Document:

Exhibit 10.1

 

Exhibit 10.1

SECOND AMENDMENT

TO

LOAN AND SECURITY AGREEMENT

     THIS SECOND AMENDMENT to Loan and Security Agreement (this “Amendment”) is entered into this
30th day of November, 2007, by and among Oxford Finance Corporation, as Agent (“Collateral
Agent”), Oxford Finance Corporation, Silicon Valley Bank and Merrill Lynch Capital, a Division
of Merrill Lynch Business Financial Services Inc. (each a “Lender” and collectively
“Lenders”) and Cadence Pharmaceuticals, Inc., a Delaware corporation (“Borrower”)
whose address is 12481 High Bluff Drive, Suite 200, San Diego, California 92130.

Recitals

     A. WHEREAS, Oxford Finance Corporation (“Oxford”), Silicon Valley Bank (“SVB”)
and Borrower have previously entered into that certain Loan and Security Agreement dated as of
February 17, 2006, as amended by that certain First Amendment to Loan and Security Agreement dated
as of September 13, 2007 (as the same may from time to time be amended, modified, supplemented or
restated, the “Loan Agreement”).

     B. WHEREAS, Oxford and SVB have previously extended credit to Borrower for the purposes
permitted in the Loan Agreement.

     C. WHEREAS, Borrower has requested that Oxford and SVB amend the Loan Agreement to (i) make a
term loan facility available to Borrower thereunder, (ii) add Merrill Lynch Capital, a Division of
Merrill Lynch Business Financial Services Inc. (“Merrill”) as a Lender, and (ii) make
certain other revisions to the Loan Agreement as more fully set forth herein.

Agreement

     Now, Therefore, in consideration of the foregoing recitals and other good and
valuable consideration, the receipt and adequacy of which is hereby acknowledged, and intending to
be legally bound, the parties hereto agree as follows:

     1. Definitions. Capitalized terms used but not defined in this Amendment shall have the
meanings given to them in the Loan Agreement.

     2. Amendments to Loan Agreement.

          2.1 Lenders; Collateral Agent; Security Grant. As of the Second Amendment Effective Date,
Merrill shall be one of the Lenders and Oxford shall be Collateral Agent as well as a Lender.
Borrower shall separately set up an ACH payment structure in favor of Merrill, reasonably
satisfactory to Merrill. Borrower hereby reaffirms the grant of a security interest in the
Collateral under the Loan Agreement and Borrower hereby grants to: (i) Collateral Agent, for the
ratable benefit of each Lender, and to each Lender, to secure the payment and performance in full
of all of the Obligations and the performance of each of Borrower’s duties under the Loan

1

 

Documents, a continuing security interest in, and pledges and assigns to each Lender the
Collateral, wherever located, whether now owned or hereafter acquired or arising, and all proceeds
and products thereof, and (ii) SVB, for the ratable benefit of each Lender, to secure the payment
and performance in full of all of the Obligations and the performance of each of Borrower’s duties
under the Loan Documents, a continuing security interest in, all of Borrower’s deposit accounts
maintained by SVB, whether now owned or hereafter acquired or arising, and all proceeds and
products thereof. Borrower acknowledges and agrees that (i) any account control agreement Oxford
has entered, or may enter, into shall perfect via control all Lenders and any such account control
agreement shall perfect via control the Obligations, and (ii) any deposit account that SVB
maintains for Borrower is perfected via control on behalf of all Lenders.

          2.2 Section 2.1.2 (Term Loan Facility). A new Section 2.1.2 is added to the Loan Agreement
which reads in its entirety as follows:

     2.1.2 Term Loan Facility.

     (a) Availability. Subject to the terms and conditions of this
Agreement, Lenders agree, severally and not jointly, to lend to Borrower from time
to time through the Term Loan Commitment Termination Date, advances (each a “Term
Loan” and collectively the “Term Loans”) in an aggregate amount not to exceed the
Term Loan Commitment according to each Lender’s pro rata share of the Term Loan
Commitment (based upon the respective Term Loan Commitment Percentage of each
Lender). When repaid, the Term Loans may not be re-borrowed. Lenders’ obligation
to lend hereunder shall terminate on the earlier of (i) at Lenders’ option, the
occurrence and continuance of an Event of Default, or (ii) the Term Loan Commitment
Termination Date. The first Term Loan shall be in an amount of Five Million
Dollars ($5,000,000) (the “First Term Loan”) and shall be made on the fifth
Business Day after the Second Amendment Effective Date. The second Term Loan shall
be in an amount of Ten Million Dollars ($10,000,000) (the “Second Term Loan”).

     (b) Repayment. For each Term Loan, Borrower shall make monthly
payments of interest only commencing on the first day of the month following the
month in which the Term Loan Funding Date occurs with respect to such Term Loan and
continuing thereafter on the first day of each successive calendar month during the
Term Loan Interest Only Period. Commencing on the Term Loan Amortization Date,
Borrower shall make thirty (30) equal monthly payments of principal and interest
which would fully amortize the outstanding Term Loan as of the Term Loan
Amortization Date over the Term Loan Repayment Period and on the first day of each
successive month and continuing thereafter during the Term Loan Repayment Period
(each a “Term Loan Scheduled Payment Date”). All unpaid principal and accrued
interest is due and payable in full on the Term Loan Maturity Date with respect to
such Term Loan. A

2

 

Term Loan may only be prepaid in accordance with Sections 2.1.2(d) and
2.1.2(e).

     (c) Final Payment. On the Term Loan Maturity Date with respect to
each Term Loan, Borrower shall pay, in addition to the unpaid principal and accrued
interest and all other amounts due on such date with respect to such Term Loan, an
amount equal to the Term Loan Final Payment.

     (d) Mandatory Prepayment Upon an Acceleration. If the Term Loans are
accelerated following the occurrence and during the continuance of an Event of
Default, Borrower shall immediately pay to Lenders an amount equal to the sum of
(i) all outstanding principal plus accrued and unpaid interest, (ii) the Term Loan
Final Payment, (iii) the Term Loan Prepayment Fee, plus (iv) all other sums, if
any, that shall have become due and payable, including interest at the Default Rate
with respect to any past due amounts.

     (e) Permitted Prepayment of Loans. So long as Borrower is
concurrently prepaying all Growth Capital Advances under Section 2.3(d),
Borrower shall have the option to prepay all, but not less than all, of the Term
Loans advanced by Lenders under this Agreement, provided Borrower (i) delivers
written notice to Agent of its election to prepay the Term Loans at least thirty
(30) days prior to such prepayment, and (ii) pays, on the date of such prepayment
(A) all outstanding principal plus accrued and unpaid interest, (B) the Term Loan
Final Payment, (C) the Term Loan Prepayment Fee (except as provided in Section
7.3), plus (D) all other sums, if any, that shall have become due and payable,
including interest at the Default Rate with respect to any past due amounts.

     (f) Interest Rate. Subject to Section 2.2(b), the principal
amount outstanding under each Term Loan shall accrue interest, which interest shall
be payable monthly, at the fixed per annum rate equal to the sum of (a) four
hundred seventy five (475) basis points or 4.75%, plus (b) the Treasury Rate as
determined by Collateral Agent on the applicable Term Loan Funding Date. Interest
is computed on the basis of a 360 day year of twelve 30-day months.

