EXHIBIT H
INTER-CREDITOR AGREEMENT
This INTER-CREDITOR AGREEMENT (the "Agreement") is made as of June 30, 2006
among Consolidated Energy, Inc., a Wyoming corporation (the "Company"), the
holders of the Company's 6% Senior Secured Convertible Notes due 2008 (such
holders, the "February 2005 Creditors"), the holders of the Company's 8% Senior
Secured Convertible Notes due 2008 (such holders, the "January 2006 Creditors"
and together with the February 2005 Creditors, the "Existing Creditors"), the
persons signatory hereto under the heading "New Creditors" (or hereafter
executing a joinder agreement in the form attached hereto as Annex A) (the "New
Creditors"), (the Existing Creditors and the New Creditors, each a "Creditor"
and collectively the "Creditors"), Gryphon Master Fund, L.P. ("Gryphon"), as
Collateral Agent for the Existing Creditors (together with its successors and
assigns in such capacity, the "Existing Creditors' Collateral Agent"), and
CAMOFI Master LDC, as Collateral Agent for the New Creditors (together with its
successors and assigns in such capacity, the "New Creditors' Collateral Agent").
RECITALS
WHEREAS, the February 2005 Creditors are party to that certain Securities
Purchase Agreement dated February 22, 2005 (the "February 2005 Purchase
Agreement") between each February 2005 Creditor and the Company and are the
holders of (i) an aggregate of $7,000,000 in principal amount of the Company's
6% Senior Secured Convertible Notes due 2008 dated February 24, 2005 and (ii) an
aggregate of $6,750,000 in principal amount of the Company's 6% Senior Secured
Convertible Notes due 2008 dated March 18, 2005, June 8, 2005 and June 30, 2005.
In addition, pursuant to a forbearance agreement dated January 13, 2006 between
the February 2005 Creditors and the Company, the February 2005 Creditors are the
holders of an aggregate of $2,640,000 in principal amount of the Company's 3%
Secured Promissory Notes due June 30, 2008 issued in satisfaction of certain
liquidated damage amounts owed to such creditors (the 6% Senior Secured
Convertible Notes due 2008, the 6% Senior Secured Convertible Notes due 2008,
the 3% Secured Promissory Notes due June 30, 2008, together with amounts which
may hereafter become due under the February 2005 Purchase Agreement or any other
agreement executed in connection therewith, collectively the "February 2005
Indebtedness");
WHEREAS, the January 2006 Creditors are party to that certain Securities
Purchase Agreement dated January 13, 2006 (the "January 2006 Purchase
Agreement") between each January 2006 Creditor and the Company and are the
holders of an aggregate of $6,239,930 of the Company's 8% Senior Secured
Convertible Notes due 2008 (the 8% Senior Secured Convertible Notes due 2008,
together with amounts which may hereafter become due under the January 2006
Purchase Agreement, or any other agreement executed in connection therewith
collectively, the "January 2006 Indebtedness" and together with the February
2005 Indebtedness, the "Existing Indebtedness");
WHEREAS, the February 2005 Creditors are the beneficiaries of (i) that
certain Amended and Restated Security Agreement dated as of January 13, 2006
(the "Existing February 2005 Creditor Security Agreement"), among the February
2005 Creditors, the Company and Existing Creditors' Collateral Agent, and (ii)
that certain Fee and Leasehold Mortgage, Assignment of Leases and Subleases,
Security Agreement, Fixture Filing and As-Extracted Collateral Filing, effective
as of February 24, 2005, by Eastern Consolidated Energy, Inc., Mortgagor, to the
Existing Creditors' Collateral Agent, Mortgagee, Relating to Premises in Xxxxxx
County Kentucky, for the benefit of the February 2005 Creditors (the "February
2005 Creditor Mortgage");
WHEREAS, the January 2006 Creditors are the beneficiaries of (i) that
certain Security Agreement dated as of January 13, 2006 (the "Existing January
2006 Creditor Security Agreement"), among the January 2006 Creditors, the
Company and the Existing Creditors' Collateral Agent, and (ii) that certain Fee
and Leasehold Mortgage, Assignment of Leases and Subleases, Security Agreement,
Fixture Filing and As-Extracted Collateral Filing, effective as of January ___,
2006, by Eastern Consolidated Energy, Inc., Mortgagor, to the Existing
Creditors' Collateral Agent, Mortgagee, Relating to Premises in Xxxxxx County
Kentucky, for the benefit of the January 2006 Creditors (the "January 2006
Creditor Mortgage");
WHEREAS, pursuant to the Existing February 2005 Creditor Security
Agreement, and the Existing January 2006 Creditor Security Agreement, the
Company granted to Existing Creditors' Collateral Agent for the benefit of
Existing Creditors, a security interest in all personal property of the Company
and pursuant to the February 2005 Creditor Mortgage and the January 2006
Creditor Mortgage, the Company's subsidiary, Eastern Consolidated Energy, Inc.
