FORBEARANCE AGREEMENT
This Forbearance Agreement (this "Agreement") is entered into as of January
13,2006, by and between each of the undersigned noteholders, acting individually
(individually a "Purchaser" and collectively the "Purchasers"), and CONSOLIDATED
ENERGY, INC., a Wyoming corporation (the "Company"), with reference to the
following facts:
A. Company and one or more Purchasers are parties to, among others, the
following documents:
1. Securities Purchase Agreement dated February 22, 2005 (the "Purchase
Agreement");
2. 6% Senior Secured Convertible Notes Due 2008, each dated February 24,
2005, for an aggregate total face amount of $7,000,000, executed by
the Company in favor of certain of the Purchasers (collectively, the
"Initial Notes");
3. 6% Senior Secured Convertible Notes Due 2008, dated March 18, 2005,
June 8, 2005 and June 30, 2005, for an aggregate total face amount of
$6,750,000, executed by the Company in favor of certain of the
Purchasers and issued by the Company upon the exercise of the AIRs
(collectively, the "AIR Notes") (each of the Initial Notes and the AIR
Notes is referred to as a "Note" and collectively they are referred to
as the "Notes");
4. Registration Rights Agreement dated February 24, 2005 (the
"Registration Rights Agreement");
5. Warrants for the Purchase of Shares of Common Stock of the Company,
each dated February 24, 2005, executed by the Company in favor of
certain of the Purchasers (each, a "Warrant" and collectively, the
"Warrants");
6. Guaranties, each dated February 24, 2005, executed by each of Eastern
Consolidated Energy, Inc., Eastern Consolidated Oil and Gas, Inc., and
CEI Holdings, Inc., for the benefit of certain of the Purchasers
(each, a "Guaranty" and collectively, the "Guaranties");
7. Bridge Forbearance Agreement dated September 23, 2005;
8. Additional Financing Forbearance Agreement dated October 6, 2005; and
9. In addition, (x) the Company and Gryphon Master Fund, L.P.
("Gryphon"), as Collateral Agent for the benefit of certain of the
Purchasers, are parties to the Security Agreement dated February 24,
2005 (the "Security Agreement") and (y) Eastern Consolidated Energy,
Inc. has granted a mortgage to Gryphon as agent with respect to
premises located in Xxxxxx County, Kentucky, pursuant to 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, and filed with the clerk of Marin
County, Kentucky, mortgage book number 105, page 262.
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The above-referenced documents, all other documents executed in connection
therewith and all other agreements between Company and Purchasers are
hereinafter collectively referred to as the "Operative Documents".
B. Certain Events of Default (the "Existing Defaults") have occurred and
are continuing under the Operative Documents by virtue of, among other things:
(1) the Company's failure to pay accrued but unpaid interest on the Notes when
due; (2) the Company's failure to comply with the Negative and Financial
Covenants of the Purchase Agreement; (3) the Company's failure to comply with
certain registration requirements of the Registration Rights Agreement; and (4)
the Company's failure to comply with certain other provisions of the Notes, the
Purchase Agreement and the Registration Rights Agreement. The Existing Defaults
entitle Purchasers to immediately enforce all the rights and remedies set forth
in the Operative Documents and for Gryphon to exercise the rights of the
Collateral Agent under the Security Agreement.
C. Purchasers acknowledge that the Company has encountered unexpected
difficulties and needs to attract additional financing. In order to attract such
financing the Company has requested that the Purchasers waive the Existing
Defaults and forbear from exercising their respective remedies under the
Operative Documents or to direct the Collateral Agent from exercising its
remedies under the Security Agreement and to amend as set forth herein certain
provisions of the Operative Documents, and Purchasers have agreed to do so
provided the Company completes at least the minimum Permanent Financing (as
defined below) no later than January 13, 2006. The proceeds of the Permanent
Financing will be used for working capital and general corporate purposes and to
provide needed funds to complete the SAMI transaction (details of which are
attached as Exhibit "A").
