of
the Purchasers, a valid perfected security interest in all Collateral in
accordance with the priorities set forth in Section 3.9 hereof; and
(e) promptly provide the Collateral Agent with duplicate originals of
all credits which any Credit Party issues to its Customers with respect to any
Receivable and immediately notify the Collateral Agent of any merchandise
returns or Disputes with respect to any Receivable. The Credit Parties shall
settle all Disputes at no cost or expense to the Collateral Agent. Should the
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Collateral Agent so elect, upon the occurrence of any Event of Default, the
Collateral Agent may at any time in its discretion: (i) withdraw any Credit
Party's authority to issue credits to its Customers with respect to any
Receivable without the Collateral Agent's prior written consent; (ii) litigate
Disputes with respect to any Receivable or settle them directly with Customers
on terms acceptable to the Collateral Agent; or (iii) direct any Credit Party to
set aside and identify as the Collateral Agent's property any returned or
repossessed merchandise or other goods which by sale resulted in Receivables
theretofore assigned to the Collateral Agent ("Retained Goods"). All Retained
Goods (and the proceeds thereof) shall be (A) held by the Credit Parties in
trust for the Collateral Agent, (B) subject to the Collateral Agent's security
interest hereunder, and (C) disposed of only in accordance with the Collateral
Agent's express written instructions.
3.4 COLLECTION AND MAINTENANCE OF COLLATERAL AND RECORDS. The
Collateral Agent may at any time verify the Receivables utilizing an audit
control company or any other agent of the Collateral Agent. The Collateral Agent
or the Collateral Agent's designee may notify Customers, at any time after a
Default or Event of Default, at the Collateral Agent's sole discretion, of the
Collateral Agent's security interest in Receivables, collect them directly and
charge the collection costs and expenses to Greka AM, but, if requested by the
Collateral Agent, the Credit Parties shall instruct all of their Customers to
make payments on account of Receivables to an account under the Collateral
Agent's dominion and control at such bank as the Collateral Agent may designate.
To the extent any Credit Party receives any payments on account of Receivables,
it shall hold such payments for the Collateral Agent's benefit in trust as the
Collateral Agent's trustee and immediately deliver them to the Collateral Agent
in their original form with all necessary endorsements or, as directed by the
Collateral Agent, deposit such payments as directed by the Collateral Agent. All
of the Credit Parties' invoices shall bear the terms stated on the applicable
customer order. The Credit Parties shall provide the Collateral Agent, as
requested by the Collateral Agent, such other schedules, documents and/or
information regarding the Collateral as the Collateral Agent may reasonably
require.
3.5 DELIVERY OF ADDITIONAL DOCUMENTATION REQUIRED. At any time upon
the request of the Collateral Agent, the Credit Parties shall execute and
deliver to the Collateral Agent, any and all financing statements, original
financing statements in lieu of continuation statements, fixture filings,
security agreements, pledges, assignments, endorsements of certificates of
title, and all other documents (the "Additional Documents") that the Collateral
Agent may request in its reasonable discretion, in form and substance
satisfactory to the Collateral Agent, to perfect and continue perfected or
better perfect the Collateral Agent's Liens in the Collateral (whether now owned
or hereafter arising or acquired) and in order to fully consummate all of the
transactions contemplated hereby and under the other Loan Documents. To the
maximum extent permitted by applicable law, each Credit Party authorizes the
Collateral Agent to execute any such Additional Documents in the applicable
Credit Party's name and authorizes the Collateral Agent to file such executed
Additional Documents in any appropriate filing office.
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3.6 POWER OF ATTORNEY. Each Credit Party hereby irrevocably makes,
constitutes, and appoints the Collateral Agent (and any of the Collateral
Agent's officers, employees, or agents designated by the Collateral Agent) as
such Credit Party's true and lawful attorney, with power to (a) if such Credit
Party refuses to, or fails timely to execute and deliver any of the documents
described in Section 3.5, sign the name of such Credit Party on any of the
documents described in Section 3.5, (b) at any time that an Event of Default has
occurred and is continuing, sign such Credit Party's name on any invoice or xxxx
of lading relating to the Collateral, drafts against Customers, or notices to
Customers, (c) send requests for verification of Receivables, (d) endorse such
Credit Party's name on any Collection item that may come into any Purchaser's
possession, (e) at any time that an Event of Default has occurred and is
continuing, make, settle, and adjust all claims under such Credit Party's
policies of liability insurance and other insurance covering any Collateral and
make all determinations and decisions with respect to such policies of
insurance, and (f) at any time that an Event of Default has occurred and is
continuing, settle and adjust Disputes respecting the Receivables, chattel
paper, or general intangibles directly with Customers, for amounts and upon
terms that the Collateral Agent determines to be reasonable, and the Collateral
Agent may cause to be executed and delivered any documents and releases that the
Collateral Agent determines to be necessary. The appointment of the Collateral
Agent as each Credit Party's attorney, and each and every one of its rights and
powers, being coupled with an interest, is irrevocable until all of the
Obligations have been fully and finally repaid and performed.
3.7 CODE AND OTHER REMEDIES. During the continuance of an Event of
Default, the Collateral Agent may exercise, in addition to all other rights and
remedies granted to them in this Agreement and in any other instrument or
agreement securing, evidencing or relating to the Obligations, all rights and
remedies of a secured party under the Code or any other applicable law. Without
limiting the generality of the foregoing, the Collateral Agent, without demand
of performance or other demand, presentment, protest, advertisement or notice of
any kind (except any notice required by law referred to below) to or upon any
Credit Party or any other Person (all and each of which demands, defenses,
advertisements and notices are hereby waived), may in such circumstances
forthwith collect, receive, appropriate and realize upon the Collateral, or any
part thereof, and/or may forthwith sell, lease, assign, give option or options
to purchase, or otherwise dispose of and deliver the Collateral or any part
thereof (or contract to do any of the foregoing), in one or more parcels at
public or private sale or sales, at any exchange, broker's board or office of
the Collateral Agent or any Purchaser or elsewhere upon such terms and
conditions as it may deem advisable and at such prices as it may deem best, for
cash or on credit or for future delivery without assumption of any credit risk.
The Collateral Agent shall have the right upon any such public sale or sales,
and, to the extent permitted by law, upon any such private sale or sales, to
purchase the whole or any part of the Collateral so sold, free of any right or
equity of redemption in any Credit Party, which right or equity is hereby waived
and released. Each Credit Party further agrees, at the Collateral Agent's
27
request, to assemble the Collateral and make it available to the Collateral
Agent at places which the Collateral Agent shall reasonably select, whether at
such Credit Party's premises or elsewhere. The Collateral Agent shall apply the
net proceeds of any action taken by it pursuant to this Section 3.7, after
deducting all reasonable costs and expenses of every kind incurred in connection
therewith or incidental to the care or safekeeping of any of the Collateral or
in any way relating to the Collateral or the rights of the Collateral Agent and
the Purchasers hereunder, including reasonable attorneys' fees and
disbursements, to the payment in whole or in part of the Obligations, in
accordance with the terms of this Agreement, and only after such application and
after the payment by the Collateral Agent of any other amount required by any
provision of law, need the Collateral Agent account for the surplus, if any, to
any Credit Party. To the extent permitted by applicable law, each Credit Party
waives all claims, damages and demands it may acquire against the Collateral
Agent or any Purchaser arising out of the exercise by them of any rights
hereunder, except for such claims, damages and demands resulting from the
Collateral Agent's or any Purchaser's gross negligence or willful misconduct. If
any notice of a proposed sale or other disposition of Collateral shall be
required by law, such notice shall be deemed reasonable and proper if given at
least 10 days before such sale or other disposition.
3.8 DEFICIENCY. Each Credit Party shall remain liable for any
deficiency if the proceeds of any sale or other disposition of the Collateral
are insufficient to pay the Obligations and the fees and disbursements of any
attorneys employed by the Collateral Agent or any Purchaser to collect such
deficiency.
3.9 LIEN PRIORITY AND SUBORDINATION. The Collateral Agent, for the
benefit of the Purchasers, shall have a first priority Lien on the Greka AM
Collateral, free and clear of all Liens and subject only to Permitted Liens
described in clauses (b) through (k) of the definition of Permitted Liens. The
Collateral Agent, for the benefit of the Purchasers, shall have a second
priority Lien on the Guarantor Collateral, free and clear of all Liens and
subject only to Permitted Liens.
4. PURCHASERS' REPRESENTATIONS AND WARRANTIES
Each Purchaser, severally and not jointly, makes the following
representations and warranties to Greka AM, each and all of which shall survive
the execution and delivery of this Agreement and the closings hereunder:
4.1 INVESTMENT INTENTION. Such Purchaser is purchasing the Notes for
its own account, for investment purposes and not with a view to the distribution
thereof. Such Purchaser will not, directly or indirectly, offer, transfer, sell,
assign, pledge, hypothecate or otherwise dispose of the Notes (or solicit any
offers to buy, purchase, or otherwise acquire any of the Notes), except in
compliance with the Securities Act and any other applicable law.
4.2 ACCREDITED INVESTOR. Such Purchaser is an "accredited investor"
(as that term is defined in Rule 501 of Regulation D under the Securities Act)
and by reason of its business and financial experience, it has such knowledge,
28
sophistication and experience in business and financial matters as to be capable
of evaluating the merits and risks of the prospective investment, is able to
bear the economic risk of such investment and is able to afford a complete loss
of such investment.
4.3 RESTRICTED SECURITIES. Each Purchaser understands that the Notes
it is purchasing may be characterized as "restricted securities" under the
federal securities laws inasmuch as they are being acquired from Greka AM in a
transaction not involving a public offering and that under such laws and
applicable regulations such Notes may be resold without registration under the
Securities Act, only in certain limited circumstances. In this connection, such
Purchaser represents that it is familiar with Rule 144 of the Securities Act, as
presently in effect, and understands the resale limitations imposed thereby and
by the Securities Act.
4.4 EXISTENCE. Such Purchaser is an entity duly organized, validly
existing and in good standing under the laws of the state of its organization.
4.5 POWER; AUTHORIZATION; ENFORCEABLE OBLIGATIONS. The execution,
delivery and performance by such Purchaser of this Agreement and the other Loan
Documents to be executed by it: (i) are within such Purchaser's corporate or
other power; (ii) have been duly authorized by all necessary corporate or other
action; (iii) are not in contravention of any provision of such Purchaser's
certificate of incorporation or by-laws or other organizational documents; and
(iv) will not violate any law or regulation, or any order or decree of any court
or governmental instrumentality binding on such Purchaser. This Agreement and
the other Loan Documents to which such Purchaser is a party have each been duly
executed and delivered by such Purchaser and constitute the legal, valid and
binding obligations of such Purchaser, enforceable against it in accordance with
their respective terms, subject to applicable bankruptcy, insolvency, fraudulent
conveyance, reorganization, moratorium and similar laws affecting creditors'
rights and remedies generally, and subject, as to enforceability, to general
principles of equity, including principles of commercial reasonableness, good
faith and fair dealing (regardless of whether enforcement is sought in a
proceeding at law or in equity).
5. CREDIT PARTIES' REPRESENTATIONS AND WARRANTIES
Each Credit Party, jointly and severally, makes the following
representations and warranties to each Purchaser and the Collateral Agent, each
and all of which shall survive the execution and delivery of this Agreement and
the Closing hereunder:
5.1 AUTHORIZED AND OUTSTANDING SHARES OF CAPITAL STOCK. After giving
effect to the Closing, the authorized capital stock of Greka Energy consists of
50,000,000 shares of common stock, no par value, of which 4,951,451 shares are
issued and outstanding. All of such issued and outstanding shares are validly
issued, fully paid and non-assessable. Except as set forth on Schedule 5.1, (i)
there is no existing option, warrant, call, commitment or other agreement to
which Greka Energy is a party requiring, and there are no convertible securities
29
of Greka Energy outstanding which upon conversion would require, the issuance of
any additional shares of Stock of Greka Energy or other securities convertible
into shares of equity securities of Greka Energy, and (ii) there are no
agreements to which Greka Energy is a party with respect to the voting or
transfer of the Stock of Greka Energy. There are no stockholders' preemptive
rights or rights of first refusal or other similar rights with respect to the
issuance of Stock by Greka Energy. True and correct copies of the certificate of
incorporation and by-laws of Greka Energy have been delivered to each Purchaser.
Greka Energy is the record and beneficial owner of all issued and outstanding
shares of capital stock of Greka AM and any right to acquire the same.
5.2 AUTHORIZATION AND ISSUANCE OF THE NOTES. The issuance of the Notes
has been duly authorized by all necessary corporate action on the part of Greka
AM and, upon delivery of the Notes against payment in accordance with the terms
hereof, the Notes will have been validly issued, free and clear of all pledges,
liens, encumbrances and preemptive rights.
5.3 SECURITIES LAWS. In reliance on the investment representations
contained in Sections 4.1 and 4.2 hereof, the offer, issuance, sale and delivery
of the Notes, as provided in this Agreement, are exempt from the registration
requirements of the Securities Act and all applicable state securities laws, and
are otherwise in compliance with such laws. Neither Greka AM nor any Person
acting on its behalf has taken or will take any action (including, without
limitation, any offering of any securities of Greka AM under circumstances which
would require the integration of such offering with the offering of the Notes
under the Securities Act and the rules and regulations of the SEC thereunder)
which might subject the offering, issuance or sale of the Notes to the
registration requirements of Section 5 of the Securities Act.
5.4 CORPORATE EXISTENCE. Each of the Credit Parties, (i) is a
corporation duly organized, validly existing and in good standing under the laws
of the State of its incorporation, as set forth on Schedule 5.5; (ii) is duly
qualified as a foreign corporation and in good standing under the laws of each
jurisdiction where its ownership or lease of property or the conduct of its
business requires such qualification (except for jurisdictions in which such
failure to so qualify or to be in good standing would not have a Material
Adverse Effect); (iii) has the requisite corporate power and authority and the
legal right to own, pledge, mortgage or otherwise encumber and operate its
properties, to lease the property it operates under lease, and to conduct its
business as now being conducted and as proposed to be conducted; and (iv) has,
or has applied for, all material licenses, permits, consents or approvals from
or by, and has made all material filings with, and has given all material
notices to, all Governmental Authorities having jurisdiction, to the extent
required for such ownership, operation and conduct.
