EXHIBIT 10.4
SUBORDINATION AGREEMENT
THIS SUBORDINATION AGREEMENT (this "AGREEMENT") dated as of September 24,
1997, is by and between ERI INVESTMENTS, INC. (together with any successors and
assigns, "SUBORDINATE LENDER"), CREDIT LYONNAIS NEW YORK BRANCH, a duly licensed
branch under the New York Banking Law of a foreign banking corporation organized
under the laws of the Republic of France, as Agent for the Lenders described
therein (together with any successors and assigns, "SENIOR LENDER"), and XPLOR
Energy, Inc., a Delaware corporation (formerly known as Araxas Holdings, Inc.)
("XPLOR") and ARAXAS ENERGY CORPORATION, an Oklahoma Corporation ("ENERGY")
(XPLOR and Energy are collectively referred to herein as "BORROWER").
Capitalized terms used herein but not otherwise defined herein shall have the
meanings ascribed to such terms in the Senior Credit Agreement (as hereinafter
defined).
R E C I T A L S
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1. Araxas SPV-1, Inc., an Oklahoma corporation and a wholly-owned second
tier subsidiary of XPLOR and a wholly-owned first tier subsidiary of Energy
("ARAXAS SPV") and Senior Lender have executed that certain Credit Agreement
dated of even date herewith (the "SENIOR CREDIT AGREEMENT"), pursuant to which
Senior Lender agreed to extend credit to Araxas SPV in a principal amount not to
exceed $35,000,000.00.
2. The obligations of Araxas SPV to Senior Lender pursuant to the Senior
Credit Agreement are also evidenced by that certain Promissory Note dated of
even date herewith, executed by Araxas SPV and payable to the order of Credit
Lyonnais New York Branch in the original principal amount of $100,000,000.00
(the "SENIOR NOTE").
3. The obligations of Araxas SPV pursuant to the Senior Credit Agreement
and the Senior Note are secured by, among other collateral, the liens and
security interests created by the following documents each dated of even date
herewith:(a) that certain Deed of Trust, Security Agreement, Financing
Statement, and Assignment of Production executed by Araxas SPV for the benefit
of Senior Lender; (b) that certain Mortgage of Mineral Interests executed by
Araxas SPV for the benefit of Senior Lender; (c) that certain Security Agreement
executed by Araxas SPV, as Debtor, for the benefit of Senior Lender, as Secured
Party; (d) that certain Deed of Trust, Security Agreement, Financing Statement,
and Assignment of Production executed by South Coast Exploration Company, a
Texas corporation and an Affiliate of Araxas SPV ("SOUTH COAST") for the benefit
of Senior Lender; (e) that certain Mortgage of Mineral Interests executed by
South Coast for the benefit of Senior Lender; (f) that certain Security
Agreement executed by South Coast, as Debtor, for the benefit of Senior Lender,
as Secured Party; (g) that certain Deed of Trust, Security Agreement, Financing
Statement, and Assignment of Production executed by SOCO Exploration, L.P., a
Texas limited liability company and an Affiliate of Araxas SPV ("SOCO") for the
benefit of Senior Lender; (h) that certain Mortgage of Mineral Interests
executed by SOCO for the benefit of Senior Lender and (i) that certain Security
Agreement executed by SOCO, as Debtor, for the benefit of Senior Lender, as
Secured Party (collectively, the "SENIOR MORTGAGE") covering oil and gas
interests, real and personal property as more particularly described on exhibits
attached to the Senior Mortgage (the "PROPERTY").
4. All of the indebtedness evidenced by the Senior Credit Agreement and
the Senior Note and secured by the Senior Mortgage, and all other obligations,
liabilities, and indebtedness of Araxas SPV to Senior Lender, whether now
existing or hereafter arising between Araxas SPV and Senior Lender, up to and
including the aggregate principal amount of $35,000,000.00 plus all accrued and
unpaid interest thereon and all other fees, expenses or other amounts payable to
Agent or any Lender under any of the Senior Loan Documents (as hereinafter
defined) is referred to herein as the "SENIOR INDEBTEDNESS" and all of the
documents evidencing or securing the Senior Indebtedness are referred to herein
as the "SENIOR LOAN DOCUMENTS."
