EXHIBIT 10.4

 

NON-RECOURSE ASSIGNMENT

 

YA Global Investments, L.P., a Cayman Islands exempt limited partnership (“YA
Global”), hereby sells, assigns, and transfers to Queensbury, Inc. (the
“Queensbury”), without recourse to YA Global, a portion of the secured
convertible debentures (the “Original Debentures”) and a portion of the right of
YA Global to receive certain payments of sales from certain wells (the “Royalty
Interest”), each issued by Westport Energy Holdings, Inc. (“Westport”) to YA
Global pursuant to the securities purchase agreement between YA Global and
Westport dated February 3, 2014 (the “Westport SPA”) in such amount as set forth
on Exhibit A attached hereto (such portion being assigned hereunder, the
“Assigned Debt”) for a purchase price in the amount of $500,000 (the “Purchase
Price”) in accordance with the terms and conditions of this assignment agreement
(the “Assignment”).

 

1. Representations and Warranties.

 

(a) YA Global represents and warrants solely the following, all as determined in
accordance with YA Global’s books and records:

 

(i)Exhibit A annexed hereto and incorporated herein by reference sets forth the
outstanding principal and accrued and unpaid interest owed in connection with
the Original Debentures as of the date hereof, and the amount of the Original
Debentures being assigned to Queensbury;     (ii)Immediately prior to the
assignment contemplated herein, YA Global owned and controlled the Original
Debentures and had the right to service and collect the same; and    
(iii)Immediately prior to assignment contemplated herein, YA Global had good and
valid title to the Original Debentures and the right to collect all amounts owed
pursuant thereto.

 

2. Issuance of Security for Assigned Debt. Contemporaneously with the execution
and delivery of this Assignment, YA Global shall deliver to Westport
instructions (a) to record the transfer of the Assigned Debt to Queensbury, and
(b) to issue and deliver to Queensbury a secured convertible debenture payable
to Queensbury in an original principal amount equal to the amount of the
Assigned Debt (the “Participation Debenture”). Upon issuance of the
Participation Debenture to Queensbury, Queensbury shall pay the Purchase Price
by wire transfer of immediately available funds to YA Global or its designee at
the account designated by YA Global for such purpose.

 

3. Distribution of Payments. All payments made by or on behalf of Westport to YA
Global or Queensbury (which for the avoidance of doubt shall not include a
reduction of the obligations owed by Westport under the Original Debentures or
the Participation Debenture as a result of conversions of such debentures into
shares of Westport’s stock) in connection with the Original Debentures, the
Participation Debenture, the Westport SPA, or any other transaction document
entered into in connection therewith or providing collateral in support thereof
(collectively, the “Financing Arrangements”), including without limitation,
payments received from Westport, and all amounts received by YA Global or
Queensbury from the proceeds of any collateral securing the Financing
Arrangements (collectively, the “Collateral”), shall be distributed as follows:

 

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(a) Within two business days following the receipt of a payment, the party that
received such payment (the “Receiving Party”) shall notify the other party
hereto (the “Non-Receiving Party”) in writing (a “Payment Notice”) of (i) the
amount of such payment, and (ii) the current balance owed by Westport to the
Receiving Party in connection with the Financing Arrangements, which balance
shall specify the principal balance, accrued and unpaid interest, and with
respect to YA Global only, any unreimbursed costs and expenses incurred in
connection with the Financing Arrangements (“Costs and Expenses”).

 

(b) Within three business days following the receipt of a Payment Notice, the
Non-Receiving Party shall provide the Receiving Party with a written notice (a
“Balance Notice”, and together with the Payment Notice, the “Notices“) setting
forth the current balance owed by Westport to the Non-Receiving Party in
connection with the Financing Arrangements, which balance shall specify the
principal balance, accrued and unpaid interest, and, with respect to YA Global
only, Costs and Expenses.

 

(c) Within three business days following the Receiving Party’s receipt of a
Balance Notice, the Receiving Party shall distribute or apply, as applicable,
all or a portion of the corresponding payment as follows:

 

(i) First, to YA Global in reimbursement for YA Global’s Costs and Expenses;

 

(ii) Second, to the Non-Receiving Party and the Receiving Party their respective
pro rata shares of such payment, based upon their respective shares of the
aggregate balance of the Financing Arrangements, and

 

(iii) Third, to any other amounts owed to YA Global under other financing
arrangements between itself and Westport.

 

(d) The Receiving Party shall apply the portion of any payments retained in
accordance with this Paragraph 3 to the outstanding balance of the obligations
owed by Westport to the Receiving Party in connection with the Financing
Arrangements.

