EXHIBIT 10.2
FORM OF SUBORDINATION AGREEMENT DATED
MAY 31, 2007
SUBORDINATION AGREEMENT
This SUBORDINATION AGREEMENT (this "AGREEMENT"), dated as of May 31,
2007 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., PROMETHEAN I MASTER LTD., CAERUS PARTNERS LLC, 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 May 31, 2007 in the
original principal amount of $600,000 (as the same has been and may hereafter be
amended, restated, supplemented, replaced, substituted, divided, increased or
otherwise modified from time to time
1
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 $600,000 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,
2
CHI02_60483238_1_208239_00102
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.
3
CHI02_60483238_1_208239_00102
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
4
CHI02_60483238_1_208239_00102
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
5
CHI02_60483238_1_208239_00102
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
May 31, 2007 (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
6
CHI02_60483238_1_208239_00102
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
7
CHI02_60483238_1_208239_00102
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
8
CHI02_60483238_1_208239_00102
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.
9
CHI02_60483238_1_208239_00102
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: Creditor set forth 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: Xxxxx X. X'Xxxxx
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
10
CHI02_60483238_1_208239_00102
If to a Lender: To the address of such Lender set
forth on the Schedule I hereto
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
11
CHI02_60483238_1_208239_00102
of Senior Indebtedness to receive any further payment or distribution
in respect of or 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
12
CHI02_60483238_1_208239_00102
the internal laws of the State of New York, without giving effect to any choice
of law or conflict 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]
13
CHI02_60483238_1_208239_00102
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, CO-TRUSTEE
--------------------------------------------
Name: Xxxxxxx X. Xxxxxxx
Title: Trustee
OBLIGORS:
GALAXY ENERGY CORPORATION, a Colorado corporation
By: /s/ XXXXXXXXXXX X. XXXXXXXX
------------------------------------------------
Name: XXXXXXXXXXX X. XXXXXXXX
----------------------------------------------
Title: SVP & 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: /s/ XXXXX X. X'XXXXX
------------------------------------------------
Name: XXXXX X. X'XXXXX
----------------------------------------------
Title: MANAGING MEMBER
---------------------------------------------
LENDERS:
HFTP INVESTMENT LLC
By: Promethean Asset Management L.L.C.
Its: Investment Manager
By: /s/ XXXXX X. X'XXXXX
------------------------------------------------
Name: Xxxxx X. X'Xxxxx
Title: Managing Member
PROMETHEAN II MASTER, L.P.
By: Promethean Asset Management L.L.C.
Its: Investment Manager
By: /s/ XXXXX X. X'XXXXX
------------------------------------------------
Name: Xxxxx X. X'Xxxxx
Title: Managing Member
PROMETHEAN I MASTER LTD.
By: Promethean Asset Management L.L.C.
Its: Investment Manager
By: /s/ XXXXX X. X'XXXXX
------------------------------------------------
Name: Xxxxx X. X'Xxxxx
Title: Managing Member
CAERUS PARTNERS LLC
By: Promethean Asset Management L.L.C.
Its: Investment Manager
By: /s/ XXXXX X. X'XXXXX
------------------------------------------------
Name: Xxxxx X. X'Xxxxx
Title: Managing Member
AG OFFSHORE CONVERTIBLES, LTD.
By: Xxxxxx, Xxxxxx & Co., L.P.
Director
By: /s/ XXXXXXX X. XXXXXX
------------------------------------------------
Name: Xxxxxxx X. Xxxxxx
Title: Chief Operating Officer
XXXXXXXX, L.P.
By: Xxxxxxxx Capital Management, Inc.
Its: General Partner
By: Xxxxxx, Xxxxxx & Co., L.P
Its: Director
By: /s/ XXXXXXX X. XXXXXX
------------------------------------------------
Name: Xxxxxxx X. Xxxxxx
Title: Chief Operating Officer
