EXHIBIT 10.2
FORM OF SUBORDINATION AGREEMENT DATED
NOVEMBER 30, 2006
SUBORDINATION AGREEMENT
This SUBORDINATION AGREEMENT (this "AGREEMENT"), dated as of November
30, 2006 is among GALAXY ENERGY CORPORATION, a Colorado corporation
("BORROWER"), DOLPHIN ENERGY CORPORATION, a Nevada corporation, and PANNONIAN
INTERNATIONAL, LTD., a Colorado corporation (each such corporation, including
Borrower, and together with each other obligor who becomes a party to this
Agreement each an "OBLIGOR" and, together, "OBLIGORS"), XXXXXX FAMILY TRUST UTD
MARCH 28, 2005 ("XXXXXX TRUST", together with any transferees or holders from
time to time of the Subordinated Note (as defined below), each a "SUBORDINATED
CREDITOR", and collectively the "SUBORDINATED CREDITORS"), and HFTP INVESTMENTS
LLC, PROMETHEAN II MASTER, L.P., GAIA OFFSHORE MASTER FUND, LTD., CAERUS FUND
LTD, AG OFFSHORE CONVERTIBLES, LTD., and LEONARDO, L.P., (collectively, and
together with any transferees or holders from time to time of the Notes (as
defined below), hereinafter, the "LENDERS"), and PROMETHEAN ASSET MANAGEMENT
L.L.C., a Delaware limited liability company, in its capacity as collateral
agent for itself and for the Lenders (including any successor agent,
hereinafter, the "AGENT").
R E C I T A L S
A. Borrower has executed and delivered to each of the Lenders those
certain senior secured convertible notes each made by Borrower and dated as of
August 19, 2004, October 27, 2004, and May 31, 2005 (as the same have been and
may hereafter be amended, restated, supplemented or modified and in effect from
time to time, and including any notes issued in exchange or substitution
therefor, individually a "NOTE" and collectively the "NOTES"). The Notes were
issued pursuant to a certain Securities Purchase Agreement dated as of August
19, 2004 (as the same has been and hereafter may be amended, modified,
supplemented or restated, the "2004 PURCHASE AGREEMENT"), and a certain
Securities Purchase Agreement dated as of May 31, 2005 (as the same has been and
hereafter may be amended, modified, supplemented or restated, the "2005 PURCHASE
AGREEMENT", and together with the 2004 Purchase Agreement, collectively, the
"PURCHASE AGREEMENT"), in each case by and among, inter alia, Borrower and the
Lenders, and pursuant to which the Lenders have made certain loans ("LOANS") to
Borrower.
B. DOLPHIN ENERGY CORPORATION, a Nevada corporation, and PANNONIAN
INTERNATIONAL, LTD, a Colorado corporation (each such entity, together with each
other person or entity who becomes a party to the Guaranty (as defined herein)
by execution of a joinder in the form of EXHIBIT A attached thereto, is referred
to individually as a "GUARANTOR" and collectively as the "GUARANTORS") have
executed a Guaranty dated as of August 19, 2004 (as the same has been and may
hereafter be amended, restated, supplemented or modified and in effect from time
to time, the "GUARANTY") in favor of the Agent in respect of Borrower's
obligations under the Purchase Agreement and the Notes.
C. Borrower (the "SUBORDINATED OBLIGOR") and Xxxxxx Trust have entered
into that certain Subordinated Promissory Note dated as of November 30, 2006 in
the original principal amount of $1,500,000 (as the same has been and may
hereafter be amended, restated, supplemented, replaced, substituted, divided,
increased or otherwise modified from time to time
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as permitted hereunder, individually and collectively, the "SUBORDINATED NOTE")
pursuant to which, among other things, Subordinated Creditors have made a loan
to the Subordinated Obligor in the original principal amount of $1,500,000 and
pursuant to which Subordinated Obligor has incurred certain obligations and
liabilities to Subordinated Creditors.
NOW, THEREFORE, in reliance upon this Agreement, and for other
good and valuable consideration, the receipt and sufficiency of which hereby are
acknowledged, the parties hereto hereby agree as follows:
1. DEFINITIONS. All capitalized terms used but not elsewhere
defined in this Agreement shall have the respective meanings ascribed to such
terms in the Purchase Agreement and the Notes. The following terms shall have
the following meanings in this Agreement:
ENFORCEMENT ACTION is defined in subsection 2.7.
LENDER OR LENDERS shall mean any holder of Senior Indebtedness
including, without limitation, any holder of any Senior Indebtedness
after the consummation of any Permitted Refinancing.