 

(e) In the event that a court of competent jurisdiction shall adjudge that any
amount received and distributed by a Receiving Party is to be repaid or
disgorged, then the Non-Receiving Party shall repay to the Receiving Party the
amount thereof previously received by the Non-Receiving Party and so adjudged to
be repaid or disgorged.

 

4. Administration of the Financing Arrangements.

 

(a) Queensbury hereby irrevocably designates and appoints YA Global as
collateral agent for the sole purpose of perfecting Queensbury’s security
interest in any collateral granted to secure the Participation Debenture and for
administering and enforcing the Financing Arrangements, including without
limitation, the Participation Debenture, as set forth herein, and irrevocably
authorizes YA Global to take such action on its behalf under the provisions of
this Assignment and the Financing Arrangements and to exercise such powers and
perform such duties in connection with the Financing Arrangements and the
Collateral as YA Global deems appropriate in its sole and exclusive discretion.

 

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(b) YA Global shall administer the Financing Arrangements in its sole and
exclusive discretion, as it deems appropriate and may take such steps, and
engage in such acts as YA Global determines in its sole and exclusive discretion
to be appropriate. YA Global shall not have any requirement to consult with
Queensbury in connection with the administration of the Financing Arrangements
and Queensbury shall not have right to vote on or otherwise direct, influence,
or have input into any action, inaction, or other determination to be made by YA
Global. YA Global may, in its sole and exclusive discretion, amend and modify
the Financing Arrangements, waive defaults, events of default and/or termination
events, release Collateral or accept substitutions thereof, enforce the
Financing Arrangements, enter into forbearance agreements, and/or otherwise
administer the Financing Arrangements as if Queensbury did not participate in
the Financing Arrangements, provided, however, that YA Global shall not amend or
modify the terms and conditions of the Participation Debenture without the prior
consent of Queensbury.

 

(c) YA Global’s sole and exclusive responsibility to Queensbury under this
Assignment is and shall be in accordance with the express provisions hereof. No
other duty, whether express or implied, or fiduciary relationship shall be
imposed upon YA Global. Queensbury shall not have any claim against YA Global or
any employee, officer, representative, affiliate, or agent of YA Global, except
for actions of YA Global which constitute (i) gross negligence, or (ii) acts
taken in bad faith.

 

(d) Except as permitted in Paragraph 5 below, Queensbury has no independent
right to enforce the Participation Debenture against Westport nor the right to
enforce any of the documents, instruments, and/or agreements evidencing the
Financing Arrangements and/or the Collateral, or to demand, accelerate, or
collect any amounts owed under the Participation Debenture or the Financing
Arrangements, nor may Queensbury maintain any independent action against
Westport to recover all or any portion of those funds, its sole rights and
interest being a participant in the Financing Arrangements established,
administered, and enforced by YA Global.

 

(e) Queensbury agrees not to interfere with YA Global’s administration and
enforcement of the Financing Arrangements. Queensbury further agrees to
cooperate with YA Global’s administration and enforcement of the Financing
Arrangements, and to render all such reasonable assistance as YA Global may
request in connection therewith. Such assistance and cooperation shall include,
without limitation, providing YA Global with all such authorizations,
documentation, and consents as may be necessary, useful, or desirable to YA
Global and, at the request of YA Global, joining as a party to any enforcement
action or proceeding.

 

5. Conversion of Participation Debenture. Notwithstanding anything contained
herein to the contrary, Queensbury shall at all times have the right to convert
the outstanding balance of the Participation Debenture into common shares of
Westport in accordance with the terms and conditions of the Participation
Debenture and applicable law and Queensbury shall have the right to enforce and
collect any payments owed to it under the Royalty Interest assigned to it
hereunder.

 

6. Liquidation of the Financing Arrangements.

 

(a) The exercise by YA Global of its rights as a creditor looking towards the
collection of the obligations owed pursuant to the Financing Arrangements,
whether through the appointment of a receiver, or otherwise (a “Liquidation”)
shall be conducted by YA Global with the advice and assistance of YA Global’s
counsel, in a manner determined by YA Global in its sole and exclusive
discretion.

 

(b) All proceeds of any Collateral and all other amounts received by YA Global
on account of any Liquidation shall be distributed in the manner set forth in
Paragraph 3 above.

 

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7. Insolvency Proceedings. In the event that any voluntary or involuntary case
or proceeding under 11 U.S.C. §§ 101, et seq. (the “Bankruptcy Code”) shall be
commenced by or against Westport (an “Insolvency Proceeding”), Queensbury hereby
agrees that:

 

(a) It shall not seek any relief from, or modification of, the automatic stay as
provided in § 362 of the Bankruptcy Code or seek or accept any form of “adequate
protection” under any or all of §§ 362, 363 and 364 of the Bankruptcy Code,
except super-priority administrative expense claims for diminution of value (the
“Priority Claims”), which Priority Claims shall be subordinated to any similar
Priority Claims granted to YA Global in accordance with, and subject to, the
terms of this Assignment;

 

(b) It shall not seek to appoint a trustee or examiner under § 1104 of the
Bankruptcy Code or to convert (or support any other person in converting) such
case or proceeding under § 1112 of the Bankruptcy Code;

 

(c) It shall not oppose or object (or support any other person in opposing or
objecting) to any “adequate protection” sought by or granted to YA Global;

 

(d) It shall not oppose or object (or support any other person in opposing or
objecting) to any post-petition financing provided by YA Global, provided, that
such post-petition financing is in such amounts and on such terms and conditions
as are consistent with the documents, agreements, and instruments evidencing the
Financing Arrangements and this Assignment (provided, further, that YA Global
may charge such fees as are customary and commercially reasonable under such
circumstances);

 

(e) It shall not object (or support any other person in objecting) to (i) the
amount of the Financing Arrangements allowed or permitted to be asserted under
any Bankruptcy Law or (ii) the extent to which the Financing Arrangements are
deemed secured claims, including under § 506(a) of the Bankruptcy Code;

 

(f) It shall not oppose or object (or support any other person in opposing or
objecting) to any protection provided to YA Global, including any form of
adequate protection under § 362, § 363 or § 364 of the Bankruptcy Code and the
payment of amounts equal to interest and expenses allowed under § 506(b) and (c)
of the Bankruptcy Code to YA Global;

 

(g) It hereby waives any claim that it may now or hereafter have arising out of
the election of YA Global, in an Insolvency Proceeding, of the application of §
1111(b) of the Bankruptcy Code in respect of the obligations represented by the
Participation Debenture; and

 

(h) If YA Global seeks any or all of the relief described in Sections 7(a)-(f),
Queensbury hereby irrevocably consents thereto and hereby agrees to join in any
such motion or application seeking such relief if requested by YA Global.

 

8. Exculpation.

 

(a) Neither YA Global, nor any officer, employee, affiliate, representative, or
agent of YA Global, shall be liable for any act or omission to act pursuant to
this Assignment except for such act or omission to act as to which a final
determination is made in a judicial proceeding (in which YA Global has had an
opportunity to be heard), which determination includes a specific finding that
such act or omission to act had been both (i) grossly negligent, and (ii) in
actual bad faith.

 

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(b) Queensbury may now or hereafter hold direct or indirect rights and interests
in Westport. Accordingly, Queensbury acknowledges and agrees that YA Global may,
in its sole and exclusive discretion, take or withhold the taking of action,
which may be adverse to such interests of Queensbury. Without limiting the
provisions hereof, Queensbury represents and warrants to YA Global that
Queensbury has assessed fully and voluntarily assumed all risks directly or
indirectly associated with the possible adverse effects on such interests of
Queensbury as a result of YA Global’s taking of action or withholding of the
taking of action.

 

9. Reliance by YA Global. YA Global may rely upon any notice, certificate,
instrument, document, letter, email, telegram, telex, or other paper and upon
any telephone call believed by YA Global in good faith to be genuine and to have
been signed or made by or on behalf of the person purporting so to do and, in
respect of legal matters, upon the advice provided YA Global by its counsel, and
shall not be liable hereunder on account of any such good faith reliance.

 

10. Non-Reliance by Queensbury.

 

(a) Except with respect to the representations and warranties contained in
Paragraph 1 above, Queensbury may not rely on any statements, information,
representations, or warranties made by or on behalf of YA Global.

 

(b) Queensbury acknowledges and agrees that YA Global, any employee, officer,
representative, affiliate, nor agent of YA Global has made any representation or
warranty, whether expressed, implied, or imposed by law, to induce Queensbury to
accept this Assignment. Without limiting the generality of the foregoing
exclusion of representations and warranties, YA Global shall have any
responsibility with respect to:

 

(i) the genuineness, legality, validity, binding effect, enforceability,
sufficiency, accuracy, or completeness of any aspect of the Assigned Debt and/or
the Financing Arrangements;

 

(ii) the filing, recording, or taking of any other action to perfect any
security interest, mortgage, or other lien or security granted by Westport or
any of the other Westports, or with respect to any aspect of the Financing
Arrangements;

 

(iii) the collectability of the Assigned Debt or the Financing Arrangements,
and/or the value of any Collateral;

 

