EXHIBIT J
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BLOCKED ACCOUNT AGREEMENT
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THIS BLOCKED ACCOUNT AGREEMENT ("Agreement"), is made and entered into as
of this 30th day of June, 2006, by and among Community Trust and Investment
Company, a Kentucky corporation ("Bank"), Consolidated Energy, Inc., a Wyoming
corporation ("Company"), and Atoll Asset Management, LLC, as agent for the
purchasers referred to in the Securities Purchase Agreement referred to below
(together with any successors and assigns, "Agent").
A. Pursuant to that certain Securities Purchase Agreement, dated as of
June 30, 2006, (as amended, supplemented or otherwise modified from time to
time, the "Securities Purchase Agreement"), between Company, Agent and the
purchasers referred to therein (the "Purchasers"), Purchasers have agreed to
purchase up to $4,444,444 in principal amount of the Variable Rate Original
Issue Discount Convertible Secured Debentures due June 30, 2008 of Company
("Debentures").
B. Company has established Account No. ▇▇▇▇▇▇▇▇▇▇ at Bank (together
with any successor accounts and any renewals or rollovers thereto, the "Blocked
Account").
C. Pursuant to the Securities Purchase Agreement, $3,750,000 (less any
applicable fees and expenses payable by the Company pursuant to the Securities
Purchase Agreement) shall be delivered by the Purchasers to the Bank for credit
to the Blocked Account.
D. The parties hereto desire to enter into this Agreement in order to
set forth their relative rights and duties with respect to the Blocked Account
and all funds on deposit therein from time to time.
NOW, THEREFORE, in consideration of the premises and the mutual
covenants and agreements hereinafter set forth, the parties hereto agree as
follows:
1. Effectiveness. This Agreement shall take effect immediately upon
its execution by all parties hereto and shall supersede any blocked account or
similar agreement in effect with respect to the Blocked Account.
2. Security Interest; Agency. As collateral security for Company's
obligations to Purchasers under the Debentures and Securities Purchase Agreement
and the other documents delivered by Company and described therein, Company
hereby grants to Agent, as agent for the Purchasers, a security interest in (a)
the Blocked Account, (b) all contract rights, claims and privileges in respect
of the Blocked Account and (c) all cash, checks, security entitlements,
financial assets, investment property, money orders and other items of value of
Company now or hereafter paid, deposited, credited, held (whether for
collection, provisionally or otherwise) or otherwise in the possession or under
the control of, or in transit to, Bank or any agent, bailee or custodian thereof
(collectively, "Receipts"). Bank hereby acknowledges notice of Agent's security
interest in such collateral and does hereby consent thereto. Bank hereby agrees
to be bound by the terms of this Agreement and all instructions delivered by
Agent to Bank pursuant hereto. Company hereby agrees that Agent shall be
entitled to exercise, upon the written instructions of Agent to Bank pursuant to
the terms of this Agreement, any and all rights which Company may have with
respect to the Blocked Account or under applicable law with respect to the
Blocked Account, all Receipts and all other collateral described in this
paragraph 2.
3. Control of Blocked Account.
(a) The Blocked Account shall be maintained by Bank in the name
of "Consolidated Energy, Inc."
(b) On receipt by Bank of a joint notice from the Agent and the
Company stating (i) that the conditions specified in the Securities
Purchase Agreement for the release of funds from the Blocked Account
have been satisfied, (ii) the amount of funds that are to be released
from the Blocked Account, (iii) the name and wire transfer
instructions of the person to whom the released funds are to be
remitted and (iv) the date on which such funds are to be released,
which date shall be no more than ten and not less than one business
day after the date of such notice (a "Payment Date"), Bank shall debit
the Blocked Account and remit to the person named in such notice the
amount specified therein in accordance with the wire instructions
specified therein.
(c) From and after the date, if any, that notice (along with
reasonable supporting documentation, including evidence of notice to
the Company of such default) has been delivered to Bank by Agent (the
"Activation Date") that a default has occurred under the Debentures,
and until such time, if any, that the Agent shall have withdrawn such
notice in writing, (i) the Blocked Account shall be under the sole
dominion and control of Agent, subject to applicable law and the
Bank's duties under the Agreement and (ii) neither Company nor any
other person or entity, through or under Company, shall have any
control over the use of, or any right to withdraw any amount from, the
Blocked Account.
(d) In the event that any certificate, written instruction or
notice hereunder is delivered by facsimile transmission or by e-mail
delivery of a ".pdf" format data file, such certificate or written
instruction shall create a valid and binding obligation of the party
executing (or on whose behalf such signature is executed) with the
same force and effect as if such facsimile or ".pdf" signature page
were an original thereof.
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4. Procedures for Blocked Account. Bank shall follow the following
procedures with respect to the Blocked Account:
(a) Apply and credit for deposit to the Blocked Account all
Receipts from time to time tendered for deposit therein, including,
without limitation, all wire transfers and other payments directed to
the Blocked Account.
(b) Within 10 days following Activation Date, unless the Agent
shall have withdrawn notice thereof in writing, Bank shall determine
the balance of all available funds in the Blocked Account and shall
send a certified check on such tenth day to such account as may be
designated in writing from time to time by Agent (the "Agent
Account").
5. Statements and Other Information. Bank shall send to Agent copies
of all returned and dishonored Receipts promptly upon Bank's receipt thereof,
and shall provide Agent with copies of the regular monthly bank statements
provided to Company and such other information relating to the Blocked Account
as shall reasonably be requested by Agent. Bank shall also deliver a copy of all
notices and statements required to be sent to Company pursuant to this Agreement
to Agent at such times as provided therein.
6. Fees. Company agrees to pay on demand all usual and customary
service charges, transfer fees, account maintenance fees and legal fees
(including in connection with the establishment of the Control Account)
(collectively, "Fees") of Bank in connection with the Blocked Account as set
forth on Schedule 6 attached hereto. In the event Company fails to timely make a
payment to Bank of any Fees, Bank may thereafter exercise its right of setoff
against the Blocked Account for such amounts. Agent shall not have any
responsibility or liability for the payment of any Fees.
7. Uncollected Funds. If any Receipts deposited in the Blocked Account
are returned unpaid or otherwise dishonored, Bank shall have the right to charge
any and all such returned or dishonored items against the Blocked Account or to
demand reimbursement therefore directly from Company. If there are insufficient
funds in the Blocked Account to cover any such charge for any returned or
dishonored item and Company fails to reimburse Bank for such amount within ten
(10) business days after demand, then Agent agrees to reimburse Bank within ten
(10) business days of written notice of demand for the amount of such returned
or dishonored item, provided that (a) such item has been previously credited to
the Agent Account and (b) Agent receives such written demand within forty-five
(45) days after termination of this Agreement.
8. Setoff. Bank hereby agrees that Bank will not exercise or claim any
right to setoff or banker's lien against the Blocked Account or any Receipts on
deposit therein, and Bank hereby further waives any such right or lien which it
may have against any Receipts deposited in the Blocked Account, except to the
extent expressly set forth in paragraphs 6 and 7 above. On the date hereof, the
records of the Bank disclose no liens or claims of any kind against the Blocked
Account.
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9. Exculpation of Bank; Indemnification by Company. Company and Agent
agree that Bank shall have no liability to Company or Agent for any loss or
damage that either or both may claim to have suffered or incurred, either
directly or indirectly, by reason of this Agreement or any transaction or
service contemplated by the provisions hereof, unless occasioned by the gross
negligence or willful misconduct of Bank. In no event shall Bank be liable for
losses or delays resulting from computer malfunction, interruption of
communication facilities, labor difficulties or other causes beyond Bank's
reasonable control or for indirect, special or consequential damages. Company
agrees to indemnify Bank and hold it harmless from and against any and all
claims, other than those ultimately determined to be founded on gross negligence
or willful misconduct of Bank, and from and against any damages, penalties,
judgments, liabilities, losses or expenses (including reasonable attorney's fees
and disbursements) incurred as a result of the assertion of any claim, by any
person or entity, arising out of, or otherwise related to, any transaction
conducted or service provided by Bank through the use of any account at Bank
pursuant to the procedures provided for or contemplated by this Agreement.
10. Conflict with Respect to Collateral.
(a) In the event that the Bank at any time receives or becomes
aware of conflicting demands or claims with respect to the Blocked
Account, this Agreement or its duties hereunder, the Bank shall have
the right to discontinue and refrain from any and all activities on
its part under this Agreement or in connection herewith until such
conflict is resolved to its satisfaction.
(b) The Bank shall have the further right to commence or defend
any action or proceedings for the determination of such conflict. The
Company agrees to pay all costs, damages, judgments and expenses,
including reasonable attorneys' fees, suffered or incurred by the Bank
in connection with or arising out of this Agreement and the
transactions described herein in the event of bona fide conflicting
claims or demands, including, but without limiting the generality of
the foregoing, a suit in interpleader brought by the Bank. In the
event that the Bank files a suit in interpleader, it shall thereupon
be fully released and discharged from all further obligations to
perform any and all duties or obligations imposed upon it by this
Agreement (except it may not release the Blocked Account except as
designated by the court).
11. Termination. This Agreement may be terminated by Company only upon
delivery to Bank of a written notification thereof jointly executed by Company
and Agent. This Agreement may be terminated by Agent at any time, with or
without cause, upon its delivery of written notice thereof to each of Company
and Bank. This Agreement may be terminated by Bank at any time on not less than
30 days' prior written notice delivered to each of Company and Agent. Upon
delivery or receipt of such notice of termination to or by Bank, Bank will: (a)
transmit to the Agent Account (i) all funds (less all accrued and unpaid fees
payable to Bank), if any, then on deposit in, or otherwise to the credit of, the
Blocked Account, and (ii) upon receipt, all funds received after such notice for
deposit in, or otherwise to the credit of, the Blocked Account; and (b) deliver
directly to Agent all Receipts consisting of checks, money orders, drafts and
other instruments or items of value, whether then in the possession of Bank or
received by Bank after such notice, without depositing such Receipts in the
Blocked Account or any other account. The provisions of Sections 2, 3 and 8
shall survive termination of this Agreement unless and until specifically
released by Agent in writing. All rights of Bank under Sections 6, 7 and 9 shall
survive any termination of this Agreement.
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12. Irrevocable Agreements. Company acknowledges that the agreements
made by it and the authorizations granted by it in Sections 2, 3 and 4 hereof
are irrevocable and that the authorizations granted in Sections 2, 3 and 4
hereof are powers coupled with an interest.
13. Notices. All notices, requests or other communications given to
Company, Agent or Bank shall be given in writing (including by facsimile) at the
address specified below:
Agent: Atoll Asset Management, LLC
▇▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇▇▇▇
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
Bank: Community Trust and Investment Company
▇▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
Company: Consolidated Energy, Inc.
▇▇ ▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇ ▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇ ▇▇▇▇▇▇▇, President
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
Any party may change its address for notices hereunder by notice to each other
party hereunder given in accordance with this Section 12. Each notice, request
or other communication shall be effective (a) if given by facsimile, when such
facsimile is transmitted to the facsimile number specified in this Section 12
and confirmation of receipt is made by the appropriate party, (b) if given by
overnight courier, 24 hours after such communication is deposited with the
overnight courier for delivery, addressed as aforesaid, or (c) if given by any
other means, when delivered at the address specified in this Section 12.
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14. Wire Transfer. Wire transfers to the Bank shall be made as
follows:
Community Trust Bank, Inc., a Kentucky banking corporation
▇▇▇ ▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
ABA #▇▇▇▇▇▇▇▇▇
Account # 4002127332
For further credit to CTIC A/C #108427101,
For further credit to A/C # ▇▇▇▇▇▇▇▇▇▇ (Account Name:
Consolidated Energy, Inc., a Wyoming corporation, by
Community Trust and Investment Company as Custodian)
15. Miscellaneous.
(a) This Agreement may be amended only by a written instrument
executed by Agent, Bank, and Company acting by their respective duly authorized
representatives.
(b) This Agreement shall be binding upon and shall inure to the
benefit of the parties hereto and their respective successors and assigns, but
neither Company nor Bank shall be entitled to assign or delegate any of its
rights or duties hereunder without first obtaining the express prior written
consent of Agent.
(c) This Agreement may be executed in any number of several
counterparts, each of which shall be deemed an original but all of which
together shall constitute one and the same instrument.
(d) THIS AGREEMENT SHALL BE GOVERNED BY THE LAWS OF THE STATE OF
NEW YORK (WITHOUT GIVING EFFECT TO ITS CONFLICT OF LAWS RULES).
[SIGNATURE PAGES FOLLOW]
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IN WITNESS WHEREOF, each of the parties has executed and delivered this Blocked
Account Agreement as of the day and year first above set forth.
Bank:
COMMUNITY TRUST AND INVESTMENT COMPANY
By: _____________________
Name:
Title:
Company:
CONSOLIDATED ENERGY, INC.
By: _____________________
Name:
Title:
Agent:
ATOLL ASSET MANAGEMENT, LLC
By: ______________________
Name:
Title:
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