Exhibit 10.2
INTERCREDITOR AGREEMENT
THIS INTERCREDITOR AGREEMENT (this "Agreement") is entered into as of the
20th day of July, 2005, by and between Quest Resource Corporation, a Nevada
corporation ("QRC"), and Cherokee Energy Partners LLC, a Delaware limited
liability company ("CEP"), with respect to certain financial arrangements with
Quest Cherokee, LLC, a Delaware limited liability company ("Borrower").
RECITALS:
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A. CEP has made to Borrower loans in the aggregate principal amount of
$63,000,000 pursuant to the terms of an Amended and Restated Note Purchase
Agreement dated as of February 11, 2005 (together with any subsequent advances
of monies to Borrower from CEP, the "CEP Loans"). All monies, liabilities and
obligations, of any and every kind and nature, owed to CEP from Borrower under
the CEP Loans are referred to herein as the "CEP Obligations."
B. Concurrent with the execution of this Agreement, QRC desires to loan to
Borrower up to $3,000,000, in the form of a 15% Promissory Note (the "QRC Loans"
and, together with the CEP Loans, the "Loans"). All monies, liabilities and
obligations, of any and every kind and nature, owed to QRC from Borrower under
the QRC Loans are referred to herein as the "QRC Obligations."
The parties hereto wish to agree upon the relative rights of interest of
CEP and QRC with respect to payments received from Borrower on or in respect of
the Loans.
AGREEMENT
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NOW THEREFORE, in consideration of these premises, the terms and conditions
set forth herein, and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto hereby agree as
follows:
Section 1. Recitals. The recitals specified above in this Agreement are
hereby incorporated into this Agreement.
Section 2. Definitions. When used in this Agreement, the following terms
shall have the meanings set forth as definitions in this Section. The singular
use of any defined term shall include the plural and the plural use shall
include the singular.
"Enforcement Action" shall mean (a) to demand, xxx for, take or receive
from or on behalf of Borrower, by set-off or in any other manner, the whole or
any part of any monies which may now or hereafter be owing by Borrower with
respect to the Obligations, (b) to initiate or participate with others in any
suit, action or proceeding against Borrower to (i) enforce payment of or to
collect the whole or any part of the Obligations or (ii) commence judicial
enforcement of any of the rights and remedies under the Obligations, or (c) to
accelerate any Obligations.
"Proceeding" shall mean any voluntary or involuntary insolvency,
bankruptcy, receivership, custodianship, liquidation, dissolution,
reorganization, assignment for the benefit of creditors, appointment of a
custodian, receiver, trustee or other officer with similar powers or any other
proceeding for the liquidation, dissolution or other winding up of Borrower.
"Obligations" shall mean the CEP Obligations and the QRC Obligations.
Section 3. Priority of Indebtedness. The indebtedness and payment
obligations of Borrower with respect to the QRC Obligations and the CEP
Obligations shall be of equal priority, and none shall have a priority of
payment over or be subordinate to the other. Any payments made by the Borrower
on any of the Obligations and the proceeds of any Enforcement Action shall be
shared pro rata by QRC and CEP based upon percentages determined by dividing the
outstanding principal amount and accrued and unpaid interest owed to each of QRC
on the QRC Loans and CEP on the CEP Loans, respectively, by the outstanding
principal amount of, and accrued and unpaid interest on, all Loans. Each party
that receives any payments from the Borrower on any of the Obligations or
proceeds from any Enforcement Action shall promptly pay to the other party its
pro rata share of such amounts.
Section 4. Default. Each party hereto shall provide prior written notice to
the other parties hereto (other than Borrower) of any Event of Default of which
it is aware under the Loans. If an Event of Default occurs on either the CEP
Loans or the QRC Loans, such default shall be deemed to be an Event of Default
with respect to all Loans. CEP shall have the right to control the exercise of
remedies related to such Event of Default in accordance with Section 7 hereof.
Section 5. No Third Party Beneficiaries. This Agreement and the terms and
provisions hereof are solely for the benefit of CEP and QRC and shall not
benefit in any way any other person, including, but not limited to, Borrower.
The parties hereto specifically reserve any and all of their respective rights
against Borrower and any third parties.
Section 6. Termination, Recision or Modification. The agreements set forth
in this Agreement shall remain in full force and effect regardless of whether
either party hereto in the future seeks to rescind, amend, terminate or reform
its respective agreements with Borrower.
Section 7. Remedies. CEP shall have the right to control the exercise of
any remedies (including the commencement and prosecution of any Enforcement
Action) against the Borrower with respect to an Event of Default under the
Loans. In the event of the commencement of any Enforcement Action by CEP against
the Borrower, QRC agrees to cooperate with CEP in the exercise of the remedies
that are set forth in any written instrument evidencing any of the Obligations,
including without limitation any promissory notes executed by Borrower in favor
of CEP or QRC (all such written instruments are referred herein to as "Financing
Documents").
Section 8. Waiver of Marshalling. Each party to this Agreement hereby
waives any right to require the other party to marshal any security or
collateral or otherwise to compel the other party to seek recourse against or
satisfaction of the indebtedness owed to it from one source before seeking
recourse or satisfaction from another source.
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Section 9. Relation of Parties. This Agreement is entered into solely for
the purposes set forth in the Recitals above, and, except as is expressly
provided otherwise herein, no party to this Agreement assumes any responsibility
to the other party to advise such other party of information known to such party
regarding the financial condition of Borrower or of any other circumstances
bearing upon the risk of nonpayment of the Obligations of Borrower to the
parties hereto. Each party shall be responsible for managing its relation with
Borrower and neither party shall be deemed the agent of the other party for any
purpose. Each of the parties hereto may alter, amend, supplement, release,
discharge or otherwise modify any terms of the documents evidencing and
embodying their respective Obligations without notice to or consent of the
other.
Section 10. Notices. Any notice required or permitted in connection with
this Agreement shall be in writing and shall be made by hand delivery, by
Federal Express, or other similar overnight delivery service, or by certified
mail, return receipt requested, postage prepaid, addressed to the party at the
appropriate address set forth below or to such other address as may be hereafter
specified by written notice by such party pursuant to notice to the other
parties hereto and shall be considered given as of the date of hand delivery,
one (1) calendar day after delivery to Federal Express or similar overnight
delivery service, or two (2) calendar days after the date of mailing,
independent of the date of mail delivery or whether mail delivery is ever in
fact accomplished, as the case may be:
If to Borrower, to: Quest Cherokee, LLC
0000 Xxxxx Xxx Xxx.
Xxxxx 000
Xxxxxxxx Xxxx, Xxxxxxxx 00000
Attention: Chief Executive Officer
If to CEP, to: Cherokee Energy Partners LLC
000 Xxxxxxxxx Xxxxxx, 00xx Xx.
Xxxxxx, XX 00000
Attn: General Counsel
If to QRC, to: Quest Resource Corporation
0000 Xxxxx Xxx Xxx.
Xxxxx 000
Xxxxxxxx Xxxx, Xxxxxxxx 00000
Attention: Chief Executive Officer
Section 11. Binding Nature. This Agreement shall be binding upon the
parties and their respective successors and assigns.
Section 12. Effective Date. This Agreement shall be effective as of the
date on which it is designated as being executed, independent of the actual date
each party hereto executes this Agreement.
Section 13. Term of Agreement. This Agreement shall continue in full force
and effect and shall be irrevocable by either party hereto until the earlier to
occur of the following:
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(a) The parties mutually agree in writing to terminate this Agreement;
or
(b) All of the obligations owed by Borrower to the parties hereto are
fully paid and satisfied.
Section 14. Section Titles. The section titles contained in this Agreement
are for convenience only and are without substantive meaning or content of any
kind and shall not be considered part of this Agreement.
Section 15. Governing Law. This Agreement shall be governed by and
construed under the laws of the State of New York, all rights and remedies being
governed by such laws.
Section 16. Continued Effectiveness of this Agreement. The terms of this
Agreement, the relationship of CEP and QRC governed hereby, and the rights and
the obligations of the parties arising hereunder, shall not be affected,
modified or impaired in any manner or to any extent by: (a) any amendment or
modification of or supplement to any of the Financing Documents; (b) the
validity or enforceability of any of the Financing Documents; or (c) any
exercise or non-exercise of any right, power or remedy under or in respect of
the Obligations or any of the Financing Documents. The parties hereto hereby
acknowledge that the provisions of this Agreement are intended to be enforceable
at all times, whether before the commencement of, after the commencement of, in
connection with or premised on the occurrence of a Proceeding.
Section 17. Cumulative Rights, No Waivers. Each and every right, remedy and
power granted to CEP or QRC hereunder shall be cumulative and in addition to any
other right, remedy or power specifically granted herein, in the Financing
Documents, or now or hereafter existing in equity, at law, by virtue of statute
or otherwise, and may be exercised by CEP or QRC, from time to time,
concurrently or independently and as often and in such order as CEP or QRC may
deem expedient. Any failure or delay on the part of CEP or QRC in exercising any
such right, remedy or power, or abandonment or discontinuance of steps to
enforce the same, shall not operate as a waiver thereof or affect the rights of
CEP or QRC thereafter to exercise the same, and any single or partial exercise
of any such right, remedy or power shall not preclude any other or further
exercise thereof or the exercise of any other right, remedy or power, and no
such failure, delay, abandonment or single or partial exercise of the rights of
CEP or QRC hereunder shall be deemed to establish a custom or course of dealing
or performance among the parties hereto.
Section 18. Modification. Any modification or waiver of any provision of
this Agreement, or any consent to any departure by any party therefrom, shall
not be effective in any event unless the same is in writing and signed by all of
the parties hereto (other than Borrower), and then such modification, waiver or
consent shall be effective only in the specific instance and for the specific
purpose given.
Section 19. Severability. In the event that any provision of this Agreement
is deemed to be invalid, illegal or unenforceable by reason of the operation of
any law or by reason of the interpretation placed thereon by any court or
governmental authority, the validity, legality and enforceability of the
remaining provisions of this Agreement shall not in any way be affected or
impaired thereby, and the affected provision shall be modified to the minimum
extent permitted by law so as most fully to achieve the intention of this
Agreement.
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Section 20. Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed to be an original, but all of which
taken together shall be one and the same instrument.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the day and year first above written.
CHEROKEE ENERGY PARTNERS LLC,
a Delaware limited liability company
/s/ Xxxxxx X. Xxxxxx
---------------------------------
Name: Xxxxxx X. Xxxxxx
Title: President
QUEST RESOURCE CORPORATION,
a Nevada corporation
/s/ Xxxxx X. Xxxx
---------------------------------
Name: Xxxxx X. Xxxx
Title: Chairman and CEO
ACKNOWLEDGEMENT:
The undersigned, referred to as "Borrower" in the foregoing Agreement, hereby
acknowledges the terms and provisions thereof and agrees to recognize the
priorities and the agreements between CEP and QRC set forth therein.
QUEST CHEROKEE, LLC
By: /s/ Xxxxx X. Xxxx
--------------------------
Name: Xxxxx X. Xxxx
Title: Chief Executive Officer
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