GULFSLOPE ENERGY, INC. - 8-K [gs-8k_030119.htm]

Exhibit 10.3

 

Execution Version

 

SUBORDINATION AGREEMENT 

 

in relation to the Loan Agreement 

 

Dated as of March 1, 2019 

 

among

 

GULFSLOPE ENERGY, INC., 

 

as Borrower 

 

JOHN N. SEITZ 

 

as Subordinated Lender 

 

and 

 

DELEK GOM INVESTMENTS, LLC 

 

as Senior Lender

 

 

TABLE OF CONTENTS

 

Page

 

Article I Definitions; Rules of Interpretation 3 Section 1.01     Incorporation
of Terms; Rules of Interpretation 3 Section 1.02     Certain Defined Terms 3
Article II Agreement to Subordinate 4 Section 2.01     No Collateral; Consent to
Security 4 Section 2.02     Subordination and Proceedings Against Borrower 4
Section 2.03     Payment Upon Dissolution, Etc. 6 Section 2.04     Defenses
Waived 7 Section 2.05     Subrogation 7 Section 2.06     Consents, Waivers and
Covenants of Subordinated Lender 7 Section 2.07     Negative Covenants of the
Subordinated Lender 8 Section 2.08     Senior Obligations Unconditional 9
Section 2.09     Representations and Warranties 10 Section 2.10     No
Representation by Senior Lender 11 Section 2.11     Notices; Disclosure 11
Section 2.12     No Waiver 11 Section 2.13     Waiver of Claims 11 Section
2.14     Additional Provisions Applicable After Bankruptcy Event or Bankruptcy
Proceeding 12 Section 2.15     Further Assurances 13 Section
2.16     Reinstatement 13 Section 2.17     Expenses 13 Section
2.18     Provisions Define Relative Rights 13 Section 2.19     Legend 13 Section
2.20     Powers Coupled With An Interest 13 Section 2.21     Authority of Senior
Lender 13 Section 2.22     Notices 14 Section 2.23     Amendments 15 Section
2.24     Successors and Assigns 15 Section 2.25     Captions 15 Section
2.26     Counterparts; Integration; Effectiveness 15 Section
2.27     Severability 16 Section 2.28     GOVERNING LAW; JURISDICTION; CONSENT
TO SERVICE OF PROCESS 16

 

1

 

THIS SUBORDINATION AGREEMENT (this “Agreement,” as it may be amended, restated,
amended and restated, supplemented or otherwise modified from time to time as
provided below), dated as of March 1 2019, is entered into by and among
GulfSlope Energy, Inc., a Delaware corporation, with its principal place of
business at 1331 Lamar St., Suite 1665, Houston, Texas 77010 (the “Borrower”),
JOHN N. SEITZ, a citizen of the United States, (the “Subordinated Lender”), and
Delek GOM Investments, LLC, a Delaware limited liability company, with a
registered office address c/o Corporation Trust Center, 1209 Orange Street,
Wilmington, Delaware 19801, as Senior Lender (as defined below).

 

RECITALS

 

WHEREAS, the Borrower and the Senior Lender have entered into a Loan Agreement
dated on or about the date hereof (as amended, amended and restated,
supplemented or otherwise modified from time to time, the “Loan Agreement”),
pursuant to which the Senior Lender (as defined below) shall extend credit and
other financial accommodations (“Loans”) to the Borrower in an aggregate
principal amount not exceeding $11,000,000, on the terms and conditions as set
forth therein;

 

WHEREAS, as a condition to the incurrence and continued availability of the
Loans, the Borrower has entered into security documents and other ancillary
financing documents for the benefit of the Senior Lender, pursuant to which the
Borrower has pledged all or substantially all of its assets as collateral to
secure its obligations under the Senior Loan Documents (as defined below);

 

WHEREAS, the Subordinated Lender will indirectly benefit from the financing
accommodations made by the Senior Lender to the Borrower under the Senior Loan
Documents;

 

WHEREAS, each of the Subordinated Lender and the Borrower desires to enter into
this Agreement in order to induce the Senior Lender to enter into the Senior
Loan Documents and in satisfaction of the related condition to the incurrence
and continued availability of the Loans;

 

WHEREAS, the Subordinated Lender acknowledges that the Senior Lender would not
enter into the Senior Loan Documents but for the execution of this Agreement;

 

WHEREAS, the Senior Lender and the Subordinated Lender wish to set forth in this
Agreement their relative rights to seek repayment from the Borrower and to
pursue claims against the Borrower and its assets;

 

WHEREAS, the Subordinated Lender has received a copy of each of the Senior Loan
Documents and is aware of the terms thereof;

 

WHEREAS, the Subordinated Lender has taken independent legal advice with respect
to the implications and legal effect of this Agreement;

 

NOW THEREFORE, in consideration of the foregoing, to induce the Senior Lender to
enter into the Senior Loan Documents and to extend credit to the Borrower
thereunder, and for other good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, the parties hereto agree as
follows:

 

2

 

 

Article I

Definitions; Rules of Interpretation

 

Section 1.01           Incorporation of Terms; Rules of Interpretation

 

(a)           Capitalized terms used but not defined herein (including, without
limitation, in the introductory paragraph and recitals above) shall have the
meanings given such terms in the Loan Agreement.

 

(b)           The definitions of terms herein shall apply equally to the
singular and plural forms of the terms defined. Whenever the context may
require, any pronoun shall include the corresponding masculine, feminine, and
neuter forms. The words “include”, “includes”, and “including” shall be deemed
to be followed by the phrase “without limitation”. The word “will” shall be
construed to have the same meaning and effect as the word “shall”. Unless the
context requires otherwise, (a) any definition of or reference to any agreement,
instrument, or other document herein shall be construed as referring to such
agreement, instrument, or other document as from time to time amended,
supplemented, or otherwise modified (subject to any restrictions on such
amendments, supplements, or modifications set forth herein), (b) any reference
herein to any Person shall be construed to include such Person’s permitted
successors and permitted assigns, (c) the words “herein”, “hereof”, and
“hereunder”, and words of similar import, shall be construed to refer to this
Agreement in its entirety and not to any particular provision hereof, (d) all
references herein to Sections, Annexes, Exhibits, and Schedules shall be
construed to refer to Sections of, Annexes, Exhibits, and Schedules to, this
Agreement, (e) any reference to any law or regulation herein shall, unless
otherwise specified, refer to such law or regulation as amended, supplemented,
or otherwise modified from time to time, and (f) the words “asset” and
“property” shall be construed to have the same meaning and effect and to refer
to any and all tangible and intangible assets and properties, including cash,
securities, accounts, and contract rights.

