SUBORDINATION AGREEMENT
-----------------------
This Subordination Agreement (this "Agreement") is entered into as of
November 7, 2002, by and among XXXXX FARGO ENERGY CAPITAL, INC., a Texas
corporation (the "Subordinated Lender"), XXXXX FARGO BANK TEXAS, N.A., a
national banking association ("Administrative Agent"), QUEST RESOURCE
CORPORATION, a Nevada corporation ("Borrower"), and QUEST OIL & GAS CORPORATION,
Kansas corporation, PONDEROSA GAS PIPELINE COMPANY, INC., a Kansas corporation,
and STP CHEROKEE, INC., an Oklahoma corporation (individually, a "Guarantor" and
a "Credit Party" and collectively with Borrower, the "Credit Parties").
RECITALS
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WHEREAS, Administrative Agent, and the Banks named therein as party
thereto (collectively "Senior Lender") and the Credit Parties have entered into
that certain Credit Agreement dated as of even date herewith (as same may be
hereafter renewed, extended, amended, or restated from time to time not in
violation of the terms of this Agreement, the "Senior Credit Agreement"); and
WHEREAS, it is proposed that Borrower and Subordinated Lender enter into
that certain Credit Agreement dated of even date herewith (as renewed, extended,
amended, or restated from time to time, the "Subordinated Credit Agreement"), to
provide Borrower with up to $20,000,000 subordinated revolving line of credit to
refinance existing debt of the Borrower, Ponderosa Gas Pipeline Company, Inc.,
Quest Oil & Gas Corporation and STP Cherokee, Inc., and to fund development and
acquisition activities of the Borrower and such other entities; and
WHEREAS, in order to induce Senior Lender to consent to Borrower incurring
subordinated secured indebtedness, Subordinated Lender has agreed to limit its
rights to receive payments from Borrower on the terms and conditions set forth
herein, and the Credit Parties have agreed to comply with such terms and
conditions.
NOW, THEREFORE, in consideration of the foregoing, and for other good and
valuable consideration, the receipt and adequacy of which is hereby
acknowledged, the parties hereto hereby agree as follows:
1. Definitions. Capitalized terms used but not otherwise defined
herein shall have the meanings ascribed to such terms in the Senior Credit
Agreement. The following terms in the Agreement shall have the following
meanings:
"Blockage Period" means that period of time commencing on the date
that Subordinated Lender receives notice from Senior Lender of the occurrence of
a Default under the Senior Credit Agreement and ending on the earlier of (i) the
date such Default shall have been cured or waived in writing by Senior Lender in
its sole discretion, (ii) the date 180 days from the date of Subordinated
Lender's receipt of such notice, or (iii) the Termination Date. Notwithstanding
anything to the contrary herein, no more than 180 days in any 365-day period may
fall within one or more Blockage Periods.
"Consolidated Interest Expense" means, for any fiscal period, the
aggregate amount of all costs, fees and expenses, including capital expenses,
paid by the Credit Parties on a consolidated basis in such fiscal period which
are classified as interest expense on the Borrower's consolidated financial
statements.
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"Guarantors" means any person or entity whether one or more, now or
hereafter guaranteeing payment in full or in part of Senior Debt to Senior
Lender or pledging any collateral as security therefor.
"Lien Enforcement Action" shall mean any action, whether legal,
equitable, judicial, non-judicial, or otherwise, to enforce any assignment,
lien, security interest, or other encumbrance now or in the future securing all
or any Subordinated Debt, including, without limitation, exercise of any
assignments of production or the right to receive proceeds thereof, division
orders or letters in lieu of division orders, any repossession, foreclosure,
public sale, private sale, or retention of all or any part of the Collateral for
the Subordinated Debt.
"Senior Debt" means all indebtedness, liabilities, and obligations of
every kind or nature, absolute or contingent, now existing or hereafter arising,
of the Credit Parties owed to Senior Lender under the Senior Note and other
Senior Loan Documents, including, without limitation, the principal of, and
interest on (including any interest accruing after the commencement of any
bankruptcy, insolvency, or similar proceeding with respect to any Credit Party
whether or not allowed as a claim in such proceeding) all loans, and letters of
credit reimbursement obligations, and all derivative obligations, premiums,
fees, charges, expenses, and indemnities arising under or in connection with the
Senior Loan Documents as same may be amended, modified, extended or restated
from time to time (to the extent any such amendment or modification is not in
violation of the terms of this Agreement).
