NOVEMBER 2007 AMENDMENT AGREEMENT
EXHIBIT
10.1
THIS
NOVEMBER 2007 AMENDMENT AGREEMENT (this “Agreement”) is made as
of November 16, 2007, among Galaxy Energy Corporation, a Colorado corporation
(“Galaxy” or the “Company”), the Subsidiaries
(as defined below), HFTP Investments LLC (“HFTP”), Promethean I
Master, Ltd. (f/k/a Gaia Offshore Master Fund, Ltd. ) (“Prom
I”), Caerus Partners LLC (“Caerus Partners”),
Promethean II Master, L.P. (“Prom II”) and Xxxxxxxx, L.P.
(“Xxxxxxxx” and, collectively with HFTP, Prom I, Caerus
Partners and Prom II, the “Buyers”).
W
I T N E
S S E T H:
WHEREAS,
the Company, Caerus Fund Ltd. (“Caerus Fund”) and certain of
the Buyers (the “2005 Buyers”) entered into that certain
Securities Purchase Agreement, dated as of May 31, 2005 (as amended, restated,
supplemented or otherwise modified and in effect from time to time, the
“2005 Purchase Agreement”), pursuant to which the Company
issued to the 2005 Buyers senior secured convertible notes in an aggregate
original principal amount of $10,000,000 (such notes, together with any
promissory notes or other securities issued in exchange or substitution therefor
or replacement thereof, and as any of the same may be amended, restated,
supplemented or otherwise modified and in effect from time to time, the
“2005 Notes”; the shares of common stock, par value $0.001 per
share (the “Common Stock”), of the Company, issuable upon
conversion of the Notes being referred to herein as the “Conversion
Shares”), and the 2005 Buyers were granted perpetual overriding royalty
interests in the hydrocarbon production on the Company’s and Dolphin’s
properties pursuant to those certain Conveyances of Overriding Royalty
Interests, dated May 31, 2005;
WHEREAS,
the Company entered into that certain Waiver and Amendment, dated as of December
1, 2005, with Caerus Fund, AG Offshore Convertibles, Ltd. (“AG
Offshore”) and certain of the Buyers;
WHEREAS,
the Company entered into that certain Waiver and Agreement, dated as of July
7,
2006, with Caerus Fund, AG Offshore and certain of the Buyers;
WHEREAS,
HFTP transferred to Prom II, among other things, a portion of the 2005 Note
originally issued by the Company to HFTP, pursuant to that certain Supplementary
Agreement, dated as of October 31, 2006, among HFTP, Prom II and the other
parties thereto, and in connection with such transfer, Prom II became a Buyer
under, among other things, the 2005 Purchase Agreement;
WHEREAS,
the Company entered into that certain November 2006 Waiver and Amendment
Agreement, dated as of November 29, 2006, with the Buyers;
WHEREAS,
Caerus Fund transferred to Caerus Partners its entire interest in, among other
things, the 2005 Note originally issued by the Company to Caerus Fund, pursuant
to that certain Securities Transfer Agreement, dated as of December 31, 2006,
between Caerus Fund and Caerus Partners, and in connection with such transfer,
Caerus Partners became a Buyer under, among other things, the 2005 Purchase
Agreement;
WHEREAS,
the Buyers believe that certain events have taken place that constitute events
of default and/or triggering events under the terms of the Transaction
Documents;
WHEREAS,
in light of the current financial condition of the Company and the Existing
Defaults, the Company and the Buyers hereby deem it advisable and in the best
interests of the parties to amend each of the 2005 Purchase Agreement and the
2005 Notes as provided herein.
NOW,
THEREFORE, in consideration of the agreements, provisions and covenants
contained herein and for other good and valuable consideration, the receipt
and
sufficiency of which are hereby acknowledged, each of the undersigned agrees
as
follows:
1. Amendment
of the 2005 Notes.
a. Each
of
the Buyers, severally and not jointly, hereby agrees with the Company that,
as
of the date first above written, each of the 2005 Notes is hereby amended to
insert the following definitions as new subsections (xvi) and (xvii),
respectively, of Section 2(a) of each of the 2005 Notes immediately following
subsection 2(a)(xv) and the current definitions set forth in paragraphs (xvi)
and (xvii) and thereafter are hereby renumbered accordingly:
“(xvi) “Installment
Amount” means the lesser of (A) the outstanding Principal and (B) a
principal amount equal to the product of (a) Five Hundred Thousand Dollars
($500,000) and (b) the Holder’s Allocation Percentage. In the event
the Holder shall sell or otherwise transfer any portion of this Note, the
transferee shall be allocated a pro rata portion of the applicable Installment
Amount equal to the product of (x) the Installment Amount and (y) a fraction
of
which the numerator is the principal amount of the Note transferred and of
which
the denominator is the original aggregate principal amount of the
Note.
(xvii) “Installment
Date” means each of November 16, 2007 (the date of that certain
November 2007 Amendment Agreement, among the Company, the Holder and the other
parties thereto (the “November 2007 Amendment”)), and the first
Business Day of each calendar month through and including the calendar month
immediately preceding the Maturity Date.”
b. Each
of
the Buyers, severally and not jointly, hereby agrees with the Company that,
as
of the date first above written, each of the 2005 Notes is hereby amended to
insert the following definitions as new subsections (xxii) and (xxiii) of
Section 2(a) of each of the 2005 Notes immediately following Section 2(a)(xxi)
and replacing the previously existing definitions (and such previously existing
definitions are hereby deleted) of “Maturity Date” and
“Maturity Date Acceleration Event,” respectively, as
follows:
“(xxii) “Maturity
Date” means the earliest of (A) October 1, 2008, (B) the
date of a Maturity Date Acceleration Event (as defined herein), and (C) such
date as all amounts due under this Note have been fully paid.
