EXHIBIT 10.1
<PAGE>
NOVEMBER 2006 WAIVER AND AMENDMENT AGREEMENT
THIS NOVEMBER 2006 WAIVER AND AMENDMENT AGREEMENT (this
"AGREEMENT") is
made as of November
29, 2006, among Galaxy Energy Corporation, a Colorado
corporation ("GALAXY"
or the "COMPANY"), the
Subsidiaries (as
defined below),
HFTP Investment LLC ("HFTP"), Gaia Offshore Master Fund, Ltd.
("GAIA"), Caerus
Fund Ltd. ("CAERUS"),
Promethean
II Master, L.P. ("MASTER"), AG Offshore
Convertibles, Ltd.
(including as successor to AG Domestic Convertibles, L.P.,
"AG OFFSHORE") and Leonardo, L.P. ("LEONARDO" and, collectively
with HFTP, Gaia,
Caerus, Master and AG Offshore, the "BUYERS").
W I T N E S S E T
H:
WHEREAS, the Company and certain of the Buyers (collectively, the
"2004
BUYERS") entered into that certain Securities Purchase Agreement (as amended,
restated, supplemented
or otherwise
modified and in effect
from time to time,
the "2004 PURCHASE
AGREEMENT"), dated as
of August 19, 2004, pursuant to which
the Company issued to
the 2004 Buyers senior
secured convertible
notes (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 "2004
NOTES"), dated August 19, 2004, in an aggregate original
principal amount of
$15,000,000 and warrants (such warrants, together with any
warrants 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
"WARRANTS" and the shares of Common Stock issuable upon exercise of
the Warrants
being referred to
herein as the "WARRANT
SHARES"), dated August
19, 2004, to
purchase initially an
aggregate of 5,194,806
shares (subject to
adjustment as
provided therein) of
the common stock, par
value $0.001 per share (the "COMMON
STOCK"), of the
Company, and subsequently issued to the 2004 Buyers
senior
secured convertible
notes, dated October 27, 2004,
in an aggregate
original
principal amount of $5,000,000, none of which remain
outstanding;
WHEREAS, the Company, Dolphin Energy Corporation, a Nevada corporation
("DOLPHIN"), Pannonian
International, Ltd., a Colorado corporation ("PANNONIAN"
and, together with Dolphin, the "SUBSIDIARIES"), and Promethean
Asset Management
L.L.C., a Delaware limited liability company, as collateral agent
(including any
successors to Promethean Asset Management L.L.C., "AGENT"), entered into that
certain Security Agreement, dated as of August 19, 2004 (as
amended, restated,
supplemented or
otherwise modified and in effect from time to time, the
"SECURITY AGREEMENT"),
in connection with the
2004 Buyers'
acquisition of the
2004 Notes;
WHEREAS, the Company entered into that certain letter agreement,
dated
January 25,
2005, with the 2004 Buyers with respect to the 2004 Notes (the
"LETTER AGREEMENT");
WHEREAS, the Company
entered into that certain Securities Purchase
Agreement (the "2005 SUBORDINATED NOTE PURCHASE Agreement"), dated as of March
1, 2005, with the parties set forth therein (the "2005 SUBORDINATED
NOTEHOLDERS"),
pursuant to which the
Company
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issued to the 2005 Subordinated Noteholders, among other things, senior
subordinated
convertible notes (as
amended by that
certain Waiver and First
Amendment to March 2005 Notes and Warrants, dated as of May 31, 2005, and in
effect as of the date thereof, without amendment or modification
thereafter, the
"2005 SUBORDINATED
NOTES"), and, in connection therewith, entered into that
certain
Subordination
Agreement, dated
as of May 31, 2005, with the
Subsidiaries, the 2005 Subordinated Noteholders, certain of the
Buyers and Agent
(the "2005 SUBORDINATION AGREEMENT");
WHEREAS, the Company
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" and, collectively
with the 2004
Purchase Agreement,
the "PURCHASE
AGREEMENTS"), 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" and,
collectively with the 2004 Notes, the "NOTES"; the shares of
Common
Stock 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 (the
"OVERRIDING
ROYALTY INTEREST") pursuant to those certain
Conveyances of
Overriding
Royalty Interests, dated May 31, 2005 (the "ORRI
DOCUMENTS");
WHEREAS, the Company
executed and delivered a Mortgage, Security
Agreement, Assignment, Financing Statement and Fixture Filing to
DAR, LLC, dated
effective January
14, 2004, covering properties subject to the Security
Agreement (the "DAR
MORTGAGE"), but did
not list the DAR Mortgage as a Lien in
the Purchase Agreements;
WHEREAS, the Company has since received and properly filed a
release of
the DAR Mortgage;
WHEREAS, the Company
entered into that
certain Waiver and
Amendment,
dated as of December 1, 2005, with the Buyers (the "2005 WAIVER AND
AMENDMENT");
WHEREAS, the Company
entered into that
certain Waiver and
Agreement,
dated as of July 7, 2006, with the Buyers (the "2006 WAIVER AND
AGREEMENT");
WHEREAS, the Company
entered into that certain Securities Purchase
Agreement, dated as of
April 25, 2006 (the "APRIL 2006 SUBORDINATED NOTE
PURCHASE AGREEMENT"),
and that certain Securities Purchase Agreement, dated as
of June 20, 2006 (the "JUNE 2006 SUBORDINATED NOTE PURCHASE AGREEMENT" and,
collectively with the April 2006 Subordinated Note Purchase
Agreement, the "2006
SUBORDINATED NOTE
PURCHASE AGREEMENTS";
the 2006 Subordinated Note Purchase
Agreements and the 2005 Subordinated Note Purchase Agreement being collectively
referred to herein as the "SUBORDINATED NOTE PURCHASE AGREEMENTS"), with the
parties named therein (the "2006 SUBORDINATED NOTEHOLDERS" and, collectively
with the 2005 Subordinated Noteholders, the "SUBORDINATED NOTEHOLDERS"),
pursuant to which the Company issued to the 2006 Subordinated
Noteholders, among
other things, subordinated
2
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convertible debentures
(the "2006
SUBORDINATED NOTES"
and, together with
the
2005 Subordinated
Notes, the "CONVERTIBLE SUBORDINATED NOTES"; all of the
Indebtedness of the Company outstanding under the Convertible
Subordinated Notes
being referred to as the "OUTSTANDING CONVERTIBLE SUBORDINATED INDEBTEDNESS")
and, in connection therewith, entered into those certain Subordination
Agreements, dated as of April 25, 2006 and June 20, 2006,
respectively, with the
Subsidiaries, the 2006 Subordinated Noteholders, certain of the
Buyers and Agent
(the "2006
SUBORDINATION
AGREEMENTS" and, together with the 2005 Subordination
Agreement, the "SUBORDINATION AGREEMENTS");
WHEREAS, the Company
and Dolphin have
entered into a letter of intent
with PetroHunter Energy Corporation, a Maryland corporation ("PETROHUNTER"),
with respect to the proposed sale (the "PRB SALE") to PetroHunter
by the Company
and Dolphin of all of their Leased Real Property in the Powder
River Basin of
Wyoming and Montana,
as more specifically
set forth on SCHEDULE
1 hereto (the
"PRB ASSETS");
WHEREAS, the Notes are
collateralized by,
among other things, the PRB
Assets;
WHEREAS, the
consent of the Buyers
is required
for the Company and
PetroHunter to consummate the PRB Sale;
WHEREAS, the
Company has incurred Indebtedness (as defined in the
Notes) in the form of obligations issued, undertaken or assumed as the
deferred
purchase price of
property or services
consisting of account
trade payables
("ACCOUNTS
PAYABLE")
exceeding an
aggregate among the Company and the
Subsidiaries of $2,500,000 (the "ACCOUNTS PAYABLE DEFAULT"), resulting in the
breach of Section 4(n) of the 2004 Purchase Agreement, Section 4(p) of the 2005
Purchase Agreement,
Section 12 of each of the 2004 Notes and Section 11 of each
of the 2005 Notes,