"Senior Lender" means the Administrative Agent, the financial
institutions party to the Senior Loan Documents, their affiliates, successors
and assigns, and any person or entity who refinances or refunds all or any
portion of the Senior Debt.
"Senior Loan Documents" means the Senior Credit Agreement and the
Loan Documents entered into in connection therewith as same may be amended or
modified from time to time (to the extent any such amendment or modification is
not in violation of the terms of this Agreement).
"Senior Note" means that certain promissory note dated of even date
herewith in the original principal amount of $20,000,000, executed by Borrower
in favor of Xxxxx Fargo Bank Texas, N.A., as such note may from time to time be
supplemented, amended or modified, and all other notes given in substitution
therefor or in modification, renewal or extension thereof in whole or in part.
"Subordinated Debt" means all indebtedness and other obligations now
and from time to time hereafter owing by the Credit Parties to Subordinated
Lender, including, without limitation, the indebtedness and obligations
evidenced by the Subordinated Credit Agreement, the Subordinated Note,
Subordinated Security Agreements, Warrant and Warrant Purchase Agreement,
including principal, interest, fees, brokers fees for sale of any Credit Party's
property and charges and all other present or future liabilities, indebtedness,
or obligations of any Credit Party to Subordinated Lender as same may be
amended, modified, extended or restated from time to time. Notwithstanding
anything to the contrary herein, Subordinated Debt shall not include any amounts
received by Subordinated Lender in repayment of the Indebtedness evidenced by
that certain Promissory Note in the principal face amount of $15,000,000.00
dated August 30, 2001 executed by STP, Inc. to the order of Subordinated Lender
or the $600,000 consideration received by Subordinated Lender for waiving its
rights to receive a net profits interest in certain oil and gas properties as
set forth in Section 2.11 of that certain Credit Agreement dated August 30, 2001
by and between STP, Inc. and Subordinated Lender.
"Subordinated Lender" means Subordinated Lender, its successor and
assigns, including any person or entity who refinances or refunds all or any
portion of the Subordinated Debt.
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"Subordinated Loan Documents" means the Subordinated Credit Agreement
and the Loan Documents (as defined in the Subordinated Credit Agreement) entered
into in connection therewith as the same may be amended or modified from time to
time.
"Subordinated Note" means that certain promissory note dated of even
date herewith, executed by Borrower in favor of Subordinated Lender.
"Subordinated Security Agreements" means any and all security
agreements, mortgages, assignments, or pledges from the Credit Parties in favor
of Subordinated Lender securing all or any portion of the Subordinated Debt.
2. Subordination to Senior Debt. Notwithstanding any other provision of
any note, document, or instrument executed by any Credit Party in connection
therewith, or any Collateral now or hereafter securing the same, all
Subordinated Debt is and shall be subordinate and junior in right of payment, to
the extent and in the manner hereinafter set forth, to the prior indefeasible
payment in full of all Senior Debt. Except as and to the extent provided in
Section 4 below, Subordinated Lender will not ask, demand, xxx for, take, or
receive from any Credit Party, by set-off or in any other manner, direct or
indirect payment (whether in cash or property) of the whole or any part of the
Subordinated Debt, or any transfer of any property in payment of or as security
therefor, unless and until Senior Lender has no further commitment to extend any
credit to Borrower pursuant to the terms of the Senior Credit Agreement and all
Senior Debt has been paid in full (or with respect solely to LC Obligations
shall be cash collateralized on a dollar for dollar basis).
3. Distributions in Liquidation and Bankruptcy. In the event of any
distribution, division, or application, partial or complete, voluntary or
involuntary, by operation of law or otherwise, of all or any part of the assets
of any Credit Party or the proceeds thereof (including any assets now or
hereafter securing any Subordinated Debt) to creditors of such Credit Party or
upon any indebtedness of such Credit Party, as a result of the liquidation,
dissolution, or other winding up, partial or complete, or any Credit Party, or
as a result of any receivership, insolvency, or bankruptcy proceeding, or
assignment for the benefit of creditors or marshaling of assets, or as a result
of any proceeding by or against any Credit Party for any relief under any
bankruptcy or insolvency law or laws relating to the relief of debtors,
readjustment of indebtedness, arrangements, reorganizations, compositions, or
extensions, or as a result of the sale of all or substantially all of the assets
of any Credit Party, then and in any such event:
(a) Senior Lender shall be entitled to receive payment in full
of all Senior Debt before Subordinated Lender shall be entitled to receive any
payment or other distributions on, or with respect to, the Subordinated Debt;
(b) Any payment or distribution of any kind or character, whether
in cash, securities, real, personal, mixed or other property, which but for
these provisions would be payable or deliverable upon or with respect to the
Subordinated Debt, shall instead be paid or delivered directly to Senior Lender
for the benefit of the holders of the Senior Debt for application on the Senior
Debt, whether then due or not due, until the Senior Debt shall have first been
fully and indefeasibly paid in full and Senior Lender shall have no further
commitment to extend any credit to Borrower;
(c) Subordinated Lender shall duly and promptly take such action
as may reasonably be requested by Senior Lender to assist in the collection of
the Subordinated Debt for the account of any holder of the Senior Debt,
including, without limitation, the filing of appropriate proofs of claim with
respect to the Subordinated Debt and the voting of such claims;
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(d) In the event that Subordinated Lender shall not have filed a
claim in any bankruptcy, insolvency, or similar proceeding with respect to any
Credit Party at least sixty (60) days prior to the expiration of the time to
file such claims, then Senior Lender, on behalf of Subordinated Lender, shall be
authorized to file a claim with respect to the Subordinated Debt; and
(e) Should any direct or indirect payment be made to Subordinated
Lender upon or with respect to the Subordinated Debt prior to the payment in
full of the Senior Debt as provided herein, Subordinated Lender will forthwith
deliver the same to Senior Lender in precisely the form received (except for the
endorsement or assignment by Subordinated Lender where necessary) for
application on the Senior Debt, whether then due or not due. Until so delivered,
the payment or distribution shall be held in trust by Subordinated Lender as
property of the holders of the Senior Debt. In the event of failure of
Subordinated Lender to make any such endorsement or assignment, Senior Lender
and each of its officers and employees are hereby irrevocably authorized to make
the same.
4. Permitted Payments and Borrowing Base Determinations.
(a) Subordinated Lender shall not receive or accept any payment
from any Credit Party with respect to the Subordinated Debt including without
limitation payment of principal, default interest, or other fees and expenses
unless such payments are approved in writing by the Administrative Agent;
provided, Subordinated Lender may receive from Borrower the Warrant (as defined
in the Subordinated Credit Agreement) and so long as no Blockage Period exists,
Borrower may pay and Subordinated Lender may accept regularly scheduled interest
payments equal to (i) all interest accruing on the principal evidenced by the
Subordinated Note, (ii) all facility fees, (iii) all commitment fees and (iv)
all fees related to an increase in the borrowing base established in the
Subordinated Credit Agreement pursuant to the terms of the Subordinated Credit
Agreement. In the event Subordinated Lender receives any payment on the
Subordinated Debt in violation of the foregoing, Subordinated Lender will hold
any such payment in trust for Senior Lender and forthwith turn it over to Senior
Lender, in precisely the form received (except for the endorsement or assignment
by Subordinated Lender where necessary), for application on the Senior Debt,
whether then due or not due. In the event of failure of Subordinated Lender to
make any such endorsement or assignment, Senior Lender and each of its officers
and employees are hereby irrevocably authorized to make the same.
(b) Subordinated Lender agrees that it shall not set the Borrowing
Base under the Subordinated Credit Agreement above the Approved Mezzanine
Borrowing Base, and shall not honor any requests by Borrower for an "Advance"
which, if made, would cause the sum of all outstanding Advances to exceed the
"Commitment Limit" (as such capitalized terms are defined in the Subordinated
Loan Documents).
