Exhibit 10.1
LOAN AGREEMENT
BETWEEN
HILAND HOLDINGS GP, LP
AS BORROWER
AND
COPPERMARK BANK
AS THE BANK
NOVEMBER 23, 2009

 

--------------------------------------------------------------------------------

 

LOAN AGREEMENT
     This Loan Agreement (the “Loan Agreement”) is made November 23, 2009 by and
between HILAND HOLDINGS GP, LP, a Delaware limited partnership (the “Borrower”),
and COPPERMARK BANK, an Oklahoma state banking association (the “Bank”).
WITNESS:
     WHEREAS, the Borrower has requested a Loan, as hereinafter defined, for
payment of Borrower’s loan from Security National Bank of Enid, for attorney and
other professional fees, for other general operating expenses and for payment of
advances, if any, under a loan from Harold Hamm to the Borrower in the amount of
$1,500,000.00 and has made, executed and delivered that certain advancing line
of credit promissory note of even date herewith (the “Note”). To secure the
Note, Borrower has executed and delivered to the Bank a pledge and security
agreement pledging as security for the Loan its common units and subordinated
units in Hiland Partners, LP.
     WHEREAS, subject to the terms and conditions of this Loan Agreement, and in
reliance upon the representations and warranties made by Borrower herein, the
Bank agrees to make the Loan
     NOW, THEREFORE, in consideration of the foregoing premises, the mutual
agreements herein contained and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, each party hereto
agrees as follows:
ARTICLE I
DEFINITIONS AND ACCOUNTING TERMS
     1.1 Certain Defined Terms. As used in this Agreement, the following terms
shall have the following meanings (such meanings to be equally applicable to
both the singular and plural forms of the terms defined):
     “Advance” means an advance of funds by the Bank to the Borrower under the
Note.
     “Affiliate” of any Person means any other Person which, directly or
indirectly, controls or is controlled by or is under common control with such
Person (excluding any trustee under, or any committee with responsibility for
administering, any Plan). A Person shall be deemed to be:
          (a) “controlled by” any other Person if such other Person possesses,
directly or indirectly, power: (i) to vote 10% or more of the securities having
at the time of any determination hereunder voting power for the election of
directors of such Person; or (ii) to direct or cause the direction of the
management and policies of such Person whether by contract or otherwise; or
          (b) “controlled by” or “under common control with” such other Person
if such other Person is the executor, administrator, or other personal
representative of such Person.
     Without limitation, each unit holder holding 10% or more of the securities
of the Borrower and each Subsidiary of the Borrower and each subsidiary of any
subsidiary of the Borrower shall be considered an Affiliate of the Borrower.
Notwithstanding the foregoing or anything contained herein to the contrary, in
no event shall Continental Resources, Inc. or any of it affiliates or
subsidiaries be considered an “Affiliate” of Borrower for purposes of this
Agreement.
     “Business Day” means a day of the year on which banks are not required or
authorized by law to close.
     “Change in Control” shall be deemed to have occurred if (a) any sale,
lease, exchange or other transfer (in one transaction or a series of related
transactions) of all, or substantially all, of the assets of the Borrower
occurs; (b) any “person” as such term is used in Sections 13(d) and 14(d) of the
Securities

 

--------------------------------------------------------------------------------

 

Exchange Act of 1934, as amended (the “Exchange Act”), or two or more persons
acting in concert, (i) is or becomes, directly or indirectly, the “beneficial
owner,” as defined in Rule 13d-3 under the Exchange Act, of securities of the
Borrower that represent 33% or more of the combined voting power of the
Borrower’s then outstanding securities, or (ii) acquires the power (whether or
not exercised) to elect a majority of the members of the Borrower’s Board of
Directors.
     “Closing Date” means the date of this Agreement.
     “Contested in Good Faith” means a matter (a) which is being Contested in
Good Faith by or on behalf of any Person, by appropriate and lawful proceedings
diligently conducted, reasonably satisfactory to the Bank, and for which a
reserve has been established in an amount so that no Material Adverse Effect
occurs, (b) in which foreclosure, distraint, sale, forfeiture, levy, execution
or other similar proceedings have not been initiated or have been stayed and
continue to be stayed, and (c) in which a Good Faith contest will not materially
detract from the value of the Collateral, materially jeopardize the rights of
the Bank or the Borrower with respect thereto, materially interfere with the
operation by the Borrower of its business, or otherwise have a Material Adverse
Effect.
     “Controlled Group” means the Borrower and any corporation, trade or
business that is, along with the Borrower, a member of a controlled group of
corporations or a controlled group of trades or businesses as described in
sections 414(b) and 414(c), respectively, of the Code or in section 4001 of
ERISA.
     “Default” means any Event of Default or any event that would constitute an
Event of Default but for the requirement that notice be given or time elapse or
both.
     “ERISA” means the Employee Retirement Income Security Act of 1974, as
amended, and any successor statute of similar import, together with the
regulations promulgated thereunder and under the Internal Revenue Code, in each
case as in effect from time to time. References to sections of ERISA also refer
to successor sections.
     “ERISA Event” means, with respect to the Borrower or any Subsidiary, (a) a
Reportable Event (other than a Reportable Event not subject to the provision for
30-day notice to the PBGC under regulations issued under section 4043 of ERISA),
(b) the withdrawal of the Borrower or any Affiliate from a Plan during a plan
year in which it was a “substantial employer” as defined in section 4001(a)(2)
of ERISA if such withdrawal would have a Material Adverse Effect on the
Borrower, or on the Borrower and its Subsidiaries taken as a whole, (c) the
filing of a notice of intent to terminate a Plan under a distress termination or
the treatment of a Plan amendment as a distress termination under section
4041(c) of ERISA, (d) the institution of proceedings to terminate a Plan by the
PBGC under section 4042 of ERISA, (e) the failure to make required contributions
which would result in the imposition of a Lien under section 412 of the Code or
section 302 of ERISA, or (f) any other event or condition which might reasonably
be expected to constitute grounds under section 4042 of ERISA for the
termination of, or the appointment of a trustee to administer, any Plan.
     “Events of Default” has the meaning specified in Section 7.1.
     “Executive Officer” means, as to any Person, the president, the chief
financial officer, the chief executive officer, the general counsel, the
treasurer or the secretary.
     “Existing Indebtedness” means the Indebtedness of the Borrower or any
Subsidiary reflected on Schedule 1.1 attached hereto.
     “Financial Statements” means statements of the financial condition of the
Borrower (compiled) at the point in time and for the period indicated in
Section 5.1 and consisting of at least a balance sheet, statement of income,
statement of cash flow and related statements of operations, membership units
and other equity, all of which shall be prepared as determined, recognized and
classified using GAAP, as and

3

--------------------------------------------------------------------------------

 

when applicable in comparative form with respect to the corresponding period of
the preceding fiscal period or as otherwise required by Bank.
     “GAAP” means generally accepted accounting principles set forth from time
to time in the opinions and pronouncements of the Accounting Principles Board
and the American Institute of Certified Public Accountants and statements and
pronouncements of the Financial Accounting Standards Board (or agencies with
similar functions of comparable stature and authority within the U.S. accounting
profession), which are applicable to the circumstances as of the date of
determination.
     “Governmental Authority” means any nation or government, any state or other
political subdivision thereof, and any entity exercising executive, legislative,
judicial, regulatory or administrative functions of or pertaining to government.
     “Indebtedness” shall mean, with respect to any Person, without duplication,
(a) all liabilities which would appear on a balance sheet of such Person
prepared, recognized and classified using the accounting principles currently
used by the Borrower, (b) all obligations of such Person evidenced by bonds,
debentures, promissory notes or such similar evidences of indebtedness, (c) all
other indebtedness of such Person for borrowed money, and (d) all obligations of
others, to the extent any such obligation is secured by a Lien, except a
Permitted Lien, on the assets of such Person (whether or not such Person has
assumed or become liable for the obligation secured by such Lien).
     “Internal Revenue Code” means the Internal Revenue Code of 1986, as amended
from time to time, and the regulations promulgated and rulings issued
thereunder.
     “Law” means all ordinances, statutes, rule, regulations, orders,
injunctions, policies, writs or decrees of any Governmental Authority or
political subdivision or agency thereof or any court or similar entity or
tribunal established by any thereof.
     “Lien” means, when used with respect to any Person, any interest in any
real or personal property, asset or other right held, owned or being purchased
or acquired by such Person for its own use, consumption or enjoyment which
secures payment or performance of any obligation and shall include any mortgage,
lien, pledge, encumbrance, charge, retained title of a conditional vendor or
lessor, or other security agreement, mortgage, deed of trust, chattel mortgage,
assignment, pledge, retention of title, financing or similar statement or
notice, or other encumbrance arising as a matter of law, judicial process or
otherwise.
     “Loan Documents” means this Agreement, the Note, each Notice of Advance,
the Pledge Agreement, and all other agreements, instruments, certificates,
financing statements, documents, schedules or other written indicia delivered by
the Borrower or any of its Subsidiaries or any other Person in connection with
any of the foregoing.
     “Loan” means the loan from the Bank to Borrower in the principal amount of
Five Million and No/100 Dollars ($5,000,000.00) as evidenced by the Note.
     “Material Adverse Effect” means, the occurrence of an event (including any
adverse determination in any litigation, arbitration, or governmental
investigation or proceeding), which has or could reasonably be expected to have
a materially adverse effect on (a) the assets, business, financial condition or
operations of the Borrower and its Subsidiaries taken as a whole; or (b) the
ability of the Borrower to perform any of its payment or other material
obligations under any of the Loan Documents; or (c) the legality, validity,
binding effect or enforceability against the Borrower or any Subsidiary of any
Loan Document that by its terms purports to bind the Borrower or any Subsidiary.
     “Obligations” means without duplication, (a) all indebtedness evidenced by
the Note, and (b) all other obligations and liabilities of the Borrower to the
Bank, now existing or hereafter incurred, whether arising under, out of or in
connection with any Loan Document, and with respect to all of the foregoing to
the extent that any of the same includes or refers to the payment of amounts
deemed or constituting

4

--------------------------------------------------------------------------------

 

interest, only so much thereof as shall have accrued, been earned and remains
unpaid at each relevant time.
     “Organization Documents” means, for any corporation or cooperative, the
certificate or articles of incorporation, the bylaws, any certificate of
determination or instrument relating to the rights of preferred shareholders of
such corporation, any shareholder rights agreement, and all applicable
resolutions of the board of directors (or any committee thereof) of such
corporation.
     “Permitted Indebtedness” means: (i) any accounts payable, taxes, insurance,
operating expenses and all other general and administrative expenses of the
Borrower incurred in the normal course of business operations, such obligations
being in amounts and of the types as are consistent with those identified in the
latest financial statements of the Borrower; (ii) any existing indebtedness
secured by any Permitted Lien; (iii) any other Debt not to exceed $50,000
without prior written approval of the Bank, reasonably exercised; (iv) existing
indebtedness which has been disclosed to the Bank from the Borrower to the
partners of the Borrower so long as the promissory notes evidencing said
indebtedness are subordinated; (v) any indebtedness pursuant to leases or lease
purchase agreements in connection with the Borrower’s operations and (vi) any
other Debt approved in writing by the Bank.
     “Permitted Liens” means (a) liens for Taxes incurred in the course of
business (which are not yet due or are being Contested in Good Faith); (b) liens
in connection with workers’ compensation, unemployment insurance or other social
security (other than Liens created by Section 4068 of ERISA) old-age pension or
public liability obligations which are not yet due or are being Contested in
Good Faith; (c) other Liens affecting the Collateral existing as of the Closing
Date and disclosed on Schedule 4.15 attached hereto under the heading “Permitted
Liens”; (d) liens created in favor of the Bank and other Liens expressly
permitted under the Security Instruments; (e) liens arising in the ordinary
course of business from pledges or deposits to secure public or statutory
obligations, or deposits to secure (or in lieu of) surety, stay, appeal or
customs bonds; encumbrances consisting of easements, zoning restrictions, of
other restrictions on the use of property, provided that such encumbrances do
not materially impair the use of such property for the purposes intended, and
none of which are violated by existing or proposed structure or land use, and
such other material encumbrances as have been disclosed to and approved by Bank
in writing; (f) Good Faith deposits in connection with bids, tenders, contracts
or leases, performance or other similar bonds; (g) liens arising from services
or materials provided In the ordinary course of business that are being
Contested in Good Faith; (h) statutory operators’, vendors’, repairmen’s,
mechanics’, suppliers’, workers’, materialmen’s, construction, or other like
liens with respect to obligations not overdue or being Contested in Good Faith,
(i) contractual liens that arise in the ordinary course of business under
operating agreements, joint venture agreements, oil and gas partnership
agreements, oil and gas leases, farm-out agreements, division orders, contracts
for the sale, transportation or exchange of oil and natural gas, unitization and
pooling declarations and agreements, area of mutual interest agreements,
overriding royalty agreements, marketing agreements, processing agreements, net
profits agreements, development agreements, gas balancing or deferred production
agreements, injection, repressuring and recycling agreements, salt water or
other disposal agreements, seismic or other geophysical permits or agreements,
and other agreements which are usual and customary in the oil and gas business
and are for claims which are not delinquent or which are being Contested in Good
Faith, and (j) liens pursuant to leases or lease purchase agreements in
connection with the Borrower’s operations.
     “Person” means an individual, partnership, corporation (including a
business trust), joint stock company, trust, unincorporated association, joint
venture, limited liability company or other entity, or a government or any
political subdivision or agency thereof.
     “Plan” means any “employee pension benefit plan,” as such term is defined
in ERISA, which is subject to Title IV of ERISA (other than a Multiemployer
Plan), and as to which any entity in the Controlled Group has or may have any
liability, including any liability by reason of having been a substantial

5

--------------------------------------------------------------------------------

 

employer within the meaning of section 4063 of ERISA for any time within the
preceding five years or by reason of being deemed to be a contributing sponsor
under section 4069 of ERISA.
     “Pledge Agreement” has the meaning specified in Section 3.1.1(e).
     “Pledged Collateral Market Value” means the cumulative value of the
following in each case owned by the Borrower and its Subsidiaries: (a) the
Hiland Common Units (as defined in Section 3.1.1(e) below), (b) the Hiland
Subordinated Units (as defined in Section 3.1.1(e) below) and (c) any assets
acquired after the Closing Date in which a security interest has been granted to
the Bank and perfected, in each case, pursuant to the terms hereof. For purposes
of this definition, the value of (i) the Hiland Common Units on any date shall
be the closing price for such Hiland Common Units as reflected on the NASDAQ
securities exchange on such date, (ii) the Hiland Subordinated Units on any date
shall be deemed to equal 85% of the value of the Hiland Common Units on such
date and (iii) the assets referred to in clause (c) above shall be the fair
market value of such assets as reasonably valued by the Bank and subject to
third-party verification as deemed necessary by the Administrative Agent.
     “Requirement of Law” for any Person means the Organization Documents of
such Person, and any law, treaty, rule, ordinance or regulation or determination
of an arbitrator or a court or other governmental authority, in each case
applicable to or binding upon such Person or any of its property or to which
such Person or any of its property is subject.
     “Subsidiary” means a Person of which the indicated Person and/or its other
Subsidiaries, individually or in the aggregate, own, directly or indirectly,
such number of outstanding shares or other equity interests as have at the time
of any determination hereunder more than 50% of the ordinary voting power;
provided that, Hiland Partners, LP, a Delaware limited partnership and its
subsidiaries and Hiland Partners GP, LLC, a Delaware limited liability company
and its subsidiaries shall not be considered “Subsidiary” for the purposes of
this Agreement., “Subsidiary” means a direct or indirect Subsidiary of the
Borrower.
     “Welfare Plan” means any “employee welfare benefit plan” as such term is
defined in ERISA, as to which the Borrower has any liability.
     1.2 Computation of Periods. In this Agreement in the computation of periods
from a specified date to a later specified date, the word “from” means “from and
including” and the words “to” and “until” each mean “to but excluding”.
     1.3 Conventions. Unless otherwise defined or the context otherwise
requires, all financial and accounting terms used herein or in any of the Loan
Documents or any certificate or other document made or delivered pursuant hereto
shall be defined in accordance with GAAP, as the context may require. When used
in this Agreement, the term “financial statements” shall include the notes and
schedules thereto, except that Borrower shall not be required to furnish notes
and schedules with any Quarterly Statement. When used herein, the terms “best
knowledge of” or “to the best knowledge of” any Person shall mean matters within
the actual knowledge of such Person (or an Executive Officer or general partner
of such Person) or which should have been known by such Person after reasonable
inquiry. The definition of any agreement, instrument or document shall also
include any amendment or modification of or supplement to the same. References
to the Borrower or any Subsidiary shall also include its permitted successors
and assigns.
     1.4 Schedules. In the event that the Borrower does not complete the
Schedules attached hereto by either noting “None” or providing specific details,
any blank Schedules shall be deemed to be a representation by the Borrower that
“None” is the appropriate disclosure.
     1.5 Construction. This Agreement and the other Loan Documents have been
reviewed and negotiated by sophisticated parties with access to legal counsel,
and no rule of construction shall apply hereto or thereto which would require or
allow any Loan Document to be construed against any party because of its role in
drafting such Loan Document. All indemnification and release of liability
provisions

6

--------------------------------------------------------------------------------

 

of this Agreement shall be construed broadly (and not narrowly) in favor of the
Persons receiving the indemnification or release of liability.
ARTICLE II
THE LOAN
     2.1. The Loan. Subject to the terms and conditions of this Agreement, and
in reliance upon the representations and warranties made by the Borrower herein,
the Bank agrees to extend the following Loan. From time to time hereafter, the
Bank may make additional loans or financial accommodations to the Borrower and
the terms of this Agreement shall apply to any such additional loans or
financial accommodations.
          2.1.1 Advancing Line of Credit. The advancing line of credit to the
Borrower shall be evidenced by this Agreement and by the Note in the face amount
of Five Million and No/100 Dollars ($5,000,000.00) with interest as set forth
therein and a maturity date of April 2, 2010. IT IS EXPRESSLY UNDERSTOOD AND
AGREED THAT ALL UNPAID OUTSTANDING PRINCIPAL AND ACCRUED BUT UNPAID INTEREST AND
ANY OTHER CHARGES SHALL BE DUE AND PAYABLE ON THE MATURITY DATE. NOTWITHSTANDING
THE MATURITY DATE, THE NOTE SHALL BE DUE AND PAYABLE NO LATER THAN THE DATE OF
ANY MERGER OF HILAND PARTNERS, LP, THE EFFECT OF WHICH IS THAT THE UNITS IN
HILAND PARTNERS, LP BECOME PRIVATELY HELD AND ARE NO LONGER PUBLICLY TRADED. All
computations by the Bank shall be conclusive and binding for all purposes absent
manifest error. Both principal and interest are payable in lawful money of the
United States of America and in immediately available funds.
          2.1.2 Use of Proceeds. The proceeds of the Loan shall be available,
and the Borrower agrees that it shall use the Loan proceeds, for payment of
Borrower’s loan from Security National Bank of Enid, for attorney and
professional fees and other general operating expenses and for payment of a
advances, if any, under a loan from Harold Hamm to the Borrower in the amount of
$1,500,000.00.
          2.1.3 Fee. To compensate the Bank for the costs of the extension of
credit hereunder, at closing, the Borrower shall pay a one-eighth percent (1/8%)
fee on $5,000,000.00.
          2.1.4 Advances. All Advances shall be requested by the Borrower using
the form of the Request for Advance attached hereto as Exhibit “2.3”.
          2.1.5 Notice of Advance. The Borrower shall give the Bank notice of
borrowing prior to 12:00 noon CST at least one (1) day before the requested
Advance. Each request shall be deemed a representation, warranty, acknowledgment
and agreement by the Borrower as to the matters which are required for an
Advance.
          2.1.6 Conditions Precedent to Advance. Each Advance is subject to the
Bank’s reasonable approval and shall be subject to the following conditions. A
waiver of any condition to any Advance shall not constitute a waiver as to any
subsequent Advance.
               2.1.6.1 Representations and Warranties. With respect to each
Advance, the representations and warranties of the Borrower under this Loan
Agreement and in each Loan Document are true and correct in all material
respects as of such date, as if then made.
               2.1.6.2 No Event of Default. No Event of Default shall have
occurred and be continuing nor shall any event have occurred or failed to occur
which, with the passage of time or service of notice or both would constitute an
Event of Default under this Agreement or under the Note.

7

--------------------------------------------------------------------------------

 

               2.1.6.3 Fees. All accrued fees and expenses of the Bank
(including the accrued fees and expenses of counsel to the Bank) have been paid.
     2.2 Making of Payments. All payments (including prepayments) made by the
Borrower on account of the Note shall be made to the Bank at its offices at 3333
N.W. Expressway, Oklahoma City, Oklahoma, or at P.O. Box 25676, Oklahoma City,
Oklahoma 73125-0676, before 12:00 p.m., local time, in lawful money of the
United States of America and in immediately available funds. If any payment
under the Note shall be due and payable on a day other than a Business Day, the
maturity thereof shall be extended to the next succeeding Business Day and, with
respect to payments of principal, interest thereon shall be payable at the then
applicable rate during such extension.
     2.3 Maximum Lawful Interest. It is not the intention of the Bank or the
Borrower to violate the laws of any applicable jurisdiction relating to usury or
other restrictions on the maximum lawful interest rate. The Loan Documents and
all other agreements between the Borrower and the Bank, whether now existing or
hereafter arising and whether written or oral, are hereby limited so that in no
event shall the interest paid or agreed to be paid to the Bank for use,
forbearance or detention of money loaned, or for the payment or performance of
any covenant or obligation contained herein or in any other Loan Document exceed
the maximum amount permissible under applicable law. If from any circumstances
the Bank shall ever receive anything of value deemed interest under applicable
law which would exceed interest at the highest lawful rate, such excessive
interest shall be applied to the reduction of the principal amount owing
hereunder, and not to the payment of interest, or if such excessive interest
exceeds any unpaid balance of principal, such excess shall be refunded to the
Borrower. All sums paid or agreed to be paid to the Bank for the use,
forbearance or detention of the Loan evidenced by the Note shall, to the extent
permitted by applicable law, be amortized, prorated, allocated and spread
throughout the full term of the affected Note until payment in full, so that the
rate of interest on account of such Note is uniform throughout the term thereof.
This Section 2.3 shall control every other provision of the Loan Documents and
all other agreements between the Bank and the Borrower contemplated hereby.
     2.4 Prepayments. The Borrower shall have the right at any time, or from
time to time, to prepay without premium or penalty, all or any part of the loan
balance outstanding on the Note; provided however, that no such prepayment
shall, until all Obligations are fully paid and satisfied, excuse the payment as
it becomes due of any payment provided for herein. All prepayments made pursuant
to this Section 2.4 shall be applied first to accrued and unpaid interest, any
costs, and then to the principal balance.
     2.5 Pledge of and Security Interest in Accounts and Right of Offset or
Lien. As security for the payment and/or performance hereunder, the Borrower
hereby transfers, assigns, and pledges to the Bank and/or grants to the Bank a
security interest in all funds of the Borrower now or hereafter or from time to
time on deposit with the Bank, with such interest of the Bank to be
retransferred, reassigned and/or released by the Bank, as the case may be, at
the expense of the Borrower upon payment in full. The aforementioned lien shall
not apply to funds contained in any account, including any drilling or escrow
account, of the Borrower held for the benefit of or in trust for any third party
including royalty, overriding royalty, or working interest owners other than
Borrower. All remedies as secured party or assignee of such funds shall be
exercisable, subject to applicable notice and cure periods provided in this
Agreement, by the Bank upon the occurrence of any Event of Default, regardless
of whether the exercise of any such remedy would result in any penalty or loss
of interest or profit with respect to any withdrawal of funds deposited in a
time deposit account prior to the maturity thereof. Furthermore, the Borrower
hereby grants to the Bank the right, exercisable, subject to applicable notice
and cure periods provided in this Agreement, at such time as any Obligation
shall mature, whether by acceleration of maturity or otherwise, of offset or
banker’s lien against all funds of the Borrower now or hereafter or from time to
time on deposit with the Bank, to the extent of the Indebtedness regardless of
whether the exercise of any such remedy would result in any penalty or loss of
interest or profit with respect to any withdrawal of funds deposited in a time
deposit account prior to the maturity thereof.

8

--------------------------------------------------------------------------------

 

ARTICLE III
CONDITIONS TO EFFECTIVENESS AND LENDING
     3.1. Conditions Precedent to Effectiveness of this Agreement. The
obligations of the Bank to enter into this Agreement and to make the Loan are
subject to the satisfaction of the following conditions precedent unless waived
in writing by Bank:
     3.1.1 Receipt of Loan Documents and Other Items. The Bank shall have no
obligation under this Agreement unless and until all matters incident to the
consummation of the transactions contemplated herein, including, without
limitation, the Bank shall have received, reviewed and approved the following
documents and other items, appropriately executed when necessary and, where
applicable, acknowledged, all in form and substance satisfactory in the Good
Faith judgment of the Bank and dated, where applicable, of even date herewith or
a date prior thereto (unless specifically noted below to the contrary) and
acceptable in the Good Faith judgment of the Bank:
(a) Multiple original counterparts of this Agreement, as reasonably requested by
the Bank;
(b) The Note executed by the Borrower;
(c) Copies of the organizational documents of the Borrower;
(d) Original of the authorization approving the borrowing, the Loan Documents
and authorizing the transactions contemplated herein duly adopted by the
Borrower, and that such authorization with respect to such transactions has not
been amended, modified, or revoked in any respect, and is in full force and
effect as of the date of such authorization;
(e) A pledge and security agreement, pledging 2,321,471 common units of Hiland
Partners, LP, a Delaware limited partnership (the ‘Hiland Common Units”) and
3,060,000 subordinated units of Hiland Partners, LP, a Delaware limited
partnership (the “Hiland Subordinated Units”), all owned by the Borrower, in
form and substance acceptable to the Bank (as amended, the “Pledge Agreement”),
duly executed by the Borrower.
(f) If required by the Bank, a security agreement, granting the Bank a
first-priority security interest in the collateral described therein, in form
and substance acceptable to the Bank (as amended, the “Security Agreement”),
duly executed by the Borrower.
(g) Evidence that all other action that the Bank may deem necessary or desirable
in order to perfect and protect the first priority liens and security interests
created under the Security Agreement, including, without limitation, the filing
of Uniform Commercial Code financing statements and the delivery to the Bank of
certificates covering the common units and subordinated units intended to be
subject to a first-priority pledge under the terms of the Pledge Agreement
together with executed stock powers.
(h) Certified copies of the resolutions of the Board of Directors of the
Borrower approving the Loan Documents, and of all documents evidencing other
necessary corporate action and governmental approvals, if any, with respect to
the Loan Documents.
(i) A certificate of the Secretary or an Assistant Secretary of the Borrower
certifying the names and true signatures of the officers of such party
authorized to sign the Loan Documents and the other documents to be delivered
hereunder, together with Organization Documents and Certificates of Good
Standing.
(j) A copy of the draft audited Consolidated balance sheets of the Borrower and
its Subsidiaries as of Fiscal Year ending December 31, 2008, and the related
Consolidated statements of income and cash flows for such Fiscal Year all
prepared in accordance with GAAP

9

--------------------------------------------------------------------------------

 

(subject to normal year-end adjustments and except that footnote and schedule
disclosure may be abbreviated), accompanied by the certification of the chief
executive officer, chief financial officer or treasurer of the Borrower that to
the best knowledge and belief of the Borrower all such financial statements are
complete and correct and present fairly in accordance with GAAP (subject to
normal year-end adjustments) the Consolidated results of operations and cash
flows of the Borrower as at the end of such Fiscal Year and that the audited
version of such financial statements will not be materially different.
(k) A copy (certified by the Borrower as true and complete) of the existing
documents evidencing the Existing Indebtedness.
(l) The Bank shall have received any schedules (satisfactory to the Bank) to
this Agreement, in form and substance satisfactory to the Bank.
(m) The Borrower shall have established a deposit account at the Bank.
(n) The Bank shall have received such other documents, or such other action
shall have been taken, in connection with the foregoing, as the Bank may
reasonably request.
     3.1.2 Representations and Warranties. The representations and warranties of
the Borrower under this Agreement are true and correct in all material respects
as of such date, as if then made.
     3.1.3 No Event of Default. No Event of Default shall have occurred and be
continuing and no event shall have occurred or failed to occur which, with the
passage of time or service of notice or both, would constitute an Event of
Default.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
     4. Representations and Warranties of the Borrower. To induce the Bank to
enter into this Agreement and to make the Loan, the Borrower represents and
warrants to the Bank (which representations and warranties shall survive the
delivery of the Loan Documents) that:
     4.1 Due Authorization and Existence. The Borrower and each Subsidiary
(i) is a corporation, limited liability company or partnership duly organized,
validly existing and (to the extent applicable) in good standing under the laws
of its jurisdiction of formation, (ii) is duly qualified to do business and (to
the extent applicable) in good standing in each jurisdiction where, because of
the nature of its activities or properties, such qualification is required
except where the failure to qualify would not have a Material Adverse Effect,
(iii) has the requisite corporate power and authority and the right to own and
operate its properties, to lease the property it operates under lease, and to
conduct its business as now and proposed to be conducted, and (iv) has obtained
all material licenses, permits, consents or approvals from or by, and has made
all filings with, and given all notices to, all Governmental Authorities having
jurisdiction, to the extent required for such ownership, operation and conduct
(including, without limitation, the consummation of the transactions
contemplated by this Agreement) as to each of the foregoing, except where the
failure to do so would not have a Material Adverse Effect. The execution,
delivery and performance by the Borrower of the Loan Documents, and the
consummation of the transactions contemplated thereby are within its respective
corporate powers and have been duly authorized by all necessary corporate action
(including, without limitation, shareholder approval, if required). The Borrower
has received all other material consents and approvals (if any shall be
required) necessary for such execution, delivery and performance, and such
execution, delivery and performance do not and will not contravene or conflict
with, or create a Lien or right of termination or acceleration under, any
Requirement of Law or Contractual Obligation binding upon the Borrower. Each of
this Agreement and each other Loan Document is (or when executed and delivered
will be) the legal, valid, and binding obligation of such of the Borrower
enforceable in accordance with such agreements’ respective term, except (i) as
limited by applicable bankruptcy, insolvency, reorganization, moratorium, and
other laws of general application

10

--------------------------------------------------------------------------------

 

affecting creditors’ rights generally and (ii) as limited by laws relating to
the availability of specific performance, injunctive relief or other equitable
remedies; provided that the Borrower assumes for purposes of this Section 4.1
that this Agreement and the other Loan Documents have been validly executed and
delivered by each of the parties thereto other than the Borrower and its
Subsidiaries.
     4.2 Consents, Conflicts and Creation of Liens. The execution and delivery
by the Borrower of the Loan Documents and the performance (except upon the
occurrence of an Event of Default) of the Obligations of the Borrower do not and
will not (a) require the consent of any Governmental Authority, (b) contravene
or conflict with any Requirement of Law which contravention or conflict would
have a Material Adverse Effect, (c) contravene or conflict with any indenture,
instrument or other agreement to which the Borrower is a party or by which any
property of the Borrower may be presently bound or encumbered, or (d) result in
or require the creation or imposition of any Lien in, upon or of any property of
the Borrower under any such indenture, instrument or other agreement, other than
the Loan Documents.
     4.3 Valid and Binding Obligations. All of the Loan Documents, when duly
executed and delivered by the Borrower will be the legal, valid and binding
obligations of the Borrower enforceable against the Borrower by the Bank in
accordance with the respective terms, except as limited by equitable principles
and applicable liquidation, conservatorship, bankruptcy, moratorium,
arrangement, receivership, insolvency, reorganization or similar laws from
time-to-time affecting the rights of creditors generally.
     4.4 Title to Collateral. All of the Collateral is free and clear of all
Liens, except Permitted Liens, and the Borrower has good and indefeasible title
to such Collateral.
     4.5 Liabilities, Litigation, and Restrictions. Other than as disclosed
under the heading “Liabilities” on Schedule 4.5 hereto, the Borrower has no
liabilities, direct or contingent, which may materially and adversely affect
their respective business, operations or ownership of the Collateral. Except as
set forth under the heading “Litigation” on Schedule 4.5 hereto, no Litigation
of any nature affecting the Borrower is pending before any Tribunal or, to the
best knowledge of the Borrower, threatened against or affecting the Borrower, as
the case may be, which might reasonably be expected to result in any material
impairment of its ownership of any Collateral or to have a Material Adverse
Effect. No unusual or unduly burdensome restriction, restraint or hazard exists
by contract, Requirement of Law, or otherwise relative to the business or
operations of the Borrower or the ownership of a material portion of the
Collateral other than such as relates generally to Persons engaged in business
activities similar to those conducted by the Borrower.
     4.6 Authorizations and Consents. No authorization, consent, approval,
exemption, franchise, permit or license of, or filing with, any Governmental
Authority, Tribunal or any other Person is required to authorize, or is
otherwise required in connection with, the valid execution and delivery by the
Borrower of the Loan Documents, or any instrument contemplated hereby or
thereby, the repayment by the Borrower of the Note and the interest and fees
provided in the Loan Documents and this Agreement, or the performance (except in
the Event of Default) by the Borrower of the Obligations.
     4.7 Compliance with Laws. The Borrower and the Collateral are in compliance
in all material respects with all applicable law, rule, regulation, order or
decree, including, without limitation, Environmental Laws and ERISA.
     4.8 Proper Filing of Tax Returns and Payment of Taxes Due. The Borrower has
duly and properly filed all United States income tax returns and all other tax
returns which are required to be filed by each, have paid all taxes due except
such as are being Contested in Good Faith and as to which adequate provisions
and disclosures have been made. The charges and reserves of the Borrower with
respect to taxes and other governmental charges are adequate, and the Borrower
has no knowledge of any deficiency or additional assessment in a material amount
in connection with taxes, assessments, or charges not provided for on its books.

11

--------------------------------------------------------------------------------

 

     4.9 Environmental Law. Except as disclosed on Schedule 4.9, under the
heading “Environmental Matters”, the Borrower has not received notice or
otherwise learned of (A) any Environmental Liability which could individually or
in the aggregate have a Material Adverse Effect arising in connection with
(i) any non-compliance with or violation of the requirements of any
Environmental Law or (ii) the release or threatened release of any toxic or
hazardous waste into the environment, (B) any threatened or actual liability in
connection with the release or threatened release of any toxic or hazardous
waste into the environment which could individually or in the aggregate have a
Material Adverse Effect or (C) any federal or state investigation evaluating
whether any remedial action is needed to respond to a release or threatened
release of any toxic or hazardous waste into the environment for which the
Borrower is or may be liable.
     4.10 No Material Misstatements. No information, exhibit, statement or
report furnished to the Bank by or at the direction of the Borrower in
connection with this Agreement contains any material misstatement of fact or
omits to state a material fact necessary to make the statements contained
therein not misleading as of the date made or deemed made.
     4.11 Location of Business and Office. The principal place of business and
chief executive office of the Borrower is located at 205 West Maple, Suite 1100,
Enid, Oklahoma 73701, or at such other location as the Borrower may have, by
proper written notice hereunder, advised the Bank.
     4.12 Security Instruments. The provisions of the Security Instruments are
effective to create in favor of the Bank legal, valid and enforceable Liens,
except as limited by equitable principles and applicable liquidation,
conservatorship, bankruptcy, moratorium, arrangement, receivership, insolvency,
reorganization or similar laws from time-to-time affecting the rights of
creditors generally, in all right, title and interest of the Borrower in the
Collateral described therein, which Liens, assuming the accomplishment of
recording and filing in accordance with applicable Laws prior to the
intervention of rights of other Persons, shall constitute fully perfected first
priority Liens on all right, title and interest of the Borrower in the
Collateral described therein, subject to Permitted Liens.
     4.13 Defaults. The Borrower is not in default and no event or circumstance
has occurred which, but for the passage of time or the giving of notice or both,
would constitute a default under any loan or credit agreement, indenture,
mortgage, deed of trust, security agreement or other agreement or instrument to
which the Borrower is a party in any respect. No Event of Default hereunder has
occurred and is continuing.
     4.14 Use of Proceeds; Margin Stock. The Borrower will use the proceeds of
the Note solely for the purposes described herein. None of such proceeds will be
used for the purpose of purchasing or carrying any “margin stock” as defined in
Regulation U or Regulation X of the Board of Governors of the Federal Reserve
System (12 C.F.R. Part 221), or for the purpose of reducing or retiring any debt
which was originally incurred to purchase or carry a margin stock or for any
other purpose which might constitute this transaction a “purpose credit” within
the meaning of such Regulations. The Borrower is not engaged principally or as
one of its important activities in the business of extending credit for the
purpose of purchasing or carrying any “margin stock” as defined in such
Regulations, or for the purpose of reducing or retiring any indebtedness which
was originally incurred to purchase or carry a margin stock or for any other
purpose which might constitute this transaction a “purpose credit” within the
meaning of said Regulations. Neither the Borrower nor any Person acting on
behalf of the Borrower, has taken or will take any action which might cause the
Note hereunder or under any of the Security Instruments, including this
Agreement, to violate said Regulations or any other regulation of the Board of
Governors of the Federal Reserve System or to violate the Securities Exchange
Act of 1934 or any rule or regulation thereunder, in each case as now in effect
or as the same may hereafter be in effect.
     4.15 Liens. Except for Permitted Liens or as set forth on Schedule 4.15,
the Collateral is free and clear of all Liens and encumbrances.
     4.16 Books of Account. All books of account of the Borrower and each
Subsidiary fully and fairly disclose all of the transactions, properties,
assets, investments, liabilities and obligations of the

12

--------------------------------------------------------------------------------

 

Borrower and each such Subsidiary in all material respects and all of such books
of account are in the possession of the Borrower and each such Subsidiary and
are true, correct and complete in all material respects.
     4.17 Financial Statements. With respect to any representation and warranty
which is deemed to be made after the date hereof by the Borrower, the balance
sheet and statements of operations, of shareholders’ equity and of cash flow,
which as of such date shall most recently have been furnished by or on behalf of
the Borrower to the Bank for the purposes of or in connection with this
Agreement or any transaction contemplated hereby, shall have been prepared in
accordance with GAAP consistently applied (except as disclosed therein and, in
the case of interim financial statements, for the absence of footnote
disclosures), and shall present fairly the Consolidated financial condition of
the corporations covered thereby as at the dates thereof for the periods then
ended, subject, in the case of quarterly financial statements, to normal
year-end audit adjustments. There has been no change in the business, assets,
operations or financial condition of the Borrower or any Subsidiary which has
had or could reasonably be expected to have a Material Adverse Effect from that
shown on the Borrower’s audited consolidated financial statements dated
September 30, 2009, the Subsidiaries’ Annual Statements dated December 31, 2008,
all of which statements have been furnished to the Bank.
     4.18 Litigation and Contingent Liabilities. Except as set forth (including
estimates of the dollar amounts involved) in Schedule 4.18, no claim, litigation
(including, without limitation, derivative actions), arbitration, governmental
investigation or proceeding or inquiry is pending or threatened against the
Borrower or any of its Subsidiaries (i) which would, if adversely determined,
have a Material Adverse Effect or (ii) which relates to any of the transactions
contemplated hereby. Other than any liability incident to such claims,
litigation or proceedings, the Borrower has no material Contingent Liabilities
not provided for or referred to in the financial statements delivered pursuant
to Sections 3.1.1(j) and 5.1.
     4.19 Employee Benefit Plans. All welfare plans and all pension plans,
within the meaning of sections 3(1) and (2) of ERISA, respectively, to the
knowledge of the Borrower, are maintained with respect to employees of the
Borrower or its Subsidiaries.
     4.20 Accuracy of Information. All factual written information furnished
heretofore or contemporaneously herewith by or on behalf of the Borrower or any
of its Subsidiaries to the Bank for purposes of or in connection with this
Agreement or any of the transactions contemplated hereby, as supplemented to the
date hereof, is and all other such factual written information hereafter
furnished by or on behalf of the Borrower or any of its Subsidiaries (including,
without limitation, information such as notice of judgments involving the
officers and directors of the Borrower and its Subsidiaries) to the Bank will be
true and accurate in every material respect on the date as of which such
information is dated or certified and not incomplete by omitting to state any
material fact necessary to make such information not misleading.
     4.21 Taxes. Each of the Borrower and each of its Subsidiaries has filed all
tax returns that are required to be filed by it, and has paid or provided
adequate reserves for the payment of all material taxes, including, without
limitation, all payroll taxes and federal and state withholding taxes, and all
assessments payable by it that have become due, other than (a) those that are
not yet delinquent or that are disclosed on Schedule 4.21 and are being
contested in good faith by appropriate proceedings and with respect to which
reserves have been established and are being maintained, in accordance with GAAP
or (b) those which the failure to file or pay would not have a Material Adverse
Effect. Except as set forth in Schedule 4.21, there is no ongoing audit or, to
the Borrower’s knowledge, other governmental investigation of the tax liability
of the Borrower or any of its Subsidiaries and there is no unresolved claim by a
taxing authority concerning the Borrower’s or any such Subsidiary’s tax
liability, for any period for which returns have been filed or were due. As used
in this Section 4.21, the term “taxes” includes all taxes of any nature
whatsoever and however denominated, including, without limitation, excise,
import, governmental fees, duties and all other charges, as well as additions to
tax, penalties and interest thereon, imposed by any government or
instrumentality, whether federal, state, local, foreign or other.

13

--------------------------------------------------------------------------------

 

     4.22 Compliance with Laws. Neither the Borrower nor any of its
Subsidiaries, by virtue of consummating the transactions evidenced by the Loan
Documents or otherwise, is in violation of any law, ordinance, rule, regulation,
order, policy, guideline or other requirement of any Governmental Authority, if
the effect of such violation could reasonably be expected to have a Material
Adverse Effect and, to the best of the Borrower’s knowledge, no such violation
has been alleged and each of the Borrower and its Subsidiaries (i) has filed in
a timely manner all reports, documents and other materials required to be filed
by it with any Governmental Authority, and the information contained in each of
such filings is true, correct and complete in all material respects and (ii) has
retained all records and documents required to be retained by it pursuant to any
law, ordinance, rule, regulation, order, policy, guideline or other requirement
of any Governmental Authority, if the failure to so retain such records and
documents could reasonably be expected to have a Material Adverse Effect.
     4.23 No Defaults. No event of default (or other event authorizing the
creditor to accelerate indebtedness) has occurred under any credit agreement or
other agreement.
ARTICLE V
COVENANTS OF THE BORROWER
     5. Affirmative Covenants. So long as any portion of any Loan or Advance
shall remain unpaid or the Bank shall have any commitment to make an Advance
hereunder, the Borrower will and will cause each of its Subsidiaries, as
applicable, to:
     5.1 Financial Statements on the Borrower and Subsidiaries. As soon as
available, and in no event later than 90 days of the end of each fiscal year,
the Borrower shall deliver to the Bank a copy of its annual consolidated audited
Financial Statement. As to Borrower, concurrent with the submission of a
Financial Statement or a tax return, a Compliance Certificate executed by a
Manager of Borrower stating that such Manager, after due inquiry, has no
knowledge of a Default or an Event of Default.
     5.2 Additional Information. The Borrower shall furnish to the Bank,
promptly upon the reasonable request of the Bank, such additional financial or
other information concerning the assets, liabilities, operations and
transactions of the Borrower as the Bank may from time to time reasonably
request; and notify the Bank not less than ten (10) Business Days prior to the
occurrence of any condition or event that may change the proper location for the
filing of any financing statement or other public notice or recording for the
purpose of perfecting a Lien in any Collateral, including, without limitation,
any change in the state of organization.
     5.3 Notice of Default, Etc. Immediately after an Executive Officer of the
Borrower knows or has reason to know of the existence of any Default or Event of
Default, or any development or other information which would have a Material
Adverse Effect, telephonic or e-mail notice specifying the nature of such
Default or Event of Default or development or information, including the
anticipated effect thereof, which notice shall be promptly confirmed in writing
by the Borrower by certified or registered mail, recognized courier, hand
delivery or telecopier within two (2) Business Days.
     5.4 Notice of Litigation and ERISA. Promptly upon learning of the
occurrence of any of the following, written notice thereof, describing the same
and the steps being taken by the Borrower with respect thereto: (A) the
institution of, or any adverse determination in, any litigation, arbitration
proceeding or governmental proceeding (including any Internal Revenue Service or
Department of Labor proceeding with respect to any Plan or Welfare Plan) which
could, if adversely determined, be reasonably expected to have a Material
Adverse Effect and which is not Ordinary Course Litigation, (B) an ERISA Event,
and an event with respect to any Plan which could result in the incurrence by
the Borrower or any of its Subsidiaries of any material liability (other than a
liability for contributions or premiums), fine or penalty, (C) the commencement
of any dispute which might lead to the modification, transfer, revocation,
suspension or termination of this Agreement or any Loan Document or (D) any
other event which could be reasonably expected to have a Material Adverse
Effect.

14

--------------------------------------------------------------------------------

 

     5.5 New Subsidiaries. Promptly upon formation or acquisition of any
Subsidiary, written notice of the name, purpose and capitalization of such
Subsidiary and whether such Subsidiary is a Material Subsidiary; and cause such
Subsidiary, to become a party to the Guaranty, pledge the shares of such
Subsidiary pursuant to the terms of the Pledge Agreement, and take such other
actions in connection therewith, as may be requested by the Bank.
     5.6 Corporate Existence; Foreign Qualification. Do and cause to be done at
all times all things necessary to (i) maintain and preserve (in the existing
jurisdiction of incorporation) the corporate existence of the Borrower and each
Material Subsidiary of the Borrower, and (ii) be, and ensure that each Material
Subsidiary of the Borrower is, duly qualified to do business and (to the extent
applicable) be in good standing as a foreign corporation in each jurisdiction
where the nature of its business makes such qualification necessary unless the
failure to be so qualified would not have a Material Adverse Effect.
     5.7 Books, Records, Inspections and Collateral. (i) Maintain, and cause
each of its Subsidiaries to maintain, materially complete and accurate books and
records in accordance with GAAP and in addition, with respect to each
Subsidiary, (ii) permit, and cause each of its Subsidiaries to permit, access at
reasonable times by the Bank to its books and records, (iii) permit, and cause
each of its Subsidiaries to permit, the Bank or its designated representative to
inspect during normal business hours its properties and operations, (iv) permit,
and cause each of its Subsidiaries to permit, the Bank to discuss its business,
operations and financial condition with its officers and its independent
accountants, and (v) maintain, and cause each of its Subsidiaries to maintain
all material books and records and all collateral described in the Security
Agreements only at the headquarters office of the Borrower.
     5.8 Insurance. Maintain, and cause each of its Material Subsidiaries to
maintain, insurance policies to such extent and against such hazards and
liabilities as in effect on the date hereof and as otherwise may be required by
the Bank or by law or as may be customarily maintained by prudent companies
similarly situated.
     5.9 Taxes and Liabilities. Pay, and cause each of its Subsidiaries to pay,
when due all material taxes, assessments and other material liabilities except
as contested in good faith and by appropriate proceedings with respect to which
reserves have been established, and are being maintained, in accordance with
GAAP except where failure to pay would not have a Material Adverse Effect.
     5.10 Employee Benefit Plans. Maintain, and cause each of its Subsidiaries
to maintain, each Plan and Welfare Plan in compliance in all material respects
with all applicable Requirements of Law except where failure to so comply would
not have a Material Adverse Effect.
     5.11 Compliance with Laws. Comply, and cause each of its Subsidiaries to
comply, (i) with all federal and local laws, rules and regulations related to
its businesses, and (ii) with all Contractual Obligations binding upon such
entity, except in each case where failure to so comply would not in the
aggregate have a Material Adverse Effect.
     5.12 Conduct of Business. Engage, and cause each Material Subsidiary to
engage, in insurance business and related activities in all material respects
(including without limitation lines of insurance underwritten) the same as
presently engaged in.
     5.13 Costs and Expenses. (a) Regardless of whether any Loan may be
extended, the Borrower agrees to pay from time to time on demand all reasonable
costs and expenses of the Bank in connection with the preparation, execution,
delivery, administration, modification and amendment of this Agreement, the
other Loan Documents and the other documents to be delivered thereunder,
including, without limitation, (A) all due diligence, syndication (including
printing, distribution and Bank meetings) transportation, computer, duplication,
appraisal, consultant, filing, and audit expenses and (B) the fees and expenses
of counsel for the Bank with respect thereto and with respect to advising the
Bank as to its rights and responsibilities under this Agreement. The Borrower
further agrees to pay on demand all costs and expenses of the Bank (including,
without limitation, counsel fees and expenses), in connection with

15

--------------------------------------------------------------------------------

 

the enforcement (whether through negotiations, legal proceedings or otherwise)
of this Agreement, the other Loan Documents and the other documents to be
delivered hereunder, including, without limitation, reasonable fees and expenses
of counsel for the Bank in connection with the enforcement of rights under this
Section 5.13.
     5.14 Depository Accounts. The Borrower shall establish a depository account
at the Bank.
ARTICLE VI
NEGATIVE COVENANTS
     6 Negative Covenants. So long as any Advance shall remain unpaid or the
commitment to make any Advance remains in effect, the Borrower will and will
cause each of its Subsidiaries, as applicable, to:
     6.1 Mergers, Consolidations and Sales. Without the Bank’s written consent,
Borrower shall not, and not permit any of its Subsidiaries to, (i) merge or
consolidate, or purchase or otherwise acquire all or substantially all of the
assets or stock of any class of, or any partnership or joint venture interest
in, any other Person (other than a newly formed Subsidiary or the acquisition of
a Subsidiary which complies with clause (B) of this Section 6.1 or the
acquisition of shares of a Subsidiary held by minority shareholders), or (ii) in
the case of any Subsidiary, issue capital stock to any person other than the
Borrower, or (iii) sell, transfer, pledge, convey, repurchase, retire (except as
required by applicable law) or otherwise grant an interest in any capital stock,
or (iv) sell, transfer, pledge, convey, lease or otherwise convey an interest in
all or any substantial part of its assets (including without limitation the
capital stock of Subsidiaries) other than any sale, transfer, conveyance or
lease in the ordinary course of business or any sale or assignment of
receivables; except for (A) any such merger or consolidation of any direct
wholly owned Subsidiary of the Borrower into, with or to Borrower or any other
direct wholly owned Subsidiary, (B) purchases or acquisitions which otherwise
comply with the terms hereof provided (x) no Default or Event of Default has
occurred and is continuing or would result therefrom and (y) the purchase price
for any single purchase or acquisition does not exceed 10% of Net Worth minus
all amounts which in accordance with GAAP would be characterized as intangible
assets (including goodwill) as of the date of such purchase or acquisition
(calculated on a pro forma basis giving effect to such acquisition or purchase)
and (z) the aggregate purchase price of all purchases and acquisitions after the
Effective Date does not exceed 20% of Net Worth minus all amounts which in
accordance with GAAP would be characterized as intangible assets (including
goodwill) and (C) sales of assets and capital stock of Subsidiaries that are not
Material Subsidiaries, provided that as to (A), (B) and (C) above, no Default or
Event of Default has occurred and is continuing.
     6.2 Other Agreements. Not, and not permit any of its Subsidiaries to, enter
into any agreement containing any provision which would be materially violated
or materially breached by the performance of obligations hereunder or under any
instrument or document delivered or to be delivered by it hereunder or in
connection herewith.
     6.3 Transactions with Affiliates. Not, and not permit any Subsidiary to,
enter into, or cause, suffer or permit to exist, directly or indirectly, any
arrangement, transaction or contract with any of its Affiliates unless such
arrangement, transaction or contract is on an arm’s length basis; provided that
(i) transactions between the Borrower and any wholly-owned Subsidiary of the
Borrower, or between any wholly-owned Subsidiaries of the Borrower, and
(ii) investments described in clause (i) of the definition of “Permitted
Investments” shall be excluded from the restrictions set forth in this
Section 6.3.
     6.4 Liens. Not create or permit to exist any Lien on any assets of the
Borrower (including, without limitation, the capital stock of the Subsidiaries)
or any of the Borrower’s Subsidiaries, now or hereafter existing or acquired, or
on the capital stock of any of the Borrower’s Subsidiaries, except the
following: (A) Liens for current taxes not delinquent or for taxes being
contested in good faith and by appropriate proceedings and with respect to which
adequate reserves have been established, and are being maintained, in accordance
with GAAP, (B) easements, party wall agreements, rights of way, restrictions,
minor defects or irregularities in title and other similar Liens not interfering
in any material

16

--------------------------------------------------------------------------------

 

respect with the ordinary course of the business of the Borrower and its
Subsidiaries taken as a whole; (C) Liens in connection with the acquisition of
fixed assets after the date hereof and attaching only to the property being
acquired, (D) Liens incurred in the ordinary course of business in connection
with workers’ compensation, unemployment insurance or other forms of
governmental insurance or benefits and Liens pursuant to letters of credit or
other security arrangements in connection with such insurance or benefits,
(E) mechanics’, workers’, materialmen’s, landlord liens and other like Liens for
amounts payable by the Borrower or its Subsidiaries, arising in the ordinary
course of business in respect of obligations which are not delinquent or which
are being contested in good faith and by appropriate proceedings and with
respect to which adequate reserves have been established, and are being
maintained, in accordance with GAAP, (F) Permitted Liens in effect on the date
hereof; (G) attachments, judgments and other similar Liens for sums payable by
the Borrower or its Subsidiaries not exceeding $50,000 in the aggregate at any
one time; (H) attachments, judgments and other similar Liens for sums exceeding
the $50,000 limit described in clause (G), the execution or other enforcement of
such Liens is effectively stayed and claims secured thereby are being actively
contested in good faith and by appropriate proceedings and have been bonded off;
and (I) Liens pursuant to the Loan Documents.
     6.5 Restrictions on Negative Pledge Agreements. Not, and not permit any of
its Subsidiaries to, enter into or assume any agreement, other than any Loan
Document, that places any restrictions upon the right of the Borrower or any of
its Subsidiaries to sell, pledge or otherwise dispose of any material portion of
its properties now owned or hereafter acquired, provided, however, the foregoing
restriction shall not apply to Hiland Partners, LP or any of its subsidiaries.
     6.6 No Amendment of Certain Documents. Not enter into or permit any
amendment, modification or waiver of or supplement to the Organization Documents
that would (i) create or amend redemption provisions applicable to the
Borrower’s capital units to provide for mandatory redemption or redemption at
the option of the holder prior to the repayment of the Loans, or (ii) in any
other manner be materially adverse to the interests of the Bank.
     6.7 Subsidiaries. Not permit any Subsidiaries to (i) expend cash other than
in the ordinary course of operations (including payment of claims) and loans to
the Borrower during any Fiscal Year of the Borrower in excess of $500,000; or
(ii) enter into, or cause, suffer or permit to exist, directly or indirectly,
any arrangement, transaction (other than loans to Borrower permitted under (i))
or contract unless such arrangement, transaction or contract (A) is on an arm’s
length basis, and (B) shall not be in connection with the making of any loans or
advances or the issuance of any guarantees to or for the benefit of any
Affiliate or otherwise; provided, however, this Section 6.7 shall not affect any
Subsidiaries’ ability to declare and pay dividends to the Borrower.
ARTICLE VII
EVENTS OF DEFAULT
     7.1 Events of Default. If any of the following events (“Events of Default”)
shall occur and be continuing:
     (a) Default shall be made in the payment by Borrower when due of any
installment of principal or interest under this Agreement, the Note, any
Obligation, or any Fee, or the principal balance due under the Loan exceeds the
Pledged Collateral Market Value;
     (b) An Event of Default as defined in any Loan Document shall have
occurred;
     (c) Default shall be made by the Borrower in the due observance or
performance of any of its obligations, covenants or agreements contained in any
of the Loan Documents;
     (d) Any representation or warranty made by the Borrower in any of the Loan
Documents proves to have been untrue in any material respect or any
representation, statement (including Financial Statements), certificate or data
furnished or made to the Bank in connection herewith proves to have been untrue
in any material respect as of the date the facts therein set forth were stated
or certified;

17

--------------------------------------------------------------------------------

 

     (e) Default shall be made by the Borrower or any Subsidiary (as principal
or other surety) in the payment or performance of any bond, debenture, note or
other evidence of indebtedness or under any credit agreement, loan agreement,
indenture, promissory note or similar agreement or instrument executed in
connection with any of the foregoing, and such default would cause a Material
Adverse Effect and shall remain unremedied beyond the applicable grace period,
if any, with respect thereto and such default is not being Contested in Good
Faith by the Borrower or the Subsidiary;
     (f) The Borrower shall (i) apply for or consent to the appointment of a
receiver, trustee or liquidator of it or all or a substantial part of its
assets, (ii) file a voluntary petition commencing an Insolvency Proceeding
concerning the Borrower, (iii) make a general assignment for the benefit of
creditors, (iv) be unable, or admit in writing its inability, to pay its debts
generally as they become due, or (v) file an answer admitting the material
allegations of a petition filed against it in any Insolvency Proceeding;
     (g) An order, judgment or decree shall be entered against the Borrower by
any court of competent jurisdiction or by any other duly authorized authority,
on the petition of a creditor or otherwise, granting relief in any Insolvency
Proceeding or approving a petition seeking reorganization or an arrangement of
its debts or appointing a receiver, trustee, conservator, custodian or
liquidator of it or all or any substantial part of its assets and such order,
judgment or decree shall not be dismissed or stayed within sixty (60) days after
the issuance and entry thereof;
     (h) The levy against any material portion of the property of the Borrower
or any execution, garnishment, attachment, sequestration or other writ or
similar proceeding which is not permanently dismissed or discharged within
30 days after the levy and which could reasonably be expected to have a Material
Adverse Effect;
     (i) A final and non-appealable order, judgment or decree with respect to
the Collateral, unless such claim, litigation or expenditure with respect to
other property of the Borrower would not cause a Material Adverse Effect, shall
be entered against the Borrower for money damages and/or Indebtedness in an
amount in excess of $500,000 which is not otherwise covered by insurance for
100% of the judgment in excess of $500,000 and such order, judgment or decree
shall not be paid, dismissed or the execution thereof stayed within 60 days;
     (j) Any charges are filed or any other action or proceeding is instituted
by any Governmental Authority against the Borrower under the Racketeering
Influence and Corrupt Organizations Statute (18 U.S.C. § 1961 et seq. the result
of which could be the forfeiture or transfer of any material property of the
Borrower subject to a lien in favor of the Bank without (i) satisfaction or
provision for satisfaction of such Lien, or (ii) such forfeiture or transfer of
such property being expressly made subject to such Lien;
     (k) The Borrower shall have (i) concealed, removed or diverted, or
permitted to be concealed, removed or diverted, any part of its property, with
intent to hinder, delay or defraud its creditors or any of them; (ii) made or
suffered a transfer of any of its property which may be fraudulent under any
bankruptcy, fraudulent conveyance or similar Law; (iii) made any transfer of its
property to or for the benefit of a creditor at a time when other creditors,
similarly situated have not been paid with the intent to hinder, delay or
defraud its creditors or any of them; or (iv) shall have suffered or permitted,
while insolvent, any creditor to obtain a Lien upon any of its property through
legal proceedings or distraint which is not vacated within 30 days from the date
thereof;
     (l) Any Security Instrument shall for any reason not, or cease to, create
valid and perfected first-priority Liens against the Pledged Collateral covered
thereby;
     (m) A contribution failure occurs with respect to any Plan sufficient to
give rise to a Lien against the Borrower or any of its Subsidiaries under
section 302(f)(1) of ERISA (as in effect on the

18

--------------------------------------------------------------------------------

 

Effective Date) or withdrawal by one or more companies in the Controlled Group
from one or more Multiemployer Plans to which it or they have an obligation to
contribute and the withdrawal liability (without unaccrued interest) to
Multiemployer Plans as a result of such withdrawal or withdrawals (including any
outstanding withdrawal liability that the Controlled Group has incurred on the
date of such withdrawal) is $100,000 or more;
     (n) Any change is made in applicable Law that restricts the authority of
any Subsidiary to issue dividends which restriction is reasonably likely to have
a Material Adverse Effect on the ability of the Borrower to perform its
obligations hereunder; or
     (o) A default or event of default shall have occurred and be continuing in
any other agreement between the Borrower or any Affiliate of Borrower as obligor
and the Bank as obligee; or then, and in any such event, the Bank (i) by notice
to the Borrower, may declare the obligation to make Advances and/or Loans to be
terminated, whereupon the same shall forthwith terminate, and (ii) by notice to
the Borrower, may declare the Loans, all interest thereon and all other amounts
payable under this Agreement to be forthwith due and payable, whereupon the
Loans, all such interest and all such amounts shall become and be forthwith due
and payable, without presentment, demand, protest or further notice of any kind,
all of which are hereby expressly waived by the Borrower; provided, however,
that in the event of an actual or deemed entry of an order for relief with
respect to the Borrower under the United States Bankruptcy Code, (A) the
obligation of the Bank to make Advances and/or Loans shall automatically be
terminated and (B) the Loans, all such interest and all such amounts shall
automatically become and be due and payable, without presentment, demand,
protest or any notice of any kind, all of which are hereby expressly waived by
the Borrower. In addition, if any Event of Default has occurred and is
continuing, the Bank may exercise any of its rights provided in the Pledge
Agreement, the Guaranties, the Security Agreements, the Assignment Agreement and
each other Loan Document or available under the Uniform Commercial Code or other
applicable Laws. Without limitation, the Bank may appoint a receiver or trustee
to assume control over all or any part of the business or assets of the Borrower
or any of its Subsidiaries (subject only to any restrictions that may be imposed
by the Authority).
     (p) The dissolution or loss of legal existence of the Borrower;
     (r) A Change in Control shall occur; or
     (s) The Hiland Common Units cease to be publicly traded.
     7.2 Remedies.
     (a) Upon the occurrence of an Event of Default specified in Subsection
7.1(a), upon ten (10) days’ written notice, all Obligations shall automatically
become immediately due and payable, without presentment, demand, protest, notice
of protest, default or dishonor, notice of intent to accelerate maturity, notice
of acceleration of maturity or other notice of any kind, except as may be
provided to the contrary elsewhere herein, all of which are hereby expressly
waived by the Borrower. Nothing contained in this Section 7.2 shall be construed
to limit or amend in any way the Events of Default enumerated in the Note, or
any other Loan Documents executed in connection with the transaction
contemplated herein.
     Upon the occurrence and during the continuance of any Event of Default
under Subsection 7.1(a), the Bank is hereby authorized at any time and from time
to time, without notice to the Borrower (any such notice being expressly waived
by the Borrower), to set-off and apply any and all deposits (general or special,
time or demand, provisional or final) of the Borrower to the extent held by the
Bank to or for the account of the Borrower against any and all of the
Indebtedness of the Borrower under the Note, irrespective of whether or not the
Bank shall have made any demand under the Security Instruments, including this
Agreement or the Note and although such Indebtedness may be unmatured. Any
amount setoff by the Bank shall be applied against the Indebtedness owed the
Bank by the Borrower pursuant to this Agreement and the Note. The Bank agrees
promptly to notify the Borrower, after any such setoff and application, provided
that the failure to give such notice shall not affect the validity of such
setoff and application. The rights of the Bank under this Section 7.2 are in
addition to other rights and

19

--------------------------------------------------------------------------------

 

remedies (including, without limitation, other rights of set-off which the Bank
may have). Within five (5) Business Days after any such set-off or appropriation
by the Bank, the Bank shall give the Borrower written notice thereof. However, a
failure to give such notice will not affect the validity of the set-off or
appropriation.
     (b) Upon the occurrence of any Event of Default, other than those specified
in Subsection 7.1(a), the Borrower shall have thirty (30) days after receiving
written notification of the Event of Default to cure such Default but, during
such cure period, the Bank will not, as a result of such Default, accelerate the
Note or exercise any of its rights pursuant to the Loan Documents, and
notwithstanding Section 7.1, such Default will not constitute an “Event of
Default”, unless such Default is not remedied to the reasonable satisfaction of
Bank within 30 days after the Borrower’s receipt of such written notification.
In the event the Borrower shall fail to effectuate such a cure, the Bank may
declare all Obligations immediately due and payable, without presentment,
demand, protest, notice of protest, default or dishonor, notice of intent to
accelerate maturity, notice of acceleration of maturity or other notice of any
kind, except as may be provided to the contrary elsewhere herein, all of which
are hereby expressly waived by the Borrower, and in such event, the Bank is
hereby authorized at any time and from time to time, without notice to the
Borrower (any such notice being expressly waived by the Borrower), to setoff and
apply any and all deposits (general or special, time or demand, provisional or
final) held by the Bank containing funds of the Borrower to the extent of the
Obligations.
     (c) Subject to the provisions of this Agreement, upon the occurrence of any
Event of Default, which is not cured within any applicable cure period, the Bank
may, in addition to the foregoing, exercise any or all of its rights and
remedies provided by Law or pursuant to the Loan Documents.
ARTICLE VIIi
MISCELLANEOUS
     9.1 Transfers and Participations. The Bank may, at any time, sell,
transfer, assign or grant participations in the Obligations or any portion
thereof; and the Bank may forward to each transferee and each prospective
transferee all documents and information relating to such Obligations, whether
furnished by the Borrower or otherwise obtained, as the Bank determines
necessary or desirable so long as responsibility, administrative or otherwise,
for the Loan remains with the Bank. The Borrower agrees that each transferee,
regardless of the nature of any transfer to it, may exercise all rights
(including, without limitation, rights of set-off) with respect to the
Obligations held by it as fully as if such transferee were the direct holder
thereof, subject to any agreements between such transferee and the transferor to
such transferee. The Bank agrees that each such transferee shall assume all of
the obligations of the Bank pursuant to the Loan Documents.
     9.2 Survival of Representations Warranties and Covenants. All
representations and warranties of the Borrower and all covenants and agreements
herein made shall survive the execution and delivery of this Agreement, the Note
and the Security Instruments and shall remain in force and effect so long as any
Obligation is outstanding.
     9.3 Notices and Other Communications. Except as to verbal notices expressly
authorized herein, which verbal notices shall be confirmed in writing, all
notices, requests and communications hereunder shall be in writing (including by
telegraph or telecopy). Unless otherwise expressly provided herein, any such
notice, request, demand or other communication shall be deemed to have been duly
given or made when delivered by hand, or, in the case of delivery by mail,
deposited in the mail, certified mail, return receipt requested, postage
prepaid, or, in the case of overnight courier service when delivered to the
courier service, when receipt thereof is addressed as follows:

  (a)   If to the Bank, to:         Coppermark Bank
3333 N.W. Expressway
P.O. Box 25676

20

--------------------------------------------------------------------------------

 

      Oklahoma City, OK 73125-0676
Attn: Chris Mostek, Vice President
Fax (405) 858-8118

21

--------------------------------------------------------------------------------

 

  (b)   If to the Borrower, to:         Hiland Holdings GP, LP
P.O. Box 5103
Enid, Oklahoma 73702-5103
Attn: Chief Financial Officer
Fax (580) 616-2080

Any party may, by proper written notice hereunder to the other, change the
individuals or addresses to which such notices to it shall thereafter be sent.
     9.4 Parties in Interest. Subject to applicable restrictions contained
herein, all covenants and agreements herein contained by or on behalf of the
Borrower or the Bank shall be binding upon and inure to the benefit of the
Borrower or the Bank, as the case may be, and their respective heirs, legal
representatives, successors and assigns.
     9.5 Rights of Third Parties. All provisions herein are imposed solely and
exclusively for the benefit of the Bank, the Borrower. No other Person shall,
have any right, benefit, priority or interest hereunder or as a result hereof or
have standing to require satisfaction of provisions hereof in accordance with
their terms, and any or all of such provisions may be freely waived in whole or
in part by the Bank at any time if in its sole discretion it deems it advisable
to do so.
     9.6 Articles and Sections. This Agreement, for convenience only, has been
divided into Articles and Sections and it is understood that the rights and
other legal relations of the parties hereto shall be determined from this
instrument as an entirety and without regard to the aforesaid division into
Articles and Sections and without regard to headings prefixed to such Articles
or Sections.
     9.7 Number and Gender. Whenever the context requires, reference herein made
to the single number shall be understood to include the plural; and likewise,
the plural shall be understood to include the singular. Definitions of terms
defined in the singular or plural shall be equally applicable to the plural or
singular, as the case may be, unless otherwise indicated. Words denoting sex
shall be construed to include the masculine, feminine and neuter, when such
construction is appropriate; and specific enumeration shall not exclude the
general but shall be construed as cumulative.
     9.8 Renewals and Extensions. All provisions of this Agreement relating to
the Note shall apply with equal force and effect to each promissory note
hereafter executed or issued which in whole or in part represents a renewal or
extension of any part of the Obligations of the Borrower under this Agreement,
the Note, or any other Loan Document.
     9.9 No Waiver; Rights Cumulative. No course of dealing on the part of the
Bank, its officers or employees, nor any failure or delay by the Bank with
respect to exercising any of its rights under any Loan Document shall operate as
a waiver thereof. The rights of the Bank under the Loan Documents shall be
cumulative and the exercise or partial exercise of any such right shall not
preclude the exercise of any other right.
     9.10 Incorporation of Exhibits. The Exhibits attached to this Agreement are
incorporated herein and shall be considered a part of this Agreement for all
purposes.
     9.11 Survival Upon Unenforceability. In the event any one or more of the
provisions contained in any of the Loan Documents or in any other instrument
referred to herein or executed in connection with the Obligations shall, for any
reason, be held to be invalid, illegal or unenforceable in any respect, such
invalidity, illegality or unenforceability shall not affect any other provision
of any Loan Document or of any other instrument referred to herein or executed
in connection with such Obligations.

22

--------------------------------------------------------------------------------

 

     9.12 Amendments or Modifications. Neither this Agreement nor any provision
hereof may be changed, waived, discharged or terminated orally, but only by an
instrument in writing signed by the party against whom enforcement of the
change, waiver, discharge or termination is sought.
     9.13 Controlling Provision Upon Conflict. In the event of a conflict
between the provisions of this Agreement and those of any other Loan Document,
the provisions of this Agreement shall control.
     9.14 Time of Essence. Time is of the essence of this Agreement and of each
provision hereof.
     9.15 Disposition of Collateral. Notwithstanding any term or provision,
express or implied, in any of the Security Instruments, the realization,
liquidation, foreclosure or any other disposition on or of any or all of the
Collateral shall be in the order and manner and determined in the sole
discretion of the Bank; provided however, that in no event shall the Bank
violate applicable Law or exercise rights and remedies other than those provided
in such Security Instruments or otherwise existing at Law or in equity.
     9.16 Lack of Relationship. The relationship between the Borrower and the
Bank is, and shall at all times remain, solely that of borrower and lender, and
Bank neither undertakes nor assumes any responsibility or duty to the Borrower
to review, inspect, supervise, pass judgment upon, or inform the Borrower of any
matter in connection with any phase of the Borrower’s business, operations, or
condition, financial or otherwise. Borrower shall rely entirely upon its own
judgment with respect to such matters, and any review, inspection, supervision,
exercise of judgment, or information supplied to the Borrower by the Bank in
connection with any such matter is for the protection of the Bank, and neither
the Borrower nor any third party are entitled to rely thereon.
     9.17 GOVERNING LAW. THIS AGREEMENT AND THE LOAN DOCUMENTS SHALL BE DEEMED
TO BE MADE UNDER AND SHALL BE CONSTRUED IN ACCORDANCE WITH, AND GOVERNED BY, THE
STATE OF OKLAHOMA AND THE SUBSTANTIVE LAWS OF SUCH STATE AND THE APPLICABLE
FEDERAL LAWS OF THE UNITED STATES OF AMERICA IN THE VALIDITY, CONSTRUCTION,
ENFORCEMENT, AND INTERPRETATION OF THIS AGREEMENT AND THE LOAN DOCUMENTS, EXCEPT
TO THE EXTENT THAT THE LAWS OF ANY JURISDICTION WHERE COLLATERAL IS LOCATED
REQUIRE APPLICATION OF SUCH LAWS WITH RESPECT TO SUCH COLLATERAL.
     9.18 JURISDICTION AND VENUE. EACH OF THE PARTIES HERETO IRREVOCABLY AND
UNCONDITIONALLY SUBMITS TO THE NONEXCLUSIVE JURISDICTION IN COURTS HAVING SITUS
IN OKLAHOMA CITY, OKLAHOMA COUNTY,OKLAHOMA FOR ALL ACTIONS OR PROCEEDINGS WITH
RESPECT TO, ARISING DIRECTLY OR INDIRECTLY IN CONNECTION WITH, OUT OF, RELATED
TO OR FROM THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT AND HEREBY WAIVE ANY RIGHTS
TO TRANSFER OR CHANGE THE JURISDICTION OR VENUE OF ANY LITIGATION BROUGHT BY THE
BANK IN ACCORDANCE WITH THIS SECTION.
     9.19 NO DAMAGES. THE BORROWER CONFIRMS AND ACKNOWLEDGES THAT IT DOES NOT
HAVE, AND IS NOT AWARE OF, ANY CLAIMS, CAUSES OF ACTION, DAMAGES, COSTS,
EXPENSES OR LOSSES OF ANY KIND OR NATURE BY REASON OF OR ARISING OUT OF ANY ACT,
OCCURRENCE, TRANSACTION, OR OMISSION OF THE BANK IN CONNECTION WITH THIS
AGREEMENT, THE NOTE OR WITH THE LOAN DOCUMENTS. THE BANK SHALL NOT BE LIABLE TO
THE BORROWER (WHETHER IN CONTRACT, TORT, OR OTHERWISE) FOR ANY SPECIAL,
INDIRECT, CONSEQUENTIAL, PUNITIVE, OR EXEMPLARY DAMAGES, HOWEVER ARISING, FOR
ANY OTHER ACTION TAKEN OR OMITTED WITH RESPECT TO THIS AGREEMENT OR THE LOAN
DOCUMENTS.
     9.20 WAIVER OF RIGHTS TO JURY TRIAL. TO THE FULLEST EXTENT PERMITTED BY
LAW, AND AS SEPARATELY BARGAINED-FOR CONSIDERATION TO THE BANK, THE BORROWER
HEREBY KNOWINGLY, VOLUNTARILY, INTENTIONALLY, IRREVOCABLY AND UNCONDITIONALLY
WAIVES ANY RIGHT TO A TRIAL BY JURY IN ANY ACTION OR PROCEEDING

23

--------------------------------------------------------------------------------

 

TO ENFORCE OR DEFEND ANY RIGHTS UNDER THIS AGREEMENT, THE NOTE, THE PLEDGE
AGREEMENT, OR ANY OTHER LOAN DOCUMENT, OR UNDER ANY AMENDMENT, INSTRUMENT,
DOCUMENT OR AGREEMENT TO THE FOREGOING LOAN DOCUMENTS OR WHICH MAY IN THE FUTURE
BE DELIVERED IN CONNECTION WITH OR RELATING THERETO, OR ARISING FROM THE LENDING
RELATIONSHIP WHICH IS THE SUBJECT OF THIS AGREEMENT AND AGREES THAT ANY SUCH
ACTION OR PROCEEDING SHALL BE TRIED BEFORE A COURT AND NOT BEFORE A JURY.
     9.21 Entire Agreement. This Agreement constitutes the entire Agreement
among the parties hereto with respect to the parties hereof and shall supersede
any prior agreement between the parties hereto, whether written or oral,
relating to the subject hereof. Furthermore, in this regard, this written
Agreement and the other written Loan Documents represent, collectively, the
final agreement between the parties and may not be contradicted by evidence of
prior, contemporaneous, or subsequent oral agreements of the parties. There are
no unwritten agreements between the parties.
     IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their respective officers thereunto duly authorized, as of the date
first above written.

            Hiland Holdings GP, LP
a Delaware limited partnership
      By:   Hiland Partners GP Holdings, LLC,         a Delaware limited
liability company        its general partner              By:   /s/  Matthew S.
Harrison         Matthew S. Harrison        Vice President-Finance, Chief
Financial
Officer and Secretary        Coppermark Bank
      By:   /s/  Chris Mostek         Chris Mostek, Vice President             

24

--------------------------------------------------------------------------------

 

Schedule 1.1
Existing Indebtedness

         
Accounts payable
         
Note payable to Security National Bank
  $ 3,000,000  

 

--------------------------------------------------------------------------------

 

Schedule 4.5
Liabilities

         
Accounts payable
  $ 579,468    
Note payable to Security National Bank
  $ 3,000,000  

Litigation
     Three putative unitholder class action lawsuits have been filed relating to
the Hiland Partners Merger and the Hiland Holdings Merger. These lawsuits are as
follows: (i) Robert Pasternack v. Hiland Partners, LP et al., In the Court of
Chancery of the State of Delaware, Civil Action No. 4397-VCS; (ii) Andrew Jones
v. Hiland Partners, LP et al., In the Court of Chancery of the State of
Delaware, Civil Action No. 4558-VCS; and (iii) Arthur G. Rosenberg v. Hiland
Partners, LP et al., In the District Court of Garfield County, State of
Oklahoma, Case No. C3-09-211-02. The lawsuits name as defendants the
Partnership, Hiland Partners, the general partner of each of the Partnership and
Hiland Partners, and the members of the board of directors of each of the
Partnership and Hiland Partners. The lawsuits challenge both the Hiland Partners
Merger and the Hiland Holdings Merger. The lawsuits allege claims of breach of
the Partnership Agreement and breach of fiduciary duty on behalf of (i) a
purported class of common unitholders of the Partnership and (ii) a purported
class of our common unitholders of Hiland Partners.
     On July 10, 2009, the court in which the Oklahoma case is pending granted
our motion to stay the Oklahoma lawsuit in favor of the Delaware lawsuits. On
July 31, 2009, the plaintiff in the first-filed Delaware case (Pasternack) filed
an Amended Class Action Complaint and a motion to enjoin the mergers. This
Amended Class Action Complaint alleges, among other things, that (i) the
original consideration and revised consideration offered by the Hamm Parties is
unfair and inadequate, (ii) the members of the conflicts committees of the
general partner of each of the Partnership and Hiland Partners that were charged
with reviewing the proposals and making a recommendation to each committee’s
respective board of directors lacked any meaningful independence, (iii) the
defendants acted in bad faith in recommending and approving the Hiland Partners
Merger or the Hiland Holdings Merger, and (iv) the disclosures in the
Preliminary Proxy Statement filed by the Partnership and Hiland Partners are
materially misleading. The Pasternack plaintiff seeks to preliminarily enjoin
the defendants from proceeding with or consummating the mergers and seeks an
order requiring defendants to supplement the Preliminary Proxy Statement with
certain information. On August 13, 2009, the Partnership, Hiland Partners and
certain individual defendants moved to dismiss the claims added in the July 31,
2009 Amended Class Action Complaint. The plaintiffs moved to expedite
proceedings on September 4, 2009. On September 4, 2009, the plaintiffs filed a
motion to expedite the proceedings. On September 9, 2009, the Delaware Chancery
Court requested that the defendants file a response to plaintiffs’ motion that
same day and set a hearing on plaintiffs’ motion for September 11, 2009.
Defendants responded to plaintiffs’ motion as ordered by the Court, and,
following the hearing on September 11, 2009, plaintiffs’ motion to expedite the
proceedings was denied.
     We cannot predict the outcome of these lawsuits, or others, nor can we
predict the amount of time and expense that will be required to resolve the
lawsuits.

 

--------------------------------------------------------------------------------

 

Schedule 4.15
Permitted Liens
NONE

 

--------------------------------------------------------------------------------

 

Schedule 4.18
Litigation/Contingent Matters
     Three putative unitholder class action lawsuits have been filed relating to
the Hiland Partners Merger and the Hiland Holdings Merger. These lawsuits are as
follows: (i) Robert Pasternack v. Hiland Partners, LP et al., In the Court of
Chancery of the State of Delaware, Civil Action No. 4397-VCS; (ii) Andrew Jones
v. Hiland Partners, LP et al., In the Court of Chancery of the State of
Delaware, Civil Action No. 4558-VCS; and (iii) Arthur G. Rosenberg v. Hiland
Partners, LP et al., In the District Court of Garfield County, State of
Oklahoma, Case No. C3-09-211-02. The lawsuits name as defendants the
Partnership, Hiland Partners, the general partner of each of the Partnership and
Hiland Partners, and the members of the board of directors of each of the
Partnership and Hiland Partners. The lawsuits challenge both the Hiland Partners
Merger and the Hiland Holdings Merger. The lawsuits allege claims of breach of
the Partnership Agreement and breach of fiduciary duty on behalf of (i) a
purported class of common unitholders of the Partnership and (ii) a purported
class of our common unitholders of Hiland Partners.
     On July 10, 2009, the court in which the Oklahoma case is pending granted
our motion to stay the Oklahoma lawsuit in favor of the Delaware lawsuits. On
July 31, 2009, the plaintiff in the first-filed Delaware case (Pasternack) filed
an Amended Class Action Complaint and a motion to enjoin the mergers. This
Amended Class Action Complaint alleges, among other things, that (i) the
original consideration and revised consideration offered by the Hamm Parties is
unfair and inadequate, (ii) the members of the conflicts committees of the
general partner of each of the Partnership and Hiland Partners that were charged
with reviewing the proposals and making a recommendation to each committee’s
respective board of directors lacked any meaningful independence, (iii) the
defendants acted in bad faith in recommending and approving the Hiland Partners
Merger or the Hiland Holdings Merger, and (iv) the disclosures in the
Preliminary Proxy Statement filed by the Partnership and Hiland Partners are
materially misleading. The Pasternack plaintiff seeks to preliminarily enjoin
the defendants from proceeding with or consummating the mergers and seeks an
order requiring defendants to supplement the Preliminary Proxy Statement with
certain information. On August 13, 2009, the Partnership, Hiland Partners and
certain individual defendants moved to dismiss the claims added in the July 31,
2009 Amended Class Action Complaint. The plaintiffs moved to expedite
proceedings on September 4, 2009. On September 4, 2009, the plaintiffs filed a
motion to expedite the proceedings. On September 9, 2009, the Delaware Chancery
Court requested that the defendants file a response to plaintiffs’ motion that
same day and set a hearing on plaintiffs’ motion for September 11, 2009.
Defendants responded to plaintiffs’ motion as ordered by the Court, and,
following the hearing on September 11, 2009, plaintiffs’ motion to expedite the
proceedings was denied.
     We cannot predict the outcome of these lawsuits, or others, nor can we
predict the amount of time and expense that will be required to resolve the
lawsuits.

 

--------------------------------------------------------------------------------

 

Schedule 4.9
Environmental Matters
NONE

 

--------------------------------------------------------------------------------

 

Schedule 4.21
Taxes
NONE