CORRAL PETROLEUM HOLDINGS AB (PUBL) - Preem

Notes, we would try to obtain waivers of such prohibitions from the lenders under those arrangements, or we couldattempt to refinance the borrowings that contain the restrictions. If we could not obtain the waivers or refinance theseborrowings, we would be unable to repay or repurchase the Senior Secured Notes. Our failure to repay or repurchase theSenior Secured Notes would be an event of default under the Senior Secured Indenture and would, therefore, have amaterial adverse effect on us.We and our subsidiaries, including Preem, may be able to incur substantially more debt, which could furtherexacerbate the risks described above.Although the agreements governing many of our financing arrangements contain restrictions on the incurrenceof additional debt, these restrictions are subject to a number of significant qualifications and exceptions. Thus, we andour subsidiaries may be able to incur substantial additional debt, including secured debt. Any future indebtedness ofPreem or any of our other subsidiaries whether or not secured is structurally senior to the Senior Secured Notes. Inaddition, to the extent we incur additional indebtedness, the substantial leverage risks described above would increase.We are controlled by one shareholder whose interests as they relate to us may conflict with your interests.All of our share capital is owned by Moroncha Holdings, and all of the share capital of Moroncha Holdings isowned by Mr. Mohammed Hussein Al-Amoudi. Our board of directors consists of designees of Moroncha Holdings,whose board of directors consists of designees of Mr. Al-Amoudi. Mr. Al-Amoudi is also the Chairman of our board ofdirectors and that of Preem. As a result, Mr. Al-Amoudi indirectly controls our operations and has the power to approveany action requiring shareholder approval (including adopting amendments to our articles of association and approvingmergers or sales of all or substantially all of our assets). It is possible that the interests of Moroncha Holdings andMr. Al-Amoudi, including as our shareholders, may conflict with your interests as noteholders.If we incur substantial operating losses or a reduction in the value of our assets, we may be subject to liquidationunder Swedish law, which would severely restrict our ability to meet our debt obligations.In light of the several possible risks to our business discussed herein, including our debt denominated in foreigncurrency, we may record losses that would reduce our share capital. To the extent these reductions are substantial, wewould need to take measures to avoid liquidation under the Swedish Companies Act (aktiebolagslagen). Such measurescould include, among other things, raising more equity from Mr. Al-Amoudi, who is under no obligation to contributemore equity. Losses to our share capital may lead to our liquidation under Swedish company law, which wouldconstitute an event of default under the Senior Secured Indenture related to the Senior Secured Notes.Under Swedish law, whenever the company’s board of directors has a reason to assume that, as a result of lossesor reductions in the value of our assets, or the assets of any of our subsidiaries, or any other event, our equity, or theequity of any of our subsidiaries, is less than half the registered share capital, the board of directors of such companyshall prepare a special balance sheet (Sw: kontrollbalansräkning) and have the auditors examine it. The same obligationarises if we or such subsidiary in connection with a seizure pursuant to Chapter 4 of the Debt Recovery Act(Sw: utsökningsbalken) is found to lack seizeable assets.If the special balance sheet shows that the equity of such company is less than half of the registered sharecapital, the board of directors shall, as soon as possible, issue notice to call a general meeting which shall considerwhether the company shall go into liquidation (initial general meeting). The special balance sheet and an auditor’s reportwith respect thereto shall be presented at the initial general meeting.If the special balance sheet presented at the initial general meeting fails to show that, on the date of suchmeeting, the equity of the company amounts to the registered share capital and the initial general meeting has notresolved that the company shall go into liquidation, the general meeting shall, within eight months of the initial generalmeeting, reconsider the issue whether the company shall go into liquidation (second general meeting). Prior to thesecond general meeting, the board of directors shall prepare a new special balance sheet and cause such to be reviewedby the company’s auditors. The new special balance sheet and an auditor’s report thereon shall be presented at thesecond general meeting.A court of general jurisdiction shall order that the company go into liquidation where (i) a second generalmeeting is not held within the period of time stated above or (ii) the new special balance sheet which was presented at thesecond general meeting was not reviewed by the company’s auditor or fails to show that, on the date of such meeting, theequity of the company amounts to at least the registered share capital and the general meeting did not resolve that thecompany shall go into liquidation.In such cases as referred to in the paragraph above, the board of directors shall petition the court for aliquidation order. The petition shall be submitted within two weeks from the second general meeting or, where suchmeeting has not been held, from the latest date on which the meeting should have been held.9