5. Modifications.
(a) Subordinated Lender covenants and agrees not to modify or
amend, or to permit the modification or amendment of, any of the Subordinated
Loan Documents without the prior written consent of the Administrative Agent, on
behalf of Senior Lender, other than:
(i) any and all ratifications, amendments, supplements or other
modifications of, or additions to, any of the security documents
securing the Subordinated Debt to the extent that any of the
foregoing arises under the provisions of Section 5.8 of the
Subordinated Credit Agreement, and so long as any liens, security
interests or rights with respect to such ratification, amendment,
supplement, modification or addition are and remain
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subordinate to the liens, security interest and rights of
Administrative Agent or the Senior Lenders;
(ii) releases of collateral granted by Subordinated Lender;
(iii) any increase in the fee applicable to increases in the
Borrowing Base (as defined in the Subordinated Credit Agreement)
provided, any increase in the commitment fee to the extent the
corresponding fee in the Senior Loan Documents has been increased by
a similar or greater amount; and
(iv) any increase in the Facility Rate (as defined in the
Subordinated Credit Agreement) to the extent that the Applicable
Margin has been increased by a similar or greater amount;
provided that the Administrative Agent shall not unreasonably
withhold its consent to any such other modification or amendment of any of the
Subordinated Loan Documents if such modification or amendment: (A) would be made
at a time when no "Default" or "Event of Default" has occurred and is continuing
or would be caused thereby (as defined in the Senior Credit Agreement), and (B)
would not adversely affect the position of Administrative Agent or Senior Lender
with respect to either the subordination provisions of this Agreement or have a
material adverse effect on the rights or interests of the Administrative Agent
or Senior Lender; provided further that this Subsection 5(a) shall not be deemed
to limit the ability of Subordinated Lender to forbear, grant temporary waivers,
to give consents, to take unilateral actions contemplated by the terms of the
Subordinated Loan Documents or to take other actions with respect to the
Subordinated Loan Documents to the extent not in violation of the terms of this
Agreement which do not have the effect of amending or modifying the terms of the
Subordinated Loan Documents.
(b) Administrative Agent and Senior Lender may modify or amend any
of the Senior Loan Documents without the prior written consent of Subordinated
Lender, except as specifically set forth below with respect to the Senior Credit
Agreement:
(i) any extension of the Termination Date to a date later
than three years and thirty (30) days following the Closing Date;
(ii) any increase in the Maximum Loan Amount to more than
$20,000,000;
(iii) any increase in the fee applicable to increases in the
Borrowing Base to a percentage more than 1% or increase in the fee
applicable to the commitment fee to a percentage more than 1% when the
Effective Amount is greater than 50% of the Borrowing Base amount and to a
percentage not more than 0.50% when the Effective Amount is equal to or
less than 50% of the Borrowing Base;
(iv) any releases of Mortgaged Properties with an aggregate
market value in excess of $250,000 during any Borrowing Base Period;
(v) any increase in the Applicable Margin by more than 200
basis points above the amounts set forth on the Pricing Grid;
(vi) any modification to the following financial covenants:
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(x) any change in minimum Consolidated Tangible Net
Worth that would result in a calculated amount less
than zero (i.e., negative net worth),
(y) any change in the ratio of Total Consolidated
Funded Debt to EBITDA ratio beyond 6.0:1.0, or
(z) any change in the ratio of Current Consolidated
Assets to Current Consolidated Liabilities to less than
0.50; and
(vii) any modification in the definitions of Termination
Date, Maximum Loan Amount, Applicable Margin, Pricing Grid, Consolidated
Tangible Net Worth, Effective Amount, EBITDA, Consolidated Interest
Expense, Current Consolidated Assets, Current Consolidated Liabilities,
Consolidated Net Income or Total Consolidated Funded Debt (other than as
expressly permitted under this Subsection 5(b));
provided that, the Subordinated Lender shall not unreasonably withhold its
consent to any such modification or amendment of the Senior Credit Agreement
above if such modification or amendment: (A) would be made at a time when
neither an Event of Default (as defined in the Subordinated Loan Agreement) nor
an Unmatured Event of Default (as defined in the Subordinated Loan Agreement)
has occurred and is continuing or would be caused thereby, and (B) would not
adversely affect the position of Subordinated Lender with respect to either the
subordination provisions of this Agreement or have a material adverse effect on
the rights or interests of the Subordinated Lender; provided further that this
Subsection 5(b) shall not be deemed to limit the ability of Administrative Agent
or the Senior Lender to forbear, grant temporary waivers, to give consents, to
take unilateral actions contemplated by the terms of the Senior Loan Documents
or to take other actions with respect to the Senior Loan Documents to the extent
not in violation of the terms of this Agreement which do not have the effect of
amending or modifying the terms of the Senior Loan Documents.
