QUEST RESOURCE HOLDING CORPORATION

3481 Plano Parkway

The Colony, Texas 75056

 

October 19, 2020

 

 

Re:Letter Agreement

 

Ladies and Gentlemen:

 

We refer to (a) that certain Credit Agreement, dated as of October 19, 2020, by
and among Quest Resource Holding Corporation (together with its Affiliates, the
“Company”), as Holdings, Quest Resource Management Group, LLC and certain of its
affiliates, as Borrowers, Monroe Capital Management Advisors, LLC, a Delaware
limited liability company, as Administrative Agent and Lead Arranger and the
lenders party thereto (as amended, restated, supplemented, refinanced, extended
or otherwise modified from time to time, the “Credit Agreement”) and (b) those
certain Warrants to Purchase Shares of Common Stock (each a “Warrant” and
collectively, the “Warrants”). Capitalized terms used but not defined herein
shall have the meanings ascribed to such terms either in the Credit Agreement in
effect from time to time, and if the Credit Agreement is Paid in Full, then
immediately prior to such Payment in Full, or the Warrants, as applicable.

 

This letter agreement (this “Letter Agreement”) confirms our agreement that, in
connection with and effective as of your execution of the Credit Agreement and
our issuance of the Warrants the Company shall grant the following contractual
rights to the holders of the Warrants (the “Holders”):

 

1.Minimum Net Warrant Proceeds. On the date that is ten (10) days following the
later to occur of (a) the Holders’ full exercise of the Warrants for all Warrant
Shares issuable in connection therewith and (b) the second anniversary of the
Closing Date (such date set forth in clause (i) or (ii), the “Measurement
Date”), the Company shall make a payment in cash to the Holders, based on each
Holder’s pro rata portion of the Warrant Shares issued to such Holder, in an
aggregate amount equal to the greater of (i) $0 and (ii)(A) $1,000,000, minus
(B) the Net Warrant Proceeds (if any) received by the Holders after the Closing
Date but prior to the Measurement Date (the “Minimum Proceeds”); provided, that
in order for the Holders to receive such Minimum Proceeds, the Holders agree to
sell all Warrant Shares underlying the Warrants at the same time. The Company
may make such payment either from cash on hand or from the net cash proceeds
from the issuance of equity interests of the Company.

 

 

2.Net Warrant Proceeds. For purposes of this Letter Agreement, “Net Warrant
Proceeds” shall mean (a) all cash proceeds received by the Holders solely in
connection with the sale of Warrant Shares issued upon exercise of the Warrants,
minus (b) all costs relating to the exercise of the Warrants or the sale or
transfer of the applicable Warrant Shares exercisable in connection therewith,
including, without limitation, payment of the Aggregate Exercise Price and any
reasonable legal, accounting or other fees, expenses or commissions as a result
of the exercise of the Warrants or the sale or transfer of the applicable
Warrant Shares. For the avoidance of doubt, Net Warrant Proceeds shall not
include or take into account any proceeds received by the Holders under the
Credit Agreement, any Credit Document or otherwise in a Holder’s capacity as a
lender to the Borrowers or any of their subsidiaries. Notwithstanding anything
set forth herein to the contrary, in the event the sale of Warrant Shares issued
upon exercise of the Warrants would result in Net Warrant Proceeds of less than
the Minimum Proceeds, as determined by the Weighted Average Price of such
Warrant Shares in an open market transaction for the ten (10) Trading Days prior
to such contemplated sale, the Holders agree to grant the Company a right of
first refusal to repurchase the Warrants (or the Warrant Shares if the Warrants
have been exercised in full) for the Minimum Proceeds, before the Holders are
permitted to sell the Warrant Shares.

 

3.Termination. The Letter Agreement, unless otherwise terminated prior to such
date by mutual agreement of the Company and Holders, shall survive the
termination of the Credit Agreement and the Warrants until all required payments
by the Company to Holders pursuant to Section 1 hereof have been validly paid in
full. 

 

4.Breach By Affiliates. The Company shall be fully responsible and liable for
any breach of this Agreement by its Affiliates as though such Affiliates were
parties hereto and directly undertook the same obligations as the Company
hereunder.

 

5.Assignment. A Holder may assign its rights under this Letter Agreement, in
full or in part, (i) in connection with the assignment to a third party of any
right, title or interest in any portion of the Warrants or Warrant Shares or
(ii) to any Affiliate of Holder; provided, that such Holder provides the Company
with written notice of such assignment. For clarity, multiple separate
assignments of separate rights under this Letter Agreement to different third
parties or Affiliates of a Holder are permitted. The Company may not assign or
transfer any of its rights or obligations under this Letter Agreement without
the prior written consent of Holders. Any purported assignment in violation of
this Section 5 shall be void.

