EXHIBIT 10.5

 

SUBORDINATED PROMISSORY NOTE

 

$2,000,000

November 6, 2009

 

FOR VALUE RECEIVED, after date, without grace, in the manner, on the dates, and
in the amounts herein stipulated, the undersigned, CRIMSON EXPLORATION, INC., a
Delaware corporation (“Maker”), promises to pay to the order of OCM GW HOLDINGS,
LLC, a Delaware limited liability company (“Payee”), the sum of TWO MILLION
DOLLARS ($2,000,000), in lawful money of the United States of America, which
shall be legal tender, in payment of all debts and dues, public and private, at
the time of payment, payable as stipulated herein. This Note shall bear interest
to accrue at the rate of 8.0% per annum. The payment obligations of Maker under
this Note are unsecured.

1.         This Note shall be paid as follows: All principal and accrued but
unpaid interest shall mature and become due and payable in full on the date
(such date the “Maturity Date”) which is the later of (i) November 8, 2012 and
(ii) the date six months after payment in full in cash of all Obligations (as
such term is defined under each of (a) that certain Amended and Restated Credit
Agreement, dated May 31, 2007, among, inter alios, Maker, as borrower and Wells
Fargo Bank, National Association, as administrative agent (the “First Lien
Agent”), as the same may be amended, restated or otherwise modified from time to
time (the “First Lien Obligations”), and (b) that certain Second Lien Credit
Agreement, dated May 8, 2007, among, inter alios, Maker, as borrower, and Credit
Suisse, as agent, as the same may be amended, restated or otherwise modified
from time to time (such agreements, collectively, the “Senior Credit
Agreements”)) (such Obligations, together with the First Lien Obligations, the
“Senior Obligations”)), and the termination of all commitments to extend credit
under the Senior Credit Agreements. Interest on this Note shall accrue and be
added to the principal balance of this Note. For the avoidance of doubt, no
interest shall be due and payable prior to the Maturity Date.

2.         It is agreed that time is of the essence of this Note, and Maker
expressly agrees that in the event of default in the payment of any principal or
interest when due, subject to paragraphs 7 and 8 below, Payee may, without
demand, notice of presentment of default, notice of acceleration, notice of
intention to accelerate or otherwise, to Maker, all of which are hereby waived
by Maker, declare the entirety of this Note immediately due and payable. Upon
the occurrence of any such default in payment, subject to paragraphs 7 and 8
below, Payee shall also have the right to exercise any and all of the rights,
remedies and recourses now or hereafter existing in equity, law, by virtue of
statute or otherwise, including. Failure to exercise said option shall not
constitute a waiver on the part of Payee of the right to exercise the same at
any other time.

3.         In the event of default in the making of any payment herein provided,
either of principal or interest, or in the event the entirety of this Note is
declared due, the interest rate on this Note shall increase by 2.0% and shall
accrue and be payable at such increased rate from such time until paid.

 

 

1

 

 

--------------------------------------------------------------------------------

 

4.         All rights and remedies available to Payee under this Note shall be
cumulative of and in addition to all other rights and remedies granted to Payee
at law or in equity.

5.         Maker hereby agrees to pay all expenses incurred, including any
reasonable attorneys’ fees, all of which shall become a part of the principal
hereof, if this Note is in default and placed in the hands of an attorney for
collection, or if collected by suit or through any probate, bankruptcy, or any
other legal proceedings.

6 .        Each maker, surety and endorser waives demand, grace, notice,
presentment for payment, and protest and agrees and consents that this Note may
be renewed, and the time of payment extended without notice, and without
releasing any of the parties.

7.         Maker agrees, and Payee by accepting this Note agrees, that this Note
is subordinated in right of payment, to the extent and in the manner provided
herein, to the prior payment in full in cash of all Senior Obligations, and that
these subordination provisions are for the benefit, and only for the benefit, of
the First Lien Agent and the lenders under the First Lien Credit Agreement (the
“First Lien Lenders”; and together with the First Lien Agent, the “Senior
Secured Parties”). This paragraph 7 shall constitute a continuing offer to all
persons who, in reliance upon such provisions, become or continue to be a Senior
Secured Party, and such provisions are made for the benefit, and solely for the
benefit, of the Senior Secured Parties, and each Senior Secured Party is made an
obligee hereunder and may enforce such provisions and Payee waives notice or
proof of reliance on this paragraph 7. Prior to the Maturity Date, Maker shall
not make any payment or prepayments of principal or interest on account of, or
repurchase, redeem, or otherwise retire (whether at the option of Payee or
otherwise) this Note (each, a “Subordinated Debt Payment”).

> 8.       By accepting this Note, Payee agrees that:

(a)       Prior to the Maturity Date, Payee, in its capacity as an obligee under
this Note, will not:

(i)        ask, demand, sue for, take or receive from Maker, directly or
indirectly, in cash or other property or by set off or in any other manner,
payment of all or any amount due hereunder;

(ii)       not to initiate or prosecute or encourage any other person or entity
to initiate or prosecute any claim, action, objection or other proceeding (A)
challenging the enforceability of the claim the Senior Secured Parties or (B)
challenging the creation, legality, validity, perfection, enforceability, or
priority of, or seeking to avoid, of any liens or security interests in any
assets securing the Senior Obligations;

> >     (iii)      initiate, prosecute, or participate in any action or take any
> > other steps to

 

 

2

 

--------------------------------------------------------------------------------

> enforce any rights or remedies of Payee hereunder, at law or in equity, or to
> enforce any judgment obtained against Maker with respect to its obligations
> hereunder; or

(iv)      commence, or join with any creditor other than the Senior Secured
Parties in commencing, any proceeding for the purposes of dissolution, winding
up, liquidation, arrangement or reorganization of Maker or its successors or
assigns, whether in bankruptcy, insolvency, arrangement, reorganization or
receivership proceedings or upon an assignment for the benefit of creditors or
any other marshaling of the assets and liabilities of Maker or its successors or
assigns (each of the foregoing, an “Involvency Proceeding”).

(b)       If an Insolvency Proceeding has been initiated and is continuing, then
the Senior Secured Parties shall be entitled to receive payment (to be paid or
delivered by Maker or any trustee in bankruptcy or any other person making such
payment or distribution directly to the First Lien Lenders) in full in cash of
such portion of the Senior Obligations owed to such parties in their capacities
as Senior Secured Parties before Payee is entitled to receive any Subordinated
Debt Payment or any other distribution of assets of Maker of any kind or
character, whether in cash, property or securities, directly or indirectly, by
setoff, redemption, purchase or in any other manner (a “Subordinated Debt
Distribution”).

(c)       If Payee receives any Subordinated Debt Distribution in violation of
this paragraph 8, then such Subordinated Debt Distribution shall be held in
trust for the benefit of the Senor Secured Parties, shall be segregated from
other funds and property held by Payee, and shall be promptly paid over and
delivered to the First Lien Agent for application to the payment of the Senior
Obligations remaining unpaid and which are owed to the Senior Secured Parties,
in full in cash after giving effect to any concurrent payments or distributions
to the Senior Secured Party.

9.       Maker shall promptly notify Payee of any facts known to Maker that
would cause a Subordinated Debt Distribution to violate paragraph 8, but failure
to give such notice shall not impair the subordination of this Note to the
Senior Obligations provided in paragraph 8.

10.       After all Senior Obligations are paid in full and until this Note is
paid in full, Payee shall be subrogated to the rights of the secured parties
under the Senior Credit Agreements to receive distributions applicable to Senior
Obligations to the extent that distributions otherwise payable to Payee have
been applied to the payment of Senior Obligations. A distribution made under
paragraph 8 to the First Lien Lenders that otherwise would have been made to
Payee is not, as between Maker and Payee, payment by Maker on this Note.

11.       No right of any First Lien Lender to enforce the subordination of the
indebtedness evidenced by this Note shall be impaired by any act or failure to
act by Maker or Payee or by its failure to comply with the terms of this Note.

                12.     This Note has been executed and delivered and shall be
construed in accordance with and governed by the laws of the State of Texas and
of the United States of America

 

3

 

--------------------------------------------------------------------------------

applicable in Texas. Venue for any litigation between Maker and Payee with
respect to this Note shall be Harris County, Texas. Maker and Payee hereby
irrevocably submit to personal jurisdiction in Texas, and waive all objections
to personal jurisdiction in Texas and venue in Harris County for purposes of
such litigation.

13.       No modification, amendment, termination, or cancellation of any
provision of this Note shall be valid and binding, unless it be in writing and
signed by Maker and Payee. No failure or delay on the part of Payee in
exercising any right, power or privilege hereunder and no course of dealing
between Maker and Payee shall operate as a waiver thereof; nor shall any single
or partial exercise of any right, remedy, power or privilege hereunder preclude
any other or further exercise thereof or the exercise of any other right,
remedy, power or privilege. So long as any of the Senior Obligations shall
remain outstanding or the obligation of any Senior Secured Party to extend
credit to Maker remains in effect, Maker shall not, without the prior written
consent of holders of a majority of the loans then outstanding under the First
Lien Credit Agreement (or if no such loans are then outstanding, a majority of
the commitments under the First Lien Credit Agreement to make loans) or the
First Lien Agent with the consent of holders of a majority of such outstanding
loans or commitments, as the case may be, permit any amendment, supplement or
other modification of this Note.

14.       THIS NOTE AND ALL DOCUMENTS AND INSTRUMENTS EXECUTED IN CONNECTION
HEREWITH OR THEREWITH, REPRESENT THE FINAL AGREEMENT BETWEEN MAKER AND PAYEE AND
MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS, OR SUBSEQUENT
ORAL AGREEMENTS BETWEEN MAKER AND PAYEE.

15.       THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN MAKER AND PAYEE.

 

 

 

4

 

 

--------------------------------------------------------------------------------

MAKER:

 

CRIMSON EXPLORATION INC.,

a Delaware corporation

 

By:/s/ E. Joseph Grady

E. Joseph Grady

Senior Vice President and

Chief Financial Officer

 

 

 

 

 

5