Exhibit
10.232


 


Resaca
Exploitation, Inc.


1331
Lamar, Suite 1450


Houston,
Texas 77010


 


May 14, 2010


 


Torch Energy Advisors
Incorporated


1331 Lamar, Suite 1450


Houston, Texas 77010


 


Re:          Letter Agreement of even date herewith
(the “Waiver Letter”) executed by
the parties to and in connection with that certain Second Amended and Restated
Credit Agreement, dated June 26, 2009, by and among Resaca Exploitation, Inc.,
as borrower (“Resaca”), CIT Capital USA
Inc., as administrative agent for the lenders (“CIT”),
and certain financial institutions from time to time party thereto as lenders
(the “Credit Agreement”).  Terms used herein and not otherwise defined
herein shall have the meanings ascribed to such terms in the Credit Agreement.


 


Ladies and Gentlemen:


 


Resaca and Torch Energy
Advisors Incorporated (“Torch”)
have previously entered into that certain Second Amended and Restated Agreement
for Administrative Services dated January 1, 2009 by and among Resaca,
Torch and, for the limited purpose described therein, Torch Energy Services, Inc.
(as amended, the “Services Agreement”).  As of March 31, 2010, $1,755,647 was due
and payable by Resaca to Torch for services performed under the Services
Agreement which remain outstanding (together with any additional amounts that
may become due and payable under the Services Agreement between the date hereof
and June 30, 2010, herein referred to as the “Torch
Payable”).  Pursuant to
the terms of the Waiver Letter, in the event that a Refinancing (as defined in
the Waiver Letter) of the Obligations under the Credit Agreement has not
occurred by June 30, 2010, Resaca is required to cause the outstanding
balance of the Torch Payable on June 30, 2010 to be contractually
subordinated to the Obligations by an agreement in form and substance
acceptable to CIT (the “Torch Subordination
Requirement”).  In
connection with the Waiver Letter, Resaca and Torch are entering into this
letter to satisfy the Torch Subordination Requirement.  CIT is executing this letter solely for the
purpose as acknowledging and agreeing that upon the execution and delivery of
the hereinafter defined Note in accordance with the terms of this letter
agreement, the Torch Subordination Requirement shall be and be deemed to be
fully satisfied.  In consideration of the
foregoing, the parties hereto agree as follows:


 


1.             To the extent that a Refinancing (as defined in the
Waiver Letter) of the Obligations under the Credit Agreement has not occurred
by June 30, 2010 Resaca shall execute and deliver to Torch a Note in substantially
the form attached hereto as Exhibit A (the
“Note”).


 


2.             The Note shall (i) be in the original principal
amount of and shall evidence the outstanding amount of the Torch Payable as of June 30,  (ii) be subordinated to the Obligations
owing by Resaca under the Credit Agreement, and (iii) have a maturity date
of October 1, 2012 or such earlier date specified therein, all upon the
terms and conditions more particularly described therein.  Nothing contained herein shall be construed
as a modification or amendment of any of the terms or provisions of the
Services Agreement, which Services Agreement remains in full force and effect.


 

















 


3.             This letter agreement will be governed by and
construed in accordance with Texas law.  This letter agreement may be
changed, modified or amended only by a writing signed by all parties
hereto.  In case any provision of this letter agreement shall be invalid,
illegal or unenforceable, the validity, legality and enforceability of the
remaining provisions shall not be in any way affected or impaired hereby.


 


4.             This letter agreement may be executed in any number of
counterparts and all of such counterparts taken together shall be deemed to
constitute one and the same instrument.


 


Please confirm that the
foregoing is in accordance with your understanding by signing and returning to
us the enclosed copy of this letter, which shall become a binding agreement
upon our receipt.


 


Remainder
of Page Intentionally Blank. 
Signature Page to Follow.


 

















 


	
   

  	
  Very truly yours,

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  RESACA EXPLOITATION, INC.

  
	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/
  Dennis Hammond

  
	
   

  	
   

  	
  Dennis
  Hammond

  
	
   

  	
   

  	
  President

  



 


 


	
  Acknowledged
  and Agreed:

  
	
   

  
	
  TORCH ENERGY ADVISORS INCORPORATED

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  By:

  	
  /s/ Chris B. Work

  	
   

  
	
   

  	
  Chris B. Work

  	
   

  
	
   

  	
  Vice President

  	
   

  
	
   

  
	
   

  
	
  CIT CAPITAL USA INC., as Administrative Agent 

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  By: 

  	
  /s/ George McKean

  	
   

  
	
   

  	
  George McKean

  	
   

  
	
   

  	
  Vice President

  	
   

  



 


Signature Page to Letter
Agreement


 

















 


Exhibit A


 


Form of
Note


 


(See
Attached)


 


Exhibit A to Letter Agreement


 

















 