and the Company granted to the Existing Creditors' Collateral Agent, a lien in
certain mining properties of Borrower;
WHEREAS, pursuant to that certain Securities Purchase Agreement, dated June
30, 2006 (the "June 2006 Purchase Agreement"), the New Creditors shall purchase
up to an aggregate of $4,444,444 in principal amount of Variable Rate Original
Issue Discount Convertible Secured Debentures due June 30, 2008 (the
"Debentures")from the Company (such amounts, together with amounts which may
hereafter become due under the June 2006 Purchase Agreement or any other
agreement executed in connection therewith, the "New Indebtedness" and
collectively with the Existing Indebtedness, the "Indebtedness");
WHEREAS, all of the Indebtedness will be secured by liens and security
interests in all assets of the Company and its subsidiaries (the "Collateral"),
provided that (i) the liens and security interests in the equipment of the
Company to be purchased with the proceeds of the Debentures as specified on
Schedule I attached hereto, any additional equipment purchased with the proceeds
of the sale of the Debentures as approved in writing by the purchasers of such
Debentures, all insurance proceeds, condemnation awards and foreclosure proceeds
arising from such equipment (collectively, the "Equipment Collateral"), which
secure the New Indebtedness, will be senior to the liens and security interests
in the Equipment Collateral, which secure the Existing Indebtedness, and (ii)
the liens and security interests in all other assets of the Company and its
subsidiaries, including all real property of the Company and its subsidiaries
and all person property of the Company and its subsidiaries other than the
Equipment Collateral, and all proceeds of such real and personal property
(collectively, the "Other Priority Collateral") which secure the Existing
Indebtedness will be senior to the liens and security interests in the Other
Priority Collateral which secure the New Indebtedness;
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WHEREAS, regardless of the order of perfection or statutory priorities, the
Creditors wish to memorialize their agreements concerning their respective
rights, duties and obligations to one another with respect to the security
interests granted in assets of the Company and its subsidiaries;
NOW, THEREFORE, in consideration of the mutual covenants herein, their
respective performances and benefits pertaining to the Indebtedness, and other
good and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties agree as follows:
1. Priority of Payment of Indebtedness.
1.1 The Indebtedness shall rank in the following order of priority: any
sums secured or owed to the Existing Creditors or the New Creditors, pari
passu and pro rata in proportion to each Creditor's outstanding principal
amounts of Indebtedness at any given time that a determination needs to be
made of pro rata holdings, provided that if any amount of Indebtedness owed
to either the Existing Creditors or the New Creditors is unpaid on a
payment date and on such payment date there is no payment default to the
other Creditors, the Creditors to whom such unpaid amount is then due and
owing shall receive payment in full of such unpaid amounts prior to the
other Creditors receiving any further payments; provided, however, that (A)
(i) the February 2005 Creditors shall not accept, and the Company shall not
pay, any interest payments or payments of principal in cash in connection
with the February 2005 Indebtedness until the New Creditors have received
payment in full of the first Monthly Redemption (as defined in the June
2006 Purchase Agreement) payment payable under the New Indebtedness, (ii)
the February 2005 Creditors shall not accept, and the Company shall not
pay, in cash any amounts of any kind that have accrued prior to July 1,
2006 in connection with the February 2005 Indebtedness and (iii) the
February 2005 Creditors shall not accept, and the Company shall not pay any
interest payments or prepayments of principal in cash at any time when the
Control Account established pursuant to the June 2006 Purchase Agreement
has a balance of less than $250,000 unless such Control Account has been
terminated pursuant to the terms of the Control Account Agreement and (B)
the January 2006 Creditors shall not accept, and the Company shall not pay,
in cash any payments of any kind (including prepayments) that are payable
in any calendar month under the terms of the January 2006 Indebtedness
unless either (i) prior to any payment date on the Existing Indebtedness,
the New Creditors receive a certificate, in the form of Exhibit A attached
hereto, along with supporting bank or other statements from the chief
financial officer or chief operating officer of the Company that
establishes, to the reasonable satisfaction of the New Creditors, that the
amount of the Company's cash on hand on such payment date, after taking
account of (a) the regularly scheduled payment in such month of interest on
the February 2005 Indebtedness, (b) the regularly scheduled payment in such
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month of principal and interest on the January 2006 Indebtedness and (c)
the regularly scheduled payment in such month of principal and interest on
the New Indebtedness, was at least $1,000,000, provided that, for purposes
hereof, in calculating the amount of the Company's cash on hand at the end
of any calendar month, there shall be excluded all amounts held in the
Control Account established pursuant to the terms of the June 2006 Purchase
Agreement (which aggregate amount, at the date hereof, is $250,000) or (ii)
prior to any payment date on the Existing Indebtedness, the New Creditors
receive a certificate, in the form of Exhibit B attached hereto, along with
supporting documentation from the chief financial officer or chief
operating officer of the Company that establishes, to the reasonable
satisfaction of the New Creditors, that (A) the Company had a monthly
EBITDA in the second preceding calendar month of at least $700,000 and (B)
in the good faith estimate of such chief financial officer or chief
operating officer, the Company also had a monthly EBITDA of at least
$700,000 during the calendar month immediately preceding the month in which
the aforesaid payment date occurs (for clarity, if a payment is due on May
1, the Company would need to certify its actual EBITDA for March and give
its estimate for April), provided that for purposes hereof, "EBITDA" means,
for the applicable period, the net income (or net loss) of the Company and
its consolidated subsidiaries, determined in accordance with GAAP,
consistently applied, plus (a) any provision for (or less any benefit from)
income taxes, (b) any deduction for interest expense, net of interest
income, (c) depreciation and amortization expense, and (d) any other
non-cash adjustments recorded "below the line" including but not limited to
adjustments to the Company's statement of operations made in accordance
with EITF 00-19. Any cash payment prohibited to be made by the Company or
received by a February 2005 Creditor pursuant to any of the foregoing
clauses (A)(i), (A)(ii) and (A) (iii) or received by a January 2006
Creditor pursuant to any of the foregoing clauses (B)(i) or (B)(ii) may be
made by the Company, and received by such February 2005 Creditor or January
2006 Creditor, in shares of Common Stock of the Company, provided that the
Company shall not be entitled to (A) make any regularly scheduled principal
payment in shares of Common Stock to any February 2005 Creditor with
respect to any February 2005 Indebtedness, without the prior written
consent of such February 2005 Creditor (which consent may be withheld by
any such February 2005 Creditor in its sole and absolute discretion), (B)
make any regularly scheduled principal or interest payment in unregistered
shares of Common Stock to any January 2006 Creditor with respect to any
January 2006 Indebtedness, without the prior written consent of such
January 2006 Creditor (which consent may be withheld by any such January
2006 Creditor in its sole and absolute discretion) or (C) make any
unscheduled principal or interest payment in shares of Common Stock to any
Existing Creditor with respect to any Existing Indebtedness, without the
prior written consent of such Existing Creditor (which consent may be
withheld by any such Existing Creditor in its sole and absolute
discretion). For clarity, as of the date of this Agreement, the pro rata
holdings of the Existing Creditors equal an aggregate of $22,629,930 and
the pro rata holdings of the New Creditors equal an aggregate of
$4,444,444.
