Document:

ex4-3.htm

     

     

     

     

    
      

    

     

     

    Exhibit
      4.3

    

      

      

      UNLIMITED
        GUARANTY

      (AROTECH
        CORPORATION)

      

      THIS
        UNLIMITED GUARANTY (“Guaranty”) made
        as of
        December _____, 2007, by AROTECH CORPORATION, a Delaware corporation (”Guarantor”), to and
        for the benefit of KEYBANK NATIONAL ASSOCIATION, a national banking association,
        its successors and assigns (“Lender”).

      

      RECITALS

       

      A.           
        On or about the date hereof, FAAC Incorporated, a Michigan corporation (the
        “Borrower”)
        along with Related Parties and Lender entered into a certain Loan Agreement
        (the
“Loan
        Agreement”) whereby Lender agreed to provide and continue to provide a
        loan (the “Loan”) available
        to
        Borrower in the maximum aggregate amount at any time outstanding not to exceed
        the sum of Seven Million Five Hundred Thousand Dollars
        ($7,500,000).  Capitalized terms used and not otherwise defined herein
        shall have the meanings given to them in the Loan Agreement.

       

      B.           
        In connection with the Loan, Borrower has executed and delivered a promissory
        note (the “Note”) in favor
        of
        Lender of even date herewith in the amount of the Loan, payment of which
        is
        secured by various security agreements made by Borrower, Guarantor and other
        Related Parties in favor of Lender including any other Related Loan
        Documents.

       

      C.           
        Guarantor will derive material financial benefit from the Loans evidenced
        and
        secured by the Note, security agreements, and the other Related Loan
        Documents.

       

      D.           
        Lender has relied on the statements and agreements contained herein in agreeing
        to make the Loans. The execution and delivery of this Guaranty by Guarantor
        is a
        condition precedent to the making of the Loans by Lender.

      

      AGREEMENTS

      

      NOW,
        THEREFORE, intending to be legally bound, Guarantor, in consideration of
        the
        matters described in the foregoing Recitals, which Recitals are incorporated
        herein and made a part hereof, and for other good and valuable consideration
        the
        receipt and sufficiency of which are acknowledged, hereby covenants and agrees
        for the benefit of Lender and its respective successors, indorsees, transferees,
        participants and assigns as follows:

       

      1. Guarantor
        absolutely, unconditionally and irrevocably guarantees:

       

      (a) the
        full
        and prompt payment of the principal and interest on the Note when due, whether
        at stated maturity, upon acceleration or otherwise, and at all times thereafter,
        and the full and prompt payment of all sums which may now be or may hereafter
        become due and owing under the Note, the Loan Agreement and the other Related
        Loan Documents;

       

      
        
          1

        

        
           

          
            

          

        

        
           

        

      

      (b) the
        prompt, full and complete performance of all of Borrower’s obligations under
        each and every covenant contained in the Related Loan Documents;
        and

       

      (c) all
        other
        indebtedness and obligations of Borrower to Lender, whether such indebtedness
        and obligations are now existing or hereafter arising without limitation
        as to
        amount or nature; and

       

      (d) the
        full
        and prompt payment of any Enforcement Costs (as hereinafter defined in Section 7
        hereof).

       

      All
        amounts due, debts, liabilities and payment obligations described in subsections
        (a) through (c) of this Section 1 shall
        be hereinafter collectively referred to as the “Indebtedness.”

       

      2. In
        the
        event of any default by Borrower in the payment of the Indebtedness, after
        the
        expiration of any applicable cure or grace period, Guarantor agrees, on demand
        by Lender or the holder of the Note, to pay the Indebtedness regardless of
        any
        defense, right of set-off or claims which Borrower or Guarantor may have
        against
        Lender or the holder of the Note.

       

      All
        of
        the remedies set forth herein and/or provided for in any of the Related Loan
        Documents or at law or equity shall be equally available to Lender, and the
        choice by Lender of one such alternative over another shall not be subject
        to
        question or challenge by Guarantor or any other person, nor shall any such
        choice be asserted as a defense, setoff, or failure to mitigate damages in
        any
        action, proceeding, or counteraction by Lender to recover or seeking any
        other
        remedy under this Guaranty, nor shall such choice preclude Lender from
        subsequently electing to exercise a different remedy.  The parties
        have agreed to the alternative remedies provided herein in part because they
        recognize that the choice of remedies in the event of a default hereunder
        will
        necessarily be and should properly be a matter of good faith business judgment,
        which the passage of time and events may or may not prove to have been the
        best
        choice to maximize recovery by Lender at the lowest cost to Borrower and/or
        Guarantor.  It is the intention of the parties that such good faith
        choice by Lender be given conclusive effect regardless of such subsequent
        developments.

       

      3. Guarantor
        does hereby (a) waive notice of acceptance of this Guaranty by Lender and
        any and all notices and demands of every kind which may be required to be
        given
        by any statute, rule or law, (b) waive any and all rights Guarantor may
        have under any anti-deficiency statute or other similar protections,
        (c) waive presentment for payment, demand for payment, notice of nonpayment
        or dishonor, protest and notice of protest, diligence in collection and any
        and
        all formalities which otherwise might be legally required to charge Guarantor
        with liability, and (d) waive any failure by Lender to inform Guarantor of
        any facts Lender may now or hereafter know about Borrower, the Collateral,
        the
        Loans, or the transactions contemplated by the Loan Agreement, it being
        understood and agreed that Lender has no duty so to inform and that Guarantor
        is
        fully responsible for being and remaining informed by Borrower of all
        circumstances bearing on the risk of nonperformance of Borrower’s
        obligations.  Credit may be granted or continued from time to time by
        Lender to Borrower without notice to or authorization from Guarantor, regardless
        of the financial or other condition of Borrower at the time of any such grant
        or
        continuation.  Lender shall have no obligation to disclose or discuss
        with Guarantor its assessment of the financial condition of
        Borrower.  Guarantor acknowledges that no representations of any kind
        whatsoever have been made by Lender.  No modification or
        waiver

       

      
        
          2

        

        
           

          
            

          

        

        
           

        

      

      of
        any of
        the provisions of this Guaranty shall be binding upon Lender except as expressly
        set forth in a writing duly signed and delivered by Lender.

       

      4. Guarantor
        further agrees that Guarantor’s liability as guarantor shall not be impaired or
        affected by any renewals or extensions which may be made from time to time,
        with
        or without the knowledge or consent of Guarantor of the time for payment
        of
        interest or principal under the Note or by any forbearance or delay in
        collecting interest or principal under the Note, or by any waiver by Lender
        under the Loan Agreement or any other Related Loan Documents, or by Lender’s
        failure or election not to pursue any other remedies it may have against
        Borrower or Guarantor, or by any change or modification in the Note, Loan
        Agreement or any other Related Loan Document, or by the acceptance by Lender
        of
        any additional security or any increase, substitution or change therein,
        or by
        the release by Lender of any security or any withdrawal thereof or decrease
        therein, or by the application of payments received from any source to the
        payment of any obligation other than the Indebtedness even though Lender
        might
        lawfully have elected to apply such payments to any part or all of the
        Indebtedness, it being the intent hereof that, subject to Lender’s compliance
        with the terms of this Guaranty, Guarantor shall remain liable for the payment
        of the Indebtedness, until the Indebtedness has been paid in full,
        notwithstanding any act or thing which might otherwise operate as a legal
        or
        equitable discharge of a surety.  Guarantor further understands and
        agrees that Lender may at any time enter into agreements with Borrower to
        amend
        and modify the Note, Loan Agreement or other Related Loan Documents, and
        may
        waive or release any provision or provisions of the Note, Loan Agreement
        and
        other Related Loan Documents, and, with reference to such instruments, may
        make
        and enter into any such agreement or agreements as Lender and Borrower may
        deem
        proper and desirable, without in any manner impairing or affecting this Guaranty
        or any of Lender’s rights hereunder or Guarantor’s obligations
        hereunder.

       

      5. This
        is
        an absolute, present and continuing guaranty of payment and not of
        collection.  Guarantor agrees that this Guaranty may be enforced by
        Lender without the necessity at any time of resorting to or exhausting any
        other
        security or collateral given in connection herewith or with the Note, Loan
        Agreement or any of the other Related Loan Documents through foreclosure
        or sale
        proceedings, as the case may be, or resorting to any other guaranties, and
        Guarantor hereby waives any right to require Lender to join Borrower in any
        action brought hereunder or to commence any action against or obtain any
        judgment against Borrower or to pursue any other remedy or enforce any other
        right.  Guarantor further agrees that nothing contained herein or
        otherwise shall prevent Lender from pursuing concurrently or successively
        all
        rights and remedies available to it at law and/or in equity or under the
        Note,
        Loan Agreement or any other Related Loan Documents, and the exercise of any
        of
        its rights or the completion of any of its remedies shall not constitute
        a
        discharge of Guarantor’s obligations hereunder, it being the purpose and intent
        of Guarantor that the obligations of Guarantor hereunder shall be absolute,
        independent and unconditional under any and all circumstances
        whatsoever.  None of Guarantor’s obligations under this Guaranty or
        any remedy for the enforcement thereof shall be impaired, modified, changed
        or
        released in any manner whatsoever by any impairment, modification, change,
        release or limitation of the liability of Borrower under the Note, Loan
        Agreement or other Related Loan Documents or by reason of the bankruptcy
        of
        Borrower or by reason of any creditor or bankruptcy proceeding instituted
        by or
        against Borrower.  This Guaranty shall continue to be effective or be
        reinstated (as the case may be) if at any time payment of all or any part
        of any
        sum payable pursuant to the Note, Loan Agreement or any other Related Loan
        Document is rescinded or otherwise required to be returned by Lender upon
        the
        insolvency, bankruptcy, dissolution, liquidation, or reorganization of Borrower,
        or upon or as a result of the appointment of a receiver, intervenor, custodian
        or conservator of or trustee or

       

      
        
          3

        

        
           

          
            

          

        

        
           

        

      

      similar
        officer for, Borrower or any substantial part of its Collateral, or otherwise,
        all as though such payment to Lender had not been made, regardless of whether
        Lender contested the order requiring the return of such payment.  In
        the event of foreclosure of any security interest and of a deficiency, Guarantor
        hereby promises and agrees forthwith to pay the amount of such deficiency
        notwithstanding the fact that recovery of said deficiency against Borrower
        would
        not be allowed by applicable law; however, the foregoing shall not be deemed
        to
        require that Lender institute foreclosure proceedings or otherwise resort
        to or
        exhaust any other collateral or security prior to or concurrently with enforcing
        this Guaranty.

       

      6. In
        the
        event Lender or any holder of the Note shall assign the Note to any lender
        or
        other entity to secure a loan from such lender or other entity to Lender
        or such
        holder for an amount not in excess of the amount which will be due, from
        time to
        time, from Borrower to Lender under the Note with interest not in excess
        of the
        rate of interest which is payable by Borrower to Lender under the Note,
        Guarantor will accord full recognition thereto and agree that all rights
        and
        remedies of Lender or such holder hereunder shall be enforceable against
        Guarantor by such Lender or other entity with the same force and effect and
        to
        the same extent as would have been enforceable by Lender or such holder but
        for
        such assignment; provided, however, that unless Lender shall otherwise consent
        in writing, Lender shall have an unimpaired right, prior and superior to
        that of
        its assignee or transferee, to enforce this Guaranty for Lender’s benefit to the
        extent any portion of the Indebtedness or any interest therein is not assigned
        or transferred.

       

      7. If:  (a) this
        Guaranty is placed in the hands of an attorney for collection or is collected
        through any legal proceeding; (b) an attorney is retained to represent
        Lender in any bankruptcy, reorganization, receivership, or other proceedings
        affecting creditors’ rights and involving a claim under this Guaranty;
        (c) an attorney is retained to provide advice or other representation with
        respect to this Guaranty; or (d) an attorney is retained to represent
        Lender in any proceedings whatsoever in connection with this Guaranty and
        Lender
        prevails in any such proceedings, then Guarantor shall pay to Lender upon
        demand
        all reasonable attorney’s fees, costs and expenses incurred in connection
        therewith (all of which are referred to herein as “Enforcement Costs”),
        in addition to all other amounts due hereunder, regardless of whether all
        or a
        portion of such Enforcement Costs are incurred in a single proceeding brought
        to
        enforce this Guaranty as well as the other Related Loan Documents.

       

      8. The
        parties hereto intend and believe that each provision in this Guaranty comports
        with all applicable local, state and federal laws and judicial
        decisions.  However, if any provision or provisions, or if any portion
        of any provision or provisions, in this Guaranty is found by a court of law
        to
        be in violation of any applicable local, state or federal ordinance, statute,
        law, administrative or judicial decision, or public policy, and if such court
        should declare such portion, provision or provisions of this Guaranty to
        be
        illegal, invalid, unlawful, void or unenforceable as written, then it is
        the
        intent of all parties hereto that such portion, provision or provisions shall
        be
        given force to the fullest possible extent that they are legal, valid and
        enforceable, that the remainder of this Guaranty shall be construed as if
        such
        illegal, invalid, unlawful, void or unenforceable portion, provision or
        provisions were not contained therein, and that the rights, obligations and
        interest of Lender or the holder of the Note under the remainder of this
        Guaranty shall continue in full force and effect.

       

      9. TO
        THE GREATEST EXTENT PERMITTED BY LAW, GUARANTOR HEREBY WAIVES ANY AND ALL
        RIGHTS
        TO REQUIRE MARSHALLING OF ASSETS BY LENDER.  WITH RESPECT TO ANY SUIT,
        ACTION OR PROCEEDINGS

       

      
        
          4

        

        
           

          
            

          

        

        
           

        

      

      RELATING
        TO THIS GUARANTY (EACH, A “PROCEEDING”), LENDER
        AND GUARANTOR IRREVOCABLY (A) SUBMITS TO THE NON-EXCLUSIVE JURISDICTION OF
        THE
        STATE AND FEDERAL COURTS HAVING JURISDICTION IN THE CITY OF ANN ARBOR AND
        STATE
        OF MICHIGAN, AND (B) WAIVES ANY OBJECTION WHICH IT MAY HAVE AT ANY TIME TO
        THE LAYING OF VENUE OF ANY PROCEEDING BROUGHT IN ANY SUCH COURT, WAIVES ANY
        CLAIM THAT ANY PROCEEDING HAS BEEN BROUGHT IN AN INCONVENIENT FORUM AND FURTHER
        WAIVES THE RIGHT TO OBJECT, WITH RESPECT TO SUCH PROCEEDING, THAT SUCH COURT
        DOES NOT HAVE JURISDICTION OVER SUCH PARTY.  NOTHING IN THIS GUARANTY
        SHALL PRECLUDE LENDER FROM BRINGING A PROCEEDING IN ANY OTHER JURISDICTION
        NOR
        WILL THE BRINGING OF A PROCEEDING IN ANY ONE OR MORE JURISDICTIONS PRECLUDE
        THE
        BRINGING OF A PROCEEDING IN ANY OTHER JURISDICTION.  LENDER AND
        GUARANTOR FURTHER AGREE AND CONSENT THAT, IN ADDITION TO ANY METHODS OF SERVICE
        OF PROCESS PROVIDED FOR UNDER APPLICABLE LAW, ALL SERVICE OF PROCESS IN ANY
        PROCEEDING IN ANY MICHIGAN STATE OR UNITED STATES COURT SITTING IN THE CITY
        OF
        ANN ARBOR AND MAY BE MADE BY CERTIFIED OR REGISTERED MAIL, RETURN RECEIPT
        REQUESTED, DIRECTED TO THE APPLICABLE PARTY AT THE ADDRESS INDICATED BELOW,
        AND
        SERVICE SO MADE SHALL BE COMPLETE UPON RECEIPT; EXCEPT THAT IF
        SUCH
        PARTY SHALL REFUSE TO ACCEPT DELIVERY, SERVICE SHALL BE DEEMED COMPLETE FIVE
        (5)
        DAYS AFTER THE SAME SHALL HAVE BEEN SO MAILED.

       

      10. Any
        indebtedness of Borrower to Guarantor now or hereafter existing is hereby
        subordinated to the payment of the Indebtedness.  Guarantor agrees
        that, until the entire Indebtedness has been paid in full, Guarantor will
        not
        seek, accept, or retain for Guarantor’s own account, any payment from Borrower
        on account of such subordinated debt.  Any payments to Guarantor on
        account of such subordinated debt shall be collected and received by Guarantor
        in trust for Lender and shall be paid over to Lender on account of the
        Indebtedness without impairing or releasing the obligations of Guarantor
        hereunder.

       

      11. Any
        amounts received by Lender from any source on account of the Loans may be
        utilized by Lender for the payment of the Indebtedness and any other obligations
        of Borrower to Lender in such order as Lender may from time to time
        elect.

       

      12. GUARANTOR
        AND LENDER (BY ITS ACCEPTANCE HEREOF) HEREBY WAIVE ANY RIGHT TO A TRIAL BY
        JURY
        IN ANY ACTION OR PROCEEDING TO ENFORCE OR DEFEND ANY RIGHT UNDER THIS GUARANTY
        OR ANY OTHER RELATED LOAN DOCUMENTS OR RELATING THERETO OR ARISING FROM THE
        LENDING RELATIONSHIP WHICH IS THE SUBJECT OF THIS GUARANTY AND AGREE THAT
        ANY
        SUCH ACTION OR PROCEEDING SHALL BE TRIED BEFORE A COURT AND NOT BEFORE A
        JURY.

       

      13. Any
        notice, demand, request or other communication which any party hereto may
        be
        required or may desire to give hereunder shall be in writing and shall be
        deemed
        to have been properly given (a) if hand delivered, when delivered; (b) if
        mailed
        by United States Certified Mail (postage prepaid, return receipt requested),
        three Business Days after mailing (c) if by Federal Express or other reliable
        overnight courier service, on the next Business Day after

       

      
        
          5

        

        
           

          
            

          

        

        
           

        

      

      delivered
        to such courier service or (d) if by telecopier on the day of transmission
        so
        long as copy is sent on the same day by overnight courier as set forth
        below:

       

      
        	
                 

              	
                Guarantor:

              	
                Arotech
                  Corporation 

              

      

      
        	
                 

              	
                1229
                  Oak Valley Drive 

              

      

      
        	
                 

              	
                Ann
                  Arbor, Michigan 48108 

              

      

      
        	
                 

              	
                Attn.
                  Yaakov Har-Oz 

              

      

      
        	
                 

              	
                FAX
                  No: 011-932-2-990-6688 

              

      

      

      If
        to the
        Bank:                                    KeyBank
        National Association

      17199
        North Laurel Park Drive, Suite 105

      Livonia,
        Michigan   48152

      ATTN:  Jason
        Graves

      FAX
        No:
        (734) 452-5500

      

      
        	
                 

              	
                With
                  a copy to:

              	
                Bruce
                  N. Elliott 

              

      

      Conlin,
        McKenney & Philbrick, P.C.

      350
        S.
        Main Street, Suite 400

      Ann
        Arbor, Michigan  48104

      FAX
        No.
        (734) 761-9001

      

      or
        at
        such other address as the party to be served with notice may have furnished
        in
        writing to the party seeking or desiring to serve notice as a place for the
        service of notice.

      

      14. In
        order
        to induce Lender to make the Loans, Guarantor makes the following
        representations and warranties to Lender set forth in this
        Section.  Guarantor acknowledges that but for the truth and accuracy
        of the matters covered by the following representations and warranties, Lender
        would not have agreed to make the Loans.

       

      (a) Any
        and
        all balance sheets, net worth statements, and other financial data with respect
        to Guarantor which have heretofore been given to Lender by or on behalf of
        Guarantor fairly and accurately present the financial condition of Guarantor
        as
        of the respective dates thereof.

       

      (b) The
        execution, delivery, and performance by Guarantor of this Guaranty does not
        and
        will not contravene or conflict with (i) any laws, order, rule, regulation,
        writ, injunction or decree now in effect of any Government Authority, or
        court
        having jurisdiction over Guarantor, (ii) any contractual restriction
        binding on or affecting Guarantor or Guarantor’s Collateral or material assets
        which may adversely affect Guarantor’s ability to fulfill Guarantor’s
        obligations under this Guaranty, or (iii) the instruments creating any trust
        holding title to any material assets included in Guarantor’s financial
        statements.

       

          (c)           
        This Guaranty creates legal, valid, and binding obligations of Guarantor
        enforceable in accordance with its terms except (i) as such enforceability
        may
        be limited by bankruptcy, insolvency, reorganization or similar laws affecting
        creditors’ rights generally, (ii) as such enforceability may be limited by the
        application of general principles of equity and similar principles, including,
        without limitation, concepts of materiality, reasonableness, unconscionability,
        good faith and fair dealing, (iii) that waivers of jury trial may be limited
        under public policy, and (iv) that the remedy of

       

      
        
          6

        

        
           

          
            

          

        

        
           

        

      

      specific
        performance and injunctive and other forms of equitable relief may be subject
        to
        equitable defenses and to the discretion of the court before which any
        proceeding therefor may be brought.

       

          (d)           
        Except as disclosed in writing to Lender, there is no action, proceeding,
        or
        investigation pending or, to the knowledge of Guarantor, threatened or affecting
        Guarantor, which may adversely affect Guarantor’s ability to fulfill his
        obligations under this Guaranty.  There are no judgments rendered
        against Guarantor which have been undischarged for a period of ten (10)
        days.  Guarantor is not in default under any agreements which may
        adversely affect Guarantor’s ability to fulfill its obligations under this
        Guaranty.

       

          (e)           
        All statements set forth in the Recitals are true and correct in all material
        aspects.

       

      All
        of
        the foregoing representations and warranties shall be deemed remade on the
        date
        of the first disbursement of Loan proceeds, on the date of each advance of
        Loan
        proceeds, and upon any extension of the Loans pursuant to the Loan
        Agreement.  Guarantor hereby agrees to indemnify and hold Lender
        harmless from and against all loss, cost, liability, damage, and expense,
        including attorney’s fees and costs, which Lender may sustain by reason of the
        inaccuracy or breach of any of the foregoing representations and warranties
        as
        of the date the foregoing representations and warranties are made and are
        remade.

       

      15. Guarantor
        shall deliver or cause to be delivered to Lender in the manner provided in
        the
        Loan Agreement all of the Guarantor financial statements to be delivered
        in
        accordance with the terms of the Loan Agreement.

       

      16. This
        Guaranty shall be binding upon the heirs, executors, legal and personal
        representatives, successors and assigns of Guarantor and shall not be discharged
        in whole or in part by the death of Guarantor.  If more than one party
        executes this Guaranty, the liability of all such parties shall be joint
        and
        several.

       

      17. THIS
        GUARANTY, THE NOTE, AND ALL OTHER INSTRUMENTS EVIDENCING AND SECURING THE
        LOANS
        SECURED HEREBY WERE NEGOTIATED IN THE STATE OF MICHIGAN, AND DELIVERED BY
        GUARANTOR OR BORROWER, AS APPLICABLE, AND ACCEPTED BY LENDER IN THE STATE
        OF
        MICHIGAN, WHICH STATE THE PARTIES AGREE HAS A SUBSTANTIAL RELATIONSHIP TO
        THE
        PARTIES AND THE UNDERLYING TRANSACTIONS EMBODIED HEREBY.  IN ALL
        RESPECTS, INCLUDING, WITHOUT LIMITATION, MATTERS OF CONSTRUCTION OF THE
        IMPROVEMENTS AND PERFORMANCE OF THIS GUARANTY AND THE OBLIGATIONS ARISING
        HEREUNDER, THIS GUARANTY SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE
        WITH,
        THE INTERNAL LAWS OF THE STATE OF MICHIGAN APPLICABLE TO CONTRACTS MADE AND
        TO
        BE PERFORMED ENTIRELY IN SUCH STATE AND ANY APPLICABLE LAWS OF THE UNITED
        STATES
        OF AMERICA.

       

      18. Lender
        shall be entitled to honor any request for Loan proceeds made by Borrower
        and
        shall have no obligation to see to the proper disposition of such
        advances.  Guarantor agrees that his obligations hereunder shall not
        be released or affected by reason of any improper disposition by Borrower
        of
        such Loan proceeds.

       

      
        
          7

        

        
           

          
            

          

        

        
           

        

      

      19. This
        Guaranty may be executed in any number of counterparts and by different parties
        hereto in separate counterparts, each of which when so executed shall be
        deemed
        to be an original and all of which taken together shall constitute one and
        the
        same instrument.

       

      IN
        WITNESS WHEREOF, Guarantor has delivered this Guaranty in the State of Michigan
        as of the date first written above.

       

      

       

      GUARANTOR:

       

      AROTECH
        CORPORATION,

      A
        Delaware Corporation

      

      By:_________________________________

      

      Its:______________________________

       

      

       

      

       

      

      
        
          8exh10-1_note.htm

     

    
      

      

    

     

     

     

     

     

    EXHIBIT
      10.1

     

    SUBORDINATED
      UNSECURED PROMISSORY NOTE

    DATED DECEMBER
      28, 2007

     

    
 

    

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    THIS
      SUBORDINATED UNSECURED PROMISSORY NOTE (THIS “NOTE”) AND THE INDEBTEDNESS
      EVIDENCED HEREBY ARE SUBORDINATE IN THE MANNER AND TO THE EXTENT SET FORTH
      IN
      THAT CERTAIN SUBORDINATION AGREEMENT DATED AS OF DECEMBER 28, 2007 (AS
      AMENDED, RESTATED SUPPLEMENTED OR OTHERWISE MODIFIED FROM TIME TO TIME, THE
      “SUBORDINATION
      AGREEMENT”) AMONG GALAXY ENERGY CORPORATION, THE SUBORDINATED CREDITORS
      NAMED THEREIN, THE LENDERS NAMED THEREIN, AND PROMETHEAN ASSET MANAGEMENT
      L.L.C., TO THE SENIOR INDEBTEDNESS (AS DEFINED IN THE SUBORDINATION AGREEMENT);
      AND EACH HOLDER OF THIS PROMISSORY NOTE (EACH A “HOLDER”, AND COLLECTIVELY
      THE
“HOLDERS”), BY ITS
      ACCEPTANCE HEREOF, SHALL BE BOUND BY THE PROVISIONS OF THE SUBORDINATION
      AGREEMENT.

     

     

     

    This
      Security has not been registered
      under the Securities Act of 1933 (hereinafter the “1933 Act”) or under
      applicable state securities law (hereinafter the “State Acts”) and may not be
      sold, assigned, pledged, transferred or hypothecated, whether or not for
      consideration, by the holder except upon issuance to the Company of a favorable
      written opinion of Counsel for the Company or upon submission to the Company
      of
      such other evidence as may be satisfactory to counsel to the Company to the
      effect that any such sale, assignment, pledge, transfer or hypothecation will
      not be in violation of the 1933 Act or the State Acts.

    

    

    GALAXY
      ENERGY
      CORPORATION

     

    Subordinated
      Unsecured Promissory
      Note

    

    December
      28, 2007

    

    $600,000.00                                                                                                                                                                                                   
      Denver, Colorado

     

    FOR
      VALUE
      RECEIVED, Galaxy Energy
      Corporation, a Colorado corporation (hereinafter the “Company”) promises
      to pay to the order of Partner
      Marketing AG (hereinafter the “Holder”), the principal sum of Six
      Hundred Thousand Dollars ($600,000.00), together with interest at the rate
      of eight percent (8.0%) per annum (hereinafter “Interest”), such principal and
      Interest to be payable ON THE LATER OF, (i) the date upon which all of the
      Senior Indebtedness (as defined in the Subordination Agreement) has been
      indefeasibly paid in full, and (ii) one hundred twenty (120) days from the
      date
      hereof, in each case, in lawful money of the United States of America, subject,
      however, to the restrictions contained in the Subordination
      Agreement.  Holder shall advance the principal amount of this Note to
      the Company in one or more advances and interest shall accrue from the date
      of
      each such advance.

    

    

    
      
        Galaxy
          Energy Corporation Subordinated Promissory Note -
          Page 1 of 4

      

      
        
        

        
          

        

      

      
        
        

      

    

    1.
      EVENTS OF DEFAULT.

    

    If
      one or more of the following events
      (hereinafter “events of default”) shall occur:

    

    (a)
      default in the payment of any
      principal of or interest on this Note and the continuation of such default
      for a
      period of 10 days;

    

    (b)
      breach of any covenant contained in
      this Note and the continuation of such breach for a period of 30 days or more
      after written notice thereof;

     

    (c)
      the
      Company or any of its subsidiaries files or is served with any petition for
      relief under the Bankruptcy Code or any similar federal or state statute (the
      “Code”) or the entry by a court of competent jurisdiction of a decree or order
      adjudging the company or the subsidiary, as the case may be, a bankrupt or
      insolvent or approving as properly filed a petition seeking reorganization,
      arrangement, adjustment or composition of or in respect of the Company or the
      subsidiary under the Code or appointing a receiver, trustee or other similar
      official of the Company or the subsidiary or all or substantially all of its
      assets or the subsidiary’s assets, or ordering the winding up or liquidation of
      its affairs or the subsidiary’s affairs, and the continuation of such decree or
      order unstayed and in effect for a period of 60 consecutive days;