5.5 SUBSIDIARIES. There currently exist no Subsidiaries of Greka
Energy or Greka AM other than as set forth on Schedule 5.5 hereto, which sets
forth such Subsidiaries, together with their respective jurisdictions of
organization, and the authorized and outstanding capital Stock of each such
Subsidiary, by class and number and percentage of each class owned by Greka
Energy or any other Person. There are no options, warrants, rights to purchase
or similar rights covering capital Stock for any such Subsidiary.
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5.6 CORPORATE POWER; AUTHORIZATION; ENFORCEABLE OBLIGATIONS. The
execution, delivery and performance by each Credit Party of this Agreement, the
other Loan Documents to which each is a party and all instruments and documents
to be delivered by each Credit Party, and the consummation of the other
transactions contemplated by any of the foregoing: (i) are within such Credit
Party's corporate power and authority; (ii) have been duly authorized by all
necessary or proper corporate action; (iii) are not in contravention of any
provision of such Credit Party's certificate of incorporation or by-laws; (iv)
will not violate any law or regulation, or any order or decree of any court or
governmental instrumentality; (v) will not conflict with or result in the breach
or termination of, constitute a default under or accelerate any performance
required by, any indenture, mortgage, deed of trust, lease, agreement or other
instrument to which such Credit Party or any of its Subsidiaries is a party or
by which such Credit Party, any of its Subsidiaries or any of their property is
bound; (vi) will not result in the creation or imposition of any Lien upon any
of the property of such Credit Party or any of its Subsidiaries other than
Permitted Liens; and (vii) do not require the consent or approval of, or any
filing with, any Governmental Authority or any other Person (except to the
extent previously obtained or made). At or prior to the Closing Date, each of
this Agreement and the other Loan Documents shall have been duly executed and
delivered by each Credit Party thereto and each shall then constitute a legal,
valid and binding obligation of such Credit Party, enforceable against it in
accordance with its terms, subject to applicable bankruptcy, insolvency,
fraudulent conveyance, reorganization, moratorium and similar laws affecting
creditors' rights and remedies generally, and subject, as to enforceability, to
general principles of equity, including principles of commercial reasonableness,
good faith and fair dealing (regardless of whether enforcement is sought in a
proceeding at law or in equity).
5.7 FINANCIAL STATEMENTS. (a) The audited consolidated balance sheets
of Greka Energy and its Subsidiaries and Greka AM and its Subsidiaries as at
December 31, 2001, and the related consolidated statements of income and cash
flows for the year then ended, with the opinion thereon of a nationally known
accounting firm acceptable to the Required Holders, copies of which have been
previously delivered to each Purchaser, and the audited consolidated balance
sheet of Greka Energy and its Subsidiaries and Greka AM and its Subsidiaries as
at December 31, 2002 (the "Balance Sheet") and the related consolidated
statements of income, and cash flows for the year then ended with the opinion
thereof of a nationally known accounting firm acceptable to the Required
Holders, copies of which shall be delivered to each Purchaser by March 31, 2003,
have been or will be, except as noted therein, prepared in conformity with GAAP
consistently applied throughout the periods involved and present fairly or will
present fairly in all material respects the consolidated financial position of
Greka Energy and its Subsidiaries and Greka AM and its Subsidiaries, as
applicable, as at the dates thereof, and the consolidated results of their
operations and cash flows for the periods then ended, subject, in the case of
the unaudited financial statements, to normal year-end audit adjustments. Each
Credit Party is, and after giving effect to the transaction contemplated hereby
will be, Solvent.
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(b) Except as set forth on Schedule 5.7, no Credit Party nor any of
its Subsidiaries has any material obligations, contingent or otherwise,
including, without limitation, liabilities for Charges, long-term leases or
unusual forward or long-term commitments which are not reflected in the Balance
Sheet, other than those incurred since December 31, 2001 in the ordinary course
of business.
(c) Except as set forth on Schedule 5.7, no dividends or other
distributions have been declared, paid or made upon any shares of capital Stock
of any Credit Party, nor have any shares of capital Stock of any Credit Party
been redeemed, retired, purchased or otherwise acquired for value by any Credit
Party since December 31, 2001.
5.8 OWNERSHIP OF PROPERTY. (a) Except as set forth on Schedule 5.8,
neither Credit Party nor any of its Subsidiaries owns any material interest in
real estate. Each Credit Party and its Subsidiaries has good and marketable and
insurable fee simple title to its owned real property, free and clear of all
Liens. Each Credit Party and its Subsidiaries has valid and marketable leasehold
interests in the leases described on Schedule 5.8 hereto, and, except as set
forth on Schedule 5.8, good and marketable title to, or valid leasehold
interests in, all of its other properties and assets free and clear of all
Liens, except Permitted Liens.
(b) All material real property leased by each Credit Party and its
Subsidiaries is set forth on Schedule 5.8. Each of such leases is valid and
enforceable in accordance with its terms (subject to applicable bankruptcy,
insolvency, fraudulent conveyance, reorganization, moratorium and similar laws
affecting creditors' rights and remedies generally, and subject, as to
enforceability, to general principles of equity, including principles of
commercial reasonableness, good faith and fair dealing (regardless of whether
enforcement is sought in a proceeding at law or in equity)) and is in full force
and effect. The Credit Parties have made available or delivered to each
Purchaser true and complete copies of each of such material leases set forth on
Schedule 5.8 and all documents affecting the rights or obligations of the Credit
Parties or any of their Subsidiaries, including, without limitation, any
non-disturbance and recognition agreements, subordination agreements, attornment
agreements and agreements regarding the term or rental of any of the leases.
Except as set forth on Schedule 5.8, none of the Credit Parties, any of its
Subsidiaries nor, to its knowledge, any other party to any such lease is in
default of its obligations thereunder or has delivered or received any notice of
default under any such lease, nor has any event occurred which, with the giving
of notice, the passage of time or both, would constitute a default under any
such lease.
(c) Except as disclosed on Schedule 5.8, no Credit Party or its
Subsidiaries is obligated under or a party to, any option, right of first
refusal or any other contractual right to purchase, acquire, sell, assign or
dispose of any real property owned or leased by such Credit Party or such
Subsidiary.
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5.9 MATERIAL CONTRACTS; INDEBTEDNESS. Schedule 5.9 contains a true,
correct and complete list and description of all Material Contracts. Each
Material Contract is a valid and binding agreement of a Credit Party or its
Subsidiaries (as the case may be) enforceable against such Credit Party or such
Subsidiary in accordance with its terms (subject to applicable bankruptcy,
insolvency, fraudulent conveyance, reorganization, moratorium and similar laws
affecting creditors' rights and remedies generally, and subject, as to
enforceability, to general principles of equity, including principles of
commercial reasonableness, good faith and fair dealing (regardless of whether
enforcement is sought in a proceeding at law or in equity)), and none of the
Credit Parties nor any of its Subsidiaries has any knowledge that any Material
Contract is not a valid and binding agreement against the other parties thereto.
Each Credit Party and each of its Subsidiaries has fulfilled or is complying
with all obligations required pursuant to the Material Contract to have been
performed by such Credit Party or such Subsidiary on its part. Except as set
forth in Schedule 5.9, none of the Credit Parties nor any of its Subsidiaries is
in default or breach, nor to such Credit Party's or such Subsidiary's knowledge,
is any third party in default or breach under, or with respect to, any Material
Contract. Except as set forth on Schedule 5.9, none of the Credit Parties nor
any of its Subsidiaries has any Indebtedness or Liens on its assets except
Permitted Indebtedness and Permitted Liens, respectively.
5.10 ENVIRONMENTAL PROTECTION. (a) Except as set forth on Schedule
5.10, (i) all real property owned, leased or otherwise operated by each Credit
Party and its Subsidiaries (each, a "Facility") is free of contamination from
any Hazardous Materials, the presence of which could result in Environmental
Liabilities and Costs in excess of more than $500,000 with respect to any one
such event or $1,000,000 in the aggregate, (ii) none of the Credit Parties nor
any of its Subsidiaries has caused or suffered to occur any Release at, or under
any current or formally owned Facility and, to the knowledge of any Credit
Party, no Release has occurred at any current or former Facility, except in
either case, Releases which would not reasonably be expected to result in the
Credit Parties and its Subsidiaries incurring Environmental Liabilities and
Costs in excess of $500,000 with respect to any one such event or $1,000,000 in
the aggregate, (iii) each Credit Party and each of its Subsidiaries and each
Facility and the operations thereon have been and are in compliance with
Environmental Laws, except for noncompliance that would not reasonably be
expected to result in any Credit Party and its Subsidiaries incurring
Environmental Liabilities and Costs in excess of $500,000 with respect to any
one such event or $1,000,000 in the aggregate; (iv) each Credit Party and each
of its Subsidiaries has obtained, or has applied for, currently maintains and is
in full compliance with and in good standing under all permits, licenses, or
other authorizations required under Environmental Laws except where the failure
to obtain, maintain or comply with such Environmental Permits is not reasonably
expected to result in any Credit Party or any Subsidiary incurring Environmental
Liabilities and Costs in excess of $1,000,000 with respect to any one such event
or $1,000,000 in the aggregate and none of the Credit Parties nor any of its
33
Subsidiaries has any knowledge of any proceedings to substantially modify or to
revoke any such permit, (v) there are no investigations, proceedings or
litigation pending or, to any Credit Party's or its Subsidiaries' knowledge,
threatened affecting or against such Credit Party, any of its Subsidiaries or
the Facilities alleging noncompliance with or potential liability under
Environmental Laws, (vi) except for communications in connection with the
matters listed on Schedule 5.10, none of the Credit Parties nor any of its
Subsidiaries has received any communication or notice (including, without
limitation, requests for information) indicating the potential of Environmental
Liabilities and Costs against such Credit Party or its Subsidiaries, which has
not been resolved, and (vii) none of the Credit Parties nor any of its
Subsidiaries is aware of any facts, circumstances or conditions that could
result in the Credit Parties or its Subsidiaries incurring unbudgeted
Environmental Liabilities and Costs in excess of $500,000 with respect to any
one such event and $1,000,000 in the aggregate.
(b) Each of the Credit Parties has provided Purchasers with copies of
any material environmental assessments, audits, inspections or similar reports
relating to the Credit Parties and their respective Subsidiaries and all real
estate owned, operated or leased by or for any Credit Party or any of its
Subsidiaries.
5.11 LABOR MATTERS. (a) There are no strikes or other labor disputes
against any Credit Party or any of its Subsidiaries pending or, to such Credit
Party's or its Subsidiaries' knowledge, threatened. Hours worked by and payment
made to employees of such Credit Party's and its Subsidiaries have not been in
violation of the Fair Labor Standards Act or any other applicable law dealing
with such matters. All payments due from each Credit Party and each of its
Subsidiaries on account of employee health and welfare insurance have been paid
or accrued as a liability on the books of such Credit Party or such Subsidiary.
There is no organizing activity involving any Credit Party or any of its
Subsidiaries pending or, to such Credit Party's or its Subsidiaries' knowledge,
threatened by any labor union or group of employees. There are no representation
proceedings pending or, to any Credit Party's or its Subsidiaries' knowledge,
threatened with the National Labor Relations Board, and no labor organization or
group of employees of any Credit Party or its Subsidiaries has made a pending
demand for recognition. There are no complaints or charges against any Credit
Party or any of its Subsidiaries pending or, to such Credit Party's or its
Subsidiaries' knowledge, threatened to be filed with any federal, state, local
or foreign court, governmental agency or arbitrator based on, arising out of, in
connection with, or otherwise relating to the employment or termination of
employment by such Credit Party's or any of its Subsidiaries of any individual.
(b) Neither Credit Party nor any of its Subsidiaries is, or during the
five years preceding the date hereof was, a party to any labor or collective
bargaining agreement and there are no labor or collective bargaining agreements
which pertain to employees of any Credit Party or its Subsidiaries.
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5.12 OTHER VENTURES. Except as set forth on Schedule 5.12, none of the
Credit Parties nor any of its Subsidiaries is engaged in any joint venture or
partnership with any other Person.
5.13 TAXES. Except as set forth on Schedule 5.13, all material
federal, state, local and foreign tax returns, reports and statements required
to be filed by each Credit Party and its Subsidiaries have been timely filed
with the appropriate Governmental Authority and all such returns, reports and
statements are true, correct and complete in all material respects. All Charges
and other impositions due and payable for the periods covered by such returns,
reports and statements have been paid prior to the date on which any fine,
penalty, interest or late charge may be added thereto for nonpayment thereof, or
any such fine, penalty, interest, late charge or loss has been paid. Proper and
accurate amounts have been withheld by such Credit Party and its Subsidiaries
from its employees for all periods in full and complete compliance with the tax,
social security and unemployment withholding provisions of applicable federal,
state, local and foreign law and such withholdings have been timely paid to the
respective governmental agencies. No Credit Party nor any of its Subsidiaries
has executed or filed with the IRS or any other Governmental Authority any
agreement or other document extending, or having the effect of extending, the
period for assessment or collection of any Charges. No tax audits or other
administrative or judicial proceedings are pending or threatened with regard to
any Charges for which any Credit Party or its Subsidiary may be liable and no
assessment of Charges is proposed against any Credit Party or its Subsidiary. No
Credit Party nor any of its Subsidiaries has filed a consent pursuant to IRC
Section 341(f) or agreed to have IRC Section 341(f)(2) apply to any dispositions
of subsection (f) assets (as such term is defined in IRC Section 341(f)(4)).
None of the property owned by any Credit Party or any of its Subsidiaries is
property which such Credit Party is required to treat as being owned by any
other Person pursuant to the provisions of Section 168(f)(8) of the Internal
Revenue Code of 1954, as amended, and in effect immediately prior to the
enactment of the Tax Reform Act of 1986 or is "tax-exempt use property" within
the meaning of IRC Section 168(h). No Credit Party nor any of its Subsidiaries
has agreed or has been requested to make any adjustment under IRC Section 481(a)
by reason of a change in accounting method or otherwise. No Credit Party nor any
of its Subsidiaries has any obligation under any written tax sharing agreement.
5.14 NO LITIGATION. Except as disclosed on Schedule 5.14, no action,
claim or proceeding is now pending or, to the knowledge of any Credit Party or
its Subsidiaries, threatened against such Credit Party or any of its
Subsidiaries, at law, in equity or otherwise, before any court, board,
commission, agency or instrumentality of any federal, state, or local government
or of any agency or subdivision thereof, or before any arbitrator or panel of
arbitrators, which if adversely determined would result in a Material Adverse
Effect or a judgment for the payment of money in excess of $10,000.
5.15 BROKERS. No broker or finder acting on behalf of any Credit Party
or any of its Subsidiaries brought about the consummation of the transactions
contemplated pursuant to this Agreement and neither such Credit Party nor any of
35
its Subsidiaries has any obligation to any Person in respect of any finder's or
brokerage fees (or any similar obligation) in connection with the transactions
contemplated by this Agreement.
5.16 EMPLOYMENT AGREEMENTS. Except as set forth on Schedule 5.16,
there are no employment, consulting or management agreements covering management
of any Credit Party or any of its Subsidiaries.
5.17 PATENTS, TRADEMARKS, COPYRIGHTS AND LICENSES. Each Credit Party
and each of its Subsidiaries owns all licenses, patents, patent applications,
copyrights, service marks, trademarks and registrations and applications for
registration thereof, and trade names necessary to continue to conduct its
business as heretofore conducted by it and now being conducted by it, each of
which is listed, together with Patent and Trademark Office or Copyright Office
application or registration numbers, where applicable, on Schedule 5.17. To such
Credit Party's knowledge, such Credit Party and each of its Subsidiaries
conducts its businesses without infringement or claim of infringement of any
license, patent, copyright, service xxxx, trademark, trade name, trade secret or
other intellectual property right of others, except as set forth on Schedule
5.17. To such Credit Party's knowledge, there is no infringement by others of
any license, patent, copyright, service xxxx, trademark, trade name, trade
secret or other intellectual property right of such Credit Party's or any of its
Subsidiaries, except as set forth on Schedule 5.17.
5.18 NO MATERIAL ADVERSE EFFECT. Except as set forth on Schedule 5.18,
no event has occurred since December 31, 2001 which has had or could be
reasonably expected to have a Material Adverse Effect.
5.19 ERISA. (a) Schedule 5.19 sets forth: (i) all "employee benefit
plans", as defined in Section 3(3) of ERISA, and any other employee benefit
arrangements or payroll practices, including, without limitation, severance pay,
sick leave, vacation pay, salary continuation for disability, consulting or
other compensation agreements, retirement, deferred compensation, bonus, stock
purchase, hospitalization, medical insurance, life insurance and scholarship
programs (the "Plans") maintained by any Credit Party and any of its
Subsidiaries or to which such Credit Party or any its Subsidiaries contributed
or is obligated to contribute thereunder, and (ii) all "employee pension plans",
as defined in Section 3(2) of ERISA (the "Pension Plans"), maintained by such
Credit Party, any of its Subsidiaries or any of its ERISA Affiliates to which
such Credit Party, any of its Subsidiaries or any of its ERISA Affiliates
contributed or is obligated to contribute thereunder.
(b) No Purchaser will have (i) any obligation to make any contribution
to any Multiemployer Plan or (ii) any withdrawal liability from any such
Multiemployer Plan under Section 4201 of ERISA which it would not have had if it
had not purchased the Notes from Greka AM at the Closing in accordance with the
terms of this Agreement.
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(c) The Pension Plans intended to be qualified under Section 401 of
the IRC are so qualified and the trusts maintained pursuant thereto are exempt
from federal income taxation under Section 501 of the IRC, and nothing has
occurred with respect to the operation of the Pension Plans which could cause
the loss of such qualification or exemption or the imposition of any liability,
penalty, or tax under ERISA or the IRC.
(d) All contributions required by law or pursuant to the terms of the
Plans (without regard to any waivers granted under Section 412 of the IRC) to
any funds or trusts established thereunder or in connection therewith have been
made by the due date thereof (including any valid extension) and no accumulated
funding deficiencies exist in any of the Pension Plans.
(e) There is no "amount of unfunded benefit liabilities" as defined in
Section 4001(a)(18) of ERISA in any of the respective Pension Plans. Each of the
respective Pension Plans are fully funded in accordance with the actuarial
assumptions used by the PBGC to determine the level of funding required in the
event of the termination of the Pension Plan and all benefit liabilities do not
exceed the assets of such Pension Plans.
(f) There has been no "reportable event" as that term is defined in
Section 4043 of ERISA and the regulations thereunder with respect to the Pension
Plans which would require the giving of notice, or any event requiring
disclosure under Sections 4041(c)(3)(C), 4063(a) or 4068(f) of ERISA.
(g) There is no material violation of ERISA with respect to the filing
of applicable reports, documents, and notices regarding the Plans with the
Secretary of Labor and the Secretary of the Treasury or the furnishing of such
documents to the participants or beneficiaries of the Plans.
(h) True, correct and complete copies of the following documents, with
respect to each of the Plans, have been made available or delivered to each
Purchaser by each Credit Party: (A) any plans and related trust documents, and
amendments thereto, (B) the most recent Forms 5500 (including any schedules
thereto) and the most recent actuarial valuation report, if any, (C) the last
IRS determination letter, (D) summary plan descriptions, (E) written
communications to employees relating to the Plans and (F) written descriptions
of all non-written agreements relating to the Plans.
(i) There are no pending actions, claims or lawsuits which have been
asserted or instituted against the Plans, the assets of any of the trusts under
such Plans or the Plan sponsor or the Plan administrator, or against any
fiduciary of the Plans with respect to the operation of such Plans (other than
routine benefit claims), nor does any Credit Party or any of its Subsidiaries
have knowledge of facts which could form the basis for any such claim or
lawsuit.
37
(j) All amendments and actions required to bring the Plans into
conformity in all material respects with all of the applicable provisions of
ERISA and other applicable laws have been made or taken except to the extent
that such amendments or actions are not required by law to be made or taken
until a date after the Closing Date.
(k) The Plans have been maintained, in all material respects, in
accordance with their terms and with all provisions of ERISA (including rules
and regulations thereunder) and other applicable Federal and state law, and no
Credit Party nor any of its Subsidiaries or "party in interest" or "disqualified
person" with respect to the Plans has engaged in a "prohibited transaction"
within the meaning of Section 4975 of the IRC or Section 406 of ERISA.
(l) None of the Credit Parties, any of their Subsidiaries or any ERISA
Affiliate has terminated any Pension Plan, or incurred any outstanding liability
under Section 4062 of ERISA to the PBGC, or to a trustee appointed under Section
4042 of ERISA.
(m) None of the Credit Parties, any of their Subsidiaries or any ERISA
Affiliate maintains retired life and retired health insurance plans which are
Welfare Plans and which provide for continuing benefits or coverage for any
participant or any beneficiary of a participant except as may be required under
the Consolidated Omnibus Budget Reconciliation Act of 1985, as amended ("COBRA")
and at the expense of the participant or the participant's beneficiary. Each
Credit Party, all of its Subsidiaries and all ERISA Affiliates which maintain a
Welfare Plan have complied with the notice and continuation requirements of
COBRA and the regulations thereunder.
(n) None of the Credit Parties, any of their Subsidiaries or any ERISA
Affiliate has contributed or been obligated to contribute to a Multiemployer
Plan as of the Closing.
(o) None of the Credit Parties, any of their Subsidiaries or any ERISA
Affiliate has withdrawn in a complete or partial withdrawal from any
Multiemployer Plan prior to the Closing Date, nor has any of them incurred any
liability due to the termination or reorganization of a Multiemployer Plan.
(p) None of the Credit Parties, any of their Subsidiaries, any ERISA
Affiliate or any organization to which any Credit Party is a successor or parent
corporation, within the meaning of Section 4069(b) of ERISA, has engaged in any
transaction, within the meaning of Section 4069 of ERISA.
5.20 SEC DOCUMENTS. Greka Energy has made available to each Purchaser
a true and complete copy of each report, schedule, registration statement and
definitive proxy statement filed by Greka Energy with the SEC since December 31,
2000 and prior to the date of this Agreement (the "SEC Documents"), which are
all the documents (other than preliminary material) that either of them was
required to file with the SEC since such date. As of their respective dates, the
SEC Documents complied in all material respects with the requirements of the
38
Securities Act or the Exchange Act, as the case may be, and the rules and
regulations of the SEC thereunder applicable to such SEC Documents, and none of
the SEC Documents contained any untrue statement of a material fact or omitted
to state a material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances under which they were made,
not misleading.
5.21 ORDINARY COURSE OF BUSINESS. Except as set forth on Schedule 5.7
hereto or in response to the events described therein, since December 31, 2001,
each Credit Party and each of its Subsidiaries has conducted its operations only
in the ordinary course of business consistent with past practice.
5.22 INSURANCE. Schedule 5.22 hereto contains a complete and correct
list of all policies of insurance of any kind or nature covering any Credit
Party and its Subsidiaries, including, without limitation, policies of life,
fire, theft, employee fidelity and other casualty and liability insurance,
indicating the type of coverage, name of insured, the insurer, the premium, the
expiration date of each policy and the amount of coverage, and such policies are
in full force and effect. Complete and correct copies of each such policy have
been furnished or made available to each Purchaser. Such policies are in amounts
customary for the industry in which the Credit Parties and their Subsidiaries
operate.
5.23 COMPLIANCE WITH LAW. Each Credit Party and its Subsidiaries are
in compliance with all Applicable Law, except where the failure to be in
compliance would not have a Material Adverse Effect.
5.24 ABSENCE OF DEFAULT. Each Credit Party and its Subsidiaries are in
material compliance in all respects with all of the provisions of their
respective certificates of incorporation and by-laws (or the equivalent
thereof), and no event has occurred or failed to occur (including, without
limitation, any matter which could create a default hereunder by cross-default)
which has not been remedied or waived, the occurrence or non-occurrence of which
constitutes, (i) a Default or (ii) a default by such Credit Party or any of its
Subsidiaries under any indenture, agreement or other instrument relating to
Indebtedness of such Credit Party or any of its Subsidiaries in the amount of
$1,000,000 or more in the aggregate, any material license, or any judgment,
decree or order to which such Credit Party or any of its Subsidiaries is a party
or by which such Credit Party or any of its Subsidiaries or any of their
respective properties may be bound or affected.
5.25 AGREEMENTS WITH AFFILIATES. Except for agreements or arrangements
with Affiliates wherein any Credit Party or one or more of its Subsidiaries
provides services to such Affiliates for fair consideration or which are set
forth on Schedule 5.25 hereto, neither Credit Party nor any of its Subsidiaries
has (i) any written agreements or binding arrangements of any kind with any
Affiliate or (ii) any management or consulting agreements of any kind with any
Affiliate.
39
5.26 GAS CONTRACTS. No Credit Party (i) is obligated in any material
respect by virtue of any prepayment made under any contract containing a
"take-or-pay" or "prepayment" provision or under any similar agreement to
deliver hydrocarbons produced from or allocated to any Oil and Gas Properties at
some future date without receiving full payment therefor at the time of
delivery, and (ii) has not produced gas, in any material amount, subject to, and
neither any Credit Party nor any of the Oil and Gas Properties is subject to,
balancing rights of third parties or balancing duties under governmental
requirements, except as to such matters for which such Credit Party has
established monetary reserves adequate in amount to satisfy such obligations and
has segregated such reserves from other accounts.
5.27 REFUNDS. No orders of, proceedings pending before, or other
governmental requirements of, the Federal Energy Regulatory Commission, or any
other similar state or federal regulatory body or governmental authority exist
which could result in any Credit Party being required to refund any material
portion of the proceeds received or to be received from the sale of hydrocarbons
constituting part of the Oil and Gas Properties.
5.28 MINUTE BOOKS. The minute books of each Credit Party, as
previously made available to each Purchaser, accurately reflect all formal
corporate action of the stockholders and Board of Directors of such Credit
Party.
5.29 FULL DISCLOSURE. No information contained in this Agreement, any
other Loan Document, the Financials or any written statement furnished by or on
behalf of any Credit Party pursuant to the terms of this Agreement contains any
untrue statement of a material fact or omits to state a material fact necessary
to make the statements contained herein or therein not misleading in light of
the circumstances under which made.
6. COVENANTS
6.1 AFFIRMATIVE COVENANTS. Each Credit Party, jointly and severally,
covenants and agrees that from and after the date hereof (except as otherwise
provided herein, or unless the Required Holders have given their prior written
consent) so long as the Notes are outstanding, it shall:
(a) BOOKS AND RECORDS. Keep adequate records and books of account with
respect to its business activities, and the Collateral, in which proper entries
reflecting all of its financial transactions are made, in accordance with GAAP.
(b) FINANCIAL STATEMENTS, REPORTS, CERTIFICATES. Provide to each
Purchaser:
(i) as soon as available, but in any event within 90 days (or, if
such Person has filed a Form 12b-25 filing extension with the SEC, 105 days)
after the end of each Fiscal Year, Greka Energy's and its Subsidiaries' and
Greka AM and its Subsidiaries' balance sheet as at the end of such Fiscal Year
40
and the related statements of income, retained earnings and statement of cash
flow for such Fiscal Year, setting forth in comparative form the figures as at
the end of and for the previous Fiscal Year, which shall have been reported on
by independent certified public accountants acceptable to the Required Holders
and shall be accompanied by an unqualified audit report issued by such
independent certified public accountants;
(ii) as soon as available, but in any event within 45 days (or, if
such Person has filed a Form 12b-25 filing extension with the SEC, 50 days)
after the close of each quarter except the fourth quarter, and upon request by
the Required Holders with respect to the fourth quarter, the balance sheet as at
the end of such quarter and the related statements of income, retained earnings
and statement of cash flow for such quarter covering Greka Energy's and its
Subsidiaries' and Greka AM and its Subsidiaries' operations during such period,
which have been internally prepared by Greka Energy and Greka AM. All financial
statements required by this Section 6.1(b) shall be prepared in accordance with
GAAP, subject to year-end adjustments in the case of quarterly statements. At
the times the financial statements are furnished pursuant to this Section
6.1(b), a certificate of Greka Energy's President or Chief Financial Officer
shall be delivered to the Purchasers stating that, based on an examination
sufficient to enable him to make an informed statement, no Default or Event of
Default exists, or, if such is not the case, specifying such Default or Event of
Default and its nature, when it occurred, whether it is continuing and the steps
being taken by Greka AM or Greka Energy with respect to such event.
(iii) monthly (with respect to the month then most recently
ended): (x) flash reports containing information contained in Schedule 6.1(b)
hereto, (y) reports on the average sales prices of crude oil produced by fields
operated by the Credit Parties and sold to non-affiliates of the Credit Parties
and (z) balance sheets and the related statements of income covering Greka
Energy's and its Subsidiaries' and Greka AM's and its Subsidiaries' operations
during each such month, which have been internally prepared by Greka Energy and
Greka AM in accordance with GAAP.
(iv) by January 31 of each Fiscal Year commencing with Fiscal Year
2003, a month-by-month projected operating budget and cash flow for such Fiscal
Year (including an income statement for each month and a balance sheet as at the
end of the last month in each fiscal quarter), such projections to be
accompanied by a certificate signed by Greka Energy's President or Chief
Financial Officer to the effect that such projections have been prepared on the
basis of sound financial planning practice consistent with past budgets and
financial statements and that such officer has no reason to question the
reasonableness of any material assumptions on which such projections were
prepared.
(c) COMMUNICATIONS WITH ACCOUNTANTS. Permit the Purchasers, upon
reasonable notice and with a representative of Greka AM or Greka Energy present,
to communicate directly with its independent certified public accountants and
41
tax advisors and authorize those accountants to disclose to the Purchasers any
and all financial statements and other supporting financial documents and
schedules including copies of any management letter with respect to the
business, financial condition and other affairs of the Credit Parties and their
Subsidiaries.
(d) MAINTENANCE OF EXISTENCE; CONDUCT OF BUSINESS AND OPERATION OF
PROPERTIES. Do or cause to be done all things necessary to preserve and keep in
full force and effect its corporate existence, and its rights and franchises,
(ii) at all times maintain, preserve and protect all of its patents, trademarks
and trade names, and preserve all the remainder of its material assets, in use
or useful in the conduct of its business and keep the same in good repair,
working order and condition (taking into consideration ordinary wear and tear)
and from time to time make, or cause to be made, all needful and proper repairs,
renewals and replacements, betterments and improvements thereto consistent with
industry practices, and (iii) operate or, to the extent that the right of
operation is vested in others, will exercise its best efforts to require the
operator to operate the Oil and Gas Properties and all xxxxx drilled thereon and
that may hereafter be drilled thereon, continuously and in good workmanlike
manner in accordance with the best usage of the field and in accordance with all
laws of the United States of America and the state in which such property is
situated, as well as all rules, regulations and laws of any governmental agency
having jurisdiction to regulate the manner in which the operation of such
property shall be carried on, and will comply with all terms and conditions of
the Leases such Credit Party now holds and each assignment or contract
obligating such Credit Party in any way with respect to the Oil and Gas
Property; but nothing herein shall be construed to empower any Credit Party to
bind the Purchasers to any contract or obligation or render the Purchasers in
any way responsible or liable for bills or obligations incurred by any Credit
Party.
(e) TAXES. Cause all assessments and taxes, whether real, personal, or
otherwise, due or payable by, or imposed, levied, or assessed against the Credit
Parties or any of their assets to be paid in full, before delinquency or before
the expiration of any extension period, except to the extent that the validity
of such assessment or tax shall be the subject of a Permitted Protest. The
Credit Parties shall pay all transfer, excise or similar taxes (not including
income or franchise taxes) in connection with the issuance, sale, delivery or
transfer by the Credit Parties to Purchasers of the Notes, and shall indemnify
and save Purchasers harmless without limitation as to time against any and all
liabilities with respect to such taxes. The Credit Parties shall not be
responsible for any taxes in connection with the transfer of the Notes by the
holder thereof. The obligations of the Credit Parties under this Section 6.1(e)
shall survive the payment, prepayment or redemption of the Notes and the
termination of this Agreement.
(f) INSURANCE. At its own cost and expense in amounts and with
carriers acceptable to the Purchasers, (i) keep all its insurable properties and
properties in which it has an interest insured against the hazards of fire,
flood, sprinkler leakage, those hazards covered by extended coverage insurance
and such other hazards, and for such amounts, as is customary in the case of
companies engaged in businesses similar to the Credit Parties' including,
without limitation, business interruption insurance; (ii) maintain a bond in
42
such amounts as is customary in the case of companies engaged in businesses
similar to the Credit Parties' insuring against larceny, embezzlement or other
criminal misappropriation of insured's officers and employees who may either
singly or jointly with others at any time have access to the assets or funds of
the Credit Parties either directly or through authority to draw upon such funds
or to direct generally the disposition of such assets; (iii) maintain public and
product liability insurance against claims for personal injury, death or
property damage suffered by others; (iv) maintain all such workers' compensation
or similar insurance as may be required under the laws of any state or
jurisdiction in any Credit Party is engaged in business; (v) furnish the
Collateral Agent with (x) copies of all policies within 5 days after any
expiration date and evidence of the maintenance of such policies at least 15
days before any expiration date, and (y) appropriate loss payable endorsements
in form and substance satisfactory to the Required Holders, in the case of Greka
AM Collateral, naming the Collateral Agent as loss payee for the benefit of the
Purchasers and in the case of Guarantor Collateral, naming the Collateral Agent
as loss payee for the benefit of the Purchasers subject to the rights granted to
the holders of the GESPA Debt and in each case, providing that as to the
Purchasers the insurance coverage shall not be impaired or invalidated by any
act or neglect of any Credit Party and the insurer will provide the Collateral
Agent with at least 30 days notice prior to cancellation. The Credit Parties
shall instruct the insurance carriers that in the event of any loss thereunder,
the carriers shall make payment for such loss to the Collateral Agent and not to
the Credit Parties and the Collateral Agent jointly. If any insurance losses are
paid by check, draft or other instrument payable to the Credit Parties and the
Collateral Agent jointly, the Collateral Agent may endorse any Credit Party's
name thereon and do such other things as the Collateral Agent may deem advisable
to reduce the same to cash. The Collateral Agent is hereby authorized to adjust
and compromise claims. The Collateral Agent shall permit the Credit Parties to
use any loss recoveries received by the Collateral Agent upon any such insurance
to acquire replacement assets useful in one or more of the Credit Parties'
businesses or to effect repairs on any asset that suffers such loss. If the
Credit Parties do not use such loss recoveries in such manner within 90 days of
the Collateral Agent's receipt of such loss recoveries, such loss recoveries
received by the Collateral Agent shall be applied to the Obligations; provided,
however, that loss recoveries in respect of the Guarantor Collateral received by
the Collateral Agent shall be applied to the Obligations in the same manner
described above, subject to the terms of the GESPA Debt. Notwithstanding the
foregoing, to the extent that any insurance proceeds received by the Collateral
Agent do not belong to the Credit Parties or result from the loss of property of
the Credit Parties which is not Collateral, the Collateral Agent will return
such proceeds to the Credit Parties. Any surplus shall be paid by the Collateral
Agent to the Credit Parties or applied as may be otherwise required by law. Any
deficiency thereon shall be paid by the Credit Parties to the Purchasers, on
demand.
(g) LOCATION OF INVENTORY AND EQUIPMENT. Keep the Inventory and
Equipment only at the locations identified on Schedule 6.1(g); provided,
however, that the Credit Parties may amend Schedule 6.1(g) with respect to the
location of Inventory so long as such amendment occurs by written notice to the
Collateral Agent not less than 30 days prior to the date on which the Inventory
43
is moved to such new location, so long as such new location is within the
continental United States, and so long as, at the time of such written
notification, the applicable Credit Party provides any financing statements
necessary to perfect and continue perfected the Purchasers' Liens on such assets
and also provides to the Collateral Agent a Collateral Access Agreement;
provided, further that the Credit Parties may move to, and keep in, China
certain Equipment identified on Schedule 6.1(g).
(h) COMPLIANCE WITH LAWS. (i) Comply with the requirements of all
applicable laws, rules, regulations, and orders of any Governmental Authority,
including without limitation the Fair Labor Standards Act, the Americans With
Disabilities Act and Sanction/Embargo Programs, other than laws, rules,
regulations, and orders the non-compliance with which, individually or in the
aggregate, would not result in and reasonably could not be expected to result in
a Material Adverse Effect and (ii) maintain a system to assure and monitor
continued compliance with all applicable Environmental Laws and Sanction/Embargo
Programs, which system shall include periodic reviews of such compliance.
(i) LEASES. Pay when due all rents and other amounts payable under any
leases to which any Credit Party is a party or by which any Credit Party's
properties and assets are bound, unless such payments are the subject of a
Permitted Protest.
(j) ENVIRONMENTAL. (i) In the event that any Credit Party obtains,
gives or receives notice of any material release or threat of Release of any
Hazardous Materials on its property at concentrations exceeding those allowed by
Environmental Laws or that need to be reported to a Governmental Authority (any
such event being hereinafter referred to as a "Hazardous Discharge") or receives
any notice of a material violation, request for information or notification that
it is potentially responsible for Environmental Liabilities and Costs, demand
letter or complaint, order, citation, or other written notice with regard to any
Hazardous Discharge or violation of any Environmental Laws affecting its
property or its interest therein (any of the foregoing is referred to herein as
an "Environmental Complaint") from any Governmental Authority or Person, then
the Credit Parties shall, within 5 Business Days, give written notice of same to
the Purchasers detailing facts and circumstances of which any Credit Party is
aware giving rise to the Hazardous Discharge or Environmental Complaint and
periodically inform the Purchasers of the status of the matter. Such information
is to be provided to allow the Purchasers to protect their security interest in
the Collateral and is not intended to create nor shall it create any obligation
upon the Purchasers with respect thereto.
(ii) The Credit Parties shall respond promptly to any Hazardous
Discharge or Environmental Complaint and take all necessary action in order to
comply with the Environmental Laws and safeguard the health and safety of any
Person and to avoid subjecting the Collateral to any lien, charge, claim or
encumbrance. If the Credit Parties shall fail to respond promptly to any
Hazardous Discharge or Environmental Complaint or the Credit Parties shall fail
to comply with any of the requirements of any Environmental Laws, the Required
Holders may, but without the obligation to do so, for the sole purpose of
44
protecting the Purchasers' interest in the Collateral: (A) give such notices or
(B) enter onto the Credit Parties' property (or authorize third parties to enter
onto such property) and take such actions as the Required Holders (or such third
parties as directed by the Required Holders) deem reasonably necessary or
advisable, to clean up, remove, mitigate or otherwise deal with any such
Hazardous Discharge or Environmental Complaint. All reasonable costs and
expenses directly incurred by the Purchasers (or such third parties) in the
exercise of any such rights, including any sums paid in connection with any
judicial or administrative investigation or proceedings, fines and penalties,
together with interest thereon from the date expended at the default rate of
interest hereunder shall be paid upon demand by the Credit Parties, and until
paid shall be added to and become a part of the Obligations secured by the Liens
created by the terms of this Agreement or any other agreement between the
Purchasers and the Credit Parties.
(iii) The Credit Parties shall defend and indemnify the Purchasers
and hold the Purchasers harmless from and against all loss, liability, damage
and expense, claims, costs, fines, penalties, including attorney's and
consulting fees, and any Environmental Liabilities and Costs suffered or
incurred by the Purchasers under or on account of (A) any Environmental Laws,
including, without limitation, the assertion of any Environmental Lien, with
respect to any Hazardous Discharge, the presence of any Hazardous Materials
affecting Credit Party's or Subsidiary's property, whether or not the same
originates or emerges from Credit Party's property or any contiguous real
estate, including any loss of value of the Collateral as a result of the
foregoing except to the extent such loss, liability, damage and expense is
attributable to any Hazardous Discharge resulting from actions on the part of
the Purchasers, and (B) any Sanction/Embargo Program. The Credit Parties'
obligations under this Section 6.1(j) (A) shall arise upon the discovery of the
presence of any Hazardous Materials on any Credit Party's property, whether or
not any Governmental Authority has taken or threatened any action in connection
with the presence of any Hazardous Materials, and (B) on failure to comply with
any Sanction/Embargo Program. The Credit Parties' obligation and the
indemnification hereunder shall survive the termination of this Agreement.
(iv) For purposes of this Section 6.1(j) all references to the
Credit Parties' property shall be deemed to include all of the Credit Parties'
right, title and interest in and to all their owned and/or leased premises.
(k) TRANSFER OR DIVISION ORDERS. Subject to the rights of the holders
of the GESPA Debt, upon the Collateral Agent's request, each Credit Party will
execute and deliver written notices of assignments to any persons, corporations
or other entities owing or which may in the future owe to such Credit Party
monies or accounts arising in connection with (a) any oil, gas or mineral
production from all or any portion of the Oil and Gas Properties; (b) any gas
contracts, processing contracts or other contracts relating to all or any
portion of the Oil and Gas Properties; or (c) the operation of or production
from all or any portion of the Oil and Gas Properties. The notices of
assignments shall advise the third parties that all of the monies or accounts
described above have been assigned to the Collateral Agent, and if required by
Collateral Agent, shall also require and direct that future payments thereof,
including amounts then owing and unpaid, be paid directly to the Collateral
Agent.
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(l) DISCLOSURE UPDATES. Promptly and in no event later than 5 Business
Days after obtaining knowledge thereof, (a) notify the Purchasers if any written
information, exhibit, or report furnished to the Purchasers contained any untrue
statement of a material fact or omitted to state any material fact necessary to
make the statements contained therein not misleading in light of the
circumstances in which made, and (b) correct any defect or error that may be
discovered therein or in any Loan Document or in the execution, acknowledgement,
filing, or recordation thereof.
(m) BOARD OBSERVER. Provide the Purchasers, so long as such Purchasers
collectively hold Notes in the aggregate principal amount equal to at least
$5,000,000, with the right to designate an observer, without voting rights, who
will be entitled to attend all meetings of Greka Energy's, Greka AM's and Greka
Integrated's Boards of Directors (including audit and compensation committees).