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1.2 Each Creditor agrees that if it shall obtain payment of funds which are
in excess of the amount that should be distributed to such Creditor
pursuant to Section 1.1, then it shall notify all other Creditors and such
payment shall be shared with the other applicable Creditors as provided in
Section 1.1. If such Creditor which receives a payment of funds in excess
of the amount that should be distributed pursuant to Section 1.1 is unaware
of such excessive amount, upon notice (along with supporting documentation)
from the other Creditors of such excessive amount, such Creditor shall
share such payment with the other applicable Creditors as provided in
Section 1.1.
1.3 Each Creditor may, at any time and from time to time, without the
consent of or notice to any other Creditors, except as otherwise required
by the agreements governing the Indebtedness, without impairing or
releasing any of their rights or obligations hereunder:
(a) Change the manner, place or terms of payment or change or
extend the time of payment of or renew or alter the Indebtedness owed
to such Creditor, or enter into or amend, supplement or replace any
other agreement relating to such Indebtedness in any manner, provided
that, except as provided in Paragraph 3.6 hereof, neither the
principal amount of such Indebtedness nor the rate of interest thereon
shall be increased;
(b) Release anyone liable in any manner for the payment or
collection of such Indebtedness;
(c) Exercise or refrain from exercising any rights against the
Company or others (including any other Creditor); and
(d) Apply payments on the Indebtedness in any order as determined
by such Creditor.
1.4 Each Creditor will advise each future holder of all or any part of the
Indebtedness owed to it of the terms of this Agreement. Each Creditor
represents that no part of the Indebtedness owed to it has been transferred
or assigned and such Creditor will not transfer or assign, except to
another Creditor, any part of such Indebtedness while this Agreement
remains in effect, unless such transfer or assignment is made expressly
subject to this Agreement. All instruments evidencing Indebtedness shall
contain a legend to the effect that the indebtedness evidenced thereby is
subject to this Agreement.
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1.5 The Existing Creditors shall not accept, and the Company shall not pay,
in cash any payments required to be made by the Company to the Existing
Creditors under the terms of any registration rights (or other similar)
agreement between the Company and any Existing Creditor that arises from
the failure of the Company to file timely, or the Securities and Exchange
Commission to declare effective timely, any registration statement required
to be filed by the Company for the benefit of any Existing Creditor. Any
cash payment prohibited to be made by the Company, or received by an
Existing Creditor, pursuant to this Section 1.5 may be made by the Company
and received by such Existing Creditor in shares of Common Stock of the
Company.
1.6 Wherever the Company is permitted hereunder to make payments in shares
of Common Stock in lieu of cash to any Creditor, the number of shares of
Common Stock to be issued shall be calculated by dividing the amount owed
by 80% of the average of the VWAP for the 10 consecutive Trading Days
ending on the Trading Day immediately prior to the applicable date when
such payment is due. For purposes hereof, VWAP means, for any date, the
price determined by the first of the following clauses that applies: (a) if
the Common Stock is then listed or quoted on the OTC Bulletin Board or such
other U.S. market or exchange which is the principal market on which the
Common Stock is then listed for trading, the daily volume weighted average
price of the Common Stock for such date as reported by Bloomberg L.P.
(based on a Trading Day from 9:30 a.m. to 4:02 p.m. New York City time);
(b) if the Common Stock is not then listed or quoted on such market and if
prices for the Common Stock are then reported in the "Pink Sheets"
published by the Pink Sheets, LLC (or a similar organization or agency
succeeding to its functions of reporting prices), the most recent bid price
per share of the Common Stock so reported; or (c) in all other cases, the
fair market value of a share of Common Stock as determined by an
independent appraiser selected in good faith by the Holder and reasonably
acceptable to the Company.