     (g) Borrowing Procedure. The Term Loan Funding Date for the First
Term Loan shall be the fifth Business Day after the Second Amendment Effective
Date, and no further notice from Borrower shall be required with respect to such
Term Loan Funding Date. To obtain the Second Term Loan, Borrower must notify
Lenders by facsimile or telephone by 12:00 p.m. Pacific Time seven (7) Business
Days prior to the date the Second Term Loan is to be made. If such notification is
by telephone, Borrower must promptly confirm the notification by delivering to
Lenders a completed Payment/Advance Form in the form attached as

3

 

Exhibit B. In addition, a Note payable to each Lender in the form of
Exhibit E must be signed by a Responsible Officer or designee. On the Term
Loan Funding Date, each Lender shall credit and/or transfer (as applicable) to
Borrower’s deposit account, an amount equal to its Term Loan Commitment Percentage
multiplied by the amount of the Term Loan. Each Lender may make Term Loans under
this Agreement based on instructions from a Responsible Officer or his or her
designee or without instructions if the Term Loans are necessary to meet
Obligations which have become due. Each Lender may rely on any telephone notice
given by a person whom such Lender reasonably believes is a Responsible Officer or
designee. Borrower shall indemnify each Lender for any loss Lender suffers due to
such reliance.

          2.3 Section 2.3(d) (Permitted Prepayment of Loans). Section 2.3(d) of the Loan Agreement
shall be replaced in its entirety and read as follows:

Permitted Prepayment of Loans. So long as Borrower is concurrently
prepaying all Term Loans under Section 2.1.2(e), Borrower shall have the
option to prepay all, but not less than all, of the Growth Capital Advances
advanced by Lenders under this Agreement, provided Borrower (i) provides written
notice to Lenders of its election to prepay the Growth Capital Advances at least
thirty (30) days prior to such prepayment, and (ii) pays, on the date of such
prepayment (A) all outstanding principal plus accrued interest, plus (B) the
Prepayment Fee (except as provided in Section 7.3), plus (C) all other
sums, if any, that shall have become due and payable, including interest at the
Default Rate with respect to any past due amounts.

          2.4 Section 7.3 (Mergers or Acquisitions). The first sentence of Section 7.3 of the Loan
Agreement shall be replaced in its entirety and read as follows:

Merge or consolidate, or permit any of its Subsidiaries to merge or consolidate,
with any other Person, or acquire, or permit any of its Subsidiaries to acquire,
all or substantially all of the capital stock or property of another Person;
provided, however, if Lenders do not consent to any such transaction, then Borrower
shall be entitled to prepay all of the Obligations without payment of the
Prepayment Fee (as more fully set forth in Section 2.3(d) of this Agreement) or the
Term Loan Prepayment Fee (as more fully set forth in Section 2.1.2(e) of this
Agreement).

          2.5 Section 8.10 (Equity Milestone). A new Section 8.10 shall be added to the Loan Agreement,
which reads in its entirety follows:

4

 

Between the Effective Date and June 30, 2008, Borrower fails to receive at least
Twenty-Five Million Dollars ($25,000,000) in net cash proceeds from Borrower’s sale
of its capital stock.

          2.6 Section 9.1 (Rights and Remedies). The first clause of Section 9.1 of the Loan Agreement,
before subsection 9.1(a), shall be replaced in its entirety and read as follows:

     When an Event of Default occurs and continues Collateral Agent or any Lender
may, without notice or demand, do any or all of the following:

          2.7 Section 9.5 (Lenders’ Liability for Collateral). The word “neither” in Section 9.5 of the
Loan Agreement is replaced with the word “no.”

          2.8 Section 10 (Notices). The following addresses for notice for Merrill is added to Section
10 of the Loan Agreement:

	 	 	 	 	 
	 

	 	If to Merrill:
	 	222 N. LaSalle Street, 16th Floor
	 

	 	 	 	Chicago, Illinois 60601
	 

	 	 	 	Attn: Account Manager for MLC-HCF Cadence transaction
	 

	 	 	 	Facsimile: 1-866-231-8408
	 

	 	 	 	E-Mail: MLC_HCF_ABL1@ml.com
	 
	 	 	 	 
	 

	 	 	 	With copies to:
	 
	 	 	 	 
	 

	 	 	 	Merrill Lynch Capital
	 

	 	 	 	222 N. LaSalle Street, 16th Floor
	 

	 	 	 	Chicago, Illinois 60601
	 

	 	 	 	Attn: Group Senior Transaction
Attorney, Healthcare Finance
	 

	 	 	 	Facsimile Number: (312) 499-3245
	 
	 	 	 	 
	 

	 	 	 	Merrill Lynch Capital
	 

	 	 	 	7700 Wisconsin Ave., Suite 400
	 

	 	 	 	Bethesda, Maryland 20814
	 

	 	 	 	Attn: Group Senior Transaction
Attorney, Healthcare Finance
	 

	 	 	 	Facsimile Number: (866) 341-9053
	 
	 	 	 	 
	 

	 	 	 	Blank Rome LLP
	 

	 	 	 	130 N. 18th Street
	 

	 	 	 	One Logan Square
	 

	 	 	 	Philadelphia, PA 19103
Attn: Lawrence F. Flick, II, Esq.

Facsimile Number: (215) 569-5555

5

 

          2.9 Section 13 (Definitions). The following terms and their respective definitions are added
in Section 13.1 of the Loan Agreement in proper alphabetical order:

     “Second Amendment” is the Second Amendment to Loan and Security Agreement by and among Agent,
Lenders and Borrower.

     “Second Amendment Effective Date” is the date the Second Amendment goes effective.

     “Term Loan” or “Term Loans” is defined in Section 2.1.2(a).

     “Term Loan Amortization Date” means, for each Term Loan, the day six (6) months after its Term
Loan Funding Date, or if such date is not the first day of the month, then the first day of the
calendar month immediately following such date.

     “Term Loan Amount” in respect of each Term Loan is the original principal amount of such Term
Loan.

     “Term Loan Commitment” is Fifteen Million Dollars ($15,000,000).

     “Term Loan Commitment Percentage” means: (i) 20% with respect to SVB, (ii) 33.3333% with
respect to Merrill, and (ii) 46.6667% with respect to Oxford.

     “Term Loan Commitment Termination Date” is: (i) with respect to the First Term Loan, the fifth
Business Day after the Second Amendment Effective Date, and (ii) with respect to the Second Term
Loan is December 31, 2007.

     “Term Loan Final Payment” is a payment (in addition to and not a substitution for the regular
monthly payments of principal plus accrued interest) for each Term Loan due on the earlier of (a)
the Term Loan Maturity Date for such Term Loan or (b) the acceleration of such Term Loan, equal to:
the Term Loan Amount for such Term Loan multiplied by the Term Loan Final Payment Percentage. The
“Term Loan Final Payment” for all of the Term Loans shall be the sum of all of the “Term Loan Final
Payments” for every Term Loan.

     “Term Loan Final Payment Percentage” is, for each Term Loan, two and one-half percent (2.50%).

     “Term Loan Funding Date” is any date on which a Term Loan is made to or on account of Borrower
which shall be a Business Day.

     “Term Loan Interest Only Period” means, for each Term Loan, the period of time commencing on
its Term Loan Funding Date through the day before the Term Loan Amortization Date.

6

 

     “Term Loan Maturity Date” is, for each Term Loan, the earlier of: (i) the 30th Term
Loan Scheduled Payment Date for such Term Loan, or (ii) December 1, 2010.

     “Term Loan Prepayment Fee” shall be, for each Term Loan, an amount equal to: (1) if the
prepayment date is on or before one year after the Term Loan Amortization Date, four percent (4.0%)
of the outstanding principal balance as of the prepayment date, (2) if the prepayment date is more
than one year after the Term Loan Amortization Date, but on or before two years after the Term Loan
Amortization Date, three percent (3.0%) of the outstanding principal balance as of the prepayment
date, and (3) if the prepayment date is more than two years after the Term Loan Amortization Date,
two percent (2.0%) of the outstanding principal balance as of the prepayment date. The “Term Loan
Prepayment Fee” for Term Loans shall be the sum of all of the “Term Loan Prepayment Fees” for every
Term Loan.

     “Term Loan Repayment Period” is a period of time equal to thirty (30) consecutive months
commencing on the Term Loan Amortization Date.

