INTERCREDITOR AND
SUBORDINATION AGREEMENT
THIS INTERCREDITOR AND SUBORDINATION AGREEMENT (this "AGREEMENT") is made
as of October 31, 2000, by and between Shell Capital Inc. as agent (in such
capacity, and together with any successor in such capacity, the "SUBORDINATED
AGENT") for each of the lenders that is signatory to, or which becomes a
signatory to, the Subordinated Credit Agreement (as defined below)
(collectively, the "SUBORDINATED LENDER"), and Bank of Montreal, individually
("BMO") and as agent for the Senior Lenders, as defined below (in such capacity
as agent, and together with any successor in such capacity, the "SENIOR Agent"),
Societe Generale, Southwest Agency ("SOC-GEN"), Shell Capital Inc. ("SCI") (BMO,
Soc-Gen, SCI and any other lender that becomes a signatory to the Senior Credit
Agreement, as defined below, are herein collectively called the "SENIOR
LENDER").
XXXXXXX EXPLORATION COMPANY, a Delaware corporation (the "PARENT"),
XXXXXXX OIL & GAS, L.P., a Delaware limited partnership ("BOG"), XXXXXXX, INC.,
a Nevada corporation ("BI"), XXXXXXX HOLDINGS I, LLC, a Nevada limited liability
company ("BH-I") and XXXXXXX HOLDINGS II, LLC, a Nevada limited liability
company ("BH-II", and together with BI and BH-I, the "OBLIGORS") are signatories
hereto solely for the purpose of evidencing their acknowledgment and consent to
the terms and conditions of this Agreement and their agreement to make payment
of the Senior Indebtedness and Subordinated Indebtedness (as such terms are
defined below) in accordance with Section 2.2 of this Agreement.
RECITALS
A. BOG, as the borrower, the Senior Agent and the Senior Lender are
parties to that certain Amended and Restated Credit Agreement dated as of
February 17, 2000 (such agreement, as the same may be from time to time amended,
modified, supplemented, restated, refinanced or replaced, the "SENIOR CREDIT
AGREEMENT"), pursuant to which the Senior Lenders have made certain credit
available to and on behalf of BOG.
B. BOG has executed one or more Mortgages (as such term is defined in the
Senior Credit Agreement) and associated security agreements and/or financing
statements (such agreements, as the same may have heretofore been or may
hereafter be from time to time amended, supplemented or replaced, the "SENIOR
MORTGAGE") in favor of the Senior Agent to secure, INTER ALIA, the obligations
outstanding under the Senior Credit Agreement.
C. Parent has executed an Amended and Restated Guaranty Agreement dated as
of February 17, 2000, as amended by a First Amendment to Amended and Restated
Guaranty Agreement of even date herewith (the "PARENT GUARANTY AGREEMENT"), and
BI, BH-I and BH-II have each executed a Guaranty Agreement dated as of January
26, 1998, as each has been amended by a First Amendment to Guaranty Agreement
dated as of February 17, 2000 (such Guaranty Agreements, together with the
Parent Guaranty Agreement, as each of the same may be from time to time further
amended, supplemented or replaced, being referred to herein as the
"SENIOR GUARANTY AGREEMENTS"), in favor of the Senior Agent and the Senior
Lender to guarantee, INTER ALIA, the obligations of BOG under the Senior Credit
Agreement.
D. Parent has executed a Security Agreement dated as of January 26, 1998
and a Security Agreement dated as of August 28, 1998, each as amended by an
Amendment to Security Agreement dated as of February 17, 2000 (as the same may
be from time to time further amended, supplemented or replaced, the "SENIOR
PARENT SECURITY AGREEMENT") to secure, INTER ALIA, the obligations of BOG under
the Senior Credit Agreement.
E. BOG has executed a Security Agreement dated as of January 26, 1998, as
amended by a First Amendment to Security Agreement dated as of March 26, 1999
and a Second Amendment to Security Agreement dated as of February 17, 2000 (as
the same may be from time to time further amended, supplemented or replaced, the
"SENIOR BOG SECURITY AGREEMENT") to secure, INTER ALIA, the obligations of BOG
under the Senior Credit Agreement.
F. BI has executed a Security Agreement dated as of August 20, 1998, as
amended by a First Amendment to Security Agreement dated as of March 26, 1999,
and a Second Amendment to Security Agreement dated as of February 17, 2000, (the
"SENIOR BI SECURITY AGREEMENT"), BH-I has executed a Security Agreement dated as
of August 20, 1998, as amended by a First Amendment to Security Agreement dated
as of March 26, 1999, and a Second Amendment to Security Agreement dated as of
February 17, 2000, (the "SENIOR BH-I SECURITY AGREEMENT"), and BH-II has
executed a Security Agreement dated as of August 20, 1998, as amended by a First
Amendment to Security Agreement dated as of March 26, 1999, and a Second
Amendment to Security Agreement dated as of February 17, 2000, (the "SENIOR
BH-II SECURITY AGREEMENT") The Senior BI Security Agreement, the Senior BH-I
Security Agreement and the Senior BH-II Security Agreement are herein
collectively called the "SENIOR AFFILIATE SECURITY Agreements". The Senior
Credit Agreement, the Senior Mortgage, the Senior Guaranty Agreements, the
Senior Parent Security Agreement, the Senior BOG Security Agreement, the Senior
Affiliate Security Agreements and any other documents or instruments given in
connection therewith or otherwise in connection with the Senior Credit Agreement
are collectively referred to herein as the "SENIOR LOAN DOCUMENTS".
G. Of even date herewith, BOG has entered into that certain Subordinated
Credit Agreement with the Subordinated Agent and the Subordinated Lender (the
"SUBORDINATED CREDIT AGREEMENT") pursuant to which the Subordinated Lender will
make loans to BOG, such advances to be evidenced by a promissory note executed
and delivered by BOG in accordance with the Subordinated Credit Agreement (the
"SUBORDINATED NOTE").
H. In connection with the execution and delivery of the Subordinated
Credit Agreement, BOG has executed, or will execute, one or more Mortgages (as
such term is defined in the Subordinated Credit Agreement) and associated
security agreements and/or financing statements (as the same may be from time to
time amended, modified, supplemented or replaced, the "SECOND MORTGAGES") in
favor of the Agent to secure, INTER ALIA, the obligations outstanding under the
Subordinated Loan Documents (as hereinafter defined).
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I. In connection with the execution and delivery of the Subordinated
Credit Agreement, Parent, BI, BH-I and BH-II have each executed and delivered a
Subordinated Guaranty Agreement dated of even date herewith (as the same may be
from time to time amended, modified, supplemented or replaced, being referred to
herein as the "SUBORDINATED GUARANTY AGREEMENTS"), in favor of the Subordinated
Agent, for the benefit of the Subordinated Agent and the Subordinated Lender to
guarantee, INTER ALIA, the obligations of the BOG under the Subordinated Loan
Documents.
J. In connection with the execution and delivery of the Subordinated
Credit Agreement, Parent, Borrower, BI, BH-I and BH-II have each executed and
delivered a Second Security Agreement in favor of the Subordinated Agent dated
of even date herewith (as the same may be from time to time further amended,
modified, supplemented or replaced, the "SECOND SECURITY AGREEMENTS").
K. The Subordinated Credit Agreement, the Subordinated Note, the Second
Mortgages, the Subordinated Guaranty Agreements, the Second Security Agreements
and those other documents or instruments now or hereafter given in connection
therewith, and including those identified on Exhibit "A" attached hereto, as any
of such documents or instruments may be amended, supplemented or replaced are
collectively referred to herein as the "SUBORDINATED LOAN DOCUMENTS".
L. Therefore, (i) in order to comply with the terms and conditions of the
Subordinated Credit Agreement, (ii) at the special insistence and request of the
Senior Agent and the Senior Lender, and (iii) for other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, the
Subordinated Agent, the Subordinated Lender, the Senior Agent on behalf of the
Senior Lender, and the Parent, BOG and the Obligors agree as follows:
ARTICLE I
DEFINITIONS
Section 1.1 TERMS DEFINED ABOVE. As used in this Agreement, the terms
defined above shall have the meanings respectively assigned to them.
Section 1.2 CERTAIN DEFINITION. As used in this Agreement the following
terms shall have the following meanings, unless the context otherwise requires:
"AFFILIATE" of any Person shall mean (i) any Person directly or indirectly
controlled by, controlling or under common control with such first Person,
(ii) any director or officer of such first Person or of any Person
referred to in clause (i) above and (iii) if any Person in clause (i)
above is an individual, any member of the immediate family (including
parents, spouse and children) of such individual and any trust whose
principal beneficiary is such individual or one or more members of such
immediate family and any Person who is controlled by any such member or
trust. For purposes of this definition, any Person which owns directly or
indirectly 20% or more of the securities having ordinary voting power for
the election of directors or other governing body of a corporation or 20%
or more of the partnership or other ownership interests of any other
Person (other than as a
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limited partner of such other Person) will be deemed to "CONTROL"
(including, with its correlative meanings, "CONTROLLED by" and "UNDER
COMMON CONTROL WITH") such corporation or other Person.
"HEDGING AGREEMENT" shall mean any commodity, interest rate or currency
swap, cap, floor, collar, forward agreement or other exchange or
protection agreements or any option with respect to any such transaction
permitted by the terms of the Senior Credit Agreement, now or hereafter
existing between (i) BOG and BMO and its successors or assigns ("BMO HEDGE
PARTY") and Soc-Gen and its successors and assigns ("SOC-GEN HEDGE PARTY")
entered into while such BMO Hedge Party or Soc-Gen Hedge Party is a Senior
Lender; and (ii) BOG and SCI and its successors or assigns (with Loans (as
defined in the Senior Credit Agreement) or Commitments (as defined in the
Senior Credit Agreement) of $20 million or more) or any Affiliate of SCI
(SCI and any Affiliate of SCI, a "SCI HEDGE PARTY") entered into while
such SCI Hedge Party or Fathom Energy Capital I, L.L.C. is a Senior
Lender.
"LIEN" shall mean any interest in Property securing an obligation owed to,
or a claim by, a Person other than the owner of the Property, whether such
interest is based on the common law, statute or contract, and whether such
obligation or claim is fixed or contingent, and including but not limited
to the lien or security interest arising from a mortgage, encumbrance,
pledged, security agreement, conditional sale or trust receipt or a lease,
consignment or bailment for security purposes.
"OIL AND GAS PROPERTIES" shall have the meaning attributed to such term in
the Senior Credit Agreement.
"PAYMENT BLOCKAGE PERIOD" means the period commencing on (i) the date on
which a default in the payment of any principal of or interest on the
Senior Indebtedness occurs or (ii) the date on which a Payment Blockage
Notice (as defined below) is given, and expiring on the date which is 60
days following the first day of the Payment Blockage Period.
"PERSON" shall mean any individual, corporation, company, voluntary
association, partnership, joint venture, trust, limited liability company,
unincorporated organization or government or any agency, instrumentality
or political subdivision thereof, or any other form of entity.
"PROPERTY" shall mean any interest in any kind of property or asset,
whether real, personal or mixed, or tangible or intangible.
"SENIOR INDEBTEDNESS" shall mean the principal balance of all loans
advanced to or letters of credit issued for the account of BOG pursuant to
the terms and conditions of the Senior Loan Documents, not to exceed
$75,000,000 in principal amount plus such additional amounts as are
permitted under Section 2.6(a)(ii) of this Agreement, and accrued but
unpaid interest thereon, all fees, expenses, reimbursements obligations,
liabilities, indemnities or other monetary obligations of BOG, the Parent
or any Obligor under any Senior Loan Document, and all swap settlement
amounts or other amounts due and payable under any
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Senior Loan Document, and all swap settlement amounts or other amounts due
and payable under any Hedging Agreements, whether any of the foregoing is
(i) absolute or contingent, direct or indirect, joint, several or
independent, (ii) now outstanding or owing or which may hereafter be
existing or incurred, (iii) due or to become due, or (iv) held or to be
held by the Senior Agent or any Senior Lender, and all renewals,
extensions, rearrangements, refundings and modifications thereof permitted
by the terms hereof.
"SUBORDINATED INDEBTEDNESS" shall mean the principal balance of all loans
advanced to BOG and/or rearranged pursuant to the terms and conditions of
the Subordinated Loan Documents (including interest paid in kind as
permitted by the Subordinated Loan Documents), and accrued but unpaid
interest thereon, and all fees, expenses, reimbursement obligations,
liabilities, indemnities or other monetary obligations of BOG, the Parent
or any Obligor under any Subordinated Loan Document, whether any of the
foregoing is (i) absolute or contingent, direct or indirect, joint,
several or independent, (ii) now outstanding or owing or hereafter
existing or incurred, (iii) due or to become due, or (iv) held or to be
held by the Subordinated Agent or any Subordinated Lender, and all
renewals, extensions, rearrangements, refundings and modifications thereof
permitted by the terms hereof.
ARTICLE II
SUBORDINATION
Section 2.1 AGREEMENT TO SUBORDINATE. The payment of any and all
Subordinated Indebtedness and the Subordinated Loan Documents are expressly
subordinated to the extent and in the manner set forth in Sections 2.2 through
2.8 hereof to the Senior Indebtedness and the Senior Loan Documents.
Section 2.2 PAYMENT SUBORDINATION UPON DEFAULT.
(a) The Subordinated Agent and the Subordinated Lender agree,
that:
(i) the Subordinated Indebtedness is subordinate in right of
payment, to the extent and in the manner provided in this Agreement,
to the prior payment in full of all Senior Indebtedness (whether
outstanding on the date hereof or hereafter created, incurred,
assumed or guaranteed);
(ii) BOG, the Parent and the Obligors may not make any payment
(whether by redemption, purchase, retirement, defeasance, set-off or
otherwise) upon or in respect of the Subordinated Indebtedness,
until all principal and other obligations with respect to the Senior
Indebtedness have been paid in full if:
(A) a default in the payment of any principal of or
interest on the Senior Indebtedness occurs; or
(B) the payment of the Subordinated Indebtedness would
result in a default or event of default under the Senior Loan
Documents or any
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other default has occurred and is continuing with respect to
the Senior Indebtedness that permits, or with the giving of
notice or passage of time or both (unless cured or waived)
would permit, the Senior Agent or the Senior Lender to
accelerate its maturity and the Subordinated Agent receives a
notice of the default (a "PAYMENT BLOCKAGE NOTICE") from the
Parent, BOG, and Obligor, the Senior Agent or any Senior
Lender with regard to the foregoing.
(iii) BOG, the Parent and each Obligor may resume payments on
and distributions in respect of the Subordinated Indebtedness upon:
(A) in the case of a default referred to in Section
2.2(a)(ii)(A), the date upon which the default is cured or
waived, or
(B) in the case of a default referred to in Section
2.2(a)(ii)(B), the earliest of (1) the date on which such
nonpayment default is cured or waived or (2) the expiration of
the applicable Payment Blockage Period unless the maturity of
the Senior Indebtedness has been accelerated.
(iv) Upon any payment or distribution of property or
securities to creditors of the Parent, BOG or any Obligor in a
liquidation or dissolution of such person or its property, or in an
assignment for the benefit of creditors or any marshaling of its
assets and liabilities:
(A) the Senior Lender shall be entitled to receive
payment in full of all Senior Indebtedness (including interest
after the commencement of any such proceeding at the rate
specified in the Senior Loan Documents, whether or not a claim
for such interest would be allowed in such proceeding) before
the Subordinated Agent and/or Subordinated Lender shall be
entitled to receive any payment with respect to the
Subordinated Indebtedness; and
(B) until the Senior Indebtedness is paid in full, any
payment or distribution to which the Subordinated Agent and/or
the Subordinated Lender would be entitled shall be made to the
Senior Agent for its benefit and the benefit of the Senior
Lender.