resulting in a Triggering Event (as defined in the 2004
Notes) under Sections
3(b)(vii) and
3(b)(viii)
of each of the 2004
Notes, a
Triggering Event (as
defined in the 2005
Notes) under Sections 3(a)(i)(F),
3(a)(i)(G) and
3(a)(i)(H)
of each of the 2005
Notes, an Event of
Default (as
defined in the 2004 Notes) under Sections 11(a)(ii) and 11(a)(iii) of each of
the 2004 Notes, and an
Event of Default (as
defined in the 2005
Notes) under
Sections 10(a)(ii) and
10(a)(iii) of each of the 2005 Notes, which would (among
other things) entitle
each of the Buyers, as
holders of the Notes,
to require
the Company to redeem
all or any portion of
the Principal
(as defined in the
Notes) of each of the Notes held by such Buyer at a price
equal to the
greater
of (i) the sum of (x) 125% of such Principal (the "TRIGGERING EVENT REDEMPTION
AMOUNT") plus (y) the
Additional Amount (as
defined in the Notes) with respect
to such Principal and (ii) the product of (A) the Conversion Rate
(as defined in
the Notes) in effect at such time as such Buyer delivers a Notice of
Redemption
at Option of Holder (as defined in the 2004 Notes) or a Notice of
Redemption at
Option of Holder Upon
Triggering
Event (as defined in the 2005 Notes), as
applicable, multiplied
by (B) the
Weighted Average Price (as defined in the
Notes) of the
Common Stock on the Trading Day (as defined in the Notes)
immediately preceding such Triggering Event;
WHEREAS, to induce
the Buyers to waive
the Triggering
Event and the
Event of Default described in the foregoing recital, as well as the breaches of
the Purchase Agreements resulting from the Company's failure to
disclose the DAR
Mortgage in the Purchase Agreements (such breaches being
collectively
referred
to herein as the "DAR MORTGAGE DISCLOSURE DEFAULT"), the Company has agreed to
amend the Notes and Warrants as provided herein;
3
<PAGE>
WHEREAS, to induce the
Buyers to consent to the PRB Sale, the Company
has agreed
to (i) issue an aggregate of 10,000,000 shares (subject to
proportionate
adjustment for stock
splits, stock
dividends or similar
events
occurring after the
date hereof)
of Common Stock to the Buyers pursuant to
automatic Cashless
Exercises (as defined in the Warrants) of the Warrants,
pursuant to Section 2(e) of each of the Warrants and Section 6(d) hereof,
upon
consummation of the
PRB Sale, (ii)
transfer an aggregate
of 1,000,000
shares
(subject to
proportionate
adjustment for stock
splits, stock dividends or
similar events
occurring after the date hereof) of common stock, par value
$0.001 per share, of PetroHunter ("PETROHUNTER COMMON STOCK") to the Buyers
by
directing PetroHunter
to issue such shares directly to the Buyers in connection
with the PRB Sale,
(iii) in the event
that an Approved
PRB Sale (as
defined
below) is not consummated on or before December 31, 2006,
issue an aggregate
of
1,000,000 shares
(subject to proportionate adjustment for stock splits,
stock
dividends or similar
events occurring after the date hereof) of Common
Stock
pursuant to Section 6(c) hereof, unless certain conditions are satisfied,
and
(iv) in the event that
an Approved
PRB Sale is not
consummated
on or before
January 31,
2007, issue an aggregate of 1,000,000 shares of Common Stock
(subject to
proportionate
adjustment for stock
splits, stock dividends or
similar events occurring after the date hereof) pursuant to Section
6(c) hereof,
unless certain conditions are satisfied; and
WHEREAS,
contemporaneously with
the execution
and delivery of this
Agreement, the parties
hereto are executing a
Registration Rights
Agreement,
relating to the
registration of
certain of the shares of Common Stock that may
be issued by the Company hereunder (the "NEW GALAXY REGISTRATION RIGHTS
AGREEMENT").