1.7 Notwithstanding anything herein or elsewhere to the contrary, each
Existing Creditor agrees not to (i) xxx upon any claim or claims now or
hereafter existing which such Existing Creditor may hold against Company,
(ii) foreclose or otherwise take any action to realize on any portion of
the Collateral, nor (iii) file or join in any petition to commence any
proceeding under the United States Bankruptcy Code against the Company;
provided, however, that each Existing Creditor may take any of the actions
specified in the foregoing clauses (i) and (ii) after the earliest of (a)
the expiration of at least 180 days following the date on which any
Existing Creditor gives written notice to the Company and the New Creditors
that a Default or an Event of Default exists under and as defined in the
Existing Indebtedness; provided, however, that such 180 days shall be
reduced to 120 days commencing on the one year anniversary of the Closing
Date (as defined in the June 2006 Purchase Agreement), (b) the acceleration
by any New Creditor of the New Indebtedness or the notice by any New
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Creditor to the Company that a Default or Event of Default has occurred or
exists under and as defined in the New Indebtedness (unless such
acceleration or notice is subsequently rescinded by such New Creditor, in
which case such acceleration or notice shall be deemed to have not
occurred), or (c) the commencement of any proceeding under the United
States Bankruptcy Code involving the Company or any of its subsidiaries as
debtor, whether commenced by the Company or any such subsidiary or by a
creditor other than an Existing Creditor, the commencement of any
receivership involving the Company or any of its subsidiaries or their
assets, or any assignment by the Company or any of its subsidiaries for the
benefit of creditors (each an "Insolvency Proceeding"). In the event that a
New Creditor takes any action described above in clause (i), (ii) or (iii)
of this Section 1.7, such New Creditor shall give written notice thereof to
the Existing Creditors' Collateral Agent within 24 hours of the taking of
such action.
2. Priority of Liens and Security Interests in Collateral.
2.1 Repayment of the New Indebtedness shall be secured by: (i) a first
priority security interest in the Equipment Collateral; and (ii) junior and
subordinate liens and security interests in the Other Priority Collateral.
Repayment of the Existing Indebtedness shall be secured by: (i) first
priority liens and security interests in the Other Priority Collateral; and
(ii) a junior and subordinate security interest in the Equipment
Collateral.
2.2 Each Creditor acknowledges that (x) all Creditors have valid liens and
security interests in the Collateral, and (y) the security interest of the
New Creditors in the Equipment Collateral shall be senior to the security
interest of the Existing Creditors therein, and (z) the security interest
of the Existing Creditors in all Other Priority Collateral shall be senior
to the security interest of the New Creditors therein.
2.3 The priority of liens and security interests set forth in this
Paragraph 2 shall apply and control, irrespective of (i) any statement to
the contrary in any mortgage, pledge, assignment or security agreement
evidencing, creating or perfecting the liens or security interests in the
Collateral, or in any agreement or other document executed and delivered by
any party hereto or any affiliate thereof, (ii) the time, order or method
of attachment or perfection of security interests or the perfection of
security interests or recordation of liens, (iii) the time or order of
recording of mortgages or filings of financing statements or any other
recordings of filings; or (iv) the giving of, or failure to give, notice of
the acquisition or expected acquisition of purchase money or other security
interests.
2.4 Each Creditor hereby agrees that it will not make any assertion or
claim in any action, suit or proceeding of any nature whatsoever in any way
challenging the priority, validity or effectiveness of the liens or
security interests of any other Creditor in the Collateral.
2.5 New Creditors' Collateral Agent is hereby authorized to file a UCC-1 or
UCC-3 with the Secretary of State of the State of Wyoming and other states
and a mortgage within one or more counties within the State of Kentucky,
each naming the New Creditors as the secured parties and the Company and
its Subsidiaries as the debtor. Such mortgage shall contain a legend
approved by the Existing Creditors' Collateral Agent reflecting the
subordination of the liens created thereby as set forth herein.
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2.6 Exercise of Remedies with respect to Other Priority Collateral.
(a) Neither New Creditors nor the New Creditors' Collateral Agent
shall exercise any rights or remedies with respect to the Other
Priority Collateral by foreclosure, repossession or sequestration
proceedings or otherwise without the prior written consent of Existing
Creditors' Collateral Agent. Neither Existing Creditors nor Existing
Creditors' Collateral Agent shall give notice of intention to
accelerate or accelerate the Existing Indebtedness, unless written
notice thereof shall have given to New Creditors' Collateral Agent at
least three business days prior to the date of such notice or
acceleration. Nothing contained in this Agreement shall be construed
to preclude any New Creditor from filing any proof of claim in any
Insolvency Proceeding, asserting any claim or remedy in any Insolvency
Proceeding, or exercising any right to vote on any plan of
reorganization or other matters in any Insolvency Proceeding, subject,
however, in all cases to the terms of this Agreement.
(b) Subject to the provisions of Section 1.7, if the exercise of
remedies by Existing Creditors or Existing Creditors' Collateral Agent
under any agreement governing the Existing Indebtedness results in a
foreclosure, deed in lieu of foreclosure or other deposition of Other
Priority Collateral (each a "Disposition"), each New Creditor hereby
acknowledges and agrees that (i) neither New Creditors nor New
Creditors' Collateral Agent shall, subject to the provisions of
Section 1.7, take any action that would hinder any exercise of
remedies undertaken by Existing Creditors or Existing Creditors'
Collateral Agent, (ii) upon the release of the liens and security
interests of the Existing Creditors and the Existing Creditors'
Collateral Agent in such Other Priority Collateral that is the subject
of such Disposition, the liens and security interests of the New
Creditors and New Creditors' Collateral Agent in such Other Priority
Collateral shall be released automatically and the New Creditors and
New Creditors' Collateral Agent shall execute and deliver to Existing
Creditors' Collateral Agent such releases of lien and UCC termination
statements that Existing Creditors' Collateral Agent may reasonably
request, and (iii) the Existing Indebtedness shall be indefeasibly
paid in full first from the proceeds of the transfer of such Other
Priority Collateral and any remaining proceeds shall be applied to the
payment of the New Indebtedness.
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2.7 Exercise of Remedies with respect to Equipment Collateral.
