INTERCOMPANY SUBORDINATION AGREEMENT
This Subordination Agreement (this "Agreement") is made as of the
____ day of April, 1997, by the following persons:
XCL Ltd., a Delaware corporation (herein sometimes called "Parent"),
XCL-Texas, Inc., a Texas corporation,
XCL-Land, Ltd., a Delaware corporation,
The Exploration Company of Louisiana, Inc., a Louisiana corporation,
XCL Acquisitions, Inc., a Delaware corporation,
XCL-China Coal Methane, Ltd., a British Virgin Islands corporation,
XCL-China LubeOil, Ltd., a British Virgin Islands corporation, and
XCL-China, Ltd., a British Virgins Islands corporation (herein
sometimes called "Borrower"),
all of whom, other than Borrower, are herein collectively called the
"Related Persons".
RECITALS:
1. Borrower, Parent, and certain lenders (herein collectively called
"Lenders") have entered into Subscription Agreements of even date herewith
(the "Subscription Agreement"), pursuant to which Borrower has borrowed funds
from Lenders which debt is represented by one or more unsecured note or
unsecured notes (the "Note" or "Notes").
2. It is a condition precedent to Lenders' obligations to advance funds
pursuant to the Subscription Agreement that the Related Persons shall
subordinate all obligations owed to them by Borrower to all obligations
owed by Borrower to Senior Creditors (as defined below);
3. The board of directors of each Related Person has determined that the
execution, delivery and performance of this Agreement may reasonably be
expected to benefit such Related Person, directly or indirectly, and is in
the best interests of each Related Person.
NOW, THEREFORE, in consideration of the foregoing and for other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto agree as follows:
Section 1. Definitions. Reference is hereby made to the Subscription
Agreement for the meaning of certain terms which are defined therein and
which, although not defined herein, are used herein with the same meanings.
As used herein, the terms "Agreement" and "Subscription Agreement" shall
have the meanings indicated above, and the following terms shall have the
following meanings:
"Insolvency Proceeding" means, with respect to any Person, any voluntary
or involuntary liquidation, dissolution, sale of all or substantially all
assets, marshalling of assets or liabilities, receivership, conservatorship,
assignment for the benefit of creditors, insolvency, bankruptcy,
reorganization, arrangement or composition of such person or entity (whether
or not pursuant to bankruptcy, insolvency or other similar laws) and any other
proceeding under laws for the protection of debtors involving such person or
entity or any of its assets.
"Lenders" means the persons purchasing Notes under the Subscription
Agreement.
"Obligations" means, with respect to any creditor, all debts, liabilities
and obligations (of any character whatsoever) of Borrower (whether as
principal, surety, endorser, guarantor, accommodation party or otherwise)
owed to such creditor now existing or hereafter incurred or arising,
whether principal, interest, fees or expenses, direct, contingent, primary,
secondary, joint and several, joint or several, or otherwise, and irrespective
of the manner in which, or the person or persons in whose favor, such debts,
liabilities, or other obligations may at their inception have been, or may
hereafter be, created, or the manner in which such creditor may have acquired
rights with respect thereto.
"Senior Creditors" means each Lender.
"Senior Obligations" means all Obligations of Borrower owed to any Senior
Creditor, including all Obligations arising under the Subscription Agreement
and the Notes.
"Subordinated Obligations" means all Obligations of Borrower to any
Related Person, including all Obligations arising out of any cash management
activities.
"Super Majority Lenders" means Lenders holding at least 66 2/3% of the
principal amount of the Notes then outstanding.
"Termination Date" means the 91st day following the earliest date after
the date hereof on which all Senior Obligations have been paid in cash and
satisfied in full; provided, however, that this Agreement shall continue to
be effective or be reinstated, as though such payment had not been made, if
at any time any payment of any of the Senior Obligations is rescinded or
must otherwise be returned by any Senior Creditor in connection with an
Insolvency Proceeding involving Borrower.
Unless the context otherwise requires or unless otherwise provided herein,
references in this Agreement to a particular agreement, instrument or
document (including references to promissory notes, loan agreements,
guaranties and security documents) also refer to and include all renewals,
extensions, amendments, modifications, supplements or restatements of any
such agreement, instrument or document, provided that nothing contained in
this Section shall be construed to authorize any party hereto to execute or
enter into any such renewal, extension, amendment, modification, supplement
or restatement.
Section 2. Subordination of Obligations. Each Related Person expressly and
in all respects subordinates and makes junior and inferior (i) the
Subordinated Obligations owed to it and the payment and enforcement of
such Subordinated Obligations owed to it, to (ii) the Senior Obligations
and the payment and enforcement of the Senior Obligations (including post
petition interest whether or not such interest is an allowed claim enforceable
in any Insolvency Proceeding under applicable law). Prior to the Termination
Date, no Related Person to whom Subordinated Obligations are owed shall
accept, receive or collect (by set-off or other manner) any payment or
distribution on account of, or ask for, demand or accelerate, directly or
indirectly, any Subordinated Obligation, and Borrower shall not make any such
payment.
Section 3. Assets Wrongly Received. If any Related Person receives any
payment or distribution of any kind (whether in cash, securities or other
property) in contravention of this Agreement, it shall hold such payment or
distribution in trust for Senior Creditors, shall segregate the same from
other cash or assets it holds and shall immediately deliver the same to the
Senior Creditors in the form received by such Related Person (together with
any necessary endorsement) to be applied (in the case of cash) to, or held
as collateral (in the case of non-cash property or securities) for, the
payment or prepayment of the Senior Obligations.
Section 4. Specific Performance. Super Majority Lenders may demand
specific performance of this Agreement at any time when Borrower or any
Related Person shall have failed to comply with any of the provisions of
this Agreement applicable to it. Each Related Person and Borrower hereby
irrevocably waives any defense based upon the adequacy of a remedy at law
which might beasserted as a bar to such remedy of specific performance and
waives any requirement of the posting of any bond which might otherwise be
required before such remedy of specific performance
is granted.
Section 5. No Acceleration or Institution of Collection Proceedings.
Prior to the Termination Date, no Related Person shall accelerate or collect
or attempt to collect any part of the Subordinated Obligations, whether
through the commencement or joinder of an action or proceeding (judicial or
otherwise) or an Insolvency Proceeding, the enforcement of any rights against
any property of Borrower, including any such enforcement by foreclosure,
repossession or sequestration proceedings, or otherwise, except as permitted
under subsections (a) and (b) of Section 2 hereof.
Section 6. Insolvency Proceedings, etc.
(a) Upon any distribution of all or any of the assets of Borrower, the
dissolution, winding up, liquidation or reorganization of Borrower (whether
in any bankruptcy, insolvency, arrangement, reorganization or receivership
proceedings), or upon an assignment for the benefit of creditors or any other
marshalling of the assets and liabilities of Borrower, any payment or
distribution ofany kind (whether in cash, securities or other property) which
otherwise would be payable or deliverable upon or with respect to the
Subordinated Obligations shall be paid and delivered directly to Lenders for
application (in the case of cash) to or as Collateral (in the case of non-
cash property or securities) for the payment or prepayment (on a pro rata
basis) of the Senior Obligations until the Senior Obligations (including post
petition interest whether or not such interest is an allowed claim enforceable
against Borrower in an Insolvency Proceeding under applicable law) shall have
been paid in full.
(b) Each Related Person hereby agrees that upon the occurrence of an
Insolvency Proceeding it shall duly and promptly execute, deliver and file
such instruments, as may be reasonably requested from time to time by Super
Majority Lenders, to file appropriate proofs of claim in respect of the
Subordinated Obligations in any such Insolvency Proceeding and to instruct any
receiver, trustee in bankruptcy, liquidating trustee, agent or other person
making any payment or distribution in any such Insolvency Proceeding to make
such payments which otherwise may be payable or deliverable in respect of
the Subordinated Obligations to the extent provided for herein.
(c) Each Related Person further agrees that Senior Creditors may file
appropriate proofs of claim in respect of the Subordinated Obligations in any
proceedings relating to an Insolvency Proceeding and may take such actions as
may be necessary to prevent the waiver or release of a claim in respect of
the Subordinated Obligations in any proceedings relating to an Insolvency
Proceeding if such a waiver or release is not consented to by Senior
Creditors.
Section 7. Assignment of Subordinated Obligations. Prior to the
Termination Date, no Related Person shall transfer, assign, pledge, encumber
or otherwise dispose of any right, claim or interest in all or any part of
the Subordinated Obligations to any person other than another Related Person
or Lenders.
Section 8. Obligations Hereunder Not Affected. No action or inaction
of any Senior Creditor or any other person, and no change of law or
circumstances, shall release or diminish the obligations, liabilities,
agreements or duties hereunder of any Related Person, affect this Agreement
in any way, or afford any person any recourse against any Senior Creditor.
Without limiting the generality of the foregoing, none of the obligations,
liabilities, agreements and duties of the Related Persons under this
Agreement shall be released, diminished, impaired, reduced or affected by
the occurrence of any of the following at any time or from time to time,
even if occurring without notice to or without the consent of any or all
Related Persons (any right of any of the Related Persons to be so notified
or to require such consent being hereby waived):
(a) the release (by operation of law or otherwise) of Borrower or any Related
Person from its duty to pay any of the Senior Obligations;
(b) any invalidity, deficiency, illegality or unenforceability of any
of the Senior Obligations or the documents and instruments evidencing,
governing or securing the Senior Obligations, in whole or in part, any
bar by any statute of limitations or other law to recovery on any of the
Senior Obligations, or any defense or excuse for failure to perform
on account of force majeure, act of God, casualty, impracticability
or other defense or excuse with respect to the Senior
Obligations whatsoever;
(c) the taking or accepting by any Senior Creditor of any additional security
for or subordination to any or all of the Senior Obligations;
(d) any release, discharge, surrender, exchange, subordination, non-perfection
impairment, modification or stay of actions or lien enforcement proceedings
against, or loss of any security at any time existing with respect to,
the Senior Obligations;
(e) the modification or amendment of, or waiver of compliance with, any terms
of the documents and instruments evidencing, governing or securing
the Senior Obligations;
(f) the insolvency, bankruptcy or disability of Borrower or any Related
Person or the filing or commencement of any Insolvency Proceeding
involving Borrower or any Related Person or other proceeding with
respect thereto;
(g) any increase or decrease in the amount of the Senior Obligations or in the
time, manner or terms in accordance with which the Senior Obligations
are to be paid, or any adjustment, indulgence, forbearance, waiver or
compromise that might be granted or given with respect to the Senior
Obligations;
(h) any neglect, delay, omission, failure or refusal of any
Senior Creditor to take or prosecute any action for the collection
of the Senior Obligations or to foreclose or take or prosecute any
action in connection with any instrument or agreement evidencing or
securing all or part of the Senior Obligations;
(i) any release of the proceeds of collateral which may come into the
possession of any Senior Creditor or its Affiliates;
(j) any judgment, order or decree by any court or governmental agency or
authority that a payment or distribution by Borrower or any Related
Person to any Senior Creditor upon the Senior Obligations is a
preference under applicable bankruptcy or similar laws for the
protection of creditors or is for any other reason required to be
refunded by such Senior Creditor or paid by such Senior Creditor to
any other Person;
(k) the release or discharge for any reason of any other party hereto from
any of its obligations under this Agreement;
(l) any modification of, or waiver of compliance with, any terms of this
Agreement with respect to any party hereto; or
(m) any neglect, delay, omission, failure or refusal of any Senior Creditor
to take or prosecute any action against any party in connection with
this Agreement.
Section 9. Waiver. Borrower and each Related Person hereby waives
promptness, diligence, notice of acceptance and any other notice with respect
to any of the Senior Obligations and this Agreement, and any requirement
that Senior Creditors exhaust any other right or take any action against
Borrower, any Related Person or any other Person or entity, or any collateral.
Section 10. No Subrogation. No payment or distribution to any Senior
Creditor pursuant to the provisions of this Agreement shall entitle any Related
Person to exercise any rights of subrogation in respect thereof. No Related
Person shall have any right of subrogation to any Senior Creditor, or any
right to receive contribution or reimbursement from any other Related Person,
on account of this Agreement or any Note.
Section 11. Representations and Warranties of Related Persons.
Borrower and each Related Person hereby represents and warrants to each Senior
Creditor that:
(a) The recitals at the beginning of this Agreement are true and correct
in all respects.
(b) Borrower and each Related Person is duly organized, validly existing
and in good standing under the laws of the state of its organization or
formation; and Borrower and each Related Person has all requisite power and
authority to execute, deliver and perform this Agreement.
(c) The execution, delivery and performance by Borrower and the Related
Persons of this Agreement do not and will not contravene any law or governmental
regulation or any contractual restriction binding on or affecting Borrower or
any Related Person or any of its properties, and do not and will not result in
or require the creation of any lien, security interest or other charge or
encumbrance upon or with respect to any of its properties.
(d) No authorization or approval or other action by, and no notice to or
filing with, any governmental authority or other regulatory body or third
party is required for the due execution, delivery and performance by Borrower
or any Related Person of this Agreement.
(e) This Agreement is a legal, valid and binding obligation of Borrower
and each Related Person, enforceable against Borrower and each Related Persons
in accordance with its terms except as limited by bankruptcy, insolvency or
other laws of general application relating to the enforcement of creditors'
rights.
(f) There is no action, suit or proceeding pending or, to the knowledge
of Borrower or Related Persons, threatened against or otherwise affecting
Borrower or any Related Person before any court, arbitrator or governmental
department, commission, board, bureau, agency or instrumentality which may
materially and adversely affect Borrower or any Related Person's financial
condition or its ability to perform its obligations hereunder.
Section 12. No Oral Change. No amendment of any provision of this
Agreement shall be effective unless it is in writing and signed by Borrower,
Related Persons and Super Majority Lenders and no waiver of any provision of
this Agreement, and no consent to any departure by Borrower or Related
Persons therefrom, shall be effective unless it is in writing and signed by
Super Majority Lenders, and then such waiver or consent shall be effective
only in the specific instance and for the specific purpose for which given.
Section 13. GOVERNING LAW. THIS AGREEMENT SHALL BE DEEMED A
CONTRACT AND INSTRUMENT MADE UNDER THE LAWS OF THE STATE OF
LOUISIANA AND SHALL BE CONSTRUED AND ENFORCED IN ACCORDANCE WITH AND
GOVERNED BY THE LAWS OF SUCH STATE AND THE LAWS OF THE UNITED STATES OF
AMERICA, WITHOUT REGARD TO PRINCIPLES OF CONFLICTS OF LAW.
Section 14. Invalidity of Particular Provisions. If any term or provision of
this Agreement shall be determined to be illegal or unenforceable, all other
terms and provisions hereof shall nevertheless remain effective and shall be
enforced to the fullest extent permitted by applicable law.
Section 15. Headings and References. The headings used herein are
for purposes of convenience only and shall not be used in construing the
provisions hereof. The words "this Agreement," "this instrument," "herein,"
"hereof," "hereby" and words of similar import refer to this Agreement as a
whole and not to any particular subdivision unless expressly so limited. The
word "or" is not exclusive, and the word "including" (in its various forms)
means "including without limitation". Pronouns in masculine, feminine and
neuter genders shall be construed to include any other gender, and words in the
singular form shall be construed to include the plural and vice versa, unless
the context otherwise requires.
Section 16. Additional Documentation. Borrower and each Related
Person agrees to execute any further instruments and to take all other action
which may become necessary or appropriate to carry out fully the purposes of
this Agreement.
Section 17. Notices. All notices, requests, consents, demands and
other communications to Borrower, any Related Person or to any Senior Creditor
which are required or permitted under this Agreement shall be in writing, unless
otherwise specifically provided herein, and shall be deemed sufficiently given
or furnished if delivered by personal delivery, by telecopy, by delivery service
with proof of delivery, or by registered or certified United States mail,
postage prepaid, to Borrower or any such Related Person at the address listed
below and to each Senior Creditor at its address specified under the
Subscription Agreement (unless changed by similar notice in writing given by the
particular Person whose address is to be changed). Any such notice or
communication shall be deemed to have been given (a) in the case of personal
delivery or delivery service, as of the date of first attempted delivery at
the address and in the manner provided herein, (b) in the case of telecopy,
upon receipt, or (c) in the case of registered or certified United States
mail, three days after deposit in the mail.
Each Related Person's
Address: 000 Xxx Xxxx Xxxxxxx
Xxxxxxxxx, Xxxxxxxxx 00000
Attention: General Counsel
Section 18. Successors and Assigns. Borrower's and each Related
Person's rights or obligations hereunder may not be assigned or delegated,
but this Agreement and such obligations shall pass to and be fully binding upon
the successors of Borrower and each Related Person. This Agreement shall
apply to and inure to the benefit of each Senior Creditor and its successors or
permitted assigns. Without limiting the generality of the immediately preceding
sentence, each Senior Creditor may assign or otherwise transfer its rights under
this Agreement as provided in the Subscription Agreement.
Section 19. Counterparts. This Agreement may be separately executed in
any number of counterparts and by different parties hereto in separate
counterparts, each of which when so executed shall be deemed to constitute one
and the same Agreement.
Section 20. Notes Control. If any provision of this Agreement shall
contradict or otherwise be inconsistent or conflict with any provision of the
Notes, the provision of the Notes to the extent of such contradiction,
inconsistency or conflict, shall control.
IN WITNESS WHEREOF, this Agreement is executed as of the date first above
written.
BORROWER AND RELATED PERSONS:
XCL LTD.
By:_________________________
Name:_______________________
Title:______________________
XCL-TEXAS, INC.
By:_________________________
Name:_______________________
Title:_______________________
XCL-LAND, LTD.
By:____________________________
Name:_________________________
Title:________________________
THE EXPLORATION COMPANY OF
LOUISIANA, INC.
By:____________________________
Name:_________________________
Title:_________________________
XCL-ACQUISITIONS, INC.
By:_____________________________
Name:___________________________
Title:__________________________
XCL-CHINA COAL METHANE, LTD.
By:__________________________
Name:_______________________
Title: ________________________
XCL-CHINA LUBEOIL, LTD.
By:_____________________________
Name:___________________________
Title:__________________________
XCL-CHINA, LTD.
By:_________________________
Name:______________________
Title:
