Exhibit 10.2
INTERCREDITOR AGREEMENT
THIS
INTERCREDITOR
AGREEMENT (this
"Agreement") is entered into as of the
20th day of July, 2005, by and between Quest Resource Corporation, a Nevada
corporation ("QRC"), and Cherokee Energy Partners LLC, a Delaware limited
liability company ("CEP"), with respect to certain financial
arrangements with
Quest Cherokee, LLC, a Delaware limited
liability company ("Borrower").
RECITALS:
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A. CEP has made
to Borrower
loans in the
aggregate principal amount of
$63,000,000 pursuant to the terms of an Amended
and Restated Note Purchase
Agreement dated as of February 11, 2005
(together with any subsequent advances
of monies to Borrower from CEP, the "CEP
Loans"). All monies,
liabilities
and
obligations, of any and every kind and nature,
owed to CEP from
Borrower under
the CEP Loans are referred to herein as the
"CEP Obligations."
B. Concurrent
with the execution of this Agreement, QRC desires to loan to
Borrower up to $3,000,000, in the form of a
15% Promissory Note (the "QRC Loans"
and, together with the CEP Loans,
the "Loans").
All monies,
liabilities
and
obligations, of any and every kind and nature,
owed to QRC from
Borrower under
the QRC Loans are referred to herein as the
"QRC Obligations."
The parties
hereto wish to agree
upon the relative
rights of interest
of
CEP and QRC with respect to payments
received from Borrower
on or in respect of
the Loans.
AGREEMENT
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NOW THEREFORE,
in consideration of these premises, the terms and conditions
set forth herein, and other good and valuable
consideration,
the receipt and
sufficiency of which are hereby
acknowledged, the parties hereto hereby agree as
follows:
Section 1.
Recitals. The recitals specified above in this Agreement are
hereby incorporated into this
Agreement.
Section 2.
Definitions.
When used in this
Agreement, the
following terms
shall have the meanings set forth as
definitions in this
Section. The
singular
use of any defined term shall include the plural and the plural use shall
include the singular.
"Enforcement
Action" shall mean (a) to demand,
sue for, take or receive
from or on behalf of Borrower, by set-off or in any other manner,
the whole or
any part of any monies which may now or hereafter be owing by Borrower with
respect to the Obligations, (b) to initiate or participate
with others in any
suit, action or proceeding against Borrower to (i) enforce
payment of or to
collect the whole or any part of the
Obligations
or (ii) commence judicial
enforcement of any of the rights and
remedies under the
Obligations, or (c)
to
accelerate any Obligations.
<PAGE>
"Proceeding"
shall
mean any voluntary or involuntary insolvency,
bankruptcy, receivership,
custodianship, liquidation,
dissolution,
reorganization, assignment for the benefit of creditors, appointment of a
custodian, receiver, trustee or other officer with
similar powers or any other
proceeding for the liquidation, dissolution
or other winding up of Borrower.
"Obligations"
shall mean the CEP Obligations and the QRC Obligations.
Section
3. Priority of Indebtedness. The indebtedness and payment
obligations of Borrower with respect to the QRC Obligations and the CEP
Obligations shall be of equal priority, and none shall have a priority of
payment over or be subordinate to the other. Any payments made by the
Borrower
on any of the Obligations and the proceeds of any
Enforcement
Action shall be
shared pro rata by QRC and CEP based upon
percentages determined by dividing the
outstanding principal amount and accrued
and unpaid interest owed to each of QRC
on the QRC Loans and CEP on the CEP
Loans, respectively, by the outstanding
principal amount of, and accrued and unpaid
interest on, all Loans. Each party
that receives any payments from the Borrower on any of the
Obligations
or
proceeds from any Enforcement Action shall promptly pay to the
other party its
pro rata share of such amounts.
Section 4.
Default. Each party hereto shall provide prior written notice
to
the other parties hereto (other than Borrower) of
any Event of Default of which
it is aware under the Loans. If an Event of Default occurs on either the CEP
Loans or the QRC Loans, such default shall be deemed to be an Event of
Default
with respect to all Loans. CEP shall have the right to
control the exercise of
remedies related to such Event of Default
in accordance with Section 7 hereof.
Section 5. No
Third Party
Beneficiaries. This
Agreement and the terms and
provisions hereof are solely for the benefit of CEP and QRC and shall not
benefit in any way any other person,
including,
but not limited to,
Borrower.
The parties hereto specifically reserve any and all of their
respective rights
against Borrower and any third parties.
Section 6.
Termination, Recision
or Modification. The agreements set forth
in this Agreement shall remain in full force and
effect regardless of
whether
either party hereto in the future seeks to
rescind, amend,
terminate or
reform
its respective agreements with
Borrower.
Section 7.
Remedies. CEP shall have the right to
control the exercise
of
any remedies (including the commencement and prosecution of any Enforcement
Action) against the Borrower with