Any observer designated by such Purchasers holding at least a majority in
principal amount of the Notes held by such Purchasers shall be entitled to
notice of all meetings of Greka Energy's, Greka AM's and Greka Integrated's
Boards of Directors (including committee meetings) and to all information
provided to directors subject to the confidentiality provisions in Section 11.15
hereof. Such observer shall be reimbursed for reasonable out-of-pocket expenses
incurred in connection with attendance at Board of Directors and committee
meetings. Notwithstanding anything to the contrary in this Section, the observer
designated pursuant to this Section shall not be entitled to be present at any
meeting of the Board of Directors of Greka Energy, Greka AM or Greka Integrated
during the time at such meeting any matters related to the Notes are discussed
if (i) an Event of Default is then continuing or (ii) if all of the members of
the Board of Directors of Greka Energy, Greka AM, or Greka Integrated, as
applicable, vote unanimously to prevent such observer from being present at such
meeting during such time.
(n) NOTICES. Promptly inform the Collateral Agent in writing of: (i)
the commencement of all proceedings and investigations by or before and/or the
receipt of any notices from, any governmental or nongovernmental body and all
actions and proceedings in any court or before any arbitrator against or in any
way concerning any the Credit Parties' properties, assets or business, involving
a possible liability in excess of $500,000 which might, singly or in the
aggregate, have a Material Adverse Effect; (ii) any amendment of any Credit
Party's certificate of incorporation or by-laws; (iii) any change in any Credit
Party's business, assets, liabilities, condition (financial or otherwise),
results of operations or business prospects which has had or might have a
Material Adverse Effect; (iv) any Default or Event of Default; (v) any default
or any event which with the passage of time or giving of notice or both would
constitute a default under any agreement for the payment of money to which any
Credit Party is a party or by which any Credit Party or any Credit Party's
properties may be bound which would have a Material Adverse Effect; (vi) any
change in the location of Credit Party's executive offices; (vii) any change in
the location of any Credit Party's Inventory or Equipment from the locations
listed on Schedule 6.1(g) hereto, (viii) any change in any Credit Party's
46
corporate name; (ix) any material delay in any Credit Party's performance of any
of its obligations to any Customer and of any assertion of any material claims,
offsets, counterclaims or Disputes by any Customer and of any allowances,
credits and/or other monies granted by any Credit Party to any Customer; (x) and
furnish to and inform the Purchasers of all material adverse information
relating to the financial condition of any Customer; and (xi) any material
return of goods;
(o) EMPLOYEE PLANS. (i) With respect to other than a Multiemployer
Plan, for each Plan and Pension Plan intended to be qualified under Section
401(a) of the IRC hereafter adopted or maintained by the Credit Parties or any
ERISA Affiliate, the Credit Parties shall (A) seek, or cause its ERISA
Affiliates to seek, and receive determination letters from the IRS to the effect
that such Plan or Pension Plan is qualified within the meaning of Section 401(a)
of the IRC; and (B) from and after the adoption of any such Plan or Pension
Plan, cause such plan to be qualified within the meaning of Section 401(a) of
the IRC and to be administered in all material respects in accordance with the
requirements of ERISA and Section 401(a) of the IRC.
(ii) With respect to each Welfare Plan hereafter adopted or
maintained by the Credit Parties or any ERISA Affiliate, to the extent
applicable, the Credit Parties shall comply, or cause its ERISA Affiliates to
comply, with the notice and continuation coverage requirements of Section 4980B
of the IRC and the regulations thereunder.
(iii) The Credit Parties shall not, directly or indirectly, and
shall not permit any ERISA Affiliate to directly or indirectly by reason of an
amendment or amendments to, or the adoption of, one or more Pension Plans,
permit the present value of all benefit liabilities, as defined in Title IV of
ERISA, (using the actuarial assumptions utilized by the PBGC upon termination of
a plan) to exceed the fair market value of assets allocable to such benefits by
more than $50,000, or to increase to the extent security must be provided to any
Pension Plan under Section 401(a)(29) of the IRC. The Credit Parties shall not
establish or become obligated to any new Retiree Welfare Plan, which would
result in the present value of future liabilities under any such plans to exceed
$50,000. Neither the Credit Parties nor any of its ERISA Affiliates shall
establish or become obligated to any new unfunded Pension Plan, which would
result in the present value of future liabilities under any such plans to exceed
$50,000. The Credit Parties shall not directly or indirectly, and shall not
permit any ERISA Affiliate to (a) satisfy any liability under any Pension Plan
by purchasing annuities from an insurance company or (b) invest the assets of
any Pension Plan with an insurance company, unless, in each case, such insurance
company is rated AA by Standard & Poor's Corporation and the equivalent by each
other nationally recognized rating agency at the time of the investment.
(iv) The Credit Parties and any ERISA Affiliate shall not
contribute or become obligated to contribute to any Multiemployer Plan.
47
(p) ROLL FORWARD RESERVE REPORTS. Deliver, on an annual basis, roll
forward reserve reports of the Oil and Gas Properties prepared by appraisers
satisfactory to the Collateral Agent.
(q) Minimum Capital Expenditures. Collectively with all Credit
Parties, make Capital Expenditures, measured on a Fiscal Year-end basis for the
12-month period ending December 31, 2003, of at least $10,000,000.
6.2 NEGATIVE AND FINANCIAL COVENANTS. Each Credit Party covenants and
agrees that from and after the date hereof (except as otherwise provided herein,
or unless the Required Holders have given their prior written consent) so long
as the Notes are outstanding it shall not:
(a) INDEBTEDNESS.
(i) With respect to any Credit Party other than Greka AM, create,
incur, assume, permit, guarantee, or otherwise become or remain, directly or
indirectly, liable with respect to any Indebtedness, except:
(1) Permitted Indebtedness
(2) Indebtedness evidenced by this Agreement and the other Loan
Documents;
(3) the GESPA Debt;
(4) the GMAC Debt;
(5) Indebtedness set forth on Schedule 6.2(a);
(6) Permitted Purchase Money Indebtedness; and
(7) Indebtedness owing by any Credit Party other than Greka AM
to any other Credit Party other than Greka AM.
(ii) With respect to Greka AM, create, incur , assume, permit,
guarantee, or otherwise become or remain, directly or indirectly, liable with
respect to any Indebtedness, except:
(1) Permitted Indebtedness
(2) Indebtedness evidenced by this Agreement and the other Loan
Documents; and
(3) the Indebtedness evidenced by the Guaranty executed by Greka
AM with respect to the GESPA Debt.
48
(b) LIENS. Create, incur, assume, or permit to exist, directly or
indirectly, any Lien on or with respect to any of its assets, of any kind,
whether now owned or hereafter acquired, or any income or profits therefrom,
except for Permitted Liens and with respect to the Santa Xxxxx Collateral, the
Lien existing on the date hereof securing the GMAC Debt.
(c) SALES OF ASSETS; LIQUIDATION. (i) Sell, transfer, convey or
otherwise dispose of any assets or properties or (ii) liquidate, dissolve or
wind up the Credit Parties, except for in the case of any Credit Party other
than Greka AM, transfers to Credit Parties other than Greka AM, whether
voluntary or involuntary; provided, however, that the foregoing shall not
prohibit (i) the sale of inventory in the ordinary course of business, (ii) the
sale of obsolete equipment and fixtures so long as the proceeds of such sale are
used to (A) replace such equipment and fixtures within 90 days of such sale or
(B) repay the GESPA Debt or the Obligations, if such proceeds are from Guarantor
Collateral or the Obligations if such proceeds are from Greka AM Collateral
(iii) transfers resulting from any casualty or condemnation of assets or
properties, or (iv) other sales of assets or properties of any Credit Party not
described on Schedule 6.2(c), the net proceeds of which, in the aggregate, do
not exceed $1,000,000 in any Fiscal Year, so long as the net cash proceeds of
such sale are placed in an escrow account satisfactory to the Collateral Agent.
If Credit Parties do not use such amounts in the escrow account to make Capital
Expenditures within 90 days of such sale, such amount shall be applied to repay
the GESPA Debt or the Obligations or, if such amounts are proceeds of the Santa
Xxxxx Collateral, the GMAC Debt and the GESPA Debt, and then the Obligations.
(d) MERGERS AND SUBSIDIARIES. (i) Directly or indirectly, by operation
of law or otherwise, merge with, consolidate with, or otherwise combine with any
Person other than another Credit Party, provided that in any merger or
combination involving Greka AM, Greka AM is the surviving entity in such
transaction or (ii) create any Subsidiary, unless such Subsidiary becomes a
signatory to the Loan Documents as an additional Credit Party, bound by all the
obligations of the Credit Parties thereunder, all in form and substance
satisfactory to the Required Holders.
(e) CHANGE NAME. Change any Credit Party's name, Federal Employee
Identification Number, corporate structure or identity, or add any new
fictitious name; provided, however, that a Credit Party may change its name or
add any new fictitious name upon at least 30 days prior written notice by a
Credit Party to the Collateral Agent and the Purchasers of such change and so
long as, at the time of such written notification, such Credit Party provides
any financing statements or fixture filings necessary to perfect and continue
perfected the Purchasers' Liens.
(f) GUARANTEE. Guarantee or otherwise become in any way liable with
respect to the obligations of any third Person except (i) by endorsement of
instruments or items of payment for deposit to the account of Credit Parties or
which are transmitted or turned over to the Purchasers with respect to the GMAC
Debt, (ii) for guarantees of Indebtedness permitted under Section 6.2(a) with
respect to such Credit Party and guarantees set forth on Schedule 6.2(f) hereto
and (iii) for guarantees of performance, surety or appeal bonds of any Credit
Party.
49
(g) NATURE OF BUSINESS. Make any change in the principal nature of any
Credit Party's business.
(h) PREPAYMENTS.
Directly or indirectly, prepay, redeem, defease, purchase, or
otherwise acquire any Indebtedness of any Credit Party in excess of $250,000 in
the aggregate during any Fiscal Year, other than the Obligations in accordance
with this Agreement; provided, however, that the Guarantors may prepay the GESPA
Debt and the GMAC Debt.
(i) CHANGE OF CONTROL. Cause, permit, or suffer to exist, directly or
indirectly, any Change of Control.
(j) CONSIGNMENTS. Consign any Inventory or sell any Inventory on xxxx
and hold, sale or return, sale on approval, or other conditional terms of sale.
(k) DISTRIBUTIONS. Other than distributions or the declaration and
payment of dividends by a Guarantor to another Credit Party, make any
distribution or declare or pay any dividends (in cash or other property, other
than common stock) on, or purchase, acquire, redeem, or retire any of, any
Credit Party's Stock of any class, whether now or hereafter outstanding or pay
any management or similar fees; provided, however, that at any time after June
30, 2003, so long as the Leverage Ratio is less than 2:1 and provided that no
Default or Event of Default has occurred and is continuing or would result
therefrom, the Guarantors may repurchase Greka Energy's Stock for an aggregate
purchase price not exceeding $5,000,000 in any Fiscal Year; provided further,
however, that the Guarantors may not acquire more then 10% of the outstanding
common stock of Greka Energy as of June 26, 2002.
(l) ACCOUNTING METHODS. Modify or change its method of accounting
(other than as may be required to conform to GAAP) or enter into, modify, or
terminate any agreement currently existing, or at any time hereafter entered
into with any third party accounting firm or service bureau for the preparation
or storage of Credit Parties' accounting records without said accounting firm or
service bureau agreeing to provide the Collateral Agent and Purchasers
information regarding the assets with respect to which the Purchasers have a
Lien or the Credit Parties' financial condition.
(m) INVESTMENTS. Directly or indirectly in any transaction or related
series of transactions, acquire or invest in any assets or business of any
Person other than investments in Cash Equivalents and, in the case of
Guarantors, Permitted Acquisitions.
(n) TRANSACTIONS WITH AFFILIATES. Except for agreements set forth on
Schedule 6.2(n) hereto or transactions among the Credit Parties, directly or
indirectly enter into or permit to exist any transaction with any Affiliate of
50
any Credit Party except for transactions that are in the ordinary course of such
Credit Parties' business, upon fair and reasonable terms, that are fully
disclosed to the Credit Parties, and that are no less favorable to such Credit
Parties than would be obtained in an arm's length transaction with a
non-Affiliate.
(o) SUSPENSION. Suspend or go out of a substantial portion of its
business.
(p) LOANS AND ADVANCES. Make or accrue any loans or other advances of
money or extensions of credit to any Person in excess of $250,000 in the
aggregate during any Fiscal Year; provided, however, that any Guarantor may
accrue loans to another Guarantor.
(q) CHANGE IN LOCATION OF CHIEF EXECUTIVE OFFICE; INVENTORY AND
EQUIPMENT WITH BAILEES. Relocate its chief executive office to a new location
without the Credit Parties providing 30 days prior written notification thereof
to the Collateral Agent and the Purchasers and so long as, at the time of such
written notification, the applicable Credit Party provides any financing
statements or fixture filings necessary to perfect and continue perfected the
Purchasers' Liens and also provides the Collateral Agent a Collateral Access
Agreement with respect to such new location. The Inventory and Equipment shall
not at any time now or hereafter be stored with a bailee, warehouseman, or
similar party without the Required Holders' prior written consent.
(r) RECEIVABLES. Xxxx Receivables under any name except the present
name of the respective Credit Party.
(s) Financial Covenants. Fail to maintain:
(i) Maximum Tangible Net Worth Ratio. A Tangible Net Worth Ratio,
measured on the last day of each fiscal quarter after the Measurement Date, of
not more than 1.5:1.00;
(ii) Fixed Charge Coverage Ratio. A Fixed Charge Coverage Ratio,
measured on a fiscal quarter-end basis for the 12-month period ending each
fiscal quarter after the Measurement Date, of not less than 1.0:1.00.
(iii) Minimum Interest Coverage Ratio. An Interest Coverage Ratio,
measured on a fiscal quarter-end basis for the 12-month period ending on each
fiscal quarter after the Measurement Date, of not less than 2.00:1.00.
(iv) Minimum EBITDA. (A) EBITDA for Greka Energy and its
Subsidiaries for the period commencing on the Closing Date and ending on each of
the following dates to be not less than the amount set forth below for the
corresponding period:
51
Period Ending Amount
------------- ------
March 31, 2003 $ 2,000,000
June 30, 2003 $ 6,000,000
September 30, 2003 $12,000,000
December 31, 2003 $17,500,000
and thereafter EBITDA for Greka Energy and its Subsidiaries,
measured on a fiscal quarter-end basis for the 12-month period ending
on March 31, 2004 and each fiscal quarter thereafter, to be not less
than $20,000,000.
