AGREEMENT FOR PURCHASE AND SALE OF UNITS
by and between
CHEROKEE ENERGY PARTNERS LLC
and
QUEST ENERGY SERVICE, INC.
STP CHEROKEE, INC.
PONDEROSA GAS PIPELINE COMPANY, INC.
QUEST OIL & GAS CORPORATION
PRODUCERS SERVICE, INCORPORATED
X-X GAS GATHERING, L.L.C.
Dated as of November 7, 2005
TABLE OF CONTENTS
AGREEMENT FOR PURCHASE AND SALE OF NOTES AND UNITS
Page
ARTICLE I. THE TRANSACTION....................................................5
1.1. Sale and Purchase of the Class A Units............................5
1.2. Purchase Price....................................................5
1.3. Closing...........................................................6
1.4. Payment of Notes..................................................6
ARTICLE II. REPRESENTATIONS AND WARRANTIES....................................7
2.1. Representations and Warranties of Seller..........................7
2.2. Representations and Warranties of Buyers.........................10
ARTICLE III. ADDITIONAL AGREEMENTS...........................................12
3.1. Conduct of Business Pending the Closing..........................12
3.2. Other Actions; Notification......................................12
3.3. Publicity........................................................13
3.4. Disclaimer of Warranties.........................................13
ARTICLE IV. CONDITIONS.......................................................14
4.1. Conditions to Buyer's Obligations................................14
4.2. Conditions to Seller's Obligations...............................15
ARTICLE V. TERMINATION.......................................................16
5.1. Termination......................................................16
5.2. Effect of Termination............................................16
ARTICLE VI. INDEMNIFICATION AND WAIVER.......................................17
6.1. Seller Indemnity.................................................17
6.2. Buyer Indemnity..................................................17
6.3. Waiver...........................................................17
6.4. Survival.........................................................17
ARTICLE VII. MISCELLANEOUS AND GENERAL.......................................17
7.1. Modification or Amendment........................................17
7.2. Waiver of Conditions.............................................18
7.3. Counterparts.....................................................18
7.4. Governing Law and Venue..........................................18
7.5. Notices..........................................................18
7.6. Entire Agreement; No Other Representations.......................19
7.7. Third-Party Beneficiaries; Joint and Several Obligations.........19
7.8. Severability.....................................................19
7.9. Interpretation...................................................19
7.10. Assignment.......................................................19
7.11. Consent..........................................................19
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INDEX TO DEFINED TERMS
Defined Term Section
------------ -------
Assignments 1.3(b)
Buyers Preamble
Claims 6.1
Class A Units Recitals
Closing 1.3
Closing Agreement 1.3(b)
Closing Date 1.3
Company Recitals
Credit Facilities 4.1(d)
Governmental Entity 1.1
Law 1.1
Liens 1.1
LLC Agreement 1.1
Note Payoff 1.4
Note Payoff Amount 1.4
Notes Recitals
Offering Recitals
Organizational Documents 2.1(a)
Person 1.1
PGPL Preamble
PSI Preamble
Purchase Price 1.2
QES Preamble
QOG Preamble
QRC Recitals
Seller Preamble
Seller Material Adverse Effect 2.1(a)
STPC Preamble
Transaction Recitals
EXHIBIT LIST
Exhibit 1.3(b)-1 Assignment of Certificates
Exhibit 1.3(b)-2 Closing Agreement
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AGREEMENT FOR PURCHASE AND SALE OF UNITS
This Agreement for Purchase and Sale of Units (the "Agreement") is made and
entered into as of the 7th day of November, 2005, by and between CHEROKEE ENERGY
PARTNERS LLC, a Delaware limited liability company (the "Seller"), on the one
hand, and Quest Energy Service, Inc., a Kansas corporation ("QES"), STP
Cherokee, Inc., an Oklahoma corporation ("STPC"), Ponderosa Gas Pipeline
Company, Inc., a Kansas corporation ("PGPL"), Quest Oil & Gas Corporation, a
Kansas corporation ("QOG"), Producers Service, Incorporated, a Kansas
corporation ("PSI"), and X-X Gas Gathering, L.L.C., a Kansas limited liability
company ("JW" and, together with QES, STPC, PGPL, QOG and PSI collectively the
"Buyers"; each a "Buyer") on the other hand.
W I T N E S S E T H:
WHEREAS, Seller desires to sell, and Buyers desire to purchase, all of the
Class A Units of Membership Interest of Quest Cherokee, LLC (the "Company")
owned by Seller (the "Class A Units"), on the terms and subject to the
conditions set forth herein (such transaction for the purchase of the Class A
Units is referred to as the "Transaction");
WHEREAS, Seller is the holder of the following debt obligations that have
been issued by the Company: (1) a Junior Subordinated Promissory Note issued by
the Company dated December 22, 2003 in the original principal amount of
$51,000,000.00, (2) a Junior Subordinated Promissory Note issued by the Company
dated February 11, 2005 in the original principal amount of $5,000,000.00, (3) a
Junior Subordinated Promissory Note issued by the Company dated February 22,
2005 in the original principal amount of $7,000,000.00, and (4) a 15% Promissory
Note issued by the Company dated August 5, 2005 in the original principal amount
of $3,000,000.00 (the foregoing are collectively referred to as the "Notes").
The parties desire to provide for the payment and retirement by the Company of
the Notes immediately following the closing of the Transaction;
WHEREAS, following the execution of this Agreement, Quest Resource
Corporation ("QRC"), the parent company of the Buyers, plans to initiate an
offering of its equity securities (the "Offering"), the proceeds of which will
be used, in part, to provide capital to the Buyers to allow them to (a) pay the
Purchase Price and complete the Transaction and (b) fund the Company so it may
pay and satisfy the Notes as herein provided, in each case if the Offering is
successfully completed; and
WHEREAS, the parties desire to make certain representations, warranties,
covenants and agreements in connection with the Transaction and to prescribe
certain conditions to the completion of the Transaction;
NOW, THEREFORE, in consideration of the premises, including the
representations, warranties, covenants and agreements contained herein, and for
other good and valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, intending to be legally bound, the parties hereto agree as
follows:
ARTICLE I.
