SUBORDINATION AGREEMENT
Exhibit
10.7
This
Subordination Agreement (this “Agreement”)
is
entered into as of the 18th day of September, 2007, by EH&P INVESTMENTS AG,
a Swiss company (the “Subordinated
Lender”
and
VALENS U.S. SPV I, LLC, a Delaware corporation, as agent for the Purchasers
under the Securities Purchase Agreement referred to below (the “Senior
Agent”).
Unless otherwise defined herein, capitalized terms used herein shall have the
meaning provided such terms in the Securities Purchase Agreement.
BACKGROUND
WHEREAS,
it is a condition to the Purchasers’ making an investment in ICF Energy
Corporation, a Texas corporation (“ICF”)
and
True North Energy Corporation, a Nevada corporation, (“TNEC”)
and
together with ICF, the “Companies”
and
each a “Company”)
pursuant to, and in accordance with, (i) that certain Securities Purchase
Agreement to be dated on or about September 18, 2007 by and among the Companies,
the Senior Agent and the other Purchasers (as amended, modified or supplemented
from time to time, the “Securities
Purchase Agreement”)
and
(ii) the Related Agreements referred to in the Securities Purchase Agreement,
that the Subordinated Lender enter into this Agreement.
WHEREAS,
the Purchasers have made or will make loans to either or both of the
Companies.
NOW,
THEREFORE, the Subordinated Lender and the Senior Agent agree as
follows:
TERMS
1. All
obligations of the Companies and/or any of their Subsidiaries to the Creditor
Parties, howsoever created, arising or evidenced, whether direct or indirect,
absolute or contingent or now or hereafter existing, or due or to become due
are
referred to as “Senior
Liabilities.”
Any
and all loans made by the Subordinated Lender to either Company and/or any
of
their respective Subsidiaries, together with all other obligations (whether
monetary or otherwise) of such Company and/or any such Subsidiary to the
Subordinated Lender (in each case, including any interest, fees or penalties
related thereto), howsoever created, arising or evidenced, whether direct or
indirect, absolute or contingent or now or hereafter existing, or due or to
become due are referred to as “Junior
Liabilities.”
It
is
expressly understood and agreed that the term “Senior Liabilities”, as used in
this Agreement, shall include, without limitation, any and all interest, fees
and penalties accruing on any of the Senior Liabilities after the commencement
of any proceedings referred to in paragraph 4 of this Agreement, notwithstanding
any provision or rule of law which might restrict the rights of any Creditor
Party, as against either Company, and their Subsidiaries or anyone else, to
collect such interest, fees or penalties, as the case may be.
2. Except
as
expressly otherwise provided in this Agreement or as the Senior Agent may
otherwise expressly consent in writing, the payment of the Junior Liabilities
shall be postponed and subordinated in right of payment and priority to the
payment in full of all Senior Liabilities. Furthermore, whether directly or
indirectly, no payments or other distributions whatsoever in respect of any
Junior Liabilities shall be made (whether at stated maturity, by acceleration
or
otherwise), nor shall any property or assets of either Company or any of their
respective Subsidiaries be applied to the purchase or other acquisition or
retirement of any Junior Liability until such time as the Senior Liabilities
have been indefeasibly paid in full. Notwithstanding anything to the contrary
contained in this paragraph 2 or elsewhere in this Agreement, each Company
and
its Subsidiaries may make regularly scheduled principal and interest payments,
as the case may be, to the Subordinated Lenders with respect to the Junior
Liabilities, so long as (i) no Event of Default (as defined in each Note) has
occurred and is continuing at the time of any such payment and (ii) the amount
of such regularly scheduled principal payments and the rate of interest, in
each
case, with respect to the Junior Liabilities is not increased from that in
effect on the date hereof.
3. The
Subordinated Lender hereby subordinates all claims and security interests it
may
have against, or with respect to, any of the assets of either Company and/or
any
of their respective Subsidiaries (the “Subordinated
Lender Liens”),
to
the security interests granted by such Company and/or any of its Subsidiaries
to
the Senior Agent, for the ratable benefit of the Creditor Parties, in respect
of
the Senior Liabilities. Neither the Senior Agent nor any Purchaser shall owe
any
duty to the Subordinated Lender as a result of or in connection with the
Subordinated Lender Liens, including without limitation any marshalling of
assets or protection of the rights or interests of the Subordinated Lender.
The
Senior Agent shall have the exclusive right to manage, perform and enforce
the
underlying terms of the Securities Purchase Agreement, the Related Agreements
and each other document, instrument and agreement executed from time to time
in
connection therewith (collectively, the “Security
Agreements”)
relating to the assets of either Company and any of their respective
Subsidiaries and to exercise and enforce its rights according to its discretion.
The Subordinated Lender waives all rights to affect the method or challenge
the
appropriateness of any action taken by the Senior Agent in connection with
the
Senior Agent’s enforcement of its rights under the Security Agreements. Only the
Senior Agent shall have the right to restrict permit, approve or disapprove
the
sale, transfer or other disposition of the assets of either Company or any
of
their respective Subsidiaries. As between the Senior Agent and the Subordinated
Lender, the terms of this Agreement shall govern even if all or part of the
Senior Agent’s liens are avoided, disallowed, set aside or otherwise
invalidated.
4. In
the
event of any dissolution, winding up, liquidation, readjustment, reorganization
or other similar proceedings relating to either Company and/or any of their
respective Subsidiaries or to its creditors, as such, or to its property
(whether voluntary or involuntary, partial or complete, and whether in
bankruptcy, insolvency or receivership, or upon an assignment for the benefit
of
creditors, or any other marshalling of the assets and liabilities either Company
and/or any of their respective Subsidiaries, or any sale of all or substantially
all of the assets of either Company and/or any of their respective Subsidiaries,
or otherwise), the Senior Liabilities shall first be paid in full before the
Subordinated Lender shall be entitled to receive and to retain any payment,
distribution, other rights or benefits in respect of any Junior Liability.
In
order to enable the Senior Agent to enforce its rights hereunder, in any such
action or proceeding, the Senior Agent is hereby irrevocably authorized and
empowered in its discretion as attorney in fact for the Subordinated Lender
to
make and present for and on behalf of the Subordinated Lender such proofs of
claims against either Company and/or any of their respective Subsidiaries as
the
Senior Agent may deem expedient or proper and to vote such proofs of claims
in
any such proceeding and to receive and collect any and all dividends or other
payments or disbursements made thereon in whatever form the same may be paid
or
issued and to apply same on account of any the Senior Liabilities. In the event,
prior to indefeasible payment in full of the Senior Liabilities, the
Subordinated Lender shall receive any payment in respect of the Junior
Liabilities and/or in connection with the enforcement of the Subordinated
Lender’s rights and remedies against either Company and/or any of their
respective Subsidiaries, whether arising in connection with the Junior
Liabilities or otherwise, then the Subordinated Lender shall forthwith deliver,
or cause to be delivered, the same to the Senior Agent in precisely the form
held by the Subordinated Lender (except for any necessary endorsement) and
until
so delivered the same shall be held in trust by the Subordinated Lender as
the
property of the Senior Agent.
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5. The
Subordinated Lender will xxxx its books and records so as to clearly indicate
that its Junior Liabilities are subordinated in accordance with the terms of
this Agreement. The Subordinated Lender will execute such further documents
or
instruments and take such further action as the Senior Agent may reasonably
request from time to time to carry out the intent of this
Agreement.
6. The
Subordinated Lender hereby waives all diligence in collection or protection
of
or realization upon the Senior Liabilities or any security for the Senior
Liabilities.
