SUBORDINATION AND NOMINEE AGREEMENT
This Subordination and Nominee Agreement (this "Nominee Agreement") is made
as of the 21st day of May, 2004, by and between The William M. Beard and Lu
Beard 1988 Charitable Unitrust (the "Unitrust"), Boatright Family, L.L.C.
("Boatright"), and McElmo Dome Nominee, LLC, a limited liability company
("Nominee").
Whereas, The Beard Company (the "Company") has executed and delivered to
William M. Beard and Lu Beard, as Trustees of the Unitrust that certain
Promissory Note dated March 26, 2004 in the original principal amount of
$2,800,000 (the "Unitrust Company Note"), evidencing a renewal and extension of
indebtedness previously evidenced by that certain Promissory Note dated October
3, 2002 in the original principal amount of $3,000,000, executed by the Company
and payable to Unitrust (the "Prior Unitrust Note"); and
Whereas, Unitrust, Boatright, and certain other parties have previously
entered into a Subordination and Nominee Agreement dated February 21, 2003 (the
"2003 Nominee Agreement") under which the Nominee has agreed to act as agent and
nominee on behalf of Unitrust, Boatright, and such other parties under that
certain Deed of Trust, Assignment of Production, Security Agreement, and
Financing Statement, dated as of February 21, 2003 (the "2003 Deed of Trust"),
executed by the Company for the benefit of Nominee, covering certain properties
owned by the Company and located in Montezuma County and Dolores County,
Colorado (collectively, the "Collateral") and securing payment of the Prior
Unitrust Note and other indebtedness described in the 2003 Nominee Agreement;
and
Whereas, all indebtedness secured by the 2003 Deed of Trust, other than the
indebtedness currently evidenced by the Unitrust Company Note, has been paid in
full; and
Whereas, contemporaneously with the execution and delivery of this
Agreement, Boatright has made a loan to Unitrust in the amount of $500,000, and
in connection therewith the Unitrust has executed and delivered its Promissory
Note in such amount dated as of May 21, 2004 and (the "Unitrust Boatright
Note"); and
Whereas, contemporaneously with the execution and delivery of this
Agreement, and pursuant to a $1,200,000 Private Placement Memorandum dated May
13, 2004, Unitrust has used the proceeds of the Unitrust Boatright Note to make
a loan to the Company in the amount of $500,000; and
Whereas, to secure payment of the loans evidenced by the Unitrust Company
Note and the Unitrust Boatright Note (collectively, the "Notes") the Company has
executed and delivered that certain Deed of Trust, Assignment of Production,
Security Agreement, and Financing Statement, dated as of May 21, 2004, (the
"2004 Deed of Trust"), covering the Collateral, for the benefit of the Nominee
under the terms of this Agreement; and
Whereas, as a condition of making the loan to the Unitrust, Boatright
requires that, with respect to the proceeds of the Collateral, Boatright be
entitled to first priority to the extent of the principal indebtedness held by
the Boatright, and interest thereon, and that the Unitrust's priority with
respect to proceeds of the Collateral be subordinated to the priority of
Boatright; and
Whereas, the Unitrust and Boatright desire to enter into this Agreement to
provide for the orderly enforcement of the rights of Unitrust and Boatright
(collectively, the "Noteholders") in the lien (the "Lien") created in the
Collateral under the 2004 Deed of Trust and to set forth the priority as among
the Noteholders of all proceeds from the foreclosure, deed-in-lieu of
foreclosure, or other sale or disposition of the Collateral or the rights of the
Nominee under the 2004 Deed of Trust, or of any other recovery resulting from or
under the 2004 Deed of Trust ("Proceeds").
Now, therefore, in consideration of the foregoing premises, the mutual
covenants and agreements contained in this Agreement, and other good and
valuable considerations, the receipt and adequacy of which are hereby
acknowledged, Unitrust and Boatright hereby designate and appoint Nominee as
their agent to act on behalf of all Noteholders in holding the beneficial
interest granted under the 2004 Deed of Trust, and in enforcing any and all
rights of the beneficiary under the 2004 Deed of Trust as provided herein, and
Nominee hereby accepts such designation and appointment and agrees to hold such
interest and act with respect to such interest in accordance with the terms and
conditions of this Agreement.
For the considerations stated above, the Unitrust, Boatright, and Nominee
hereby further agree as follows:
1. Nominee. Nominee shall act as the Noteholders' agent and shall hold
title as nominee to the Lien and the Collateral for the benefit of all
Noteholders.
2. Enforcement of Deed of Trust. Nominee shall not transfer, sell, pledge,
hypothecate, encumber, or otherwise exercise any incident of ownership with
respect to the Lien or the Collateral held by it as nominee, except as follows:
a. At all times prior to payment in full of the Unitrust Boatright
Note, Nominee shall execute and deliver such instruments and shall take
such actions or refrain from taking such actions as Boatright may require
for purposes of enforcing the rights of the Noteholders under the Deeds of
Trust.
b. At all times following payment in full of the Unitrust Boatright
Note, but prior to payment in full of the Unitrust Note, Nominee shall
execute and deliver such instruments and shall take such actions or refrain
from taking such actions as the Unitrust may require for purposes of
enforcing the rights of the Noteholders under the Deeds of Trust.
3. Disposition of Collateral. All Proceeds shall be applied in the
following order:
a. First, to the expenses incurred in enforcement of the 2004 Deed of
Trust, the obligations secured thereby, and collection of such obligations;
b. Second, to Boatright to the extent necessary to pay the Unitrust
Boatright Note, principal and interest;
c. Third, to the Unitrust to the extent necessary to pay the Unitrust
Company Note, principal and interest; and
d. Fourth, as required by law and by the 2004 Deed of Trust.
4. Notice to Noteholders. The Nominee may, at any time, notify any
Noteholder of the status of the obligations secured by the Deed of Trust and the
enforcement thereof, including any notice or instruction received by the Nominee
by any Noteholder.
5. Binding Effect. This Agreement shall be binding upon the respective
successors and assigns of the parties hereto.
6. Termination. This Agreement may not be terminated without the written
consent of the Noteholders; provided, that following payment in full of the
Unitrust Boatright Note, no such consent shall be required of Boatright. In the
event of termination, Nominee agrees to take such action and execute such
documents as the Noteholders shall request to cause the Lien or the Collateral
to be conveyed to the Noteholders, or as otherwise directed by the Noteholders.
7. Governing Law. The provisions of this Agreement shall be construed in
accordance with the laws of the State of Oklahoma.
8. Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be deemed as original, but all of which
together shall constitute one and the same agreement.
9. Subordination of 2003 Deed of Trust. It is the intent of the parties
that the 2003 Deed of Trust, the liens created thereunder, and all of Nominees
rights thereunder, be renewed and extended and incorporated within the 2004 Deed
of Trust. To the extent, if any, that the 2003 Deed of Trust remains separately
enforceable, the 2003 Deed of Trust is and shall be, at all times prior to
payment in full of the Unitrust Boatright Note, subordinate and inferior to the
2004 Deed of Trust.
"UNITRUST" THE WILLIAM M. BEARD AND LU BEARD 1988 CHARITABLE
UNITRUST
By /s/ William Beard
William Beard, Trustee
"NOMINEE" MCELMO DOME NOMINEE, LLC, an Oklahoma limited
liability company
By /s/ William Beard
William Beard, Member
By: BOATRIGHT FAMILY L.L.C., Member
By /s/ Peter Boatright
Peter Boatright, Manager
"BOATRIGHT" BOATRIGHT FAMILY L.L.C., an Oklahoma limited
liability company
By /s/ Peter Boatright
Peter Boatright, Manager
ACKNOWLEDGED by The Beard Company this 21st day of May, 2004.
/s/ Herb Mee, Jr.
Herb Mee, Jr., President
STATE OF OKLAHOMA )
) SS.
COUNTY OF OKLAHOMA )
The foregoing instrument was acknowledged before me this 21st day of May,
2004, by William Beard, Trustee of The William M. Beard and Lu Beard 1988
Charitable Unitrust.
My Commission Expires: /s/ Linda Shrum
10/30/06 Notary Public, State of Oklahoma
Commission No. 02017703
(Seal)
STATE OF OKLAHOMA )
) SS.
COUNTY OF OKLAHOMA )
The foregoing instrument was acknowledged before me this 21st day of May,
2004, by William Beard, Member of McElmo Dome Nominee LLC, an Oklahoma limited
liability company, on behalf of the limited liability company.
My Commission Expires: /s/ Linda Shrum
10/30/06 Notary Public, State of Oklahoma
Commission No. 02017703
(Seal)
STATE OF OKLAHOMA )
) SS.
COUNTY OF OKLAHOMA )
The foregoing instrument was acknowledged before me this 21st day of May,
2004, by Peter Boatright, as Manager of BOATRIGHT FAMILY L.L.C., as member of
McElmo Dome Nominee LLC, an Oklahoma limited liability company, on behalf of the
limited liability company.
My Commission Expires: /s/ Linda Shrum
10/30/06 Notary Public, State of Oklahoma
Commission No. 02017703
(Seal)
STATE OF OKLAHOMA )
) SS.
COUNTY OF OKLAHOMA )
The foregoing instrument was acknowledged before me this 21st day of May,
2004, by Peter Boatright, Manager of Boatright Family L.L.C., an Oklahoma
limited liability company, on behalf of the limited liability company.
My Commission Expires: /s/ Linda Shrum
10/30/06 Notary Public, State of Oklahoma
Commission No. 02017703
(Seal)
STATE OF OKLAHOMA )
) SS.
COUNTY OF OKLAHOMA )
The foregoing instrument was acknowledged before me this 21st day of May,
2003, by Herb Mee, Jr., President of The Beard Company, an Oklahoma corporation,
on behalf of the corporation.
My Commission Expires: /s/ Linda Shrum
10/30/06 Notary Public, State of Oklahoma
Commission No. 02017703
(Seal)