THE TRANSACTION
1.1. Sale and Purchase of the Class A Units. Subject to the terms and
conditions set forth in this Agreement, Seller shall sell, assign, transfer,
convey and deliver to Buyers at the Closing free and clear of all Liens except
for those conditions or restrictions on transferability imposed by Law or as set
forth in the LLC Agreement, and Buyers shall purchase at the Closing, all right,
title and interest in and to the Class A Units. Such purchase and sale shall be
accomplished by the Seller selling, assigning, transferring, conveying and
delivering to each respective Buyer, and each Buyer purchasing, at the Closing
the following number of Class A Units:
Number of
Buyer Class A Units
----- -------------
QES 000
XXXX 3,726
PGPL 335
QOG 4,790
PSI 71
JW 882
------
Total Class A 10,000
Units
Each Buyer shall be responsible for payment of its proportionate share of the
Purchase Price, i.e., an amount that bears the same ratio to the Purchase Price
that the number of Class A Units to be purchased by such Buyer (as shown above)
bears to the total number of Class A Units. "Liens" means liens, security
interests, pledges, options, rights of first refusal, easements, mortgages,
charges, indentures, deeds of trust, rights of way, encroachments, licenses,
leases, security agreements, or any other encumbrances, and other restrictions
and limitations of a similar nature, on the use of real, personal or mixed
property. "Law" shall mean any applicable United States or foreign, federal,
state or local statute, ordinance, rule, regulation, judgment, order,
injunction, decree, agency requirement, license or permit of any Governmental
Entity. "LLC Agreement" shall mean the Amended and Restated Limited Liability
Company of Quest Cherokee, LLC, dated December 22, 2003, as amended, including
that certain Amendment dated as of February 11, 2005. "Governmental Entity"
shall mean any United States or foreign federal, state or local court, tribunal,
judicial, governmental or regulatory authority, agency, commission, body or
other governmental entity. "Person" shall mean any individual, corporation
(including not-for-profit corporations), general or limited partnership, limited
liability company, joint venture, estate, trust, association, organization,
Governmental Entity or other entity of any kind or nature.
1.2. Purchase Price. The aggregate purchase price to be paid by Buyers to
Seller for the purchase of the Class A Units shall be Twenty-six Million
Eighty-Eight Thousand Four Hundred Twenty-Six Dollars ($26,088,426.00) (the
"Purchase Price"). The Purchase Price is payable to Seller by Buyers on the
Closing Date by wire transfer of immediately available funds to an account to be
designated in writing by Seller prior to the Closing Date.
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1.3. Closing.
-------
(a) Subject to each party's right to terminate this Agreement pursuant
to Article V, the purchase and sale referred to in Section 1.1 (the
"Closing") will take place at the offices of Xxxxxxx Xxxxxxxx Xxxxxx LLP,
0000 Xxxxxx Xxxxxx, Xxxxx 0000, Xxxxxx Xxxx, Xxxxxxxx 00000, or such other
place as the parties may agree, on (i) the date that the conditions set
forth in Section 4.1 and Section 4.2 are satisfied or waived, or (ii) such
later date as the parties hereto may agree in writing. Such date is
referred to as the "Closing Date." The Closing shall be deemed effective
for all purposes hereunder as of 12:01 a.m. on the Closing Date (and the
parties acknowledge that pursuant to Section 1.6 of Exhibit E to the LLC
Agreement, the transfer shall be deemed effective for all purposes of the
LLC Agreement as of November 1, 2005).
(b) At the Closing, Seller shall sell, assign, transfer, convey and
deliver to each respective Buyer, free and clear of all Liens except for
those conditions and restrictions on transferability imposed by Law or as
set forth in the LLC Agreement, all right, title and interest in and to
that number of Class A Units indicated for such Buyer in Section 1.1. In
connection therewith, Seller shall deliver to Buyers the certificates
representing all of the Class A Units and shall duly execute and deliver to
Buyers (as requested) one or more assignments in the form attached hereto
as Exhibit 1.3(b)-1 (collectively, the "Assignments"), in order to transfer
to each Buyer the number of Class A Units indicated in Section 1.1. At the
Closing, Seller shall also deliver to Buyers letters of resignation signed
by each of the Managers designated by Seller to serve on the Company's
Board of Managers (as provided in Section 6.2(b) of the LLC Agreement.
Seller shall duly execute and deliver all other certificates, consents and
other documents expressly required hereunder to be delivered by Seller at
the Closing, as well as any other bills of sale, assignments, certificates,
stock powers, consents and other documents of transfer reasonably
acceptable in form and substance to Seller and Buyers that are necessary or
appropriate in connection with the sale, assignment, transfer, conveyance
and delivery to Buyers of the Class A Units and effectuation of the
Transaction. After the Closing and contemporaneously with the Note Payoff,
Buyers and Seller shall each execute and deliver to the other the Closing
Agreement in the form attached hereto as Exhibit 1.3(b)-2 (the "Closing
Agreement"), and the Buyers shall cause QRC to execute and deliver the
Closing Agreement.
(c) At the Closing, Buyers shall make the payment of the Purchase
Price to Seller by wire transfer as required pursuant to Section 1.2.
Buyers will also duly execute and deliver all other certificates, consents
and other documents expressly required to be delivered by Buyers at the
Closing.
1.4. Payment of Notes. On the Closing Date (and immediately following the
Closing), Buyers will cause and require that the Company pay and satisfy the
Notes by the payment of Eighty-three Million Nine Hundred Eleven Thousand Five
Hundred Seventy-four Dollars ($83,911,574.00) (the "Note Payoff Amount") for
such purpose (such transaction being the "Note Payoff"). Seller agrees that it
will accept the Note Payoff Amount as full payment, satisfaction and retirement
of the Notes including any right or claim of Seller with respect to principal,
interest, deferred and unpaid interest, "PIK Notes" (as such term is used in the
Notes)
3
or any right to receive PIK Notes, prepayment penalties, make-whole amounts or
other amounts due or accruing under or in connection with the Notes. Subject to
receipt of the Note Payoff Amount, Seller will deliver to the Company at Closing
the original of each Note, duly endorsed by Seller as having been "PAID IN
FULL." The parties acknowledge that the Note Payoff has been a mutually
negotiated transaction and has not resulted from the exercise by the Company of
any prepayment or other right that would cause or result in any prepayment
penalty, make-whole amount or other similar obligation to arise, accrue or
become payable. Notwithstanding anything to the contrary, the consummation of
the Note Payoff immediately following the Closing is a condition subsequent to
the effectiveness of the Transaction and the Assignments, the failure of such
condition rendering the Transaction and the Assignments null and void, and of no
force or effect.
ARTICLE II.
REPRESENTATIONS AND WARRANTIES
2.1. Representations and Warranties of Seller. Seller hereby represents and
warrants to Buyer that:
(a) Organization, Good Standing and Qualification. Seller is a limited
liability company duly organized, validly existing and in good standing
under the Laws of the State of Delaware. Seller has all requisite limited
liability company power and authority to own and operate its material
properties and assets and to carry on its business as currently conducted
in all material respects and is qualified to do business and is in good
standing as a limited liability company in each jurisdiction where the
ownership or operation of its properties and assets or conduct of its
business requires such qualification, except where the failure to be so
qualified or be in good standing would not be reasonably likely, either
individually or in the aggregate, to have a Seller Material Adverse Effect
or prevent or materially impair or delay the ability of Seller to
consummate the transactions contemplated by this Agreement. Seller has
heretofore made available to Buyer complete and correct copies of Seller's
articles of organization and operating agreement (or comparable governing
instruments). The certificate of organization and operating agreements or
comparable governing instruments (the "Organizational Documents") of Seller
so made available are in full force and effect.
As used in this Agreement the term "Seller Material Adverse Effect" means a
material adverse effect on the condition (financial or otherwise),
business, assets, liabilities or results of operations of Seller, taken as
a whole.