5. Subordinate Lender made a loan (the "SUBORDINATE LOAN") to Borrower
pursuant to a Promissory Note dated July 7, 1997, executed by Borrower and
payable to the order of Subordinate Lender in the original principal amount of
$5,000,000.00 (the "SUBORDINATE NOTE").
6. Borrower has guaranteed the obligations of Araxas SPV under the Senior
Credit Agreement pursuant to the terms and conditions of that certain Guaranty
(the "GUARANTY") of even date herewith by Borrower, among others, in favor of
Senior Lender.
7. All of the indebtedness of Borrower and all of the obligations created
or evidenced by the Subordinate Note and the other Subordinate Loan Documents
(defined below), and all other obligations, liabilities, and indebtedness of
Borrower to Subordinate Lender, whether now existing or hereafter arising
between Borrower and Subordinate Lender, is referred to herein as the
"SUBORDINATE INDEBTEDNESS," and all of the documents evidencing, securing, or
executed pursuant to the Subordinate Indebtedness are referred to herein as the
"SUBORDINATE LOAN DOCUMENTS."
8. Subordinate Lender acknowledges that because Araxas SPV is a wholly-
owned second tier subsidiary of XPLOR and a wholly-owned first tier subsidiary
of Energy that the loan or advance of monies or other extensions of credit to
Araxas SPV by Senior Lender is of value to Subordinate Lender.
9. Senior Lender is unwilling to make the loan under the Senior Credit
Agreement unless Subordinate Lender enters into this Agreement.
NOW, THEREFORE, in order to induce Senior Lender to make the loans under
the Senior Credit Agreement, and for other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties hereto,
intending to be legally bound hereby agrees as follows:
1. DEFINITIONS. The following terms shall have the meanings herein
specified unless the context otherwise requires (such meanings to apply to such
terms in both the singular and plural forms):
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"ENFORCEMENT ACTION" means the commencement of the exercise of any remedies
against Borrower including, without limitation, the commencement of any
litigation or proceeding, the commencement of any foreclosure proceeding, the
exercise of any power of sale, the sale by advertisement, the taking of a deed
or assignment in lieu of foreclosure, the obtaining of a receiver or the taking
of any other enforcement action against, or the taking of possession or control
of, the Property, but specifically excluding (a) any requests and demands made
upon Borrower by delivery of notices to Borrower, (b) any assertion or
enforcement of any right of Subordinate Lender to receive payment from proceeds
of a foreclosure sale of the Property incident to foreclosure of the liens or
security interests created by the Senior Loan Documents which may remain after
payment of costs and expenses of such foreclosure and payment and satisfaction
in full of the Senior Indebtedness, and (c) the filing of claims in any
Insolvency Proceeding concerning Borrower as may be required to protect and
preserve the right of Subordinate Lender to participate in such Insolvency
Proceeding as creditor and to participate in distributions of assets of Borrower
in such Insolvency Proceeding with respect to the Subordinate Indebtedness after
payment and satisfaction in full of the Senior Indebtedness, but subject in all
respects to the rights of Senior Lender under and as provided in this Agreement
and without in any way impairing or affecting the right of Senior Lender to
require performance and observance by Subordinate Lender of or the obligations
of Subordinate Lender to perform and observe the covenants, undertakings, and
agreements of Subordinate Lender under and as provided in this Agreement.
"INSOLVENCY PROCEEDING" means any proceeding under Title 11 of the United
States Code (11 U.S.C. Sec. 101 et. seq.) or any other insolvency, liquidation,
reorganization, or other similar proceeding concerning Borrower, any action for
the dissolution of Borrower, any proceeding (judicial or otherwise) concerning
the application of the assets of Borrower, for the benefit of its creditors, the
appointment of or any proceeding seeking the appointment of a trustee, receiver,
or other similar custodian for all or any substantial part of the assets of
Borrower or any other action concerning the adjustment of the debts of Borrower,
the cessation of business by Borrower, except following a sale, transfer, or
other disposition of all or substantially all of the assets of Borrower in a
transaction permitted under the Senior Loan Documents.