(v) Maximum Total Debt to EBITDA. On the last day of each fiscal
quarter after the Measurement Date, a ratio of Total Debt as of each such date
to EBITDA for Greka Energy and its Subsidiaries for the 12- month period ending
as of each such date of not more than 3.90:1.00.
(vi) Minimum Crude Run and Aggregate Crude Oil Production. (x) A
Crude Run, measured on a month-end basis for each month after the Measurement
Date, equal to at least the number of barrels for the corresponding month
specified in Schedule 6.2(s) or (y) crude oil production from all properties
owned or leased by Greka Energy or any of its Subsidiaries, measured on a
month-end basis for each month after the Measurement Date, equal to at least the
number of barrels for the corresponding month specified in Schedule 6.2(s);
provided, however, that non-compliance with the minimum Crude Run for any one
month in any Fiscal Year shall not be a Default or Event of Default hereunder so
long as Greka Energy provides the Collateral Agent with at least 30 days prior
notice of any such potential non-compliance.
(vii) Greka AM Minimum Crude Oil Production. Crude oil production
from all properties owned or leased directly by Greka AM measured on a month-end
basis, equal to at least the number of barrels for the corresponding month
specified in Schedule 6.2(s).
(t) Capital Expenditures. Make Capital Expenditures, collectively with
all other Credit Parties, measured on a Fiscal Year-end basis for the 12-month
period ending each Fiscal Year after the Closing Date, in excess of the amounts
stated on Schedule 6.2(s) for the corresponding types of assets described on
Schedule 6.2(s) and for the corresponding status of the GMAC Debt; provided,
however, that proceeds from any asset sales permitted under Section 6.2(c) may
be used to make Capital Expenditures so long as such proceeds are used within 90
days of any such asset sale.
(u) MANAGEMENT COMPENSATION. Increase the salary and bonus of any
officer of any Credit Party in any calendar year, except consistent with past
practice of such Credit Party.
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(v) AMENDMENTS TO CERTIFICATE OF INCORPORATION AND BY-LAWS. Authorize,
adopt or approve an amendment to the certificate of incorporation or by-laws of
any Credit Party, except to increase the number of authorized shares of common
stock.
7. CONDITIONS PRECEDENT
7.1 CONDITIONS PRECEDENT. The obligation of each Purchaser to purchase
the Notes at the Closing pursuant to Section 2.1 hereof, is subject to the
condition that such Purchaser shall have received, on the Closing Date, the
following, each dated the Closing Date unless otherwise indicated, in form and
substance satisfactory to such Purchaser:
(a) Favorable opinion of Xxxxx Xxxxxx, Esq., in-house counsel to the
Credit Parties, substantially in the form attached hereto as Exhibit C, it being
understood that to the extent that such opinion of counsel to the Credit Parties
shall rely upon any other opinion of counsel, each such other opinion shall be
in form and substance reasonably satisfactory to the Purchasers and shall
provide that Purchasers may rely thereon.
(b) Resolutions of the Board of Directors of each Credit Party,
certified by the Secretary or Assistant Secretary of such Credit Party, as of
the Closing Date, to be duly adopted and in full force and effect on such date,
authorizing (i) the consummation of each of the transactions contemplated by
this Agreement and (ii) specific officers to execute and deliver this Agreement
and each other Loan Document to which it is a party.
(c) Governmental certificates, dated the most recent practicable date
prior to the Closing Date, with telegram updates where available, showing that
each Credit Party is organized and in good standing in the state of its
organization, and is qualified as a foreign corporation and in good standing in
all other jurisdictions in which it is qualified to transact business.
(d) A copy of the certificate of incorporation and all amendments
thereto of each Credit Party, certified as of a recent date by the Secretary of
State of the state of its organization, and copies of each Credit Party's
by-laws, certified by the Secretary or Assistant Secretary of such Credit Party
as true and correct as of the Closing Date.
(e) Each of the Notes duly executed by Greka AM.
(f) Each of the Collateral Documents, duly executed by the parties
thereto.
(g) UCC-1 financing statements reflecting each Credit Party as the
debtor in favor of Collateral Agent for the benefit of the Purchasers, in form
and substance satisfactory to the Purchasers.
53
(h) Certificates of the Secretary or an Assistant Secretary of each
Credit Party, dated the Closing Date, as to the incumbency and signatures of the
officers of such Credit Party executing this Agreement, the Notes, each other
Loan Document to which it is a party and any other certificate or other document
to be delivered pursuant hereto or thereto, together with evidence of the
incumbency of such Secretary or Assistant Secretary.
(i) Certificate of the President of each Credit Party, dated the
Closing Date, stating that all of the representations and warranties of such
Credit Party contained herein or in the other Loan Documents are true and
correct on and as of the Closing Date as if made on such date and that no breach
of any covenant contained in Section V has occurred or would result from the
Closing hereunder.
(j) Such additional documentation as the Collateral Agent or the
Required Holders may reasonably require.
7.2 ADDITIONAL CONDITIONS. The obligation of each Purchaser to
purchase the Notes at the Closing pursuant to Section 2.1 is subject to the
additional conditions precedent that:
(a) Such Purchaser shall have received evidence that the insurance
policies provided for in Section 5.22 are in full force and effect, certified by
the insurer thereof.
(b) Such Purchaser shall have received pay-off letters and UCC-3
termination statements, in form and substance satisfactory to it, with respect
to the Bank of Texas Debt and the IPH Debt.
(c) Such Purchaser shall have received a copy of the Intercreditor
Agreement, duly executed by the parties thereto.
(d) The Credit Parties shall have paid the Closing Fee and all fees
required to be paid by them pursuant to Section 11.2 hereof for which the Credit
Parties shall have received an invoice on or prior to the Closing Date.
(e) Except as disclosed pursuant to Section 5.18 hereof, there shall
not have occurred any event or condition since December 31, 2001 which could
have a Material Adverse Effect.
(f) All of the representations and warranties of each Credit Party
contained herein or in the other Loan Documents shall be true and correct on and
as of the Closing Date as if made on such date and no breach of any covenant
contained in Section V and no Default or Event of Default shall have occurred or
would result from the Closing hereunder.
54
(g) All required consents and approvals from any third parties to
consummate the transactions contemplated hereby, including pursuant to the
GESPA, shall have been obtained.
(h) The Closing shall have occurred no later than March 11, 2003.
8. EVENTS OF DEFAULT; RIGHTS AND REMEDIES
8.1 EVENTS OF DEFAULT. The occurrence of any one or more of the
following events (regardless of the reason therefor) shall constitute an "Event
of Default" hereunder and under the Notes:
(a) Any Credit Party fails to make any payment of principal of, or
interest on or any other amount owing in respect of, any Note, or any of the
other Obligations, when due and payable or declared due and payable which, other
than principal (which shall constitute an immediate Event of Default), shall
have remained unremedied for a period of 10 days.
(b) Any Credit Party fails or neglects to perform, keep or observe any
of the provisions of Section 6.2 or Section 6.1(b) hereof.
(c) Any Credit Party fails or neglects to perform, keep or observe any
other provision of this Agreement or of any of the other Loan Documents, and the
same shall remain unremedied for a period of 30 days after the Credit Parties
shall receive written notice of any such failure from the Purchasers.
(d) A default shall occur under any other agreement, document or
instrument to which any Credit Party is a party or by which any Credit Party or
any of their property is bound (after giving effect to any applicable notice or
cure periods), and such default (i) involves the failure to make any payment
(whether of principal, interest or otherwise) due (whether by scheduled
maturity, required prepayment, acceleration, demand or otherwise) in respect of
any Indebtedness of any Credit Party in an aggregate amount exceeding $250,000,
or (ii) causes (or permits any holder of such Indebtedness or a trustee to
cause) such Indebtedness or a portion thereof in an aggregate amount exceeding
$250,000, to become due prior to its stated maturity or prior to its regularly
scheduled dates of payment.
(e) Any representation or warranty herein or in any Loan Document or
in any written statement pursuant thereto or hereto, report, financial statement
or certificate made or delivered to Purchasers by any Credit Party pursuant
hereto or thereto is untrue or incorrect in any material respect, as of the date
when made.
(f) Any of the assets of any Credit Party shall be attached, seized,
levied upon or subjected to a writ or distress warrant, or come within the
possession of any receiver, trustee, custodian or assignee for the benefit of
creditors of any Credit Party and shall remain unstayed or undismissed for 60
consecutive days; or any Credit Party shall have concealed, removed or permitted
55
to be concealed or removed, any part of its property, with intent to hinder,
delay or defraud its creditors or any of them or made or suffered a transfer of
any of its property or the incurring of an obligation which may be fraudulent
under any bankruptcy, fraudulent conveyance or other similar law.
(g) A case or proceeding shall have been commenced against any Credit
Party in a court having competent jurisdiction seeking a decree or order in
respect of any Credit Party (i) under title 11 of the United States Code, as now
constituted or hereafter amended, or any other applicable federal, state or
foreign bankruptcy or other similar law, (ii) appointing a custodian, receiver,
liquidator, assignee, trustee or sequestrator (or similar official) of any
Credit Party of any substantial part of its or their properties, or (iii)
ordering the winding-up or liquidation of the affairs of any Credit Party and
such case or proceeding shall remain undismissed or unstayed for 60 consecutive
days or such court shall enter a decree or order granting the relief sought in
such case or proceeding.
(h) Any Credit Party (i) files a petition seeking relief under title
11 of the United States Code, as now constituted or hereafter amended, or any
other applicable federal, state or foreign bankruptcy or other similar law, (ii)
consents to the institution of proceedings thereunder or to the filing of any
such petition or to the appointment of or taking possession by a custodian,
receiver, liquidator, assignee, trustee or sequestrator (or similar official) of
any Credit Party of any substantial part of its properties, (iii) fails
generally to pay its debts as such debts become due, or (iv) takes any corporate
action in furtherance of any such action.
(i) Final judgment or judgments (after the expiration of all times to
appeal therefrom) for the payment of money in excess of $500,000 in the
aggregate shall be rendered against any Credit Party and the same shall not be
(i) fully covered by insurance, or (ii) vacated, stayed, bonded, paid or
discharged for a period of 30 days.
(j) (i) With respect to any Plan, a prohibited transaction within the
meaning of Section 4975 of the IRC or Section 406 of ERISA occurs which in the
reasonable determination of the Required Holders could result in direct or
indirect liability to any Credit Party, (ii) with respect to any Title IV Plan,
the filing of a notice to voluntarily terminate any such plan in a distress
termination, (iii) with respect to any Multiemployer Plan, any Credit Party or
any ERISA Affiliate shall incur any Withdrawal Liability, (iv) with respect to
any Pension Plan subject to Section 412 of the Code or Section 302 of ERISA, any
Credit Party or any ERISA Affiliate shall incur an accumulated funding
deficiency or request a funding waiver from the IRS, or (v) with respect to any
Title IV Plan or Multiemployer Plan which has an ERISA Event not described in
clauses (ii) - (iv) hereof, in the reasonable determination of the Agent there
is a reasonable likelihood for termination of any such plan by the PBGC;
provided, however, that the events listed in clauses (i) - (v) hereof shall
constitute Events of Default only if the liability, deficiency or waiver request
of any Credit Party or any ERISA Affiliate, whether or not assessed, exceeds
$500,000 in any case set forth in (i) - (v) above, or exceeds $500,000 in the
aggregate for all such cases.
56
8.2 REMEDIES. If any Event of Default specified in Section 8.1 shall
have occurred and be continuing, the Required Holders may, without notice,
declare all Obligations to be forthwith due and payable, whereupon all such
Obligations shall become and be due and payable, without presentment, demand,
protest or further notice of any kind, all of which are expressly waived by
Greka AM; provided, however, that upon the occurrence of an Event of Default
specified in Section 8.1(f), (g) or (h) hereof, all Obligations shall become due
and payable without declaration, notice or demand by any Purchaser.
Any Purchaser may (but shall not be obligated to) take such action, or
refrain from taking such action, with respect to such Default or Event of
Default as it shall deem advisable in its best interests, including any action
(or the failure to act) pursuant to the Loan Documents.
8.3 WAIVERS BY THE CREDIT PARTIES. Except as otherwise provided for in
this Agreement and applicable law, the Credit Parties waive (i) presentment,
demand and protest and notice of presentment, dishonor notice of intent to
accelerate and notice of acceleration, (ii) all rights to notice and a hearing
prior to the Purchasers' taking possession or control of, or to the Purchasers'
replevy, attachment or levy upon, any collateral securing the Obligations or any
bond or security which might be required by any court prior to allowing such
Purchasers to exercise any of their remedies, and (iii) the benefit of all
valuation, appraisal and exemption laws. The Credit Parties acknowledge that
they have been advised by counsel of their choice with respect to this
Agreement, the other Loan Documents and the transactions evidenced by this
Agreement and the other Loan Documents.
8.4 RIGHT OF SET-OFF. Upon the occurrence and during the continuance
of any Event of Default, each Purchaser, with the prior consent of the
Collateral Agent, is hereby authorized at any time and from time to time, to the
fullest extent permitted by law, to set off and apply any and all deposits
(general or special, time or demand, provisional or final) at any time held and
other indebtedness at any time owing by such Purchaser to or for the credit or
the account of Greka AM against any and all of the obligations of Greka AM now
or hereafter existing under this Agreement and the Notes held by Purchaser
irrespective of whether or not such Purchaser shall have made any demand under
this Agreement or any Note and although such obligations may be unmatured. Each
Purchaser agrees promptly to notify Greka AM, after any such set-off and
application made by such Purchaser; provided, however, that the failure to give
such notice shall not affect the validity of such set-off and application. The
rights of the Purchasers under this Section are in addition to other rights and
remedies (including, without limitation, other rights of set-off) which the
Purchasers may have.
9. INDEMNIFICATION
Each Credit Party agrees to indemnify and hold harmless each
Purchaser, the Collateral Agent and their Affiliates and their respective
officers, directors and employees from and against any losses, liabilities,
obligations, damages, penalties, actions, proceedings, judgments, suits, claims,
57
costs, fees, expenses and disbursements (including, without limitation,
reasonable attorneys' fees and disbursements) of any kind ("Losses") which may
be imposed upon, incurred by or asserted against such Purchaser, Collateral
Agent or such other indemnified Persons as a result of such Purchaser or
Collateral Agent having entered into this Agreement or any of the other Loan
Documents or relating to or arising out of any untrue representation, breach of
warranty or failure to perform any covenants or agreement by any Credit Party
contained herein or in any certificate or document delivered pursuant hereto or
arising out of, under or pursuant to any Environmental Law applicable to any
Credit Party or its Subsidiaries or any Hazardous Materials located at, on,
under, or Released from any Facility or by any Credit Party or any of its
Subsidiaries or otherwise relating to or arising out of the transactions
contemplated hereby; provided, however, that such Credit Party shall not be
liable for such indemnification to such indemnified Person to the extent that
any such Losses result from such indemnified Person's gross negligence or
willful misconduct.
10. COLLATERAL AGENT
10.1 COLLATERAL AGENCY PROVISIONS. (a) Appointment. Guggenheim
Investment Management, LLC is hereby appointed to act on behalf of all the
Purchasers as the Collateral Agent under this Agreement, and the other Loan
Documents. The provisions of this Section 11.1 are solely for the benefit of the
Collateral Agent and such Purchasers, and no Credit Party nor any other Person
shall have any rights as a third party beneficiary of any of the provisions
hereof. In performing its functions and duties under this Agreement, the
Collateral Agent shall act solely as an agent of the respective Purchasers and
does not assume and shall not be deemed to have assumed any obligation toward or
relationship of agency or trust with or for any Credit Party or any other
Person. The Collateral Agent shall have no duties or responsibilities except for
those expressly set forth in this Agreement. The duties of the Collateral Agent
shall be mechanical and administrative in nature and the Collateral Agent shall
not have, or be deemed to have, by reason of this Agreement or otherwise a
fiduciary relationship in respect of any Purchaser. The Purchasers hereby
authorize the Collateral Agent to execute the Intercreditor Agreement.
(b) Actions. If the Collateral Agent shall request instructions from
the Required Holders or all Purchasers affected thereby with respect to any act
or action (including failure to act) in connection with this Agreement, then the
Collateral Agent shall be entitled to refrain from such act or taking such
action unless and until the Collateral Agent shall have received instructions
from the Required Holders or all Purchasers affected thereby, as the case may
be, and the Collateral Agent shall not incur liability to any Person by reason
of so refraining. The Collateral Agent shall be fully justified in failing or
refusing to take any action hereunder (a) if such action would, in the opinion
of the Collateral Agent, be contrary to law or the terms of this Agreement, (b)
if such action would, in the opinion of the Collateral Agent, expose the
Collateral Agent to any liability or (c) if the Collateral Agent shall not first
be indemnified to its satisfaction against any and all liability and expense
which may be incurred by it by reason of taking or continuing to take any such
action. Without limiting the foregoing, no Purchaser shall have any right of
58
action whatsoever against the Collateral Agent as a result of the Collateral
Agent acting or refraining from acting hereunder in accordance with the
instructions of the Required Holders or all affected Purchasers, as applicable.
(c) Collateral Agent's Reliance, etc. Neither the Collateral Agent nor
any of its Affiliates nor any of their respective directors, officers, agents or
employees shall be liable for any action taken or omitted to be taken by it or
them under or in connection with this Agreement, except for damages caused by
its or their own gross negligence or willful misconduct. Without limitation of
the generality of the foregoing, the Collateral Agent: (i) may treat the payee
of any Note as the holder thereof until the Collateral Agent receives written
notice of the assignment or transfer thereof signed by such payee and in form
satisfactory to the Collateral Agent; (ii) may consult with legal counsel,
independent public accountants and other experts selected by it and shall not be
liable for any action taken or omitted to be taken in good faith by it in
accordance with the advice of such counsel, accountants or experts; (iii) makes
no warranty or representation to any Purchaser and shall not be responsible to
any Purchaser for any statements, warranties or representations made in or in
connection with this Agreement; (iv) shall not have any duty to ascertain or to
inquire as to the performance or observance of any of the terms, covenants or
conditions of this Agreement on the part of any Credit Party or to inspect the
Collateral including the books and records of any Credit Party; (v) shall not be
responsible to any Purchaser for the due execution, legality, validity,
enforceability, genuineness, sufficiency or value of this Agreement or any other
instrument or document furnished pursuant hereto or thereto; and (vi) shall
incur no liability under or in respect of this Agreement by acting upon any
notice, consent, certificate or other instrument or writing (which may be by
telecopy, telegram, cable or telex) believed by it to be genuine and signed or
sent by the proper party or parties.
(d) Purchaser Credit Decisions. Each Purchaser acknowledges that it
has, independently and without reliance upon the Collateral Agent or any other
Purchaser and based on such financial statements and other documents and
information as it has deemed appropriate, made its own credit and financial
analysis of the Credit Parties and its own decision to enter into this
Agreement. Each Purchaser also acknowledges that it will, independently and
without reliance upon the Collateral Agent or any other Purchaser and based on
such documents and information as it shall deem appropriate at the time,
continue to make its own credit decisions in taking or not taking action under
this Agreement. Each Purchaser acknowledges the potential conflict of interest
of each other Purchaser as a result of the Purchasers holding disproportionate
interests in the Notes, and expressly consents to, and waives any claim based
upon, such conflict of interest.
(e) Successor Collateral Agent. The Collateral Agent may resign at any
time by giving not less than 30 days' prior written notice thereof to the
Purchasers and Greka AM. Upon any such resignation, the Required Holders shall
have the right to appoint a successor Collateral Agent. If no successor
Collateral Agent shall have been so appointed by the Required Holders and shall
have accepted such appointment within 30 days after the resigning Collateral
Agent's giving notice of resignation, then the resigning Collateral Agent may,
59
on behalf of the Purchasers, appoint a successor Collateral Agent, which shall
be a Purchaser, if a Purchaser is willing to accept such appointment, or
otherwise shall be a commercial bank or financial institution or a subsidiary of
a commercial bank or financial institution if such commercial bank or financial
institution is organized under the laws of the United States of America or of
any State thereof and has a combined capital and surplus of at least
$300,000,000. If no successor Collateral Agent has been appointed pursuant to
the foregoing by the 30th day after the date such notice of resignation was
given by the resigning Collateral Agent, such resignation shall become effective
and the Required Holders shall thereafter perform all the duties of the
Collateral Agent hereunder until such time, if any, as the Required Holders
appoint a successor Collateral Agent as provided above. Prior to the occurrence
and continuation of an Event of Default any successor Collateral Agent appointed
by the Collateral Agent or the Required Holders shall be subject to the prior
approval of Greka AM, such approval not to be unreasonably withheld or delayed.
Upon the acceptance of any appointment as the Collateral Agent hereunder by a
successor Collateral Agent, such successor Collateral Agent shall succeed to and
become vested with all the rights, powers, privileges and duties of the
resigning Collateral Agent. Upon the earlier of the acceptance of any
appointment as the Collateral Agent hereunder by a successor Collateral Agent or
the effective date of the resigning Collateral Agent's resignation, the
resigning Collateral Agent shall be discharged from its duties and obligations
under this Agreement, except that any indemnity rights or other rights in favor
of such resigning Collateral Agent shall continue. After any resigning
Collateral Agent's resignation hereunder, the provisions of this Section 11.1
shall inure to its benefit as to any actions taken or omitted to be taken by it
while it was the Collateral Agent under this Agreement.
(f) Indemnification by the Purchasers. The Purchasers agree to
indemnify the Collateral Agent (to the extent the Collateral Agent is not
reimbursed by the Credit Parties and without limiting the obligations of Greka
AM hereunder), ratably on a pro rata basis based on the principal amount
outstanding under the Notes from and against any and all liabilities,
obligations, losses, damages, penalties, actions, judgments, suits, costs,
expenses or disbursements of any kind or nature whatsoever which may be imposed
on, incurred by, or asserted against the Collateral Agent in any way relating to
or arising out of this Agreement or any other Loan Document or any action taken
or omitted by the Collateral Agent in connection therewith; provided, however,
that no Purchaser shall be liable to the extent it is finally judicially
determined that such liabilities, obligations, losses, damages, penalties,
actions, judgments, suits, costs, expenses or disbursements arose primarily from
the Collateral Agent's gross negligence or willful misconduct.
11. MISCELLANEOUS
11.1 COMPLETE AGREEMENT; MODIFICATION OF AGREEMENT; SALE OF INTEREST.
(a) The Loan Documents constitute the complete agreement between the parties
with respect to the subject matter hereof and thereof, supercede any previous
agreement or understanding between them relating hereto or thereto and may not
be modified, altered or amended except as provided therein, or in the case of
the Loan Documents by an agreement in writing signed by the Credit Parties and
60
the Purchasers in accordance with Section 11.1(d) hereof. The Credit Parties may
not sell, assign or transfer any of the Loan Documents or any portion thereof,
including, without limitation, their rights, title, interests, remedies, powers
and duties hereunder or thereunder. The Credit Parties hereby consent to any
Purchaser's sale of participations, assignment, transfer or other disposition,
at any time or times, of any of the Loan Documents or of any portion thereof or
interest therein, including, without limitation, such Purchaser's rights, title,
interests, remedies, powers or duties thereunder, whether evidenced by a writing
or not.
(b) In the event any Purchaser assigns or otherwise transfers all or
any part of any of the Notes, Greka AM shall, upon the request of such Purchaser
issue new Notes to effectuate such assignment or transfer.
(c) Any Purchaser may sell, assign, transfer or negotiate to one or
more other lenders, commercial banks, insurance companies, other financial
institutions or any other Person acceptable to such Purchaser all or a portion
of its rights and obligations under the Notes held by such Purchaser and this
Agreement; provided, however, that acceptance of such assignment by any assignee
shall constitute the agreement of such assignee to be bound by the terms of this
Agreement applicable to such Purchaser; provided further, however, the
Purchasers may not assign any interest in the Notes to any Person who is in the
oil and gas business without Greka AM's prior consent, not to be unreasonably
withheld, except that such consent shall not be required if an Event of Default
has occurred and is continuing. From and after the effective date of such an
assignment, (x) the assignees thereunder shall, in addition to the rights and
obligations hereunder held by it immediately prior to such effective date, have
the rights and obligations hereunder that have been assigned to it pursuant to
such assignment and (y) the assignor thereunder shall, to the extent that rights
and obligations hereunder have been assigned by it pursuant to such assignment,
relinquish its rights and be released from its obligations under this Agreement
(and, in the case of an assignment and acceptance covering all or the remaining
portion of an assignor's rights and obligations under this Agreement, such
assignor shall cease to be a party hereto).
(d) No amendment or waiver of any provision of this Agreement, any
Note or any other Loan Document, nor consent to any departure by any Credit
Party therefrom, shall in any event be effective unless the same shall be in
writing and signed by the Required Holders, and then such waiver or consent
shall be effective only in the specific instance and for the specific purpose
for which given; provided, however, that no amendment, waiver or consent shall,
unless in writing and signed by each holder of a Note affected thereby do any of
the following: (i) subject such holder to any additional obligations, (ii)
reduce the principal of, or interest on, any Note or other amounts payable
hereunder or release or discharge any Credit Party from its obligations to make
such payments, (iii) postpone any date fixed for any payment of principal of, or
interest on, any Note or other amounts payable hereunder, (iv) change the
aggregate unpaid principal amount of any Note, or the number of holders thereof,
which shall be required for such holders or any of them to take any action
hereunder, or (v) amend this Section 11.1(d).
61
11.2 FEES AND EXPENSES. The Credit Parties shall pay all reasonable
out-of-pocket costs, fees and expenses of each of the Purchasers and the
Collateral Agent in connection with the preparation of the Loan Documents and
the transactions contemplated thereby, including, without limitation, all
reasonable legal fees and expenses of Weil, Gotshal & Xxxxxx LLP, counsel to the
Purchasers and the Collateral Agent, and any other local counsel. If, at any
time or times, regardless of the existence of an Event of Default (except with
respect to paragraph (iii) below, which shall be subject to an Event of Default
having occurred and be continuing), the Required Holders or, in the case of
paragraphs (ii) or (iii) below, any Purchaser, shall employ counsel or other
advisors for advice or other representation or shall incur reasonable legal or
other costs and expenses in connection with:
(i) any amendment, modification or waiver, or consent with
respect to, any of the Loan Documents or advice in connection with the
administration of the loans made pursuant hereto or its rights
hereunder or thereunder;
(ii) any litigation, contest, dispute, suit, proceeding or
action (whether instituted by such Purchaser, any Credit Party, any
Subsidiary of such Credit Party or any other Person) in any way
relating to any of the Loan Documents or any other agreements to be
executed or delivered in connection herewith; or
(iii) any attempt to enforce any rights of such Purchaser
against any Credit Party, any of its Subsidiaries or any other Person,
that may be obligated to such Purchaser by virtue of any of the Loan
Documents;
then, and in any such event, the reasonable attorneys' and other parties' fees
arising from such services, including those of any appellate proceedings, and
all expenses, costs, charges and other fees incurred by such counsel and others
in any way or respect arising in connection with or relating to any of the
events or actions described in this Section shall be payable, on demand, by the
Credit Parties to such Purchaser and shall be additional Obligations under this
Agreement and the other Loan Documents. Without limiting the generality of the
foregoing, such expenses, costs, charges and fees may include: paralegal fees,
costs and expenses; accountants' and investment bankers' fees, costs and
expenses; court costs and expenses; photocopying and duplicating expenses; court
reporter fees, costs and expenses; long distance telephone charges; air express
charges; telegram charges; secretarial overtime charges; expenses for travel,
lodging and food paid or incurred in connection with the performance of such
legal services; and costs and expenses of the Collateral Agent.
11.3 NO WAIVER BY PURCHASER. Any Purchaser's failure, at any time or
times, to require strict performance by any Credit Party of any provision of
this Agreement and any of the other Loan Documents shall not waive, affect or
diminish any right of such Purchaser thereafter to demand strict compliance and
performance therewith. Any suspension or waiver by such Purchaser of an Event of
Default by any Credit Party under the Loan Documents shall not suspend, waive or
affect any other Event of Default by any Credit Party under this Agreement and
any of the other Loan Documents whether the same is prior or subsequent thereto
62
and whether of the same or of a different type. None of the undertakings,
agreements, warranties, covenants and representations of any Credit Party
contained in this Agreement or any of the other Loan Documents and no Event of
Default by any Credit Party under this Agreement and no defaults by any Credit
Party under any of the other Loan Documents shall be deemed to have been
suspended or waived by any Purchaser, unless such suspension or waiver is by an
instrument in writing signed by an officer of such Purchaser and the Required
Holders and directed to any Credit Party specifying such suspension or waiver.
