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EXHIBIT 10.3
INTERCREDITOR AND SUBORDINATION AGREEMENT
THIS INTERCREDITOR AND SUBORDINATION AGREEMENT is made as of June 30,
1999, between NATIONSBANK, N.A., (the "Subordinate Creditor"), and WELLS FARGO
BANK (TEXAS), N.A. (the "Senior Creditor").
RECITALS
WHEREAS, Venus Exploration, Inc., a Delaware corporation (the
"Borrower") and Senior Creditor entered into that certain Second Amendment and
Restated Loan Agreement (as amended from time to time, the "Loan Agreement")
dated December 22, 1997, pursuant to which Senior Creditor agreed to make loans
to Borrower subject to the terms of the Loan Agreement;
WHEREAS, Borrower has agreed to acquire certain oil and gas producing
properties from Apache Corporation for an amount not to exceed $28,500,000 (the
"Apache Acquisition"); and
WHEREAS, Borrower has agreed to assign its rights, duties and
obligations with respect to the Apache Acquisition to EXUS Energy, LLC ("EXUS"),
a Delaware limited liability company which will be jointly owned by Borrower
with EXCO Resources, Inc., a Texas corporation ("EXCO"), and EXUS will acquire
the assets contemplated by the Apache Acquisition; and
WHEREAS, EXUS proposes to enter into a Credit Agreement with the
Subordinate Creditor pursuant to which the Subordinate Creditor and other
financial institutions will make loans to EXUS in an amount not to exceed
$50,000,000 (the "EXUS Credit Agreement"); and
WHEREAS, it is a condition precedent to the consummation of the EXUS
Credit Agreement that Borrower execute and deliver an unconditional guaranty of
the obligations of EXUS under the EXUS Credit Agreement pursuant to a Guaranty
Agreement dated June 30, 1999 (the "Guaranty Agreement"); and
WHEREAS, pursuant to the Loan Agreement the consent of Senior Creditor
is required for the execution and delivery of the Guaranty Agreement by
Borrower, and Senior Creditor has required, as a condition to granting such
consent, the execution and delivery of this Intercreditor and Subordination
Agreement (the "Subordination Agreement"), and to facilitate such requirement,
Subordinate Creditor has agreed to enter into this Subordination Agreement; and
WHEREAS, (i) in order to comply with the terms and conditions of the
Loan Agreement; (ii) to induce the Senior Creditor to consent to the proposed
transaction by Borrower, (iii) at the special insistence and request of the
Senior Creditor, and (iv) for other good and valuable consideration, the receipt
and sufficiency of which are hereby acknowledged, Subordinate Creditor hereby
agrees as follows:
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ARTICLE I
DEFINITIONS
Section 1.01 Terms Defined Above and in Loan Agreement. As used in this
Subordination Agreement, the terms defined above shall have the meanings
respectively assigned to them. Unless otherwise defined herein, all terms
beginning with a capital letter which are defined in the Loan Agreement shall
have the meanings herein as assigned therein, unless the context hereof requires
otherwise.
Section 1.02 Certain Definitions. As used in this Subordination
Agreement the following terms shall have the following meanings, unless the
context otherwise requires:
"Subordinated Debt" shall mean any and all indebtedness, liabilities
and obligations of Borrower to the Subordinate Creditor arising out of or
related to the Guaranty Agreement.
"Superior Indebtedness" shall mean any and all indebtedness,
liabilities and obligations of Borrower under the Loan Agreement and other loan
documents related thereto, whether owed individually or jointly, to the Senior
Creditor, absolute or contingent, direct or indirect, joint, several or
independent, now outstanding or owing or which may hereafter be existing or
incurred, arising by operation of law or otherwise, due or to become due, or
held or to be held by the Senior Creditor.
ARTICLE II
SUBORDINATION
Section 2.01 Agreement to Subordinate. The payment of any and all
Subordinated Debt is expressly subordinated to the Superior Indebtedness to the
extent and in the manner set forth in Sections 2.02 through 2.06 hereof.
Section 2.02 Payment Subordination upon Default. If for any reason any
of the Superior Indebtedness is not paid when due or is not paid on or before
the maturity thereof, or if there shall occur and be continuing any event which
with the giving of notice or lapse of time or both would constitute an Event of
Default under the Loan Agreement or any Security Instrument, then, unless and
until such Event of Default shall have been cured to the satisfaction of the
Senior Creditor, in its sole discretion, or unless and until the Superior
Indebtedness shall be paid in full, the Subordinate Creditor will not take,
receive or accept from Borrower, by set-off or in any other manner, any payment
or distribution on account of the Subordinated Debt.
Section 2.03 Payments Received in Violation of Subordination Agreement.
In the event the Subordinate Creditor shall receive any payment or distribution
on account of the -Subordinated Debt (whether by offset, direct or indirect
payment or in any other manner) which Subordinate Creditor is not entitled to
receive under the provisions of this Subordination Agreement, Subordinate
Creditor will hold any amount so received in trust for the Senior Creditor and
will
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forthwith turn over such payment to the Senior Creditor in the form received by
Subordinate Creditor (together with any necessary endorsement) to be applied on
the Superior Indebtedness.
Section 2.04 Liens Subordinate. Except as otherwise expressly provided
herein, Subordinate Creditor agrees that any liens upon Borrower's assets
securing payment of the Subordinated Debt shall be and remain inferior and
subordinate to any liens securing payment of the Superior Indebtedness
regardless of whether such encumbrances in favor of Subordinate Creditor or the
Senior Creditor presently exist or are hereafter created or attach. Without the
prior written consent of the Senior Creditor, the Subordinate Creditor shall not
foreclose, repossess, sequester or otherwise take steps or institute any action
or proceeding judicial or otherwise, including without limitation the
commencement of or joinder in any liquidation, bankruptcy, rearrangement,
debtor's relief or insolvency proceeding) to enforce any lien on Borrower's
assets held by Subordinate Creditor.
Section 2.05 Agreement Not to Pursue Actions.
(a) The Subordinate Creditor will not commence any action or proceeding
against Borrower to recover all or any part of the Subordinated Debt or join
with any other creditor in commencing any such action, unless (i) Senior
Creditor shall have accelerated the maturity of the Superior Indebtedness; (ii)
the Senior Creditor shall also join in bringing, or shall have separately
commenced, any proceedings against Borrower to recover all or any part of the
Superior Indebtedness or under any bankruptcy, reorganization, readjustment of
debt, arrangement of debt, receivership, liquidation or insolvency law or
statute of the federal or any state government unless and until all Superior
Indebtedness shall have been paid in full; or (iii) the expiration of at least
one hundred and eighty days from the date Senior Creditor receives written
notice of a default under the Subordinated Debt and that Subordinate Creditor
intends to pursue its rights and remedies against Borrower.
(b) In the event of any receivership, insolvency, bankruptcy,
assignment for the benefit of creditors, reorganization or arrangement with
creditors, adjustment of debt, whether or not pursuant to the Federal Bankruptcy
Code, the sale of all or substantially all of the assets, dissolution,
liquidation, or any other marshaling of the assets and liabilities of Borrower,
the Subordinate Creditor will hold in trust for the Senior Creditor and pay over
to the Senior Creditor, in the form received (together with any necessary
endorsement), to be applied on the Superior Indebtedness, any and all monies,
dividends, distributions or other assets received in any such proceedings on
account of the Subordinated Debt unless and until the Superior Indebtedness
shall be paid in full. In the event that the Subordinate Creditor shall fail to
file any proof of claim or take any other action in respect of the Subordinated
Debt necessary to preserve the claim of the Subordinated Debt on or before the
tenth (10th) day prior to the bar date applicable thereto, the Senior Creditor,
may, take such action on behalf of the Subordinate Creditor, and the Subordinate
Creditor hereby authorizes Senior Creditor to file such proof of claim or take
such other action; and the Subordinate Creditor will execute and deliver to the
Senior Creditor such other instruments as the Senior Creditor may request in
order to accomplish the foregoing.
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Section 2.06 Rights of Senior Creditor. The Senior Creditor may, at any
time, and from time to time, without the consent of or notice to the Subordinate
Creditor, without incurring responsibility to the Subordinate Creditor, without
impairing or releasing any of the Senior Creditor's rights or any of the
obligations of the Subordinate Creditor 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 or otherwise alter the
Superior Indebtedness or any instrument or agreement now or hereafter executed
evidencing, in connection with, as security for or providing for the issuance of
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;
(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 Borrower or
others, including the Subordinate Creditor; and
(e) Apply any sums received by the Senior Creditor, paid by any Person
and however realized, to payment of the Superior Indebtedness in such a manner
as the Senior Creditor, in its sole discretion, may deem appropriate.
ARTICLE III
REPRESENTATIONS, WARRANTIES AND COVENANTS
Section 3.01 Representations of Subordinate Creditor. The Subordinate
Creditor represents and warrants that: (a) it has all requisite authority to
execute, deliver and perform its obligations under this Subordination Agreement;
and (b) Subordinate Creditor is the only creditor under the EXUS Credit
Agreement and is entitled to one hundred per cent of the benefits under the
Guaranty Agreement, as limited by this Subordination Agreement.
Section 3.02 Covenants. The Subordinate Creditor covenants that so long
as any of the Superior Indebtedness remains outstanding, the Subordinate
Creditor will: (a) cause all Subordinated Debt to be evidenced by the Guaranty
Agreement; (b) cause a statement or legend to be entered thereon to the effect
that Guaranty Agreement is subordinated to the Superior Indebtedness in favor of
the Senior Creditor in the manner and to the extent set forth in this
Subordination Agreement; (c) execute any and all other instruments reasonably
necessary as required by the Senior Creditor to subordinate the Subordinated
Debt to the Superior Indebtedness as herein provided; (d) not assign or transfer
to others any portion of the Subordinated Debt or any claim the Subordinate
Creditor has or may have against Borrower as long as any of the Superior
Indebtedness remains outstanding, unless such assignment or transfer is
expressly made subject to this Subordination Agreement; (e)
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not amend, supplement or otherwise modify the terms of the Guaranty Agreement
without the express written consent of the Senior Creditor, which consent will
not be unreasonably withheld; (f) not ask for, take, demand, receive or accept
any property as collateral security for the Subordinated Debt granted by
Borrower; and (g) promptly upon either receipt or delivery, forward to the
Senior Creditor a true and complete copy of any demand for payment delivered to
Borrower under the Guaranty Agreement.
ARTICLE IV
MISCELLANEOUS
Section 4.01 Acceptance by Senior Creditor. Notice of acceptance of
this Subordination Agreement is waived, acceptance on the part of the Senior
Creditor being conclusively presumed by its request for this Subordination
Agreement and delivery of the same to it.
Section 4.02 Assignment by Senior Creditor. This Subordination
Agreement may be assigned by the Senior Creditor in connection with any
assignment or transfer of the Superior Indebtedness.
Section 4.03 Notices. Any notice required or permitted to be given
under or in connection with this Subordination Agreement shall be given as
specified in the Loan Agreement.
Section 4.04 Amendments and Waivers. The Senior Creditor's acceptance
of partial or delinquent payments or any forbearance, failure or delay by the
Senior Creditor in exercising any right, power or remedy hereunder shall not be
deemed a waiver of any obligation of Borrower or the Subordinate Creditor, or of
any right, power or remedy of the Senior Creditor; and no partial exercise of
any right, power or remedy shall preclude any other or further exercise thereof.
The Senior Creditor may remedy any Event of Default hereunder or in connection
with the Superior Indebtedness without waiving the Event of Default so remedied.
Subordinate Creditor hereby agrees that if the Senior Creditor agrees to a
waiver of any provision hereunder, or an exchange of or release of the
Collateral, or the addition or release of any Person, any such action shall not
constitute a waiver of any of the Senior Creditor's other rights or of
Subordinate Creditor's obligations hereunder. This Subordination Agreement may
be amended only by an instrument in writing executed jointly by Subordinate
Creditor and the Senior Creditor and may be supplemented only by documents
delivered or to be delivered in accordance with the express terms hereof.
Section 4.05 Governing Law; Submission to Jurisdiction.
(a) THIS SUBORDINATION AGREEMENT SHALL BE GOVERNED BY, AND
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF TEXAS.
(b) ANY LEGAL ACTION OR PROCEEDING WITH RESPECT TO THIS
SUBORDINATION AGREEMENT MAY BE BROUGHT IN THE COURT'S OF THE STATE OF TEXAS OR
OF THE UNITED STATES OF AMERICA FOR THE SOUTHERN DISTRICT OF TEXAS, AND, BY
EXECUTION AND DELIVERY OF THIS SUBORDINATION
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AGREEMENT, THE SUBORDINATE CREDITOR HEREBY ACCEPTS AND (TO THE EXTENT PERMITTED
BY LAW) IN RESPECT OF THE PROPERTY OF THE SUBORDINATE CREDITOR, WHETHER HELD
JOINTLY OR OTHERWISE, GENERALLY AND UNCONDITIONALLY, THE JURISDICTION OF THE
AFORESAID COURTS. THE SUBORDINATE CREDITOR HEREBY IRREVOCABLY WAIVES ANY
OBJECTION, INCLUDING, WITHOUT LIMITATION, ANY OBJECTION TO THE LAYING OF VENUE
OR BASED ON THE GROUNDS OF FORUM NON CONVENIENS, WHICH MAY NOW OR HEREAFTER BE
HAD TO THE BRINGING OF ANY SUCH ACTION OR PROCEEDING IN SUCH RESPECTIVE
JURISDICTIONS. THIS SUBMISSION TO JURISDICTION IS NONEXCLUSIVE AND DOES NOT
PRECLUDE THE SENIOR CREDITOR FROM OBTAINING JURISDICTION OVER THE SUBORDINATE
CREDITOR IN ANY COURT OTHERWISE HAVING JURISDICTION.
(c) Nothing herein shall affect the right of the Senior
Creditor or any holder of the Note to serve process in any other manner
permitted by law or to commence legal proceedings or otherwise proceed against
the Subordinate Creditor in any other jurisdiction.
Section 4.06 Counterparts. This Subordination Agreement may be signed
in any number of counterparts, each of which shall be construed as an original,
but all of which together shall constitute one and the same instrument.
SECTION 4.07 ENTIRE AGREEMENT. THIS WRITTEN SUBORDINATION AGREEMENT
EMBODIES THE ENTIRE AGREEMENT AND UNDERSTANDING BETWEEN THE SENIOR CREDITOR AND
THE SUBORDINATE CREDITOR 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 AGREEMENT'S OF THE PARTIES. THERE ARE NO UNWRITTEN ORAL
AGREEMENTS BETWEEN THE PARTIES.
SECTION 4.08 LIMITATIONS ON SUBORDINATION. SENIOR CREDITOR HEREBY
AGREES THAT THE AGREEMENTS OF SUBORDINATE CREDITOR UNDER THIS AGREEMENT ARE
LIMITED SOLELY TO SUBORDINATE CREDITOR'S RIGHTS AGAINST BORROWER UNDER THE
SUBORDINATE GUARANTY. SUBORDINATE CREDITOR HAS NOT, IN ANY WAY, SUBORDINATED, OR
OTHERWISE LIMITED, ITS RIGHTS WITH RESPECT TO EXUS, EXCO OR ANY OTHER PARTY
(OTHER THAN BORROWER) OR ANY ASSETS OF ANY SUCH PERSON, ARISING UNDER THE EXUS
CREDIT AGREEMENT OR ANY DOCUMENT, INSTRUMENT OR AGREEMENT EVIDENCING, SECURING
OR OTHERWISE PERTAINING TO THE EXUS CREDIT AGREEMENT IN ANY WAY.
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WITNESS THE EXECUTION HEREOF, as of the day and year written above.
SUBORDINATE CREDITOR:
NATIONSBANK, N.A.,
By:
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Name:
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Title:
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Address for Subordinate Creditor:
901 Main Street, 64th Floor
Dallas, Texas 75202
SENIOR CREDITOR:
WELLS FARGO BANK (TEXAS), N.A.
By: /s/ ANDREW A. MOY
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Andrew A. Moy, Vice President
Address for Senior Creditor:
1000 Louisiana, 4th Floor
Houston, Texas 77002
Borrower hereby executes this document for the purpose of acknowledging the
terms hereof and agrees to cooperate in the implementation thereof.
BORROWER:
VENUS EXPLORATION, INC.
By: /s/ E. L. AMES, JR.
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Name: E. L. Ames, Jr.
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Title: Chief Executive Officer
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Address for Borrower:
1250 N.E. Loop 410, Suite 1000
San Antonio, Texas 78209
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