SUBORDINATED UNSECURED NOTE


 


As of June 30, 2010


 


FOR
VALUE RECEIVED, the undersigned, Resaca Exploitation, Inc. (“Maker”), hereby
unconditionally promises to pay to the order of Torch Energy Advisors Incorporated (“Payee”) in the manner and at the place
provided in this Note the principal sum of
                              
DOLLARS
($                              )
plus any additional
amounts that may become due and payable under that certain Second Amended and
Restated Agreement for Administrative Services dated January 1, 2009 by
and among Maker, Payee and, for the limited purpose described therein, Torch
Energy Services, Inc., between
[          ], 2010 and June 30,
2010, or so much thereof as may be outstanding hereunder prior to maturity,
in lawful money of the United States of America, together with interest
(calculated on the basis of a 360-day year) on the unpaid principal balance
from day to day remaining, computed from the date hereof until maturity at the
rate per annum which shall from day to day be equal to the lesser of (a) the
Maximum Rate, or (b) the prime rate in effect on the date hereof at Amegy
Bank N.A. plus two percent (2%).


 


1.             Definitions.  When used in this Note, the following terms
shall have the respective meanings specified herein or in the  Section referred
to:


 


“Business Day” means a
day upon which business is transacted by national banks in Houston, Texas.


 


“Default” has the
meaning ascribed to it in Section 5
hereof.


 


“Maximum Rate” means,
with respect to the holder hereof, the highest non-usurious rate of interest,
if any, permitted by applicable law on such day.


 


“Note” means this Subordinated
Unsecured Note.


 


“Note Documents” means this Note, and any
agreements, documents (and with respect to this Note, and such other agreements
and documents, any modifications, amendments, renewals, extensions, or
restatements thereof), or certificates at any time executed or delivered
pursuant to the terms of this Note.


 


“Person” means any
individual, corporation, limited liability company, partnership, joint venture,
trust, unincorporated organization or government or any agency or political
subdivision thereof.


 


“Prepayment Date”
means the date Maker prepays the outstanding principal balance of this Note as
provided in Section 6 hereof.


 


2.             Payment.  The unpaid principal of and interest upon this
Note shall be payable as follows:


 


(a)           All interest shall be paid-in-kind by
being added to the principal balance of this Note on the last day of each
fiscal quarter and at maturity (inclusive of any interest theretofore so
added).


 


(b)           The unpaid
principal of, and interest on, this Note shall be finally due and payable on
the earlier of (i) October 1, 2012 and (ii) (A) in the
event that the Senior Debt is paid in full with funds that do not constitute
proceeds from an Equity (as defined in the Credit Agreement) offering,
ninety-one days after the date on which the Senior Debt (hereinafter defined)
has been paid in full, or (B) in the event that the Senior Debt is paid in
full with funds that constitute proceeds from an Equity offering, two Business
Days after the date on which the Senior Debt (hereinafter defined) has been
paid in full.


 


All
payments of principal and interest of this Note shall be made by Maker to Payee
in federal or other immediately available funds to the following account:


 


Promissory Note


 














 


Receiving
Bank:   Amegy Bank N.A.


ABA Routing No.        113
011 258


For Credit to the account of Torch Energy Services


Account Number: 166 154


 


Payments
made to Payee by Maker hereunder shall be applied first to accrued interest and
then to principal.


 


Should
the principal of, or any installment of the principal of or interest upon, this
Note become due and payable on any day other than a Business Day, the maturity
thereof shall be extended to the next succeeding Business Day, and interest
shall be payable with respect to such extension.


 


3.             Subordination.  This Note, and the
indebtedness evidenced hereby (the “Subordinated Debt”), including principal and
interest, is expressly subordinate and junior to all of the obligations and
indebtedness of Maker (the “Senior Debt”) under the Loan Documents (as defined in
that certain Second Amended and Restated Credit Agreement dated as of June 26,
2009, by and among Resaca Exploitation, Inc, the Lenders party thereto and CIT
Capital USA Inc., as Administrative Agent for such Lenders (in such capacity, “Agent”), together
with all amendments, supplements, modifications and/or restatements thereto
(the “Credit Agreement”)) to the
extent set forth in subparagraphs (a) through (f), inclusive, below (the “Subordination Subparagraphs”).


 


(a)           If
a Default or an Event of Default (as such terms are defined in the Credit
Agreement) shall occur, then, unless and until such Default or Event of Default
shall have been remedied by indefeasible payment in full of all Senior Debt in
cash or otherwise cured, or expressly waived in writing by all affected holders
of Senior Debt, the Maker shall not make and the holder of this Note shall not
accept or receive, any direct or indirect payment of or on account of any
Subordinated Debt.


 


(b)           In
the event of any insolvency, bankruptcy, liquidation, reorganization or other
similar proceedings, or any receivership proceedings in connection therewith,
relative to the Maker, and in the event of any proceedings for voluntary
liquidation, dissolution or other winding up of the Maker, whether or not
involving insolvency or bankruptcy proceedings, then all Senior Debt shall
first be indefeasibly paid in full and in cash before any payment is made of or
on account of any Subordinated Debt.


 


(c)           In
any of the proceedings referred to in subparagraph (b) above, any payment
or distribution of any kind or character whether in cash, property, stock or
obligations, which may be payable or deliverable by the Maker in respect of
this Note shall be paid or delivered directly to the holders of Senior Debt for
the payment thereof in accordance with the priorities then existing among such
holders, unless and until all Senior Debt shall have been indefeasibly paid in
full and in cash.


 


(d)           If
any payment or distribution of any character, whether in cash, securities or
other property, shall be received by the Payee in contravention of any of the
terms of this Note or any other Loan Document (as defined in the Credit
Agreement) and before all the Senior Debt shall have been indefeasibly paid in
full and in cash, such payment or distribution shall be received in trust for
the benefit of the holders of the Senior Debt at the time outstanding and shall
forthwith be paid over or delivered and transferred to the holders of the Senior
Debt for the ratable application in payment thereof in accordance with the
priorities then existing among such holders.


 


(e)           The
Payee will not commence any action or proceeding, including, without
limitation, an action to recover on a right of set-off or similar right or
remedy, against the Maker to recover all or any part of the Subordinated Debt
or join with any creditor, unless the holders of the Senior Debt shall also
join, in bringing any proceedings against the Maker under any bankruptcy,
reorganization, readjustment of debt, arrangement of debt, receivership,
liquidation or insolvency law or statute of the Federal or any state government
unless and until all Senior Debt shall be indefeasibly paid in full and in
cash.


 

















 


(f)            The
maximum principal amount, the rate of interest charged, or the time, place,
manner, terms or amount of principal or interest payments of this Note, may not
be modified or amended without, in each instance, the prior express written
consent of the holder(s) of the Senior Debt unless all Senior Debt has
been indefeasibly paid in full and in cash.


 


The
subordination provisions of this Note shall be deemed a continuing offer to all
holders of Senior Debt to act in reliance on such provisions (but no such
reliance shall be required to be proven to receive the benefits hereof) and may
be enforced by such holders, and no right of any present or future holder of
any Senior Debt to enforce subordination as provided in this Note shall at any
time in any way be prejudiced or impaired by any act or failure to act on the
part of the Maker or by any act or failure to act by any such holder, or by any
non-compliance by the Maker with the terms, provisions and covenants of this
Note.


 


4.             Notice
of Default; No Waiver.  Maker
and each surety, endorser, guarantor, and other party ever liable for payment
of any sums of money payable upon this Note, jointly and severally waive
presentment, demand, protest, notice of protest and non-payment or other notice
of default, notice of acceleration, and intention to accelerate, or other
notice of any kind, and agree that their liability under this Note shall not be
affected by any renewal or extension in the time of payment hereof, or in any
indulgences, or by any release or change in any security for the payment of
this Note, and hereby consent to any and all renewals, extensions, indulgences,
releases, or changes, regardless of the number of such renewals, extensions,
indulgences, releases, or changes.


 


No
waiver by Payee of any of its rights or remedies hereunder or under any other
document evidencing or securing this Note or otherwise, shall be considered a
waiver of any other subsequent right or remedy of Payee; no delay or omission
in the exercise or enforcement by Payee of any rights or remedies shall ever be
construed as a waiver of any right or remedy of Payee; and no exercise or
enforcement of any such rights or remedies shall ever be held to exhaust any
right or remedy of Payee.


 


5.             Default
and Remedies.


 


(a)           A “Default”
shall exist hereunder if Maker shall fail to pay when due any principal of, or
interest upon this Note.


 


(b)           If Maker fails or refuses to pay any
part of the principal of or interest upon this Note as the same become due, or
upon the occurrence of any Default hereunder or under any other agreement or
instrument securing or assuring the payment of this Note or executed in
connection herewith, then in any such event the holder hereof may, at its
option, (i) declare the entire unpaid balance of principal and accrued
interest of the Note to be immediately due and payable without presentment or
notice of any kind which Maker waives pursuant to Section 4 herein, (ii) reduce
any claim to judgment, and/or (iii) pursue and enforce any of Payee’s
rights and remedies available pursuant to any applicable law or agreement
including, without limitation, foreclosing all liens and security interests
securing payment thereof or any part thereof.


 


6.             Voluntary
Prepayment.  Until the
Senior Debt is indefeasibly paid in cash in full, Maker shall not repay, in
whole or in part, any principal or interest on this Note (other than the
payment of interest “in-kind”).  Thereafter, Maker reserves the right to
prepay the outstanding principal balance of this Note, in whole or in part, at
any time and from time to time, without premium or penalty.  Any such prepayment shall be made together
with payment of interest accrued on the amount of principal being prepaid
through the date of such prepayment.


