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EXHIBIT 10.16
SUBORDINATION AGREEMENT
THIS SUBORDINATION AGREEMENT (the "Subordination Agreement") is made as
of December 29, 1997, by and among the undersigned (the "Subordinated
Lenders"), in favor of each of the lenders that is a signatory thereto or which
becomes a signatory thereto as provided in Section 12.06 of the herein defined
Senior Credit Agreement (collectively, the "Senior Lenders"), and BANK OF
MONTREAL, as agent for the Senior Lenders (in such capacity, the "Agent").
RECITALS
A. Queen Sand Resources, Inc., a Nevada corporation, as the borrower
(the "Borrower"), Queen Sand Resources, Inc., a Delaware corporation, as the
parent guarantor (the "Parent Company"), the Agent and the Senior Lenders are
parties to that certain Credit Agreement dated as of August 1, 1997, as amended
by that certain First Amendment to Credit Agreement dated as of December 3,
1997, and as amended by that certain Second Amendment to Credit Agreement dated
as of December 29, 1997 (such agreement, as the same may be from time to time
further amended, supplemented or replaced, the "Senior Credit Agreement"),
pursuant to which the Senior Lenders have made certain credit available to and
on behalf of the Borrower.
B. Corrida Resources, Inc., a Nevada corporation ("Corrida"), and
Northland Operating Co., a Nevada corporation ("Northland", Corrida and
Northland collectively being the "Obligors"), each executed a Guaranty
Agreement dated as of August 1, 1997 (such agreements, as the same may be from
time to time further amended, supplemented or replaced, the "Senior Subsidiary
Guaranty Agreements") in favor of the Agent and the Senior Lenders to secure,
inter alia, the obligations of the Borrower under the Senior Credit Agreement.
C. The Borrower and Corrida each executed a Mortgage, Deed of Trust,
Assignment of Production, Security Agreement and Financing Statement (such
agreements, as the same may be from time to time further amended, supplemented
or replaced, the "Senior Mortgages") dated as of August 1, 1997 in favor of the
Agent to secure, inter alia, the obligations outstanding under the Credit
Agreement.
D. The Parent Company executed a Guaranty Agreement dated as of
August 1, 1997 (such agreement, as the same may be from time to time further
amended, supplemented or replaced, the "Senior Parent Guaranty Agreement") in
favor of the Agent and the Senior Lenders to secure, inter alia, the
obligations of the Borrower under the Senior Credit Agreement. (The Senior
Credit Agreement, the Senior Subsidiary Guaranty Agreements, the Senior
Mortgages, the Senior Parent Guaranty Agreement and the other documents or
instruments given in connection therewith being collectively referred to herein
as the "Senior Loan Documents").
E. Of even date herewith, the Borrower, the Parent Company and the
Obligors are executing the documents described on Exhibit A hereto (such
agreements, as the same may be from time to time further amended, supplemented
or replaced in accordance with the terms hereof, the "Subordinated Loan
Documents") with and in favor of the Subordinated Lenders and Enron Trade &
Capital Resources Corp., as agent for the Subordinated Lenders (the
"Subordinated Agent").
F. One of the conditions to the Agent and the Senior Lenders
executing the Second Amendment to Credit Agreement referred to above is the
execution and delivery of this Subordination
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Agreement, and Subordinated Agent and the Subordinated Lenders have agreed to
enter into this Subordination Agreement.
G. Therefore, (i) in order to comply with the terms and conditions
of the Second Amendment to Credit Agreement, (ii) at the special insistence and
request of the Agent and the Senior Lenders, and (iii) for other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the Subordinated Agent and the Subordinated Lenders hereby agree
as follows:
ARTICLE I
Definitions
Section 1.01 Terms Defined Above. As used in this Subordination
Agreement, the terms defined above shall have the meanings respectively
assigned to them.
Section 1.02 Certain Definitions. As used in this Subordination
Agreement the following terms shall have the following meanings, unless the
context otherwise requires:
"Hedging Agreements" shall mean any commodity, interest rate or currency
swap, rate cap, rate floor, rate collar, forward agreement or other exchange,
price or rate protection agreements or any option with respect to any such
transaction.
"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
(i) the lien or security interest arising from a mortgage, charge, encumbrance,
pledge, lien (statutory or otherwise), security agreement, conditional sale or
trust receipt or a lease, consignment or bailment for security purposes, or
preferential arrangement of any kind or nature whatsoever (including, any
agreement to give or grant a lien), or (ii) production payments and the like
payable out of oil and gas Properties.
"Person" shall mean any individual, corporation, limited liability
company, voluntary association, partnership, joint venture, trust,
unincorporated organization or governmental authority, 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.
"Subordinated Debt" shall mean any and all indebtedness, liabilities and
obligations owed by the Borrower, the Parent Company and/or any Obligor to the
Subordinated Agent and/or the Subordinated Lenders, whether (i) absolute or
contingent, direct or indirect, joint, several or independent, (ii) now
outstanding or owing or hereafter existing or incurred, (iii) arising by
operation of law or otherwise, (iv) due or to become due, or (v) held or to be
held by the Subordinated Agent or any Subordinated Lender; including all
indebtedness, obligations and liabilities of the Borrower, the Parent Company
and/or the Obligors to the Subordinated Agent and/or any Subordinated Lender
arising out of the Subordinated Loan Documents (described in greater detail on
Exhibit A hereto), and all renewals, extensions, rearrangements, refundings and
modifications thereof permitted by the terms hereof; provided the foregoing
shall not include (A) any Hedging Agreement between the Borrower, the Parent
Company or any Obligor with the Subordinated Agent or any Subordinated Lender
or any affiliate of a Subordinated Lender, and (B) any liabilities or
obligations in respect of shares of stock or other equity interests that
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are subordinated to all Superior Indebtedness of the Borrower, the Parent
Company or an Obligor to at least the same extent as the Subordinated Debt.
"Superior Indebtedness" shall mean any and all indebtedness, liabilities
and obligations owed by the Borrower, the Parent Company and/or any Obligor to
the Agent and/or any Senior Lender under the Credit Agreement, any Hedging
Agreement between the Borrower, the Parent Company or any other Obligor and any
Senior Lender, or any Senior Loan Document, whether (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) arising by
operation of law or otherwise, (iv) due or to become due, or (v) held or to be
held by the Agent or any Senior Lender, including without limitation all
indebtedness, obligations and liabilities of the Borrower, the Parent Company
and/or the Obligors arising out of the Senior Loan Documents. The Superior
Indebtedness shall include amounts accruing subsequently to the filing of any
bankruptcy, receivership, insolvency or similar petition. Without limiting the
generality of the foregoing, Superior Indebtedness shall include all
obligations for fees, all indemnity and reimbursement payments (whether for
expenses or for advances) to the Agent or any Senior Lender.
ARTICLE II
Subordination
Section 2.01 Agreement to Subordinate. The payment of any and all
Subordinated Debt is expressly subordinated to the extent and in the manner set
forth in Sections 2.02 through 2.07 hereof to Superior Indebtedness.
Section 2.02 Payment Subordination upon Default.
(a) If any principal, interest or other amounts due in respect of the
Superior Indebtedness is not paid when due (including at maturity) or a
borrowing base deficiency under Section 2.07(c) of the Senior Credit Agreement
and as a result thereof, either the Agent or any Senior Lender shall give the
Subordinated Agent notice (which may be oral, provided that it is promptly
confirmed in writing or by facsimile transmission) that an "Event of Default"
has occurred under any Senior Loan Document, then, unless and until such Event
of Default shall have been cured or the Superior Indebtedness shall have been
paid in full, the Subordinated Agent and the Subordinated Lenders will not
take, receive or accept from the Borrower, the Parent Company or any other
Obligor, by set-off or in any other manner, any payment or distribution on
account of the Subordinated Debt nor present any instrument evidencing the
Subordinated Debt for payment (other than such presentment as may be necessary
to prevent discharge of other liable parties on such instrument).
(b) If any Event of Default on the Senior Indebtedness occurs other
than one described under Section 2.02(a), and as a result thereof, either the
Agent or any Senior Lender shall give the Subordinated Agent notice (which may
be oral, provided that it is promptly confirmed in writing or by facsimile
transmission) that an "Event of Default" has occurred under any Senior Loan
Document, then, unless and until such Event of Default shall have been cured or
the Superior Indebtedness shall have been paid in full, the Subordinated Agent
and the Subordinated Lenders will not, for a period of 135 days following its
receipt of such notice, take, receive or accept from the Borrower, the Parent
Company or any other Obligor, by set-off or in any other manner, any payment or
distribution on account of the Subordinated Debt nor present any instrument
evidencing the Subordinated Debt for payment (other than such presentment as
may be necessary to prevent discharge of other liable parties on such
instrument).
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Section 2.03 Payments Received or Made in Violation of Subordination
Agreement.
(a) In the event the Subordinated Agent or any Subordinated Lender
shall receive any payment or distribution on account of the Subordinated Debt
which it is not entitled to receive under the provisions of Section 2.02, the
Subordinated Agent or such Subordinated Lender will hold any amount so received
in trust for the Senior Lenders and will forthwith turn over such payment to
the Agent in the form received by it (together with any necessary endorsement)
to be applied to the Superior Indebtedness. In the event of any failure by the
Subordinated Agent or any Subordinated Lender to make any such endorsement, the
Agent is hereby irrevocably authorized and granted a power of attorney (which
is irrevocable and coupled with interest) to make the same.
(b) The Borrower, the Parent Company or any Obligor hereby
acknowledge and agree to follow the payment priorities established in Section
2.02. If the Borrower, the Parent Company or any Obligor shall become aware
that an "Event of Default" has occurred under any Senior Loan Document, then
such Person shall give the Agent, the Senior Lenders and the Subordinated Agent
prompt written notice thereof.
(c) This Subordination Agreement defines the relative rights of Agent
and the Senior Lenders and the Subordinated Agent and Subordinated Lenders.
Nothing in this Subordination Agreement shall: (i) impair, as between the
Borrower, the Parent Company or any Obligor, the Subordinated Agent and the
Subordinated Lenders, the obligation of the Borrower, the Parent Company and
the Obligors, which are absolute and unconditional, to pay principal of and
interest on the Subordinated Debt 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 the
terms of Section 2.05 and the rights of the Agent and the Senior Lenders to
receive distributions otherwise payable to the Subordinated Agent and the
Subordinated Lenders.
Section 2.04 Liens Subordinated.
(a) The Subordinated Agent and the Subordinated Lenders agree that
any Liens, upon the Property of any of the Borrower, the Parent Company or any
Obligor securing payments of the Subordinated Debt are and shall be and remain
inferior and subordinated to any Liens securing payments of the Superior
Indebtedness regardless of whether such encumbrances in favor of the
Subordinated Agent or any Subordinated Lender or the Agent and the Senior
Lenders presently exist or are hereafter created or attached.
(b) Other than the Liens taken on or about the date hereof for which
the Subordinated Agent has already given notice, the Subordinated Agent and
each Subordinated Lender agree to give the Agent written notice at least
fifteen (15) days prior to the time that it takes a Lien on any Property of the
Parent Company, the Borrower or any Obligor, such notice to specify the
Property to be encumbered by the proposed Lien. If the Subordinated Agent or
any Subordinated Lender shall obtain a Lien on Property of any of the Borrower,
the Parent Company or any Obligor which is not subject to a Lien in favor of
the Agent and the Senior Lenders, then Subordinated Agent and the Subordinated
Lenders agree to exercise their respective rights under the instruments
evidencing such Lien in accordance with the terms of this Subordination
Agreement.
(c) The Subordinated Agent and the Subordinated Lenders 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 Agent or any Senior Lender or take any steps or
actions, including the institution of any proceedings, to enjoin or restrain
the Agent or any Senior Lender from the exercise of the remedies afforded them
under the Senior Loan Documents or applicable law.
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(d) If the Borrower, the Parent Company or any Obligor shall, after
the date hereof, acquire any Oil and Gas Properties (or a Person owning Oil and
Gas Properties), then the Subordinated Agent and the Subordinated Lenders
covenant and agree not to take or perfect any Lien against such Properties
until the earlier of (i) 30 days following the date of such acquisition or (ii)
the date the Agent and the Senior Lenders have been granted and have perfected
a Lien in their favor on such Properties.
Section 2.05 Agreement Not to Pursue Actions.
(a) If the Agent or the Senior Lenders have given the Subordinated
Agent notice under Section 2.02 that an Event of Default under the Senior Loan
Documents has occurred, the Subordinated Agent and each Subordinated Lender
covenants that it will not, for a period of 180 days following its receipt of
such notice, do any of the following unless the Agent shall also join in such
action or commence a similar action: (i) commence any action or proceeding
against the Borrower, the Parent Company or any Obligor to recover all or any
part of the Subordinated Debt 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 or (ii)
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 Borrower, the Parent Company or any Obligor
held by the Subordinated Agent or any Subordinated Lender; provided the
foregoing will not prohibit such presentment as may be necessary to prevent
discharge of other liable parties an instrument.
(b) If the Subordinated Agent and the Subordinated Lenders shall not
file a proper claim or proof of debt in the form required in any insolvency,
bankruptcy or liquidation proceeding prior to 30 days before the expiration of
the time to file such claim or claims, then the Agent shall have the right to
file an appropriate claim for and on behalf of the Subordinated Agent or such
Subordinated Lender. Nothing herein contained shall be deemed to authorize or
consent to or accept or adopt on behalf of the Subordinated Agent or any
Subordinated Lender any plan of reorganization, arrangement, adjustment or
composition affecting the Subordinated Debt or the rights of the Subordinated
Agent and the Subordinated Lenders, or to authorize the Agent or any Senior
Lender to vote in respect of the claim of the Subordinated Agent or any
Subordinated Lender in any such proceeding.
Section 2.06 Rights of the Agent and the Senior Lenders. The Agent and
the Senior Lenders 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 Agent or the Senior Lenders'
rights or any of the obligations of the Subordinated Agent and the Subordinated
Lenders under this Subordination 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 Superior Indebtedness or any Senior Loan Document or any
other instrument or agreement now or hereafter executed or evidencing any of
the Superior Indebtedness in any manner, or enter into or amend in any manner
any other agreement relating to the Superior Indebtedness (including provisions
restricting or further restricting payments of the Subordinated Debt);
(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 Superior Indebtedness;
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(c) release any Person liable in any manner for payment or collection
of the Superior Indebtedness;
(d) exercise or refrain from exercising any rights against the
Borrower, the Parent Company or any other Obligor or others, including the
Subordinated Agent and the Subordinated Lenders; and
(e) apply any sums received by the Senior Lenders, paid by any Person
and however realized, to payment of the Superior Indebtedness in such a manner
as the Agent and the Senior Lenders, in their sole discretion, may deem
appropriate.
Section 2.07 Payments within 90 Days of Default. The obligations under
the Subordinated Loan Documents are revolving in nature and, except as set
forth in Section 2.02, this Subordination Agreement will not prohibit certain
payments made prior to the occurrence of an "Event of Default" under the Senior
Loan Documents. To effect the subordinations intended hereby, the Subordinated
Agent and each Subordinated Lender agree that if (i) it receives a payment in
any manner on account of the Subordinated Debt and within 90 days following its
receipt of such payment the Agent or any Senior Lender shall give a notice
under Section 2.02 that an Event of Default under the Senior Loan Documents has
occurred (other than an Event of Default: (1) for which the Agent or the Senior
Lenders have previously given notice and instituted a payment blockage pursuant
to Section 2.02(b) and (2) which has continued for over 135 days), and (ii) the
Superior Indebtedness has not been paid in full, then such payment will be
treated as if it had been made after the giving of a notice that an Event of
Default under the Senior Loan Documents has occurred and the Subordinated Agent
and the Subordinated Lenders will hold such amount in trust and pay to the
Agent, for its benefit and the benefit of the Senior Lenders, any amount equal
to the amount so received during such 90 day period. The foregoing provisions
shall apply without regard to whether the payments would or would not
constitute preferential payments under the Federal Bankruptcy Code or other
applicable insolvency laws. The Subordinated Agent and the Subordinated
Lenders acknowledge and agree that for purposes of clause (i) above, any
subsequent action, failure to act or any breach of a financial covenant for a
period commencing after the date of the commencement of a payment blockage
under Section 2.02(b) that would give rise to a new Event of Default pursuant
to any provision under which a payment blockage previously existed or was
continuing shall constitute a new Event of Default for purposes of Section
2.02(b) and this Section 2.07. The Subordinated Agent and the Subordinated
Lenders shall be subrogated to the claims and rights of the Agent and the
Senior Lenders to the extent of the Superior Indebtedness so acquired; provided
that the Subordinated Agent and the Subordinated Lenders shall have no rights
until such time as the Superior Indebtedness shall have been paid in full.
Section 2.08 Conversions Not Affected. Nothing in this Subordination
Agreement is intended or shall be construed to prevent: (a) the exercise by the
Subordinated Agent or any Subordinated Lender (or an affiliate of it) of
conversion rights contained in the Subordinated Loan Documents, (b) the receipt
by the Subordinated Agent or any Subordinated Lender of shares of stock and
debt securities that are subordinated to all Superior Indebtedness of the
Borrower, the Parent Company or an Obligor to at least the same extent as the
Subordinated Debt, and (c) the presentment of an instrument to prevent
discharge of other liable parties on such instrument.
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ARTICLE III
Representations, Warranties and Covenants
Section 3.01 Representations of Subordinated Agent and Subordinated
Lenders. The Subordinated Agent and each Subordinated Lender represent and
warrant that:
(a) neither the execution nor delivery of this Subordination
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 Subordination Agreement; and
(c) this Subordination Agreement constitutes it legal, valid, and
binding obligation in accordance to its terms, subject to applicable
bankruptcy, insolvency or similar laws and general principles of equity.
Section 3.02 Covenants. The Subordinated Agent and each Subordinated
Lender covenant that so long as any of the Superior Indebtedness remains
outstanding and until the termination of the "Aggregate Commitments" (as
defined in the Senior Credit Agreement), it will:
(a) cause all Subordinated Debt to be evidenced by a note, debenture
or other instrument evidencing the Subordinated Debt;
(b) cause any such note, debenture, or instrument evidencing the
Subordinated Debt to contain a statement or legend to the effect that such
note, debenture, or other instrument is subordinated to the Superior
Indebtedness in the manner and to the extent set forth in this Subordination
Agreement;
(c) not assign or transfer to others the Subordinated Debt or any
claim it has or may have against the Borrower, the Parent Company or any other
Obligor as long as any of the Superior Indebtedness remains outstanding, unless
such assignment or transfer is expressly made subject to this Subordination
Agreement;
(d) not ask for, sue for, take, demand, receive or accept any
principal or interest on any of the Subordinated Debt except in accordance with
the terms of this Subordination Agreement;
(e) not amend, supplement or otherwise modify the terms of the
Subordinated Debt without the express written consent of the Agent and the
Senior Lenders, which consent will not be unreasonably withheld, which has the
effect of (i) increasing the "Commitment" under the Subordinated Loan Agreement
(provided that the foregoing shall not affect the Subordinated Agent and the
Subordinated Lenders' ability to increase its borrowing base), (ii) increasing
the rate of interest charged on the Subordinated Debt (provided that the
foregoing shall not prohibit changes in the rate of interest contemplated by
the terms of the Subordinated Loan Agreement), (iii) changes the fees charged
under the Subordinated Loan Documents, or (iv) modifies or deletes the terms of
Section 9.22 of the Subordinated Loan Agreement or the subordination language
contained in the note issued pursuant to the Subordinated Loan Agreement;
(f) promptly upon either receipt or delivery, forward to the Agent
and the Senior Lenders a true and complete copy of any material notices or
communications either received or delivered to or from the Parent Company, the
Borrower or any Obligor with respect to the Subordinated Debt; and
(g) execute any and all other instruments necessary as reasonably
required by the Agent or the Senior Lenders to effect the subordinations
intended hereby.
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ARTICLE IV
Miscellaneous
Section 4.01 Acceptance by the Agent and the Senior Lenders. The
foregoing subordination provisions are, and are intended to be, an inducement
and a consideration to the Agent and each Senior Lender, whether such Senior
Lender's Superior Indebtedness is created or acquired before or after the
issuance of Subordinated Debt, to acquire and continue to hold, or to continue
to hold, such Superior 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 Superior Indebtedness.
Notice of acceptance of this Subordination Agreement is waived, acceptance on
the part of the Agent and the Senior Lenders being conclusively presumed by
their request for this Subordination Agreement and delivery of the same to
them.
Section 4.02 Assignment by the Agent and the Senior Lenders. This
Subordination Agreement may be assigned by the Agent and the Senior Lenders in
connection with any assignment or transfer of the Superior Indebtedness.
Section 4.03 Notices. 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 Agent or any Senior Lender in care of the Agent
at the following address:
Bank of Montreal, as Agent
700 Louisiana, Suite 4400
Houston, Texas 77002
Telecopier No.: (713) 223-4007
Telephone No.: (713) 546-9700
Attention: Client Services Group
Except as otherwise provided in this Subordination Agreement, all such
communications shall be deemed to have been duly given when transmitted by
telecopier, delivered to the telegraph or cable office or personally delivered
or, in the case of a mailed notice, three (3) Business Days after the date
deposited in the mails, postage prepaid, in each case given or addressed as
aforesaid.
Section 4.04 Amendments and Waivers. The Agent or any Senior Lender's
acceptance of partial or delinquent payments or any forbearance, failure or
delay by the Agent and the Senior Lenders in exercising any right, power or
remedy hereunder shall not be deemed a waiver of any obligation of the
Borrower, the Parent Company or any Obligor or the Subordinated Agent or any
Subordinated Lender, or of any right, power or remedy of the Agent and the
Senior Lenders; and no partial exercise of any right, power or remedy shall
preclude any other or further exercise thereof. The Subordinated Agent and the
Subordinated Lenders hereby agree that if the 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 Agent's and/or any Senior
Lender's other rights or of the Subordinated Agent's or any Subordinated
Lender's obligations hereunder. This Subordination Agreement may be amended
only by an instrument in writing executed jointly by Subordinated Agent and the
Agent and may be supplemented only by documents delivered or to be delivered in
accordance with the express terms hereof.
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Section 4.05 Parties to the Agreement. The provisions of this
Subordination Agreement are and are intended solely for the purpose of defining
the relative rights of the Subordinated Agent, the Subordinated Lenders, the
Agent and the Senior Lenders, and are solely for the benefit of the Agent, the
Senior Lenders, the Subordinated Agent and the Subordinated Lenders; and may
not be relied upon or enforced by any party other than the Agent, the Senior
Lenders, the Subordinated Agent or the Subordinated Lenders.
Section 4.06 Reinstatement. To the extent that any payments on the
Superior Indebtedness or proceeds of any collateral are subsequently
invalidated, declared to be fraudulent or preferential, set aside or required
to be repaid by the 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
Superior Indebtedness so satisfied shall be revived and continue as if such
payment or proceeds had not been received and the Agent's and the Senior
Lenders' Liens, interests, rights, powers and remedies under the Senior Loan
Documents and this Subordination Agreement shall continue in full force and
effect. In such event, each Senior Loan Document and this Subordination
Agreement shall be automatically reinstated and the Borrower, the Parent
Company, the Obligors, the Subordinated Agent and the Subordinated Lenders
shall take such action as may be reasonably requested by the Agent and the
Senior Lenders to effect such reinstatement.
Section 4.07 Governing Law. THIS SUBORDINATION AGREEMENT SHALL BE
GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF TEXAS.
Section 4.08 ENTIRE AGREEMENT. THIS WRITTEN SUBORDINATION AGREEMENT
EMBODIES THE ENTIRE AGREEMENT AND UNDERSTANDING BETWEEN THE AGENT AND THE
SENIOR LENDERS, 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 SUBORDINATION
AGREEMENT REPRESENTS THE 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 4.09 References and Titles. All references in this
Subordination Agreement to articles, sections, subsections and other
subdivisions refer to the articles, sections, subsections and other
subdivisions of this Subordination 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 Subordination Agreement invalid under the provisions of
any applicable law. If any term or provision of this Subordination Agreement
shall be determined to be illegal or unenforceable, all other terms and
provisions of this Subordination 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 Subordination Agreement.
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WITNESS THE EXECUTION HEREOF, as of this the 29th day of December 1997.
Subordinated Agent and Subordinated Lender:
Enron Capital & Trade Resources Corp., as Subordinated
Agent and as sole Subordinated Lender
By: /s/ AUTHORIZED SIGNATORY
--------------------------------------------------
Name:
Title:
Address for the Subordinated Agent and Lender:
1400 Smith
Houston, Texas 77002
Attention: Donna Lowry
Telephone: (713) 853-
Telecopy: (713) 646-3602
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The Borrower, the Parent Company and the Obligors hereby execute this
Subordination Agreement to evidence their agreement that:
1. each shall be bound by all of the terms and provisions of the
Subordination Agreement.
2. each acknowledge and agree that the terms of the Subordination
Agreement shall control over the terms of the Senior Loan
Documents and the Subordinated Loan Documents, any notes issued
pursuant thereto, and the instruments evidencing any of the
foregoing to the extent of any conflict relating to the relative
rights of the Agent and the Senior Lenders, the Subordinated
Agent or the Subordinated Lenders.
3. the terms and provisions of the Subordination Agreement shall
inure solely to the benefit of the Agent, the Senior Lenders, the
Subordinated Agent, the Subordinated Lenders and their respective
successors and assigns and the terms and provisions of this
Subordination Agreement shall not inure to the benefit of nor be
enforceable by the Borrower, the Parent Company or any Obligor or
their successors or assigns.
4. each at its expense will execute, acknowledge and deliver all
such agreements and instruments and take all such action as any
party to this Subordination Agreement from time to time may
reasonably request in order further to effectuate the purposes of
this Subordination Agreement and to carry out the terms hereof.
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BORROWER: QUEEN SAND RESOURCES, INC., a Nevada corporation
By: /s/ ROBERT P. LINDSAY
---------------------------------------
Robert P. Lindsay
Vice President
Address for Notices:
Queen Sand Resources, Inc.
3500 Oak Lawn Drive, Suite 380
Dallas, Texas 75219
Attention: Robert P. Lindsay
Telephone: (214) 521-9959
Facsimile: (214) 521-9960
with copy to:
Queen Sand Resources, Inc.
60 Queen Street, Suite 1400
Ottawa, Canada KIP 5Y7
Attention: Mr. Ronald Benn
Telephone: (613) 230-7211
Facsimile: (613) 230-6055
and
Haynes & Boone LLP
901 Main Street, Suite 3100
Dallas, Texas 75202-3789
Attention: Mr. William L. Boeing
Telephone: (214) 651-5553
Facsimile: (214) 651-5940
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PARENT COMPANY: QUEEN SAND RESOURCES, INC., a Delaware corporation
By: /s/ ROBERT P. LINDSAY
---------------------------------------
Robert P. Lindsay
Chief Operating Officer
and Executive Vice President
Address for Notices:
Queen Sand Resources, Inc.
3500 Oak Lawn Drive, Suite 380
Dallas, Texas 75219
Attention: Robert P. Lindsay
Telephone: (214) 521-9959
Facsimile: (214) 521-9960
with copy to:
Queen Sand Resources, Inc.
60 Queen Street, Suite 1400
Ottawa, Canada KIP 5Y7
Attention: Mr. Ronald Benn
Telephone: (613) 230-7211
Facsimile: (613) 230-6055
and
Haynes & Boone LLP
901 Main Street, Suite 3100
Dallas, Texas 75202-3789
Attention: Mr. William L. Boeing
Telephone: (214) 651-5553
Facsimile: (214) 651-5940
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GUARANTORS: NORTHLAND OPERATING CO.
By: /s/ ROBERT P. LINDSAY
---------------------------------------
Robert P. Lindsay
Vice President
CORRIDA RESOURCES, INC.
By: /s/ ROBERT P. LINDSAY
---------------------------------------
Robert P. Lindsay
Vice President
Address for Notices of each Guarantor: [same as
Parent Company]
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Exhibit A
Subordinated Loan Documents
1. Subordinated Revolving Credit Loan Agreement dated as of December 29,
1997 between the Borrower, the Subordinated Lenders party thereto and
the Subordinated Agent (the "Subordinated Loan Agreement").
2. Subordinated Note(s) in the aggregate principal amount of $10,000,000
issued by the Borrower in favor of the Subordinated Lender(s).
3. Mortgage, Line of Credit Mortgage, Deed of Trust, Assignment of
Production, Security Agreement and Financing Statement (Subordinated
Revolving Credit Loan Agreement) dated as of December 29, 1997 executed
by the Borrower in favor of the Subordinated Agent, for its benefit and
the benefit of Subordinated Lenders.
4. Financing Statement executed by the Borrower with respect to item 3
above.
5. Guaranty Agreement dated as of December 29, 1997 executed by the Parent
Company in favor of the Subordinated Agent and Subordinated Lenders.
6. Guaranty Agreement dated as of December 29, 1997 executed by Corrida
Resources, Inc. and Northland Operating Co. in favor of the Subordinated
Agent and Subordinated Lenders.
7. Fee Letter dated as of December 29, 1997 executed between the Borrower
and ECT Securities Corp.
8. Any other Security Instrument or Loan Document (as defined in the
Subordinated Revolving Credit Loan Agreement described in paragraph 1
above).
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