(iv) the truthfulness, accuracy, or completeness of any representation or
warranty made by Westport;

 

(v) the financial or other condition of Westport or any endorser, guarantor, or
surety of Westport;

 

(vi) the state of title to any Collateral subject to any security interest,
mortgage, or other lien or security granted to YA Global by Westport or any
endorser, guarantor, or surety of Westport, or the priority thereof; or

 

(vii) any other matter relating in any way to the Financing Arrangements,
Westport, or any endorser, guarantor, or surety of Westport, or this Assignment,
or any other person, entity, or matter not specifically referred to herein
except (with respect to this Subsection (vii)) any matter which constitutes an
act or omission to act which a final determination is made in a judicial
proceeding (in which YA Global has had an opportunity to be heard), which
determination includes a specific finding that such act or omission to act had
been both (x) grossly negligent, and (y) in actual bad faith.

 

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11. Contribution. In the event that at any time YA Global issued or shall have a
demand, threat, or claim made upon it, or suit, cause of action, or the like
brought against it by or on behalf of Westport or any guarantor, or any creditor
of Westport or of any guarantor, any trustee, receiver, administrator,
Queensbury, or other fiduciary appointed with respect to Westport or any
guarantor, or any person whose rights derive from Westport or any guarantor,
which demand, threat, claim, suit, cause of action, or the like, is based upon
or directly or indirectly relates to the Financing Arrangements or YA Global’s
acting in accordance with this Assignment, then, unless (a) YA Global has been
found liable to Westport or such other party due to YA Global’s gross negligence
and actual bad faith, or (b) YA Global has been reimbursed therefore by
Westport, YA Global may charge any monies paid or to be paid in satisfaction or
compromise of such demand, threat, claim, suit, cause of action, or the like,
and all costs and expenses and attorneys’ fees and expenses incurred by YA
Global in connection with the defense of such demand, threat, claim, suit, cause
of action, or the like as costs of collection reimbursable as provided in
Paragraph 3 above.

 

12. Securities Law Provisions. Queensbury has agreed to enter into this
Assignment and to receive the Participation Debenture for its own account, for
investment purposes only, and not for the account of any other person, and not
with a view to distribution, assignment, or resale to others, as to
fractionalization in whole or in part.

 

13. Assignments. Upon five days prior written notice to YA Global, Queensbury
may assign the Participation Debenture, provided, however, that (a) the person
or entity to which the Participation Debenture is assigned must acknowledge in
writing that it received the Participation Debenture subject to the terms and
conditions of this Assignment; and (b) the Participation Debenture may not be
assigned to Westport, or one of its employees, subsidiaries, directors,
affiliates, agents, or any person or entity affiliated with Westport.

 

14. Notices. All notices hereunder to any party hereto shall be in writing and
(i) hand delivered, (ii) sent by a nationally recognized overnight courier, or
(iii) posted in the United States mail by registered or certified mail, return
receipt requested, addressed to such party at its address set forth above, or at
any other address specified by such party in writing upon seven days written
notice to the other parties. Any such notice shall be treated as having been
given upon the earlier of (i) actual receipt (by any method of delivery) by the
person to whom the notice is addressed, or (ii) upon delivery to such address
(or refusal to accept delivery).

 

15. Choice of Law. This Assignment shall be construed in accordance with the law
of the State of New Jersey and is intended to take effect as a sealed
instrument.

 

[SIGNATURE PAGE TO IMMEDIATELY FOLLOW]

 

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Executed as of the February 5, 2014.

 

  YA GLOBAL INVESTMENTS, L.P.       By: Yorkville Advisors, LLC   Its:
Investment Manager         By:     Name: David Gonzalez   Its: Managing Member &
General Counsel

 

ACCEPTED AND AGREED:

 

Queensbury, Inc.

 

By:     Name: Raffaele Attar   Title: President  

 

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EXHIBIT “A”

 

Assigned Debt

 

Original Debentures:

 

Secured Convertible Debenture (Debenture Number: CICS-28) in the Principal
Amount of $1,080,000 originally issued on February 3, 2014.

 

 Outstanding Principal    Accrued and Unpaid Interest  $1,080,000   $0 

 

Portion of the Original Debentures Assigned (Assigned Debt):

 

 Principal Amount Assigned    Accrued and Unpaid Interest Assigned  $540,000  
$0 

 

Royalty Interest:

 

The right to receive 25% of net gas sales resulting from the Allocated Wells of
Westport.

 

Original Principal Amount of Participation Debenture: $540,000

 

Royalty Interest: One half of YA Global’s Royalty Interest (12.5% of net gas
sales resulting from the Allocated Wells).

 

Purchase Price: $500,000