Subordination Agreement between WEDGE Energy Services, L.L.C. and Frost National Bank regarding South Texas Drilling & Exploration, Inc. Debt

Summary

This agreement, dated March 30, 2001, is between WEDGE Energy Services, L.L.C. and Frost National Bank. WEDGE agrees that its $9,000,000 loan to South Texas Drilling & Exploration, Inc. (SOTX) will be subordinate to two existing loans from Frost National Bank to Pioneer Drilling Co., Ltd. and/or SOTEX. WEDGE will not collect on its loan until the bank's loans are fully repaid and will convert its loan to equity in SOTX once shareholders approve. The agreement sets the priority of debt repayment and outlines WEDGE's obligations regarding its loan.

EX-4.8 14 h88511ex4-8.txt SUBORDINATION AGREEMENT - DATED MARCH 30, 2001 1 EXHIBIT 4.8 SUBORDINATION AGREEMENT WHEREAS, WEDGE Energy Services, L.L.C., a Delaware limited liability company ("WEDGE") intends to lend South Texas Drilling & Exploration, Inc. ("SOTX") the sum of $9,000,000.00 evidenced by a Subordinated Note of even date herewith (the "Subordinated Note"); and WHEREAS, the Frost National Bank ("Bank") has outstanding two loans in the amounts of $1,000,000 (under a note dated March 20, 2001) and $9,000,000 (under a note dated August 11, 2000) to Pioneer Drilling Co., Ltd. and/or SOTEX (which loans are collectively referred to herein as the "Frost Superior Indebtedness"); and WHEREAS, WEDGE has agreed to subordinate the Subordinated Note and any renewals and extensions thereof (the "Inferior Indebtedness") to the Superior Indebtedness: NOW, THEREFORE, KNOW ALL MEN BY THESE PRESENTS, that WEDGE, in consideration of the premises, and in consideration of the sum of TEN AND NO/100 DOLLARS ($10.00) and other good and valuable consideration, the receipt and sufficiency of which consideration is hereby acknowledged, HAS COVENANTED AND AGREED, and does hereby COVENANT AND AGREE, that the Inferior Indebtedness shall be, and the same is hereby made subject and inferior to the Superior Indebtedness. WEDGE further agrees that it will not receive, collect or seek to collect any amount owing under the Inferior Indebtedness until all of the Superior Indebtedness is paid in full. WEDGE further agrees to take all action necessary to convert the Inferior Indebtedness into equity in SOTX as soon as shareholder approval has been obtained. IN WITNESS WHEREOF, this instrument has been executed by WEDGE effective the 30th day of March, 2001. WEDGE ENERGY SERVICES, L.L.C. By: /s/ James M. Tidwell ---------------------------------------- James M. Tidwell, Vice President -1-