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(xxiii) “Maturity
Date Acceleration Event” means any principal amount of the March 2005
Notes is outstanding on the Business Day immediately preceding the maturity
date
of any of the March 2005 Notes or any other date on which the principal of
the
March 2005 Notes is due and payable.”
c. Each
of
the Buyers, severally and not jointly, hereby agrees with the Company that,
as
of the date first above written, each of the 2005 Notes is hereby amended to
insert a new subsection (ix) in Section 2(d) of each of the 2005 Notes, such
paragraph to immediately follow Section 2(d)(viii) and to read in its entirety
as follows:
“(ix) Application
of Conversion Amounts. Any principal amount which the Holder
converts in accordance with this Section 2 will be deducted first from the
last
scheduled payment of principal due under this Note (i.e., the principal amount
payable on the Maturity Date), and then sequentially from the immediately
preceding payments of principal due under this Note (i.e., the Installment
Amounts and the Mandatory Early Redemption Amount), unless the Holder specifies
otherwise in a Conversion Notice (in which case, the principal which Holder
converts in accordance herewith shall be applied as so specified in such
Conversion Notice).
d. Each
of
the Buyers, severally and not jointly, hereby agrees with the Company that,
as
of the date first above written, each of the 2005 Notes is hereby amended to
insert the following sentence in Section 2(f)(i) of each of the 2005 Notes,
such
sentence to immediately follow the initial sentence thereof and to read in
its
entirety as follows:
“Notwithstanding
the foregoing, this Section 2(f)(i) shall be of no force or effect on or after
the date of the November 2007 Amendment (the “November Amendment
Date”) unless and until an Event of Default or a Triggering Event shall
have occurred after such date.”
e. Each
of
the Buyers, severally and not jointly, hereby agrees with the Company that,
as
of the date first above written, each of the 2005 Notes is hereby amended to
insert the following sentence in Section 2(f)(iii) of each of the 2005 Notes,
such sentence to immediately follow the last sentence thereof and to read in
its
entirety as follows:
“Notwithstanding
the foregoing, this Section 2(f)(iii) shall be of no force or effect on or
after
the November Amendment Date unless and until an Event of Default or a Triggering
Event shall have occurred after such date.”
f. Each
of
the Buyers, severally and not jointly, hereby agrees with the Company that,
as
of the date first above written, each of the 2005 Notes is hereby amended to
insert a new subsection (vi) in Section 2(f) of each of the 2005 Notes, such
paragraph to immediately follow Section 2(f)(v) and to read in its entirety
as
follows:
“(vi) Adjustment
of Fixed Conversion Price upon Issuance of Common Stock as Payment of Permitted
Subordinated Indebtedness or March 2005 Notes. If and whenever on
or after the November Amendment Date, the Company issues any Shares in payment,
or upon conversion, of principal or interest under any Permitted Subordinated
3
Indebtedness
or the March 2005 Notes (to the extent permitted by, and subject to the
conditions of, Section 4(w) of the Securities Purchase Agreement) at a
Subordinated Indebtedness Issue Price (as defined below) less than the
Applicable Price, then immediately after such issue the Fixed Conversion Price
then in effect shall be reduced to the Subordinated Indebtedness Issue
Price. For purposes hereof, “Subordinated Indebtedness Issue
Price” means the quotient of (A) the aggregate principal and/or
interest as to which Shares are issued as payment thereon, or upon conversion
thereof, divided by (B) the number of Shares so issued, and any Shares so
issued shall be deemed to have been issued at the Subordinated Indebtedness
Issue Price.”
g. Each
of
the Buyers, severally and not jointly, hereby agrees with the Company that,
as
of the date first above written, Section 3(b) of each of the 2005 Notes is
hereby deleted in its entirety and is replaced with “[Intentionally
Omitted.]”.
h. Each
of
the Buyers, severally and not jointly, hereby agrees with the Company that,
as
of the date first above written, each of the 2005 Notes is hereby amended to
restate Section 3(d) to each of the 2005 Notes, such Section to read in its
entirety as follows:
“(d) Adjustment
of Fixed Conversion Price Upon Redemption at Option of Holder. In
the event that Holder delivers to the Company a Notice of Redemption at Option
of Holder Upon Triggering Event (the date on which such notice is delivered,
the
“Triggering Event Notice Date”) and the Company does not, on or
prior to the first Business Day after the Triggering Event Notice Date, either
pay the applicable Redemption Price (and the applicable Redemption Price of
each
of the Other Notes) or deliver to the Holder (and the holder of each of the
Other Notes) a notice, duly executed by the Chief Executive Officer or Chief
Financial Officer of the Company, to the effect that the Company shall file
a
voluntary case under Title 11, U.S. Code and any other applicable Bankruptcy
Laws within four (4) Business Days of the date of delivery by the Company to
the
Holder of such notice (a “Bankruptcy Notice”), the Fixed
Conversion Price with respect to all the Principal shall be adjusted to the
lowest Weighted Average Price of the Common Stock during the period beginning
on
and including the Triggering Event Notice Date and ending on and including
the
first Business Day following the Triggering Event Notice Date. In the
event that the Company delivers to the Holder a Bankruptcy Notice and the
Company does not file a voluntary case under Title 11, U.S. Code and any other
applicable Bankruptcy Laws within five (5) Business Days of the Triggering
Event
Notice Date, the Fixed Conversion Price with respect to all the Principal shall
be adjusted to the lowest Weighted Average Price of the Common Stock during
the
period beginning on and including the Triggering Event Notice Date and ending
on
and including the fifth Business Day following the Triggering Event Notice
Date. Notwithstanding anything to the contrary in this Section 3, (i)
the Company’s delivery of a Bankruptcy Notice shall not affect the Company’s
obligation to pay the Redemption Price (together with any Interest thereon)
to
the Holder or the Holder’s rights and remedies with respect to any failure of
the Company to pay the Redemption Price to the Holder, and (ii) subject to
Section 5, until the Redemption Price is paid in full, the principal of this
Note to be redeemed pursuant to this Section 3(d) (together with any Interest
thereon) may be converted, in whole or in part, by the Holder into Common Stock
pursuant to Section 2.
4
i. Each
of
the Buyers, severally and not jointly, hereby agrees with the Company that,
as
of the date first above written, each of the 2005 Notes is hereby amended to
insert the following sentence in Section 6(a) of each of the 2005 Notes, such
sentence to immediately follow the last sentence thereof and to read in its
entirety as follows:
“Notwithstanding
the foregoing, the Company may only elect an Interest Conversion with respect
to
any Interest payable on any Interest Payment Date if the Holder has agreed
in
writing to the Company’s election of such Interest Conversion.”
j. Each
of
the Buyers, severally and not jointly, hereby agrees with the Company that,
as
of the date first above written, Section 6 of each of the 2005 Notes is hereby
re-titled “Interest; Installment Redemption.” and each of the 2005 Notes
is hereby amended to insert new subsections (f), (g) and (h) in Section 6 of
each of the 2005 Notes, such subsections to immediately follow Section 6(e)
and
to read in their entirety as follows:
“(f) Installment
Redemption. With respect to each Installment Date, the Company
shall redeem all of the outstanding Installment Amount in accordance with this
Section 6 (an “Installment Redemption”). Upon an
Installment Redemption, the Installment Amount shall be redeemed by the Company
on such Installment Date, by the Company’s payment to the Holder on such
Installment Date, by wire transfer of immediately available funds, of an amount
in cash equal to the Installment Amount. If the Company fails to
redeem any Installment Amount which is outstanding on the applicable Installment
Date by payment to the Holder of the Installment Amount, then in addition to
any
remedy the Holder may have under this Note (including Section 3) and the
Securities Purchase Agreement (including indemnification pursuant to Section
8
thereof or at law or in equity), the Installment Amount payable in respect
of
such unredeemed Installment Amount shall bear interest at the rate of 2.0%
per
month (prorated for partial months) until paid in
full. Notwithstanding anything to the contrary in this Section 6, but
subject to Section 5, until the Installment Amount (together with any interest
thereon) is paid in full, the Installment Amount (together with any interest
thereon) may be converted, in whole or in part, by the Holder into Common Stock
pursuant to Section 2.
(g) Mandatory
Early Redemption. If any Principal remains outstanding on March
1, 2008 (the “Mandatory Early Redemption Date”), then the
Company shall redeem a principal amount (the “Mandatory Early Redemption
Amount”) of this Note equal to the lesser of (i) the outstanding
Principal and (ii) a principal amount equal to the product of (a) Six Million
Dollars ($6,000,000) and (b) the Holder’s Allocation Percentage (such product,
the “MaximumMandatory Early Redemption
Amount”), by payment on the Mandatory Early Redemption Date to the
Holder, by wire transfer of immediately available funds, of an amount equal
to
the Mandatory Early Redemption Amount; provided, however, that the
Maximum Mandatory Early Redemption Amount shall be reduced by any payments
made
by the Company to the Holders pursuant to Section 6(h) hereof prior to the
Mandatory Early Redemption Date. For the avoidance of doubt, the
Company agrees that the failure of the Company to pay the Mandatory Early
Redemption Amount on the Mandatory Early Redemption Date shall constitute an
Event of Default and any portion of the Mandatory Early Redemption Amount not
paid on the Mandatory Early Redemption Date shall bear interest at a rate of
5
two
percent (2%) per month until paid in full. Notwithstanding anything
to the contrary in this Section 6, but subject to Section 5, until the Mandatory
Early Redemption Amount (together with any Interest thereon) is paid in full,
the Mandatory Early Redemption Amount (together with any Interest thereon)
may
be converted, in whole or in part, by the Holder into Common Stock pursuant
to
Section 2.
(h) Redemption
Upon Sale of Assets. Upon the sale of any Collateral, in
accordance with Section 4(h) of the Securities Purchase Agreement, the Company
shall, immediately following the consummation of such sale, redeem a principal
amount (in each case, a “Sale Redemption Amount”) equal to the
lesser of (i) the outstanding Principal and (ii) a principal amount equal to
the
product of (a) the proceeds from such sale or transfer and (b) the Holder’s
Allocation Percentage, by payment to the Holder, by wire transfer of immediately
available funds, of an amount equal to the Sale Redemption
Amount. Notwithstanding anything to the contrary in this Section 6,
but subject to Section 5, until the Sale Redemption Amount (together with any
Interest thereon) is paid in full, the Sale Redemption Amount (together with
any
Interest thereon) may be converted, in whole or in part, by the Holder into
Common Stock pursuant to Section 2.”
k. Each
of
the Buyers, severally and not jointly, hereby agrees with the Company that,
as
of the date first above written, each of the 2005 Notes is hereby amended to
insert the following clause immediately prior to the period at the end of the
first sentence of Section 7(a) of each of the 2005 Notes, such clause to read
in
its entirety as follows:
“;
and
provided further that, if the Weighted Average Price of Common Stock on each
of
the Trading Days during the twenty (20) Trading Days prior to the Company
Alternative Redemption Date, and the closing price per share of Common Stock
on
the Trading Day immediately preceding the Company Alternative Redemption Date,
is less than the Fixed Conversion Price, the Conditions to Company Alternative
Redemption set forth in clauses (i), (ii), (iv) and (vii) of Section 7(c) shall
be deemed to be satisfied”
l. Each
of
the Buyers, severally and not jointly, hereby agrees with the Company that,
as
of the date first above written, each of the 2005 Notes is hereby amended to
restate clause (ii) of Section 7(c) of each of the 2005 Notes, such restated
clause to read in its entirety as follows:
“(ii)
on
each day during the period beginning ninety (90) days prior to the Company
Alternative Redemption Notice Date and ending on and including the applicable
Company Alternative Redemption Date, the Common Stock is quoted on the OTC
Bulletin Board or listed on a national securities exchange and has not been
suspended from trading on such market or exchange;”
m. Each
of
the Buyers, severally and not jointly, hereby agrees with the Company that,
as
of the date first above written, each of the 2005 Notes is hereby amended to
restate clause (vi) of Section 7(c) of each of the 2005 Notes, such restated
clause to read in its entirety as follows:
6
“(vi)
on
each day during the period beginning ninety (90) days prior to the Company
Alternative Redemption Date, the Company and its Subsidiaries otherwise shall
have been in compliance in all material respects and shall not have breached
or
been in breach of any material provision or covenant of the Securities Purchase
Agreement, the Security Documents, the Registration Rights Agreement, or any
of
the Notes;”
n. Each
of
the Buyers, severally and not jointly, hereby agrees with the Company that,
as
of the date first above written, each of the 2005 Notes is hereby amended to
insert a new subsection (e) in Section 7 of each of the 2005 Notes, such
subsection to immediately follow Section 7(d) and to read in its entirety as
follows:
“(ix) Application
of Amounts Redeemed Pursuant to Company Alternative
Redemption. Any principal amount which the Company redeems in
accordance with this Section 7 will be deducted first from the last scheduled
payment of principal due under this Note (i.e., the principal amount payable
on
the Maturity Date), and then sequentially from the immediately preceding
payments of principal due under this Note (i.e., the Installment Amounts and
the
Mandatory Early Redemption Amount), unless the Holder specifies otherwise in
a
notice to the Company delivered within three (3) days of the Holder’s receipt of
the applicable Company Alternative Redemption Notice (in which case, the
principal redeemed in accordance herewith shall be applied as so specified
in
such notice from the Holder).
o. Each
of
the Buyers, severally and not jointly, hereby agrees with the Company that,
as
of the date first above written, each of the 2005 Notes is hereby amended to
restate clause (i) of Section 10(a), such restated clause to read in its
entirety as follows:
“(i)
default in payment of any Principal of this Note, including without limitation
payment of any Installment Amount or the Mandatory Early Redemption Amount,
any
Interest on this Note, any Company Alternative Redemption Price or any Change
of
Control Redemption Price, when and as due;”
p. Each
of
the Buyers, severally and not jointly, hereby agrees with the Company that,
as
of the date first above written, each of the 2005 Notes is hereby amended to
delete the “or” prior to clause (ix) of Section 10(a) of each of the 2005 Notes
and insert the following clauses (x) and (xi) in Section 10(a), such clauses
to
immediately follow clause (ix) thereof and to read in their entirety as
follows:
“(x)
any
breach of, default under, or other failure to comply with, the November 2007
Amendment; or (xi) any violation or breach of Sections 4(u), 4(v) or 4(w) of
the
Securities Purchase Agreement.”
q. Each
of
the Buyers, severally and not jointly, hereby agrees with the Company that,
as
of the date first above written, each of the 2005 Notes is hereby amended to
restate the last sentence of Section 10(a) of each of the 2005 Notes, such
restated sentence to read in its entirety as follows:
7
“Within
two (2) Business Days after the occurrence of any Event of Default or Triggering
Event, the Company shall deliver written notice thereof to the Holder and
contemporaneously Publicly Disclose such occurrence and the remedies available
to the holders of the Notes. For purposes hereof, “Publicly
Disclose” shall mean the Company’s public dissemination of information
through the filing via the Electronic Data Gathering, Analysis, and Retrieval
system of the SEC of a annual report on Form 10K, quarterly report on Form
10Q or current report on Form 8-K disclosing such information pursuant to
the requirements of the 1934 Act.”
r. Each
of
the Buyers, severally and not jointly, hereby agrees with the Company that,
as
of the date first above written, each of the 2005 Notes is hereby amended to
restate Section 10(c) of each of the 2005 Notes, such Section to read in its
entirety as follows:
“(c) Adjustment
of Conversion Price Upon Acceleration. In the event that this
Note becomes due and payable pursuant to Section 10(b) hereof (the date on
which
this Note becomes due and payable pursuant to Section 10(b) hereof, the
“Acceleration Date”) and the Company does not, on or prior to
the first Business Day after the Acceleration Date, either pay the applicable
Acceleration Amount (and the applicable Acceleration Amount of each of the
Other
Notes) or deliver to the Holder (and the holder of each of the Other Notes)
a
Bankruptcy Notice, the Fixed Conversion Price with respect to all the Principal
shall be adjusted to the lowest Weighted Average Price of the Common Stock
during the period beginning on and including the Acceleration Date and ending
on
and including the first Business Day following the Acceleration
Date. In the event that the Company delivers to the Holder a
Bankruptcy Notice and the Company does not file a voluntary case under Title
11,
U.S. Code and any other applicable Bankruptcy Laws within five (5) Business
Days
of the Acceleration Date, the Fixed Conversion Price with respect to all the
Principal shall be adjusted to the lowest Weighted Average Price of the Common
Stock during the period beginning on and including the Acceleration Date and
ending on and including the fifth Business Day following the Acceleration
Date. Notwithstanding anything to the contrary in Section 6, (i) the
Company’s delivery of a Bankruptcy Notice shall not affect the Company’s
obligation to pay the Acceleration Amount (together with any Interest thereon)
to the Holder or the Holder’s rights and remedies with respect to any failure of
the Company to pay the Acceleration Amount to the Holder, and (ii) subject
to
Section 5, until the Principal (together with any interest thereon) is paid
in
full, the Principal (together with interest thereon) may be converted, in whole
or in part, by the Holder into Common Stock pursuant to Section 2.
s. As
amended hereby, each of the 2005 Notes remain in full force and
effect.
2. Amendment
to the 2005 Purchase Agreement.
a. Each
of
the Buyers, severally and not jointly, hereby agrees with the Company that,
as
of the date first above written, the 2005 Purchase Agreement is hereby amended
to insert a new sentence into Section 4(h) of the 2005 Purchase Agreement,
such
sentence to immediately follow the first sentence thereof and to read in its
entirety as follows:
8
“Notwithstanding
the foregoing, the provisions of this Section 4(h) shall not apply to any Future
Offering unless a Related Party is purchasing securities of the Company in
such
Future Offering or a Related Party is otherwise participating (other than acting
on behalf of the Company) in such Future Offering.”
b. Each
of
the Buyers, severally and not jointly, hereby agrees with the Company that,
as
of the date first above written, the 2005 Purchase Agreement is hereby amended
to insert a new sentence into Section 4(r) of the 2005 Purchase Agreement,
such
sentence to immediately follow the last sentence thereof and read in its
entirety as follows:
“Notwithstanding
the foregoing, the Company may consummate a reverse split of the Common Stock
approved by the Board of Directors and the shareholders of the
Company.”
c. Each
of
the Buyers, severally and not jointly, hereby agrees with the Company that,
as
of the date first above written, the 2005 Purchase Agreement is hereby amended
to insert new subsections (u), (v) and (w) into Section 4 of the 2005 Purchase
Agreement, such subsections to immediately follow Section 4(t) thereof and
to
read in their entirety as follows:
“(u) Sale
of Collateral. During the Reporting Period, neither the Company
nor any of the Subsidiaries shall sell, transfer, assign or dispose of any
Collateral (as defined in the Security Agreement), except for (a) a sale of
Collateral to a third-party that is not a Related Party of the Company in an
arms-length transaction approved by at least two-thirds (2/3) of the aggregate
principal amount of the Notes then outstanding, and so long as all of the
proceeds from such sale or transfer are used solely to redeem principal of the
Notes, in accordance with Section 6(h) of each of the Notes, or (b) a sale
of
Hydrocarbons by the Company or the Subsidiaries to customers in the ordinary
course of business, in each case to the extent such sale is not otherwise
prohibited by this Agreement, the Notes or the other Transaction
Documents.
(v) Cash
Payments on Permitted Subordinated Indebtedness or the March 2005
Notes. During the Reporting Period, the Company shall not, nor
will it permit any of its Subsidiaries to, make any cash payments, in payment
of
principal, interest, premium or otherwise, on any Permitted Subordinated
Indebtedness (as defined in the Notes) or the March 2005 Notes.
(w) Conversion
of any Permitted Subordinated Indebtedness or the March 2005
Notes. During the Reporting Period, the Company shall not convert
or permit the conversion of any Permitted Subordinated Indebtedness or the
March
2005 Notes into shares of Common Stock, or otherwise issue any shares of Common
Stock as payment of principal, interest or any other amounts payable under,
or
otherwise issue shares of Common Stock in respect of, any Permitted Subordinated
Indebtedness or the March 2005 Notes; provided, however, that the Company may
issue shares of Common Stock in payment, or upon conversion, of principal or
interest under any Permitted Subordinated Indebtedness or the March
9
2005
Notes, so long as such shares of Common Stock are subject to a restriction
to
the effect that no such shares may be resold or otherwise transferred prior
to
the first date on which each of the Notes have been paid or redeemed in full;
and provided further that, notwithstanding the foregoing, the Company may
pay up
to an aggregate of $800,000 of principal and/or interest under the March
2005
Notes through the issuance of shares of Common Stock, where the foregoing
restriction on transfer and resale terminates on March 31, 2008 (even if
each of
the Notes has not been paid or redeemed in full). The Company shall
take all steps necessary to effectuate the foregoing restriction, including
placing a legend on the certificates representing any such shares of Common
Stock and issuing stop transfer instructions to the Company’s transfer agent
with respect to the restriction on such shares of Common
Stock.
d. As
amended hereby, the 2005 Purchase Agreement remains in full force and
effect.
3. Covenants.
a. Disclosure
of Transactions and Other Material Information. Prior to 9:00
a.m., New York time, on the first Business Day (as defined in the 2005 Notes)
following the date hereof, the Company shall file a Form 8-K (the
“Amendment Form 8-K”) with the Securities and Exchange
Commission (the “SEC”) describing the
terms of each of this Agreement and including as exhibits to such Form 8-K
this
Agreement, in the form required by the 1934 Act. From and after the
filing of this Amendment Form 8-K with the SEC, no Buyer shall be in possession
of any material nonpublic information received from the Company or any of their
respective officers, directors, employees or agents.
b. Issuance
of Amended and Restated 2005 Notes. Promptly following the date
hereof, and in no event later than three (3) Business Days following the date
hereof, the Company shall issue to each of the Buyers an amended and restated
2005 Note, in a form acceptable to such Buyer, which Note shall reflect the
terms of the 2005 Notes as amended through the date hereof (each, individually,
a “New 2005 Note”). Upon the issuance by the Company
to each Buyer of such New 2005 Note, the 2005 Note previously held by such
Buyer
(each individually, the “Original 2005 Note”) will be void and
of no further force and effect, and such Buyer shall promptly return such
Original 2005 Note to the Company for cancellation.
c. Fees. Within
two (2) Business Days following the execution of this Agreement by the Company
and the Buyers, the Company shall reimburse each Buyer for all of the
out-of-pocket fees, costs and expenses (including, but not limited to,
attorneys’ fees, costs and expenses) incurred by such Buyer in connection with
the negotiation and documentation of this Amendment.
4. Representations
and Warranties of the Company. The Company represents and
warrants to each of the Buyers that:
a. Authorization;
Enforcement; Validity. Each of the Company and the Subsidiaries
has the requisite corporate power and authority to enter into and perform its
10
obligations
under this Agreement, the 2005 Purchase Agreement (as amended hereby), and
the
2005 Notes (as amended hereby), and to issue the Conversion Shares issuable
upon
conversion of the 2005 Notes (as amended hereby) in accordance with the terms
of
the 2005 Notes (as amended hereby). The execution and delivery of
this Agreement by the Company and the Subsidiaries and the consummation of
the
transactions contemplated hereby and thereby and by the 2005 Purchase Agreement
(as amended hereby) and the 2005 Notes (as amended hereby), including the
issuance of the Conversion Shares issuable upon conversion of the 2005 Notes
(as
amended hereby), have been duly authorized by the respective boards of directors
of the Company and the Subsidiaries, and no further consent or authorization
is
required by the Company, the Subsidiaries or their respective boards of
directors or shareholders. This Agreement has been duly executed and
delivered by the Company, and each of the Agreement, the 2005 Purchase Agreement
(as amended hereby) and the 2005 Notes (as amended hereby) constitutes a
valid
and binding obligation of each of the Company and the Subsidiaries, enforceable
against each of the Company and the Subsidiaries in accordance with its
terms.
b. Issuance
of Securities. Upon issuance in accordance with the 2005 Notes
(as amended hereby), the Conversion Shares issuable upon conversion of the
2005
Notes (as amended hereby) will be validly issued, fully paid and nonassessable
and free from all taxes and Liens (as defined in the 2005 Purchase Agreement
(as
amended hereby)) with respect to the issue thereof, with the holders being
entitled to all rights accorded to a holder of the Common Stock. Each
of the amendment of the 2005 Notes pursuant hereto and the issuance by the
Company of the Conversion Shares issuable upon conversion of the 2005 Notes
(as
amended hereby) is exempt from registration under the Securities Act of 1933,
as
amended, and applicable state securities laws.
c. No
Conflicts. The execution and delivery of this Agreement by each
of the Company and the Subsidiaries, the performance by each of the Company
and
the Subsidiaries of their respective obligations hereunder, under the 2005
Purchase Agreement (as amended hereby) and under the 2005 Notes (as amended
hereby) and the consummation by each of the Company and the Subsidiaries of
the
transactions contemplated hereby, by the 2005 Purchase Agreement (as amended
hereby), and by the 2005 Notes (as amended hereby) (including the reservation
for issuance and issuance of the Conversion Shares issuable upon conversion
of
the 2005 Notes (as amended hereby)) will not (i) result in a violation of the
articles of incorporation or the bylaws of the Company or the organizational
documents of any Subsidiary; (ii) conflict with, or constitute a breach or
default (or an event which, with the giving of notice or lapse of time or both,
constitutes or would constitute a breach or default) under, or give to others
any right of termination, amendment, acceleration or cancellation of, or other
remedy with respect to, any agreement, indenture or instrument to which the
Company or any of the Subsidiaries is a party; or (iii) result in a violation
of
any law, rule, regulation, order, judgment or decree (including federal and
state securities laws and regulations) applicable to the Company or any of
the
Subsidiaries or by which any property or asset of the Company or any of the
Subsidiaries is bound or affected. The Company is not required to
obtain any consent, authorization or order of or, except as required by
Section 3 above, make any filing or registration with, any court or
governmental agency or any regulatory or self-regulatory agency in order for
it
to execute, deliver or perform any of its obligations under, or contemplated
by,
this Agreement, the 2005 Notes (as amended hereby), the 2005 Purchase Agreement
(as amended hereby) or any of the other Transaction Documents.
11
d. Payments
on and Violations of Permitted Subordinated Indebtedness or March 2005
Notes. Neither the Company nor any of its Subsidiaries (i) has
made any cash payments on any Permitted Subordinated Indebtedness or the March
2005 Notes or (ii) otherwise breached or violated any provision of any
subordination agreement entered into by the Company or any of its Subsidiaries
with respect to any Permitted Subordinated Indebtedness or the March 2005
Notes.
e. No
Violation of Security Documents. Neither the Company nor any of
its Subsidiaries has breached or violated any of the provisions of the Security
Documents (as defined in the 2005 Notes) or taken any action that would impair,
or otherwise adversely affect, the rights of any of the Buyers or the Collateral
Agent (as defined in the Security Documents) under the Security Documents or
otherwise with respect to the Collateral (as defined in the Security
Documents).
5. Representation
and Warranties of Each of the Buyers. Each of the Buyers
represents and warrants to the Company that (a) such Buyer is a validly existing
corporation, partnership, limited liability company or other entity and has
the
requisite corporate, partnership, limited liability or other organizational
power and authority to enter into and perform its obligations under this
Agreement, and (b) this Agreement has been duly and validly authorized, executed
and delivered on behalf of such Buyer and is a valid and binding agreement
of
such Buyer, enforceable against such Buyer in accordance with its
terms.
6. Acknowledgment
of the Company and the Subsidiaries. The Company and each of the
Subsidiaries hereby irrevocably and unconditionally acknowledge, affirm and
covenant to each of the Buyers that:
a. none
of
the Buyers is in default under any of the Transaction Documents (as defined
in
the 2005 Purchase Agreement (as amended hereby)) or otherwise has breached
any
obligations to the Company or any of the Subsidiaries; and
b. there
are
no offsets, counterclaims or defenses to the Liabilities or Obligations,
including the liabilities and obligations of the Company under the 2005 Purchase
Agreement (as amended hereby) and the 2005 Notes (as amended hereby), or to
the
rights, remedies or powers of the Buyers in respect of any of the Liabilities
or
Obligations or any of the Transaction Documents, and the Company and each of
the
Subsidiaries agree not to interpose (and each does hereby waive and release)
any
such defense, set-off or counterclaim in any action brought by the Buyers with
respect thereto.
7. Avoidance
of Doubt. The parties hereto hereby agree, for the avoidance of
doubt, that (a) the term “Securities Purchase Agreement” as
used in the Transaction Documents shall mean the 2005 Purchase Agreement, as,
and to the extent, amended by this Agreement, (b) the term “2005
Notes” as used in the Transaction Documents shall mean the 2005 Notes,
as, and to the extent, amended by this Agreement, (c) the term
“Notes” as used in the Transaction Documents shall include the
2005 Notes, as, and to the extent, amended by this Agreement; (d) the terms
“Liabilities” and “Obligations” as used in the
Transaction Documents shall include all liabilities and obligations of the
Company under this Agreement, under the 2005 Purchase Agreement (as amended
hereby), under each of the 2005 Notes (as amended hereby) and under
12
the
other
Transaction Documents, and each of the parties hereto agrees not to take
any
contrary positions; and (e) the term “March 2005 Notes” as used
in the Transaction Documents shall mean the March 2005 Notes, as amended
through
the date of this Agreement and as may be amended from time to hereafter (to
the
extent permitted by the Transaction Documents (as amended
hereby)). Further, for purposes of clarification, the parties hereby
agree that the Allocation Percentage for each of the Buyers as of the date
hereof is as follows: (a) HFTP – 25.07%; (b) Prom I – 13.33%; (c)
Caerus Partners – 1.67%; (d) Prom II – 26.60%; and Xxxxxxxx –
33.33%.
8. Reservation
of Rights. Each of the Buyers hereby agrees not to declare the
2005 Notes due and payable immediately, in accordance with Section 10(b) of
the
2005 Notes as a result of any Event of Default (as defined in the 2005 Notes)
that occurred prior to the date hereof, or as a result of any Triggering Event
(as defined in the 2005 Notes) that occurred prior to the date hereof, in each
case, so long as (and only so long as) after the date hereof each of the Company
and the Subsidiaries is in compliance with, and has not violated or breached
any
of, the terms of each of the Transaction Documents, including the 2005 Purchase
Agreement (as amended hereby), the 2005 Notes (as amended hereby) and this
Agreement. The Company acknowledges and agrees that none of the
Buyers has hereby waived (a) any breach, default, Event of Default or Triggering
Event that may be continuing under any of the Transaction Documents or (b)
any
of such Buyer’s rights or remedies arising from any such breach, default, Event
of Default or Triggering Event or otherwise available under the Transaction
Documents or at law, and each of the Buyers expressly reserves all such rights
and remedies.
9. Independent
Nature of the Buyers. The obligations of each of the Buyers
hereunder are several and not joint with the obligations of the other Buyers,
and none of the Buyers shall be responsible in any way for the performance
of
the obligations of any of the other Buyers hereunder, under the 2005 Purchase
Agreement (as amended hereby), any of the 2005 Notes (as amended hereby) or
under any of the other Transaction Documents. Each of the Buyers
shall be responsible only for its own agreements and covenants hereunder, under
the 2005 Purchase Agreement (as amended hereby), under the 2005 Notes (as
amended hereby) and under the other Transaction Documents. The
decision of each of the Buyers to enter into this Agreement has been made by
each such party independently of any of the other Buyers and independently
of
any information, materials, statements or opinions as to the business, affairs,
operations, assets, properties, liabilities, results of operations, condition
(financial or otherwise) or prospects of the Company, and none of the Buyers
nor
any of their respective agents or employees shall have any liability to any
of
the other Buyers (or any other Person) relating to or arising from any such
information, materials, statements or opinions. Nothing contained
herein, in the 2005 Purchase Agreement (as amended hereby), in any of the 2005
Notes (as amended hereby) or in any of the other Transaction Documents, and
no
action taken by any of the Buyers pursuant hereto or thereto, shall be deemed
to
constitute any of the Buyers as a partnership, an association, a joint venture
or any other kind of entity, or create a presumption that any of the Buyers
are
in any way acting in concert or as a group with respect to such obligations
or
the transactions contemplated hereby or thereby. Each of the Buyers
shall be entitled to independently protect and enforce its rights, including
the
rights arising out of this Agreement, the 2005 Purchase Agreement (as amended
hereby), the 2005 Notes (as amended hereby) and the other Transaction Documents,
and it shall not be necessary for any of the other Buyers to be joined as an
additional party in any proceeding for such purpose.
13
10. Successors
and Assigns. This Agreement shall be binding upon and shall inure
to the benefit of the parties hereto and their respective successors and
permitted assigns. The successors and assigns of such entities shall
include their respective receivers, trustees or
debtors-in-possession.
11. Further
Assurances. The Company hereby agrees from time to time, as and
when requested by any Buyer, to execute and deliver or cause to be executed
and
delivered, all such documents, instruments and agreements, including secretary’s
certificates, stock powers and irrevocable transfer agent instructions, and
to
take or cause to be taken such further or other action, as such Buyer may
reasonably deem necessary or desirable in order to carry out the intent and
purposes of this Agreement, the 2005 Purchase Agreement (as amended hereby),
the
2005 Notes (as amended hereby) and the other Transaction Documents.
12. Rules
of Construction. All words in the singular or plural include the
singular and plural and pronouns stated in either the masculine, the feminine
or
neuter gender shall include the masculine, feminine and neuter, and the use
of
the word “including” in this Agreement shall be by way of example rather than
limitation.
13. Governing
Law; Jurisdiction; Jury Trial. All questions concerning the
construction, validity, enforcement and interpretation of this Agreement shall
be governed by the internal laws of the State of New York, without giving effect
to any choice of law or conflict 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.
14. 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. In the event that any signature to this Agreement or any
amendment hereto is delivered by facsimile transmission or by e-mail delivery
of
a “.pdf” format data file, such signature shall create a valid and binding
obligation of the party executing (or on whose behalf such signature is
executed) with the same force and effect as if such facsimile or “.pdf”
signature page were an original
14
thereof. No
party hereto shall raise the use of a facsimile machine or e-mail delivery
of a
“.pdf” format data file to deliver a signature to this Agreement or any
amendment hereto or the fact that such signature was transmitted or communicated
through the use of a facsimile machine or e-mail delivery of a “.pdf” format
data file as a defense to the formation or enforceability of a contract,
and
each party hereto forever waives any such defense.
15. Section
Headings. The section headings herein are for convenience of
reference only, and shall not affect in any way the interpretation of any of
the
provisions hereof.
16. No
Strict Construction. The language used in this Agreement will be
deemed to be the language chosen by the parties to express their mutual intent,
and no rule of strict construction will be applied against any
party.
17. Merger. This
Agreement, the 2005 Purchase Agreement (as amended hereby), the 2005 Notes
(as
amended hereby), and the other Transaction Documents represent the final
agreement of each of the parties hereto with respect to the matters contained
herein and may not be contradicted by evidence of prior or contemporaneous
agreements, or prior or subsequent oral agreements, among any of the parties
hereto.
18. Ratification
by Guarantors. By execution hereof, each of the Subsidiaries
hereby acknowledges and agrees that it has reviewed this Agreement and hereby
ratifies and confirms its obligations under the Transaction Documents, including
such obligations that relate to the 2005 Purchase Agreement (as amended hereby)
and the 2005 Notes (as amended hereby).
[Remainder
of page intentionally left blank; Signature page
follows]
15
IN
WITNESS WHEREOF, this Agreement has been duly executed and delivered by each
of
the undersigned as of the date first above written.
| COMPANY: | |||
| GALAXY ENERGY CORPORATION | |||
|
|
By:
|
/s/ Xxxx X. Xxxxxx | |
| Name: | Xxxx Xxxxxx | ||
| Title: | President | ||
| SUBSIDIARIES: | |||
| DOLPHIN ENERGY CORPORATION | |||
|
|
By:
|
/s/ Xxxxxxxxxxx X. Xxxxxxxx | |
| Name: | Xxxxxxxxxxx X. Xxxxxxxx | ||
| Title: | Treasurer & Secretary | ||
| PANNONIAN INTERNATIONAL, LTD. | |||
|
|
By:
|
/s/ X. X. Xxxxx | |
| Name: | X. X. Xxxxx | ||
| Title: | COO | ||
| BUYERS: | |||
| HFTP INVESTMENT L.L.C. | |||
| By: | Promethean Asset Management L.L.C. | ||
| Its: | Investment Manager | ||
|
|
By:
|
/s/ Xxxxx X. X'Xxxxx | |
| Name: | Xxxxx X. X'Xxxxx | ||
| Title: | Partner and Authorized Signatory | ||
| 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: | Partner and Authorized Signatory | ||
| 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: | Partner and Authorized Signatory | ||
| 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: | Partner and Authorized Signatory | ||
| XXXXXXXX, L.P. | |||
| By: | Xxxxxxxx Capital Management, Inc. | ||
| Its: | General Partner | ||
| By: Xxxxxx, Xxxxxx & Co., L.P. | |||
| Its: Director | |||
|
|
By:
|
/s/ Xxxx X. Xxxxxx | |
| Name: | Xxxx X. Xxxxxx | ||
| Title: | Chief Executive Officer | ||