(b) Company Authority. Seller has all requisite limited liability
company power and authority and has taken all action necessary in order to
execute, deliver and perform its obligations under this Agreement and to
consummate, on the terms and subject to the conditions of this Agreement,
the transactions contemplated hereby including the execution, delivery and
performance of the Closing Agreement and the Assignments. This Agreement
has been duly authorized, executed and delivered by Seller, and no other
limited liability company proceedings on the part of Seller are necessary
to authorize or approve this Agreement or to consummate the transactions
contemplated hereby including the execution, delivery and performance of
the Closing
4
Agreement and the Assignments. Assuming due authorization, execution and
delivery by Buyer, this Agreement is a valid and legally binding agreement
of Seller enforceable against Seller in accordance with its terms, except
as the same may be limited by bankruptcy, insolvency, reorganization or
other similar Laws relating to or affecting the rights of creditors
generally, or by general equitable principles.
(c) No Conflicts. Neither the execution, delivery and performance of
this Agreement and the consummation by Seller of the transactions
contemplated hereby nor compliance by Seller with any of the provisions
hereof will constitute or result in (A) a breach, conflict or violation of,
or a default under, the Organizational Documents of Seller, or (B) a
breach, conflict or violation of, a default under, the acceleration of any
obligations, the loss of any right or benefit, or the creation of a Lien on
any assets of Seller (with or without notice, lapse of time or both)
pursuant to any agreement, lease, contract, note, mortgage, indenture,
arrangement or other obligation binding upon Seller or any Law or
governmental or non-governmental permit or license to which Seller is
subject or by which any of Seller's assets may be bound, or (C) any change
in the rights or obligations of any party under contracts binding on
Seller, except, in the case of clause (B) or (C) above, for such breaches,
conflicts, violations, defaults, accelerations, creations or changes that
would not be reasonably likely, either individually or in the aggregate, to
have a Seller Material Adverse Effect or prevent or materially impair or
delay the ability of Seller to consummate the transactions contemplated by
this Agreement.
(d) Consents and Approvals. Neither the execution and delivery of this
Agreement by Seller nor the consummation of the transactions contemplated
by this Agreement will result in a violation of Law by Seller. The
execution and delivery of this Agreement by Seller and the consummation by
Seller of the transactions contemplated by this Agreement will not require
any material action or consent or approval of, or review by, or
registration or filing by Seller with any Person.
(e) Title. The Class A Units owned by Seller consist of 10,000 Class A
Units of Membership Interest in the Company, constituting all of the Class
A Units issued by the Company. Seller owns, both beneficially and of
record, the Notes and the Class A Units, and will sell, assign, transfer,
convey and deliver the Class A Units to Buyers at the Closing, free and
clear of all Liens except for those conditions and restrictions on
transferability imposed by Law or as set forth in the LLC Agreement. The
Notes are and will be at the time of Closing held by Seller free and clear
of all Liens.
(f) No Unauthorized Action. Neither Seller nor its agents or
representatives (including the Managers designated by Seller to the Board
of the Company pursuant to the terms of the LLC Agreement) have taken any
action which creates or purports to create any binding or legally
enforceable commitment or obligation by or on behalf of the Company except
for those matters that have been duly authorized and approved by the
Company's Board of Managers in accordance with the terms of the LLC
Agreement.
(g) Brokers. There are, and after Closing there will be, no Claims (or
any basis for any Claim) for brokerage commissions, finder's fees or like
payments in
5
connection with this Agreement or the transactions contemplated hereby
resulting from any action taken by Seller or anyone else on Seller's
behalf.
2.2. Representations and Warranties of Buyers. Buyers jointly and severally
represent and warrant to Seller that:
(a) Organization, Good Standing and Qualification. Each Buyer is a
corporation or limited liability company duly organized, validly existing
and in good standing under the Laws of its State of organization. Each
Buyer has all requisite corporate or limited liability company power and
authority to own and operate its material properties and assets and to
carry on its business as currently conducted in all material respects and
is qualified to do business and is in good standing as a foreign
corporation or limited liability company in each jurisdiction where the
ownership or operation of its properties and assets or conduct of its
business requires such qualification, except where the failure to be so
qualified as a foreign corporation or limited liability company or be in
good standing would not be reasonably likely to prevent or materially
impair or delay the consummation of the transactions contemplated by this
Agreement.
(b) Authority. Each Buyer has all requisite corporate or limited
liability company power and authority and has taken all action necessary in
order to execute, deliver and perform its obligations under this Agreement
and to consummate, on the terms and subject to the conditions of this
Agreement, the transactions contemplated hereby including the execution,
delivery and performance of the Closing Agreement and the Assignments. This
Agreement has been duly authorized, executed and delivered by each Buyer,
and no other corporate or limited liability company proceedings on the part
of any Buyer are necessary to authorize or approve this Agreement or to
consummate the transactions contemplated hereby including the execution,
delivery and performance of the Closing Agreement and the Assignments.
Assuming due authorization, execution and delivery by Seller, this
Agreement is a valid and legally binding agreement of each Buyer,
enforceable against each Buyer in accordance with its terms, except as the
same may be limited by bankruptcy, insolvency, reorganization or other
similar Laws relating to or affecting the right of creditors generally, or
by general equitable principles.
(c) No Conflicts. Assuming that all requisite consents are hereafter
received under the Credit Facilities (as contemplated in Section 4.1(d)),
but in any event if Closing occurs, neither the execution, delivery and
performance of this Agreement by Buyers and the consummation by Buyers and
the Company of the transactions contemplated hereby nor compliance by
Buyers with any of the provisions hereof will constitute or result in (A) a
breach or violation of, or a default under the certificate of
incorporation, bylaws or comparable governing instruments of any Buyer or
the Company, (B) a breach or violation of, or a default under, the
acceleration of any obligations, the loss of any right or benefit or the
creation of a Lien on any of the assets of any Buyer or the Company (with
or without notice, lapse of time or both) pursuant to any agreement, lease,
contract, note, mortgage, indenture, arrangement or other obligation
binding upon any Buyer or the Company or any Law or governmental or
non-governmental permit or license to which any Buyer or the Company is
subject or by which any of the Buyers' or the Company's
6
assets may be bound, or (C) any change in the rights or obligations of any
party under contracts binding on any Buyer or the Company, except, in the
case of clause (B) or (C) above, for such breaches, violations, defaults
accelerations, creations or changes that would not, individually or in the
aggregate, be reasonably likely to prevent or materially impair or delay
the ability of any Buyer to consummate the transactions contemplated
hereby.
(d) Consents and Approvals. Neither the execution and delivery of this
Agreement by any Buyer nor the consummation of the transactions
contemplated hereby will result in a violation of Law by any Buyer or the
Company. The execution and delivery of this Agreement by Buyers and the
consummation of the transactions contemplated hereby will not require any
material action or consent or approval of, or review by, or registration or
filing by any Buyer or the Company with any Person, except for those
consents contemplated in Section 4.1(d).
(e) Brokers. There are, and after Closing there will be, no Claims (or
any basis for any Claims) for brokerage commissions, finder's fees or like
payments in connection with this Agreement or the transactions contemplated
hereby resulting from any action taken by a Buyer or anyone else on any
Buyer's behalf.
(f) Financial Resources. Upon satisfaction of the condition set forth
in Section 4.1(c), Buyers will have sufficient cash available at the
Closing to pay the Purchase Price, and the Company will have sufficient
cash available at Closing to pay the Note Payoff Amount, all as herein
provided.