(a) Neither Existing Creditors nor the Existing Creditors'
Collateral Agent shall exercise any rights or remedies with respect to
the Equipment Collateral by foreclosure, repossession or sequestration
proceedings or otherwise without the prior written consent of New
Creditors' Collateral Agent. Neither New Creditors nor New Creditors'
Collateral Agent shall give notice of intention to accelerate or
accelerate the New Indebtedness, unless written notice thereof shall
have given to Existing Creditors' Collateral Agent at least three
business days prior to the date of such notice or acceleration.
Nothing contained in this Agreement shall be construed to preclude any
Existing Creditor from filing any proof of claim in any Insolvency
Proceeding, asserting any claim or remedy in any Insolvency
Proceeding, or exercising any right to vote on any plan of
reorganization or other matters in any Insolvency Proceeding, subject,
however, in all cases to the terms of this Agreement.
(b) Subject to the provisions of Section 1.7, if the exercise of
remedies by New Creditors or New Creditors' Collateral Agent under any
agreement governing the New Indebtedness results in a Disposition of
Equipment Collateral, each Existing Creditor hereby acknowledges and
agrees that (i) neither Existing Creditors nor Existing Creditors'
Collateral Agent shall take any action that would hinder any exercise
of remedies undertaken by New Creditors or New Creditors' Collateral
Agent, (ii) upon the release of the liens and security interests of
the New Creditors and the New Creditors' Collateral Agent in such
Equipment Collateral that is the subject of such Disposition, the
liens and security interests of the Existing Creditors and Existing
Creditors' Collateral Agent in such Equipment Collateral shall be
released automatically and the Existing Creditors and Existing
Creditors' Collateral Agent shall execute and deliver to New
Creditors' Collateral Agent such releases of lien and UCC termination
statements that New Creditors' Collateral Agent may reasonably
request, and (iii) the New Indebtedness shall be indefeasibly paid in
full first from the proceeds of the transfer of such Equipment
Collateral and any remaining proceeds shall be applied to the payment
of the Existing Indebtedness.
2.8 Insolvency Proceedings.
(a) If the Company shall be subject to any Insolvency Proceeding,
this Agreement shall nevertheless remain in full force and effect and
enforceable pursuant to its terms, and all references herein to the
Company shall be deemed to apply to the Company as a
debtor-in-possession and to any trustee in bankruptcy for the estate
of such entity.
(b) The New Creditors' Collateral Agent, on behalf of itself and
the New Creditors, agrees that none of them shall contest (or support
any other person or entity contesting) (i) any request by the Existing
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Creditors' Collateral Agent or the Existing Creditors for adequate
protection with respect to the Other Priority Collateral or (ii) any
objection by the Existing Creditors' Collateral Agent or the Existing
Creditors to any motion, relief, action or proceeding based on the
Existing Creditors' Collateral Agent or the Existing Creditor s
claiming a lack of adequate protection with respect to the Other
Priority Collateral.
(c) If the Existing Creditors' Collateral Agent or any Existing
Creditor is required in any Insolvency Proceeding or otherwise to
disgorge, turn over or otherwise pay to the estate of the Company, for
any reason, including, without limitation, because it was found to be
a fraudulent or preferential transfer, any proceeds of Other Priority
Collateral (a "Relinquished Amount of Existing Indebtedness"), then
the Existing Indebtedness shall be reinstated to the extent of such
Relinquished Amount of Existing Indebtedness and deemed to be
outstanding as if such payment had not occurred. If this Agreement
shall have been terminated prior to such the date of such Relinquished
Amount of Existing Indebtedness, this Agreement shall be reinstated in
full force and effect, and such prior termination shall not diminish,
release, discharge, impair or otherwise affect the obligations of the
parties hereto.
(d) Each New Creditor acknowledges and agrees that (i) the grant
of liens and security interests in the Other Priority Collateral to
secure the Existing Indebtedness and the grant of liens and security
interests in the Other Priority Collateral to secure the New
Indebtedness constitute two separate and distinct grants of liens and
security interests and (ii) because of, among other things, their
differing rights in the Other Priority Collateral, the New
Indebtedness is fundamentally different from the Existing Indebtedness
and must be separately classified in any plan of reorganization
proposed or adopted in an Insolvency Proceeding. To further effectuate
the intent of the parties as provided in the immediately preceding
sentence, if it is held that the claims of the Existing Creditors and
New Creditors in respect of the Other Priority Collateral constitute
only one secured claim (rather than separate classes of senior and
junior secured claims), then each New Creditors hereby acknowledges
and agrees that all distributions shall be made as if there were
separate classes of senior and junior secured claims against the
Company in respect of the Other Priority Collateral, with the effect
being that, to the extent that the aggregate value of the Other
Priority Collateral is sufficient (for this purpose ignoring all
claims held by the New Creditors), the Existing Creditors shall be
entitled to receive, in addition to amounts distributed to them in
respect of principal, pre-petition interest and other claim, all
amounts owing in respect of post-petition interest before any
distribution is made in respect of the claims held by the New
Creditors, with each New Creditor hereby acknowledging and agreeing to
turn over to the Existing Creditors amounts otherwise received or
receivable by them to the extent necessary to effectuate the intent of
this sentence, even if such turnover has the effect of reducing the
claim of the New Creditors.
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(e) The Existing Creditor Collateral Agent, on behalf of itself
and the Existing Creditors, agrees that none of them shall contest (or
support any other person or entity contesting) (i) any request by the
New Creditors' Collateral Agent or the New Creditors for adequate
protection with respect to the Equipment Collateral or (ii) any
objection by the New Creditors' Collateral Agent or the New Creditors
to any motion, relief, action or proceeding based on the New Creditors
Collateral Agent or the New Creditors claiming a lack of adequate
protection with respect to the Equipment Collateral.