 

 

6.Governing Law; Jurisdiction. This Letter Agreement shall be governed by and
construed and enforced in accordance with, and all questions concerning the
construction, validity, interpretation and performance of this Letter Agreement
shall be governed by, the internal laws of the State of New York, without giving
effect to any choice of law or conflict of law provision or rule (whether of the
State of New York or any other jurisdictions) that would cause the application
of the laws of any jurisdictions other than the State of New York. The Company
hereby irrevocably submits to the exclusive jurisdiction of the state and
federal courts sitting in The City of New York, Borough of Manhattan, for the
adjudication of any dispute hereunder or in connection herewith or with any
transaction contemplated hereby or discussed herein, and hereby irrevocably
waives, and agrees not to assert in any suit, action or proceeding, any claim
that it is not personally subject to the jurisdiction of any such court, that
such suit, action or proceeding is brought in an inconvenient forum or that the
venue of such suit, action or proceeding is improper. The Company hereby
irrevocably waives personal service of process and consents to process being
served in any such suit, action or proceeding by mailing a copy thereof to the
Company at the address set forth in the Warrants or such other address as the
Company subsequently delivers to the Holders and agrees that such service shall
constitute good and sufficient service of process and notice thereof. Nothing
contained herein shall be deemed to limit in any way any right to serve process
in any manner permitted by law. Nothing contained herein shall be deemed or
operate to preclude the Holders from bringing suit or taking other legal action
against the Company in any other jurisdiction to collect on the Company’s
obligations to the Holders, to realize on any collateral or any other security
for such obligations, or to enforce a judgment or other court ruling in favor of
the Holders. THE COMPANY HEREBY IRREVOCABLY WAIVES ANY RIGHT IT MAY HAVE, AND
AGREES NOT TO REQUEST, A JURY TRIAL FOR THE ADJUDICATION OF ANY DISPUTE
HEREUNDER OR IN CONNECTION WITH OR ARISING OUT OF THE LETTER AGREEMENT OR ANY
TRANSACTION CONTEMPLATED HEREBY.

 

7.Miscellaneous. Upon execution of this Letter Agreement, the terms of this
Letter Agreement shall be binding upon, and in full force and effect, against
the Company. In the event of a conflict between the provisions of this Letter
Agreement and the Warrants or the Credit Agreement, the provisions of this
Letter Agreement shall control. This Letter Agreement may be executed in
counterparts, each of which shall be an original, with the same effect as if the
signatures were upon the same instrument.

 

8.Severability; Construction. If any provision of this Letter Agreement is
prohibited by law or otherwise determined to be invalid or unenforceable by a
court of competent jurisdiction, the provision that would otherwise be
prohibited, invalid or unenforceable shall be deemed amended to apply to the
broadest extent that it would be valid and enforceable, and the invalidity or
unenforceability of such provision shall not affect the validity of the
remaining provisions of this Letter Agreement so long as this Letter Agreement
as so modified continues to express, without material change, the original
intentions of the parties as to the subject matter hereof and the prohibited
nature, invalidity or unenforceability of the provision(s) in question does not
substantially impair the respective expectations or reciprocal obligations of
the parties or the practical realization of the benefits that would otherwise be
conferred upon the parties. The parties will endeavor in good faith negotiations
to replace the prohibited, invalid or unenforceable provision(s) with a valid
provision(s), the effect of which comes as close as possible to that of the
prohibited, invalid or unenforceable provision(s). This Letter Agreement shall
be deemed to be jointly drafted by the Company and Holders and shall not be
construed against any person as the drafter hereof.

 

 

9.Confidentiality. The Company and Holders each acknowledge that the existence
and the terms of this Letter Agreement and any oral or written information
exchanged between the parties in connection with the preparation and performance
this Letter Agreement are regarded as confidential information. Each party
hereto shall maintain the confidentiality of all such confidential information,
and without obtaining the written consent of the other parties hereto, shall not
disclose any relevant confidential information to any third parties, except for
the information that: (a) is or will be in the public domain (other than through
the receiving party’s unauthorized disclosure); (b) is under the obligation to
be disclosed pursuant to the applicable laws or regulations, rules of any stock
exchange, or orders of the court or other government authorities; or (c) is
required to be disclosed by any party to its shareholders, investors, legal
counsels or financial advisors regarding the transaction contemplated hereunder.

 

[Remainder of Page Intentionally Left Blank]

 

 

  Very truly yours,         QUEST RESOURCE HOLDING CORPORATION         By: /s/
Laurie L. Latham   Name: Laurie L. Latham   Title: Senior Vice President, Chief
Financial Officer, Secretary, and Treasurer

 

[Signature Page to Warrant Side Letter]