7. Until
such time as the Senior Liabilities have been indefeasibly paid in full, the
Subordinated Lender will not, except as otherwise provided in this Agreement,
without the prior written consent of the Senior Agent: (a) attempt to enforce
or
collect any Junior Liability or any rights in respect of any Junior Liability
or
any other rights or remedies of any kind or nature whatsoever against either
Company and/or any of their respective Subsidiaries whether in respect of the
Junior Liabilities or otherwise (each an “Enforcement
Action”);
unless, in each case (i) an event of default shall have occurred and be
continuing under any one or more agreements between and among the Subordinated
Lender, such Company and/or any such Subsidiary which would entitle the
Subordinated Lender to take such action (each, a “Subordinated
Lender Default”),
(ii)
the Subordinated Lender shall have provided the Senior Agent written notice
of
the occurrence of each such Subordinated Lender Default and that it intends
to
take an Enforcement Action (each, a “Subordinated
Lender Enforcement Action Notice”),
and
(iii) a period of at least one hundred and eighty (180) days shall have elapsed
after the receipt by the Senior Agent of the respective Subordinated Lender
Enforcement Action Notice; provided that, notwithstanding the foregoing, the
Subordinated Lender shall only be permitted to provide the Senior Agent with
one
(1) Subordinated Lender Enforcement Action Notice in any three hundred and
sixty
five (365) day period; or (b) commence, or join with any other creditor in
commencing, any bankruptcy, reorganization or insolvency proceedings with
respect to either Company and/or any of their respective
Subsidiaries.
8. The
Senior Agent may, from time to time, at its sole discretion and without notice
to the Subordinated Lender, take any or all of the following actions: (a) retain
or obtain a security interest in any property to secure any of the Senior
Liabilities; (b) retain or obtain the primary or secondary obligation of any
other obligor or obligors with respect to any of the Senior Liabilities; (c)
extend or renew for one or more periods (whether or not longer than the original
period), alter, increase or exchange any of the Senior Liabilities, or release
or compromise any obligation of any nature of any obligor with respect to any
of
the Senior Liabilities; and (d) release its security interest in, or surrender,
release or permit any substitution or exchange for, all or any part of any
property securing any of the Senior Liabilities, or extend or renew for one
or
more periods (whether or not longer than the original period) or release,
compromise, alter or exchange any obligations of any nature of any obligor
with
respect to any such property.
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9. Neither
the Senior Agent nor any Purchaser may, from time to time, whether before or
after any discontinuance of this Agreement, without notice to the Subordinated
Lender, assign or transfer any or all of the Senior Liabilities or any interest
in the Senior Liabilities; and, notwithstanding any such assignment or transfer
or any subsequent assignment or transfer of the Senior Liabilities, such Senior
Liabilities shall be and remain Senior Liabilities for the purposes of this
Agreement, and every immediate and successive assignee or transferee of any
of
the Senior Liabilities or of any interest in the Senior Liabilities shall,
to
the extent of the interest of such assignee or transferee in the Senior
Liabilities, be entitled to the benefits of this Agreement to the same extent
as
if such assignee or transferee were the Senior Agent and/or such Purchaser,
as
applicable; provided, however, that, unless the Senior Agent shall otherwise
consent in writing, the Senior Agent shall have an unimpaired right, prior
and
superior to that of any such assignee or transferee, to enforce this Agreement,
for the benefit of the Senior Agent and the Purchasers, as to those of the
Senior Liabilities which the Senior Agent and/or the Purchasers have not
assigned or transferred.
10. The
Senior Agent shall not be prejudiced in its rights under this Agreement by
any
act or failure to act of the Subordinated Lender, or any noncompliance of the
Subordinated Lender with any agreement or obligation, regardless of any
knowledge thereof which the Senior Agent may have or with which the Senior
Agent
may be charged; and no action of the Senior Agent permitted under this Agreement
shall in any way affect or impair the rights of the Senior Agent, or any
Purchaser, and the obligations of the Subordinated Lender under this
Agreement.
