SUBORDINATION AND INTERCREDITOR AGREEMENT

 

 

 

TABLE OF CONTENTS

 

				Page
SECTION 1.		DEFINITIONS		2
SECTION 2.		SUBORDINATION		8
	2.1	Subordination of Sowood Obligations to Senior Obligations		8
	2.2	Certain Agreements.		8
	2.3	Sowood Obligations Payment Prohibition		9
	2.4	Sowood Obligations Standstill Provisions		10
	2.5	Incorrect Payments		10
	2.6	Sale, Transfer or other Disposition of Sowood Obligations.		11
	2.7	Legends		11
	2.8	Final Payment of Senior Obligations		12
SECTION 3.		LIEN PRIORITIES		12
	3.1	Subordination of Liens		12
	3.2	Nature of Obligations		14
	3.3	Agreements Regarding Actions to Perfect Liens		14
SECTION 4.		ENFORCEMENT RIGHTS		16
	4.1	Exclusive Enforcement		16
	4.2	Standstill and Waivers		16
	4.3	Judgment Creditors		18
	4.4	Cooperation		18
	4.5	No Additional Rights For the Borrowers Hereunder		19
	4.6	Actions Upon Breach		19
	4.7	Certain Rights of Secured Counterparties Reserved		19
SECTION 5.		APPLICATION OF PROCEEDS OF COLLATERAL; DISPOSITIONS AND RELEASES OF COLLATERAL; INSPECTION AND INSURANCE		19
	5.1	Application of Proceeds; Turnover Provisions		19
	5.2	Releases of Junior Liens		20
	5.3	Inspection Rights and Insurance		21
SECTION 6.		INSOLVENCY PROCEEDINGS		21
	6.1	Filing of Motions		21

 

 

	6.2	Financing Matters	22
	6.3	Relief From the Automatic Stay	23
	6.4	Adequate Protection	23
	6.5	Avoidance Issues	26
	6.6	Asset Dispositions in an Insolvency Proceeding	27
	6.7	Separate Grants of Security and Separate Classification	28
	6.8	No Waivers of Rights of Credit Agreement Secured Parties	29
	6.9	Plans of Reorganization	29
	6.10	Effectiveness in Insolvency Proceedings	30
SECTION 7.		SECURED COUNTERPARTY DOCUMENTS, CREDIT AGREEMENT DOCUMENTS, AND SOWOOD DOCUMENTS	30
SECTION 8.		RELIANCE; WAIVERS; ETC	30
	8.1	Reliance	30
	8.2	No Warranties or Liability	30
	8.3	No Waivers	30
SECTION 9.		OBLIGATIONS UNCONDITIONAL	30
	9.1	Credit Agreement Obligations Unconditional	30
	9.2	Secured Counterparty Obligations Unconditional	31
SECTION 10.		MISCELLANEOUS	31
	10.1	Conflicts	31
	10.2	Continuing Nature of Provisions	31
	10.3	Amendments	32
	10.4	Information Concerning Financial Condition of the Borrowers and the other Loan Parties	32
	10.5	Governing Law	32
	10.6	Submission to Jurisdiction	32
	10.7	Notices	33
	10.8	Successors and Assigns	33
	10.9	Headings	33
	10.10	Severability	33
	10.11	Counterparts; Integration; Effectiveness	33

 

ii

 

	10.12	Additional Secured Counterparties	33
	10.13	Existing Intercreditor Agreement	34

 

 

Exhibits

Exhibit A                —            VPEM Documents

Exhibit B                —            Sowood Documents

Exhibit C                —            Form of Joinder Agreement

 

iii

 

SUBORDINATION AND INTERCREDITOR AGREEMENT

This Subordination and Intercreditor Agreement dated as of December 19, 2005 (this “ Agreement ”) is among (a) Société Générale, as Administrative Agent (in such capacity, with its successors and assigns, the “ Credit Agreement Representative ”) for the Credit Agreement Secured Parties (as defined below), (b) Virginia Power Energy Marketing, Inc., a Virginia corporation (“ VPEM ”), and each additional counterparty which becomes a party to this Agreement in compliance with Section 10.12 (VPEM and each such additional counterparty, with its successors and assigns, a “ Secured Counterparty ”), (c) Sowood Commodity Partners Fund LP, a Delaware limited partnership (together with its successors and assigns, “ Sowood ”), (d) MxEnergy Holdings Inc., a Delaware corporation (“ Parent ”), and (e) MxEnergy Inc., a Delaware corporation (“ MxEnergy ”), and MxEnergy Electric Inc., a Delaware corporation (“ MxElectric ”, and together with MxEnergy, the “ Borrowers ”), and each of the other Loan Parties (as defined below) party hereto.

INTRODUCTION

A.            The Borrowers, the Parent, the other Loan Parties, the Credit Agreement Representative and certain financial institutions are parties to a Credit Agreement dated as of December 19, 2005 (as amended, supplemented, restated, or otherwise modified from time to time, the “ Initial Credit Agreement” ) pursuant to which such financial institutions have agreed to make loans and extend other financial accommodations to the Borrowers.