     “Term Loan Scheduled Payment Date” is defined in Section 2.1.2(b).

     “Term Loan Warrants” are that certain Warrant to Purchase Stock dated as of the Second
Amendment Effective Date executed by Borrower in favor of Oxford, that certain Warrant to Purchase
Stock dated as of the Second Amendment Effective Date executed by Borrower in favor of SVB and that
certain Warrant to Purchase Stock dated as of the Second Amendment Effective Date executed by
Borrower in favor of Merrill.

          2.10 Section 13 (Definitions). The following terms and their respective definitions set forth
in Section 13.1 of the Loan Agreement are amended in their entirety and replaced with the
following:

     “Credit Extension” is each Growth Capital Advance, Term Loan or any other extension of credit
by any Lender for Borrower’s benefit.

     “Default Rate” means for each Credit Extension, five percent (5%) above the highest rate
otherwise applicable thereto.

     “Note” means: (i) for each Growth Capital Advance, one of the secured promissory notes of
Borrower substantially in the form of Exhibit D, and (i) for each Term Loan, one of the
secured promissory notes of Borrower substantially in the form of Exhibit E.

     “Treasury Rate” means the U.S. Treasury note yield to maturity for a 36-month term as quoted
in the Wall Street Journal on the day the Note for the applicable Growth Capital Advance or Term
Loan is prepared.

          2.11 Exhibit C (Compliance Certificate). Compliance Certificates delivered by Borrower on or
after the Second Amendment Effective Date shall be addressed to Oxford, SVB and Merrill.

7

 

          2.12 Exhibit E (Form of Term Loan Note). A new Exhibit E is added to the Loan Agreement and
is in the form of Exhibit 1 to the Second Amendment.

     3. Limitation of Amendments.

          3.1 The amendments set forth in Section 2 above, are effective for the purposes set forth
herein and shall be limited precisely as written and shall not be deemed to (a) be a consent to any
amendment, waiver or modification of any other term or condition of any Loan Document, or
(b) otherwise prejudice any right or remedy which Collateral Agent or Lenders may now have or may
have in the future under or in connection with any Loan Document.

          3.2 This Amendment shall be construed in connection with and as part of the Loan Documents and
all terms, conditions, representations, warranties, covenants and agreements set forth in the Loan
Documents, except as herein amended, are hereby ratified and confirmed and shall remain in full
force and effect.

     4. Representations and Warranties. To induce Lenders to enter into this Amendment, Borrower
hereby represents and warrants to Lenders as follows:

          4.1 Immediately after giving effect to this Amendment (a) the representations and warranties
contained in the Loan Documents are true, accurate and complete in all material respects as of the
date hereof (except to the extent such representations and warranties relate to an earlier date, in
which case they are true and correct as of such date), and (b) no Event of Default has occurred and
is continuing;

          4.2 Borrower has the power and authority to execute and deliver this Amendment and the Term
Loan Warrants and to perform its obligations under the Loan Agreement, as amended by this
Amendment, and the Term Loan Warrants;

          4.3 The organizational documents of Borrower delivered to Lenders on the Second Amendment
Effective Date remain true, accurate and complete and have not been amended, supplemented or
restated and are and continue to be in full force and effect;

          4.4 The execution and delivery by Borrower of this Amendment and the Term Loan Warrants and
the performance by Borrower of its obligations under the Loan Agreement, as amended by this
Amendment, and the Term Loan Warrants have been duly authorized;

          4.5 The execution and delivery by Borrower of this Amendment and the Term Loan Warrants and
the performance by Borrower of its obligations under the Loan Agreement, as amended by this
Amendment, and the Term Loan Warrants do not and will not contravene (a) any law or regulation
binding on or affecting Borrower, (b) any contractual restriction with a Person binding on
Borrower, except as may have been properly waived, (c) any order, judgment or decree of any court
or other

8

 

governmental or public body or authority, or subdivision thereof, binding on Borrower, or
(d) the organizational documents of Borrower;

          4.6 The execution and delivery by Borrower of this Amendment and the Term Loan Warrants and
the performance by Borrower of its obligations under the Loan Agreement, as amended by this
Amendment, and the Term Loan Warrants do not require any order, consent, approval, license,
authorization or validation of, or filing, recording or registration with, or exemption by any
governmental or public body or authority, or subdivision thereof, binding on Borrower, except as
already has been obtained or made; and

          4.7 This Amendment and the Term Loan Warrants have been duly executed and delivered by
Borrower and are the binding obligations of Borrower, enforceable against Borrower in accordance
with their terms, except as such enforceability may be limited by bankruptcy, insolvency,
reorganization, liquidation, moratorium or other similar laws of general application and equitable
principles relating to or affecting creditors’ rights.

     5. Fees. Borrower shall pay to Lenders:

          5.1 Deposit; Loan Fee. A fully earned, non-refundable loan fee of $45,000 (the “Loan
Fee”) on the Term Loan Funding Date of the First Term Loan, which Lenders shall debit from the
amount of the First Term Loan proceeds disbursed to Borrower.

          5.2 Lenders Expenses. All Lenders Expenses (including reasonable attorneys’ fees and
reasonable expenses for documentation and negotiation of this Amendment) incurred through and after
the Second Amendment Effective Date, when due. Borrower has paid Collateral Agent a good faith
deposit of $30,000 (the “Deposit”). Agent shall use the Deposit to pay Lenders Expenses for
documentation and negotiation of this Amendment and the remainder, if any, of the Deposit will be
refunded to Borrower promptly after the First Term Loan is made.

     6. Counterparts. This Amendment may be executed in any number of counterparts and all of such
counterparts taken together shall be deemed to constitute one and the same instrument.

     7. Effectiveness. This Amendment shall be deemed effective upon the occurrence of all of the
following (the “Second Amendment Effective Date”):

               (a) the due execution and delivery of this Amendment by each party hereto,

               (b) Borrower shall have delivered duly executed original signatures to the three Term Loan
Warrants;

               (c) Borrower shall have paid the Lenders Expenses then due as specified in Section 5
of this Amendment,

9

 

               (d) Borrower shall have delivered: (i) a copy of its most current certificate of
incorporation, as amended to date, certified by the Delaware Secretary of State, and (ii) a copy of
Borrower’s signed By-laws, and (iii) a copy of its most recent signed investor rights agreement, as
amended,

               (e) Borrower shall have delivered good standing certificates of Borrower certified by the
Secretary of State of the States of California and Delaware as of a date no earlier than thirty
(30) days prior to the date of this Amendment;

               (f) Borrower shall have delivered certified copies, dated as of a recent date, of financing
statement searches, as Collateral Agent shall request, accompanied by written evidence (including
any UCC termination statements) that the Liens indicated in any such financing statements either
constitute Permitted Liens or have been or, in connection with the initial Credit Extension, will
be terminated or released;

               (g) Borrower shall have delivered duly executed original signatures to the completed Corporate
Borrowing Certificate as to this Amendment; and

               (h) Borrower shall have delivered insurance certificates in favor of Merrill.

[Signature page follows.]

10

 

     In Witness Whereof, the parties hereto have caused this Amendment to be duly executed
and delivered as of the date first written above.

	 	 	 	 	 
	CADENCE PHARMACEUTICALS, INC., as Borrower	 	 
	 
	 	 	 	 
	By:

	 	/s/ Theodore R. Schroeder	 	 
	Name:

	 	 

Theodore R. Schroeder
	 	 
	Title:

	 	President and CEO	 	 
	 
	 	 	 	 
	OXFORD FINANCE CORPORATION, as Collateral Agent and as a Lender	 	 
	 
	 	 	 	 
	By:

	 	/s/ T.A. Lex	 	 
	 

	 	 	 	 
	Name:

	 	T.A. Lex	 	 
	Title:

	 	COO	 	 
	 
	 	 	 	 
	SILICON VALLEY BANK, as a Lender	 	 
	 
	 	 	 	 
	By:

	 	/s/ R. Michael White	 	 
	 

	 	 	 	 
	Name:

	 	R. Michael White	 	 
	Title:

	 	Deal Team Leader	 	 
	 
	 	 	 	 
	MERRILL LYNCH CAPITAL, a Division of

Merrill Lynch Business Financial Services Inc., as a Lender
	 
	 	 	 	 
	By:

	 	/s/ Chris York	 	 
	 

	 	 	 	 
	Name:

	 	Chris York	 	 
	Title:

	 	VP	 	 

 

 

EXHIBIT 1

FORM OF TERM LOAN NOTE

SECURED PROMISSORY NOTE

$    
            
            
              
    
     
     
     
     
     
     
     
     
     
     
     
     
     
     
     
     
     
     
     
     

Dated: [Date]

     FOR VALUE RECEIVED, the undersigned, CADENCE PHARMACEUTICALS, INC., a Delaware corporation
(“Borrower”), HEREBY PROMISES TO PAY to the order of [LENDER] (“Lender”) the
principal amount of           
           Dollars ($ 
              
     ) or such lesser amount as shall equal the
outstanding principal balance of the Term Loan made to Borrower by Lender pursuant to the Loan
Agreement (defined below), and to pay all other amounts due with respect to the Term Loan on the
dates and in the amounts set forth in the Loan Agreement. (Capitalized terms, unless defined in
this Note, shall have the meaning given such capitalized term in the Loan Agreement.)

     Interest on the principal amount of this Note from the date of this Note shall accrue at
___% per annum based on a 360-day year of twelve 30-day months or, if applicable, the Default
Rate. Borrower shall make payments of accrued interest only on the outstanding principal amount of
the Term Loan on the first day of each month (“Payment Date”), commencing                     , 200_,
through and including           
           1, 200_. Commencing on                                          1, 200_, and continuing
on consecutive Payment Dates thereafter, Borrower shall make to Lender thirty (30) equal payments
of principal and accrued interest on the then outstanding principal amount in the amount of
              
       Dollars ($      
              ).

     Principal, interest and all other amounts due with respect to the Term Loan, are payable in
lawful money of the United States of America to Lender as set forth in the Loan Agreement. The
principal amount of this Note and the interest rate applicable thereto, and all payments made with
respect thereto, shall be recorded by Lender and, prior to any transfer hereof, endorsed on the
grid attached hereto which is part of this Note.

     This Note is one of the Notes referred to in, and is entitled to the benefits of, the Loan and
Security Agreement dated as February 17, 2006, as amended by that certain First Amendment to Loan
and Security Agreement dated as of September 13, 2007, as further amended by that certain Second
Amendment to Loan and Security Agreement dated as of [Date], to which Borrower and Lender are
parties (as the same may from time to time be amended, modified, supplemented or restated, the
“Loan Agreement”). The Loan Agreement, among other things, (a) provides for the making of
this secured Term Loan to Borrower, and (b) contains provisions for acceleration of the maturity
hereof upon the happening of certain stated events.

     This Note may not be prepaid except as set forth in Sections 2.1.2 and 7.3 of the Loan
Agreement. This Note and the obligation of Borrower to repay the unpaid principal amount of the
Term Loan, interest on the Term Loan and all other amounts due Lenders under the Loan Agreement is
secured under the Loan Agreement.

     Presentment for payment, demand, notice of protest and all other demands and notices of any
kind in connection with the execution, delivery, performance and enforcement of this Note are
hereby waived.

 

 

     Borrower shall pay all reasonable fees and expenses, including, without limitation, reasonable
attorneys’ fees and costs, incurred by Lenders in the enforcement or attempt to enforce any of
Borrower’s obligations hereunder not performed when due. This Note shall be governed by, and
construed and interpreted in accordance with, the laws of the State of California.

     IN WITNESS WHEREOF, Borrower has caused this Note to be duly executed by one of its officers
thereunto duly authorized on the date hereof.

	 	 	 	 	 	 	 
	 	 	CADENCE PHARMACEUTICALS, INC.	 	 
	 
	 	 	 	 	 	 
	 

	 	By:	 	 	 	 
	 

	 	 	 	 	 	 
	 
	 	 	 	 	 	 
	 

	 	Name:	 	 	 	 
	 

	 	 	 	 	 	 
	 
	 	 	 	 	 	 
	 

	 	Title:	 	 	 	 
	 

	 	 	 	 	 	 

 

 

LOAN INTEREST RATE AND PAYMENTS OF PRINCIPAL

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	 	 	 	 	 	 	Scheduled	 	 
	 	 	 	 	Principal	 	 	 	 	 	Payment	 	 
	Date	 	Amount	 	Interest Rate	 	Amount	 	Notation By

 

 

SCHEDULE 1 (FOR LOAN ADMINISTRATION PURPOSES ONLY)

TERM LOAN COMMITMENT: $15,000,000.00

	 	 	 	 	 	 	 	 	 
	 	 	Commitment	 	Commitment Percentage
	Oxford:
	 	$	7,000,000	 	 	 	46.6667	%
	 
	 	 	 	 	 	 	 	 
	Merrill:
	 	$	5,000,000	 	 	 	33.3333	%
	 
	 	 	 	 	 	 	 	 
	SVB:
	 	$	3,000,000	 	 	 	20	%exh10-55_waiver.htm

     

    
      

      

    

     

     

     

     

     

     

     

     

     

     

     

    EXHIBIT
      10.55

     

    APRIL
      2007 WAIVER, AMENDMENT AND AGREEMENT

    AS
      TO 2005 SUBORDINATED NOTES

     

    
 

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    APRIL
      2007 WAIVER, AMENDMENT AND AGREEMENT

     

    AS
      TO
      2005 SUBORDINATED NOTES

     

    

     

    THIS
      APRIL 2007 WAIVER, AMENDMENT AND AGREEMENT AS TO 2005 SUBORDINATED NOTES (this
      “Agreement”) is made as of April 27, 2007, among Galaxy Energy
      Corporation, a Colorado corporation (“Galaxy” or the
“Company”), Bank Sal. Oppenheim jr. & Cie., Clarion Finanz
      AG, Capriccio Investments Inc., Desmodio Management Inc., Centrum Bank AG,
      Finter Bank Zurich, Julius Baer Fund Trading, Vanguard Capital Limited, Rahn
      & Bodmer and Bost & Co. (collectively, the
“Buyers”).

     

    W
      I T N E
      S S E T H:

     

    WHEREAS,
      the Company and the Buyers entered into that certain Securities Purchase
      Agreement (the “2005 Subordinated Note Purchase Agreement”),
      dated as of March 1, 2005, pursuant to which the Company issued to the Buyers,
      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
      warrants (the “2005 Warrants”), dated March 1, 2005 to purchase
      an aggregate of 1,637,235 shares (the
“WarrantShares”) (subject to adjustment as
      provided therein) of the Common Stock of the Company and, in connection
      therewith, entered into that certain Subordination Agreement, dated as of May
      31, 2005, with the Subsidiaries, the Buyers, holders of secured notes issued
      in  2004 (the “2004Noteholders”) and
      an agent for the 2004 Noteholders (the “2005 Subordination
      Agreement”); and

     

    WHEREAS,
      the 2005 Subordinated Notes have a stated maturity date of April 30, 2007;
      and

     

    WHEREAS,
      the Company and Dolphin have entered into a Purchase and Sale Agreement with
      PetroHunter Energy Corporation, a Maryland corporation
      (“PetroHunter”), with respect to the proposed sale (the
“PRB Sale”) to PetroHunter by the Company and Dolphin
      Energy
      Corporation, a wholly-owned subsidiary of Galaxy (“Dolphin”) of
      all of their real property; facilities; and oil, gas and other mineral drilling,
      exploration and development rights, concessions, working interests and
      participation that (i) are leased or otherwise owned or possessed by the Company
      or Dolphin, (ii) in connection with which the Company or Dolphin has entered
      into an option agreement, participation agreement or acquisition and drilling
      agreement or (iii) the Company or Dolphin has agreed (or has an option) to
      lease
      or otherwise acquire or may be obligated to lease or otherwise acquire in
      connection with the conduct of its business in the Powder River Basin of Wyoming
      and Montana (the “PRB Assets”); and

     

    WHEREAS,
      the consideration for the PRB Assets is $20,000,000 in cash and $25,000,000
      in
      restricted shares of PetroHunter common stock (“PetroHunter
      Stock”); and

     

    WHEREAS,
      to induce the holders of its secured debt to consent to the PRB Sale, the
      Company (i) has agreed to 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 such holders pursuant to automatic cashless exercises of the Warrants
        held by such holders, pursuant to Section 2(e) of each of the Warrants and
        Section 6(d) hereof, upon consummation of the PRB Sale (the “PRB Cash
        Exercise”) and (ii) issued an aggregate of 2,000,000 shares of Common
        Stock (the “Delayed Sale Share Issuance”) to such holders as
        the PRB Sale was not consummated on or before January 31, 2007;
        and

    

     

    WHEREAS,
      Galaxy desires to pay the 2005 Subordinated Notes with shares of PetroHunter
      stock it receives upon closing of the PRB Sale and the Buyers are willing to
      accept shares of PetroHunter stock as payment of their 2005 Subordinated Notes
      on the terms set forth herein; and

     

    WHEREAS,
      Galaxy requires an extension of the maturity date of the 2005 Subordinated
      Notes
      as the PRB Sale may not be completed by April 30, 2007; and

     

    WHEREAS,
      one or more Triggering Events and/or Events of Default, both as defined in
      the
      2005 Subordinated Notes, may have occurred;

     

    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.           Extension
      of Maturity Date and Confirmation of Subordination.

     

    a.  Each
      of
      the Buyers, severally and not jointly, hereby agrees with the Company that
      the
      first sentence of Section 2(a)(xvi) of each of the Notes held by such Buyer
      is
      hereby amended and restated in its entirety as follows:

     

    “(xvi)                      “Maturity
      Date” means the earliest of (A) the date of consummation of the PRB
      Sale (as defined in the April 2007 Waiver, Amendment and Agreement as to 2005
      Subordinated Notes), (B) October 31, 2007, and (C) such date as all amounts
      due
      under this Note have been fully paid.”

     

    b.           Each
      of the Buyers, severally and not jointly, hereby agrees and confirms that the
      2005 Subordinated Notes continue to be subordinate pursuant to the terms of
      the
      2005 Subordination Agreement.

    

    2.  Amendment
      of Notes.

    

    a.  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
      

     

     

     

    
      
         

      

      
        2

        
          

        

      

      
         

      

    

     

     

     

    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”).”

     

    b.  Each
      of
      the Buyers, severally and not jointly, hereby agrees with the Company that
      the
      third sentence of Section 11 of each of the Notes held by such Buyer is hereby
      amended and restated in its entirety as follows:

     

    “For
      purposes of this Note:  (x) “Indebtedness” of any
      Person means, without duplication (A) all indebtedness for borrowed money,
      (B)
      all obligations issued, undertaken or assumed as the deferred purchase price
      of
      property or services (other than unsecured account trade payables that are
      (i)
      entered into or incurred in the ordinary course of the Company’s and its
      Subsidiaries’ business, (ii) on terms that require full payment within 90 days,
      (iii) not unpaid in excess of 90 days beyond invoice due date or are being
      contested in good faith and as to which such reserve as is required by United
      States generally accepted accounting principles (“GAAP”) has
      been made and (iv) not exceeding at any one time an aggregate among the Company
      and its Subsidiaries of $5,000,000), (C) all reimbursement or payment
      obligations with respect to letters of credit, surety bonds and other similar
      instruments, (D) all obligations evidenced by notes, bonds, debentures,
      redeemable capital stock or similar instruments, including obligations so
      evidenced incurred in connection with the acquisition of property, assets or
      businesses, (E) all indebtedness created or arising under any conditional sale
      or other title retention agreement, or incurred as financing, in either case
      with respect to any property or assets acquired with the proceeds of such
      indebtedness (even though the rights and remedies of the seller or bank under
      such agreement in the event of default are limited to repossession or sale
      of
      such property), (F) all indebtedness referred to in clauses (A) through (E)
      above secured by (or for which the holder of such Indebtedness has an existing
      right, contingent or otherwise, to be secured by) any mortgage, lien, pledge,
      change, security interest or other encumbrance upon or in any property or assets
      (including accounts and contract rights) owned by any Person, even though the
      Person that owns such assets or property has not assumed or become liable for
      the payment of such indebtedness, and (G) all Contingent Obligations in respect
      of indebtedness or obligations of others of the kinds referred to in clauses
      (A)
      through (F) above, and (y) “Contingent Obligation” means, as to
      any Person, any direct or indirect liability, contingent or otherwise, of that
      Person with respect to any indebtedness, lease, dividend or other obligation
      of
      another Person if the primary purpose or intent of the Person incurring such
      liability, or the primary effect thereof, is to provide assurance to the obligee
      of such liability that such liability will be paid or discharged, or that any
      agreements relating thereto will be complied with, or that the holders of such
      liability will be protected (in whole or in part) against loss with respect
      thereto.”

    

    
      
         

      

      
        3

        
          

        

      

      
         

      

    

    3.  Waiver
      as to Section 2(f) of the 2005 Subordinated Notes.

     

    a.  The
      Company hereby confirms that by the terms of Section 2(f) of the 2005
      Subordinated Notes, the Fixed Conversion Price has decreased to
      $1.25.  However, each of the Buyers, severally and not jointly, hereby
      irrevocably waives the right to receive any more shares upon conversion of
      the
      2005 Subordinated Note, than it would have received had the Fixed Conversion
      Price remained at $1.88 per share.  By way of example, a note in the
      principal amount of $1,000,000 that was originally convertible at $1.88 would
      have been converted into 531,915 shares.  That note is still
      convertible into 531,915 shares, but the remaining principal balance of
      $335,106.25 must be paid in cash.

     

    b.  Each
      of
      the Buyers, severally and not jointly, hereby agrees that whenever the terms
      of
      its 2005 Subordinated Note requires an adjustment to the Fixed Conversion Price
      that would decrease such price, the Company shall not be required to issue
      Buyer
      any more shares than it would have issued, had the Fixed Conversion Price
      remained at $1.88 per share.  Each of the Buyers, severally and not
      jointly, agrees that Buyer’s right to convert under Section 2 of the 2005
      Subordinated Note shall be limited to that number of shares that Buyer would
      have received had the Fixed Conversion Price remained at $1.88 per
      share.

     

    c.  Each
      of
      the Buyers, severally and not jointly, hereby irrevocably waives any adjustment
      of the Fixed Conversion Price pursuant to Section 2(f) of the 2005 Subordinated
      Notes resulting from the PRB Cashless Exercise and Delayed Sale Share
      Issuance.

     

    4.  Waiver
      as to Section 9(a) of the 2005 Warrants.

     

    a.  The
      Company hereby confirms that by the terms of the Section 9(a) of the 2005
      Warrants, the Warrant Exercise Price has decreased to $1.25 per
      share.  However, each of the Buyers, severally and not jointly, hereby
      waives the right to receive any more shares upon exercise of the 2005 Warrant,
      than it would have received had the Warrant Exercise Price remained at $1.88
      per
      share.  By way of example, a warrant to purchase 1,000,000 shares at
      $1.88 per share is now a warrant to purchase 1,000,000 shares at $.125 per
      share.

     

    b.  Each
      of
      the Buyers, severally and not jointly, hereby irrevocably waives the right
      to
      receive any more shares upon exercise of the 2005 Warrant in the event of
      further decreases in the Warrant Exercise Price.

     

    c.  Each
      of
      the Buyers, severally and not jointly, hereby irrevocably waives any adjustment
      of the Warrant Exercise Price and the number of shares of Common Stock
      purchasable upon exercise of the 2005 Warrant pursuant to Section 9(a) of the
      2005 Warrants resulting from the PRB Cashless Exercise and Delayed Sale Share
      Issuance.

     

    5.           Trigger
      Event and Event of Default Waiver.

     

    Each
      of
      the Buyers, severally and not jointly, hereby waives (i) the Company’s failure
      to list as a lien in the 2005 Subordinated Note Purchase Agreement a Mortgage,
      Security Agreement, Assignment, Financing Statement and Fixture Filing to DAR,
      LLC, dated effective January 14, 2004, (ii) the breaches of Section 4(m) of
      the
      2005 Subordinated Note Purchase Agreement and Section 11 of each of the 2005
      Subordinated Notes held by such Buyer, as well 

     

     

    
      
         

      

      
        4

        
          

        

      

      
         

      

       

      as
        the
        occurrence of a Triggering Event (as defined in the 2005 Subordinated Notes)
        under Sections 3(b)(vii) and 3(b)(viii) of each of the 2005 Subordinated
        Notes
        held by such Buyer and an Event of Default (as defined in the 2005 Subordinated
        Notes) under Sections 10(a)(ii) and 10(a)(iii) of each of the 2005 Subordinated
        Notes held by such Buyer, resulting solely from the Company having 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 exceeding an aggregate among the Company
        and its Subsidiaries of $2,500,000, and (iii) any Triggering Event, Event
        of
        Default or other default under the 2005 Subordinated Note or 2005 Subordinated
        Note Purchase Agreement resulting from the execution and delivery of the
        November 2006 Waiver and Amendment Agreement between the Company and the
        holders
        of the Company’s secured debt and the consummation of the transactions
        contemplated thereby.

    

     

    6.           Payment
      upon PRB Sale.

     

    Each
      of
      the Buyers, severally and not jointly, hereby agrees to accept as full and
      complete payment of principal and interest due under the 2005 Subordinated
      Notes, restricted shares of PetroHunter Stock, the number of which and the
      value
      of which are to be negotiated between each of the Buyers and the
      Company.

     

    7.           Representations
      and Warranties of the Company.  The Company represents and
      warrants to each of the Buyers that:

     

    a.  Authorization;
      Enforcement; Validity.  The Company has the requisite corporate
      power and authority to enter into and perform its obligations under this
      Agreement, the Notes (as amended hereby), and the Warrants.  The
      execution and delivery of this Agreement by the Company and the consummation
      of
      the transactions contemplated hereby (including the transfer of the shares
      of
      PetroHunter Stock in accordance herewith) have been duly authorized by the
      board
      of directors of the Company, and no further consent or authorization is required
      of any of the Company or its Board of Directors or shareholders (under
      applicable law, the rules and regulations of the Principal Market (as defined
      in
      the Notes) or otherwise.  This Agreement has been duly executed and
      delivered by the Company, and each of this Agreement, the Notes (as amended
      hereby), and the Warrants constitutes a valid and binding obligation of each
      of
      the Company enforceable against the Company in accordance with its
      terms.  

     

    b.  No
      General Solicitation.  Neither the Company, nor any of its
      affiliates, nor any Person acting on its or their behalf, has engaged or will
      engage in any form of general solicitation or general advertising (within the
      meaning of Regulation D under the 1933 Act) in connection with the offer or
      sale
      of the PetroHunter Stock to the Buyers.

     

    c.  Acquisition
      of PetroHunter Stock.  The Company will acquire the PetroHunter
      Stock for its own account as principal and not with a view towards, or for
      resale in connection with, the public sale or distribution thereof, except
      pursuant to sales registered or exempted from registration under the 1933 Act;
      provided, however, that by making the representations herein, the Company does
      not represent that it agreed to hold any of the PetroHunter Stock for any
      minimum or other specific term.

     

    
      
         

      

      
        5

        
          

        

      

      
         

      

    

    d.  Accredited
      Investor Status.  The Company is an “accredited investor” as that
      term is defined in Rule 501(a)(3) of Regulation D under the 1933
      Act.

     

    e.  Reliance
      on Exemptions.  The Company understands that the PetroHunter Stock
      will be transferred to the Buyers in reliance on specific exemptions from the
      registration requirements of federal and state securities laws and that the
      Buyers are relying in part upon the truth and accuracy of, and the Company’s
      compliance with, the representations, warranties, agreements, acknowledgments
      and understandings of the Company set forth herein in order to determine the
      availability of such exemptions and the eligibility of the Company to transfer
      the PetroHunter Stock to the Buyers.

     

    f.  Information.  The
      Company and its advisors, if any, were furnished with all materials relating
      to
      the business, finances and operations of PetroHunter and materials relating
      to
      the Company’s acquisition of PetroHunter Stock that were requested by the
      Company.  The Company and its advisors, if any, were afforded the
      opportunity to ask questions of PetroHunter.  The Company has sought
      such accounting, legal and tax advice as it has considered necessary to make
      an
      investment decision with respect to its acquisition and subsequent transfer
      of
      the PetroHunter Stock. The Company has conducted its own investigation, to
      the
      extent that the Company has determined necessary or desirable, in connection
      with the transfer of the PetroHunter Stock to the Buyers and is not relying
      on
      any statements of or information from any  Buyer concerning
      PetroHunter.

     

    8.  Representation
      and Warranties of Each of the Buyers.  Each of the Buyers, jointly
      and not severally, represents and warrants to the Company that with respect
      to
      such Buyer:

     

    a.  Existence;
      Authorization.  Such Buyer is a validly existing corporation,
      partnership, limited liability company or other entity and has the requisite
      corporate, partnership, limited liability or other organizational power and
      authority to enter into and perform its obligations under this
      Agreement.  This Agreement has been duly and validly authorized,
      executed and delivered on behalf of such Buyer and is a valid and binding
      agreement of such Buyer, enforceable against such Buyer in accordance with
      its
      terms.

     

    b.           Investment
      Purpose.  Such Buyer will acquire the PetroHunter Stock for its
      own account and not with a view towards, or for resale in connection with,
      the
      public sale or distribution thereof, except pursuant to sales registered or
      exempted under the 1933 Act; provided, however, that by making the
      representations herein, such Buyer does not agree to hold any of the PetroHunter
      Stock for any minimum or other specific term and reserves the right to dispose
      of the Common Shares and PetroHunter Stock at any time in accordance with or
      pursuant to a registration statement or an exemption under the 1933
      Act.

     

    c.  Accredited
      Investor Status.  Such Buyer is an “accredited investor” as that
      term is defined in Rule 501(a) of Regulation D.

     

    d.  No
      Registration.  Such Buyer understands that (1) the shares of
      PetroHunter Stock (A) have not been registered under the 1933 Act or any state
      securities laws and (B) will be issued in reliance upon an exemption from the
      registration and prospectus delivery requirements of the 1933 Act and state
      securities laws, and (2) such Buyer must 

     

     

    
      
         

      

      
        6

        
          

        

      

      
         

      

       

      therefore
        bear the economic risk of such investment indefinitely unless a subsequent
        disposition thereof is registered under the 1933 Act and applicable state
        securities laws or is exempt therefrom.

    

     

    e.  Understanding
      of Investment Risks.  Such Buyer has knowledge, skill and
      experience in financial, business and investment matters relating to an
      investment of this type and is capable of evaluating the merits and risks of
      such investment and protecting Buyer’s interest in connection with the
      acquisition of the shares of PetroHunter Stock.  Such Buyer
      understands that the acquisition of the PetroHunter Stock is a speculative
      investment and involves substantial risks and that Buyer could lose Buyer’s
      entire investment in the 2005 Subordinated Notes.  To the extent
      deemed necessary by Buyer, such Buyer has retained, at its own expense, and
      relied upon, appropriate professional advice regarding the investment, tax
      and
      legal merits and consequences of purchasing and owning the PetroHunter
      Stock.  Such Buyer has the ability to bear the economic risks of
      Buyer’s investment in the PetroHunter Stock, including a complete loss of the
      investment, and Buyer has no need for liquidity in such investment.

     

    f.  Access
      to Information.  Such Buyer has been furnished all information (or
      provided access to all information) regarding the business and financial
      condition of PetroHunter, its expected plans for future business activities,
      the
      attributes of the PetroHunter Stock and the merits and risks of an investment
      in
      the PetroHunter Stock which such Buyer has requested or otherwise needs to
      evaluate the investment in PetroHunter.  In making the proposed
      investment decision, such Buyer is relying solely on investigations made by
      Buyer and Buyer’s representatives.  The offer to acquire the
      PetroHunter Stock was communicated to such Buyer in such a manner that Buyer
      was
      able to ask questions of and receive answers from the management of the Company
      concerning the terms and conditions of the proposed transaction.

     

    g.  Nature
      of Investment.  Such Buyer acknowledges and is aware that there
      has never been any representation, guarantee or warranty made by the Company
      or
      any officer, director, employee or agent or representative of the Company,
      expressly or by implication, as to (1) the approximate or exact length of time
      that such Buyer will be required to remain an owner of the PetroHunter Stock;
      (2) the percentage of profit and/or amount of or type of consideration, profit
      or loss to be realized, if any, as a result of this investment; or (3) that
      the
      limited past performance (if any) or experience on the part of PetroHunter,
      or
      any future expectations will in any way indicate the predictable results of
      the
      ownership of the PetroHunter Stock or of the overall financial performance
      of
      PetroHunter.

     

    h.  Reliance
      on Exemptions.  Such Buyer understands that the PetroHunter Stock
      are being offered and sold to it in reliance on specific exemptions from the
      registration requirements of the United States federal and state securities
      laws
      and that the Company is relying in part upon the truth and accuracy of, and
      such
      Buyer’s compliance with, the representations, warranties, agreements,
      acknowledgments and understandings of such Buyer set forth herein in order
      to
      determine the availability of such exemptions and the eligibility of such Buyer
      to acquire the PetroHunter Stock.

     

    i.  Restricted
      Nature of Shares.  Such Buyer understands that the shares of
      PetroHunter Stock have not been registered under the 1933 Act or any securities
      laws of any jurisdiction, that the shares of PetroHunter Stock are “restricted
      securities” as that term is defined 

     

     

    
      
         

      

      
        7

        
          

        

      

      
         

      

       

      in
        Rule
        144 under the 1933 Act, that PetroHunter will, from time to time, make stop
        transfer notations in its records to ensure compliance with the 1933 Act
        in
        connection with any proposed transfer of the shares of PetroHunter Stock
        and
        that all certificates evidencing the shares of PetroHunter Stock shall bear
        a
        restrictive legend in substantially the language set forth
        below:

    

     

    “THE
      SECURITES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE
      US
      SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”), AND MAY NOT BE
      OFFERED, SOLD, PLEDGED OR OTHERWISE TRANSFERRED EXCEPT (1) IN AN OFFSHORE
      TRANSACTION MEETING THE REQUIREMENTS OF RULE 903 OR RULE 904 OF REGULATION
      S
      UNDER THE SECURITIES ACT, (2) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT
      UNDER THE SECURITIES ACT, OR (3) PURSUANT TO AN AVAILABLE EXEMPTION FROM THE
      REGISTRATION REQUIREMENTS OF THE SECURITIES ACT, IN EACH CASE IN ACCORDANCE
      WITH
      ALL APPLICABLE SECURITIES LAWS.  HEDGING TRANSACTIONS INVOLVING THE
      COMMON SHARES OF THE COMPANY MAY NOT BE CONDUCTED UNLESS IN COMPLIANCE WITH
      THE
      SECURITIES ACT.”

     

    9.  Information.  Such
      Buyer and its advisors, if any, have been furnished with all materials relating
      to the business, finances and operations of PetroHunter and materials relating
      to the offer and sale of the PetroHunter Stock that have been requested by
      such
      Buyer.  Such Buyer and its advisors, if any, have been afforded the
      opportunity to ask questions of the Company regarding
      PetroHunter.  Neither such inquiries nor any other due diligence
      investigations conducted by such Buyer or its advisors, if any, or its
      representatives shall modify, amend or affect such Buyer’s right to rely on the
      Company’s representations and warranties contained in Section 8.  Such
      Buyer understands that its investment in the PetroHunter Stock involves a high
      degree of risk.  Such Buyer has sought such accounting, legal and tax
      advice as it has considered necessary to make an informed investment decision
      with respect to its acquisition of the PetroHunter Stock. 

     

    10.  Independent
      Nature of the Buyers.  The obligations of each of the Buyers
      hereunder are several and not joint with the obligations of the other
      Buyers.  Each of the Buyers shall be responsible only for its own
      agreements and covenants hereunder and under the other documents executed in
      connection with the 2005 Subordinated Notes (the “Transaction
Documents”).  The decision of each of the Buyers to
      enter into this Agreement has been made by each such party independently of
      any
      of the other Buyers and independently of any information, materials, statements
      or opinions as to the business, affairs, operations, assets, properties,
      liabilities, results of operations, condition (financial or otherwise) or
      prospects of the Company or any of its Subsidiaries or PetroHunter or any of
      its
      subsidiaries which may have been made or given by any of the other Buyers or
      by
      any agent or employee of any of the other Buyers, and none of the Buyers nor
      any
      of their respective agents or employees shall have any liability to any of
      the
      other Buyers (or any other Person) relating to or arising from any such
      information, materials, statements or opinions.  Nothing contained
      herein or in any of the other Transaction Documents, and no action taken by
      any
      of the Buyers pursuant hereto or thereto, 

     

     

    
      
         

      

      
        8

        
          

        

      

      
         

      

       

      shall
        be
        deemed to constitute any of the Buyers as a partnership, an association,
        a joint
        venture or any other kind of entity, or create a presumption that any of
        the
        Buyers are in any way acting in concert or as a group with respect to such
        obligations or the transactions contemplated hereby or thereby.  Each
        of the Buyers shall be entitled to independently protect and enforce its
        rights,
        including the rights arising out of this Agreement and the other Transaction
        Documents (in each case as amended hereby), and it shall not be necessary
        for
        any of the other Buyers to be joined as an additional party in any proceeding
        for such purpose.

    

     

    11.  Successors
      and Assigns.  This Agreement shall be binding upon and shall inure
      to the benefit of the parties hereto and their respective successors and
      permitted assigns.  The successors and assigns of such entities shall
      include their respective receivers, trustees or
      debtors-in-possession.

     

    12.  Further
      Assurances.  The Company hereby agrees from time to time, as and
      when requested by any Buyer, to execute and deliver or cause to be executed
      and
      delivered, all such documents, instruments and agreements, including secretary’s
      certificates, stock powers and irrevocable transfer agent instructions, and
      to
      take or cause to be taken such further or other action, as such Buyer may
      reasonably deem necessary or desirable in order to carry out the intent and
      purposes of this Agreement and the other Transaction Documents.

     

    13.  Rules
      of Construction.  All words in the singular or plural include the
      singular and plural and pronouns stated in either the masculine, the feminine
      or
      neuter gender shall include the masculine, feminine and neuter, and the use
      of
      the word “including” in this Agreement shall be by way of example rather than
      limitation.

     

    14.  Governing
      Law; Jurisdiction; Jury Trial.  All questions concerning the
      construction, validity, enforcement and interpretation of this Agreement shall
      be governed by the internal laws of the State of Colorado, without giving effect
      to any choice of law or conflict of law provision or rule (whether of the State
      of Colorado or any other jurisdiction) that would cause the application of
      the
      laws of any jurisdiction other than the State of Colorado.  Each party
      hereby irrevocably submits to the exclusive jurisdiction of the state and
      federal courts sitting in the City of Denver, for the adjudication of any
      dispute hereunder or in connection herewith or with any transaction contemplated
      hereby or discussed herein, and hereby irrevocably waives, and agrees not to
      assert in any suit, action or proceeding, any claim that it is not personally
      subject to the jurisdiction of any such court, that such suit, action or
      proceeding is brought in an inconvenient forum or that the venue of such suit,
      action or proceeding is improper.  Each party hereby irrevocably
      waives personal service of process and consents to process being served in
      any
      such suit, action or proceeding by mailing a copy thereof to such party at
      the
      address for such notices to it under this Agreement and agrees that such service
      shall constitute good and sufficient service of process and notice
      thereof.  Nothing contained herein shall be deemed to limit in any way
      any right to serve process in any manner permitted by law.  EACH PARTY
      HEREBY IRREVOCABLY WAIVES ANY RIGHT IT MAY HAVE, AND AGREES NOT TO REQUEST,
      A
      JURY TRIAL FOR THE ADJUDICATION OF ANY DISPUTE HEREUNDER OR IN CONNECTION
      HEREWITH OR ARISING OUT OF THIS AGREEMENT OR ANY TRANSACTION CONTEMPLATED
      HEREBY.

     

    
      
         

      

      
        9

        
          

        

      

      
         

      

    

    15.  Counterparts.  This
      Agreement may be executed in two or more identical counterparts, all of which
      shall be considered one and the same agreement and shall become effective when
      counterparts have been signed by each party and delivered to each other
      party.  In the event that any signature to this Agreement or any
      amendment hereto is delivered by facsimile transmission or by e-mail delivery
      of
      a “.pdf” format data file, such signature shall create a valid and binding
      obligation of the party executing (or on whose behalf such signature is
      executed) with the same force and effect as if such facsimile or “.pdf”
signature page were an original thereof.  No party hereto shall raise
      the use of a facsimile machine or e-mail delivery of a “.pdf” format data file
      to deliver a signature to this Agreement or any amendment hereto or the fact
      that such signature was transmitted or communicated through the use of a
      facsimile machine or e-mail delivery of a “.pdf” format data file as a defense
      to the formation or enforceability of a contract, and each party hereto forever
      waives any such defense.

     

    16.  Section
      Headings.  The section headings herein are for convenience of
      reference only, and shall not affect in any way the interpretation of any of
      the
      provisions hereof.

     

    17.  No
      Strict Construction.  The language used in this Agreement will be
      deemed to be the language chosen by the parties to express their mutual intent,
      and no rules of strict construction will be applied against any
      party.

     

    18.  Merger.  This
      Agreement and the other Transaction Documents, as amended hereby, represent
      the
      final agreement of each of the parties hereto with respect to the matters
      contained herein and may not be contradicted by evidence of prior or
      contemporaneous agreements, or prior or subsequent oral agreements, among any
      of
      the parties hereto.

     

     [Remainder
      of page intentionally left blank; Signature page
      follows]

    
      
         

      

      
        10

        
          

        

      

      
         

      

    

    IN
      WITNESS WHEREOF, this Agreement has been duly executed and delivered by each
      of
      the undersigned as of the date first above written.

     

    
      	 	
              COMPANY:

               

              GALAXY
                ENERGY CORPORATION

               

            
	 	
               

              By:       /s/
                Christopher S.
                Hardesty                     
                

              Name:   Christopher
                S.
                Hardesty                       
                

              Title:     SVP
                &
                CFO                                   
                

               

            
	 	 

    

    

    
      
        
        

         

      

      
         

        
          

        

      

      
         

      

    

     

    
      	 	BUYERS:	 
	 	 	 
	 	BANK
              SAL. OPPENHEIM JR. & CIE.	 
	 	 	 	 
	
               

            	
              By:
                

            	/s/ R.
              Grelat                
              /s/ U. Fricker	 
	 	Name: 
              	R.
              Grelat                       U.
              Fricker	 
	 	Title:	Vice
              President             
              Director	 
	 	 	 	 

    

     

    
      
        	 	CLARION
                FINANZ AG	 
	 	 	 	 
	
                 

              	
                By:
                  

              	/s/ Carlo
                Civelli	 
	 	Name: 
                	Carlo
                Civelli	 
	 	Title:	Director	 
	 	 	 	 

      

      
         

        
          	 	CAPPRICCIO
                  INVESTMENTS INC.	 
	 	 	 	 
	
                   

                	
                  By:
                    

                	/s/ E.
                  Schreiber	 
	 	Name: 
                  	E.
                  Schreiber	 
	 	Title:	Director	 
	 	 	 	 

        

         

        
          
            	 	DESMODIO
                    MANAGEMENT INC.	 
	 	 	 	 
	
                     

                  	
                    By:
                      

                  	/s/ Karl-Heinz
                    Hemmerle	 
	 	Name: 
                    	Karl-Heinz
                    Hemmerle	 
	 	Title:	Director	 
	 	 	 	 

          

          
             

            
              	 	CENTRUM
                      BANK AG	 
	 	 	 	 
	
                       

                    	
                      By:
                        

                    	/s/ J.
                      Muhlethaler            
                      /s/ D. Kieber	 
	 	Name: 
                      	J.
                      Muhlethaler                 
                      D. Kieber	 
	 	Title:	Executive
                      Director          Authorized
                      Officer	 
	 	 	 	 

            

             

            
              
                 

              

              
                 

                
                  

                

              

              
                 

              

            

            
              
                	 	FINTER
                        BANK ZURICH	 
	 	 	 	 
	
                         

                      	
                        By:
                          

                      	/s/ Roger
                        Curchod                
                        /s/ Karl Siegel	 
	 	Name: 
                        	Roger
                        Curchod                     
                        Karl Siegel	 
	 	Title:	AVP                                       
                        AVP	 
	 	 	 	 

              

              
                 

                
                  	 	JULIUS
                          BAER FUND TRADING	 
	 	 	 	 
	
                           

                        	
                          By:
                            

                        	/s/ Z.
                          Bozanic                     
                          /s/ R. Mader	 
	 	Name: 
                          	Z.
                          Bozanic                          
                          R. Mader	 
	 	Title:	AVP                                     AVP	 
	 	 	 	 

                

                 

                
                  
                    	 	VANGUARD
                            CAPITAL LIMITED	 
	 	 	 	 
	
                             

                          	
                            By:
                              

                          	/s/ Olivier
                            Chaponnier	 
	 	Name: 
                            	Olivier
                            Chaponnier	 
	 	Title:	Director	 
	 	 	 	 

                  

                  
                     

                    
                      	 	RAHN
                              & BODMER (custodian for Tuula Civelli)	 
	 	 	 	 
	
                               

                            	
                              By:
                                

                            	/s/ Tuula
                              Civelli	 
	 	Name: 
                              	Tuula
                              Civelli	 
	 	Title:	 	 
	 	 	 	 

                    

                     

                    
                      
                        	 	BOST
                                & CO.	 
	 	 	 	 
	
                                 

                              	
                                By:
                                  

                              	/s/ Carlo
                                Civelli	 
	 	Name: 
                                	Carlo
                                Civelli	 
	 	Title:	Director

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