     

    (d)
      the
      institution by the Company or any of its subsidiaries or the consent to the
      institution by the Company or its subsidiary of proceedings to adjudicate the
      Company or its subsidiary a bankrupt or insolvent or the filing or consent
      by
      the Company or its subsidiary to the filing of a petition or answer seeking
      reorganization or relief under the Code, the consent by the Company or its
      subsidiary to the appointment of a receiver, trustee or other similar official
      of the Company or its subsidiary or of any substantial part of its property
      of
      its subsidiary’s property, an assignment by the Company or its subsidiary for
      the benefit of creditors or the admission by the Company or its subsidiary
      in
      writing of its inability to pay its debts generally as they become due;
      or

     

    (e)
      a
      default by the Company in any of its obligations under any other promissory
      note
      or any mortgage, credit agreement or other facility, indenture agreement,
      factoring agreement or other instrument under which there may be issued, or
      by
      which there may be secured or evidenced any indebtedness for borrowed money
      or
      money due under any long term leasing or factoring arrangement of the Company
      in
      an amount exceeding $50,000, whether such indebtedness now exists or shall
      hereafter be created and such default shall result in such indebtedness becoming
      or being declared due and payable prior to the date on which it would otherwise
      become due and payable;

    

    then,
      subject to the terms, provisions and restrictions contained in the Subordination
      Agreement, the Holder of this Note may, by written notice to the Company,
      declare the entire unpaid principal of and accrued and unpaid Interest on this
      Note to be due and payable and, upon such declaration, the same shall become
      due
      and payable forthwith without further demand or notice, the payment on such
      declaration, however, being subject to the subordination provisions of this
      Note.

     

     

    
 

    
      
        Galaxy
          Energy Corporation Subordinated Promissory Note -
          Page 2 of 4

      

      
        
        

        
          

        

      

      
        
        

      

    

    2.
      MISCELLANEOUS.

     

    2.1.
      All
      powers and remedies given by this Note to the Holder hereof shall, to the extent
      permitted by law, be deemed cumulative and not exclusive of any other power
      or
      remedy or of any other powers and remedies available to the Holder hereof,
      by
      judicial proceedings or otherwise, to enforce the performance or observance
      of
      the covenants and agreements contained in this Note.  No delay or
      omission of the Holder hereof to exercise any right or power accruing upon
      any
      default occurring and continuing as aforesaid shall impair any such right or
      power or shall be construed to be a waiver of any such default or any
      acquiescence therein.  Every power and remedy given by this Note or by
      law to the Holder hereof may be exercised from time to time, and as often as
      shall be deemed expedient, by the Holder hereof, all subject, as hereinabove
      provided, to the payment of the principal of and the interest on this Note
      being
      expressly subordinated in right of payment to the prior payment in full of
      all
      Senior Indebtedness.

    

    2.2.
      In addition to the payments
      provided for above, subject to the terms, provisions and restrictions contained
      in the Subordination Agreement, the Company agrees to pay all expenses incurred,
      including reasonable attorneys’ fees, if this Note is placed in the hands of an
      attorney for collection or if it is collected through bankruptcy or other
      judicial proceedings.

    

    2.3.
      The Company, to the extent
      permitted by law, waives notice, demand, presentment for payment, protest,
      the
      filing of suit or the taking of any other action by any Holder hereof for the
      purpose of fixing its liability hereon.

    

    2.4.
      This Note has been executed and
      delivered in and shall be governed by and construed in accordance with the
      laws
      of the State of Colorado.

    

    
      
        Galaxy
          Energy Corporation Subordinated Promissory Note -
          Page 3 of 4    

        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    

    IN
      WITNESS WHEREOF, the Company has
      executed this Note under seal on the day and year first above
      written.

    

     

    
      	 	GALAXY
              ENERGY
              CORPORATION	 
	 	 	 	 
	
               

            	
              By:
                

            	/s/    
              Christopher S. Hardesty	 
	 	 	Christopher
              S.
              Hardesty 	 
	 	 	Chief
              Financial Officer	 
	 	 	 	 

    

    

    

     

     

     

     

     

     

     

     

     

     

     

     

     

     

    Galaxy
      Energy Corporation Subordinated Promissory Note - Page
      4 of 4

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00134-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00134-of-00352.parquet"}]]