LOAN DOCUMENTS means the collective reference to the Purchase
Agreement, the Notes, the Warrants, Registration Rights Agreement, the
Irrevocable Transfer Agent Instructions, the Conveyances of Overriding
Royalty Interests, the USBIT Account Control Agreement, the ANB
Amendment and the ANB Account Control Agreement as amended thereby, the
First Amendment and the Security Agreement as amended thereby, the
Guaranty as amended thereby and the Pledge Agreement as amended
thereby, the 2004 Amendment, the Mortgage Amendments and the Mortgages
as amended thereby, the Colorado Mortgage and each of the other
agreements to which any Obligor is a party or is bound in connection
with the transactions contemplated under the Purchase Agreement and the
Notes.
PAID IN FULL or PAYMENT IN FULL shall mean the indefeasible
payment in full in cash of all Senior Indebtedness and termination of
all commitments to lend under the Loan Documents and Permitted
Refinancing Loan Documents.
PERMITTED REFINANCING means any refinancing of the Senior
Indebtedness.
PERMITTED REFINANCING LOAN DOCUMENTS means any and all
agreements, documents and instruments executed in connection with a
Permitted Refinancing of Senior Indebtedness.
PROCEEDING is defined in subsection 2.3.
SENIOR INDEBTEDNESS shall mean the obligations, liabilities
and other amounts owed under the Purchase Agreement, the Notes or any
other Loan Document including all interest, fees, expenses, indemnities
and enforcements costs, whether before or after the commencement of a
Proceeding and without regard to whether or not an allowed claim, and
all obligations and liabilities incurred with respect to Permitted
Refinancings,
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together with any amendments, restatements, modifications, renewals or
extensions of any thereof.
SUBORDINATED CREDITOR shall mean Xxxxxx Trust, each
"Subordinated Creditor" which is signatory to this Agreement from time
to time and any other holders of a Subordinated Note or any other
Subordinated Indebtedness from time to time.
SUBORDINATED DEFAULT shall mean a default in the payment of
the Subordinated Indebtedness, or performance of any term, covenant or
condition contained in the Subordinated Indebtedness Documents or the
occurrence of any event or condition, which default, event or condition
permits any Subordinated Creditor to accelerate or demand payment of
all or any portion of the Subordinated Indebtedness.
SUBORDINATED DEFAULT NOTICE shall mean a written notice to
Agent pursuant to which Agent is notified of the existence of a
Subordinated Default, which notice incorporates a reasonably detailed
description of such Subordinated Default.
SUBORDINATED INDEBTEDNESS shall mean all of the obligations of
Obligors (including Subordinated Obligor) to Subordinated Creditors
pursuant to or evidenced by the Subordinated Note and the other
Subordinated Indebtedness Documents.
SUBORDINATED INDEBTEDNESS DOCUMENTS shall mean the
Subordinated Note and all other documents and instruments executed in
connection with the Subordinated Note or otherwise evidencing or
pertaining to any portion of the Subordinated Indebtedness, as amended,
supplemented, restated or otherwise modified from time to time as
permitted hereunder.
2. SUBORDINATION OF SUBORDINATED INDEBTEDNESS TO SENIOR
INDEBTEDNESS.
2.1 SUBORDINATION. The payment of any and all of the
Subordinated Indebtedness hereby expressly is subordinated, to the
extent and in the manner set forth herein, to the Payment in Full of
the Senior Indebtedness. Each holder of Senior Indebtedness, whether
now outstanding or hereafter arising, shall be deemed to have acquired
Senior Indebtedness in reliance upon the provisions contained herein.
2.2 RESTRICTION ON PAYMENTS. Notwithstanding any provision
of the Subordinated Indebtedness Documents to the contrary and in
addition to any other limitations set forth herein or therein, no
payment (whether made in cash, securities or other property or by
set-off) of principal, interest or any other amount due with respect to
the Subordinated Indebtedness shall be made or received, and no
Subordinated Creditor shall exercise any right of set-off or recoupment
with respect to any Subordinated Indebtedness, until all of the Senior
Indebtedness is Paid in Full, PROVIDED HOWEVER: subject to any
adjustments or rights set forth in the Notes, any warrant for the
capital stock of Borrower or Borrower's charter, bylaws and similar
constituent documents, Subordinated Obligor shall be permitted to make
interest payments by means of the issuance to any Subordinated Creditor
of common stock of the Borrower.
