Document:

Exhibit 10.12

 

SALARY
CONTINUATION AGREEMENT

 

This Salary Continuation Agreement (the “Agreement”)
is made this 19th day of January, 2005, by and among First
Capital Bank Holding Corporation, a Florida corporation (the “Company”), First
National Bank of Nassau County, a national bank organized under the laws of the
United States (the “Bank”) (the “Company and the Bank being referred to herein
collectively as the “Employer”) and Leo Deas III (the “Executive”).

 

WITNESSETH

 

WHEREAS, the Bank is a national bank
organized under the laws of the United States and operating in Nassau County,
Florida;

 

WHEREAS, Executive is the Executive Vice
President of Employer; and

 

WHEREAS, the parties desire to enter into
this agreement to provide for certain severance payments to Executive in the
event there is a Change in Control (as defined herein) and in accordance of the
terms and conditions of this Agreement.

 

NOW, THEREFORE, in consideration of Executive’s
services to Employer, the mutual covenants contained herein, and other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto, intending to be legally bound, do hereby
agree as follows:

 

1.                                       Definitions

 

a.                                       “Cause” shall mean (A) the commission by the Executive
of a willful act (including, without limitation, a dishonest or fraudulent act)
or a grossly negligent act, or the willful or grossly negligent omission to act
by the Executive, which is intended to cause, causes, or is reasonably likely
to cause material harm to the Employer (including harm to its business
reputation); (B) the indictment of the Executive for the commission or
perpetration by the Executive of any felony or any crime involving dishonesty,
moral turpitude or fraud; (C) the material breath by the Executive of this
Agreement that, if susceptible of cure, remains uncured 10 days following
written notice to the Executive of such breach; (D) the exhibition by the
Executive of a standard of behavior within the scope of his employment that is
materially disruptive to the orderly conduct of the Employer’s business
operations (including, without limitation, substance abuse or sexual
misconduct) to a level which, in the Board of Directors’ good faith and
reasonable judgment, is materially detrimental to the Employer’s best interest,
that, if susceptible of cure, remains uncured 10 days following written notice
to the Executive of such specific inappropriate behavior; (E) the receipt
of any form of notice, written or otherwise, that any regulatory agency having
jurisdiction over the Employer intends to institute any form of formal or
informal (e.g., a memorandum of understanding which relates to the
Executive’s performance) regulatory action against the Executive or the
Employer if the Board of Directors in good faith determines that the subject
matter of such action involves acts or omissions by or under the supervision of
the Executive or that termination of the Executive would advance the Employer’s
compliance with the purpose of the action or would assist the Employer in
avoiding or reducing the restrictions or adverse effects to the Employer
related to the regulatory action; or 

 

 

(F) the failure of the Executive to render the services hereunder
in accordance with an appropriate performance standard determined in the sole
discretion of the Board of Directors;

 

b.                                      “Change in Control” shall mean the occurrence during the Term
of any of the following events, unless such event is a result of a Non-Control
Transaction:

 

(i)                                     The
individuals who, as of the date of this Agreement, are members of the Board of
Directors of the Company (the “Incumbent Board”)
cease for any reason to constitute at least 50% of the Board of Directors of
the Company; provided, however, that if the election, or
nomination for election by the Company’s shareholders, of any new director was
approved in advance by a vote of at least 50% of the Incumbent Board, such new
director shall, for purposes of this Agreement, be considered as a member of the
Incumbent Board; provided, further, that no individual shall be
considered a member of the Incumbent Board if such individual initially assumed
office as a result of either an actual or threatened election contest, or other
actual or threatened solicitation of proxies, proxy contest, or consents by or
on behalf of any person other than the Board of Directors of the Company,
including by reason of any agreement intended to avoid or settle any election
contest or proxy contest.

 

(ii)                                  An
acquisition (other than directly from the Company) of any voting securities of
the Company (the “Voting Securities”) by any “Person” (as the term “person” is used for purposes of Section 13(d) or
14(d) of the Exchange Act) immediately after which such Person has “Beneficial Ownership” (within the meaning of Rule l3d-3
promulgated under the Exchange Act) of 50% or more of the combined voting power
of the Company’s then outstanding Voting Securities; provided, however,
that in determining whether a Change in Control has occurred, Voting Securities
which are acquired in a Non-Control Acquisition shall not constitute an
acquisition which would cause a Change in Control.

 

(iii)                               Consummation
of:  (i) a merger, consolidation, or
reorganization involving the Company (ii) a complete liquidation or
dissolution of the Company; or (iii) the sale or other disposition of all
or substantially all of the assets of the Company to any Person (other than a
transfer to a Subsidiary).

 

(iv)                              A
notice of an application is filed with the Office of Comptroller of the
Currency (the “OCC”) or the Federal Reserve
Board or any other bank or thrift regulatory approval (or notice of no
disapproval) is granted by the Federal Reserve, the OCC, the Federal Deposit
Insurance Corporation, or any other regulatory authority for permission to
acquire control of the Company or any of its banking subsidiaries; provided
that if the application is filed in connection with a transaction which has
been approved by the Board, then the Change in Control shall not be deemed to
occur until consummation of the transaction.