(C) Under the circumstances described in this clause
(iv), the Parent, BOG, and Obligor, or any receiver, trustee
in bankruptcy, liquidating trustee, agent or other similar
Person making any payment or distribution of cash or other
property or securities is authorized or instructed to make any
payment or distribution to which the Subordinated Agent and/or
the Subordinated Lender would otherwise be entitled (other
than securities that are subordinated at least to the same
extent as the Subordinated Indebtedness) directly to the
Senior Agent for its benefit and the benefit of the Senior
Lender to the extent necessary to pay all Senior
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Indebtedness in full, after giving effect to any concurrent
payment, distribution or provision thereof to or for the
Senior Agent and the Senior Lender.
(b) The Senior Agent and the Senior Lender shall have the right, in
their sole and absolute discretion, to waive the conditions of Section 2.2(a)
prohibiting the payment of the Subordinated Indebtedness whether in an
enforcement action brought by the Senior Agent or Senior Lender on the Senior
Indebtedness or otherwise.
(c) The foregoing provisions of Section 2.2 shall not impair or
prohibit the rights of the Subordinated Lender to receive payments in the form
of equity securities or additional subordinated debt (including the payment of
interest in kind as permitted by the Subordinated Loan Documents) that is
subordinated to the Senior Indebtedness in accordance with the terms of this
Agreement. Nothing in this Agreement shall limit or restrict the accrual or
charging of default interest on any of the Subordinated Indebtedness not paid
when due. In addition, the foregoing provisions of this Section 2.2 shall not
prevent the Subordinated Agent or any Subordinated Lender from exercising its
available remedies upon a default or event of default under the Subordinated
Loan Documents, subject to (y) the rights of the Senior Agent and the Senior
Lender to receive distributions and payments otherwise payable to the
Subordinated Lenders, and (z) the expiration of any then applicable Payment
Blockage Period.
Section 2.3 PAYMENTS RECEIVED OR MADE IN VIOLATION OF THIS AGREEMENT.
(a) In the event the Subordinated Agent or any Subordinated Lender
shall receive any payment or distribution on account of the Subordinated
Indebtedness which is not entitled to receive under the provisions of Section
2.2, the Subordinated Agent or such Subordinated Lender will hold any amount so
received in trust for the Senior Lender and will forthwith turn over such
payment to the Senior Agent in the form received by it (together with any
necessary endorsement) to be applied to the Senior Indebtedness. In the event of
any failure by the Subordinated Agent or any Subordinated Lender to make any
such endorsement, the Senior Agent is hereby irrevocably authorized and granted
a power of attorney (which is irrevocable and coupled with interest) to make the
same.
(b) If the Parent, BOG or any Obligor shall become aware that a
"Default" or an "Event of Default" has occurred under the Senior Credit
Agreement then such Person shall give the Senior Agent, the Senior Lender and
the Subordinated Agent prompt written notice thereof.
(c) This Agreement defines the relative rights of the Senior Agent
and the Senior Lender and the Subordinated Agent and Subordinated Lender.
Nothing in this Agreement shall: (i) impair, as between the Parent, BOG or any
Obligor, the Subordinated Agent and the Subordinated Lender, the obligations of
the Parent, BOG and each Obligor, which are absolute and unconditional, to pay
the Subordinated Indebtedness in accordance with the terms of the Subordinated
Loan Documents, or (ii) prevent the Subordinated Agent or any Subordinated
Lender from exercising its available remedies subject to any applicable Payment
Blockage Period.
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Section 2.4 LIENS SUBORDINATE.
(a) The Subordinated Agent and the Subordinated Lender agree that
any Liens upon the Property of any of the Parent, BOG or any Obligor securing
payments of the Subordinated Indebtedness are and shall be and remain inferior
and subordinated to any Liens securing payments of the Senior Indebtedness in
such Property regardless of whether such encumbrances in favor of the
Subordinated Agent or any Subordinated Lender or the Senior Agent and the Senior
Lender presently exist or are hereafter created or attached and regardless of
the date of execution and delivery or the date of filing or recording. Any
obligation of the Parent, BOG or any Obligor under the Subordinated Loan
Documents to deliver possession of any Property to the Subordinated Agent or the
Subordinated Lender, whether for purposes of perfection or realization of any
rights thereunder shall be subordinate in all respects to the Parent's, BOG's or
any Obligor's obligation to deliver possession of any such Property to the
Senior Agent or Senior Lender under the Senior Loan Documents for such purposes.
(b) The Subordinated Agent and the Subordinated Lender covenant and
agree not to contest or dispute, whether in any proceeding or otherwise, the
validity, enforceability, attachment, priority or perfected status of any Lien
granted in favor of the Senior Agent or any Senior Lender or take any steps or
actions, including the institution of any proceedings, to enjoin or restrain the
Senior Agent or any Senior Lender from the exercise of the remedies afforded
them under the Senior Loan Documents or applicable law in and to any of the
Senior Lender Collateral.
Section 2.5 AGREEMENT NOT TO PURSUE ACTION.
(a) Following the commencement of any Payment Blockage Period, the
Subordinated Agent and each Subordinated Lender covenants that it will not,
until the earlier of the date (1) of expiration of the applicable Payment
Blockage Period, (2) the Senior Indebtedness is paid in full or the event which
gave rise to the Payment Blockage Period is cured or waived, (3) there occurs an
event which would cause an automatic acceleration of the Subordinated
Indebtedness under any of Sections 10.01(f), (g), (h) or (l) but only to the
extent (l) relates to (f), (g) and (h) of the Subordinated Credit Agreement, or
(4) the Senior Indebtedness is accelerated and the Senior Agent or Senior Lender
takes any action to enforce any of their respective rights under the Senior
Credit Agreement, do any of the following unless the Senior Agent or Senior
Lender shall also join in such action or commence a similar action: (i) commence
any action or proceeding against the Parent, BOG or any Obligor to recover all
or any part of the Subordinated Indebtedness or join with any other creditor in
bringing any proceedings against such Person under any bankruptcy,
reorganization, readjustment of debt, arrangement of debt, receivership,
liquidation or insolvency law or statute of the Federal or any state government,
(ii) accelerate the maturity of any Subordinated Indebtedness, or (iii)
foreclose, repossess, sequester or otherwise take steps or institute any action
or proceeding to enforce any Lien, collateral right, judgment or other
encumbrances on any Property of the Parent, BOG or any Obligor held by the
Subordinated Agent or any Subordinated Lender, or to take possession of any such
Property; provided the foregoing will not prohibit (A) such presentment as may
be necessary to prevent the discharge of any liable parties on any instrument,
(B) the filing of claims or notices to prevent
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the running of any applicable statute of limitations, or (C) or similar actions
necessary to preserve the legal rights of the Subordinated Lender and/or the
Subordinated Agent.
(b) Notwithstanding anything contained in this Agreement to the
contrary, the Subordinated Agent and the Subordinated Lender shall not be
prohibited at any time, whether during a Payment Blockage Period or otherwise,
from delivering any notice of default to the Parent, BOG or any Obligor, and the
existence of any Payment Blockage Period shall not prevent, xxxxx or delay the
running of any applicable cure period under the Subordinated Loan Documents
following any default or notice of any default under the Subordinated Loan
Documents.
(c) The Senior Lender and Senior Agent may enforce no more than two
(2) Payment Blockage Periods during any 365 day period.
Section 2.6. RIGHTS OF THE SENIOR AGENT AND THE SENIOR LENDER. The Senior
Agent and the Senior Lender may, at any time, and from time to time, without the
consent of or notice to the Subordinated Agent or any Subordinated Lender,
without incurring responsibility to the Subordinated Agent and/or any
Subordinated Lender, without impairing or releasing any of the Senior Agent or
the Senior Lender's rights or any of the obligations of the Subordinated Agent
and the Subordinated Lender under this Agreement:
(a) change the amount, manner, place or terms of payment, or change
or extend for any period the time of payment of, or renew, increase or otherwise
alter the Senior Indebtedness or any Senior Loan Document or any other
instrument or agreement now or hereafter executed or evidencing any of the
Senior Indebtedness in any manner, or enter into or amend in any manner any
other agreement relating to the Senior Indebtedness, except as follows:
(i) To increase rate of interest; or
(ii) To increase the principal amount of the Senior
Indebtedness (excluding obligations of any kind under any Hedging
Agreements) above $75,000,000, unless such increase does not violate
the terms of or create a default under the Subordinated Credit
Agreement; or
(iii) To further restrict (beyond those restrictions in the
Senior Credit Agreement as in effect on the date hereof) any payment
of dividends or similar distributions by any subsidiary of the
Parent to the Parent or the granting of any Lien or other security
interest securing payment of the Subordinated Indebtedness or any
guarantees of the Subordinated Indebtedness; or
(iv) To restrict any payments of the Subordinated Indebtedness
except as provided in Section 2.2 above;
(b) sell, exchange, release or otherwise deal with all or any part
of any Property by whomsoever at any time pledged or mortgaged to secure,
howsoever securing, the Senior Indebtedness;
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(c) release any Person liable in any manner for payment or
collection of the Senior Indebtedness;
(d) exercise or refrain from exercising any rights against the
Parent, BOG or any Obligor or others, including the Subordinated Agent and the
Subordinated Lender; and
(e) apply any sums received by the Senior Agent and/or Senior
Lender, paid by any Person and however realized, to payment of the Senior
Indebtedness in such a manner as the Senior Agent and the Senior Lender, in
their sole discretion, may deem appropriate.
Upon request by the Senior Agent prior to the funding of any Senior Indebtedness
(excluding obligations of any kind under any Hedging Agreements) in excess of
$75,000,000, if such funding is permitted under Section 2.6(a)(ii) above, the
Subordinated Lender will confirm, based upon the information available to it,
whether or not such proposed additional Senior Indebtedness is permitted under
Section 2.6(a)(ii).
Section 2.7 SUBORDINATION MAY NOT BE IMPAIRED BY THE PARENT, BOG OR ANY
OBLIGORS. No right of any present or future Senior Agent or Senior Lender to
enforce the subordination as provided in this Agreement will at any time or in
any way be prejudiced or impaired by any act or failure to act on the part of
the Parent, BOG or any Obligor or by any act or failure to act, in good faith,
by the Senior Agent or any Senior Lender, or by any noncompliance by the Parent,
BOG or any Obligor with the terms of any Subordinated Loan Document, regardless
of any knowledge thereof that the Senior Agent or any Senior Lender may have or
otherwise be charged with. The provisions of this Section 2.7 are intended to be
for the benefit of, and shall be enforceable directly by, the Senior Agent or
the Senior Lender.
Section 2.8. AUTHORIZATION TO FILE PROOF OF CLAIM. If the Subordinated
Agent or any Subordinated Lender does not file a proper proof of claim or proof
of debt in the form required in any proceeding referred to in Section 2.2(a)(iv)
hereof at least 30 days before the expiration of the time to file such claim,
the Senior Agent is hereby authorized to file an appropriate claim for and on
behalf of the Subordinated Agent and the Subordinated Lender.
ARTICLE III
REPRESENTATIONS, WARRANTIES AND COVENANT
Section 3.1. REPRESENTATIONS OF SUBORDINATED AGENT AND SUBORDINATED
LENDER. The Subordinated Agent and each Subordinated Lender represent and
warrant that:
(a) neither the execution nor delivery of this Agreement nor
fulfillment of or compliance with the terms and provisions hereof will conflict
with, or result in a breach of the terms, conditions or provisions of, or
constitute a default under, any agreement or instrument which it is now subject
to;
(b) it has all requisite authority to execute, deliver and perform
its obligations under this Agreement; and
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(c) this Agreement constitutes the legal, valid, and binding
obligation of the Senior Agent and the Subordinated Agent, enforceable in
accordance with its terms, subject to applicable bankruptcy, insolvency or
similar laws and general principles of equity.
Section 3.2. REPRESENTATIONS OF SENIOR AGENT. The Senior Agent represents
and warrants that:
(a) neither the execution nor delivery of this Agreement nor
fulfillment of or compliance with the terms and provisions hereof will conflict
with, or result in a breach of the terms, conditions or provisions of, or
constitute a default under, any of the Senior Loan Documents or any other
agreement or instrument which it is now subject to;
(b) it has all requisite authority for itself and as agent acting on
behalf of the Senior Lender to execute, deliver and perform its and the Senior
Lender's obligations under this Agreement; and
(c) this Agreement constitutes the legal, valid, and binding
obligation of the Senior Agent, enforceable in accordance with its terms,
subject to applicable bankruptcy, insolvency or similar laws and general
principles of equity.
Section 3.3 SUBORDINATED AGENT, SUBORDINATED LENDER COVENANTS. The
Subordinated Agent and each Subordinated Lender covenant that so long as any of
the Senior Indebtedness remains outstanding and until the termination of the
"Aggregate Commitments" (as defined in the Senior Credit Agreement), it will:
(a) cause any note, debenture, or instrument evidencing or securing
the Subordinated Indebtedness to contain a statement or legend to the effect
that such note, debenture, or other instrument is subordinated to the Senior
Indebtedness in the manner and to the extent set forth in this Agreement;
(b) not assign or transfer to others the Subordinated Indebtedness
or any claim it has or may have against the Parent, BOG or any Obligor as long
as any of the Senior Indebtedness remains outstanding, unless such assignment or
transfer is expressly made subject to this Agreement;
(c) not amend, supplement or otherwise modify the terms of the
Subordinated Indebtedness, (including, without limitation, the Subordinated Loan
Documents) without the express written consent of the Senior Agent, which
consent will not be unreasonably withheld, which has the effect of (i)
increasing the outstanding principal amount of the Subordinated Indebtedness
above $20,000,000, provided that the foregoing shall not affect the BOG's right
to make payment in kind of accrued interest or the Subordinated Lender's ability
to accept payment in kind as provided in the Subordinated Loan Documents,
thereby increasing the principal amount of the Subordinated Indebtedness and
(ii) increasing the rate of interest or any fees charged on the Subordinated
Indebtedness.
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(d) not ask for, xxx for, take, or demand any payment on such
indebtedness, except as permitted hereby; and
(e) execute any and all other instruments necessary as reasonably
required by the Senior Agent or the Senior Lender to effect the subordinations
intended hereby.
ARTICLE IV
MISCELLANEOUS
Section 4.1 ACCEPTANCE BY THE SENIOR AGENT AND THE SENIOR LENDER. The
foregoing subordination provisions are, and are intended to be, an inducement
and a consideration to the Senior Agent and each Senior Lender, whether such
Senior Lender's Senior Indebtedness is created or acquired before or after the
issuance of Subordinated Indebtedness, to acquire and hold, or continue to hold,
such Senior Indebtedness and each such Senior Lender shall be deemed
conclusively to have relied on such subordination provisions in acquiring and
continuing to hold, or in continuing to hold, such Senior Indebtedness. Notice
of acceptance of this Agreement is waived, acceptance on the part of the Senior
Agent and the Senior Lender being conclusively presumed by their request for
this Agreement and delivery of the same to them.
Section 4.2 ASSIGNMENT BY THE SENIOR AGENT AND THE SENIOR LENDER. This
Agreement may be assigned by the Senior Agent and the Senior Lender in
connection with any assignment or transfer of the Senior Indebtedness or any
replacement or refinancing of the Senior Loan.
Section 4.3 NOTICE. All notices and other communications provided for
herein shall be given or made by telecopy, courier or U.S. Mail or in writing
and telecopied, mailed or delivered to the intended recipient at the "Address
for Notices" specified below its name on the signature pages hereof or at such
other address as shall be designated by such party in a notice to each other
party; and in the case of the Senior Agent or any Senior Lender in care of the
Senior Agent at the following address:
Bank of Montreal, as Agent
000 Xxxxxxxxx, Xxxxx 0000
Xxxxxxx, Xxxxx 00000
Telecopier No.: (000) 000-0000
Telephone No.: (000)000-0000
Attention: Client Services Group
or at such other address as shall be designated by the Senior Agent in a notice
to each other party. Except as otherwise provided in this Agreement, all such
communications shall be deemed to have been duly given when transmitted by
telecopier or personally delivered or, in the case of a mailed notice, five (5)
days after the date deposited in the mails, postage prepaid, in each case given
or addressed as aforesaid.
Section 4.4 AMENDMENTS AND WAIVERS. The Senior Agent's, Subordinated
Agent's, any Senior Lender's or Subordinated Lender's acceptance of partial or
delinquent payments or any forbearance, failure or delay by any of the foregoing
in exercising any right, power or
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remedy hereunder shall not be deemed a waiver of any obligation of the Parent,
BOG or any Obligor or the Senior Agent, Senior Lender, Subordinated Agent or
Subordinated Lender, or of any right, power or remedy of the Senior Agent,
Senior Lender, Subordinated Agent or Subordinated Lender; and no partial
exercise of any right, power or remedy shall preclude any other or further
exercise thereof. The Subordinated Agent and the Subordinated Lender hereby
agree that if the Senior Agent and/or any Senior Lender agrees to a waiver of
any provision hereunder, or an exchange of or release of collateral, or the
addition or release of any Person as an Obligor, any such action shall not
constitute a waiver of any of the Senior Agent's and/or any Senior Lender's
other rights or of the Subordinated Agent's or any Subordinated Lender's
obligations hereunder. This Agreement may be amended only by an instrument in
writing executed jointly by the Subordinated Agent and the Senior Agent and may
be supplemented only by documents delivered or to be delivered in accordance
with the express terms hereof.
Section 4.5 PARTIES TO THE AGREEMENT. The provisions of this Agreement are
and are intended solely for the purpose of defining the relative rights of the
Subordinated Agent, the Subordinated Lender, the Senior Agent and the Senior
Lender, and are solely for the benefit of the Senior Agent, the Senior Lender,
the Subordinated Agent and the Subordinated Lender (including their respective
assignees and successors); and may not be relied upon or enforced by any other
Person. The Parent, BOG and each Obligor have joined herein solely for the
purpose of evidencing their acknowledgment and consent to the terms and
conditions of this Agreement and their agreement to make payments of the Senior
Indebtedness and Subordinated Indebtedness in accordance with the terms of
Section 2.2.
Section 4.6 REINSTATEMENT. To the extent that any payments on the Senior
Indebtedness or proceeds of any collateral are subsequently invalidated,
declared to be fraudulent or preferential, set aside or required to be repaid by
the Senior Agent or any Senior Lender to a trustee, debtor in possession,
receiver or other Person under any bankruptcy law, common law or equitable
cause, then to such extent, obligations hereunder with respect to the Senior
Indebtedness so satisfied shall be revived and continue as if such payment or
proceeds had not been received and the Senior Agent's and the Senior Lender's
Liens, interests, rights, powers and remedies under the Senior Loan Documents
and this Agreement shall continue in full force and effect. In such event, each
Senior Loan Document and this Agreement shall be automatically reinstated and
the Parent, BOG, the Obligors, the Subordinated Agent and the Subordinated
Lender shall take such action as may be reasonably requested by the Senior Agent
and the Senior Lender to effect such reinstatement. Any Senior Lender which has
assigned its rights hereunder shall continue to be entitled to the benefits of
this Section notwithstanding such assignment.
Section 4.7 GOVERNING LAW. THIS AGREEMENT SHALL BE GOVNERNED BY, AND
CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF TEXAS.
Section 4.8 ENTIRE AGREEMENT. THIS WRITTEN AGREEMENT EMBODIES THE ENTIRE
AGREEMENT AND UNDERSTANDING BETWEEN THE SENIOR AGENT AND THE SENIOR LENDER, THE
SUBORDINATED AGENT AND THE SUBORDINATED LENDER AND SUPERSEDES ALL OTHER
AGREEMENTS AND UNDERSTANDINGS BETWEEN SUCH PARTIES RELATING TO THE SUBJECT
MATTER HEREOF AND THEREOF. THIS WRITTEN AGREEMENT REPRESENTS THE
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FINAL AGREEMENT BETWEEN THE PARTIES AND MAY NOT BE CONTRADICTED BY EVIDENCE OF
PRIOR, CONTEMPORANEOUS, OR SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES. THERE ARE
NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES.
Section 4.9 REFERENCES AND TITLE. All references in this Agreement to
articles, sections, subsections and other subdivisions refer to the articles,
sections, subsections and other subdivisions of this Agreement unless expressly
provided otherwise. Titles appearing at the beginning of any subdivisions are
for convenience only and do not constitute any part of such subdivisions and
shall be disregarded in construing the language contained in such subdivisions.
Section 4.10 SEVERABILITY. All rights, remedies and powers provided herein
may be exercised only to the extent that the exercise thereof does not violate
any applicable provision of law; and all the provisions hereof are intended (a)
to be subject to all applicable mandatory provisions of law which may be
controlling and (b) to be limited to the extent necessary so that they will not
render this Agreement invalid under the provisions of any applicable law. If any
term or provision of this Agreement shall be determined to be illegal or
unenforceable, all other terms and provisions of this Agreement shall
nevertheless remain effective and shall be enforced to the fullest extent
permitted by applicable law and the parties agree to promptly meet and negotiate
in good faith to establish new arrangements which have the effect of preserving
in the economic and commercial benefits established by this Agreement.
Section 4.11 SUBROGATION. Subject to the terms of Section 4.6, after all
Senior Indebtedness is paid in full and until the Subordinated Indebtedness has
been paid in full, the Subordinated Lender shall be subrogated to the rights of
the Senior Agent and the Senior Lender to receive distributions and payments
applicable to the Senior Indebtedness to the extent that distributions and
payments otherwise payable to the Subordinated Lender have been applied to the
payment of Senior Indebtedness. A payment or distribution made under this
Agreement to the Senior Agent and/or the Senior Lender that otherwise would have
been made to the Subordinated Lender is not, as between Parent, BOG or any
Obligor and the Subordinated Agent and Subordinated Lender, a payment on the
Subordinated Indebtedness.
WITNESS THE EXECUTION HEREOF, as of this the 31st day of October, 2000.
SENIOR AGENT AND SENIOR LENDERS:
BANK OF MONTREAL,
both as Senior Agent and a Senior Lender
By: /s/ Xxxxxx X. XxXxxx
Name: Xxxxxx X. XxXxxx
Title: Director
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SOCIETE GENERALE, SOUTHWEST AGENCY,
as a Senior Lender
By: /s/ Xxxx X. Xxx
Name: Xxxx X. Xxx
Title: Director
SHELL CAPITAL INC.,
as a Senior Lender
By: /s/ Xxxxxx X. Xxxxxxx
Name: Xxxxxx X. Xxxxxxx
Title: Vice President
SUBORDINATED AGENT AND
SUBORDINATED LENDER:
SHELL CAPITAL INC.
both as a Subordinated Agent and a Subordinated
Lender
By: /s/ Xxxxxx X. Xxxxxxx
Name: Xxxxxx X. Xxxxxxx
Title: Vice President
Address for the Subordinated Agent
and Subordinated Lender:
000 Xxxxxxxxx Xxxxxx, Xxxxx 0000
Xxxxxxx, Xxxxx 00000
and
Attention: Xxxxx Xxxxx
Telecopy: (000) 000-0000
PARENT:
XXXXXXX EXPLORATION COMPANY,
a Delaware corporation
By: /s/ Xxxxxx X. Xxxxxxx
Xxxxxx X. Xxxxxxx
Chief Financial Officer
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BOG:
XXXXXXX OIL & GAS, L.P.,
a Delaware limited partnership
By: Xxxxxxx, Inc., a Nevada
corporation, its General Partner
By: /s/ Xxxxxx X. Xxxxxxx
Xxxxxx X. Xxxxxxx
Chief Financial Officer
OBLIGORS:
XXXXXXX, INC.,
A Nevada corporation
By: /s/ Xxxxxx X. Xxxxxxx
Xxxxxx X. Xxxxxxx
Chief Financial Officer
XXXXXXX HOLDINGS I, LLC,
A Nevada limited liability company
By: /s/ Xxx X. Xxxxxxx
Name: Xxx X. Xxxxxxx
Title: President
XXXXXXX HOLDINGS II, LLC,
A Nevada limited liability company
By: /s/ Xxx X. Xxxxxxx
Name: Xxx X. Xxxxxxx
Title: President
Addresses for notices of the Parent, BOG and each
Obligor:
0000 Xxxxxx Xxxxx Xxxxxxx
Xxxxxxxx 0, Xxxxx 000
Xxxxxx, Xxxxx 00000
Telecopy No.: 000-000-0000
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EXHIBIT A
SUBORDINATED LOAN DOCUMENTS
1. The Subordinated Credit Agreement.
2. Subordinated Note in the aggregate face amount of $23,000,000 issued by BOG
in favor of the Subordinated Lender.
3. Second Mortgage, Deed of Trust, Assignment of Production, Security
Agreement and Financing Statement agreements dated as of October 31, 2000
and thereafter executed by BOG in favor of the Subordinated Agent, for the
benefit of the Subordinated Agent and the Subordinated Lender.
4. Subordinated Guaranty Agreement dated as of October 31, 2000 executed by
Parent in favor of the Subordinated Agent for the benefit of the
Subordinated Agent and the Subordinated Lender.
5. Subordinated Guaranty Agreement dated as of October 31, 2000 executed by BI
in favor of the Subordinated Agent for the benefit of the Subordinated
Agent and the Subordinated Lender.
6. Subordinated Guaranty Agreement dated as of October 31, 2000 executed by
BH-I in favor of the Subordinated Agent for the benefit of the Subordinated
Agent and the Subordinated Lender.
7. Subordinated Guaranty Agreement dated as of October 31, 2000 executed by
BH-II in favor of the Subordinated Agent for the benefit of the
Subordinated Agent and the Subordinated Lender.
8. Second Security Agreement (Pledge) dated as of October 31, 2000 executed by
Parent in favor of the Subordinated Agent for the benefit of the
Subordinated Agent and the Subordinated Lender.
9. Second Security Agreement dated as of October 31, 2000 executed by Parent
in favor of the Subordinated Agent for the benefit of the Subordinated
Agent and the Subordinated Lender.
10. Second Security Agreement dated as of October 31, 2000 executed by BOG in
favor of the Subordinated Agent for the benefit of the Subordinated Agent
and the Subordinated Lender.
12. Second Security Agreement (Pledge) dated as of October 31, 2000 executed by
Xxxxxxx, Inc. in favor of the Subordinated Agent for the benefit of the
Subordinated Agent and the Subordinated Lender.
13. Second Security Agreement (Pledge) dated as of October 31, 2000 executed by
Xxxxxxx Holdings I in favor of the Subordinated Agent for the benefit of
the Subordinated Agent and the Subordinated Lender.
14. Second Security Agreement (Pledge) dated as of October 31, 2000 executed by
Xxxxxxx Holdings II, LLC in favor of the Subordinated Agent for the benefit
of the Subordinated Agent and the Subordinated Lender.
15. Financing Statements in connection with any of the items above.
16. Any guaranty agreements, pledges, security agreements or financing
statements that may hereafter be executed by any subsidiaries of the Parent
in favor of the Subordinated Agent or the Subordinated Lender.
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