B.            MxEnergy, certain of the other Loan Parties, and VPEM are parties to agreements described on Exhibit A (as the same may be amended, supplemented, restated, or otherwise modified from time to time, collectively, the “ VPEM Agreement ”) pursuant to which VPEM has agreed, among other things, to sell natural gas to MxEnergy and its subsidiaries and to extend credit to MxEnergy and its subsidiaries in connection therewith and to provide commodity price hedging arrangements for and commodity future sales to MxEnergy and its subsidiaries.

C.            MxEnergy and Sowood are parties to agreements described on Exhibit B (as the same may be amended, supplemented, restated, or otherwise modified from time to time, collectively, the “ Sowood Agreement ”) pursuant to which Sowood has made a $12 million subordinated revolving line of credit and a $9 million subordinated term loan available to MxEnergy.

D.            The Borrowers and the other Loan Parties propose to grant (a) to the Credit Agreement Representative a first-priority security interest in the Credit Agreement Primary Collateral and a second priority security interest in the Secured Counterparty Primary Collateral as security for the Credit Agreement Obligations, (b) to each Secured Counterparty a first-priority security interest in such Secured Counterparty’s Secured Counterparty Primary Collateral and a second-priority security interest in the Credit Agreement Primary Collateral as security for such Secured Counterparty’s Secured Counterparty Obligations, and (c) to Sowood a third-priority security interest in the Credit Agreement Primary Collateral and the Secured Counterparty Primary Collateral as security for payment and performance of Sowood Obligations.

 

 

Therefore, the parties to this Agreement agree as follows:

Section 1.  Definitions .

The following terms, as used herein, have the following meanings:

“ Bankruptcy Code ” means the United States Bankruptcy Code (11 U.S.C. §101 et seq.), as amended from time to time.

“ Cash Management Obligations ” means, with respect to any Loan Party, any obligations of such Loan Party owed to a Credit Agreement Representative or any Credit Agreement Secured Party (or any of its affiliates) in respect of treasury management arrangements, depositary arrangements, or other cash management services.

“ Collateral ” means the Credit Agreement Primary Collateral and the Secured Counterparty Primary Collateral.

“ Credit Agreement ” means, collectively, (a) the Initial Credit Agreement and (b) any other credit agreement, loan agreement, note agreement, promissory note, indenture, or other agreement or instrument evidencing or governing the terms of any indebtedness or other financial accommodation that has been incurred to extend, replace, refinance, or refund in whole or in part the indebtedness and other obligations outstanding under the Initial Credit Agreement or any other agreement or instrument referred to in this clause (b) unless such agreement or instrument expressly provides that it is not intended to be and is not a Credit Agreement hereunder.  Any reference to the Credit Agreement in this Agreement shall be deemed a reference to any Credit Agreement then in effect.

“ Credit Agreement Documents ” means the Credit Agreement and each Credit Agreement Security Document.

“ Credit Agreement Obligations ” means, with respect to any Credit Agreement, (a) all principal of and interest (including without limitation any Post-Petition Interest) and premium (if any) on all loans made pursuant to such Credit Agreement, (b) all reimbursement obligations (if any) and interest thereon (including without limitation any Post-Petition Interest) with respect to any letter of credit or similar instruments issued pursuant to such Credit Agreement, (c) all Hedging Obligations of any Loan Party with a Credit Agreement Secured Party (or any of its affiliates) secured in connection with such Credit Agreement, (d) all Cash Management Obligations of any Loan Party owed to a Credit Agreement Secured Party (or any of its affiliates) secured in connection with such Credit Agreement, and (e) all fees, expenses, and other amounts payable from time to time pursuant to such Credit Agreement and the related Credit Agreement Documents, in each case whether allowed or allowable in an Insolvency Proceeding.  To the extent any payment with respect to any Credit Agreement Obligation (whether by or on behalf of any Loan Party, as proceeds of security, enforcement of any right of setoff or otherwise) is declared to be a fraudulent conveyance or a preference in any respect, set aside, or required to be paid to a debtor in possession, any Secured Counterparty, Sowood, any receiver or similar

 

2

 

Person, then the obligation or part thereof originally intended to be satisfied shall, for the purposes of this Agreement and the rights and obligations of the Credit Agreement Secured Parties, the Secured Counterparties, and Sowood, be deemed to be reinstated and outstanding as if such payment had not occurred.

“ Credit Agreement Obligations Payment Date ” means, with respect to any Credit Agreement and the Hedging Obligations and Cash Management Obligations secured in connection with such Credit Agreement, the first date on which (a) the Credit Agreement Obligations (other than those that constitute Unasserted Contingent Obligations) have been indefeasibly paid in cash in full (or cash collateralized or defeased in accordance with the terms of the such Credit Agreement and the related Credit Agreement Documents), (b) all commitments to extend credit under such Credit Agreement have been terminated, (c) there are no outstanding letters of credit or similar instruments issued under such Credit Agreement (other than such as have been cash collateralized or defeased in accordance with the terms of the related Credit Agreement Security Documents), and (d) the Credit Agreement Representative under such Credit Agreement has delivered a written notice to each other Credit Agreement Representative, the Secured Counterparty, and Sowood stating that the events described in clauses (a), (b), and (c) have occurred to the satisfaction of the Credit Agreement Representative.

“ Credit Agreement Primary Collateral ” means all assets, whether now owned or hereafter acquired, of the Borrowers or any other Loan Party in which a Lien is granted or purported to be granted to any Credit Agreement Secured Party as security for any Credit Agreement Obligation, other than the Secured Counterparty Primary Collateral.

“ Credit Agreement Representative ” has the meaning set forth in the introductory paragraph of this Agreement.  If at anytime there is more than one Credit Agreement, the Credit Agreement Representative for each Credit Agreement shall be the Person designated as such under each Credit Agreement.

“ Credit Agreement Secured Parties ” means the Credit Agreement Representatives and the holders of the Credit Agreement Obligations.

“ Credit Agreement Security Documents ” means the “Security Documents” as defined in the Credit Agreement and any other documents that are designated under any Credit Agreement as “Credit Agreement Security Documents” for purposes of this Agreement.

“ Distribution ” means, with respect to any Loan Party, any payment or distribution by such Loan Party of Property of any kind or character (whether in cash, securities, assets, by set-off or otherwise and including by purchase, redemption or other acquisition) on account of indebtedness or obligations of such Loan Party or another Loan Party.

“ Enforcement Action ” means, with respect to any Credit Agreement Obligations, the Secured Counterparty Obligations, or Sowood Obligations, any demand for payment or acceleration thereof, the exercise of any rights and remedies with respect to any Collateral securing such obligations or the commencement or prosecution of enforcement of any of the

 

3

 

rights and remedies under, as applicable, the Credit Agreement Documents, the Secured Counterparty Documents, or Sowood Documents or applicable law, including the exercise of any rights of set-off or recoupment and the exercise of any rights or remedies of a secured creditor under the UCC of any applicable jurisdiction or under the Bankruptcy Code.

“ Hedging Obligations ” means, with respect to any Loan Party, any obligations of such Loan Party owed to the Credit Agreement Representative or any Credit Agreement Secured Party (or any of its affiliates) or any Secured Counterparty in respect of any Swap Contract.

“ Initial Credit Agreement ” has the meaning set forth in the introduction to this Agreement.

“ Insolvency Proceeding ” means any proceeding in respect of bankruptcy, insolvency, winding up, receivership, dissolution, or assignment for the benefit of creditors, in each of the foregoing events whether under the Bankruptcy Code or any similar federal, state, or foreign bankruptcy, insolvency, reorganization, receivership, or similar law.

“ Lenders ” means the “Lenders” as defined in the Initial Credit Agreement or any Persons that are designated under a Credit Agreement as the “Lenders” for purposes of this Agreement.

“ Lien ” means, with respect to any asset, any mortgage, deed of trust, deed to secure debt, lien, pledge, hypothecation, assignment, encumbrance, charge, or security interest in, on, or of such asset.

“ Loan Party ” means the Borrowers and each direct or indirect affiliate or shareholder (or equivalent) of the Borrowers or any of their affiliates that are now or hereafter become a party to any Credit Agreement Document, Secured Counterparty Document, or Sowood Document.

“ Person ” means and includes natural persons, corporations, limited partnerships, general partnerships, limited liability companies, limited liability partnerships, joint stock companies, joint ventures, associations, companies, trusts, banks, trust companies, land trusts, business trusts or other organizations, whether or not legal entities, and governments and agencies and political subdivisions thereof.

“ Post-Petition Interest ” means any interest or entitlement to fees or expenses that accrues after the commencement of any Insolvency Proceeding, whether allowed or allowable in any such Insolvency Proceeding.

“ Primary Secured Counterparty ” has the meaning set forth in Section 3.1(c).

“ Proceeding ” means, with respect to any Loan Party, any voluntary or involuntary insolvency, bankruptcy, receivership, custodianship, liquidation, dissolution, or reorganization proceeding, assignment for the benefit of creditors, appointment of a custodian, receiver, trustee or other officer with similar powers or any other proceeding for the liquidation, dissolution or other winding up of such Loan Party.

 

4

 

“ Property with respect to any Person means any interest in any kind of property or asset, whether real, personal or mixed, tangible or intangible, of such Person.

“ Reorganization Subordinated Securities ” means equity securities or debt securities of any Loan Party or any other Person, the payment of which is subordinated in right of payment, at least to the extent provided in this Agreement with respect to the Sowood Obligations, to the payment of all Senior Obligations at the time outstanding and to the payment of all debt securities issued in exchange therefor to the holders of Senior Obligations at the time outstanding, in each case provided for by a plan of reorganization, composition, arrangement, adjustment or readjustment of such Loan Party or of its securities, which plan has been adopted pursuant to a proceeding under the Bankruptcy Code or other federal or state judicial proceeding and confirmed or approved by the court having jurisdiction of such proceeding; provided that each Credit Agreement Representative, each Secured Counterparty, Sowood, and the Loan Parties shall have entered into such supplements to or modifications to this Agreement as any Credit Agreement Representative or Secured Counterparty may reasonably request to reflect the continued subordination of the Reorganization Subordinated Securities to the Senior Obligations (or notes or other securities issued in substitution of all or a portion of the Senior Obligations) to the same extent as provided herein).

“ Secondary Secured Counterparty ” has the meaning set forth in Section 3.1(c).

“ Secured Counterparty ” has the meaning set forth in the introductory paragraph of this Agreement.

