EXECUTION COPY
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AMENDED AND RESTATED
NOTE PURCHASE AGREEMENT
between
QUEST CHEROKEE, LLC
and
CHEROKEE ENERGY PARTNERS LLC
Dated February 11, 2005
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TABLE OF CONTENTS
Section Page
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1. AUTHORIZATION OF NOTES......................................1
2. SALE AND PURCHASE OF SUBORDINATED NOTES.....................1
3. ISSUANCE OF SUBORDINATED NOTES..............................2
3.1. Initial Issuance.....................................2
3.2. Second Issuance......................................2
3.3. Third Issuance.......................................2
3.4. Fourth Issuance......................................2
4. CONDITIONS TO FUNDING.......................................3
4.1. Representations and Warranties.......................3
4.2. Performance; No Defaults; No Change of Control.......3
4.3. Transactions.........................................3
4.4. Closing Date and Closing Deliverables................3
4.5. Proceedings and Documents............................4
4.6. Fees and Expenses....................................4
5. REPRESENTATIONS AND WARRANTIES OF THE COMPANY...............5
5.1. Organization; Power and Authority....................5
5.2. Authorization, etc...................................5
5.3. Compliance with Laws, Other Instruments, etc.........5
5.4. Governmental Authorizations, etc.....................6
6. REPRESENTATIONS OF THE PURCHASER............................6
6.1. Purchase for Investment..............................6
6.2. Source of Funds......................................6
6.3. Organization; Power and Authority....................7
6.4. Authorization, etc...................................7
6.5. Compliance with Laws, Other Instruments, etc.........8
6.6. Governmental Authorizations, etc.....................8
6.7. Accredited Investor..................................8
7. INTEREST; PREPAYMENT OF THE NOTES...........................8
7.1. Interest.............................................8
7.2. Repayments and Prepayments...........................9
7.3. Maturity; Surrender, etc.............................9
8. AFFIRMATIVE COVENANTS......................................10
8.1. Compliance with Law.................................10
8.2. Legal Existence, etc................................10
8.3. Use of Proceeds.....................................10
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9. NEGATIVE COVENANTS.........................................10
9.1. Merger, Consolidation, etc..........................10
10. REMEDIES ON DEFAULT, ETC...................................11
10.1. Acceleration........................................11
10.2. Other Remedies......................................11
10.3. Rescission..........................................11
10.4. No Waivers or Election of Remedies, Expenses, etc...12
11. REGISTRATION; EXCHANGE; SUBSTITUTION OF NOTES..............12
11.1. Registration of Notes...............................12
11.2. Transfer and Exchange of Notes......................12
11.3. Replacement of Notes................................13
12. PAYMENTS ON NOTES..........................................13
12.1. Home Office Payment.................................13
13. SURVIVAL OF REPRESENTATIONS AND WARRANTIES; ENTIRE
AGREEMENT..................................................14
14. AMENDMENT AND WAIVER.......................................14
14.1. Requirements........................................14
14.2. Solicitation of Holders of Notes....................14
14.3. Binding Effect, etc.................................15
14.4. Notes held by Company, etc..........................15
15. NOTICES....................................................15
16. REPRODUCTION OF DOCUMENTS..................................16
17. MISCELLANEOUS..............................................16
17.1. Successors and Assigns..............................16
17.2. Payments Due on Non-Business Days...................16
17.3. Severability........................................16
17.4. Construction........................................16
17.5. Counterparts........................................17
17.6. Governing Law.......................................17
Schedule A - Information Relating To Purchaser
Schedule B - Defined Terms
Exhibit 1 - Form of 15% Subordinated Note
Exhibit 2 - Form of Second Closing LLC Amendment
Exhibit 3 - Form of Fourth Closing LLC Amendment
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AMENDED AND RESTATED
NOTE PURCHASE AGREEMENT
THIS AMENDED AND RESTATED NOTE PURCHASE AGREEMENT dated as of
February 11, 2005 (this "Agreement") is between QUEST CHEROKEE, LLC, a Delaware
limited liability company (the "Company") and CHEROKEE ENERGY PARTNERS LLC("you"
or "Purchaser").
The Company and Purchaser entered into that certain Note Purchase
Agreement dated December 22, 2003 (such note purchase agreement, the "Original
Note Purchase Agreement"), under the terms of which the Company issued and the
Purchaser purchased $51,000,000.00 of the Company's 15% Subordinated Notes (as
hereinafter defined).
The Company and Purchaser desire to amend and restate the Original Note
Purchase Agreement in its entirety to, inter alia, authorize, issue and sell up
to an additional $15,000,000.00 of Subordinated Notes until February 11, 2006.
NOW, THEREFORE, in consideration of the foregoing and the mutual
covenants set forth herein, the Company and the Purchaser agree as follows:
1. AUTHORIZATION OF NOTES.
In accordance with the terms of the Original Note Purchase Agreement,
the Company previously authorized the issuance and sale of and issued and sold
to Purchaser $51,000,000.00 aggregate principal amount of its 15% Subordinated
Notes (the "Subordinated Notes"), such term to include any notes issued under
this Agreement or in substitution of any Subordinated Notes issued pursuant to
Section 12 of this Agreement. The Company now desires to issue up to an
additional $15,000,000.00 of its Subordinated Notes. In addition to the
$51,000,000.00 of its Subordinated Notes which were authorized in connection
with the Original Note Purchase Agreement, the Company will authorize the issue
and sale of another $15,000,000.00 aggregate principal amount of its
Subordinated Notes. The Subordinated Notes shall be substantially in the form
set out in Exhibit 1, with such changes therefrom, if any, as may be approved by
you and the Company. Certain capitalized terms used in this Agreement are
defined in Schedule B; references to a "Schedule" or an "Exhibit" are, unless
otherwise specified, to a Schedule or an Exhibit attached to this Agreement. In
addition, on or before the Initial Closing, the Company authorized the issuance
and delivery of PIK Notes (as hereinafter defined). The aggregate principal
amount of the Subordinated Notes outstanding at any time may not exceed
$66,000,000.00 plus the aggregate principal amount of PIK Notes.
2. SALE AND PURCHASE OF SUBORDINATED NOTES.
Subject to the terms and conditions of this Agreement, on the date of
the Initial Closing, the Company issued and sold to you and you purchased
Subordinated Notes in the aggregate principal amount of $51,000,000.00 (the
"First Issuance"). On February 11, 2005 or such other date as you and the
Company shall agree (the "Second Closing"), the Company will
issue and sell to you and you will purchase Subordinated Notes in the aggregate
principal amount of $5,000,000.00 (the "Second Issuance"). On the date that all
of the conditions to the Third Issuance have been satisfied, but in no event
after March 15, 2005 (the "Third Closing"), the Company will issue and sell to
you and you will purchase additional Subordinated Notes in the aggregate
principal amount of $7,000,000 (the "Third Issuance"). On the date that all of
the conditions to the Fourth Issuance have been satisfied (the "Fourth Closing";
each of the Initial Closing, the Second Closing, the Third Closing and the
Fourth Closing are referred to as a "Closing"), the Company will issue and sell
to you and you will purchase additional Subordinated Notes in the aggregate
principal amount of $3,000,000.00 (the "Fourth Issuance").
3. ISSUANCE OF SUBORDINATED NOTES.
3.1. Initial Issuance.
The sale and purchase of $51,000,000.00 of the Subordinated Notes
purchased by you occurred at a closing (the "Initial Closing") on December 22,
2003.
3.2. Second Issuance.
Subject to the terms and conditions of this Agreement, at the Second
Closing, the Company will issue and sell to you, and you shall purchase from the
Company an additional Subordinated Note in the principal amount of
$5,000,000.00, such Subordinated Note shall be dated the date of the Second
Closing and registered in your name (or in the name of your nominee), against
delivery by you to the Company or its order of immediately available funds in
the amount of the purchase price therefor by wire transfer of immediately
available funds for the account of the Company to account number specified in
writing to you.
3.3. Third Issuance.
On the date on which all of the conditions to the Third Issuance have
been satisfied, but prior to March 15, 2005, the Company will issue and sell to
you, and you shall purchase from the Company an additional Subordinated Note in
the principal amount of $7,000,000.00, such Subordinated Note shall be dated the
date of the Third Closing and registered in your name (or in the name of your
nominee), against delivery by you to the Company or its order of immediately
available funds in the amount of the purchase price therefor by wire transfer of
immediately available funds for the account of the Company to account number
specified in writing to you.
3.4. Fourth Issuance
On the date on which all of the conditions to the Fourth Issuance have
been satisfied, but prior to February 11, 2006, the Company will issue and sell
to you, and you shall purchase from the Company an additional Subordinated Note
in the principal amount of $3,000,000.00, such Subordinated Note shall be dated
the date of the Fourth Closing and registered in your name (or in the name of
your nominee), against delivery by you to the Company or its order of
immediately available funds in the amount of the purchase price therefor
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by wire transfer of immediately available funds for the account of the Company
to account number specified in writing to you.
4. CONDITIONS TO FUNDING.
Your obligation to purchase and pay for the Subordinated Notes to be
sold to you at a Closing is subject to the fulfillment to your satisfaction,
prior to or at such Closing of the following conditions:
4.1. Representations and Warranties.
The representations and warranties of the Company in this Agreement
shall be true and correct in all material respects at the time of each Closing.
4.2. Performance; No Defaults; No Change of Control.
The Company shall have performed and complied with all agreements and
conditions contained in this Agreement required to be performed or complied with
by it prior to or at such Closing.
After giving effect to the issue and sale of the Subordinated Notes to
be issued in connection with such Closing, (i) no Default or Event of Default
shall have occurred and be continuing under this Agreement, (ii) except with
respect to the Second Closing, no Default or Event of Default (each as defined
in the Senior Credit Facility) shall have occurred and be continuing and (iii)
no Change of Control (as defined in the LLC Agreement) shall have occurred.
4.3. Transactions.
The Closing Transactions shall have been consummated or shall be
consummated concurrently with the Initial Closing on terms and conditions
reasonably acceptable to you.
4.4. Closing Date and Closing Deliverables.
(a) Officer's Certificate. The Company shall have delivered to
you an Officer's Certificate, dated the date of such Closing, certifying that
the conditions specified in Sections 4.1 and 4.2 have been fulfilled with
respect to such Closing.
(b) Secretary's Certificate. The Company shall have delivered to
you a certificate, dated the date of such Closing, certifying as to the
resolutions attached thereto and other limited liability company proceedings
relating to the authorization, execution and delivery of the Notes and this
Agreement.
(c) LLC Amendment. In connection with the Second Closing, the
Company shall have delivered to you a fully executed Amendment to Amended and
Restated Limited Liability Company Agreement of Quest Cherokee LLC, in
substantially the form set out in Exhibit 2 (the "Second Closing LLC Amendment")
amending the Amended and Restated LLC Agreement as provided therein. In
connection with the Fourth Closing, the Company shall have
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delivered to you a fully executed Amendment to Amended and Restated Limited
Liability Company Agreement of Quest Cherokee LLC, in substantially the form set
out in Exhibit 3 (the "Fourth Closing LLC Amendment" and together with the
Second Closing LLC Amendment, the "LLC Amendments") amending the Amended and
Restated LLC Agreement as provided therein.
(d) Application for Funding. With respect to the Fourth Closing,
the Company shall have delivered to you a written application for funding from
the Chief Executive Officer or Chief Financial Officer of the Company, which
shall specify: (i) the requested issue date for the Subordinated Notes (which
date shall not be after February 11, 2006, or less than ten Business Days after
the date of Purchaser's receipt of such application); (ii) the principal amount
of such funding (which shall be $3,000,000.00); and (iii) a representation and
warranty of the Company that the conditions to funding specified in Section 4
have been, as of the date of such notice, satisfied in full. The Company has no
obligation to deliver the application for funding of the Fourth Issuance.
(e) Consents and Waivers. With respect to the Third Closing, the
Company shall have delivered to you a fully executed amendment and waiver to the
Senior Credit Facility that (1) waives all existing Defaults and Events of
Default under the Senior Loan Documents, (2) amends the definition of
Subordinated Notes under the Senior Credit Facility to include the Subordinated
Notes to be issued at the Second Closing and the Third Closing, (3) amends the
Senior Credit Facility in a manner reasonably satisfactory to the Company and
you, and (4) will become effective prior to or concurrent with the Third
Closing. With respect to the Fourth Closing, the Company shall have delivered to
you all consents and/or waivers required under the Senior Loan Documents in
order for the Company to execute and deliver to you the Subordinated Note
required to be delivered at the Fourth Closing and to cause the execution and
delivery to you of the Fourth Closing LLC Amendment.
