SUBORDINATION AGREEMENT
THIS SUBORDINATION AGREEMENT (this "AGREEMENT") is made and
entered into effective this ___ day of August, 1999, by and among SHOEINVEST II,
LP, a Delaware corporation ("Shoeinvest"); MIDDLE BAY OIL COMPANY, INC., an
Alabama corporation (the "BORROWER") and COMPASS BANK, an Alabama state
chartered banking institution, as Agent for itself and BANK OF OKLAHOMA,
NATIONAL ASSOCIATION (collectively, the "LENDERS").
W I T N E S S E T H :
WHEREAS, pursuant to that certain Credit Agreement dated March
27, 1998, by and between the Borrower and ENEX RESOURCES CORPORATION as
Borrowers and the Lenders as amended by various letter amendments and by First
Amendment of even date herewith (as such agreement may be amended, modified,
supplemented or restated from time to time, the "CREDIT AGREEMENT"), the Lenders
has agreed to make Loans to or for the benefit of the Borrower;
WHEREAS, Shoeinvest has or is obligated to advance certain
funds to the Borrower pursuant to that certain note dated August __, 1999, from
the Borrower to Shoeinvest ( the "SHOEINVEST NOTE"), in the amount of $100,000
(the "DEBT");
WHEREAS, pursuant to the Credit Agreement and as an inducement
to the Lenders to extend credit to the Borrower under the Credit Agreement,
Shoeinvest and the Borrower have agreed to execute this Agreement in favor of
the Lenders;
NOW, THEREFORE, in consideration of the mutual covenants and
agreements herein contained, the parties hereto agree as follows:
ARTICLE I
DEFINITIONS
1.01 TERMS DEFINED ABOVE. As used in this Agreement, each of
the terms "AGREEMENT," "BORROWER," "CREDIT AGREEMENT," "DEBT," "LENDERS,"
"SHOEINVEST," and the "SHOEINVEST NOTE" shall have the meaning assigned to such
term hereinabove.
1.02 TERMS DEFINED IN CREDIT AGREEMENT. Each term defined in
the Credit Agreement and used herein without definition shall have the meaning
assigned to such term in the Credit Agreement.
1.03 OTHER DEFINITIONAL PROVISIONS.
(a) The words "hereby," "herein," "hereinafter,"
"hereinabove," "hereinbelow," "hereof," "hereunder," and words of
similar import when used in this
Agreement shall refer to this Agreement as a whole and not to any
particular Article, Section or provision of this Agreement.
(b) Section references are to such Sections of this
Agreement unless otherwise specified.
(c) As used herein and in any certificate or other document
made or delivered pursuant hereto, accounting and financial terms not
otherwise defined shall be defined according to GAAP.
ARTICLE II
SUBORDINATION
2.01 SUBORDINATION OF PAYMENT. The payment of the Debt is
hereby expressly subordinated in right of payment to the prior payment in full
of all Obligations and all other indebtedness of the Borrower owed to the
Lenders; PROVIDED, HOWEVER, so long as no Event of Default has occurred and is
continuing for which (other than an event specified in Subsection 7.1(d) of the
Credit Agreement) the Lenders have given written notice of such Event of Default
to the Borrower (a "DEFAULT NOTICE"), the Borrower may pay only interest due on
the Debt according to its terms. At any time following the occurrence and during
the continuance of any Event of Default and provided that the Lenders have given
a Default Notice, Shoeinvest will not request, accept or receive, and the
Borrower will not make, any payments, whether in cash or other Property, on or
with respect to the Debt unless and until (a) such Event of Default shall have
been cured or waived or shall have ceased to exist, or (b) such time as all
Obligations shall have been fully paid and performed and the obligation of the
Lenders to make Loans under the Credit Agreement shall have terminated.
Notwithstanding the above, if within ninety (90) days after the giving of such
Default Notice by the Lenders such Event of Default has not become the subject
of (a) judicial proceedings or (b) an acceleration notice by the Lenders, then
the Borrower shall (unless in such interval the provision of this Section 2.01
have again come into effect on account of any other Event of Default), resume
making any and all required payments in respect of the Debt in any manner
authorized under the terms governing such Debt until such time (if any) that
such judicial proceedings are instituted, such an acceleration notice is given
or a Default Notice (on account of any other Event of Default) is given and a
period of ninety (90) days shall not have elapsed since the giving of such
Default Notice as contemplated above. In the event any direct or indirect
payment or distribution, whether in cash or other Property, shall be received by
Shoeinvest in contravention of the provisions hereof, such payment or
distribution shall be held in trust for, and shall be immediately paid over or
delivered to, the Lenders.
2.02 SHOEINVEST DEBT SUBORDINATED TO PRIOR PAYMENT OF
OBLIGATIONS ON DISSOLUTION, LIQUIDATION OR REORGANIZATION OF THE BORROWER. Upon
any distribution of assets of the Borrower upon any voluntary or involuntary
dissolution, winding up, liquidation or reorganization of the Borrower (whether
in bankruptcy, insolvency or receivership proceedings or upon an assignment for
the benefit of creditors or otherwise):
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(a) the Lenders shall first be entitled to receive payment
in full (or to have such payment duly provided for to their
satisfaction) of the principal thereof and interest due on the
Obligations and other amounts due in connection therewith before
Shoeinvest is entitled to receive any payment on account of the
principal of or interest on the Debt;
(b) any payment or distribution of assets of the Borrower of
any kind or character, whether in cash, property or securities, to
which Shoeinvest would be entitled except for the provisions of this
Agreement, shall be paid by the liquidating trustee or agent or other
person making such payment or distribution directly to the Lenders or
its representative, to the extent necessary to make payment in full of
all Obligations remaining unpaid, after giving effect to any concurrent
payment or distribution or provision therefor to the Lenders; and
(c) in the event that, notwithstanding the foregoing, any
payment or distribution of assets of the Borrower of any kind or
character, whether in cash, property or securities, shall be received
by Shoeinvest on account of principal of or interest on the Debt before
all Obligations are paid in full or provision made for their payment,
such payment or distribution (subject to the further provisions of this
Article) shall be paid over to the Lenders or their representative for
application to the payment of all Obligations remaining unpaid or
unprovided for until all such Obligations shall have been paid in full,
after giving effect to any concurrent payment or distribution or
provision therefor to the Lenders.
2.03 SUBORDINATION OF LIENS. So long as any Obligation
remains outstanding or any obligation of the Lenders exists to make Loans under
the Credit Agreement, Shoeinvest hereby subordinates all Liens, now existing or
hereafter created or arising, securing all or any portion of the Debt to all
Liens, now existing or hereafter created or arising, securing all or any portion
of the Obligations, notwithstanding any defect, deficiency, error or omission
which may be contained in any Loan Document creating or perfecting any such Lien
securing all or any portion of the Obligations. All Liens, now existing or
hereafter created or arising, securing all or any portion of the Debt shall at
all times remain subordinate, secondary and inferior to all Liens, now existing
or hereafter created or arising, securing all or any portion of the Obligations.
2.04 SUBORDINATION OF REMEDIES. So long as any Obligation
remains outstanding or any obligation of the Lenders exists to make Loans under
the Credit Agreement, Shoeinvest shall not, without the prior written consent of
the Lenders, declare any Debt due or in default (other than to accelerate the
Debt and take such other actions as reasonably required to protect Shoeinvest's
claims upon any bankruptcy, insolvency, or receivership proceeding with respect
to Borrower) or foreclose upon or exercise any power of sale with respect to any
security for all or any portion of the Debt or exercise any other right, power
or remedy of Shoeinvest provided for in any document or instrument executed in
connection with the Debt or by law or initiate or join with any other creditor
of the Borrower in initiating any plan or proceeding pursuant to any bankruptcy,
insolvency or receivership proceedings or seeking an assignment for the benefit
of creditors or the marshalling of the assets and liabilities of the Borrower.
Upon any distribution of assets of the Borrower or the
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dissolution, winding up, liquidation or reorganization (whether in
bankruptcy, insolvency or receivership proceedings or upon an assignment for
the benefit of creditors or the marshalling of the assets and liabilities of
the Borrower or otherwise), any payment to which Shoeinvest would otherwise
be entitled with respect to the Debt shall be held in trust for, and shall be
immediately paid over or delivered to, the Lenders for application to the
Obligations until all Obligations shall have been paid in full.
Notwithstanding any provision of this Agreement (i) the holder of the
Shoeinvest Note may convert the Shoeinvest Note to shares of common stock of
Borrower at any time in accordance with the terms of the Shoeinvest Note; and
(ii) Shoeinvest may exercise any warrants for shares of common stock of the
Borrower in accordance with the terms of any such warrants.
2.05 CONTINUING AGREEMENT. This Agreement shall continue in
full force and effect and the liabilities and obligations of the Borrower and
Shoeinvest hereunder shall not be affected or impaired by any amendment,
modification or alteration of any Loan Document, except as may be expressly
provided in any such amendment, modification or alteration. This Agreement shall
continue to be effective or shall be reinstated, as the case may be, if at any
time any payment of any of the Obligations is rescinded or must otherwise be
returned by the Lenders upon the insolvency, bankruptcy or reorganization of the
Borrower or otherwise, all as though such payment had not been made.
2.06 LIABILITY NOT IMPAIRED. The liabilities and obligations
of the Borrower and Shoeinvest hereunder shall not be affected or impaired by
(a) the failure of the Agent or the Lenders or any other Person to exercise
diligence or reasonable care in the preservation, protection or other handling
or treatment of all or any part of any Collateral for all or any portion of the
Obligations, (b) the failure of any Lien intended to be granted or created to
secure all or any part of the Obligations to be properly perfected or created or
the unenforceability of any such Lien for any other reason, or (c) the
subordination of any such Lien to any other Lien. The Lenders may at any time
and from time to time, without the consent of or notice to Shoeinvest, and
without incurring any responsibility to Shoeinvest, and without impairing or
releasing or otherwise affecting any of the obligations or agreements of
Shoeinvest hereunder, (a) change the manner, place or terms of payment, or
change or extend the time of payment of, renew, or alter all or any portion of
the Obligations, (b) exchange, release, surrender, realize upon or otherwise
deal with, in any manner and any order, any Property at any time subject to any
Lien in favor of the Lenders, (c) exercise or refrain from exercising any rights
against the Borrower or others, and (d) sell, transfer, assign or grant
participations in the Obligations or any portion thereof.
2.07 WAIVERS. Shoeinvest waives any right to require the
Lenders to (a) proceed against the Borrower or make any effort at the collection
of the Obligations from the Borrower or any other Person liable for all or any
portion of the Obligations, (b) proceed against or exhaust any Collateral
securing all or any portion of the Obligations, or (c) pursue any other remedy
in the power of the Lenders. The liability and obligations of Shoeinvest
hereunder shall not be affected or impaired by any action or inaction by the
Lenders in regard to any matter waived herein.
2.08 MODIFICATION OF SHOEINVEST DEBT. Without the prior
written consent of the Lenders, none of the terms or provisions of the
Shoeinvest Note, or the payment of the Debt evidenced thereby, shall be
modified, amended, accelerated, renewed or extended. Notwithstanding
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the foregoing, Borrower may, without the consent of Lender (a) extend the
date on which payments are required on the Shoeinvest Note, (b) reduce the
interest rate applicable to the Shoeinvest Note, (c) waive compliance with
the terms of the Shoeinvest Note or loan documents associated therewith or
any default arising from non-compliance, or (d) relax or make less
restrictive any covenant in the Shoeinvest Note or loan documents associated
therewith.
2.09 KNOWLEDGE OF SHOEINVEST. Shoeinvest shall not at any
time be charged with knowledge of the existence of any facts which would
prohibit the making of any payment to Shoeinvest under the Shoeinvest Note or
the taking of any action under the Shoeinvest Note by Shoeinvest unless and
until Shoeinvest shall have received written notice thereof from the Borrower
or the Agent or the Lenders or from any trustee or representative therefor and,
prior to the receipt of any such written notice, shall be entitled in all
respects conclusively to assume that no such facts exist.
2.10 OBLIGATION OF THE BORROWER. Nothing contained in this
Agreement shall affect the obligation of the Borrower to make, or prevent the
Borrower from making, payment of the principal of or interest on the Debt,
except as otherwise provided in this Agreement and the Shoeinvest Note.
ARTICLE III
MISCELLANEOUS
3.01 SURVIVAL OF COVENANTS AND AGREEMENTS. All covenants
and agreements of the Borrower and Shoeinvest herein made shall survive the
execution and delivery hereof and shall remain in force and effect so long as
any Obligation remains outstanding or any obligation of the Lenders exists to
make Loans under the Credit Agreement.
3.02 PARTIES IN INTEREST. All covenants and agreements
herein contained by or on behalf of the Borrower, Shoeinvest or the Lenders
shall be binding upon and inure to the benefit of the Borrower, Shoeinvest,
or the Lenders, as the case may be, and their respective legal representatives,
successors and assigns.
3.03 RIGHTS OF THIRD PARTIES. All provisions herein are
imposed solely and exclusively for the benefit of the Borrower, Shoeinvest, and
the Lenders. No other Person shall have any right, benefit, priority or interest
hereunder or as a result hereof or have standing to require satisfaction of
provisions hereof in accordance with their terms; and any or all of such
provisions may be freely waived in whole or in part by the Lenders at any time
if in their sole discretion it deems it advisable to do so.
3.04 ARTICLES AND SECTIONS. This Agreement, for convenience
only, has been divided into Articles and Sections; and it is understood and
agreed that the rights and other legal relations of the parties hereto shall be
determined from this Agreement as an entirety and without
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regard to the aforesaid division into Articles and Sections and without
regard to headings prefixed to such Articles or Sections.
3.05 NUMBER AND GENDER. Whenever the context requires,
reference herein made to the single number shall be understood to include the
plural; and likewise, the plural shall be understood to include the singular.
Definitions of terms defined in the singular or plural shall be equally
applicable to the plural or singular, as the case may be, unless otherwise
indicated. Words denoting sex shall be construed to include the masculine,
feminine and neuter, when such construction is appropriate; and specific
enumeration shall not exclude the general but shall be construed as cumulative.
3.06 NO WAIVER; RIGHTS CUMULATIVE. No course of dealing on
the part of the Lenders, their officers or employees, nor any failure or delay
by the Lenders with respect to exercising any of its rights hereunder or under
any Loan Document shall operate as a waiver of any of the rights of the Lenders
hereunder or under such Loan Document. The rights of the Lenders hereunder and
under the Loan Documents shall be cumulative, and the exercise or partial
exercise of any such right shall not preclude the exercise of any other right.
3.07 SURVIVAL UPON UNENFORCEABILITY. In the event any one or
more of the provisions contained herein or executed in connection herewith
shall, for any reason, be held to be invalid, illegal or unenforceable in any
respect, such invalidity, illegality or unenforceability shall not affect any
other provision hereof or of any such other instrument.
3.08 AMENDMENTS OR MODIFICATIONS. Neither this Agreement nor
any provision hereof may be changed, waived, discharged or terminated orally,
but only by an instrument in writing signed by the party against whom
enforcement of the change, waiver, discharge or termination is sought.
3.09 GOVERNING LAW. THIS AGREEMENT SHALL BE DEEMED TO BE A
CONTRACT MADE UNDER AND SHALL BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY
THE LAWS OF THE STATE OF TEXAS.
3.10 JURISDICTION AND VENUE. ALL ACTIONS OR PROCEEDINGS WITH
RESPECT TO, ARISING DIRECTLY OR INDIRECTLY IN CONNECTION WITH, OUT OF, RELATED
TO OR FROM THIS AGREEMENT MAY BE LITIGATED, AT THE SOLE DISCRETION AND ELECTION
OF THE LENDERS, IN COURTS HAVING SITUS IN HOUSTON, XXXXXX COUNTY, TEXAS. EACH OF
THE BORROWER AND SHOEINVEST HEREBY SUBMITS TO THE JURISDICTION OF ANY LOCAL,
STATE OR FEDERAL COURT LOCATED IN HOUSTON, XXXXXX COUNTY, TEXAS, AND HEREBY
WAIVES ANY RIGHTS IT MAY HAVE TO TRANSFER OR CHANGE THE JURISDICTION OR VENUE OF
ANY LITIGATION BROUGHT AGAINST IT BY THE LENDERS IN ACCORDANCE WITH THIS
SECTION.
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3.11 ENTIRE AGREEMENT. THIS AGREEMENT CONSTITUTES THE ENTIRE
AGREEMENT AMONG THE PARTIES HERETO WITH RESPECT TO THE SUBJECT HEREOF AND SHALL
SUPERSEDE ANY PRIOR AGREEMENT AMONG THE PARTIES HERETO, WHETHER WRITTEN OR ORAL,
RELATING TO THE SUBJECT HEREOF. THIS AGREEMENT AND THE OTHER WRITTEN LOAN
DOCUMENTS REPRESENT, COLLECTIVELY, THE FINAL AGREEMENT AMONG THE PARTIES THERETO
AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS, OR SUBSEQUENT
ORAL AGREEMENTS OF SUCH PARTIES. THERE ARE NO UNWRITTEN ORAL AGREEMENTS AMONG
SUCH PARTIES.
IN WITNESS WHEREOF, this Agreement is deemed executed
effective as of the date first above written.
SHOEINVEST II, LP
By:
--------------------------------
Printed Name:
----------------------
Title:
-----------------------------
MIDDLE BAY OIL COMPANY, INC.
By:
--------------------------------
Xxxx X. Xxxxxxx
President
LENDER AND AGENT:
COMPASS BANK
By:
---------------------------------
Xxxxxxx Xxxxxxxx Xxxxxx
Senior Vice President
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LENDER:
BANK OF OKLAHOMA, NATIONAL
ASSOCIATION
By:
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Xxxxxxx X. Xxxxx
Senior Vice President
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