(f) If the New Creditors Collateral Agent or any New Creditor is
required in any Insolvency Proceeding or otherwise to disgorge, turn
over or otherwise pay to the estate of any the Company, for any
reason, including without limitation because it was found to be a
fraudulent or preferential transfer, any proceeds of Equipment
Collateral (a "Relinquished Amount of New Indebtedness"), then the New
Indebtedness shall be reinstated to the extent of such Relinquished
Amount of New Indebtedness and deemed to be outstanding as if such
payment had not occurred. If this Agreement shall have been terminated
prior to such the date of such Relinquished Amount of New
Indebtedness, this Agreement shall be reinstated in full force and
effect, and such prior termination shall not diminish, release,
discharge, impair or otherwise affect the obligations of the parties
hereto.
(g) Each Existing Creditor acknowledges and agrees that (i) the
grant of liens and security interests in the Equipment Collateral to
secure the New Indebtedness and the grant of liens and security
interests in the Equipment Collateral to secure the Existing
Indebtedness constitute two separate and distinct grants of liens and
security interests and (ii) because of, among other things, their
differing rights in the Equipment Collateral, the Existing
Indebtedness is fundamentally different from the New Indebtedness and
must be separately classified in any plan of reorganization proposed
or adopted in an Insolvency Proceeding. To further effectuate the
intent of the parties as provided in the immediately preceding
sentence, if it is held that the claims of the New Creditors and
Existing Creditors in respect of the Equipment Collateral constitute
only one secured claim (rather than separate classes of senior and
junior secured claims), then each Existing Creditor hereby
acknowledges and agrees that all distributions shall be made as if
there were separate classes of senior and junior secured claims
against the Company in respect of the Equipment Collateral, with the
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effect being that, to the extent that the aggregate value of the
Equipment Collateral is sufficient for this purpose (ignoring all
claims held by the Existing Creditors), the New Creditors shall be
entitled to receive from the proceeds of the Equipment Collateral, in
addition to amounts distributed to them in respect of principal,
pre-petition interest and other claim, all amounts owing in respect of
post-petition interest before any distribution is made in respect of
the claims held by the Existing Creditors, with the Existing Creditors
hereby acknowledging and agreeing to turn over to the New Creditors
amounts otherwise received or receivable by them to the extent
necessary to effectuate the intent of this sentence, even if such
turnover has the effect of reducing the claim of the Existing
Creditors.
3. Miscellaneous.
3.1 Addition of New Creditors. Each Creditor originally a signatory hereto
acknowledges and agrees that any investor that is or becomes a party to the
June 2006 Purchase Agreement shall become a New Creditor and shall have all
of the rights and duties of a Creditor hereunder, provided that such party
executes and delivers a joinder agreement in the form of Annex A hereto to
_____ on or prior to July __, 2006.
3.2 Indemnification by Existing Creditors. Each Existing Creditor shall
indemnify, defend, and hold harmless each New Creditor against and in
respect of any and all claims, demands, losses, costs, expenses,
obligations, liabilities, damages, recoveries, and deficiencies, including
interest, penalties, and reasonable professional and attorneys' fees,
including those arising from settlement negotiations, that each such New
Creditors shall incur or suffer, which arise, result from, or relate to a
breach of, or failure by such Existing Creditor to perform under this
Agreement. For clarity, the liability of each Existing Creditor under this
Section 3.2 shall be several and not joint.
3.3 Indemnification by New Creditors. Each New Creditor shall indemnify,
defend, and hold harmless each Existing Creditor against and in respect of
any and all claims, demands, losses, costs, expenses, obligations,
liabilities, damages, recoveries, and deficiencies, including interest,
penalties, and reasonable professional and attorneys' fees, including those
arising from settlement negotiations, that each such Existing Creditor
shall incur or suffer, which arise, result from, or relate to a breach of,
or failure by such New Creditor to perform under this Agreement. For
clarity, the liability of each New Creditor under this Section 3.3 shall be
several and not joint.
3.4 Assignment. The rights and obligations of the Creditors under this
Agreement may be assigned to and assumed by a transferee of the Notes (as
defined in the February 2005 Purchase Agreement and as defined in the
January 2006 Purchase Agreement) or the Debentures (as defined in the June
2006 Purchase Agreement), as applicable.
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3.5 Binding Effect. This Agreement shall be binding on, and shall inure to
the benefit of, the parties to it and their respective heirs, legal
representatives, and successors.
3.6 Parties in Interest. Except as expressly provided in this Agreement,
nothing in this Agreement, whether express or implied, is intended to
confer any rights or remedies under or by reason of this Agreement on any
persons other than the parties to it and their respective successors and
assigns, nor is anything in this Agreement intended to relieve or discharge
the obligation or liability of any third persons to any party to this
Agreement, nor shall any provision give any third persons any right to
subrogation or action over against any party to this Agreement. The
Existing Creditors acknowledge that the New Creditors will not necessarily
all be closing on their respective purchases of the Debentures at the same
time, and that each New Creditor shall be required to become a party to
this Agreement at the time of such New Creditor's purchase of a Debenture
as a closing condition of such purchase. All parties hereto acknowledge
that such "rolling closing", if it occurs, shall cause a continuing
re-allocation of the pro rata holdings of Indebtedness by the various
Creditors. In no event shall the Company issue more than $4,444,444 in
principal amount of New Indebtedness which are to be covered by this
Agreement.
3.7 Entire Agreement. This Agreement constitutes the entire agreement
between the parties pertaining to the subject matter contained in it and
supersedes all prior and contemporaneous agreements, representations and
understandings of the parties.
3.8 Amendment. No supplement, modification, or amendment of this Agreement
shall be binding unless executed in writing by all parties signatory
hereto.
3.9 Waiver. No waiver of any of the provisions of this Agreement shall be
deemed, or shall constitute, a waiver of any other provision, whether or
not similar, nor shall any waiver constitute a continuing waiver. No waiver
shall be binding unless executed in writing by the party making the waiver.
3.10 Notices. Notices given under this Agreement shall be delivered as set
forth in the February 2005 Purchase Agreement, January 2006 Purchase
Agreement or June 2006 Purchase Agreement.
3.11 Governing Law. This Agreement shall be construed in accordance with,
and governed by, the laws of the State of New York. Each party hereto
hereby irrevocably waives personal service of process and consents to
process being served in any suit, action or proceeding arising out of or
relating to this Agreement by receiving a copy thereof sent to it at its
address in effect for notices to it under the February 2005 Purchase
Agreement, the January 2006 Purchase Agreement or the June 2006 Purchase
Agreement, as applicable, and agrees that such service shall constitute
good and sufficient service of process and notice thereof. The parties
hereby waive any right to a trial by jury. Nothing contained herein shall
be deemed to limit in any way any right to serve process in any manner
permitted by law.
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3.12 Effect of Headings. The headings of the Paragraphs of this Agreement
are included for purposes of convenience only, and shall not affect the
construction or interpretation of any of its provisions.
3.13 Invalidity. Any provision of this Agreement which is invalid, void, or
illegal, shall not affect, impair, or invalidate any other provision of
this Agreement, and such other provisions of this Agreement shall remain in
full force and effect.
3.14 Counterparts. This Agreement may be executed in multiple counterparts,
each of which may be executed by less than all of the parties and shall be
deemed to be an original instrument which shall be enforceable against the
parties actually executing such counterparts and all of which together
shall constitute one and the same instrument. In lieu of the original
documents, a facsimile transmission or copy of the original documents shall
be as effective and enforceable as the original.
3.15 Number and Gender. When required by the context of this Agreement,
each number (singular and plural) shall include all numbers, and each
gender shall include all genders.
3.16 Further Assurances. Each party to this Agreement agrees to execute
further instruments as may be necessary or desirable to carry out this
Agreement, provided the party requesting such further action shall bear all
related costs and expenses.
3.17 Professional Fees and Costs. If any legal or equitable action,
arbitration, or other proceeding, whether on the merits or on motion, are
brought or undertaken, or an attorney retained, to enforce this Agreement,
or because of an alleged dispute, breach, default, or misrepresentation in
connection with any of the provisions of this Agreement, then the
successful or prevailing party or parties in such undertaking (or the party
that would prevail if an action were brought) shall be entitled to recover
reasonable attorney's fees and other professional fees and other costs
incurred in such action, proceeding, or discussions, in addition to any
other relief to which such party may be entitled. The parties intend this
provision to be given the most liberal construction possible and to apply
to any circumstances in which such party reasonably incurs expenses.
3.18 Termination. This Agreement shall terminate upon the earlier of (i)
the date on which all Existing Indebtedness has been paid in cash and
satisfied in full or (ii) the date on which all New Indebtedness has been
paid in cash and satisfied in full and any preference period under any
applicable insolvency law has passed.
*************************
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[SIGNATURE PAGE CEIW INTERCREDITOR AGREEMENT]
IN WITNESS WHEREOF, this Agreement has been duly executed by the Company,
the Existing Creditors and the New Creditors as of the day and year first
written above.
COMPANY:
CONSOLIDATED ENERGY, INC.
---------------------------------
By:
Its:
EXISTING CREDITORS:
GRYPHON MASTER FUND, L.P. as Existing Creditor and as Collateral Agent for the
Existing Creditors
By: Gryphon Partners, L.P., its General Partner
By: Gryphon Management Partners, L.P., its General Partner
By: Gryphon Advisors, L.L.C., its General Partner
By:___________________________________
X.X. Xxxx, XX, Manager and Authorized Agent
GSSF MASTER FUND, LP
By: Gryphon Special Situations Fund, LP, its General Partner
By: GSSF Management Partners, LP, its General Partner
By: GSSF, LLC, its General Partner
By:________________________________________
X.X. Xxxx, XX, Manager and Authorized Agent
15
XXXXXXXX PARTNERS, L.P.
By: Xxxxxxxx Capital Management, LLC, its General Partner
By:__________________________________________
Yedi Xxxx, CFO
WS OPPORTUNITY INTERNATIONAL FUND, LTD.
By: WS Ventures Management, L.P., as agent and attorney-in-fact
By: WSV Management, LLC, its General Partner
By:___________________________________
Xxxx X. Xxxxxx, Member
WS OPPORTUNITY FUND, (QP), L.P.
By: WS Ventures Management, L.P., as General Partner
By: WSV Management, LLC, its General Partner
By:____________________________________
RENAISSANCE US GROWTH INVESTMENT TRUST PLC
By:______________________________________
Xxxxxxx Xxxxxxxxx, Director
BFS US SPECIAL OPPORTUNITIES TRUST PLC
By:_______________________________________
Xxxxxxx Xxxxxxxxx, Director
ENABLE GROWTH PARTNERS, L.P.
By:________________________, its General Partner
By:________________________
Xxxxxxx X'Xxxx, Principal
ENABLE OPPORTUNITY PARTNERS, L.P.
By:________________________, its General Partner
By:________________________
Xxxxxxx X'Xxxx, Principal
GAMMA OPPORTUNITY CAPITAL PARTNERS, L.P.