“ Secured Counterparty Agreement ” means the VPEM Agreement or any other agreement to which a Loan Party is a party and pursuant to which a Secured Counterparty sells electricity or gas or related products to a Loan Party or provides commodity price hedging or futures sales of commodities to a Loan Party, including any Swap Contracts for commodities.

“ Secured Counterparty Documents ” means, for any Secured Counterparty, each Secured Counterparty Agreement and each Secured Counterparty Security Document to which such Secured Counterparty is a party.

“ Secured Counterparty Letter of Credit ” means each standby letter of credit issued and outstanding from time to time under the Credit Agreement for the benefit of, and approved by, a Secured Counterparty to secure in whole or in part the Secured Counterparty Obligations.

“ Secured Counterparty Obligations ” means, with respect to any Secured Counterparty, (a) all amounts owed under any Secured Counterparty Document in respect of the sale of gas, electricity or related products by such Secured Counterparty, (b) all Hedging Obligations of any Loan Party with such Secured Counterparty (or any of its affiliates) secured in connection with such Secured Counterparty Document, and (c) all other amounts payable under any Secured Counterparty Document with such Secured Counterparty and interest on such amounts (including without limitation any Post-Petition Interest), whether allowed or allowable in an Insolvency Proceeding.  To the extent any payment with respect to any Secured Counterparty

 

5

 

Obligation (whether by or on behalf of any Loan Party, as proceeds of security, enforcement of any right of setoff, or otherwise) is declared to be a fraudulent conveyance or a preference in any respect, set aside or required to be paid to a debtor in possession, any Credit Agreement Secured Party, Sowood, or any receiver or similar Person, then the obligation or part thereof originally intended to be satisfied shall, for the purposes of this Agreement and the rights and obligations of the Credit Agreement Secured Parties, the Secured Counterparties, and Sowood, be deemed to be reinstated and outstanding as if such payment had not occurred.

“ Secured Counterparty Obligations Payment Date ” means, with respect to any Secured Counterparty Document and the Hedging Obligations secured in connection with such Secured Counterparty Document, the first date on which (a) the Secured Counterparty Obligations (other than those that constitute Unasserted Contingent Obligations) with respect to such Secured Counterparty Document have been indefeasibly paid in cash in full or cash collateral in at least the outstanding amount of such Secured Counterparty Obligations has been posted to secure such Secured Counterparty Obligations, (b) all commitments, if any, to provide electricity or gas or related products or commodity price hedging or future sales of commodities under such Secured Counterparty Document have been terminated, and (c) the Secured Counterparty under such Secured Counterparty Document has delivered a written notice to each Credit Agreement Representative, each other Secured Counterparty, and Sowood stating that the events described in clauses (a) and (b) have occurred to the satisfaction of such Secured Counterparty.

“ Secured Counterparty Primary Collateral ” means, with respect to each Secured Counterparty, all rights, whether now owned or hereafter acquired, and proceeds therefrom under all contracts of the Borrower or any of its Subsidiaries for the sale of electricity or gas or related products to one of such Loan Party’s customers (a) for which such Secured Counterparty provides (i) any of the electricity or gas or related products or (ii) commodity price hedging or futures sales of commodities, and (b) in which a Lien is granted or purported to be granted to such Secured Counterparty as security for any Secured Counterparty Obligation owing to such Secured Counterparty, excluding, however, accounts (as defined in the UCC) with respect to such contracts, whether now owned or hereafter acquired, and all proceeds from such accounts.

“ Secured Counterparty Security Documents ” means any document executed by a Loan party that purports to secure such Loan Party’s Secured Counterparty Obligations and any other documents that are designated under a Secured Counterparty Agreement as “Secured Counterparty Security Documents” for purposes of this Agreement.

“ Secured Parties ” means the Credit Agreement Secured Parties, the Secured Counterparties, and Sowood.

“ Security Documents ” means the Credit Agreement Security Documents, the Secured Counterparty Security Documents, and the Sowood Security Documents.

“ Senior Default” means any Default or Event of Default, as such terms are defined in any Credit Agreement Documents or any default, event of default, termination event or similar event under any Secured Counterparty Document.

 

6

 

“ Senior Obligations ” means the Credit Agreement Obligations and the Secured Counterparty Obligations.

“ Senior Obligations Acceleration ” means the acceleration of any Credit Agreement Obligations or Secured Counterparty Obligations (including automatic acceleration of either of the foregoing upon any Proceeding).

“ Sowood Agreement ” has the meaning set forth in the introduction to this Agreement.

“ Sowood Collateral ” means all assets, whether now owned or hereafter acquired by a Borrower or any other Loan Party, in which a Lien is granted or purported to be granted to Sowood as security for the Sowood Obligations.

“ Sowood Documents ” means the Sowood Agreement and Sowood Security Document.

“ Sowood Obligations ” means (a) all principal of and interest (including without limitation any Post-Petition Interest) and premium (if any) on all indebtedness under the Sowood Documents and (b) all fees, expenses, and other amounts payable from time to time pursuant to the Sowood Documents, in each case whether allowed or allowable in an Insolvency Proceeding.  To the extent any payment with respect to the Sowood Obligations (whether by or on behalf of any Loan Party, as proceeds of security, enforcement of any right of setoff or otherwise) is declared to be a fraudulent conveyance or a preference in any respect, set aside or required to be paid to a debtor in possession, any Credit Agreement Secured Party, any Secured Counterparty, or any receiver or similar Person, then the obligation or part thereof originally intended to be satisfied shall, for the purposes of this Agreement and the rights and obligations of the Credit Agreement Secured Parties, the Secured Counterparties, and Sowood, be deemed to be reinstated and outstanding as if such payment had not occurred.

“ Sowood Obligations Payment Date ” means the first date on which (a) the Sowood Obligations (other than those that constitute Unasserted Contingent Obligations) have been indefeasibly paid in cash in full, (b) all commitments to extend credit under the Sowood Agreement have been terminated, and (c) Sowood has delivered a written notice to each Credit Agreement Representative and each Secured Counterparty stating that the events described in clauses (a) and (b) have occurred to the satisfaction of Sowood.

“ Sowood Security Documents ” means the Security Agreement (as defined in Sowood Agreement) and any documents that are designated under a Sowood Agreement as “Sowood Security Documents” for purposes of this Agreement.

“ Subsidiary ” of a Person means any corporation, association, partnership or other business entity of which more than 50% of the outstanding equity interests having by the terms thereof ordinary voting power under ordinary circumstances to elect a majority of the board of directors or Persons performing similar functions (or, if there are no such directors or Persons, having general voting power) of such entity (irrespective of whether at the time equity interests of any other class or classes of such entity shall or might have voting power upon the occurrence

 

7

 

of any contingency) is at the time directly or indirectly owned or controlled by such Person, by such Person and one or more Subsidiaries of such Person or by one or more Subsidiaries of such Person.

“ Swap Contract ” means (a) any and all rate swap transactions, basis swaps, credit derivative transactions, forward rate transactions, commodity swaps, commodity options, forward commodity contracts, commodity futures contracts, equity or equity index swaps or options, bond or bond price or bond index swaps or options or forward bond or forward bond price or forward bond index transactions, interest rate options, forward foreign exchange transactions, cap transactions, floor transactions, collar transactions, currency swap transactions, cross-currency rate swap transactions, currency options, spot contracts, or any other similar transactions or any combination of any of the foregoing (including any options to enter into any of the foregoing), whether any such transaction is governed by or subject to any master agreement and (b) any and all transactions of any kind, and the related confirmations, which are subject to the terms and conditions of, or governed by, any form of master agreement published by the International Swaps and Derivatives Association, Inc., any International Foreign Exchange Master Agreement, or any other master agreement with respect to the foregoing (any such master agreement, together with any related schedules, a “ Master Financial Agreement ”), including any such obligations or liabilities under any Master Financial Agreement.

“ Unasserted Contingent Obligations ” shall mean, at any time, obligations for taxes, costs, indemnifications, reimbursements, damages, and other liabilities (excluding (a) the principal of, and interest and premium (if any) on, and fees and expenses relating to, any Credit Agreement Obligation, Secured Counterparty Obligation, or Sowood Obligation and (b) contingent reimbursement obligations in respect of amounts that may be drawn under outstanding letters of credit) in respect of which no assertion of liability (whether oral or written) and no claim or demand for payment (whether oral or written) has been made (and no notice for indemnification has been issued by the indemnitee) at such time.

“ UCC ” shall mean the Uniform Commercial Code as in effect from time to time in the State of New York.

“ VPEM Agreement ” has the meaning set forth in the introduction to this Agreement.

Section 2.              Subordination .

2.1           Subordination of Sowood Obligations to Senior Obligations .  Each Loan Party covenants and agrees, and Sowood (whether upon original issue or upon transfer or assignment) likewise covenants and agrees, notwithstanding anything to the contrary contained in any of the Sowood Documents, that the payment of any and all of the Sowood Obligations shall be subordinate and subject in right and time of payment, to the extent and in the manner hereinafter set forth, to the payment of all Senior Obligations.  Each holder of Senior Obligations, whether such Senior Obligations are now outstanding or hereafter created, incurred, assumed or guaranteed, shall be deemed to have acquired Senior Obligations in reliance upon the provisions contained in this Agreement.  Sowood waives any and all notice of the creation, renewal,

 

8

 

increase, extension or accrual of any of the Senior Obligations and notice of or proof of reliance by any holder of Senior Obligations upon this Agreement.  All Senior Obligations shall be deemed conclusively to have been created, contracted or incurred in reliance upon this Agreement, and all dealings between the Loan Parties and any holder of Senior Obligations, including the transactions in respect of the Senior Obligations, shall be deemed to have been consummated in reliance upon this Agreement.

2.2           Certain Agreements .

(a)           Sowood agrees not to initiate, prosecute or participate in any claim, action or other proceeding challenging the enforceability, validity, perfection or priority of this Agreement.  The Loan Parties shall give prompt notice to Sowood and each Credit Agreement Representative and each Secured Counterparty of any Proceeding with respect to any Loan Party or of its securities or the commencement of any action by any creditor to realize upon any assets of any Loan Party.

(b)           The Senior Obligations shall continue to be treated as Senior Obligations and the provisions of this Agreement shall continue to govern the relative rights and priorities of Credit Agreement Representative, the Credit Agreement Secured Parties, the Secured Counterparties, and Sowood even if all or part of the Senior Obligations or the security interests securing the Senior Obligations are subordinated, set aside, avoided, invalidated or disallowed in connection with any such Proceeding, and this Agreement, and any such portion of the Senior Obligations originally intended to be satisfied and any such security interests, shall be reinstated if at any time any payment of any of the Senior Obligations is rescinded or must otherwise be returned by any holder of Senior Obligations or any representative of such holder.

2.3           Sowood Obligations Payment Prohibition .  Notwithstanding any of the terms of the Sowood Documents, any Loan Party hereby agrees that it may not make, and Sowood hereby agrees that it will not accept, any Distribution (other than a distribution of Reorganization Subordinated Securities) with respect to the Sowood Obligations until the Credit Obligations Payment Date for all Credit Agreement Obligations and the Secured Counterparty Obligations Payment Date for all Secured Counterparty Obligations has occurred; provided that the foregoing shall not prohibit:

(a)           payments of principal of the Sowood Obligations with respect to revolving loans when (i) no Senior Default exists immediately before and after giving effect to such payment; (ii) Borrowing Base Availability (as defined in the Initial Credit Agreement) is at least $15,000,000.00 after giving effect to such payment; and (iii) the Parent’s ratio of Consolidated EBITDA for the four fiscal quarters ending immediately before any such payment to Consolidated Interest Expense for such period is less than 3.0 to 1.0;

(b)           payments of interest on the Sowood Obligations when no Senior Default exists immediately before and after giving effect to such payment; and

 

9

 

(c)           non-cash payment of regularly scheduled interest and default interest on the Sowood Obligations payable in kind or by compounding pursuant to and in accordance with the terms of the Sowood Documents.

The Loan Parties shall resume Distributions in respect of the Sowood Obligations prohibited under the foregoing provisions of Section 2.3 (provided that such Distributions are not then prohibited under another provision of this Agreement), including any amounts in arrears by reason of the operation of the preceding provisions of Section 2.3, immediately upon the earlier to occur of (i) if applicable, the cure or waiver of such Senior Default in accordance with the applicable provisions of the applicable Credit Agreement Documents and Secured Counterparty Documents and the satisfaction of the conditions set forth in Sections 2.3(a)(ii) and (iii) and (ii) the date upon which the Credit Agreement Obligations Payment Date for all Credit Agreement Obligations and the Secured Counterparty Obligations Payment Date for all Secured Counterparty Obligations shall have occurred.

2.4           Sowood Obligations Standstill Provisions .  Until the earliest to occur of (a) 365 days after the occurrence of the Senior Default, (b) a Senior Obligations Acceleration, (c) commencement of any Proceeding against the Borrower, (d) the date upon which the Credit Agreement Obligations Payment Date for all Credit Agreement Obligations and the Secured Counterparty Obligations Payment Date for all Secured Counterparty Obligations has occurred, and (e) the institution or commencement by any Credit Agreement Secured Party or Secured Counterparty of any remedies against any Loan Party or in respect of any of the Senior Obligations to enforce payment of, or foreclose upon or exercise other remedies with respect to any collateral securing payment of, any Senior Obligations, Sowood shall not, without the prior written consent of each Credit Agreement Representative and each Secured Counterparty, take any Enforcement Action with respect to the Sowood Obligations.  Notwithstanding the foregoing, subject to the terms of Section 2.2(d) hereof, Sowood may file proofs of claim against any Loan Party in any Proceeding involving any Loan Party (and the principal amount of the Sowood Obligations may be accelerated upon the occurrence of a Proceeding with respect to a Loan Party).

2.5           Incorrect Payments .  (a)  If any Distribution on account of the Sowood Obligations is made and received by Sowood in contravention of the provisions of Section 2.3 or 2.4, such Distribution shall not be commingled with any of the assets of Sowood, shall be held in trust by Sowood for the benefit of the Credit Agreement Secured Parties and the Secured Counterparties.

(b)           Except for Distributions permitted under Section 2.3, (i)  any Distribution which would otherwise, but for the terms hereof, be payable or deliverable in respect of the Sowood Obligations (other than a distribution of Reorganization Subordinated Securities) shall be paid or delivered (in the same form as received, with any necessary endorsements) (A) first, directly to any Credit Agreement Representative to be held and/or applied by such Credit Agreement Representative in accordance with the terms of the applicable Credit Agreement Documents until the Credit Obligations Payment Date has occurred for all Credit Agreement Obligations and (B) second, directly to any Secured Counterparty to be held and/or applied by

 

10

 

such Secured Counterparty in accordance with the terms of the applicable Secured Counterparty Documents until the Secured Counterparty Obligations Payment Date has occurred for all Secured Counterparty Obligations.

(ii)           (A) If more than one Credit Agreement Representative exists, then the Credit Agreement Representative receiving the Distribution shall transfer to the other Credit Agreement Representative its ratable share of such Distributions based on the outstanding Credit Agreement Obligations at such time and (B) if more than one Secured Counterparty exists, then the Secured Counterparty receiving the Distribution shall transfer to the other Secured Counterparties its ratable share of such Distributions based on the outstanding Secured Counterparty Obligations at such time.

(iii)          Sowood irrevocably authorizes, empowers and directs any debtor, debtor in possession, receiver, trustee, liquidator, custodian, conservator or other Person having authority, to pay or otherwise deliver all such Distributions to a Credit Agreement Representative until the Credit Obligations Payment Date has occurred for all Credit Agreement Obligations and to a Secured Counterparty until the Secured Counterparty Obligations Payment Date has occurred for all Secured Counterparty Obligations.  Sowood also irrevocably authorizes and empowers each Credit Agreement Representative and each Secured Counterparty, in the name of Sowood, to demand, sue for, collect and receive any and all such Distributions

(c)           The Loan Parties shall promptly notify Sowood of any change in the identity of the Credit Agreement Representatives and Secured Counterparties from time to time.  In the event that Sowood determines in good faith that further evidence is required with respect to the right of any holder of Senior Obligations to participate in any Distribution pursuant to this Agreement, Sowood may request such Person to furnish evidence to the reasonable satisfaction of Sowood as to the amount of Senior Obligations held by such Person, the extent to which such Person is entitled to participate in such Distribution and any other facts pertinent to the rights of such Person under this Agreement, and if such evidence is not furnished Sowood may defer any payment to such Person pending judicial determination as to the right of such Person to receive such Distribution; provided that, upon the written request of such Person to Sowood, such Distribution shall be made to the court having jurisdiction over such judicial determination or to another Person mutually satisfactory to such Person and Sowood, as escrowee, to be held and invested pending such judicial determination in accordance with such instructions as shall be mutually satisfactory to such Person and Sowood and upon such judicial determination becoming final and nonappealable to be distributed in accordance therewith to the Person entitled thereto.

2.6           Sale, Transfer or other Disposition of Sowood Obligations .

(a)           Sowood shall not sell, assign, pledge, dispose of or otherwise transfer all or any portion of the Sowood Obligations or any Sowood Document: (i) without giving prior written notice of such action to the Credit Agreement Representatives and the Secured Counterparties and (ii) unless, prior to the consummation of any such action, the transferee thereof shall execute and deliver to the Credit Agreement Representatives and the Secured Counterparties an agreement substantially identical to this Agreement, providing for the

 

11

 

continued subordination of the Sowood Obligations to the Senior Obligations as provided herein and for the continued effectiveness of all of the rights of Credit Agreement Representatives and the Credit Agreement Secured Parties arising under this Agreement.

(b)           Notwithstanding the foregoing, the subordination effected hereby shall survive any sale, assignment, pledge, disposition or other transfer of all or any portion of the Sowood Obligations in violation of the foregoing prohibition, and the terms of this Agreement shall be binding upon the successors and assigns of Sowood, as provided in Section 10.8 hereof.

2.7           Legends .  Until the termination of this Agreement in accordance with Section 10.2 hereof, Sowood will cause to be clearly, conspicuously and prominently inserted on the face of each Sowood Document, as well as any renewals or replacements thereof, the following legend (or a legend substantially identical thereto):

“This instrument and the rights and obligations evidenced hereby are and shall at all times be and remain subordinated in right of payment to the extent and in the manner set forth in that certain Subordination and Intercreditor Agreement dated as of December 19, 2005 among (a) Société Générale, as Credit Agreement Representative, (b) Virginia Power Energy Marketing, Inc., a Virginia corporation, and each additional counterparty which becomes a party to such Subordination and Intercreditor Agreement in compliance with Section 10.12 thereof, (c) Sowood Commodity Partners Fund LP, a Delaware limited partnership, (d) MxEnergy Holdings Inc., a Delaware corporation, and (e) MxEnergy Inc., a Delaware corporation, and MxEnergy Electric Inc., a Delaware corporation, and each of the other Loan Parties (as defined therein) party thereto to the prior payment in full of all Senior Obligations (as defined therein), as amended, supplemented, or otherwise modified from time to time; and each holder of this instrument, by its acceptance hereof, irrevocably agrees to be bound by the provisions of such Subordination and Intercreditor Agreement.”

2.8           Final Payment of Senior Obligations .  Unless applicable law requires otherwise, any Distribution or other proceeds of Enforcement Action remaining in the possession of a Credit Agreement Representative or a Secured Counterparty after the Credit Agreement Obligations Payment Date for all Credit Agreement Obligations and the Secured Counterparty Obligations Payment Date for all Secured Counterparty Obligations have occurred shall be held in trust by it for the benefit of the Sowood and promptly paid or delivered to Sowood in the form received for application to the Sowood Obligations.

Section 3.  Lien Priorities.

3.1           Subordination of Liens .  (a)  Any and all Liens now existing or hereafter created or arising in favor of any Secured Counterparty in the Credit Agreement Primary Collateral, regardless of how acquired, whether by grant, statute, operation of law, subrogation, or otherwise are expressly junior in priority, operation, and effect to any and all Liens now existing or hereafter created or arising in favor of the Credit Agreement Secured Parties in the Credit Agreement Primary Collateral, notwithstanding (i) anything to the contrary contained in any agreement or filing to which any Secured Counterparty may now or hereafter be a party, and

 

12

 

regardless of the time, order, or method of grant, attachment, recording, or perfection of any financing statements or other Liens or any defect or deficiency or alleged defect or deficiency in any of the foregoing, (ii) any provision of the UCC or any applicable law or any Credit Agreement Document or Secured Counterparty Document or any other circumstance whatsoever, and (iii) the fact that any such Liens in favor of any Credit Agreement Secured Party are (A) subordinated to any Lien securing any obligation of any Loan Party other than the Secured Counterparty Obligations or (B) otherwise subordinated, voided, avoided, invalidated, or lapsed.