6. Limitation on Acceleration or Exercise of Remedies.
(a) Except as set forth below in Subsection 6(b) during any
Blockage Period, Subordinated Lender shall be prohibited from taking any action
towards the collection of the Subordinated Debt or the payment of any other
amounts in respect of the Subordinated Debt, including without limitation
(i) accelerating the maturity of the Subordinated Debt, (ii) suing for payment
of the Subordinated Debt (including, without limitation, the commencement or
joining with any other creditors of any Credit Party in the commencement of any
bankruptcy, reorganization, receivership, or insolvency proceeding of any Credit
Party), except as provided in Section 7 below, (iii) exercising any right of
set-off for the collection of any amounts due in respect of the Subordinated
Debt, or (iv) commencing or prosecuting a Lien Enforcement Action. Any Lien
Enforcement Action taken by Subordinated Lender shall be expressly undertaken,
prosecuted, settled, compromised, or otherwise effected at all times subject to
the senior and prior rights of the Senior Lender in and to any such Collateral,
and all such Collateral or proceeds thereof, or rights obtained with respect
thereto, shall be subject to the senior and prior rights of Senior Lender.
(b) Notwithstanding anything in Subsection 6(a) to the contrary,
during any Blockage Period, the Subordinated Lender may (i) declare any default
pursuant to the terms of the Subordinated Credit Agreement, (ii) accrue interest
at the default rate of interest as set forth and pursuant to the terms of the
Subordinated Credit Agreement, and (iii) file proofs of claim to the extent
necessary to protect that status of the Subordinated Lender's claims.
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7. Bankruptcy. Until Senior Lender has no further commitments to lend
to Borrower and the Senior Debt shall have been indefeasibly paid in full,
during any Blockage Period Subordinated Lender may not, without the prior
written consent of Senior Lender, commence, or join with any other person or
entity in commencing, any proceeding against any person or entity with respect
to the Subordinated Debt under any bankruptcy reorganization, readjustment of
debt, dissolution, receivership, liquidation, or insolvency law or statute now
or hereafter in effect in any jurisdiction. Subordinated Lender
authorizes Senior Lender as its attorney-in-fact to vote and prove the
Subordinated Debt in any of the above-described proceedings or in any meeting of
creditors of any Credit Party related thereto.
8. Continuing Subordination. The subordination effected by these
provisions is a continuing subordination and may not be modified or terminated
by Subordinated Lender or any other holder of any Subordinated Debt until Senior
Lender has no further commitments to lend to Borrower and all of the Senior Debt
shall have been indefeasibly paid in full. At any time and from time to time,
without consent of or notice to Subordinated Lender or any other holder of
Subordinated Debt, and without impairing or affecting the obligations of any of
them hereunder:
(a) Senior Lender may exercise or refrain from exercising any
rights under the Senior Loan Documents, or any other agreement, instrument, or
document relating to the Senior Debt;
(b) The maturity of the Senior Debt may be accelerated, and any
Collateral security therefor or any other rights or Senior Lender may be
exchanged, sold, surrendered, released, or otherwise dealt with, in accordance
with the terms of any present or future agreement with any Credit Party and any
other agreement of subordination (and the debt covered thereby) may be
surrendered, released, or discharged; and
(c) Any person or entity liable in any manner for payment of any
Senior Debt may be released by holders of Senior Debt.
9. Waivers. Subordinated Lender hereby waives, and agrees not to
assert: (a) any right, now or hereafter existing, to require Senior Lender to
proceed against or exhaust any Collateral at any time securing the Senior Debt,
or to marshal any assets in favor of Subordinated Lender or any other holder of
Subordinated Debt; and (b) any notice of the incurrence of Senior Debt, it being
understood that Senior Lender may, in reliance upon these subordination
provisions, make advances under the Senior Loan Documents, or any other
agreement, document, or instrument now or hereafter relating to the Senior Debt,
without notice to or authorization of Subordinated Lender.
10. Lien Subordination and Standby. Any lien, security interest,
encumbrance, charge, or claim of Subordinated Lender on any assets or property
of any Credit party or any proceeds or revenues therefrom which Subordinated
Lender may have at any time as security for any Subordinated Debt shall be, and
hereby is, subordinated to all liens, security interests, or encumbrances now or
hereafter granted to Senior Lender by such Credit Party or by law,
notwithstanding the date or order of attachment or perfection of any such lien,
security interest, encumbrance, or claim or charge or the provision of any
applicable law. During any Blockage Period, whether one or more, Subordinated
Lender agrees that Subordinated Lender will not assert or seek to enforce
against any Credit Party any interest of Subordinated Lender in any and all
Collateral for the Subordinated Debt and that Senior Lender may dispose of any
or all of the Collateral for the Senior Debt free of any and all security
interests and liens, including, but not limited to, security interests and liens
created in favor of Subordinated Lender through judicial or nonjudicial
proceedings, in accordance with applicable law, including taking title, after
notice to Subordinated Lender. Subordinated Lender agrees that any such sale or
other disposition by Senior
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Lender of so much of the Collateral for the Senior Debt as is necessary to
satisfy in full all of the principal of, interest on and reasonable costs of
collection of the Senior Debt shall be made free and clear of any security
interest and liens granted to holder provided the entire proceeds (after
deducting reasonable expenses of sale) are applied in reduction of the Senior
Debt. Consistent with the foregoing, upon Senior Lender's request, Subordinated
Lender shall execute and deliver any releases or other documents and agreements
that Senior Lender, in its reasonable discretion, deems necessary to dispose of
the Collateral for the Senior Debt free of Subordinated Lender's interest in
same. Subordinated Lender retains all of its rights as a junior secured creditor
with respect to the surplus, if any, arising from any such disposition of the
Collateral for the Senior Debt.
11. Subrogation. Until Senior Lender has no further commitments to
extend credit to Borrower and the Senior Debt shall have been indefeasibly paid
in full, Subordinated Lender hereby waives all rights of subrogation with
respect to the rights of Senior Lender to receive payments or distributions and
with respect to any rights to any Collateral for the Senior Debt. Upon payment
in full of the Senior Debt, Subordinated Lender shall be subrogated to the
extent permitted by law, to all rights of the holders of Senior Debt.
12. Subordination Not Impaired by Borrower. No right of any holder of
Senior Debt to enforce the subordination of the Subordinated Debt shall be
impaired by any act or failure to act by any Credit Party or by such Credit
Party's failure to comply with these provisions.
13. No Third Party Beneficiaries. This Agreement is not intended to
give or confer any rights to any person other than the holders of the Senior
Debt. No other party, including any Credit Party, is intended to be a third
party beneficiary of this Agreement.
14. Representations and Warranties. Subordinated Lender hereby
represents and warrants that: (a) the execution and delivery of this Agreement
and the performance by Subordinated Lender of its obligations hereunder have
received all necessary approvals, corporate or otherwise, and do not and will
not contravene or conflict with any provision of law or any provision of any
indenture, instrument, or other agreement to which Subordinated Lender is a
party or by which it or its property may be bound or affected; (b) Subordinated
Lender has full power, authority, and legal right to make and perform this
Agreement; (c) Subordinated Lender has not assigned or transferred any
indebtedness owing by any Credit Party or any of the Collateral of the
Subordinated Debt and Subordinated Lender will not assign or transfer same
without at least ten (10) days' prior written notice to Senior Lender; and (d)
this Agreement is the legal, valid, and binding obligation of Subordinated
Lender, enforceable against Subordinated Lender in accordance with its terms.
15. No Waiver. No failure on the part of Senior Lender to exercise, no
delay in exercising, and no course of dealing with respect to any right or
remedy hereunder will operate as a waiver thereof; nor will any single or
partial exercise of any right or remedy hereunder preclude any other or further
exercise thereof or the exercise of any other right or remedy. This Agreement
may not be amended or modified except by written agreement of Senior Lender,
Subordinated Lender, Borrower and Guarantors, and no consent or waiver hereunder
shall be valid unless in writing and signed by Senior Lender.
16. Successor and Assigns. This Agreement, and the terms, covenants,
and conditions hereof, shall be binding upon and inure to the benefit of the
parties hereto, and their respective heirs, personal representatives,
successors, and assigns.
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17. Arbitration. The Parties hereto incorporate by reference the
Arbitration provisions set forth in Section 11.19 of the Senior Credit
Agreement. Any and all Disputes shall be resolved by the terms thereof.
18. GOVERNING LAW. THIS AGREEMENT WILL BE CONSTRUED IN ACCORDANCE WITH
AND GOVERNED BY THE LAWS OF THE STATE OF TEXAS.
IN WITNESS WHEREOF, this Agreement has been duly executed as of the day
and year first above written.
ADMINISTRATIVE AGENT AND SENIOR LENDER:
--------------------------------------
XXXXX FARGO BANK TEXAS, N.A.,
a national banking association
By: /s/ J. Xxxx Xxxxxxxxx, Xx.
--------------------------------------
J. Xxxx Xxxxxxxxx, Xx.
Vice President
SUBORDINATED LENDER:
-------------------
XXXXX FARGO ENERGY CAPITAL, INC.,
a Texas corporation
By: /s/ Xxxxxxx Xxxxxx
--------------------------------------
Xxxxxxx Xxxxxx
Assistant Vice President
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The undersigned, being the Credit Parties referred to in the foregoing
Subordination Agreement, hereby (i) acknowledges receipt of a copy thereof, (ii)
agrees to all of the terms and provisions thereof, (iii) agrees to and with the
Senior Lender that is shall make no payments on the Subordinated Debt that the
Subordinated Lender would not be entitled to receive under the provisions of the
Subordination Agreement, (iv) agrees that any such payment will constitute a
default under the Senior Loan Documents, and (v) agrees to xxxx its books
conspicuously to evidence the subordination of the Subordinated Debt affected
hereby.
QUEST RESOURCE CORPORATION,
a Nevada corporation
By: /s/ Xxxxxxx X. Xxxx
---------------------------------------
Xxxxxxx X. Xxxx
President
By: /s/ Xxxxx X. Xxxx
---------------------------------------
Xxxxx X. Xxxx
Treasurer and Chief Financial Officer
QUEST OIL & GAS CORPORATION,
a Kansas Corporation
By: /s/ Xxxxxxx X. Xxxx
---------------------------------------
Xxxxxxx X. Xxxx
President
By: /s/ Xxxxx X. Xxxx
---------------------------------------
Xxxxx X. Xxxx
Treasurer and Chief Financial Officer
PONDEROSA GAS PIPELINE COMPANY, INC.,
a Kansas Corporation
By: /s/ Xxxxxxx X. Xxxx
---------------------------------------
Xxxxxxx X. Xxxx
President
By: /s/ Xxxxx X. Xxxx
---------------------------------------
Xxxxx X. Xxxx
Treasurer and Chief Financial Officer
STP CHEROKEE, INC.,
an Oklahoma Corporation
By: /s/ Xxxxxxx X. Xxxx
---------------------------------------
Xxxxxxx X. Xxxx
President
By: /s/ Xxxxx X. Xxxx
---------------------------------------
Xxxxx X. Xxxx
Treasurer and Chief Financial Officer