NOW, THEREFORE, for good and valuable consideration, the parties agree as
follows:
1. Defined Terms. Capitalized terms not otherwise defined herein shall have
the same meanings as set forth in the Operative Documents.
2. Acknowledgment of Liability; Waiver as to Purchasers.
(a) Company reaffirms all of its obligations under the Operative
Documents and hereby forever waives and relinquishes any and all claims, off
sets or defenses that Company may now have with respect to the payment of sums
due to Purchasers and the performance of its other obligations thereunder.
Company acknowledges that pursuant to the Security Agreement, the Purchasers
have a valid, first priority security interest in all of the assets of the
Company and its Subsidiaries and that the Existing Defaults are existing and
uncured Events of Default under the Operative Documents, which are continuing to
the date of this Agreement.
(b) As a material inducement to the Purchasers to enter into this
Forbearance Agreement, which the parties have determined to be to their direct
advantage and benefit, the Company does hereby release and forever discharge
each of the Purchasers, their past and present employees, agents, attorneys,
officers and directors and all other affiliates from any and all claims, losses,
liabilities, demands, defenses, setoffs, counterclaims, and causes of action of
any kind, if any, whether absolute or contingent, known or unknown, matured or
unmatured that the Company now has or has ever had for the period through and
including the date hereof, in whatever capacity, against the Purchasers,
including matters arising out of or relating to the Operative Documents, this
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Forbearance Agreement and the lending relationship between the Purchasers and
the Company, and all consequences from the Operative Documents, this Forbearance
Agreement, and the lending relationship between the Purchasers and the Company.
For clarity purposes, this release relates to the period up to and including the
date of this Forbearance Agreement. This release is non-contingent, absolute and
shall survive and remain in force after the Permanent Financing has closed.
3. Consent. Each Purchaser consents to the Company completing the
convertible note financing transaction (the "Permanent Financing") (terms of
which are attached as Exhibit "B") and the transactions anticipated thereby.
Further, the Purchasers waive, solely for purposes of the Company completing the
Permanent Financing, the following provisions of the Operative Documents: (i)
Purchasers' anti-dilution provisions as set forth in Section 3(c)(ii) of each
Note, (ii) Purchasers' rights under Sections 3.12 and 3.15 of the Purchase
Agreement, (iii) Purchasers' anti-dilution provisions as set forth in Section 6
of each Warrant, (iv) Purchasers' remaining rights associated with each AIR, and
(v) Purchasers' rights under Section 8 of the Registration Rights Agreement, to
the extent that completion of the Permanent Financing may cause any processing
delay of the Registration Statement at the Commission.
4. Forbearance. Company acknowledges the Existing Defaults are existing and
uncured Events of Default under the Operative Documents, which are continuing to
the date of this Agreement. Company further acknowledges and agrees that no
Purchaser is in any way agreeing to waive such Existing Defaults as a result of
this Agreement or the performance by the parties of their respective obligations
hereunder or thereunder except as expressly set forth herein. Subject to the
conditions contained herein and performance by Company of all of the terms of
this Agreement, each Purchaser shall waive the Existing Defaults identified in
Recital B above and to forbear from enforcing the remedies set forth in clauses
(i) through (v) below, if and only if the Permanent Financing closes by January
13, 2006, and shall forbear from exercising the following remedies it has as a
result of the occurrence of the Existing Defaults through December 30, 2005 in
order to allow the Company to complete the Permanent Financing, including
without limitation: (i) acceleration of the interest rate from 6% to the Default
Rate as set forth in each Note and any penalties therefrom, (ii) acceleration of
the principal payment due date under Section 4(b) of each Note, (iii)
enforcement of the Guaranties, (iv) enforcement of the liquidated damages
provision as set forth in Section 8(d) of the Registration Rights Agreement, and
(v) enforcement of default provision set forth in Section 6 of the Security
Agreement; provided, however, that in the event that the Company does not close
at least the minimum amount of the Permanent Financing on or before January 13,
2006 (the "Forbearance Period"), this forbearance and waiver shall be of no
effect.