 

2

 

c.                                       “Good Reason” shall mean the occurrence after a Change in
Control of any of the events or conditions described in subsections (i) through
(viii) hereof:

 

(i)                                     a
change in the Executive’s status, title, position or responsibilities
(including reporting responsibilities) which, in the Executive’s reasonable
judgment, represents an adverse change from his status, title, position or
responsibilities as in effect at any time within ninety days preceding the date
of a Change in Control or at any time thereafter; the assignment to the
Executive of any duties or responsibilities which, in the Executive’s
reasonable judgment, are inconsistent with his status, title, position or
responsibilities as in effect at any time within ninety days preceding the date
of a Change in Control or at any time thereafter; any removal of the Executive
from or failure to reappoint or reelect him to any of such offices or
positions, except in connection with the termination of his employment for
disability or Cause, as a result of his death, or by the Executive other than
for Good Reason, or any other change in condition or circumstances that in the
Executive’s reasonable judgment makes it materially more difficult for the
Executive to carry out the duties and responsibilities of his office than
existed at any time within ninety days preceding the date of Change in Control
or at any time thereafter;

 

(ii)                                  a
reduction in the Executive’s base salary or any failure to pay the Executive
any compensation or benefits to which he is entitled within 10 days of the date
due;

 

(iii)                               the
Employer’s requiring the Executive to be based at any place outside a 30-mile
radius from the executive offices occupied by the Executive immediately prior
to the Change in Control, except for reasonably required travel on the Employer’s
business which is not materially greater than such travel requirements prior to
the Change in Control;

 

(iv)                              the
failure by the Employer to (A) continue in effect (without reduction in
benefit level and/or reward opportunities) any material compensation or
employee benefit plan in which the Executive was participating at any time
within 90 days preceding the date of a Change in Control or at any time
thereafter, unless such plan is replaced with a plan that provides
substantially equivalent compensation or benefits to the Executive, or (B) provide
the Executive with compensation and benefits, in the aggregate, at least equal
(in terms of benefit levels and/or reward opportunities) to those provided for
under each other employee benefit plan, program and practice in which the
Executive was participating at any time within 90 days preceding the date of a
Change in Control or at any time thereafter;

 

(v)                                 the
insolvency or the filing (by any party, including the Company or the Employer)
of a petition for bankruptcy of the Company or the Employer, which petition is
not dismissed within 60 days;

 

3

 

(vi)                              any
material breach by the Employer of any material provision of this Agreement;

 

(vii)                           any
purported termination of the Executive’s employment for Cause by the Employer
which does not comply with the terms of’ this Agreement; or

 

(viii)                        the
failure of the Employer to obtain an agreement, satisfactory to the Executive,
from any successor or assign to assume and agree to perform this
Agreement, as contemplated in Section 4 hereof.

 

Any event or condition described in clause (i) through
(viii) above which occurs prior to a Change in Control but which the
Executive reasonably demonstrates (A) was at the request of a third party,
or (B) otherwise arose in connection with, or in anticipation of, a Change
in Control which actually occurs, shall constitute Good Reason for purposes of
this Agreement, notwithstanding that it occurred prior to the Change in Control.
The Executive’s right to terminate his employment for Good Reason shall not be
affected by his incapacity due to physical or mental illness.

 

d.                                      “Non-Control Transaction” shall mean a transaction described
below:

 

(i)                                     the
shareholders of the Company, immediately before such merger, consolidation or
reorganization, own, directly or indirectly, immediately following such merger,
consolidation or reorganization, at least 50% of the combined voting power of
the outstanding voting securities of the corporation resulting from such
merger, consolidation or reorganization (the “Surviving
Corporation”) in substantially the same proportion as their
ownership of the Voting Securities immediately before such merger,
consolidation or reorganization; and

 

(ii)                                  immediately
following such merger, consolidation or reorganization, the number of directors
on the board of directors of the Surviving Corporation who were members of the
Incumbent Board shall at least equal the number of directors who were
affiliated with or appointed by the other party to the merger, consolidation or
reorganization.

 

e.                                       “Notice of Termination” shall mean a written notice of termination
from the Employer or the Executive which specifies an effective date of
termination, indicates the specific termination provision in this Agreement
relied upon, and, in the case of a termination for Good Reason or for Cause,
sets forth in reasonable detail the facts and circumstances claimed to provide
a basis for termination of the Executive’s employment under the provision so
indicated.

 

2.                                       Payments
to Executive.

 

If Executive’s employment is terminated (a) Upon
a Change in Control, for any reason upon delivery of notice to the Employer
within a 12 month period after the occurrence of a Change in Control; (b) for
Good Reason pursuant to Section 1(c)(iv); or (c) if the Employer
terminates the Executive Without Cause after a Change in Control, then, in
addition to other 

 

4

 

rights and remedies available in law or equity, the Executive shall be
entitled to the following (i) the Employer shall pay the Executive in cash
within 15 days of such termination date any sums due him as base salary and/or
reimbursement of expenses through the date of such termination, plus any bonus
earned or accrued under the Bonus Plan through the date of termination
(including any amounts awarded for previous years but which were not yet
vested) and a pro  rata share of any bonus with respect to the
current fiscal year which had been earned as of the date of the Executive’s
termination (and any forfeiture in other restrictive provisions applicable to
each award shall not apply); and (ii) the Employer shall pay the Executive
in cash within 15 days of such termination date one lump sum payment in an
amount equal to the sum of (1) the Executive’s then current annual base
salary, and (2) the average bonuses paid to Executive during the three
preceding fiscal years.

 

3.                                       Governing
Law; Jurisdiction and Venue.

 

This Agreement shall be governed by and
construed and enforced in accordance with the laws of the State of Florida
without giving effect to the conflict of laws principles thereof. The parties
agree to the exclusive jurisdiction and venue of the federal courts sitting in
Nassau County, Florida with regard to any actions that arise out of this
Agreement.

 

4.                                       Successors;
Binding Agreement.

 

This Agreement shall be binding upon and
shall inure to the benefit of Employer and its successors and assigns. Neither
this Agreement nor any right or interest hereunder shall be assignable or
transferable by Executive, his beneficiaries or legal representatives, except
by will or by the laws of descent and distribution. This Agreement shall inure
to the benefit of and be enforceable by Executive’s legal personal
representative.

 

5.                                       Entire
Agreement.

 

This Agreement constitutes the entire
agreement between the parties hereto and supersedes all prior agreements, if
any, understandings and arrangements, oral or written, between the parties
hereto with respect to the subject matter hereof.

 

6.                                       Counterparts.

 

This Agreement may be executed in one or
more counterparts, each of which shall be deemed an original but all of which
together shall constitute one and the same instrument.

 

5

 

	
   

  	
  EMPLOYER

  
	
   

  	
   

  
	
   

  	
  FIRST CAPITAL BANK 

  HOLDING CORPORATION, a 

  Florida corporation

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Suellen R. Garner 

  	
   

  
	
   

  	
   

  	
  Name: Suellen R. Garner 

  
	
   

  	
   

  	
  Title: Chairman

  
	
   

  	
   

  
	
   

  	
  FIRST NATIONAL BANK OF 

  NASSAU COUNTY

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Michael G. Sanchez 

  	
   

  
	
   

  	
   

  	
  Name: Michael G. Sanchez 

  
	
   

  	
   

  	
  Title: President and CEO

  
	
   

  	
   

  
	
   

  	
  EXECUTIVE

  
	
   

  	
   

  
	
   

  	
  /s/ Leo Deas III 

  	
   

  
	
   

  	
  Name: Leo Deas III

  

 

6EXHIBIT 4.6

 

THE SECURITIES
REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933,
AS AMENDED, (THE “SECURITIES ACT”) OR ANY STATE OR OTHER SECURITIES LAWS AND
NEITHER THE SECURITIES NOR ANY INTEREST THEREIN MAY BE OFFERED, SOLD, HYPOTHECATED,
PLEDGED OR OTHERWISE DISPOSED OF IN THE UNITED STATES OR TO U.S. PERSONS EXCEPT
PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT AND
SUCH LAWS OR AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT AND SUCH
LAWS WHICH, IN THE OPINION OF COUNSEL FOR THE HOLDER, WHICH COUNSEL AND OPINION
ARE REASONABLY SATISFACTORY TO COUNSEL FOR THIS CORPORATION, IS AVAILABLE.

 

THIS
NOTE IS ONE OF A SERIES OF NOTES OF THE SAME TERMS AND TENOR THAT MAY BE ISSUED
BY MAKER UP TO AN AGGREGATE OF $15,000,000.

 

PRB GAS TRANSPORTATION, INC.

 

SENIOR SUBORDINATED CONVERTIBLE NOTE

 

	
  US
  $                                    

  	
   

  	
  January      , 2006

  
	
   

  	
   

  	
  Denver, Colorado

  

 

FOR
VALUE RECEIVED, PRB Gas Transportation, Inc., a corporation incorporated under
the laws of the State of Nevada (the “Company”),
promises to pay to                                          
(the “Holder”) or registered assigns, the
principal amount of US $                                 ,
and to pay interest (computed on the basis of a 360-day year) (a) on the unpaid
principal amount at the rate of ten percent (10%) quarterly in arrears
commencing on March 15, 2006 and thereafter on the fifteenth day of each June,
September, December and March thereafter (each, an “Interest
Payment Date”) and (b) to the extent permitted by law on any overdue
payment of the principal amount at the rate of twelve percent (12%) per annum.
Principal and accrued but unpaid interest hereunder shall be due and payable on
demand on or after the Maturity Date (as defined in Section (f) hereof), unless
converted by the Holder in accordance with Section (g) hereof.

 

Payments
of principal and interest shall be made in lawful money of the United States of
America by check and mailed to the address of the Holder specified in Section (m)(iv).

 

This
Note is subject to the following terms and conditions:

 

(a)           Note Subordination. The indebtedness evidenced by this Note is
subordinate and subject in right of payment as to principal and interest to the
prior payment in full of all principal, premium, if any, and interest on all
indebtedness of the Company, regardless of when incurred, including
indebtedness incurred after the date hereof, for money borrowed from the
Company’s principal banking institution (“Senior Debt”)
which may be secured by the Company’s oil and gas reserves. Upon maturity of
any Senior Debt, payment in full must be made on such Senior Debt before any
payment is made on or in respect of this Note. During the continuance of any
default with respect to any Senior Debt entitling the holder thereof to
accelerate the maturity thereof, or if any such default would be caused by any
payment upon or in respect of this Note, no payment may be made by the Company
upon or in respect of the Notes. Upon any distribution of assets of the Company
in any dissolution, winding up, liquidation or reorganization of the Company,
payment of the principal of and premium, if any, and interest on the Notes will
be subordinated to the prior payment in full of all Senior Debt. (Such subordination
will not prevent the occurrence of any event of default, as set forth in Section
(c) below.)

 

 

(b)
          Security. This Note together with
all Senior Convertible Secured Notes of the Company, is secured by a first
position lien on all of the operating gathering assets of the Company as of the
date of all such notes except for the Crosby Gathering Line and the West Tioga
Gas Processing Plant.

 

(c)           Default.

 

(i)            Default. The occurrence of any one or more of the
following events shall constitute an event of default (an “Event of
Default”) hereunder:

 

(1)           if the Company shall default in the punctual
payment of any sum payable with respect to, or in the observance or performance
of any of the agreements, promises, covenants, terms and conditions of any of,
the Notes.