11.4 REMEDIES. Each Purchaser's rights and remedies under this
Agreement shall be cumulative and nonexclusive of any other rights and remedies
which such Purchaser may have under any other agreement, including without
limitation, the Loan Documents, the other Loan Documents, by operation of law or
otherwise.
11.5 WAIVER OF JURY TRIAL. The parties hereto waive all right to trial
by jury in any action or proceeding to enforce or defend any rights under the
Loan Documents.
11.6 SEVERABILITY. Wherever possible, each provision of this Agreement
shall be interpreted in such manner as to be effective and valid under
applicable law, but if any provision of this Agreement shall be prohibited by or
invalid under applicable law, such provision shall be ineffective to the extent
of such prohibition or invalidity, without invalidating the remainder of such
provision or the remaining provisions of this Agreement.
11.7 BINDING EFFECT; BENEFITS. This Agreement and the other Loan
Documents shall be binding upon, and inure to the benefit of, the successors of
each Credit Party and each Purchaser and the assigns, transferees and endorsees
of each Purchaser.
11.8 CONFLICT OF TERMS. Except as otherwise provided in this Agreement
or any of the other Loan Documents by specific reference to the applicable
provisions of this Agreement, if any provision contained in this Agreement is in
conflict with, or inconsistent with, any provision in any of the other Loan
Documents, the provision contained in this Agreement shall govern and control.
11.9 GOVERNING LAW. Except as otherwise expressly provided in any of
the Loan Documents, in all respects, including all matters of construction,
validity and performance, this Agreement and the Obligations arising hereunder
shall be governed by, and construed and enforced in accordance with, the laws of
the State of New York applicable to contracts made and performed in such state,
without regard to the principles thereof regarding conflict of laws, and any
applicable laws of the United States of America. Each Purchaser and each Credit
Party agree to submit to personal jurisdiction and to waive any objection as to
venue in the federal or New York State courts located in the County of New York,
State of New York. Service of process on Purchaser or Company in any action
arising out of or relating to any of the Loan Documents shall be effective if
63
mailed to such party at the address listed in Section 11.10 hereof. Nothing
herein shall preclude any Purchaser or any Credit Party from bringing suit or
taking other legal action in any other jurisdiction.
11.10 NOTICES. Except as otherwise provided herein, whenever it is
provided herein that any notice, demand, request, consent, approval, declaration
or other communication shall or may be given to or served upon any of the
parties by another, or whenever any of the parties desires to give or serve upon
another any such communication with respect to this Agreement, each such notice,
demand, request, consent, approval, declaration or other communication shall be
in writing and either shall be delivered in person with receipt acknowledged or
by registered or certified mail, return receipt requested, postage prepaid, or
by telecopy and confirmed by telecopy answerback addressed to the respective
party hereto at the address indicated for such party on Schedule A and Schedule
B; provided, however, any party may substitute such other address by notice
given as herein provided. The giving of any notice required hereunder may be
waived in writing by the party entitled to receive such notice. Every notice,
demand, request, consent, approval, declaration or other communication hereunder
shall be deemed to have been duly given or served on the date on which
personally delivered, with receipt acknowledged, telecopied and confirmed by
telecopy answerback, or three (3) business days after the same shall have been
deposited with the United States mail. Failure or delay in delivering copies of
any notice, demand, request, consent, approval, declaration or other
communication to the persons designated above to receive copies shall in no way
adversely affect the effectiveness of such notice, demand, request, consent,
approval, declaration or other communication.
11.11 SURVIVAL. The representations and warranties of the Credit
Parties in this Agreement shall survive the execution, delivery and acceptance
hereof by the parties hereto and the closing of the transactions described
herein or related hereto.
11.12 SECTION AND OTHER HEADINGS. The section and other headings
contained in this Agreement are for reference purposes only and shall not affect
the meaning or interpretation of this Agreement.
11.13 COUNTERPARTS. This Agreement may be executed in any number of
counterparts, each of which shall be deemed to be an original and all of which
together shall be deemed to be one and the same instrument.
11.14 PUBLICITY. Neither any Credit Party nor its Subsidiaries nor any
Purchaser shall issue any press release or make any public disclosure regarding
the transactions contemplated hereby unless such press release or public
disclosure is approved by the other parties hereto in advance. Notwithstanding
the foregoing, each of the parties hereto may, in documents required to be filed
by it with the SEC or other regulatory bodies, make such statements with respect
to the transactions contemplated hereby as each may be advised by counsel is
legally necessary or advisable, and may make such disclosure as it is advised by
its counsel is required by law, subject to advance notice to the Purchasers.
64
11.15 CONFIDENTIALITY. Each of the Credit Parties and Purchasers
agrees to keep confidential and not to disclose to or use for the benefit of any
third party the terms of this Agreement or any other information which at any
time is communicated by any other party hereto as being confidential without the
prior written approval of such other party; provided, however, that this
provision shall not apply to (a) information which, at the time of disclosure,
is already part of the public domain (except by breach of this Agreement), (b)
information which is required to be disclosed by law (including, without
limitation, pursuant to Item 10 of Rule 601 of Regulation S-K under the
Securities Act and the Exchange Act) and (c) any disclosure of information to
assignees or prospective assignees of any Notes or to participants or
prospective participants in any Notes.
[Signature Page Follow]
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IN WITNESS WHEREOF, the Credit Parties and the Purchasers have
executed this Agreement as of the day and year first above written.
Borrower:
GREKA AM, INC.
By:
---------------------------
Name: Xxxxxxx X. Xxxxxx
Title: President, Chief
Executive Officer
and Chairman
Guarantors:
GREKA ENERGY CORPORATION
By:
---------------------------
Name: Xxxxxxx X. Xxxxxx
Title: President, Chief
Executive Officer
and Chairman
GREKA INTEGRATED, INC.
By:
---------------------------
Name: Xxxxxxx X. Xxxxxx
Title: President, Chief
Executive Officer
and Chairman
GREKA REALTY, INC.
By:
---------------------------
Name: Xxxxxxx X. Xxxxxx
Title: President, Chief
Executive Officer
and Chairman
66
GREKA SMV, INC.
By:
---------------------------
Name: Xxxxxxx X. Xxxxxx
Title: President, Chief
Executive Officer
and Chairman
WINDSOR ENERGY US CORPORATION
By:
---------------------------
Name: Xxxxxxx X. Xxxxxx
Title: President, Chief
Executive Officer
and Chairman
XXXXXX ISLAND LIMITED PARTNERSHIP
By: WINDSOR ENERGY US CORPORATION,
its General Partner
By:
---------------------------
Name: Xxxxxxx X. Xxxxxx
Title: President, Chief
Executive Officer
and Chairman
GREKA CA, INC.
By:
---------------------------
Name: Xxxxxxx X. Xxxxxx
Title: President, Chief
Executive Officer
and Chairman
67
SABA PETROLEUM COMPANY
By:
---------------------------
Name: Xxxxxxx X. Xxxxxx
Title: President, Chief
Executive Officer
and Chairman
SABA PETROLEUM, INC.
By:
---------------------------
Name: Xxxxxxx X. Xxxxxx
Title: President, Chief
Executive Officer
and Chairman
SANTA XXXXX REFINING COMPANY
By:
---------------------------
Name: Xxxxxxx X. Xxxxxx
Title: President, Chief
Executive Officer
and Chairman
68
Purchasers:
-----------
1888 FUND LTD.
By:
---------------------------
Name:
Title:
Xxxxxxx CDO L.P.
By:
---------------------------
Name:
Title:
North American Company For Life
and Health Insurance of New York
By:
---------------------------
Name:
Title:
Midland National Life Insurance
Company
By:
---------------------------
Name:
Title:
Collateral Agent:
-----------------
Guggenheim Investment Management,
LLC
By:
---------------------------
Name: Xxxx X. Xxxxxx
Title: Managing Director
69
--------------------------------------------------------------------------------
NOTE PURCHASE AGREEMENT
dated as of March 11, 2003
by and among
GREKA AM, as BORROWER
and
GREKA ENERGY CORPORATION
and
THE OTHER ENTITIES PARTY HERETO, as GUARANTORS
and
THE PURCHASERS PARTY HERETO
and
GUGGENHEIM INVESTMENT MANAGEMENT, LLC, as COLLATERAL AGENT
--------------------------------------------------------------------------------
TABLE OF CONTENTS
Page
1. DEFINITIONS...........................................................1
2. PURCHASE OF SECURITIES...............................................19
2.1 Purchase of Notes...........................................19
2.2 Closing.....................................................20
2.3 Optional Prepayment.........................................20
2.4 Intentionally Omitted.......................................20
2.5 Repayment of Notes..........................................20
2.6 Use of Proceeds.............................................20
2.7 Interest Rates and Interest Payments........................21
2.8 Receipt of Payments.........................................22
2.9 Application of Payments.....................................22
2.10 Sharing of Payments.........................................22
2.11 Access......................................................23
2.12 Taxes.......................................................23
3. CREATION OF SECURITY INTEREST........................................24
3.1 Security Interest...........................................24
3.2 Representations Concerning the Collateral...................25
3.3 Covenants Concerning the Collateral.........................25
3.4 Collection and Maintenance of Collateral and Records........26
3.5 Delivery of Additional Documentation Required...............26
3.6 Power of Attorney...........................................27
3.7 Code and Other Remedies.....................................27
3.8 Deficiency..................................................28
3.9 Lien Priority and Subordination.............................28
4. PURCHASERS' REPRESENTATIONS AND WARRANTIES...........................28
4.1 Investment Intention........................................28
4.2 Accredited Investor.........................................28
4.3 Restricted Securities.......................................29
4.4 Existence...................................................29
i
TABLE OF CONTENTS
(continued)
Page
4.5 Power; Authorization; Enforceable Obligations...............29
5. CREDIT PARTIES' REPRESENTATIONS AND WARRANTIES.......................29
5.1 Authorized and Outstanding Shares of Capital Stock..........29
5.2 Authorization and Issuance of the Notes.....................30
5.3 Securities Laws.............................................30
5.4 Corporate Existence.........................................30
5.5 Subsidiaries................................................30
5.6 Corporate Power; Authorization; Enforceable Obligations.....31
5.7 Financial Statements........................................31
5.8 Ownership of Property.......................................32
5.9 Material Contracts; Indebtedness............................33
5.10 Environmental Protection....................................33
5.11 Labor Matters...............................................34
5.12 Other Ventures..............................................35
5.13 Taxes.......................................................35
5.14 No Litigation...............................................35
5.15 Brokers.....................................................35
5.16 Employment Agreements.......................................36
5.17 Patents, Trademarks, Copyrights and Licenses................36
5.18 No Material Adverse Effect..................................36
5.19 ERISA.......................................................36
5.20 SEC Documents...............................................38
5.21 Ordinary Course of Business.................................39
5.22 Insurance...................................................39
5.23 Compliance with Law.........................................39
5.24 Absence of Default..........................................39
5.25 Agreements with Affiliates..................................39
5.26 Gas Contracts...............................................40
5.27 Refunds.....................................................40
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5.28 Minute Books................................................40
5.29 Full Disclosure.............................................40
6. COVENANTS............................................................40
6.1 Affirmative Covenants.......................................40
6.2 Negative and Financial Covenants............................48
7. CONDITIONS PRECEDENT.................................................53
7.1 Conditions Precedent........................................53
7.2 Additional Conditions.......................................54
8. EVENTS OF DEFAULT; RIGHTS AND REMEDIES...............................55
8.1 Events of Default...........................................55
8.2 Remedies....................................................57
8.3 Waivers by the Credit Parties...............................57
8.4 Right of Set-Off............................................57
9. INDEMNIFICATION......................................................57
10. COLLATERAL AGENT.....................................................58
10.1 Collateral Agency Provisions................................58
11. MISCELLANEOUS........................................................60
11.1 Complete Agreement; Modification of Agreement; Sale of
Interest....................................................60
11.2 Fees and Expenses...........................................62
11.3 No Waiver by Purchaser......................................62
11.4 Remedies....................................................63
11.5 Waiver of Jury Trial........................................63
11.6 Severability................................................63
11.7 Binding Effect; Benefits....................................63
11.8 Conflict of Terms...........................................63
11.9 Governing Law...............................................63
11.10 Notices.....................................................64
11.11 Survival....................................................64
11.12 Section and Other Headings..................................64
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11.13 Counterparts................................................64
11.14 Publicity...................................................64
11.15 Confidentiality.............................................65
Schedules
Schedule A - Purchasers and Allocations of Notes
Schedule B - Credit Parties
Schedule 1 - Mortgages
Schedule 2 - Oil and Gas Properties
Schedule 5.1 - Stock and Warrants
Schedule 5.5 - Subsidiaries and Organization
Schedule 5.7 - Financial Statements; Other Obligations
Schedule 5.8 - Ownership and Properties
Schedule 5.9 - Material Contracts and Indebtedness
Schedule 5.10 - Environmental Protection
Schedule 5.12 - Other Ventures
Schedule 5.13 - Taxes
Schedule 5.14 - Litigation
Schedule 5.16 - Employment Agreements
Schedule 5.17 - Patents, Trademarks, Etc.
Schedule 5.18 - Material Adverse Effect
Schedule 5.19 - ERISA
Schedule 5.22 - Insurance
Schedule 5.25 - Agreements with Affiliates
Schedule 6.1(b) - Monthly Flash Reports
Schedule 6.1(g) - Inventory
Schedule 6.2(a) - Indebtedness
Schedule 6.2(c) - Sales of Assets; Liquidation
Schedule 6.2(f) - Guarantees
Schedule 6.2(m) - Permitted Acquisitions
Schedule 6.2(n) - Affiliate Transactions
Schedule 6.2(s)(v) Crude Production
Exhibits
Exhibit A-1 Form of Floating Rate Senior Note
Exhibit A-2 Form of Fixed Rate Senior Note
Exhibit B Form of Guaranty
Exhibit C Form of Opinion of Credit Parties' Counsel
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