Additionally, this forbearance shall not be construed as an agreement by
any Purchaser to forbear from exercising any of its rights or remedies under the
Operative Documents with respect to any further Event of Default that may occur
after date of this Agreement.
5. Amendment. To the extent this Agreement constitutes an amendment of the
Operative Documents, the parties by signing their signature below agree to such
amendment of the Operative Documents. Further the parties agree to the following
amendments:
(a) Section 3.14(a) "EBITDA" of the Purchase Agreement is hereby
amended by making the minimum EBITDA requirement effective beginning April 1,
2006 (i.e. deleting the obligations from October 1, 2005 through March 31,
2006).
(b) Section 3.14(b) "Capital Expenditures" of the Purchase Agreement
is hereby amended by deleting the requirements in their entirety.
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(c) Section 3.14(c) "Cash Level" of the Purchase Agreement is hereby
amended by making the minimum cash level requirement effective beginning July 1,
2006 (i.e. deleting the obligations from October 1, 2005 through June 30, 2006).
The Cash Level requirements are further amended by changing the minimum cash
level for July 1, 2006 through September 30, 2006 from $2,000,000 to $1,000,000.
(d) Section 1 "Definitions" of each Note is hereby amended by changing
the definition of "Conversion Price" to read "$0.90."
(e) Section 1 "Definitions" of each Note is hereby amended by changing
the definition of "Interest Payment Date" to read "means each January 1 and July
1, commencing July 1, 2006, and continuing until the Final Maturity Date."
(f) Section 2(a) "Interest" of each Note is hereby amended by changing
the commencement date from July 1, 2005 to July 1, 2006.
(g) The following new subsection is added to each Note as Section
3(c)(ii)(C): "In the event that the Company's annualized EBITDA for the two
fiscal quarters ended December 31, 2006 is less than $17 million (based on the
EBITDA from the audited financial statements of the Company for the quarters
ended September 30, 2006 and December 31, 2006) (the "Annualized EBITDA"), the
Conversion Price shall be reset to a price equal to the greater of $0.30
(subject to adjustment for forward and reverse stock splits, stock dividends,
recapitalizations and the like) or a price determined by the following formula:
3xX/Y where X equals the Annualized EBITDA and Y equals the number of shares of
Common Stock outstanding on a fully diluted basis on December 31, 2006. Such
adjustment shall be effective on March 31, 2007. Notwithstanding anything herein
to the contrary, any adjustment pursuant to this section may only decrease the
Conversion Price. By way of an example, if the Company's EBITDA for the quarters
ended September 30, 2006 and December 31, 2006 are $3 million and $2 million,
respectively, and there are 20,000,000 shares of Common Stock outstanding as of
December 31, 2006, the Conversion Price would be reduced to $0.50 ($2.5 million
x 4 divided by 20,000,000). The Company shall, at its own expense, have its
regular independent auditors conduct a special audit of the Company's financial
statements for such six-month period to determine such EBITDA. Such audit shall
be completed no later than January 31, 2007."
(h) The following new subsection is added to each Note as Section
3(c)(ii)(D): "In addition, if the Company or any Subsidiary thereof, as
applicable, at any time while this Note is outstanding, shall offer, sell, grant
any option to purchase or offer, sell or grant any right to reprice its
securities, or otherwise dispose of or issue (or announce any offer, sale, grant
or any option to purchase or other disposition) any Common Stock or New
Securities entitling any Person to acquire shares of Common Stock, at an
effective price per share less than the then Conversion Price (such lower price,
the "Base Conversion Price" and such issuances collectively, a "Dilutive
Issuance"), as adjusted hereunder (if the holder of the Common Stock or New
Securities so issued shall at any time, whether by operation of purchase price
adjustments, reset provisions, floating conversion, exercise or exchange prices
or otherwise, or due to warrants, options or rights per share which is issued in
4
connection with such issuance, be entitled to receive shares of Common Stock at
an effective price per share which is less than the Conversion Price, such
issuance shall be deemed to have occurred for less than the Conversion Price on
such date of the Dilutive Issuance), then the Conversion Price shall be reduced
to equal the Base Conversion Price. Such adjustment shall be made whenever such
Common Stock or New Securities are issued. The Company shall notify the Holder
in writing, no later than the Business Day following the issuance of any Common
Stock or New Securities subject to this section, indicating therein the
applicable issuance price, or of applicable reset price, exchange price,
conversion price and other pricing terms (such notice the "Dilutive Issuance
Notice"). For purposes of clarification, whether or not the Company provides a
Dilutive Issuance Notice pursuant to this Section 3(c), upon the occurrence of
any Dilutive Issuance, after the date of such Dilutive Issuance the Holder is
entitled to receive a number of Conversion Shares based upon the Base Conversion
Price regardless of whether the Holder accurately refers to the Base Conversion
Price in the Notice of Conversion."