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2.3 PROCEEDINGS. In the event of any insolvency, bankruptcy, receivership,
custodianship, liquidation, reorganization, assignment for the benefit
of creditors or other proceeding for the liquidation, dissolution or
other winding up of any Obligor or any of its Subsidiaries or any of
their respective properties (a "PROCEEDING"):
(i) the Lenders shall be entitled to receive Payment
in Full in cash of the Senior Indebtedness before any
Subordinated Creditor is entitled to receive any
payment upon the Subordinated Indebtedness, and
Lenders shall be entitled to receive for application
in payment of such Senior Indebtedness any payment or
distribution of any kind or character, whether in
cash, property or securities or by set-off or
otherwise, which may be payable or deliverable in any
such Proceedings in respect of the Subordinated
Indebtedness;
(ii) any payment or distribution of assets of any
Obligor of any kind or character, whether in cash,
property or securities, by set-off or otherwise, to
which any Subordinated Creditor would be entitled
pursuant to the Subordinated Indebtedness but for the
provisions hereof shall be paid by the liquidating
trustee or agent or other Person making such payment
or distribution, whether a trustee in bankruptcy, a
receiver or liquidating trustee or otherwise,
directly to the Lenders until the Senior Indebtedness
shall have been Paid in Full, and each Subordinated
Creditor acknowledges and agrees that such payment or
distribution may, particularly with respect to
interest on Senior Indebtedness after the
commencement of a Proceeding, result in such
Subordinated Creditor receiving less than it would
otherwise receive;
(iii) each Subordinated Creditor hereby irrevocably
(x) authorizes, empowers and directs all receivers,
trustees, debtors in possession, liquidators,
custodians, conservators and others having authority
in the premises to effect all such payments and
deliveries, and each Subordinated Creditor also
irrevocably authorizes, empowers and directs, the
Agent and the Lenders until the Senior Indebtedness
shall have been Paid in Full, to demand, xxx for,
collect and receive every such payment or
distribution, and (y) agrees to execute and deliver
to the Agent and the Lenders all such further
instruments confirming the authorization referred to
in the foregoing clause (x); and
(iv) each Subordinated Creditor hereby irrevocably
authorizes, empowers and appoints Agent and the
Lenders (until the Senior Indebtedness shall have
been Paid in Full) as its agent and attorney in fact
to (x) execute, verify, deliver and file such proofs
of claim upon the failure of any Subordinated
Creditor promptly to do so (and in any event prior to
thirty (30) days before the expiration of the time to
file any proof) and (y) vote such claims in any such
Proceeding; provided that no holder of Senior
Indebtedness shall have any obligation to execute,
verify, deliver and/or file any such proof of claim
or vote such claim. In the event the
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Agent or any Lender (or any agent, designee or
nominee thereof) votes any claim in accordance with
the authority granted hereby, such Subordinated
Creditor shall not be entitled to change or withdraw
such vote.
The Senior Indebtedness shall continue to be treated as Senior
Indebtedness and the provisions hereof shall continue to
govern the relative rights and priorities of Lenders and the
Subordinated Creditors even if all or part of the Senior
Indebtedness or the security interests securing the Senior
Indebtedness are subordinated, set aside, avoided or
disallowed in connection with any such Proceeding and the
provisions hereof shall be reinstated if at any time any
payment of any of the Senior Indebtedness is rescinded or must
otherwise be returned by Agent, any Lender or any agent,
designee or nominee of such holder.
2.4 INCORRECT PAYMENTS. If any payment (whether made in cash,
securities or other property) not permitted under this Agreement is
received by any Subordinated Creditor on account of the Subordinated
Indebtedness before all Senior Indebtedness is Paid in Full, such
payment shall not be commingled with any asset of such Subordinated
Creditor, shall be held in trust by such Subordinated Creditor for the
benefit of the Lenders and shall promptly be paid over to the Lenders,
or their respective designated representatives, for application (in
accordance with the Purchase Agreement, the Notes or the Permitted
Refinancing Loan Documents) to the payment of the Senior Indebtedness
then remaining unpaid, until all of the Senior Indebtedness is Paid in
Full.
2.5 SALE, TRANSFER. No Subordinated Creditor shall sell,
assign, dispose of or otherwise transfer all or any portion of the
Subordinated Indebtedness or any Subordinated Note or other
Subordinated Indebtedness Document (a) without giving prior written
notice of such action to Agent, (b) unless prior to the consummation of
any such action, the transferee thereof shall execute and deliver to
Agent and the Lenders a joinder to this Agreement, or an agreement
substantially identical to this Agreement and acceptable to Agent and
the Lenders, in either case providing for the continued subordination
and forbearance of the Subordinated Indebtedness to the Senior
Indebtedness as provided herein and for the continued effectiveness of
all of the rights of Agent and Lenders arising under this Agreement and
(c) unless following such sale, assignment, pledge, disposition or
other transfer, there shall either be (i) no more than two more than
the number of holders of Subordinated Indebtedness on the date hereof
or (ii) one Person acting as agent for all holders of the Subordinated
Indebtedness pursuant to documentation reasonably satisfactory to
Agent, such that any notices and communications to be delivered to
Subordinated Creditors hereunder and any consents required by
Subordinated Creditors shall be made to or obtained from such agent and
shall be binding on each Subordinated Creditor as if directly obtained
from such Subordinated Creditor. In the event of a permitted sale,
assignment, disposition or other transfer, each Subordinated Creditor
engaging in such sale, assignment, disposition or other transfer, prior
to the consummation of any such action, shall cause the transferee
thereof to execute and deliver to Agent and the Lenders a joinder to
this Agreement, or an agreement substantially identical to this
Agreement and acceptable to the Lenders, in either case providing for
the continued subordination and forbearance of the
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Subordinated Indebtedness to the Senior Indebtedness as provided herein
and for the continued effectiveness of all of the rights of Lenders and
Agent arising under this Agreement. Notwithstanding the failure to
execute or deliver any such agreement, the subordination effected
hereby shall survive any sale, assignment, disposition or other
transfer of all or any portion of the Subordinated Indebtedness, and
the terms of this Agreement shall be binding upon the successors and
assigns of each Subordinated Creditor, as provided in Section 10 below.