By: _______________________, its General Partner
By:______________________________________
Xxxxxxxx X. Xxxxxx, President/Director
17
BUSHIDO CAPITAL MASTER FUND, L.P.
By: Bushido Capital Partners, Ltd., its General Partner
By:______________________________________
Xxxxxxxxxxx Xxxxxxx, Managing Director
CORDILLERA FUND L.P.
By: ACCF Gen Par, L.P., its General Partner
By: Xxxxxx Xxxxxx Capital, Inc., its General Partner
By:_______________________________________________
Xxxxx X. Xxxxxx, Co-CEO
NEWGRANGE PARTNERS LP
By:_______________________________________________
Xxxxxxx X. Xxxxxxxx, Managing Partner
WHALEHAVEN CAPITAL FUND LIMITED
By:__________________________________________________
Xxxx Xxxxxxxxxxx, Director
ABS SOS-PLUS PARTNERS, LTD.
By:__________________________________________________
Xxxxxxxx X. Xxxxxx, President/Director
REGENMACHER HOLDINGS, LTD.
By:__________________________________________________
Xxxxxxxx X. Xxxxxx, President/Director
IROQOUIS MASTER FUND LTD.
By:__________________________________________________
Xxxxxx Xxxxxxxxx, Authorized Signatory
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COLLATERAL AGENT FOR NEW CREDITORS:
CAMOFI MASTER LDC
By:___________________________________
Its:__________________________________
****************
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[NEW CREDITOR SIGNATURE PAGE TO CEIW INTERCREDITOR AGREEMENT]
Name of New Creditor: __________________________
Signature of Authorized Signatory of New Creditor: __________________________
Name of Authorized Signatory: _________________________
Title of Authorized Signatory: __________________________
20
ANNEX A
to
INTERCREDITOR
AGREEMENT
FORM OF ADDITIONAL NEW CREDITOR JOINDER
Intercreditor Agreement
dated as of June __, 2006 (the "Intercreditor Agreement")
Reference is made to the Intercreditor Agreement as defined above.
Capitalized terms used herein and not otherwise defined herein shall have the
meanings given to such terms in, or by reference in, the Intercreditor
Agreement.
The undersigned hereby agrees that upon delivery of this Additional New
Creditor Joinder to Gryphon, the undersigned shall (a) be a New Creditor under
the Intercreditor Agreement (b) have all the rights and obligations as a
Creditor thereunder as fully and to the same extent as if the undersigned was an
original signatory thereto and (c) be deemed to have made the representations,
warranties and covenants of a Creditor set forth therein.
IN WITNESS WHEREOF, the undersigned has caused this Joinder to be executed
in the name and on behalf of the undersigned.
[Name of Additional New Creditors]
By:______________________________
Name:
Title:
Address:
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Exhibit A
Consolidated Energy, Inc.
00 Xxxxxx Xxxx
Xxxxx Xxxxx, Xxxxxxxx 00000
Officer's Certificate
The undersigned, being the Chief Financial Officer or the Chief Operating
Officer of Consolidated Energy, Inc., a Wyoming corporation, hereby certifies on
behalf of the Company that the condition set forth in Section 1.1(B)(i) of the
Intercreditor Agreement, dated as of June 30, 2006, between the Company, the
holders of the Company's 6% Senior Secured Convertible Notes due 2008, the
holders of the Company's 8% Senior Secured Convertible Notes and the holders of
the Company's Variable Rate Original Issue Discount Convertible Secured
Debentures due June 30, 2008 (the "Intercreditor Agreement") has been satisfied.
As of the __th day of ____, ____, the Company's aggregate cash and cash
equivalents, as customarily set forth on the Company's financial statements, are
$____________. Attached are supporting bank and other statements evidencing such
cash and cash equivalents.
The next regularly scheduled payment of interest on the February 2005
Indebtedness (as defined in the Intercreditor Agreement) shall be $____ and
shall occur on _________. The next regularly scheduled payment of interest on
the January 2006 Indebtedness (as defined in the Intercreditor Agreement) shall
be $____ and shall occur on _________. The next regularly scheduled payment of
interest on the New Indebtedness (as defined in the Intercreditor Agreement)
shall be $____ and shall occur on _________. Attached are supporting documents
evidencing the amounts of interest and payment dates on the February 2005
Indebtedness, the January 2006 Indebtedness and the New Indebtedness.
________________________
Name:
Title:
Date:
22
Exhibit B
Consolidated Energy, Inc.
00 Xxxxxx Xxxx
Xxxxx Xxxxx, Xxxxxxxx 00000
Officer's Certificate
The undersigned, being the Chief Financial Officer or the Chief Operating
Officer of Consolidated Energy, Inc., a Wyoming corporation, hereby certifies on
behalf of the Company that the condition set forth in Section 1.1(B)(ii)(A) of
the Intercreditor Agreement, dated as of June 30, 2006, between the Company, the
holders of the Company's 6% Senior Secured Convertible Notes due 2008, the
holders of the Company's 8% Senior Secured Convertible Notes and the holders of
the Company's Variable Rate Original Issue Discount Convertible Secured
Debentures due June 30, 2008 (the "Intercreditor Agreement") has been satisfied.
As of ____, _________, the Company's EBITDA, as determined in accordance with
GAAP, in the second preceding calendar month was $____________. Attached is
supporting documentation evidencing such EBITDA.
It is my good faith estimate that the Company also had a monthly EBITDA, as
determined in accordance with GAAP, in the immediately preceding calendar month
of at least $700,000.
______________________
Name:
Title:
Date:
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