SUBORDINATION AGREEMENT
THIS
SUBORDINATION AGREEMENT executed effective as of the 19th day of November 2007,
by and between [Name of Investor] (“Loan Holder”),
Wachovia Bank, National Association ("Lender"), SMF Energy
Corporation, a Delaware corporation (“SMF”), H & W
Petroleum Company, Inc. (“H & W”) and SMF Services, Inc.
(“SSI”) (SMF, H & W and SSI are referred to collectively as
“Borrower").
WITNESSETH:
WHEREAS,
Loan Holder is the legal owner and holder of an unsecured Promissory Note dated
November 19, 2007, executed by SMF in favor of Loan Holder (the "Note")
(the
loan evidenced by the Note, together with any present or future unsecured
indebtedness of Borrower to Loan Holder of every kind and description, direct
or
contingent, due or not due, original, renewed or extended and whether now in
existence or hereafter arising in connection with the Note are referred to
as
the "Subordinated
Debt”);
and
WHEREAS,
Lender and Borrower have entered into that certain Loan and Security Agreement
dated September 26, 2002 (as at any time amended, the “Loan Agreement) and
certain other loan documents in connection therewith (collectively, the
"Loan
Documents")
which
provide to Lender a first priority security interest ("Lender's
Security Interest")
in
certain assets of Borrower whether now owned or hereafter acquired (the
"Collateral"),
in
exchange for prior and continuing loans by Lender to Borrower (the “Loans");
and
WHEREAS,
Borrower will materially benefit as a result of Lender continuing to make Loans
to Borrower; and
WHEREAS,
Loan Holder is a shareholder of SMF and as such will benefit from Lender
continuing to extend the Loans to Borrower; and
WHEREAS,
Loan Holder acknowledges that Lender is willing to continue extending the Loans
only on the condition that the Subordinated Debt be subordinate and inferior
to
the Loans, and to all other indebtedness of Borrower to Lender, whether now
in
existence or hereafter created; and
WHEREAS,
Loan Holder has agreed to subordinate the Note and Subordinated Debt to the
lien
and effect of the Loans and Lender's Security Interest and all security
instruments securing the Loans, and all other indebtedness of Borrower to Lender
of every kind and description, direct or contingent, due or not due, secured
or
unsecured, original, renewed
or
extended, whether now in existence or hereafter arising, except that Lender
has
agreed to permit Loan Holder to be repaid with a portion of the proceeds of
a
proposed offering by SMF of equity securities meeting certain criteria set
forth
herein; and
WHEREAS,
Loan Holder acknowledges that Lender would not continue to extend the Loans
without the execution of this Agreement by Loan Holder and by any other
subsequent lenders to Borrower (“Other
Loan Holders”);
and
NOW,
THEREFORE, in consideration of, and as an inducement to Lender to continue
to
extend the Loans to Borrower, Loan Holder, Lender and Borrower do hereby agree
as follows:
1. The
facts
as set forth above are true and correct and are incorporated herein by
reference.
2. Loan
Holder and Borrower do hereby warrant and represent that the Note represents
the
only indebtedness currently outstanding that is due and owing from Borrower
to
Loan Holder except for the debt evidenced by a promissory note dated August
8,
2007 (the “Secured
Note”)
and
secured by a first priority security interest in certain property of Borrower
other than the Collateral pursuant to a Security Agreement dated August 8,
2007
(the “Security
Agreement”)
between Borrower and the trustee named in the Indenture Agreement of even date
therewith for the Secured Notes, which is subject to a Subordination Agreement
dated July 13, 2007 in favor of Lender (the "July
2007 Subordination Agreement").
3. Loan
Holder hereby unconditionally subordinates the Note and the Subordinated Debt
to
the Loans and to all other present and future debts and obligations of Borrower
to Lender, including all obligations of Borrower to Lender of every kind and
description, direct or contingent, due or not due, secured or unsecured,
original, renewed or extended, whether now in existence or hereafter arising
and
to the lien and effect of Lender's Security Interest in and to the Collateral
and to all Loan Documents and all other debts and obligations of Borrower to
Lender. Nothing herein shall affect the security interest of Loan Holder
pursuant to the Security Agreement, to the extent such security interest secures
obligations of Borrower to Loan Holder arising under or in connection with
the
Secured Note, and nothing herein shall modify or amend in any manner the July
2007 Subordination Agreement, which remains in full force and effect.
4. Loan
Holder and Borrower do hereby warrant, represent and agree that no payment
(principal, interest or any other payment) shall be made, permitted or accepted
under the Note or Subordinated Debt until all of the Loans have been fully
paid
and the Loan Agreement terminated, excepting for payments of interest in money
or shares of stock of Borrower which shall be permitted so long as no Event
of
Default (as defined in the Loan Agreement) has occurred and is continuing.
If
any payment is made to Loan Holder in payment of the Note or the Subordinated
Debt, or if any security or proceeds thereof is received on account of the
Note
or the Subordinated Debt contrary to the terms of this Agreement, the Borrower
agrees that the same shall be and constitute an Event of Default. Loan Holder
acknowledges that (i) upon the occurrence of an Event of Default, Lender shall
be entitled to immediately exercise all remedies provided to Lender in
connection with the Collateral and under the Loan Documents, and (ii) following
the occurrence of such Event of Default and so long as the same shall be
continuing, (A) each and every amount paid by or on behalf of any Borrower
to
Loan Holder or items received by Loan Holder (from any Borrower or from an
individual or an entity on behalf of any Borrower) from and after such
occurrence shall be forthwith paid by Loan Holder to Lender, in precisely the
form received (except for Loan Holder's endorsement, where necessary), to be
credited and applied, in Lender's sole discretion, upon any indebtedness
(principal and/or interest and/or otherwise as Lender may elect, in its sole
discretion) then owing to Lender by Borrower and, whether matured or unmatured,
and, until so delivered, the same shall be held in trust by Loan Holder as
the
property of Lender; and (B) in the event of a failure of Loan Holder to endorse
any instrument for the payment of monies so received by Loan Holder payable
to
Loan Holder's order, Lender, or any officer or employee of Lender, is hereby
irrevocably constituted and appointed attorney-in-fact (coupled with an
interest) for Loan Holder and Loan Holder's heirs, representatives, successors
and assigns, with full power to make any such endorsement and with full power
of
substitution. Notwithstanding anything herein to the contrary and in accordance
with the terms and conditions of the Note or Subordinated Debt, (i) Loan Holder
may, at Loan Holder’s election, convert all or part of the Note or Subordinated
Debt into common stock of SMF; to the extent permitted by the terms of the
Note
or as may subsequently be agreed by Borrower and Loan Holder and (ii) Borrower
shall be entitled, so long as no Event of Default (as defined in the Loan
Documents) has occurred and is continuing, to repay to Loan Holder in accordance
with the terms of the Note, as the same may be hereinafter amended, the
outstanding principal balance of the Note and the Subordinated Debt associated
therewith from the proceeds of any issuance or sale by SMF of equity securities
after the date hereof (but only to the extent of the net proceeds from such
issuance or sale), and Loan Holder may accept and retain any such payment
without regard to the provisions of this Agreement.
5. Loan
Holder agrees that it will not exercise any collection rights with respect
to
the Note or Subordinated Debt, will not take possession of, sell or dispose
of,
accept any lien on, or otherwise deal with, any Collateral, and will not
exercise or enforce any right or remedy which may be available to Loan Holder
with respect to the Note or Subordinated Debt upon default of Borrower under
the
Loans or any other indebtedness of Borrower to Lender or under the Subordinated
Debt until such time as the Loans, as the same may be modified from time to
time, including all principal, interest and other charges associated therewith,
have been paid in full and no other debts or obligations are due and owing
from
Borrower to Lender and the Loan Agreement is terminated. Loan Holder agrees
to
promptly notify Lender, in writing, by certified mail, return receipt requested,
of any default by Borrower under the Notes or Subordinated Debt; and Lender
agrees to promptly notify Loan Holder in the same manner of any Event of
Default, but failure of Lender to notify Loan Holder shall not negate the Event
of Default.
6. Upon
any
distribution of the assets or readjustment of indebtedness of Borrower, whether
by reason of reorganization, liquidation, dissolution, bankruptcy, receivership,
assignment for the benefit of creditors, or any other action or proceeding
involving the readjustment of all or any part of the Subordinated Debt or the
application of the assets of the Borrower to the payment or liquidation thereof,
either in whole or in part, Lender shall be entitled to receive payment in
full
of any and all indebtedness under the Loans or otherwise then owing to Lender
by
Borrower prior to the payment of all or any of the Subordinated Debt.
7. Loan
Holder agrees that Loan Holder shall not transfer, assign, encumber, hypothecate
or subordinate, at any time while this Agreement remains in effect, any right,
claim or interest of any kind in or to any of Loan Holder's Subordinated Debt,
either principal or interest or otherwise, unless such transfer, encumbrance,
hypothecation or subordination is made upon prior written notice to Lender,
subject to this Subordination Agreement, and the transferee or recipient has
expressly assumed the covenants and obligations contained herein; and provided
further that there shall promptly be placed on each of the Notes a legend
reciting that the same is subject to this Agreement.
8. Loan
Holder acknowledges that Lender may, at any time, in its discretion, increase
or
decrease the amount of the Loans, renew or extend the time of payment of all
or
any portion of the Loans or any other existing or future indebtedness or
obligations of Borrower to Lender and/or waive or delay in enforcing any rights
or release any collateral relative thereto at any time(s) and, in reference
thereto, to modify or amend the Loan Documents (including, without limitation,
to add or release any person or entity as a borrower or guarantor thereunder,
to
accept additional collateral as security for the Loans or to release any
existing Collateral, to expand the Events of Default contained therein, to
expand Lender's enforcement remedies thereunder, or otherwise) and/or make
and
enter into such agreement(s), compromise(s) and other indulgence(s), as Lender
may deem proper or desirable, without notice to or further assent of Loan
Holder, all without in any manner impairing or affecting this Agreement or
any
of Lender's rights hereunder.
9. Loan
Holder hereby agrees that Loan Holder will render to Lender, upon demand, from
time to time, a statement of the account of Loan Holder with Borrower. Borrower
agrees to duly comply with and conform with each and every term of this
Agreement, on its part required to be performed.
10. All
notices, demands and communications given or made hereunder or pursuant thereto
shall be in writing and shall be hand delivered, delivered by recognized
expedited carrier, or mailed by registered or certified mail with postage
prepaid, addressed in each case as follows and shall be deemed to have been
given or made when so mailed:
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To
Loan Holder:
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[Investor]
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[Address]
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[Address]
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Attention:
[Authorized Representative]
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To
Lender:
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Wachovia
Bank, National Association.
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000
Xxxx Xxxxxxx Xxxxxxxxx
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Xxxxx
0000
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Xxxxx,
XX 00000
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Attention:
Portfolio Manager
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To
Borrower:
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SMF
Energy Corporation.
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000
Xxxx Xxxxxxx Xxxxx Xxxx
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Xxxxx
000
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Xxxx
Xxxxxxxxxx, XX 00000
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Attn:
Xxxxxxx X. Xxxxxxxxx, President
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or
to
such other address or to such other person as any party shall designate to
the
others for such purposes in the manner hereinabove set forth.
11. The
parties hereto acknowledge and agree that Loan Holder shall be deemed to have
appointed Lender as Loan Holder’s attorney-in-fact (coupled with an interest)
for the purposes of ensuring compliance with Lender’s rights under Section 4
hereof and, in any bankruptcy or other insolvency proceeding, to give Lender
the
right (without any obligation or liability): (a) to file proofs of claim for
the
Subordinated Debt, either in Lender’s or Loan Holder’s name; (b) to receive any
assets of Borrower distributed on account of the Subordinated Debt for
application to the Loans; (c) to vote claims for the Subordinated Debt to accept
or reject any plan of reorganization or liquidation; and (d) to take any action
in such bankruptcy or other insolvency proceeding that Loan Holder would be
authorized to take in respect of the Subordinated Debt but for this Agreement.
The terms of this Agreement shall remain in full force and effect until the
Loan
and any other indebtedness of any Borrower to Lender, or any Replacement
Facility (as defined below) is indefeasibly paid in full and Lender's
commitments to make further extensions of credit to any Borrower have been
terminated
12. This
Agreement may be signed in multiple counterparts, and each such counterpart
shall have the same binding force and effect as if it were signed by all parties
hereto. This Agreement shall be governed by the laws of the State of Delaware.