2.6 LEGENDS. Until the Senior Indebtedness is Paid in Full,
each of the Subordinated Indebtedness Documents at all times shall
contain in a conspicuous manner the following legend:
"This [ Promissory Note ] and the indebtedness evidenced
hereby are subordinate in the manner and to the extent set
forth in that certain Subordination Agreement dated as of
November 30, 2006 (the "Subordination Agreement") among Galaxy
Energy Corporation, the Subordinated Creditors named therein,
the Lenders named therein, and Promethean Asset Management
L.L.C., to the Senior Indebtedness (as defined in the
Subordination Agreement); and each holder of this Promissory
Note, by its acceptance hereof, shall be bound by the
provisions of the Subordination Agreement."
2.7 RESTRICTION ON ACTION BY SUBORDINATED CREDITORS.
(a) Until the Senior Indebtedness is Paid in Full and
notwithstanding anything contained in the Subordinated Indebtedness
Documents, the Purchase Agreement, the other Loan Documents or the
Permitted Refinancing Loan Documents to the contrary, no Subordinated
Creditor shall, without the prior written consent of Agent, agree to
any amendment, modification or supplement to the Subordinated
Indebtedness Documents, the effect of which is to (i) increase the
maximum principal amount of the Subordinated Indebtedness or rate of
interest (or cash pay rate of interest) on any of the Subordinated
Indebtedness, (ii) change to an earlier date, any date upon which
payments of principal or interest on the Subordinated Indebtedness are
due or otherwise front load the amortization of any of the Subordinated
Indebtedness, (iii) change in a manner adverse to any Obligor or add
any event of default or add or make more restrictive any covenant with
respect to the Subordinated Indebtedness, (iv) change the redemption,
prepayment or put provisions of the Subordinated Indebtedness, (v)
alter the subordination provisions with respect to the Subordinated
Indebtedness, including, without limitation, subordinating the
Subordinated Indebtedness to any other debt, (vi) shorten the maturity
date of any of the Subordinated Indebtedness or otherwise alter the
repayment terms of the Subordinated Indebtedness in a manner adverse to
any Obligor, (vii) take any liens in any assets of any Obligor or any
of its Subsidiaries or any other assets securing the Senior
Indebtedness or (viii) obtain any guaranties or credit support from any
Person which is an affiliate of any Obligor, or (ix) change or amend
any other term of the Subordinated Indebtedness Documents if such
change or amendment would increase the obligations of any Obligor or
confer additional material rights on any
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Subordinated Creditor or any other holder of the Subordinated
Indebtedness in a manner adverse to any Obligor, Agent or Lenders.
(b) Until the Senior Indebtedness is Paid in Full, no
Subordinated Creditor shall, without the prior written consent of
Agent, take or continue any action, or exercise any rights, remedies or
powers in respect of the Subordinated Indebtedness or any Subordinated
Indebtedness Document, or exercise or continue to exercise any other
right or remedy at law or in equity that such Subordinated Creditor
might otherwise possess, to collect any amount due and payable in
respect of any Subordinated Indebtedness, including, without
limitation, the acceleration of the Subordinated Indebtedness, the
commencement of any action to enforce payment or foreclosure on any
lien or security interest, the filing of any petition in bankruptcy or
the taking advantage of any other insolvency law of any jurisdiction
(any of the foregoing, an "ENFORCEMENT ACTION"). If any Subordinated
Creditor shall attempt to take any Enforcement Action or otherwise seek
to collect or realize upon any of the Subordinated Indebtedness in
violation of the terms hereof, the holders of the Senior Indebtedness
may, by virtue of the terms hereof, restrain any such Enforcement
Action or other action, either in its own name or in the name of the
applicable Obligor.
(c) Until the Senior Indebtedness is Paid in Full, any Liens
of Subordinated Creditors in the Collateral which may exist in breach
of each Subordinated Creditor's agreement pursuant to subsection
2.7(a)(vii) or Section 18 of this Agreement shall be and hereby are
subordinated for all purposes and in all respects to the Liens of Agent
and Lenders in the Collateral, regardless of the time, manner or order
of perfection of any such Liens. In the event that any Subordinated
Creditor obtains any Liens in the Collateral in violation of subsection
2.7(a)(vii) or Section 18 of this Agreement, Subordinated Creditors (i)
shall (or shall cause their agent to) promptly execute and deliver to
Agent such termination statements and releases as Agent shall request
to effect the release of the Liens of such Subordinated Creditor in
such Collateral and (ii) shall be deemed to have authorized Agent to
file any and all termination statements required by Agent in respect of
such Liens. In furtherance of the foregoing, each Subordinated Creditor
hereby irrevocably appoints Agent its attorney-in-fact, with full
authority in the place and stead of such Subordinated Creditor and in
the name of such Subordinated Creditor or otherwise, to execute and
deliver any document or instrument which such Subordinated Creditor may
be required to deliver pursuant to this subsection 2.7(c).
3. CONTINUED EFFECTIVENESS OF THIS AGREEMENT; MODIFICATIONS TO SENIOR
INDEBTEDNESS.
(a) The terms of this Agreement, the subordination effected
hereby, and the rights and the obligations of Subordinated Creditors,
Agent and Lenders arising hereunder, shall not be affected, modified or
impaired in any manner or to any extent by: (i) any amendment or
modification of or supplement to the Purchase Agreement, any other Loan
Document or any Permitted Refinancing Loan Document or any Subordinated
Indebtedness Document; (ii) the validity or enforceability of any of
such documents; or (iii) any exercise or non-exercise of any right,
power or remedy under or in respect of the
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Senior Indebtedness or the Subordinated Indebtedness or any of the
instruments or documents referred to in clause (i) above.
(b) Agent and Lenders may at any time and from time to time in
their sole discretion, renew, amend, refinance, extend or otherwise
modify the terms and provisions of Senior Indebtedness (including,
without limitation, the terms and provisions relating to the principal
amount outstanding thereunder, the rate of interest thereof, the
payment terms thereof and the provisions thereof regarding default or
any other matter) or exercise (or refrain from exercising) any of their
rights under the Loan Documents, all without notice to or consent from
the Subordinated Creditors and without incurring liability to any
Subordinated Creditor and without impairing or releasing the
obligations of any Subordinated Creditor under this Agreement. No
compromise, alteration, amendment, renewal, restatement, refinancing or
other change of, or waiver, consent or other action in respect of any
liability or obligation under or in respect of, any terms, covenants or
conditions of Senior Indebtedness or the Loan Documents, whether or not
in accordance with the provisions of the Senior Indebtedness, shall in
any way alter or affect any of the subordination provisions hereof.
4. REPRESENTATIONS AND WARRANTIES.
(A) Each Subordinated Creditor hereby represents and warrants
(as to itself and not as to any other Subordinated Creditor) to Agent
and Lenders as follows:
4.1 EXISTENCE AND POWER. If an entity, such Subordinated
Creditor is duly organized, validly existing and in good
standing under the laws of the state of its organization.
4.2 AUTHORITY. Such Subordinated Creditor has full power
and authority to enter into, execute, deliver and carry out
the terms of this Agreement and to incur the obligations
provided for herein, all of which have been duly authorized
by all proper and necessary action and are not prohibited
by the organizational documents of such Subordinated Creditor.
4.3 BINDING AGREEMENTS. This Agreement, when executed
and delivered, will constitute the valid and legally binding
obligation of such Subordinated Creditor enforceable in
accordance with its terms.
4.4 CONFLICTING AGREEMENTS; LITIGATION. No provisions
of any mortgage, indenture, contract, agreement, statute,
rule, regulation, judgment, decree or order binding on such
Subordinated Creditor or affecting the property of such
Subordinated Creditor conflicts with, or requires any consent
which has not already been obtained under, or would in any way
prevent the execution, delivery or performance of the terms of
this Agreement. The execution, delivery and carrying out of
the terms of this Agreement will not constitute a default
under, or result in the creation or imposition of, or
obligation to create, any Lien upon the property of such
Subordinated Creditor pursuant to the terms of any such
mortgage, indenture, contract or agreement. No pending or, to
the best of such
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Subordinated Creditor's knowledge, threatened, litigation,
arbitration or other proceedings if adversely determined would
in any way prevent the performance of the terms of this
Agreement.
4.5 NO DIVESTITURE. On the date hereof, such
Subordinated Creditor which is signatory hereto is the current
owner and holder of its Subordinated Note and all other
Subordinated Indebtedness Documents (if any).
4.6 DEFAULT UNDER SUBORDINATED INDEBTEDNESS
DOCUMENTS. On the date hereof, no default exists under or with
respect to the Subordinated Note held by Subordinated Creditor
or any of the other Subordinated Indebtedness Documents
applicable to such Subordinated Note.
(B) Each Obligor hereby represents and warrants to Agent and
Lenders that the signatory to this Agreement under the heading
"Subordinated Creditor" constitutes the only holder of the Subordinated
Note and the other Subordinated Indebtedness.
5. CUMULATIVE RIGHTS, NO WAIVERS. Each and every right, remedy and
power granted to Agent or Lenders hereunder shall be cumulative and in addition
to any other right, remedy or power specifically granted herein, in the Purchase
Agreement, the other Loan Documents or Permitted Refinancing Loan Documents or
now or hereafter existing in equity, at law, by virtue of statute or otherwise,
and may be exercised by Agent or Lenders, from time to time, concurrently or
independently and as often and in such order as Agent or Lenders may deem
expedient. Any failure or delay on the part of Agent or Lenders in exercising
any such right, remedy or power, or abandonment or discontinuance of steps to
enforce the same, shall not operate as a waiver thereof or affect Agent's or
Lenders' right thereafter to exercise the same, and any single or partial
exercise of any such right, remedy or power shall not preclude any other or
further exercise thereof or the exercise of any other right, remedy or power,
and no such failure, delay, abandonment or single or partial exercise of Agent's
or Lenders' rights hereunder shall be deemed to establish a custom or course of
dealing or performance among the parties hereto.
6. MODIFICATION. Any modification or waiver of any provision of this
Agreement, or any consent to any departure by Agent or any Subordinated Creditor
therefrom, shall not be effective in any event unless the same is in writing and
signed by Agent and the holders of at least 51% of the then outstanding
principal balance of the Subordinated Note and then such modification, waiver or
consent shall be effective only in the specific instance and for the specific
instance and for the specific purpose given. Any notice to or demand on any
Subordinated Creditor in any event not specifically required of Agent hereunder
shall not entitle any Subordinated Creditor to any other or further notice or
demand in the same, similar or other circumstances unless specifically required
hereunder.
7. ADDITIONAL DOCUMENTS AND ACTIONS. Each Subordinated Creditor at any
time, and from time to time, after the execution and delivery of this Agreement,
upon the request of Agent and at the expense of Borrower, will promptly execute
and deliver such further documents and do such further acts and things as Agent
may request in order to effect fully the purposes of this Agreement.
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8. NOTICES. Any notices, consents, waivers or other communications
required or permitted to be given under the terms of this Agreement must be in
writing and will be deemed to have been delivered: (i) upon receipt, when
delivered personally; (ii) upon receipt, when sent by facsimile (provided
confirmation of transmission is mechanically or electronically generated and
kept on file by the sending party); or (iii) one (1) Business Day after deposit
with a nationally recognized overnight delivery service, in each case properly
addressed to the party to receive the same. The addresses and facsimile numbers
for such communications shall be:
If to Xxxxxx Trust: Xxxxxx Family Trust UTD March 28, 2005
Xxxxxxx X. Xxxxxxx, Trustee
Xxxxxx Xxxxx LLP
0000 Xxxxxxxx Xxxxx, Xxxxx 000
XxXxxx, Xxxxxxxx 00000
Telecopy: (000) 000-0000
If to any other Subordinated To the address of such Subordinated Creditor set forth
Creditor: on the joinder to this Agreement executed by such
Subordinated Creditor
If to any Obligor: Galaxy Energy Corporation
0000 00xx Xxxxxx, Xxxxx 0000
Xxxxxx, Xxxxxxxx 00000
Attention: Xxxx X. Xxxxxx
Telecopy: (000) 000-0000
with a copy to: Xxxx Xxxx Xxxx Xxxxxxxxxx & Xxxxxxxxx, P.C.
000 Xxxxxxx Xxxxxx, Xxxxx 000
Xxxxxx, Xxxxxxxx 00000
Attention: Xxx X. Xxxxxxxxx
Telecopy: (000) 000-0000
If to Agent: Promethean Asset Management L.L.C.
00 Xxxxx Xxxxxx, 00xx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxxxx X. Xxxxxxxx
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
with a copy to: Xxxxxx Xxxxxx Xxxxxxxx LLP
000 Xxxx Xxxxxx Xxxxxx
Xxxxxxx, Xxxxxxxx 00000-0000
Attn: Xxxx X. Xxxx
Telecopy: (000) 000-0000
If to a Lender: To the address of such Lender set forth on the
Schedule I hereto
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or, in the case of party named above, at such other address and/or facsimile
number and/or to the attention of such other person as the recipient party has
specified by written notice given to each other party five (5) days prior to the
effectiveness of such change. Written confirmation of receipt (A) given by the
recipient of such notice, consent, waiver or other communication, (B)
mechanically or electronically generated by the sender's facsimile machine
containing the time, date, recipient facsimile number and an image of the first
page of such transmission or (C) provided by a nationally recognized overnight
delivery service shall be rebuttable evidence of personal service, receipt by
facsimile or deposit with a nationally recognized overnight delivery service in
accordance with clause (i), (ii) or (iii) above, respectively.
9. SEVERABILITY. In the event that any provision of this Agreement is
deemed to be invalid by reason of the operation of any law or by reason of the
interpretation placed thereon by any court or governmental authority, this
Agreement shall be construed as not containing such provision and the invalidity
of such provision shall not affect the validity of any other provisions hereof,
and any and all other provisions hereof which otherwise are lawful and valid
shall remain in full force and effect.
10. SUCCESSORS AND ASSIGNS. This Agreement shall inure to the benefit
of the successors and assigns of Agent and Lenders and shall be binding upon the
successors and assigns of Subordinated Creditors and Obligors.
11. COUNTERPARTS. This Agreement may be executed in two or more
identical counterparts, all of which shall be considered one and the same
agreement and shall become effective when counterparts have been signed by each
party and delivered to each other party; provided that a facsimile signature
shall be considered due execution and shall be binding upon the signatory
thereto with the same force and effect as if the signature were an original, not
a facsimile signature.
12. DEFINES RIGHTS OF CREDITORS; SUBROGATION.
(a) The provisions of this Agreement are solely for the purpose of
defining the relative rights of Subordinated Creditors, Agent and
Lenders and shall not be deemed to (i) create any rights or priorities
in favor of any other Person, including, without limitation, any
Obligor, (ii) amend any of the Loan Documents or in any way waive any
of the rights that the Agent and the Lenders have against any Obligor
under the Loan Documents, or (iii) waive any Event of Default or
Triggering Event under any of the Loan Documents.
(b) Subject to the Payment in Full of the Senior Indebtedness, in
the event and to the extent cash, property or securities otherwise
payable or deliverable to the holders of the Subordinated Indebtedness
shall have been applied pursuant to this Agreement to the payment of
Senior Indebtedness, then and in each such event, the holders of the
Subordinated Indebtedness shall be subrogated to the rights of each
holder of Senior Indebtedness to receive any further payment or
distribution in respect of or
11
applicable to the Senior Indebtedness; and, for the purposes of such
subrogation, no payment or distribution to the holders of Senior
Indebtedness of any cash, property or securities to which any holder of
Subordinated Indebtedness would be entitled except for the provisions
of this Agreement shall, and no payment over pursuant to the provisions
of this Agreement to the holders of Senior Indebtedness by the holders
of the Subordinated Indebtedness shall, as between any Obligor, its
creditors other than the holders of Senior Indebtedness and the holders
of Subordinated Indebtedness, be deemed to be a payment by such Obligor
to or on account of Senior Indebtedness.
13. CONFLICT. In the event of any conflict between any term, covenant
or condition of this Agreement and any term, covenant or condition of any of the
Subordinated Indebtedness Documents, the provisions of this Agreement shall
control and govern. For purposes of this Section 13, to the extent that any
provisions of any of the Subordinated Indebtedness Documents provide rights,
remedies and benefits to Agent or Lenders that exceed the rights, remedies and
benefits provided to Agent or Lenders under this Agreement, such provisions of
the applicable Subordinated Indebtedness Documents shall be deemed to supplement
(and not to conflict with) the provisions hereof.
14. STATEMENT OF INDEBTEDNESS TO SUBORDINATED CREDITORS. Borrower will
furnish to Agent upon demand, a statement of the indebtedness owing from
Obligors to Subordinated Creditors, and will give Agent access to the books of
Obligors in accordance with the Purchase Agreement so that Agent can make a full
examination of the status of such indebtedness.
15. HEADINGS. The paragraph headings used in this Agreement are for
convenience only and shall not affect the interpretation of any of the
provisions hereof.
16. TERMINATION. This Agreement shall terminate upon the Payment in
Full of the Senior Indebtedness.
17. SUBORDINATED DEFAULT NOTICE. Subordinated Creditors and Borrower
each shall provide Agent with a Subordinated Default Notice upon the occurrence
of each Subordinated Default, and Subordinated Creditors shall notify Agent in
the event such Subordinated Default is cured or waived.
18. NO CONTEST OF SENIOR INDEBTEDNESS OR LIENS; NO SECURITY FOR
SUBORDINATED INDEBTEDNESS. Each Subordinated Creditor agrees that it will not,
and will not encourage any other Person to, at any time, contest the validity,
perfection, priority or enforceability of the Senior Indebtedness or Liens in
the Collateral granted to Agent and the Lenders pursuant to the Purchase
Agreement, the other Loan Documents or the Permitted Refinancing Loan Documents
or accept or take any collateral security for the Subordinated Indebtedness. In
furtherance of the foregoing, on the date hereof, each Subordinated Creditor
hereby represents and warrants that it has not taken or received a security
interest in, or lien upon, any asset of any Obligor, whether in respect of the
Subordinated Indebtedness or otherwise.
19. GOVERNING LAW, JURISDICTION WAIVER OF JURY TRIAL. All questions
concerning the construction, validity, enforcement and interpretation of this
Agreement shall be governed by the internal laws of the State of New York,
without giving effect to any choice of law or conflict
12
of law provision or rule (whether of the State of New York or any other
jurisdiction) that would cause the application of the laws of any jurisdiction
other than the State of New York. Each party hereby irrevocably submits to the
exclusive jurisdiction of the state and federal courts sitting in the City of
New York, borough of Manhattan, for the adjudication of any dispute hereunder or
in connection herewith or with any transaction contemplated hereby or discussed
herein, and hereby irrevocably waives, and agrees not to assert in any suit,
action or proceeding, any claim that it is not personally subject to the
jurisdiction of any such court, that such suit, action or proceeding is brought
in an inconvenient forum or that the venue of such suit, action or proceeding is
improper. Each party hereby irrevocably waives personal service of process and
consents to process being served in any such suit, action or proceeding by
mailing a copy thereof to such party at the address for such notices to it under
this Agreement and agrees that such service shall constitute good and sufficient
service of process and notice thereof. Nothing contained herein shall be deemed
to limit in any way any right to serve process in any manner permitted by law.
EACH PARTY HEREBY IRREVOCABLY WAIVES ANY RIGHT IT MAY HAVE, AND AGREES NOT TO
REQUEST, A JURY TRIAL FOR THE ADJUDICATION OF ANY DISPUTE HEREUNDER OR IN
CONNECTION HEREWITH OR ARISING OUT OF THIS AGREEMENT OR ANY TRANSACTION
CONTEMPLATED HEREBY.
20. WAIVER OF CONSOLIDATION. Each Subordinated Creditor acknowledges
and agrees that (i) Obligors are each separate and distinct entities; and (ii)
it will not at any time insist upon, plead or seek advantage of any substantive
consolidation, piercing the corporate veil or any other order or judgment that
causes an effective combination of the assets and liabilities of Obligors in any
case or proceeding under Title 11 of the United States Code or other similar
proceeding.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK; SIGNATURE PAGES FOLLOW]
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IN WITNESS WHEREOF, Subordinated Creditor, each Obligor, Agent and each
Lender has caused this Agreement to be executed as of the date first above
written.
SUBORDINATED CREDITOR:
XXXXXX FAMILY TRUST UTD MARCH 28, 2005
By: /s/ XXXX X. XXXXXX
------------------------------------------
Name: Xxxx X. Xxxxxx
Title: Trustee
By: /s/ XXXXXXX X. XXXXXXX
------------------------------------------
Name: Xxxxxxx X. Xxxxxxx
Title: Trustee
OBLIGORS:
GALAXY ENERGY CORPORATION, a Colorado corporation
By: /s/ XXXXXXXXXXX X. XXXXXXXX
------------------------------------------------
Name: XXXXXXXXXXX X. XXXXXXXX
----------------------------------------------
Title: SENIOR VP & CFO
---------------------------------------------
DOLPHIN ENERGY CORPORATION, a Nevada
corporation
By: /s/ XXXXXXX X. XXXXXXXXXX
------------------------------------------------
Name: XXXXXXX X. XXXXXXXXXX
----------------------------------------------
Title: CORPORATE SECRETARY
---------------------------------------------
PANNONIAN INTERNATIONAL, LTD., a Colorado
corporation
By: /s/ XXXXXXX X. XXXXXXXXXX
------------------------------------------------
Name: XXXXXXX X. XXXXXXXXXX
----------------------------------------------
Title: CORPORATE SECRETARY
---------------------------------------------
AGENT:
PROMETHEAN ASSET MANAGEMENT L.L.C. in its
capacity as agent for all Lenders
By:
------------------------------------------------
Name:
----------------------------------------------
Title:
---------------------------------------------
LENDERS:
HFTP INVESTMENT L.L.C.
By: Promethean Asset Management L.L.C.
Its: Investment Manager
By:
------------------------------------------------
Name:
Title:
PROMETHEAN II MASTER, L.P.
By: Promethean Asset Management L.L.C.
Its: Investment Manager
By:
------------------------------------------------
Name:
Title:
GAIA OFFSHORE MASTER FUND, LTD.
By: Promethean Asset Management L.L.C.
Its: Investment Manager
By:
------------------------------------------------
Name:
Title:
CAERUS FUND LTD.
By: Promethean Asset Management L.L.C.
Its: Investment Manager
By:
------------------------------------------------
Name:
Title:
AG OFFSHORE CONVERTIBLES, LTD.
By: Xxxxxx, Xxxxxx & Co., L.P.
Director
By:
------------------------------------------------
Name: Xxx Xxxxxxxxxxx
Title: Chief Financial Officer
XXXXXXXX, L.P.
By: Xxxxxxxx Capital Management, Inc.
Its: General Partner
By: Xxxxxx, Xxxxxx & Co., L.P
Its: Director
By:
------------------------------------------------
Name:
Title:
