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Exhibit 10.6
EXECUTION
VERSION
INTERCREDITOR AND SUBORDINATION AGREEMENT
This Intercreditor and Subordination Agreement is entered into as of
January 23, 2003, among Foothill Capital Corporation, a California corporation,
in its capacity as agent (in such capacity, together with any successor in such
capacity, the "Senior Agent") for the lenders who are from time to time parties
to the Senior Loan Agreement referred to below (the "Senior Lenders"), U.S.
Bank, National Association, a national banking association in its capacity as
trustee (in such capacity, together with any successor in such capacity, the
"Trustee") for the holders of the Notes (as defined below) issued under the
Noteholder Indenture referred to below (the "Noteholders").
RECITALS
A. Concurrently herewith, the Borrower is entering into that certain
Loan and Security Agreement, of even date herewith (the "Senior Loan
Agreement"), with the Senior Lenders and the Senior Agent pursuant to which the
Senior Lenders have agreed to extend certain financial accommodations to Abraxas
Petroleum Corporation, a Nevada corporation (the "Borrower").
B. Concurrently herewith, (i) as security for the prompt payment and
performance of the Senior Indebtedness (as hereinafter defined), the Borrower is
entering into certain mortgages, deeds of trust, debentures, security
agreements, pledge agreements, collateral assignments and other security
documents (collectively, the "Senior Security Documents") pursuant to which the
Borrower is granting a lien on and a security interest in all of its assets to
the Senior Agent for the benefit of the Senior Lenders, and (ii) each of the
Guarantors (as defined herein) is guaranteeing (each a "Senior Guaranty") the
obligations of the Borrower owing to the Senior Agent and the Senior Lenders
under the Senior Loan Agreement and, as security for the prompt payment and
performance of its obligations under the Senior Guaranty, each Guarantor is
entering into certain mortgages, deeds of trust, debentures, security
agreements, pledge agreements, collateral assignments and other security
documents (collectively, the "Senior Guaranty Documents"), pursuant to which
each such Guarantor is granting a lien on and a security interest in all of its
assets to the Senior Agent for the benefit of the Senior Lenders.
C. Concurrently herewith, each of the Obligors is entering into the
Indenture, dated as of January 23, 2003 (the "Noteholder Indenture"), among each
of the Obligors and the Trustee, pursuant to which the Borrower has agreed to
issue its 11-1/2% Secured Notes due 2007.
D. Concurrently herewith, (i) as security for the prompt payment and
performance of the Junior Indebtedness (as hereinafter defined), the Borrower is
entering into certain mortgages, deeds of trust, debentures, security
agreements, pledge agreements, collateral assignments and other security
documents (the "Noteholder Security Documents") pursuant to which the Borrower
is granting a lien on and a security interest in all of its assets to the
Trustee for the benefit of the Noteholders, and (ii) each of the Guarantors is
guaranteeing the obligations of the Borrower owing to the Noteholders under the
Noteholder Indenture and, as security for the
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prompt payment and performance of its guaranty obligations, each Guarantor is
entering into certain mortgages, deeds of trust, debentures, security
agreements, pledge agreements, collateral assignments and other security
documents (collectively, the "Noteholder Guaranty Documents"), pursuant to which
each such Guarantor is granting a lien on and a security interest in all of its
assets to the Trustee for the benefit of the Noteholders.
E. The Senior Agent and the Trustee wish to agree as to the priority
of the repayment of the Senior Indebtedness and the Junior Indebtedness, and the
rights of each with respect thereto, and as to their respective liens upon and
security interests in the Collateral (as hereinafter defined) and as to certain
other rights, priorities, and interests as between and among the Senior Agent
and the Senior Lenders and the Trustee and the Noteholders.
AGREEMENT
In consideration of the foregoing, the mutual covenants contained
herein, and for other good and valuable consideration, the receipt of which the
Senior Agent and the Trustee hereby acknowledge, the Senior Agent and the
Trustee hereby agree as follows:
1. Definitions and Rules of Construction.
(a) DEFINITIONS. The following terms, as used in this
Agreement, shall have the following meanings:
"ACCOUNTS" and "INVESTMENT PROPERTY" shall have the meanings
assigned to them under Article 9 of the UCC.
"AGREEMENT" means this Intercreditor and Subordination
Agreement together with any and all amendments, extensions, modifications,
riders, addenda, exhibits, and schedules hereto.
"BANK PRODUCT AGREEMENT" means any agreement for any service
or facility extended to the Borrower or any of its Subsidiaries by the Senior
Agent or the Senior Lenders or any Affiliate of the Senior Agent or the Senior
Lenders including: (a) credit cards, (b) credit card processing services, (c)
debit cards, (d) purchase cards, (e) cash management or related services
(including the Automated Clearing House processing of electronic funds transfers
through the direct Federal Reserve Fedline system), (f) cash management,
including controlled disbursement, accounts or services, or (g) Hedging
Agreements.
"BANKRUPTCY CASE" means any proceeding commenced by or against
any Borrower or any Guarantor, under any provision of the Bankruptcy Code or
under any other federal, provincial or state bankruptcy or insolvency law,
including assignments for the benefit of creditors, formal or informal
moratoria, compositions, extensions generally with its creditors, or proceedings
seeking reorganization, arrangement, or other similar relief, and all converted
or succeeding cases in respect thereof.
"BANKRUPTCY CODE" means (i) the United States Bankruptcy Code
(11 U.S.C. ss. 101, ET SEQ.), as amended, and any successor statute, (ii) the
Bankruptcy and Insolvency Act (Canada) and any successor statute or (iii) the
Companies' Creditors Arrangement Act
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(Canada), as applicable or any similar legislation in a relevant jurisdiction
and any successor statute, in each case as in effect from time to time.
"BOOKS" means any Obligor's now owned or hereafter acquired
books and records (including all of its Records indicating, summarizing, or
evidencing its assets (including the Collateral) or liabilities, all of its
Records relating to its business operations or financial condition, and all of
its goods or General Intangibles related to such information).
"BORROWER" has the meaning set forth in the preamble to this
Agreement.
"BUSINESS DAY" means any day that is not a Saturday, Sunday or
other day on which national banks are authorized or required to close in New
York City.
"COLLATERAL" means all assets and property of each Obligor,
including, without limitation, all of each Obligor's presently existing and
hereafter acquired personal property, including, without limitation, such
Obligor's Accounts, Books, deposit accounts, Equipment, General Intangibles and
DDA's, Inventory, Investment Property and Negotiable Collateral, Oil and Gas
Properties; all of each Obligor's Real Property and leases for Real Property;
all proceeds and insurance proceeds of the foregoing; all money or other assets
of each Obligor that now or hereafter come into the possession, custody, or
control of a Secured Creditor; and the proceeds and products, whether tangible
or intangible, of any of the foregoing, including proceeds of insurance covering
any or all of the foregoing, and any and all Accounts, Books, Equipment, General
Intangibles and DDA's, Inventory, Investment Property, Negotiable Collateral,
Oil and Gas Properties, Real Property, leases for Real Property, money, deposit
accounts, or other tangible or intangible property resulting from the sale,
exchange, collection, or other disposition of any of the foregoing, or any
portion thereof or interest therein.
"COMMODITY HEDGING AGREEMENT" means a commodity hedging or
purchase agreement or similar arrangement entered into with the intent of
protecting against fluctuations in commodity prices or the exchange of notional
commodity obligations, either generally or under specific contingencies.
"CURRENCY PROTECTION AGREEMENT" means a currency swap, cap or
collar agreement or similar arrangement entered into with the intent of
protecting against fluctuations in currency values, either generally or under
specific contingencies.
"DDA" means any checking or other demand deposit account
maintained by any Obligor.
"DOCUMENTS" means, collectively, the Senior Documents and the
Noteholder Documents.
"EQUIPMENT" means all of Obligors' now owned or hereafter
acquired right, title, and interest with respect to equipment (including gaming
equipment), machinery, machine tools, motors, furniture, furnishings, fixtures,
vehicles (including motor vehicles), vessels, tools, parts, goods (other than
consumer goods, farm products, or Inventory), wherever located, including all
attachments, accessories, accessions, replacements, substitutions, additions,
and improvements to any of the foregoing.
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"GENERAL INTANGIBLES" means all of each Obligor's now owned or
hereafter acquired right, title, and interest with respect to general
intangibles (including payment intangibles, contract rights, rights to payment,
judgments, rights arising under common law, statutes, or regulations, choses or
things in action, goodwill, patents, designs, inventions, trade names, trade
secrets, d/b/a's, Internet domain names, logos, trademarks, servicemarks,
copyrights, blueprints, drawings, purchase orders, customer lists, monies due or
recoverable from pension funds, route lists, rights to payment and other rights
under any royalty or licensing agreements, infringement claims, computer
programs, information contained on computer disks or tapes, software,
literature, reports, catalogs, money, deposit accounts, insurance premium
rebates, tax refunds, and tax refund claims), and any and all supporting
obligations in respect thereof, and any other personal property other than
goods, Accounts, Investment Property, and Negotiable Collateral.
"GOVERNMENTAL AUTHORITY" means any federal (including the
federal government of Canada), state, local, provincial or other governmental or
administrative body, instrumentality, department, or agency or any court,
tribunal, administrative hearing body, arbitration panel, commission, or other
similar dispute-resolving panel or body.
"GUARANTOR" and GUARANTORS" means Sandia Oil & Gas
Corporation, a Texas corporation, Sandia Operating Corp., a Texas corporation,
Eastside Coal Company, Inc., a Colorado corporation, Western Associated Energy
Corporation, a Texas corporation, Wamsutter Holdings Inc., a Texas corporation,
and Grey Wolf Exploration Inc., an Alberta corporation, and shall include any
Person that becomes a guarantor of the Senior Indebtedness or the Junior
Indebtedness after the date hereof.
"HEDGING AGREEMENT" means any Currency Protection Agreement,
any Interest Rate Protection Agreement or Commodity Hedging Agreement.
"HYDROCARBON INTERESTS" means all rights, titles, interests
and estates now owned or hereafter acquired in and to oil and gas leases, oil,
gas and mineral leases, oil, gas and casinghead gas leases, or other liquid or
gaseous hydrocarbon leases, mineral fee, term or lease interests, farm-outs,
overriding royalty and royalty interests, net profit interests, oil payments,
production payment interests and similar mineral interests, including any
reserved or residual interest of whatever nature.
"HYDROCARBONS" means oil, gas, coal seam gas, casinghead gas,
condensate, distillate, liquid hydrocarbons, gaseous hydrocarbons, all products
and byproducts refined, separated, settled and dehydrated therefrom and all
products and byproducts refined therefrom, including, without limitation,
kerosene, liquefied petroleum gas, refined lubricating oils, diesel fuel, drip
gasoline, natural gasoline, helium, sulfur, geothermal steam, water, carbon
dioxide, and all other minerals.
"INTEREST RATE PROTECTION AGREEMENT" an interest rate swap,
cap or collar agreement or similar arrangement entered into with the intent of
protecting against fluctuations in interest rates or the exchange of notional
interest obligations, either generally or under specific contingencies.
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"INVENTORY" means all of each Obligor's now owned or hereafter
acquired right, title, and interest with respect to inventory (as defined in the
UCC), including extracted Hydrocarbons and other goods held for sale or lease or
to be furnished under a contract of service, goods that are leased by any
Obligor as lessor, goods that are furnished by any Obligor under a contract of
service, and raw materials, work in process, or materials used or consumed in
any Obligor business.
"JUNIOR INDEBTEDNESS" means any and all presently existing or
hereafter arising indebtedness, claims, debts, liabilities, obligations
(including, without limitation, any prepayment premium), fees, expenses or
indemnities of the Obligors owing to the Noteholders and the Trustee under the
Noteholder Documents, whether direct or indirect, whether contingent (including
in respect of any Noteholder Guaranty or the Registration Rights Agreement
referred to in the definition of Noteholder Documents) or of any other nature,
character, or description (including all interest and other amounts accruing
after commencement of any Bankruptcy Case, and any interest and other amounts
that, but for the provisions of the Bankruptcy Code, would have accrued and
become due or otherwise would have been allowed), and any refinancings,
renewals, refundings, or extensions of such amounts to the extent permitted
under this Agreement.
"MAXIMUM SENIOR INDEBTEDNESS" means, at any time of
determination, the sum of (a) $50 million less the aggregate amount applied from
time to time to repay the principal amount of the Senior Indebtedness which is
accompanied by a corresponding permanent reduction of the Revolver Commitment
(as defined in the Senior Loan Agreement) plus (b) (x) $15 million, if the then
applicable Revolver Commitment under the Senior Loan Agreement is $25 million or
greater, (y) $10 million, if the then applicable Revolver Commitment under the
Senior Loan Agreement is less than $25 million and greater than or equal to $15
million or (z) $5 million, if the then applicable Revolver Commitment under the
Senior Loan Agreement is less than $15 million; PROVIDED, HOWEVER, that in no
event shall Indebtedness constituting Bank Product Obligations or Related Senior
Indebtedness be included in the calculation of Maximum Senior Indebtedness.
"NEGOTIABLE COLLATERAL" means all of each Obligor's now owned
and hereafter acquired right, title, and interest with respect to letters of
credit, letter of credit rights, instruments, promissory notes, drafts,
documents, and chattel paper (including electronic chattel paper and tangible
chattel paper), and any and all supporting obligations in respect thereof.
"NOTEHOLDER DOCUMENTS" means, collectively, the Noteholder
Indenture, the Noteholder Security Documents, the Noteholder Guaranty Documents
and any other document, instrument, mortgage or agreement now existing or in the
future entered into evidencing, documenting, securing, or otherwise relating to
the Junior Indebtedness or the Collateral (including, without limitation, the
Registration Rights Agreement, dated January 23, 2003, by and among Jefferies &
Company, Inc. as the dealer manager on behalf of the tendering Noteholders, the
Borrower and the Guarantors), together with any amendments, replacements,
substitutions, or restatements thereof.
"NOTEHOLDER GUARANTY DOCUMENTS" has the meaning set forth in
the Recitals to this Agreement.
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"NOTEHOLDER INDENTURE" has the meaning set forth in the
Recitals to this Agreement.
"NOTEHOLDER SECURITY DOCUMENTS" has the meaning set forth in
the Recitals to this Agreement.
"NOTEHOLDERS" has the meaning set forth in the preamble to
this Agreement.
"OBLIGORS" means, collectively, the Borrower and each
Guarantor and each other Person who becomes a Borrower or a Guarantor under the
Documents.
"OIL AND GAS PROPERTIES" means all Hydrocarbon Interests;
personal property and/or real property now or hereafter pooled or unitized with
Hydrocarbon Interests; presently existing or future unitization, pooling
agreements and declarations of pooled units and the units created thereby
(including without limitation all units created under orders, regulations and
rules of any Governmental Authority having jurisdiction) which may affect all or
any portion of the Hydrocarbon Interests; pipelines, gathering lines,
compression facilities, tanks and processing plants; oil and wells, gas wells,
water well, injection wells, platforms, spars or other offshore facilities,
casings, rods, tubing, pumping units and engines, Christmas trees, derricks,
separators, gun barrels, flow lines, gas systems (for gathering, treating and
compression), and water systems (for treating, disposal and injection);
interests held in royalty trusts whether presently existing or hereafter
created; Hydrocarbons in and under and which may be produced, saved, processed
or attributable to the Hydrocarbon Interests, the lands covered thereby and all
Hydrocarbons in pipelines, gathering lines, tanks and processing plants and all
rents, issues, profits, proceeds, products, revenues and other incomes from or
attributable to the Hydrocarbon Interests; all tenements, hereditaments,
appurtenances and personal property and/or real property in any way
appertaining, belonging, affixed or incidental to the Hydrocarbon Interests, and
all rights, titles, interests and estates described or referred to above,
including any and all real property, now owned or hereafter acquired, used or
held for use in connection with the operating, working or development of any of
such Hydrocarbon Interests or personal property and/or Real Property and
including any and all surface leases, rights-of-way, easements and servitude
together with all additions, substitutions, replacements, accessions and
attachments to any and all of the foregoing; oil, gas and mineral leasehold, fee
and term interests, overriding royalty interests, mineral interests, royalty
interests, net profits interests, net revenue interests, oil payments,
production payments, carried interests, leases, subleases, farmouts and any and
all other interests in Hydrocarbons; in each case whether now owned or hereafter
acquired directly or indirectly.
"PAID IN FULL" means the indefeasible final payment in full in
cash of all Senior Indebtedness in accordance with the Senior Documents and such
payment shall not be subject to defeasance, disgorgement, repayment or return
for any reason whatsoever.
"PERSON" means natural persons, corporations, limited
liability companies, limited partnerships, general partnerships, limited
liability partnerships, joint ventures, trusts, land trusts, business trusts, or
other organizations, irrespective of whether they are legal entities, and
governments and agencies and political subdivisions thereof.
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"REAL PROPERTY" means all present and future interests of any
Obligor as owner, lessee, or otherwise, in real property, with respect to which
any Secured Creditor, has been or is in the future granted a lien or security
interest, including all rents, issues, and profits or other proceeds arising
therefrom, including insurance proceeds, any interest arising from an option to
purchase or lease any such assets, and all of such Obligor's books and records
relating thereto.
"RECORD" means information that is inscribed on a tangible
medium or which is stored in an electronic or other medium and is retrievable in
perceivable form.
"RELATED SENIOR INDEBTEDNESS" means (i) any indebtedness of
any Obligor under the Senior Documents related to any fees and expenses incurred
by any Obligor in connection with any Senior Document, including, without
limitation, to Persons not affiliated to any Obligor or any of its Subsidiaries
in connection with any amendment (including any amendment and restatement
thereof), supplement, replacement, restatement or other modification from time
to time, including any agreements (and related instruments and documents)
extending the maturity of, refinancing, replacement or other restructuring of
all or any portion of the Indebtedness under any such Senior Document or any
successor or replacement agreements (and related instruments and documents) and
(ii) any capitalized interest, fees, or other expenses incurred by any Obligor
whether or not charged to a loan account or any similar account created under
the Senior Documents.
"SECURED CREDITOR" means any of the Senior Agent, the Senior
Lenders, the Trustee or the Noteholders, or any successor or assignee of any of
them, or any future holder of Senior Indebtedness or Junior Indebtedness,
respectively.
"SECURED CREDITOR REMEDIES" means any action by a Secured
Creditor in furtherance of the sale, foreclosure, realization upon, or the
repossession or liquidation of any of the Collateral, including, without
limitation: (i) the exercise of any remedies or rights of a "Secured Creditor"
under Article 9 of the UCC, such as, without limitation, the notification of
account debtors; (ii) the exercise of any remedies or rights as a mortgagee or
beneficiary (or by the trustee on behalf of the beneficiary), including, without
limitation, the appointment of a receiver, or the commencement of any
foreclosure proceedings or the exercise of any power of sale, including, without
limitation, the placing of any advertisement for the sale of any Collateral;
(iii) the exercise of any remedies available to a judgment creditor; (iv) the
exercise of any rights of forfeiture, recession or repossession of any assets,
or (v) any other remedy available in respect of the Collateral available to such
Secured Creditor under any Document to which it is a party or under applicable
law, provided that Secured Creditor Remedies shall not include any action taken
by a Secured Creditor solely to (A) correct any mistake or ambiguity in any
Documents or (B) remedy or cure any defect in or lapse of perfection of the lien
of a Secured Creditor in the Collateral.
"SECURED CREDITORS' INDEBTEDNESS" means, collectively, the
Senior Indebtedness and the Junior Indebtedness.
"SENIOR AGENT" has the meaning set forth in the Recitals to
this Agreement and shall include any successor agent under the Senior Loan
Agreement or any replacement or
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refinancing thereof and shall serve as the Senior Credit Facility
Representative, as such term is used in the Noteholder Indenture.
"SENIOR DOCUMENTS" means, collectively, the Senior Loan
Agreement, the Senior Security Documents, any Loan Documents (as defined in the
Senior Loan Agreement), the Senior Guaranty, the Senior Guaranty Documents and
any other document, instrument or agreement now existing or in the future
entered into evidencing, documenting, securing or otherwise relating to the
Senior Indebtedness or the Collateral, together with, to the extent not
prohibited by Section 14(a) of this Agreement, any amendments, replacements,
substitutions, or restatements thereof.
"SENIOR GUARANTY" has the meaning set forth in the Recitals to
this Agreement.
"SENIOR GUARANTY DOCUMENTS" has the meaning set forth in the
Recitals to this Agreement.
"SENIOR INDEBTEDNESS" means any and all presently existing or
hereafter arising indebtedness, reimbursement obligations, claims, debts,
liabilities, obligations (including, without limitation, any prepayment
premium), expenses or fees or indemnities (including all fees set forth in the
Fee Letter (as defined in the Senior Loan Agreement)) of the Obligors owing to
the Senior Agent and the Senior Lenders under the Senior Documents (including,
without limitation, any Bank Product Agreement), whether direct or indirect,
whether contingent (including in respect of the Senior Guaranty) or of any other
nature, character, or description (including all interest and other amounts
accruing after commencement of any Bankruptcy Case, and all interest and other
amounts that, but for the provisions of the Bankruptcy Code, would have accrued
and become due or otherwise would have been allowed), and any refinancings,
renewals, refundings, or, to the extent permitted in Section 14(a) hereof,
extensions of such amounts.
"SENIOR LENDERS" has the meaning set forth in the preamble to
this Agreement and shall include all subsequent holders of the Senior
Indebtedness.
"SENIOR LOAN AGREEMENT" has the meaning set forth in the
Recitals to this Agreement.
"SENIOR SECURITY DOCUMENTS" has the meaning set forth in the
Recitals to this Agreement.
"SPECIFIED COLLATERAL" has the meaning set forth in Section 12
of this Agreement.
"UCC" means the Uniform Commercial Code as adopted in the
State of New York, or in such other jurisdiction as governs the perfection of
the liens and security interests in the Collateral for the purposes of the
provisions hereof relating to such perfection or effect of perfection.
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(b) UCC DEFINITIONS. All other capitalized terms used in this
Agreement that are defined in the UCC shall have the meanings given to them in
the UCC unless otherwise expressly defined herein.
(c) OTHER DEFINITIONAL PROVISIONS. When used in this
Agreement: (i) the words "herein," "hereof," and "hereunder" and words of
similar import shall refer to this Agreement as a whole and not to any provision
of this Agreement; (ii) the words "include," "includes," and "including" are not
limiting; the word "or" has, except where otherwise required by the context, the
inclusive meaning represented by the phrase "and/or"; (iii) unless otherwise
specified, the words "Section," "Schedule" and "Exhibit" refer to Sections of,
and Schedules and Exhibits to, this Agreement unless otherwise specified; and
(iv) the singular number includes the plural, and vice versa, whenever the
context so requires.
2. SUBORDINATION OF JUNIOR INDEBTEDNESS.
2.1 BLOCKAGE OF PAYMENTS TO THE NOTEHOLDERS. (a) No payment in
cash or other property or otherwise (excluding securities that are subordinated
to the Senior Indebtedness to the same extent as, or more deeply than, the
Junior Indebtedness is subordinated to the Senior Indebtedness pursuant to this
Agreement) on account of any Junior Indebtedness shall be made by or on behalf
of the Obligors, and neither the Trustee nor the Noteholders will ask, demand,
sue for, take, or receive any such payment, directly or indirectly, from or on
behalf of the Obligors, if at the time of such payment or immediately after
giving effect thereto there shall have occurred and be continuing an Event of
Default (as defined in any Senior Documents) which Event of Default arises out
of the failure to make any payment with respect to any Senior Indebtedness, in
each case, until all Senior Indebtedness has been Paid in Full.
(b) Upon the occurrence of any Event of Default under any
Senior Documents other than an Event of Default described in paragraph (a) of
this Section 2.1, and upon receipt by the Trustee of written notice of such
occurrence (a "Blockage Notice"), no payment in cash or other property or
otherwise (excluding securities that are subordinated to the Senior Indebtedness
to the same extent as, or more deeply than, the Junior Indebtedness is
subordinated to the Senior Indebtedness) on account of any Junior Indebtedness
shall be made by or on behalf of the Obligors, and neither the Trustee nor the
Noteholders will ask, demand, sue for, take, or receive any such payment,
directly or indirectly, from or on behalf of the Obligors, during a period (the
"Payment Blockage Period") commencing on the date of receipt of a Blockage
Notice by the Trustee and ending 180 days thereafter, or on such earlier date,
if any, which all Senior Indebtedness has been Paid in Full or such Event of
Default is waived in writing by the Senior Lenders. There shall be at least 180
consecutive days during which no Payment Blockage Period is in effect during any
period of 365 consecutive days.
(c) If at any time following a blockage of payments to the
Trustee pursuant to paragraph (a) or (b) of this Section 2.1, the Trustee and
the Noteholders are no longer prohibited from receiving any payments with
respect to the Junior Indebtedness by such paragraphs, the Trustee and the
Noteholders shall be entitled to receive all payments with respect to the Junior
Indebtedness that have been blocked together with any default interest to the
extent provided for in the Noteholder Documents.
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2.2 PROHIBITION OF PAYMENTS OF JUNIOR INDEBTEDNESS ON
ACCELERATION OR IN BANKRUPTCY CASE. (a) Upon (i) any acceleration of any Junior
Indebtedness or (ii) any payment or distribution of assets of any Obligor, of
any kind or character, whether in cash, property or securities, following the
commencement of a Bankruptcy Case, all amounts due or to become due upon all
Senior Indebtedness shall first be Paid in Full before any payment is made on
account of any of the Junior Indebtedness; and following the commencement of a
Bankruptcy Case, any payment or distribution of assets of any Obligor of any
kind or character, whether in cash, property or securities, to which the Trustee
or the Noteholders would be entitled, except for the provisions hereof, shall be
paid by any Obligor or any other Person making such payment or distribution, or
by the Trustee or the Noteholders if received by it, directly to the Senior
Lenders, to the extent necessary to result in all Senior Indebtedness being Paid
in Full, before any payment or distribution is made to the Noteholders.
(b) In any Bankruptcy Case by or against any Obligor,
(i) the Senior Lenders may, and are hereby irrevocably
authorized and empowered (in their own name or in the name of the Trustee,
the Noteholders or otherwise), but shall have no obligation, to, (A)
demand, sue for, collect and receive every payment or distribution owing
directly or indirectly to the Noteholders referred to in this Section 2.2
and give acquittance therefor and (B) file claims and proofs of claim in
respect of the Junior Indebtedness and take such other action as the
Senior Lenders may reasonably deem necessary or advisable for the exercise
or enforcement of any of the rights or interests of the Senior Lenders
hereunder, provided that the Senior Lenders may only file claims and
proofs of claims in respect of the Junior Indebtedness or take any other
action referred to in this Section 2.2(b)(i) if there shall remain not
more than 30 days before such action is barred, prohibited or otherwise
cannot be taken; and
(ii) the Trustee and each Noteholder will use commercially
reasonable best efforts to take such action as the Senior Lenders may
reasonably request (at the Senior Lender's expense) (A) to collect the
Junior Indebtedness for the account of the Senior Lenders and to file
appropriate claims or proofs of claim with respect thereto, (B) to execute
and deliver to the Senior Lenders such powers of attorney, assignments or
other instruments as the Senior Lenders may request in order to enable
them to enforce any and all claims with respect to, and any security
interests and other liens securing payment of, the Junior Indebtedness,
and (C) to collect and receive for the account of the Senior Lenders any
and all payments or distributions which may be payable or deliverable upon
or with respect to the Junior Indebtedness.
2.3 PAYMENTS HELD IN TRUST/TURNOVER. In the event that,
notwithstanding the foregoing, any payment or distribution of assets of any
Obligor, whether in cash, property or securities, prohibited by this Agreement
shall be received by the Trustee or any Noteholder before all Senior
Indebtedness is Paid in Full such payment or distribution shall be held in trust
for the benefit of and shall be paid over to or delivered to the Senior Lenders,
until all such Senior Indebtedness shall have been Paid in Full.
2.4 SUBROGATION, ETC. No payment or distribution to the Senior
Lenders pursuant to the provisions of this Agreement shall entitle the Trustee
or the Noteholders
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to exercise any rights of subrogation, contribution, reimbursement or indemnity
in respect thereof until all Senior Indebtedness shall have been Paid in Full.
After the Senior Indebtedness has been Paid in Full, the Noteholders shall be
subrogated to the rights of the Senior Lenders to receive payments or
distributions of assets of the Obligors applicable to the Senior Indebtedness
until all amounts owing in respect of the Junior Indebtedness shall be Paid in
Full, and for the purpose of such subrogation, no such payments or distributions
to the Senior Lenders by or on behalf of the Obligors or by or on behalf of the
Trustee or the Noteholders by virtue of this Agreement which otherwise would
have been made to the Trustee or the Noteholders shall, as among the Obligors,
their creditors other than the Senior Lenders and the Trustee and the
Noteholders, be deemed to be payment by the Obligors to or on account of the
Trustee or the Senior Indebtedness, it being understood that the above
provisions relating to subordination are solely for the purpose of defining the
relative rights of the Senior Lenders on the one hand, and the Trustee and the
Noteholders, on the other hand.
3. PERMITTED LIENS AND RELATIVE PRIORITIES. As among the Secured
Creditors, and notwithstanding the terms (including the description of
Collateral), dating, execution, or delivery of any document, instrument, or
agreement; the time, order, method, or manner of granting, or perfection of any
security interest or lien; the time of filing or recording of any financing
statements, assignments, deeds of trust, mortgages, or any other documents,
instruments, or agreements under the UCC or any other applicable law; and any
provision of the UCC or any other applicable law to the contrary, the Secured
Creditors agree:
(a) The Senior Agent, on behalf of and for the benefit of the
Senior Lenders, shall have a first priority security interest in and lien upon
the Collateral; and
(b) The Trustee, on behalf of and for the benefit of the
Noteholders shall have a second priority security interest in and lien upon the
Collateral.
For purposes of the foregoing allocation of priorities, any
claim of a right to a setoff shall be treated in all respects as a security
interest and no claimed right of setoff shall be asserted to defeat or diminish
the rights or priorities provided for herein.
4. NO ALTERATION OF PRIORITY. The lien and security interest
priorities provided in Section 3 shall not be altered or otherwise affected by
any amendment, modification, supplement, extension, renewal, restatement or (to
the extent permitted in Section 14(a) hereof) refinancing of any of the Senior
Indebtedness or any Junior Indebtedness nor by any action or inaction which any
Secured Creditor may take or fail to take in respect of the Collateral. The
Secured Creditors consent to the Obligors' granting to each other Secured
Creditor the liens and security interests reflected in Section 3.
5. PERFECTION. Each of the Secured Creditors shall be solely
responsible for, and nothing herein shall prohibit any Secured Creditor from,
perfecting and maintaining the perfection of its lien or security interest in
any of the Collateral in which such party has been granted a lien or security
interest. The provisions of this Agreement are intended solely to govern the
respective priorities as among the Secured Creditors. The Trustee, on behalf of
the Noteholders agrees that it will not directly or indirectly take any action
to contest or challenge the validity, legality, perfection, priority,
availability, or enforceability of the liens of any Senior
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Lenders upon the Collateral or seek to have the same avoided, disallowed, set
aside, or otherwise invalidated in any judicial proceeding or otherwise.
6. EXERCISE OF REMEDIES; MANAGEMENT OF COLLATERAL.
Notwithstanding anything to the contrary contained in any of the Documents:
(a) Subject to Section 7, until all Senior Indebtedness has
been Paid in Full: (i) the Senior Lenders shall have the exclusive right to
manage, perform, and enforce the terms of the Senior Documents with respect to
the Collateral and to exercise and enforce all privileges and rights thereunder
in their sole discretion, including, without limitation, the exclusive right to
enforce or settle insurance claims with respect to Collateral, take or retake
control or possession of Collateral and to hold, prepare for sale, process,
sell, lease, dispose of, or liquidate Collateral; (ii) the Trustee on behalf of
the Noteholders shall not exercise any Secured Creditor Remedies with respect to
Collateral or commence, or join with any other creditor other than the Senior
Lenders in commencing, any Bankruptcy Case; and (iii) any and all proceeds of
Collateral which shall come into the possession, control, or custody of the
Trustee or the Noteholders will be deemed to have been received for the account
of the Senior Lenders and shall be immediately paid over to the Senior Lenders.
In connection with the provisions of clause 6(a)(i) above, the Trustee and the
Noteholders waive any and all rights to affect the method or challenge the
appropriateness of any action by the Senior Lenders with respect to the
Collateral, and waive any claims or defenses they may have against the Senior
Lenders, including any such claims or defenses based on any actions or omissions
of any such person in connection with the perfection, maintenance, enforcement,
foreclosure, sale, liquidation or release of any lien or security interest
therein, or any modification or waiver of any Senior Documents.
(b) The rights and priorities set forth in this Agreement
shall remain binding irrespective of the terms of any plan of reorganization in
a Bankruptcy Case or other provisions of the Bankruptcy Code or any similar
federal or state statute.
7. SALE OF COLLATERAL.
(a) Subject to clause (b) of this Section 7, until the Senior
Indebtedness has been Paid in Full: (i) only the Senior Lenders shall have the
right to restrict or permit, or approve or disapprove, the sale, transfer or
other disposition of the Collateral; and (ii) upon an event of default under any
Senior Document, the Trustee will, immediately upon the request of the Senior
Lenders, release or otherwise terminate its liens and security interests upon
the Collateral, to the extent such Collateral is sold or otherwise disposed of
by any Obligor with the consent of the Senior Lenders in accordance with the
Senior Documents, and the Trustee will immediately deliver such release
documents as the Senior Lenders may require in connection therewith to the
extent the proceeds of such sale or other dispositions are applied to the Senior
Indebtedness until Paid in Full; PROVIDED, HOWEVER, that if any such sale or
disposition results in a surplus after the Senior Indebtedness has been Paid in
Full, such surplus shall be paid to the Trustee, for the benefit of the
Noteholders, for application in accordance with the terms of the Noteholder
Documents.
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(b) Upon the occurrence and during the continuance of an event
of default under any Noteholder Documents, subject at all times to the
provisions of Section 6(a)(iii), commencing 180 days after receipt by the Senior
Lenders of the written declaration of the Noteholders or the Trustee on behalf
of the Noteholders of such event of default, the Noteholders may take action to
exercise their Secured Creditor Remedies or commence a Bankruptcy Case, but, in
the case of such action to exercise their Secured Creditor Remedies, only so
long as the Senior Lenders are not diligently pursuing in good faith the
exercise of their Secured Creditor Remedies, or are attempting to vacate any
stay of enforcement of their liens on, a material portion of the Collateral,
including, without limitation, any or all of the following: solicitation of bids
from third parties to conduct the liquidation of all or a material portion of
the Collateral, the engagement or retention of sales brokers, marketing agents,
investment bankers, accountants, appraisers, auctioneers or other third parties
for the purposes of valuing, marketing, promoting and selling a material portion
of the Collateral, the commencement of any action to foreclose on its liens on
all or any material portion of the Collateral, notification of account debtors
to make payments to the Senior Lenders or their agents, any action to take
possession of all or any material portion of the Collateral or commencement of
any legal proceedings or actions against or with respect to all or any material
portion of the Collateral, provided that, notwithstanding the foregoing, such
180 day period shall be tolled during such time as both the Senior Lenders and
the Noteholders are stayed from enforcing their liens on a material portion of
the Collateral to the extent the Senior Lenders used reasonable efforts to
attempt to vacate such stay or made a reasonable determination that any action
to vacate such stay would have been without any merit. In addition to and not by
way of limitation of the foregoing, at no time shall the Noteholders take any
action prejudicial to or inconsistent with Senior Lenders' rights and senior
priority secured position with respect to the Obligors or the assets or property
of the Obligors including, without limitation, that the Noteholders shall not
take any action that will impede, interfere with, restrict, or restrain the
exercise by the Senior Lenders of their rights and remedies under the Senior
Documents. If the Noteholders shall attempt any Secured Creditor Remedies or
attempt any other action prohibited or restricted under this Agreement, any
Obligor or the Senior Lenders may interpose as a defense or plea the making of
this Agreement and the Senior Lenders may intervene and interpose such defense
in its name or in the name of any Obligor and any Obligor or the Senior Lenders
may by virtue of this Agreement restrain the enforcement thereof in the name of
any Obligor or the Senior Lenders. Notwithstanding anything to the contrary, any
payment or distribution of cash, assets or securities of any Obligor received by
the Trustee or the Noteholders prior to all Senior Indebtedness being Paid in
Full (other than interest paid-in-kind on the Junior Indebtedness), shall be
held by the Trustee or the Noteholders in trust for and paid over to the Senior
Lenders for application to the Senior Indebtedness until such Senior
Indebtedness is Paid in Full.
(c) This Section 7 shall not be construed in any way to limit
or impair the right of (i) any Secured Creditor to bid for and purchase
Collateral at any private or judicial foreclosure upon such Collateral initiated
by any other Secured Creditor, (ii) the Noteholders to join (but not control)
any foreclosure or other judicial lien enforcement proceeding with respect to
such Collateral initiated by the Senior Lenders thereon, so long as it does not
delay or interfere with the exercise by the Senior Lenders of their rights and
(iii) subject to the terms of this Agreement, the right of the Noteholders on
any Collateral to receive payments from the proceeds of the collection, sale or
other disposition of such Collateral.
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8. SECTIONS 9-611 AND 9-613 NOTICE AND WAIVER OF MARSHALLING.
Each Secured Creditor hereby acknowledges that this Agreement shall constitute
notice of the other Secured Creditors' respective interests in the Collateral as
provided by Sections 9-611, 9-613 of the UCC and each of the Secured Creditors
waives any right to compel the other Secured Creditors to marshal any of the
Collateral or to seek payment from any particular assets of any Obligor or from
any third party.
9. INSURANCE OR CONDEMNATION. In the event of:
(a) a taking or threatened taking by condemnation or other
eminent domain of all or any portion of any Real Property or any Oil and Gas
Property (collectively, a "Taking") or
(b) the occurrence of a fire or other casualty resulting in
damage to all or any portion of any Collateral (collectively, a "Casualty"):
(i) the Noteholders hereby waive any right to participate
or join in any adjustment, compromise, or settlement of any claims
resulting from a Taking or a Casualty with respect to any Collateral;
(ii) all proceeds received or to be received on account of
a Taking and/or Casualty shall be applied in the manner or manners
provided for in the Senior Documents; and
(iii) the Noteholders agree to execute and deliver any
documents, instruments, agreements or further assurances required to
effectuate any of the foregoing.
10. BANKRUPTCY ISSUES.
(a) Except as provided in this Section 10, this Agreement
shall continue in full force and effect after the commencement of a Bankruptcy
Case (all references herein to Obligors being deemed to apply to Obligors as
debtor-in-possession and to a trustee for Obligors' estate in a Bankruptcy
Case), and shall apply with full force and effect with respect to all Collateral
acquired by such Obligors, and to all Secured Creditors' Indebtedness incurred
by Obligors, subsequent to such commencement.
(b) If any Obligor shall become subject to a Bankruptcy Case,
and if the Senior Agent and the Senior Lenders shall desire to permit the use of
cash collateral or to provide post-petition financing to such Obligor, the
Noteholders agree as follows: (i) adequate notice to the Noteholders shall be
deemed to have been provided for such use of cash collateral or post-petition
financing if the Trustee receives written notice thereof at least three (3)
Business Days prior to any hearing on a request to approve such use of cash
collateral or post-petition financing; and (ii) no objection will be raised by
the Noteholders to any such use of cash collateral or such post-petition
financing by the Senior Agent and the Senior Lenders, provided that (x) the
Trustee, on behalf of and for the benefit of the Noteholders, or the Noteholders
are granted the same liens and security interests on the post-petition
Collateral that may be granted to or for the benefit of the Senior Agent and the
Senior Lenders, junior only to the liens or
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security interests of the Senior Agent and the Senior Lenders therein and (y)
the aggregate principal amount of pre-petition secured indebtedness together
with the aggregate principal amount of financing in such Bankruptcy Case will
not exceed, at the time of determination, the Maximum Senior Indebtedness
(excluding any Related Senior Indebtedness and Senior Indebtedness under any
Bank Product Agreement). No objection will be raised by the Noteholders to the
Senior Agent's motion for relief from the automatic stay in any proceeding under
the Bankruptcy Code to foreclose on and sell the Collateral.
11. NOTICE OF DEFAULT AND CERTAIN EVENTS. Each Secured Creditor
(or the Senior Agent or the Trustee, as applicable) shall send written notice to
each other Secured Creditor (or the Senior Agent or the Trustee, as applicable)
upon the occurrence of any of the following as applicable:
(a) the declaration of any default under such Secured
Creditor's Documents, or the acceleration of any of such Secured Creditor's
Indebtedness; or
(b) the commencement of any sale or liquidation of, or
realization upon, any of the Collateral.
Each such notice shall be sent to each other Secured Creditor
(or the Senior Agent or the Trustee, as applicable) contemporaneously with the
sending of such notice to Obligors if and when sent under the applicable
Documents. The failure of any Secured Creditor to give such notice shall not
affect the relative lien or security interest priorities or the other privileges
of such Secured Creditor as provided in this Agreement or give rise to any
liability.
12. BAILMENT. With respect to any Collateral in which a security
interest may be perfected under the UCC or other relevant law by possession or
with respect to which the rights or interests granted to the Noteholders may be
precluded by or inconsistent with the rights or interests granted to the Senior
Lender ("Specified Collateral"), the Senior Lenders will act as pledgeholder
and/or bailee for the Noteholders until the Senior Indebtedness is Paid in Full,
whereupon possession of or the other rights with respect to any such Specified
Collateral remaining shall be immediately transferred to the Trustee for the
benefit of the Noteholders; and immediately upon such transfer of possession or
the other rights the Trustee shall become the pledgeholder and/or the bailee of
the Specified Collateral for the benefit of the Noteholders. The Trustee
acknowledges and agrees that: (a) the Senior Lenders do not make any
representation or warranty whatsoever as to the nature, extent, description,
validity or priority of any Specified Collateral or the security interests in or
liens upon any Specified Collateral; (b) while any Specified Collateral is held
by the Senior Lenders, the Senior Lenders shall not have any liability to, and
shall be held harmless by, the Noteholders, for any losses, damages, claim, or
liability of any kind to the extent arising out of the holding of such Specified
Collateral, other than losses, damages, claims, or liabilities arising out of
the Senior Lender's gross negligence or willful misconduct; (c) the Senior
Lender need not act as a pledgeholder for the Noteholders with respect to any
Collateral in which a security interest may be perfected by means other than
possession; (d) the Trustee and the Noteholders shall immediately deliver to the
Senior Lenders any Specified Collateral that is now in or in the future comes
into their possession until the Senior Indebtedness is Paid in Full; and (e) the
priority of the Secured Creditors' security
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interests in and liens upon the Specified Collateral shall be governed by the
terms of this Agreement.
13. AUTHORITY OF THE SENIOR AGENT AND THE TRUSTEE.
(a) The Senior Agent represents and warrants that the
execution, delivery and performance by it of this Agreement has been duly
authorized by the Senior Lenders and that this Agreement constitutes the legal,
valid and binding obligation of the Senior Agent and the Senior Lenders,
enforceable against each of them in accordance with its terms.
(b) The Trustee represents and warrants that the execution,
delivery and performance by it of this Agreement has been duly authorized by the
Noteholders and that this Agreement constitutes the legal, valid and binding
obligation of the Trustee and the Noteholders, enforceable against each of them
in accordance with its terms.
(c) The Trustee agrees that any assignment or transfer of an
interest in any of the Junior Indebtedness shall be made expressly subject to
the terms and conditions of this Agreement. The Senior Agent is the agent for
the Senior Lenders for all purposes of this Agreement and each Person that
becomes a Senior Lender after the date of this Agreement shall execute and
deliver to the Senior Agent an acknowledgment and consent to the terms of this
Agreement. The Trustee is the trustee for the Noteholders for all purposes of
this Agreement and each Person that becomes a Noteholder after the date of this
Agreement shall execute and deliver to the Trustee an acknowledgement and
consent to the terms of this Agreement.
14. MODIFICATION OF DOCUMENTS; ADDITIONAL COVENANTS.
(a) The Trustee agrees that the Senior Lenders shall have
absolute power and discretion, without notice to the Noteholders, to deal in any
manner with the Senior Indebtedness, including, but not by way of limitation,
the power and discretion to do any of the following: (i) any demand for payment
of any Senior Indebtedness may be rescinded in whole or in part, and any Senior
Indebtedness may be continued, and the Senior Indebtedness or the liability of
Obligors upon or for any part thereof, or any Collateral or guaranty therefor,
or right of offset with respect thereto, may, from time to time, in whole or in
part, be renewed, extended, modified, accelerated, compromised, waived,
surrendered, or released; and (ii) the Senior Documents may be amended,
modified, supplemented, refinanced, renewed, refunded, extended or terminated,
in whole or in part, as the Senior Lenders may deem advisable from time to time,
provided that, notwithstanding clauses (i) and (ii) above, the Senior Lenders
shall not (A) increase the principal amount of the Senior Indebtedness
(excluding any Related Senior Indebtedness and Senior Indebtedness under any
Bank Product Agreement) to a principal amount in excess of the Maximum Senior
Indebtedness, less the outstanding Term Loan (as defined in the Senior Loan
Agreement) or (B) extend the final maturity of the Senior Indebtedness beyond
January 23, 2008, and (iii) any Collateral may be sold, exchanged, waived,
surrendered, or released. The Noteholders will remain bound under this
Agreement, and the subordination provided for herein shall not be impaired,
abridged, released, or otherwise affected notwithstanding any such renewal,
extension, modification, acceleration, compromise, amendment, supplement,
termination, sale, exchange, waiver, surrender, or release, in each case, to the
extent permitted by this Agreement. The Senior Indebtedness shall conclusively
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be deemed to have been created, contracted, or incurred in reliance upon this
Agreement, and all dealings between the Senior Lenders on the one hand, and the
Obligors, on the other hand, shall be deemed to have been consummated in
reliance upon this Agreement.
(b) Without the prior written consent of the Senior Lenders,
the Noteholders agree not to amend, modify or supplement, in whole or in part,
any terms or provisions of any Noteholder Document in a manner adverse to the
Senior Agent or the Senior Lenders.
(c) So long as any of the Senior Indebtedness shall remain
outstanding, the Noteholders will not, without the prior written consent of the
Senior Lenders:
(i) (A) except as otherwise expressly permitted in this
Agreement, cancel or otherwise discharge any Junior Indebtedness (except
upon payment in full thereof to the Noteholders or the Senior Lenders as
contemplated hereby), or (B) subordinate any Junior Indebtedness to any
indebtedness of any Obligor other than the Senior Indebtedness; or
(ii) except to the extent permitted by Section 7(b),
commence, or join with any creditor other than the Senior Lenders in
commencing, any Bankruptcy Case.
15. THE NOTEHOLDERS' WAIVERS. Each Noteholder waives: (a) any
and all notice of the creation, modification, renewal, extension, or accrual of
any of the Senior Indebtedness and notice of or proof of reliance by Senior
Lenders upon this Agreement; (b) agrees not to assert against the Senior
Lenders, any rights which a guarantor or surety could exercise, but nothing in
this Agreement shall constitute any Noteholder as a guarantor or surety; and (c)
prior to the time the Senior Indebtedness is Paid in Full, any right of
subrogation, contribution, reimbursement, or indemnity which it may have against
any Obligor arising directly or indirectly out of this Agreement.
16. BINDING EFFECT; OTHER. This Agreement shall be a continuing
agreement, shall be binding upon and shall inure to the benefit of the parties
hereto from time to time and their respective successors and assigns, shall be
irrevocable, and shall remain in full force and effect until the Senior
Indebtedness shall have been Paid in Full, but shall continue to be effective,
or be reinstated, as the case may be, if any payment, or any part thereof, of
any amount paid by or on behalf of any Obligor with regard to any Senior
Indebtedness is rescinded or must otherwise be restored or returned upon or as a
result of any Bankruptcy Case, or for any other reason, all as though such
payments had not been made. Any waiver or amendment hereunder must be evidenced
by a signed writing of the party to be bound thereby, and shall only be
effective in the specific instance, PROVIDED, HOWEVER, that, such waivers or
amendments shall not require the signature of any Obligor but shall binding upon
each Obligor as if each such Obligor were a signatory to such waiver or
amendment. This Agreement shall be governed by and construed in accordance with
the laws of the State of New York. The parties agree that any actions arising
out of or in connection with this Agreement shall be tried and litigated in the
state and federal courts located in the County of New York, in the State of New
York. The headings
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in this Agreement are for convenience of reference only, and shall not alter or
otherwise affect the meaning hereof.
17. PARTIES INTENDED TO BE BENEFITED. All of the understandings,
covenants, and agreements contained herein are solely for the benefit of the
Senior Agent, the Senior Lenders, the Trustee and the Noteholders, their
respective successors and assigns, and future holders of the Senior Indebtedness
and the Junior Indebtedness respectively, and there are no other parties,
including any Obligor or any of their creditors, successors, or assigns, which
are intended to be benefited, in any way, by this Agreement.
18. NO LIMITATION INTENDED. Nothing contained in this Agreement
is intended to or shall affect or limit, in any way, the rights that the Senior
Agent, the Senior Lenders, the Trustee and the Noteholders have with respect to
any third parties. The Senior Agent, the Senior Lenders, the Trustee and the
Noteholders hereby specifically reserve all of their respective rights against
the Obligors and all other third parties.
19. NOTICE. Whenever it is provided herein that any notice,
demand, request, consent, approval, declaration, or other communication shall or
may be given to or served upon any of the parties hereto, or whenever any of the
parties desires to give or serve upon the other communication with respect to
this Agreement, each such notice, demand, request, consent, approval,
declaration, or other communication shall be in writing and shall be delivered
either in person or by registered, or certified United States mail, postage
prepaid, by facsimile, or by recognized overnight courier service, addressed as
follows:
19.1 If to the Senior Agent, at:
FOOTHILL CAPITAL CORPORATION
2450 Colorado Avenue
Suite 3000 West
Santa Monica, California 90404
Attn: Business Finance Division Manager
Fax No. 310-478-9788
with a copy to:
SCHULTE ROTH & ZABEL LLP
919 Third Avenue
New York, New York 10022
Attn: Frederic L. Ragucci, Esq.
Fax No. 212-593-5955
19.2 If to the Trustee, at:
U.S. Bank, National Association
180 East 5th Street
St. Paul, Minnesota 55101
Attn: Corporate Trust Administration
Fax No. 651-244-0711
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19.3 If to the Obligors, at:
Abraxas Petroleum Corporation
500 North Loop 1604 East
Suite 100
San Antonio, Texas 78232
Attn: Robert Carington
Fax No. 210-490-8816
with a copy to:
Cox & Smith Incorporated
112 East Pecan, Suite 1800
San Antonio, Texas 78205
Attn: Steve R. Jacobs, Esq.
Fax No. 210-226-8395
or at such other address as may be substituted by notice given as herein
provided. Giving of any notice required hereunder may be waived in writing by
the party entitled to receive such notice. Every notice, demand, request,
consent, approval, declaration or other communication hereunder shall be deemed
to have been duly given when received.
20. SEVERABILITY. Whenever possible, each provision of this
Agreement shall be interpreted in such manner as to be effective and valid under
applicable law, but if any provision of this Agreement shall be prohibited by or
invalid under applicable law, such provision shall be ineffective to the extent
of such prohibition or invalidity, without invalidating the remainder of such
provision or the remaining provisions of this Agreement.
21. COMPLETE AGREEMENT. This Agreement constitutes the complete
agreement and understanding of each of the Secured Creditors, and supersedes all
prior or contemporaneous oral and written negotiations, agreements and
understandings, express or implied, with respect to the subject matter hereof.
22. NO JOINT VENTURE. Each of the Secured Creditors acknowledges
and confirms that this Agreement shall not create a joint venture, agency or
fiduciary relationship.
23. COUNTERPARTS. This Agreement may be executed in any number
of counterparts, and by the parties each in separate counterparts, each of which
shall be an original, but all of which shall together constitute one and the
same Agreement.
24. WAIVER OF JURY TRIAL. THE SENIOR AGENT, THE SENIOR LENDERS,
THE TRUSTEE AND THE NOTEHOLDERS HEREBY EXPRESSLY WAIVE ANY RIGHT TO TRIAL BY
JURY OF ANY CLAIM, DEMAND, ACTION OR CAUSE OF ACTION (A) ARISING UNDER THIS
AGREEMENT OR ANY OTHER INSTRUMENT, DOCUMENT, OR AGREEMENT EXECUTED OR DELIVERED
IN CONNECTION HEREWITH, OR (B) IN ANY WAY CONNECTED WITH OR RELATED OR
INCIDENTAL TO THE DEALINGS OF THE SENIOR AGENT, THE SENIOR LENDERS, THE TRUSTEE
AND THE NOTEHOLDERS WITH RESPECT TO THIS AGREEMENT OR ANY OTHER
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INSTRUMENT, DOCUMENT OR AGREEMENT EXECUTED OR DELIVERED BY THEM IN CONNECTION
HEREWITH, OR THE TRANSACTIONS RELATED HERETO OR THERETO, IN EACH CASE WHETHER
NOW EXISTING OR HEREAFTER ARISING, AND WHETHER SOUNDING IN CONTRACT OR TORT OR
OTHERWISE. THE SENIOR AGENT, THE SENIOR LENDER, THE TRUSTEE AND THE NOTEHOLDERS
HEREBY AGREE AND CONSENT THAT ANY CLAIM, DEMAND, ACTION OR CAUSE OF ACTION SHALL
BE DECIDED BY COURT TRIAL WITHOUT JURY, AND THAT ANY OF THEM MAY FILE AN
ORIGINAL COUNTERPART OR A COPY OF THIS SECTION WITH ANY COURT AS WRITTEN
EVIDENCE OF THE CONSENT TO THE WAIVER OF RIGHT TO TRIAL BY JURY.
25. SPECIFIC PERFORMANCE. Each of the parties agrees and
acknowledges that in the event of any breach of this Agreement, the
non-breaching party would be irrevocably harmed and would not be made whole by
monetary damages. It is accordingly agreed that the parties hereto shall and do
hereby waive the defense in any action for specific performance that a remedy at
law would be adequate and that the parties hereto, in addition to any other
remedy to which they made be entitled at law or in equity, shall be entitled to
compel specific performance of this Agreement in any action instituted in the
Supreme Court of the State of New York or the United States District Court of
the Southern District of New York, or, in the event such courts shall not have
jurisdiction of such action, in any court of the United States or any state
thereof having subject matter jurisdiction of such actions.
26. LEGEND; FURTHER ASSURANCES.
(a) The Trustee and each Obligor will cause each Noteholder
Document and any other instrument or agreement hereafter evidencing or
guaranteeing any Junior Indebtedness to be indorsed with substantially the
following legend:
"The indebtedness evidenced by this instrument is subordinated to
the prior payment in full of the Senior Indebtedness (as defined in
the Intercreditor and Subordination Agreement hereinafter referred
to) pursuant to, and to the extent provided in, the Intercreditor
and Subordination Agreement, dated as of January 23, 2003, among
Foothill Capital Corporation, in its capacity as agent to the
lenders from time to time party to the Loan and Security Agreement
dated January 22, 2003, and U.S. Bank, National Association, as
trustee to the holders of the 11-1/2% Secured Notes due 2007 of
Abraxas Petroleum Corporation, Sandia Oil & Gas Corporation, Sandia
Operating Corp., Eastside Coal Company, Inc., Western Associated
Energy Corporation, Wamsutter Holdings Inc. and Grey Wolf
Exploration Inc."
(b) The Noteholders and the Obligors will (i) mark their books
or accounts or take such other action as shall be effective to give reasonable
notice of the effect of this Agreement and (ii) in the case of any Junior
Indebtedness which is not evidenced by any instrument, upon Senior Lenders'
request, cause such Junior Indebtedness to be evidenced by an appropriate
instrument or instruments indorsed with the above legend. The Noteholders and
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Obligors will, at Obligors' expense and at any time and from time to time,
promptly execute and deliver all further instruments and other documents, and
take all further action, that may be necessary or, in the opinion of the Senior
Lenders, desirable, or that the Senior Lenders may request, in order to protect
any right or interest granted or purported to be granted hereby or to enable the
Senior Lenders to exercise and enforce their rights and remedies hereunder.
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed as of the date first herein above set forth.
FOOTHILL CAPITAL CORPORATION,
as Senior Agent
/s/ JOSH EASTERLY
--------------
Vice President
U.S. BANK, N.A.,
as Trustee
/s/ FRANK LESLIE
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Vice President
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Each of the undersigned hereby acknowledges and agrees to the
foregoing terms and provisions. By its signature below, the undersigned agrees
that it will, together with its successors and assigns, be bound by the
provisions hereof.
The undersigned agrees that any Secured Creditor holding Collateral
does so as bailee (under the UCC) for each other Secured Creditors which has a
lien on such Collateral and is hereby authorized to and may turn over to such
other Secured Creditors upon request therefor any such Collateral, after all
obligations and indebtedness of the undersigned to the bailee Secured Creditors
have been fully paid and performed.
Each of undersigned acknowledges and agrees that: (i) although it
may sign this Intercreditor and Subordination Agreement it is not a party hereto
for purposes of receiving any right, benefit, priority or interest under or
because of the existence of the foregoing Intercreditor and Subordination
Agreement, and (ii) it will execute and deliver such additional documents and
take such additional action as may be necessary or desirable in the reasonable
opinion of any of the Secured Creditors to effectuate the provisions and
purposes of the foregoing Intercreditor and Subordination Agreement.
ABRAXAS PETROLEUM CORPORATION
/s/ ROBERT W. CARINGTON, JR.
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Executive Vice President
SANDIA OIL & GAS CORPORATION
/s/ ROBERT W. CARINGTON, JR.
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Vice President
SANDIA OPERATING CORP.
/s/ ROBERT W. CARINGTON, JR.
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Vice President
EASTSIDE COAL COMPANY, INC.
/s/ ROBERT W. CARINGTON, JR.
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Vice President
WESTERN ASSOCIATED ENERGY CORPORATION
/s/ ROBERT W. CARINGTON, JR.
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Vice President
WAMSUTTER HOLDINGS, INC.
/s/ ROBERT W. CARINGTON, JR.
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Vice President
GREY WOLF EXPLORATION INC.
/s/ ROBERT W. CARINGTON, JR.
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Vice President