The terms of this Agreement cannot be waived, changed or terminated, except
by a
written document signed by Lender. This Agreement shall be binding upon the
undersigned and their successors and assigns and shall inure to the benefit
of
and shall be enforceable by Lender, and any participants, successors or assigns
of Lender. In addition, any person or entity whose loans (a "Replacement
Facility")
are
used to refinance and pay in full the Loan shall be deemed for all purposes
hereof to be the successor to Lender, and from and after the date of any such
refinancing and satisfaction in full of the Loan, such persons or entities
shall
be deemed a party hereto in the place and stead of Lender, as if such persons
or
entities had been original signatories hereto, and all loans, advances,
liabilities, debit balances, covenants and duties at any time or times owed
by
Borrowers to such successor shall be deemed for all purposes hereunder to
constitute and be the "Loans".
13. WAIVER
OF JURY TRIAL.
BORROWER, LOAN HOLDER AND LENDER HEREBY MUTUALLY, KNOWINGLY, WILLINGLY,
INTENTIONALLY AND VOLUNTARILY WAIVE THEIR RIGHT TO TRIAL BY JURY AND NO PARTY
NOR ANY ASSIGNEE, SUCCESSOR, HEIR, OR LEGAL REPRESENTATIVE OF THE PARTIES (ALL
OF WHOM ARE HEREINAFTER COLLECTIVELY REFERRED TO AS THE "PARTIES") SHALL SEEK
A
JURY TRIAL IN ANY LAWSUIT, PROCEEDING, COUNTERCLAIM OR ANY OTHER LITIGATION
PROCEEDING BASED UPON OR ARISING OUT OF THIS AGREEMENT OR THE LOAN DOCUMENTS
OR
ANY INSTRUMENT EVIDENCING, SECURING OR RELATING TO THIS AGREEMENT OR THE LOAN
DOCUMENTS, THE INDEBTEDNESS OR OTHER OBLIGATIONS REFERRED TO HEREIN OR ANY
RELATED AGREEMENT OR INSTRUMENT, ANY OTHER COLLATERAL FOR THE INDEBTEDNESS
REFERRED TO HEREIN OR ANY COURSE OF ACTION, COURSE OF DEALING, STATEMENTS
(WHETHER VERBAL OR WRITTEN) OR ACTIONS RELATING TO THE LOAN OR TO THIS
AGREEMENT. THE PARTIES ALSO WAIVE ANY RIGHT TO CONSOLIDATE ANY ACTION IN WHICH
A
JURY TRIAL HAS BEEN WAIVED WITH ANY OTHER ACTION IN WHICH A JURY TRIAL HAS
NOT
BEEN WAIVED. THE PROVISIONS OF THIS PARAGRAPH HAVE BEEN FULLY NEGOTIATED BY
THE
PARTIES. THE WAIVER CONTAINED HEREIN IS IRREVOCABLE, CONSTITUTES A KNOWING
AND
VOLUNTARY WAIVER, AND SHALL BE SUBJECT TO NO EXCEPTIONS. LENDER HAS IN NO WAY
AGREED WITH OR REPRESENTED TO LOAN HOLDER OR ANY OTHER PARTY THAT THE PROVISIONS
OF THIS PARAGRAPH WILL NOT BE FULLY ENFORCED IN ALL INSTANCES.
IN
WITNESS WHEREOF, the undersigned have executed this Subordination Agreement
as
of the date first written above.
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LOAN
HOLDER:
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[Name
of Investor]
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By:
__________________________________
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Name:
_______________________________
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Title:
________________________________
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LENDER:
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WACHOVIA
BANK, NATIONAL ASSOCIATION
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By:
__________________________________
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Name:
_______________________________
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Title:
________________________________
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BORROWER:
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SMF
ENERGY CORPORATION
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By:
_____________________________________
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Xxxxxxx
X. Xxxxxxxxx
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President
and Chief Executive Officer
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H
& W PETROLEUM COMPANY, INC.
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By:
_____________________________________
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Xxxxxxx
X. Xxxxxxxxx
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President
and Chief Executive
Officer
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| SMF SERVICES, INC. | ||
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| By: | ||
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Xxxxxxx X. Xxxxxxxxx |
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| President and Chief Executive Officer | ||
