INTERCREDITOR AGREEMENT
INTERCREDITOR AGREEMENT dated as of May 20, 1997
(together with all amendments and supplements thereto, the
"Agreement"), by and among XCL Ltd., a Delaware corporation (the
"Company"), ING (U.S.) Capital Corporation ("ING"), ▇▇▇ ▇. ▇▇▇▇,
as agent (the "Agent") on behalf of the holders (the
"Subordinated Debt Holders") of the Secured Subordinated Notes of
the Company due April 5, 2000 (the "Subordinated Notes")
identified on Schedule A attached hereto, and Fleet National
Bank, as trustee (in such capacity, together with its successor
in trust appointed pursuant to the Indenture (as defined below),
the "Trustee") for the holders (the "Noteholders") of the Notes
(as defined below). Capitalized terms not otherwise defined
herein shall have the meanings assigned to them in the Indenture.
W I T N E S S E T H:
WHEREAS, the Company has entered into a credit
agreement with ING (the "Credit Facility") pursuant to which the
Company has had varying amounts of outstanding Indebtedness owed
to ING from time to time (all debts, liabilities and obligations
of any character whatsoever which are owed to ING by the Company
or any of its subsidiaries are herein called the "ING
Obligations", whether the same are owed as principal, surety,
endorser, guarantor, accommodation party or otherwise, whether
now existing or hereafter incurred or arising, whether principal,
interest, fees or expenses, whether direct, indirect, contingent,
primary, secondary, joint and several, joint or several, or
otherwise, and irrespective of the manner in which the same arise
or were created or the manner in which ING may have acquired
rights with respect thereto, and expressly including any interest
accruing after the commencement of any insolvency proceeding
whether or not such interest is an allowed claim enforceable in
such proceeding); and
WHEREAS, the Company has issued the Subordinated Notes
in the aggregate principal amount of $15,000,000 to the
Subordinated Debt Holders; and
WHEREAS, the Company and the Trustee have entered into
an Indenture dated as of May 20, 1997 (as the same may be
amended, modified or supplemented from time to time in accordance
with its terms, the "Indenture"), pursuant to which the Company
will issue $75,000,000 aggregate principal amount of 13.50%
Senior Secured Notes due May 1, 2004, Series A (the "Initial
Notes") and 13.50% Senior Secured Notes due May 1, 2004, Series B
to be issued in exchange for the Initial Notes (the "Exchange
Notes" and, together with the Private Exchange Notes (as defined
in the Indenture) and the Initial Notes, the "Notes"); and
WHEREAS, the Company, the Trustee, Fleet National Bank,
as disbursement agent (the "Disbursement Agent"), and ▇▇▇▇▇▇ ▇.
▇▇▇▇▇▇▇▇▇▇▇ & Associates, Inc., as representative acting on
behalf of the Noteholders, have entered into a Cash Collateral
and Disbursement Agreement dated as of May 20, 1997 (the "Cash
Collateral and Disbursement Agreement"), establishing (i) two
cash collateral accounts (the "Collateral Accounts") in the name
of the Company, as more fully identified on Schedule I to the
Security Agreement, Pledge and Financing Statement dated as of
May 20, 1997 (the "Security Agreement" and, together with the
Indenture and the Cash Collateral and Disbursement Agreement, the
"Security Documents"), by the Company in favor of the Trustee,
under the control of the Trustee and the Disbursement Agent, into
which the Company has agreed to deposit all of the proceeds (the
"Proceeds") received by it from the issuance and sale of the
Units (the "Units"), each consisting of $1,000 aggregate
principal amount of the Initial Notes and one Common Stock
Purchase Warrant to purchase 1,280 shares of Common Stock of the
Company, pursuant to the offering (the "Offering") described in
the Final Offering Memorandum dated May 13, 1997 (the "Offering
Memorandum") of the Company, and (ii) the terms and conditions of
the release of the funds from the Collateral Accounts; and
WHEREAS, pursuant to the Security Documents, the
Company has granted the Trustee, for the ratable benefit of the
Noteholders, a Security Interest in and to, and first Lien on,
the "Collateral", as such term is defined in Schedule I attached
hereto and made apart hereof;
WHEREAS, the parties hereto wish to enter into an
agreement setting forth their respective rights and obligations
with respect to the property and assets of the Company in certain
circumstances.
NOW, THEREFORE, in consideration for the premises,
covenants and agreements contained herein and other good and
valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, the parties hereto agree as follows.
SECTION 1. Collateral Accounts.
(a) Each of ING and each Subordinated Debt
Holder agrees that the sale of the Units and the deposit of the
Proceeds in the Collateral Accounts as contemplated in the
Offering Memorandum and the Security Documents, and the
execution, delivery and performance of this Agreement, shall not
constitute a default or event of default, with or without notice
or the passage of time or both, under either the Credit Facility
or the Subordinated Notes.
(b) In the event any principal payment shall
become due with respect to the Notes, whether as a result of a
Mandatory Redemption, a purchase of the Notes by the Company
following a Change of Control or upon acceleration of the Notes
following an Event of Default, the Collateral shall be disbursed
to the Trustee, for the ratable benefit of the Noteholders, and
shall be applied first to the payment of any and all Obligations
of the Company under the Notes and the Security Documents (the
"Note Obligations") and, only after the Note Obligations have
been paid and discharged in full, next to the payment of any ING
Obligations and last to any obligations of the Company to the
Subordinated Debt Holders under the Subordinated Notes (the ING
Obligations and the Subordinated Debt being collectively referred
to herein as the "Existing Secured Debt").
(c) Any and all determinations regarding the
exercise of remedies against the Collateral shall be made by the
Trustee at the direction of the holders of a majority of the
outstanding principal amount of the Notes.
(d) Each of ING and each Subordinated Debt
Holder agrees that (i) it shall have no security interest in the
Collateral, irrespective of the terms and provisions of any
pledge or security agreements heretofore entered into by it and
the Company and any Subsidiary with respect to the Existing
Secured Debt, or the recording or filing of any financing
statements or other recordings or filings with respect to such
obligations of the Company, and (ii) at all times, it shall
refrain from taking any action to foreclose upon, take possession
of, liquidate or otherwise proceed against the Collateral, except
after all of the Note Obligations have been paid and discharged
in full or with the prior written consent of the holders of a
majority of the outstanding principal amount of the Notes.
(e) As used herein, "Shortfall Obligations"
means (i) any claim against the Company by the Trustee, the
Disbursement Agent or the Noteholders (or any person acting for
their benefit) for any portion of the Note Obligations which has
not been or cannot be satisfied by means of recourse to the
Collateral, and (ii) any obligation of the Company to the
Trustee, the Disbursement Agent or the Noteholders (or any person
acting for their benefit) to deposit additional funds into the
Collateral Accounts or otherwise provide collateral or funds from
any source other than the proceeds from the sale of the Notes,
and (iii) any claim of any kind by the Trustee, the Disbursement
Agent or the Noteholders (or any person acting for their benefit)
against any subsidiary of the Company.
SECTION 2. Extinguishment of the Existing Secured Debt.
At such time as the funds on deposit in the
applicable Collateral Account are disburseable to the Company in
accordance with the provisions of the Cash Collateral and
Disbursement Agreement, the Company shall, in connection with any
such disbursement, satisfy all of the outstanding Existing
Secured Debt, which shall then be extinguished.
SECTION 3. Other Assets of the Company.
(a) All Shortfall Obligations are hereby
expressly and in all respects subordinated and made junior and
inferior to the Existing Secured Debt, and until the Existing
Secured Debt is paid and discharged in full (i) neither the
Trustee, the Disbursement Agent nor any Noteholder shall have any
lien or security interest on any property or assets of the
Company other than the Collateral (or on any property or assets
of the Company's subsidiaries), (ii) no Person to whom Shortfall
Obligations are owed shall accept, receive or collect (by set-off
or any other manner) any payment or distribution on account of,
or ask for, demand or accelerate, directly or indirectly, any
Shortfall Obligation, or foreclose upon, take possession of,
liquidate or otherwise proceed against any such property other
than the Collateral, and (iii) the Company shall not make any
payment of Shortfall Obligations.
(b) Upon any distribution of all or any of the
assets of the Company upon the dissolution, winding up,
liquidation or reorganization of the Company (whether or not in
any insolvency proceeding), or upon any assignment for the
benefit of creditors or any other marshalling of the assets and
liabilities of the Company, then any payment or distribution of
any kind (whether in cash, securities or other property) which
otherwise would be payable or deliverable upon or with respect to
the Shortfall Obligations shall be paid and delivered directly to
ING (until the ING Obligations have been paid and discharged in
full), and then to the Agent (until the Subordinated Debt has
been paid and discharged in full). During the pendency of any
insolvency proceeding with respect to the Company, the Trustee
shall promptly execute, deliver and file any documents and
instruments which ING may from time to time request in order to
(i) file appropriate proofs of claim in respect of the Shortfall
Obligations in such insolvency proceeding, (ii) instruct any
receiver, trustee in bankruptcy, liquidating trustee, agent or
other Person making any payment or distribution in such
insolvency proceeding to make all payments which might otherwise
be payable or deliverable in respect of the Shortfall Obligations
directly to ING or the Agent, and (iii) otherwise effect the
purposes of this Agreement. In addition, ING is hereby
irrevocably authorized (but not in any way obligated), as the
agent and attorney of Trustee and Noteholders, to file any such
proofs of claim and give any such instructions in any such
insolvency proceeding and to otherwise prosecute and enforce all
claims for the Shortfall Obligations in any such insolvency
proceeding and to exercise any rights in any such proceeding
which accrue to the holders of the Shortfall Obligations.
(c) If Trustee, Disbursement Agent or any
Noteholder receives any payment or distribution of any kind
(whether in cash, securities or other property) in contravention
of this Agreement, it shall hold such payment or distribution in
trust for ING and the Subordinated Debt Holders and immediately
deliver the same to ING (until the ING Obligations have been paid
and discharged in full) and then to the Agent (until the
Subordinated Debt has been paid and discharged in full) to be
applied first to the ING Obligations and then to the Subordinated
Notes.
(d) No action or inaction of ING, the Agent,
any Subordinated Debt Holder, the Company or any other Person,
and no change of law or circumstances, shall release or diminish
the obligations, liabilities, agreements or duties under this
Section 3 of the Trustee, the Disbursement Agent or any
Noteholder or the rights under this Section 3 of ING, the Agent
or the Subordinated Debt Holders.
SECTION 4. Further Assurances. Each party hereto
covenants to execute and deliver, file and record such further
instruments and documents and to take such further action as any
party hereto may at any time or times reasonably request, at such
requesting party's expense, in order to carry out the provisions
and intent of this Agreement.
SECTION 5. Notices. Any notice or other
communication in connection with this Agreement shall be
effective if made in writing, addressed to such party at its
address set forth underneath its signature below, and delivered
or mailed first class mail, postage prepaid, or sent by facsimile
transmissions (provided confirmation of receipt is received); or
delivered, marked or sent by facsimile to such other addresses as
the addressee shall have specified by notice given in compliance
with this Section. All notices to any Holder shall be given by
delivering or mailing such notice to the Trustee. All notices to
any Subordinated Debt Holder shall be given by delivering or
mailing such notice to the Agent. Notices shall be deemed given
upon the earlier to occur of (i) the third day following deposit
thereof in the U.S. mail, first class postage prepaid, or (ii)
receipt by the party to whom such notice is directed.
SECTION 6. Benefit of Agreement; Obligations
Several. This Agreement shall be binding upon and inure to the
benefit of and be enforceable by the respective heirs,
administrators, successors and assigns of the parties hereto.
The obligations of each of the parties to this Agreement are
several and not joint.
SECTION 7. Governing Law. This Agreement and the
rights and obligations of the parties hereunder shall be
construed in accordance with and be governed by the laws of the
State of New York. Any legal action or proceeding with respect
to this Agreement shall be brought in the competent courts of the
State of New York, sitting in the City of New York, or of the
United States of America for the Southern District of New York
and, by execution and delivery of this Agreement, each party
hereto hereby accepts for itself and in respect of its property,
generally and unconditionally, the non-exclusive jurisdiction of
the aforesaid courts and agrees to waive any objection to venue.
Any legal process in any sale, action or proceeding may be
delivered by first class mail, postage prepaid, in accordance
with the notice provisions of Section 5 provided a sufficient
amount of time is allowed to respond to such process.
SECTION 8. Counterparts. This Agreement may be
executed in any number of counterparts and by the different
parties hereto on separate counterparts, each of which when so
executed and delivered shall be an original, but all of which
shall together constitute one and the same instrument.
SECTION 9. Effectiveness. This Agreement shall
become effective on the date on which all of the parties hereto
shall have signed a copy hereof (whether the same or different
copies). This Agreement shall remain effective until the earlier
of a date on which (i) all Note Obligations have been irrevocably
paid in full, provided that once the Note Obligations shall have
been irrevocably paid in full and each Holder's rights and
obligations under the Indenture have been terminated, such Holder
shall have no further rights or obligations hereunder, and (ii)
all of the Indebtedness under the Existing Secured Debt shall
have been extinguished.
SECTION 10. Headings Descriptive. The headings of
the several sections of this Agreement are inserted for
convenience only and shall not in any way affect the meaning or
construction of any provision of this Agreement.
SECTION 11. Amendment or Waiver. This Agreement
may be amended, changed, waived or terminated with the written
consent of the Company, ING, the holders of seventy percent (70%)
of the outstanding principal amount of the Subordinated Notes,
the Trustee, and the Holders of a majority of the outstanding
principal amount of the Notes, provided that such amendment,
waiver, modification or termination shall not impair the right of
the Holders to receive payments under the Indenture and the Notes
as and when due; provided, further, however, that no such consent
of any Holder shall be required if all the Obligations of the
Company under the Indenture and the Notes to such Holder shall
have been irrevocably paid in full and are no longer outstanding.
The prior written consent of ING will be required to any
amendment of the Cash Collateral and Disbursement Agreement.
SECTION 12. Inconsistent Provisions. If any
provision of this Agreement shall be inconsistent with, or
contrary to, any provision in any Security Document, the Credit
Facility, the Subordinated Notes, or any document ancillary or
related thereto or providing security in connection therewith,
the provision in this Agreement shall be controlling, and shall
supersede such inconsistent provision to the extent necessary to
give full effect to all provisions contained in this Agreement.
SECTION 13. Consent to Representation. Guinness
▇▇▇▇▇ & Co. Limited and the Trustee, on behalf of the
Noteholders, hereby consent to the legal representation by ▇▇▇▇▇▇
& ▇▇▇▇▇▇ L.L.P., Houston, Texas, of the Initial Purchaser (as
defined in the Offering Memorandum) in the Offering of the Units.
IN WITNESS WHEREOF, the Company, ING, the Subordinated
Debt Holders and the Trustee have caused this Agreement to be
duly executed by their respective representatives, thereunto duly
authorized, as of the date and year first above written.
XCL LTD.
By:________________________________
Name:
Title:
Address for Notice Purposes:
▇▇▇ ▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: Marsden ▇. ▇▇▇▇▇▇, ▇▇.
Telecopier No.: (▇▇▇) ▇▇▇-▇▇▇▇
ING (U.S.) CAPITAL CORPORATION
By:________________________________
Name:
Title:
Address for Notice Purposes:
▇▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇ ▇▇▇▇▇▇▇
Telecopier No.: (▇▇▇) ▇▇▇-▇▇▇▇
FLEET NATIONAL BANK,
as Trustee and on behalf of the
Noteholders
By:________________________________
Name:
Title:
Address for Notice Purposes:
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: Corporate Trust
Administration
Ref: XCL Ltd.
Telecopier No.: (▇▇▇) ▇▇▇-▇▇▇▇
SUBORDINATED DEBT HOLDERS
Identified on Schedule A attached
hereto and made a part hereof:
By:________________________________
▇▇▇ ▇. ▇▇▇▇, as agent under an
Agency Agreement dated as of
April 2, 1993 for the
benefit of the Subordinated
Debt Holders
Address for Notice Purposes:
▇▇▇ ▇. ▇▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇ ▇▇▇
P.O. Box 3263
▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Telecopier No.: (▇▇▇) ▇▇▇-▇▇▇▇