 

(2)           if any warranty, representation or statement
of fact made herein by the Company is false or misleading in any material
respect when made;

 

(3)           if the Company or any significant subsidiary,
as defined in Rule 405 of the Rules and Regulations under the Securities Act of
1933, as amended (“Significant Subsidiary”)
shall be dissolved or liquidated or any proceeding for dissolution or
liquidation of the Company or any Significant Subsidiary is commenced or the
Company or any Significant Subsidiary fails to maintain its corporate
existence;

 

(4)            if the Company or any Significant Subsidiary
becomes insolvent (however defined or evidenced) or makes an assignment for the
benefit of creditors (or similar arrangement under the laws of the State of Colorado);

 

(5)           if there shall be filed by or against the
Company or any Significant Subsidiary any petition for any relief under the
bankruptcy laws of the United States now or hereafter in effect or any
proceeding shall be commenced with respect to the Company or any Significant
Subsidiary under any insolvency, readjustment of debt, reorganization,
dissolution, liquidation or similar law or statute of any jurisdiction now or
hereafter in effect (whether at law or in equity), provided that in the case of
any involuntary filing or the commencement of any involuntary proceeding
against the Company or any Significant Subsidiary such proceeding or petition
shall have continued undismissed and unvacated for at least 60 days;

 

(6)           if the usual business of the Company or any
Significant Subsidiary shall cease or be terminated or suspended;

 

(7)           if any proceeding, procedure or remedy
supplementary to or in enforcement of judgment shall be commenced against, or
with respect to any property of, the Company or any Significant Subsidiary; or

 

(8)           if any petition or application to any court
or tribunal, at law or in equity, be filed by or against the Company or any
Significant Subsidiary for the appointment of any receiver or trustee for the
Company or any Significant Subsidiary or any part of the property of the
Company or any Significant Subsidiary, provided that in the case of any
involuntary filing against the Company or any Significant Subsidiary, such
proceeding or appointment shall have continued undismissed and unvacated for at
least 60 days.

 

2

 

(ii)           Remedies Upon Default. If any Event of Default shall occur for any
reason, then and in any such event, in addition to all rights and remedies of
the Holder under applicable law or otherwise, all such rights and remedies
being cumulative, not exclusive and enforceable alternatively, successively and
concurrently, the Holder may, at its option, declare any or all amounts owing
under this Note, to be due and payable, whereupon the then unpaid balance
hereof, together with all interest accrued thereon, shall forthwith become due
and payable, together with interest accruing thereafter at the then applicable
interest rate stated above until the indebtedness evidenced by this Note is
paid in full, plus the costs and expenses of collection hereof, including, but
not limited to) attorney’s fees and legal expenses.

 

(iii)          The Company’s Waivers. The Company (i) waives diligence, demand,
presentment, protest and notice of any kind, (ii) agrees that it will not be
necessary for the Holder to first institute suit in order to enforce payment of
this Note and (iii) consents to any one or more extensions or postponements of
time of payment, release, surrender or substitution of collateral security, or
forbearance or other indulgence, without notice or consent, The pleading of any
statute of limitations as a defense to any demand against the Company is hereby
expressly waived by the Company.

 

(iv)          Certain Obligors. The Holder may proceed against the Company
and any guarantors or endorsees hereof in such order and manner as the Holder
may choose. None of the rights of the Holder shall be waived or diminished by
any failure or delay in the exercise thereof.

 

(d)           Covenants. The Company covenants and agrees that, so
long as this Note is outstanding and unpaid:

 

(i)            Payment of Note. The Company will punctually pay or cause to
be paid the principal, premium, if any, and Interest on this Note at the dates
and places and in the manner specified herein. Any sums required to be withheld
from any payment of principal, premium, if any, or Interest on this Note by
operation of law or pursuant to any order, judgment, execution, treaty, rule or
regulation may be withheld by the Company and paid over in accordance
therewith. In the event any restriction is placed upon payment of principal,
premium, if any, or Interest by virtue of a currency or monetary control law,
rule or regulation of Canada or of the United States Federal Government, as set
forth in a written notice delivered to the Holder within thirty (30) days after
the imposition of such a restriction, such payments shall be deposited to the
account of the payee in a bank, trust company or other financial institution in
the United States, as directed by the payee. Such payment or deposit will be
deemed payment to the Holder.

 

Nothing
in this Note or in any other agreement between the Holder and the Company shall
require the Company to pay, or the Holder to
accept, interest in an amount which would subject the Holder to any penalty or
forfeiture under applicable law. In the event that the payment of any charges,
fees or other sums due under this Note or provided for in any other agreement
between the Company and the Holder are or could be held to be in the nature of
interest and would subject the Holder to any penalty or forfeiture under
applicable law, then ipso facto the obligations of the Company to make such
payment to the Holder shall be reduced to the highest rate authorized under
applicable law and, in the event that the Holder shall have ever received,
collected, accepted or applied as interest any amount in excess of the maximum
rate of interest permitted to be charged by applicable law, such amount which
would be excess interest under applicable law shall be applied first to the
reduction of principal then outstanding, and, second, if such principal amount
is paid in full, any remaining excess shall forthwith be returned to the
Company.

 

(ii)           Maintenance of Corporate
Existence: Merger and Consolidation. The Company will at all times cause to be done all things necessary or
appropriate to preserve and keep in full force and effect its corporate
existence and the corporate existence of any Significant Subsidiary and all of
its rights and franchises and shall not consolidate with or merge into any
other corporation or transfer all or substantially all of its assets to any
person unless (i) the corporation formed by such consolidation or into which
the Company is merged or to which the assets of the Company are transferred is
a

 

3

 

corporation that expressly
assumes all of the obligations of the Company under this Note and (ii) after
giving effect to such transaction, no Event of Default and no event which, after
notice or lapse of time, or both, would become an Event of Default, shall have
occurred and be continuing.

 

(iii)          Maintenance of Properties. The Company will reasonably maintain in
good repair, working order and condition, reasonable wear and tear excepted,
its properties and other assets, and those of its Significant Subsidiaries, and
from time to time make all necessary or desirable repairs, renewals and
replacements thereto.

 

(iv)          Payment of Taxes. The Company will use its best efforts to pay
or discharge or cause to be paid, set aside for payment or discharge, before
the same shall become delinquent, all taxes, assessments and governmental
charges levied or imposed upon the Company or upon its income, profits or
property; provided, that the Company shall not be required to pay or discharge
or cause to be paid or discharged any such tax, assessment, charge or claim
whose amount or validity is being contested in good faith by appropriate
proceedings.

 

(v)           Compliance with Statutes. The Company will and will cause its
Significant Subsidiaries to comply in all material respects with all applicable
statutes and regulations of the provinces of Canada and of the United States of
America and of any state or municipality, and of any agency thereof, in respect
of the conduct of business and the ownership of property by the Company and its
Significant Subsidiaries; provided, that nothing contained in this Section (d)(v)
shall require the Company or a Significant Subsidiary to comply with any such
statute or regulations so long as its legality or applicability shall be
contested in good faith.

 

(vi)          Reports; Financial Statements: No
Adverse Change. The
financial statements included in the Company’s filings (the “SEC Filings”) with United States Securities and Exchange
Commission did not contain any untrue statement of a material fact or omit to
state a material fact required to be stated therein or necessary to make the
statements made therein, in light of the circumstances in which they were made,
not misleading. The financial statements included in the SEC Filings (including
the related notes and schedules) fairly present, as of December 31, 2005, the
financial position and results of operations for the periods set forth therein
(subject, in the case of unaudited statements, to the omission of certain notes
not ordinarily accompanying such unaudited financial statements, and to normal
year-end audit adjustments which are not material in amount or effect), in each
case in accordance with generally accepted accounting principles consistently
applied during the period involved. Since December 31, 2005, there has been no
material adverse change in the Company’s or a Significant Subsidiary’s
business, properties, financial condition or results of operations, except as
disclosed in the SEC Filings.

 

(vii)         Restrictions on Dividends,
Redemptions Etc. The Company
will not declare or pay any dividend or make any other distribution of the
Company, except dividends or distributions payable in equity securities of the
Company.

 

(viii)        Transactions with Affiliates. Neither the Company nor any of its
Significant Subsidiaries will itself, and will not permit any of their
respective officers or directors, or holder of 5% or more of the Company’s
Common Stock, to engage in any transaction of any kind or nature with any
affiliate of the Company or any Significant Subsidiary, other than transactions
with any wholly-owned subsidiary of the Company or any Significant Subsidiary
or pursuant to the terms of any agreement existing as of the date hereof
between the Company or any Significant Subsidiary and any affiliate of the
Company or any Significant Subsidiary, unless such transaction, or in the case
of a course of related or similar transactions or continuing transactions, such
course of transactions or continuing transactions is or are upon terms which
are fair to the Company or any Significant Subsidiary and which are reasonably

 

4

 

similar to, or more
beneficial to the Company or any Significant Subsidiary than the terms deemed
likely to occur in similar transactions with unrelated persons under the same
circumstances.

 

(e)           No Prepayment. This Note may not be prepaid in whole or in
part except as set forth in Section (h) below.

 

(f)            Maturity. If this Note is not converted at the option
of the Holder in accordance with Section (g) hereof, the principal amount of
this Note, together with accrued but unpaid interest, shall be due and payable
on demand thirty (30) months from the date of this Note (the “Maturity Date”).

 

(g)           Conversion. All or any portion of
the principal amount of this Note, together with accrued but unpaid interest,
may be converted into shares of Common Stock (the “Note Shares”)
at the option of the Holder at any time on or prior to the Maturity Date,
subject to the terms and conditions set forth in this Section (g). Upon
conversion into Note Shares, the principal amount and accrued but unpaid
interest on this Note that are applicable to the Note Shares that have been so
converted shall be discharged.

 

(i)            Conversion Price. The number of Note Shares into which this
Note may be converted shall be determined by dividing the aggregate amount of
principal and accrued but unpaid interest outstanding on this Note on the
Conversion Date (as defined below) by seven dollars ($7.00) (subject to
adjustment under certain circumstances) (the “Conversion
Price”).

 

(ii)           Method of Conversion. Before the Holder shall be entitled to
receive Note Shares upon the conversion of this Note or any portion thereof,
the Holder shall surrender this Note and deliver a Notice of Conversion (in the
form attached hereto as Exhibit A) to
the office of the Company or its designated agent. The Notice of Conversion
shall state therein the amount of the Note being converted into Note Shares and
the amount(s) in which the certificate(s) for Note Shares are to be issued. The
time of conversion (the “Conversion Date”)
shall be the close of business on the first business day following the date on
which the Company receives the Notice of Conversion. Interest on Notes
converted ceases to accrue on and after the date of the Notice of Conversion.

 

(iii)
         Issuance of Note Shares. The Company shall, as soon as practicable
after surrender of this Note and receipt of the Notice of Conversion, but in no
event more than three (3) business days thereafter, issue and deliver to the
Holder, a certificate(s) for the number of Note Shares to which the Holder
shall be entitled as aforesaid.

 

(iv)          No Fractional Shares. No fractional Note Shares shall be issuable
upon conversion of this Note or any portion thereof, If the conversion of this
Note would result in the issuance of a fractional share of Common Stock, such
fractional share shall be rounded up to the nearest whole share and issued to the
Holder.

 

(v)
Adjustment of Conversion Price; Merger.

 

(1)           If the Company at any time or from time to
time while this Note is issued and outstanding shall declare or pay, without
consideration, any dividend on the Common Stock payable in Common Stock, or shall
effect a subdivision of the outstanding shares of Common Stock into a greater
number of shares of Common Stock (by stock split, reclassification or otherwise
than by payment of a dividend in Common Stock or in any right to acquire Common
Stock), or if the outstanding shares of Common Stock shall be combined or
consolidated, by reclassification or otherwise, into a lesser number of shares
of Common Stock, then the Conversion Price in effect immediately before such
event shall, concurrently with the effectiveness of such event, be
proportionately decreased or increased, as appropriate. If the Company shall
declare or pay, without consideration, any dividend on the Common Stock payable
in any right to acquire Common Stock for no consideration, then the Company
shall be

 

5

 

deemed to have made a
dividend payable in Common Stock in an amount of shares equal to the maximum
number of shares issuable upon exercise of such rights to acquire Common Stock.

 

(2)           If the Common Stock shall be changed into the
same or a different number of shares of any other class or classes of stock,
whether by capital reorganization, reclassification or otherwise (other than a
subdivision or combination of shares provided for in Section (g)(v)(1)), the
Conversion Price then in effect shall, concurrently with the effectiveness of
such reorganization or reclassification, be proportionately adjusted so that
the Note Shares shall be convertible into, in lieu of the number of shares of
Common Stock which the Holder would otherwise have been entitled to receive, a
number of shares of such other class or classes of stock equivalent to the
number of shares of Note Shares that would have been subject to receipt by the
Holder upon payment of Note Shares on this Note immediately before that change.

 

(3)           In case of any consolidation or merger of the
Company with any other corporation, limited liability company or any other
entity (each such transaction, a “Merger”), the
corporation formed by the Merger shall succeed to the covenants, stipulations,
promises and the agreements contained in this Note. In the event of a Merger,
the Company shall make appropriate provisions so that the Holder shall have the
right thereafter to convert this Note into the kind and amount of securities
receivable upon such Merger by a Holder of the number of securities into which
this Note might have been converted immediately prior to a Merger. The above
provisions shall similarly apply to successive Mergers.

 

(4)           Upon the occurrence of each adjustment or
readjustment of any Conversion Price pursuant to this Section (g)(v), the
Company at its expense shall promptly compute such adjustment or readjustment
in accordance with the terms hereof and prepare and furnish to the Holder a
notice setting forth such adjustment or readjustment and showing in detail the
facts upon which such adjustment or readjustment is based.

 

(vi)          Reservation of Stock. The Company shall at all times reserve and
keep available out of its authorized but unissued shares of Common Stock,
solely for the purpose of effecting the conversion of this Note into Note
Shares, such number of its shares of Common Stock as shall from time to time be
sufficient to effect the conversion of all of the Notes; and if at any time the
number of authorized but unissued shares of Common Stock shall not be
sufficient to effect the conversion of all of the Notes then, the Company will
take such corporate action as may be necessary to increase its authorized but
unissued shares of Common Stock to such number of shares as shall be sufficient
for such purpose, including without limitation, engaging in best efforts to
obtain the requisite stockholder approval of any necessary amendment to its
Articles of Incorporation or charter documents.

 

(vii)         Issue Taxes. The Company shall pay any and all issue and
other taxes that may be payable in respect of any issue or delivery of Note
Shares; provided, that the Company shall not be obligated to pay any transfer
taxes resulting from any transfer requested by the Holder in connection with
any such conversion.

 

(h)           Call Provision. This Note may be retired
by the Company, at its option, by the payment of the principal amount of this
Note plus any accrued but unpaid interest upon 10 days prior written notice to
the Holder (the “Call Notice Period”) if the closing selling price of the
Company’s Common Stock for 10 consecutive trading days exceeds 200% of the
conversion price of this Note as set forth in Section (g).

 

(i)            Registration: Registration of
Transfer and Exchange of this Note.

 

(i)            The Company shall keep or cause to be kept a
note register (the “Note Register”)

 

6

 

for the Notes in which,
subject to such reasonable regulations as it may prescribe, the Company shall
provide for the registration of the Notes and the registration of transfers of
the Notes.

 

(ii)           Subject to the restrictions on transfer set
forth herein, this Note may be exchanged, at the option of each Holder, for
other Notes in any authorized denominations, of a like aggregate principal
amount, upon surrender of this Note to be exchanged at the offices of the
Company or its designated agent (either, the “Registrar”).

 

(iii)          All Notes issued upon any registration of
transfer or exchange of this Note shall be valid obligations of the Company,
evidencing the same debt, and entitling the Holder to the same benefits under
this Note.

 

(iv)          Every Note presented or surrendered for
registration of transfer or exchange shall be duly endorsed by, or be
accompanied by a written instrument of transfer in form satisfactory to the
Registrar, duly executed by the Holder thereof or such Holder’s attorney duly
authorized in writing.

 

(v)           No charge shall be made to a Holder for any
registration of transfer or exchange of Notes.

 

(vi)          Prior to due presentment for registration of
transfer of any Note, the Company may treat the person in whose name any Note
is registered (as of the day of determination) as the Holder for the purpose of
receiving payments of principal of and interest on such Note and for all other
purposes, and neither the Company nor any agent of the Company shall be
affected by notice to the contrary.

 

(j)            Other Provisions Relating to
Rights of the Holder of this Note.

 

(i)            Rights of the Holder of this Note. This Note shall not entitle the Holder to
any of the rights of a shareholder of the Company, including, without
limitation, the right to vote, to receive dividends and other distributions, or
to receive any notice of, or to attend, meetings of shareholders or any other
proceedings of the Company. This Section (j)(i) shall not affect the rights of
the Holder in its capacity as a shareholder of the Company upon conversion of
this Note and issuance to the Holder of Note Shares pursuant to Section (g)
hereof.

 

(ii)           Lost,
Stolen, Mutilated or Destroyed Note. If this Note shall be mutilated, lost, stolen or
destroyed, the Company shall execute and deliver, in exchange and substitution
for and upon cancellation of a mutilated Note, or in lieu of or in substitution
for a lost, stolen or destroyed Note, a new Note for the principal amount of
this Note so mutilated, lost, stolen or destroyed but only upon receipt of
evidence (which may consist of a signed affidavit of the Holder), of such loss,
theft or destruction of such Note, and of the ownership thereof,
and indemnity, if requested, all reasonably satisfactory to the Company.

 

(k)           Securities Law Compliance;
Registration Rights.

 

(i)            Restrictions on Transfer. The Holder and the Company understand that
each of (i) the Holder’s right to convert this Note and (ii) the ability of the
Company to issue the Note Shares are subject to full compliance with the
provisions of all applicable securities laws and the availability thereunder of
an exemption from registration, and that the certificates evidencing the Note
Shares, shall bear a legend substantially to the effect of the legend on the
first page hereof.

 

(ii)           Compliance with Laws. The Holder agrees to comply with all
applicable laws, rules and regulations of all federal and state securities
regulators within the United States, including but not limited to, the
Securities and Exchange Commission, the National Association of Securities
Dealers,

 

7

 

Inc. and applicable state
securities regulators with respect to disclosure, filings and any other
requirements resulting in any way from the issuance of this Note.

 

(iii)          Registration of Note Shares Under
Securities Act of 1933. The
Company has agreed to promptly file a registration statement with the United
States Securities and Exchange commission under the Securities Act of 1933, as
amended, (the “Securities Act”) for the sale of all the Common Stock underlying
the Note under a Registration Rights Agreement entered into between the Company
and the Holder as of                                         
(the Note and the Registration Rights Agreement are together referred to as the
“Transaction Documents”).

 

(l)            Holder Representations. The Holder hereby represents, warrants and
covenants to the Company as of the date hereof:

 

(i)            Requisite Power and Authority. The Holder has all necessary power and
authority to execute and deliver the Transaction Documents and to carry out
their provisions. All actions on the Holder’s part required for the lawful
execution and delivery of the Transaction Documents for which it has executed
and delivered have been taken prior to the date hereof.

 

(ii)           Investment Representations. The Holder understands that the Note and
the Note Shares have not been registered under the Securities Act. The Holder
also understands that the Note is being offered and sold pursuant to an
exemption from registration contained in regulations under the Securities Act
based in part upon the Holder’s representations contained herein.

 

(1)           Acquisition for Own Account. The Holder is acquiring the Debenture to be
acquired by the Holder for its own account, or the account of its designated
assignee, for investment only, and not with a view towards distribution in
violation of applicable securities laws.

 

(2)           Accredited Investor. Holder represents that it, and each of its
partners (limited or general), is an “accredited investor” within the meaning
of Rule 501(a) of Regulation D as promulgated under the Securities Act.

 

(3)           Financial Experience. The Holder and each of its partners
(limited or general) has such knowledge and experience in financial and
business matters as to be capable of evaluating the merits and risks of an
investment in the Note or Note Shares to be acquired by the Holder and is able
to bear the economic risk of loss of the entire investment.

 

(4)           Information. The Company has provided to Holder the
opportunity to ask questions and receive answers concerning the terms and
conditions of the transactions contemplated in the Transaction Documents and it
has had access to such information concerning the Company as it has considered
necessary or appropriate in connection with its investment decision to acquire
the Note and Note Shares.

 

(5)           Transfer Restrictions. Holder agrees that if it decides to offer,
sell or otherwise transfer the Note or Note Shares, it will not offer,
sell or otherwise transfer the Security directly or indirectly, unless:

 

(A)          the sale is made pursuant to registration
under the Securities Act;

 

(B)           the sale is made pursuant to the exemption
from the registration

 

8

 

requirements under the
Securities Act provided by Rule 144 thereunder and in accordance with any
applicable state securities or “Blue Sky” laws; or

 

(C)           the Security is sold in a transaction that
does not require registration under the Securities Act or any applicable state
laws and regulations governing the offer and sale of securities, and it has
prior to such sale furnished to the Company an opinion of counsel reasonably
satisfactory to the Company.

 

(6)           Due Diligence. (i) The Holder has been solely responsible
for its own “due diligence” investigation of the Company and its management,
business and financial condition, for its own analysis of the merits and risks
of this investment and for its own analysis of the fairness and desirability of
the terms of the investment; (ii) in taking any action or performing any role
relative to the arranging of the proposed investment, the Holder has acted
solely in its own interest; and (iii) neither the Holder nor any of its
agents or employees has acted as an agent of the Company, or as an issuer,
underwriter, broker, dealer or investment adviser relative to any security
involved in this investment.

 

(7)           Tax Consequences. Holder understands and agrees that there
may be material tax consequences to the Holder of an acquisition or disposition
of the Note or Note Shares. The Company gives no opinion and makes no
representation with respect to the tax consequences to the Holder under United
States, state, local or foreign tax law of the undersigned’s acquisition or
disposition of the Note or Note Shares.

 

(8)           No General Solicitation. The Holder confirms that the Holder has
received no general solicitation or general advertisement and has attended no
seminar or meeting (whose attendees have been invited by any general
solicitation or general advertisement) and has received no advertisement in any
newspaper, magazine or similar media, broadcast on television or radio
regarding the offering of the Note or Note Shares.

 

(m)
         Other Matters.

 

(i)            Binding Effect; Assignment. The provisions of this Note shall be
binding upon and inure to the benefit of the parties hereto and the successors
and assigns of the Company.

 

(ii)           Further Actions. At any time and from time to time, the
Company and the Holder agree, without further consideration, to take such
actions and to execute and deliver such documents as the other may reasonably
request to consummate the transactions contemplated in this Note.

 

(iii)          Modification:
Waiver.
This Note sets forth the entire understanding of the Company and the Holder
with respect to the subject matter hereof and supersedes all existing
agreements between them concerning such subject matter. This Note may be
amended, modified, superseded, canceled, renewed or extended, and the terms
hereof may be waived, only by a written instrument signed by the Company and
Holders of at least fifty-one percent (51%) in principal amount of the Notes at
the time outstanding; provided, however, that the consent of a Holder shall be
required to modify the terms of this Note affecting the payment of principal
amount of, or interest on, such Holder’s Note or the term of such Holder’s
Note. Any waiver by the Company or the Holder of a breach of any provision of
this Note shall not operate as or be construed to be a waiver of any other
breach of such provision or of any breach of any other provision of this Note.
The failure of the Company or the Holder to insist upon strict adherence to any
term of this Note on one or more occasions shall not be considered a waiver or
deprive that party of the right thereafter to insist upon strict adherence to
that term or any other term of this Note. No delay on the part of any party in
exercising any right, power or privilege hereunder shall operate as a waiver
thereof or hereof, nor shall any waiver on the part of any party of any right,
power or privilege hereunder preclude any other or further exercise hereof or
the exercise of any other right, power or privilege hereunder. Any waiver must

 

9

 

be in
writing. The rights and remedies provided herein are cumulative and are not
exclusive of any rights or remedies which any party may otherwise have at law
or in equity.

 

(iv)          Notices. Any notice or other communication required
or permitted to be given hereunder shall be in writing and shall be mailed by
certified mail, return receipt requested, or delivered against receipt if to
(i) the Company, to PRB Gas Transportation, Inc., 1875 Lawrence Street, Suite
450, Denver, Colorado 80202, and (ii) the Holder, to                                               ,
or to such Holder at its last address as shown on the Note Register (or to such
other address as the party shall have furnished in writing in accordance with
the provisions of this Section (m)(iv)). Any notice or other communication
given by certified mail shall be deemed given at the time of certification
thereof, except for a notice changing a party’s address which shall be deemed
given at the time of receipt thereof.

 

(v)           Severability. If any provision of this Note is invalid, illegal
or unenforceable, the balance of this Note shall remain in effect, and if any
provision is inapplicable to any person or circumstance, it shall nevertheless
remain applicable to all other persons and circumstances. The rate of interest
on this Note is subject to any limitations imposed by applicable usury laws.

 

(vi)          Headings. The headings in this Note are solely for
convenience of reference and shall be given no effect in the construction or
interpretation of this Note.

 

(vii)         Governing Law. This Agreement shall be governed by and
construed in all respects under the laws of the State of Colorado, without reference
to its conflict of laws rules or principles. Any suit, action, proceeding or
litigation arising out of or relating to this Agreement shall be brought and
prosecuted in such federal or state court or courts located within the State of
Colorado, City and County of Denver, as provided by law. The parties hereby
irrevocably and unconditionally consent to the jurisdiction of each such court
or courts located within the State of Colorado and to service of process by
registered or certified mail, return receipt requested, or by any other manner
provided by applicable law, and hereby irrevocably and unconditionally waive
any right to claim that any suit, action, proceeding or litigation so commenced
has been commenced in an inconvenient forum. The prevailing party in any such
suit or action shall be paid all costs of suit including fees of counsel,
filing fees and all other costs of bringing and pursuing the action.

 

(viii)        Due Authorization. The execution and delivery of this Note and
the consummation of the transactions contemplated herein have been authorized
by the Board of Directors of the Company and by any necessary vote or with the
consent of the shareholders of the Company.

 

IN
WITNESS WHEREOF, the Company has caused this Note to be executed on its behalf
by its Chairman of the Board of Directors thereunto duly authorized.

 

	
   

  	
  PRB
  GAS TRANSPORTATION, INC.

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
  Robert
  W. Wright

  
	
   

  	
   

  	
  Chairman
  of the Board of Directors

  

 

 

[SIGNATURE OF HOLDER ON FOLLOWING PAGE]

 

10

 

IN
WITNESS WHEREOF, the Holder has executed this Note this                
day of January, 2006.

 

 

	
   

  	
  By:

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  (Address)

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  (City/State/Zip
  Code)

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  (Area
  Code/Telephone Number)

  

 

11

 

EXHIBIT A

 

NOTICE OF CONVERSION

 

The
undersigned being the holder of the attached Senior Subordinated Convertible Note(s)
(the “Note(s)”) due the Maturity Date (as
defined in the Note) of PRB Gas Transportation,
Inc. (the “Company”), hereby exercises the option to convert the
Note(s) into Note Shares (as defined in the Note(s)) in accordance with the
terms of the Note(s).

 

The
undersigned directs that the Note Shares be issued in the name of the Holder of
the attached Note and delivered as soon as practicable and in accordance with
the provisions of the Note(s) to:

 

 

	
  Full
  address:

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Date:

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  By:

  	
   

  	
   

  	
   

  
	
  Name:

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00102-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00102-of-00352.parquet"}]]