(f) Amendment to Subordinated Notes. With respect to the Fourth
Closing, the Subordinated Notes shall be amended to increase the interest rate
on the Subordinated Notes from 15% to 20%.
4.5. Proceedings and Documents.
All limited liability company and other proceedings in connection
with the transactions contemplated by this Agreement (including, without
limitation, the Transaction Documents and, as of the Second Closing, the Second
Closing LLC Amendment and, as of the Fourth Closing, the Fourth Closing LLC
Amendment) and all documents and instruments incident to such transactions shall
be satisfactory to you and your special counsel, and you and your special
counsel shall have received all such counterpart originals or certified or other
copies of such documents as you or they may reasonably request.
4.6. Fees and Expenses
On the Initial Closing date, the Company paid to you a commitment fee
in an amount equal to 2.0% of the Subordinated Notes issued and sold on the
Initial Closing date and paid you the fees, charges and disbursements incurred
by you in connection the Initial Closing,
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including reasonable fees payable to your special counsel as reflected in a
statement of such counsel rendered to the Company. On each of the Second Closing
date, the Third Closing Date and the Fourth Closing date, the Company shall pay
to you the fees, charges and disbursements incurred by you in connection with
such Closing, including reasonable fees payable to your special counsel as
reflected in a statement of such counsel rendered to the Company.
5. REPRESENTATIONS AND WARRANTIES OF THE COMPANY.
The Company represents and warrants to you that:
5.1. Organization; Power and Authority.
The Company is a limited liability company duly formed, validly existing
and in good standing under the laws of the State of Delaware. The Company is
duly qualified to transact business as a foreign limited liability company and
is in good standing in each jurisdiction in which the character of its
properties or the nature of its business make such qualification necessary,
except where the failure to be so qualified could not reasonably be expected to
result in a Material Adverse Effect. The Company (or, with respect to each LLC
Amendment, each of the Purchaser's counterparties thereto) has the power and
authority to execute and deliver this Agreement, the Notes, the Transaction
Documents, the Second Closing LLC Amendment (as of the Second Closing) and the
Fourth Closing LLC Amendment (as of the Fourth Closing) and to perform the
provisions hereof and thereof.
5.2. Authorization, etc.
This Agreement, the Notes, the Transaction Documents, the Second Closing
LLC Amendment (as of the Second Closing), and the Fourth Closing LLC Amendment
(as of the Fourth Closing) have been duly authorized by all necessary limited
liability company action on the part of the Company (or, with respect to the LLC
Amendments, by all necessary corporate or limited liability company, as
applicable action on the part of each of the Purchaser's counterparties
thereto), and this Agreement constitutes, and upon execution and delivery
thereof each Note will constitute, a legal, valid and binding obligation of the
Company enforceable against the Company in accordance with its terms, except as
such enforceability may be limited by (i) applicable bankruptcy, insolvency,
reorganization, moratorium or other similar laws affecting the enforcement of
creditors' rights generally and (ii) general principles of equity (regardless of
whether such enforceability is considered in a proceeding in equity or at law).
5.3. Compliance with Laws, Other Instruments, etc.
The execution,delivery and performance by the Company (or, with respect
to the LLC Amendments, each of the Purchaser's counterparties thereto) of this
Agreement, the Notes, the Transaction Documents, the Second Closing LLC
Amendment (as of the Second Closing) and the Fourth Closing LLC Amendment (as of
the Fourth Closing) will not (i) contravene, result in any breach of, or
constitute a default under any indenture, mortgage, deed of trust, loan,
purchase or credit agreement (including, without limitation, the Senior Loan
Documents), lease, limited liability company agreement, or any other agreement
or instrument to which the Company is bound or by which the Company or any of
their respective properties may be bound or affected, (ii) conflict with or
result in a breach of any of the terms, conditions or provisions of
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any order, judgment, decree, or ruling of any court, arbitrator or Governmental
Authority applicable to the Company or (iii) violate any provision of any
statute or other rule or regulation of any Governmental Authority applicable to
the Company, except in each case above, where such contravention, conflict,
breach or violation could not reasonably be expected to result in a Material
Adverse Effect; provided, however, that no representation or warranty is made
with respect to the Senior Loan Documents in connection with the Second Closing.
5.4. Governmental Authorizations, etc.
Except for such consents, approvals, authorizations, registrations,
filings or declarations previously obtained, no consent, approval or
authorization of, or registration, filing or declaration with, any Governmental
Authority is required in connection with the execution, delivery or performance
by the Company (or, with respect to the LLC Amendments, each of the Purchaser's
counterparties thereto) of this Agreement, the Notes, the Transaction Documents,
the Second Closing LLC Amendment (as of the Second Closing) and the Fourth
Closing LLC Amendment (as of the Fourth Closing).
6. REPRESENTATIONS OF THE PURCHASER.
6.1. Purchase for Investment.
You represent that you are purchasing the Notes for your own
account or for one or more separate accounts maintained by you or for the
account of one or more pension or trust funds and not with a view to the
distribution thereof, provided that the disposition of your or their property
shall at all times be within your or their control. You understand that the
Notes have not been registered under the Securities Act and may be resold only
if registered pursuant to the provisions of the Securities Act or if an
exemption from registration is available, except under circumstances where
neither such registration nor such an exemption is required by law, and that the
Company is not required to register the Notes.
6.2. Source of Funds.
You represent that at least one of the following statements is an
accurate representation as to each source of funds (a "Source") to be used by
you to pay the purchase price of the Notes to be purchased by you hereunder:
(a) if you re an insurance company, the Source does not include
assets allocated to any separate account maintained by you in which any employee
benefit plan (or its related trust) has any interest, other than a separate
account that is maintained solely in connection with your fixed contractual
obligations under which the amounts payable, or credited, to such plan and to
any participant or beneficiary of such plan (including any annuitant) are not
affected in any manner by the investment performance of the separate account; or
(b) the Source is either (i) an insurance company pooled
separate account, within the meaning of Prohibited Transaction Exemption ("PTE")
00-0 (xxxxxx Xxxxxxx 00, 0000), xx (xx) a bank collective investment fund,
within the meaning of the PTE 91-38 (issued July 12, 1991) and, except as you
have disclosed to the Company in writing pursuant to this paragraph (b), no
employee benefit plan or group of plans maintained by the same employer or
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employee organization beneficially owns more than 10% of all assets allocated to
such pooled separate account or collective investment fund; or
(c) the Source constitutes assets of an "investment fund"
(within the meaning of Part V of the QPAM Exemption) managed by a "qualified
professional asset manager" or "QPAM" (within the meaning of Part V of the QPAM
Exemption), no employee benefit plan's assets that are included in such
investment fund, when combined with the assets of all other employee benefit
plans established or maintained by the same employer or by an affiliate (within
the meaning of Section V(c)(1) of the QPAM Exemption) of such employer or by the
same employee organization and managed by such QPAM, exceed 20% of the total
client assets managed by such QPAM, the conditions of Part I(c) and (g) of the
QPAM Exemption are satisfied, neither the QPAM nor a person controlling or
controlled by the QPAM (applying the definition of "control" in Section V(e) of
the QPAM Exemption) owns a 5% or more interest in the Company and (i) the
identity of such QPAM and (ii) the names of all employee benefit plans whose
assets are included in such investment fund have been disclosed to the Company
in writing pursuant to this paragraph (c); or
(d) the Source is a governmental plan; or
(e) the Source is one or more employee benefit plans, or a
separate account or trust fund comprised of one or more employee benefit plans,
each of which has been identified to the Company in writing pursuant to this
paragraph (e); or
(f) the Source does not include assets of any employee benefit
plan, other than a plan exempt from the coverage of ERISA.
As used in this Section 6.2, the terms "employee benefit plan", "governmental
plan", "party in interest" and "separate account" shall have the respective
meanings assigned to such terms in Section 3 of ERISA.
6.3. Organization; Power and Authority.
The Purchaser is a limited liability company duly formed, validly
existing and in good standing under the laws of the State of Delaware. The
Purchaser is duly qualified to transact business as a foreign limited liability
company and is in good standing in each jurisdiction in which the character of
its properties or the nature of its business make such qualification necessary,
except where the failure to be so qualified could not reasonably be expected to
result in a material adverse effect. The Purchaser has the power and authority
to execute and deliver this Agreement and to perform the provisions hereof and
thereof.
6.4. Authorization, etc.
This Agreement has been duly authorized by all necessary
limited liability company action on the part of the Purchaser, and this
Agreement constitutes a legal, valid and binding obligation of the Purchaser
enforceable against the Purchaser in accordance with its terms, except as such
enforceability may be limited by (i) applicable bankruptcy, insolvency,
reorganization, moratorium or other similar laws affecting the enforcement of
creditors' rights
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generally and (ii) general principles of equity (regardless of whether such
enforceability is considered in a proceeding in equity or at law).
6.5. Compliance with Laws, Other Instruments, etc.
The execution, delivery and performance by the Purchaser of this
Agreement will not (i) contravene, result in any breach of, or constitute a
default under any indenture, mortgage, deed of trust, loan, purchase or credit
agreement, lease, limited liability company agreement, or any other agreement or
instrument to which the Purchaser is bound or by which the Purchaser or any of
their respective properties may be bound or affected, (ii) conflict with or
result in a breach of any of the terms, conditions or provisions of any order,
judgment, decree, or ruling of any court, arbitrator or Governmental Authority
applicable to the Purchaser or (iii) violate any provision of any statute or
other rule or regulation of any Governmental Authority applicable to the
Purchaser, except in each case above, where such contravention, conflict, breach
or violation could not reasonably be expected to result in a material adverse
effect.
6.6. Governmental Authorizations, etc.
No consent, approval or authorization of, or registration,
filing or declaration with, any Governmental Authority is required in connection
with the execution, delivery or performance by the Purchaser of this Agreement.
6.7. Accredited Investor.
Purchaser represents that it is an "accredited investor"
within the meaning of Rule 501(a)(1), (2), (3) or (7) under the Securities Act.
7. INTEREST; PREPAYMENT OF THE NOTES.
7.1. Interest.
(a) Interest accrued on each Note shall be payable, without
duplication: (i) subject to Section 7.1(b), on each Interest Payment Date and
(ii) on the date of any payment or prepayment, in whole or in part, of principal
outstanding on such Note.
(b) All interest occurring under the Notes which becomes due and
payable on an Interest Payment Date shall, to the extent (i) that a payment due
under the Notes is precluded to be made to you in cash by the terms of the
Senior Loan Documents or (ii) the Company does not having sufficient cash
available on such Interest Payment Date to make such payment pursuant to Section
5.4 of the Amended and Restated LLC Agreement, be paid to you by the issuance of
a note (a "PIK Note") in a principal amount equal to the amount of accrued
interest due and payable to you on such Interest Payment Date. The PIK Notes
shall be substantially in the form set out in Exhibit 1. The failure of the
Company to issue you a PIK Note on any Interest Payment Date when due as
provided in this Section 7.1(b) shall not alter or affect the obligation of the
Company to pay the amount due on such Interest Payment Date under the terms of
this Agreement and each Note, and such accrued and unpaid amount shall in all
events be deemed to be an obligation to issue a PIK Note hereunder
notwithstanding any action or non-action of the Company.
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7.2. Repayments and Prepayments.
The Company shall repay in full the unpaid principal amount of the
Notes upon the Final Maturity Date. The Company shall have the right to extend
the Final Maturity Date until December 22, 2010, provided that the Company
notifies the Purchaser in writing that it desires to extend the Final Maturity
Date, such notice to be received by the holder of each Junior Note no later than
sixty (60) days prior to the current Final Maturity Date. Prior thereto, the
Company:
(a) may, from time to time on any Business Day, prepay, in whole
or in part, the outstanding principal amount of any Notes; provided, however,
that all such voluntary prepayments shall require at least three (3) but no more
than five (5) Business Days prior written irrevocable notice to you, and (ii) if
such prepayment is made as a result of an Early Liquidation Event, such
prepayment shall include the Make Whole Amount;
(b) shall, to the extent permitted under the Senior Loan
Documents, on each Distribution Date, prepay the principal of the Notes in an
amount equal to a percentage of the Company's Net Cash Flow determined pursuant
to Section 5.4(a) of the Amended and Restated LLC Agreement;
(c) shall, to the extent permitted under the Senior Loan
Documents, upon the occurrence of an Early Liquidation Event, repay each and
every Note and the Make Whole Amount;
(d) from and after the date all the Term B Loans have been paid
in full, shall, immediately upon any acceleration of the Final Maturity Date of
the Notes pursuant to Section 10, repay each and every Note. Except as otherwise
provided in this Section 7.2, each prepayment of the Notes made in accordance
with this Section 7.2 shall be applied, to the extent of such payment, in the
following order: (1) first, to the payment of accrued interest on the Notes; (2)
second, to the payment of accrued interest on the outstanding PIK Notes in the
inverse order of the dates of the issuance of the PIK Notes; (3) third, to the
payment of principal on the Notes in the inverse order of the dates of the
issuance of the Notes; (4) fourth, in the event of an Early Liquidation Event,
to the payment of the Make Whole Amount, if any; and (5) fifth, to the payment
of all other obligations owing to you under this Agreement. The parties hereto
agree, that even if the outstanding principal amount of the Notes has been
repaid in full, the Notes will continue to be outstanding until the earlier of
(i) December 22, 2006 and (ii) the date the Make Whole Amount has been paid in
full. The Company acknowledges, and the parties hereto agree, that each holder
of a Note has the right to maintain its investment in the Notes free from
repayment by the Company (except as herein specifically provided for) and that
the provision for payment of a Make-Whole Amount by the Company in the event
that the Notes are prepaid, is intended to provide compensation for the
deprivation of such right under such circumstances.
7.3. Maturity; Surrender, etc.
In the case of each prepayment of Notes pursuant to this Section 7,
the principal amount of each Note to be prepaid shall mature and become due and
payable on the date fixed for such prepayment, together with interest on such
principal amount accrued to such date and
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the applicable Make-Whole Amount, if any, but only in the event of an Early
Liquidation Event. From and after such date, unless the Company shall fail to
pay such principal amount when so due and payable, together with the interest
and Make-Whole Amount, if any, as aforesaid, interest on such principal amount
shall cease to accrue. Any Note paid or prepaid in full shall be surrendered to
the Company and cancelled and shall not be reissued, and no Note shall be issued
in lieu of any prepaid principal amount of any Note.
8. AFFIRMATIVE COVENANTS.
The Company covenants that so long as any of the Notes are
outstanding:
8.1. Compliance with Law.
The Company will comply with all laws, ordinances or governmental
rules or regulations to which it is subject and will obtain and maintain in
effect all licenses, certificates, permits, franchises and other governmental
authorizations necessary to the ownership of its properties or to the conduct of
its business, in each case to the extent necessary to ensure that non-compliance
with such laws, ordinances or governmental rules or regulations or failures to
obtain or maintain in effect such licenses, certificates, permits, franchises
and other governmental authorizations could not, individually or in the
aggregate, reasonably be expected to have a Material Adverse Effect.
8.2. Legal Existence, etc.
The Company will at all times preserve and keep in full force and
effect its limited liability company existence and all rights and franchises of
the Company and its Subsidiaries unless, in the good faith judgment of the
Company, the termination of or failure to preserve and keep in full force and
effect such limited liability company existence, right or franchise could not,
individually or in the aggregate, have a Material Adverse Effect.
8.3. Use of Proceeds.
The Company will use the proceeds of the Subordinated Notes issued
at the Initial Closing in the manner permitted pursuant to the Bank One Credit
Facilities. The Company will use the proceeds of the Subordinated Notes issued
at the Second Closing only to pay for the purchase of property or the cost of
installation, construction or improvement of property. The Company will use the
net proceeds of the Subordinated Notes issued at the Third Closing and, if
applicable, the Fourth Closing only in the manner approved by the Board of the
Company.
9. NEGATIVE COVENANTS.
The Company covenants that so long as any of the Notes are
outstanding:
9.1. Merger, Consolidation, etc.
The Company shall not consolidate with or merge with any other
corporation or convey, transfer or lease substantially all of its assets in a
single transaction or series of
10
transactions to any Person unless (a) the Company is the survivor, or (b) the
surviving Person assumes all obligations of the Company under this Agreement.
10. REMEDIES ON DEFAULT, ETC.
10.1. Acceleration.
(a) If an Event of Default described in Section 5(a)(ii) of the
Subordinated Note has occurred, all the Notes then outstanding shall
automatically become immediately due and payable.
(b) If any other Event of Default has occurred and is continuing,
any holder or holders of more than 50% in principal amount of the Notes at the
time outstanding may at any time at its or their option, by notice or notices to
the Company, declare all the Notes then outstanding to be immediately due and
payable.
(c) If any Event of Default described in Section 5(a)(i) of the
Subordinated Note has occurred and is continuing, any holder or holders of Notes
at the time outstanding affected by such Event of Default may at any time, at
its or their option, by notice or notices to the Company, declare all the Notes
held by it or them to be immediately due and payable.
Upon any Notes becoming due and payable under this Section 10.1,
whether automatically or by declaration, such Notes will forthwith mature and
the entire unpaid principal amount of such Notes, plus all accrued and unpaid
interest thereon, shall all be immediately due and payable, in each and every
case without presentment, demand, protest or further notice, all of which are
hereby waived.
10.2. Other Remedies.
If any Default or Event of Default has occurred and is continuing,
and irrespective of whether any Notes have become or have been declared
immediately due and payable under Section 10.1, the holder of any Note at the
time outstanding may proceed to protect and enforce the rights of such holder by
an action at law, suit in equity or other appropriate proceeding, whether for
the specific performance of any agreement contained herein or in any Note, or
for an injunction against a violation of any of the terms hereof or thereof, or
in aid of the exercise of any power granted hereby or thereby or by law or
otherwise.
10.3. Rescission.
At any time after any Notes have been declared due and payable
pursuant to clause (b) or (c) of Section 10.1, the holders of not less than 50%
in principal amount of the Notes then outstanding, by written notice to the
Company, may rescind and annul any such declaration and its consequences if (a)
the Company has paid all overdue interest on the Notes, all principal of any
Notes that are due and payable and are unpaid other than by reason of such
declaration, and all interest on such overdue principal, (b) all Events of
Default and Defaults, other than non-payment of amounts that have become due
solely by reason of such declaration, have been cured or have been waived
pursuant to Section 15, and (c) no judgment or decree has been entered for the
payment of any monies due pursuant hereto or to the Notes. No rescission
11
and annulment under this Section 10.3 will extend to or affect any subsequent
Event of Default or Default or impair any right consequent thereon.
10.4. No Waivers or Election of Remedies, Expenses, etc.
No course of dealing and no delay on the part of any holder of any
Note in exercising any right, power or remedy shall operate as a waiver thereof
or otherwise prejudice such holder's rights, powers or remedies. No right, power
or remedy conferred by this Agreement or by any Note upon any holder thereof
shall be exclusive of any other right, power or remedy referred to herein or
therein or now or hereafter available at law, in equity, by statute or
otherwise. Without limiting the obligations of the Company under Section 13, the
Company will pay to the holder of each Note on demand such further amount as
shall be sufficient to cover all costs and expenses of such holder incurred in
any enforcement or collection under this Section 10, including, without
limitation, reasonable attorneys' fees, expenses and disbursements.
11. REGISTRATION; EXCHANGE; SUBSTITUTION OF NOTES.
11.1. Registration of Notes.
The Company shall keep at its principal executive office a register
for the registration and registration of transfers of Notes. The name and
address of each holder of one or more Notes, each transfer thereof and the name
and address of each transferee of one or more Notes shall be registered in such
register. Prior to due presentment for registration of transfer, the Person in
whose name any Note shall be registered shall be deemed and treated as the owner
and holder thereof for all purposes hereof, and the Company shall not be
affected by any notice or knowledge to the contrary. The Company shall give to
any holder of a Note that is an Institutional Investor promptly upon request
therefor, a complete and correct copy of the names and addresses of all
registered holders of Notes.
11.2. Transfer and Exchange of Notes.
Upon surrender of any Note at the principal executive office of the
Company for registration of transfer or exchange (and in the case of a surrender
for registration of transfer, duly endorsed or accompanied by a written
instrument of transfer duly executed by the registered holder of such Note or
his attorney duly authorized in writing and accompanied by the address for
notices of each transferee of such Note or part thereof), the Company shall
execute and deliver, at the Company's expense (except as provided below), one or
more new Notes (as requested by the holder thereof) in exchange therefor, in an
aggregate principal amount equal to the unpaid principal amount of the
surrendered Note. Any transfer of all or a portion of the Notes must be made
simultaneously with, and in proportion to, a transfer of a Class A Membership
Interests in the Company. Each such new Note shall be payable to such Person as
such holder may request and shall be substantially in the form of Exhibit 1.
Each such new Note shall be dated and bear interest from the date to which
interest shall have been paid on the surrendered Note or dated the date of the
surrendered Note if no interest shall have been paid thereon. The Company may
require payment of a sum sufficient to cover any stamp tax or governmental
charge imposed in respect of any such transfer of Notes. Notes shall not be
12
transferred in denominations of less than $100,000, provided that if necessary
to enable the registration of transfer by a holder of its entire holding of
Notes, one Note may be in a denomination of less than $100,000. Any transferee,
by its acceptance of a Note registered in its name (or the name of its nominee),
shall be deemed to have made the representation set forth in Section 6.2.
11.3. Replacement of Notes.
Upon receipt by the Company of evidence reasonably satisfactory to
it of the ownership of and the loss, theft, destruction or mutilation of any
Note (which evidence shall be, in the case of an Institutional Investor, notice
from such Institutional Investor of such ownership and such loss, theft,
destruction or mutilation), and
(a) in the case of loss, theft or destruction, of indemnity
reasonably satisfactory to it (provided that if the holder of such Note is, or
is a nominee for, an original Purchaser or another holder of a Note with a
minimum net worth of at least $100,000,000, such Person's own unsecured
agreement of indemnity shall be deemed to be satisfactory), or
(b) in the case of mutilation, upon surrender and cancellation
thereof, the Company at its own expense shall execute and deliver, in lieu
thereof, a new Note, dated and bearing interest from the date to which interest
shall have been paid on such lost, stolen, destroyed or mutilated Note or dated
the date of such lost, stolen, destroyed or mutilated Note if no interest shall
have been paid thereon.
12. PAYMENTS ON NOTES.
12.1. Home Office Payment.
So long as you or your nominee shall be the holder of any Note, the
Company will pay all sums becoming due on such Note for principal, Make-Whole
Amount, if any, and interest by the method and at the address specified for such
purpose below your name in Schedule A, or by such other method or at such other
address as you shall have from time to time specified to the Company in writing
for such purpose, without the presentation or surrender of such Note or the
making of any notation thereon, except that upon written request of the Company
made concurrently with or reasonably promptly after payment or prepayment in
full of any Note, you shall surrender such Note for cancellation, reasonably
promptly after any such request, to the Company at the address specified in
Schedule A. Prior to any sale or other disposition of any Note held by you or
your nominee you will, at your election, either endorse thereon the amount of
principal paid thereon and the last date to which interest has been paid thereon
or surrender such Note to the Company in exchange for a new Note or Notes
pursuant to Section 11.2. The Company will afford the benefits of this Section
12.1 to any Institutional Investor that is the direct or indirect transferee of
any Note purchased by you under this Agreement and that has made the same
agreement relating to such Note as you have made in this Section 12.1.
13
13. SURVIVAL OF REPRESENTATIONS AND WARRANTIES; ENTIRE AGREEMENT.
All representations and warranties contained herein shall survive
the execution and delivery of this Agreement and the Notes, the purchase or
transfer by you of any Note or portion thereof or interest therein and the
payment of any Note, and may be relied upon by any subsequent holder of a Note,
regardless of any investigation made at any time by or on behalf of you or any
other holder of a Note. All statements contained in any certificate or other
instrument delivered by or on behalf of the Company pursuant to this Agreement
shall be deemed representations and warranties of the Company under this
Agreement. Subject to the preceding sentence, this Agreement and the Notes
embody the entire agreement and understanding between you and the Company and
supersede all prior agreements and understandings relating to the subject matter
hereof.
14. AMENDMENT AND WAIVER.
14.1. Requirements.
This Agreement and the Notes may be amended, and the observance of
any term hereof or of the Notes may be waived (either retroactively or
prospectively), with (and only with) the written consent of the Company and the
Required Holders, except that (a) no amendment or waiver of any of the
provisions of Section 5 or 6 hereof, or any defined term (as it is used
therein), will be effective as to you unless consented to by you in writing, and
(b) no such amendment or waiver may, without the written consent of the holder
of each Note at the time outstanding affected thereby, (i) subject to the
provisions of Section 10 relating to acceleration or rescission, change the
amount or time of any prepayment or payment of principal of, or reduce the rate
or change the time of payment or method of computation of interest or of the
Make-Whole Amount, if any, on, the Notes, (ii) change the percentage of the
principal amount of the Notes the holders of which are required to consent to
any such amendment or waiver, or (iii) amend any of Sections 8, 10, or 14.
14.2. Solicitation of Holders of Notes.
(a) Solicitation. The Company will provide each holder of the Notes
(irrespective of the amount of Notes then owned by it) with sufficient
information, sufficiently far in advance of the date a decision is required, to
enable such holder to make an informed and considered decision with respect to
any proposed amendment, waiver or consent in respect of any of the provisions
hereof or of the Notes. The Company will deliver executed or true and correct
copies of each amendment, waiver or consent effected pursuant to the provisions
of this Section 14 to each holder of outstanding Notes promptly following the
date on which it is executed and delivered by, or receives the consent or
approval of, the requisite holders of Notes.
(b) Payment. The Company will not directly or indirectly pay or
cause to be paid any remuneration, whether by way of supplemental or additional
interest, fee or otherwise, or grant any security, to any holder of Notes as
consideration for or as an inducement to the entering into by any holder of
Notes or any waiver or amendment of any of the terms and provisions hereof
unless such remuneration is concurrently paid, or security is concurrently
14
granted, on the same terms, ratably to each holder of Notes then outstanding
even if such holder did not consent to such waiver or amendment.
14.3. Binding Effect, etc.
Any amendment or waiver consented to as provided in this Section 14
applies equally to all holders of Notes and is binding upon them and upon each
future holder of any Note and upon the Company without regard to whether such
Note has been marked to indicate such amendment or waiver. No such amendment or
waiver will extend to or affect any obligation, covenant, agreement, Default or
Event of Default not expressly amended or waived or impair any right consequent
thereon. No course of dealing between the Company and the holder of any Note nor
any delay in exercising any rights hereunder or under any Note shall operate as
a waiver of any rights of any holder of such Note. As used herein, the term
"this Agreement" and references thereto shall mean this Agreement as it may from
time to time be amended or supplemented.
14.4. Notes held by Company, etc.
Solely for the purpose of determining whether the holders of the
requisite percentage of the aggregate principal amount of Notes then outstanding
approved or consented to any amendment, waiver or consent to be given under this
Agreement or the Notes, or have directed the taking of any action provided
herein or in the Notes to be taken upon the direction of the holders of a
specified percentage of the aggregate principal amount of Notes then
outstanding, Notes directly or indirectly owned by the Company or any of its
Affiliates shall be deemed not to be outstanding.
15. NOTICES.
All notices and communications provided for hereunder shall be in
writing and sent (a) by telecopy if the sender on the same day sends a
confirming copy of such notice by a recognized overnight delivery service
(charges prepaid), or (b) by registered or certified mail with return receipt
requested (postage prepaid), or (c) by a recognized overnight delivery service
(with charges prepaid). Any such notice must be sent:
(i) if to you or your nominee, to you or it at the address specified
for such communications in Schedule A, or at such other address as you or
it shall have specified to the Company in writing,
(ii) if to any other holder of any Note, to such holder at such
address as such other holder shall have specified to the Company in
writing, or
(iii) if to the Company, to 0000 Xxxxx Xxx Xxx., Xxxxx 000, Xxxxxxxx
Xxxx, Xxxxxxxx 00000, or at such other address as the Company shall have
specified to the holder of each Note in writing.
Notices under this Section 15 will be deemed given only when actually received.
15
16. REPRODUCTION OF DOCUMENTS.
This Agreement and all documents relating thereto, including,
without limitation, (a) consents, waivers and modifications that may hereafter
be executed, (b) documents received by you at the Initial Closing (except the
Notes themselves), and (c) certificates and other information previously or
hereafter furnished to you, may be reproduced by you by any photographic,
photostatic, microfilm, microcard, miniature photographic or other similar
process and you may destroy any original document so reproduced. The Company
agrees and stipulates that, to the extent permitted by applicable law, any such
reproduction shall be admissible in evidence as the original itself in any
judicial or administrative proceeding (whether or not the original is in
existence and whether or not such reproduction was made by you in the regular
course of business) and any enlargement, facsimile or further reproduction of
such reproduction shall likewise be admissible in evidence. This Section 16
shall not prohibit the Company or any other holder of Notes from contesting any
such reproduction to the same extent that it could contest the original, or from
introducing evidence to demonstrate the inaccuracy of any such reproduction.
17. MISCELLANEOUS.
17.1. Successors and Assigns.
All covenants and other agreements contained in this Agreement by or
on behalf of any of the parties hereto bind and inure to the benefit of their
respective successors and assigns (including, without limitation, any subsequent
holder of a Note) whether so expressed or not.
17.2. Payments Due on Non-Business Days.
Anything in this Agreement or the Notes to the contrary
notwithstanding, any payment of principal of or Make-whole Amount or interest on
any Note that is due on a date other than a Business Day shall be made on the
next succeeding Business Day without including the additional days elapsed in
the computation of the interest payable on such next succeeding Business Day.
17.3. Severability.
Any provision of this Agreement that is prohibited or unenforceable
in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent
of such prohibition or unenforceability without invalidating the remaining
provisions hereof, and any such prohibition or unenforceability in any
jurisdiction shall (to the full extent permitted by law) not invalidate or
render unenforceable such provision in any other jurisdiction.
17.4. Construction.
Each covenant contained herein shall be construed (absent express
provision to the contrary) as being independent of each other covenant contained
herein, so that compliance with any one covenant shall not (absent such an
express contrary provision) be deemed to excuse compliance with any other
covenant. Where any provision herein refers to action to be taken by
16
any Person, or which such Person is prohibited from taking, such provision shall
be applicable whether such action is taken directly or indirectly by such
Person.
17.5. Counterparts.
This Agreement may be executed in any number of counterparts, each
of which shall be an original but all of which together shall constitute one
instrument. Each counterpart may consist of a number of copies hereof, each
signed by less than all, but together signed by all, of the parties hereto.
17.6. Governing Law.
This Agreement and the Notes shall be construed in accordance with,
and this Agreement and the Notes and all matters arising out of or relating in
any way whatsoever (whether in contract, tort or otherwise) to this Agreement
and the Notes shall be governed by, the law of the State of New York.
[Remainder of Page Intentionally Left Blank]
* * * * *
17
If you are in agreement with the foregoing, please sign the form of
agreement on the accompanying counterpart of this Agreement and return it to the
Company, whereupon the foregoing shall become a binding agreement between you
and the Company.
Very truly yours,
QUEST CHEROKEE, LLC
By: /s/ Xxxxx X. Xxxx
---------------------------------------
Name: Xxxxx X. Xxxx
-------------------------------------
Title: Chief Executive Officer
------------------------------------
The foregoing is hereby agreed to as
of the date thereof.
CHEROKEE ENERGY PARTNERS LLC
By: /s/ Xxxxxx X. Xxxxxx
---------------------------------
Name: Xxxxxx X. Xxxxxx
-------------------------------
Title: President
------------------------------
18
SCHEDULE A
----------
INFORMATION RELATING TO PURCHASERS
Principal Amount of
Name and Address of Purchaser Notes to be Purchased
----------------------------- ---------------------
CHEROKEE ENERGY PARTNERS LLC Up to
$66,000,000.00
(1) All payments by wire transfer of immediately
available funds to:
For ArcLight Energy Partners Fund I, L.P.
Bank: Boston Private Bank & Trust Company
Boston, MA
ABA: 000-000-000
Account Name: ArcLight Energy Partners
Fund I, L.P.
Account Number: 0000000
with sufficient information to identify the
source and application of such funds.
(2) All notices of payments and written confirmations of such wire transfers:
000 Xxxxxxxxx Xxxxxx, 00xx Xx.
Xxxxxx, XX 00000
Attn: General Counsel
(000) 000-0000 (Fax)
(000) 000-0000 (Ph)
(3) All other communications:
000 Xxxxxxxxx Xxxxxx, 00xx Xx.
Xxxxxx, XX 00000
Attn: General Counsel
(000) 000-0000 (Fax)
(000) 000-0000 (Ph)
Schedule A - Page 1
SCHEDULE B
----------
DEFINED TERMS
-------------
As used herein, the following terms have the respective meanings set
forth below or set forth in the Section hereof following such term:
"Affiliate" means, at any time, and with respect to any Person, any
other Person that at such time directly or indirectly through one or more
intermediaries Controls, or is Controlled by, or is under common Control with,
such first Person. As used in this definition, "Control" means the possession,
directly or indirectly, of the power to direct or cause the direction of the
management and policies of a Person, whether through the ownership of voting
securities, by contract or otherwise. Unless the context otherwise clearly
requires, any reference to an "Affiliate" is a reference to an Affiliate of the
Company. For purposes of this Agreement the Purchaser shall not be deemed an
Affiliate of the Company.
"Amended and Restated LLC Agreement" means the Amended and Restated
Limited Liability Company Agreement of the Company attached as Exhibit A to the
Membership Interest Purchase Agreement, as the same may be amended from time to
time.
"Bank One Credit Facilities" means collectively, (i) the
$200,000,000.00 Credit Agreement dated December 22, 2003, among the Company, the
lenders party thereto, and Bank One, NA, as administrative agent and collateral
agent and (ii) the $35,000,000.00 Credit Agreement dated December 22, 2003,
among the Company, the lenders party thereto, and Bank One, NA, as
administrative agent and collateral agent.
"Business Day" means any day other than a Saturday, a Sunday or a
day on which commercial banks in New York, New York are required or authorized
to be closed.
"Closing" is defined in Section 2.
"Closing Transactions" means the closing of each of the transactions
described as "Closing Transactions" in the Senior Loan Documents (other than the
Initial Closing under this Agreement) and the execution and delivery to
Purchaser of (i) the Guaranty by Quest, in favor of Purchaser, of the
obligations of the Quest Subsidiaries under the Membership Interest Purchase
Agreement, (ii) the Pledge Agreement pledging to Purchaser, all of the Quest
Subsidiaries' Class B Membership Interests in the Company to secure the
obligations of the Quest Subsidiaries under the Membership Interest Purchase
Agreement; and (iii) the Non-Competition and Non-Disclosure Agreement among the
Company, the Purchaser, Quest and the Quest Subsidiaries.
"Company" means Quest Cherokee, LLC, a Delaware limited liability
company.
"Default" means an event or condition the occurrence or existence of
which would, with the lapse of time or the giving of notice or both, become an
Event of Default.
"Distribution Date" is defined in the Amended and Restated LLC
Agreement.
Schedule B - Page 1
"Early Liquidation Event" is defined in the Amended and Restated LLC
Agreement.
"ERISA" means the Employee Retirement Income Security Act of 1974,
as amended from time to time, and the rules and regulations promulgated
thereunder from time to time in effect.
"Event of Default" is defined in Section 5 of the Subordinated Note.
"Exchange Act" means the Securities Exchange Act of 1934, as
amended.
"Final Maturity Date" means the later of (i) October 22, 2010 and
(ii) the final maturity date for the Term B Loans permitted under the Senior
Credit Facility, or such later date as extended by the Company pursuant to
Section 7.2.
"First Issuance" is defined in Section 2.
"Fourth Closing" is defined in Section 2.
"Fourth Issuance" is defined in Section 2.
"Fourth Closing LLC Amendment" is defined in Section 4.4(c).
"Governmental Authority" means
(a) the government of
(i) the United States of America or any State or other
political subdivision thereof, or
(ii) any jurisdiction in which the Company or any Subsidiary
conducts all or any part of its business, or which asserts
jurisdiction over any properties of the Company or any Subsidiary,
or
(b) any entity exercising executive, legislative, judicial,
regulatory or administrative functions of, or pertaining to, any such
government.
"holder" means, with respect to any Note, the Person in whose name
such Note is registered in the register maintained by the Company pursuant to
Section 11.1.
"Initial Closing" is defined in Section 3.1.
"Institutional Investor" means (a) any original purchaser of a Note
and (b) any bank, trust company, savings and loan association or other financial
institution, any pension plan, any investment company, any insurance company,
any broker or dealer, or any other similar financial institution or entity,
regardless of legal form that has a net worth of at least $100,000,000.
Schedule B - Page 2
"Interest Payment Date" means the last day of each January, April,
July and October of each year, commencing January 31, 2004.
"JW" means X-X Gas Gathering, LLC, a Kansas limited liability
company.
"LLC Amendment" is defined in Section 4.4(c).
"Make Whole Amount" means an amount equal to the Make Whole Payment
(as defined in the Amended and Restated LLC Agreement).
"Material Adverse Effect" means a material adverse effect on (a) the
business, operations, affairs, financial condition, assets or properties of the
Company and its Subsidiaries taken as a whole, or (b) the ability of the Company
to perform its obligations under this Agreement and the Notes, or (c) the
validity or enforceability of this Agreement or the Notes.
"Membership Interest Purchase Agreement" shall mean the Membership
Interest Purchase Agreement dated as of December 22, 2003, by and among you,
QOG, QES, STPC, PGPC, PSI, and JW.
"Net Cash Flow" is defined in the Amended and Restated LLC
Agreement.
"Notes" mean the Subordinated Notes and the PIK Notes.
"Officer's Certificate" means a certificate of a Senior Financial
Officer or of any other officer of the Company whose responsibilities extend to
the subject matter of such certificate.
"Person" means an individual, partnership, corporation, limited
liability company, association, trust, unincorporated organization, or a
government or agency or political subdivision thereof.
"PGPC" means Ponderosa Gas Pipeline Company, Inc., a Kansas
corporation.
"PIK Notes" is defined in Section 7.1(b).
"PSI" means Producers Service, Incorporated, a Kansas corporation.
"Purchaser" is defined in Section 1.
"QES" means Quest Energy Service, Inc., a Kansas corporation.
"QOG" means Quest Oil & Gas Corporation, a Kansas corporation.
"QPAM Exemption" means Prohibited Transaction Class Exemption 84-14
issued by the United States Department of Labor.
"Quest" means Quest Resource Corporation, a Nevada corporation.
"Quest Subsidiaries" means QES, PSI, PGPC, QOG, JW and STPC.
Schedule B - Page 3
"Required Holders" means, at any time, the holders of at least 50%
in principal amount of the Notes at the time outstanding (exclusive of Notes
then owned by the Company or any of its Affiliates).
"Responsible Officer" means any Senior Financial Officer and any
other officer of the Company with responsibility for the administration of the
relevant portion of this Agreement.
"Second Closing" is defined in Section 2.
"Second Closing LLC Amendment" is defined in Section 4.4(c).
"Second Issuance" is defined in Section 2.
"Securities Act" means the Securities Act of 1933, as amended from
time to time.
"Senior Credit Facility" means that certain Credit Agreement dated
as of July 22, 2004, by and among the Company, as Borrower, other guarantors
party thereto, as Guarantors, the lenders from time to time a party thereto, UBS
Securities LLC, as Arranger, Bookmanager, Documentation Agent and Syndication
Agent, UBS AG, Stamford Branch Agent, as Issuing Bank, LC Facility Issuing Bank,
Administrative Agent and Collateral Agent, and UBS Loan Finance LLC, as
Swingline Lender, as amended, modified or supplemented from time to time and any
replacement, successor or new credit agreement entered into in connection with
the refinancing thereof.
"Senior Financial Officer" means the chief financial officer,
principal accounting officer, treasurer or comptroller of the Company.
"Senior Loan Documents" means the Loan Documents as defined in the
Senior Credit Facility.
"STPC" means STP Cherokee, Inc., an Oklahoma corporation.
"Subordinated Notes" is defined in Section 1.
"Subsidiary" means, as to any Person, any corporation, association
or other business entity in which such Person or one or more of its Subsidiaries
or such Person and one or more of its Subsidiaries owns sufficient equity or
voting interests to enable it or them (as a group) ordinarily, in the absence of
contingencies, to elect a majority of the directors (or Persons performing
similar functions) of such entity, and any partnership or joint venture if more
than a 50% interest in the profits or capital thereof is owned by such Person or
one or more of its Subsidiaries or such Person and one or more of its
Subsidiaries (unless such partnership can and does ordinarily take major
business actions without the prior approval of such Person or one or more of its
Subsidiaries). Unless the context otherwise clearly requires, any reference to a
"Subsidiary" is a reference to a Subsidiary of the Company.
"Term B Loan" means a Term B Loan as defined in the Senior Credit
Facility.
Schedule B - Page 4
"Third Closing" is defined in Section 2.
"Third Issuance" is defined in Section 2.
"Transaction Documents" means each of the agreements and instruments
executed by the Company in connection with the Closing Transactions.
Schedule B - Page 5
EXHIBIT 1
---------
FORM OF 15% SUBORDINATED NOTE
THE SECURITY REPRESENTED HEREBY WAS ORIGINALLY ISSUED AS OF
[____________], 200[__], HAS NOT BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933, AS AMENDED (THE "ACT"), AND MAY NOT BE SOLD OR
TRANSFERRED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT
UNDER THE ACT OR AN EXEMPTION FROM REGISTRATION THEREUNDER. THE
SECURITY REPRESENTED HEREBY IS ALSO SUBJECT TO THE CONDITIONS
SPECIFIED IN THE AMENDED AND RESTATED NOTE PURCHASE AGREEMENT AMONG
THE COMPANY AND THE ORIGINAL HOLDER HEREOF AND CERTAIN INVESTORS,
DATED AS OF FEBRUARY 11, 2005 AND THE COMPANY RESERVES THE RIGHT TO
REFUSE THE TRANSFER OF THIS SECURITY UNTIL THE CONDITIONS THEREIN HAVE
BEEN FULFILLED WITH RESPECT TO SUCH TRANSFER. A COPY OF SUCH NOTE
PURCHASE AGREEMENT MAY BE OBTAINED BY THE HOLDER HEREOF AT THE
COMPANY'S PRINCIPAL PLACE OF BUSINESS WITHOUT CHARGE.
THIS INSTRUMENT AND THE OBLIGATIONS EVIDENCED HEREBY ARE SUBORDINATED
TO THE PRIOR PAYMENT IN FULL OF THE SUPERIOR DEBT (AS DEFINED
HEREINAFTER).
JUNIOR SUBORDINATED
PROMISSORY NOTE
---------------
[______________], 200[__] $[___],000,000
Quest Cherokee, LLC, a Delaware limited liability company (the "Company"),
hereby promises to pay to the order of Cherokee Energy Partners LLC, a Delaware
limited liability company, the principal amount of $[___],000,000 together with
interest thereon calculated from the date hereof (the "Date of Issuance") in
accordance with the provisions of this Junior Subordinated Promissory Note (the
"Note").
This Note was issued pursuant to an Amended and Restated Note Purchase
Agreement, dated as of February 11, 2005 (such agreement to which the initial
holder is a party, as amended and modified from time to time, the "Purchase
Agreement"), by and among the Company and the initial holder of this Note. For
purposes of this Note, "Junior Notes" means this Note, the note issued pursuant
to the Purchase Agreement on December 22, 2003 and all other notes issued on the
date hereof or at any time hereafter in substantially the same form whether
issued pursuant to the Purchase Agreement or otherwise (including any PIK Notes
(as defined in Section 6 hereof)). The Purchase Agreement contains terms
governing the rights of the holder of this Note, and all provisions of the
Purchase Agreement are hereby incorporated herein by reference.
1. Payment of Interest. Interest shall accrue at the rate of fifteen
percent (15%) per annum on the unpaid principal amount of this Note from time to
time outstanding. Interest shall be computed on the basis of a 365 or 366-day
year (as applicable) and the actual number of days
Exhibit 1 - Page 1
elapsed, and shall be payable on each Interest Payment Date (as defined in the
Purchase Agreement); provided that, except to the extent same is permitted to be
paid in cash under the Senior Credit Agreement (as defined in Section 6 hereof)
on each Interest Payment Date, the Company shall pay interest in kind by either
(i) issuing a PIK Note to the holder hereof in principal amount equal to the
amount of the interest due on such Interest Payment Date or (ii) deferring the
interest due on such Interest Payment Date and all interest so deferred pursuant
to this clause (ii) shall be added to and become a part of the principal of this
Note as of the Interest Payment Date upon which it was deferred, and shall
thereafter earn interest as provided herein. Except as provided in the last
sentence of this Section 1, in all events an amount of accrued and unpaid
interest (including any interest represented by a PIK Note or otherwise
previously added to principal) shall be paid by the Company in cash, on each
Interest Payment Date occurring after December 22, 2008, equal to the least
amount of such accrued and unpaid interest such that the Note shall not have at
any time "significant original issue discount" within the meaning of section
163(i)(2) of the Internal Revenue Code of 1986. Any accrued interest which for
any reason has not theretofore been paid shall be paid in full on the date on
which the final principal payment on this Note is made. Except for interest paid
by the issuance of a PIK Note or deferred and paid-in-kind in accordance with
the terms hereof, interest shall be paid only if such payment is permitted by
the terms of the Senior Credit Agreement and only to the extent therefor
pursuant to Section 5.4 of the Company's Amended and Restated Limited Liability
Company Agreement.
2. Payment of Principal on Note.
(a) Maturity. The Company shall pay the principal amount outstanding
under this Note (including interest deferred and added to the principal amount
of this Note as provided in Section 1 above) together with all accrued and
unpaid interest on such principal amount, to the holder of this Note on the
Final Maturity Date (as defined in the Purchase Agreement as in effect on the
date hereof).
(b) Prepayments.
(i) Upon notice given as provided in subsection (ii) below, the
Company may at any time and from time to time prepay all or any
proportion of the outstanding principal amount of the Note, plus
accrued interest on the outstanding principal amount of the Note
through the date of prepayment; provided that (A) such prepayment
-------- is permitted by the terms of the Senior Credit Agreement and
(B) such prepayment shall be made pro rata among the holders of the
Junior Notes on the basis of the outstanding principal amount of the
Junior Note held by each holder.
(ii) The Company shall send written notice of its election to
make a prepayment on the Junior Notes to the holder of this Note by
registered or certified mail, return receipt requested, at least three
(3) Business Days prior to the date of prepayment. Such notice shall
specify the date fixed for prepayment, the aggregate principal amount
outstanding, the aggregate amount of interest accrued on the
outstanding principal amount of this Note through the date of
prepayment specified in the Company's notice.
Exhibit 1 - Page 2
(c) Time of Payment. If any payment of principal, interest or premium
shall become due on a day which is not a Business Day (as defined below), such
payment shall be made on the next succeeding Business Day and such extension of
time shall in such case be included in computing interest in connection with
such payment. The term "Business Day" as used herein means any day other than
Saturday or Sunday or public holiday under the laws of the State of New York or
other day on which banking institutions are authorized or obligated to close in
the City of New York in the State of New York.
(d) Form of Payment. Unless otherwise indicated herein, any payment to
be made hereunder shall be made at the direction of the holder hereof by
cashier's or certified check to or upon the order of the holder or by wire
transfer of immediately available funds to an account designated by the holder.