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. DEFINED
TERMS.
a. "APPROVED PRB
SALE" means the
PRB Sale; provided that, in
order for such PRB Sale to qualify as an "APPROVED PRB SALE," (i) the PRB Sale
shall be consummated
no later than
February 28, 2007,
(ii) the Company
shall
receive consideration of at least $45,000,000 pursuant to such PRB
Sale (subject
to adjustment pursuant
to the definitive
purchase agreement
pertaining to the
PRB Sale to be
entered into by and among the Company and/or Dolphin and
PetroHunter and/or
its operating subsidiary, but in any event, (A) such
adjustment shall not
reduce the aggregate
consideration to be
received by the
Company by more than
$2,000,000, and (B)
such consideration
shall include at
least an aggregate
of 1,000,000 shares of PetroHunter Stock (subject to
proportionate
adjustment for stock
splits, stock
dividends or similar
events
occurring after the date hereof), but not more than $25,000,000 of PetroHunter
Stock), (iii) all of
the PRB Sale Related
Transactions
shall be consummated
concurrently with such PRB Sale, and (iv) the Company shall be, and
shall at all
times hereafter
have been,
in compliance in all respects with the terms
and
conditions of this Agreement, the Purchase Agreements,
the Notes, the
Warrants
and the other Transaction Documents (as defined below).
b. "PRB SALE RELATED
TRANSACTIONS"
means, collectively, the
following
transactions: (i) the
issuance by the Company to the Buyers of an
aggregate of
10,000,000
shares of Common Stock (subject to proportionate
adjustment for stock splits, stock dividends or
4
<PAGE>
similar events
occurring after the date hereof), pro rata based upon the
relative outstanding
principal amounts of
the Notes held by each of the Buyers
immediately prior to
the execution hereof (which principal amounts are, for the
avoidance of doubt,
set forth on SCHEDULE 2 attached hereto and which number of
shares so issuable to each Buyer are, for the avoidance of doubt, set forth on
SCHEDULE 3 attached
hereto), pursuant to
automatic Cashless
Exercises of the
Warrants pursuant to
Section 2(e) of each
of the Warrants
and Section 6(d)
hereof, and the credit
of such aggregate
number of shares of
Common Stock to
which each such Buyer
shall be entitled to such Buyer's or its designee's
balance account with The Depository Trust Company ("DTC") through
DTC's Deposit
Withdrawal Agent
Commission
System; (ii) the transfer by the Company of an
aggregate of 1,000,000
shares (subject to
proportionate
adjustment for
stock
splits, stock
dividends or similar
events occurring after
the date hereof) of
PetroHunter Common
Stock to the
Buyers, pro rata based upon the relative
outstanding principal
amounts of the Notes held by each of the Buyers as of the
date hereof
(which number of shares so issuable to each Buyer are, for the
avoidance of doubt, set forth on SCHEDULE 3 hereto), by causing PetroHunter to
directly issue such
shares to the Buyers in connection with the Approved PRB
Sale, and the delivery to each of the Buyers of a duly executed stock
certificate
representing the
shares of PetroHunter
common stock so issued
to
each such Buyer; (iii) the execution and delivery by PetroHunter
and each of the
Buyers of a Registration Rights Agreement (A) providing
that, no later than one
hundred twenty
(120) days after the date of the PRB Sale, the shares of
PetroHunter common stock so issued to each of the Buyers shall be
(I) registered
for public resale
pursuant to a
registration statement
that has been declared
effective by the SEC, (II) freely tradable, without restriction of any type,
on
the Alternative
Investment Market of the London Stock Exchange pursuant to Rule
904 of Regulation
S under the 1933 Act or (III) freely tradable, without
restriction of any
type, in the United States on the OTC Bulletin Board and (B)
in a form acceptable
to each of the Buyers, in its sole discretion, and
acknowledged in
writing by PetroHunter
as acceptable to it by no later than
December 14, 2006;
(iv) the repayment
of all of the
Outstanding
Convertible
Subordinated
Indebtedness, in cash
and/or shares of
PetroHunter Common
Stock
received by the Company as consideration in PRB Sale having an aggregate
value
of not more than
$17,696,302.54
(subject to appropriate adjustment under the
Convertible
Subordinated Notes for
any change in the
prime rate from the date
hereof through February 28, 2007), and the retirement and
cancellation of all of
the Convertible Subordinated Notes; and (v) the concurrent or prior
amendment to
the ORRI Documents,
and the filing of the amended ORRI Documents as directed by
the Buyer, to provide
that in the event of
an Approved PRB Sale,
PetroHunter
shall be deemed to be an "AFFILIATE OF GRANTOR" for purposes of Section 14 of
any of the ORRI Documents.