(i) Section 4(a)(viii) "Events of Default" of each Note is hereby
amended by deleting "the SEC within 270 days following the Closing Date;" and
replacing it with "the SEC within 270 days of the closing date of the Permanent
Financing." Section 4(a)(v) "Events of Default" of the Note is hereby amended by
adding the following at the end of such Section: ", provided, however, that the
events described in Sections 8(d)(i)-(ii) of the Registration Rights Agreement
shall not constitute an Event of Default." The following is added as an Event of
Default as new Section 4(a)(xi): "the Company shall breach any of its
representations, warranties or covenants contained in any agreement or document
executed in connection with the Permanent Financing, including, without
limitation, any default or breach under any promissory note issued in connection
therewith.
(j) Section 1 "Definitions" of the Registration Rights Agreement is
hereby amended by changing the definition of "Effectiveness Date" by replacing
the first clause in (i) with "the earlier of May 31, 2006 or the 150th calendar
day following the closing date of the Permanent Financing". Notwithstanding the
foregoing amendment, the Company shall be obligated to pay liquidated damages
pursuant to the terms of the Registration Rights Agreement for failure of the
Registration Statement to be declared effective by the Effectiveness Date as
defined immediately prior to the date hereof through December 30, 2005, which
damages shall be paid in the manner set forth herein. For clarity, each
Purchaser is agreeing to forbear from the accrual of further liquidated damages
under the Registration Rights Agreement from and after December 31, 2005 through
and including the Required Filing Date.
(k) Section 1 "Definitions" of the Registration Rights Agreement is
hereby amended by changing the first clause of the definition of "Required
Filing Date" to read "means the thirtieth (30th) calendar day immediately
following the closing date of the Permanent Financing." Notwithstanding the
foregoing amendment, the Company shall be obligated to pay liquidated damages
pursuant to the terms of the Registration Rights Agreement for failure of the
Registration Statement to be filed by the Required Filing Date as defined
immediately prior to the date hereof through December 30, 2005, which damages
shall be paid in the manner set forth herein. For clarity, each Purchaser is
agreeing to forbear from the accrual of further liquidated damages under the
Registration Rights Agreement from and after December 31, 2005 through and
including the Required Filing Date.
(l) The definition of "Exercise Price" in the first paragraph of each
Warrant is hereby amended to read "$0.90."
(m) The following is added as new Section 6(a)(ii)(C) of each Warrant:
"In the event that the Company's annualized EBITDA for the two fiscal quarters
ended December 31, 2006 is less than $17 million (based on the EBITDA from the
audited financial statements of the Company for the quarters ended September 30,
2006 and December 31, 2006) (the "Annualized EBITDA"), the Conversion Price
shall be reset to a price equal to the greater of $0.30 (subject to adjustment
for forward and reverse stock splits, stock dividends, recapitalizations and the
5
like) or a price determined by the following formula: 3xX/Y where X equals the
Annualized EBITDA and Y equals the number of shares of Common Stock outstanding
on a fully diluted basis on December 31, 2006. Such adjustment shall be
effective on March 31, 2007. Notwithstanding anything herein to the contrary,
any adjustment pursuant to this section may only decrease the Exercise Price. By
way of an example, if the Company's EBITDA for the quarters ended September 30,
2006 and December 31, 2006 are $3 million and $2 million, respectively, and
there are 20,000,000 shares of Common Stock outstanding as of December 31, 2006,
the Exercise Price would be reduced to $0.50 ($2.5 million x 4 divided by
20,000,000). The Company shall, at its own expense, have its regular independent
auditors conduct a special audit of the Company's financial statements for such
six-month period to determine such EBITDA. Such audit shall be completed no
later than January 31, 2007."