 

Section 1.02           Certain Defined Terms

 

As used in this Agreement, the following terms shall have the following
meanings:

 

“Agreement” has the meaning set forth in the introduction hereto.

 

“Bankruptcy Event” has the meaning given to such term in the Loan Agreement.

 

“Bankruptcy Proceeding” means the occurrence or commencement of any proceeding
specified in clause (a) or (b) in the definition of “Bankruptcy Event” as
defined in the Loan Agreement.

 

“Borrower” has the meaning set forth in the introduction hereto.

 

“Collateral” means any and all property from time to time subject to Liens or
other security interests to secure the payment or performance of the Senior
Obligations.

 

“Loan Agreement” has the meaning set forth in the recitals to this Agreement.

 

“Loans” has the meaning set forth in the recitals to this Agreement.

 

“Senior Lender” means the “Lender” under the Loan Agreement and each other
holder of a Senior Obligation and each of their respective successors and
assigns.

 

“Senior Loan Documents” means, collectively, the Loan Agreement and other “Loan
Documents” (as such term is defined in the Loan Agreement) and all other
documents, instruments and agreements that from time to time evidence the Senior
Obligations or secure or support payment or performance of such Senior
Obligations, as the same may be amended, amended and restated, modified or

 

3

 

supplemented from time to time, including, without limitation, amendments,
modifications, supplements and restatements thereof giving effect to increases,
renewals, extensions, refundings, deferrals, restructurings, replacements or
refinancings of, or additions to, the arrangements provided therein (whether
provided by the Senior Lender under the Loan Agreement as of the date hereof or
any successor Lender), but excluding, in any event, any documentation evidencing
Subordinated Obligations.

 

“Senior Obligations” means collectively, the “Obligations” (as such term is
defined in the Loan Agreement) including, without limitation, all principal,
interest, fees, expenses, indemnities and reimbursement obligations (including,
without limitation, attorney costs) at any time owed by the Borrower to the
Senior Lender pursuant to the terms of the Senior Loan Documents, in each
instance, whether before or after the commencement of a Bankruptcy Proceeding
and without regard to whether or not any such obligation is an allowed claim,
and all obligations and liabilities incurred with respect to any refinancing of
such obligations, together with any amendments, amendment and restatements,
modifications, renewals or extensions thereof.

 

“Subordinated Debt” has the meaning given to such term in the Loan Agreement.

 

“Subordinated Lender” is defined in the parties hereto.

 

“Subordinated Obligations” means, collectively, the unpaid principal of and
interest on any Subordinated Debt and all other Indebtedness of the Borrower
owing to the Subordinated Lender (including, without limitation, interest
accruing at the then applicable rate set forth in the Subordinated Loan
Documents after the maturity of the Subordinated Debt and interest accruing at
the then applicable rate in respect of the Subordinated Debt after the filing of
any petition in bankruptcy, or the commencement of any insolvency,
reorganization or like proceeding, relating to the Borrower, whether or not a
claim for post-filing or post-petition interest is allowed in such proceeding),
whether direct or indirect, absolute or contingent, due or to become due, or now
existing or hereafter incurred, which may arise under, out of, or in connection
with, the Subordinated Debt, this Agreement, or any other Subordinated Loan
Document, in each case whether on account of principal, interest, reimbursement
obligations, fees, indemnities, costs, expenses or otherwise (including, without
limitation, attorney costs incurred by the Subordinated Lender that are required
to be paid by the Borrower pursuant to the terms of any other Subordinated Loan
Document).

 

“Subordinated Loan Documents” means, collectively, any notes, documents,
agreements or instruments that from time to time evidence or otherwise relate to
Subordinated Obligations.

 

Article II

Agreement to Subordinate

 

Section 2.01          No Collateral; Consent to Security. The Subordinated
Lender is an unsecured creditor of the Borrower and has not taken and shall not
take any Lien or other collateral security or any other credit support of any
kind from the Borrower for any reason, including to secure the Borrower’s
obligations with respect to the Subordinated Obligations. The Subordinated
Lender acknowledges and consents to the pledge by the Borrower of all or
substantially all of its assets as collateral to secure its obligations under
the Senior Loan Documents.

 

Section 2.02           Subordination and Proceedings Against Borrower

 

(a)           The Subordinated Lender agrees that (i) the payment of the
principal of, interest on, and all other amounts in respect of, the Subordinated
Obligations, and all rights of the Subordinated Lender against the Borrower, are
expressly made subordinate and subject in right of payment to the prior
indefeasible and unconditional payment in full of all Senior Obligations, (ii)
that it will not, directly or

4

 

indirectly ask, demand, sue for, take, accept or receive from the Borrower, by
set-off or in any other manner, or accept or retain payment (in whole or in
part) of the Subordinated Obligations from the Borrower, unless and until all of
the Senior Obligations have been paid in full and the commitments thereunder
have expired or been terminated and (iii) no holder of the Subordinated
Obligations shall have any claim to any assets of the Borrower on a parity with
or prior to the claim of any holder of the Senior Obligations.