c. "PRB SALE
DEADLINE" means February 28, 2007.
d. "TRANSACTION
DOCUMENTS" means, collectively, the Transaction
Documents (as
defined in the 2004 Purchase Agreement) and the Transaction
Documents (as defined in the 2005 Purchase Agreement), including
this Agreement,
the New Galaxy Registration Rights Agreement, the Letter Agreement, the
Subordination Agreements, the 2005 Waiver and Amendment and
the 2006 Waiver and
Agreement.
Each capitalized term
used herein, and not
otherwise defined,
shall have the
meaning ascribed thereto in the 2005 Purchase Agreement.
5
<PAGE>
2. INCREASE IN
PRINCIPAL AND AMENDMENT OF NOTES.
a. For
purposes of this
Section 2, each
capitalized term
used
herein, and not
otherwise defined,
shall have the meaning
ascribed thereto in
the Notes.
b. Each of
the Buyers, severally
and not jointly, hereby agrees
with the Company that as of the date hereof, the Principal of each of the
Notes
held by such Buyer shall increase to an amount equal to the
difference
between
(i) 125% of the Principal of such Note (equal to the Triggering
Event Redemption
Amount with respect thereto) as of the end of the day on October
31, 2006, minus
(ii) any Principal of
such Note redeemed by
the Company after October 31, 2006
but prior to the date
hereof in accordance with such Note (as set forth on
SCHEDULE 2
attached hereto). For avoidance of doubt, each of the Buyers,
severally and not
jointly, hereby agrees
with the Company that, as a result of
the preceding
sentence, immediately following the execution hereof, the
Principal of each of
the Notes held by such Buyer shall be the amount set forth
for such Note on SCHEDULE 2 attached hereto.
c. Each of
the Buyers, severally
and not jointly, hereby agrees
with the Company that the definition of "MATURITY DATE" under:
(i) each of the
2004 Notes held by such Buyer is hereby
amended to mean "the
earliest of (A) the date of consummation of the PRB Sale
(as defined in the November 2006 Waiver and Amendment (as defined
herein)), (B)
April 29, 2007,
and (C) such date as
all amounts due under this Note have been
fully paid"; and
(ii) each of
the 2005 Notes held by such Buyer is hereby
amended to mean "the earliest of (A) the date of consummation of the PRB Sale,
(B) May 31, 2010, (C) the date of a Maturity Date Acceleration
Event (as defined
herein), and (D) such
date as all amounts
due under this Note
have been fully
paid."
d. Each of the Buyers, severally and not
jointly, hereby agrees
with the Company that
the first sentence of
Section 4(b) of each
of the Notes
held by such Buyer is hereby amended and restated in its entirety
as follows:
"(b) OPTIONAL
REDEMPTION UPON CHANGE OF CONTROL. In addition
to the rights of the Holder under Section 4(a), upon a Change
of Control (as defined below) of the Company, the Holder shall
have the right, at the Holder's option, to require the Company
to redeem all or a portion of the Principal at a price equal
to 100% (or
115% in the case of an event satisfying the
definition of Change of Control pursuant to subsection
(iii)
below that is not pursuant to a definitive written agreement
executed by the Company and approved by the Company's Board of
Directors) of the
Principal plus the Interest Amount with
respect to such Principal (the "CHANGE OF CONTROL
REDEMPTION
PRICE")."
e. Each of the Buyers, severally and not jointly,
hereby agrees
with the Company that the definition of "TRIGGERING EVENT" set
forth in:
6
<PAGE>
(i) Section 3(b) of
each of the 2004 Notes held by such Buyer
is hereby amended
by adding new paragraphs (ix) and (x) immediately after
paragraph (viii) thereof, such paragraphs to read in their entirety
as follows:
"(ix) any failure of the Company to pay any Principal of this
Note, when and as due; or
(x) the Company breaches, or does not comply with, any of
the
provisions of that certain November 2006 Waiver and
Amendment
Agreement,
dated as of November
29, 2006, by and among the
Company, its
Subsidiaries and the Buyers (as defined therein)
(the "NOVEMBER 2006 WAIVER AND AMENDMENT")."