(n) The following is added as new Section 6(a)(ii)(D) of each Warrant:
"Subsequent Equity Sales. If the Company or any Subsidiary thereof, as
applicable, at any time while this Warrant is outstanding, shall offer, sell,
grant any option to purchase or offer, sell or grant any right to reprice its
securities, or otherwise dispose of or issue (or announce any offer, sale, grant
or any option to purchase or other disposition) any Common Stock or New
Securities entitling any Person to acquire shares of Common Stock, at an
effective price per share less than the then Exercise Price (such lower price,
the "Base Share Price" and such issuances collectively, a "Dilutive Issuance"),
as adjusted hereunder (if the holder of the Common Stock or New Securities so
issued shall at any time, whether by operation of purchase price adjustments,
reset provisions, floating conversion, exercise or exchange prices or otherwise,
or due to warrants, options or rights per share which is issued in connection
with such issuance, be entitled to receive shares of Common Stock at an
effective price per share which is less than the Exercise Price, such issuance
shall be deemed to have occurred for less than the Exercise Price on such date
of the Dilutive Issuance), then the Exercise Price shall be reduced and only
reduced to equal the Base Share Price and the number of Warrant Shares issuable
hereunder shall be increased such that the aggregate Exercise Price payable
hereunder, after taking into account the decrease in the Exercise Price, shall
be equal to the aggregate Exercise Price prior to such adjustment. Such
adjustment shall be made whenever such Common Stock or New Securities are
issued. The Company shall notify the Holder in writing, no later than the
Trading Day following the issuance of any Common Stock or New Securities subject
to this section, indicating therein the applicable issuance price, or of
applicable reset price, exchange price, conversion price and other pricing terms
(such notice the "Dilutive Issuance Notice"). For purposes of clarification,
whether or not the Company provides a Dilutive Issuance Notice pursuant to this
Section 6(a)(ii)(D), upon the occurrence of any Dilutive Issuance, after the
date of such Dilutive Issuance the Holder is entitled to receive a number of
Warrant Shares based upon the Base Share Price regardless of whether the Holder
accurately refers to the Base Share Price in the Notice of Exercise."
(o) In lieu of the payment of accrued but unpaid liquidated damages
under the Registration Rights Agreement in the amounts set forth on Schedule
5(o) hereto, each Purchaser agrees to accept, and the Company agrees to issue, a
secured promissory note, in the form attached hereto as Exhibit "C".
(p) Each Purchaser further agrees to execute and enter into the
Inter-Creditor Agreement in the form attached hereto as Exhibit "D".
(q) In lieu of the payment of accrued but unpaid interest under the
Notes, each Purchaser agrees to accept as payment therefor, and the Company
agrees to issue, notes and warrants pursuant to the terms of the Permanent
Financing, in the amounts set forth on Schedule 5(q) hereto.
6
(r) Notwithstanding the availability of Rule 144, each Purchaser
agrees not to sell, offer or otherwise transfer any shares of Common Stock
beneficially owned by it until the earlier of (i) May 31, 2006, or (ii) the date
the Registration Statement is declared effective by the SEC.
6. Representations and Warranties. Company hereby represents and warrants
that:
(a) No Event of Default or failure of condition has occurred or
exists, or would exist with notice or lapse of time or both under any of the
Operative Documents, other than the Existing Defaults.
(b) The Forbearance Period granted pursuant to the terms of this
Agreement is reasonable and is based upon the projections of Company and
Company's reasonable expectations regarding its ability to obtain the Permanent
Financing.
