FINANCING ARRANGEMENTS

3 Months Ended

Mar. 31, 2024

Debt Disclosure [Abstract]

FINANCING ARRANGEMENTS

FINANCING AGREEMENTS

The Company's long-term debt consisted of the following as of March 31, 2024 and December 31, 2023 (in thousands):

Creditor	Loan Type	Balance at March 31, 2024		Balance at December 31, 2023
Senior Convertible Note	Convertible note	$	15,230	$	15,230
Term Loan 2025	Loan	195,950		195,950
Citizens National Bank - Promissory Note	Loan	2,611		—
Various institutions	Short-term note	2,399		6,237
Principal amount of long-term debt		216,190		217,417
Less: unamortized discount and deferred financing costs		(25,894)		(30,354)
Total debt, net of unamortized discount and deferred financing costs		190,296		187,063
Less: current maturities, net of unamortized discount and deferred financing costs		(12,524)		(16,362)
Long-term debt, net of current maturities		$	177,772	$	170,701

Future maturities of long-term debt, excluding financing lease obligations, as of March 31, 2024 are summarized as follows (in thousands):

Period Ended March 31,	Amount Due
2025	$	12,524
2026	185,825
2027	—
2028	15,230
2029	2,611
Total	$	216,190

Short-Term Loan

The Company financed insurance premiums through various financial institutions bearing interest at rates ranging from 3.24% to 6.25% per annum. All such premium finance agreements have maturities of less than one year and have a balance of $1.4 million at March 31, 2024 and $4.9 million at December 31, 2023.

The Company has a short-term promissory note for the purchase of assets bearing 8.5% interest per annum, with an outstanding balance of $1.0 million at March 31, 2024 and $1.3 million at December 31, 2023.

Promissory Note

The Company has a long-term promissory note for the purchase of assets with an outstanding balance of $2.6 million bearing 7.83% interest rate per annum at March 31, 2024.

Term Loan

Vertex Refining, the Company, as a guarantor, substantially all of the Company’s direct and indirect subsidiaries, as guarantors, certain funds as lenders (the “Lenders”), and Cantor Fitzgerald Securities, in its capacity as administrative agent and collateral agent for the Lenders (the “Agent”), entered into a Loan and Security Agreement on April 1, 2022 (as amended from time to time, the “Loan and Security Agreement”).

On September 30, 2022, the parties entered into a second amendment to the Loan and Security Agreement which (a) extended the date that the Company was required to begin initial commercial production of renewable diesel at the Mobile Refinery, from February 28, 2023 to April 28, 2023 (which date the Lenders subsequently further agreed to extend until July 14, 2023), and provided other corresponding extensions of the milestones required to complete the Company’s capital project designed to modify the Mobile Refinery’s existing hydrocracking unit to produce renewable diesel fuel on a standalone basis, which mechanical completion was achieved in March 2023; and (b) waived and extended certain deadlines and time periods for the Company to take other actions in connection with the Loan and Security Agreement.

On December 28, 2023, the parties entered into a fifth amendment to the Loan and Security Agreement (a) pursuant to which certain of the Lenders (the “Additional Lenders”) agreed to provide an additional term loan in the amount of $50 million (the “Additional Term Loan”, and together with the existing term loans, the “Term Loan”); and (b) the Lenders waived certain technical events of default which had occurred under the Loan and Security Agreement, mainly relating to monetary thresholds for indebtedness and investments; and to include certain other mutually negotiated changes to the Loan and Security Agreement.

Amounts outstanding under the existing Term Loan mature at April 1, 2025, and bear interest at a rate per annum equal to the sum of (i) the greater of (x) the per annum rate publicly quoted from time to time by The Wall Street Journal as the “Prime Rate” in the United States minus 1.50% as in effect on such day and (y) the Federal Funds rate for such day plus 0.50%, subject in the case of this clause (i), to a floor of 1.0%, plus (ii) 10.25%, currently 17.25%. Interest is payable in cash (i) quarterly, in arrears, on the last business day of each calendar quarter, commencing on the last business day of the calendar quarter ending March 28, 2024, (ii) in connection with any payment, prepayment or repayment of the Term Loans, and (iii) at maturity (whether upon demand, by acceleration or otherwise). Pursuant to the Loan and Security Agreement, on the last day of March, June, September and December of each year (or if such day is not a business day, the next succeeding business day), beginning on June 28, 2024 and ending on December 31, 2024, Vertex Refining Alabama LLC (“Vertex Refining”) is required to repay

$2,687,500 of the principal amount of the Term Loans, subject to reductions in the event of any prepayment of the Loan and Security Agreement.

Pursuant to the Loan and Security Agreement, the Lenders agreed to provide a $215.0 million term loan to Vertex Refining (the “Term Loan”).

On March 22, 2024, the Lenders entered into a limited consent with all of the parties to the Term Loan, and consented to the Company selling certain real property (land) located at the Mobile Refinery for $4.1 million to build out a rail spur at the refinery site. The payment of $1.5 million of this total amount is contingent upon the completion of the Company's infrastructure such that the railroad can access the Mobile Refinery.     

On March 28, 2024, the Lenders entered into a limited consent with all of the parties to the Term Loan, and consented to the Company postponing the mandatory prepayment of an aggregated principal amount of $2.1 million and interest of $9.4 million related to the Term Loan, which would have otherwise been due on the last business day of the calendar quarter ending March 31, 2024, until April 15, 2024, which payment was made on such date.

Warrant Agreement and Derivative Liabilities

In connection with the Loan and Security Agreement, and as additional consideration for the Lenders agreeing to loan funds to the Company thereunder, the Company granted warrants to purchase 2.75 million shares of common stock of the Company with an exercise price of $4.50 per share, to the Lenders (and/or their affiliates) on April 1, 2022 (the “Initial Warrants”). The terms of the warrants are set forth in a Warrant Agreement (the “April 2022 Warrant Agreement”) entered into on April 1, 2022, between the Company and Continental Stock Transfer & Trust Company as warrant agent.

In connection with the entry into Amendment No. One to Loan and Security Agreement, and as a required term and condition thereof, on May 26, 2022, the Company granted warrants (the “Additional Warrants” and together with the Initial Warrants, the “Warrants”) to purchase 0.25 million shares of the Company’s common stock with an exercise price of $9.25 per share, to the Additional Lenders and their affiliates. The terms of the Additional Warrants are set forth in a Warrant Agreement (the “May 2022 Warrant Agreement” and together with the April 2022 Warrant Agreement, the “Prior Warrant Agreements”) entered into on May 26, 2022, between the Company and Continental Stock Transfer & Trust Company as warrant agent.

In connection with the entry into Amendment No. Five to Loan and Security Agreement, and as a required term and condition thereof, on December 28, 2023, the Company granted warrants (the “New Warrants”) to purchase 1.0 million shares of the Company’s common stock with an exercise price of $3.00 per share, to certain lenders and their affiliates. As additional consideration for the Lenders agreeing to Amendment No. Five to Loan Agreement, the Company agreed to reprice the Prior Warrants to have an exercise price of $3.00 per share (the “Warrant Repricing”).

Each Warrant holder has a put right to require the Company to repurchase any portion of the Warrants held by such holder concurrently with the consummation of a fundamental transaction, as detailed in the applicable Warrant Agreement. The fundamental transaction clause requires the Warrants to be classified as liabilities. The fair value of the Warrants is presented in “Note 19. Fair Value Measurements”, and warrant activities are presented in “Note 17. Equity”.

Indenture and Convertible Senior Notes

On November 1, 2021, we issued $155 million aggregate principal amount at maturity of our 6.25% Convertible Senior Notes due 2027 (the “Convertible Senior Notes”) pursuant to an Indenture (the “Indenture”), dated November 1, 2021, between the Company and U.S. Bank National Association, as trustee (the “Trustee”), in a private offering to persons reasonably believed to be “qualified institutional buyers” and/or to “accredited investors” in reliance on the exemption from registration provided by Section 4(a)(2) of the Securities Act of 1933, as amended, pursuant to Securities Purchase Agreements. The issue price was 90% of the face amount of each note. Interest payments on the Notes are paid semiannually on April 1 and October 1 of each year, beginning on April 1, 2022.

During the year ended December 31, 2022, holders of an aggregate of $60 million of the Convertible Senior Notes due 2027, converted such notes into 10.2 million shares of common stock of the Company pursuant to the terms of the Indenture. Upon the conversion, the Company recognized $33.9 million of unamortized deferred loan cost and discount as interest expense.

On June 12, 2023, pursuant to the terms of certain separate, privately negotiated exchange agreements, the holders of $79.9 million principal amount of the Convertible Senior Notes due 2027, exchanged such principal amount of notes for an aggregate of 17.2 million newly issued shares of common stock. The Company also paid an aggregate of $1.0 million in cash to satisfy accrued and unpaid interest on the converted notes through the closing date of the exchanges. Upon the exchange, the

Company recognized $40.7 million unamortized deferred loan cost and discount and $21.2 million in inducement cost as interest expense.

The components of the Convertible Senior Notes are presented as follows (in thousands):

	March 31, 2024		December 31, 2023
Principal amounts at beginning of period	$	15,230	$	95,178
Conversion of principal into common stock	—		(79,948)
Outstanding principal amount	15,230		15,230
Unamortized discount and issuance costs	(6,865)		(7,157)
Net carrying amount at end of period	$	8,365	$	8,073

Our Convertible Senior Notes will mature on October 1, 2027, unless earlier repurchased, redeemed or converted. Interest is payable semiannually in arrears on April 1 and October 1 of each year, beginning on April 1, 2022.