and;
(ii) Section 3(a)(i)
of each of the 2005
Notes held by such
Buyer is hereby amended by adding new paragraphs (J) and (K)
immediately
after
paragraph (I) thereof, such paragraphs to read in their entirety as
follows:
"(J) any failure of the Company to pay any Principal of this
Note, when and as due; or
(K) the Company breaches, or does not comply with, any of
the
provisions of that certain November 2006 Waiver and
Amendment
Agreement, dated as of
November 29,
2006, by and among the
Company, its
Subsidiaries and the Buyers (as defined therein)
(the "NOVEMBER 2006 WAIVER AND AMENDMENT")."
f. Each of the Buyers, severally and not
jointly, hereby agrees
with the Company that the definition of "EVENT OF DEFAULT" set
forth in:
(i) Section 11(a) of each of the 2004 Notes held by such Buyer
is hereby amended by
adding a new clause (ix) immediately after clause (viii)
thereof, such clause to read in its entirety as follows:
"(ix) any Subordinated
Noteholder (as defined in the November
2006 Waiver and
Amendment) exercises
any rights or
remedies
that it may have under any Convertible Subordinated Note (as
defined in the November 2006 Waiver and Amendment) or any of
the Subordinated Note
Purchase Agreements
(as defined in the
November 2006 Waiver
and Amendment) on
account of any breach
of any representation,
warranty, covenant or other term or
condition of, or any "Event of Default," "Triggering Event" or
other default under, any of the Convertible Subordinated Notes
or any of the Subordinated Note Purchase Agreements, relating
to, or resulting from (or any Subordinated Noteholder
otherwise breaches
or violates any of the Subordination
Agreements in connection with), the Accounts Payable Default
(as defined in the November 2006 Waiver and Amendment), the
2005 Subordinated
Notes Accounts Payable
Default (as defined
in the November 2006 Waiver and Amendment), the DAR Mortgage
Disclosure Default (as defined in the November 2006 Waiver and
Amendment), the
Subordinated
Note DAR Mortgage Disclosure
Default (as
defined in the
7
<PAGE>
November 2006
Waiver and Amendment), or the execution
and
delivery of the November 2006 Waiver and Amendment and the
consummation of the transactions contemplated thereby."
and;
(ii) Section
10(a) of each of the 2005 Notes held by such
Buyer is hereby
amended by adding a new clause (ix) immediately after clause
(viii) thereof, such clause to read in its entirety as follows:
"(ix) any Subordinated
Noteholder (as defined in the November
2006 Waiver and
Amendment) exercises
any rights or
remedies
that it may have under any Convertible Subordinated Note (as
defined in the November 2006 Waiver and Amendment) or any of
the Subordinated Note
Purchase Agreements
(as defined in the
November 2006 Waiver
and Amendment) on
account of any breach
of any representation,
warranty, covenant or other term or
condition of, or any "Event of Default," "Triggering Event" or
other default under, any of the Convertible Subordinated Notes
or any of the Subordinated Note Purchase Agreements relating
to, or resulting from (or any Subordinated Noteholder
otherwise breaches
or violates any of the Subordination
Agreements in connection with), the Accounts Payable Default
(as defined in the November 2006 Waiver and Amendment), the
2005 Subordinated
Notes Accounts Payable
Default (as defined
in the November 2006 Waiver and Amendment), the DAR Mortgage
Disclosure Default (as defined in the November 2006 Waiver and
Amendment), the
Subordinated
Note DAR Mortgage Disclosure
Default (as
defined in the November 2006 Waiver and
Amendment), or the execution and delivery of the November 2006
Waiver and Amendment and the consummation of the
transactions
contemplated thereby."
3.
AMENDMENT OF WARRANTS.
a. For purposes of this Section 3, each capitalized term used
herein, and not
otherwise defined,
shall have the meaning
ascribed thereto in
the Warrants.
b. Each of
the Buyers, severally and not jointly,
hereby agrees
with the Company that Section 1(b) of each of the Warrants held by
such Buyer is
hereby amended by adding the following definitions to read in their
entirety as
follows:
""APPROVED PRB SALE"
means the PRB Sale;
provided that,
in
order for such PRB Sale to qualify as an "APPROVED PRB SALE,"
(i) the PRB Sale shall
be consummated
no later than the
PRB
Sale Deadline
(as defined
herein), (ii) the Company shall
receive consideration of at least $45,000,000 pursuant to such
PRB Sale (subject to
adjustment
pursuant to the
definitive
purchase agreement
pertaining
to the PRB Sale to be
entered
into by and among the Company and/or Dolphin and PetroHunter
and/or its operating
subsidiary, but in any
event, (A) such
adjustment shall not reduce the aggregate consideration to be
received by the Company by more than $2,000,000, and (B) such
consideration shall include at
8
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least an aggregate of 1,000,000 shares (subject to
proportionate
adjustment for stock splits, stock dividends or
similar events
occurring after the date hereof) of common
stock, par value
$0.001 per
share, of PetroHunter Energy
Corporation, a Maryland corporation ("PETROHUNTER STOCK"), but
not more than $25,000,000 of PetroHunter Stock), (iii) the PRB
Sale Related Transactions (as defined in that certain November
2006 Waiver and Amendment Agreement, dated as of November 29,
2006, among the Company, its Subsidiaries and the Buyers named
therein (the "NOVEMBER
2006 WAIVER AND
AMENDMENT") shall
be
consummated
concurrently with
such PRB Sale, and (iv) the
Company shall be, and
shall at all times after November 29,
2006 have been, in
compliance in all
respects with the terms
and conditions of this
Warrant, the November
2006 Waiver and
Amendment and the other Transaction Documents (as defined in
the November 2006 Waiver and Amendment);
"PRB SALE" means the sale to PetroHunter Energy Corporation, a
Maryland corporation
("PETROHUNTER"),
by the Company and
Dolphin Energy
Corporation,
a Nevada corporation and
wholly-owned Subsidiary of the Company, of all of their Leased
Real Property in the Powder River Basin of Wyoming and Montana
as more specifically
set forth on SCHEDULE
1 to the November
2006 Waiver and Amendment;
"PRB SALE DEADLINE" means February 28, 2007."
c. Each of the Buyers, severally and not
jointly, hereby agrees
with the Company that Section 1(b) of each of the Warrants held by
such Buyer is
hereby amended to
restate the following
definition to read in
its entirety as
follows:
""EXPIRATION DATE" means the date that is the later of (A) the
date that is three (3) years after the Warrant Date (as defined in Section
14)
or, if such date does not fall on a Business Day, then the next Business Day,
and (B) if this Warrant was issued in replacement of another
Warrant pursuant to
Section 3(b) of such other Warrant, then the date which is 20
Trading Days after
the date on which a
Registration Statement
(as defined in the Registration
Rights Agreement)
covering the resale of all of the
Warrant Shares has been
declared effective by the Securities and Exchange Commission in accordance with
the terms of the Registration Rights Agreement; provided, however, that in the
event that (i) an Approved PRB Sale is not consummated by the PRB Sale
Deadline
or (ii) the PRB Sale is terminated or abandoned and publicly
disclosed as such
prior to the PRB Sale Deadline and the Company has contemporaneously delivered
irrevocable written
notice to each of the Buyers that the limited consent
provided under
Section 6(a) of the
November 2006 Waiver and Amendment has been
terminated, then the Expiration Date shall be extended for a period
equal to the
number of days from
November 1, 2006 until the earlier of (x) the PRB Sale
Deadline or (y)
the date of such termination or abandonment and public
disclosure of such and delivery of such irrevocable notice."
9
<PAGE>
4. TERMINATION
OF LIENS AND SECURITY INTEREST DOCUMENTS.
a. For purposes of this Section 4, each
capitalized
term used
herein, and not
otherwise defined,
shall have the meaning
ascribed thereto in
the Security Agreement.
b. Each of the Buyers,
severally and not
jointly, hereby
agrees
that, upon the
fi
