SUBORDINATION AND
INTERCREDITOR AGREEMENT
THIS SUBORDINATION AND INTERCREDITOR AGREEMENT (this “
Agreement
”) is entered into as of this June ___, 2008, by and among
(i) BLACK FOREST INTERNATIONAL, LLC (“ Subordinated
Creditor ”; and any references herein to
“each” or “any” Subordinated Creditor or to
the “Subordinated Creditor” (or similar words) shall
mean and refer to Subordinated Creditor and its successors and
permitted assigns), (ii) FOURTH THIRD
LLC, a Delaware limited liability company (“
Fourth
Third ”) , as
Agent for all Senior Lenders party to the Senior Credit Agreement
described below and as a Senior Lender, (iii) PNG VENTURES, INC., a
Nevada corporation (“ PNG
”), (iv) NEW EARTH LNG, LLC, a Delaware limited liability
company (“ Earth
”) and (v) the subsidiaries of Earth listed under
“Companies” on the signature pages hereto (together
with PNG and Earth the “ Companies
” or a “ Company
”).
R E C I T A L S
A. The
Agent, Senior Lenders (as hereinafter defined) and the
Companies have entered into an Amended and Restated Credit
Agreement, dated as of June __, 2008 (as the same may be
amended, supplemented or otherwise modified from time to time
as permitted hereunder, the “ Senior
Credit Agreement ”) pursuant to which, among
other things, Senior Lenders are making certain loans and
financial accommodations to Earth.
B. The
Agent and the Companies have entered into a Guarantee and
Collateral Agreement, dated as of June __, 2008 (as the same
may be amended, supplemented or otherwise modified from time
to time as permitted hereunder, the “ Senior
Guarantee and Collateral Agreement ”) pursuant
to which, among other things, the Companies (other than
Earth, but including PNG) have guaranteed the debts of Earth
to Senior Lenders arising pursuant to the Senior Credit
Agreement and all Companies (including Earth and PNG) have
granted security interests in the Collateral (as hereinafter
defined).
C. PNG
has issued to Subordinated Creditor its 12% Subordinated
Secured Convertible Promissory Note, dated June 3, 2008 in
the principal amount of $626,250 (as the same may be amended,
supplemented or otherwise modified from time to time as
permitted hereunder, the “ Subordinated
Note ”).
D. Payment
of the Subordinated Note is guaranteed by each of the
Companies (other than PNG) pursuant to a Guaranty Agreement,
dated as of June __, 2008 (as the same may be amended,
supplemented or otherwise modified from time to time as
permitted hereunder, the “ Subordinated
Guaranty ”).
E. The
Companies, including PNG, have made in favor of Subordinated
Creditor, a General Security Agreement, dated as of June __,
2008 (as the same may be amended, supplemented or otherwise
modified from time to time as permitted hereunder, the
“ Subordinated
Security Agreement ”).
F. It
is a condition to any extensions of credit being made to
Earth under the Senior Credit Agreement that the Subordinated
Note, the Subordinated Guaranty and the Subordinated Security
Agreement shall have been made subordinate, in right of
payment and claim, to the
rights
and claims of the Senior Lenders under the Senior Credit
Agreement and the Senior Guarantee and Collateral
Agreement.
NOW, THEREFORE, for good and valuable consideration, the
receipt and sufficiency of which hereby are acknowledged, the
parties hereto hereby agree as follows:
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1.
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Definitions . The following terms
shall have the following meanings in this Agreement:
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“
Agent
” shall mean
Fourth Third LLC, as Agent for the Senior Lenders, or any
other Person appointed by the holders of the Senior Debt as
administrative agent for purposes of the Senior Debt Documents
and this Agreement.
“
Bankruptcy
Code ” shall mean
Chapter 11 of Title 11 of the United States Code, as amended
from time to time and any successor statute and all rules and
regulations promulgated thereunder.
“
Business
Day ” shall mean
“Business Day” as defined in the Senior Credit
Agreements.
“
Collateral
” shall mean all real and personal property of any
Company in which a lien, security interest or mortgage has
been or hereafter may be granted or created in favor or the
Agent or any Senior Lender as collateral security for the
payment or performance of any Senior Debt.
“
Collection
Action “ shall mean (a) to initiate or join in
any suit, action or proceeding against any Company or
Collateral to enforce payment of or make demand for all or any
part of the Subordinated Debt, (b) to seek monetary damages
against any Company, or (c) to take from or for the account of
any Company, by set-off or in any other matter, all or any
part of any moneys which may now or hereafter be owing by such
Company with respect to the Subordinated Debt, but shall not
include or mean any action by Subordinated Creditor with
respect to enforcement of any right to convert the
Subordinated Note as provided therein or with respect to its
enforcement of any similar equity rights not deemed part of
the Subordinated Debt (as hereinafter defined).
“
Distribution
” means, with respect to any indebtedness or obligation,
(a) any payment or distribution by any Company (including any
Company in its capacity as a debtor or debtor-in-possession in
a Proceeding) of cash, securities or other property, by
set-off or otherwise, on account of such indebtedness or
obligation or (b) any redemption, purchase or other
acquisition of such indebtedness or obligation by any
Company.
“
Enforcement
Action ” shall mean (a) to take from or for the
account of any Company or any other obligor on the
Subordinated Debt, by set-off or in any other manner, the
whole or any part of any moneys which may now or hereafter be
owing by any Company or any such other obligor with respect to
the Subordinated Debt, (b) to sue for payment of, or to
initiate or participate with others in any suit, action or
proceeding against any Company or any such other obligor to
(i) enforce payment of or to collect the whole or any part of
the Subordinated Debt or (ii) commence judicial enforcement of
any of the rights and remedies under the Subordinated Debt
Documents or applicable law with respect to the Subordinated
Debt, (c) to notify account debtors or directly collect
accounts receivable or other payment rights of any Company or
any such other obligor or (d) take any action under the
provisions of any state or federal law, including, without
limitation, the UCC , or
under any contract or agreement, to enforce against, foreclose
upon, take possession of or sell any property or assets of any
Company or any Collateral; provided
, however ,
that the term “Enforcement Action” shall not
include (i) an exercise of rights and remedies for specific
performance or equitable relief to compel any Company to
comply with any non-payment
obligations
under the Subordinated Debt Documents so long as it is not
accompanied by (a) a Collection Action or (b) a claim for
relief or any other Enforcement Action against or with respect
to any Collateral, or (ii) any suit or action initiated or
maintained by the Subordinated Creditor solely to prevent the
running of any applicable statute of limitations or other
similar restriction on claims.
“
Fourth
Third
Loan
Documents ” shall mean
the Senior Credit Agreement, the Senior Guarantee and
Collateral Agreement, and all other agreements, documents and
instruments executed from time to time in connection
therewith, as the same may be amended, supplemented or
otherwise modified from time to time in accordance with the
terms hereof.
“
Permitted
Refinancing ” shall mean
any refinancing of the outstanding Senior Debt under the
Fourth Third Loan
Documents provided that the financing documentation entered
into by the Companies in connection with such Permitted
Refinancing constitutes
Permitted Refinancing Senior Debt Documents.
“
Permitted
Refinancing Senior Debt Documents ” shall mean
any financing documentation which replaces the Fourth Third Loan Documents and
pursuant to which the outstanding Senior Debt under the
Fourth Third Loan
Documents is refinanced, as such financing documentation may
be amended, supplemented or otherwise modified from time to
time in compliance with this Agreement, but specifically
excluding any such financing documentation to the extent that
it contains provisions violating
Section 3.1 hereof .
“
Person
” means any
natural person, corporation, general or limited partnership,
limited liability company, firm, trust, association,
government, governmental agency or other entity, whether
acting in an individual, fiduciary or other
capacity.
“
Proceeding
” shall mean any voluntary or involuntary insolvency,
bankruptcy, receivership, custodianship, liquidation,
dissolution, reorganization, 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 a
Person.
“
Reorganization
Subordinated Securities ” shall mean any debt or
equity securities issued in substitution of all or any portion
of the Subordinated Debt, in each case that are subordinated
in right of payment, performance, liens and otherwise to the
Senior Debt (or any debt and/or equity securities issued in
substitution of all or any portion of the Senior Debt) to at
least the same extent that the Subordinated Debt (and the
liens securing the Subordinated Debt) are subordinated to the
Senior Debt (and the liens securing the Senior Debt) pursuant
to the terms of this Agreement.
“
Secured
Claim ” shall mean a “secured claim”
within the meaning of such term in Section 506(a) of the
Bankruptcy Code (as presently in effect).
“
Senior
Debt ” shall mean all obligations, liabilities
and indebtedness of every nature of any Company or any other
obligor (other than Earth Biofuels) under the Senior Debt
Documents from time to time owed to Agent or any Senior Lender
under the Senior Debt Documents, including, without
limitation, the principal amount of all debts, claims and
indebtedness, credit exposure and related obligations arising
from any hedging agreements, accrued and unpaid interest and
all fees, costs and expenses, whether primary, secondary,
direct, contingent, fixed or otherwise, heretofore, now and
from time to time hereafter owing, due or payable, whether
before or after the filing of a Proceeding under the
Bankruptcy Code together with (a) any amendments,
modifications, renewals or extensions thereof to the extent
not prohibited by the terms of this
Agreement
and (b) any interest accruing thereon after the commencement
of a Proceeding, without regard to whether or not such
interest is an allowed claim; provided
, however ,
that in no event shall the principal amount of the Senior Debt
(excluding any interest or fees added to
principal) exceed the amount that is the excess of
(i) $35,000,000, over (ii) the amount of any prepayments or
repayments under the Senior Credit Agreements (specifically
excluding, however, any such prepayments or repayments
occurring solely as a result of a Permitted Refinancing) (the
“ Senior
Debt Limit ”). The sum of the amount
of principal outstanding under the Senior Debt Documents that
is in excess of the Senior Debt Limit (including pursuant to
any refinancing other than a Permitted Refinancing), together
with interest on such excess principal and fees attributable
to such excess principal shall not be considered Senior Debt
for purposes of this Agreement (such amount, “
Excluded
Senior Debt ”).
“
Senior
Debt Documents ” shall mean the Fourth Third Loan
Documents and, after the consummation of any Permitted
Refinancing, the Permitted Refinancing Senior Debt
Documents.
“
Senior
Default ” shall mean any “Event of
Default” under the Senior Debt Documents in respect of,
or resulting from, the non-payment of any money when due to
Agent or any Senior Lender.
“
Senior
Lenders ” shall mean
the holders of the Senior Debt.
“
Subordinated
Debt ” shall mean all of the obligations of any
Company under the Subordinated Debt Documents to the
Subordinated Creditor or evidenced by or incurred pursuant to
the Subordinated Debt Documents, but shall not be deemed to
include any right to convert the Subordinated Note into equity
as provided in the Subordinated Note, any anti-dilution
adjustment rights or rights to conversion of the Subordinated
Note, rights to receive replacement securities for or to an
adjustment of the convertibility provisions and conversion
ratios as set forth in the Subordinated Note (whether upon
merger, sale of the company or otherwise), or other rights to
receive securities from time to time upon conversion of the
Subordinated Note, so long as none of the foregoing involves
the payment of money by any Company.
“ Subordinated
Debt Documents ” shall mean the
Subordinated Note, the Subordinated Guaranty, the Subordinated
Security Agreement, and all other documents, agreements and
instruments now existing or hereinafter entered into by any Company
to, with or in favor of the Subordinated Creditor in connection
therewith.
“
UCC
” shall mean the Uniform Commercial Code (or any similar
or equivalent legislation) as in effect in any applicable
jurisdiction.
2.1.
Subordination
of Subordinated Debt to Senior Debt . Each
Company covenants and agrees, and each Subordinated Creditor
by its acceptance of the Subordinated Debt Documents (whether
upon original issue or upon transfer or assignment) likewise
covenants and agrees, notwithstanding anything to the contrary
contained in any of the Subordinated Debt Documents, that the
payment of any and all of the Subordinated Debt shall be
subordinate and subject in right and time of payment, to the
extent and in the manner hereinafter set forth, to the prior
payment in full in cash (or other consideration acceptable to
Agent in its sole discretion) of all Senior Debt (but, for
avoidance of any doubt, not any Excluded Senior
Debt). Each holder of Senior Debt, whether now
outstanding or hereafter created, incurred, assumed or
guaranteed, shall be deemed to have acquired Senior Debt in
reliance upon the provisions contained in this
Agreement.
2.2.
Liquidation,
Dissolution, Bankruptcy . In
the event of any Proceeding involving any Company but subject
to Section 2.7(b) which shall control in the event of any
inconsistency between its provision and the
following:
(a) All
Senior Debt shall first be paid in full in cash (or other
consideration acceptable to Agent in its sole discretion)
before any Distribution (other than Reorganization
Subordinated Securities), whether in cash, securities or other
property, shall be made to the Subordinated
Creditor on account of any Subordinated Debt.
(b) Any
Distribution (other than Reorganization Subordinated
Securities), whether in cash, securities or other property
which would otherwise, but for the terms hereof, be payable or
deliverable in respect of the Subordinated Debt shall be paid
or delivered directly to Agent (to be held and/or applied by
Agent in accordance with the terms of the Senior Debt
Documents) until all Senior Debt is paid in full in cash (or
other consideration acceptable to Agent in its sole
discretion). Each Subordinated Creditor 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 Agent. Each
Subordinated Creditor also irrevocably authorizes and empowers
Agent and appoints Agent its attorney-in-fact, in the name of
such Subordinated Creditor, to demand, sue for, collect and
receive any and all such Distributions, at Companies’
expense. This power of attorney is coupled with an
interest and is irrevocable.
(c) Each
Subordinated Creditor agrees not to initiate, prosecute or
participate in any claim, action or other proceeding
challenging the enforceability, validity, perfection or
priority of the Senior Debt or any liens and security
interests securing the Senior Debt. Agent agrees
not to initiate, prosecute or participate in any claim, action
or other proceeding challenging the enforceability, validity,
perfection or priority of the Subordinated Debt or any liens
and security interests securing the Subordinated
Debt.
(d) Each
Subordinated Creditor, in its capacity as the holder of a
Secured Claim, agrees that Agent and Senior Lenders may
consent to the use of cash collateral or provide (or consent
to any other Person providing) financing to any Company (or
trustee) on such terms and conditions and in such amounts as
Agent and Senior Lenders, in their sole discretion, may decide
and, in connection therewith, each Company (or trustee) may
grant to Agent and Senior Lenders (or such other Person
providing financing) liens and security interests upon all of
its property, which liens and security interests (i) shall
secure payment of all Senior Debt (whether such Senior Debt
arose prior to the commencement of any Proceeding or at any
time thereafter) and all other financing provided by Senior
Lenders (or such other Persons providing financing) during the
Proceeding and (ii) shall be superior in priority to the liens
and security interests, if any, in favor of such Subordinated
Creditor on the property of any Company, provided, that (A)
the financing (x) does not compel such Company to seek
confirmation of a specific plan of reorganization for which
all or substantially all of the material terms are set forth
in the financing documentation or a related document or (y)
that the financing documentation or cash collateral order does
not expressly require the liquidation of the Collateral prior
to a default under the financing documentation or cash
collateral order. Each Subordinated Creditor, in
its capacity as the holder of Secured Claim, agrees that it
will not object to or oppose, and will consent to, a sale or
other disposition of any property securing all of any part of
the Senior Debt free and clear of security interests, liens or
other claims of such Subordinated Creditor under Section 363
of the Bankruptcy Code or any other provision of the
Bankruptcy Code if Agent and Senior Lenders have consented to
such sale or disposition, provided that such Subordinated
Creditor shall have the right to object to the further use of
the proceeds of such sale or other disposition unless
such
proceeds
are applied to permanently reduce the amount of Senior Debt
outstanding. Each Subordinated Creditor, in
its capacity as the holder of a Secured Claim, agrees not
to: (1) assert any rights, to the extent adverse,
in the commercially reasonable opinion of the Agent, to the
interests of the Agent and the Senior Lenders, under Sections
362, 363 or 364 of the Bankruptcy Code with respect to the
Collateral, including any rights it may have to
“adequate protection” of such Subordinated
Creditor’s interest in any Collateral in any Proceeding
or objecting to or opposing any use of cash, financing,
security or priority described in clauses (i) and (ii) above;
provided
, if the Agent or any Senior Lender is granted adequate
protection in the form of additional collateral in connection
with any cash collateral use or debtor-in-possession
financing, then the Subordinated Creditor may seek or request
adequate protection in the form of a Lien on such additional
collateral, which Lien will be subordinated to the Liens
securing the Senior Debt (and such cash collateral use or
debtor-in-possession financing on the same basis) as the other
Liens securing the Subordinated Debt are so subordinated to
the Senior Debt under this Agreement; (2) oppose or object to
any adequate protection sought by or granted to Agent or any
Senior Lender with respect to the Collateral;
(3) initiate or prosecute or join with any other Person
to initiate or prosecute any claim, action or other proceeding
opposing a motion by Agent to lift the automatic stay;
(4) vote in favor of any chapter 11 plan that seeks
confirmation under Section 1129(b)(2)(A) of the Bankruptcy
Code, solely to the extent such vote is required to satisfy
Section 1129(a)(10) of the Bankruptcy Code (i.e., each
Subordinated Creditor agrees not to vote in favor of such plan
if its allowed secured claim is deemed impaired and no other
impaired class has accepted the plan, determined without
including acceptance of the plan by any insider);
(5) seek the dismissal or conversion of a Proceeding,
(6) seek the appointment of a trustee, receiver or
examiner in a Proceeding; or (7) seek to have the
automatic stay of Section 362 of the Bankruptcy Code (or any
similar stay under any other applicable law) lifted or
modified with respect to the Collateral; provided, however,
that each Subordinated Creditor may object to any financing
under Section 364 in its capacity as the holder of a Secured
Claim to the extent that the principal amount, together with
the aggregate principal amount of Senior Debt outstanding
immediately after giving effect to any payment thereof with
the proceeds of such financing, exceeds the Senior Debt
Limit. Any claim of any Subordinated Creditor
arising during a Proceeding, including a claim under Section
507(b) of the Bankruptcy Code, shall constitute Subordinated
Debt under this Agreement. Except for any claim
based upon a breach of this Agreement, each Subordinated
Creditor waives any claim it may now or hereafter have arising
out of Agent’s or Senior Lenders’ election, in any
Proceeding instituted under the Bankruptcy Code, of the
application of Section 1111(b)(2) of the Bankruptcy Code,
and/or any borrowing or grant of a security interest under
Section 364 or use of cash collateral under Section 363 of the
Bankruptcy Code by any Company, as debtor in
possession. Notwithstanding anything in this
Section 2.2(d) to the contrary but subject to the other
provisions of this Agreement (including Section 2.2(c)), in
any Proceeding involving any Company, a Subordinated Creditor
may exercise rights and remedies generally available to
holders of unsecured claims against any of the Companies and
otherwise in accordance with the Subordinated Debt Documents
and applicable law. In furtherance of the foregoing, each
Subordinated Creditor shall be entitled to file any pleadings,
objections, motions or agreements which assert rights or
interests available to unsecured creditors of the Companies
arising under either the Bankruptcy Code or applicable
non-bankruptcy law, in each case if not otherwise in
contravention of the express terms of this Agreement,
including any right to object to the sale or use of property
under Section 363 of the Bankruptcy Code and/or any financing
under Section 364 of the Bankruptcy Code solely to the extent
such objection could be asserted by the holder of an unsecured
claim against any Company.
(e) Each
Subordinated Creditor agrees to execute, verify, deliver and
file any proofs of claim in respect of the Subordinated Debt
requested by Agent in connection with any
such
Proceeding and hereby irrevocably authorizes, empowers and
appoints Agent its agent and attorney-in-fact to execute,
verify, deliver and file such proofs of claim upon the failure
of any Subordinated Creditor promptly to do so prior to ten
(10) days before the expiration of the time to file any such
proof of claim; provided
, that Agent shall have no obligation to execute, verify,
deliver, and/or file any such proof of claim.
(f) The
Senior Debt shall continue to be treated as Senior Debt and
the provisions of this Agreement shall continue to govern the
relative rights and priorities of Senior Lenders and the
Subordinated Creditor even if all or part of the Senior Debt
or the security interests securing the Senior Debt are
subordinated, set aside, avoided, invalidated or disallowed in
connection with any such Proceeding and this Agreement shall
be reinstated if at any time any payment of any of the Senior
Debt is rescinded or must otherwise be returned by any holder
of Senior Debt or any representative of such
holder.
(g) The
parties acknowledge and agree that (i) the claims and
interests of Agent and the Senior Lenders under the Senior
Debt Documents are substantially different from the claims and
in
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