"MATURITY DATE" means the earlier of (a) the Bridge Stated-Termination Date
(as defined in the Senior Credit Agreement) as such date may be extended by
Senior Lender (subject to SECTION 5(A) below), and (b) the date on which the
Bridge Stated-Termination Date has been accelerated by Senior Lender following
the occurrence of a Default (as defined in the Senior Credit Agreement);
provided, however, that if the Facility Conversion Date (as defined in the
Senior Credit Agreement) shall have occurred on or prior to May 24, 1998, the
Maturity Date shall mean the earlier of (x) the Revolving Stated-Termination
Date (as defined in the Senior Credit Agreement) as such date may be extended by
Senior Lender (subject to Section 5(a) below), and (y) the date on which the
Revolving Stated-Termination Date has been accelerated by Senior Lender
following the occurrence of a Default (as defined in the Senior Credit
Agreement).
"PERMITTED INTEREST PAYMENTS" means regularly scheduled payments of
interest on the Subordinated Note that are payable prior to the Maturity Date.
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"PLAN VOTING RIGHTS" means, with respect to any person, the rights of such
person to vote to approve or reject any plan of reorganization in respect of
Borrower in an Insolvency Proceeding.
2. STANDBY; SUBORDINATION.
(A) SUBORDINATION OF LOAN. Subordinate Lender hereby agrees that the
Subordinate Indebtedness is and shall be subordinate, to the extent and in the
manner hereinafter set forth, to the prior indefeasible payment in full of the
Senior Indebtedness. Except as specifically provided in SECTION 2(E), no
payment shall be made by or on behalf of Borrower for or on account of any
Subordinate Indebtedness, and Subordinate Lender shall not take or receive from
Borrower, directly or indirectly, in cash or other property or by setoff or in
any other manner, including, without limitation, from or by way of collateral,
payment of all or any of the Subordinate Indebtedness, unless and until the
Senior Indebtedness shall have been indefeasibly paid in full. In the event of
any distribution, division, or application, partial or complete, voluntary or
involuntary, by operation of law or otherwise, of all or any part of the assets
of Borrower or the proceeds thereof (including any assets now or hereafter
securing any Subordinate Indebtedness) to creditors of Borrower or upon any
indebtedness of Borrower, as a result of the liquidation, dissolution, or other
winding up, partial or complete, of Borrower, or as a result of any
receivership, insolvency, or bankruptcy proceeding, or assignment for the
benefit of creditors or marshaling of assets, or as a result of any proceeding
by or against Borrower for any relief under any bankruptcy or insolvency law or
laws relating to the relief of debtors, readjustment of indebtedness,
arrangements, reorganizations, compositions, or extensions, or as a result of
the sale of all or substantially all of the assets of Borrower, then and in any
such event:
(I) Senior Lender shall be entitled to receive payment in full of all
Senior Indebtedness before Subordinate Lender shall be entitled to receive
any payment or other distributions on, or with respect to, the Subordinate
Indebtedness;
(II) Any payment or distribution of any kind or character, whether in
cash, securities, or other property, which but for these provisions would
be payable or deliverable upon or with respect to the Subordinated
Indebtedness, shall instead be paid or delivered directly to Senior Lender
for the benefit of the holders of the Senior Indebtedness for application
on the Senior Indebtedness, whether then due or not due, until all of the
Senior Indebtedness shall have first been fully and indefeasibly paid in
full and Senior Lender shall have no further commitment to extent any
credit to Borrower;
(III) Subordinate Lender shall duly and promptly take such action as
may reasonably be requested by Senior Lender to assist in the collection of
the Subordinate Indebtedness for the account of any holder of the Senior
Indebtedness, including, without limitation, the filing of appropriate
proofs of claim with respect to the Subordinated Indebtedness and the
voting of such claims; and
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(IV) In the event that Subordinate Lender shall not have filed a claim
in any bankruptcy, insolvency, or similar proceeding with respect to
Borrower at least sixty (60) days prior to the expiration of the time to
file such claims, then Senior Lender, on behalf of Subordinate Lender,
shall be authorized to file a claim with respect to the Subordinate
Indebtedness.
(B) STANDSTILL; LIMITATION ON SUBORDINATE LENDER RIGHTS.
(I) Notwithstanding Subordinate Lender's rights under applicable law
or any provision of the Subordinate Loan Documents to the contrary,
Subordinate Lender hereby acknowledges and agrees that, (A) prior to the
Maturity Date, so long as Subordinate Lender receives the principal and
interest payments on the Subordinate Note permitted under Section 2[(e)]
when due or within the time period during which Senior Lender may cure any
failure to pay such amounts in accordance with Section 6(e) hereof, and (B)
after the Maturity Date, Subordinate Lender shall not (1) accelerate the
Subordinate Indebtedness or any portion thereof, or (2) take any
Enforcement Action until the indefeasible satisfaction in full of the
Senior Indebtedness. Subordinate Lender hereby waives any right it may
have to require that Senior Lender marshal any assets of Borrower in favor
of Subordinate Lender and Subordinate Lender agrees that it shall not
acquire, by subrogation or otherwise, any lien, estate, right, or other
interest in the Property or the proceeds therefrom that is or may be equal
or prior to any Senior Loan Document until the indefeasible payment in full
of the Senior Indebtedness.
(II) Until the indefeasible satisfaction in full of the Senior
Indebtedness, Subordinate Lender hereby covenants and agrees that, (A)
prior to the Maturity Date, so long as Subordinate Lender receives the
principal and interest payments on the Subordinate Note permitted under
Section 2[(e)] when due or within the time period during which Senior
Lender may cure any failure to pay such amounts in accordance with Section
6(e) hereof, and (B) after the Maturity Date, Subordinate Lender will not
acquiesce in, petition, or otherwise invoke or cause any other person to
invoke the process of the United States of America, any state or other
political subdivision thereof or any other jurisdiction, any entity
exercising executive, legislative, judicial, regulatory, or administrative
functions of or pertaining to government for the purpose of commencing or
sustaining a case against Borrower, under a Federal or state bankruptcy,
insolvency, or similar law or appointing a receiver, liquidator, assignee,
trustee, custodian, sequestrator, or other similar official of Borrower or
all or any part of its property or assets or ordering the winding-up or
liquidation of the affairs of Borrower.
(C) NON-INTERFERENCE BY SUBORDINATE LENDER. Subordinate Lender shall not
institute any judicial or administrative proceeding against Borrower or Senior
Lender which directly or indirectly would interfere with or delay the exercise
by Senior Lender of its rights and remedies in respect of the Property or any
part thereof or under the Senior Loan Documents, this Agreement or the Guaranty.
Without limiting the generality of the foregoing, in the event of a bankruptcy
or
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insolvency of Borrower, Subordinate Lender shall not object to or oppose any
efforts by Senior Lender to obtain relief from the automatic stay under Section
362 of the United States Bankruptcy Code or to seek to cause such entity's
bankruptcy estate to abandon the Property (or any portion thereof) that is
subject to the Senior Mortgage.
(D) ASSIGNMENT OF VOTING RIGHTS. Subordinate Lender hereby absolutely,
irrevocably, and unconditionally assigns and sets over to Senior Lender all of
Subordinate Lender's Plan Voting Rights in any Insolvency Proceeding respecting
Borrower. Senior Lender, however, acknowledges and agrees that it will not
exercise any such Plan Voting Rights of Subordinate Lender in favor of any plan
of reorganization which would result in or have the effect of lowering the
payment priority of the claims evidenced by the Subordinate Loan Documents below
that which such claims would otherwise be entitled based on the ranking and
priority of claims at the commencement of such Insolvency Proceeding (a
"PRIORITY REDUCTION"); provided, however, that Senior Lender may exercise such
Plan Voting Rights of Subordinate Lender in favor of a plan of reorganization
containing any Priority Reduction resulting from (i) administrative claims and
claims in favor of persons providing post-petition financing in such Insolvency
Proceedings and approved by the applicable court, or (ii) a judicial
determination made in such Insolvency Proceeding or ancillary proceedings
relating thereto approving or ordering such Priority Reduction under applicable
law, including, without limitation, principles of equitable subordination or
other equitable remedies available to the debtor, trustee or other creditors in
such Insolvency Proceeding.
(E) PAYMENTS ON SUBORDINATE INDEBTEDNESS. Notwithstanding any provision
contained herein to the contrary, until the Maturity Date, Subordinate Lender
may receive and retain (i) Permitted Interest Payments from Borrower, and (ii)
provided no Default or Potential Default (as each of such terms are defined in
the Senior Credit Agreement) has occurred and is continuing, the outstanding
principal balance of the Subordinate Note on the maturity date thereof.
(F) DISTRIBUTIONS HELD IN TRUST. If Subordinate Lender shall receive any
cash distributions in respect of, or other proceeds of, the Property (including,
without limitation, (i) any distribution arising directly or indirectly from any
lien of Senior Lender being avoided, declared to be fraudulent, or otherwise set
aside under the provisions of any law governing fraudulent conveyances or
transfers, and (ii) any distribution arising directly or indirectly by reason of
or in connection with an Insolvency Proceeding), in excess of what Subordinate
Lender is entitled to pursuant to the Subordinate Loan Documents and SECTION
2(E) (or would have been entitled to if such Insolvency Proceeding had not
occurred or if any such lien had not been avoided, declared to be fraudulent, or
otherwise set aside under the provisions of any law governing fraudulent
conveyances or transfers), then Subordinate Lender shall hold the same in trust,
as trustee, for the benefit of Senior Lender and shall promptly deliver the same
to or at the direction of Senior Lender, for the benefit of Senior Lender in
precisely the form received (except for the endorsement or assignment thereof by
such Subordinate Lender without recourse or warranty), it being understood that
it is the intention of the parties that until the Senior Indebtedness (without
regard to any modifications thereof arising by reason of or in connection with
an Insolvency Proceeding) is repaid in full, Senior Lender shall receive all
proceeds relating to any realization upon, distribution in
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respect of, or interest in any of the Property as and to the extent set forth in
the Senior Loan Documents. In the event Subordinate Lender fails to make any
such endorsement or assignment, Senior Lender, or any of its officers or
employees, is hereby irrevocably authorized to make the same.
3. REPRESENTATIONS. Subordinate Lender represents and warrants to Senior
Lender that:
(A) Subordinate Lender has all necessary power and authority to execute,
deliver, and perform its obligations under this Agreement.
(B) All action on the part of Subordinate Lender that is required for the
authorization, execution, delivery, and performance of this Agreement has been
duly and effectively taken.
(C) This Agreement has been duly executed and delivered by Subordinate
Lender and constitutes the legal, valid, and binding obligation of Subordinate
Lender, enforceable against Subordinate Lender in accordance with the terms
thereof.
4. AGREEMENT BY BORROWER. Borrower agrees that Senior Lender and
Subordinate Lender may share information that each may acquire with respect to
Borrower or the Property and consents to the transfer of such information,
whether financial or otherwise, between them, without having to obtain
Borrower's consent.
5. AGREEMENTS BY SUBORDINATE LENDER. Subordinate Lender agrees that so
long as the Senior Credit Agreement is outstanding:
(A) Senior Lender and Borrower may from time-to-time enter into
modifications, renewals, extensions, and replacements of the Senior Credit
Agreement and the Senior Loan Documents without the further consent of, or
notice to, Subordinate Lender.
(B) Subordinate Lender shall not make any further loans or advances to
Borrower.
(C) Subordinate Lender shall not amend the Subordinate Loan Documents
without Senior Lender's prior written consent.
6. DEFAULTS AND NOTICES. The parties agree that:
(A) The occurrence of a Default or an event of default under the Senior
Loan Documents shall not, in and of itself, constitute a default under the
Subordinate Loan Documents.
(B) The occurrence of a default under the Subordinate Loan Documents shall
constitute a default under the Senior Loan Documents.
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(C) Senior Lender shall provide Subordinate Lender with copies of all
written notices which are sent to Borrower under the Senior Loan Documents
(including notices of default and notices of intention to exercise remedies
under the Senior Loan Documents), simultaneously with the sending of such
notices to Borrower.
(D) Subordinate Lender shall provide Senior Lender with copies of all
written notices which are sent to Borrower under the Subordinate Loan Documents
(including notices of default and notices of intention to exercise remedies
under the Subordinate Loan Documents), simultaneously with the sending of such
notices to Borrower.
