EXHIBIT 10.1
AGREEMENT
---------
THIS AGREEMENT is executed effective the 14th day of February, 2006, by
and among QUEST MINERALS & MINING CORP., a Utah corporation ("Quest"), GWENCO,
INC., a Kentucky corporation ("Gwenco"), QUEST ENERGY, LTD., a Kentucky
corporation ("QEL"), and PROFESSIONAL TRADERS FUND LLC, a New York limited
liability company ("PTF").
R E C I T A L S:
WHEREAS, pursuant to that certain Unit Purchase Agreement (the "Unit
Agreement") dated as of February 22, 2005, Quest issued to PTF (i) a 7% senior
secured convertible promissory note due March 31, 2006 in the aggregate
principal amount of $350,000.00 (the "Unit Note"), and (ii) a Series A Warrant
(the "Series A Warrant") to purchase (a) up to 2,100,000 shares of Quest common
stock, par value $0.001 per share ("Common Stock") and (b) a Series B Warrant
(the "Series B Warrant") to purchase up to an additional 2,100,000 shares of
Common Stock;
WHEREAS, pursuant to the Unit Agreement, Quest issued to PTF (i) a 7%
senior secured convertible promissory note due April 18, 2006 in the aggregate
principal amount of $50,000.00 (the "April Unit Note"), and (ii) a Series A
Warrant (the "April Series A Warrant") to purchase (a) up to 150,000 shares of
Common Stock and (b) a Series B Warrant to purchase up to an additional 150,000
shares of Common Stock;
WHEREAS, on December 14, 2005, PTF exercised the Series A Warrant on a
"cashless" basis, pursuant to which PTF contends it was entitled to receive (i)
700,000 shares of Common Stock and (ii) a Series B Warrant to purchase 2,100,000
shares of Common Stock;
WHEREAS, on December 14, 2005, PTF also exercised the April Series A
Warrant on a "cashless" basis, pursuant to which PTF contends it was entitled to
receive (i) 50,000 shares of Common Stock and (ii) a Series B Warrant to
purchase 150,000 shares of Common Stock;
WHEREAS, in connection with the Unit Agreement, Quest and PTF entered
into that certain Registration Rights Agreement dated as of February 22, 2005
(the "Unit Registration Rights Agreement") pursuant to which Quest agreed to
register the shares of Common Stock issuable to PTF upon conversion of the Unit
Notes, exercise of the Series A Warrants, and exercise of the Series B Warrants;
WHEREAS, PTF contends that Quest is currently in default under the Unit
Registration Rights Agreement;
WHEREAS, on January 13, 2006, PTF commenced an action against Quest in
the United States District Court for the Southern District of New York, Case No.
06-CV-00309, alleging, among other things, breach by Quest of the Series A
Warrants (the "Unit Litigation");
WHEREAS, Quest and PTF entered into that certain Credit Agreement dated
as of May 16, 2005 (the "Credit Agreement"), pursuant to which PTF agreed to
loan Quest up to $500,000.00;
WHEREAS, pursuant to the Credit Agreement, Quest has drawn down
$269,500.00 and has repaid $5,500.00, such amounts drawn under the Credit
Agreement evidenced by that certain promissory note dated as of May 16, 2005 in
an amount of up to $500,000.00 made by Quest in favor of PTF (the "Credit
Agreement Note");
WHEREAS, PTF has alleged that Quest has failed to pay the outstanding
principal amount of $264,000.00 (and all accrued interest) due on the August 19,
2005 maturity date and that Quest is currently in default under the Credit
Agreement Note;
WHEREAS, PTF contends that, under the Credit Agreement, Quest agreed to
pay PTF's cost of collection and enforcement, including outside counsel's legal
fees ("PTF Collection Fees");
WHEREAS, on November 2, 2005, PTF commenced an action against Quest and
Gwenco in the United States District Court for the Southern District of New
York, Case No. 05-CV-9311, to collect all amounts owing under the Credit
Agreement Note, including PTF Collection Fees (the "Credit Agreement
Litigation");
WHEREAS, on November 3, 2005, PTF commenced an action against Quest,
QEL, and Gwenco in the Pike County Circuit Court for the Commonwealth of
Kentucky, Case No. 05-CI-01494, to collect all amounts owing under the Credit
Agreement Note, including PTF Collection Fees, and to seek judicial foreclosure
on certain assets held by Gwenco pursuant to the Security Agreement and the
Mortgage (the "Kentucky Litigation");
WHEREAS, in connection with the Credit Agreement, Quest issued PTF a
warrant, dated May 16, 2005, to purchase up to 10,260,028 shares of Common Stock
(the "PTF Credit Warrant");
WHEREAS, in connection with the Credit Agreement and the issuance of
the PTF Credit Warrant, Quest and PTF entered into that certain Registration
Rights Agreement dated as of May 16, 2005 (the "Credit Registration Rights
Agreement") pursuant to which Quest agreed to register shares of its common
stock issuable to PTF upon conversion of the PTF Credit Warrant;
WHEREAS, PTF contends that Quest is currently in default under the
Credit Registration Rights Agreement; and
WHEREAS, Quest and PTF wish to settle and resolve all disputes arising
under the Unit Agreement, the Credit Agreement (collectively, the "Prior
Financings"), and any and all documents related thereto (collectively, the
"Prior Financing Documents").
NOW, THEREFORE, in consideration of the mutual agreements between the
parties, it is agreed as follows:
1. RESTRUCTURE. Pursuant to this Agreement, the parties agree to a
complete restructuring of the obligations under the Prior Financing Documents
thereunder, all to be effectuated through the issuance of amended and restated
instruments, new instruments, and common stock. This Agreement together with all
2
notes, security agreements, mortgages, guaranties, securities and other
documents and instruments executed to effectuate this Agreement shall be
referred to hereafter as the "Restructure Documents."
2. CLOSING. Subject to all of the terms and conditions set forth in this
Agreement being satisfied, the closing of the transactions contemplated by this
Agreement (the "Closing") shall take place at the offices of the Quest's counsel
on such date, at such place and at such time (the "Closing Date") within two (2)
business days after the satisfaction or waiver of the last of the conditions set
forth in Sections 8 and 9 and hereof as shall be determined by the mutual
consent of the parties hereto.
3. UNIT AGREEMENT RESTRUCTURING. In accordance with the terms of this
Agreement, Quest and PTF shall restructure all obligations under the Unit
Agreement (and all related documentation) as follows:
3.1. Amended and Restated Unit Note. At Closing, Quest will sign an
amended and restated Unit Note (the "Amended and Restated Unit
Note") in form and substance and payable on the terms approved
by PTF in the aggregate principal amount of $350,000.00 in
favor of PTF, which note shall be payable on or before
February 22, 2007. This Amended and Restated Unit Note will
initially be convertible into Common Stock ("Unit Conversion
Shares") at a rate of $.075 per share; provided, however,
that, in the event that the Market Price (as defined herein)
of Common Stock is less than $0.10 for ten (10) consecutive
trading days, the conversion price will be reduced to $0.05
per share; provided, further, that if the Market Price of
Common Stock is less $0.05 for ten (10) consecutive trading
days, the conversion price will become the lesser of (i) $0.05
per share and (ii) 70% of the average of the 5 closing bid
prices of Quest's common stock immediately preceding such
conversion date. In the event that the Market Price of the
Common Stock is less than $0.01 for ten (10) consecutive
trading days, the Amended and Restated Unit Note will become
immediately due and payable. "Market Price" shall mean the
average of the closing bid prices of the Common Stock as
reported by Bloomberg LP for the principal securities exchange
or trading market for Common Stock. The conversion price of
the Amended and Restated Unit Note will be subject to
proportional adjustment for stock splits, stock dividends,
recapitalizations, and the like.
3.2. Issuance of Quest Common Stock. At Closing, Quest will issue
to PTF share certificates representing: (i) 700,000 shares of
Common Stock per PTF's exercise of the Series A Warrant to
purchase 2,100,000 shares of Common Stock in full on a
cashless basis (the "Series A Warrant Shares"), (ii) 233,333
shares of Common Stock per PTF's exercise of the Series B
Warrant to purchase 700,000 shares of Quest Common Stock
(issued upon exercise of the Series A Warrant) in full on a
cashless basis (the "Series B Warrant Shares"), (iii) 50,000
shares of Common Stock per PTF's exercise of the April Series
A Warrant to purchase 150,000 shares of Common Stock in full
on a cashless basis (the "April Series A Warrant Shares"), and
(iv) 16,667 shares of Common Stock per PTF's exercise of the
April Series B Warrant to purchase 50,000 shares of Quest
3
Common Stock (issued upon exercise of the April Series A
Warrant) in full on a cashless basis (the "Series B Warrant
Shares"). The issuances of Common Stock under this Section 3.2
will constitute full and complete performance by Quest to PTF
under the Series A and Series B Warrants.
3.3. Termination of Unit Agreement. Each of PTF and Quest agree
that as of Closing, all of the provisions contained in the
Unit Agreement shall, solely as to PTF, be terminated and of
no further force and effect. In addition, PTF hereby waives
any and all right to any claims or damages previously incurred
under the Unit Agreement due to Quest's default thereunder,
including any defaults under the Unit Registration Rights
Agreement.
3.4. Termination of Unit Registration Rights Agreement. Each of PTF
and Quest agree that as of Closing, all of the provisions
contained in the Unit Registration Rights Agreement shall,
solely as to PTF, be terminated and of no further force and
effect. In addition, PTF hereby waives any and all right to
any Liquidated Damages previously incurred under the Unit
Registration Rights Agreement due to Quest's default
thereunder.
3.5. Dismissal of Unit Litigation. On the Closing Date, PTF and
Quest's counsel shall file a Stipulation for Dismissal without
Prejudice with respect to the Unit Litigation in the form
attached hereto as Schedule 3.5 (the "Unit Dismissal").
3.6. New Warrant. At Closing, Quest will issue to PTF a warrant to
purchase up to 5,000,000 shares of Common Stock (the
"Settlement Warrant"). Such warrant will have an initial
exercise price of $0.10 per share and will expire on February
10, 2009. Quest has no obligation to register the shares of
Common Stock underlying the Settlement Warrant (the
"Settlement Shares") for resale pursuant to an effective
registration statement; provided, however, in the event that
such Settlement Shares are not registered for resale by
February 14, 2007, the holder of the Settlement Warrant will
(a) be allowed to exercise the Settlement Warrant on a
"cashless" basis, and (b) be entitled to receive a minimum of
one-half of one share of Common Stock for each warrant right
exercised on a "cashless" basis.
4. CREDIT AGREEMENT RESTRUCTURING. In accordance with the terms of this
Agreement, Quest and PTF shall restructure all obligations under the Credit
Agreement (and all related documentation) as follows:
4.1. Repayment of Principal Under Credit Note. On or before
closing, Quest shall deliver a check or wire transfer pursuant
to the instructions set forth on Schedule 4.1 in the amount of
$264,000.00 representing payment in full of all principal owed
to PTF by Quest under the Credit Note.
4.2. Amended and Restated Credit Note. As payment in full for all:
(i) accrued interest due PTF under the Credit Note and (ii)
PTF Collection Fees; at Closing, Quest will sign an amended
and restated Credit Note (the "Amended and Restated Credit
Note") in form and substance and payable on the terms approved
4
by PTF in the aggregate principal amount of $100,000.00 in
favor of PTF, which note shall be payable on the earlier of:
July 10, 2006 or the closing of a new debt or equity financing
by Quest, or series of related financings, in excess of
$1,500,000.00. In addition, upon an "Event of Default" (as
defined under the Amended and Restated Credit Note), this note
will be convertible into shares of Common Stock ("Credit
Conversion Shares") of at an initial conversion rate of $0.10
per share. The conversion price of the Amended and Restated
Credit Note will be subject to proportional adjustment for
stock splits, stock dividends, recapitalizations, and the
like.
4.3. Amended and Restated PTF Credit Warrant. At Closing, Quest
will issue to PTF an amended and restated warrant (the
"Amended and Restated PTF Credit Warrant") to purchase up to
10,260,028 shares of Common Stock ("Credit Warrant Shares") of
which 2,500,000 shares will be exercisable on a "cashless
basis", provided, however, that PTF's ability to utilize such
cashless exercise feature will be limited to 400,000 shares of
Common Stock per quarter.
4.4. Amendments/Waivers under Credit Agreement. Pursuant to the
terms of this Agreement, the Credit Agreement is hereby
amended as follows: (i) the definition of "Maturity Date" is
amended to mean: "the earlier of July 10, 2006 or the closing
of a new financing by Quest in excess of $1,500,000.00." Any
and all defaults under the Credit Agreement prior to the
execution of this Agreement are hereby waived by PTF,
including any defaults under the Credit Registration Rights
Agreement. PTF expressly agrees that, notwithstanding in the
Credit Agreement to the contrary, the execution and delivery
of this agreement or any of the Restructure Documents shall
not constitute a breach of the Credit Agreement or the Amended
and Restated Credit Note.
4.5. Termination of Credit Registration Rights Agreement. Each of
PTF and Quest agree that as of Closing, the Credit
Registration Rights Agreement shall be terminated and of no
further force and effect. In addition, PTF hereby waives any
and all right to any Liquidated Damages previously incurred
under the Credit Registration Rights Agreement due to Quest's
default thereunder.
4.6. Dismissal of Credit Agreement Litigation and Kentucky
Litigation. On the Closing Date, PTF and Quest's counsel shall
file a Stipulation for Dismissal without Prejudice with
respect to the Credit Agreement Litigation in the form
attached hereto as Schedule 4.6(a) (the "Credit Dismissal")
and a Stipulation for Dismissal without Prejudice with respect
to the Kentucky Litigation in the form attached hereto as
Schedule 4.6(b) (the "Kentucky Dismissal").
5. SECURITY. The performance of all covenants and agreements contained in
this Agreement and in the other documents executed or delivered as a part of
this transaction and the payment of the notes and all renewals, amendments and
modifications thereof shall continue to be secured under the following
previously executed documents: (i) Amended and Restated Security Agreement,
dated as of May 16, 2005 by and between Quest, Gwenco, QEL and ANC Group, Inc.
(the "Security Agreement"); (ii) Term Loan Guaranty and Leasehold Mortgage,
5
Assignment of Leases and Subleases, Security Agreement and Fixture Filing dated
as of May 16, 2005 by Gwenco, Inc. to ANC Group, Inc. (the "Mortgage"); (iii)
Collateral Agency and Intercreditor Agreement dated as of May 16, 2005 by and
among ANC Group, Inc., Quest, Gwenco, QEL and the creditors listed on Schedule A
thereto; (iv) a stipulation for entry of judgment with respect to the Amended
and Restated Unit Note in the form attached hereto as Schedule 5(a) (the "Unit
Stipulation"); and (vi) a stipulation for entry of judgment with respect to the
Amended and Restated Credit Note in the form attached hereto as Schedule 5(b)
(the "Credit Stipulation").
6. SALES PURSUANT TO RULE 144.
--------------------------
6.1. Restrictions on Sale. PTF agrees that until February 14, 2008,
PTF and its affiliates shall not make any Net Sales (as
defined below) of Common Stock held by it on any single day
during such period, a number of shares of Common Stock in
excess of 30% of the five day daily trading volume of the
Common Stock (as reported by Bloomberg Financial Markets (or
any successor thereto)) on each day immediately preceding such
sale. "Net Sales" means, with respect to any date of
determination, the difference of (A) the number of shares of
Common Stock sold, including by way of short sales, or
otherwise transferred or disposed of, directly or indirectly,
on such date of determination by PTF and its affiliates minus
(B) the number of shares of Common Stock purchased, directly
or indirectly, on such date of determination by PTF and its
affiliates.
6.2. Rule 144. Quest shall file the reports required to be filed by
it under the Securities Act of 1933, as amended and the
Securities Exchange Act of 1934, as amended and the rules and
regulations adopted by the Securities and Exchange Commission
thereunder, and will take such further action as PTF may
reasonably request, all to the extent required from time to
time to enable PTF to sell share of Common Stock held by it
without registration under the Securities Act within the
limitation of the exemption provided by Rule 144 or Rule 144A.
Upon the request by PTF, Quest shall deliver to such holder a
written statement as to whether Quest has complied with such
requirements. In addition, if any shares of Common Stock
issuable under this Agreement, the Series A Warrants, the
Series B Warrants, the Amended and Restated Unit Note, the
Settlement Warrant, the Amended and Restated Credit Note, or
the Amended and Restated PTF Credit Warrant may be resold in
the absence of an effective registration thereof under the
Securities Act pursuant to Rule 144, then upon the request by
PTF, Quest shall deliver, at no cost to PTF, to such holder an
opinion of Quest's counsel to that effect; provided, however,
that Quest's obligation to deliver such an opinion shall be
conditioned upon Quest's receipt of a written certification of
Xxxxxxxx & Worcester, LLP, counsel for PTF (or such other
counsel as shall be reasonably acceptable to Quest) that PTF
has provided its trading records to such counsel and that,
based on review of such information, PTF has not violated
sales volume restrictions set forth in Section 6.1.
6
6.3. Holding Period. Quest agrees and stipulates that, for purposes
of Rule 144 of the Securities Act of 1933, as amended, any
shares of common stock issuable upon (i) conversion of
$250,000.00 in principal amount, and any accrued interest
thereon, under the Amended and Restated Unit Note are deemed
to have been acquired by PTF on October 12, 2004, the date on
which the PTF initially loaned $250,000.00 to Quest pursuant
to a Secured Convertible Promissory Note, pursuant to Rule
144(d)(3)(ii) of the Securities Act; (ii) conversion of
$100,000.00 in principal amount, and any accrued interest
thereon, under the Amended and Restated Unit Note are deemed
to have been acquired by PTF on February 22, 2005, the date on
which the PTF loaned $100,000.00 to Quest pursuant to the Unit
Note, pursuant to Rule 144(d)(3)(ii) of the Securities Act;
(iii) upon cashless exercise of the Series A Warrant or Series
B Warrant are deemed to have been acquired on February 22,
2005, the date on which the Series A Warrant was issued,
pursuant to Rule 144(d)(3)(ii) of the Securities Act; (iv)
upon cashless exercise of the April Series A Warrant or April
Series B Warrant are deemed to have been acquired on February
22, 2005, the date on which the Series A Warrant was issued,
pursuant to Rule 144(d)(3)(ii) of the Securities Act; and
(v)(A) conversion of the Amended and Restated Credit Note or
(B) cashless exercise of the Amended and Restated PTF Credit
Warrant, in either event are deemed to have been acquired by
PTF on May 16, 2005, the date on which the PTF purchased the
Credit Note and PTF Credit Warrant, pursuant to Rule
144(d)(3)(ii) of the Securities Act of 1933, as amended.
7. RELEASES. The parties agree that the following releases will be
delivered at the Closing of the transactions contemplated herein:
7.1. PTF. PTF, on behalf of it itself and its subsidiaries,
affiliates, officers, directors, shareholders, agents,
employees, servants, attorneys and representatives, as well as
any respective heirs, personal representatives, successors and
assigns of any and all of them (the "PTF Parties"), hereby
releases, acquits, and discharges Quest and its subsidiaries
(including, but not limited to, QEL and Gwenco), affiliates,
officers, directors, shareholders, agents, employees,
servants, attorneys and representatives, as well as any
respective heirs, personal representatives, successors and
assigns of any and all of them (the "Quest Parties") from any
and all claims, demands, debts, actions, causes of action,
suits, contracts, agreements, obligations, accounts, defenses,
offsets against indebtedness and liabilities of any kind or
character whatsoever, known or unknown, suspected or
unsuspected, in contract or in tort, at law or in equity,
including without implied limitation, such claims and defenses
as fraud, mistake, duress and usury, which the PTF Parties
ever had, now have, or might hereafter have against the Quest
Parties which arise out of or relate to the Prior Financings,
except to the extent that the Prior Financings are
specifically amended and restated herein and provision for
payment is specifically made herein, in the Amended and
Restated Unit Note, the Amended and Restated Credit Note, the
Amended and Restated PTF Credit Warrant, in the Settlement
Warrant, or any other document, instrument, agreement, or
other papers issued, executed, or delivered pursuant hereto.
7
As a part of such release, PTF will dismiss all litigation,
and release all judgments, if any, against Quest arising out
of or relating to the Prior Financings.
7.2. QUEST. Quest, Gwenco, and QEL, on behalf of themselves and the
Quest Parties, hereby release, acquit, and discharge the PTF
Parties from any and all claims, demands, debts, actions,
causes of action, suits, contracts, agreements, obligations,
accounts, defenses, offsets against indebtedness and
liabilities of any kind or character whatsoever, known or
unknown, suspected or unsuspected, in contract or in tort, at
law or in equity, including without implied limitation, such
claims and defenses as fraud, mistake, duress and usury, which
the Quest Parties ever had, now have, or might hereafter have
against the PTF Parties which arise out of or relate to the
Prior Financings, except to the extent that the Prior
Financings are specifically amended and restated herein and
provision for payment is specifically made herein, in the
Amended and Restated Unit Note, the Amended and Restated
Credit Note, the Amended and Restated PTF Credit Warrant, in
the Settlement Warrant, or any other document, instrument,
agreement, or other papers issued, executed, or delivered
pursuant hereto. As a part of such release, Quest will dismiss
all litigation, and release all judgments, if any, against PTF
arising out of or relating to the Prior Financings.
8. CONDITIONS OF CLOSING BY PTF. The obligation of PTF to perform this
Agreement is subject to the continued performance by Quest of the following
conditions subsequent:
8.1. Restructure Documents. The Restructure Documents and all other
instruments and documents incidental to the transactions
contemplated hereby shall have been duly executed,
acknowledged (where appropriate), and delivered to PTF by
Quest, all in form and substance satisfactory to PTF.
8.2. Authority. PTF shall have received a certificate of
incorporation, certificate of good standing, a certified copy
of the bylaws and certified copies of corporate resolutions
and other documents reasonably required to authorize the
execution, delivery and performance of the Restructure
Documents by Quest, QEL, and Gwenco, all in form and substance
satisfactory to the PTF.
8.3. Representations and Warranties. The representations and
warranties of Quest set forth in this Agreement shall be true
and correct on and as of Closing.
8.4. Deliveries. Quest shall have delivered the following to PTF:
8.4.1. Funds. A check or wire transfer pursuant to the
instructions set forth on Schedule 4.1 in the amount
of $264,000.00;
8.4.2. Notes. The Amended and Restated Unit Note and the
Amended and Restated Credit Note;
8
8.4.3. Resolutions. Copies of resolutions of the board of
directors of Quest authorizing the execution,
delivery and performance of the Restructure Documents
by Quest;
8.4.4. Articles and Certificate. A copy of the articles of
incorporation of Quest, QEL, and Gwenco, and a
certificate of good standing as to Quest issued by
the secretary of state of Utah;
8.4.5. Common Stock. The certificates representing the
Series A Warrant Shares and the Series B Warrant
Shares in definitive form and registered in the name
of PTF.
8.4.6. Instruction Letter. An irrevocable letter of
instruction to Quest's transfer agent regarding the
issuance of Common Stock issuable under this
Agreement, the Series A Warrants, the Series B
Warrants, the Amended and Restated Unit Note, the
Settlement Warrant, the Amended and Restated Credit
Note, or the Amended and Restated PTF Credit Warrant,
in form and substance satisfactory to PTF.
8.4.7. Current Report on Form 8-K. A form of current
report on Form 8-K disclosing the execution of this
Agreement and the terms hereof, which Quest shall
file with the SEC within four (4) business days of
the Closing.
8.4.8. Stipulated Judgments; Dismissals. The Unit
Stipulation, the Credit Stipulation, the Unit
Dismissal, the Credit Dismissal, and the Kentucky
Dismissal, in form and substance satisfactory to PTF.
9. CONDITIONS OF CLOSING BY QUEST. The obligations of Quest to perform
this Agreement and consummate the transactions contemplated hereby, is subject
to the performance by PTF of each of the following conditions subsequent:
9.1. Restructure Documents. The Restructure Documents and all other
instruments and documents incidental to the transactions
contemplated hereby shall have been duly executed,
acknowledged (where appropriate), and delivered to Quest by
PTF, all in form and substance satisfactory to Quest.
9.2. Authority. Quest shall have received certified copies of
corporate resolutions and other documents reasonably required
to authorize the execution, delivery and performance of the
Restructure Documents by PTF, all in form and substance
satisfactory to the Quest.
9.3. Representations and Warranties. The representations and
warranties of PTF set forth in this Agreement shall be true
and correct on and as of Closing.
9.4. Deliveries. PTF shall have delivered the following to the
Quest:
9
9.4.1. Notes. The original executed Unit Notes and Credit
Note;
9.4.2. Warrants. The original executed Series A Warrants,
Series B Warrants and PTF Credit Warrant;
9.4.3. Resolutions. Copies of resolutions of the board of
directors of PTF authorizing the execution, delivery
and performance of the Restructure Documents by PTF;
9.4.4. Attorney's Fees. PTF will deliver letters addressed
to Quest from its attorneys of record in each of the
Unit Litigation, the Credit Litigation, and the
Kentucky Litigation verifying the attorney's fees and
costs which PTF has incurred in connection with these
litigations to date.
9.4.5. Stipulated Judgments; Dismissals. The Unit
Stipulation, the Credit Stipulation, the Unit
Dismissal, the Credit Dismissal, and the Kentucky
Dismissal, in form and substance satisfactory to
Quest.
10. REPRESENTATIONS AND WARRANTIES OF QUEST COMPANIES. To induce PTF to
enter into this Agreement and, Quest, QEL, and Gwenco (collectively, the "Quest
Companies") represent and warrant to PTF that:
10.1. Existence and Power. Each Quest Company is a corporation duly
incorporated and validly existing in good standing under the
laws of its jurisdiction of incorporation and is authorized
and qualified to do business in each state where, because of
the nature of the activities or assets, such qualification is
required, except those states where failure to so qualify will
not have a material adverse effect; each Quest Company has
adequate authority, power and legal right to enter into,
execute, deliver and perform the terms of the Restructure
Documents, to borrow money and to give security for borrowings
as contemplated by the Restructure Documents and to consummate
the transactions contemplated thereby, and in doing so, no
Quest Company will violate any law or the provisions of any
articles, charter or bylaws. The Restructure Documents, upon
their execution and delivery, will constitute valid, legal and
binding obligations of each Quest Company, enforceable in
accordance with their terms, subject only to applicable
bankruptcy, insolvency or similar laws generally affecting the
enforcement of creditor's rights.
10.2. Full Disclosure. Neither this Agreement, the other Restructure
Documents nor any statement or documents referred to herein or
delivered to PTF by the Quest Companies, or any other party on
their behalf contains any untrue statement or omits to state a
material fact necessary to make the statements herein or
therein not misleading.
10.3. SEC Reports and Financial Statements.
------------------------------------
10
10.3.1. Quest has delivered or made available to PTF accurate
and complete copies (excluding copies of exhibits) of
each report, registration statement, and definitive
proxy statement filed by the Company with the United
States Securities and Exchange Commission ("SEC")
since January 1, 2004 (collectively, with all
information incorporated by reference therein or
deemed to be incorporated by reference therein, the
"SEC Reports"). All statements, reports, schedules,
forms and other documents required to have been filed
by Quest with the SEC have been so filed. As of the
time it was filed with the SEC (or, if amended or
superseded by a filing prior to the date of this
Agreement, then on the date of such filing): (i) each
of the SEC Reports complied in all material respects
with the applicable requirements of the Securities
Act of 1933, as amended, or the Securities Exchange
Act of 1934, as amended; and (ii) none of the SEC
Reports contained any untrue statement of a material
fact or omitted to state a material fact required to
be stated therein or necessary in order to make the
statements therein, in the light of the circumstances
under which they were made, not misleading.
10.3.2. Except for the pro forma financial statements, the
consolidated financial statements contained in the
SEC Reports: (i) complied as to form in all material
respects with the published rules and regulations of
the SEC applicable thereto; (ii) were prepared in
accordance with GAAP applied on a consistent basis
throughout the periods covered (except as may be
indicated in the notes to such financial statements
and, in the case of unaudited statements, as
permitted by Form 10-QSB of the SEC, and except that
unaudited financial statements may not contain
footnotes and are subject to normal and recurring
year-end audit adjustments which will not,
individually or in the aggregate, be material in
amount); and (iii) fairly present, in all material
respects, the consolidated financial position of the
Company and its consolidated subsidiaries as of the
respective dates thereof and the consolidated results
of operations of Quest and its consolidated
subsidiaries for the periods covered thereby. All
adjustments considered necessary for a fair
presentation of the financial statements have been
included.
10.4. Liens. The Collateral (as defined in the Security Agreement)
has been duly and validly assigned, delivered and pledged by
Quest under the Security Agreement, and the Security
Agreement, together with such assignment, delivery and pledge,
creates a valid security interest in the Collateral.
10.5. Leases. Within thirty days of the Closing, Gwenco shall
deliver to PTF true and correct copies of all leases described
in the Mortgage (the "Leases"). Except as set forth on
Schedule 10.5 hereto (which the Quest Companies may supplement
or amend currently with the delivery of the Leases), the
Leases are legal, valid, binding, and in full force and effect
and enforceable by Gwenco in accordance with their respective
terms, except as such may be limited by bankruptcy,
insolvency, reorganization or other laws affecting creditors'
rights generally and by general equitable principles.
11
10.6. Survival of Representations. All representations and
warranties made by Quest herein will survive the Closing, and
any investigation at any time made by or on behalf of PTF will
not diminish PTF's right to rely thereon. All statements
contained in any certificate or other instrument delivered by
or on behalf of Quest under or pursuant to this Agreement or
in connection with the transactions contemplated hereby will
constitute representations and warranties made by Quest
hereunder.
11. REPRESENTATIONS AND WARRANTIES OF PTF. To induce Quest to enter into
this Agreement, PTF represents and warrant to Quest that:
11.1. Existence and Power. PTF is and will continue to be a limited
liability company duly formed and validly existing in good
standing under the laws of New York and is authorized and
qualified to do business in each state where, because of the
nature of the activities or assets, such qualification is
required, except those states where failure to so qualify will
not have a material adverse effect; PTF has adequate
authority, power and legal right to enter into, execute,
deliver and perform the terms of the Restructure Documents and
to consummate the transactions contemplated thereby. The
Restructure Documents, upon their execution and delivery, will
constitute valid, legal and binding obligations of PTF,
enforceable in accordance with their terms, subject only to
applicable bankruptcy, insolvency or similar laws generally
affecting the enforcement of creditor's rights.
11.2. Information on Subscriber. PTF is, and will be at the time of
the conversion of the Amended and Restated Unit Note or the
Amended and Restated Credit Note and exercise of the Amended
and Restated PTF Credit Warrant or the Settlement Warrant, an
"accredited investor", as such term is defined in Regulation D
promulgated by the Securities and Exchange Commission under
the Securities Act of 1933, as amended, is experienced in
investments and business matters, has made investments of a
speculative nature and has purchased securities of United
States publicly-owned companies in private placements in the
past and, with its representatives, has such knowledge and
experience in financial, tax and other business matters as to
enable PTF to utilize the information made available by the
Quest to evaluate the merits and risks of and to make an
informed investment decision with respect to the proposed
purchase, which represents a speculative investment. PFT has
the authority and is duly and legally qualified to purchase
and own the Amended and Restated Unit Note, Series A Warrant
Shares, the Series B Warrant Shares, the Amended and Restated
Credit Note, the Amended and Restated PTF Credit Warrant, the
Settlement Warrant, the Unit Conversion Shares, the Credit
Conversion Shares, the Credit Warrant Shares and the
Settlement Shares (collectively, the "Securities"). PTF is
able to bear the risk of such investment for an indefinite
period and to afford a complete loss thereof.
12
11.3. Purchase of Securities. On the Closing Date, PTF will acquire
the Amended and Restated Unit Note, the Amended and Restated
Credit Note, the Series A Warrant Shares, the Series B Warrant
Shares, the Amended and Restated PTF Credit Warrant and the
Settlement Warrant as principal for its own account for
investment only and not with a view toward, or for resale in
connection with, the public sale or any distribution thereof.
11.4. Compliance with Securities Act. PTF understands and agrees
that the Securities have not been registered under the
Securities Act of 1933, as amended or any applicable state
securities laws, by reason of their issuance in a transaction
that does not require registration under the Securities Act of
1933, as amended (based in part on the accuracy of the
representations and warranties of PTF contained herein), and
that such Securities must be held indefinitely unless a
subsequent disposition is registered under the Securities Act
of 1933, as amended or any applicable state securities laws or
is exempt from such registration.
11.5. Shares Legend. The Series A Warrant Shares, the Series B
Warrant Shares, the Unit Conversion Shares, the Credit
Conversion Shares, the Credit Warrant Shares and the
Settlement Shares shall bear the following or similar legend:
"THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED. THESE
SHARES MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED OR
HYPOTHECATED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION
STATEMENT UNDER SUCH SECURITIES ACT OR ANY APPLICABLE STATE
SECURITIES LAW OR AN OPINION OF COUNSEL REASONABLY
SATISFACTORY TO THE COMPANY THAT SUCH REGISTRATION IS NOT
REQUIRED."
11.6. Warrants Legend. The Amended and Restated PTF Credit Warrant
and the Settlement Warrant shall bear the following or similar
legend:
"THIS WARRANT AND THE COMMON SHARES ISSUABLE UPON EXERCISE OF
THIS WARRANT HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT
OF 1933, AS AMENDED. THIS WARRANT AND THE COMMON SHARES
ISSUABLE UPON EXERCISE OF THIS WARRANT MAY NOT BE SOLD,
OFFERED FOR SALE, PLEDGED OR HYPOTHECATED IN THE ABSENCE OF AN
EFFECTIVE REGISTRATION STATEMENT AS TO THIS WARRANT UNDER SAID
ACT OR ANY APPLICABLE STATE SECURITIES LAW OR AN OPINION OF
COUNSEL REASONABLY SATISFACTORY TO THE COMPANY THAT SUCH
REGISTRATION IS NOT REQUIRED."
13
11.7. Note Legend. The Amended and Restated Unit Note and the
Amended and Restated Credit Note shall bear the following
legend:
"THIS NOTE AND THE COMMON SHARES ISSUABLE UPON CONVERSION OF
THIS NOTE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED. THIS NOTE AND THE COMMON SHARES ISSUABLE
UPON CONVERSION OF THIS NOTE MAY NOT BE SOLD, OFFERED FOR
SALE, PLEDGED OR HYPOTHECATED IN THE ABSENCE OF AN EFFECTIVE
REGISTRATION STATEMENT AS TO THIS NOTE UNDER SAID ACT OR AN
OPINION OF COUNSEL REASONABLY SATISFACTORY TO THE COMPANY THAT
SUCH REGISTRATION IS NOT REQUIRED."
11.8. Communication of Offer. The offer to sell the Securities was
directly communicated to the PTF by Quest. At no time was PTF
presented with or solicited by any leaflet, newspaper or
magazine article, radio or television advertisement, or any
other form of general advertising or solicited or invited to
attend a promotional meeting otherwise than in connection and
concurrently with such communicated offer.
11.9. Restricted Securities. PTF understands that the Securities
have not been registered under the Securities Act of 1933, as
amended and PTF will not sell, offer to sell, assign, pledge,
hypothecate or otherwise transfer any of the Securities unless
pursuant to an effective registration statement under the
Securities Act of 1933, as amended
11.10. No Governmental Review. PTF understands that no United States
federal or state agency or any other governmental or state
agency has passed on or made recommendations or endorsement of
the Securities or the suitability of the investment in the
Securities, nor have such authorities passed upon or endorsed
the merits of the offering of the Securities.
12. MISCELLANEOUS. It is further agreed as follows:
12.1. Recitals. The recitals are hereby acknowledged by the parties
to be true and correct and are adopted and incorporated herein
as material terms of this Agreement.
12.2. Hold Harmless. Each party hereby agrees to indemnify and hold
any other party to this Agreement harmless from all liability,
loss, damage or expense, including reasonable attorney's fees,
whether incurred under retainer, salary or otherwise, that
14
such party may incur in good faith in compliance with or the
enforcement of the terms of this Agreement or any of the
Restructure Documents.
12.3. Supersession. It is agreed and understood between Quest and
PTF that: (a) except to the extent the Prior Financing
Documents are amended hereby, at and after the Closing, the
Prior Financings will remain in full force and effect; and (b)
the execution of this Agreement will not discharge, interrupt,
impair, xxxxx or otherwise modify the priority or the validity
of any lien or security interest securing payment of the
indebtedness evidenced by the Prior Financing Documents.
12.4. Notices. All notices, requests and demands will be served by
first class or express mail, postage prepaid, or sent by
telex, telegram, telecopy or other similar form of rapid
transmission confirmed by mailing written confirmation at
substantially the same time as such rapid transmission, as
follows:
Quest- Quest Minerals & Mining Corp.
00X 0xx Xxxxxx
Xxxxxxxx, XX 00000
Telephone: (000) 000-0000
Attention: Xxxxxx Xxxxxxxxxxx, Xx.
Facsimile: (000) 000-0000
With a copy to- Xxxx X. Xxxxxxxx
Spectrum Law Group, LLP
0000 Xxxx Xxxxxx, Xxxxx 000
Xxxxxx, XX 00000
Fax: (000) 000-0000
PTF - Professional Traders Fund LLC
0000 Xxx Xxxxxxx Xxxx, Xxxxx 000
Xxxxxxxx, Xxx Xxxx
Attn: Xxxxxx Xxxxxx
Fax: (000) 000-0000
With a copy to - Xxxxxx X. Xxxxxxx
Xxxxxxxx & Worcester LLP
1290 Avenue of the Xxxxxxxx, 00xx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
Fax: (000) 000-0000
or at such other address as any party designates for such
purpose in a written notice to the other parties. Notices will
be deemed to have been given on the date notice is sent by
rapid transmission or three business days after notice is
placed in the mail, properly addressed, postage prepaid.
15
12.5. Construction. Nothing contained in this Agreement will be
construed to constitute PTF as a joint venturer with Quest or
to constitute a partnership. The descriptive headings of the
paragraphs of this Agreement are for convenience only and are
not to be used in the construction of the content of this
Agreement. This Agreement may be executed in multiple
counterparts, each of which will be an original instrument,
but all of which will constitute one agreement.
12.6. Venue. This Agreement and the documents issued hereunder are
executed and delivered as an incident to a lending transaction
negotiated and to be performed in New York, New York. The
Restructure Documents are intended to constitute a contract
made under the laws of the State of New York and to be
construed in accordance with the internal laws of said state.
Quest and PTF hereby waive all objections and irrevocably
consent to the jurisdiction and venue of any state or federal
court sitting in New York, New York.
12.7. Attorney's Fees. The prevailing party in any proceeding
instituted to resolve any dispute between any of the parties
arising out of or relating to this Agreement shall be
entitled, in addition to any award rendered, to all reasonable
attorneys' fees, costs and expenses incurred in connection
with any such proceeding.
12.8. Severability. In case any one or more of the provisions
contained in the Restructure Documents should be invalid,
illegal or unenforceable in any respect in any jurisdiction,
the validity, legality and enforceability of such provision or
provisions will not in any way be affected or impaired thereby
in any other jurisdiction; and the validity, legality and
enforceability of the remaining provisions contained herein
and therein will not in any way be affected or impaired
thereby.
12.9. No Oral Modification. This Agreement may not be amended,
altered, modified or changed verbally, but only by an
agreement in writing signed by the party against whom
enforcement of any amendment, waiver, change, modification or
discharge is sought.
12.10. Exclusive Benefit. All provisions of the Restructure Documents
are for the sole and exclusive benefit of the Quest and PTF,
and no other person will have standing to require satisfaction
of the provisions thereof or be entitled to assume that
advances thereunder will not be made by the Lender in the
absence of strict compliance with the provisions of the
Restructure Documents. Any and all provisions of the
Restructure Documents may be waived by the PTF in whole or in
part at any time if, in the sole discretion of the PTF, it is
advisable to do so.
12.11. Binding Effect. This Agreement will be binding on Quest and
their successors and permitted assigns and will inure to the
benefit of the PTF, and PTF's successors and assigns.
16
12.12. Counterparts. This Agreement may be executed in multiple
counterparts, each of which will be an original instrument,
but all of which will constitute one agreement. The parties to
this Agreement may rely upon original, fax, digital or scanned
signatures in the execution of this Agreement.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
--------------------------------------------
17
IN WITNESS WHEREOF, Quest and PTF have duly executed this Agreement
effective the date first above written.
QUEST MINERALS & MINING CORP., a Utah
corporation
By: /s/ XXXXXX XXXXXXXXXXX, XX.
-------------------------------------
Name: Xxxxxx Xxxxxxxxxxx, Xx.
Title: Vice President
GWENCO, INC., a Kentucky corporation
By: /s/ XXXXXX XXXXXXXXXXX, XX.
-------------------------------------
Name: Xxxxxx Xxxxxxxxxxx, Xx.
Title: Vice President
QUEST ENERGY, LTD., a Kentucky
corporation
By: /s/ XXXXXX XXXXXXXXXXX, XX.
-------------------------------------
Name: Xxxxxx Xxxxxxxxxxx, Xx.
Title: Vice President
PROFESIONAL TRADERS FUND, a New York
limited liability company
By: /s/ XXXXXX XXXXXX
-------------------------------------
Name: Xxxxxx Xxxxxx
Title: President
18