(c) All representations and warranties of Company in this Agreement
and the Operative Documents are true and correct as of the date hereof, and
shall survive the execution of this Agreement.
7. Default. In addition to all other Events of Default under each Note and
the other Operative Documents as amended by Section 5 hereof, the following
shall constitute an Event of Default hereunder:
(a) Company's failure to pay any amount when due under this Agreement
or the Operative Documents as amended hereby;
(b) Company's failure to perform any covenant or other agreement
contained in this Agreement or any other document entered into in connection
herewith, provided, however, that the events described in Sections 8(d)(i)-(ii)
of the Registration Rights Agreement shall not constitute an Event of Default;
and
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(c) Any representation or warranty of the Company made in connection
with this Agreement or the Operative Documents shall be false, misleading or
incorrect when made or at any time thereafter.
8. Rights and Remedies.
(a) Upon the occurrence and during the continuance of an Event of
Default, each Purchaser may, at its election, without notice of its election and
without demand, do any one or more of the following, all of which are authorized
by Company:
(i) Take action against Company for payment under the Operative
Documents and this Agreement; and/or
(ii) Exercise any right and remedy authorized by the Operative
Documents and/or this Agreement and/or applicable law.
(b) Purchasers' rights and remedies under this Agreement, the
Operative Documents and all other agreements shall be cumulative. Purchasers
shall have all other rights and remedies not inconsistent herewith as provided
by law or in equity. No exercise by Purchasers of one right or remedy shall be
deemed an election, and no waiver by Purchasers of any Event of Default on the
part of Company shall be deemed a continuing waiver. No delay by Purchasers
shall constitute a waiver, election, or acquiescence by it.
9. Forbearance Agreement Closing Conditions. As a condition to the
effectiveness of this Agreement, each Purchaser shall have received, in form and
substance satisfactory to such Purchaser, the following:
(a) this Agreement, duly executed by the Company;
(b) a warrant certificate issued in the name of such Purchaser, and
otherwise identical to the warrants issued in the Permanent Financing, duly
executed by the Company, for a number of shares of Common Stock, par value $.001
per share, of the Company ("Common Stock") equal to the number computed using
the following formula:
X = Y multiplied by 0.50 minus Z
-
$0.90
Where:
X = the number of shares of Common Stock underlying the warrant certificate;
Y = the stated aggregate principal amount of all Notes issued
to such Purchaser under the Operative Documents; and
Z = the number of shares of Common Stock underlying all Warrants issued
to such Purchaser,
and
(c) such other documents, and completion of such other matters, as
such Purchaser may reasonably deem necessary or appropriate.
10. Waiver of Notice and Cure. Company acknowledges that an Event of
Default has occurred under each Note that, but for this Agreement, would have
entitled Purchasers to exercise all the remedies available to Purchasers under
the Notes and applicable law. As to the Existing Defaults through the date
hereof, the Company waives all notices of default and rights to cure that are
otherwise provided in the Notes or applicable law.
11. Further Assurances. Company will take such other actions as Purchasers
may reasonably request from time to time to accomplish the objectives of this
Agreement.
12. Consultation of Counsel. Company acknowledges that Company has had the
opportunity to be represented by legal counsel of its own choice throughout all
of the negotiations that preceded the execution of this Agreement. Company has
executed this Agreement after reviewing and understanding each provision of this
Agreement and without reliance upon any promise or representation of any person
or persons acting for or on behalf of Purchasers. Company further acknowledges
that Company and its counsel have had adequate opportunity to make whatever
investigation or inquiry they may deem necessary or desirable in connection with
the subject matter of this Agreement prior to the execution hereof and the
delivery and acceptance of the consideration described herein.
8
13. Notices. Unless otherwise provided in this Agreement, all notices or
demands by any party relating to this Agreement or any other agreement entered
into in connection herewith shall be in writing and shall be personally
delivered or sent by a recognized overnight delivery service, certified mail,
postage prepaid, return receipt requested, or by facsimile to Company or to
Purchasers, as the case may be, at its addresses set forth below.
If to Company: Consolidated Energy, Inc.
00 Xxxxxx Xxxx
Xxxxx Xxxxx, Xxxxxxxx 00000
Attention: Xxxxx Xxxxxxx, President
Telecopier: (000) 000-0000
Telephone: (000) 000-0000
With a copy to: Xxxx X. Xxxxxxxx, Esq.
1371 East 0000 Xxxxx, # 000
Xxxx Xxxx Xxxx, Xxxx 00000
Attention: Xxxx X. Xxxxxxxx
Fax: (000) 000-0000
Telephone: (000) 000-0000
If to Purchasers: See listing attached as Exhibit "E"
The parties hereto may change the address at which they are to receive
notices hereunder, by notice in writing in the foregoing manner given to the
other.
14. Miscellaneous.
(a) Successors and Assigns. This Agreement shall be binding upon and shall
inure to the benefit of Company and Purchasers and their respective successors
and assigns; provided, however, that the foregoing shall not authorize any
assignment by Company of its rights or duties hereunder.
(b) Integration. This Agreement and any documents executed in connection
herewith or pursuant hereto contain the entire agreement between the parties
with respect to the subject matter hereof and supersede all prior agreements,
understandings, offers and negotiations, oral or written, with respect thereto
and no extrinsic evidence whatsoever may be introduced in any judicial or
arbitration proceeding, if any, involving this Agreement.
(c) Effect of This Agreement. This Agreement does not impair, alter, waive,
annul, vary or affect any provision, acknowledgement, representation, condition,
covenant, right, security interest, lien or remedy contained in the Operative
Documents or in any other instrument or agreement at any time executed by any of
the Company in favor of the Purchasers, except as expressly provided in this
Agreement. The Company and the Purchasers intend that the terms and provisions
contained in the other Operative Documents shall continue in full force and
effect subject to the terms of this Agreement. In the event that the terms of
this Agreement conflict with those of the Operative Documents, the terms of this
Agreement shall govern.
(d) Course of Dealing; Waivers. No course of dealing on the part of
Purchasers or its partners, nor any failure or delay in the exercise of any
right by Purchasers, shall operate as a waiver thereof, and any single or
partial exercise of any such right shall not preclude any later exercise of any
such right. Purchasers' failure at any time to require strict performance by
Company of any provision shall not affect any right of Purchasers thereafter to
demand strict compliance and performance. Any suspension or waiver of a right
must be in writing signed by a general partner of Purchasers.
9
(e) Time is of the Essence. Time is of the essence as to each and every
term and provision of this Agreement and the other Operative Documents.
(f) Counterparts. This Agreement may be signed in counterparts and all of
such counterparts when properly executed by the appropriate parties thereto
together shall serve as a fully executed document, binding upon the parties.
(g) Legal Effect. The Operative Documents remain in full force and effect.
If any provision of this Agreement conflicts with applicable law, such provision
shall be deemed severed from this Agreement, and the balance of this Agreement
shall remain in full force and effect.
(h) Governing Law; Jurisdiction. This Agreement shall be governed by, and
construed in accordance with, the laws of the State of Texas without regard to
principles of conflicts of laws. The parties hereby agree that all actions or
proceedings arising directly or indirectly from or in connection with this
Agreement shall be litigated exclusively in the United States District Court for
the Northern District of Texas located in Dallas County, Dallas, Texas. The
parties consent and submit to the jurisdiction and venue of the foregoing courts
and consent that any process or notice of motion or other application to said
court or a judge thereof may be served inside or outside the State of Texas or
the Northern District of Texas (but with respect to any party hereto, such
consent shall not be deemed a general consent to jurisdiction and service for
any third parties) by registered mail, return receipt requested, directed to the
party being served at its address provided in or pursuant to this Agreement (and
service so made shall be deemed complete three (3) days after the same has been
posted as aforesaid) or by personal service or in such other manner as may be
permissible under the rules of said court. The Company hereby waives any right
to a jury trial in connection with any litigation pursuant to this Agreement.
(i) Assignment and Indemnity. Company consents to Purchasers' assignment of
all or any part of Purchasers' rights under this Agreement and the Operative
Documents. Company shall indemnify and defend and hold Purchasers and any
assignee of Purchasers' interests harmless from any actions, costs, losses or
expenses (including attorneys' fees) arising out of such assignment, this
Agreement and the Operative Documents.
IN WITNESS WHEREOF the undersigned have executed this Agreement as of the
first date above written.
CONSOLIDATED ENERGY, INC.
By:/s/ Xxxxx Xxxxxxx
-----------------
Name: Xxxxx Xxxxxxx
Title: President
[Signature of Purchasers to follow on next pages]
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PURCHASERS:
GRYPHON MASTER FUND, L.P.
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: /s/ X.X. Xxxx XX
-------------------------------
X.X. Xxxx, XX, Authorized Agent
GSSF MASTER FUND, LP
By: Gryphon Special Situations Fund, LP, its General Partner
By: Gryphon Management Partners, LP, its General Partner
By: GSSF, LLC, its General Partner
By: /s/ X.X. Xxxx XX
-------------------------------
X.X. Xxxx, XX, Authorized Agent
11
XXXXXXXX PARTNERS, L.P.
By: Xxxxxxxx Capital Management, LLC, its General Partner
By: /s/ Xxxxxx Xxxxx
--------------------
Xxxxxx Xxxxx, Managing member
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: /s/ Xxxxxxx X. Xxxxxx
-------------------------
Xxxxxxx 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: /s/ Xxxxxxx X. Xxxxxx
------------------------
Xxxxxxx X. Xxxxxx, Member
WS OPPORTUNITY FUND, L.P.
By: WS Ventures Management, L.P., as General Partner
By: WSV Management, LLC, its General Partner
By: /s/ Xxxxxxx X. Xxxxxx
-------------------------
Xxxxxxx X. Xxxxxx, Member
12
RENAISSANCE US GROWTH INVESTMENT TRUST PLC
By: /s/ Xxxxxxx Xxxxxxxxx
-----------------------
Xxxxxxx Xxxxxxxxx, Director
BFS US SPECIAL OPPORTUNITIES TRUST PLC
By: /s/ Xxxxxxx Xxxxxxxxx
---------------------
Xxxxxxx Xxxxxxxxx, Director
[NAMES OF ADDITIONAL AIR INVESTORS]
ENABLE GROWTH PARTNERS, L.P.
By: /s/ Xxxxxxx X'Xxxx
------------------
Name: Xxxxxxx X'Xxxx
Title: Principal & Portfolio Manager
ENABLE OPPORTUNITIES PARTNERS, L.P.
By: /s/ Xxxxxxx X'Xxxx
------------------
Name: Xxxxxxx X'Xxxx
Title: Principal & Portfolio Manager
GAMMA OPPORTUNITY CAPITAL PARTNERS, L.P.
By: /s/ Xxxxxxxx X. Xxxxxx
-----------------------
Name: Xxxxxxxx X. Xxxxxx
Title: President / Director
BUSHIDO CAPITAL MASTER FUND, L.P.
By: /s/ Xxxxxxxxxxx Xxxxxxx
------------------------
Name: Xxxxxxxxxxx Xxxxxxx
Title: Managing Director,
Bushido Capital Partners, Ltd.
CORDILLERA FUND, L.P.
By: /s/ Xxxxx X. Xxxxxx
--------------------
Name: Xxxxx X. Xxxxxx
Title: Co-CEO of Xxxxxx Xxxxxx Capital, Inc.
General Partner of ACCF GenPar, L.P.
General Partner of the Cordillera Fund, L.P.
13
NEWGRANGE PARTNERS, L.P.
By: /s/ Xxxxxxx X. Xxxxxxxx
-----------------------
Name: Xxxxxxx X. Xxxxxxxx
Title: Managing Partner
14