(E) Senior Lender shall have the right, but not the obligation, to cure any
monetary default by Borrower under the Subordinate Loan Documents at any time on
or before the thirtieth (30th) day following the expiration of any grace,
notice, or cure period available to Borrower for any monetary default under the
Subordinate Loan Documents and written notice thereof from Subordinate Lender to
Senior Lender. Senior Lender shall have the right, but not the obligation, to
cure any non-monetary default by Borrower under the Subordinate Loan Documents
at any time on or before the (i) sixtieth (60th) day following the expiration of
any grace, notice, or cure period available to Borrower for any non-monetary
default under the Subordinate Loan Documents and written notice thereof from
Subordinate Lender to Senior Lender, and (ii) the sixtieth (60th) day
thereafter, if such non-monetary default is not susceptible of being cured
within sixty (60) days of expiration of Borrower's non-monetary cure period
under the Subordinate Loan Documents.
7. INSTRUMENT LEGEND. Any instrument evidencing any of the Subordinate
Indebtedness shall, on the date hereof, be inscribed with a legend conspicuously
indicating that payment thereof is subordinated to the claims of Senior Lender
pursuant to the terms of this Agreement, and a certified copy thereof will be
delivered to Senior Lender on the date hereof. Any instrument evidencing any of
the Subordinate Indebtedness, or any portion thereof, which is hereafter
executed by Borrower, will, on the date thereof, be inscribed with the aforesaid
legend and a copy thereof will be delivered to Senior Lender on the date of its
execution or within five (5) days thereafter.
8. CONTINUING NATURE OF SUBORDINATION. This Agreement shall continue to
be effective until the Senior Indebtedness shall have been fully discharged or
the termination of this Agreement. This is a continuing agreement of
subordination.
9. SUBORDINATE LENDER'S WAIVERS. All of the Senior Indebtedness shall be
deemed to have been made or incurred in reliance upon this Agreement.
Subordinate Lender expressly waives all notices of the acceptance by Senior
Lender of the subordination and other provisions of this Agreement and all other
notices not specifically required pursuant to the terms of this Agreement
whatsoever, and Subordinate Lender expressly waives reliance by Senior Lender
upon the subordination and other agreements contained herein. Subordinate
Lender agrees that Senior Lender has made no warranties or representations with
respect to the due execution, legality, validity, completeness, or
enforceability of the Senior Loan Documents, or the collectability of the Senior
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Indebtedness, that Senior Lender shall be entitled to manage and supervise loans
to Borrower in accordance with applicable law and its usual practices, modified
from time-to-time as Senior Lender deems appropriate under the circumstances,
without regard to the existence of any rights that Subordinate Lender may now or
hereafter have in or to any of the assets of Borrower, and that Senior Lender
shall have no liability to Subordinate Lender for, and Subordinate Lender waives
any claim which Subordinate Lender may now or hereafter have against Senior
Lender arising out of, any and all actions which Senior Lender, in good faith,
takes or omits to take (including, without limitation, actions with respect to
the creation, perfection or continuation of liens or security interests in
collateral or security, actions with respect to the occurrence of default,
actions with respect to the foreclosure upon, sale, release, or depreciation of,
or failure to realize upon, any collateral or security and actions with respect
to the collection of any claim for all or any part of the Senior Indebtedness
from any account debtor, guarantor, or any other party and actions with respect
to any bankruptcy proceeding or the extension of credit by Senior Lender to
Borrower in any such proceeding) with respect to the Senior Loan Documents, or
any other agreement related thereto or to the collection of the Senior
Indebtedness or the valuation, use protection or release of collateral or
security for the Senior Indebtedness.
10. SENIOR LENDER'S WAIVERS. No waiver shall be deemed to be made by
Senior Lender of any of their rights hereunder, unless the same shall be in
writing signed on behalf of Senior Lender, and each waiver, if any, shall be a
waiver only with respect to the specific instance involved and shall in no way
impair the rights of Senior Lender or the obligations of Subordinate Lender to
Senior Lender in any other respect at any other time.