(b)           Any and all Liens now existing or hereafter created or arising in favor of any Credit Agreement Secured Party in the Secured Counterparty Primary Collateral, regardless of how acquired, whether by grant, statute, operation of law, subrogation, or otherwise are expressly junior in priority, operation, and effect to any and all Liens now existing or hereafter created or arising in favor of the Secured Counterparties in the Secured Counterparty Primary Collateral, notwithstanding (i) anything to the contrary contained in any agreement or filing to which any Credit Agreement Secured Party may now or hereafter be a party, and regardless of the time, order, or method of grant, attachment, recording, or perfection of any financing statements or other Liens or any defect or deficiency or alleged defect or deficiency in any of the foregoing, (ii) any provision of the UCC or any applicable law or any Credit Agreement Document or Secured Counterparty Document or any other circumstance whatsoever, and (iii) the fact that any such Liens in favor of any Secured Counterparty are (A) subordinated to any Lien securing any obligation of any Loan Party other than the Credit Agreement Obligations or (B) otherwise subordinated, voided, avoided, invalidated, or lapsed.

(c)           Any and all Liens now existing or hereafter created or arising in favor of any Secured Counterparty (the “ Secondary Secured Counterparty ”) in the Secured Counterparty Primary Collateral of another Secured Counterparty (the “ Primary Secured Counterparty ”), regardless of how acquired, whether by grant, statute, operation of law, subrogation, or otherwise are expressly junior in priority, operation, and effect to any and all Liens now existing or hereafter created or arising in favor of such Primary Secured Counterparty in the Secured Counterparty Primary Collateral of such Primary Secured Counterparty, notwithstanding (i) anything to the contrary contained in any agreement or filing to which such Secondary Secured Counterparty may now or hereafter be a party, and regardless of the time, order, or method of grant, attachment, recording, or perfection of any financing statements or other Liens or any defect or deficiency or alleged defect or deficiency in any of the foregoing, (ii) any provision of the UCC or any applicable law or any Secured Counterparty Document or any other circumstance whatsoever, and (iii) the fact that any such Liens in favor of such Primary Secured Counterparty are (A) subordinated to any Lien securing any obligation of any Loan Party other than such Primary Secured Counterparty’s Secured Counterparty Obligations or (B) otherwise subordinated, voided, avoided, invalidated, or lapsed.

(d)           Any and all Liens now existing or hereafter created or arising in favor of Sowood in the Collateral, regardless of how acquired, whether by grant, statute, operation of law, subrogation, or otherwise are expressly junior in priority, operation, and effect to any and all Liens now existing or hereafter created or arising in favor of the Credit Agreement Secured

 

13

 

Parties or the Secured Counterparties in the Collateral, notwithstanding (i) anything to the contrary contained in any agreement or filing to which any Credit Agreement Secured Party or Secured Counterparty may now or hereafter be a party, and regardless of the time, order, or method of grant, attachment, recording, or perfection of any financing statements or other Liens or any defect or deficiency or alleged defect or deficiency in any of the foregoing, (ii) any provision of the UCC or any applicable law or any Credit Agreement Document, Secured Counterparty Document, or Sowood Document or any other circumstance whatsoever, and (iii) the fact that any such Liens in favor of any Credit Agreement Secured or Secured Counterparty are (A) subordinated to any Lien securing any obligation of any Loan Party other than Sowood Obligations or (B) otherwise subordinated, voided, avoided, invalidated, or lapsed.

(e)           None of any Credit Agreement Secured Party, any Secured Counterparty, or Sowood shall object to or contest, or support any other Person in contesting or objecting to, in any proceeding (including without limitation, any Insolvency Proceeding), the validity, extent, perfection, priority (consistent with this Agreement), or enforceability of any security interest in the Collateral granted to the other.  Notwithstanding any failure by any Credit Agreement Secured Party, any Secured Counterparty, or Sowood to perfect its security interests in the Collateral or any avoidance, invalidation or subordination by any third party or court of competent jurisdiction of the security interests in the Collateral granted to the Credit Agreement Secured Parties, the Secured Counterparties, or Sowood, the priority and rights as among the Credit Agreement Secured Parties, the Secured Counterparties, and Sowood with respect to the Collateral shall be as set forth in this Agreement.

(f)            The provisions of this Agreement are intended solely to govern the respective Lien priorities as among the Credit Agreement Secured Parties, the Secured Counterparties, and Sowood and shall not impose on the Credit Agreement Secured Parties, the Secured Counterparties, or Sowood any obligations in respect of any Collateral (or any proceeds thereof) that would conflict with prior perfected Liens or any claims thereon in favor of any other Person that is not a Secured Party.

3.2           Nature of Obligations .  (a) Each of the Credit Agreement Representatives, the Secured Counterparties, and Sowood acknowledges (i) that a portion of the Credit Agreement Obligations or the Sowood Obligations may be revolving in nature and that the amount of Secured Counterparty Obligations change from time to time and (ii) that the amount of the Credit Agreement Obligations, Secured Counterp