3. Subordination: Restrictions on Payment.
Anything in this Note or the Purchase Agreement to the contrary
notwithstanding, the obligations of the Company in respect of the principal,
interest, fees and charges on this Note shall be subordinate and junior in right
of payment, to the extent and in the manner hereinafter set forth, to the prior
payment in full in cash of all Superior Debt. By its acceptance hereof, the
payee and each other present and future holder of this Note and beneficial owner
of any interest in this Note or any other Subordinated Debt (collectively,
including the payee, the "holders" of Subordinated Debt) irrevocably agree, for
the directly intended and enforceable benefit of each present and future holder
of Superior Debt, that the Subordinated Debt is hereby subordinated to the
Superior Debt on the following terms:
(a) In the event that the Company makes a general assignment for the
benefit of creditors; or an order, judgment or decree is entered adjudicating
the Company bankrupt or insolvent; or any order for relief with respect to the
Company is entered under the Federal Bankruptcy Code; or the Company petitions
or applies to any tribunal for the appointment of a custodian, trustee, receiver
or liquidator of the Company or of any substantial part of the assets of the
Company, or commences any proceeding relating to the Company under any
bankruptcy, reorganization, arrangement, insolvency, readjustment of debt,
dissolution or liquidation law of any jurisdiction; or any such petition or
application is filed, or any such proceeding is commenced, against the Company
(collectively referred to as an "Insolvency Event"), or upon any acceleration of
Superior Debt, then:
(i) the holders of Superior Debt shall be entitled to receive
payment in full in cash of all principal, premium, interest, fees,
charges and other amounts then due on all Superior Debt (including
interest, fees, charges and other amounts accruing thereon after the
commencement of any such Insolvency Event at the rate provided in the
documentation for such Superior Debt (irrespective of whether such
interest, fees, charges or other amounts are allowed as a claim in
such proceedings)) before the holder of this Note is entitled to
receive any payment of any kind or character on account of principal,
interest or other amounts due (or past due) upon this Note, and the
holders of Superior Debt shall be entitled to receive for application
in payment thereof all payments and distributions of any kind or
character, whether in cash, property or securities or by
Exhibit 1 - Page 3
set-off or otherwise, which may be payable or deliverable in any such
proceedings in respect of this Note; and
(ii) any payment or distribution of assets of the Company, of any
kind or character, whether in cash, property or securities, to which
the holder of this Note would be entitled except for the provisions of
this Section 3(a) shall be paid or delivered by the Company (or any
receiver or trustee in such proceedings) directly to the Senior Agent
for the benefit of the holders of Superior Debt for application of
such payment or distribution among the holders of the Superior Debt
according to the priorities of such debt, until all Superior Debt
(including interest, fees, charges and other amounts accrued thereon
after the date of commencement of such proceedings at the rate
provided in the documentation for such Superior Debt (irrespective of
whether such interest, fees, charges or other amounts are allowed as a
claim in such proceedings)) shall have been paid in full in cash.
(b) In any proceedings with respect to any Insolvency Event, or the
application of the assets of the Company to the payment or liquidation thereof,
or upon the dissolution or other winding up of the business of the Company or
upon the sale of all or substantially all of the assets of the Company, then,
and in any such event, (A) each holder of the Superior Debt shall be entitled to
receive full and indefeasible payment and satisfaction in cash of the Superior
Debt prior to the payment of all or any part of the Subordinated Debt by the
Company, other than a distribution of Reorganization Subordinated Securities if
the Senior Agent and the holder of this Note shall have entered into such
amendments to this Note as the Senior Agent may reasonably request to reflect
the continued subordination of the Reorganization Subordinated Securities to the
Superior Debt, and (B) any payment or distribution of any kind or character from
the Company of its assets, whether in cash, securities or other property, which
shall be payable or deliverable upon or with respect to any or all of the
Subordinated Debt, other than a distribution of Reorganization Subordinated
Securities if the Senior Agent and the holder of this Note shall have entered
into such amendments to this Note as the Senior Agent may reasonably request to
reflect the continued subordination of the Reorganization Subordinated
Securities to the Superior Debt, shall be paid or delivered directly to the
Senior Agent for the benefit of the holders of the Superior Debt for application
to the Superior Debt in accordance with the priorities thereof, due or not due,
until such Superior Debt shall have first been fully and indefeasibly paid in
cash and satisfied and all financing arrangements terminated. The holder of this
Note irrevocably authorizes, empowers and directs all receivers, trustees,
liquidators, custodians, conservators and others having authority in the
premises to effect all such payments and distributions, and the holder of this
Note also irrevocably authorizes, empowers and directs the Senior Agent to
demand, xxx for, collect and receive every such payment or distribution for the
benefit of the Senior Lenders. Any amounts collected or received by the Senior
Agent pursuant to the authority granted hereby, shall be paid or delivered
directly to holders of the Superior Debt for application to the Superior Debt in
accordance with the priorities thereof, due or not due, until such Superior Debt
shall have first been fully and indefeasibly paid in cash and satisfied and all
financing arrangements terminated. The holder of this Note agrees to execute and
deliver to the Senior Agent or its representative all such further instruments
confirming the authorization referred to in the foregoing clause and agrees not
to initiate or prosecute or encourage any other person to initiate or prosecute
any
Exhibit 1 - Page 4
claim, action or other proceeding challenging the enforceability of the Superior
Debt or any liens and security interests securing the Superior Debt. The holder
of this Note agrees to execute, verify, deliver and file any proofs of claim in
respect of the Subordinated Debt requested by the Senior Agent in connection
with any such proceeding and hereby irrevocably authorizes, empowers and
appoints the Senior Agent its agent and attorney-in-fact to (i) execute, verify,
deliver and file such proofs of claim upon the failure of the holder of this
Note promptly to do so (and, in any event, prior to 30 days before the
expiration of the time to file any such proof) and (ii) vote such claim in any
such proceeding upon the failure of the holder of this Note to do so prior to 15
days before the expiration of the time to vote any such claim; provided that the
Senior Agent shall not have any obligation to execute, verify, deliver, file
and/or vote any such proof of claim. In the event that the Senior Agent votes
any claim in accordance with the authority granted hereby, no holder shall be
entitled to change or withdraw such vote. The Superior Debt shall continue to be
treated as Superior Debt and the provisions of this Note shall continue to cover
the relative rights and priorities of the Senior Lenders, on the one hand, and
the holder of this Note, on the other hand, even if all or part of the Superior
Debt or the security interests securing the Superior Debt are subordinated, set
aside, avoided or disallowed in connection with any such proceeding and this
Note shall be reinstated if at any time any payment of any of the Superior Debt
is rescinded or must otherwise be returned by any holder of Superior Debt or any
representative of such holder.
(c) Except for payments of interest in kind, and the issuance of
Reorganization Subordinated Securities expressly permitted herein, no holder of
the Subordinated Debt will, except as otherwise agreed to by the Senior Agent
and the Required Lenders (as defined in Section 6 hereof) or to the extent
permitted under the Senior Credit Agreement, ask, demand, xxx for, take or
receive from the Company, by set off or in any other manner, the whole or any
part of the Subordinated Debt (whether such amounts represent principal or
interest, or obligations which are due or not due, including costs, fees and
expenses with respect to the Junior Notes, direct or indirect, absolute or
contingent), including, without limitation, the taking of any negotiable
instruments evidencing such Subordinated Debt nor any security for any
Subordinated Debt, unless and until all Superior Debt, whether now existing or
hereafter arising directly between the Company and any holder of the Superior
Debt, or acquired outright, conditionally or as collateral security from another
by any holder the Superior Debt, shall have been fully and indefeasibly paid in
full in cash and satisfied and all financing arrangements and commitments
between the Company and all holders of the Superior Debt have been terminated.
(d) Any amendment or modification of the terms of Section 3 of this
Note shall not be effective against any Person who was a holder of Superior Debt
prior to or at the time of such amendment or modification unless such holder of
Superior Debt so consents in writing.
(e) The holders of Superior Debt may, at any time, in their
discretion, renew, amend, extend, increase, restate, refinance or otherwise
modify the terms and provisions of the Superior Debt so held or exercise or
release any of their rights under the Superior Debt including, without
limitation, the waiver of defaults thereunder and the amendment of any of the
terms or provisions thereof (or any notice evidencing or creating the same), or
the release of collateral securing the Superior Debt, all without notice to or
assent from the holder of this Note.
Exhibit 1 - Page 5
No compromise, alteration, amendment, renewal, restatement, refinancing or other
change of, or waiver, consent or other action in respect of any liability or
obligation under or in respect of, any terms, covenants or conditions of the
Superior Debt (or any instrument evidencing or creating the same), whether or
not such release is in accordance with the provisions of the Superior Debt (or
any instrument evidencing or creating the same), shall in any way alter or
affect the enforceability of the subordination provisions of this Note against
the holder hereof.
(f) If, notwithstanding the provisions of Section 3 of this Note, any
payment or distribution of any kind or character (whether in cash, securities or
other property) or any security shall be received by the holder of this Note in
contravention of this Section 3 and before all the Superior Debt shall have been
paid in full in cash, such payment, distribution or security shall be held in
trust for the benefit of, and shall be immediately paid over or delivered or
transferred to the Senior Agent for the benefit of the holders of Superior Debt
or their duly appointed agents for application of such payment, distribution or
security among the holders of each class of Superior Debt according to the
priorities of such Superior Debt. Any such payments received by the holder of
this Note and delivered to the Senior Agent for the benefit of the holders of
the Superior Debt shall be deemed not to be a payment on this Note for any
reason whatsoever and the indebtedness under this Note shall remain as if such
erroneous payment had never been paid by the Company or received by the holder
of this Note. In the event of the failure of any holder of this Note to endorse
or assign any such payment, distribution or security, the Senior Agent is hereby
irrevocably authorized to endorse or assign the same.
(g) No present or future holder of Superior Debt shall be prejudiced
in its right to enforce the provisions of Section 3 of this Note by any act or
failure to act on the part of the Company or such holder or any other holder of
Superior Debt.
(h) The holder of this Note shall not take or continue any action, or
exercise or continue to exercise any rights, remedies or powers under the terms
of this Note, or exercise or continue to exercise any other right or remedy at
law or equity that such holder might otherwise possess, to collect any amount
due and payable in respect of this Note, including, without limitation, the
acceleration of this Note, the commencement of any foreclosure on any Lien, the
filing of any petition in bankruptcy or the taking advantage of any other
insolvency law of any jurisdiction.
(i) Subject to the indefeasible payment in full in cash of all
Superior Debt and the termination of all lending commitments under the Senior
Credit Agreement, the holder of this Note shall be subrogated to the rights of
the Senior Agent and Senior Lenders to receive payments and distributions with
respect to the Superior Debt until this Note is paid in full. The holder of this
Note agrees that in the event that all or any part of a payment made with
respect to the Superior Debt is recovered from the holders of the Superior Debt
in a proceeding with respect to an Insolvency Event or otherwise, any payment or
distribution received by the holder of this Note with respect to this Note at
any time after the date of the payment that is so recovered, whether pursuant to
the right of subrogation provided for in this Note or otherwise, shall be deemed
to have been received by the holder of this Note in trust as property of the
holders of the Superior Debt and the holder of this Note shall forthwith deliver
the same to the Senior Agent for the benefit of the Senior Lenders for
application to the Superior Debt until the Superior Debt is paid in full. A
payment or distribution made pursuant to this Section 3(i) to the
Exhibit 1 - Page 6
Senior Agent or any Senior Lender which otherwise would have been paid to or
retained by the holder of this Note is not, as between the Company and the
holder of this Note, a payment by the Company to or on account of the Superior
Debt.
(j) The provisions of this Section 3 are solely for the purpose of
defining the relative rights of the holders of Superior Debt, on the one hand,
and the holder of this Note on the other, against the Company and its assets,
and nothing herein is intended to or shall impair, as between the Company and
the holder of this Note, the obligations of this Company which are absolute and
unconditional, to pay to the holder of this Note the principal and interest on
this Note as and when they become due and payable in accordance with their
terms, or is intended to or will affect the relative rights of the holder of
this Note and creditors of the Company other than the holders of the Superior
Debt, nor, except as provided in this Section 3, will anything herein or therein
prevent the holder of this Note from exercising all remedies otherwise permitted
by applicable law upon default under this Note subject to the rights, if any,
under this Section 3 of the holders of Superior Debt in respect of cash,
property or securities of the Company received upon the exercise of any such
remedy and subject to this Section 3.
(k) Each holder of the Subordinated Debt has purchased or acquired the
Subordinated Debt held by it with the express understanding that:
(i) the Subordinated Debt constitutes the liability solely of the
Company;
(ii) no member of the Company has guaranteed or is otherwise
liable for any Subordinated Debt;
(iii) the Subordinated Debt is not secured by any mortgage, lien,
pledge, charge, financing statement, security interest, hypothecation
or other security device of any type (a "Lien"), nor is such
Subordinated Debt supported directly or indirectly by any direct or
indirect guaranty of any Person; and
(iv) such holder of Subordinated Debt will never ask, demand,
accept, receive or retain any guarantee of any Subordinated Debt, or
any collateral security for the payment of any Subordinated Debt, or
any other form of payment assurance as to any Subordinated Debt, from
any member or Subsidiary of the Company, and will not initiate or
prosecute, or encourage any other Person to initiate or prosecute any
claim or other proceeding.
(l) Except for the payment of interest in kind in accordance with the
terms of this Note, if by the terms of this Note any payment becomes due and
payable on account of the principal of or interest on this Note at any time and
payment hereon is not permitted under the Senior Credit Agreement, then the
holder of this Note hereby agrees that, notwithstanding the terms of this Note,
the date on which such payment would otherwise be due shall automatically be
deferred, extended and postponed until the date (the "Extension Date") such
payment is permitted pursuant to the terms of said Senior Credit Agreement, as
fully as if by the terms of this Note such payment was not due until the
Extension Date. The Company shall not be in any respect in default under this
Note by reason of any such deferral, extension and postponement to
Exhibit 1 - Page 7
the Extension Date, and such deferral, extension and postponement shall not
otherwise subject the Company to any claim of default or any enforcement remedy.
The holder of this Note, in its capacity as a creditor, and by its acceptance of
this Note, covenants and agrees that it will not, and will not encourage any
other individual or entity to, at any time, contest the validity, perfection,
priority or enforceability of any Superior Debt and the promissory notes issued
pursuant thereto or any guarantees thereof or any of the other Superior Loan
Documents (as defined in Section 6 hereof) (or the liens and security interests
granted to the Collateral Agent (as defined in Section 6 hereof) pursuant
thereto.
(m) Any and all payments and distributions on account of this Note
that are received by the Senior Agent or any Senior Lender as a result of this
Section 3 shall be distributed to the holders of the Superior Debt according to
the priorities of such Superior Debt.
4. Transfer of Note. This Note may be transferred subject to the
restrictions set forth in the Purchase Agreement. Upon any such transfer, the
holder shall send written notice to the Company specifying the new holder's name
and address. The term "Note" as used herein includes this Note and any notes or
other evidences of indebtedness issued in exchange for or in respect of this
Note or any portion hereof.
5. Events of Default.
(a) Definition. For purposes of this Note, an Event of Default shall
be deemed to have occurred if:
(i) the Company fails to pay (A) when due, the full amount of any
principal payment on any Junior Note or (B) within five days of the
date when due, the full amount of any interest then accrued on any
Junior Note; or
(ii) the Company or any subsidiary makes an assignment for the
benefit of creditors or admits in writing its inability to pay its
debts generally as they become due; or an order, judgment or decree is
entered adjudicating the Company or any Subsidiary bankrupt or
insolvent; or any order for relief with respect to the company or any
Subsidiary is entered under the Federal Bankruptcy Code; or the
Company or any Subsidiary petitions or applies to any tribunal for the
appointment of a custodian, trustee, receiver or liquidator of the
Company or any Subsidiary, or of any substantial part of the assets of
the Company or any Subsidiary, or commences any proceeding (other than
a proceeding for the voluntary liquidation and dissolution of any
Subsidiary) relating to the Company or any Subsidiary under any
bankruptcy, reorganization, arrangement, insolvency, readjustment of
debt, dissolution or liquidation law of any jurisdiction; or any such
petition or application is filed, or any such proceeding is commenced,
against the Company or any Subsidiary and either (A) the Company or
any such Subsidiary by any act indicates its approval thereof, consent
thereto or acquiescence therein or (B) such petition, application or
proceeding is not dismissed within 60 days.
Exhibit 1 - Page 8
(b) Consequences of Events of Default. Subject to the provisions of
Section 3 hereof, if an Event of Default has occurred and is continuing, the
holder or holders of the Junior Notes representing a majority of the aggregate
principal amount of the Junior Notes then outstanding may declare all or any
portion of the outstanding principal amount of the Junior Notes due and payable
and demand immediate payment of all or any portion of the outstanding principal
amount of the Junior Notes owned by such holder or holders. The Company shall
give prompt written notice of any such demand to the other holders of the Junior
Notes, each of which may demand immediate payment of all or any portion of such
holder's Note.
6. Definitions. For purposes of this Note, the following capitalized terms
have the following meaning.
"Collateral Agent" has the meaning assigned to such term in the
Superior Loan Documents.
"paid in full", "paid in full in cash", "payment in full" or similar
phrases mean with respect to the Superior Debt, the final and indefeasible
payment in full in cash of such Superior Debt and the termination of all
commitments of the Senior Lenders (as applicable) pursuant to the Senior Credit
Agreement.
"Person" means an individual, a partnership, a corporation, a limited
liability company, an association, a joint stock company, a trust, a joint
venture, an unincorporated organization and a governmental entity or any
department, agency or political subdivision thereof.
"PIK Note" means a junior subordinated promissory note of the Company
that is substantially identical to this Note except for the stated principal
amount thereof.
"Refinancing Lender" means any Person which provides refinancing to
the Company of all or a portion of the Superior Debt outstanding prior to such
refinancing.
"Reorganization Subordinated Securities" means (a) any equity
securities issued in substitution of all or any portion of the Subordinated Debt
that are subordinated in right of payment to the Superior Debt (or any notes or
other securities issued in substitution of all or any portion of the Superior
Debt), and (b) any notes or other debt securities issued in substitution of all
or any portion of the Subordinated Debt that are subordinated to the Superior
Debt (or any notes or other securities issued in substitution of all or any
portion of the Superior Debt) to the same extent that the Subordinated Debt is
subordinated to the Superior Debt pursuant to the terms of this Note.
"Required Lenders" means the Required Lenders as defined in the Senior
Credit Agreement.
"Senior Agent" means UBS AG, Stamford Branch, as Administrative Agent
under the Senior Credit Agreement, in its capacity as contractual representative
of the Senior Lenders pursuant to the Senior Credit Agreement and not in its
individual capacity as a Senior Lender, and any successor Administrative Agent
appointed pursuant to the Senior Credit Agreement (including any Refinancing
Lender or successor or replacement administrative agent under any
Exhibit 1 - Page 9
successor or new credit agreement entered into in connection with the
refinancing, replacement or substitution in whole or in part of the Superior
Debt).
"Senior Credit Agreement" means that certain Credit Agreement dated as
of July 22, 2004, by and among the Company, as Borrower, other guarantors party
thereto, as Guarantors, the lenders from time to time a party thereto, UBS
Securities LLC, as Arranger, Bookmanager, Documentation Agent and Syndication
Agent, the Senior Agent, as Issuing Bank ,LC Facility Issuing Bank,
Administrative Agent and Collateral Agent, and UBS Loan Finance LLC, as
Swingline Lender, as amended, modified or supplemented from time to time and any
replacement, successor or new credit agreement entered into in connection with
the refinancing thereof.
"Senior Lenders" means Lenders as defined in the Senior Credit
Agreement.
"Subordinated Debt" means (i) indebtedness under the Junior Notes,
including, without limitation, principal, premium, interest and other
liabilities payable from time to time and similar obligations, premiums,
penalties, fees, indemnities or expenses, and regardless of whether direct or
indirect, now existing or hereafter arising, absolute or contingent, secured or
unsecured, or long or short term, (ii) obligations arising under guarantees
executed by the Company or any of its Subsidiaries of items described in (i)
above, and (iii) renewals, extensions, refundings, refinancings, deferrals,
restructurings, amendments and modifications of the items described in (i)
and/or (ii) above.
"Subsidiary" means, with respect to any Person, any corporation,
limited liability company, partnership, association or other business entity of
which (i) if a corporation, a majority of the total voting power of shares of
stock entitled (without regard to the occurrence of any contingency) to vote in
the election of directors, managers or trustees thereof is at the time owned or
controlled, directly or indirectly, by that Person or one or more of the other
Subsidiaries of that Person or a combination thereof, or (ii) if a limited
liability company, partnership, association or other business entity, a majority
of the partnership or other similar ownership interest thereof is at the time
owned or controlled, directly or indirectly, by any Person or one or more
Subsidiaries of that Person or a combination thereof. For purposes hereof, a
Person or Persons shall be deemed to have a majority ownership interest in a
limited liability company, partnership, association or other business entity if
such Person or Persons shall be allocated a majority of limited liability
company, partnership, association or other business entity gains or losses or
shall be or control any managing director or general partner of such limited
liability company, partnership, association or other business entity.
"Superior Debt" means (i) the Obligations (as defined in the Senior
Credit Agreement) and the promissory notes issued pursuant thereto, including,
without limitation, principal, premium, interest and other liabilities payable
from time to time and similar obligations, interest accruing before and after
any event of insolvency at the rate provided in the documentation with respect
thereto (irrespective of whether such principal, premium, interest or other
liabilities are allowed as a claim in any such proceeding), premiums, penalties,
fees, indemnities or expenses, and regardless of whether direct or indirect, now
existing or hereafter arising, absolute or contingent, secured or unsecured, or
long or short term, (ii) obligations arising under guarantees executed by the
Company or any of its members or Subsidiaries of items described in (i) above,
Exhibit 1 - Page 10
and (iii) renewals, extensions, refundings, refinancings, deferrals,
restructurings, amendments and modifications of the items described in (i)
and/or (ii) above.
"Superior Loan Documents" means the "Loan Documents" as defined in the
Senior Credit Agreement.
7. Amendment and Waiver. Except as otherwise expressly provided herein, the
provisions of the Note may be amended and the Company may take any action herein
prohibited, or omit to perform any act herein required to be performed by it,
only if the Company has obtained the written consent of the holders of the
Junior Notes then outstanding and the Senior Agent and the Required Lenders with
respect to any Superior Debt then outstanding.
8. Cancellation. After all principal and accrued interest at any time owed
on this Note has been paid in full, this Note shall be surrendered to the
Company for cancellation and shall not be reissued.
9. Remedies Cumulative. No remedy herein conferred upon the holder of this
Note is intended to be exclusive of any other remedy, and each and every such
remedy shall be cumulative and shall be in addition to every other remedy given
hereunder or now or hereafter existing at law or in equity or by statute or
otherwise.
10. Remedies not Waived. No course of dealing between the Company and the
holder of this Note or any delay on the part of the holder hereof in exercising
any rights hereunder shall operate as a waiver of any right of the holder of
this Note.
11. Covenants Bind Successors and Assigns. All the covenants, stipulations,
promises and agreements in this Note contained by or on behalf of the Company
shall bind its successors and assigns, whether so expressed or not.
12. Governing Law. This Note shall be governed by and construed in
accordance with the laws of the State of New York.
13. Heading. The headings of the sections and subsections of this Note are
inserted for convenience only and do not constitute a part of this Note.
14. Third Party Beneficiary. The Company and the holder of this Note
acknowledge and agree that the Senior Agent and the Senior Lenders and each of
their successors and assigns are third party beneficiaries of the provisions of
Section 3 of this Note, and the provisions of Section 3 of this Note shall inure
to the benefit of and be enforceable by the Senior Agent and the Senior Lenders
and their respective successors and assigns.
15. Acceptance and Acknowledgment. By accepting this Note and advancing the
proceeds of the Subordinated Debt evidenced by this Note, the holder hereof
hereby agrees to, acknowledges and accepts, each of the terms and provisions of
this Note.
[Remainder Of Page Intentionally Left Blank]
Exhibit 1 - Page 11
IN WITNESS WHEREOF, the Company has executed and delivered this Note on the
Date of Issuance.
QUEST CHEROKEE, LLC
By:
---------------------------------
Name:
-------------------------------
Title:
------------------------------
Exhibit 1 - Page 12
EXHIBIT 2
---------
FORM OF SECOND CLOSING LLC AMENDMENT
AMENDMENT
TO
AMENDED AND RESTATED
LIMITED LIABILITY COMPANY AGREEMENT
OF
QUEST CHEROKEE, LLC
This Amendment to the Amended and Restated Limited Liability Company
Agreement of Quest Cherokee, LLC (this "Amendment"), dated as of February 11,
2005 (the "Effective Date"), is by and among the Members of Quest Cherokee, LLC,
a Delaware limited liability company (the "Company").
WHEREAS, reference is herein made to that certain Amended and Restated
Limited Liability Company Agreement of Quest Cherokee, LLC, dated as of December
22, 2003 (as amended prior to the Effective Date, the "LLC Agreement"), by and
among the Members of the Company; and
WHEREAS, all capitalized terms used but not otherwise defined herein shall
have the meanings attributed to them in the LLC Agreement; and
WHEREAS, the Members wish to amend the LLC Agreement as set forth in this
Amendment; and
WHEREAS, pursuant to Section 10.9 of the LLC Agreement, the LLC Agreement
may be amended only by a written instrument approved by a Member Vote; and
pursuant to Section 1.1 of the LLC Agreement, the term, "Member Vote" is defined
to mean "the approval by those Class A Members who, in the aggregate, have a
Class A Unit Sharing Ratio in excess of 50%, together with the approval of those
Class B Members who, in the aggregate, have a Class B Unit Sharing Ratio in
excess of 50%"; and
WHEREAS, as of the Effective Date: (i) Cherokee Energy Partners LLC is the
sole Class A Member of the Company (and owns and holds 10,000 Class A Units);
and (ii) the following constitute all of the Class B Members of the Company: (A)
Quest Energy Service, Inc. (which owns and holds 196 Class B Units); (B) STP
Cherokee, Inc. (which owns and holds 3,726 Class B Units); (C) Ponderosa Gas
Pipeline Company, Inc. (which owns and holds 335 Class B Units); (D) Quest Oil &
Gas, Corporation (which owns and holds 4,790 Class B Units); (E) Producers
Service, Incorporated (which owns and holds 71 Class B Units), and (F) X-X Gas
Gathering, L.L.C. (which owns and holds 882 Class B Units); and
WHEREAS, this Amendment shall be effective to amend the LLC Agreement, and
shall be binding on all of the Members, upon the execution and delivery hereof
by Cherokee Energy
Exhibit 2 - Page 1
Partners LLC (the sole Class A Member), together with those Class B Members who,
in the aggregate, have a Class B Unit Sharing Ratio in excess of 50%.
NOW, THEREFORE, in accordance with the terms of the LLC Agreement and for
good and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the Members hereby agree as follows:
1. Section 1.1.
(a) Definition of Class A Member IRR. The definition of "Class A
Member IRR" in Section 1.1 of the LLC Agreement is hereby amended and
restated in its entirely to read as follows:
"Class A Member IRR" means, as of any date of
distribution, the per annum discount rate at which
the sum of the following cash flows is equal to
zero (assuming discounting on the basis of a year
of 365 days and actual days elapsed): (i) the
aggregate amount of capital contributed, and loans
made, by the Class A Member and its Affiliates
(including all Subordinated Notes issued pursuant
to the Subordinated Note Agreement, as amended,
and all amounts made available to pay fees and
expenses to the Class A Member or its Affiliates)
directly to the Company (each of which amounts
will be deemed to be negative for purposes of this
calculation) and (ii) (A) the aggregate amount of
equity distributions, and payments made in respect
of loans, by the Company directly to the Class A
Member or its Affiliates minus (B) any
distributions made pursuant to Section 5.4(c).
The equity distributions and payments in (ii)(A)
above exclude the aggregate fees and reimbursed
expenses paid by the Company, directly or
indirectly, to the Class A Member or its
Affiliates. The "Class A Member IRR" will be
calculated using the "XIRR" function in Microsoft
Excel 2000 or an equivalent function in another
software package.
(b) Definition of Early Liquidation Event. The definition of "Early
Liquidation Event" in Section 1.1 of the LLC Agreement is hereby amended
and restated in its entirely to read as follows:
"Early Liquidation Event" means a Dissolution
Event that occurs on or before three years after
the Second Closing (as defined in the Subordinated
Note Agreement) or the acceleration of the Loans
(as defined in the Subordinated Notes) or exercise
of other remedies by the Senior Lenders (as
defined in the Subordinated Notes) under the
Superior Loan Documents (as defined in the
Subordinated Notes)."
(c) Definition of Make Whole Payment. The definition of "Make Whole
Payment" in Section 1.1 of the LLC Agreement is hereby amended by replacing
the word "150%" with "140%".
Exhibit 2 - Page 2
2. Section 5.4(a)(iii). Section 5.4(a)(iii) of the LLC Agreement is hereby
amended and restated in its entirety to read as follows:
"(iii) Then, an amount up to 10 percent of the Net
Cash Flow shall be distributed (A) 0% to the Class A
Members in proportion to their respective Class A Unit
Sharing Ratios, and (B) 100 percent to the Class B
Members in proportion to their respective Class B Unit
Sharing Ratios; "
3. Section 5.4(b)(iv). Section 5.4(b)(iv) of the LLC Agreement is hereby
amended and restated in its entirety to read as follows:
"(iv)thereafter, Net Cash Flow will be distributed
(A) 35 percent to the Class A Members in
proportion to their Class A Unit Sharing Ratios,
and (B) 65 percent to the Class B Members in
proportion to their respective Class B Unit
Sharing Ratios."
4. Ratification. Except as amended by this Amendment, all of the terms and
provisions of the LLC Agreement (including, without limitation, all exhibits
thereto) are hereby ratified and affirmed in all respects and are incorporated
herein by reference.
5. Counterparts. This Amendment may be executed in one or more counterparts
(including faxed or electronic counterparts), all of which shall be considered
one and the same agreement, and shall become effective, as described above, when
one or more counterparts hereof have been signed and delivered by the minimum
number of Members necessary to amend the LLC Agreement.
Exhibit 2 - Page 3
IN WITNESS WHEREOF, the undersigned Members have executed this Amendment on
the respective dates set forth below their signatures, but effective for all
purposes as of the Effective Date.
CLASS A UNIT
CLASS A MEMBERS: CLASS A UNITS: SHARING RATIOS:
--------------- ------------- --------------
CHEROKEE ENERGY PARTNERS LLC 10,000 Class A Units 100%
By:
-------------------------
Name:
-----------------------
Title:
----------------------
Execution Date:
-------------
CLASS B UNIT
CLASS B MEMBERS: CLASS B UNITS: SHARING RATIOS:
--------------- ------------- --------------
QUEST ENERGY SERVICE, INC. 196 Class B Units 1.96%
By:
-----------------------
Name:
---------------------
Title:
--------------------
Execution Date:
-----------
CLASS B UNIT
CLASS B UNITS: SHARING RATIOS:
------------- --------------
STP CHEROKEE, INC. 3,276 Class B Units 37.26%
By:
-----------------------
Name:
---------------------
Title:
--------------------
Execution Date:
-----------
PONDEROSA GAS PIPELINE COMPANY, INC. 335 Class B 3.35%
By:
-----------------------
Name:
---------------------
Title:
--------------------
Execution Date:
-----------
Exhibit 2 - Page 4
QUEST OIL & GAS CORPORATION 4,790 Class B Units 47.9%
By:
-----------------------
Name:
---------------------
Title:
--------------------
Execution Date:
-----------
PRODUCERS SERVICE, INCORPORATED 71 Class B Units 0.71%
By:
-----------------------
Name:
---------------------
Title:
--------------------
Execution Date:
-----------
X-X GAS GATHERING, L.L.C. 882 Class B Units 8.82%
By:
-----------------------
Name:
---------------------
Title:
--------------------
Execution Date:
-----------
Exhibit 2 - Page 5
EXHIBIT 3
---------
FORM OF FOURTH CLOSING LLC AMENDMENT
AMENDMENT
TO
AMENDED AND RESTATED
LIMITED LIABILITY COMPANY AGREEMENT
OF
QUEST CHEROKEE, LLC
This Amendment to the Amended and Restated Limited Liability Company
Agreement of Quest Cherokee, LLC (this "Amendment"), dated as of _________ __,
200__ (the "Effective Date"), is by and among the Members of Quest Cherokee,
LLC, a Delaware limited liability company (the "Company").
WHEREAS, reference is herein made to that certain Amended and Restated
Limited Liability Company Agreement of Quest Cherokee, LLC, dated as of December
22, 2003 (as amended prior to the Effective Date, the "LLC Agreement"), by and
among the Members of the Company; and
WHEREAS, all capitalized terms used but not otherwise defined herein shall
have the meanings attributed to them in the LLC Agreement; and
WHEREAS, the Members wish to amend the LLC Agreement as set forth in this
Amendment; and
WHEREAS, pursuant to Section 10.9 of the LLC Agreement, the LLC Agreement
may be amended only by a written instrument approved by a Member Vote; and
pursuant to Section 1.1 of the LLC Agreement, the term, "Member Vote" is defined
to mean "the approval by those Class A Members who, in the aggregate, have a
Class A Unit Sharing Ratio in excess of 50%, together with the approval of those
Class B Members who, in the aggregate, have a Class B Unit Sharing Ratio in
excess of 50%"; and
WHEREAS, as of the Effective Date: (i) Cherokee Energy Partners LLC is the
sole Class A Member of the Company (and owns and holds 10,000 Class A Units);
and (ii) the following constitute all of the Class B Members of the Company: (A)
Quest Energy Service, Inc. (which owns and holds 196 Class B Units); (B) STP
Cherokee, Inc. (which owns and holds 3,726 Class B Units); (C) Ponderosa Gas
Pipeline Company, Inc. (which owns and holds 335 Class B Units); (D) Quest Oil &
Gas, Corporation (which owns and holds 4,790 Class B Units); (E) Producers
Service, Incorporated (which owns and holds 71 Class B Units), and (F) X-X Gas
Gathering, L.L.C. (which owns and holds 882 Class B Units); and
WHEREAS, this Amendment shall be effective to amend the LLC Agreement, and
shall be binding on all of the Members, upon the execution and delivery hereof
by Cherokee Energy
Exhibit 3 - Page 1
Partners LLC (the sole Class A Member), together with those Class B Members who,
in the aggregate, have a Class B Unit Sharing Ratio in excess of 50%.
NOW, THEREFORE, in accordance with the terms of the LLC Agreement and for
good and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the Members hereby agree as follows:
1. Section 1.1 (Definition of Subordinated Note). The definition of
"Subordinated Note" in Section 1.1 of the LLC Agreement is hereby amended by
replacing the word "150%" with "140%".
"Subordinated Note" (whether one or more) means the 20
percent notes issued by the Company pursuant to the
terms of the Subordinated Note Agreement.
2. Section 5.4(a)(iii). Section 5.4(a)(iii) of the LLC Agreement is hereby
amended and restated in its entirety to read as follows:
"(iii) Then, an amount up to 5 percent of the Net
Cash Flow shall be distributed (A) 0% to the Class A
Members in proportion to their respective Class A Unit
Sharing Ratios, and (B) 100 percent to the Class B
Members in proportion to their respective Class B Unit
Sharing Ratios; "
3. Section 5.4(b)(iv). Section 5.4(b)(iv) of the LLC Agreement is hereby
amended and restated in its entirety to read as follows:
"(iv)thereafter, Net Cash Flow will be distributed (A)
40 percent to the Class A Members in proportion to
their Class A Unit Sharing Ratios, and (B) 60 percent
to the Class B Members in proportion to their
respective Class B Unit Sharing Ratios."
4. Ratification. Except as amended by this Amendment, all of the terms and
provisions of the LLC Agreement (including, without limitation, all exhibits
thereto) are hereby ratified and affirmed in all respects and are incorporated
herein by reference.
5. Counterparts. This Amendment may be executed in one or more counterparts
(including faxed or electronic counterparts), all of which shall be considered
one and the same agreement, and shall become effective, as described above, when
one or more counterparts hereof have been signed and delivered by the minimum
number of Members necessary to amend the LLC Agreement.
Exhibit 3 - Page 2
IN WITNESS WHEREOF, the undersigned Members have executed this Amendment on
the respective dates set forth below their signatures, but effective for all
purposes as of the Effective Date.
CLASS A UNIT
CLASS A MEMBERS: CLASS A UNITS: SHARING RATIOS:
--------------- ------------- --------------
CHEROKEE ENERGY PARTNERS LLC 10,000 Class A Units 100%
By:
-----------------------
Name:
---------------------
Title:
--------------------
Execution Date:
-----------
CLASS B UNIT
CLASS B MEMBERS: CLASS B UNITS: SHARING RATIOS:
--------------- ------------- --------------
QUEST ENERGY SERVICE, INC. 196 Class B Units 1.96%
By:
-----------------------
Name:
---------------------
Title:
--------------------
Execution Date:
-----------
CLASS B UNIT
CLASS B UNITS: SHARING RATIOS:
------------- --------------
STP CHEROKEE, INC. 3,276 Class B Units 37.26%
By:
-----------------------
Name:
---------------------
Title:
--------------------
Execution Date:
-----------
PONDEROSA GAS PIPELINE COMPANY, INC. 335 Class B Units 3.35%
By:
-----------------------
Name:
---------------------
Title:
--------------------
Execution Date:
-----------
Exhibit 3 - Page 3
QUEST OIL & GAS CORPORATION 4,790 Class B Units 47.9%
By:
-----------------------
Name:
---------------------
Title:
--------------------
Execution Date:
-----------
PRODUCERS SERVICE, INCORPORATED 71 Class B Units 0.71%
By:
-----------------------
Name:
---------------------
Title:
--------------------
Execution Date:
-----------
X-X GAS GATHERING, L.L.C. 882 Class B Units 8.82%
By:
-----------------------
Name:
---------------------
Title:
--------------------
Execution Date:
-----------
Exhibit 3 - Page 4