11. INFORMATION CONCERNING FINANCIAL CONDITION OF BORROWER. Subordinate
Lender hereby assumes responsibility for keeping itself informed of the
financial condition of Borrower, any and all endorsers and any and all
guarantors of the Senior Indebtedness and the Subordinate Indebtedness and of
all other circumstances bearing upon the risk of nonpayment of the Senior
Indebtedness and the Subordinate Indebtedness that diligent inquiry would
reveal, and Subordinate Lender hereby agrees that Senior Lender shall have no
duty to advise Subordinate Lender of information known to Senior Lender
regarding such condition or any such circumstances.
12. PRIORITIES. The subordinations and priorities specified hereinabove
are applicable irrespective of the time or order of attachment or perfection of
any security interest or other interests referred to herein, the time or order
of filing of financing statements or mortgages, the acquisition of purchase
money or other security interests, or the time of giving or failure to give
notice of the acquisition or expected acquisition of purchase money or other
security interests. The subordinations and priorities specified herein are not
conditioned upon the non-avoidability or perfection of Senior Lender's security
interests in any collateral for the Senior Indebtedness.
13. CONTROLLING AGREEMENTS. In the event of any conflict between the
terms and conditions of this Agreement and the terms and provisions of the
Senior Loan Documents or the Subordinate Loan Documents, then the terms and
provisions of this Agreement shall control.
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14. NO THIRD-PARTY BENEFICIARY. Nothing in this Agreement, express or
implied, is intended or shall be construed to confer upon, or to give to, any
party other than the parties hereto and their respective successors and assigns,
any right, remedy, or claim under or by reason of this Agreement or any
covenant, condition, or stipulation thereto; and the covenants, stipulations,
and agreements contained in this Agreement are and shall be for the sole and
exclusive benefit of the parties hereto and their respective successors and
assigns.
15. MISCELLANEOUS.
(A) SEVERABILITY. In case any one or more of the provisions contained in
this Agreement shall be invalid, illegal, or unenforceable in any respect, the
validity, legality, and enforceability of the remaining provisions contained
herein shall not in any way be affected and/or impaired thereby.
(B) NOTICES. All notices, demands, certificates, or other communications
hereunder shall be in writing and shall be deemed sufficiently given or served
for all purposes when delivered personally, when sent by certified or registered
mail, postage prepaid, return receipt requested or by private courier service,
in each case, with the proper address as indicated below. Each party may, by
written notice given to the other parties, designate any other address or
addresses to which notices, certificates or other communications to them shall
be sent as contemplated by this Agreement. Until otherwise so provided by the
respective parties, all notices, certificates and communications to each of them
shall be addressed as follows:
SENIOR LENDER: Credit Lyonnais New York Branch
1000 Louisiana, Suite 5360
Houston, Texas 77002
Attention: Mr. John M. Falbo
Vice President and Group Manager
Telecopy No.: (713) 751-0307
SUBORDINATE LENDER: ERI Investments, Inc.
911 Washington Street
Wilmington, Delaware 19801
Attention: Johanna O'Loughlin
Telecopy No.: (412) 553-5757
With a copy to: Jeff Swoveland
Telecopy No. (412) 553-5853
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BORROWER: XPLOR Energy, Inc.
10200 Grogans Mill Road, Suite 500
Houston, Texas 77380
Attention: Mr. Stephen M. Clark
Chief Financial Officer
Telecopy No.: (281) 364-3707
Araxas Energy Corporation
10200 Grogans Mills Road, Suite 500
Houston, Texas 77380
Attention: Mr. Stephen M. Clark
Chief Financial Officer
Telecopy No.: (281) 364-3707
(C) SUCCESSORS AND ASSIGNS. Whenever in this Agreement any party hereto is
named or referred to, the successors and assigns of such party shall be deemed
to be included and all rights, benefits, covenants, promises, and agreements in
this Agreement by or on behalf of the respective parties hereto shall bind and
inure to the benefit of the respective successors and assigns of such parties,
whether so expressed or not.
(D) COUNTERPARTS. This Agreement may be executed in any number of
counterparts, each executed counterpart constituting an original but all
counterparts together constituting only one instrument.
(E) GOVERNING LAW. This Agreement shall be governed by and construed and
enforced in accordance with the laws of the State of Texas applicable to
contracts made and to be performed in such state; provided that with respect to
obligations running solely between Borrower, Araxas SPV and Senior Lender, the
applicable law shall be determined in the same manner as is provided in the
Senior Credit Agreement and the Guaranty.
(F) AMENDMENTS. No amendment or waiver of any provision of this Agreement
shall be effective unless the same shall be in writing and signed by the party
or parties against whom it is to be enforced, and any such waiver or consent
shall be effective only in the specific instance and for the specific purpose
for which given. No delay on the part of Senior Lender or Subordinate Lender in
the exercise of any right, power, or remedy shall operate as a waiver thereof,
nor shall any single or partial waiver by either Senior Lender or Subordinate
Lender of any right, power, or remedy preclude any further exercise thereof, or
the exercise of any other right, power or remedy.
(G) SURVIVAL. This Agreement shall remain in full force and effect until
payment in full of the Senior Indebtedness.
11
(H) ENTIRETY. This Agreement, including the documents referred to herein,
embodies the entire agreement and understanding of the parties hereto and
supersedes all prior agreements and understandings of the parties hereto
relating to the subject matter herein contained.
12
IN WITNESS WHEREOF, this Agreement has been executed and delivered by the
parties hereto on the date first above written.
SUBORDINATE LENDER:
ERI INVESTMENTS, INC.
By: /s/ Jeffrey C. Swoveland
------------------------
Name: Jeff Swoveland
Title: President
13
SIGNATURE PAGE TO SUBORDINATION AGREEMENT
SENIOR LENDER:
CREDIT LYONNAIS NEW YORK BRANCH, AS
AGENT
By: /s/ Pascal Poupelle
---------------------------
Name: Pascal Poupelle
Title: Executive Vice President
14
SIGNATURE PAGE TO SUBORDINATION AGREEMENT
BORROWER:
XPLOR ENERGY, INC.
By: /s/ Steven W. Nance
------------------------------
Name: Steven W. Nance
Title: President
ARAXAS ENERGY CORPORATION
By: /s/ Steven W. Nance
-------------------------------
Name: Steven W. Nance
Title: President
15
ACKNOWLEDGMENT PAGE TO SUBORDINATION AGREEMENT
STATE OF PENNSYLVANIA (S)
(S)
COUNTY OF ALLEGHENY (S)
This instrument was acknowledged before me on September 24, 1997 by Jeffrey
C. Swoveland of ERI INVESTMENTS, INC. a Delaware corporation, on behalf of such
corporation.
/s/ Janice A. Haas
----------------------------------
Notary Public Signature
(PERSONALIZED SEAL)
16
ACKNOWLEDGMENT PAGE TO SUBORDINATION AGREEMENT
STATE OF NEW YORK (S)
(S)
COUNTY OF NEW YORK (S)
This instrument was acknowledged before me on September 24, 1997 by Pascal
Poupelle, Executive Vice President of CREDIT LYONNAIS NEW YORK BRANCH, a duly
licensed branch under the New York Banking Law of a foreign banking corporation
organized under the laws of the Republic of France, on behalf of such
corporation.
/s/ Breige Lavery
---------------------------------
Notary Public Signature
(PERSONALIZED SEAL)
17
ACKNOWLEDGMENT PAGE TO SUBORDINATION AGREEMENT
STATE OF TEXAS (S)
(S)
COUNTY OF MONTGOMERY (S)
This instrument was acknowledged before me on September 24th, 1997 by
Steven W. Nance, President of XPLOR Energy, Inc., a Delaware corporation on
behalf of said corporation.
/s/ Patricia S. Anderson
----------------------------------
Notary Public Signature
(PERSONALIZED SEAL)
18
ACKNOWLEDGMENT PAGE TO SUBORDINATION AGREEMENT
STATE OF TEXAS (S)
(S)
COUNTY OF MONTGOMERY (S)
This instrument was acknowledged before me on September 24, 1997 by Steven
W. Nance, President of Araxas Energy Corporation, an Oklahoma corporation on
behalf of said corporation.
/s/ Patricia S. Anderson
----------------------------------
Notary Public Signature
(PERSONALIZED SEAL)
19