(g) Acquisition as Investment. Each Buyer is an "accredited investor"
as defined in Rule 501(a) under the Securities Act of 1933, as amended. The
Class A Units to be acquired by Buyers under the terms of this Agreement
are and will be acquired for Buyers' own account as an investment, and
without the intent to sell, transfer or otherwise distribute the Class A
Units to any other Person.
ARTICLE III.
ADDITIONAL AGREEMENTS
3.1. Conduct of Business Pending the Closing. Seller covenants and agrees
that, from the date hereof and continuing until the Closing Date, except as
expressly contemplated or permitted by this Agreement, Seller shall conduct its
business only in the ordinary and usual course consistent with past practice.
Without limiting the generality of the foregoing, Seller will not, directly or
indirectly, sell, transfer, lease, place or suffer a Lien upon or otherwise
dispose of any of the Notes or the Class A Units (except for any Lien to be
released at or prior to the Closing, or conditions or restrictions on
transferability imposed by Law or as set forth in the LLC Agreement).
3.2. Other Actions; Notification.
---------------------------
(a) Seller and Buyers shall cooperate with each other and use their
respective reasonable efforts to take or cause to be taken all actions, and
do or cause to be done all things, necessary, proper or advisable on its
part under this Agreement and applicable
7
Law to consummate and make effective the Transaction and the Note Payoff as
soon as practicable.
(b) Each party hereby agrees to perform, and to cause its affiliates
to perform, any further acts and to execute and deliver any documents which
may be reasonably necessary to carry out the provisions of this Agreement
and to effect the transactions contemplated hereby.
3.3. Publicity. Seller and Buyers each shall consult with the other
prior to issuing any press releases or otherwise making public
announcements with respect to the transactions contemplated hereby and
prior to making any filings with any third party and/or any Governmental
Entity with respect thereto, except as may be required by Law or by
obligations pursuant to any listing agreement with or rules of any national
securities exchange or national market system on which such party's
securities are listed or traded.
3.4. Disclaimer of Warranties. NOTWITHSTANDING ANYTHING CONTAINED TO
THE CONTRARY IN ANY OTHER PROVISION OF THIS AGREEMENT, IT IS THE EXPLICIT
INTENT OF EACH PARTY HERETO THAT SELLER IS NOT MAKING ANY REPRESENTATION OR
WARRANTY WHATSOEVER, EXPRESS, IMPLIED, STATUTORY OR OTHERWISE, BEYOND THOSE
REPRESENTATIONS AND WARRANTIES EXPRESSLY GIVEN IN THIS AGREEMENT, AND
EXCEPT AS PROVIDED IN SECTION 2.1(e), IT IS UNDERSTOOD THAT BUYERS TAKE THE
CLASS A UNITS AND THE COMPANY (INCLUDING ITS ASSETS AND PROPERTIES) "AS IS
AND WHERE IS, AND WITH ALL FAULTS." WITHOUT LIMITING THE GENERALITY OF THE
IMMEDIATELY PRECEDING SENTENCE, SELLER HEREBY EXPRESSLY DISCLAIMS AND
NEGATES ANY REPRESENTATION OR WARRANTY, EXPRESS OR IMPLIED, AT COMMON LAW,
BY STATUTE OR OTHERWISE, RELATING TO (A) THE COMPANY'S TITLE TO, AND THE
CONDITION OF, THE ASSETS AND PROPERTIES OF THE COMPANY (INCLUDING ANY
IMPLIED OR EXPRESS WARRANTY OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR
PURPOSE, OR OF CONFORMITY TO MODELS OR SAMPLES OF MATERIALS; AND (B) THE
ACCURACY, COMPLETENESS OR MATERIALITY OF ANY (i) RESERVE ESTIMATES AND
PROJECTIONS, ENGINEERING AND TECHNICAL EVALUATIONS AND ASSESSMENTS,
PRODUCTION RATES, RECOMPLETION OPPORTUNITIES, DECLINE RATES, GEOLOGICAL OR
GEOPHYSICAL DATA OR INTERPRETATIONS, (ii) THE QUALITY, QUANTITY,
RECOVERABILITY OR COST OF RECOVERY OF ANY HYDROCARBON OR MINERAL RESERVES,
(iii) PRODUCT PRICING ASSUMPTIONS, OR (iv) THE ABILITY TO SELL OR MARKET
ANY HYDROCARBONS OR MINERALS PRODUCED FROM OR ATTRIBUTABLE TO THE ASSETS
AND PROPERTIES OF THE COMPANY.
ARTICLE IV.
CONDITIONS
4.1. Conditions to Buyer's Obligations. The obligation of Buyers to
purchase the Class A Units on the Closing Date and to take the other actions
required to be taken by Buyers at
8
the Closing is subject, at Buyers' election, to the satisfaction or waiver, at
or prior to the Closing, of each of the following conditions:
(a) Truth of Representations and Warranties. The representations and
warranties of Seller contained in this Agreement shall have been true and
correct in all material respects as of the date of this Agreement and shall
be true and correct in all material respects on and as of the Closing Date,
with the same effect as though such representations and warranties had been
made on and as of the Closing Date, except that those representations and
warranties that by their terms are qualified by materiality shall be true
and correct in all respects.
(b) Performance of Agreements. All of the agreements, obligations and
covenants of Seller to be performed on or prior to the Closing pursuant to
the terms of this Agreement shall have been duly performed or complied with
in all material respects.
(c) Completion of the Offering. QRC shall have successfully completed
the Offering and received not less than One Hundred Eighty Million Dollars
($180,000,000.00) of proceeds (net of Offering costs) as a result thereof.
(d) Bank Consent. To the extent required pursuant to any one or more
credit agreements, credit facilities or lines-of-credit (collectively, the
"Credit Facilities") maintained by or available to QRC, any Buyer or the
Company, QRC, such Buyer or the Company, as the case may be, shall have
received any requisite approval, consent or waiver in connection with the
completion of the Transaction or the Note Payoff, with the result that all
of the transactions contemplated by this Agreement may be completed without
constituting or resulting in a breach or violation of, or a default under,
the acceleration of any obligations, loss of any right or benefit or the
creation of a lien, pledge, security interest or other encumbrance on the
assets of QRC, any Buyer or the Company (with or without notice, lapse of
time or both) pursuant to any of the Credit Facilities.
(e) Injunction. No Governmental Entity of competent jurisdiction shall
have enacted, issued, promulgated, enforced or entered any statute, Law,
ordinance, rule, regulation, judgment, decree, injunction or other order
that is in effect or taken any other action enjoining, restraining or
otherwise prohibiting the consummation of the Transaction or the Note
Payoff which has the effect of making the completion of the Transaction or
the Note Payoff illegal.
4.2. Conditions to Seller's Obligations. The obligation of Seller to sell
the Class A Units on the Closing Date and to take the other actions required to
be taken by Seller at the Closing is subject, at Seller's election, to the
satisfaction or waiver, at or prior to the Closing, of each of the following
conditions:
(a) Truth of Representations and Warranties. The representations and
warranties of Buyers contained in this Agreement shall have been true and
correct in all material respects as of the date of this Agreement and shall
be true and correct in all material respects on and as of the Closing Date,
with the same effect as though such
9
representations and warranties had been made on and as of the Closing Date,
except that those representations and warranties that by their terms are
qualified by materiality shall be true and correct in all respects.
(b) Performance of Agreements. All of the agreements, obligations and
covenants of Buyers to be performed on or prior to the Closing pursuant to
the terms of this Agreement shall have been duly performed or complied with
in all material respects.
(c) Injunction. No Governmental Entity of competent jurisdiction shall
have enacted, issued, promulgated, enforced or entered any statute, Law,
ordinance, rule, regulation, judgment, decree, injunction or other order
that is in effect or taken any other action enjoining, restraining or
otherwise prohibiting the consummation of the Transaction or the Note
Payoff which has the effect of making the completion of the Transaction or
the Note Payoff illegal.
(d) Unanimity. At the Closing not less than all Buyers shall
consummate the Transaction and acquire their respective Class A Units as
herein provided.
ARTICLE V.
TERMINATION
5.1. Termination. This Agreement may be terminated and the transactions
contemplated hereby may be abandoned:
(a) By mutual consent of Buyers and Seller at any time prior to
Closing; or
(b) By Buyers (but not by less than all Buyers) or Seller if the
Closing has not occurred on or prior to November 14, 2005; provided, that
the right to terminate this Agreement under this Section 5.1(b) is not
available to any party whose failure to fulfill any obligation under this
Agreement or breach of a representation or warranty is the cause of the
failure of the Closing to occur on or before such date.
5.2. Effect of Termination. In the event of the termination of this
Agreement pursuant to Section 5.1(b) by Buyers on the one hand, or Seller, on
the other hand, written notice thereof shall forthwith be given to the other
party specifying the provision hereof pursuant to which such termination is
made, and this Agreement shall be terminated. In the event of a termination of
this Agreement pursuant to Section 5.1, there shall be no liability hereunder on
the part of Buyers or Seller, except that (i) the provisions of Article VII
(excluding Section 7.11; provided, however, that in any event the parties have
waived any objection to or right to exercise or assert any right or remedy that
results from or is triggered by (with or without notice or lapse of time) the
execution of this Agreement) and this Section 5.2 shall survive any termination
of this Agreement, and (ii) nothing in this Section 5.2 shall relieve any party
from any liability for any material breach, prior to termination, of any
covenant contained in this Agreement.
10
ARTICLE VI.
INDEMNIFICATION AND WAIVER
6.1. Seller Indemnity. From and after the Closing, subject to the other
terms and provisions hereof and notwithstanding anything in the Closing
Agreement to the contrary, Seller shall assume, be responsible for and pay on a
current basis, and shall indemnify, defend, reimburse, and hold harmless the
Buyers and their affiliates, and their respective shareholders, members,
partners, officers, directors, agents, servants, employees, successors and
assigns, from and against any and all claims, demands, damages (actual and
punitive), actions, liabilities, costs, expenses (including attorneys' fees and
costs of court) and obligations, past, present and future, whether known or
unknown, or liquidated or contingent ("Claims") caused by, resulting from or
arising in connection with (a) any breach of any representation or warranty of
Seller set forth in this Agreement and (b) any breach, or any failure to perform
or satisfy, any of the covenants, agreements or obligations of Seller set forth
in this Agreement.
6.2. Buyer Indemnity. From and after the Closing, subject to the other
terms and provisions hereof and notwithstanding anything in the Closing
Agreement to the contrary, Buyers, jointly and severally, shall assume, be
responsible for and pay on a current basis, and shall indemnify, defend,
reimburse, and hold harmless the Seller and its affiliates, and their respective
shareholders, members, partners, officers, directors, agents, servants,
employees, successors and assigns, from and against any and all Claims caused
by, resulting from or arising in connection with (a) any breach of any
representation or warranty of any Buyer set forth in this Agreement, (b) any
breach, or any failure to perform or satisfy, any of the covenants, agreements
or obligations of any Buyer set forth in this Agreement, (c) the Offering, and
(d), to the extent attributable to the period from and after the Closing, the
Class A Units or the Company.
6.3. Waiver. NOTWITHSTANDING ANYTHING TO THE CONTRARY IN THIS AGREEMENT, NO
PARTY SHALL BE LIABLE HEREUNDER FOR CONSEQUENTIAL, INCIDENTAL, SPECIAL, INDIRECT
OR PUNITIVE DAMAGES FOR ANY REASON, WHETHER BASED ON STATUTE, CONTRACT, TORT OR
OTHERWISE, AND WHETHER OR NOT ARISING FROM THE OTHER PARTY'S SOLE, JOINT OR
CONCURRENT NEGLIGENCE, STRICT LIABILITY OR OTHER FAULT, EXCEPT TO THE EXTENT AND
SUCH DAMAGES ARE INCLUDED IN ANY THIRD-PARTY ACTION FOR WHICH A PERSON IS
ENTITLED TO INDEMNIFICATION UNDER THIS AGREEMENT.
6.4. Survival. All of the representations, warranties, covenants,
obligations, agreements and indemnities of the parties set forth in this
Agreement shall survive the Closing and the consummation of the transactions
contemplated hereby.
ARTICLE VII.
MISCELLANEOUS AND GENERAL
7.1. Modification or Amendment. At any time, the parties hereto may modify
or amend this Agreement, by written agreement executed and delivered by duly
authorized officers of the respective parties.
11
7.2 Waiver of Conditions. The conditions to each of the parties'
obligations to consummate the transactions contemplated hereby are for the sole
benefit of such party and may be waived by such party, in writing, in whole or
in part.
7.3. Counterparts. This Agreement may be executed in any number of
counterparts, each such counterpart being deemed to be an original instrument,
and all such counterparts shall together constitute the same agreement.
7.4. Governing Law and Venue. This Agreement shall be governed by and
construed in accordance with the Laws of the State of New York, without regard
to the principles of conflicts of Law thereof.
7.5. Notices. Any notice, request, instruction or other document to be
given hereunder by any party to the other shall be in writing and delivered
personally or sent by registered or certified mail, postage prepaid, or by
facsimile (upon receipt of electronic confirmation of successful transmission):
if to Buyers:
c/o Quest Resource Corporation
0000 Xxxxx Xxx Xxxxxx
Xxxxxxxx Xxxx, Xxxxxxxx 00000
Attention:Xxxxx X. Xxxx, CEO
with a copy to (which shall not constitute notice):
Xxxxxxx Xxxxxxxx Xxxxxx LLP
0000 Xxxxxx Xxxxxx, Xxxxx 0000
Xxxxxx Xxxx, Xxxxxxxx 00000
Attention:Xxxxxxx X. Xxxxxxxxxx
if to Seller:
Cherokee Energy Partners LLC
c/o Arclight Capital Partners, LLC
000 Xxxx 00xx Xxxxxx, 00xx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention:Xxxxxxxxxxx X. Xxxxxxx, Managing Director
with a copy to (which shall not constitute notice):
Xxxxxxx Xxxxx LLP
000 Xxxxxx, Xxxxx 0000
Xxxxxxx, Xxxxx 00000
Attention:Xxxx X. Xxxxxxxx
or to such other Persons or addresses as may be designated in writing by the
party to receive such notice as provided above.
12
7.6 Entire Agreement; No Other Representations. This Agreement (including
any annexes, schedules and exhibits hereto) constitutes the entire agreement by
and among the parties hereto and supersede all other prior agreements,
understandings, representations and warranties, both written and oral, among the
parties, with respect to the subject matter hereof.
7.7. Third-Party Beneficiaries; Joint and Several Obligations. This
Agreement is not intended to confer upon any Person other than the parties
hereto any rights or remedies hereunder, except that the Company is a
beneficiary of the agreements and obligations of Seller set forth in Section
1.4. All of the agreements, covenants, obligations, representations and
warranties of the Buyers hereunder shall be the joint and several obligation of
each Buyer.
7.8. Severability. The provisions of this Agreement shall be deemed
severable and the invalidity or unenforceability of any provision shall not
affect the validity or enforceability of the other provisions hereof. Upon any
determination that any term or other provision of this Agreement, or the
application thereof to any Person or any circumstance, is invalid, illegal or
unenforceable, the parties hereto shall negotiate in good faith to modify this
Agreement so as to effect the original intent of the parties as closely as
possible in an acceptable manner to the end that transactions contemplated
hereby are fulfilled to the extent possible.
7.9. Interpretation. The table of contents and headings herein are for
convenience of reference only, do not constitute part of this Agreement and
shall not be deemed to limit or otherwise affect any of the provisions hereof.
Where a reference in this Agreement is made to a Section, such reference shall
be to a Section of this Agreement unless otherwise indicated. Whenever the words
"include," "includes" or "including" are used in this Agreement, they shall be
deemed to be followed by the words "without limitation." Words importing the
singular include the plural and vice versa, and words importing a gender include
any gender. The word "or" is disjunctive but not necessarily exclusive. All
references to agreements or Laws are deemed to refer to such agreements or Laws
as amended or as in effect at the applicable time. The parties hereto each
acknowledge that each party has participated in the drafting of and been
represented by counsel in connection with this Agreement and the transactions
contemplated hereby. Accordingly, any rule of Law or any legal decision that
would require interpretation of any claimed ambiguities in any portions of this
Agreement against the party that drafted it has no application and is expressly
waived.
7.10. Assignment. This Agreement shall not be assignable by operation of
Law or otherwise by any party without the prior written consent of the other
party.
7.11. Consent. By their signatures below, Seller and Buyers each hereby
approve and consent to the Transaction and the Note Payoff and waive any
objection to or right to exercise or assert any right or remedy that results
from or is triggered by (with or without notice or lapse of time) the execution
of this Agreement or the completion of the Transaction or the Note Payoff.
Without limiting the generality of the foregoing, Seller agrees that it shall
not have any rights or remedies as a result of any "Change of Control" (as such
term is defined in the LLC Agreement) occurring as a result of the Transaction,
the Offering or related matters, including any rights pursuant to Section 1.8 of
Exhibit E to the LLC Agreement; and that until the earliest to occur of (i) the
Closing, (ii) termination of this Agreement, or (iii) November 15, 2005, Seller
will not declare a default under or otherwise exercise any rights or remedies of
collection, acceleration or
13
realizing upon any collateral pursuant to the terms of any Note or any security
agreement or pledge agreement in favor of Seller that secures performance by the
other parties of their obligations under the Notes or the LLC Agreement. Also
without limiting the generality of any of the foregoing, the Buyers consent to
the Transaction and waive any transfer restrictions in connection therewith or
any rights of first offer in favor of the Buyers, including the requirements of
Section 1.2(b) and Section 1.5 of Exhibit E to the LLC Agreement. By their
signatures below, the Class B Board Representatives (as such term is defined in
Section 1.2(b) of Exhibit E to the LLC Agreement) hereby consent to and approve
the Transaction.
IN WITNESS WHEREOF, this Agreement has been duly executed, acknowledged and
delivered by the duly authorized representatives of the parties hereto as of the
date first written above.
CHEROKEE ENERGY PARTNERS LLC
By: /s/ Xxxxxx X. Xxxxxx
----------------------------------------
Name(print): Xxxxxx X. Xxxxxx
Title: President
QUEST ENERGY SERVICE, INC.
By: /s/ Xxxxx X. Xxxx
----------------------------------------
Name (print): Xxxxx X. Xxxx
Title: CEO
STP CHEROKEE, INC.
By: /s/ Xxxxx X. Xxxx
----------------------------------------
Name (print): Xxxxx X. Xxxx
Title: CEO
PONDEROSA GAS PIPELINE COMPANY, INC.
By: /s/ Xxxxx X. Xxxx
----------------------------------------
Name (print): Xxxxx X. Xxxx
Title: CEO
QUEST OIL & GAS CORPORATION
By: /s/ Xxxxx X. Xxxx
----------------------------------------
Name (print): Xxxxx X. Xxxx
Title: CEO
14
PRODUCERS SERVICE, INCORPORATED
By: /s/ Xxxxx X. Xxxx
----------------------------------------
Name (print): Xxxxx X. Xxxx
Title: CEO
X-X GAS GATHERING, L.L.C.
By: /s/ Xxxxx X. Xxxx
----------------------------------------
Name (print): Xxxxx X. Xxxx
Title: CEO
15
The undersigned, being all of the Class B Board Representatives, hereby
consent to and approve the Transaction, as required by Section 1.2(b) of Exhibit
E to the LLC Agreement of Quest Cherokee, LLC:
/s/ Xxxxx X. Xxxx
------------------------------------------------
Xxxxx X. Xxxx
/s/ Xxxxx X. Xxxxx
------------------------------------------------
Xxxxx X. Xxxxx
16
EXHIBIT 1.3(b)-1
ASSIGNMENT OF
LIMITED LIABILITY COMPANY INTERESTS IN
QUEST CHEROKEE, LLC
-------------------
Pursuant to Section 1.3(b) of the Agreement for Purchase and Sale of Units,
dated as of October ___, 2005 (the "Purchase Agreement"), among CHEROKEE ENERGY
PARTNERS LLC, a Delaware limited liability company (the "Seller"), and the
assignees named below (each a "Buyer" and collectively the "Buyers"), and
subject to the terms and provisions thereof, including without limitation
Section 1.4, all of which are incorporated herein by such reference, Seller
hereby irrevocably assigns, sells, transfers and conveys to each Buyer named
below, free and clear of all Liens (as defined in the Purchase Agreement) and
without any condition or restriction on transferability except for those Liens,
conditions or restrictions imposed by Law (as defined in the Purchase Agreement)
and as imposed pursuant to the terms of the LLC Agreement (as defined in the
Purchase Agreement), all right, title and interest of Seller as a member of
Quest Cherokee, LLC, a Delaware limited liability company (the "Company") under
applicable Laws, under the Certificate of Formation of the Company filed with
the Delaware Secretary of State and under the LLC Agreement, and otherwise, with
respect to the following number of Class A Units of membership interest
specified for each Buyer as follows:
Number of
Buyer Class A Units
----- -------------
Quest Energy Service, Inc. 000
XXX Cherokee, Inc. 3,726
Ponderosa Gas Pipeline Company, Inc. 335
Quest Oil & Gas Corporation 4,790
Producers Service, Incorporated 71
X-X Gas Gathering, L.L.C. 882
------
Total Class A Units 10,000
Seller's membership interests which are being assigned, sold, transferred
and conveyed are represented by Certificate No. ____ representing 10,000 Class A
Units of the Company. The assignment of each Class A Unit by Seller hereunder
also constitutes an assignment of all right, title and interest of Seller to its
related capital account in the Company and all economic, voting, consensual and
other rights relating thereto, intending Buyers to be substitute members in
place of Seller. Seller hereby authorizes and consents to the transfer of such
member interests on the Company's books. This Assignment is binding upon Seller
and its successors and assigns, and will inure to the benefit of each Buyer and
its successors and assigns.
NOTWITHSTANDING ANYTHING CONTAINED HEREIN OR IN THE PURCHASE AGREEMENT TO
THE CONTRARY, IT IS THE EXPLICIT INTENT OF EACH PARTY HERETO THAT SELLER IS NOT
MAKING ANY REPRESENTATION OR WARRANTY WHATSOEVER, EXPRESS, IMPLIED, STATUTORY OR
OTHERWISE, BEYOND THOSE REPRESENTATIONS AND WARRANTIES EXPRESSLY GIVEN IN THE
PURCHASE AGREEMENT, AND EXCEPT AS PROVIDED IN SECTION 2.1(e) THEREOF, IT IS
UNDERSTOOD THAT BUYERS TAKE THE CLASS A UNITS, THE COMPANY (INCLUDING ITS ASSETS
AND PROPERTIES) AND THE OTHER INTERESTS, IF ANY, HEREIN CONVEYED "AS IS AND
WHERE IS, AND WITH ALL FAULTS."
Dated: , 2005
---------- ---
CHEROKEE ENERGY PARTNERS LLC
By:
----------------------------------------
Name (print):
--------------------------------
Title:
----------------------------------------
2
ACCEPTANCE OF ASSIGNMENT
Buyers hereby accept the foregoing Assignment and, in connection therewith,
hereby agree to be bound by all of the terms and conditions of the Certificate
of Formation and the LLC Agreement of the Company.
Dated: , 2005
---------- ---
QUEST ENERGY SERVICE, INC.
By:
----------------------------------------
Name (print):
--------------------------------
Title:
----------------------------------------
STP CHEROKEE, INC.
By:
----------------------------------------
Name (print):
--------------------------------
Title:
----------------------------------------
PONDEROSA GAS PIPELINE COMPANY, INC.
By:
----------------------------------------
Name (print):
--------------------------------
Title:
----------------------------------------
QUEST OIL & GAS CORPORATION
By:
----------------------------------------
Name (print):
--------------------------------
Title:
----------------------------------------
PRODUCERS SERVICE, INCORPORATED
By:
----------------------------------------
Name (print):
--------------------------------
Title:
----------------------------------------
X-X GAS GATHERING, L.L.C.
By:
----------------------------------------
Name (print):
--------------------------------
Title:
----------------------------------------
3
EXHIBIT 1.3(b)-2
CLOSING AGREEMENT
-----------------
This Closing Agreement is made and entered into on ___________ ___, 2005 by
and among QUEST RESOURCE CORPORATION, a Nevada corporation ("QRC"), CHEROKEE
ENERGY PARTNERS LLC a Delaware limited liability company (the "Seller), QUEST
CHEROKEE, LLC, a Delaware limited liability company (the "Company"), QUEST
ENERGY SERVICE, INC., a Kansas corporation ("QES"), STP CHEROKEE, INC., an
Oklahoma corporation ("STPC"), PONDEROSA GAS PIPELINE COMPANY, INC., a Kansas
corporation ("PGPL"), QUEST OIL & GAS CORPORATION, a Kansas corporation ("QOG"),
PRODUCERS SERVICE, INCORPORATED, a Kansas corporation ("PSI"), and X-X GAS
GATHERING, L.L.C., a Kansas limited liability company ("JW" and, together with
QES, STPC, PGPL, QOG and PSI collectively the "Buyers"; each a "Buyer").
RECITALS
--------
WHEREAS, on this date, the parties have completed the transactions
contemplated in that certain Agreement for Purchase and Sale of Units (the
"Purchase Agreement") dated October ___, 2005, including the purchase by Buyer
of all of the Class A membership interests in the Company owned by Seller (such
purchase, the "Transaction") and the payment and satisfaction of the Notes
previously issued by the Company and held by Seller (such transaction, the "Note
Payoff"); and
WHEREAS, pursuant to the Purchase Agreement, the parties have agreed to
execute this Closing Agreement in order to clarify and adjust certain of their
rights and obligations to one another.
NOW, THEREFORE, for and in consideration of the premises intending to be
contractually bound, the parties hereby agree as follows:
1. Defined Terms. Capitalized terms not otherwise defined in this Closing
Agreement shall have the same meaning as assigned to such terms in the Purchase
Agreement. In addition to the terms elsewhere defined in this Closing Agreement,
the following terms shall have the indicated meanings:
(a) "Guaranty" shall mean the Guaranty dated December 22, 2003 and
executed by QRC in favor of Seller.
(b) "Investment Agreements" shall mean all of the agreements and
understandings which create any right or obligation in connection with
Seller's loan or advance of any money to the Company or Seller's equity
investment in the Company or otherwise in connection with any rights of
Seller as a member of the Company, including any and all such rights and
obligations pursuant to (i) the Certificate of Formation of the Company
filed with the Delaware Secretary of State, (ii) the LLC Agreement, (iii)
the Member Interest Purchase Agreement dated December 22, 2003 between the
Company, Buyers and Seller, (iv) the Guaranty, (v) the Pledge Agreement,
(vi) the Non-
Competition Agreement, (vii) the Note Purchase Agreement dated December 22,
2003 between the Company and Seller, (viii) the Notes, and (ix) the Amended
and Restated Note Purchase Agreement dated February 11, 2005 between the
Company and Seller, as any of the foregoing may have been modified or
amended from time to time; and the term "Investment Agreements" shall
include any and all exhibits, attachments, addenda, certificates, and any
other documents attached to or executed in connection with any of the
foregoing.
(c) "LLC Agreement" shall mean the Amended and Restated Limited
Liability Company Agreement of Quest Cherokee, LLC dated as of December 22,
2003, as amended pursuant to an Amendment dated as of February 11, 2005 and
as otherwise amended pursuant to the terms thereof.
(d) "Non-Competition Agreement" shall mean the Non-Competition
Agreement dated as of December 22, 2003 entered into by and among the
Company, Seller, the Quest Members, and Buyer.
(e) "Pledge Agreement" shall mean the Pledge Agreement entered into as
of December 22, 2003 by and between the Quest Members and Seller.
2. Termination of Pledge Agreement and Guaranty. The respective parties to
each such agreement hereby agree that the Pledge Agreement and the Guaranty are
hereby terminated. As a result of such termination, Seller agrees that its
security interest in the Collateral (as such term is defined in the Pledge
Agreement) is fully and forever terminated. Seller will immediately return to
each of the Buyers the certificates representing the Class B units owned by each
such Buyer, which certificates have been held by Seller pursuant to the terms of
the Pledge Agreement. In addition, Seller will execute and deliver to the
Company for filing, appropriate UCC termination statements, as required to
terminate any filings previously made by or on behalf of Seller in connection
with the Pledge Agreement.
3. Effect of Completion of the Transaction and the Note Payoff. As the
result of the completion of the Transaction and the Note Payoff, Seller has no
continuing right or interest under any of the Investment Agreements or as an
owner, member or creditor of the Company, all such rights having either been
sold and assigned to Buyer as part of the Transaction or extinguished as a
result of the Note Payoff. Seller does not have any continuing obligation
pursuant to the Investment Agreements or as an owner, member or creditor of the
Company, except that Seller agrees that it continues to be bound by and will
comply with the requirements of Section 10.16 (Confidentiality) of the LLC
Agreement for a period of five (5) years after the date hereof (as contemplated
in such section) and that Seller and its Affiliates shall continue to be bound
by and will comply with the requirements of the Non-Competition Agreement for a
period of two (2) years following the date hereof, as contemplated in the
Non-Competition Agreement (the foregoing continuing requirements are referred to
as the "Continuing Confidentiality and Non-Competition Requirements").
4. Release of Seller. QRC, the Company and each of the Buyers fully and
forever releases, acquits and discharges Seller and its affiliates, together
with their shareholders, members, partners, officers, directors, agents,
servants, employees, successors, assigns, and any
2
Person liable on their behalf, from any and all claims, demands, damages (actual
and punitive), actions, liabilities, costs and obligations, past, present and
future, whether known or unknown, or liquidated or contingent, for, upon or by
reason of any matter, cause or thing whatsoever arising from or related to the
Investment Agreements or as a result of Seller being an owner, member or lender
of or to the Company or having any agreement or arrangement with respect
thereto, except for the failure of Seller to comply with its obligations in the
Purchase Agreement, this Closing Agreement or other documents, certificates or
assignments to be executed in connection with the Purchase Agreement and further
except that nothing herein shall be deemed to release, acquit or discharge
Seller or its affiliates from their obligations to comply with the Continuing
Confidentiality and Non-Competition Requirements.
5. Release of QRC, the Company and the Buyers. Seller fully and forever
releases, acquits and discharges QRC, the Company, the Buyers, and their
respective affiliates, together with their shareholders, members, partners,
officers, directors, agents, servants, employees, successors, assigns, and any
Person liable on their behalf, from any and all claims, demands, damages (actual
and punitive), actions, liabilities, costs and obligations, past, present and
future, whether known or unknown, or liquidated or contingent, for, upon or by
reason of any matter, cause or thing whatsoever arising from or related to the
Investment Agreements or as a result of Seller being an owner, member or lender
of or to the Company or having any agreement or arrangement with respect
thereto, except for the failure of QRC, the Company or the Buyers to comply with
their respective obligations in the Purchase Agreement, this Closing Agreement
or other documents, certificates or assignments to be executed in connection
with the Purchase Agreement.
6. General.
-------
(a) Modification or Amendment. At any time, the parties hereto may
modify or amend this Closing Agreement, by written agreement executed and
delivered by duly authorized officers of the respective parties.
(b) Counterparts. This Closing Agreement may be executed in any number
of counterparts, each such counterpart being deemed to be an original
instrument, and all such counterparts shall together constitute the same
agreement.
(c) Governing Law and Venue. This Closing Agreement shall be governed
by and construed in accordance with the Laws of the State of New York,
without regard to the principles of conflicts of Law thereof.
(d) Entire Agreement; No Other Representations. This Closing Agreement
(including any annexes, schedules and exhibits hereto) constitutes the
entire agreement by and among the parties hereto and supersedes all other
prior agreements, understandings, representations and warranties, both
written and oral, among the parties, with respect to the subject matter
hereof.
(e) Severability. The provisions of this Closing Agreement shall be
deemed severable and the invalidity or unenforceability of any provision
shall not affect the validity or enforceability of the other provisions
hereof. Upon any determination that any
3
term or other provision of this Closing Agreement, or the application
thereof to any Person or any circumstance, is invalid, illegal or
unenforceable, the parties hereto shall negotiate in good faith to modify
this Closing Agreement so as to effect the original intent of the parties
as closely as possible in an acceptable manner to the end that transactions
contemplated hereby are fulfilled to the extent possible.
(f) Interpretation. The headings herein are for convenience of
reference only, do not constitute part of this Closing Agreement and shall
not be deemed to limit or otherwise affect any of the provisions hereof.
Where a reference in this Closing Agreement is made to a Section, such
reference shall be to a Section of this Closing Agreement unless otherwise
indicated. Whenever the words "include," "includes" or "including" are used
in this Closing Agreement, they shall be deemed to be followed by the words
"without limitation." Words importing the singular include the plural and
vice versa, and words importing a gender include any gender. The word "or"
is disjunctive but not necessarily exclusive. All references to agreements
or Laws are deemed to refer to such agreements or Laws as amended or as in
effect at the applicable time. The parties hereto each acknowledge that
each party has participated in the drafting of and been represented by
counsel in connection with this Closing Agreement and the transactions
contemplated hereby. Accordingly, any rule of Law or any legal decision
that would require interpretation of any claimed ambiguities in any
portions of this Closing Agreement against the party that drafted it has no
application and is expressly waived.
(g) Conflict. In the event of any conflict or inconsistency between
the terms and provisions of this Closing Agreement and the Purchase
Agreement, the terms and provisions of the Purchase Agreement shall control
and govern.
IN WITNESS WHEREOF, this Closing Agreement has been duly executed,
acknowledged and delivered by the duly authorized officers of the parties hereto
as of the date first written above.
QUEST RESOURCE CORPORATION
By:
----------------------------------------
Name (print):
--------------------------------
Title:
----------------------------------------
CHEROKEE ENERGY PARTNERS LLC
By:
----------------------------------------
Name (print):
--------------------------------
Title:
----------------------------------------
4
QUEST CHEROKEE, LLC
By:
----------------------------------------
Name (print):
--------------------------------
Title:
----------------------------------------
QUEST ENERGY SERVICE, INC.
By:
----------------------------------------
Name (print):
--------------------------------
Title:
----------------------------------------
STP CHEROKEE, INC.
By:
----------------------------------------
Name (print):
--------------------------------
Title:
----------------------------------------
PONDEROSA GAS PIPELINE COMPANY, INC.
By:
----------------------------------------
Name (print):
--------------------------------
Title:
----------------------------------------
QUEST OIL & GAS CORPORATION
By:
----------------------------------------
Name (print):
--------------------------------
Title:
----------------------------------------
PRODUCERS SERVICE, INCORPORATED
By:
----------------------------------------
Name (print):
--------------------------------
Title:
----------------------------------------
X-X GAS GATHERING, L.L.C.
By:
----------------------------------------
Name (print):
--------------------------------
Title:
----------------------------------------
5