 

(b)           In furtherance of the foregoing Section 2.02(a), and
notwithstanding anything in the Senior Loan Documents to the contrary, the
Subordinated Lender shall not, until all of the Senior Obligations have been
paid in full and the commitments thereunder terminated:

 

(i)            directly or indirectly, take, demand, accept or receive from the
Borrower or any other Person, in cash or other property or by setoff or in any
other manner, payment of all or any of the Subordinated Obligations; except that
nothing herein shall prohibit the Subordinated Lender from converting any of the
Subordinated Obligations into common stock of Borrower, nor prohibit the
Borrower from permitting conversion of any Subordinated Obligations into common
stock of Borrower;

 

(ii)           take any action to collect all or any portion of the Subordinated
Obligations, to accelerate or demand payment of all or any portion of the
Subordinated Obligations or to enforce any of the rights and remedies of any
holder of any of the Subordinated Obligations, either pursuant to the
Subordinated Loan Documents, at Law, or in equity; except that nothing herein
shall prohibit the Subordinated Lender from converting any of the Subordinated
Obligations into common stock of Borrower, nor prohibit the Borrower from
permitting conversion of any Subordinated Obligations into common stock of
Borrower;

 

(iii)           take, pursue, or commence or otherwise engage, undertake, or
institute any judicial or other steps, action, or proceedings against the
Borrower (whether by itself or joined with any other creditor), with a view to
commencing any insolvency or other proceedings for the winding up or liquidation
of the Borrower (including without limitation the appointing of, or procuring
the appointment of, an administrator or administrative receiver, liquidator,
receiver, trustee in bankruptcy, or other such enforcement officer in respect of
the Borrower or any of its assets);

 

(iv)           take any steps to enforce any judgment or order obtained by it in
respect of any obligations or liabilities of the Borrower;

 

(v)           commence any judicial action or proceeding to collect payment of
principal of, interest on, and other amounts in respect of the Subordinated
Obligations; or

 

(vi)          take any Lien or other collateral security or any other credit
support of any kind for the Subordinated Obligations.

 

The expressions “prior payment in full,” “payment in full,” “paid in full” and
any other similar terms or phrases when used herein with respect to the Senior
Obligations shall mean (i) the indefeasible payment in full, in immediately
available funds, of all of the Senior Obligations and the performance in full of
all of the Senior Obligations, (ii) the termination or expiration of all Senior
Loan Documents, and (iii) termination of any and all commitments to lend under
the Senior Loan Documents. Senior Obligations shall be considered to be
outstanding whenever any loan commitment under any Senior Loan Document is
outstanding. 

5

(c)           The Senior Lender and each holder of Senior Obligations, whether
now outstanding or hereafter created, incurred, assumed or guaranteed, shall be
deemed to have acquired Senior Obligations in reliance upon the provisions
contained in this Agreement.

 

(d)           Notwithstanding anything to the contrary in this Agreement, the
Borrower shall not make, give or permit, directly or indirectly, by setoff,
redemption, purchase or in any other manner, any payment of or with respect to,
or any collateral or other security for, the whole or any part of the
Subordinated Obligations, including, without limitation, any guarantee, letter
of credit or similar credit support to support payment of any of the
Subordinated Obligations, except that nothing herein shall prohibit the
Subordinated Lender from converting any of the Subordinated Obligations into
common stock of Borrower, nor prohibit the Borrower from permitting conversion
of any Subordinated Obligations into common stock of Borrower.

 

(e)           The Subordinated Lender and the Borrower hereby agree that all
Senior Obligations shall be paid in full before any payment or distribution is
made with respect to any of the Subordinated Obligations.

 

Section 2.03           Payment Upon Dissolution, Etc.

 

(a)           Without in any way limiting the provisions of Section 2.02, upon
the occurrence of any Bankruptcy Event in respect of the Borrower:

 

(i)            the Subordinated Lender and Borrower agree that:

 

(A)           the Senior Lender shall be entitled to receive payment in full of
all amounts due or to become due on or in respect of all of the Senior
Obligations before the Subordinated Lender shall be entitled to receive any
payment on account of the Subordinated Obligations (whether in respect of
principal, interest, premium, fees, indemnities, commissions, or otherwise); and

 

(B)           any payment or distribution of assets of the Borrower of any kind
or character, whether in cash, property or securities, to which Subordinated
Lender would be entitled, shall be paid or delivered by the Borrower, or any
receiver, trustee in bankruptcy, liquidating trustee, disbursing agent or other
Person making such payment or distribution, directly to the Senior Lender for
application against the Senior Obligations (in accordance with the terms of the
Senior Loan Documents), to the extent necessary to pay in full all Senior
Obligations, before any payment or distribution shall be made to Subordinated
Lender, and (x) Subordinated Lender hereby unconditionally authorizes, empowers
and directs all trustees, receivers, custodians, conservators, or any other
Persons having authority over the property of the Borrower to effect delivery of
all such payments and distributions to the Senior Lender and (y) Subordinated
Lender agrees to execute and deliver to the Senior Lender such further
instruments as may be requested by the Senior Lender to confirm the
authorization referred to in the foregoing clause (x); and

 

(ii)           the Subordinated Lender irrevocably authorizes and empowers the
Senior Lender to:

 

(A)          demand, sue for, collect and receive every payment or distribution
on account of any of the Subordinated Obligations payable or deliverable in
connection with such event or proceeding, until the Senior Obligations are paid
in full, and give acquittance therefor; and

 

(B)           file claims and proofs of claim in any such Bankruptcy Proceeding
and take such other actions, in its own name, or in the name of the

6

 

Subordinated Lender or otherwise, as the Senior Lender may deem necessary or
advisable for the enforcement of the provisions of this Agreement; and, in
furtherance thereof, the Subordinated Lender shall execute and deliver such
powers of attorney, assignments or proofs of claim or other instruments as the
Senior Lender may request;

 

provided that, in each case, the foregoing authorization and empowerment imposes
no obligation on the Senior Lender to take any such action.

 

(b)           If any payment or distribution, whether consisting of money,
property or securities, shall be collected or received by or come into the
custody, control or possession of the Subordinated Lender in respect of the
Subordinated Debt, the Subordinated Lender shall forthwith deliver the same to
the Senior Lender for application against the Senior Obligations, in the exact
form received, duly endorsed to the Senior Lender, if required, in each case to
be applied to the payment or prepayment of the applicable Senior Obligations in
accordance with the terms of the applicable Senior Loan Documents until such
Senior Obligations are paid in full. Until so delivered, such payment or
distribution shall be held in trust by the Subordinated Lender as the property
of the Senior Lender, segregated from other funds and property held by the
Subordinated Lender.

 

Section 2.04          Defenses Waived. The Subordinated Lender hereby
absolutely, unconditionally, and irrevocably waives, to the fullest extent
permitted by law, (a) any defense based on the adequacy of a remedy at law which
might be asserted as a bar to the remedy of specific performance hereof in any
action brought therefor by the Senior Lender and (b) any requirement that the
Senior Lender protect, secure, perfect, or insure any collateral security or any
property subject thereto or exhaust any right or take any action against the
Borrower or any other Person or any collateral.

 

Section 2.05          Subrogation. The Subordinated Lender hereby agrees that
until the indefeasible payment in full of all the Senior Obligations, the
Subordinated Lender shall not exercise any right or remedy arising by way of
subrogation, contribution, reimbursement, indemnity, security, guarantee, or
otherwise against the Borrower (whether under Law or otherwise).

 

Section 2.06           Consents, Waivers and Covenants of Subordinated Lender

 

(a)           The Subordinated Lender consents and agrees that, without the
necessity of any reservation of rights against Subordinated Lender, and without
notice to or further assent by the Subordinated Lender:

 

(i)           any demand for payment of any Senior Obligations made by the
Senior Lender may be rescinded in whole or in part by such Senior Lender, and
any Senior Obligation may be continued, and the Senior Obligations, or the
liability of the Borrower or any guarantor or any other party upon or for any
part thereof, or any collateral security or guarantee therefor or right of
offset with respect thereto, or any obligation or liability of the Borrower or
any other party under any Senior Loan Document, or any other agreement, may,
from time to time, in whole or in part, be amended, restated, renewed, extended,
increased, modified, accelerated, compromised, restructured, waived,
surrendered, or released by the Senior Lender;

 

(ii)           the Senior Loan Documents and the Senior Obligations may be
amended, restated, modified, extended, increased, renewed, restructured,
supplemented or terminated, in whole or in part, as the Senior Lender may deem
advisable from time to time, and any collateral security at any time held by the
Senior Lender for the payment of any of the Senior Obligations may be sold,
exchanged, restructured, waived, surrendered or released, in each case all
without notice to or further assent by Subordinated Lender, which will remain
bound under this Agreement, and the Senior Lender shall have the

 

7

 

right to grant waivers or consents to the Borrower with respect to any of the
Senior Obligations or any Senior Loan Document in any manner whatsoever, all
without impairing, abridging, releasing or affecting the subordination provided
for herein; and

 

(iii)           any refinancing of the Senior Obligations may be consummated by
the Borrower.

 

(b)           The Subordinated Lender waives any and all notice of the creation,
renewal, extension, increase, or accrual of any of the Senior Obligations and
notice of or proof of reliance by the Senior Lender upon this Agreement. The
Senior Obligations shall be deemed conclusively to have been created, contracted
or incurred in reliance upon this Agreement, and all dealings between the
Borrower and Senior Lender shall be deemed to have been consummated in reliance
upon this Agreement. The Subordinated Lender acknowledges and agrees that the
Senior Lender has relied upon the subordination provided for herein in entering
into the Senior Loan Documents and in making funds available to Borrower
thereunder. Subordinated Lender waives notice of or proof of reliance on this
Agreement and protest, demand for payment and notice of default.

 

(c)           The Subordinated Lender hereby consents to the Liens on the
Collateral created in favor of Senior Lender under the Senior Loan Documents,
and agrees and acknowledges the grant, perfection, priority and existence of
such Liens, which shall be senior in respect of priority, ranking and security
to any Subordinated Loan Document.

 

(d)           Notwithstanding anything in the Subordinated Loan Documents or any
other agreement or instrument to the contrary, the Subordinated Lender and
Borrower hereby acknowledge and agree that the maturity date of each of the
Subordinated Obligations shall be no earlier than the date upon which the Senior
Obligations are paid in full.

 

Section 2.07           Negative Covenants of the Subordinated Lender. Until the
payment in full of the Senior Obligations, the Subordinated Lender shall not,
without the prior written consent of the Senior Lender:

 

(a)           sell, assign, or otherwise transfer, in whole or in part, the
Subordinated Obligations or any interest therein to any other Person or create,
incur or suffer to exist any security interest, Lien, charge or other
encumbrance whatsoever upon any of the Subordinated Obligations or under any
Subordinated Loan Document in favor of any other Person;

 

(b)           permit any of the Subordinated Loan Documents or the Subordinated
Obligations to be amended, restated, amended and restated, renewed,
restructured, increased, extended, supplemented or otherwise modified in any
respect, except that nothing herein shall prohibit the Subordinated Lender from
converting any of the Subordinated Obligations into common stock of Borrower,
nor prohibit the Borrower from permitting conversion of any Subordinated
Obligations into common stock of Borrower;

 

(c)           permit or require the Borrower to create any Lien on any of its
assets or properties or provide any other collateral security or credit support
of any kind, in any such case to secure the payment or performance of any of the
Subordinated Obligations;

 

(d)           commence, or join with any creditors (other than Senior Lender) in
commencing, or otherwise cause, any Bankruptcy Proceeding;

 

(e)           challenge the validity, enforceability, priority of, or any other
term or provision of, any Senior Loan Document;

 

8

 

 

(f)           challenge the extent, validity, creation, perfection or priority
of, any Lien created or purported to be created pursuant to any Senior Loan
Document or seek to avoid or subordinate any such Lien; or

 

(g)           interfere in any respect with the exercise by the Senior Lender of
any right or remedy under any Senior Loan Document or Applicable Law,

 

provided that a transfer by operation of Law to the estate of a deceased
Subordinated Lender shall not be a default hereunder; provided, further, that it
is the express intent of all parties hereto that such transfer shall be
expressly subject to this Agreement, and that the transferee of the estate
expressly acknowledges to the Senior Lender, by a written agreement in form and
substance satisfactory to the Senior Lender or by delivery of an executed
counterpart of this Agreement or a subordination agreement substantially
identical to this Agreement, the subordination provided for herein and agrees to
be bound by all of the terms and provisions hereof.

 

Section 2.08          Senior Obligations Unconditional. All obligations and
agreements of the Subordinated Lender hereunder shall be irrevocable,
unconditional, continuing and absolute. All rights and interests of the Senior
Lender hereunder, and all agreements and obligations of the Subordinated Lender
and the Borrower, shall remain in full force and effect irrespective of:

 

(a)           any lack of validity or enforceability of any Senior Loan Document
or if all or any portion of the Senior Obligations and/or the Liens securing
same are subordinated, set aside, avoided or disallowed, in each case pursuant
to a Bankruptcy Event or otherwise (as a result of the fraudulent transfer
provisions under the Bankruptcy Code, under any state fraudulent conveyance or
fraudulent transfer statute, or otherwise);

 

(b)           any change in the time, manner or place of payment of, or in any
other term of, all or any of the Senior Obligations, or any amendment or waiver
or other modification, whether by course of conduct or otherwise, of the terms
of any Senior Loan Document, including, without limitation, any increase in any
of the Senior Obligations resulting from the extension of additional credit to
the Borrower or otherwise;

 

(c)           any exchange, release or nonperfection of any Lien upon any
Collateral, or any release, amendment, waiver or other modification, whether in
writing or by course of conduct or otherwise, of all or any of the Senior
Obligations or any guarantee thereof;

 

(d)           the existence of any claim, set-off, defense, counterclaim or
other right that the Subordinated Lender, the Borrower or any other Person may
have against any Person, including, without limitation, the Senior Lender;

 

(e)           any manner of application of Collateral or any other collateral or
credit support, or proceeds thereof, to all or any of the Senior Obligations, or
any manner of sale or other disposition of any Collateral or any other
collateral for all or any of the Senior Obligations or any obligations of the
Borrower under the Senior Loan Documents or any other assets of the Borrower;

 

(f)           any change, restructuring or termination of the corporate or other
organizational structure or existence of the Borrower;

 

(g)           any failure of the Senior Lender to disclose to the Subordinated
Lender any information relating to the business, condition (financial or
otherwise), operations, performance, properties or prospects of Borrower or any
of its Affiliates now or hereafter known to the Senior Lender (the Subordinated
Lender hereby waiving any duty on the part of the Senior Lender to disclose such
information); or

 

9

 

(h)           any other event or circumstance which otherwise might constitute a
defense or counterclaim available to, or a discharge of, the Borrower in respect
of any of the Senior Obligations, or of the Subordinated Lender or the Borrower
in respect of this Agreement.

 

Section 2.09           Representations and Warranties. The Subordinated Lender
represents and warrants to the Senior Lender that:

 

(a)           he is a natural person who is competent to execute and deliver
this Agreement;

 

(b)           he is a citizen solely of the United States of America and he has
legal domicile in the United States of America;

 

(c)           he has had due opportunity to (i) study the terms of this
Agreement and understands this Agreement and (ii) take separate independent
legal advice on the effect of this Agreement, and has taken such legal advice,
and, in any case, understands and has received advice in respect of, without
limitation: (A) the consequences of entering into this Subordination Agreement
as regards the treatment of the Subordinated Obligations owed to the
Subordinated Lender by the Borrower as compared to the Senior Obligations owed
to the Senior Lender by the Borrower, and (B) the extent of his potential
liabilities under this Agreement;

 

(d)           the Subordinated Obligations: (i) have been issued to him for good
and valuable consideration; (ii) are owned by him free and clear of any security
interests, Liens, charges or encumbrances whatsoever, other than the interests
of Senior Lender under this Agreement; (iii) are payable solely and exclusively
to him and to no other Person and are payable without deduction for any defense,
recoupment, offset or counterclaim, and (iv) constitute the only evidence of the
obligations evidenced thereby;

 

(e)           he has the power, authority and legal right to execute and deliver
and to perform his obligations under this Agreement and has taken all necessary
action to authorize his execution, delivery and performance of this Agreement;

 

(f)           this Agreement has been duly executed and delivered by him and
constitutes a legal, valid and binding obligation, enforceable against him in
accordance with its terms;

 

(g)           the execution, delivery and performance of this Agreement will not
violate any provision of any requirement of Law applicable to him or any of his
other contractual obligations and will not result in the creation or imposition
of any Lien on any of his properties or revenues pursuant to any requirement of
Law affecting him, or any of his contractual obligations, except the interest of
the Senior Lender under this Agreement;

 

(h)           no consent or authorization of, filing with, or other act by or in
respect of, any arbitrator or Governmental Authority or any other Person
(including, without limitation, any of his creditors), is required in connection
with the execution, delivery, performance, validity or enforceability of this
Agreement;

 

(i)           no pending or, to the best of its knowledge, threatened
litigation, arbitration or other proceedings if adversely determined would in
any way prevent the performance of the terms of this Agreement;

 

(j)           as of the date hereof, the Borrower is indebted to him under the
Subordinated Loan Documents in the aggregate amount of $10,500,000;

 

(k)           he has full knowledge of the commercial and legal implications of
entering into the transactions contemplated by this Agreement and he is
willingly entering into such transactions

 

10

 

without being unduly influenced by any other party to this Agreement or the
Senior Loan Documents; and

 

(l)            in entering into this Agreement, he is acting as principal and
for his own account and not as agent or trustee or in any other capacity for a
third party.

 

Section 2.10          No Representation by Senior Lender. The Senior Lender has
not made, and the Senior Lender does not hereby nor otherwise make to the
Subordinated Lender, any representations or warranties, express, or implied, nor
does the Senior Lender assume any liability or obligation to or of the
Subordinated Lender with respect to, without limitation:

 

(a)           the financial or other condition of the Borrower or any other
obligors under any instruments of guarantee with respect to the Senior
Obligations;

 

(b)           the enforceability, validity, value or collectability of any of
the Senior Obligations or the Subordinated Obligations, any collateral therefor,
or any guarantee or security which may have been granted in connection with any
of the Senior Obligations or the Subordinated Obligations; or

 

(c)           the title or right of the Borrower or any other Person to transfer
any collateral or security.

 

Section 2.11           Notices; Disclosure

 

The Subordinated Lender agrees, promptly upon obtaining actual knowledge
thereof, that he will give the Senior Lender notice of any default by the
Borrower in respect of the Subordinated Obligations.

 

Section 2.12          No Waiver. No failure on the part of the Senior Lender,
and no delay in exercising any right, remedy, or power hereunder or under any
Senior Loan Document, shall operate as a waiver thereof by the Senior Lender,
nor shall any single or partial exercise by the Senior Lender of any right,
remedy, or power hereunder or under any Senior Loan Document preclude any other
or future exercise of any other right, remedy or power. Each and every right,
remedy, and power hereby granted to the Senior Lender or allowed to the Senior
Lender by law or other agreement shall be cumulative and not exclusive of any
other, and may be exercised by the Senior Lender from time to time. Without in
any way limiting the generality of the foregoing, the Senior Lender may, at any
time and from time to time, without the consent of or notice to the Subordinated
Lender, without incurring responsibility to the Subordinated Lender, and without
impairing or releasing the subordination provided herein or the obligations
hereunder of the Subordinated Lender, do any one or more of the following: (a)
change the manner, place, or terms of payment of, or extend the time of payment
of, or renew or alter, the Senior Obligations under the Senior Loan Documents,
or otherwise amend or supplement in any manner the Senior Loan Documents or any
instruments evidencing the same or any agreement under which the obligations
under the Senior Loan Documents are outstanding; (b) sell, exchange, release, or
otherwise deal with any property pledged, mortgaged, or otherwise securing the
obligations owed to the Senior Lender under the Senior Loan Documents; and (c)
exercise or refrain from exercising any rights against the Borrower or any other
Person.

 

Section 2.13          Waiver of Claims. To the maximum extent permitted by Law,
the Subordinated Lender waives any claim it might have against the Senior Lender
with respect to, or arising out of, any action or failure to act or any error of
judgment, negligence, or mistake or oversight whatsoever on the part of the
Senior Lender or its affiliates, directors, officers, employees, advisors,
attorneys or agents with respect to any exercise of any rights or remedies under
any of the Senior Loan Documents or any transaction relating to any of the
Collateral or any guarantee. Neither the Senior Lender nor any of its
affiliates, directors, officers, employees, advisors, attorneys or agents shall
be liable for failure to demand, collect or realize upon any of the Collateral
or any guarantee or for any delay in doing so or shall be under

 

11

 

any obligation to sell or otherwise dispose of any Collateral or realize upon
any guarantee upon the request of the Borrower or the Subordinated Lender or any
other Person or to take any other action whatsoever with regard to the
Collateral or any part thereof or any guarantee.

 

Section 2.14           Additional Provisions Applicable After Bankruptcy Event
or Bankruptcy Proceeding. Without limiting any other term or provision in this
Agreement or any Senior Loan Document:

 

(a)           The provisions of this Agreement shall continue in full force and
effect notwithstanding the occurrence of any Bankruptcy Event or Bankruptcy
Proceeding.

 

(b)           The Subordinated Lender agrees that it will not, directly or
indirectly (including, without limitation, as a member of any unsecured
creditors’ committee), take any action in or relating to any proceeding arising
from, as a result of, in connection with or relating to any Bankruptcy
Proceeding or Bankruptcy Event to challenge, contest or object in any manner to
(i) the extent, validity, creation, enforceability, perfection or priority of
any of the Senior Obligations or any Senior Loan Document or any Liens or
security interests created under any Senior Loan Document, or any term or
provision of this Agreement or the Subordinated Lender’s obligations,
undertakings, acknowledgments and agreements set forth in this Agreement; (ii)
any pleading, motion, notice, objection or argument of or made by or on behalf
of any holder of any of the Senior Obligations based on, under or in respect of
Section 361, 362, 363 or 364 of the Bankruptcy Code, including, without
limitation, in respect of permitting the use of any cash or other collateral by,
or providing any financing to, the Borrower under either Section 363 or 364 of
the Bankruptcy Code (including, without limitation, any request for adequate
protection, or in respect of the sale or other disposition of any property by
the Borrower under Section 363 of the Bankruptcy Code or pursuant to a plan of
reorganization or any other arrangement (and Subordinated Lender shall be deemed
to have consented to any such sale or disposition and all of the terms
applicable thereto); or (iii) the payment of interest, fees, expenses or other
amounts to the Senior Lender under Sections 506(b) or 506(c) of the Bankruptcy
Code or otherwise. The Subordinated Lender agrees that it will not seek relief
from the automatic stay or from any other stay in any Bankruptcy Proceeding or
take any action in derogation thereof, without the prior written consent of
Lender.

 

(c)           The Subordinated Lender shall not support or vote in favor of any
plan of reorganization (and they shall be deemed to have voted to reject any
plan of reorganization) unless such plan (i) pays off in full, in cash, all
Senior Obligations or (ii) is accepted by the Senior Lender, provided that this
undertaking is not intended and shall not be construed to limit any fiduciary
obligations of the Subordinated Lender in its capacity as the Chief Executive
Officer of GulfSlope Energy, Inc. This Agreement, which the parties hereto
expressly acknowledge is a “subordination agreement” under Section 510(a) of the
Bankruptcy Code, shall be effective, during and after the commencement of a
Bankruptcy Proceeding.

 

12

 

Section 2.15           Further Assurances. The Subordinated Lender and the
Borrower, at their own sole cost and expense and at any time from time to time,
upon the written request of Lender, will promptly and duly execute and deliver
such further instruments and documents and take such further actions as the
Senior Lender reasonably may request for the purposes of obtaining or preserving
the full benefits of this Agreement and of the rights and powers herein granted.
Without limiting the generality of the foregoing, in the event of an assignment
pursuant to any Senior Loan Document or in the event of a refinancing of the
Senior Obligations, the Subordinated Lender and the Borrower shall, upon the
request of the Senior Lender, execute a new subordination agreement upon the
same terms as this Agreement to further evidence and confirm that the
Subordinated Debt are and shall remain junior and subordinate in right of
payment to the Senior Obligations.

 

Section 2.16          Reinstatement. The terms and provisions of this Agreement
shall continue to be effective or be reinstated, and the Senior Obligations
shall not be deemed to be paid in full, as the case may be, if at any time any
payment of any of the Senior Obligations is rescinded or avoided, or must
otherwise be returned by the Senior Lender pursuant to any Bankruptcy Proceeding
or otherwise, all as though such payment had not been made.

 

Section 2.17           Expenses. The Subordinated Lender shall pay or reimburse
the Senior Lender, upon demand, for all of its reasonable and documented costs
and expenses incurred in connection with the enforcement of any rights and
remedies with respect to the Subordinated Lender under this Agreement,
including, without limitation, attorney costs of the Senior Lender.

 

Section 2.18           Provisions Define Relative Rights. This Agreement is
intended solely for the purpose of defining the relative rights of the Senior
Lender, on the one hand, and the Subordinated Lender, on the other, and the
obligations of Borrower in connection with the foregoing and no other Person
shall have any right, benefit or other interest under this Agreement. The
Borrower hereby agrees that it will not make any payment on or in respect of any
of the Subordinated Obligations, or take any other actions, in contravention of
the provisions of this Agreement.

 

Section 2.19           Legend. Prior to any assignment of any Subordinated Loan
Document, the Subordinated Lender will cause each Subordinated Loan Document
(and each other Subordinated Loan Document as Lender shall request) to bear upon
its face the following legend:

 

“ALL INDEBTEDNESS EVIDENCED BY THIS AGREEMENT IS SUBORDINATED TO CERTAIN SENIOR
RANKING INDEBTEDNESS PURSUANT TO, AND TO THE EXTENT PROVIDED IN, AND IS
OTHERWISE SUBJECT TO THE TERMS OF, THE SUBORDINATION AGREEMENT, DATED AS OF
MARCH 1, 2019 (THE “SUBORDINATION AGREEMENT”), AS THE SAME MAY BE AMENDED,
AMENDED AND RESTATED, SUPPLEMENTED OR OTHERWISE MODIFIED FROM TIME TO TIME, BY
AND AMONG GULFSLOPE ENERGY, INC., AS BORROWER, DELEK GOM INVESTMENTS, LLC, AS
SENIOR LENDER, AND THE HOLDERS FROM TIME TO TIME OF THE OBLIGATIONS ARISING
UNDER THE SUBORDINATED LOAN DOCUMENTS REFERRED TO IN SUCH SUBORDINATION
AGREEMENT, INCLUDING, WITHOUT LIMITATION, THIS AGREEMENT, AND EACH HOLDER
HEREOF, BY ITS ACCEPTANCE HEREOF, ACKNOWLEDGES AND AGREES TO BE BOUND BY THE
PROVISIONS OF THE SUBORDINATION AGREEMENT.”

 

Section 2.20           Powers Coupled With An Interest. All powers,
authorizations and agencies contained in this Agreement are coupled with an
interest and are irrevocable until the Senior Obligations are paid in full.

 

Section 2.21          Authority of Senior Lender. Each of the Borrower and the
Subordinated Lender acknowledges and agrees that the rights and responsibilities
of the Senior Lender under this Agreement

 

13

 

with respect to any action taken by the Senior Lender or the exercise or
non-exercise by the Senior Lender of any option, request, judgment or other
right or remedy provided for herein or resulting or arising out of this
Agreement shall be governed by the Senior Loan Documents and by such other
agreements with respect thereto as may exist from time to time among, but, as
between the Senior Lender, on the one hand, and the Borrower and the
Subordinated Lender, on the other hand, the Senior Lender shall be conclusively
presumed to be acting with full and valid authority so to act or refrain from
acting, and neither the Borrower nor the Subordinated Lender shall be under any
obligation, or entitlement, to make any inquiry respecting such authority.

 

Section 2.22           Notices

 

(a)           All notices, demands, requests, consents, and other communications
provided for in this Agreement shall be given in writing, or by any
telecommunication device capable of creating a written record (including
electronic mail), and addressed to the party to be notified as follows:

 

(i)If to the Borrower, at:

 

1331 Lamar Street
Suite 1665
Houston, Texas 77010
John Malanga, Chief Financial Officer
Tel: (281) 918-4103
Email:john.malanga@gulfslope.com

 

with a copy to:

 

Mayer Brown LLP

Attention: Tristan Propst

Suite 3400
700 Louisiana Street
Tel: (713) 238-2657
Fax: (713) 238-4657
Email: tprobst@mayerbrown.com

 

(ii)if to the Senior Lender:

 

c/o Corporation Trust Center
1209 Orange Street
Wilmington, Delaware 19801

 

and a copy to:

 

Leora Pratt Levin 

VP & General Counsel 

Delek Group Ltd 

19, Abba Eban blvd. P.O.B 2054 

Herzliya 4612001, Israel 

Tel: (+972 9) 8638492 

Direct: (+972 9) 8638491 

Fax: (+972 9) 8854955 

E-mail: leorapl@delek-group.com

 

14

 

(iii)if to the Subordinated Lender:

 

John Seitz 

5602 Orchard Valley Court 

Kingwood TX 77345 

Direct: 281-918-4101 

Mobile: 713-203-3303 

E-mail: jnseitz@gulfslope.com

 

(b)           Any such notice shall be deemed to have been given or made or to
have become effective on the terms set forth in Section 8.01 of the Loan
Agreement.

 

Section 2.23           Amendments

 

This Agreement may not be amended, modified or supplemented without the prior
written consent of each of the parties hereto.

 

Section 2.24           Successors and Assigns

 

The provisions of this Agreement shall be binding upon and inure to the benefit
of the parties hereto and their respective successors and permitted assigns.

 

Section 2.25           Captions

 

The table of contents and captions and section headings appearing herein are
included solely for convenience of reference and are not intended to affect the
interpretation of any provision of this Agreement.

 

Section 2.26           Counterparts; Integration; Effectiveness.

 

(a)           This Agreement may be executed in counterparts (and by different
parties to this Agreement on different counterparts), each of which shall
constitute an original, but all of which when taken together shall constitute a
single contract.

 

(b)           This Agreement constitutes the entire contract among the parties
relating to the subject matter herein and supersede any and all previous
agreements and understandings, oral or written, relating to such subject matter.
This Agreement represent the final agreement among the parties hereto and may
not be contradicted by evidence of prior, contemporaneous or subsequent oral
agreements of the parties. There are no unwritten oral agreements between the
parties.

 

(c)           This Agreement shall become effective when it shall have been
executed by the Senior Lender and when the Senior Lender shall have received
counterparts that, when taken together, bear the signatures of each of the other
parties to this Agreement, and thereafter shall be binding upon and inure to the
benefit of the parties to this Agreement and their respective successors and
assigns. Delivery of an executed counterpart of a signature page of this
Agreement by telecopy or electronic mail shall be effective as delivery of a
manually executed counterpart of this Agreement.

15

 

Section 2.27           Severability. Any provision of this Agreement held to be
invalid, illegal or unenforceable in any jurisdiction shall, as to that
jurisdiction, be ineffective to the extent of the invalidity, illegality or
unenforceability without affecting the validity, legality and enforceability of
the remaining provisions of this Agreement; and the invalidity of a particular
provision in a particular jurisdiction shall not invalidate that provision in
any other jurisdiction.

 

Section 2.28           GOVERNING LAW; JURISDICTION; CONSENT TO SERVICE OF
PROCESS.

 

(a)           EXCEPT TO THE EXTENT (IF ANY) PROVIDED OTHERWISE IN A PARTICULAR
SENIOR LOAN DOCUMENT, THIS AGREEMENT AND THE OTHER SENIOR LOAN DOCUMENTS SHALL
BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW
YORK.

 

(b)           ANY LEGAL ACTION OR PROCEEDING WITH RESPECT TO THE SENIOR LOAN
DOCUMENTS MAY BE BROUGHT, IF AT ALL, IN THE COURTS OF THE STATE OF NEW YORK AND
OF ANY FEDERAL COURT LOCATED IN THE STATE OF NEW YORK (OR ANY APPELLATE COURT
FROM ANY THEREOF), AND, BY EXECUTION AND DELIVERY OF THIS AGREEMENT, EACH PARTY
TO THIS AGREEMENT HEREBY ACCEPTS FOR ITSELF AND (TO THE EXTENT PERMITTED BY LAW)
IN RESPECT OF ITS PROPERTY, GENERALLY AND UNCONDITIONALLY, THE JURISDICTION OF
THOSE COURTS. EACH PARTY HEREBY IRREVOCABLY WAIVES ANY OBJECTION, INCLUDING ANY
OBJECTION TO THE LAYING OF VENUE OR BASED ON THE GROUNDS OF FORUM NON
CONVENIENS, THAT IT NOW OR SUBSEQUENTLY MAY HAVE TO THE BRINGING OF ANY SUCH
ACTION OR PROCEEDING IN ANY SUCH COURT. IN THE CASE OF THE BORROWER ONLY, THIS
SUBMISSION TO JURISDICTION IS NON-EXCLUSIVE AND DOES NOT PRECLUDE A PARTY FROM
OBTAINING JURISDICTION OVER THE BORROWER IN ANY OTHER COURT OTHERWISE HAVING
JURISDICTION.

 

(c)           EACH PARTY TO THIS AGREEMENT HEREBY (i) KNOWINGLY, VOLUNTARILY,
INTENTIONALLY, IRREVOCABLY AND UNCONDITIONALLY WAIVES, TO THE FULLEST EXTENT
PERMITTED BY LAW, TRIAL BY JURY IN ANY LEGAL ACTION OR PROCEEDING RELATING TO
THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT AND FOR ANY COUNTERCLAIM IN ANY SUCH
PROCEEDING; (ii) CERTIFIES THAT NO PARTY TO THIS AGREEMENT OR ANY REPRESENTATIVE
OR AGENT OR COUNSEL FOR ANY PARTY TO THIS AGREEMENT HAS REPRESENTED, EXPRESSLY
OR OTHERWISE, OR IMPLIED THAT PARTY WOULD NOT, IN THE EVENT OF LITIGATION, SEEK
TO ENFORCE THE FOREGOING WAIVERS, (iii) ACKNOWLEDGES THAT IT HAS BEEN INDUCED TO
ENTER INTO THIS AGREEMENT, THE LOAN DOCUMENTS AND THE TRANSACTIONS CONTEMPLATED
HEREBY AND THEREBY BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS
CONTAINED IN THIS SECTION 2.28(C), AND (IV) ACKNOWLEDGES THAT THIS SECTION
2.28(C) \ WAS NEGOTIATED BY IT AND THAT ITS COUNSEL HAS HAD AN OPPORTUNITY TO
REVIEW THIS AGREEMENT.

 

[SIGNATURE PAGES TO FOLLOW]

 

16

IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly
executed and delivered as of the day and year first above written.

 

 

  GulfSlope Energy, Inc., as Borrower         By: /s/ John N. Seitz   Name: John
N. Seitz   Title: CEO

 

 

17

 

  John N. Seitz., as Subordinated Lender         By: /s/ John N. Seitz   Name:
John N. Seitz   Title: CEO

 

Witnessed

 

  }

/s/ Charles Kelley

 

     

Witness Name: Charles Kelley

Witness Occupation: Attorney 

Witness Address: 700 Louisiana St., Suite 3400, Houston, TX 77002

 

   

 

18

 

  Delek GOM Investments, LLC, as Senior Lender         By: /s/ Leora Pratt Levin
  Name: Leora Pratt Levin   Title: Authorized Person

 

 

19