11. No
delay
on the part of the Senior Agent in the exercise of any right or remedy shall
operate as a waiver of such right or remedy, and no single or partial exercise
by the Senior Agent of any right or remedy shall preclude other or further
exercise of such right or remedy or the exercise of any other right or remedy;
nor shall any modification or waiver of any of the provisions of this Agreement
be binding upon the Senior Agent except as expressly set forth in a writing
duly
signed and delivered on behalf of the Senior Agent. For the purposes of this
Agreement, Senior Liabilities shall have the meaning set forth in Section 1
above, notwithstanding any right or power of the Subordinated Lender or anyone
else to assert any claim or defense as to the invalidity or unenforceability
of
any such obligation, and no such claim or defense shall affect or impair the
agreements and obligations of the Subordinated Lender under this
Agreement.
12. This
Agreement shall continue in full force and effect after the filing of any
petition (“Petition”)
by or
against either Company and/or any of their respective Subsidiaries under the
United States Bankruptcy Code (the “Code”)
and
all converted or succeeding cases in respect thereof. All references herein
to
either Company and/or any of their respective Subsidiaries shall be deemed
to
apply to such Company and any such Subsidiary as debtor-in-possession and to
a
trustee for such Company and/or any such Subsidiary. If either Company or any
of
their respective Subsidiaries shall become subject to a proceeding under the
Code, and if the Senior Agent shall desire to permit the use of cash collateral
or to provide post-Petition financing from the Senior Agent to such Company
or
any such Subsidiary under the Code, the Subordinated Lender agrees as follows:
(a) adequate notice to the Subordinated Lender shall be deemed to have been
provided for such consent or post-Petition financing if the Subordinated Lender
receives notice thereof three (3) business days (or such shorter notice as
is
given to the Senior Agent) prior to the earlier of (i) any hearing on a request
to approve such post-petition financing or (ii) the date of entry of an order
approving same and (b) no objection will be raised by the Subordinated Lender
to
any such use of cash collateral or such post-Petition financing from the Senior
Agent, or any Purchaser.
4
13. This
Agreement shall be binding upon the Subordinated Lender and upon the heirs,
legal representatives, successors and assigns of the Subordinated Lender and
the
successors and assigns of the Subordinated Lender.
14. This
Agreement shall be construed in accordance with and governed by the laws of
New
York without regard to conflict of laws provisions. Wherever possible each
provision of this Agreement shall be interpreted in such manner as to be
effective and valid under applicable law, but if any provision of this Agreement
shall be prohibited by or invalid under such law, such provision shall be
ineffective to the extent of such prohibition or invalidity, without
invalidating the remainder of such provision or the remaining provisions of
this
Agreement.
15. This
Agreement shall terminate upon the indefeasible payment in full of the Senior
Liabilities.
[Signature
appears on the following page.]
5
IN
WITNESS WHEREOF, this Agreement has been made and delivered this 18th day of
September, 2007.
| EH&P INVESTMENTS AG | ||
| |
|
|
| By: | /s/ Xxxxxx Xxxxxx | |
|
Name: |
||
| Title: | ||
| VALENS U.S. SPV I, LLC, as Agent | ||
| |
|
|
|
By: Valens
Capital
Management, LLC,
its investment manager
|
||
| By: | /s/ Xxxxxx Grin | |
|
Name: Xxxxxx Grin |
||
| Title: Authorized Signatory | ||
Acknowledged
and Agreed to by:
TRUE
NORTH ENERGY CORPORATION
| By: /s/ Xxxx X. Folnovic | |||
|
Name:
Xxxx X. Folnovic
Title:
President and Chief Executive Officer
|
ICF
ENERGY CORPORATION
| By: /s/ Xxxx X. Folnovic | |||
|
Name:
Xxxx X. Folnovic
Title:
President and Chief Executive Officer
|