 


7.             Usury
Laws.  Regardless of any provisions
contained in this Note, the Payee shall never be deemed to have contracted for
or be entitled to receive, collect, or apply as interest on the Note, any
amount in excess of the Maximum Rate, and, in the event Payee ever receives,
collects, or applies as interest any such excess, such amount which would be
excessive interest shall be applied to the reduction of the unpaid principal
balance of this Note, and, if the principal balance of this Note is paid in
full, then any remaining excess shall forthwith be paid to Maker.  In determining whether or not the interest
paid or payable under any specific contingency exceeds the highest lawful rate,
Maker and Payee shall, to the maximum extent permitted under applicable law, (a) characterize



 

















 


any
non-principal payment (other than payments which are expressly designated as
interest payments hereunder) as an expense, fee, or premium, rather than as
interest, (b) exclude voluntary prepayments and the effect thereof, and (c) spread
the total amount of interest throughout the entire contemplated term of this
Note so that the interest rate is uniform throughout such term.


 


8.             Costs.  If this Note is placed in the hands of an
attorney for collection, or if it is collected through any legal proceeding at
law or in equity, or in bankruptcy, receivership or other court proceedings,
Maker agrees to pay all costs of collection, including, but not limited to,
court costs and reasonable attorneys’ fees, including all costs of appeal.  No service charge shall be made for any such
registration of transfer or exchange, but Maker may require payment of a sum
sufficient to cover any tax or other governmental charge payable in connection
therewith.


 


9.             GOVERNING LAW.  THIS NOTE AND ALL ISSUES AND CLAIMS ARISING
IN CONNECTION WITH OR RELATING TO THE INDEBTEDNESS EVIDENCED HEREBY SHALL BE
GOVERNED AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF TEXAS AND
THE APPLICABLE LAWS OF THE UNITED STATES OF AMERICA.


 


10.          JURY TRIAL.  TO THE FULLEST EXTENT PERMITTED BY APPLICABLE
LAW, MAKER HEREBY IRREVOCABLY AND EXPRESSLY WAIVES ALL RIGHT TO A TRIAL BY JURY
IN ANY ACTION, PROCEEDING, OR COUNTERCLAIM (WHETHER BASED UPON CONTRACT, TORT,
OR OTHERWISE) ARISING OUT OF OR RELATING TO ANY OF THIS NOTE, THE OTHER NOTE
DOCUMENTS, OR THE TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY, OR THE ACTIONS
OF PAYEE IN THE NEGOTIATION, ADMINISTRATION, OR ENFORCEMENT THEREOF.  THIS WAIVER OF RIGHT TO TRIAL BY JURY IS
GIVEN KNOWINGLY AND VOLUNTARILY BY MAKER, AND IS INTENDED TO ENCOMPASS INDIVIDUALLY
EACH INSTANCE AND EACH ISSUE AS TO WHICH THE RIGHT TO A TRIAL BY JURY WOULD
OTHERWISE ACCRUE.  PAYEE IS HEREBY
AUTHORIZED TO FILE A COPY OF THIS PARAGRAPH IN ANY PROCEEDING AS A CONCLUSIVE
EVIDENCE OF THIS WAIVER BY MAKER.


 


11.          ENTIRETY.  THE PROVISIONS OF THIS NOTE AND THE NOTE
DOCUMENTS MAY BE AMENDED OR REVISED ONLY BY AN INSTRUMENT IN WRITING
SIGNED BY MAKER AND PAYEE.  THIS NOTE AND
ALL THE OTHER NOTE DOCUMENTS EMBODY THE FINAL, ENTIRE AGREEMENT OF MAKER AND
PAYEE AND SUPERSEDE ANY AND ALL PRIOR COMMITMENTS, AGREEMENTS, REPRESENTATIONS,
AND UNDERSTANDINGS, WHETHER WRITTEN OR ORAL, RELATING TO THE SUBJECT MATTER
HEREOF AND THEREOF AND MAY NOT BE CONTRADICTED OR VARIED BY EVIDENCE OF
PRIOR, CONTEMPORANEOUS, OR SUBSEQUENT ORAL AGREEMENTS OR DISCUSSIONS OF MAKER
AND PAYEE.  THERE ARE NO ORAL AGREEMENTS
BETWEEN MAKER AND PAYEE.


 


[Remainder of Page Intentionally Left Blank;


Signature Page Follows]


 

















 


	
   

  	
  MAKER:

  
	
   

  	
   

  
	
   

  	
  RESACA
  EXPLOITATION, INC.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
  Name:

  	
   

  
	
   

  	
  Title: