Exhibit 10.3
EXECUTION
SECOND AMENDED AND RESTATED CREDIT AGREEMENT
Among
POSTROCK ENERGY SERVICES CORPORATION,
as a Borrower,
POSTROCK MIDCONTINENT PRODUCTION, LLC,
as a Borrower,
ROYAL BANK OF CANADA,
as Administrative Agent and Collateral Agent
and
The Lenders Party Hereto
$350,000,000
BORROWING BASE FACILITY
Initial Borrowing Base $225,000,000
Dated as of September 21, 2010

 

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TABLE OF CONTENTS

              Page
ARTICLE I. DEFINITIONS AND ACCOUNTING TERMS
    3  
1.01. Defined Terms
    3  
1.02. Other Interpretive Provisions
    27  
1.03. Accounting Terms
    28  
1.04. Rounding
    28  
1.05. References to Agreements, Persons and Laws; Rules of Construction
    28  
 
       
ARTICLE II. THE REVOLVING COMMITMENTS AND BORROWINGS
    28  
2.01. Revolving Loans
    28  
2.02. Borrowing Base
    29  
2.03. Borrowings, Conversions and Continuations of Loans
    32  
2.04. Prepayments
    33  
2.05. Reduction or Termination of Revolving Commitments
    34  
2.06. Repayment of Revolving Loans.
    35  
2.07. Interest
    35  
2.08. Fees
    36  
2.09. Computation of Interest and Fees
    36  
2.10. Evidence of Debt
    36  
2.11. Payments Generally
    37  
2.12. Sharing of Payments
    39  
2.13. Pari Passu Lien Securing Lender Hedging Obligations
    39  
2.14. Letters of Credit
    39  
 
       
ARTICLE III. TAXES, YIELD PROTECTION AND ILLEGALITY
    46  
3.01. Taxes
    46  
3.02. Illegality
    48  
3.03. Inability to Determine Rates
    48  
3.04. Increased Cost and Reduced Return; Capital Adequacy; Reserves on
Eurodollar Rate Loans
    49  
3.05. Compensation for Losses
    50  
3.06. Matters Applicable to all Requests for Compensation
    50  
3.07. Survival
    50  
3.08. Mitigation Obligations
    50  
 
       
ARTICLE IV. CONDITIONS PRECEDENT TO CREDIT EXTENSION
    51  
4.01. Conditions Precedent to Initial Credit Extension
    51  
4.02. Conditions to all Credit Extensions
    53  
4.03. Conditions Precedent to Funding Loans for Permitted Acquisitions
    54  
 
       
ARTICLE V. REPRESENTATIONS AND WARRANTIES
    54  
5.01. Existence; Qualification and Power; Compliance with Laws
    54  
5.02. Authorization; No Contravention
    55  
5.03. Governmental Authorization
    55  
5.04. Binding Effect
    55  
5.05. Financial Statements; No Material Adverse Effect
    56  
5.06. Litigation
    56  
5.07. No Default
    56  

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              Page
5.08. Title; Liens; Priority of Liens
    56  
5.09. Environmental Compliance
    57  
5.10. Insurance
    57  
5.11. Taxes
    57  
5.12. ERISA Compliance
    57  
5.13. Subsidiaries and other Investments
    58  
5.14. Margin Regulations; Investment Company Act; Use of Proceeds
    58  
5.15. Disclosure; No Material Misstatements
    58  
5.16. Location of Business and Offices
    58  
5.17. Compliance with Laws
    58  
5.18. Third Party Approvals
    59  
5.19. Solvency
    59  
5.20. Oil and Gas Leases
    59  
5.21. Oil and Gas Contracts
    59  
5.22. Producing Wells
    59  
5.23. Purchasers of Production
    60  
5.24. Swap Contracts
    60  
 
       
ARTICLE VI. AFFIRMATIVE COVENANTS
    60  
6.01. Financial Statements
    60  
6.02. Certificates; Other Information
    61  
6.03. Notices
    61  
6.04. Payment of Obligations
    62  
6.05. Preservation of Existence, Etc.
    62  
6.06. Maintenance of Assets and Business
    62  
6.07. Maintenance of Insurance
    63  
6.08. Compliance with Laws and Contractual Obligations
    63  
6.09. Books and Records
    63  
6.10. Inspection Rights
    63  
6.11. Compliance with ERISA
    64  
6.12. Use of Proceeds
    64  
6.13. Material Agreements
    64  
6.14. Guaranties; New Subsidiaries’ Collateral Documents
    64  
6.15. Further Assurances; Additional Collateral; In Lieu Letters
    65  
6.16. Title Defects
    66  
6.17. Leases
    66  
6.18. Operation of Borrowing Base Oil and Gas Properties
    66  
6.19. Change of Purchasers of Production
    66  
6.20. Fiscal Year
    67  
6.21. Liens on Oil and Gas Properties; Title Information
    67  
6.22. Capital Expenditures
    67  
 
       
ARTICLE VII. NEGATIVE COVENANTS
    67  
7.01. Liens
    67  
7.02. Investments
    70  
7.03. Hedging Agreements
    71  
7.04. Indebtedness
    72  
7.05. Lease Obligations
    73  
7.06. Fundamental Changes
    73  
7.07. Dispositions
    74  
7.08. Transfer Payments; Restricted Payments; Distributions and Redemptions
    75  

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              Page
7.09. ERISA
    76  
7.10. Nature of Business; Risk Management
    76  
7.11. Transactions with Affiliates
    76  
7.12. Burdensome Agreements
    77  
7.13. Use of Proceeds
    77  
7.14. Material Agreements
    77  
7.15. Pooling or Unitization
    77  
7.16. Financial Covenants
    77  
 
       
ARTICLE VIII. EVENTS OF DEFAULT AND REMEDIES
    78  
8.01. Events of Default
    78  
8.02. Remedies Upon Event of Default
    81  
8.03. Application of Funds
    81  
 
       
ARTICLE IX. ADMINISTRATIVE AGENT
    82  
9.01. Appointment and Authorization of Agents; Lender Hedging Agreements
    82  
9.02. Delegation of Duties
    82  
9.03. Default; Collateral
    82  
9.04. Liability of Agents
    84  
9.05. Reliance by Administrative Agent
    84  
9.06. Notice of Default
    85  
9.07. Credit Decision; Disclosure of Information by Administrative Agent
    85  
9.08. Indemnification of Agents
    86  
9.09. Administrative Agent in its Individual Capacity
    86  
9.10. Successor Administrative Agent and Collateral Agent
    86  
9.11. Other Agents
    87  
9.12. Administrative Agent May File Proofs of Claim
    87  
9.13. Hedging Agreements
    88  
 
       
ARTICLE X. MISCELLANEOUS
    88  
10.01. Amendments, Release of Collateral, Etc.
    88  
10.02. Notices and Other Communications; Facsimile Copies
    90  
10.03. No Waiver; Cumulative Remedies
    91  
10.04. Attorney Costs; Expenses and Taxes
    91  
10.05. Indemnification
    92  
10.06. Payments Set Aside
    93  
10.07. Successors and Assigns
    93  
10.08. Confidentiality
    96  
10.09. Set-off
    96  
10.10. Interest Rate Limitation
    97  
10.11. Counterparts
    97  
10.12. Integration
    97  
10.13. Survival of Representations and Warranties
    97  
10.14. Severability
    97  
10.15. Replacement of Lenders
    98  
10.16. Defaulting Lender
    98  
10.17. Governing Law
    100  
10.18. Waiver of Right to Trial by Jury, Etc.
    101  
10.19. Release
    101  
10.20. Time of the Essence
    102  
10.21. Release of Liens on KPC Pipeline
    102  

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              Page
10.22. Amendment and Restatement
    102  
10.23. Termination of Revolving Commitments Under Original Credit Agreement
    102  
10.24. No Novation, Etc.
    102  
10.25. Joint and Several Liability
    103  
10.26. ENTIRE AGREEMENT
    105  

SCHEDULES

     
1.01A
  Litigation Associated with EBITDA Adjustments for Related Litigation and
Settlement Costs
 
   
1.01B
  Other Consolidated EBITDA Adjustments for Specified Quarters
 
   
2.01
  Revolving Commitments
5.06
  Litigation
5.12
  ERISA
5.13
  Subsidiaries and Equity Investments
5.21
  Take-or Pay and Gas Balancing Obligations
5.23
  Purchasers of Production
5.24
  Swap Contracts
7.01
  Existing Liens
7.04
  Indebtedness
7.11
  Transactions with Affiliates
10.02
  Addresses for Notices to Borrower, Guarantors and Administrative Agent

EXHIBITS
Exhibit: Form of:

     
A-1
  Borrowing Notice
A-2
  Conversion/Continuation Notice
A-3
  Repayment Notice
B
  Revolving Note
C
  Compliance Certificate pursuant to Section 6.01(a)
D
  Assignment and Assumption

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SECOND AMENDED AND RESTATED CREDIT AGREEMENT
     THIS SECOND AMENDED AND RESTATED CREDIT AGREEMENT is entered into as of
September 21, 2010, among POSTROCK ENERGY SERVICES CORPORATION, a Delaware
corporation formerly known as Quest Resource Corporation and successor by merger
to Quest Resource Acquisition Corp., PostRock Midstream, LLC (the successor by
merger to Quest Midstream Partners, L.P. and Quest Midstream GP, LLC), Quest
Cherokee Oilfield Service, LLC, Quest Mergersub, Inc., Quest Midstream Holdings
Corp., Quest Energy Service, LLC and Energy & Midstream Partners JV, LLC
(“PESC”), POSTROCK MIDCONTINENT PRODUCTION, LLC, a Delaware limited liability
company formerly known as Bluestem Pipeline, LLC, and successor by merger to
Quest Cherokee, LLC and to a related entity known as PostRock MidContinent
Production, LLC formerly known as Quest Energy Partners, L.P. (“MidContinent”;
and together with PESC, collectively, the “Borrowers” and individually a
“Borrower”), each lender from time to time party hereto (collectively, the
“Lenders” and individually, “Lender”), ROYAL BANK OF CANADA, as Administrative
Agent and Collateral Agent.
PRELIMINARY STATEMENTS
     (1) Quest Resource Corporation (“QRC”) (now known as PESC) as initial
co-borrower, Quest Cherokee, LLC (“Quest Cherokee”), (now merged with a related
entity named PostRock MidContinent Production LLC (“MidContinent I”) and
subsequently merged with and into Bluestem) as borrower, Quest Energy Partners,
L.P., a Delaware master limited partnership (which converted into MidContinent
I) (“QELP”) as guarantor, Royal Bank of Canada as administrative agent and
collateral agent and the other lenders party thereto entered into that certain
Amended and Restated Credit Agreement, dated November 15, 2007 (the “Initial
First Lien Credit Agreement”).
     (2) The Initial First Lien Credit Agreement was amended by First Amendment
to Amended and Restated Credit Agreement, dated April 15, 2008, the Second
Amendment to Amended and Restated Credit Agreement, dated October 28, 2008; the
Third Amendment to Amended and Restated Credit Agreement dated May 29, 2009, the
Fourth Amendment to Amended and Restated Credit Agreement, dated June 30, 2009,
and the Fifth Amendment to Amended and Restated Credit Agreement, dated
December 17, 2009 (the Initial First Lien Credit Agreement as so amended, the
“Prior First Lien Credit Agreement”).
     (3) Quest Cherokee, LLC, as borrower, QELP, as guarantor, Royal Bank of
Canada, as administrative agent and collateral agent, KeyBank National
Association, as syndication agent, Société Générale, as Documentation Agent, and
the lenders party thereto entered into a Second Lien Senior Term Loan Agreement
relating to a $45,000,000 Term Loan Facility, dated as of July 11, 2008 (the
“Initial Second Lien Credit Agreement”).
     (4) The Initial Second Lien Credit Agreement was amended by First Amendment
to Second Lien Senior Term Loan Agreement, dated October 28, 2008, the Second
Amendment to Second Lien Senior Term Loan Agreement, dated June 30, 2009, the
Third Amendment to Second Lien Senior Term Loan Agreement, dated September 30,
2009, the Fourth Amendment to Second Lien Senior Term Loan Agreement, dated
October 30, 2009, the Fifth Amendment to Second Lien Senior Term Loan Agreement,
dated November 16, 2009, the Sixth Amendment to Second Lien Senior Term Loan
Agreement, dated November 20, 2009, the Seventh Amendment to Second Lien Senior
Term Loan Agreement, dated December 7, 2009, and the Eighth Amendment to Second
Lien Senior Term Loan Agreement, dated December 17, 2009 (the Initial Second
Lien Credit Agreement as so amended the “Prior Second Lien Credit Agreement”).
Borrowing Base
Credit Agreement

1

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     (5) Quest Midstream Partners, L.P., a Delaware master limited partnership
(which merged into and became Quest Midstream Acquisition, LLC, which changed
its name to PostRock Midstream, LLC, which merged into PESC) and Bluestem
Pipeline, LLC, as borrowers, and Royal Bank of Canada as administrative and
collateral agent, and the lenders party thereto, entered into a Credit
Agreement, dated as of January 31, 2007, providing for a $75,000,000 Senior
Credit Facility (the "Original Midstream Credit Agreement”). The Original
Midstream Credit Agreement was secured by mortgages filed against Bluestem’s
Cherokee Basin pipeline system covering 11 counties in Kansas and 2 counties in
Oklahoma (the “Bluestem Gathering System”).
     (6) The Original Midstream Credit Agreement was amended and restated by an
Amended and Restated Credit Agreement dated as of November 1, 2007 among Quest
Midstream Partners, L.P. and Bluestem Pipeline, LLC, as borrowers, Royal Bank of
Canada, as administrative and collateral agent, and the lenders party thereto
(the “Midstream Lenders”) providing for a $135,000,000 Senior Credit Facility
(the “First Amended and Restated Midstream Credit Agreement”).
     (7) In connection with the First Amended and Restated Midstream Credit
Agreement, Quest Midstream Partners, L.P. financed its acquisition of (i) 100%
of the limited liability company membership interest in each of (a) Midcoast
Kansas Pipeline, L.L.C., a Delaware limited liability company (whose name after
its acquisition was changed to Quest Kansas Pipeline, L.L.C.), and (b) Midcoast
Kansas General Partner, L.L.C., a Delaware limited liability company (whose name
after its acquisition was changed to Quest Kansas General Partner, L.L.C.), each
of whom collectively owned 100% of the general partner interest in Enbridge
Pipelines (KPC), a Kansas general partnership (whose name after its acquisition
was changed to Quest Pipelines (KPC)) which owned an approximate 1,120 mile
interstate natural gas pipeline, gathering systems, processing facilities and
related assets located in the States of Kansas, Oklahoma and Missouri (the “KPC
Pipeline”).
     (8) The First Amended and Restated Midstream Credit Agreement was amended
by First Amendment to Amended and Restated Credit Agreement, dated November 1,
2007, Second Amendment to Amended and Restated Credit Agreement, dated
October 28, 2008, and Third Amendment to Amended and Restated Credit Agreement,,
dated December 17, 2009 (the First Amended and Restated Midstream Credit
Agreement as so amended the “Prior Midstream Credit Agreement”, and together
with the Prior First Lien Credit Agreement and the Prior Second Lien Credit
Agreement, the “Prior Credit Agreements”).
     (9) Pursuant to assignments, the holders of the Indebtedness outstanding
under the Prior Credit Agreements have assigned such Indebtedness to the Lenders
(in whole or in part as aforesaid), together with all Liens securing such
Indebtedness, except for the Liens on the KPC Pipeline, which are being assigned
in part to RBC as collateral agent on behalf of the KPC Lenders, and which are
being assigned in part to RBC as collateral agent on behalf of the Lenders and
subordinated to the first lien on the KPC Pipeline in favor of RBC as collateral
agent on behalf of the KPC Lenders.
     (10) The agents acting under the Prior Credit Agreements are hereby
replaced by the Administrative Agent;
     (11) Prior to the date hereof, there was a paydown on the Prior First Lien
Credit Agreement in an amount equal to $13,600,000 which reduced the outstanding
principal balance thereof to $125,000,000. The Borrowers agree, promptly upon
the effectiveness of the assignments described in Preliminary Statement (9), to
prepay the Outstanding Amount of Indebtedness (i) under the Prior First Lien
Credit Agreement in an additional amount equal to $19,200,l00 from the proceeds
of White Deer Energy Investment; and (ii) under the Prior Midstream Credit
Agreement in an amount equal to
Borrowing Base
Credit Agreement

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$14,700,000 from the proceeds of the White Deer Energy Investment (the amount of
such prepayments herein collectively called the “Closing Date Prepayment
Amount”).
     (12) The Borrowers, Administrative Agent, and Lenders have agreed to amend
and restate in their entirety the Prior First Lien Credit Agreement and the
Prior Second Lien Credit Agreement and to amend and restate in part the Prior
Midstream Credit Agreement as regards the Collateral previously owned by
Bluestem and now owned by MidContinent, namely, the Bluestem Gathering System,
and the Indebtedness associated therewith, on the terms and conditions set forth
herein and to renew, restructure and rearrange such Indebtedness outstanding
under the Prior Credit Agreements.
     (13) The Borrowers, Administrative Agent and Lenders have agreed that the
Prior Midstream Credit Agreement will also be amended and restated in part by
the credit agreement that governs the Secured Pipeline Loan of even date
herewith executed by the Borrowers, RBC as administrative agent and collateral
agent thereto and the lenders party thereto.
     NOW THEREFORE, in consideration of the mutual covenants and agreements
herein contained, the parties hereto covenant and agree that the Prior First
Lien Credit Agreement and the Prior Second Lien Credit Agreement are hereby
amended and restated in their entirety and that the Prior Midstream Credit
Agreement is hereby amended and restated in part as follows:
ARTICLE I.
DEFINITIONS AND ACCOUNTING TERMS
     1.01. Defined Terms. As used in this Agreement, the terms defined in the
introductory paragraph and the Preliminary Statements hereof shall have the
meanings therein indicated and the following terms shall have the meanings set
forth below:
     Acquisition means any transaction or series of related transactions for the
purpose of, or resulting in, directly or indirectly, (a) the acquisition by a
Company of all or substantially all of the assets located in the United States
of a Person or of any business or division of a Person; (b) the acquisition by a
Company of more than 50% of any class of Voting Stock (or similar ownership
interests) of any Domestic Person; or (c) a merger, consolidation, amalgamation,
or other combination by a Company with another Person if a Company is the
surviving entity, provided that, (i) in any merger involving a Borrower, such
Borrower must be the surviving entity (unless the surviving entity is a
Borrower); and (ii) in any merger involving a Wholly-Owned Subsidiary and
another Subsidiary, a Wholly-Owned Subsidiary shall be the survivor.
     Adjusted Consolidated EBITDA means, for the period of determination,
(i) Consolidated EBITDA, minus (ii) the Consolidated EBITDA adjustments made
pursuant to Section 7.16(d) plus (iii) the Consolidated EBITDA adjustments made
pursuant to Section 7.16(e).
     Administrative Agent means Royal Bank of Canada in its capacity as
administrative agent under any of the Loan Documents, or any successor
administrative agent.
     Administrative Agent’s Office means the Administrative Agent’s address and,
as appropriate, account as set forth on Schedule 10.02, or such other address or
account as the Administrative Agent may from time to time notify to the
Borrowers and the Lenders.
     Administrative Details Form means the Administrative Details Reply Form
furnished by a Lender to the Administrative Agent in connection with this
Agreement.
Borrowing Base
Credit Agreement

3

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     Affiliate means, as to any Person, any other Person directly or indirectly
controlling, controlled by, or under direct or indirect common control with,
such Person. A Person shall be deemed to be controlled by any other Person if
such other Person possesses, directly or indirectly, power to direct or cause
the direction of the management and policies of such Person whether by contract
or otherwise.
     Agent-Related Persons means the Administrative Agent (including any
successor administrative agent), the Collateral Agent (including any successor
collateral agent) and their respective Affiliates (including the officers,
directors, employees, agents and attorneys-in-fact of such Person).
     Aggregate Revolving Commitment means collectively the Revolving Commitments
of all the Lenders.
     Agreement means this Second Amended and Restated Credit Agreement.
     Amended QRC Facility means the $35,000,000 amended and restated term
facility of even date herewith provided to Eastern, as borrower, by Royal Bank
of Canada and secured by such borrower’s assets, namely, the non-producing
Marcellus assets.
     Applicable Rate means, from time to time, the following percentages per
annum, based upon the Utilization Percentage:

                                      Pricing   Utilization   Eurodollar        
  Letters of    
Level
  Percentage   Rate   Base Rate   Credit   Commitment
   1
  < 75%     3.50 %     2.50 %     3.50 %     0.75 %
   2
  > 75% but <90%     3.75 %     2.75 %     3.75 %     0.75 %
   3
  > 90%     4.00 %     3.00 %     4.00 %     0.75 %

     Any increase or decrease in the Applicable Rate resulting from a change in
the Utilization Percentage shall become effective on the date such change
occurs.
     Approved Fund means any Fund that is administered or managed by a Lender,
an Affiliate of a Lender, or an entity or an Affiliate of an entity that
administers or manages a Lender.
     Approved Hedge Counterparty means (i) BP Corporation North America, Inc.,
which has entered into an Approved Hedge Counterparty Swap Contract, and
(ii) Royal Dutch Shell, Goldman Sachs, or any of their respective Affiliates
that enters into (A) a novation agreement or similar arrangement with BP
Corporation North America, Inc. or with any Lender or an Affiliate of a Lender
and is substituted as a counterparty for such Lender or Affiliate of a Lender
under any Lender Hedging Agreement or (B) an Approved Hedge Counterparty Swap
Contract.
     Approved Hedge Counterparty Swap Contract means (i) any Lender Hedging
Agreement to which the Approved Hedge Counterparty has become a party by
novation or otherwise and succeeded to the rights and obligations of a Lender or
an Affiliate of a Lender and (ii) any Swap Contract entered into by the Approved
Hedge Counterparty with a Company.
     Assignment and Assumption means an Assignment and Assumption substantially
in the form of Exhibit D.
     Assignment of First Lien Notes means those certain Assignment and
Assumptions, dated of even date herewith, between Royal Bank of Canada as
administrative agent and each other lender party to the
Borrowing Base
Credit Agreement

4

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Prior First Lien Credit Agreement, as assignors, and Administrative Agent, as
assignee, in form and content satisfactory to Administrative Agent.
     Assignment of Midstream Notes, Liens and Security Interest means that
certain Assignment of Notes, Liens and Security Interests, dated of even date
herewith, between Royal Bank of Canada, as administrative agent and each other
lender party to the Prior Midstream Credit Agreement, as assignors, and
Administrative Agent, as assignee, in form and content satisfactory to
Administrative Agent.
     Assignment of Second Lien Notes, Liens and Security Interest means that
certain Assignment of Notes, Liens and Security Interests, dated of even date
herewith, between Royal Bank of Canada, as administrative agent and each other
lender party to the Prior Second Lien Credit Agreement, as assignors, and
Administrative Agent, as assignee, in form and content satisfactory to
Administrative Agent.
     Attorney Costs means and includes the reasonable fees and disbursements of
any law firm or other external counsel and the reasonable allocated cost of
internal legal services and disbursements of internal counsel.
     Attributable Indebtedness means, on any date, (a) in respect of any Capital
Lease of any Person, the capitalized amount thereof that would appear on a
balance sheet of such Person prepared as of such date in accordance with GAAP,
and (b) in respect of any Synthetic Lease Obligation, the capitalized amount of
the remaining lease payments under the relevant lease that would appear on a
balance sheet of such Person prepared as of such date in accordance with GAAP if
such lease were accounted for as a capital lease.
     Authorizations means all filings, recordings, and registrations with, and
all validations or exemptions, approvals, orders, authorizations, consents,
franchises, licenses, certificates, and permits from, any Governmental
Authority.
     Base Rate means for any day a fluctuating rate per annum equal to the
greatest of (a) the Federal Funds Rate plus one-half of one percent (0.5%),
(b) the Prime Rate for such day, and (c) the Eurodollar Rate for a one-month
Interest Period on such day (or if such day is not a Business Day, the
immediately preceding Business Day) plus one and one-quarter percent (1.25%);
provided that, for the avoidance of doubt, the Eurodollar Rate for any day shall
be based on the rate appearing on the Reuters BBA Libor Rates Page 3750 (or on
any successor or substitute page of such page) at approximately 11:00 a.m.
(London time) on such day. Any change in the Base Rate due to a change in the
Prime Rate, Federal Funds Rate or the Eurodollar Rate shall be effective
automatically and without notice to Borrower or any Lender on the effective date
of such change in the Prime Rate, Federal Funds Rate or Eurodollar Rate,
respectively.
     Base Rate Loan means a Revolving Loan that bears interest based on the Base
Rate.
     Basis Points means for one Basis Point, 1/100th of 1%.
     Bluestem means Bluestem Pipeline, LLC, a Delaware limited liability
company.
     Bluestem Gathering System has the meaning specified in Preliminary
Statement (5).
     Board means the Board of Governors of the Federal Reserve System of the
United States.
     Borrower and Borrowers have the meanings specified in the introductory
paragraph hereto.
Borrowing Base
Credit Agreement

5

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     Borrower Affiliate means each Borrower’s respective Subsidiaries other than
(i) the Excluded Subsidiaries, (ii) KPC Pipeline, LLC, and (iii) and any
Subsidiary that KPC Pipeline, LLC may hereafter form.
     Borrowing means a borrowing consisting of simultaneous Revolving Loans of
the same Type and having the same Interest Period made by each of the Lenders
pursuant to Section 2.01.
     Borrowing Base means the maximum loan amount that may be supported by the
Borrowing Base Oil and Gas Properties, as determined by the Administrative Agent
and approved by the Lenders or Required Lenders (as applicable) from time to
time in accordance with Section 2.02 of this Agreement.
     Borrowing Base Deficiency means the Total Outstandings at any time exceed
the lesser of Aggregate Revolving Commitments then in effect and the Borrowing
Base then in effect.
     Borrowing Base Oil and Gas Properties means those Oil and Gas Properties of
the Borrowers and each of the other Loan Parties that are subject to the Liens
created by the Collateral Documents.
     Borrowing Base Value means, with respect to any Collateral, the value
attributed to such collateral in the most recent Borrowing Base redetermination,
as the loan amount that may be supported by the Borrowing Base for such
Collateral, as determined by the Administrative Agent and approved by the
Lenders or Required Lenders (as applicable) from time to time in accordance with
Section 2.02 of this Agreement; provided however that, by agreement of the
parties, the Borrowing Base Value for the Marcellus Assets equals $17,000,000.
     Borrowing Notice means a notice of (a) a Borrowing, (b) a conversion of
Revolving Loans from one Type to the other, or (c) a continuation of Revolving
Loans as the same Type, pursuant to Section 2.03(a), which, if in writing, shall
be substantially in the form of Exhibit A-1 or A-2, as applicable.
     Business Day means any day other than a Saturday, Sunday, or other day on
which commercial banks are authorized to close under the Laws of New York, or
are in fact closed and, if such day relates to any Eurodollar Rate Loan or the
calculation of the Eurodollar Rate, means any such day on which dealings in
Dollar deposits are conducted by and between banks in the applicable offshore
Dollar interbank market.
     Capital Expenditure means all expenditures which, in accordance with GAAP
(and including for maintenance and growth), would be required to be capitalized
and shown on the consolidating balance sheet of Parent with reference to the
Borrowers and their consolidated Subsidiaries (other than the Excluded
Subsidiaries), including expenditures in respect of Capital Leases, but
excluding expenditures made in connection with the replacement, substitution or
restoration of assets to the extent financed (a) from insurance proceeds (or
other similar recoveries) paid on account of the loss of or damage to the assets
being replaced or restored or (b) with awards of compensation arising from the
taking by eminent domain or condemnation of the assets being replaced. Capital
Expenditures shall include, without limitation, expenditures made in connection
with acquisitions (whether for cash or equity), drilling, gathering lines, and
the maintenance or expansion of acreage position. Capital Expenditures shall
exclude capital expenditures relating to the Borrowers’ Marcellus Assets.
     Capital Lease means any capital lease or sublease which should be
capitalized on a balance sheet in accordance with GAAP.
     Cash Adjusted Consolidated Funded Debt means, as of any date of
determination, for the Borrowers and their Subsidiaries (other than the Excluded
Subsidiaries) on a consolidated basis, the
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excess of (a) Consolidated Funded Debt over (b) cash of the Borrowers and their
Subsidiaries (other than the Excluded Subsidiaries) deposited in an account with
the Administrative Agent (or another financial institution acceptable to the
Administrative Agent) subject to a control agreement in favor of the
Administrative Agent or, at the Administrative Agent’s discretion, cash of the
Borrowers and their Subsidiaries (other than the Excluded Subsidiaries)
reflected on Parent’s consolidating balance sheet and otherwise subjected to a
Lien in favor of the Administrative Agent and not otherwise pledged or subject
to any claim or encumbrance of any third party.
     Cash Collateralize means to pledge and deposit with or deliver to the
Administrative Agent or Collateral Agent, for the benefit of the L/C Issuer and
the Lenders and their Affiliates, as collateral for the L/C Obligations, cash
and deposit account balances pursuant to documentation in form and substance
satisfactory to the Administrative Agent and the L/C Issuer (which documents
hereby are consented to by the Lenders).
     Cash Equivalents means:
     (a) United States Dollars;
     (b) direct general obligations or obligations fully and unconditionally
guaranteed as to the timely payment of principal and interest by, the United
States or any agency or instrumentality thereof having remaining maturities of
not more than thirteen (13) months, but excluding any such securities whose
terms do not provide for payment of a fixed dollar amount upon maturity or call
for redemptions;
     (c) certificates of deposit and eurodollar-time deposits with remaining
maturities of thirteen (13) months or less, bankers acceptances with remaining
maturities not exceeding one hundred eighty (180) days, overnight bank deposits
and other similar short term instruments, in each case with any domestic
commercial bank having capital and surplus in excess of $250,000,000 and having
a rating of at least “A2” by Moody’s or at least “A” by S&P;
     (d) repurchase obligations with a remaining term of not more than thirteen
(13) months for underlying securities of the types described in (b) and
(c) above entered into with any financial institution meeting the qualifications
in (c) above;
     (e) commercial paper (having remaining maturities of not more than two
hundred seventy (270) days) of any Person rated “P-1” or better by Moody’s or
“A-1” or the equivalent by S&P;
     (f) money market funds that (i) comply with the criteria set forth in SEC
Rule 2a-7 under the Investment Company Act of 1940, as amended, (ii) are rated
AAA by S&P or Aaa by Moody’s and (iii) have portfolio assets of at least
$5,000,000,000; and
     (g) money market mutual or similar funds having assets in excess of
$100,000,000, at least 95% of the assets of which are comprised of assets
specified in clause (a) through (f) above, except that with respect to the
maturities of the assets included in such funds the requirements of clauses
(a) through (f) shall not be applied to the individual assets included in such
funds but to the weighted-average maturity of all assets included in such funds.
     Change in Law means (a) the adoption of any law, rule or regulation after
the date of this Agreement, (b) any change in any law, rule or regulation or in
the interpretation or application thereof by any Governmental Authority after
the date of this Agreement or (c) compliance by any Lender or the L/C
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Issuer (or, for purposes of Section 3.04(b), by any Lending Office of such
Lender or by such Lender’s or the L/C Issuer’s holding company, if any) with any
request, guideline or directive (whether or not having the force of law) of any
Governmental Authority made or issued after the date of this Agreement.
     Change of Control means (i) Parent shall fail to own, directly or
indirectly, or fail to have voting control over, 100% of the equity interest of
Borrowers or KPC Pipeline, LLC, or (ii) a Parent Change of Control shall occur.
     Closing Date means the first date all the conditions precedent in
Section 4.01 and Section 4.02 are satisfied or waived (or, in the case of
Sections 4.01(e) and (f) waived by the Person entitled to receive the applicable
payment).
     Closing Date Prepayment Amount has the meaning specified in Preliminary
Statement (9) hereto.
     Code means the Internal Revenue Code of 1986.
     Collateral means all property and interests in property and proceeds
thereof now owned or hereafter acquired by any Borrower and its respective
Subsidiaries (other than the Excluded Subsidiaries) in or upon which a Lien now
or hereafter exists in favor of the Secured Parties, or the Administrative Agent
or Collateral Agent on behalf of the Secured Parties, including, but not limited
to the Borrowing Base Oil and Gas Properties, the Bluestem Gathering System ,
the KPC Pipeline, and substantially all of the personal property (including
stock and other equity interests) of the Borrowers and their respective
Subsidiaries (other than the Excluded Subsidiaries) whether under this
Agreement, the Collateral Documents, or under any other document executed by any
Borrower Affiliate or KPC Pipeline, LLC and delivered to the Administrative
Agent, Collateral Agent or any Secured Party. Collateral does not include any
Excluded Assets, the limited liability company membership interest in Eastern or
the Three Little Pipes.
     Collateral Agent means Royal Bank of Canada in its capacity as collateral
agent under any of the Loan Documents, or any successor collateral agent.
     Collateral Documents means (a) each Guaranty, Security Agreement and
Mortgage, and all other security agreements, deeds of trust, mortgages, chattel
mortgages, assignments, pledges, guaranties, extension agreements and other
similar agreements or instruments executed by any Borrower, any Guarantor, or
any of their respective Subsidiaries (other than the Excluded Subsidiaries), for
the benefit of the Secured Parties now or hereafter delivered to the Secured
Parties, the Administrative Agent or the Collateral Agent pursuant to or in
connection with the transactions contemplated hereby, and all financing
statements (or comparable documents now or hereafter filed in accordance with
the Uniform Commercial Code or comparable Law) against the Borrowers, any
Guarantor, or any of their respective Subsidiaries (other than the Excluded
Subsidiaries), as debtor in favor of the Secured Parties, the Administrative
Agent or the Collateral Agent for the benefit of the Secured Parties, as secured
party, to secure or guarantee the payment of any part of the Obligations or the
performance of any other duties and obligations of Borrowers under the Loan
Documents, whenever made or delivered, (b) any amendments, supplements,
modifications, renewals, replacements, consolidations, substitutions,
restatements, continuations, and extensions of any of the foregoing, (c) all the
security documents covered by the Assignment of First Lien Notes, Liens and
Security Interests, subject to the release of any Liens prior to or
contemporaneously with the date hereof, (d) all the security documents covered
by the Assignment of Second Lien Notes, Liens and Security Interests, subject to
the release of any Liens prior to or contemporaneously with the date hereof, and
(e) all the security documents covered by the Assignment of Midstream Lien
Notes, Liens and Security Interests, subject to the release of any Liens prior
to or contemporaneously with the date hereof.
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     Company and Companies means, on any date of determination thereof, the
Borrowers and each of the Borrower Affiliates (whether in existence on the date
hereof or formed hereafter in accordance with the terms of this Agreement).
     Compensation Period has the meaning set forth in Section 2.11(e)(ii).
     Compliance Certificate means a certificate substantially in the form of
Exhibit C.
     Consolidated EBITDA means, for any period, for the Borrowers and their
Subsidiaries (other than the Excluded Subsidiaries) on a consolidated basis, an
amount equal to the sum of (a) Consolidated Net Income, (b) Consolidated
Interest Charges, (c) the amount of taxes, based on or measured by income, used
or included in the determination of such Consolidated Net Income, (d) the amount
of depreciation, depletion and amortization expense deducted in determining such
Consolidated Net Income, (e) merger and acquisition costs required to be
expensed under FAS 141(R), (f) the amount of payments made to parties or placed
in escrow, in each case during the period when paid or placed in escrow,
representing damages or settlement amounts associated with, and attorney’s fees,
court costs and other litigation expenses associated with, the litigation set
forth on Schedule 1.01A; (g) other amounts (without duplication) representing
charges relating to the fiscal quarters ended December 31, 2009, March 31, 2010,
and June 30, 2010 set forth on the Schedule 1.01B and described as “additional
add-backs” thereon, in each case during the period when the charge was incurred;
and (h) other non-cash charges and expenses, including, without limitation,
non-cash charges and expenses relating to Swap Contracts or resulting from
accounting convention changes, of the Borrowers on a consolidated basis, all
determined in accordance with GAAP.
     Consolidated Funded Debt means, as of any date of determination, for the
Borrowers and their Subsidiaries (other than the Excluded Subsidiaries) on a
consolidated basis, the sum of (a) the outstanding principal amount of all
obligations and liabilities, whether current or long-term, for borrowed money
(including Obligations hereunder, but excluding all reimbursement obligations
relating to outstanding but undrawn letters of credit), (b) Attributable
Indebtedness pertaining to Capital Leases, (c) Attributable Indebtedness
pertaining to Synthetic Lease Obligations, and (d) without duplication, all
Guaranty Obligations with respect to Indebtedness of the type specified in
subsections (a) through (c) above.
     Consolidated Interest Charges means, for any period, for the Borrowers and
their Subsidiaries (other than the Excluded Subsidiaries) on a consolidated
basis, the excess of (I) the sum of (a) all interest, premium payments, fees,
charges and related expenses of the Borrowers and their Subsidiaries (other than
the Excluded Subsidiaries) in connection with Indebtedness (net of interest rate
Swap Contract settlements) (including capitalized interest), in each case to the
extent treated as interest in accordance with GAAP, and (b) the portion of rent
expense of the Borrowers with respect to such period under Capital Leases that
is treated as interest in accordance with GAAP over (II) all interest income for
such period.
     Consolidated Net Income means, for any period, for the Borrowers and their
Subsidiaries (other than the Excluded Subsidiaries) on a consolidated basis, the
net income or net loss of Borrowers and their Subsidiaries (other than the
Excluded Subsidiaries) from continuing operations, provided that there shall be
excluded from such net income (to the extent otherwise included therein): (a)
the income (or loss) of any entity other than a Subsidiary in which a Borrower
or one of its Subsidiaries (other than the Excluded Subsidiaries) has an
ownership interest, except to the extent that any such income has been actually
received by a Borrower or such Subsidiary in the form of cash dividends or
similar cash distributions; (b) net extraordinary gains and losses (other than,
in the case of losses, losses resulting from charges against net income to
establish or increase reserves for potential environmental liabilities and
reserve for exposure under rate cases), (c) any gains or losses attributable to
non-cash write-ups or write-downs of
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assets, (d) proceeds of any insurance on property, plant or equipment other than
business interruption insurance, (e) any gain or loss net of taxes on the sale,
retirement or other disposition of assets (including the capital stock or other
equity ownership of any other Person, but excluding the sale of inventories in
the ordinary course of business), and (f) the cumulative effect of a change in
accounting principles, net of taxes.
     Contractual Obligation means, as to any Person, any provision of any
security issued by such Person or of any agreement, instrument or other
undertaking to which such Person is a party or by which it or any of its
property is bound.
     Credit Extension means each of the following: (a) a Borrowing and (b) an
L/C Credit Extension.
     Debtor Relief Laws means the Bankruptcy Code of the United States, and all
other liquidation, conservatorship, bankruptcy, assignment for the benefit of
creditors, moratorium, rearrangement, receivership, insolvency, reorganization,
or similar debtor relief Laws of the United States or other applicable
jurisdictions from time to time in effect and affecting the rights of creditors
generally.
     Default means any event that, with the giving of any notice, the passage of
time, or both, would be an Event of Default.
     Default Rate means an interest rate equal to (a) the Base Rate plus (b) the
Applicable Rate, if any, applicable to Base Rate Loans plus (c) 2% per annum;
provided, however, that with respect to a Eurodollar Rate Loan, the Default Rate
shall be an interest rate equal to the interest rate (including any Applicable
Rate) otherwise applicable to such Eurodollar Rate Loan plus 2% per annum, in
each case to the fullest extent permitted by applicable Laws.
     Defaulting Lender means any Lender that (a) has failed to fund any portion
of the Revolving Loans or participations in L/C Obligations required to be
funded by it under this Agreement within one Business Day of the date required
to be funded by it under this Agreement, (b) has otherwise failed to pay over to
Administrative Agent or any other Lender any other amount required to be paid by
it under this Agreement within one Business Day of the date when due, unless the
subject of a good faith dispute, (c) has notified the Borrowers, the
Administrative Agent or any Lender that it does not intend to comply with its
funding obligations or has made a public statement to that effect with respect
to its funding obligations hereunder or generally under other agreements in
which it commits to extend credit; (d) has failed, within three Business Days
after request by the Administrative Agent, to confirm in a manner satisfactory
to the Administrative Agent that it will comply with its funding obligations
hereunder; or (e) has, or has a direct or indirect parent company that has,
(i) become the subject of a proceeding under any Debtor Relief Law, (ii) had a
receiver, conservator, trustee, administrator, assignee for the benefit of
creditors or similar Person charged with reorganization or liquidation of its
business or a custodian appointed for it, or (iii) taken any action in
furtherance of, or indicated its consent to, approval of or acquiescence in any
such proceeding or appointment; provided that a Lender shall not be a Defaulting
Lender solely by virtue of the ownership or acquisition of any equity interest
in that Lender or any direct or indirect parent company thereof by a
Governmental Authority.
     Disposition or Dispose means the sale (excluding the sale of inventory in
the ordinary course of business), transfer, license or other disposition
(including any sale and leaseback transaction) of any property (including stock,
partnership and other equity interests) by any Person of property owned by such
Person, including any sale, assignment, transfer or other disposal, with or
without recourse, of any notes or accounts receivable or any rights and claims
associated therewith. For the avoidance of doubt, a Restricted Payment is not a
Disposition.
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     Dollar and $ means lawful money of the United States.
     Domestic Person means any corporation, general partnership, limited
partnership, limited liability partnership, or limited liability company that is
organized under the laws of the United States or any state thereof or the
District of Columbia.
     Eastern means Quest Eastern Resource LLC.
     Eligible Assignee means (a) a Lender, (b) an Affiliate of a Lender, (c) an
Approved Fund, and (d) any other Person (other than a natural Person) approved
by the Administrative Agent and, unless an Event of Default has occurred and is
continuing, the Borrowers (neither the Administrative Agent’s nor the Borrowers’
approval to be unreasonably withheld, conditioned or delayed); provided that
notwithstanding the foregoing, “Eligible Assignee” shall not include White Deer
Energy, any Borrower, any PostRock Party, or any of their respective Affiliates
or Subsidiaries.
     Environmental Law means any applicable Law that relates to (a) the
condition or protection of air, groundwater, surface water, soil, or other
environmental media, (b) the environment, including natural resources or any
activity which affects the environment, (c) the regulation of any pollutants,
contaminants, wastes, substances, and Hazardous Substances, including, without
limitation, the Comprehensive Environmental Response, Compensation, and
Liability Act (42 U.S.C. §9601 et seq.) (“CERCLA”), the Clean Air Act (42 U.S.C.
§ 7401 et seq.), the Federal Water Pollution Control Act, as amended by the
Clean Water Act (33 U.S.C. § 1251 et seq.), the Federal Insecticide, Fungicide,
and Rodenticide Act (7 U.S.C. § 136 et seq.), the Emergency Planning and
Community Right to Know Act of 1986 (42 U.S.C. § 1100 1 et seq.), the Hazardous
Materials Transportation Act (49 U.S.C. § 1801 et seq.), the National
Environmental Policy Act of 1969 (42 U.S.C. § 4321 et seq.), the Oil Pollution
Act (33 U.S.C. § 2701 et seq.), the Resource Conservation and Recovery Act (42
U.S.C. § 6901 et seq.), the Rivers and Harbors Act (33 U.S.C. §401 et seq.), the
Safe Drinking Water Act (42 U.S.C. § 201 and § 300f et seq.), the Solid Waste
Disposal Act, as amended by the Resource Conservation and Recovery Act of 1976
and the Hazardous and Solid Waste Amendments of 1984 (42 U.S.C. § 6901 et seq.),
the Toxic Substances Control Act (15 U.S.C. § 2601 et seq.), and analogous state
and local Laws, as any of the foregoing may have been and may be amended or
supplemented from time to time, and any analogous enacted or adopted Law, or
(d) the Release or threatened Release of Hazardous Substances.
     ERISA means the Employee Retirement Income Security Act of 1974 and any
regulations issued pursuant thereto.
     ERISA Affiliate means any trade or business (whether or not incorporated)
under common control with the Borrowers within the meaning of Section 414(b) or
(c) of the Code (and Sections 414(m) and (o) of the Code for purposes of
provisions of this Agreement relating to obligations imposed under Section 412
of the Code).
     ERISA Event means (a) a Reportable Event with respect to a Pension Plan;
(b) a withdrawal by the Borrowers or any ERISA Affiliate from a Pension Plan
subject to Section 4063 of ERISA during a plan year in which it was a
substantial employer (as defined in Section 4001(a)(2) of ERISA) or a cessation
of operations that is treated as such a withdrawal under Section 4062(e) of
ERISA; (c) a complete or partial withdrawal by the Borrowers or any ERISA
Affiliate from a Multiemployer Plan or notification that a Multiemployer Plan is
in reorganization; (d) the filing of a notice of intent to terminate, the
treatment of a Plan amendment as a termination under Sections 4041 or 4041A of
ERISA, or the commencement of proceedings by the PBGC to terminate a Pension
Plan or Multiemployer Plan; (e) an 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 Pension Plan or
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Multiemployer Plan; or (f) the imposition of any liability under Title IV of
ERISA, other than PBGC premiums due but not delinquent under Section 4007 of
ERISA, upon the Borrowers or any ERISA Affiliate.
     Eurodollar Rate means for any Interest Period with respect to any
Eurodollar Rate Loan, a rate per annum described below:
     (a) the rate per annum equal to the rate determined by the Administrative
Agent to be the offered rate that appears on the page of the LIBOR I screen (or
any successor thereto) that displays an average British Bankers Association
Interest Settlement Rate for deposits in Dollars (for delivery on the first day
of such Interest Period) with a term equivalent to such Interest Period,
determined as of approximately 11:00 a.m. (London time) two Business Days prior
to the first day of such Interest Period, or
     (b) if the rate referenced in the preceding subsection (a) is not
available, the rate per annum determined by the Administrative Agent as the rate
of interest (rounded upward to the next 1/100th of 1%) at which deposits in
Dollars for delivery on the first day of such Interest Period in same day funds
in the approximate amount of the Eurodollar Rate Loan being made, continued or
converted by the Administrative Agent and with a term equivalent to such
Interest Period would be offered by the Administrative Agent’s London Branch to
major banks in the offshore Dollar market at their request at approximately
11:00 a.m. (London time) two Business Days prior to the first day of such
Interest Period.
     Eurodollar Rate Loan means a Revolving Loan that bears interest at a rate
based on the Eurodollar Rate.
     Event of Default means any of the events or circumstances specified in
Article VIII.
     Evergreen Letter of Credit has the meaning specified in
Section 2.14(b)(iii).
     Excluded Assets means any contracts, agreements or permits as to which the
granting of a security interest in same would cause a default, termination or
penalty thereunder or under any applicable requirement of a Governmental
Authority.
     Excluded Subsidiaries means collectively, (i) Eastern and any Subsidiary of
Eastern that Eastern may form after the date of this Agreement; and (ii) any
Subsidiary of Parent that Parent may form after the date of this Agreement that
is not also a Subsidiary of a Borrower.
     Existing Letter of Credit means that certain standby letter of credit no.
1185/S24044 issued by Royal Bank of Canada to Cullen Allen Holdings, L.P., as
beneficiary, for the account of MidContinent, f/k/a Bluestem Pipeline, LLC, in
the face amount of $31,151.75 having an expiration date of March 11, 2011.
     FA Costs means and includes the reasonable fees and disbursements of any
financial advisory or consulting firm to Lenders or the Administrative Agent.
     Facility means, prior to the date of this Agreement, the term loan credit
facility under this Agreement, and on and after the date of this Agreement, the
revolving credit facility as described in and subject to the limitations set
forth in Section 2.01.
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     Federal Funds Rate means, for any day, the rate per annum (rounded upwards
to the nearest 1/100 of 1%) equal to the weighted average of the rates on
overnight Federal funds transactions with members of the Federal Reserve System
arranged by Federal funds brokers on such day, as published by the Federal
Reserve Bank on the Business Day next succeeding such day; provided that (a) if
such day is not a Business Day, the Federal Funds Rate for such day shall be
such rate on such transactions on the next preceding Business Day as so
published on the next succeeding Business Day, and (b) if no such rate is so
published on such next succeeding Business Day, the Federal Funds Rate for such
day shall be the average rate charged to the Administrative Agent on such day on
such transactions as determined by the Administrative Agent.
     Foreign Lender means any Lender that is organized under the laws of a
jurisdiction other than that in which the Borrowers are resident for tax
purposes. For purposes of this definition, the United States, each State thereof
and the District of Columbia shall be deemed to constitute a single
jurisdiction.
     Fund means any Person (other than a natural person) that is (or will be)
engaged in making, purchasing, holding or otherwise investing in commercial
loans and similar extensions of credit in the ordinary course of its business.
     G&A Formula means the Modified Massachusetts Formula, which establishes a
three-part factor using assets, payroll (labor/headcount), and revenue to
allocate general and administrative expenses. The G&A Formula will be adjusted
annually subsequent to Parent’s annual audit and applied to the entire year
following such audit. For the remainder of 2010, general and administrative
expenses will be allocated based on the G&A formula for the first seven months
of 2010. The applicable percentages are 2.4% to Eastern; 15.5% to KPC Pipeline,
LLC and 82.1% to PESC.
     GAAP means generally accepted accounting principles set forth 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 and the Public Company Accounting
Oversights Board or such other principles as may be approved by a significant
segment of the accounting profession, that are applicable to the circumstances
as of the date of determination, consistently applied. If at any time any change
in GAAP would affect the computation of any financial ratio or requirement set
forth in any Loan Document, and either the Borrowers or the Required Lenders
shall so request, the Administrative Agent, the Lenders and the Borrowers shall
negotiate in good faith to amend such ratio or requirement to preserve the
original intent thereof in light of such change in GAAP (subject to the approval
of the Required Lenders); provided that, until so amended, (a) such ratio or
requirement shall continue to be computed in accordance with GAAP prior to such
change therein and (b) the Borrowers shall provide to the Administrative Agent
and the Lenders financial statements and other documents required under this
Agreement or as reasonably requested hereunder setting forth a reconciliation
between calculations of such ratio or requirement made before and after giving
effect to such change in GAAP.
     General Partner means Quest Energy GP, LLC, a Delaware limited liability
company, the sole general partner of the MLP prior to the Recombination, which
in connection with the Recombination was merged into MLP after the MLP had been
converted to a limited liability company and its general partner interest in the
MLP cancelled for no consideration.
     Governmental Authority means any nation or government, any state or other
political subdivision thereof, any agency, authority, instrumentality,
regulatory body, court, administrative tribunal, central bank or other legal
entity exercising executive, legislative, judicial, taxing, regulatory or
administrative powers or functions of or pertaining to government.
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     Guarantors means Parent and every present and future Subsidiary of the
Borrowers (other than the Excluded Subsidiaries and KPC Pipeline, LLC and any
Subsidiary it may hereafter form), which undertakes to be liable for all or any
part of the Obligations by execution of a Guaranty.
     Guaranty means a Guaranty now or hereafter made by any Guarantor in favor
of the Administrative Agent on behalf of the Lenders, including the Parent
Guaranty, each in form and substance acceptable to the Administrative Agent.
     Guaranty Obligation means, as to any Person, (a) any obligation, contingent
or otherwise, of such Person guaranteeing or having the economic effect of
guaranteeing any Indebtedness or other payment obligation of another Person (the
“primary obligor”) in any manner, whether directly or indirectly, and including
any obligation of such Person, direct or indirect, (i) to purchase or pay (or
advance or supply funds for the purchase or payment of) such Indebtedness or
other payment obligation, (ii) to purchase or lease property, securities or
services for the purpose of assuring the obligee in respect of such Indebtedness
or other payment obligation of the payment of such Indebtedness or other payment
obligation, (iii) to maintain working capital, equity capital or any other
financial statement condition or liquidity of the primary obligor so as to
enable the primary obligor to pay such Indebtedness or other payment obligation,
or (iv) entered into for the purpose of assuring in any other manner the
obligees in respect of such Indebtedness or other payment obligation of the
payment thereof or to protect such obligees against loss in respect thereof (in
whole or in part), or (b) any Lien on any assets of such Person securing any
Indebtedness or other payment obligation of any other Person, whether or not
such Indebtedness or other payment obligation is assumed by such Person;
provided, however, that the term “Guaranty Obligation” shall not include
endorsements of instruments for deposit or collection in the ordinary course of
business. The amount of any Guaranty Obligation shall be deemed to be the lesser
of (a) an amount equal to the stated or determinable outstanding amount of the
related primary obligation and (b) the maximum amount for which such
guaranteeing Person may be liable pursuant to the terms of the instrument
embodying such Guaranty Obligation, unless the outstanding amount of such
primary obligation and the maximum amount for which such guaranteeing Person may
be liable are not stated or determinable, in which case the amount of such
Guaranty Obligation shall be the maximum reasonably anticipated liability in
respect thereof as determined by the guaranteeing Person in good faith.
     Hazardous Substance means any substance that poses a threat to, or is
regulated to protect, human health, safety, public welfare, or the environment,
including without limitation: (a) any “hazardous substance,” “pollutant” or
“contaminant,” and any “petroleum” or “natural gas liquids” as those terms are
defined or used under Section 101 of the Comprehensive Environmental Response,
Compensation and Liability Act of 1980, as amended ( 42 U.S.C. §§ 9601 et seq.)
(CERCLA), (b) “solid waste” as defined by the federal Solid Waste Disposal Act
(42 U. S.C. § § 6901 et seq.), (c) asbestos or a material containing asbestos,
(d) any material that contains lead or lead-based paint, (e) any item or
equipment that contains or is contaminated by polychlorinated biphenyls, (f) any
radioactive material, (g) urea formaldehyde, (h) putrescible materials,
(i) infectious materials, (j) toxic microorganisms, including mold, or (k) any
substance the presence or Release of which requires reporting, investigation or
remediation under any Environmental Law.
     Honor Date has the meaning set forth in Section 2.14(c)(i).
     Hydrocarbons means crude oil, condensate, natural gas, natural gas liquids,
coal bed methane and other hydrocarbons and all products refined or separated
therefrom.
     Indebtedness means, as to any Person at a particular time, all of the
following:
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     (a) all obligations of such Person for borrowed money and all obligations
of such Person evidenced by bonds, debentures, notes, loan agreements or other
similar instruments;
     (b) the face amount of all letters of credit (including standby and
commercial), banker’s acceptances, surety bonds, and similar instruments issued
for the account of such Person, and, without duplication, all drafts drawn and
unpaid thereunder;
     (c) whether or not so included as liabilities in accordance with GAAP, all
obligations of such Person to pay the deferred purchase price of property or
services, other than trade accounts payable in the ordinary course of business
not overdue by more than 90 days, and Indebtedness of others (excluding prepaid
interest thereon) secured by a Lien on property owned or being purchased by such
Person, whether or not such Indebtedness shall have been assumed by such Person
or is limited in recourse;
     (d) all obligations of such Person under conditional sales or other title
retention agreements relating to property acquired by such Person;
     (e) Capital Leases and Synthetic Lease Obligations of such Person; and
     (f) all Guaranty Obligations of such Person in respect of any of the
foregoing.
     For all purposes hereof, the Indebtedness of any Person shall include the
Indebtedness of any partnership or joint venture in which such Person is a
general partner, unless such Indebtedness is expressly made non-recourse to such
Person except for customary exceptions acceptable to the Required Lenders. The
amount of any Capital Lease or Synthetic Lease Obligation as of any date shall
be deemed to be the amount of Attributable Indebtedness in respect thereof as of
such date. In addition, the determination of Indebtedness of the Borrowers
and/or their Subsidiaries (other than the Excluded Subsidiaries) shall be made
on a consolidated basis without taking into account any Indebtedness owed by any
such Person to any other such Person.
     Indemnified Liabilities has the meaning set forth in Section 10.05.
     Indemnitees has the meaning set forth in Section 10.05.
     Intercreditor Agreement means that certain Second Amended and Restated
Intercreditor and Collateral Agency Agreement, dated of even date herewith,
among Borrowers, KPC Pipeline, LLC, Royal Bank of Canada, as administrative
agent and collateral agent for the Lenders under this Agreement, Royal Bank of
Canada, as administrative agent and lenders party to the credit agreement
governing the Secured Pipeline Loan, Royal Bank of Canada, as collateral agent,
and any Approved Hedge Counterparty, which at all times shall provide that
(i) no Approved Hedge Counterparty has any voting rights under any Loan Document
as a result of the existence of obligations owed to it under any Approved Hedge
Counterparty Swap Contract and (ii) each Approved Hedge Counterparty has a pro
rata vote in connection with any action or proposed action to enforce any Lien
upon any Collateral.
     Interest Coverage Ratio means for any four quarter period and as of any
determination date, as calculated based on the quarterly Compliance Certificate
most recently delivered pursuant to Section 6.02(a) for the Borrowers, the ratio
of (a) Adjusted Consolidated EBITDA for such trailing four quarter period ending
on the determination date to (b) Consolidated Interest Charges for such four
quarter period.
     Interest Payment Date means, (a) as to any Revolving Loan other than a Base
Rate Loan, the last day of each Interest Period applicable to such Revolving
Loan; provided, however, that if any Interest
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Period for a Eurodollar Rate Loan exceeds three months, the respective dates
that fall every three months after the beginning of such Interest Period shall
also be Interest Payment Dates; and (b) as to any Base Rate Loan, the last
Business Day of each March, June, September and December and the Maturity Date.
     Interest Period means, as to each Eurodollar Rate Loan, the period
commencing on the date such Eurodollar Rate Loan is disbursed or converted to or
continued as a Eurodollar Rate Loan and ending on the date one, two, three or
six months thereafter, as selected by the applicable Borrower (and in the case
of the initial Borrowing Notice, by PESC) in its Borrowing Notice; provided
that:
     (i) any Interest Period that would otherwise end on a day that is not a
Business Day shall be extended to the next succeeding Business Day unless such
Business Day falls in another calendar month, in which case such Interest Period
shall end on the next preceding Business Day;
     (ii) any Interest Period pertaining to a Eurodollar Rate Loan that begins
on the last Business Day of a calendar month (or on a day for which there is no
numerically corresponding day in the calendar month at the end of such Interest
Period) shall end on the last Business Day of the calendar month at the end of
such Interest Period; and
     (iii) no Interest Period shall extend beyond the Maturity Date.
     Investment means, as to any Person, any acquisition or investment by such
Person, whether by means of (a) the purchase or other acquisition of capital
stock or other securities of another Person, (b) a loan, advance or capital
contribution to, guaranty of Indebtedness of, or purchase or other acquisition
of any other Indebtedness or equity participation or interest in, another
Person, including any partnership or joint venture interest in such other
Person, or (c) the purchase or other acquisition (in one transaction or a series
of transactions) of assets of another Person that constitute a business unit.
For purposes of covenant compliance, the amount of any Investment shall be the
amount actually invested, without adjustment for subsequent increases or
decreases in the value of such Investment, less all returns of principal or
equity thereon, and shall, if made by the transfer or exchange of property other
than cash be deemed to have been made in an amount equal to the fair market
value of such property.
     IRS means the United States Internal Revenue Service.
     ISDA means the International Swaps and Derivatives Association, Inc
     KPC Lenders means the lenders party to the Secured Pipeline Loan.
     KPC Pipeline means an approximate 1,120 mile interstate natural gas
pipeline, gathering systems, processing facilities and related assets located in
the States of Kansas, Oklahoma and Missouri.
     KPC Pipeline, LLC means PostRock KPC Pipeline, LLC, a Delaware limited
liability company and owner of the KPC Pipeline.
     Laws means, collectively, all applicable international, foreign, federal,
state and local statutes, treaties, rules, regulations, ordinances, codes and
administrative or judicial precedents or authorities, including the
interpretation or administration thereof by any Governmental Authority charged
with the enforcement, interpretation or administration thereof, and all
applicable administrative orders, licenses, authorizations and permits of, any
Governmental Authority.
     L/C Advance means, with respect to each Lender, such Lender’s participation
in any L/C Borrowing in accordance with its Pro Rata Share.
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     L/C Borrowing means an extension of credit resulting from a drawing under
any Letter of Credit which has not been reimbursed on the date when made or
refinanced as a Borrowing.
     L/C Credit Extension means, with respect to any Letter of Credit, the
issuance thereof or extension of the expiry date thereof, or the renewal or
increase of the amount thereof.
     L/C Issuer means Royal Bank of Canada in its capacity as issuer of Letters
of Credit hereunder, or any successor issuer of Letters of Credit hereunder
which is a Lender or an Affiliate of a Lender.
     L/C Obligations means, as at any date of determination, the aggregate
undrawn face amount of all outstanding Letters of Credit plus the aggregate of
all Unreimbursed Amounts, including all L/C Borrowings.
     Leases means oil and gas leases and all oil, gas and mineral leases
constituting any part of the Borrowing Base Oil and Gas Properties.
     Lender and Lenders have the meanings specified in the introductory
paragraph hereto and, as the context requires, includes the L/C Issuer.
     Lender Hedging Agreement means (i) a Swap Contract between a Company and a
Lender or an Affiliate of a Lender and (ii) an Approved Hedge Counterparty Swap
Contract.
     Lending Office means, as to any Lender, the office or offices of such
Lender set forth on its Administrative Details Form, or such other office or
offices as a Lender may from time to time notify the Borrower and the
Administrative Agent.
     Letter of Credit means the Existing Letter of Credit and any standby letter
of credit issued hereunder.
     Letter of Credit Application means an application and agreement for the
issuance or amendment of a letter of credit in the form from time to time in use
by the L/C Issuer.
     Letter of Credit Expiration Date means the fifth Business Day prior to the
Maturity Date.
     Letter of Credit Sublimit means an amount equal to the lesser of (i) the
Aggregate Revolving Commitment and (ii) $26,000,000.
     Leverage Ratio means, for the Borrowers on a consolidated basis, the ratio,
as calculated based on the quarterly Compliance Certificate most recently
delivered pursuant to Section 6.02(a), of (a) Cash Adjusted Consolidated Funded
Debt as of the determination date to (b) Adjusted Consolidated EBITDA for the
four (4) fiscal quarters ending on the applicable determination date.
     Lien means any mortgage, pledge, hypothecation, assignment, deposit
arrangement, encumbrance, lien (statutory or other), charge, or preference,
priority or other security interest or preferential arrangement of any kind or
nature whatsoever to secure or provide for payment of any obligation of any
Person (including any conditional sale or other title retention agreement, any
financing lease having substantially the same economic effect as any of the
foregoing, and the filing of any financing statement under the Uniform
Commercial Code or comparable Laws of any jurisdiction, other than any financing
statement filed as a notice filing), including the interest of a purchaser of
accounts receivable.
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     Loan Documents means this Agreement, each Revolving Note, each of the
Collateral Documents, each Borrowing Notice, each Compliance Certificate, the
Guaranties, each Letter of Credit Application, and each other agreement,
document or instrument delivered by any Loan Party or any of their respective
Subsidiaries from time to time in connection with this Agreement and the
Revolving Notes.
     Loan Party means each of the Borrowers, each Guarantor, and each other
entity that is an Affiliate of the Borrowers that executes one or more Loan
Documents. For the avoidance of doubt, the term “Loan Party” does not include
any Excluded Subsidiary.
     Marcellus Assets means the producing Marcellus shale gas properties owned
by MidContinent and located in New York and West Virginia that constitute part
of the Borrowing Base Oil and Gas Properties that were initially acquired by
Eastern from PetroEdge Resource (WV) LLC and transferred to Quest Cherokee by
Eastern and acquired by MidContinent by merger.
     Marcellus Gathering System means that portion of the gathering system
relating to the Marcellus Assets that is owned by Eastern.
     Marketable Title means good and indefeasible title, free and clear of all
Liens other than Permitted Liens.
     Material Acquisition means any acquisition of Oil and Gas Properties or
series of related acquisitions of Oil and Gas Properties that involves the
payment of consideration (including, without limitation, the issuance of equity)
by any Borrower and its Subsidiaries in excess of five percent (5%) of the then
current Borrowing Base.
     Material Adverse Effect means: (a) a material adverse change in, or a
material adverse effect upon, the operations, business, properties or financial
condition of the Borrowers and their Subsidiaries (other than the Excluded
Subsidiaries) taken as a whole; (b) a material adverse effect on the ability of
any Loan Party to perform its obligations under the Loan Documents to which it
is a party; (c) a material adverse effect upon the legality, validity, binding
effect or enforceability against a Borrower or any other Loan Party of any Loan
Documents; or (d) a material adverse change in, or a material adverse effect
upon, the Borrowing Base Oil and Gas Properties, taken as a whole, excluding
changes in commodity prices; provided however, that with respect to each case
described in (a)-(d), Material Adverse Effect shall take into account the impact
of the White Deer Energy Investment and any White Deer Energy Additional
Investment and the closing of the transactions occurring contemporaneously with
this Agreement and shall exclude events that have been the subject of public
filings of Parent prior to the date of this Agreement or of which Lenders
otherwise have knowledge as of the date of this Agreement.
     Material Agreements means the following: (a) the Organization Documents of
MidContinent; and (b) the Organization Documents of PESC and any agreement or
agreements entered into in replacement or substitution of any of the foregoing.
     Material Disposition means any sale, transfer or other disposition of
Borrowing Base Oil and Gas Properties or other Collateral (other than the
Marcellus Assets) or series of related sales, transfers or other dispositions of
Borrowing Base Oil and Gas Properties that yields gross proceeds to the
Borrowers or their respective Subsidiaries in excess of five percent (5%) of the
then current Borrowing Base or, if other Collateral, has a Borrowing Base Value
in excess of five percent (5%) of the then current Borrowing Base.
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     Maturity Date means the earliest of (a) June 30, 2013, (b) the date of any
refinancing of the credit facility set forth in this Agreement; or (c) the
effective date of any other termination, cancellation, or acceleration of the
Aggregate Revolving Commitment under this Agreement.
     Maximum Amount and Maximum Rate respectively mean, for each Lender, the
maximum non-usurious amount and the maximum non-usurious rate of interest which,
under applicable Law, such Lender is permitted to contract for, charge, take,
reserve, or receive on the Obligations.
     Midstream Businesses means gathering, transportation, fractionation,
processing, marketing, and storage of natural gas, crude oil, natural gas
liquids and other liquid and gaseous hydrocarbons and businesses closely related
to the foregoing.
     Midstream General Partner means Quest Midstream GP, LLC, a Delaware limited
liability company, the sole general partner of the Midstream MLP prior to the
Recombination, which in connection with the Recombination was merged into Quest
Midstream Acquisition, LLC and its general partner interest in the Midstream MLP
cancelled.
     Midstream Lenders has the meaning set forth in Preliminary Statement ( 6).
     Midstream MLP means PostRock Midstream, LLC, a Delaware limited liability
company, which has, as part of the Restructure Transactions, been merged into
PESC.
     Misappropriation Transaction collectively means the alleged series of
unauthorized fund transfers occurring over a multi-year period initiated by the
former chairman and chief executive officer (“CEO”) of Quest Cherokee (now known
as MidContinent) whereby funds of the MLP, Quest Cherokee or one or more of
their Subsidiaries were transferred to an entity controlled by the former CEO
and periodically repaid but in such a manner that the transactions were not
timely discovered and over time resulted in the former CEO having allegedly
misappropriated and converted to his personal use, approximately $10 million.
     MLP means QELP as identified in Preliminary Statement (1).
     Moody’s means Moody’s Investors Service, Inc.
     Mortgaged Properties means collectively all the Mortgaged Property as
defined in the Mortgages and Mortgaged Property individually means any one of
such Mortgaged Properties.
     Mortgages means the mortgages, deeds of trust, or similar instruments
executed by any of the Loan Parties in favor of Administrative Agent or
Collateral Agent, for the benefit of the Secured Parties, including the
Mortgages creating a first lien on the Borrowing Base Oil and Gas Properties and
the Bluestem Gathering System and the Mortgages creating a second lien on the
KPC Pipeline, and all supplements, assignments, amendments, and restatements
thereto (or any agreement in substitution therefor, and Mortgage means each of
such Mortgages).
     Multiemployer Plan means any employee benefit plan of the type described in
Section 4001(a)(3) of ERISA, to which the Borrowers or any ERISA Affiliate makes
or is obligated to make contributions, or during the preceding three calendar
years, has made or been obligated to make contributions.
     Net Available Cash from a Disposition means cash payments received
(including any cash payments received by way of deferred payment of principal
pursuant to a note or installment receivable or
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otherwise and net proceeds from the Disposition of any securities received as
consideration, but only as and when received, but excluding any other
consideration received in the form of assumption by the acquiring Person of
Indebtedness or other obligations relating to the properties or assets that are
the subject of such Disposition or received in any other non-cash form)
therefrom, in each case net of:
     (1) all legal, accounting, investment banking, title and recording tax
expenses, commissions and other fees and expenses incurred including, without
limitation, the commission to be paid to Robert W. Baird & Company under a
contract with Parent in which Robert W. Baird & Company is to solicit bids for a
sale of the Marcellus Assets (or 100% of the equity of Eastern), and all
federal, state, provincial, foreign and local taxes required to be paid or
accrued as a liability under GAAP (after taking into account any available tax
credits or deductions and any tax sharing agreements), as a consequence of such
Disposition;
     (2) all payments made on any Indebtedness (other than the Indebtedness
governed by this Agreement and the other Loan Documents) which is secured by any
assets subject to such Disposition, in accordance with the terms of any Lien
upon such assets, or which must by its terms, or in order to obtain a necessary
consent to such Disposition, or by applicable Law be repaid out of the proceeds
from such Disposition;
     (3) all distributions and other payments required to be made to minority
interest holders in Subsidiaries or joint ventures or to holders of royalty or
similar interests as a result of such Disposition; and
     (4) the deduction of appropriate amounts to be provided by the seller as a
reserve, in accordance with GAAP, against any liabilities associated with the
assets Disposed of in such Disposition and retained by the Borrowers or any of
their respective Subsidiaries after such Disposition.
     Nonrenewal Notice Date has the meaning specified in Section 2.14(b)(iii).
     Obligations means all advances to, and debts, liabilities, obligations,
covenants and duties of, any Loan Party arising under any Loan Document, whether
direct or indirect (including those acquired by assumption), absolute or
contingent, due or to become due, now existing or hereafter arising and
including interest that accrues after the commencement by or against any Loan
Party of any proceeding under any Debtor Relief Laws naming such Person as the
debtor in such proceeding. In addition, all references to the “Obligations” in
the Collateral Documents and in Sections 2.13 and 10.09 of this Agreement shall,
in addition to the foregoing, also include all present and future indebtedness,
liabilities, and obligations (and all renewals and extensions thereof or any
part thereof) now or hereafter owed to any Lender or any Affiliate of a Lender
arising pursuant to any Lender Hedging Agreement and all present and future
indebtedness, liabilities, and obligations (and all renewals and extensions
thereof or any part thereof) now or hereafter owed to the Approved Hedge
Counterparty arising pursuant to any Approved Hedge Counterparty Swap Contract.
     Obligor means the Borrowers and any other Person (other than the
Administrative Agent, Collateral Agent or any Lender) obligated under any Loan
Document.
     Oil and Gas Properties means fee, leasehold or other interests in or under
mineral estates or Hydrocarbon leases with respect to properties situated in the
United States, including overriding royalty and royalty interests, leasehold
estate interests, net profits interests, production payment interests and
mineral fee interests, together with contracts executed in connection therewith
and all tenements, hereditaments, appurtenances and properties, real or
personal, appertaining, belonging, affixed or incidental thereto.
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     Organization Documents means, (a) with respect to any corporation, the
certificate or articles of incorporation and the bylaws; (b) with respect to any
limited liability company, the certificate of formation and operating agreement;
and (c) with respect to any partnership, joint venture, trust or other form of
business entity, the partnership, joint venture or other applicable agreement of
formation and any agreement, instrument, filing or notice with respect thereto
filed in connection with its formation with the secretary of state or other
department in the state of its formation, in each case as amended from time to
time.
     Other Taxes has the meaning specified in Section 3.01(b).
     Outstanding Amount on any date (i) with respect to Revolving Loans, means
the aggregate principal amount thereof after giving effect to any Borrowings and
prepayments or repayments occurring on such date, (ii) with respect to any L/C
Obligations, the amount of such L/C Obligations on such date after giving effect
to any L/C Credit Extension occurring on such date and any other changes in the
aggregate amount of the L/C Obligations as of such date, including as a result
of any reimbursements of outstanding unpaid drawings under any Letters of Credit
or any reductions in the maximum amount available for drawing under Letters of
Credit taking effect on such date, and (iii) for purposes of Section 2.11(d)
with respect to Obligations under a Lender Hedging Agreement, means the amount
then due and payable under such Lender Hedging Agreement.
     Parent means PostRock Energy Corporation, a Delaware corporation.
     Parent Change of Control means any Person or two or more Persons acting in
concert (other than White Deer Energy or its Affiliates) acquires beneficial
ownership (within the meaning of Rule 13d-3 of the Securities and Exchange
Commission under the Securities Exchange Act of 1934) of more than 50% of the
outstanding shares of, and warrants relating to ,Voting Stock of Parent;
provided, however, that a merger of Parent into another entity in which the
other entity is the survivor shall not be deemed a Parent Change of Control, if
Parent’s stockholders of record as constituted immediately prior to such
acquisition hold more than 50% of the outstanding shares of, and warrants
relating to, Voting Stock of the surviving entity; and provided further however,
that in no event will the issuance of new equity by Parent constitute a Parent
Change of Control.
     Parent Guaranty means the Guaranty, dated of even date herewith, executed
by Parent for the benefit of the Lenders.
     Participant has the meaning specified in Section 10.07(d).
     PBGC means the Pension Benefit Guaranty Corporation.
     Pension Plan means any “employee pension benefit plan” (as such term is
defined in Section 3(2)(A) of ERISA), other than a Multiemployer Plan, that is
subject to Title IV of ERISA and is sponsored or maintained by the Borrowers or
any ERISA Affiliate or to which the Borrowers or any ERISA Affiliate contributes
or has an obligation to contribute, or in the case of a multiple employer plan
(as described in Section 4064(a) of ERISA) has made contributions at any time
during the immediately preceding five plan years.
     Permitted Liens means Liens permitted under Section 7.01 as described in
such Section.
     Permitted Acquisition means any Acquisition by a Borrower or any of its
Subsidiaries (other than the Excluded Subsidiaries) resulting in ownership of
assets inside the United States, or of equity interests
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in a Domestic Person or a non-Domestic Person whose business operations and
assets are located in the U.S.; provided, however, that the following
requirements have been satisfied:
     (i) if such Acquisition results in a Borrower’s ownership of a Subsidiary,
the Borrower shall have complied with the requirements of Sections 6.14 and 6.15
as of the date of such Acquisition;
     (ii) with respect to Acquisitions involving acquisitions of an equity
interest, such Acquisition shall have been approved or consented to by the board
of directors or similar governing entity of the Person being acquired; and
     (iii) as of the closing of such Acquisition no Default or Event of Default
shall exist or occur as a result of, and after giving effect to, such
Acquisition.
     Person means any individual, trustee, corporation, general partnership,
limited partnership, limited liability company, joint stock company, trust,
unincorporated organization, bank, business association, firm, joint venture or
Governmental Authority.
     Plan means any “employee benefit plan” (as such term is defined in
Section 3(3) of ERISA) established by the Borrower or any ERISA Affiliate.
     PostRock Party means Parent or any direct or indirect Subsidiary of Parent.
     Preferred Dividend means the dividend required to be paid to White Deer
Energy by Parent, whether in cash or in kind, by reason of the White Deer Energy
Investment.
     Prime Rate means for any day, the rate of interest in effect for such day
as publicly announced from time to time by the Administrative Agent as its U.S.
“prime rate.” Such rate is a rate set by the Administrative Agent based upon
various factors including the Administrative Agent’s costs and desired return,
general economic conditions and other factors, and is used as a reference point
for pricing some loans, which may be priced at, above, or below such announced
rate.
     Prior Credit Agreements has the meaning specified in Preliminary Statement
(6) hereto.
     Prior First Lien Credit Agreement has the meaning specified in Preliminary
Statement (2) hereto.
     Prior Midstream Credit Agreement has the meaning specified in Preliminary
Statement (6) hereto.
     Prior Second Lien Credit Agreement has the meaning specified in Preliminary
Statement (4) hereto.
     Pro Rata Share means with respect to each Lender, at any time, a fraction
(expressed as a percentage, carried out to the ninth decimal place), the
numerator of which is the amount of the Revolving Commitment of such Lender at
such time and the denominator of which is the amount of the Aggregate Revolving
Commitments at such time; provided that if the Revolving Commitment of each
Lender to make Loans and the obligation of the L/C Issuer to make L/C Credit
Extensions have been terminated pursuant to Section 8.02, then the Pro Rata
Share of each Lender shall be determined based on the Pro Rata Share of such
Lender immediately prior to such termination and after giving effect to any
subsequent assignments made pursuant to Section 10.07. The initial Pro Rata
Share of each Lender is set out
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opposite the name of such Lender on Schedule 2.01 or in the Assignment and
Assumption pursuant to which such Lender becomes a party hereto, as applicable.
     Proved Developed Producing Reserves means Proved Reserves which are
categorized as both "Developed” and “Producing” in the Definitions for Oil and
Gas reserves promulgated by the Society of Petroleum Engineers (or any generally
recognized successor) as in effect at the time in question.
     Proved Reserves means Proved Reserves as defined in the Definitions for Oil
and Gas reserves promulgated by the Society of Petroleum Engineers (or any
generally recognized successor) as in effect at the time in question.
     PV10 means the present worth of future net income, discounted to present
value at the simple interest rate of ten percent (10%) per year.
     Quest Cherokee means Quest Cherokee, LLC, which has merged into Bluestem
with Bluestem being the survivor and being now known as MidContinent.
     QRC has the meaning specified in Preliminary Statement (1).
     QRC Credit Agreement means the Second Amended and Restated Credit
Agreement, dated November 15, 2007, among Quest Resource Corporation, the QRC
Subsidiaries (as defined therein, and RBC.
     RBC means Royal Bank of Canada.
     Recombination means the transactions specified in the Recombination
Agreement, pursuant to which the equity owners of QRC, the MLP and QMLP
exchanged their equity in such entities for equity in Parent.
     Recombination Agreement means that certain Agreement and Plan of Merger,
dated as of July 2, 2009, among Parent, QRC, QMLP, MLP, QMLPGP, the General
Partner, Quest Resource Acquisition Corp., Quest Energy Acquisition, LLC, Quest
Midstream Holdings Corp. and Quest Midstream Acquisition, LLC, as the same may
be amended, modified or waived from time to time in accordance with
Section 7.14, pursuant to which the Recombination was consummated.
     Reference Period has the meaning set forth in Section 7.16.
     Register has the meaning set forth in Section 10.07(c).
     Reinvested means used for capital expenditures or Acquisitions in
connection with the Midstream Businesses of a Company or the exploration,
production and marketing of Hydrocarbons and related activities.
     Related Parties means, with respect to any specified Person, such Person’s
Affiliates and the respective directors, officers, employees, agents and
advisors of such Person and such Person’s Affiliate.
     Release means any spilling, leaking, pumping, pouring, emitting, emptying,
discharging, injecting, escaping, leaching, dumping, disposal, deposit,
dispersal, migrating, or other movement into the air, ground, or surface water,
or soil.
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     Repayment Notice means a notice of repayment of a Borrowing pursuant to
Section 2.04(a), which, if in writing, shall be substantially in the form of
Exhibit A-3.
     Reportable Event means any of the events set forth in Section 4043(c) of
ERISA, other than events for which the 30 day notice period has been waived.
     Request for Credit Extension means (a) with respect to a Borrowing,
conversion or continuation of Revolving Loans, a Borrowing Notice, and (b) with
respect to an L/C Extension, a Letter of Credit Application.
     Required Lenders means, as of any date of determination, Lenders having
more than 66+2/3% of the Aggregate Revolving Commitments or, if the Revolving
Commitment of each Lender to make Revolving Loans and the obligation of the L/C
Issuer to make L/C Credit Extensions have been terminated pursuant to
Section 8.02, Lenders holding in the aggregate more than 66+2/3% of the Total
Outstandings (with the aggregate amount of each Lender’s risk participation and
funded participation in L/C Obligations being deemed “held” by such Lender for
purposes of this definition); provided that the Revolving Commitment of, and the
portion of the Total Outstandings held or deemed held by, any Defaulting Lender
shall be excluded for purposes of making a determination of Required Lenders.
     Reserve Report means a report regarding the Proved Reserves attributable to
the Borrowing Base Oil and Gas Properties, using the criteria and parameters
required by and acceptable to the Securities and Exchange Commission and
incorporating the present cost of appropriate plugging and abandonment
obligations to be incurred in the future, taking into account any plugging and
abandonment fund required to be accrued or established by Borrowers out of cash
flow from the Borrowing Base Oil and Gas Properties covered by such report with
respect to such future obligations.
     Responsible Officer means the president, chief executive officer, executive
vice president, senior vice president, vice president, chief financial officer,
controller, treasurer or assistant treasurer of a Person. Any document delivered
hereunder that is signed by a Responsible Officer of a Loan Party shall be
conclusively presumed to have been authorized by all necessary corporate,
partnership, limited liability company, and/or other action on the part of such
Loan Party and such Responsible Officer shall be conclusively presumed to have
acted on behalf of such Loan Party.
     Restricted Payment by a Person means any dividend or other distribution
(whether in cash, securities or other property) with respect to any equity
interest in such Person, or any payment (whether in cash, securities or other
property), including any sinking fund or similar deposit on account of the
purchase, redemption, retirement, acquisition, cancellation or termination of
any such equity interest or of any option, warrant or other right to acquire any
such equity interest.
     Restructure Transactions means the series of corporate transactions
involving PESC and Affiliates of PESC concluding on the date of this Agreement
that includes the amendment of the relevant Organization Documents and the
amendment or termination of various Material Agreements that relate to the
entities and their intercompany transactions or are impacted by such corporate
transactions, including the following: (i) PESC Corporation converts to a
Delaware close corporation; (ii) Quest Transmission Company, LLC conveys the
Three Little Pipes to Bluestem (provided timely approval to do so is obtained
from the Kansas Corporation Commission); (iii) Quest Transmission Company, LLC
is merged into PostRock Midstream, LLC; (iv).Quest Pipelines (KPC) converts to a
Delaware limited liability company named “PostRock KPC Pipeline, LLC,” which is
KPC Pipeline, LLC, a grantor of a mortgage hereunder; (v) Quest Kansas Pipeline,
L.L.C. and Quest Kansas General Partner, L.L.C. are merged into KPC Pipeline,
LLC; (vi) Quest Energy Service, LLC, Quest Mergersub, Inc., Energy & Midstream
Partners JV, LLC and Quest Midstream Holdings Corp. are each merged into PESC;
(vii). MidContinent is
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merged into Quest Cherokee, Quest Cherokee survives, and the EIN remains that of
Quest Cherokee; (viii) Quest Cherokee Oilfield Service, LLC and PostRock
Midstream, LLC are each merged into PESC; (ix) Quest Oil & Gas, LLC is merged
into Quest Cherokee; (x) Bluestem conveys all vehicles and equipment to PESC;
(x) Quest Cherokee merges into Bluestem, Bluestem’s EIN remains, and Bluestem
takes the name “PostRock MidContinent Production, LLC” which entity is one of
the Borrowers hereunder; and (xi) the White Deer Energy Investment in Parent
occurs.
     Revolving Commitment means, as to each Lender, its obligation to (a) make
Revolving Loans to Borrower pursuant to Section 2.01, and (b) purchase
participations in L/C Obligations, in an aggregate principal amount at any one
time outstanding not to exceed the lesser of (i) the amount set out opposite
such Lender’s name on Schedule 2.01, or in the Assignment and Assumption
pursuant to which such Lender becomes a party hereto, as applicable, as such
amount may be adjusted from time to time in accordance with this Agreement and
(ii) such Lender’s Pro Rata Share of the Borrowing Base then in effect.
     Revolving Loan means an extension of revolving credit by a Lender to the
Borrowers pursuant to Section 2.01, which prior to the date of this Agreement
had been converted to a term loan, which term loan shall be automatically
converted to a revolving loan.
     Revolving Note means a revolving promissory note of the Borrowers in
substantially the form of Exhibit B, evidencing the obligation of Borrowers to
repay the Revolving Loans and all renewals and extensions of all or any part
thereof and “Revolving Notes” collectively means all of such promissory notes.
     Rights means rights, remedies, powers, privileges, and benefits.
     S&P means Standard & Poor’s Rating Services, a division of The McGraw-Hill
Companies, Inc.
     Secured Parties means the Lenders party to this Agreement, the Lenders
and/or any Affiliate of a Lender party to a Lender Hedging Agreement and the
Approved Hedge Counterparty party to an Approved Hedge Counterparty Swap
Contract. The term “Secured Parties” shall include a former Lender or an
Affiliate of a former Lender that is party to a Swap Contract with any Borrower
or Borrower Affiliate; provided that such former Lender or Affiliate was a
Lender or an Affiliate of a Lender at the time it entered into such Swap
Contract.
     Secured Pipeline Loan means the term loan facility in the amount of
$15,000,000 entered into of even date herewith by KPC Pipeline, LLC and PESC, as
borrowers, and RBC as administrative agent for the lenders party thereto,
secured by a first lien on the KPC Pipeline and by a second lien on the
Collateral on which the Lenders under this Agreement have a first lien.
     Security Agreements means, collectively, the security agreements, or
similar instruments, executed by any of the Loan Parties in favor of the
Administrative Agent or the Collateral Agent for the benefit of the Secured
Parties, creating a first lien on all assets securing the Prior First Lien
Credit Agreement and the Prior Midstream Credit Agreement on the Closing Date
and a second lien on the KPC Pipeline, in form and substance acceptable to the
Administrative Agent, and all supplements, assignments, amendments, and
restatements thereto (or any agreement in substitution therefor), and “Security
Agreement” means each of such Security Agreements.
     STP means STP Newco, Inc., an Oklahoma corporation.
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     Subsidiary of a Person means a corporation, partnership, joint venture,
limited liability company or other business entity of which a majority of the
shares of securities or other interests having ordinary voting power for the
election of directors or other governing body (other than securities or
interests having such power only by reason of the happening of a contingency)
are at the time beneficially owned, or the management of which is otherwise
controlled, directly, or indirectly through one or more intermediaries, or both,
by such Person. Unless otherwise specified, all references herein to a
“Subsidiary” or to “Subsidiaries” shall refer to a Subsidiary or Subsidiaries of
the Borrowers.
     Subsidiary Guaranty means any Subsidiary Guaranty made by a Subsidiary of
the Borrowers (other than the Excluded Subsidiaries and KPC Pipeline, LLC and
any Subsidiary it may hereafter form) in favor of the Administrative Agent on
behalf of the Lenders, in form and substance acceptable to the Administrative
Agent.
     Swap Contract means (a) any and all interest rate swap transactions, basis
swaps, credit derivative transactions, forward rate transactions, commodity
swaps, commodity options, forward commodity contracts, equity or equity index
swaps or options, bond or bond price or bond index swaps or options or forward
bond or forward bond price or forward bond index transactions, interest rate
options, forward foreign exchange transactions, cap transactions, floor
transactions, collar transactions, currency swap transactions, cross-currency
rate swap transactions, currency options, spot contracts, or any other similar
transactions or any combination of any of the foregoing (including any options
to enter into any of the foregoing), whether or not any such transaction is
governed by or subject to any master agreement, and (b) any and all transactions
of any kind, and the related confirmations, which are subject to the terms and
conditions of, or governed by, any form of master agreement published by the
International Swaps and Derivatives Association, Inc., any International Foreign
Exchange Master Agreement, or any other master agreement (any such master
agreement, together with any related schedules, a “Master Agreement”), including
any such obligations or liabilities under any Master Agreement.
     Swap Termination Value means, in respect of any one or more Swap Contracts,
after taking into account the effect of any legally enforceable netting
agreement relating to such Swap Contracts, (a) for any date on or after the date
such Swap Contracts have been closed out and termination value(s) determined in
accordance therewith, such termination value(s).
     Synthetic Lease Obligation means the monetary obligation of a Person under
(a) a so-called synthetic or tax retention lease, or (b) an agreement for the
use or possession of property creating obligations that do not appear on the
balance sheet of such Person but which are depreciated for tax purposes by such
Person.
     Taxes has the meaning set forth in Section 3.01(a).
     Three Little Pipes means the three (3) small ancillary pipelines identified
as the Augusta System, the OCF System and the Quindaro System, located in
Kansas, owned by Quest Transmission Company and contemplated to be conveyed to
MidContinent as part of the Restructure Transactions, subject to timely approval
to do so being obtained from the Kansas Corporation Commission.
     Total Outstandings means the aggregate Outstanding Amount of all Revolving
Loans and all L/C Obligations.
     Transfer Payments means any payment made to Parent, any of the Excluded
Subsidiaries, or to KPC Pipeline, LLC.
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     Type means, with respect to a Revolving Loan, its character as a Base Rate
Loan or a Eurodollar Rate Loan.
     Unfunded Pension Liability means the excess of a Pension Plan’s benefit
liabilities under Section 4001(a)(16) of ERISA, over the current value of that
Pension Plan’s assets, determined in accordance with the assumptions used for
funding the Pension Plan pursuant to Section 412 of the Code for the applicable
plan year.
     United States or U.S. means the United States of America, its fifty states
and the District of Columbia.
     Unreimbursed Amount has the meaning set forth in Section 2.14(c)(i).
     Utilization Percentage means, on any day, the ratio, stated as a percentage
of the aggregate principal amount of the Total Outstandings to the Aggregate
Revolving Commitments.
     Voting Stock means the capital stock (or equivalent thereof) of any class
or kind, of a Person, the holders of which are entitled to vote for the election
of directors, managers, or other voting members of the governing body of such
Person.
     White Deer Energy means any one or more of White Deer Energy L.P. a Cayman
Islands exempted limited partnership, White Deer Energy TE L.P., and White Deer
Energy FI L.P.
     White Deer Energy Additional Investment means any amount in excess of
$50,000,000 paid to Parent by White Deer Energy to purchase additional equity in
Parent.
     White Deer Energy Investment means the purchase, on or prior to the date
hereof, by White Deer Energy of shares of Series A Cumulative Redeemable
Preferred Stock issued by Parent, together with warrants to purchase common
stock and Series B Preferred Stock, for at least $50,000,000 as an initial
investment, with White Deer Energy reserving $30,000,000 of additional capital
to be invested in equity of Parent under the terms and conditions of that
certain Securities Purchase Agreement, by and among Parent and White Deer
Energy.
     Wholly-Owned when used in connection with a Person means any Subsidiary of
such Person of which all of the issued and outstanding equity interests (except
shares required as directors’ qualifying shares) shall be owned by such Person
or one or more of its Wholly-Owned Subsidiaries.
     1.02. Other Interpretive Provisions.
     (a) The meanings of defined terms are equally applicable to the singular
and plural forms of the defined terms.
     (b) (i) The words “herein” and “hereunder” and words of similar import when
used in any Loan Document shall refer to such Loan Document as a whole and not
to any particular provision thereof.
     (ii) Unless otherwise specified herein, Article, Section, Exhibit and
Schedule references are to this Agreement.
     (iii) The term “including” is by way of example and not limitation.
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     (iv) The term “documents” includes any and all instruments, documents,
agreements, certificates, notices, reports, financial statements and other
writings, however evidenced.
     (c) In the computation of periods of time from a specified date to a later
specified date, the word “from” means “from and including;” the words “to” and
“until” each mean "to but excluding;” and the word “through” means “to and
including.”
     (d) Section headings herein and in the other Loan Documents are included
for convenience of reference only and shall not affect the interpretation of
this Agreement or any other Loan Document.
     1.03. Accounting Terms. All accounting terms not specifically or completely
defined herein shall be construed in conformity with, and all financial data
required to be submitted pursuant to this Agreement shall be prepared in
conformity with, GAAP applied on a consistent basis, as in effect from time to
time, applied in a manner consistent with that used in preparing the audited
financial statements, except as otherwise specifically prescribed herein.
     1.04. Rounding. Any financial ratios required to be maintained by the
Borrowers pursuant to this Agreement shall be calculated by dividing the
appropriate component by the other component, carrying the result to one place
more than the number of places by which such ratio is expressed herein and
rounding the result up or down to the nearest number (with a rounding-up if
there is no nearest number).
     1.05. References to Agreements, Persons and Laws; Rules of Construction.
Unless otherwise expressly provided herein, (a) references to agreements
(including the Loan Documents) and other contractual instruments shall be deemed
to include all subsequent amendments, restatements, extensions, supplements and
other modifications thereto, but only to the extent that such amendments,
restatements, extensions, supplements and other modifications are not prohibited
by any Loan Document; and (b) references to any Law shall include all statutory
and regulatory provisions consolidating, amending, replacing, supplementing or
interpreting such Law; and (c) any reference herein to any Person shall be
construed to include such Person’s successors and assigns (subject to the
restrictions contained in the Loan Documents). No provision of this Agreement or
any other Loan Document shall be interpreted or construed against any Person
solely because such Person or its legal representatives drafted such provision.
ARTICLE II.
THE REVOLVING COMMITMENTS AND BORROWINGS
     2.01. Revolving Loans. Subject to and in reliance upon the terms,
conditions, representations, and warranties in the Loan Documents, each Lender
severally, but not jointly, agrees to make revolving loans (each such revolving
loan a “Revolving Loan”) to Borrowers from time to time on any Business Day
during the period from the Closing Date to the Maturity Date, in an aggregate
amount not to exceed at any time outstanding the amount of such Lender’s
Revolving Commitment as set forth on Schedule 2.01; provided that, that after
giving effect to any Borrowing, (a) the Total Outstandings shall not exceed the
lesser of (i) Aggregate Revolving Commitments and (ii) the Borrowing Base, and
(b) the aggregate Outstanding Amount of the Revolving Loans of any Lender, plus
such Lender’s Pro Rata Share of the Outstanding Amount of all L/C Obligations
shall not exceed such Lender’s Revolving Commitment; provided further that on
and after the date of this Agreement, all outstanding Revolving Loans, which had
previously been converted to term loans, shall automatically be converted to
revolving loans and each Lender’s Revolving Commitment shall be revived,
renewed, and amended, in accordance with the terms of this Agreement, as
Lender’s Revolving Commitment hereunder and the Aggregate Revolving Commitment
shall be revived, renewed, and amended, in accordance with the terms of this
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Agreement, as the Aggregate Revolving Commitment hereunder. Within the limits of
each Lender’s Revolving Commitment, and subject to the other terms and
conditions hereof, Borrowers may borrow under this Section 2.01, prepay under
Section 2.04, and reborrow under this Section 2.01. Revolving Loans may be Base
Rate Loans or Eurodollar Rate Loans, as further provided herein.
     2.02. Borrowing Base.
     (a) The Borrowing Base in effect as of the date of this Agreement is
$225,000,000 and without the consent of all Lenders shall not exceed such amount
and each Lender may exercise its sole and absolute discretion in determining
whether to agree to any increase above $225,000,000. Upon a sale of the
Marcellus Assets, the Borrowing Base will be automatically reduced by
$17,000,000 pursuant to Section 2.02(l). The Borrowing Base in existence at any
time may not be increased without the consent of one hundred percent (100%) of
the Lenders.
     (b) Borrower shall deliver to Administrative Agent on or before March 31,
2011 for distribution to each Lender the Reserve Report relating to the Proved
Reserves attributable to the Borrowing Base Oil and Gas Properties as of
December 31, 2010 which shall be prepared by Cawley Gillespie & Associates, Inc.
or other independent reservoir engineers reasonably acceptable to Administrative
Agent. This Reserve Report will not be used for purposes of redetermining the
Borrowing Base pursuant to Section 2.02(c) except to the extent the March 31,
2011 Reserve Report will be prepared on a roll forward basis using the
December 31, 2010 Reserve Report,
     (c) The first redetermined Borrowing Base will be based upon a Reserve
Report dated effective as of March 31, 2011 which shall set out the Proved
Reserves attributable to the Borrowing Base Oil and Gas Properties. This Reserve
Report may be prepared by one of the Borrower’s own internal petroleum
engineers, shall be certified by the President or other Responsible Officer of
such Borrower, and shall be prepared on a roll forward basis from the
December 31, 2010 Reserve Report prepared by Cawley & Gillespie & Associates,
Inc. or other independent reservoir engineers reasonably acceptable to
Administrative Agent and shall include a reconciliation from the December 31,
2010 Reserve Report. This Reserve Report shall be delivered to the
Administrative Agent on or before June 30, 2011. The Administrative Agent shall
make a determination of the first redetermined Borrowing Base and submit the
first redetermined Borrowing Base to the Lenders for approval, with such first
redetermined Borrowing Base to become effective on July 31, 2011, and, in the
case of an increase in the Borrowing Base, upon approval of all Lenders and the
L/C Issuer, and in the case of maintaining or decreasing the Borrowing Base,
upon approval of the Administrative Agent and the Required Lenders and in any
case with the subsequent written notification from the Administrative Agent to
the Borrowers. Administrative Agent shall announce the first redetermined
Borrowing Base on or about July 31, 2011 (but no later than August 15, 2011).
Such redetermined Borrowing Base, subject to the other provisions of this
Agreement, shall be the Borrowing Base until the effective date of the next
redetermination of the Borrowing Base as set out in Section 2.02(d), subject to
being automatically reduced by $17,000,000 upon the sale of the Marcellus Assets
pursuant to Section 2.02(l) (if not previously reduced in accordance with
Section 2.02(l)).
     (d) After the first redetermination of the Borrowing Base to become
effective July 31, 2011, the Borrowing Base shall thereafter be redetermined
from time to time pursuant to the provisions of this Section 2.02(d) relative to
the Proved Reserves attributable to the Borrowing Base Oil and Gas Properties.
On or before each March 31 and September 30 thereafter until the Maturity Date,
commencing March 31, 2012, the Borrowers shall furnish to the Administrative
Agent a Reserve Report, which shall set out, as of each preceding December 31 or
June 30, as applicable, the Proved Reserves attributable to the Borrowing Base
Oil and Gas Properties. Each June 30 Reserve Report may be prepared by one of
the Borrower’s own internal petroleum engineers, shall be certified by the
President or other Responsible
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Officer of such Borrower, and shall be internally generated and prepared on a
roll forward basis from the prior Reserve Report. Each Reserve Report relating
to the Proved Reserves attributable to the Borrowing Base Oil and Gas Properties
as of December 31 shall be prepared by Cawley Gillespie & Associates, Inc. or
other independent reservoir engineers acceptable to Administrative Agent. Each
Reserve Report as of June 30 shall include a reconciliation from the prior
December 31 Reserve Report. Upon receipt of each such Reserve Report commencing
with the Reserve Report as of December 31, 2011 delivered on or before March 31,
2012, the Administrative Agent shall make a determination of the Borrowing Base
which shall become effective on or about April 30 or October 31 of each year,
and, in the case of an increase in the Borrowing Base, upon approval of all
Lenders and the L/C Issuer, and in the case of maintaining or decreasing the
Borrowing Base, upon approval of the Administrative Agent and the Required
Lenders and in any case with the subsequent written notification from the
Administrative Agent to the Borrowers. Administrative Agent shall announce the
redetermined Borrowing Base on or about October 31 (but no later than
November 15) with respect to the June 30 Reserve Report (delivered in September)
and on or about April 30 of each year (but no later than May 15 of each year)
with respect to the December 31 Reserve Report (delivered in March). Such
redetermined Borrowing Base, subject to the other provisions of this Agreement,
shall be the Borrowing Base until the effective date of the next redetermination
of the Borrowing Base as set out in this Section 2.02.
     (e) After the second redetermination of the Borrowing Base effective on
April 30, 2012, during each successive period between scheduled redeterminations
of the Borrowing Base, the Administrative Agent shall have the right to
initiate, and shall initiate at the request of Required Lenders, one
(1) unscheduled redetermination of the Borrowing Base by requesting in writing
that the Borrowers provide an unscheduled internally generated Reserve Report
regarding the Proved Reserves attributable to the Borrowing Base Oil and Gas
Properties with an effective date not more than sixty (60) days prior to the
Borrower’s delivery of such Reserve Report to the Administrative Agent, and such
Reserve Report shall be delivered to the Administrative Agent within thirty (30)
days after the Borrower’s receipt of such written request; provided, however,
that there shall not be any more than two (2) unscheduled redeterminations of
the Borrowing Base under this Section 2.02(e) during any twelve (12) month
period.
     (f) In addition to the redetermination provided for in Section 2.02(e),
upon a Material Disposition or any material (in the judgment of the
Administrative Agent or the Required Lenders) defect in title, or failure of
title to, five percent (5%) or more of the PV-10 of the Borrowing Base Oil and
Gas Properties, the Administrative Agent may, and upon the request of the
Required Lenders shall, redetermine the Borrowing Base by requesting in writing
that the Borrowers provide an unscheduled internally generated Reserve Report
regarding the Proved Reserves attributable to the Borrowing Base Oil and Gas
Properties with an effective date not more than sixty (60) days prior to the
Borrowers’ delivery of such Reserve Report to the Administrative Agent, and such
Reserve Report shall be delivered to the Administrative Agent within thirty days
after the Borrowers’ receipt of such written request.
     (g) If prior to December 31, 2011 any Swap Contracts are amended, modified,
terminated or unwound and after taking into account the effect of any such
amendment or modification and the effect of any new Swap Contracts entered into,
the Borrowing Base would be reduced by more than $11,250,000, then the Borrowing
Base will be automatically reduced by an amount equal to the excess of such
reduction in the Borrowing Base over $11,250,000.
     (h) During each period between scheduled redeterminations of the Borrowing
Base, the Borrowers shall have the right to request, by written notice to the
Administrative Agent, one (1) unscheduled redetermination of the Borrowing Base,
subject to contemporaneously providing to the Administrative Agent a Reserve
Report with an effective date not more than sixty days prior to the date of such
notice; provided, however, that there shall not be any more than two
(2) unscheduled redeterminations of the Borrowing Base under this
Section 2.02(h) during any twelve (12) month period.
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     (i) In addition to the redetermination provided for in Section 2.02(f),
upon a Material Acquisition, the Borrowers may, from time to time upon written
notice to the Administrative Agent, propose to add Oil and Gas Properties to the
Borrowing Base Oil and Gas Properties and other Collateral to the Borrowing
Base. Any such proposal to add Oil and Gas Properties to the Borrowing Base Oil
and Gas Properties shall be accompanied by a Reserve Report applicable to such
properties that conforms to the requirements of Section 2.02, and evidence
sufficient to establish that the Borrowers or the other applicable Loan Party
has Marketable Title to such Oil and Gas Properties or other Collateral, and any
such addition shall become effective at such time as: (a) the Administrative
Agent, with the approval of all the Lenders, has made a determination of the
amount by which the Borrowing Base would be increased as the result of such
addition and (b) the conditions set out in Article IV hereof, to the extent they
are applicable to such additional Oil and Gas Properties or other Collateral of
the Borrowers, have been satisfied. In determining the increase in the Borrowing
Base pursuant to this Section, the Administrative Agent and the Lenders shall
apply the parameters and other credit factors set out in this Section 2.02.
     (j) If in connection with a redetermination of the Borrowing Base
maintaining or decreasing the Borrowing Base, the Required Lenders cannot
otherwise agree on the new Borrowing Base, then the Borrowing Base shall be the
Administrative Agent’s calculation of the “weighted arithmetic average” (as
hereinafter calculated) of the Borrowing Base, as determined by each individual
Lender and communicated to the Administrative Agent in writing. However, the
amount of the Borrowing Base shall never be increased at any time without the
unanimous consent of all the Lenders, notwithstanding anything else herein to
the contrary. For purposes of this paragraph, the “weighted arithmetic average”
of the Borrowing Base shall be determined by first multiplying the Borrowing
Base proposed in writing to Administrative Agent by each Lender by such Lender’s
Pro Rata Share, and then adding the results of each such calculation, with the
resultant sum being the Borrowing Base.
     (k) The Borrowing Base shall represent the Required Lenders’ approval
(except where unanimous consent is required) of the Administrative Agent’s
determination, in accordance with their customary oil and gas lending practices,
of the maximum Credit Extensions that may be supported by the Borrowing Base Oil
and Gas Properties and the Borrowers acknowledge, for purposes of this
Agreement, such determination by the Administrative Agent as being the maximum
Credit Extensions that may be supported by the Borrowing Base Oil and Gas
Properties. In making any redetermination of the Borrowing Base, the
Administrative Agent and the Lenders shall apply the parameters and other credit
factors consistently applied then generally being utilized by the Administrative
Agent and each such Lender, respectively, for Borrowing Base redeterminations
for other similarly situated borrowers. The Borrowers, Lenders and the
Administrative Agent acknowledge that (i) due to the uncertainties of the oil
and gas extraction process, the Borrowing Base Oil and Gas Properties are not
subject to evaluation with a high degree of accuracy and are subject to
potential rapid deterioration in value, (ii) for this reason and the
difficulties and expenses involved in liquidating and collecting against the
Borrowing Base Oil and Gas Properties, the Administrative Agent’s determination
of the maximum Credit Extensions with respect to the Borrowing Base Oil and Gas
Properties contains an equity cushion, which equity cushion is acknowledged by
the Borrowers as essential for the adequate protection of the Lenders, and
(iii) decisions regarding the Borrowing Base shall be made by the Lenders in
their sole discretion.
     (l) Upon the sale of the Marcellus Assets, and contemporaneously therewith,
the Borrowing Base will be reduced by $17,000,000.
     (m) Upon Borrowers’ failure to make the minimum Capital Expenditures
required by the dates specified in Section 6.22, the Borrowing Base will be
reduced by an amount equal to such shortfall as provided in Section 6.22.
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     2.03. Borrowings, Conversions and Continuations of Loans.
     (a) Each Borrowing, each conversion of Revolving Loans from one Type to the
other, and each continuation of Revolving Loans as the same Type shall be made
upon a Borrower’s irrevocable notice to the Administrative Agent, which may be
given by telephone. Each such notice must be received by the Administrative
Agent not later than noon, New York time, (i) three Business Days prior to the
requested date of any Borrowing of, conversion to or continuation of Eurodollar
Rate Loans, and (ii) one Business Day prior to the conversion of Eurodollar Rate
Loans to Base Rate Loans, or the requested date of any Borrowing of Base Rate
Loans. Each such telephonic notice must be confirmed promptly by delivery to the
Administrative Agent of a written Borrowing Notice, appropriately completed and
signed by a Responsible Officer of a Borrower. Each Borrowing of, conversion to
or continuation of Eurodollar Rate Loans shall be in a principal amount of
$1,000,000 or a whole multiple of $1,000,000 in excess thereof. Each Borrowing
of or conversion to Base Rate Loans shall be in a principal amount of $500,000
or a whole multiple of $500,000 in excess thereof; provided that any Base Rate
Loan may be in an aggregate amount that is equal to the entire unused balance of
the Aggregate Revolving Commitment or that is required to finance the
Unreimbursed Amount as provided in Section 2.14(c)(i). Each Borrowing Notice
(whether telephonic or written) shall specify (i) whether a Borrower is
requesting a Borrowing, a conversion of Revolving Loans from one Type to the
other, or a continuation of Revolving Loans as the same Type, (ii) the requested
date of the Borrowing, conversion or continuation, as the case may be (which
shall be a Business Day), (iii) the principal amount of Revolving Loans to be
borrowed, converted or continued, (iv) the Type of Loans to be borrowed or to
which existing Revolving Loans are to be converted, and (v) if applicable, the
duration of the Interest Period with respect thereto. If a Borrower fails to
specify a Type of Revolving Loan in a Borrowing Notice or if a Borrower fails to
give a timely notice requesting a conversion or continuation, then the
applicable Revolving Loans shall be made or continued as, or converted to, Base
Rate Loans. Any such automatic conversion to Base Rate Loans shall be effective
as of the last day of the Interest Period then in effect with respect to the
applicable Eurodollar Rate Loans. If a Borrower requests a Borrowing of,
conversion to, or continuation of Eurodollar Rate Loans in any such Borrowing
Notice, but fails to specify an Interest Period, it will be deemed to have
specified an Interest Period of one month.
     (b) Following receipt of a Borrowing Notice, the Administrative Agent shall
promptly notify each Lender of its Pro Rata Share of the applicable Borrowing,
and if no timely notice of a conversion or continuation is provided by such
Borrower, the Administrative Agent shall notify each Lender of the details of
any automatic conversion to Base Rate Loans described in the preceding
subsection. In the case of a Borrowing, each Lender shall make the amount of its
Revolving Loan available to the Administrative Agent in immediately available
funds at the Administrative Agent’s Office not later than noon, New York time,
on the Business Day specified in the applicable Borrowing Notice. Upon
satisfaction of the applicable conditions set forth in Sections 4.01 and 4.02,
as applicable, the Administrative Agent shall make all funds so received
available to such Borrower in like funds as received by the Administrative Agent
either by (i) crediting the account of such Borrower on the books of the
Administrative Agent with the amount of such funds or (ii) wire transfer of such
funds, in each case in accordance with instructions provided to the
Administrative Agent by such Borrower; provided, however, that if, on the date
of the Borrowing there are L/C Borrowings outstanding, then the proceeds of such
Borrowing shall be applied, first, to the payment in full of any such L/C
Borrowings, and second, to such Borrower as provided above.
     (c) Except as otherwise provided herein, a Eurodollar Rate Loan may be
continued or converted only on the last day of the Interest Period for such
Eurodollar Rate Loan. During the existence of an Event of Default, no Revolving
Loans may be requested as, converted to or continued as Eurodollar Rate Loans
without the consent of the Required Lenders, and the Required Lenders may demand
that any or all of the then outstanding Eurodollar Rate Loans be converted
immediately to Base Rate Loans. The
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Administrative Agent shall promptly notify the Borrowers and the Lenders of the
interest rate applicable to any Eurodollar Rate Loan upon determination of such
interest rate. The determination of the Eurodollar Rate by the Administrative
Agent shall be conclusive in the absence of manifest error.
     (d) After giving effect to all Borrowings, all conversions of Revolving
Loans from one Type to the other, and all continuations of Revolving Loans as
the same Type, there shall not be more than six (6) Interest Periods in effect
at any given time with respect to Revolving Loans.
     2.04. Prepayments.
     (a) Optional Prepayments. The Borrowers (or one or more of them) may, upon
delivery of a Repayment Notice to the Administrative Agent, at any time or from
time to time voluntarily prepay in whole or in part Revolving Loans outstanding
under the Facility without premium or penalty; provided that (i) such notice
must be received by the Administrative Agent not later than noon, New York time,
(A) three Business Days prior to any date of prepayment of Eurodollar Rate
Loans, and (B) the date of prepayment of Base Rate Loans; (ii) any prepayment of
Eurodollar Rate Loans shall be in a principal amount of $5,000,000 or a whole
multiple of $1,000,000 in excess thereof; and (iii) any prepayment of Base Rate
Loans shall be in a principal amount of $1,000,000 or a whole multiple of
$1,000,000 in excess thereof. Each such notice shall specify the date and amount
of such prepayment and the Type(s) of Revolving Loans to be prepaid. The
Administrative Agent will promptly notify each Lender of its receipt of each
such notice, and of such Lender’s Pro Rata Share of such prepayment. If such
notice is given by a Borrower, such Borrower shall make such prepayment and the
payment amount specified in such notice shall be due and payable on the date
specified therein. Any prepayment of a Eurodollar Rate Loan shall be accompanied
by all accrued interest thereon, together with any additional amounts required
pursuant to Section 3.05. Each such prepayment shall be applied to the Revolving
Loans of the Lenders in accordance with their respective Pro Rata Shares.
     Unless a Default or Event of Default has occurred and is continuing or
would arise as a result thereof, any payment or prepayment of the Revolving
Loans may be reborrowed by Borrowers, subject to the terms and conditions
hereof.
     (b) Mandatory Prepayments. If for any reason (including a redetermination
of the Borrowing Base) a Borrowing Base Deficiency exists (other than (x) as a
result of a Credit Extension having been mistakenly or impermissibly made which
causes the Total Outstandings to exceed the lesser of (A) Aggregate Revolving
Commitments and (B) the Borrowing Base and (y) as a result of a sale of the
Marcellus Assets, in both of which cases any Borrowing Base Deficiency is
required to be cured by prepayment, in the case of clause (x), on the Business
Day after the Borrower is advised of the Borrowing Base Deficiency, and in the
case of clause (y), on the date of the sale of the Marcellus Assets), the
Borrowers shall within thirty (30) days after being notified of such Borrowing
Base Deficiency by the Administrative Agent indicate in writing the Borrowers’
election to do one or more of the following to eliminate such Borrowing Base
Deficiency:
     (i) prepay Revolving Loans and/or Cash Collateralize the L/C Obligations in
an aggregate amount equal to such Borrowing Base Deficiency within thirty
(30) days of such election,
     (ii) prepay Revolving Loans and/or Cash Collateralize the L/C Obligations
in an aggregate amount equal to such Borrowing Base Deficiency in six (6) equal
monthly installments beginning on or before the thirtieth (30th) day after being
notified of the Borrowing Base Deficiency; and
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     (iii) add to the Borrowing Base Oil and Gas Properties additional Oil and
Gas Properties of the Borrowers or another Loan Party sufficient in value, as
determined pursuant to Section 2.02, or add other Collateral to increase the
Borrowing Base to equal or exceed the Total Outstandings.
     (c) Mandatory Prepayments of Borrowing Base Value from Net Available Cash.
An amount equal to Borrowing Base Value of any Collateral sold in a Material
Disposition (other than a disposition of the Marcellus Assets which shall be
governed by subsection (d)) shall be prepaid by the selling Borrower or any of
its Subsidiaries (other than the Excluded Subsidiaries) out of the Net Available
Cash received by such Borrower or such Subsidiary. On any date on which a
Borrower or another Loan Party makes a Material Disposition of any of the
Borrowing Base Oil and Gas Properties, the Borrowing Base shall be automatically
reduced by the Borrowing Base Value of the properties so Disposed. Net Available
Cash received by the Borrower or such Subsidiary shall be used to prepay
outstanding Revolving Loans in an amount at least equal to the excess of Total
Outstandings over the reduced Borrowing Base (or to Cash Collateralize Letters
of Credit, if no Revolving Loans are outstanding). Following any such prepayment
and reduction of the Borrowing Base, any Borrower shall have the right to
request a Borrowing Base redetermination (which right shall be in addition to
any Borrower’s right to request a redetermination of the Borrowing Base pursuant
to Section 2.02(h)). (For clarification, a prepayment of the Revolving Loans may
be reborrowed, if, after a Borrowing Base redetermination, there is sufficient
Borrowing Base to permit such reborrowing.)
     (d) Mandatory Prepayments from Sale of Marcellus Assets. Net Available Cash
received by MidContinent from the Disposition of the Marcellus Assets shall be
prepaid contemporaneously with the closing of any such Disposition. On the date
MidContinent Disposes of the Marcellus Assets, the Borrowing Base shall be
automatically reduced by $17,000,000 pursuant to Section 2.02(l). Net Available
Cash received by MidContinent from the Disposition of the Marcellus Assets shall
be used to prepay outstanding Revolving Loans in an amount at least equal to the
excess of Total Outstandings over the reduced Borrowing Base (or to Cash
Collateralize Letters of Credit, if no Revolving Loans are outstanding). For the
avoidance of doubt, any prepayment resulting in Total Outstandings being less
than the reduced Borrowing Base may be reborrowed.
     (e) Closing Date Prepayment Amount and Outstandings. On the Closing Date,
MidContinent or PESC shall make a prepayment of the Indebtedness outstanding
(i) under the Prior First Lien Credit Agreement in an amount equal to the
Closing Date Prepayment Amount relating thereto; and under the Prior Midstream
Agreement in an amount equal to the Closing Date Prepayment Amount relating
thereto.
     (f) Change of Control. Upon a Change of Control, the Borrowers shall repay
to the Lenders the aggregate principal amount of Revolving Loans outstanding,
together with all accrued and unpaid interest and fees and Cash Collateralize
the L/C Obligations contemporaneously with such Change of Control.
     (g) Prepayments: Interest/Consequential Loss. All prepayments under this
Section 2.04 shall be made together with accrued interest to the date of such
prepayment on the principal amount prepaid and any amounts due under
Section 3.05.
     2.05. Reduction or Termination of Revolving Commitments. The Borrowers may,
upon notice to the Administrative Agent, terminate the Aggregate Revolving
Commitment or permanently reduce the Aggregate Revolving Commitment to an amount
not less than the sum of the Outstanding Amount of the then existing (i) unpaid
principal balance of the Revolving Loans and (ii) L/C Obligations; provided that
(i) any such notice shall be received by the Administrative Agent not later than
noon, three
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Business Days prior to (or if all the outstanding Borrowings are Base Rate
Loans, no later than noon on) the date of termination or reduction, and (ii) any
such partial reduction shall be in an aggregate amount of $1,000,000 or any
whole multiple of $1,000,000 in excess thereof. The Administrative Agent shall
promptly notify the Lenders of any such notice of reduction or termination. Once
reduced in accordance with this Section, the Aggregate Revolving Commitment may
not be increased. Any reduction of the Aggregate Revolving Commitment shall be
applied to the Revolving Commitment of each Lender according to its Pro Rata
Share. Except in connection with a termination or reduction of the entire
Aggregate Revolving Commitment, all commitment fees on the portion of the
Aggregate Revolving Commitment so terminated which have accrued to the effective
date of any termination of the Aggregate Revolving Commitment shall at
Administrative Agent’s option either be paid on the effective date of such
termination or on the date when such commitment fee would otherwise be due.
     2.06. Repayment of Revolving Loans. The Borrowers shall repay to the
Lenders on the Maturity Date the aggregate principal amount of Revolving Loans
outstanding on such date, together with all accrued and unpaid interest and
fees.
     2.07. Interest. (a) Subject to the provisions of subsection (b) below,
(i) each Eurodollar Rate Loan shall bear interest on the outstanding principal
amount thereof for each Interest Period at a rate per annum equal to the
Eurodollar Rate for such Interest Period plus the Applicable Rate and (ii) each
Base Rate Loan shall bear interest on the outstanding principal amount thereof
from the applicable borrowing date at a rate per annum equal to the Base Rate
plus the Applicable Rate.
     (b) If any amount payable by the Borrowers under any Loan Document is not
paid when due (after the expiration of any applicable grace periods), whether at
stated maturity by acceleration or otherwise, such amount shall thereafter bear
interest at a fluctuating interest rate per annum at all times equal to the
Default Rate to the fullest extent permitted by applicable Laws. Furthermore,
while any Event of Default exists or after acceleration (i) the Borrowers shall
pay interest on the principal amount of all outstanding Obligations at a
fluctuating interest rate per annum at all times equal to the Default Rate to
the fullest extent permitted by applicable Law, and (ii) accrued and unpaid
interest on past due amounts (including interest on past due interest, to the
extent allowed by Law) shall be due and payable upon demand.
     (c) Interest on each Revolving Loan shall be due and payable in arrears on
each Interest Payment Date applicable thereto and at such other times as may be
specified herein. Interest hereunder shall be due and payable in accordance with
the terms hereof before and after judgment, and before and after the
commencement of any proceeding under any Debtor Relief Law.
     (d) If the designated rate applicable to any Borrowing exceeds the Maximum
Rate, the rate of interest on such Borrowing shall be limited to the Maximum
Rate, but any subsequent reductions in such designated rate shall not reduce the
rate of interest thereon below the Maximum Rate until the total amount of
interest accrued thereon equals the amount of interest which would have accrued
thereon if such designated rate had at all times been in effect. In the event
that at maturity (stated or by acceleration), or at final payment of the
Outstanding Amount of any Revolving Loans or L/C Obligations, the total amount
of interest paid or accrued is less than the amount of interest which would have
accrued if such designated rates had at all times been in effect, then, at such
time and to the extent permitted by Law, the Borrowers shall pay an amount equal
to the difference between (a) the lesser of the amount of interest which would
have accrued if such designated rates had at all times been in effect and the
amount of interest which would have accrued if the Maximum Rate had at all times
been in effect, and (b) the amount of interest actually paid or accrued on such
Outstanding Amount.
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     2.08. Fees. (a) Commitment Fee. The Borrowers shall pay to the
Administrative Agent for the account of each Lender (other than a Defaulting
Lender) in accordance with its Pro Rata Share, a commitment fee equal to the
Applicable Rate times the actual daily amount by which the lesser of (i) the
Aggregate Revolving Commitment (subject to reduction pursuant to Sections 2.04
and 2.05) and (ii) the Borrowing Base exceeds the sum of (1) the Outstanding
Amount of Revolving Loans plus (2) the Outstanding Amount of L/C Obligations.
The commitment fee shall accrue at all times from the Closing Date until the
Maturity Date (except as to any Defaulting Lender, during any period in which a
Lender is a Defaulting Lender) and shall be due and payable quarterly in arrears
on the last Business Day of each March, June, September and December, commencing
with the first such date to occur after the Closing Date, and on the Maturity
Date. The commitment fee shall accrue at all times (except as respects a
Defaulting Lender), including at any time during which one or more of the
conditions in Article IV is not met.
     (b) Amendment Fees. On the Closing Date, the Borrowers irrevocably agree to
pay the amendment fees previously incurred under the Prior First Lien Credit
Agreement and the Prior Second Lien Credit Agreement in cash. Such previously
incurred amendment fees equal $725,000 to be paid to the lenders party to the
Prior First Lien Credit Agreement and $157,000 to be paid to the lenders party
to the Prior Second Lien Credit Agreement. No new or additional amendment fees
shall accrue by reason of the amendment and restatement of the Prior First Lien
Credit Agreement and the Prior Second Lien Credit Agreement evidenced by this
Agreement.
     (c) Processing Fee. No Section 10.07(b)(iii) processing and recordation fee
shall be due with reference to any assignment of any indebtedness and liens
under the Prior Credit Agreements effective on the Closing Date.
     2.09. Computation of Interest and Fees. Computation of interest on Base
Rate Loans shall be calculated on the basis of a year of 365 or 366 days, as the
case may be, and the actual number of days elapsed. Computation of all other
types of interest (including interest on Eurodollar Rate Loans) and all fees
shall be calculated on the basis of a year of 360 days and the actual number of
days elapsed, which results in a higher yield to the payee thereof than a method
based on a year of 365 or 366 days. Interest shall accrue on each Revolving Loan
for the day on which the Revolving Loan is made, and shall not accrue on a
Revolving Loan, or any portion thereof, for the day on which the Revolving Loan
or such portion is paid; provided that any Revolving Loan that is repaid on the
same day on which it is made shall bear interest for one day.
     2.10. Evidence of Debt. (a) The Credit Extensions made by each Lender shall
be evidenced by one or more accounts or records maintained by such Lender and by
the Administrative Agent in the ordinary course of business. The accounts or
records maintained by the Administrative Agent and each Lender shall be
conclusive absent manifest error of the amount of the Revolving Loans made by
the Lenders to the Borrowers and the interest and payments thereon. Any failure
so to record or any error in doing so shall not, however, limit or otherwise
affect the obligation of the Borrowers hereunder to pay any amount owing with
respect to the Revolving Loans or the L/C Obligations. In the event of any
conflict between the accounts and records maintained by any Lender and the
accounts and records of the Administrative Agent in respect of such matters, the
accounts and records of such Lender shall control absent manifest error. Upon
the request of any Lender made through the Administrative Agent, such Lender’s
Revolving Loans may be evidenced by one or more Revolving Notes. Each Lender may
attach schedules to its Revolving Note(s) and endorse thereon the date, Type (if
applicable), amount and maturity of the applicable Revolving Loans and payments
with respect thereto.
     (b) In addition to the accounts and records referred to in subsection (a),
each Lender and the Administrative Agent shall maintain in accordance with its
usual practice accounts or records evidencing
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the purchases and sales by such Lender of participations in Letters of Credit.
In the event of any conflict between the accounts and records maintained by the
Administrative Agent and the accounts and records of any Lender in respect of
such matters, the accounts and records of the Administrative Agent shall
control.
     2.11. Payments Generally.
     (a) All payments to be made by the Borrowers shall be made without
condition or deduction for any counterclaim, defense, recoupment or setoff.
Except as otherwise expressly provided herein, all payments by the Borrowers
hereunder shall be made to the Administrative Agent, for the account of the
respective Lenders to which such payment is owed, at the Administrative Agent’s
Office in Dollars and in immediately available funds not later than noon, New
York time, on the date specified herein. The Administrative Agent will promptly
distribute to each Lender its Pro Rata Share (or other applicable share as
provided herein) of such payment in like funds as received by wire transfer to
such Lender’s Lending Office. All payments received by the Administrative Agent
after noon, New York time, shall be deemed received on the next succeeding
Business Day and any applicable interest or fee shall continue to accrue.
     (b) Subject to the definition of “Interest Period,” if any payment to be
made by the Borrowers shall come due on a day other than a Business Day, payment
shall be made on the next following Business Day, and such extension of time
shall be reflected in computing interest or fees, as the case may be.
     (c) If no Event of Default exists and if no order of application is
otherwise specified in the Loan Documents, payments and prepayments of the
Obligations shall be applied first to fees, second to accrued interest then due
and payable on the Outstanding Amount of Revolving Loans and L/C Obligations,
and then to the remaining Obligations in the order and manner as Borrowers may
direct.
     (d) If at any time insufficient funds are received by and available to the
Administrative Agent to pay fully the Obligations, or if an Event of Default
exists, any payment or prepayment shall be applied in the following order:
(i) to the payment of enforcement expenses incurred by the Administrative Agent,
including Attorney Costs; (ii) to the ratable payment of all fees, expenses and
indemnities (including amounts payable under Article III) for which the
Administrative Agent, Lenders or Approved Hedge Counterparty have not been paid
or reimbursed in accordance with the Loan Documents or Approved Hedge
Counterparty Swap Contract (as used in this Section 2.11(d)(ii), a "ratable
payment” for any Lender, the Administrative Agent or Approved Hedge Counterparty
shall be, on any date of determination, that proportion which the portion of the
total fees, expenses and indemnities owed to such Lender, the Administrative
Agent or Approved Hedge Counterparty bears to the total aggregate fees, expenses
and indemnities owed to all Lenders, the Administrative Agent and Approved Hedge
Counterparty on such date of determination); (iii) to the ratable payment of
accrued and unpaid Letter of Credit fees, the Outstanding Amount of L/C
Borrowings, accrued and unpaid interest on, and principal of, the Outstanding
Amount of Revolving Loans and the Outstanding Amount of Obligations under Lender
Hedging Agreements; (it being understood that for purposes of this clause
(iii) the Outstanding Amount of Obligations under Lender Hedging Agreements
refers to payments owing in connection with an Early Termination Date as defined
in the 2002 Master Agreement form promulgated by the ISDA (or equivalent type
payment obligation if some other form of Swap Contract is in effect)(as used in
this Section 2.11(d)(iii), “ratable payment” means for any Lender (or Lender
Affiliate, in the case of Lender Hedging Agreements or the Approved Hedge
Counterparty, in the case of an Approved Hedge Counterparty Swap Contract), on
any date of determination, that proportion which the accrued and unpaid Letter
of Credit fees, the Outstanding Amount of L/C Borrowings, accrued and unpaid
interest on, and principal of, the Outstanding Amount of Revolving Loans and the
Outstanding Amount of Obligations under Lender Hedging Agreements owed to such
Lender (or Lender Affiliate, in the case of Lender Hedging
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Agreements or the Approved Hedge Counterparty, in the case of an Approved Hedge
Counterparty Swap Contract) bears to the accrued and unpaid Letter of Credit
fees, the Outstanding Amount of L/C Borrowings, accrued and unpaid interest on,
and principal of, the Outstanding Amount of Revolving Loans and the Outstanding
Amount of Obligations under Lender Hedging Agreements owed to all Lenders) (and
Affiliates, in the case of Lender Hedging Agreements or the Approved Hedge
Counterparty, in the case of an Approved Hedge Counterparty Swap Contract));
(iv) to Cash Collateralize the Letters of Credit; and (v) to the payment of the
remaining Obligations, if any, in the order and manner the Required Lenders deem
appropriate. Subject to Section 2.14(g), amounts used to Cash Collateralize the
aggregate undrawn amount of Letters of Credit pursuant to clause (iv) above
shall be applied to satisfy drawings under such Letters of Credit as they occur.
If any amount remains on deposit as Cash Collateral after all Letters of Credit
have either been fully drawn or expired, such remaining amount shall be applied
to the other Obligations, if any, in the order set forth above.
     (e) Unless any Borrower or any Lender has notified the Administrative Agent
prior to the date any payment is required to be made by it to the Administrative
Agent hereunder, that such Borrower or such Lender, as the case may be, will not
make such payment, the Administrative Agent may assume that such Borrower or
such Lender, as the case may be, has timely made such payment and may (but shall
not be so required to), in reliance thereon, make available a corresponding
amount to the Person entitled thereto. If and to the extent that such payment
was not in fact made to the Administrative Agent in immediately available funds,
then:
     (i) if a Borrower failed to make such payment, each Lender shall forthwith
on demand repay to the Administrative Agent the portion of such assumed payment
that was made available to such Lender in immediately available funds, together
with interest thereon in respect of each day from and including the date such
amount was made available by the Administrative Agent to such Lender to the date
such amount is repaid to the Administrative Agent in immediately available
funds, at the Federal Funds Rate from time to time in effect; and
     (ii) if any Lender failed to make such payment, such Lender shall forthwith
on demand pay to the Administrative Agent the amount thereof in immediately
available funds, together with interest thereon for the period from the date
such amount was made available by the Administrative Agent to the Borrowers to
the date such amount is recovered by the Administrative Agent (the “Compensation
Period”) at a rate per annum equal to the Federal Funds Rate from time to time
in effect. If such Lender pays such amount to the Administrative Agent, then
such amount shall constitute such Lender’s Revolving Loan, included in the
applicable Borrowing. If such Lender does not pay such amount forthwith upon the
Administrative Agent’s demand therefor, the Administrative Agent may make a
demand therefor upon the Borrowers, and the Borrowers shall pay such amount to
the Administrative Agent, together with interest thereon for the Compensation
Period at a rate per annum equal to the rate of interest applicable to the
applicable Borrowing. Nothing herein shall be deemed to relieve any Lender from
its obligation to fulfill its Revolving Commitment or to prejudice any rights
which the Administrative Agent or the Borrowers may have against any Lender as a
result of any default by such Lender hereunder.
     A notice of the Administrative Agent to any Lender with respect to any
amount owing under this subsection (e) shall be conclusive, absent manifest
error.
     (f) If any Lender makes available to the Administrative Agent funds for any
Revolving Loan to be made by such Lender as provided in the foregoing provisions
of this Article II, and the conditions to the applicable Borrowing set forth in
Article IV are not satisfied or waived in accordance with the terms
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hereof, the Administrative Agent shall return such funds (in like funds as
received from such Lender) to such Lender, without interest.
     (g) The obligations of the Lenders hereunder to make Revolving Loans are
several and not joint. The failure of any Lender to make any Revolving Loan on
any date required hereunder shall not relieve any other Lender of its
corresponding obligation to do so on such date, and no Lender shall be
responsible for the failure of any other Lender to so make its Revolving Loan or
purchase its participation.
     (h) Nothing herein shall be deemed to obligate any Lender to obtain the
funds for any Revolving Loan in any particular place or manner or to constitute
a representation by any Lender that it has obtained or will obtain the funds for
any Revolving Loan in any particular place or manner.
     2.12. Sharing of Payments. If, other than as expressly provided elsewhere
herein, any Lender shall obtain on account of the Revolving Loans made by it, or
the participations in the L/C Obligations, any payment (whether voluntary,
involuntary, through the exercise of any right of set-off, or otherwise) in
excess of its ratable share (or other share contemplated hereunder) thereof,
such Lender shall immediately (a) notify the Administrative Agent, of such fact,
and (b) purchase from the other Lenders such participations in the Revolving
Loans made by them, and/or such subparticipations in the participations in L/C
Obligations held by them, as shall be necessary to cause such purchasing Lender
to share the excess payment in respect of such Revolving Loan or such
participations, as the case may be, pro rata with each of them; provided,
however, that if all or any portion of such excess payment is thereafter
recovered from the purchasing Lender, such purchase shall to that extent be
rescinded and each other Lender shall repay to the purchasing Lender the
purchase price paid therefor, together with an amount equal to such paying
Lender’s ratable share (according to the proportion of (i) the amount of such
paying Lender’s required repayment to (ii) the total amount so recovered from
the purchasing Lender) of any interest or other amount paid or payable by the
purchasing Lender in respect of the total amount so recovered. The Borrowers
agree that any Lender so purchasing a participation from another Lender may, to
the fullest extent permitted by law, exercise all its rights of payment
(including the right of set-off, but subject to Section 10.09) with respect to
such participation as fully as if such Lender were the direct creditor of the
Borrowers in the amount of such participation. The Administrative Agent will
keep records (which shall be conclusive and binding in the absence of manifest
error) of participations purchased under this Section and will in each case
notify the Lenders following any such purchases or repayments. Each Lender that
purchases a participation pursuant to this Section shall from and after such
purchase have the right to give all notices, requests, demands, directions and
other communications under this Agreement with respect to the portion of the
Obligations purchased to the same extent as though the purchasing Lender were
the original owner of the Obligations purchased.
     2.13. Pari Passu Lien Securing Lender Hedging Obligations. All Obligations
arising under the Loan Documents, including, without limitation, Obligations
under this Agreement and Obligations under any Lender Hedging Agreement (but not
Indebtedness of any Borrower or Borrower Affiliate owing to any non-Lender,
non-Lender Affiliate or any Person other than the Approved Hedge Counterparty
which enters into a Swap Contract with any Borrower or any Borrower Affiliate),
shall be secured pari passu by the Collateral. No Lender, any Affiliate of a
Lender or the Approved Hedge Counterparty shall have any voting rights under any
Loan Document as a result of the existence of obligations owed to it under any
such Lender Hedging Agreement.
     2.14. Letters of Credit. (a) The Letter of Credit Commitment.
     (i) Subject to the terms and conditions set forth herein, (A) the L/C
Issuer agrees, in reliance upon the agreements of the other Lenders set forth in
this Section 2.14, (1) from time
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to time on any Business Day during the period from the Closing Date until the
Letter of Credit Expiration Date, to issue Letters of Credit for the account of
any Borrower (and such Letters of Credit may be issued for the benefit of any
Borrower, or any of its Subsidiaries (other than the Excluded Subsidiaries)),
and to amend or renew Letters of Credit previously issued by it, in accordance
with subsection (b) below, and (2) to honor drafts under the Letters of Credit;
and (B) the Lenders severally agree to participate in Letters of Credit issued
for the account of the any Borrower; provided that the L/C Issuer shall not be
obligated to make any L/C Credit Extension with respect to any Letter of Credit,
and no Lender shall be obligated to participate in any Letter of Credit, if as
of the date of such L/C Credit Extension, (x) the Total Outstandings would
exceed the Aggregate Revolving Commitment, (y) the aggregate Outstanding Amount
of the Revolving Loans of any Lender, plus such Lender’s Pro Rata Share of the
Outstanding Amount of all L/C Obligations would exceed such Lender’s Revolving
Commitment, or (z) the Outstanding Amount of the L/C Obligations would exceed
the Letter of Credit Sublimit. Within the foregoing limits, and subject to the
terms and conditions hereof, any Borrower’s ability to obtain Letters of Credit
shall be fully revolving, and accordingly any Borrower may, during the foregoing
period, obtain Letters of Credit to replace Letters of Credit that have expired
or that have been drawn upon and reimbursed. The Existing Letter of Credit shall
be deemed to have been issued pursuant hereto, and from and after the Closing
Date shall be subject to and governed by the terms and conditions hereof.
     (ii) The L/C Issuer shall be under no obligation to issue any Letter of
Credit if:
     (A) any order, judgment or decree of any Governmental Authority or
arbitrator shall by its terms purport to enjoin or restrain the L/C Issuer from
issuing such Letter of Credit, or any Law applicable to the L/C Issuer or any
request or directive (whether or not having the force of law) from any
Governmental Authority with jurisdiction over the L/C Issuer shall prohibit, or
request that the L/C Issuer refrain from, the issuance of letters of credit
generally or such Letter of Credit in particular or shall impose upon the L/C
Issuer with respect to such Letter of Credit any restriction, reserve or capital
requirement (for which the L/C Issuer is not otherwise compensated hereunder)
not in effect on the Closing Date, or shall impose upon the L/C Issuer any
unreimbursed loss, cost or expense which was not applicable on the Closing Date
and which the L/C Issuer in good faith deems material to it; provided, however,
if any of the forgoing occur, then the Borrowers may, at their sole expense and
effort, upon notice to L/C Issuer and Administrative Agent, require the L/C
Issuer to resign as L/C Issuer and a new replacement L/C Issuer be appointed,
which new replacement L/C Issuer shall be reasonably acceptable to the
Administrative Agent;
     (B) subject to Section 2.14(b)(iii), the expiry date of such requested
Letter of Credit would occur more than twelve months after the date of issuance
or last renewal, unless the Required Lenders have approved such expiry date;
     (C) the expiry date of such requested Letter of Credit would occur after
the Letter of Credit Expiration Date, unless all the Lenders have approved such
expiry date;
     (D) the issuance of such Letter of Credit would violate one or more
policies of the L/C Issuer generally applicable to all borrowers; or
     (E) such Letter of Credit is in a face amount less than $100,000 (unless
upon a Borrower’s request the L/C Issuer agrees to issue a Letter of Credit for
a lesser
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amount), or is to be used for a purpose other than as described in Section 6.12
or is denominated in a currency other than Dollars.
     (iii) The L/C Issuer shall be under no obligation to amend any Letter of
Credit if (A) the L/C Issuer would have no obligation at such time to issue such
Letter of Credit in its amended form under the terms hereof, or (B) the
beneficiary of such Letter of Credit does not accept the proposed amendment to
such Letter of Credit.
     (iv) The L/C Issuer shall act on behalf of the Lenders with respect to any
Letters of Credit issued by it and the documents associated therewith, and the
L/C Issuer shall have all of the benefits and immunities (A) provided to the
Administrative Agent in Article IX with respect to any acts taken or omissions
suffered by the L/C Issuer in connection with Letters of Credit issued by it or
proposed to be issued by it and L/C Issuer documents pertaining to such Letters
of Credit as fully as if the term “Administrative Agent” as used in Article IX
included the L/C Issuer with respect to such acts or omissions, and (B) as
additionally provided herein with respect to the L/C Issuer.
     (b) Procedures for Issuance and Amendment of Letters of Credit; Evergreen
Letters of Credit.
     (i) Each Letter of Credit shall be issued or amended, as the case may be,
upon the request of any Borrower delivered to the L/C Issuer (with a copy to the
Administrative Agent) in the form of a Letter of Credit Application,
appropriately completed and signed by a Responsible Officer of such Borrower.
Such Letter of Credit Application must be received by the L/C Issuer and the
Administrative Agent not later than noon, New York time, at least two Business
Days (or such later date and time as the L/C Issuer may agree in a particular
instance in its sole discretion) prior to the proposed issuance date or date of
amendment, as the case may be. In the case of a request for an initial issuance
of a Letter of Credit, such Letter of Credit Application shall specify in form
and detail satisfactory to the L/C Issuer: (A) the proposed issuance date of the
requested Letter of Credit (which shall be a Business Day); (B) the amount
thereof; (C) the expiry date thereof; (D) the name and address of the
beneficiary thereof; (E) the documents to be presented by such beneficiary in
case of any drawing thereunder; (F) the full text of any certificate to be
presented by such beneficiary in case of any drawing thereunder; and (G) such
other matters as the L/C Issuer may require. In the case of a request for an
amendment of any outstanding Letter of Credit, such Letter of Credit Application
shall specify in form and detail satisfactory to the L/C Issuer (A) the Letter
of Credit to be amended; (B) the proposed date of amendment thereof (which shall
be a Business Day); (C) the nature of the proposed amendment; and (D) such other
matters as the L/C Issuer may require.
     (ii) Promptly after receipt of any Letter of Credit Application, the L/C
Issuer will confirm with the Administrative Agent (by telephone or in writing)
that the Administrative Agent has received a copy of such Letter of Credit
Application from a Borrower and, if not, the L/C Issuer will provide the
Administrative Agent with a copy thereof. Upon receipt by the L/C Issuer of
confirmation from the Administrative Agent that the requested issuance or
amendment is permitted in accordance with the terms hereof, then, subject to the
terms and conditions hereof, the L/C Issuer shall, on the requested date, issue
a Letter of Credit for the account of such Borrower or enter into the applicable
amendment, as the case may be, in each case in accordance with the L/C Issuer’s
usual and customary business practices. Immediately upon the issuance of each
Letter of Credit, each Lender shall be deemed to, and hereby irrevocably and
unconditionally agrees to, purchase from the L/C Issuer a participation in such
Letter of
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Credit in an amount equal to the product of such Lender’s Pro Rata Share times
the amount of such Letter of Credit.
     (iii) If a Borrower so requests in any applicable Letter of Credit
Application, the L/C Issuer may, in its sole and absolute discretion, agree to
issue a Letter of Credit that has automatic renewal provisions (each, an
“Evergreen Letter of Credit”); provided that any such Evergreen Letter of Credit
must permit the L/C Issuer to prevent any such renewal at least once in each
twelve-month period (commencing with the date of issuance of such Letter of
Credit) by giving prior notice to the beneficiary thereof not later than a day
(the “Nonrenewal Notice Date”) in each such twelve-month period to be agreed
upon at the time such Letter of Credit is issued. Unless otherwise directed by
the L/C Issuer, the Borrowers shall not be required to make a specific request
to the L/C Issuer for any such renewal. Once an Evergreen Letter of Credit has
been issued, the L/C Issuer shall permit the renewal of such Letter of Credit
unless the L/C Issuer has received notice on or before the Business Day
immediately preceding the Nonrenewal Notice Date from any Lender stating that
one or more of the applicable conditions specified in Section 4.02 is not then
satisfied or the L/C Issuer would not then be required to issue a replacement
Letter of Credit pursuant to this Section 2.14.
     (iv) Promptly after its delivery of any Letter of Credit or any amendment
to a Letter of Credit to an advising bank with respect thereto or to the
beneficiary thereof, the L/C Issuer will also deliver to the Borrowers and the
Administrative Agent a true and complete copy of such Letter of Credit or
amendment.
     (c) Drawings and Reimbursements; Funding of Participations.
     (i) Upon any drawing under any Letter of Credit, the L/C Issuer shall
notify the Borrowers and the Administrative Agent thereof. Not later than noon,
New York time, on the date of any payment by the L/C Issuer under a Letter of
Credit (each such date, an “Honor Date”), the Borrowers shall reimburse the L/C
Issuer through the Administrative Agent in an amount equal to the amount of such
drawing. If the Borrowers fails to so reimburse the L/C Issuer by such time, the
Administrative Agent shall promptly notify each Lender of the Honor Date, the
amount of the unreimbursed drawing (the “Unreimbursed Amount”), and such
Lender’s Pro Rata Share thereof. In such event, the Borrowers shall be deemed to
have requested a Borrowing of Base Rate Loans to be disbursed on the Honor Date
in an amount equal to the Unreimbursed Amount, without regard to the minimum and
multiples specified in Section 2.03 for the principal amount of Base Rate Loans,
but subject to the amount of the unutilized portion of the Aggregate Revolving
Commitment and the conditions set forth in Section 4.02 (other than the delivery
of a Borrowing Notice) and the failure of the Borrowers to so reimburse the
Administrative Agent shall not be deemed a Default or an Event of Default. Any
notice given by the L/C Issuer or the Administrative Agent pursuant to this
Section 2.14(c)(i) may be given by telephone if immediately confirmed in
writing; provided that the lack of such an immediate confirmation shall not
affect the conclusiveness or binding effect of such notice.
     (ii) Each Lender (including the Lender acting as L/C Issuer) shall upon any
notice pursuant to Section 2.14(c)(i) make funds available to the Administrative
Agent for the account of the L/C Issuer at the Administrative Agent’s Office in
an amount equal to its Pro Rata Share of the Unreimbursed Amount not later than
11:00 a.m., New York time, on the Business Day specified in such notice by the
Administrative Agent, whereupon, subject to the provisions of
Section 2.14(c)(iii), each Lender that so makes funds available shall be deemed
to have made a
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Base Rate Loan to the Borrowers in such amount. The Administrative Agent shall
remit the funds so received to the L/C Issuer.
     (iii) With respect to any Unreimbursed Amount that is not fully refinanced
by a Borrowing of Base Rate Loans because the conditions set forth in
Section 4.02 cannot be satisfied or for any other reason, the Borrowers shall be
deemed to have incurred from the L/C Issuer an L/C Borrowing in the amount of
the Unreimbursed Amount that is not so refinanced, which L/C Borrowing shall be
due and payable on demand (together with interest) and shall bear interest at
the Default Rate. In such event, each Lender’s payment to the Administrative
Agent for the account of the L/C Issuer pursuant to Section 2.14(c)(ii) shall be
deemed payment in respect of its participation in such L/C Borrowing and shall
constitute an L/C Advance from such Lender in satisfaction of its participation
obligation under this Section 2.14.
     (iv) Until each Lender funds its Revolving Loan or L/C Advance pursuant to
this Section 2.14(c) to reimburse the L/C Issuer for any amount drawn under any
Letter of Credit, interest in respect of such Lender’s Pro Rata Share of such
amount shall be solely for the account of the L/C Issuer.
     (v) Each Lender’s obligation to make Revolving Loans or L/C Advances to
reimburse the L/C Issuer for amounts drawn under Letters of Credit, as
contemplated by this Section 2.14(c), shall be absolute and unconditional and
shall not be affected by any circumstance, including (A) any set-off,
counterclaim, recoupment, defense or other right which such Lender may have
against the L/C Issuer, the Borrowers or any other Person for any reason
whatsoever; (B) the occurrence or continuance of a Default or Event of Default,
or (C) any other occurrence, event or condition, whether or not similar to any
of the foregoing. Any such reimbursement shall not relieve or otherwise impair
the obligation of the Borrowers to reimburse the L/C Issuer for the amount of
any payment made by the L/C Issuer under any Letter of Credit, together with
interest as provided herein.
     (vi) If any Lender fails to make available to the Administrative Agent for
the account of the L/C Issuer any amount required to be paid by such Lender
pursuant to the foregoing provisions of this Section 2.14(c) by the time
specified in Section 2.14(c)(ii), the L/C Issuer shall be entitled to recover
from such Lender (acting through the Administrative Agent), on demand, such
amount with interest thereon for the period from the date such payment is
required to the date on which such payment is immediately available to the L/C
Issuer at a rate per annum equal to the Federal Funds Rate from time to time in
effect. A certificate of the L/C Issuer submitted to any Lender (through the
Administrative Agent) with respect to any amounts owing under this clause
(vi) shall be conclusive absent manifest error.
     (d) Repayment of Participations.
     (i) At any time after the L/C Issuer has made a payment under any Letter of
Credit and has received from any Lender such Lender’s L/C Advance in respect of
such payment in accordance with Section 2.14(c), if the Administrative Agent
receives for the account of the L/C Issuer any payment related to such Letter of
Credit (whether directly from the Borrowers or otherwise, including proceeds of
cash Collateral applied thereto by the Administrative Agent), or any payment of
interest thereon, the Administrative Agent will distribute to such Lender its
Pro Rata Share thereof in the same funds as those received by the Administrative
Agent.
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     (ii) If any payment received by the Administrative Agent for the account of
the L/C Issuer pursuant to Section 2.14(c)(i) is required to be returned, each
Lender shall pay to the Administrative Agent for the account of the L/C Issuer
its Pro Rata Share thereof on demand of the Administrative Agent, plus interest
thereon from the date of such demand to the date such amount is returned by such
Lender, at a rate per annum equal to the Federal Funds Rate from time to time in
effect.
     (e) Obligations Absolute. The obligation of the Borrowers to reimburse the
L/C Issuer for each drawing under each Letter of Credit, and to repay each L/C
Borrowing and each drawing under a Letter of Credit that is refinanced by a
Borrowing of Revolving Loans, shall be absolute, unconditional and irrevocable,
and shall be paid strictly in accordance with the terms of this Agreement under
all circumstances, including the following:
     (i) any lack of validity or enforceability of such Letter of Credit, this
Agreement, or any other agreement or instrument relating thereto;
     (ii) the existence of any claim, counterclaim, set-off, defense or other
right that the Borrowers may have at any time against any beneficiary or any
transferee of such Letter of Credit (or any Person for whom any such beneficiary
or any such transferee may be acting), the L/C Issuer or any other Person,
whether in connection with this Agreement, the transactions contemplated hereby
or by such Letter of Credit or any agreement or instrument relating thereto, or
any unrelated transaction;
     (iii) any draft, demand, certificate or other document presented under such
Letter of Credit proving to be forged, fraudulent, invalid or insufficient in
any respect or any statement therein being untrue or inaccurate in any respect;
or any loss or delay in the transmission or otherwise of any document required
in order to make a drawing under such Letter of Credit;
     (iv) any payment by the L/C Issuer under such Letter of Credit against
presentation of a draft or certificate that does not strictly comply with the
terms of such Letter of Credit; or any payment made by the L/C Issuer under such
Letter of Credit to any Person purporting to be a trustee in bankruptcy,
debtor-in-possession, assignee for the benefit of creditors, liquidator,
receiver or other representative of or successor to any beneficiary or any
transferee of such Letter of Credit, including any arising in connection with
any proceeding under any Debtor Relief Law; or
     (v) any other circumstance or happening whatsoever, whether or not similar
to any of the foregoing, that might otherwise constitute a defense available to,
or a discharge of, the Borrowers.
     The relevant Borrower requesting a Letter of Credit shall promptly examine
a copy of each Letter of Credit and each amendment thereto that is delivered to
it and, in the event of any claim of noncompliance with such Borrowers’
instructions or other irregularity, such Borrower will immediately notify the
L/C Issuer. The Borrowers shall be conclusively deemed to have waived any such
claim against the L/C Issuer and its correspondents unless such notice is given
as aforesaid.
     (f) Role of L/C Issuer. Each Lender and the Borrowers agree that, in paying
any drawing under a Letter of Credit, the L/C Issuer shall not have any
responsibility to obtain any document (other than any sight draft, certificates
and documents expressly required by the Letter of Credit) or to ascertain or
inquire as to the validity or accuracy of any such document or the authority of
the Person executing or delivering any such document. No Agent-Related Person
nor any of the respective correspondents,
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Participants or assignees of the L/C Issuer shall be liable to any Lender for
(i) any action taken or omitted in connection herewith at the request or with
the approval of the Lenders or the Required Lenders, as applicable, (ii) any
action taken or omitted in the absence of gross negligence or willful
misconduct; or (iii) the due execution, effectiveness, validity or
enforceability of any document or instrument related to any Letter of Credit or
Letter of Credit Application. The Borrowers hereby assume all risks of the acts
or omissions of any beneficiary or transferee with respect to its use of any
Letter of Credit; provided, however, that this assumption is not intended to,
and shall not, preclude the Borrowers’ pursuing such rights and remedies as it
may have against the beneficiary or transferee at law or under any other
agreement. No Agent-Related Person, nor any of the respective correspondents,
Participants or assignees of the L/C Issuer, shall be liable or responsible for
any of the matters described in clauses (i) through (v) of Section 2.14(e);
provided, however, that anything in such clauses to the contrary
notwithstanding, the Borrowers may have a claim against the L/C Issuer, and the
L/C Issuer may be liable to the Borrowers, to the extent, but only to the
extent, of any direct, as opposed to consequential or exemplary, damages
suffered by the Borrowers which the Borrowers prove were caused by the L/C
Issuer’s willful misconduct or gross negligence or the L/C Issuer’s willful
failure to pay under any Letter of Credit after the presentation to it by the
beneficiary of a sight draft and certificate(s) strictly complying with the
terms and conditions of a Letter of Credit. In furtherance and not in limitation
of the foregoing, the L/C Issuer may accept documents that appear on their face
to be in order, without responsibility for further investigation, regardless of
any notice or information to the contrary, and the L/C Issuer shall not be
responsible for the validity or sufficiency of any instrument transferring or
assigning or purporting to transfer or assign a Letter of Credit or the rights
or benefits thereunder or proceeds thereof, in whole or in part, which may prove
to be invalid or ineffective for any reason.
     (g) Cash Collateral. Upon the request of the Administrative Agent, (i) if
the L/C Issuer has honored any full or partial drawing request under any Letter
of Credit and such drawing has resulted in an L/C Borrowing, or (ii) if, as of
the Letter of Credit Expiration Date, any Letter of Credit may for any reason
remain outstanding and partially or wholly undrawn, the Borrowers shall
immediately Cash Collateralize the then Outstanding Amount of all L/C
Obligations (in an amount equal to such Outstanding Amount). The Borrowers
hereby grant the Administrative Agent, for the benefit of the L/C Issuer and the
Lenders, a Lien on all such cash and deposit accounts at any Lender.
     (h) Applicability of ISP98. Unless otherwise expressly agreed by the L/C
Issuer and the relevant Borrower requesting a Letter of Credit when a Letter of
Credit is issued, the rules of the “International Standby Practices 1998”
published by the Institute of International Banking Law & Practice (or such
later version thereof as may be in effect at the time of issuance) shall apply
to each Letter of Credit.
     (i) Letter of Credit Fees. The Borrowers shall pay to the Administrative
Agent for the account of each Lender in accordance with its Pro Rata Share a
Letter of Credit fee for each Letter of Credit issued equal to the Applicable
Rate times the actual daily undrawn amount under each Letter of Credit. Such fee
for each Letter of Credit shall be due and payable on the last Business Day of
each March, June, September and December, commencing with the first such date to
occur after the issuance of such Letter of Credit, and on the Letter of Credit
Expiration Date. If there is any change in the Applicable Rate during any
quarter, the actual amount of each Letter of Credit shall be computed and
multiplied by the Applicable Rate separately for each period during such quarter
that such Applicable Rate was in effect.
     (j) Fronting Fee and Documentary and Processing Charges Payable to L/C
Issuer. The Borrowers shall pay directly to the L/C Issuer for its own account a
fronting fee in an amount with respect to each Letter of Credit issued equal to
the greater of (i) $500 and (ii) 1/4 of 1% (25 Basis Points) calculated on the
face amount thereof. In addition, the Borrowers shall pay directly to the L/C
Issuer for
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its own account the customary issuance, presentation, amendment and other
processing fees, and other standard costs and charges, of the L/C Issuer
relating to letters of credit as from time to time in effect. Such fees and
charges are due and payable on demand and are nonrefundable.
     (k) Conflict with Letter of Credit Application. In the event of any
conflict between the terms hereof and the terms of any Letter of Credit
Application, the terms hereof shall control.
     (l) Letters of Credit Issued for the Borrowers. Notwithstanding that a
Letter of Credit issued or outstanding hereunder is in support of any
obligations of, or is for the account of, a Borrower or any of its Subsidiaries
(other than the Excluded Subsidiaries), the Borrowers shall be jointly and
severally obligated to reimburse the L/C Issuer hereunder for any and all
drawings under such Letter of Credit. Each Borrower hereby acknowledges that the
issuance of Letters of Credit in support of any obligation of, or for the
account of the other Borrower or any of such other Borrower’s Subsidiaries
(other than the Excluded Subsidiaries) inures to the benefit of both Borrowers,
and that each other Borrower’s business derives substantial benefits from the
businesses of the other Borrower and its Subsidiaries (other than the Excluded
Subsidiaries).
ARTICLE III. TAXES, YIELD PROTECTION AND ILLEGALITY
     3.01. Taxes.
     (a) Any and all payments by the Borrowers to or for the account of the
Administrative Agent or any Lender under any Loan Document shall be made free
and clear of and without deduction for any and all present or future taxes,
duties, levies, imposts, deductions, assessments, fees, withholdings or similar
charges, and all liabilities with respect thereto; excluding, in the case of the
Administrative Agent and each Lender, taxes imposed on or measured by its net
income (including any franchise taxes imposed on or measured by its net income),
by the jurisdiction (or any political subdivision thereof) under the Laws of
which the Administrative Agent or such Lender, as the case may be, is organized
or maintains its Lending Office (all such non-excluded taxes, duties, levies,
imposts, deductions, assessments, fees, withholdings or similar charges, and
liabilities being hereinafter referred to as “Taxes”). If the Borrowers shall be
required by any Laws to deduct any Taxes from or in respect of any sum payable
under any Loan Document to the Administrative Agent or any Lender, (i) the sum
payable shall be increased as necessary so that after making all required
deductions (including deductions applicable to additional sums payable under
this Section), each of the Administrative Agent and such Lender receives an
amount equal to the sum it would have received had no such deductions been made,
(ii) the Borrowers shall make such deductions and (iii) the Borrowers shall pay
the full amount deducted to the relevant taxation authority or other authority
in accordance with applicable Laws.
     (b) In addition, the Borrowers agree to pay any and all present or future
stamp, mortgage, court or documentary taxes and any other excise or property
taxes or charges or similar levies which arise from any payment made under any
Loan Document or from the execution, delivery, performance, enforcement or
registration of, or otherwise with respect to, any Loan Document (hereinafter
referred to as “Other Taxes”).
     (c) If the Borrowers shall be required to deduct or pay any Taxes or Other
Taxes from or in respect of any sum payable under any Loan Document to the
Administrative Agent or any Lender, the Borrowers shall also pay to the
Administrative Agent (for the account of such Lender) or to such Lender, at the
time interest is paid, such additional amount that such Lender specifies as
necessary to preserve the after-tax yield (after factoring in all taxes,
including taxes imposed on or measured by net income) such Lender would have
received if such Taxes or Other Taxes had not been imposed.
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     (d) The Borrowers agree to indemnify the Administrative Agent and each
Lender for (i) the full amount of Taxes and Other Taxes (including any Taxes or
Other Taxes imposed or asserted by any jurisdiction on amounts payable under
this Section) paid by the Administrative Agent and such Lender, and (ii) amounts
payable under Section 3.01(c) and (iii) any liability (including penalties,
interest and expenses) arising therefrom or with respect thereto, except to the
extent such sums are determined by a court of competent jurisdiction by final
and non-appealable judgment to have resulted from the gross negligence or
willful misconduct of the Administrative Agent, the L/C Issuer or such Lender,
as applicable. Neither the Administrative Agent, the L/C Issuer nor any Lender
shall be entitled to receive any payment with respect to any indemnity claim
under this Section 3.01 with respect to Taxes or Other Taxes that are incurred
or accrued more than 180 days prior to the date such party gives notice and
demand with respect thereto to the Borrowers. Payment under this subsection (d)
shall be made within 30 days after the date the Lender or the Administrative
Agent makes a demand therefor.
     (e) As soon as practicable after any payment of indemnified Taxes or Other
Taxes by the Borrowers to a Governmental Authority, the Borrowers shall deliver
to the Administrative Agent the original or a certified copy of a receipt issued
by such Governmental Authority evidencing such payment, a copy of the return
reporting such payment or other evidence of such payment reasonably satisfactory
to the Administrative Agent.
     (f) Any Foreign Lender that is entitled to an exemption from or reduction
of withholding tax under the Law of the jurisdiction in which any Borrower is
resident for tax purposes, or any treaty to which such jurisdiction is a party,
with respect to payments hereunder or under any other Loan Document shall
deliver to the Borrowers (with a copy to the Administrative Agent), at the time
or times prescribed by applicable Law or reasonably requested by the Borrowers
or the Administrative Agent, such properly completed and executed documentation
prescribed by applicable Law, or reasonably requested by Borrowers, as will
permit such payments to be made without withholding or at a reduced rate of
withholding. In addition, any Lender, if requested by the Borrowers or the
Administrative Agent, shall deliver such other documentation prescribed by
applicable Law or reasonably requested by the Borrowers or the Administrative
Agent as will enable the Borrowers or the Administrative Agent to determine
whether or not such Lender is subject to backup withholding or information
reporting requirements.
     Without limiting the generality of the foregoing, in the event that any
Borrower is resident for tax purposes in the United States, any Foreign Lender
shall deliver to the Borrowers and the Administrative Agent (in such number of
copies as shall be requested by the recipient) on or prior to the date on which
such Foreign Lender becomes a Lender under this Agreement (and from time to time
thereafter upon the request of the Borrowers or the Administrative Agent, but
only if such Foreign Lender is legally entitled to do so), whichever of the
following is applicable:
     (i) duly completed copies of Internal Revenue Service Form W-8BEN claiming
eligibility for benefits of an income tax treaty to which the United States is a
party;
     (ii) duly completed copies of Internal Revenue Service Form W-8ECI;
     (iii) in the case of a Foreign Lender claiming the benefits of the
exemption for portfolio interest under section 881(c) of the Code, (x) a
certificate to the effect that such Foreign Lender is not (A) a “bank” within
the meaning of section 881(c)(3)(A) of the Code, (B) a “10 percent shareholder”
of any Borrower within the meaning of section 881(c)(3)(B) of the Code, or (C) a
“controlled foreign corporation” described in section 881(c)(3)(C) of the Code
and (y) duly completed copies of Internal Revenue Service Form W-8BEN; or
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     (iv) any other form prescribed by applicable Law as a basis for claiming
exemption from or a reduction in United States Federal withholding tax duly
completed together with such supplementary documentation as may be prescribed by
applicable Law to permit the Borrowers to determine the withholding or deduction
required to be made.
     (g) If the Administrative Agent, any Lender or the L/C Issuer determines,
in its sole discretion, that it has received a refund of any Taxes or Other
Taxes as to which it has been indemnified by the Borrowers or with respect to
which the Borrowers have paid additional amounts pursuant to this Section, it
shall pay to the Borrowers an amount equal to such refund (but only to the
extent of indemnity payments made, or additional amounts paid, by the Borrowers
under this Section with respect to the Taxes or Other Taxes giving rise to such
refund), net of all out-of-pocket expenses of the Administrative Agent, such
Lender or the L/C Issuer, as the case may be, and without interest (other than
any interest paid by the relevant Governmental Authority with respect to such
refund); provided that the Borrowers, upon the request of the Administrative
Agent, such Lender or the L/C Issuer, agrees to repay the amount paid over to
the Borrowers (plus any penalties, interest or other charges imposed by the
relevant Governmental Authority) to the Administrative Agent, such Lender or the
L/C Issuer in the event the Administrative Agent, such Lender or the L/C Issuer
is required to repay such refund to such Governmental Authority. This subsection
shall not be construed to require the Administrative Agent, any Lender or the
L/C Issuer to make available its tax returns (or any other information relating
to its taxes that it deems confidential) to the Borrowers or any other Person.
     3.02. Illegality. If any Lender determines that any Change in Law has made
it unlawful for any Lender or its applicable Lending Office to make, maintain or
fund Eurodollar Rate Loans, or materially restricts the authority of such Lender
to purchase or sell, or to take deposits of, Dollars in the applicable offshore
Dollar market, or to determine or charge interest rates based upon the
Eurodollar Rate, then, on notice thereof by such Lender to the Borrowers through
the Administrative Agent, any obligation of such Lender to make or continue
Eurodollar Rate Loans or to convert Base Rate Loans to Eurodollar Rate Loans
shall be suspended until such Lender notifies the Administrative Agent and the
Borrowers that the circumstances giving rise to such determination no longer
exist. Upon receipt of such notice, the Borrowers shall, upon demand from such
Lender (with a copy to the Administrative Agent), prepay or, if applicable,
convert all Eurodollar Rate Loans of such Lender to Base Rate Loans, either on
the last day of the Interest Period thereof, if such Lender may lawfully
continue to maintain such Eurodollar Rate Loans to such day, or immediately, if
such Lender may not lawfully continue to maintain such Eurodollar Rate Loans.
Upon any such prepayment or conversion, the Borrowers shall also pay interest on
the amount so prepaid or converted and all amounts due under Section 3.05 in
accordance with the terms thereof due to such prepayment or conversion. Each
Lender agrees to designate a different Lending Office if such designation will
avoid the need for such notice and will not, in the reasonable judgment of such
Lender, otherwise be materially disadvantageous to such Lender.
     3.03. Inability to Determine Rates. If (a) the Administrative Agent (or any
Lender) determines in connection with any request for a Eurodollar Rate Loan or
a conversion to or continuation thereof that Dollar deposits are not being
offered to banks (or such Lender) in the applicable offshore Dollar market for
the applicable amount and Interest Period of such Eurodollar Rate Loan, or
adequate and reasonable means do not exist for determining the Eurodollar Rate
for such Eurodollar Rate Loan, or (b) the Required Lenders (or any Lender)
determine and notify the Administrative Agent that the Eurodollar Rate for such
Eurodollar Rate Loan does not adequately and fairly reflect the cost to the
Lenders (or such Lender) of funding such Eurodollar Rate Loan, then the
Administrative Agent will promptly notify the Borrowers and all Lenders.
Thereafter, the obligation of the Lenders to make or maintain Eurodollar Rate
Loans shall be suspended until all of the Lenders agree the conditions specified
in clauses (a) or (b) above no longer exist, whereupon the Administrative Agent
shall revoke such notice. Upon receipt of such notice, the Borrowers may revoke
any pending request for a Borrowing, conversion
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or continuation of Eurodollar Rate Loans or, failing that, will be deemed to
have converted such request into a request for a Borrowing of Base Rate Loans in
the amount specified therein.
     3.04. Increased Cost and Reduced Return; Capital Adequacy; Reserves on
Eurodollar Rate Loans.
     (a) If any Lender or the L/C Issuer determines that as a result of a Change
in Law, or such Lender’s or L/C Issuer’s compliance therewith, there shall be
any increase in the cost to such Lender or L/C Issuer of agreeing to make or
making, funding or maintaining Eurodollar Rate Loans or to increase the cost to
such Lender or the L/C Issuer of participating in, issuing or maintaining any
Letter of Credit, or a reduction in the amount received or receivable by such
Lender or L/C Issuer in connection with any of the foregoing (excluding for
purposes of this subsection (a) any such increased costs or reduction in amount
resulting from (i) Taxes or Other Taxes (as to which Section 3.01 shall govern),
(ii) changes in the basis of taxation of overall net income or overall gross
income by the United States or any foreign jurisdiction or any political
subdivision of either thereof under the Laws of which such Lender or L/C Issuer
is organized or has its Lending Office, and (iii) reserve requirements
contemplated by Section 3.04(c) utilized, as to Eurodollar Rate Loans, in the
determination of the Eurodollar Rate), then from time to time upon demand of
such Lender or L/C Issuer (with a copy of such demand to the Administrative
Agent), the Borrowers shall pay to such Lender or L/C Issuer, as the case may
be, such additional amounts as will compensate such Lender or L/C Issuer for
such increased cost or reduction.
     (b) If any Lender determines a Change in Law has the effect of reducing the
rate of return on the capital of such Lender or any corporation controlling such
Lender as a consequence of such Lender’s obligations hereunder (taking into
consideration its policies with respect to capital adequacy and such Lender’s
desired return on capital), then from time to time upon demand of such Lender
(with a copy of such demand to the Administrative Agent), the Borrowers shall
pay to such Lender such additional amounts as will compensate such Lender for
such reduction.
     (c) The Borrowers shall pay to each Lender, as long as such Lender shall be
required under regulations of the Board to maintain reserves with respect to
liabilities or assets consisting of or including Eurocurrency funds or deposits
(currently known as “Eurocurrency liabilities”), additional costs on the unpaid
principal amount of each Eurodollar Rate Loan equal to the actual costs of such
reserves allocated to such Revolving Loan by such Lender (as determined by such
Lender in good faith, which determination shall be conclusive), which shall be
due and payable on each date on which interest is payable on such Revolving
Loan; provided the Borrowers shall have received at least 15 days’ prior notice
(with a copy to the Administrative Agent) of such additional interest from such
Lender. If a Lender fails to give notice 15 days prior to the relevant Interest
Payment Date, such additional interest shall be due and payable 15 days from
receipt of such notice.
     (d) Failure or delay on the part of any Lender or the L/C Issuer to demand
compensation pursuant to this Section shall not constitute a waiver of such
Lender’s or the L/C Issuer’s right to demand such compensation; provided that
the Borrowers shall not be required to compensate a Lender or the L/C Issuer
pursuant to this Section for any increased costs or reductions incurred more
than 180 days prior to the date that such Lender or the L/C Issuer, as the case
may be, notifies the Borrowers of the Change in Law giving rise to such
increased costs or reductions and of such Lender’s or the L/C Issuer’s intention
to claim compensation therefor; provided further that, if the Change in Law
giving rise to such increased costs or reductions is retroactive, then the
180-day period referred to above shall be extended to include the period of
retroactive effect thereof.
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     3.05. Compensation for Losses. Upon demand of any Lender (with a copy to
the Administrative Agent) from time to time, the Borrowers shall promptly
compensate such Lender for and hold such Lender harmless from any loss, cost or
expense incurred by it as a result of:
     (a) any assignment pursuant to Section 10.15 (except pursuant to clause
(iii) and clause (iv) of the second sentence in Section 10.15, to the extent
clause (iv) includes clause (iii)) or any continuation, conversion, payment,
prepayment of any Revolving Loan other than a Base Rate Loan on a day other than
the last day of the Interest Period for such Revolving Loan (whether voluntary,
mandatory, automatic, by reason of acceleration, or otherwise); or
     (b) any failure by the Borrowers (for a reason other than the failure of
such Lender to make a Revolving Loan) to prepay, borrow, continue or convert any
Revolving Loan other than a Base Rate Loan on the date or in the amount notified
by the Borrowers; including any loss of anticipated profits and any loss or
expense arising from the liquidation or reemployment of funds obtained by it to
maintain such Revolving Loan or from fees payable to terminate the deposits from
which such funds were obtained. The Borrowers shall also pay any customary
administrative fees charged by such Lender in connection with the foregoing.
     For purposes of calculating amounts payable by the Borrowers to the Lenders
under this Section 3.05, each Lender shall be deemed to have funded each
Eurodollar Rate Loan made by it at the Eurodollar Rate for such Revolving Loan
by a matching deposit or other borrowing in the applicable offshore Dollar
interbank market for a comparable amount and for a comparable period, whether or
not such Eurodollar Rate Loan was in fact so funded.
     3.06. Matters Applicable to all Requests for Compensation. A certificate of
the Administrative Agent or any Lender claiming compensation under this
Article III and setting forth the additional amount or amounts to be paid to it
hereunder shall be conclusive in the absence of manifest error. In determining
such amount, the Administrative Agent or such Lender may use any reasonable
averaging and attribution methods.
     3.07. Survival. All of the Borrowers’ obligations under this Article III
shall survive termination of the Aggregate Revolving Commitment and payment in
full of all the other Obligations.
     3.08. Mitigation Obligations. If any Lender or L/C Issuer requests
compensation under Section 3.04, or if the Borrowers are required to pay any
additional amount to any Lender, L/C Issuer or any Governmental Authority for
the account of any Lender or L/C Issuer, as applicable, pursuant to
Section 3.01, then such Lender or L/C Issuer shall use reasonable efforts to
designate a different lending office for funding or booking its Revolving Loans
or issuing Letters of Credit hereunder or to assign its rights and obligations
hereunder to another of its offices, branches or affiliates, if, in the judgment
of such Lender or L/C Issuer, such designation or assignment (i) would eliminate
or reduce amounts payable pursuant to Section 3.01 or Section 3.04, as the case
may be, in the future and (ii) would not subject such Lender or L/C Issuer to
any un-reimbursed cost or expense and would not otherwise be disadvantageous to
such Lender or L/C Issuer. The Borrowers hereby agree to pay all reasonable
costs and expenses incurred by any Lender or L/C Issuer in connection with any
such designation or assignment.
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ARTICLE IV.
CONDITIONS PRECEDENT TO CREDIT EXTENSION
     4.01. Conditions Precedent to Initial Credit Extension.
     A. To be fulfilled by Borrowers. The obligation of the L/C Issuer and each
Lender to make its initial Credit Extension hereunder is subject to satisfaction
of the following conditions precedent:
     (a) Evidence satisfactory to the Administrative Agent that a minimum of
$50,000,000 has been received by Parent from the White Deer Energy Investment,
on terms reasonably satisfactory to the Administrative Agent.
     (b) Receipt by the Administrative Agent of executed and acknowledged
counterparts of (i) the Assignments and Assumptions relating to the First Lien
Credit Agreement, (ii) the Assignment of Second Lien Notes, Liens and Security
Interests, and (iii) the Assignment of Midstream Notes, Liens and Security
Interests.
     (c) The Administrative Agent’s receipt of the following, each of which
shall be originals or facsimiles (followed promptly by originals) and unless
otherwise specified, each properly executed by a Responsible Officer of the
signing Loan Party or other Person party thereto, each dated the Closing Date
(or, in the case of certificates of governmental officials, a recent date before
the Closing Date), and each in form and substance reasonably satisfactory to the
Administrative Agent and its legal counsel:
     (i) executed counterparts dated as of the Closing Date of this Agreement,
the Parent Guaranty, and the other amended Collateral Documents including,
without limitation, the amended Collateral Documents covering all assets of each
Loan Party including, without limitation, the Borrowing Base Oil and Gas
Properties and related Collateral, and all other Loan Documents sufficient in
number for distribution to the Administrative Agent each Lender and Borrowers;
     (ii) Revolving Notes executed by the Borrowers in favor of each Lender
requesting a Revolving Note, each Revolving Note in a principal amount equal to
such Lender’s Revolving Commitment, and each Revolving Note dated as of the
Closing Date;
     (iii) such certificates of resolutions or other action, incumbency
certificates and/or other certificates of officers of each Loan Party as the
Administrative Agent may require to establish the identities of and verify the
authority and capacity of each officer thereof authorized to act in connection
with this Agreement and the other Loan Documents to which such Loan Party is a
party;
     (iv) such evidence as the Administrative Agent may reasonably require to
verify that each Loan Party is duly organized or formed, validly existing, and
in good standing in the jurisdiction of its organization and is qualified to
engage in business in each jurisdiction where its ownership, lease or operation
of properties or the conduct of its business requires such qualification;
     (v) a certificate signed by a Responsible Officer of each Borrower
certifying (A) that the representations and warranties contained in Article V
are true and correct in all respects on and as of the Closing Date, (B) no
Default or Event of Default will exist immediately after closing and the initial
Credit Extension under this Agreement, (C) all material governmental and third
party approvals necessary or, in the discretion of the Administrative Agent,
advisable
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in connection with the financing contemplated by this Agreement and the
continuing operation of the Borrowers and their respective Subsidiaries (other
than the Excluded Subsidiaries) have been obtained and are in full force and
effect, and (D) no action, suit, investigation or proceeding (other than the
litigation disclosed on any schedule hereto) is pending or, to the knowledge of
such Responsible Officer, threatened in any court or before any arbitrator or
governmental authority by or against the Borrowers, Parent, or any of their
respective properties, that (x) could reasonably be expected to materially and
adversely affect the Borrowers and their respective Subsidiaries (other than the
Excluded Subsidiaries), taken as a whole, or (z) seeks to affect or pertains to
any transaction contemplated hereby or the ability of the Borrowers or any
Guarantor to perform its obligations under the Loan Documents;
     (vi) a certificate of a Responsible Officer of the Borrowers (a) as to the
satisfaction of all conditions specified in this Section 4.01 and Section 4.02,
(b) certifying that the Borrowers have entered into Swap Contracts covering at
least 80% of estimated net production from Proved Developed Producing Reserves
through December 31, 2010 and at least 70% of estimated net production from
Proved Developed Producing Reserves through December 31, 2011 and attaching
copies of any new Swap Contracts, and (c) providing such other financial
information as the Administrative Agent may reasonably request;
     (vii) a Request for Borrowing; and
     (viii) such other assurances, certificates, documents, consents or opinions
as the Administrative Agent reasonably may require.
     (d) An opinion from counsel to each Loan Party, in form and substance
satisfactory to the Administrative Agent and its counsel, including where
advisable local counsel.
     (e) The amendment fees specified in Section 2.08(b) shall have been paid by
the Borrowers.
     (f) The Borrowers shall have paid Attorney Costs of the Administrative
Agent to the extent invoiced prior to, or on, the Closing Date, subject to the
limitation set forth in Section 10.04 hereof.
     (g) The Administrative Agent’s receipt of Collateral Documents, executed by
each Borrower, STP, and, as regards a second lien on the KPC Pipeline, KPC
Pipeline, LLC, in appropriate form for recording, where necessary, together
with:
     (i) such Lien searches as the Administrative Agent shall have reasonably
requested, and such amendment or termination statements or other documents as
may be necessary to confirm that the Collateral is subject to no other Liens
(other than Permitted Liens) in favor of any Persons; provided Administrative
Agent may elect to obtain such Lien searches post-closing to reflect appropriate
filings have been made to take into account the Restructure Transactions;
     (ii) funds sufficient to pay any filing or recording tax or fee in
connection with any and all UCC-1 financing statements and fees associated with
the filing of the Mortgages, including any mortgage tax;
     (iii) evidence that the Administrative Agent has been named as mortgagee or
additional insured under all policies of casualty insurance pertaining to the
Collateral and all general liability policies;
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     (iv) certificates evidencing all of the issued and outstanding shares of
capital stock or membership interests pledged pursuant thereto, which
certificates shall in each case be accompanied by undated stock powers duly
executed in blank, or, if any securities pledged pursuant thereto are
uncertificated securities, confirmation and evidence satisfactory to the
Administrative Agent that the security interest in such uncertificated
securities has been transferred to and perfected by the Administrative Agent for
the benefit of the Lenders in accordance with the Uniform Commercial Code; and
     (v) evidence that all other actions reasonably necessary or, in the opinion
of the Administrative Agent or the Lenders, desirable to perfect and protect the
first priority Lien created by the Collateral Documents (except to the extent
otherwise permitted hereunder), and to enhance the Administrative Agent’s
ability to preserve and protect its interests in and access to the Collateral,
have been taken.
     (h) The Administrative Agent’s receipt (with sufficient copies for all
Lenders) of the certificate of formation of each Borrower, together with all
amendments, certified by an appropriate governmental officer in its jurisdiction
of organization, as well as any other information required by Section 326 of the
USA Patriot Act or necessary for the Administrative Agent or any Lender to
verify the identity of Borrowers as required by Section 326 of the USA Patriot
Act; .
     (i) Payment by the Borrowers of the Closing Date Prepayment Amount; and
     (j) Closing of the Secured Pipeline Loan.
The Administrative Agent shall notify Borrowers and the Lenders of the Closing
Date, and such notice shall be conclusive and binding.
     B. Other Conditions Precedent:
     (a) Termination of PESC’s Guaranty of the Prior First Lien Credit
Agreement, the Prior Second Lien Credit Agreement, and the Midstream Credit
Agreement;
     (b) Amendment of the Guaranty previously executed by Parent relating to the
Prior First Lien Credit Agreement, the Second Lien Credit Agreement, and the
Midstream Credit Agreement;
     (c) Closing of the Amended QRC facility and execution by Lenders of the
terminations and guaranty releases associated therewith; and
     (d) Closing of the Secured Pipeline Loan.
     4.02. Conditions to all Credit Extensions. The obligation of each Lender to
honor any Borrowing Notice for a Credit Extension and the obligation of the L/C
Issuer to issue any Letter of Credit is subject to the following conditions
precedent:
     (a) The representations and warranties of the Loan Parties contained in
Article V (including, without limitation, Sections 5.05(b) and 5.06), or which
are contained in any document furnished at any time under or in connection
herewith, including, but not limited to the Collateral Documents, shall be true
and correct in all material respects on and as of the date such Revolving Loan
is made or such Letter of Credit is issued except to the extent that such
representations and warranties specifically refer to an earlier date, in which
case they shall be true and correct in all material respects as of such earlier
date.
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     (b) No Borrowing Base Deficiency, Default or Event of Default shall exist
or would result from such proposed Revolving Loan or L/C Credit Extension.
     (c) The Administrative Agent and, if applicable, the L/C Issuer, shall have
received a Request for Credit Extension and, if applicable, a Letter of Credit
Application in accordance with the requirements hereof.
     (d) As of the time of funding any additional advances to the Borrowers that
have been approved by the Lenders pursuant to Section 2.01 and are made in
conjunction with the addition of Oil and Gas Properties or other Collateral
owned by the Borrowers or other Loan Party to the Borrowing Base Oil and Gas
Properties, the Borrowers and each other applicable Loan Party shall have duly
delivered to the Administrative Agent: (i) the Collateral Documents that are
necessary or appropriate, in the reasonable opinion of the Administrative Agent,
relating to such additional Oil and Gas Properties or other Collateral, and
(ii) evidence, reasonably satisfactory to Agent in its sole discretion, that the
Borrowers and the Borrowing Base Oil and Gas Properties will be in material
compliance with all Environmental Laws. Furthermore, Administrative Agent shall
have completed its title due diligence confirming that a Borrower or other Loan
Party has satisfactory title to the Leases.
     (e) The Administrative Agent shall have received, in form and substance
reasonably satisfactory to it, such other assurances, certificates, documents or
consents related to the foregoing as the Administrative Agent or the Required
Lenders reasonably may require.
     Each Request for Credit Extension submitted by a Borrower shall be deemed
to be a representation and warranty that the conditions specified in
Sections 4.02(a) and (b) have been satisfied on and as of the date of the
applicable Credit Extension.
     4.03. Conditions Precedent to Funding Loans for Permitted Acquisitions. The
obligation of each Lender to fund its portion of any Revolving Loan to finance a
Permitted Acquisition shall be subject to satisfaction of the conditions
precedent set forth in Sections 4.02(a) and (b) and to the additional condition
precedent that if, such Permitted Acquisition involves the acquisition of equity
interests of a Person for a purchase price that exceeds $20,000,000 and the
Borrowers intend to fund, in whole or in part, the Permitted Acquisition with a
Revolving Loan in excess of $20,000,000, then the Borrowers shall deliver to the
Administrative Agent and the Lenders at least five Business Days before any
requested Revolving Loan to fund a Permitted Acquisitions (i) audited financial
statements of the Person or business proposed to be acquired (or if audited
financial statements are unavailable, such unaudited financial statements
pertaining to the Person or business proposed to be acquired as shall be
satisfactory in form and substance to the Administrative Agent) and (ii) a
Compliance Certificate demonstrating pro forma compliance with the financial
covenants set forth in Section 7.16. In the event that the Permitted Acquisition
is funded, in whole or in part, with the proceeds of equity and other cash
sufficient in amount that Borrowers do not require a Revolving Loan in an amount
that exceeds $20,000,000 to finance a Permitted Acquisition, then the Borrowers
shall not be required to provide the information described in clauses (i) and
(ii) of this Section.
ARTICLE V.
REPRESENTATIONS AND WARRANTIES
     Each of the Borrowers represents and warrants to the Administrative Agent
and the Lenders that:
     5.01. Existence; Qualification and Power; Compliance with Laws. As of the
Closing Date, PESC is a direct wholly-owned subsidiary of Parent, and
MidContinent, Eastern, and KPC Pipeline, LLC are direct wholly—owned
subsidiaries of PESC. Each Loan Party (a) is a corporation or limited liability
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company duly organized or formed, validly existing and in good standing under
the Laws of the jurisdiction of its incorporation or organization, (b) has all
requisite power and authority and all governmental licenses, authorizations,
consents and approvals to own its assets, carry on its business and to execute,
deliver, and perform its obligations under the Loan Documents to which it is a
party, (c) is duly qualified and is licensed and in good standing under the Laws
of each jurisdiction where its ownership, lease or operation of properties or
the conduct of its business requires such qualification or license, except in
each case referred to in clause (a), (b) or (c), to the extent that failure to
do so could not reasonably be expected to have a Material Adverse Effect, (d) is
not a Person (I) whose property or interest in property is blocked or subject to
blocking pursuant to Section 1 of Executive Order 13224 of September 23, 2001
Blocking Property and Prohibiting Transactions With Persons Who Commit, Threaten
to Commit, or Support Terrorism (66 Fed. Reg. 49079 (2001)), or (II) who engages
in any dealings or transactions prohibited by Section 2 of such executive order,
or is otherwise associated with any such Person in any manner violative of
Section 2, or (III) on the list of Specially Designated Nationals and Blocked
Persons or subject to the limitations or prohibitions under any other U.S.
Department of Treasury’s Office of Foreign Assets Control regulation or
executive order, and (e) is in compliance, in all material respects, with
(A) the Trading with the Enemy Act, as amended, and each of the foreign assets
control regulations of the United States Treasury Department (31 CFR, Subtitle
B, Chapter V, as amended) and any other enabling legislation or executive order
relating thereto, and (B) the Uniting And Strengthening America By Providing
Appropriate Tools Required To Intercept And Obstruct Terrorism (USA Patriot Act
of 2001). No part of the proceeds of the Revolving Loans or L/C Credit
Extensions will be used, directly or indirectly, for any payments to any
governmental official or employee, political party, official of a political
party, candidate for political office, or anyone else acting in an official
capacity, in order to obtain, retain or direct business or obtain any improper
advantage, in violation of the United States Foreign Corrupt Practices Act of
1977, as amended.
     5.02. Authorization; No Contravention. The execution, delivery and
performance by each Loan Party of each Loan Document to which such Person is
party, have been duly authorized by all necessary corporate or other
organizational action, and do not and will not: (a) contravene the terms of any
of such Person’s Organization Documents; (b) conflict with or result in any
breach or contravention of, or the creation of any Lien under, any material
Contractual Obligation (other than the Liens created under the Loan Documents)
to which such Person is a party or any order, injunction, writ or decree of any
Governmental Authority to which such Person or its property is subject; or (c)
violate any Law except in each case referred to in clause (b) or (c), to the
extent that any such conflict, breach, contravention, creation or violation
could not reasonably be expected to have a Material Adverse Effect.
     5.03. Governmental Authorization. No approval, consent, exemption,
authorization, or other action by, or notice to, or filing with, any
Governmental Authority, except for the filings in connection with the granting
or continuation of security interests pursuant to the Collateral Documents or
filings to maintain the existence, foreign qualification and good standing of
the Loan Parties, is necessary or required in connection with the execution,
delivery or performance by any Loan Party of this Agreement or any other Loan
Document.
     5.04. Binding Effect. This Agreement has been, and each other Loan
Document, when delivered hereunder, will have been duly executed and delivered
by each Loan Party that is party thereto. This Agreement constitutes, and each
other Loan Document when so delivered will constitute, a legal, valid and
binding obligation of such Loan Party, enforceable against each Loan Party that
is party thereto in accordance with its terms, subject to applicable bankruptcy,
insolvency, reorganization, moratorium or other Laws affecting creditors’ rights
generally and subject to general principles of equity, regardless of whether
considered in a proceeding in equity or at Law.
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     5.05. Financial Statements; No Material Adverse Effect.
     (a) The financial statements delivered to the Lenders pursuant to
Sections 6.01(a) and (b) for periods commencing with the period beginning
January 1, 2010 have been, in the case of financial statements delivered prior
to the Closing Date, and will be, with respect to hereafter delivered financial
statements, prepared in accordance with GAAP consistently applied throughout the
period covered thereby, except as otherwise expressly noted therein. Such
financial statements will: (i) fairly present in all material respects the
financial condition of Parent and its consolidated Subsidiaries as of the date
thereof and their results of operations for the period covered thereby in
accordance in all material respects with GAAP consistently applied throughout
the period covered thereby, except as otherwise expressly noted therein, subject
in the case of quarterly financial statements delivered pursuant to
Section 6.01(b) to year-end audit adjustments and the absence of footnotes; and
(ii) show all material indebtedness and other liabilities of Parent and its
consolidated Subsidiaries as of the date thereof required to be reflected
therein in accordance with GAAP consistently applied throughout the period
covered thereby.
     (b) Since December 31, 2009, there has been no event or circumstance that
has or could reasonably be expected to have a Material Adverse Effect.
     5.06. Litigation. Except for actions, suits, proceedings, claims and
disputes arising out of or related to the Misappropriation Transaction or as
disclosed on Schedule 5.06, there are no actions, suits, proceedings, claims or
disputes pending or, to the knowledge of Borrowers, threatened or contemplated
in writing, at law, in equity, in arbitration or before any Governmental
Authority, by or against Borrowers or any Borrower Affiliate or against any of
their properties or revenues which (a) seek to affect or pertain to this
Agreement or any other Loan Document, the borrowing of Revolving Loans, the use
of the proceeds thereof, or the issuance of Letters of Credit hereunder, or
(b) could reasonably be expected to have a Material Adverse Effect.
     5.07. No Default. Neither the Borrowers nor any Borrower Affiliate is in
default under or with respect to any Contractual Obligation which could be
reasonably expected to have a Material Adverse Effect. No Default or Event of
Default has occurred and is continuing or would result from the consummation of
the transactions contemplated by this Agreement or any other Loan Document.
There is no default under any Material Agreement, which could reasonably be
expected to have a Material Adverse Effect.
     5.08. Title; Liens; Priority of Liens. Each Loan Party (a) has Marketable
Title in fee simple to, or valid leasehold interests in, all real property
necessary or used in the ordinary conduct of its business, except for such
defects in title as could not, individually or in the aggregate, reasonably be
expected to have a Material Adverse Effect, (b) owns the personal property
granted by it as Collateral under the Collateral Documents, free and clear of
any and all Liens in favor of third parties other than Permitted Liens, and
(c) has Marketable Title to the working and net revenue interests in the
Borrowing Base Oil and Gas Properties as reflected on the Mortgage encumbering
such Borrowing Base Oil and Gas Properties, subject to the limitations and
qualifications set forth in such Mortgage. Except as reflected on the Mortgage
encumbering such Borrowing Base Oil and Gas Properties, all such shares of
production which each Borrower and each other applicable Loan Party is entitled
to receive, and shares of expenses which each Borrower and each other applicable
Loan Party is obligated to bear, are not subject to change, except for changes
attributable to future elections by each such Borrower and each other applicable
Loan Party not to participate in operations proposed pursuant to customary forms
of applicable joint operating agreements, and except for changes attributable to
changes in participating areas under any federal units wherein participating
areas may be formed, enlarged or contracted in accordance with the rules and
regulations of the applicable Governmental Authority. Upon the proper filing of
UCC financing statements, the recording of the Mortgages, and the taking of the
other actions required by the
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Administrative Agent, the Liens granted by Borrowers in property pursuant to the
Collateral Documents will constitute valid and enforceable first, prior and
perfected Liens on the Collateral constituting the Borrowing Base Oil and Gas
Properties and the Bluestem Gathering System in favor of the Administrative
Agent, for the ratable benefit of the Lenders, subject to Permitted Liens and,
in the case of Collateral consisting of the KPC Pipeline, second perfected Liens
in favor of the Administrative Agent, for the ratable benefit of the Lenders,
subject to the Permitted Liens The property of the Loan Parties is subject to no
Liens, other than Permitted Liens.
     5.09. Environmental Compliance. The Borrowers have reasonably concluded
that (a) there are no claims alleging potential liability under or
responsibility for violation of any Environmental Law except any such claims
that could not, individually or in the aggregate, reasonably be expected to have
a Material Adverse Effect, (b) there is no environmental condition or
circumstance, such as the presence or Release of any Hazardous Substance, on any
property owned, operated or used by any Borrower or any Borrower Affiliate that
could reasonably be expected to have a Material Adverse Effect, and (c) there is
no violation by any Borrower or any Borrower Affiliate of any Environmental Law,
except for such violations as could not, individually or in the aggregate,
reasonably be expected to have a Material Adverse Effect.
     5.10. Insurance. The properties of the Borrowers and the Borrower
Affiliates are insured with financially sound and reputable insurance companies
not Affiliates of the Borrowers, in such amounts, with such deductibles and
covering such risks as are consistent with past practice.
     5.11. Taxes. The Borrowers and the Borrower Affiliates have filed all
federal, state and other material tax returns and reports required to be filed,
and have paid all federal, state and other material taxes, assessments, fees and
other governmental charges levied or imposed upon them or their properties,
income or assets otherwise due and payable, except those which are being
contested in good faith by appropriate proceedings and for which adequate
reserves have been provided in accordance with GAAP or to the extent that the
failure to do so could not reasonably be expected to result in a Material
Adverse Effect. To the knowledge of the Borrowers, there is no proposed tax
assessment against the Borrowers or any Borrower Affiliate or any of their
respective Subsidiaries that would, if made, have a Material Adverse Effect.
     5.12. ERISA Compliance. The representations and warranties set forth in
this Section 5.12 shall apply only if any Borrower or an ERISA Affiliate
establishes a Plan.
     (a) Each Plan is in compliance in all material respects with the applicable
provisions of ERISA, the Code and other federal or state Laws except to the
extent that noncompliance could not reasonably be expected to have a Material
Adverse Effect and except to the extent disclosed on Schedule 5.12. Each Plan
that is intended to qualify under Section 401(a) of the Code has received a
favorable determination letter from the IRS, an application for such a letter is
currently being processed by the IRS with respect thereto or the Plan utilizes a
prototype form plan document and the prototype plan’s sponsor has received a
favorable opinion or advisory letter from the IRS upon which such Borrower or
such ERISA Affiliate may rely, and, to the knowledge of the Borrowers, nothing
has occurred which would prevent, or cause the loss of, such qualification,
except to the extent that nonqualification could not reasonably be expected to
have a Material Adverse Effect and except to the extent disclosed on
Schedule 5.12. Any such Borrower and each ERISA Affiliate have made all required
contributions to each Plan subject to Section 412 of the Code, and no
application for a funding waiver or an extension of any amortization period
pursuant to Section 412 of the Code has been made with respect to any Plan,
except to the extent that nonpayment could not reasonably be expected to have a
Material Adverse Effect except to the extent disclosed on Schedule 5.12.
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     (b) There are no pending or, to the knowledge of the Borrowers, threatened
claims, actions or lawsuits, or action by any Governmental Authority, with
respect to any Plan that could reasonably be expected to have a Material Adverse
Effect or except to the extent disclosed on Schedule 5.12. Neither any Borrower
nor any ERISA Affiliate has engaged in or knowingly permitted to occur and, to
each Borrower’s knowledge, no other party has engaged in or permitted to occur
any prohibited transaction or violation of the fiduciary responsibility rules
with respect to any Plan that has resulted or could reasonably be expected to
result in a Material Adverse Effect or except to the extent disclosed on
Schedule 5.12.
     (c) (i) No ERISA Event has occurred or is reasonably expected to occur that
could reasonably be expected to have a Material Adverse Effect; (ii) no Pension
Plan has any Unfunded Pension Liability that (when aggregated with any other
Unfunded Pension Liability) has resulted or could reasonably be expected to
result in a Material Adverse Effect; and (iii) neither any Borrower nor any
ERISA Affiliate has engaged in a transaction that could be subject to
Sections 4069 or 4212(c) of ERISA that could reasonably be expected to have a
Material Adverse Effect.
     5.13. Subsidiaries and other Investments. Except as set forth on
Schedule 5.13, as of the Closing Date, the Borrowers have no Subsidiaries and
have no equity Investment in any other Person.
     5.14. Margin Regulations; Investment Company Act; Use of Proceeds.
     (a) Neither any Borrower nor any Borrower Affiliate is engaged nor will it
engage, principally or as one of its important activities, in the business of
purchasing or carrying margin stock (within the meaning of Regulation U issued
by the Board), or extending credit for the purpose of purchasing or carrying
margin stock.
     (b) Neither any Borrower nor any Borrower Affiliate, no Person controlling
any Borrower or any Borrower Affiliate, or any Subsidiary thereof is or is
required to be registered as an “investment company” under the Investment
Company Act of 1940.
     (c) The Borrowers will use all proceeds of Credit Extension in the manner
set forth in Section 6.12.
     5.15. Disclosure; No Material Misstatements. All material factual
information furnished in connection with this Agreement by or on behalf of any
Borrower in writing to the Administrative Agent or any Lender for purposes of or
in connection with this Agreement or any transaction contemplated hereby, as
modified or supplemented by other information so furnished, is true and accurate
in all material respects, and such information is not, or shall not be, as the
case may be, incomplete by omitting to state any material fact necessary to make
such information, in light of the circumstances under which it was made, not
misleading. All estimates and projections delivered to the Administrative Agent
or any Lender in connection with this Agreement were based upon information that
was available at the time such estimates or projections were prepared and
believed to be correct and upon assumptions believed to be reasonable at that
time; however, the Borrowers do not warrant that such estimates and projections
will ultimately prove to have been accurate.
     5.16. Location of Business and Offices. Each Loan Party’s (i) jurisdiction
of organization, (ii) organizational identification number, (iii) correct legal
name, and (iv) principal place of business and chief executive offices are as
set forth in the Security Agreement from such Loan Party.
     5.17. Compliance with Laws. Except with respect to Environmental Laws and
Laws relating to taxes and employee benefits (which are covered by
Sections 5.09, 5.11 and 5.12, respectively), and
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except as a consequence of or related to the Misappropriation Transaction,
neither any Borrower nor any Borrower Affiliate is in violation of any Laws,
other than such violations which could not, individually or collectively,
reasonably be expected to have a Material Adverse Effect. Neither any Borrower
nor any Borrower Affiliate has received notice alleging any noncompliance with
any Laws, except for (i) such noncompliance which no longer exists, (ii) alleged
noncompliance arising out of or related to the Misappropriation Transaction, or
(iii) noncompliance which could not reasonably be expected to have a Material
Adverse Effect.
     5.18. Third Party Approvals. No approval, consent, exemption,
authorization, or other action by, or notice to, or filing with, any party that
is not a party to this Agreement is necessary or required in connection with the
execution, delivery or performance by any Loan Party of this Agreement or any
other Loan Document except where obtained or where the failure to receive such
approval, consent, exemption, authorization, or the failure to do such other
action by, or provide such notice could not reasonably be expected to have a
Material Adverse Effect; and provided, however, that the transfer of rights in
certain Collateral consisting of rights under contracts to a foreclosure
purchaser may, in some instances, require the consent of third parties who have
rights in such Collateral.
     5.19. Solvency. The Borrowers on a consolidated basis are not “insolvent”
as such term is used and defined in (i) the United States Bankruptcy Code or
(ii) the New York Uniform Fraudulent Transfer Act.
     5.20. Oil and Gas Leases. The Leases which constitute any part of the
Borrowing Base Oil and Gas Properties are in full force and effect as to those
portions thereof that comprise the Borrowing Base Oil and Gas Properties, except
to the extent the failure to be in full force and effect could not reasonably be
expected to have a Material Adverse Effect.
     5.21. Oil and Gas Contracts. Except (a) as set out on Schedule 5.21
attached hereto, and (b) as may subsequently occur and be disclosed by Borrowers
in the next Compliance Certificate delivered by Borrowers after such occurrence,
neither any Borrower nor any other Loan Party is obligated, by virtue of any
prepayment under any contract providing for the sale by any Borrower or any
other Loan Party of Hydrocarbons which contains a “take-or-pay” clause or under
any similar prepayment agreement or arrangement, including, “gas balancing
agreements”, to deliver a material amount of Hydrocarbons produced from the
Borrowing Base Oil and Gas Properties at some future time without then or
thereafter receiving full payment therefor (i.e., in the case of oil, not in
excess of sixty days, and in the case of gas, not in excess of ninety days).
Except (a) as set out on Schedule 5.21 attached hereto, and (b) as may
subsequently occur and be disclosed by Borrowers in the next Compliance
Certificate delivered by Borrowers after such occurrence, the Borrowing Base Oil
and Gas Properties are not subject to any contractual or other arrangement for
the sale of crude oil which cannot be canceled on ninety days’ (or less) notice,
unless the price provided for therein is equal to or greater than the prevailing
market price in the vicinity. To the best of the Borrowers’ knowledge, the
Borrowing Base Oil and Gas Properties are not subject to any regulatory refund
obligation and no facts exist which might cause the same to be imposed.
     5.22. Producing Wells. All producing wells that constitute part of the
Borrowing Base Oil and Gas Properties (a) have been, during all times that any
such wells were operated by any Borrower or any Borrower Affiliate, and (b) to
the knowledge of Borrowers, have been at all other times, drilled, operated and
produced in conformity with all applicable Laws, are subject to no penalties on
account of past production, and are bottomed under and are producing from, and
the well bores are wholly within, the Borrowing Base Oil and Gas Properties, or
on Oil and Gas Properties which have been pooled, unitized or communitized with
the Borrowing Base Oil and Gas Properties, except to the extent that any
noncompliance with the representations set out in this Section 5.22 would not
have a Material Adverse Effect.
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     5.23. Purchasers of Production. The names and business addresses of the
Persons who (a) have purchased any of Borrowers’ or any other Loan Party’s
interests in oil and gas produced from the Borrowing Base Oil and Gas Properties
during the six calendar months preceding the Closing Date, and (b) as of the
Closing Date, are considered by Borrowers or other Loan Party to be potential
future purchasers of any Borrower’s interest in oil and gas produced from the
Borrowing Base Oil and Gas Properties, are identified on Schedule 5.23 attached
hereto.
     5.24. Swap Contracts. Schedule 5.24, as of the date hereof, sets forth, a
true and complete list of all Swap Contracts of each Loan Party, the material
terms thereof (including the type, term, effective date, termination date and
notional amounts or volumes), the net mark to market value thereof, all credit
support agreements relating thereto (including any margin required or supplied)
and the counterparty to each such agreement.
ARTICLE VI.
AFFIRMATIVE COVENANTS
     So long as any Lender shall have any Revolving Commitment hereunder, or any
Revolving Loan or other Obligation (other than contingent indemnity obligations
and obligations under Lender Hedging Agreements) shall remain unpaid or
unsatisfied, or any Letter of Credit shall remain outstanding (unless such
Letter of Credit has been Cash Collateralized), each of the Borrowers shall, and
shall cause each of their Subsidiaries (other than the Excluded Subsidiaries)
to:
     6.01. Financial Statements. Deliver to the Administrative Agent, in form
and detail reasonably satisfactory to the Administrative Agent and the Required
Lenders (and the Administrative Agent shall deliver to the Lenders):
     (a) as soon as available, but in any event within 90 days after the end of
each fiscal year of Parent (beginning with the 2010 fiscal year), consolidated
balance sheets of Parent and its Subsidiaries as at the end of such fiscal year,
and the related statements of income and cash flows for such fiscal year and
consolidating financial statements of Parent and its Subsidiaries at the end of
such fiscal year (provided, that as long as Parent is a public company, such
financial statements shall be required to be furnished no later than the date
that Parent is required to timely file its annual report on Form 10-K with the
Securities Exchange Commission (taking into account any extension of time
available under Rule 12b-25 under the Securities Exchange Act of 1934)), setting
forth in each case in comparative form the figures for the previous fiscal year
of Parent, if any, all in reasonable detail, audited and accompanied by a report
and opinion of UHY LLP or other nationally recognized firm of independent
certified public accountants reasonably acceptable to the Required Lenders,
which report and opinion shall be prepared in accordance with GAAP (except as
otherwise noted herein) and, as it pertains to the Borrowers and each of their
respective Subsidiaries (other than the Excluded Subsidiaries), shall not be
subject to any qualifications or exceptions as to the scope of the audit nor to
any qualifications and exceptions not reasonably acceptable to the Required
Lenders;
     (b) as soon as available, but in any event within 45 days after the end of
each of the first three fiscal quarters of each fiscal year of Parent, an
unaudited consolidated balance sheet of Parent and its Subsidiaries as at the
end of such fiscal quarter, and the related statements of income and cash flows
for such fiscal quarter and for the portion of Parent’s fiscal year then ended
and unaudited consolidating financial statements of Parent and its Subsidiaries
(provided, that as long as Parent continue to be a public company, such
financial statements shall be required to be furnished no later than the date
that Parent is required to timely file its quarterly report on Form 10-Q with
the Securities Exchange Commission (taking into account any extension of time
available under Rule 12b-25 under the Securities Exchange Act of 1934)), setting
forth in each case in comparative form the figures for the corresponding fiscal
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quarter of the previous fiscal year of Parent and the corresponding portion of
the previous fiscal year of Parent, if any, all in reasonable detail and
certified by a Responsible Officer of Parent, as fairly presenting in all
material respects the financial condition, results of operations and cash flows
of Parent and its Subsidiaries in accordance with GAAP (except as otherwise
noted herein), subject only to normal year-end audit adjustments and the absence
of footnotes;
     (c) within 90 days after the end of each fiscal year, PESC shall deliver
Parent’s one year projection/budget for the year following such fiscal year; and
     (d) on a monthly basis, on or before the thirtieth (30th) day after the end
of each month except as to the end of each month that is also at the end of each
quarter, in which case, on or before the forty-fifth (45th) day after the end of
such quarter, until the reporting package is delivered on or before May 30,
2011, for the month ending April 30, 2011, PESC shall deliver to Administrative
Agent, Parent’s monthly internal financial reporting package, which includes
(i) an unaudited income statement, balance sheet and capital expenditures on a
GAAP basis relating to the assets in Appalachia (including the Marcellus
Assets), the assets in the Cherokee Basin (including the Oil and Gas Properties
located there and the Bluestem Gathering System), the Central Oklahoma oil
properties, and the KPC Pipeline; (ii) a detail of general and administrative
expenses; (iii) a summary of open derivative positions, and (iv) with respect to
the financial reporting package delivered at the end of each month that is also
at the end of each quarter, press release tables and non-GAAP reconciliations.
     6.02. Certificates; Other Information. Deliver to the Administrative Agent,
in form and detail reasonably satisfactory to the Administrative Agent and the
Required Lenders:
     (a) concurrently with the delivery of the financial statements referred to
in Sections 6.01(a) and (b), a duly completed Compliance Certificate in form of
Exhibit C signed by a Responsible Officer of Parent;
     (b) promptly upon request, copies of each annual report, proxy or financial
statement or other report or written communication sent to the equity owners of
Parent, and copies of all annual, regular, periodic and special reports and
registration statements which Parent may file or be required to file with the
Securities and Exchange Commission under Section 13 or 15(d) of the Securities
Exchange Act of 1934, and not otherwise required to be delivered to the
Administrative Agent pursuant hereto;
     (c) copies of Material Agreements and any material amendment thereto; and
     (d) promptly, such additional information (that is in the possession of the
Borrowers or that may be readily produced by the Borrowers without undue effort
or expense) regarding the business, financial or corporate affairs of any Loan
Party as the Administrative Agent, at the request of any Lender, may from time
to time reasonably request, which information may include copies of any detailed
audit reports, if any, management letters or recommendations submitted to the
board of directors or managers (or the audit committee of the board of directors
or managers) of Parent by independent accountants in connection with the
accounts or books of Parent or any of its Subsidiaries, or any audit of any of
them.
     6.03. Notices. Promptly notify the Administrative Agent:
     (a) of the occurrence of any Default or Event of Default, as soon as
possible but in any event within ten (10) days after the Borrowers have
knowledge thereof;
     (b) of any matter that has resulted or could reasonably be expected to
result in a Material Adverse Effect, including any of the following events if
such has resulted or could reasonably be
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expected to result in a Material Adverse Effect: (i) breach or non-performance
of, or any default under, a Contractual Obligation of any Loan Party; (ii) any
litigation, investigation by or required by a Governmental Authority, proceeding
or suspension of licenses or permits between any Loan Party and any Governmental
Authority (other than any litigation disclosed on any schedule hereto); and
(iii) any dispute, litigation, investigation or proceeding involving any Loan
Party related to any Environmental Law;
     (c) of any litigation, investigation or proceeding (other than any
litigation disclosed on any schedule hereto) known to and affecting any Borrower
or any Borrower Affiliate in which (i) the amount involved exceeds (individually
or collectively) $1,000,000, or (ii) injunctive relief or other relief is
sought, which could be reasonably expected to have a Material Adverse Effect;
     (d) of any material change in accounting policies or financial reporting
practices by Parent or the Borrowers; and
     (e) by means of written notice (except in the case of the Restructure
Transactions) at least ten (10) days before any proposed (A) relocation of any
Loan Party’s principal place of business or chief executive office, (B) change
of any Loan Party’s name, identity, or corporate, partnership or limited
liability company structure, (C) relocation of the place where the books and
records concerning a Loan Party’s accounts are kept, (D) relocation of any Loan
Party’s Collateral (other than delivery of inventory in the ordinary course of
business to third party contractors for processing and sales of inventory in the
ordinary course of business or as permitted by any Loan Document) to a location
not described on Annex A to the Security Agreement to which such Loan Party is a
party, and (E) change of any Loan Party’s jurisdiction of organization or
organizational identification number, as applicable.
     Each notice pursuant to this Section shall be accompanied by a statement of
a Responsible Officer of the notifying Borrower that is the relevant Loan Party
or whose Subsidiary is the relevant Loan Party, setting forth details of the
occurrence referred to therein and stating what action such Borrower has taken
and proposes to take with respect thereto. Each notice pursuant to
Section 6.03(a) shall describe with particularity any and all provisions of this
Agreement or other Loan Document that have been breached.
     6.04. Payment of Obligations. Pay and discharge as the same shall become
due and payable (a) the Obligations, (b) all tax liabilities, assessments and
governmental charges or levies upon it or its properties or assets and (c) all
lawful claims which, if unpaid, would by law become a Lien upon its property;
except, in the case of clause (b) or (c), where (x) the validity thereof are
being contested in good faith by appropriate proceedings and (y) adequate
reserves in accordance with GAAP are being maintained by the appropriate Loan
Party.
     6.05. Preservation of Existence, Etc. (a) Preserve, renew and maintain in
full force and effect its legal existence and good standing under the Laws of
the jurisdiction of its organization, except in a transaction permitted by
Sections 7.06 and 7.07 and the Restructure Transactions, and (b) take all
reasonable action to maintain all rights, privileges, permits, licenses and
franchises material to the conduct of its business, except in a transaction
permitted by Sections 7.06 and 7.07, except where the failure to do so in each
case could not reasonably be expected to have a Material Adverse Effect.
     6.06. Maintenance of Assets and Business. (a) Keep all property material to
the conduct of its business in good working order and condition (ordinary wear
and tear excepted) and make all necessary repairs thereto and replacements
thereof; provided that no item of operating equipment need be repaired or
replaced if the Borrowers shall determine in good faith that such action is not
necessary or desirable for the continued efficient and profitable operation of
the business of the Borrowers and their
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respective Subsidiaries (other than the Excluded Subsidiaries); (b) do all
things necessary to obtain, renew, extend, and continue in effect all
Authorizations which may at any time and from time to time be necessary for the
operation of its business in compliance with applicable Law, except where the
failure to so maintain, renew, extend, or continue in effect could not
reasonably be expected to have a Material Adverse Effect; and (c) use the
standard of care typical in the industry in the operation and maintenance of its
facilities.
     6.07. Maintenance of Insurance. (a) Maintain with responsible insurance
companies insurance with respect to its properties and business (including
business interruption insurance) against such casualties and contingencies and
of such types and in such amounts as is customary in the case of similar
businesses and which is reasonably acceptable to the Administrative Agent and
will (i) furnish to the Administrative Agent on each anniversary of the Closing
Date a certificate or certificates of insurance from the applicable insurance
company evidencing the existence of insurance required to be maintained by this
Agreement and the other Loan Documents and evidencing that Administrative Agent
is listed as mortgagee on property insurance as to all properties serving as
Collateral hereto and the Administrative Agent and Lenders are additional
insureds on liability insurance, and (ii) upon request of the Administrative
Agent, furnish to each Lender at reasonable intervals a certificate of an
Authorized Officer of the Borrowers setting forth the nature and extent of all
insurance maintained in accordance with this Section.
     (b) (i) Except as the Administrative Agent may otherwise consent to in
writing, Borrowers will, and will cause each of their respective Subsidiaries
to, forthwith upon receipt, transmit and deliver to the Administrative Agent, in
the form received, all cash, checks, drafts, chattel paper and other instruments
or writings for the payment of money (properly endorsed, where required, so that
such items may be collected by the Administrative Agent) which may be received
by the Borrowers at any time in full or partial payment of amounts due under any
insurance policy in an amount in excess of $1,000,000. Except as the
Administrative Agent may otherwise consent in writing, any such items which may
be received by the Borrowers in excess of $1,000,000 will not be commingled with
any other of its funds or property, but will be held separate and apart from its
own funds or property and upon express trust for the Administrative Agent until
delivery is made to the Administrative Agent.
     6.08. Compliance with Laws and Contractual Obligations. (a) Comply in all
material respects with the requirements of all Laws (including Environmental
Laws) applicable to it or to its business or property, except in such instances
in which (i) such requirement of Law is being contested in good faith or a bona
fide dispute exists with respect thereto, (ii) the failure to comply therewith
arose out of or was related to the Misappropriation Transaction or (iii) the
failure to comply therewith could not be reasonably expected to have a Material
Adverse Effect; and (b) comply with all Contractual Obligations, except if the
failure to comply therewith could not be reasonably expected to have a Material
Adverse Effect.
     6.09. Books and Records. Maintain (a) proper books of record and account,
in which full, true and correct entries in conformity with GAAP consistently
applied (except as otherwise noted herein) shall be made of all financial
transactions and matters involving its assets and business, and (b) maintain
such books of record and account in material conformity with all applicable
requirements of any Governmental Authority having regulatory jurisdiction over
it.
     6.10. Inspection Rights. Permit representatives and independent contractors
of the Administrative Agent and each Lender to visit and inspect any of its
properties, to examine its corporate, financial and operating records, and make
copies thereof or abstracts therefrom, and to discuss its affairs, finances and
accounts with its officers and independent public accountants, and make all
financial records and other records relating to the Borrowing Base Oil & Gas
Properties available for inspection at such
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reasonable times during normal business hours and as often as may be reasonably
desired, upon reasonable advance notice to the Borrowers; provided, however,
that when an Event of Default exists the Administrative Agent or any Lender (or
any of their respective representatives or independent contractors) may do any
of the foregoing at the expense of the Borrowers at any time during normal
business hours and without advance notice. Additionally, Administrative Agent
may, at the request of the Required Lenders, conduct or cause to be conducted a
commercial field examination of the Borrowers’ and their respective
Subsidiaries’ (other than the Excluded Subsidiaries and KPC Pipeline, LLC and
any Subsidiary it may hereafter form) financial and accounting records and
Borrowers shall pay the cost of such commercial field examination; provided so
long as no Event of Default shall exist and be continuing, no more than one such
commercial field examination shall be undertaken at the Borrowers’ expense
during any period of twelve consecutive months and the Borrowers shall not be
obligated to pay more than $20,000 for any such annual commercial field
examination.
     6.11. Compliance with ERISA. With respect to each Plan maintained by a
Borrower or an ERISA Affiliate, do each of the following: (a) maintain each Plan
in compliance in all material respects with the applicable provisions of ERISA,
the Code and other federal or state Laws, (b) cause each Plan which is qualified
under Section 401(a) of the Code to maintain such qualification; and (c) make
all required contributions to any Plan subject to Section 412 of the Code,
except to the extent that noncompliance, with respect to each event listed
above, could not be reasonably expected to have a Material Adverse Effect and
except to the extent disclosed on Schedule 5.12.
     6.12. Use of Proceeds. Use proceeds of the Facility on and after the
Closing Date to (i) finance working capital and general company purposes of the
Borrowers and their respective Subsidiaries, including in connection with the
acquisition development, exploitation and exploration of Oil and Gas Properties
and the Midstream Businesses, (ii) finance Permitted Acquisitions; (iii) issue
Letters of Credit, (iv) pay fees, costs and expenses owed pursuant to this
Agreement; (v) to pay principal and interest on the Secured Pipeline Loan and
make other Transfer Payments and Restricted Payments permitted under
Section 7.08.; and (vi) to renew, arrange and extend the Indebtedness owing
under the Prior First Lien Credit Agreement, the Prior Second Lien Credit
Agreement, and in part, under the Prior Midstream Credit Agreement.
     6.13. Material Agreements. Enforce the obligations of parties to the
Material Agreements, except where such failure could not reasonably be expected
to have a Material Adverse Effect.
     6.14. Guaranties; New Subsidiaries’ Collateral Documents. As an inducement
to the Administrative Agent and Lenders to enter into this Agreement, cause
Parent and each Subsidiary of the Borrowers (other than the Excluded
Subsidiaries and KPC Pipeline, LLC and any Subsidiary it may hereafter form) to
execute and deliver to Administrative Agent a Guaranty executed by the Parent
and Borrowers’ Subsidiaries (other than the Excluded Subsidiaries and KPC
Pipeline, LLC and any Subsidiary it may hereafter form), each in form and
substance reasonably satisfactory to the Administrative Agent, providing for the
guaranty of payment and performance of the Obligations. In addition, within
thirty (30) days after the formation or acquisition of any Subsidiary of any
Borrower after the date hereof (other than the Excluded Subsidiaries and KPC
Pipeline, LLC and any Subsidiary it may hereafter form), cause such Subsidiary
to execute and deliver to the Administrative Agent (a) a Guaranty in form and
substance reasonably satisfactory to the Administrative Agent, providing for the
guaranty of payment and performance of the Obligations, (b) Collateral Documents
in form and substance reasonably satisfactory to the Administrative Agent
creating Liens in all Borrowing Base Oil and Gas Properties and substantially
all of the property of such Subsidiary and in the equity interests in such
Subsidiary, subject to Permitted Liens, and (c) certified copies of such
Subsidiary’s Organization Documents and opinions of counsel with respect to such
Subsidiary and such Guaranty, and (d) such other documents and instruments as
may be required with respect to such Subsidiary pursuant to Section 6.15.
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     6.15. Further Assurances; Additional Collateral; In Lieu Letters. (a) The
Borrowers shall cause each of their respective Subsidiaries (other than the
Excluded Subsidiaries) to take such actions and to execute and deliver such
documents and instruments as the Administrative Agent shall require to ensure
that the Administrative Agent or Collateral Agent on behalf of the Secured
Parties shall, at all times, have received currently effective duly executed
Loan Documents granting Liens and security interests in all Borrowing Base Oil
and Gas Properties and in substantially all of the property of the Borrowers and
their Subsidiaries (other than (x) the Three Little Pipes (which because of
their minimal value have not been, and are not contemplated to be, subjected to
a Lien), (y) the limited liability company membership interest in Eastern and
(z) the Excluded Subsidiaries), including all capital stock, partnership, joint
venture, membership interests, or other equity interests except for (i) any
motor vehicle or other equipment that has a certificate of title and a fair
market value of less than $50,000, (ii) Excluded Assets, and (iii) those
properties and assets as to which the Administrative Agent shall determine in
its sole discretion (in consultation with the Borrowers) that the costs of
obtaining such security interest are excessive in relation to the value of the
security to be afforded thereby; provided, that with respect to rights of way,
easements, leases or other similar property interests acquired by any Loan Party
after the date hereof relating to the Bluestem Gathering System now owned by
MidContinent or other gathering system or pipeline hereafter acquired, the
relevant Loan Party shall promptly grant to the Collateral Agent as additional
security for the Obligations, within 60 days after each June 30th and
December 31st, a security interest in and Mortgage on each right of way,
easement, lease or other similar property interest acquired by it during the six
month period ended on such June 30 or December 31, as applicable, and not
constituting an Excluded Asset.
     (b) In connection with the actions required pursuant to the foregoing
subsection (a), the Borrowers shall cause each of their respective Subsidiaries
(other than the Excluded Subsidiaries) to execute and deliver such stock
certificates, blank stock powers, evidence of corporate authorization, opinions
of counsel, current valuations, evidence of title, and other documents, and
shall use commercially reasonable efforts to obtain third party consents, as
shall be reasonably requested by the Administrative Agent, in each case in form
and substance reasonably satisfactory to the Administrative Agent.
     (c) Except for the second priority Liens in favor of the Administrative or
Collateral Agent for the benefit of the Lenders on the KPC Pipeline, the Liens
required by this Section 6.15 shall be first priority Liens in favor of the
Administrative Agent or Collateral Agent for the benefit of the Secured Parties,
subject to no other Liens except Permitted Liens of the type described in
Section 7.01. The Liens required by this Section 6.15 shall be perfected Liens
in favor of the Administrative Agent or Collateral Agent for the benefit of the
Secured Parties in all collateral to the extent perfection has or will occur by
(i) the filing of a Uniform Commercial Code financing statement in the relevant
jurisdiction, (ii) filing or recording a mortgage in real property records of
the county in which such real property or fixtures is located, (iii) possession
or control or (iv) the notation on a certificate of title. If the Administrative
Agent shall determine that, as of any date, the Borrowers shall have failed to
comply with this Section 6.15, the Administrative Agent may (and at the
direction of the Required Lenders, shall) notify the Borrowers in writing of
such failure and, within 30 days from and after receipt of such written notice
by the Borrowers, the Borrowers shall execute and deliver to the Administrative
Agent supplemental or additional Loan Documents, in form and substance
satisfactory to the Administrative Agent and its counsel, securing payment of
the Revolving Notes and the other Obligations and covering additional assets and
properties not then encumbered by any Loan Documents (together with such other
information, as may be requested by the Administrative Agent, each of which
shall be in form and substance reasonably satisfactory to the Administrative
Agent) such that the Administrative Agent shall have received currently
effective duly executed and perfected Collateral Documents encumbering
substantially all of the assets of the Borrowers and their respective
Subsidiaries (other than the Excluded Subsidiaries) as required by
Section 6.15(a).
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     (d) If an Event of Default exists and is continuing, the Borrowers agree to
deliver and to cause each other Loan Party to deliver, whenever requested by
Administrative Agent, in its sole and absolute discretion, transfer orders or
letters in lieu thereof with respect to the production and proceeds of
production from the Borrowing Base Oil and Gas Properties, in form and substance
satisfactory to Administrative Agent.
     6.16. Title Defects. Cure any title defects to the Borrowing Base Oil and
Gas Properties material in value, in the reasonable opinion of the
Administrative Agent, within ninety days after receipt of written notice thereof
from Administrative Agent and, in the event any title defects are not cured in a
timely manner, pay all related costs and fees reasonably incurred by the
Administrative Agent for the account of the Lenders to do so; provided the
Borrowers may remove any of its Oil and Gas Properties from the Borrowing Base
Oil and Gas Properties so long as the Indebtedness evidenced by the Revolving
Notes is less than or equal to the Borrowing Base (determined by the Lenders in
accordance with Section 2.02 exclusive of such Oil and Gas Properties). In the
event that the Borrowers are unable to cure a title defect, the Borrowers shall
have the ability to substitute additional collateral; provided that the
Borrowers’ ability to substitute such collateral is subject to the full
satisfaction of the Administrative Agent, including, without limitation in full
compliance with the requirements described in Section 2.02. Furthermore, after
identification and prior to the cure of any such title defect, the
Administrative Agent may, subject to approval of the Required Lenders, and must,
upon the request of the Required Lenders, redetermine the Borrowing Base to
reflect the amount of such title defect.
     6.17. Leases. Keep and continue all material Leases comprising the
Borrowing Base Oil and Gas Properties and related contracts and agreements
relating thereto in full force and effect in accordance with the terms thereof
and not permit the same to lapse or otherwise become impaired for failure to
comply with the obligations thereof, whether express or implied; provided,
however, that this provision shall not prevent the Borrowers or any other Loan
Party from abandoning and releasing any such Leases upon their termination as
the result of cessation of production in paying quantities that did not result
from any Borrower’s’ or any other Loan Party’s failure to maintain such
production as a reasonably prudent operator. Subject to approval by the
Administrative Agent, the Borrowers and each Loan Party shall have the right to
replace Leases that lapse or become impaired.
     6.18. Operation of Borrowing Base Oil and Gas Properties. Operate or, to
the extent that the right of operation is vested in others, exercise all
reasonable efforts to require the operator to operate the Borrowing Base Oil and
Gas Properties and all wells drilled thereon and that may hereafter be drilled
thereon, continuously and in a prudent and workmanlike manner and in accordance
with all Laws of the state in which the Borrowing Base Oil and Gas Properties
are situated and the United States, as well as all rules, regulations, and Laws
of any Governmental Authority having jurisdiction to regulate the manner in
which the operation of the Borrowing Base Oil and Gas Properties shall be
carried on, and comply with all terms and conditions of the Leases it now holds,
and any assignment or contract obligating any Borrower or any other Loan Party
in any way with respect to the Borrowing Base Oil and Gas Properties, except for
any such non-compliance that would not have a Material Adverse Effect; but
nothing herein shall be construed to empower any Borrower to bind the
Administrative Agent or any Lender to any contract obligation, or render the
Administrative Agent or any Lender in any way responsible or liable for bills or
obligations incurred by any Borrower or any other Loan Party.
     6.19. Change of Purchasers of Production. Concurrently with the delivery of
(and as part of) the annual Compliance Certificate, and at any other time that
the Administrative Agent may reasonably request in writing, the Borrowers shall
notify the Administrative Agent in writing of the identity and address of each
Person who: (a) has purchased any of any Borrower’s or any other Loan Party’s
interests in oil and gas produced from the Borrowing Base Oil and Gas Properties
during the six calendar months preceding such anniversary of the Closing, and
(b) are considered by Borrowers or another Loan Party to
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be potential future purchasers of any Borrower’s or any other Loan Party’s
interest in oil and gas produced from the Borrowing Base Oil and Gas Properties.
     6.20. Fiscal Year. The Borrowers shall maintain its December 31 fiscal year
end.
     6.21. Liens on Oil and Gas Properties; Title Information. (a) At all times
have granted in favor of the Administrative Agent for the benefit of the Lenders
as security for the Obligations first priority perfected Liens on no less than
ninety percent (90%) of PV10 of the Proved Reserves that are attributable to the
Borrowing Base Oil and Gas Properties.
     (b) On or before the delivery to the Administrative Agent of each Reserve
Report required by Sections 2.02(c) and (d), the Borrowers will deliver (or have
previously delivered to the Administrative Agent) title information in form and
substance acceptable to the Administrative Agent comprising a minimum of eighty
percent (80%) of the PV10 (based on the most recent Borrowing Base evaluation by
the Administrative Agent) of the Proved Reserves that are attributable to those
Borrowing Base Oil and Gas Properties evaluated by such Reserve Report (it being
acknowledged that landman title reports on proved but undeveloped Oil and Gas
Properties shall be satisfactory to the Administrative Agent and Lenders for the
purpose of demonstrating the status of title to such Oil and Gas Properties).
     6.22. Capital Expenditures. The Borrowers shall make minimum Capital
Expenditures in the cumulative aggregate amount of (i) $5.0 million for the
six-month period ending December 31, 2010, (ii) $10.0 million for the nine-month
period ending March 31, 2011, (iii) $17.5 million for the twelve-month period
ending June 30, 2011, and (iv) $25.0 million for the fifteen-month period ending
September 30, 2011; provided however that if, in the time period described in
clause (i), the Borrowers (or any one or more of them) have not expended the
minimum aggregate Capital Expenditure amount required to be expended by
December 31, 2010, the Borrowers shall be entitled to an additional quarter to
expend such amount, as long as by the end of the quarter ended March 31, 2011,
$10.0 million in aggregate minimum Capital Expenditures has been expended. In
the event the Borrowers have not expended the minimum aggregate Capital
Expenditure amount required to be expended by March 31, 2011, June 30, 2011 or
September 30, 2011, the sole result shall be a reduction in the Borrowing Base
by an amount equal to the shortfall, and Borrowers’ failure to expend the
required minimum Capital Expenditures amount shall not constitute a Default or
an Event of Default under this Agreement.
ARTICLE VII.
NEGATIVE COVENANTS
     So long as any Lender shall have any Revolving Commitment hereunder, or any
Revolving Loan or other Obligations (other than contingent indemnity obligations
and obligations under Lender Hedging Agreements) shall remain unpaid or
unsatisfied, or any Letter of Credit shall remain outstanding (unless such
Letter of Credit has been Cash Collateralized), each of the Borrowers agrees
that it shall not, nor shall it permit any of its Subsidiaries (other than the
Excluded Subsidiaries) to, directly or indirectly:
     7.01. Liens. Create, incur, assume or suffer to exist, any Lien upon any of
its Borrowing Base Oil and Gas Properties, or any of its property, assets or
revenues, whether now owned or hereafter acquired, other than the following:
     (a) Liens pursuant to any Loan Document;
     (b) Liens existing on the Closing Date and listed on Schedule 7.01 to this
Agreement and any renewals or extensions thereof; provided that the property
covered thereby is not increased, the
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amount of the Indebtedness secured thereby is not increased, and any renewal or
extension of the obligations secured or benefited thereby is permitted under
this Agreement;
     (c) Liens for taxes, assessments, or other governmental charges or levies
not yet due or which are being contested in good faith and by appropriate
proceedings, if adequate reserves with respect thereto are maintained on the
books of the applicable Person in accordance with GAAP;
     (d) landlord’s, royalty owner’s, supplier’s, constructor’s, operator’s,
vendor’s, carriers’, warehousemen’s, mechanics’, materialmen’s, repairmen’s or
other like Liens arising in the ordinary course of business or which are
incident to the exploration, development, operation and maintenance of the
Borrowing Base Oil and Gas Properties or the Midstream Businesses not overdue
for a period of more than 30 days or which are being contested in good faith and
by appropriate proceedings, if adequate reserves with respect thereto are
maintained on the books of the applicable Person;
     (e) pledges or deposits in the ordinary course of business in connection
with workers’ compensation, unemployment insurance and other social security
legislation;
     (f) deposits to secure the performance of bids, trade contracts (other than
for borrowed money), leases, statutory obligations, surety and appeal bonds,
performance bonds and other obligations of a like nature, in each case incurred
in the ordinary course of business;
     (g) easements, rights-of-way, restrictions, servitudes, permits,
conditions, covenants, exception or reservations and other similar encumbrances,
defects, irregularities and deficiencies in title affecting real property which,
in the aggregate, are not substantial in amount, and which do not, taken as a
whole, materially detract from the value of the property subject thereto or
materially interfere with the ordinary conduct of the business of the applicable
Person;
     (h) judgment Liens not giving rise to an Event of Default;
     (i) any Lien existing on any asset (other than stock of a Subsidiary) prior
to acquisition thereof by the Borrowers or any of their respective Subsidiaries;
provided that (i) no such Lien shall be extended to cover property other than
the asset being acquired, and (ii) such Lien was not created in contemplation of
or in connection with such acquisition;
     (j) Liens securing Capital Lease obligations; provided that the
Indebtedness in respect of such Capital Lease obligations is permitted under
Section 7.04(f);
     (k) purchase money Liens upon or in any property acquired, constructed or
improved by any Borrower or any of its Subsidiaries (placed on such property at
the time of such acquisition or the completion of the construction or
improvement or within 90 days thereafter) to secure the deferred portion of the
purchase price of such property or to secure Indebtedness incurred to finance
the acquisition, construction or improvement of such property; provided that
(i) no such Lien shall be extended to cover property other than the property
being acquired, constructed or improved and (ii) the Indebtedness thereby
secured is permitted by Section 7.04(e);
     (l) Liens reserved in or exercisable under any lease or sublease to which
any Borrower or its Subsidiary is a lessee which secure the payment of rent or
compliance with the terms of such lease or sublease; provided, that the rent
under such lease or sublease is not then overdue and such Borrower or Subsidiary
is in material compliance with the terms and conditions thereof;
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     (m) any interest or title of a lessor under any lease entered into by any
Borrower or any Subsidiary in the ordinary course of its business and covering
only the assets so leased, and any interest of a landowner in the case of
easements entered into by any Borrower or any of its Subsidiaries in the
ordinary course of its business and covering only the property subject to the
easement;
     (n) Liens securing obligations (other than obligations representing
Indebtedness for borrowed money) under operating, reciprocal easement or similar
agreements entered into in the ordinary course of business of the Borrowers and
their respective Subsidiaries;
     (o) licenses of patents, trademarks and other intellectual property rights
granted by each Borrower or any of its Subsidiaries in the ordinary course of
business and not interfering in any material respect with the ordinary conduct
of the business of each such Borrower and its Subsidiaries;
     (p) Liens arising solely by virtue of any statutory or common law provision
relating to banker’s liens, rights of set-off or similar rights and remedies and
burdening only deposit accounts or other funds maintained with a creditor
depository institution;
     (q) Liens on any additions, improvements, replacements, repairs, fixtures,
appurtenances or component parts thereof attaching to or required to be attached
to property or assets pursuant to the terms of any mortgage, pledge agreement,
security agreement or other similar instrument, creating a Lien upon such
property or asset otherwise permitted under this Section;
     (r) Liens securing an obligation of a third party neither created, assumed
nor guaranteed by the Borrowers or any Subsidiary upon lands over which
easements or similar rights are acquired by the Borrowers or any Subsidiary in
the ordinary course of business of the Borrowers or any Subsidiary;
     (s) any Liens arising out of the refinancing, extension, renewal or
refunding of any Indebtedness secured by any Lien permitted by any of the
foregoing clauses of this Section, provided that such Indebtedness is not
increased except for increases in an amount equal to a reasonable premium or
other reasonable amount paid, and fees and expenses reasonably incurred, in
connection with such extension, renewal, refinancing, or replacement and in an
amount equal to any existing commitments unutilized thereunder, and is not
secured by any additional assets;
     (t) Liens arising solely by virtue of cash collateralizing letters of
credit issued by non-Lender financial institutions in an aggregate amount not to
exceed $4,000,000.
     (u) contractual Liens which 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 sale, purchase, transportation or exchange of oil or natural gas,
unitization and pooling declarations and agreements, area of mutual interest
agreements, royalty and 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;
     (v) Rights reserved to or vested in a Governmental Authority having
jurisdiction to control or regulate any Oil and Gas Property or other Collateral
in any manner whatsoever and all laws of such Governmental Authorities, so long
as the Borrowers and their respective Subsidiaries (other than the Excluded
Subsidiaries) are in compliance with all such laws, except for any
non-compliance that would not result in a Material Adverse Effect;
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     (w) consents to assignment and similar contractual provisions affecting an
Oil and Gas Property or other Collateral to the extent, and only to the extent,
such consents are not affected by or required for the execution, delivery,
performance and enforcement of any Loan Document;
     (x) preferential rights to purchase and similar contractual provisions
affecting an Oil and Gas Property or other Collateral to the extent, and only to
the extent, such consents are not affected by delivery of any Loan Document or,
if affected, have been waived;
     (y) all defects and irregularities affecting title to an Oil and Gas
Property or other Collateral that could not operate to reduce the net revenue
interest of any Borrower and its Subsidiaries for such Oil and Gas Property (if
any), increase the working interest of any Borrower and its Subsidiaries for
such Oil and Gas Property (if any) without a corresponding increase in the
corresponding net revenue interest, or otherwise interfere materially with the
operation, value or use of such Oil and Gas Property or other Collateral or
cause a Material Adverse Effect;
     (z) Liens securing the Secured Pipeline Loan for the benefit of KPC
Lenders;
     (aa) Liens incurred in the ordinary course of business in connection with
margin requirements (ii) under Swap Contracts not to exceed in the aggregate
$2,000,000 at any time outstanding; and (ii) under applicable Laws;
     (bb) Liens that KPC Pipeline, LLC and any of its Subsidiaries that may
hereafter be formed are permitted to grant under the credit agreement governing
the Secured Pipeline Loan; and
     (cc) Liens on the equity of Eastern granted by PESC for the benefit of
Royal Bank of Canada securing Royal Bank of Canada’s credit agreement with
Eastern.
     7.02. Investments. Make or own any Investments, except
     (a) Investments existing on the Closing Date and listed in Section (b) of
Schedule 5.13;
     (b) Cash Equivalents;
     (c) Investments constituting Indebtedness permitted under Section 7.04(b);
     (d) Investments (i) by any Borrower or any other Loan Party in Subsidiaries
formed to acquire Oil and Gas Properties or in connection with the Midstream
Businesses, and (ii) not exceeding $5,000,000 in the aggregate resulting from
any Borrower’s or any other Loan Party’s acquisition of equity or joint venture
interests in a Person primarily engaged in the ownership or development of Oil
and Gas Properties or in the Midstream Businesses;
     (e) Investments by any Borrower in another Borrower, Investments by any
Borrower and its Subsidiaries in any Subsidiary of such Borrower that, prior to
such Investment, is a Loan Party, and Investments by Subsidiaries in any
Borrower;
     (f) acquisitions by any Borrower or its Subsidiaries of Oil and Gas
Properties provided any such acquired Oil and Gas Properties are pledged to
secure, on a first lien basis, the Obligations, and on a junior, second and
subordinate lien basis, Indebtedness owing in connection with the Secured
Pipeline Loan;
     (g) Guarantees of Indebtedness permitted under Section 7.04;
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     (h) Swap Contracts permitted under Section 7.03;
     (i) Investments consisting of extensions of credit, including without
limitation, in the nature of accounts receivable, arising from the grant of
trade credit or prepayments or similar transactions entered into in the ordinary
course of business and investments by any Borrower or any of its Subsidiaries in
satisfaction or partial satisfaction thereof from financially troubled account
debtors to prevent or limit financial loss;
     (j) endorsements for collection or deposit in the ordinary course of
business;
     (k) Permitted Acquisitions by a Borrower or any of its Subsidiaries;
     (l) Investments not otherwise permitted by this Section 7.02 in an
aggregate amount not to exceed $5,000,000 at anytime outstanding;
     (m) Investments that KPC Pipeline, LLC and any of its Subsidiaries that may
hereafter be formed are permitted to make under the credit agreement governing
the Secured Pipeline Loan;
     (n) Investments funded entirely using proceeds from equity issued by
Parent, including Investments funded with proceeds of any White Deer Energy
Additional Investment; and
     (o) Investments consisting of loans by PESC to Eastern in an aggregate
amount not to exceed $3,000,000 at any one time outstanding to enable Eastern to
pay direct costs and expenses on its own behalf and to pay for general and
administrative expenses to be paid by PESC on Eastern’s behalf in accordance
with the G&A Formula; provided, such loan is governed by an intercompany
agreement and evidenced by bookkeeping entries; provided further, by its terms
such loan will be repaid before the repayment of any Indebtedness for borrowed
money owing by Eastern.
     7.03. Hedging Agreements. (a) Enter into any Swap Contracts other than in
the ordinary course of business for the purpose of protecting against
fluctuations in interest rates, commodity prices, or foreign exchange rates and
not for purposes of speculation; provided:
     (i) that, except as required under applicable Law, the Swap Contract shall
not contain any provision (a) exonerating the non-defaulting party from its
obligation to make payments on outstanding transactions to the defaulting party
other than pursuant to netting and setoff provisions based on standard
provisions in documentation promulgated by the International Swaps and
Derivatives Association or similar organization recognized as providing
standardized documentation for Swap Contracts; and (b) requiring any Company at
any time or under any circumstance to post any cash collateral or letter of
credit or grant a Lien on any collateral to secure any Company’s obligations
under such Swap Contract (except for Lender Hedging Agreements which shall be
secured by a pari passu Lien on the Collateral as provided in Section 2.13 but
which shall not be secured by any other or additional collateral) provided
however that in no event may any Approved Hedge Counterparty Swap Contract
require any Company at any time or under any circumstance to post any cash
collateral or letter of credit as long as this Agreement is in effect) provided
further however, that notwithstanding the foregoing, if the Swap Contracts in
question are cleared (directly or ultimately) through clearing corporations or
on an exchange, the foregoing shall not prohibit the posting of initial or
variance margins or other amounts, if required by Law, in order for the Company
to enter into Swaps Contracts of a nature that, in the business judgment of the
Company, represent an appropriate pricing and structure as among available
alternatives; provided, further however, a Company may not elect to clear
(directly or indirectly) through a clearing corporation or an
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exchange if an Event of Default has occurred and is continuing but if applicable
Law requires that a Company clear its Swap Contracts through a clearing
corporation or be exchanged traded and in connection therewith any margin is
required to be posted, the Company may do so in compliance with applicable Law.
     (ii) if the Swap Contract relates to Hydrocarbons, a Company enters into
such Swap Contract with or through a counterparty that has a credit rating of at
least “A-” by S&P or “A3” by Moody’s at the time that such Company enters into
such Swap Contract;
     (iii) such Swap Contracts relating to Hydrocarbons cover monthly notional
volumes of Hydrocarbons that do not exceed the greater of (i) ninety percent
(90%) of a Company’s forecasted oil and gas production for the next five years
for each of such Company’s crude oil and natural gas properties calculated
separately, from Proved Developed Producing Reserves, and (ii) eighty-five
percent (85%) of forecasted production for the next five years from total Proved
Reserves and seventy-five percent (75%) of forecasted production from total
Proved Reserves thereafter (such amounts computed on an annual basis and applied
to crude oil and natural gas properties calculated separately); provided that
the aggregate amount of all such Swap Contracts shall not exceed one hundred
percent (100%) of actual oil or gas production, calculated separately, in any
given month (or if as a result of a force majeure event the foregoing
limitations are breached, then in any given three consecutive month period); and
     (iv) that where only annual volumes are presented in the Reserve Report,
monthly volumes will be calculated by dividing the applicable volumes by the
number of months covered by the Reserve Report for the applicable year.
     7.04. Indebtedness. Create, incur, or assume any Indebtedness except:
     (a) Indebtedness incurred pursuant to the Loan Documents or existing on the
date hereof and disclosed on Schedule 7.04 attached hereto;
     (b) Indebtedness owed by a Borrower to another Borrower, by a Subsidiary of
a Borrower to a Borrower or to a Wholly-Owned Subsidiary (other than an Excluded
Subsidiary) of a Borrower, or by a Borrower to a Wholly-Owned Subsidiary (other
than an Excluded Subsidiary) of another Borrower; provided, that, in each such
case such Indebtedness is governed by an intercompany agreement and evidenced by
bookkeeping entries;
     (c) Indebtedness owing in connection with the Secured Pipeline Loan;
     (d) obligations (contingent or otherwise) of the Borrowers or any of their
respective Subsidiaries existing or arising under any Swap Contract to the
extent permitted by Section 7.03;
     (e) Indebtedness of the Borrowers and their respective Subsidiaries in
respect of purchase money obligations for fixed or capital assets within the
limitations set forth in Section 7.01(k); provided, however, that the aggregate
amount of such Indebtedness at any one time outstanding shall not exceed
$10,000,000;
     (f) Indebtedness of the Borrowers or any of their respective Subsidiaries
(other than any Excluded Subsidiary) in respect of Capital Lease obligations;
provided that, such Capital Lease obligations will not require the payment of an
aggregate amount in excess of $8,000,000 annually; and provided that any Capital
Lease obligation relating to compressors or compression equipment shall be
excluded from this subsection and dealt with in Section 7.05;
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     (g) Indebtedness consisting of surety bonds that the Borrowers or any of
their respective Subsidiaries is required to obtain in order to comply with
applicable Law or the requirements of any Governmental Authority;
     (h) Indebtedness secured by any Lien permitted under Section 7.01(i);
provided, however, that the aggregate amount of such Indebtedness at any one
time outstanding shall not exceed $10,000,000; and Indebtedness secured by any
other Lien permitted under Section 7.01; and
     (i) other Indebtedness of the Borrowers and their respective Subsidiaries
not to exceed $10,000,000 in the aggregate principal amount outstanding at any
time;
     (j) Indebtedness associated with bonds, surety obligations or sinking funds
required by any Governmental Authority or operators in connection with the
operation of Oil and Gas Properties or the Midstream Businesses; and
     (k) reimbursement obligations under letters of credit issued for any Loan
Party under this Agreement; and reimbursement obligations under letters of
credit issued for any Loan Party by third parties not to exceed $4,000,000 in
the aggregate amount outstanding at any one time; and
     (l) Indebtedness that KPC Pipeline, LLC and any of its Subsidiaries that
may hereafter be formed are permitted to incur under the credit agreement
governing the Secured Pipeline Loan;
provided, that if any Indebtedness is incurred pursuant to this Section 7.04,
immediately after such Indebtedness is created, incurred or assumed, no Default
or Event of Default shall exist.
     7.05. Lease Obligations. Create or suffer to exist any obligations for the
payment of rent for any property under operating leases or agreements to lease
(excluding leases of Oil and Gas Properties), except for (i) operating leases
(or Capital Lease obligations) for compressors and compression equipment and
services for which no dollar limitation shall be applicable; (ii) such other
non-compressor and non-compression equipment and services operating leases (or
Capital Lease obligations) having an annual aggregate payment amount not to
exceed $20,000,000 (excluding escalations resulting from a rise in the consumer
price or similar index), exclusive of expenses for maintenance, repairs,
insurance, taxes, assessments and similar changes, and (iii) other operating
leases (other than those constituting Synthetic Lease Obligations) entered into
or assumed by the Borrowers or any of their respective Subsidiaries prior to the
date hereof or after the date hereof in the ordinary course of business or
entered into or assumed in connection with any Permitted Acquisition provided
that, such other operating leases under this clause (iii) will not require the
payment of an aggregate amount of payments in excess of (excluding escalations
resulting from a rise in the consumer price or similar index) $4,000,000
annually, exclusive of expenses for maintenance, repairs, insurance, taxes,
assessments and similar changes.
     7.06. Fundamental Changes. Except in connection with the Restructure
Transactions and except with respect to KPC Pipeline, LLC any transaction
permitted under this same section of the credit agreement governing the Secured
Pipeline Loan, merge, dissolve, liquidate, or consolidate with or into, or
convey, transfer, lease or otherwise Dispose of (whether in one transaction or
in a series of related transactions) all or substantially all of its assets
(whether now owned or hereafter acquired) to or in favor of any Person; except
that, so long as no Default or Event of Default exists or would result
therefrom:
     (a) any Person (other than any Excluded Subsidiary, KPC Pipeline LLC or any
of its Subsidiaries) may merge, dissolve or liquidate into a Borrower; provided
that such Borrower is the surviving entity;
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     (b) any Subsidiary (other than any Excluded Subsidiary, KPC Pipeline LLC or
any of its Subsidiaries) may merge, dissolve or liquidate with (i) a Borrower;
provided that such Borrower shall be the continuing or surviving Person, or
(ii) any one or more Subsidiaries; provided that when any Wholly-Owned
Subsidiary is merging with another Subsidiary, a Wholly-Owned Subsidiary shall
be the continuing or surviving Person;
     (c) any Subsidiary (other than any Excluded Subsidiary, KPC Pipeline LLC or
any of its Subsidiaries) may sell all or substantially all of its assets (upon
voluntary liquidation or otherwise), to a Borrower or to another Subsidiary;
provided that if the seller in such a transaction is a Wholly-Owned Subsidiary,
then the purchaser must also be a Wholly-Owned Subsidiary;
     (d) any Person (other than any Excluded Subsidiary, KPC Pipeline LLC or any
of its Subsidiaries or a Borrower) may merge, dissolve or liquidate into any
Subsidiary; provided that such Subsidiary is the surviving entity;
     (e) any Dispositions permitted under Section 7.07; and
     (f) any liquidation or dissolution of STP in accordance with applicable
Law.
     7.07. Dispositions. Make any Disposition or enter into any agreement to
make any Disposition, except:
     (a) Dispositions by the Borrowers or any of their respective Subsidiaries
of (i) Hydrocarbons in the ordinary course of business for fair market value, or
(ii) other inventory in the ordinary course of business;
     (b) Dispositions of property by any Borrower to another Borrower, by any
Subsidiary (other than an Excluded Subsidiary) to a Borrower, or by any
Subsidiary (other than an Excluded Subsidiary) or by any Borrower, to a
Wholly-Owned Subsidiary that is a Guarantor;
     (c) Dispositions of equipment and other real and personal property
(including Oil and Gas Properties) for fair market value by any Borrower or any
Subsidiary to the extent that (i) such property is exchanged for credit against
the purchase price of similar replacement or exchanged property, or (ii) the Net
Available Cash of such Disposition is within 180 days Reinvested, and if any
portion of such Net Available Cash has not been Reinvested within 180 days from
the receipt by such Company of Net Available Cash (including receipt of any
deferred payments for any such Disposition, if and when received), then on the
Business Day following such 180th day, the Revolving Loans shall be prepaid, in
an amount equal to the portion of the Net Available Cash that is not so
Reinvested,
     (d) other Dispositions for fair market value; provided no Default or Event
of Default then exists or arises as a result thereof; and provided that if the
Disposition is for cash and a prepayment is required by Section 2.04(c), the
Borrowers shall make such prepayment in accordance with such Section;
     (e) Dispositions of the Marcellus Assets provided that the Borrowers shall
make the prepayment required under Section 2.04(d) in accordance with such
Section and Dispositions by Eastern to a Borrower of the Marcellus Gathering
System;
     (f) Dispositions of the KPC Pipeline in accordance with the terms of the
Secured Pipeline Loan;
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     (g) Dispositions of property that is no longer commercially viable to
maintain or is obsolete, surplus or worn-out property;
     (h) Dispositions permitted under Section 7.06;
     (i) any Disposition made as part of the Restructure Transactions;
     (j) Disposition by PESC of its membership interests in Eastern;
     (k) Disposition by PESC of its membership interests in KPC Pipeline, LLC in
accordance with the terms of the credit agreement governing the Secured Pipeline
Loan,
     (l) Disposition by MidContinent of its equity interests in STP; and
     (m) Dispositions that KPC Pipeline, LLC and any of its Subsidiaries that
may hereafter be formed are permitted to make under the credit agreement
governing the Secured Pipeline Loan.
     7.08. Transfer Payments; Restricted Payments; Distributions and
Redemptions. Declare or make, directly or indirectly, any Restricted Payment or
Transfer Payment, or incur any obligation (contingent or otherwise) to do so,
except that:
     (a) each Subsidiary may make Transfer Payments and Restricted Payments to
the Borrowers; and to Wholly-Owned Subsidiaries of the Borrowers (other than
Excluded Subsidiaries);
     (b) each Borrower and its Subsidiaries may make Transfer Payments and
Restricted Payments to PESC (or through a parent to PESC) of direct costs and
expenses to be paid by PESC on its behalf and PESC may make Transfer Payments to
its Subsidiaries (other than Excluded Subsidiaries) to enable such Subsidiaries
to pay direct costs and expenses on their own behalf; provided, however, PESC
may make Transfer Payments and Restricted Payments to Eastern in the form of a
loan to pay direct costs and expenses incurred by Eastern subject to the
limitations set forth in Section 7.02(o);
     (c) each Borrower and its Subsidiaries may make Transfer Payments and
Restricted Payments to PESC (or through a parent to PESC) for general and
administrative expenses allocated to it in any particular period in accordance
with the G&A Formula; and PESC may make Transfer Payments and Restricted
Payments to its Subsidiaries (other than Excluded Subsidiaries) for general and
administrative expenses to be paid by such Subsidiary or may pay such general
and administrative expenses of such Subsidiary on such Subsidiary’s behalf in
accordance with the G&A Formula; provided, however, PESC may make Transfer
Payments and Restricted Payments to Eastern in the form of a loan to pay general
and administrative expenses of Eastern on Eastern’s behalf in accordance with
the G&A Formula subject to the limitations set forth in Section 7.02(o);
     (d) each Borrower and its Subsidiaries may make Transfer Payments and
Restricted Payments to PESC (or through a parent to PESC) to fund drilling
expenses of Eastern and expenses to keep lease rights owned by Eastern from
expiring, in an aggregate amount for all such expenses not to exceed $5,000,000,
and PESC may make Transfer Payments to Eastern in such aggregate amount;
provided, however any such Transfer Payments and/or Restricted Payments are
funded using only proceeds of any White Deer Energy Additional Investment;
     (e) each Borrower and its Subsidiaries may make Transfer Payments and
Restricted Payments to PESC (or through a parent to PESC) in an amount equal to
its consolidated income tax
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liability (with the method of allocation of income tax obligations to be
reasonably acceptable to the Lenders);
     (f) MidContinent may make Transfer Payments and Restricted Payments to
PESC, and PESC may make Transfer Payments and Restricted Payments to KPC
Pipeline, LLC, in the aggregate amount equal to the principal and interest
required to be paid during any period by KPC Pipeline, LLC under the Secured
Pipeline Loan;
     (g) MidContinent may make Transfer Payments and Restricted Payments to
PESC, and PESC may make Transfer Payments and Restricted Payments to Eastern in
the aggregate equal to the amount of principal and interest required to be paid
during any period by Eastern under the Amended QRC Facility; provided, however
any such Transfer Payments and/or Restricted Payments are funded using only
proceeds of any White Deer Energy Additional Investment;
     (h) Borrowers and their Subsidiaries may make Transfer Payments and
Restricted Payments to PESC, and PESC may make Transfer Payments and Restricted
Payments to Eastern or Parent, not to exceed $7,500,000 in the aggregate, in
connection with, and to the extent that, the Asset Sale Agreement, of even date
herewith, between RBC, Eastern, and Parent, relating to the Amended QRC
Facility, requires a payment to RBC as a result of the sale price for the sale
of the non-producing Marcellus assets owned by Eastern or of the equity of
Eastern; provided, however any such Transfer Payments and/or Restricted Payments
are funded using only proceeds of any White Deer Energy Additional Investment;
     (i) MidContinent and any of its Subsidiaries may make payments to Eastern
as operator of the Marcellus Assets, pursuant to that certain gas gathering
agreement between MidContinent (f/k/a Quest Cherokee) and Eastern relating to
gas gathering in the Appalachian region; and
     (j) KPC Pipeline, LLC and any of its Subsidiaries that may hereafter be
formed may make Transfer Payments and Restricted Payments to the extent
permitted under the credit agreement governing the Secured Pipeline Loan.
     7.09. ERISA. At any time engage in a transaction which could be subject to
Section 4069 or 4212(c) of ERISA, or knowingly permit any Plan maintained by a
Company to: (a) engage in any non-exempt "prohibited transaction” (as defined in
Section 4975 of the Code); (b) fail to comply with ERISA or any other applicable
Laws except as disclosed on Schedule 5.12; or (c) incur any material
"accumulated funding deficiency” (as defined in Section 302 of ERISA), which,
with respect to each event listed above, could be reasonably expected to have a
Material Adverse Effect or except to the extent disclosed on Schedule 5.12.
     7.10. Nature of Business; Risk Management. Engage in any line of business
other than exploration, production and marketing of Hydrocarbons and related
activities and the Midstream Businesses or make any capital expenditures or
Permitted Acquisitions permitted by Section 7.02, except in connection
therewith. Without the written approval of the Administrative Agent, the
Borrowers shall not materially change their risk management policy.
     7.11. Transactions with Affiliates(a) . Sell, lease or otherwise transfer
any property or assets to, or purchase, lease or otherwise acquire any property
or assets from, or otherwise engage in any other transactions with, any of its
Affiliates, except (i) transactions between or among the Borrowers or between
the Borrowers and their Wholly-Owned Subsidiaries (other than the Excluded
Subsidiaries) not involving any other Affiliate; (ii) any Investment permitted
under Section 7.02; (iii) any transaction involving Indebtedness permitted under
Section 7.04; (iii) any transactions permitted under Section 7.06; (iv) any
Dispositions permitted under Section 7.07; (v) any Transfer Payment, Restricted
Payment,
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distribution or dividend permitted under Section 7.08; (vi) the transactions
under the agreements listed on Schedule 7.11; (vii) the transaction involving
the Lien on the equity of Eastern granted by PESC for the benefit of Royal Bank
of Canada under a credit agreement with Eastern; (viii) in the ordinary course
of business at prices and on terms and conditions not less favorable to the
Borrowers or their respective Subsidiaries, as applicable, than could be
obtained on an arm’s length basis from unrelated third parties; and
(ix) transactions pursuant to the Material Agreements.
     7.12. Burdensome Agreements. Enter into any Contractual Obligation that
limits the ability of any Subsidiary to make Restricted Payments to a Borrower
or to otherwise transfer property to a Borrower; provided that (i) the foregoing
shall not apply to restrictions and conditions imposed by applicable Law or by
this Agreement, (ii) the foregoing shall not apply to customary restrictions and
conditions contained in agreements relating to the sale of a Subsidiary pending
such sale, provided such restrictions and conditions apply only to the
Subsidiary that is to be sold and such sale is permitted hereunder, and
(iii) the foregoing shall not apply to restrictions and conditions contained in
the documentation evidencing any Indebtedness permitted hereunder.
Notwithstanding the foregoing, (i) documents governing a Capitalized Lease or a
purchase money Lien permitted by Sections 7.01(j) and (k) may prohibit other
Liens on the asset encumbered by such Lien.
     7.13. Use of Proceeds. Use the proceeds of any Revolving Loan for purposes
other than those permitted by Section 6.12, or use the proceeds of any Revolving
Loan, whether directly or indirectly, and whether immediately, incidentally or
ultimately, to purchase or carry margin stock (within the meaning of
Regulation U of the Board) or to extend credit to others for the purpose of
purchasing or carrying margin stock or to refund indebtedness originally
incurred for such purpose.
     7.14. Material Agreements. Permit, except for amendments or assignments
made to accommodate, permit, or otherwise made in connection with, the
Restructure Transactions (including the White Deer Energy Investment), (a) any
amendment to any Organization Document of any Borrower or any Material Agreement
if such amendment could reasonably be expected to (y) have a Material Adverse
Effect on the ability of any Borrower or any Guarantor to perform its
obligations under the Loan Documents to which it is a party or (z) otherwise
materially adversely affect the Lenders, or (b) any assignment of any Material
Agreement if such assignment could reasonably be expected to materially
adversely affect the Lenders or have a Material Adverse Effect on the ability of
any Borrower or any other Loan Party to perform its obligations under the Loan
Documents to which it is a party.
     7.15. Pooling or Unitization. Voluntarily pool or unitize all or any part
of the Borrowing Base Oil and Gas Properties where the pooling or unitization
would result in any material diminution of any Borrower’s or any other Loan
Party’s net revenue interest in production from the pooled or unitized lands,
without the Required Lenders’ prior consent, which will not be unreasonably
withheld. Any unitization, pooling or communitization or other action or
instrument in violation of this Section 7.15 shall be of no force or effect
against any Lender.
     7.16. Financial Covenants. For purposes of determining compliance with the
financial covenants contained in this Agreement any election by the Borrowers to
measure an item of Indebtedness using fair value (as permitted by Statement of
Financial Accounting Standards No. 159 or any similar accounting standard) shall
be disregarded and such determination shall be made as if such election had not
been made.
     (a) Current Ratio. Permit the ratio (calculated based on the Compliance
Certificate most recently delivered pursuant to Section 6.02(a)) of the
Borrowers’ consolidated current assets (including the unused amount of the
Borrowing Base, but excluding non-cash assets under FAS 133) to consolidated
current liabilities (excluding non-cash obligations under FAS 133, asset and
asset retirement obligations
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and current maturities of Indebtedness under this Agreement and the Secured
Pipeline Loan Agreement) at any fiscal quarter-end, commencing with the
quarter-ended September 30, 2010, to be less than or equal to 1.0 to 1.0;
provided, however, that for purposes of this covenant, current assets and
current liabilities shall exclude mark-to-market values of Swap Contracts, to
the extent such values are included in current assets and current liabilities.
     (b) Interest Coverage Ratio. Permit the Interest Coverage Ratio at any
fiscal quarter-end to be less than or equal to 3.0 to 1.0.
     (c) Leverage Ratio. Permit the Leverage Ratio at any fiscal quarter-end
(i) commencing with the quarter ending September 30, 2010 and ending on the
quarter ending March 31, 2011, to be greater than or equal to 4.5 to 1.0;
(ii) commencing with the quarter-ending June 30, 2011 and ending with the
quarter ending March 31, 2012, to be greater than or equal to 4.0 to 1.0; and
(iii) commencing with the quarter-ending June 30, 2012 and continuing until the
Maturity Date, to be greater than or equal to 3.5 to 1.0.
     (d) Adjustments for Material Dispositions. For the purposes of calculating
Adjusted Consolidated EBITDA for any period of four consecutive fiscal quarters
(each, a “Reference Period”) pursuant to any determination of the covenants set
forth in this Section 7.16 (which calculation shall, in all respects, be
acceptable to, and approved by the Administrative Agent), if at any time after
the first day of such Reference Period any Borrower or its consolidated
Subsidiary (other than the Excluded Subsidiaries) shall have made any Material
Disposition, the Adjusted Consolidated EBITDA for such Reference Period shall be
reduced by an amount equal to the Adjusted Consolidated EBITDA (if positive)
attributable to the Oil and Gas Property or other Collateral that is the subject
of such Material Disposition for such Reference Period. Except as otherwise
indicated, the ratios set out above shall be calculated at the end of each
reporting period for which this Agreement requires Borrowers to deliver
financial statements pursuant to Sections 6.01(a) and (b), using the results of
the twelve-month period ending with that reporting period.
     (e) Adjustments for Permitted Acquisitions and Material Acquisitions. For
purposes of determining compliance with Sections 7.16(b) and (c)):
     (i) Adjusted Consolidated EBITDA shall be calculated after giving effect,
on a pro forma basis (in a manner reasonably acceptable to the Administrative
Agent) for the four consecutive fiscal quarters most recently completed, to any
Permitted Acquisition or Material Acquisition occurring during such period, as
if such Permitted Acquisition or Material Acquisition occurred on the first day
of such period.
     (ii) If, in connection with a Permitted Acquisition or a Material
Acquisition, any Indebtedness is incurred or assumed by a Company, then
Consolidated Interest Charges shall be calculated, on a pro forma basis (in a
manner reasonably acceptable to the Administrative Agent) for the four quarters
most recently completed, as if such Indebtedness had been incurred on the first
day of such period.
ARTICLE VIII.
EVENTS OF DEFAULT AND REMEDIES
     8.01. Events of Default. Any of the following shall constitute an Event of
Default:
     (a) Non-Payment. The Borrowers fail to pay (i) when and as required to be
paid herein, any amount of principal of any Revolving Loan or any L/C Obligation
or (ii) within three Business Days after
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the same becomes due, any interest on any Revolving Loan, any L/C Obligation,
any commitment or other fee due hereunder, or any other amount payable hereunder
or under any other Loan Document; or
     (b) Specific Covenants. The Borrowers fail to perform or observe any term,
covenant or agreement contained in any of Section 6.03(a), 6.05 (with respect to
the respective Borrower’s existence), 6.12, or Article VII; or
     (c) Other Defaults. Any Loan Party fails to perform or observe any other
covenant or agreement (not specified in subsection (a) or (b) above) contained
in any Loan Document on its part to be performed or observed and such failure
continues for 30 days after the date notice has been given to the Borrowers by
the Administrative Agent or the Required Lenders; or
     (d) Representations and Warranties. Any representation or warranty made or
deemed made by the Borrowers or any other Loan Party herein, in any other Loan
Document, or in any document delivered in connection herewith or therewith
proves to have been incorrect in any material respect when made or deemed made;
or
     (e) Cross-Default. (i) The Borrowers or any Borrower Affiliate or, solely
as regards a default under the Secured Pipeline Loan, KPC Pipeline, LLC
(A) fails to make any payment when due (whether by scheduled maturity, required
prepayment, acceleration, demand, or otherwise) in respect of any Indebtedness
or Guaranty Obligation in respect of Indebtedness (other than Indebtedness under
Swap Contracts) under the Secured Pipeline Loan or having an aggregate principal
amount (or, in the case of a Capitalized Lease or a Synthetic Lease Obligation,
Attributable Indebtedness) (including undrawn or available amounts and including
amounts owing to all creditors under any combined or syndicated credit
arrangement) of more than (individually or collectively) $5,000,000, or
(B) fails to observe or perform any other agreement or condition relating to any
such Indebtedness or Guaranty Obligation in respect of Indebtedness or contained
in any instrument or agreement evidencing, securing or relating thereto, or any
other event occurs, the effect of which default or other event is to cause, or
to permit the holder or holders of such Indebtedness, the lessor under such
Synthetic Lease Obligation or the beneficiary or beneficiaries of such Guaranty
Obligation (or a trustee or agent on behalf of such holder or holders or
beneficiary or beneficiaries) to cause, with the giving of notice if required,
such Indebtedness to be demanded or to become due or to be repurchased or
redeemed (automatically or otherwise) prior to its stated maturity, or such
Guaranty Obligation to become payable or cash collateral in respect thereof to
be demanded; provided that this clause (e)(i)(B) shall not apply to secured
Indebtedness that becomes due as a result of the voluntary sale or transfer of
the property or assets securing such Indebtedness; or (ii) (A) there occurs
under any Swap Contract an Early Termination Date (as defined in such Swap
Contract) resulting from any event of default under such Swap Contract as to
which a Borrower or any Borrower Affiliate is the Defaulting Party (as defined
in such Swap Contract) and the Swap Termination Value owed by a Borrower or any
Borrower Affiliate as a result thereof is greater than (individually or
collectively) $5,000,000, or (B) there occurs under any Swap Contract an Early
Termination Date (as defined in such Swap Contract) resulting from any
Termination Event (as so defined) under such Swap Contract as to which a
Borrower or any Borrower Affiliate is an Affected Party (as so defined) and the
Early Termination Amount owed by a Borrower and Borrower Affiliate as a result
thereof is greater than (individually or collectively) $5,000,000 and such
amount is not paid when due under such Swap Contract; or
     (f) Insolvency Proceedings, Etc. (i) A Borrower or any Borrower Affiliate
institutes or consents to the institution of any proceeding under any Debtor
Relief Law, or makes an assignment for the benefit of creditors; or applies for
or consents to the appointment of any receiver, trustee, custodian, conservator,
liquidator, rehabilitator or similar officer for it or for all or any material
part of its property or takes any action to effect any of the foregoing; or
(ii) any receiver, trustee, custodian, conservator,
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liquidator, rehabilitator or similar officer is appointed without the
application or consent of such Person and the appointment continues undischarged
or unstayed for 60 calendar days; or (iii) any proceeding under any Debtor
Relief Law relating to any such Person or to all or any part of its property is
instituted without the consent of such Person and continues undismissed or
unstayed for 60 calendar days, or an order for relief is entered in any such
proceeding; or
     (g) Inability to Pay Debts; Attachment. (i) A Borrower or any Borrower
Affiliate becomes unable or admits in writing its inability or fails generally
to pay its debts as they become due, or (ii) any writ or warrant of attachment
or execution or similar process is issued or levied against property which is a
material part of the property of the Borrowers and their Subsidiaries (other
than the Excluded Subsidiaries) taken as a whole, and is not released, vacated
or fully bonded within 45 days after its issue or levy; or
     (h) Judgments. There is entered against a Borrower or any Borrower
Affiliate (i) a final non-appealable judgment or order for the payment of money
in an aggregate amount exceeding (individually or collectively) $5,000,000 (to
the extent not covered by third-party insurance as to which the insurer does not
dispute coverage), or (ii) any non-monetary final non-appealable judgment that
has or could reasonably be expected to have a Material Adverse Effect and, in
either case, (A) enforcement proceedings are commenced by any creditor upon such
judgment or order and is not released, vacated or fully bonded within 60 days
after its attachment or levy; or (B) there is a period of 60 consecutive days
during which a stay of enforcement of such judgment, by reason of a pending
appeal or otherwise, is not in effect; or
     (i) ERISA. (i) If a Borrower, any Borrower Affiliate or any of their ERISA
Affiliates maintains any Pension Plan or any Multiemployer Plan, an ERISA Event
occurs with respect to a Pension Plan or Multiemployer Plan which has resulted
or could reasonably be expected to result in liability of a Borrower or any
Borrower Affiliate under Title IV of ERISA to the Pension Plan, Multiemployer
Plan or the PBGC in an aggregate amount in excess of $1,000,000, or (ii) if
there is any Multiemployer Plan, a Borrower, any Borrower Affiliate or any ERISA
Affiliate thereof fails to pay when due, after the expiration of any applicable
grace period, any installment payment with respect to its withdrawal liability
under Section 4201 of ERISA under a Multiemployer Plan in an aggregate amount in
excess of $1,000,000; or
     (j) Invalidity of Loan Documents. Any Loan Document, at any time after its
execution and delivery and for any reason other than the agreement of the
Required Lenders or termination of all Revolving Commitments and satisfaction in
full of all the Obligations, ceases to be in full force and effect, or is
declared by a court of competent jurisdiction to be null and void, invalid or
unenforceable in any material respect; or any Loan Party denies that it has any
or further liability or obligation under any Loan Document, or purports to
revoke, terminate or rescind any Loan Document; provided, however, that the
foregoing shall not apply to the Guaranty and other Collateral Documents of any
Subsidiary that is Disposed of by a Borrower in accordance with the provisions
of this Agreement; or
     (k) Change of Control. There occurs any Change of Control; or
     (l) Dissolution. A Borrower or any Borrower Affiliate shall dissolve,
liquidate, or otherwise terminate its existence, except as permitted in
Section 7.06; or
     (m) Collateral; Impairment of Security, etc. (i) Any provision of any Loan
Document shall for any reason cease to be valid and binding on or enforceable
against a Loan Party or any Loan Party shall so state in writing or bring an
action to limit its obligations or liabilities thereunder; or (ii) any
Collateral Document shall for any reason (other than pursuant to the terms
thereof) cease to create a valid
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security interest in the Collateral purported to be covered thereby or such
security interest shall for any reason (other than as permitted herein or in any
Collateral Document and except as to the second Lien for the benefit of the
Lenders on the KPC Pipeline) cease to be a perfected and first priority security
interest subject to Permitted Liens; provided, however, that the foregoing shall
not apply to the Guaranty and other Collateral Documents of any Subsidiary that
is Disposed of by the Borrowers in accordance with the provisions of this
Agreement; or
     (n) Borrowing Base Deficiency. If any Borrowing Base Deficiency continues
to exist beyond the applicable time periods permissible under Section 2.04 .
     8.02. Remedies Upon Event of Default. If any Event of Default occurs and is
continuing, the Administrative Agent shall, at the request of, or may, with the
consent of, the Required Lenders:
     (a) declare the Revolving Commitment of each Lender to make Revolving Loans
and any obligation of the L/C Issuer to make L/C Credit Extensions to be
terminated, whereupon such Revolving Commitments and obligations shall be
terminated;
     (b) declare the unpaid principal amount of all outstanding Revolving Loans,
all interest accrued and unpaid thereon, and all other amounts owing or payable
hereunder or under any other Loan Document to be immediately due and payable,
without presentment, demand, protest, notice of intent to accelerate, notice of
acceleration or other notice of any kind, all of which are hereby expressly
waived by the Borrowers;
     (c) declare that an amount equal to the then Outstanding Amount of all L/C
Obligations be immediately due and payable by the Borrowers, without
presentment, demand, protest, notice of intent to accelerate, notice of
acceleration or other notice of any kind, all of which are hereby expressly
waived by the Borrowers, and require that the Borrowers deliver such payments to
the Administrative Agent to Cash Collateralize the L/C Obligations (in an amount
equal to the then Outstanding Amount thereof); and
     (d) exercise on behalf of itself and the Lenders all rights and remedies
available to it and the Lenders under the Loan Documents or applicable Law;
provided, however, that upon the occurrence of any event specified in subsection
(f) of Section 8.01, the obligation of each Lender to make Revolving Loans and
any obligation of the L/C Issuer to make L/C Credit Extensions shall
automatically terminate, the unpaid principal amount of all outstanding
Revolving Loans and all interest and other amounts as aforesaid shall
automatically become due and payable, and an amount equal to the then
Outstanding Amount of all L/C Obligations shall be deemed to be forthwith due
and owing by the Borrowers to the L/C Issuer and the Lenders as of the date of
such occurrence and the Borrowers’ obligation to pay such amounts shall be
absolute and unconditional, without regard to whether any beneficiary of any
such Letter of Credit has attempted to draw down all or a portion of such amount
under the terms of a Letter of Credit and, to the fullest extent permitted by
applicable Law, shall not be subject to any defense or be affected by a right of
set-off, counterclaim or recoupment which the Borrowers may now or hereafter
have against any such beneficiary, the L/C Issuer, the Administrative Agent, the
Lenders or any other Person for any reason whatsoever. Such payments shall be
delivered to and held by the Administrative Agent as cash collateral securing
the L/C Obligations.
     8.03. Application of Funds. After the exercise of remedies provided for in
Section 8.02 (or after the Revolving Loans have automatically become immediately
due and payable and the L/C Obligations have automatically been required to be
Cash Collateralized as set forth in the proviso to Section 8.02), any amounts
received on account of the Obligations shall be applied by the Administrative
Agent as set forth in Section 2.11(d).
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ARTICLE IX.
ADMINISTRATIVE AGENT
     9.01. Appointment and Authorization of Agents; Lender Hedging Agreements.
(a) Each Lender hereby irrevocably (subject to Section 9.10) appoints,
designates and authorizes the Administrative Agent to take such action on its
behalf under the provisions of this Agreement and each other Loan Document and
to exercise such powers and perform such duties as are expressly delegated to it
by the terms of this Agreement or any other Loan Document, together with such
powers as are reasonably incidental thereto. Notwithstanding any provision to
the contrary contained elsewhere herein or in any other Loan Document, the
Administrative Agent shall not have any duties or responsibilities, except those
expressly set forth herein, nor shall the Administrative Agent have or be deemed
to have any fiduciary relationship with any Lender or Participant, and no
implied covenants, functions, responsibilities, duties, obligations or
liabilities shall be read into this Agreement or any other Loan Document or
otherwise exist against the Administrative Agent. Without limiting the
generality of the foregoing sentence, the use of the term “agent” herein and in
the other Loan Documents with reference to the Administrative Agent or
Collateral Agent is not intended to connote any fiduciary or other implied (or
express) obligations arising under agency doctrine of any applicable Law.
Instead, such term is used merely as a matter of market custom, and is intended
to create or reflect only an administrative relationship between independent
contracting parties.
     (b) The L/C Issuer shall act on behalf of the Lenders with respect to any
Letters of Credit issued by it and the documents associated therewith until such
time (and except for so long) as the Administrative Agent may agree at the
request of the Required Lenders to act for the L/C Issuer with respect thereto;
provided, however, that the L/C Issuer shall have all of the benefits and
immunities (i) provided to the Administrative Agent in this Article IX with
respect to any acts taken or omissions suffered by the L/C Issuer in connection
with Letters of Credit issued by it or proposed to be issued by it and the
application and agreements for letters of credit pertaining to the Letters of
Credit as fully as if the term “Administrative Agent” as used in this Article IX
included the L/C Issuer with respect to such acts or omissions, and (ii) as
additionally provided herein with respect to the L/C Issuer.
     (c) To the extent any Lender or any Affiliate of a Lender is a party to a
Lender Hedging Agreement and accepts the benefits of the Liens in the Collateral
arising pursuant to the Collateral Documents, such Lender (for itself and on
behalf of any such Affiliates) shall be deemed (i) to appoint the Administrative
Agent and Collateral Agent, as its nominee and agent, to act for and on behalf
of such Lender or Affiliate thereof in connection with the Collateral Documents
and (ii) to be bound by the terms of this Article IX.
     9.02. Delegation of Duties. The Administrative Agent may execute any of its
duties under this Agreement or any other Loan Document by or through agents
(including the Collateral Agent), employees or attorneys-in-fact and shall be
entitled to advice of counsel and other consultants or experts concerning all
matters pertaining to such duties. Neither the Administrative Agent nor
Collateral Agent shall be responsible for the negligence or misconduct of any
agent or attorney-in-fact that it selects in the absence of gross negligence or
willful misconduct.
     9.03. Default; Collateral. (a) Upon the occurrence and continuance of a
Default or Event of Default, the Lenders agree to promptly confer in order that
Required Lenders or the Lenders, as the case may be, may agree upon a course of
action for the enforcement of the rights of the Lenders; and the Administrative
Agent shall be entitled to refrain from taking any action (without incurring any
liability to any Person for so refraining) unless and until the Administrative
Agent shall have received instructions from Required Lenders. All rights of
action under the Loan Documents and all right to the Collateral, if any,
hereunder may be enforced by the Administrative Agent (or Collateral Agent) and
any suit or
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proceeding instituted by the Administrative Agent (or Collateral Agent) in
furtherance of such enforcement shall be brought in its name as the
Administrative Agent (or Collateral Agent) without the necessity of joining as
plaintiffs or defendants any other Lender, and the recovery of any judgment
shall be for the benefit of the Lenders (and, with respect to Lender Hedging
Agreements, Affiliates, if applicable) subject to the expenses of the
Administrative Agent and Collateral Agent. In actions with respect to any
property of the Borrowers or any other Obligor, the Administrative Agent (and
the Collateral Agent) is acting for the ratable benefit of each Lender (and,
with respect to Lender Hedging Agreement, Affiliates, if applicable). Any and
all agreements to subordinate (whether made heretofore or hereafter) other
indebtedness or obligations of Borrowers to the Obligations shall be construed
as being for the ratable benefit of each Lender (and, with respect to Lender
Hedging Agreement, Affiliates, if applicable).
     (b) Each Lender authorizes and directs the Administrative Agent and the
Collateral Agent to enter into the Collateral Documents on behalf of and for the
benefit of the Lenders (and, with respect to Lender Hedging Agreements,
Affiliates, if applicable)(or if previously entered into, hereby ratifies the
Administrative Agent’s and Collateral Agent’s previously entering into such
agreements and Collateral Documents).
     (c) Except to the extent unanimity (or other percentage set forth in
Section 10.01) is required hereunder, each Lender agrees that any action taken
by the Required Lenders in accordance with the provisions of the Loan Documents,
and the exercise by the Required Lenders of the power set forth herein or
therein, together with such other powers as are reasonably incidental thereto,
shall be authorized and binding upon all of the Lenders.
     (d) The Administrative Agent and Collateral Agent are each hereby
authorized on behalf of the Lenders, without the necessity of any notice to or
further consent from any Lender, from time to time to take any action with
respect to any Collateral or Collateral Documents which may be necessary to
perfect and maintain perfected the Liens upon the Collateral granted pursuant to
the Collateral Documents.
     (e) Neither the Administrative Agent nor the Collateral Agent shall have
any obligation whatsoever to any Lender or to any other Person to assure that
the Collateral exists or is owned by any Obligor or is cared for, protected, or
insured or has been encumbered or that the Liens granted to the Administrative
Agent and/or Collateral Agent herein or pursuant thereto have been properly or
sufficiently or lawfully created, perfected, protected, or enforced, or are
entitled to any particular priority, or to exercise at all or in any particular
manner or under any duty of care, disclosure, or fidelity, or to continue
exercising, any of the Rights granted or available to the Administrative Agent
or Collateral Agent in this Section 9.03 or in any of the Collateral Documents;
it being understood and agreed that in respect of the Collateral, or any act,
omission, or event related thereto, the Administrative Agent may act in any
manner it may deem appropriate, in its sole discretion, given the Administrative
Agent’s own interest in the Collateral as one of the Lenders and that the
Administrative Agent shall have no duty or liability whatsoever to any Lender,
other than to act without gross negligence or willful misconduct and the same
shall apply to the Collateral Agent so long as the Administrative Agent is also
the Collateral Agent.
     (f) The Lenders hereby irrevocably authorize the Administrative Agent
and/or Collateral Agent, at its option and in its discretion, to release any
Lien granted to or held by the Administrative Agent or Collateral Agent upon any
Collateral: (i) constituting property in which no Obligor owned an interest at
the time the Lien was granted or at any time thereafter; (ii) constituting
property leased or granted to an Obligor under a lease, easement or right-of-way
which has expired or been terminated in a transaction permitted under the Loan
Documents or is about to expire and which has not been, and is not
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intended by such Obligor to be, renewed; and (iii) consisting of an instrument
evidencing Indebtedness pledged to the Administrative Agent or Collateral Agent
(for the benefit of the Lenders), if the Indebtedness evidenced thereby has been
paid in full. In addition, the Lenders irrevocably authorize the Administrative
Agent and Collateral Agent to release Liens upon Collateral as contemplated in
Section 10.01(c) or (d), or if approved, authorized, or ratified in writing by
the requisite Lenders. Upon request by the Administrative Agent (or Collateral
Agent) at any time, the Lenders will confirm in writing the Administrative
Agent’s (or Collateral Agent’s) authority to release particular types or items
of Collateral pursuant to this Section 9.03.
     (g) In furtherance of the authorizations set forth in this Section 9.03,
each Lender hereby irrevocably appoints the Administrative Agent and Collateral
Agent its attorney-in-fact, with full power of substitution, for and on behalf
of and in the name of each such Lender (i) to enter into Collateral Documents
(including, without limitation, any appointments of substitute trustees under
any Collateral Documents and any appointment of a collateral agent under the
Intercreditor Agreement), (ii) to take action with respect to the Collateral and
Collateral Documents to perfect, maintain, and preserve Lenders’ Liens, and
(iii) to execute instruments of release or to take other action necessary to
release Liens upon any Collateral to the extent authorized in paragraph (f)
hereof. This power of attorney shall be liberally, not restrictively, construed
so as to give the greatest latitude to the Administrative Agent’s and the
Collateral Agent’s power, as attorney, relative to the Collateral matters
described in this Section 9.03. The powers and authorities herein conferred on
the Administrative Agent and Collateral Agent may be exercised by the
Administrative Agent or Collateral Agent through any Person who, at the time of
the execution of a particular instrument, is an officer of the Administrative
Agent or Collateral Agent (or any Person acting on behalf of the Administrative
Agent or Collateral Agent pursuant to a valid power of attorney). The power of
attorney conferred by this Section 9.03(g) to the Administrative Agent and
Collateral Agent is granted for valuable consideration and is coupled with an
interest and is irrevocable so long as the Obligations, or any part thereof,
shall remain unpaid or the Lenders have any Revolving Commitment hereunder.
     9.04. Liability of Agents. No Agent-Related Person shall (a) be liable for
any action taken or omitted to be taken by any of them under or in connection
with this Agreement or any other Loan Document or the transactions contemplated
hereby (except for its own gross negligence or willful misconduct in connection
with its duties expressly set forth herein), or (b) be responsible in any manner
to any Lender or Participant for any recital, statement, representation or
warranty made by any Loan Party or any officer thereof, contained herein or in
any other Loan Document, or in any certificate, report, statement or other
document referred to or provided for in, or received by Administrative Agent or
Collateral Agent under or in connection with, this Agreement or any other Loan
Document, or the validity, effectiveness, genuineness, enforceability or
sufficiency of this Agreement or any other Loan Document, or for the creation,
perfection or priority of any Liens purported to be created by any of the Loan
Documents, or the validity, genuineness, enforceability, existence, value or
sufficiency of any collateral security, or to make any inquiry respecting the
performance by the Borrowers of their obligations hereunder or under any other
Loan Document, or for any failure of any Loan Party or any other party to any
Loan Document to perform its obligations hereunder or thereunder. No
Agent-Related Person shall be under any obligation to any Lender or Participant
to ascertain or to inquire as to the observance or performance of any of the
agreements contained in, or conditions of, this Agreement or any other Loan
Document, or to inspect the properties, books or records of any Loan Party or
any Affiliate thereof.
     9.05. Reliance by Administrative Agent. (a) The Administrative Agent shall
be entitled to rely, and shall be fully protected in relying, upon any writing,
communication, signature, resolution, representation, notice, consent,
certificate, affidavit, letter, facsimile, electronic mail message or telephone
message, statement or other document or conversation believed by it to be
genuine and correct
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and to have been signed, sent or made by the proper Person or Persons, and upon
advice and statements of legal counsel (including counsel to any Loan Party),
independent accountants and other experts selected by the Administrative Agent.
The Administrative Agent shall be fully justified in failing or refusing to take
any action under any Loan Document unless it shall first receive such advice or
concurrence of the Required Lenders as it deems appropriate and, if it so
requests, it shall first be indemnified to its satisfaction by the Lenders
against any and all liability and expense which may be incurred by it by reason
of taking or continuing to take any such action. The Administrative Agent shall
in all cases be fully protected in acting, or in refraining from acting, under
this Agreement or any other Loan Document in accordance with a request or
consent of the Required Lenders or all the Lenders, if required hereunder, and
such request and any action taken or failure to act pursuant thereto shall be
binding upon all the Lenders and Participants. Where this Agreement expressly
permits or prohibits an action unless the Required Lenders otherwise determine,
the Administrative Agent shall, and in all other instances, the Administrative
Agent may, but shall not be required to, initiate any solicitation for the
consent or a vote of the Lenders.
     (b) For purposes of determining compliance with the conditions specified in
Section 4.01, each Lender that has funded its Pro Rata Share of the Borrowing on
the Closing Date shall be deemed to have consented to, approved or accepted or
to be satisfied with, each document or other matter either sent by the
Administrative Agent to such Lender (or otherwise made available for such Lender
on Intralinks or any similar website) for consent, approval, acceptance or
satisfaction, or required hereunder to be consented to or approved by or
acceptable or satisfactory to a Lender.
     9.06. Notice of Default. The Administrative Agent shall not be deemed to
have knowledge or notice of the occurrence of any Default or Event of Default,
except with respect to defaults in the payment of principal, interest and fees
required to be paid to the Administrative Agent for the account of the Lenders,
unless the Administrative Agent shall have received written notice from a Lender
or the Borrowers referring to this Agreement, describing such Default or Event
of Default and stating that such notice is a “notice of default.” The
Administrative Agent will notify the Lenders of its receipt of any such notice.
The Administrative Agent shall take such action with respect to such Default or
Event of Default as may be directed by the Required Lenders in accordance with
Article VIII; provided, however, that unless and until the Administrative Agent
has received any such direction, the Administrative Agent may (but shall not be
obligated to) take such action, or refrain from taking such action, with respect
to such Default or Event of Default as it shall deem advisable or in the best
interest of the Lenders.
     9.07. Credit Decision; Disclosure of Information by Administrative Agent.
Each Lender acknowledges that no Agent-Related Person has made any
representation or warranty to it, and that no act by the Administrative Agent
hereinafter taken, including any consent to and acceptance of any assignment or
review of the affairs of any Loan Party or any Affiliate thereof, shall be
deemed to constitute any representation or warranty by any Agent-Related Person
to any Lender as to any matter, including whether Agent-Related Persons have
disclosed material information in their possession. Each Lender represents to
the Administrative Agent that it has, independently and without reliance upon
any Agent-Related Person and based on such documents and information as it has
deemed appropriate, made its own appraisal of and investigation into the
business, prospects, operations, property, financial and other condition and
creditworthiness of the Loan Parties and their respective Subsidiaries, and all
applicable bank or other regulatory Laws relating to the transactions
contemplated hereby, and made its own decision to enter into this Agreement and
to extend credit to the Borrowers hereunder. Each Lender also represents that it
will, independently and without reliance upon any Agent-Related Person and based
on such documents and information as it shall deem appropriate at the time,
continue to make its own credit analysis, appraisals and decisions in taking or
not taking action under this Agreement and the other Loan Documents, and to make
such investigations as it deems necessary to inform itself as to the business,
prospects, operations, property, financial and other condition and
creditworthiness of the
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Borrowers and the other Loan Parties. Except for notices, reports and other
documents expressly required to be furnished to the Lenders by the
Administrative Agent herein, the Administrative Agent shall not have any duty or
responsibility to provide any Lender with any credit or other information
concerning the business, prospects, operations, property, financial and other
condition or creditworthiness of any of the Loan Parties or any of their
respective Affiliates which may come into the possession of any Agent Related
Person.
     9.08. Indemnification of Agents. Whether or not the transactions
contemplated hereby are consummated, the Lenders shall indemnify upon demand
each Agent-Related Person (to the extent not reimbursed by or on behalf of any
Loan Party and without limiting the obligation of any Loan Party to do so), pro
rata, and hold harmless each Agent-Related Person from and against any and all
Indemnified Liabilities incurred by it; provided, however, that no Lender shall
be liable for the payment to any Agent-Related Person of any portion of such
Indemnified Liabilities to the extent determined in a final, nonappealable
judgment by a court of competent jurisdiction to have been caused primarily by
such Agent-Related Person’s own gross negligence or willful misconduct;
provided, however, it being agreed by all Lenders that no action taken in
accordance with the directions of the Required Lenders shall be deemed to
constitute gross negligence or willful misconduct for purposes of this Section.
Without limitation of the foregoing, each Lender shall reimburse the
Administrative Agent upon demand for its ratable share of any costs or
out-of-pocket expenses (including Attorney Costs, costs and expenses in
connection with the use of Intralinks, Inc. or other similar information
transmission systems in connection with this Agreement and FA Costs) incurred by
the Administrative Agent in connection with the preparation, execution,
delivery, administration, modification, amendment or enforcement (whether
through negotiations, legal proceedings or otherwise) of, or legal advice in
respect of rights or responsibilities under, this Agreement, any other Loan
Document, or any document contemplated by or referred to herein, to the extent
that the Administrative Agent is not reimbursed for such expenses by or on
behalf of the Borrowers. The undertaking in this Section shall survive
termination of the Revolving Commitments, the payment of all Obligations
hereunder and the resignation or replacement of the Administrative Agent.
     9.09. Administrative Agent in its Individual Capacity. RBC and its
Affiliates may make loans to, accept deposits from, acquire equity interests in
and generally engage in any kind of banking, trust, financial advisory,
underwriting or other business with each of the Loan Parties and their
respective Affiliates as though RBC were not the Administrative Agent,
Collateral Agent or the L/C Issuer hereunder and without notice to or consent of
the Lenders. The Lenders acknowledge that, pursuant to such activities, RBC or
its Affiliates may receive information regarding any Loan Party or its
Affiliates (including information that may be subject to confidentiality
obligations in favor of such Loan Party or such Affiliate) and acknowledge that
the Administrative Agent shall be under no obligation to provide such
information to them. With respect to its Revolving Loans, RBC shall have the
same rights and powers under this Agreement as any other Lender and may exercise
such rights and powers as though it were not the Administrative Agent,
Collateral Agent or the L/C Issuer, and the terms “Lender” and “Lenders” include
RBC in its individual capacity.
     9.10. Successor Administrative Agent and Collateral Agent.
     (a) The Administrative Agent may resign as Administrative Agent and
Collateral Agent upon 30 days’ notice to the Lenders with a copy of such notice
to the Borrowers. If the Administrative Agent resigns under this Agreement, the
Required Lenders shall appoint from among the Lenders a successor administrative
agent and collateral agent for the Lenders which successor administrative agent
shall be consented to by the Borrowers at all times other than during the
existence of an Event of Default (which consent of the Borrowers shall not be
unreasonably withheld, conditioned or delayed). If no successor administrative
agent is appointed prior to the effective date of the resignation of the
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Administrative Agent, the Administrative Agent may appoint, after consulting
with the Lenders and the Borrowers, a successor administrative agent from among
the Lenders who shall also succeed to the role of successor collateral agent.
Upon the acceptance of its appointment as successor administrative agent
hereunder, such successor administrative agent shall succeed to all the rights,
powers and duties of the retiring Administrative Agent and the term
"Administrative Agent” shall mean such successor administrative agent and the
retiring Administrative Agent’s appointment, powers and duties as Administrative
Agent shall be terminated. After any retiring Administrative Agent’s resignation
hereunder as Administrative Agent, the provisions of this Article IX and
Sections 10.04 and 10.13 shall inure to its benefit as to any actions taken or
omitted to be taken by it while it was Administrative Agent under this
Agreement. If no successor administrative agent has accepted appointment as
Administrative Agent by the date which is 30 days following a retiring
Administrative Agent’s notice of resignation, the retiring Administrative
Agent’s resignation shall nevertheless thereupon become effective and the
Lenders shall perform all of the duties of the Administrative Agent and
Collateral Agent hereunder until such time, if any, as the Required Lenders
appoint a successor agent as provided for above.
     (b) The Collateral Agent may resign as Collateral Agent upon 30 days’
notice to the Administrative Agent with a copy of such notice to the Borrowers.
If the Collateral Agent resigns under this Agreement, the Administrative Agent
shall designate a successor collateral agent. Upon the acceptance of its
appointment as successor collateral agent hereunder, such successor collateral
agent shall succeed to all the rights, powers and duties of the retiring
Collateral Agent and the term “Collateral Agent” shall mean such successor
collateral agent and the retiring Collateral Agent’s appointment, powers and
duties as Collateral Agent shall be terminated. After any retiring Collateral
Agent’s resignation hereunder as Collateral Agent, the provisions of this
Article IX and Sections 10.04 and 10.13 shall inure to its benefit as to any
actions taken or omitted to be taken by it while it was Collateral Agent under
this Agreement.
     9.11. Other Agents. None of the Lenders or other Persons identified on the
facing page or signature pages of this Agreement as a “syndication agent,” as a
“documentation agent,” any other type of agent (other than the Administrative
Agent and Collateral Agent), shall have any right, power, obligation, liability,
responsibility or duty under this Agreement other than those applicable to all
Lenders as such. Without limiting the foregoing, none of the Lenders so
identified shall have or be deemed to have any fiduciary relationship with any
Lender. Each Lender acknowledges that it has not relied, and will not rely, on
any of the Lenders so identified in deciding to enter into this Agreement or in
taking or not taking action hereunder.
     9.12. Administrative Agent May File Proofs of Claim. In case of the
pendency of any receivership, insolvency, liquidation, bankruptcy,
reorganization, arrangement, adjustment, composition or other judicial
proceeding relative to any Loan Party, the Administrative Agent (irrespective of
whether the principal of any Revolving Loan or L/C Obligation shall then be due
and payable as herein expressed or by declaration or otherwise and irrespective
of whether the Administrative Agent shall have made any demand on the Borrowers)
shall be entitled and empowered, by intervention in such proceeding or otherwise
     (i) to file and prove a claim for the whole amount of the principal and
interest owing and unpaid in respect of the Revolving Loans, L/C Obligations and
all other Obligations that are owing and unpaid and to file such other documents
as may be necessary or advisable in order to have the claims of the Lenders, the
L/C Issuer and the Administrative Agent (including any claim for the reasonable
compensation, expenses, disbursements and advances of the Lenders, the L/C
Issuer and the Administrative Agent and their respective agents and counsel and
all other amounts due the Lenders, the L/C Issuer and the Administrative Agent
under Sections 2.14(i) and 2.14(j), 2.08, 10.04 and 10.05) allowed in such
judicial proceeding; and
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     (ii) to collect and receive any monies or other property payable or
deliverable on any such claims and to distribute the same;
and any custodian, receiver, assignee, trustee, liquidator, sequestrator or
other similar official in any such judicial proceeding is hereby authorized by
each Lender and the L/C Issuer to make such payments to the Administrative Agent
and, in the event that the Administrative Agent shall consent to the making of
such payments directly to the Lenders and the L/C Issuer, to pay to the
Administrative Agent any amount due for the reasonable compensation, expenses,
disbursements and advances of the Administrative Agent and its agents and
counsel, and any other amounts due the Administrative Agent under Sections 2.08,
10.04 and 10.05.
     Nothing contained herein shall be deemed to authorize the Administrative
Agent to authorize or consent to or accept or adopt on behalf of any Lender or
the L/C Issuer any plan of reorganization, arrangement, adjustment or
composition affecting the Obligations or the rights of any Lender or to
authorize the Administrative Agent to vote in respect of the claim of any Lender
in any such proceeding.
     9.13. Hedging Agreements. To the extent any Affiliate of a Lender is a
party to a Swap Contract with a Borrower or any Borrower Affiliate and thereby
becomes a beneficiary of the Liens pursuant to the Collateral Document, such
Affiliate of a Lender shall be deemed to appoint the Administrative Agent and
Collateral Agent its nominee and agent to act for and on behalf of such
Affiliate in connection with the Collateral Documents and to be bound by the
terms of this Article IX, and Section 10.01(e).
ARTICLE X.
MISCELLANEOUS
     10.01. Amendments, Release of Collateral, Etc. (a) No amendment or waiver
of any provision of this Agreement or any other Loan Document, and no consent to
any departure by the Borrowers or any other Loan Party therefrom shall be
effective to do any of the following unless in writing signed by the Required
Lenders and the Borrowers or the applicable Loan Party, as the case may be, and
acknowledged by the Administrative Agent, and each such waiver or consent shall
be effective only in the specific instance and for the specific purpose for
which given; provided, however, that in connection with subsections (i),
(ii) and (iii) below, no such amendment, waiver or consent shall, unless in
writing and signed by each of the Lenders directly affected thereby and by the
Borrowers, and acknowledged by the Administrative Agent, and in connection with
subsections (iv), (v), (vi), (vii), and (viii) below, no such amendment, waiver
or consent shall, unless in writing and signed by all of the Lenders and by the
Borrowers, and acknowledged by the Administrative Agent:
     (i) extend or increase the Revolving Commitment of any Lender (or reinstate
any Revolving Commitment terminated pursuant to Section 8.02);
     (ii) extend the Maturity Date or extend, postpone or delay any date fixed
by this Agreement or any other Loan Document for any payment or mandatory
prepayment of principal, interest, fees or other amounts due to the Lenders (or
any of them) hereunder or under any other Loan Document;
     (iii) reduce the principal of, or the rate of interest specified herein on,
any Revolving Loan or L/C Borrowing or any fees or other amounts payable
hereunder or under any other Loan Document; provided, however, that only the
consent of the Required Lenders shall be necessary to (A) amend the definition
of “Default Rate” or to waive any obligation of the Borrowers to pay interest at
the Default Rate or (B) to amend any financial covenant hereunder
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(or any defined term used therein) even if the effect of such amendment would be
to reduce the rate of interest on any Revolving Loan or L/C Borrowing or to
reduce any fee payable hereunder;
     (iv) change the percentage of the Aggregate Revolving Commitment or of the
aggregate unpaid principal amount of the Revolving Loans and L/C Obligations
which is set forth in the definition of “Required Lenders”;
     (v) change the Pro Rata Share of any Lender;
     (vi) release a material amount of Collateral or release any Guarantor from
a Guaranty (except in connection with a Disposition permitted under Section 7.07
or as otherwise permitted under this Section 10.01 and except for any releases
contemplated in Section 4.01, which shall not require any Lender consents other
than Lenders’ execution of this Agreement);
     (vii) amend the definition of the term “Borrowing Base” or amend the
requirement that the Borrowing Base may be increased only with the consent of
all Lenders; or
     (viii) amend this Section, or Section 2.04(b) or 2.12, or any provision
herein providing for unanimous consent or other action by all the Lenders;
and, provided further: (i) no amendment, waiver or consent shall, unless in
writing and signed by the L/C Issuer in addition to the Required Lenders or all
the Lenders, as the case may be, affect the rights or duties of the L/C Issuer
under this Agreement or any Letter of Credit Application relating to any Letter
of Credit issued or to be issued by it; and (ii) no amendment, waiver or consent
shall, unless in writing and signed by the Administrative Agent in addition to
the Required Lenders or all the Lenders, as the case may be, affect the rights
or duties of the Administrative Agent under this Agreement or any other Loan
Document. Notwithstanding anything to the contrary herein, any Lender that has
failed to fund any portion of the Revolving Loans or participation in L/C
Obligations required to be funded by it hereunder shall not have any right to
approve or disapprove any amendment, waiver or consent hereunder, except that
the Pro Rata Share of such Lender may not be increased without the consent of
such Lender.
The right of each Lender to receive in connection with the Revolving Loan owed
to it interest on each Interest Payment Date and to receive principal on the
Maturity Date shall not be impaired or affected without the consent of such
Lender, nor shall such Lender’s right to institute suit against the Borrowers or
Guarantors for payment of such amounts on or after the due dates thereof be
impaired or affected without the consent of such Lender; provided the foregoing
shall not give any Lender any right to proceed against Collateral or take any
actions described in Section 8.02 that are vested in the Administrative Agent or
Required Lenders.
     (b) Any amendment to any Loan Document which purports to (i) decrease the
amount of any mandatory prepayment or commitment reduction required by
Section 2.04(c) or (ii) change this Section 10.01(b), must be by an instrument
in writing executed by the Borrowers, the Administrative Agent, and the Required
Lenders.
     (c) Upon any sale, transfer, or Disposition of Collateral which is
permitted pursuant to the Loan Documents, and upon 5 Business Days’ prior
written request by the Borrowers (which request must be accompanied by (i) true
and correct copies of all material documents of transfer or Disposition,
including any contract of sale, (ii) a preliminary closing statement and
instructions to the title company, if any, (iii) all requested release
instruments in form and substance satisfactory to the Administrative Agent and
(iv) if required, written consent of the requisite Lenders), the Administrative
Agent and/or Collateral
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Agent shall (and is hereby irrevocably authorized by the Lenders to) execute
such documents as may be necessary to evidence the release of Liens granted to
the Administrative Agent and/or Collateral Agent for the benefit of the Secured
Parties pursuant hereto in such Collateral. Neither the Administrative Agent nor
the Collateral Agent shall be required to execute any release instruments on
terms which, in the Administrative Agent’s (or Collateral Agent’s) opinion,
would expose the Administrative Agent or Collateral Agent to liability or create
any obligation or entail any consequence other than the release of Liens without
recourse or warranty. No such release shall impair the Administrative Agent’s
and/or Collateral Agent’s Lien on the proceeds of sale of such Collateral.
     (d) If all outstanding Revolving Loans and other Obligations (other than
contingent indemnity obligations) have been indefeasibly paid in full (or, with
respect to L/C Obligations, Cash Collateralized) and the Revolving Commitments
have terminated or have been reduced to zero, and, subject to Section 10.01(e)
all Lender Hedging Agreement have terminated, the Administrative Agent agrees
to, and the Lenders hereby instruct the Administrative Agent and Collateral
Agent to, at the Borrowers’ expense, execute and authorize such releases of the
Collateral Documents as the Borrowers shall reasonably request and this
Agreement shall be deemed terminated except that such termination shall not
relieve the Borrowers of any obligation to make any payments to the
Administrative Agent or any Lender required by any Loan Document to the extent
accruing, or relating to an event occurring, prior to such termination.
     (e) Notwithstanding any provision herein to the contrary, if the Revolving
Commitments have been terminated, and the only outstanding Obligations (other
than contingent indemnity obligations and L/C Obligations that are Cash
Collateralized) are amounts owed pursuant to one or more Lender Hedging
Agreements, the Administrative Agent and/or Collateral Agent will, and is hereby
authorized to, (A) release the Liens created under the Loan Documents and
(B) release all Guaranties of the Guarantors; provided, that contemporaneously
with such release, (i) the Borrowers (and, if applicable, any Borrower Affiliate
that is a party to such Lender Hedging Agreements) (A) execute a margin
agreement in form and substance acceptable to such Lender(s) (or its Affiliates)
that are parties to such Lender Hedging Agreements (the “Lender Counterparties”)
and (B), if required, provide collateral in the form of cash or a letter of
credit having an aggregate value acceptable to such Lender Counterparties, and
(ii) if such Lender Hedging Agreement is executed by a Subsidiary of the
Borrowers and the Borrowers are not parties thereto, the Borrowers execute a
guaranty covering such Subsidiary’s obligations thereunder, such guaranty to be
in form and substance satisfactory to the Lender Counterparties. Any release
under this Section 10.01(e) must be in writing and signed by the Administrative
Agent.
     (f) The Lenders and the Administrative Agent hereby waive (i) notice of the
Restructure Transactions, (ii) any notice period requirements relating to the
Restructure Transactions; (iii) any contents of the notice or other requirements
associated with notice relating to the Restructure Transactions; (iv) any
provisions of the Prior Midstream Credit Agreement in regards to the Restructure
Transactions that would have the effect of prohibiting any or all of the
Restructure Transactions; and (v) any amendment or termination of Material
Agreements (as defined in the Prior Credit Agreements) that occurs in connection
with the Restructure Transactions.
     10.02. Notices and Other Communications; Facsimile Copies.
     (a) General. Unless otherwise expressly provided herein, all notices and
other communications provided for hereunder and under the other Loan Documents
shall be in writing (including by facsimile transmission) and mailed, faxed or
delivered, to the address, facsimile number or (subject to subsection (c) below)
electronic mail address specified for notices on Schedule 10.02 (for the
Borrowers, any Guarantor and the Administrative Agent) or on the Administrative
Details Form (for the other Lenders); or, in the case of the Borrowers, the
Guarantors, the Administrative Agent, or the L/C
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Issuer, to such other address as shall be designated by such party in a notice
to the other parties, and in the case of any other party, to such other address
as shall be designated by such party in a notice to the Borrowers, the
Administrative Agent and the L/C Issuer. All such notices and other
communications shall be deemed to be given or made upon the earlier to occur of
(i) actual receipt by the intended recipient and (ii) (A) if delivered by hand
or by courier, when signed for by the intended recipient; (B) if delivered by
mail, four Business Days after deposit in the mails, postage prepaid; (C) if
delivered by facsimile, when sent and receipt has been confirmed by telephone;
and (D) if delivered by electronic mail (which form of delivery is subject to
the provisions of subsection (c) below), when delivered; provided, however, that
notices and other communications to the Administrative Agent or the L/C Issuer
pursuant to Article II shall not be effective until actually received by such
Person. Any notice or other communication permitted to be given, made or
confirmed by telephone hereunder shall be given, made or confirmed by means of a
telephone call to the intended recipient at the number specified in accordance
with this Section, it being understood and agreed that a voicemail message shall
in no event be effective as a notice, communication or confirmation hereunder.
     (b) Effectiveness of Facsimile Documents and Signatures. Loan Documents may
be transmitted and/or signed by facsimile or other electronic means. The
effectiveness of any such documents and signatures shall, subject to applicable
Law, have the same force and effect as manually-signed originals and shall be
binding on all Loan Parties, the Administrative Agent and the Lenders. The
Administrative Agent may also require that any such documents and signatures be
confirmed by a manually-signed original thereof; provided, however, that the
failure to request or deliver the same shall not limit the effectiveness of any
facsimile document or signature.
     (c) Limited Use of Electronic Mail. Electronic mail and internet and
intranet websites may be used only to distribute routine communications, such as
financial statements and other information, and to distribute Loan Documents for
execution by the parties thereto, and shall not be recognized hereunder for any
other purpose.
     (d) Reliance by Administrative Agent and Lenders. The Administrative Agent
and the Lenders shall be entitled to rely and act upon any notices (including
telephonic Borrowing Notices) purportedly given by or on behalf of the Borrowers
even if (i) such notices were not made in a manner specified herein, were
incomplete or were not preceded or followed by any other form of notice
specified herein, or (ii) the terms thereof, as understood by the recipient,
varied from any confirmation thereof. The Borrowers shall indemnify each
Agent-Related Person and each Lender from all losses, costs, expenses and
liabilities resulting from the reliance by such Person on each notice
purportedly given by or on behalf of the Borrowers. All telephonic notices to
and other communications with the Administrative Agent may be recorded by the
Administrative Agent, and each of the parties hereto hereby consents to such
recording.
     10.03. No Waiver; Cumulative Remedies. No failure by any Lender or the
Administrative Agent to exercise, and no delay by any such Person in exercising,
any right, remedy, power or privilege hereunder shall operate as a waiver
thereof; nor shall any single or partial exercise of any right, remedy, power or
privilege hereunder preclude any other or further exercise thereof or the
exercise of any other right, remedy, power or privilege. The rights, remedies,
powers and privileges herein or therein provided are cumulative and not
exclusive of any rights, remedies, powers and privileges provided by law.
     10.04. Attorney Costs; Expenses and Taxes. The Borrowers agree (a) to pay
or reimburse the Administrative Agent for all reasonable costs and expenses
incurred in connection with the development, preparation, negotiation,
syndication, administration and execution of this Agreement and the other Loan
Documents, including the filing, recording, refiling or rerecording of any
Mortgage, any
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pledge agreement and any Security Agreement and/or any Uniform Commercial Code
financing statements relating thereto and all amendments, supplements and
modifications to any thereof and any and all other documents or instruments of
further assurance required to be filed or recorded or refiled or rerecorded by
the terms hereof or of any mortgage, any pledge agreement or any security
agreement, and any amendment, waiver, consent or other modification of the
provisions hereof and thereof (whether or not the transactions contemplated
hereby or thereby are consummated), and the consummation and administration of
the transactions contemplated hereby and thereby, including all Attorney Costs
and FA Costs and reasonable costs and expenses in connection with the use of
Intralinks, Inc. or other similar information transmission systems in connection
with this Agreement; provided however that all such costs and expenses, Attorney
Costs and FA Costs of the Administrative Agent and Lenders relating to this
Agreement, together with all such costs and expenses, Attorney Costs and FA
Costs as defined in, and as provided for in, the credit agreements of even date
herewith relating to the Secured Pipeline Loan and the Amended QRC Facility
shall not exceed in the aggregate $1,000,000, and (b) to pay or reimburse the
Administrative Agent and each Lender for all costs and expenses incurred in
connection with the enforcement, attempted enforcement, or preservation of any
rights or remedies under this Agreement or the other Loan Documents (including
all such costs and expenses incurred during any workout or restructuring in
respect of the Obligations and during any legal proceeding, including any
proceeding under any Debtor Relief Law), including all Attorney Costs and FA
Costs. The foregoing costs and expenses shall include all search, filing,
recording, title insurance and appraisal charges and fees and taxes related
thereto, and other out-of-pocket expenses incurred by the Administrative Agent
and the cost of independent public accountants and other outside experts
retained by the Administrative Agent or any Lender (if such Lender is otherwise
entitled to recover such costs under the terms of this Agreement). The
agreements in this Section shall survive the termination of the Aggregate
Revolving Commitment and repayment of all the other Obligations.
     10.05. Indemnification. Whether or not the transactions contemplated hereby
are consummated, each of the Borrowers and each other Guarantor (by execution of
a Guaranty), jointly and severally, agrees to indemnify, save and hold harmless
each Agent-Related Person, the Administrative Agent, the Collateral Agent, each
Lender, the L/C Issuer and their respective Affiliates, directors, officers,
employees, counsel, agents and attorneys-in-fact (collectively the
“Indemnitees”) from and against: (a) any and all claims, demands, actions or
causes of action that are asserted against any Indemnitee by any Person (other
than the Administrative Agent or any Lender) relating directly or indirectly to
a claim, demand, action or cause of action that such Person asserts or may
assert against any Loan Party, any Affiliate of any Loan Party or any of their
respective officers or directors, arising out of or relating to, the Loan
Documents, the Aggregate Revolving Commitment, the use or contemplated use of
the proceeds of any Revolving Loans, or the relationship of any Loan Party, the
Administrative Agent, the Collateral Agent, the Lenders and the L/C Issuer under
this Agreement or any other Loan Document; (b) any and all claims, demands,
actions or causes of action that may at any time (including at any time
following repayment of the Obligations and the resignation of the Administrative
Agent or the replacement of any Lender) be asserted or imposed against any
Indemnitee by any Person or by a Borrower or any other Loan Party, arising out
of or relating to, the Loan Documents, the Revolving Commitments, the use or
contemplated use of the proceeds of any Revolving Loans, or the relationship of
any Loan Party, the Administrative Agent, the Collateral Agent, the Lenders and
the L/C Issuer under this Agreement or any other Loan Document; (c) without
limiting the foregoing, any and all claims, demands, actions or causes of
action, judgments and orders, penalties and fines that are asserted or imposed
against any Indemnitee, (i) under the application of any Environmental Law
applicable to the Borrowers or any of their respective Subsidiaries (other than
the Excluded Subsidiaries) or any of their properties or assets, including the
treatment or disposal of Hazardous Substances on any of their properties or
assets, (ii) as a result of the breach or non-compliance by the Borrowers or any
of their respective Subsidiaries (other than the Excluded Subsidiaries) with any
Environmental Law applicable to the Borrowers or any of their respective
Subsidiaries (other than the Excluded Subsidiaries), (iii) due to past ownership
by the
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Borrowers or any of their respective Subsidiaries (other than the Excluded
Subsidiaries) of any of their properties or assets or past activity on any of
their properties or assets which, though lawful and fully permissible at the
time, could result in present liability, (iv) due to the presence, use, storage,
treatment or disposal of Hazardous Substances on or under, or the escape,
seepage, leakage, spillage, discharge, emission or Release from, any of the
properties owned or operated by the Borrowers or any of their respective
Subsidiaries (other than the Excluded Subsidiaries) (including any liability
asserted or arising under any Environmental Law), regardless of whether caused
by, or within the control of, the Borrowers or any of their respective
Subsidiaries (other than the Excluded Subsidiaries), or (v) due to any other
environmental, health or safety condition in connection with the Loan Documents;
(d) any administrative or investigative proceeding by any Governmental Authority
arising out of or related to a claim, demand, action or cause of action
described in subsection (a), (b) or (c) above; and (e) any and all liabilities
(including liabilities under indemnities), losses, costs, damages or expenses
(including Attorney Costs and settlement costs) that any Indemnitee suffers or
incurs as a result of the assertion of any foregoing claim, demand, action,
cause of action or proceeding, or as a result of the preparation of any defense
in connection with any foregoing claim, demand, action, cause of action or
proceeding, in all cases, WHETHER OR NOT ARISING OUT OF THE STRICT LIABILITY OR
NEGLIGENCE OF AN INDEMNITEE, and whether or not an Indemnitee is a party to such
claim, demand, action, cause of action or proceeding (all the foregoing,
collectively, the “Indemnified Liabilities”); provided that such indemnity shall
not, as to any Indemnitees, be available to the extent that such liabilities,
obligations, losses, damages, penalties, claims, demands, actions, judgments,
suits, costs, expenses or disbursements are determined by a court of competent
jurisdiction by final and nonappealable judgment to have resulted from the gross
negligence or willful misconduct of such Indemnitee. The agreements in this
Section shall survive and continue for the benefit of the Indemnitees at all
times after the Borrowers’ acceptance of the Lenders’ Revolving Commitments
under this Agreement, whether or not the Closing Date shall occur and shall
survive the termination of the Revolving Commitments and repayment of all the
other Obligations.
     10.06. Payments Set Aside. To the extent that the Borrowers make a payment
to the Administrative Agent or any Lender, or the Administrative Agent or any
Lender exercises its right of setoff, and such payment or the proceeds of such
set-off or any part thereof is subsequently invalidated, declared to be
fraudulent or preferential, set aside or required (including pursuant to any
settlement entered into by the Administrative Agent or such Lender in its
discretion) to be repaid to a trustee, receiver or any other party, in
connection with any proceeding under any Debtor Relief Law or otherwise, then
(a) to the extent of such recovery, the obligation or part thereof originally
intended to be satisfied shall be revived and continued in full force and effect
as if such payment had not been made or such setoff had not occurred, and
(b) each Lender severally agrees to pay to the Administrative Agent upon demand
its applicable share of any amount so recovered from or repaid by the
Administrative Agent, plus interest thereon from the date of such demand to the
date such payment is made at a rate per annum equal to the Federal Funds Rate
from time to time in effect.
     10.07. Successors and Assigns.
     (a) The provisions of this Agreement shall be binding upon and inure to the
benefit of the parties hereto and their respective successors and assigns
permitted hereby, except that no Borrower may assign or otherwise transfer any
of its rights or obligations hereunder without the prior written consent of each
Lender and no Lender may assign or otherwise transfer any of its rights or
obligations hereunder except (i) to an Eligible Assignee in accordance with the
provisions of paragraph (b) of this Section, (ii) by way of participation in
accordance with the provisions of paragraph (d) of this Section or (iii) by way
of pledge or assignment of a security interest subject to the restrictions of
paragraph (f) of this Section (and any other attempted assignment or transfer by
any party hereto shall be null and void). Nothing in this Agreement, expressed
or implied, shall be construed to confer upon any Person (other than the parties
hereto, their respective successors and assigns permitted hereby, Participants
to the extent provided in
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paragraph (d) of this Section and, to the extent expressly contemplated hereby,
the Related Parties of each of the Administrative Agent and the Lenders) any
legal or equitable right, remedy or claim under or by reason of this Agreement.
     (b) Any Lender may at any time assign to one or more Eligible Assignees all
or a portion of its rights and obligations under this Agreement (including all
or a portion of its Revolving Commitment and the Revolving Loans (including for
purposes of this subsection (b), participations in L/C Obligations) at the time
owing to it); provided that:
except in the case of an assignment of the entire remaining amount of the
assigning Lender’s Revolving Commitment and the Revolving Loans at the time
owing to it or in the case of an assignment to a Lender or an Affiliate of a
Lender or an Approved Fund with respect to a Lender, the aggregate amount of the
Revolving Commitment (which for this purpose includes Revolving Loans
outstanding thereunder) or, if the applicable Revolving Commitment is not then
in effect, the outstanding principal balance of the Revolving Loan of the
assigning Lender subject to each such assignment (determined as of the date the
Assignment and Assumption with respect to such assignment is delivered to the
Administrative Agent or, if “Trade Date” is specified in the Assignment and
Assumption, as of the Trade Date) shall not be less than $5,000,000, unless each
of the Administrative Agent and, so long as no Event of Default has occurred and
is continuing, the Borrowers otherwise consent (neither the Administrative
Agent’s nor Borrowers’ consent to be unreasonably withheld, conditioned or
delayed);
     (i) each partial assignment shall be made as an assignment of a
proportionate part of all the assigning Lender’s rights and obligations under
this Agreement with respect to the Revolving Loan or the Revolving Commitment
assigned;
     (ii) any assignment of a Revolving Commitment must be approved by the
Administrative Agent and L/C Issuer unless the Person that is the proposed
assignee is itself a Lender (whether or not the proposed assignee would
otherwise qualify as an Eligible Assignee); and
     (iii) the parties to each assignment shall execute and deliver to the
Administrative Agent an Assignment and Assumption, together with a processing
and recordation fee of $3,500, and the Eligible Assignee, if it shall not be a
Lender, shall deliver to the Administrative Agent an Administrative Details
Form.
Subject to acceptance and recording thereof by the Administrative Agent pursuant
to paragraph (c) of this Section, from and after the effective date specified in
each Assignment and Assumption, the Eligible Assignee thereunder shall be a
party to this Agreement and, to the extent of the interest assigned by such
Assignment and Assumption, have the rights and obligations of a Lender under
this Agreement, and the assigning Lender thereunder shall, to the extent of the
interest assigned by such Assignment and Assumption, be released from its
obligations under this Agreement (and, in the case of an Assignment and
Assumption covering all of the assigning Lender’s rights and obligations under
this Agreement, such Lender shall cease to be a party hereto) but shall continue
to be entitled to the benefits of Sections 3.07, 10.04 and 10.05 with respect to
facts and circumstances occurring prior to the effective date of such
assignment. Any assignment or transfer by a Lender of rights or obligations
under this Agreement that does not comply with this paragraph shall be treated
for purposes of this Agreement as a sale by such Lender of a participation in
such rights and obligations in accordance with paragraph (d) of this Section.
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     (c) The Administrative Agent, acting solely for this purpose as an agent of
the Borrowers, shall maintain at one of its offices a copy of each Assignment
and Assumption delivered to it and a register for the recordation of the names
and addresses of the Lenders, and the Revolving Commitment of, and principal
amounts of the Revolving Loans and L/C Obligations owing to, each Lender
pursuant to the terms hereof from time to time (the “Register”). The entries in
the Register shall be conclusive absent manifest error, and the Borrowers, the
Administrative Agent and the Lenders may treat each Person whose name is
recorded in the Register pursuant to the terms hereof as a Lender hereunder for
all purposes of this Agreement, notwithstanding notice to the contrary. The
Register shall be available for inspection by the Borrowers and any Lender, at
any reasonable time and from time to time upon reasonable prior notice.
     (d) Any Lender may at any time, without the consent of, or notice to, the
Borrowers or the Administrative Agent, sell participations to any Person (other
than a natural person or the Borrowers or any of the Borrowers’ Affiliates or
Subsidiaries) (each, a “Participant”) in all or a portion of such Lender’s
rights and/or obligations under this Agreement (including all or a portion of
its Revolving Commitment and/or the Revolving Loans (including such Lender’s
participation in L/C Obligations) owing to it); provided that (i) such Lender’s
obligations under this Agreement shall remain unchanged, (ii) such Lender shall
remain solely responsible to the other parties hereto for the performance of
such obligations and (iii) the Borrowers, the Administrative Agent and the other
Lenders shall continue to deal solely and directly with such Lender in
connection with such Lender’s rights and obligations under this Agreement. Any
agreement or instrument pursuant to which a Lender sells such a participation
shall provide that such Lender shall retain the sole right to enforce this
Agreement and to approve any amendment, modification or waiver of any provision
of this Agreement; provided that such agreement or instrument may provide that
such Lender will not, without the consent of the Participant, agree to any
amendment, modification or waiver that would (i) postpone any date upon which
any payment of money is scheduled to be paid to such Participant, (ii) reduce
the principal, interest, fees or other amounts payable to such Participant, or
(iii) release Parent from its Guaranty. Subject to subsection (e) of this
Section, the Borrowers agree that each Participant shall be entitled to the
benefits of Sections 3.01, 3.04 and 3.05 to the same extent as if it were a
Lender and had acquired its interest by assignment pursuant to subsection (b) of
this Section; provided said Participant agrees to be subject to Sections 3.08
and 10.15 as though it were a Lender. To the extent permitted by Law, each
Participant also shall be entitled to the benefits of Section 10.09 as though it
were a Lender; provided such Participant agrees to be subject to Section 2.12 as
though it were a Lender.
     (e) A Participant shall not be entitled to receive any greater payment
under Section 3.01 or 3.04 than the applicable Lender would have been entitled
to receive with respect to the participation sold to such Participant, unless
the sale of the participation to such Participant is made with the Borrowers’
prior written consent. A Participant that would be a Foreign Lender if it were a
Lender shall not be entitled to the benefits of Section 3.01 unless the
Borrowers are notified of the participation sold to such Participant and such
Participant agrees, for the benefit of the Borrowers, to comply with
Section 3.01 as though it were a Lender.
     (f) Any Lender may at any time pledge or assign a security interest in all
or any portion of its rights under this Agreement (including under its Revolving
Notes, if any) to secure obligations of such Lender, including any pledge or
assignment to secure obligations to a Federal Reserve Bank; provided that no
such pledge or assignment shall release a Lender from any of its obligations
hereunder or substitute any such pledgee or assignee for such Lender as a party
hereto.
     (g) If the consent of the Borrowers to an assignment or to an Eligible
Assignee is required hereunder (including a consent to an assignment which does
not meet the minimum assignment threshold specified in clause (i) of the proviso
to the first sentence of Section 10.07(b)), the Borrowers shall be
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deemed to have given their consent five Business Days after the date notice
thereof has been delivered by the assigning Lender (through the Administrative
Agent) unless such consent is expressly refused by the Borrowers prior to such
fifth Business Day.
     (h) Notwithstanding anything to the contrary contained herein, if at any
time RBC assigns all of its Revolving Commitment and Revolving Loans pursuant to
subsection (b) above, RBC may, upon 30 days’ notice to the Borrowers and the
Lenders, resign as L/C Issuer. In the event of any such resignation as L/C
Issuer, the Borrowers shall be entitled to appoint from among the Lenders a
successor L/C Issuer hereunder; provided, however, that any such successor L/C
Issuer have accepted such appointment; provided further, however, that no
failure by the Borrowers to appoint any such successor shall affect the
resignation of RBC as L/C Issuer. RBC shall retain all the rights and
obligations of the L/C Issuer hereunder with respect to all Letters of Credit
outstanding as of the effective date of its resignation as L/C Issuer and all
L/C Obligations with respect thereto (including the right to require the Lenders
to make Base Rate Loans or fund participations in Unreimbursed Amounts pursuant
to Section 2.14(c)).
     10.08. Confidentiality. Each Lender agrees that it will not disclose
without the prior consent of the Borrowers (other than to directors, officers,
employees, auditors, accountants, counsel or other professional advisors of the
Administrative Agent or any Lender) any information with respect to the
Borrowers or any of their respective Subsidiaries, which is furnished pursuant
to this Agreement; provided that any Lender may disclose any such information
(a) as has become generally available to the public, (b) as may be required or
appropriate in any report, statement or testimony submitted to or required by
any municipal, state or federal regulatory body having or claiming to have
jurisdiction over such Lender or submitted to or required by the Board or the
Federal Deposit Insurance Corporation or similar organizations (whether in the
United States or elsewhere) or their successors, (c) as may be required or
appropriate in response to any summons or subpoena in connection with any
litigation, (d) in order to comply with any law, order, regulation or ruling
applicable to such Lender, (e) to any Eligible Assignee of or Participant in, or
any prospective Eligible Assignee of or Participant in, any of its rights or
obligations under this Agreement; provided that such Eligible Assignee or
Participant or prospective Eligible Assignee or Participant executes an
agreement containing provisions substantially similar to those contained in this
Section 10.08, (f) in connection with the exercise of any remedy by such Lender
if an Event of Default pertaining to the Loan Documents has occurred and is
continuing, (g) in connection with any litigation involving such Lender
pertaining to the Loan Documents, (h) to any Lender or the Administrative Agent,
or (i) to any Affiliate of any Lender (it being understood that the Persons to
whom such disclosure is made will be informed of the confidential nature of such
information and obligated to keep such information confidential).
     10.09. Set-off. In addition to any rights and remedies of the Lenders
provided by Law, upon the occurrence and during the continuance of any Event of
Default, each Lender is authorized at any time and from time to time, without
prior notice to the Borrowers or any other Guarantor, any such notice being
waived by the Borrowers (each on its own behalf and on behalf of each Guarantor)
to the fullest extent permitted by law, to set off and apply any and all
deposits (general or special, time or demand, provisional or final) at any time
held by, and other indebtedness at any time owing by, such Lender to or for the
credit or the account of the respective Borrowers or Guarantor, as applicable,
against any and all Obligations owing to the Administrative Agent and the
Lenders, now or hereafter existing, irrespective of whether or not the
Administrative Agent or such Lender shall have made demand under this Agreement
or any other Loan Document and although such Obligations may be contingent or
unmatured. Each Lender agrees promptly to notify the Borrowers and the
Administrative Agent after any such set-off and application made by such Lender;
provided, however, that the failure to give such notice shall not affect the
validity of such set-off and application.
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     10.10. Interest Rate Limitation. Regardless of any provision contained in
any Loan Document, neither the Administrative Agent nor any Lender shall ever be
entitled to contract for, charge, take, reserve, receive, or apply, as interest
on all or any part of the Obligations, any amount in excess of the Maximum Rate,
and, if any Lender ever does so, then such excess shall be deemed a partial
prepayment of principal and treated hereunder as such and any remaining excess
shall be refunded to the Borrowers. In determining if the interest paid or
payable exceeds the Maximum Rate, the Borrowers and the Lenders shall, to the
maximum extent permitted under applicable Law, (a) treat all Borrowings as but a
single extension of credit (and the Lenders and the Borrowers agree that such is
the case and that provision herein for multiple Borrowings is for convenience
only), (b) characterize any nonprincipal payment as an expense, fee, or premium
rather than as interest, (c) exclude voluntary prepayments and the effects
thereof, and (d) amortize, prorate, allocate, and spread the total amount of
interest throughout the entire contemplated term of the Obligations. However, if
the Obligations are paid and performed in full prior to the end of the full
contemplated term thereof, and if the interest received for the actual period of
existence thereof exceeds the Maximum Amount, the Lenders shall refund such
excess, and, in such event, the Lenders shall not, to the extent permitted by
Law, be subject to any penalties provided by any Laws for contracting for,
charging, taking, reserving or receiving interest in excess of the Maximum
Amount.
     10.11. Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same agreement. Delivery of an executed
counterpart of a signature page of this Agreement by telecopy, facsimile,
photocopy or by sending a scanned copy by electronic mail shall be effective as
delivery of a manually executed counterpart of this Agreement. Any signature
page of a counterpart may be detached therefrom without impairing the legal
effect of the signatures thereon and attached to another counterpart identical
in form thereto but having attached to it one or more additional signature pages
signed by other parties.
     10.12. Integration. This Agreement, together with the other Loan Documents,
comprises the complete and integrated agreement of the parties on the subject
matter hereof and thereof and supersedes all prior agreements, written or oral,
on such subject matter. In the event of any conflict between the provisions of
this Agreement and those of any other Loan Document, the provisions of this
Agreement shall control; provided that the inclusion of supplemental rights or
remedies in favor of the Administrative Agent or the Lenders in any other Loan
Document shall not be deemed a conflict with this Agreement. Each Loan Document
was drafted with the joint participation of the respective parties thereto and
shall be construed neither against nor in favor of any party, but rather in
accordance with the fair meaning thereof.
     10.13. Survival of Representations and Warranties. All representations and
warranties made hereunder and in any other Loan Document or other document
delivered pursuant hereto or thereto or in connection herewith or therewith
shall survive the execution and delivery hereof and thereof. Such
representations and warranties have been or will be relied upon by the
Administrative Agent and each Lender, regardless of any investigation made by
the Administrative Agent or any Lender or on their behalf and notwithstanding
that the Administrative Agent or any Lender may have had notice or knowledge of
any Default or Event of Default at the time of any Borrowing, and shall continue
in full force and effect as long as any Revolving Loan or any other Obligation
shall remain unpaid or unsatisfied.
     10.14. Severability. Any provision of this Agreement and the other Loan
Documents to which any Borrower is a party that is prohibited or unenforceable
in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent
of such prohibition or unenforceability without invalidating the
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remaining provisions thereof, and any such prohibition or unenforceability in
any jurisdiction shall not invalidate or render unenforceable such provision in
any other jurisdiction.
     10.15. Replacement of Lenders. If Required Lenders and the Administrative
Agent have approved an identical increase of the Borrowing Base, the Borrowers
shall have the right to replace any Lenders that have failed to approve such
Borrowing Base increase pursuant to the provisions of the following sentence. If
(i) any Lender fails or refuses to consent to any requested amendment or waiver
pursuant to Section 10.01, (ii) any Lender requests compensation under
Section 3.04, or if the Borrowers are required to pay any additional amount to
any Lender or any Governmental Authority for the account of any Lender pursuant
to Section 3.01, (iii) any Lender is in breach of any of its obligations under
this Agreement or is otherwise a Defaulting Lender, or (iv) any other
circumstance exists hereunder that gives the Borrowers the right to replace a
Lender as a party hereto, then the Borrowers may, at their sole expense and
effort, upon notice to such Lender and the Administrative Agent, require such
Lender to assign and delegate, without recourse (in accordance with and subject
to the restrictions contained in, and consents required by, Section 10.07), all
of its interests, rights and obligations under this Agreement and the related
Loan Documents to an Eligible Assignee that shall assume such obligations (which
assignee may be another Lender, if a Lender accepts such assignment); provided
that:
     (a) the Borrowers shall have paid to the Administrative Agent the
assignment fee specified in Section 10.07(b)(iii);
     (b) such Lender shall have received payment of an amount equal to the
outstanding principal of its Revolving Loans, L/C Advances, L/C Borrowings,
accrued interest thereon, accrued fees and all other amounts payable to it
hereunder and under the other Loan Documents (including any amounts under
Section 3.05) from the assignee (to the extent of such outstanding principal and
accrued interest and fees) or the Borrowers (in the case of all other amounts)
such payment being at par, with no premium or discount;
     (c) in the case of any such assignment resulting from a claim for
compensation under Section 3.04 or payments required to be made pursuant to
Section 3.01, such assignment will result in a reduction in such compensation or
payments thereafter; and
     (d) such assignment does not conflict with applicable Laws.
     A Lender shall not be required to make any such assignment or delegation
if, prior thereto, as a result of a waiver by such Lender or otherwise, the
circumstances entitling the Borrowers to require such assignment and delegation
cease to apply.
     10.16. Defaulting Lender.
     (a) Notwithstanding anything to the contrary contained in this Agreement,
if any Lender becomes a Defaulting Lender, then, until such time as that Lender
is no longer a Defaulting Lender, to the extent permitted by applicable law:
     (i) That Defaulting Lender’s right to approve or disapprove any amendment,
waiver or consent with respect to this Agreement shall be restricted.
     (ii) Any payment of principal, interest, fees or other amounts received by
the Administrative Agent for the account of that Defaulting Lender (whether
voluntary or mandatory, at maturity, pursuant to Section 2.04 (Prepayments) or
otherwise, and including any amounts made available to the Administrative Agent
by the Defaulting Lender pursuant to a
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right of set-off, shall be applied at such time or times as may be determined by
the Administrative Agent as follows:
first, to the payment of any amounts owing by that Defaulting Lender to the
Administrative Agent hereunder;
second, to the payment on a pro rata basis of any amounts owing by that
Defaulting Lender to an L/C Issuer hereunder;
third, if so determined by the Administrative Agent or requested by the L/C
Issuer, to be held as cash collateral for future funding obligations of that
Defaulting Lender of any participation in any Letter of Credit;
fourth, as the Borrowers may request (so long as no Default or Event of Default
exists), to the funding of any Loan in respect of which that Defaulting Lender
has failed to fund its portion thereof as required by this Agreement, as
determined by the Administrative Agent;
fifth, if so determined by the Administrative Agent and the Borrowers, to be
held in a deposit account and released in order to satisfy obligations of that
Defaulting Lender to fund Loans under this Agreement;
sixth, to the payment of any amounts owing to the Lenders, the L/C Issuer as a
result of any judgment of a court of competent jurisdiction obtained by any
Lender, the L/C Issuer against that Defaulting Lender as a result of that
Defaulting Lender’s breach of its obligations under this Agreement;
seventh, so long as no Default or Event of Default exists, to the payment of any
amounts owing to the Borrowers as a result of any judgment of a court of
competent jurisdiction obtained by the Borrowers against that Defaulting Lender
as a result of that Defaulting Lender’s breach of its obligations under this
Agreement; and
eighth, to that Defaulting Lender or as otherwise directed by a court of
competent jurisdiction; provided that if (x) such payment is a payment of the
principal amount of any Loans or reimbursement obligations in respect of which
that Defaulting Lender has not fully funded its appropriate share and (y) such
Loans or reimbursement obligations were made at a time when the conditions set
forth in Section 4.02 were satisfied or waived, such payment shall be applied
solely to pay the Loans of, and reimbursement obligations owed to, all
non-Defaulting Lenders on a pro rata basis prior to being applied to the payment
of any Loans of, or reimbursement obligations owed to, that Defaulting Lender.
Any payments, prepayments or other amounts paid or payable to a Defaulting
Lender that are applied (or held) to pay amounts owed by a Defaulting Lender or
to post cash collateral pursuant to this Section 10.16 shall be deemed paid to
and redirected by that Defaulting Lender, and each Lender irrevocably consents
hereto.
     (iii) That Defaulting Lender (x) shall not be entitled to receive any
commitment fee for any period during which that Lender is a Defaulting Lender
(and the Borrowers shall not be required to pay any such fee that otherwise
would have been required to have been paid to that Defaulting Lender) and
(y) shall be limited in its right to receive fees in respect of Letter of Credit
(if any).
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     (iv) During any period in which there is a Defaulting Lender, for purposes
of computing the amount of the obligation of each non-Defaulting Lender to
acquire, refinance or fund participations in Letters of Credit the ratable
portion of each non-Defaulting Lender shall be computed without giving effect to
the Revolving Commitments of that Defaulting Lender; provided, that, (i) each
such reallocation shall be given effect only if, at the date the Lender becomes
a Defaulting Lender, no Default or Event of Default exists; and (ii) the
aggregate obligation of each non-Defaulting Lender to acquire, refinance or fund
participations in Letters of Credit shall not exceed the positive difference, if
any, of (1) the Revolving Commitments of that non-Defaulting Lender minus
(2) the aggregate Outstandings of that Lender.
     (b) If the Borrowers, the Administrative Agent, and the L/C Issuer agree in
writing in their sole discretion that a Defaulting Lender should no longer be
deemed to be a Defaulting Lender, the Administrative Agent will so notify the
parties hereto, whereupon as of the effective date specified in such notice and
subject to any conditions set forth therein (which may include arrangements with
respect to any cash collateral), that Lender will, to the extent applicable,
purchase that portion of outstanding Loans of the other Lenders or take such
other actions as the Administrative Agent may determine to be necessary to cause
the Loans and participations in Letters of Credit to be held on a pro rata basis
by the Lenders in accordance with their ratable portions (without giving effect
to clause (a)(iv) above), whereupon that Lender will cease to be a Defaulting
Lender; provided that no adjustments will be made retroactively with respect to
fees accrued or payments made by or on behalf of the Borrowers while that Lender
was a Defaulting Lender; and provided, further, that except to the extent
otherwise expressly agreed by the affected parties, no change hereunder from
Defaulting Lender to Lender will constitute a waiver or release of any claim of
any party hereunder arising from that Lender’s having been a Defaulting Lender.
     (c) If any Lender is a Defaulting Lender, then the Borrowers may, at their
sole expense and effort, upon notice to such Lender and the Administrative
Agent, require such Lender to be replaced in accordance with Section 10.15.
     10.17. Governing Law.
     (a) THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH,
THE LAW OF THE STATE OF NEW YORK APPLICABLE TO AGREEMENTS MADE AND TO BE
PERFORMED ENTIRELY WITHIN SUCH STATE; PROVIDED THAT THE ADMINISTRATIVE AGENT AND
EACH LENDER SHALL RETAIN ALL RIGHTS ARISING UNDER UNITED STATES FEDERAL LAW.
     (b) EACH COMPANY AND OTHER PARTY HERETO, AND EACH GUARANTOR, BY EXECUTION
OF A GUARANTY, AGREES TO THIS SECTION 10.17(b). ANY LEGAL ACTION OR PROCEEDING
WITH RESPECT TO THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT MAY BE BROUGHT IN THE
COURTS OF THE STATE OF NEW YORK SITTING IN THE BOROUGH OF NEW YORK OR OF THE
UNITED STATES FOR THE SOUTHERN DISTRICT OF NEW YORK AND APPELLATE COURTS FROM
ANY THEREOF, AND BY EXECUTION AND DELIVERY OF THIS AGREEMENT, THE BORROWERS, THE
ADMINISTRATIVE AGENT AND EACH LENDER CONSENTS, AND BY EXECUTION OF A GUARANTY,
EACH GUARANTOR CONSENTS, FOR ITSELF AND IN RESPECT OF ITS PROPERTY, TO THE
NON-EXCLUSIVE JURISDICTION OF THOSE COURTS. THE BORROWERS, EACH GUARANTOR, THE
ADMINISTRATIVE AGENT AND EACH LENDER (1) IRREVOCABLY WAIVES ANY OBJECTION,
INCLUDING ANY OBJECTION TO THE LAYING OF VENUE OR BASED ON THE GROUNDS OF FORUM
NON CONVENIENS, WHICH IT MAY NOW OR HEREAFTER HAVE TO THE BRINGING OF ANY ACTION
OR PROCEEDING IN SUCH JURISDICTION IN RESPECT OF
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ANY LOAN DOCUMENT OR OTHER DOCUMENT RELATED THERETO, AND (2) IRREVOCABLY
CONSENTS TO THE SERVICE OF PROCESS OUT OF ANY OF THE AFOREMENTIONED COURTS IN
ANY SUCH ACTION OR PROCEEDING BY THE MAILING OF COPIES THEREOF BY CERTIFIED
MAIL, RETURN RECEIPT REQUESTED, POSTAGE PREPAID, AT ITS ADDRESS FOR NOTICES
DESIGNATED HEREIN. THE BORROWERS, EACH GUARANTOR, THE ADMINISTRATIVE AGENT AND
EACH LENDER WAIVES PERSONAL SERVICE OF ANY SUMMONS, COMPLAINT OR OTHER PROCESS,
WHICH MAY BE MADE BY ANY OTHER MEANS PERMITTED BY THE LAW OF SUCH STATE.
     10.18. Waiver of Right to Trial by Jury, Etc. EACH PARTY TO THIS AGREEMENT
AND EACH GUARANTOR, BY EXECUTION OF A GUARANTY, HEREBY (a) EXPRESSLY AND
IRREVOCABLY WAIVES ANY RIGHT TO TRIAL BY JURY OF ANY CLAIM, DEMAND, ACTION OR
CAUSE OF ACTION ARISING UNDER ANY LOAN DOCUMENT OR IN ANY WAY CONNECTED WITH OR
RELATED OR INCIDENTAL TO THE DEALINGS OF THE PARTIES TO THE LOAN DOCUMENTS OR
ANY OF THEM WITH RESPECT TO ANY LOAN DOCUMENT, OR THE TRANSACTIONS RELATED
THERETO, IN EACH CASE WHETHER NOW EXISTING OR HEREAFTER ARISING, AND WHETHER
FOUNDED IN CONTRACT OR TORT OR OTHERWISE; AND EACH PARTY HEREBY AGREES AND
CONSENTS THAT ANY SUCH CLAIM, DEMAND, ACTION OR CAUSE OF ACTION SHALL BE DECIDED
BY COURT TRIAL WITHOUT A JURY, AND THAT ANY PARTY TO THIS AGREEMENT MAY FILE AN
ORIGINAL COUNTERPART OR A COPY OF THIS SECTION WITH ANY COURT AS WRITTEN
EVIDENCE OF THE CONSENT OF EACH PARTY TO THIS AGREEMENT AND EACH GUARANTOR TO
THE WAIVER OF THEIR RIGHT TO TRIAL BY JURY; AND (b) EXPRESSLY AND IRREVOCABLY
WAIVES, TO THE MAXIMUM EXTENT NOT PROHIBITED BY LAW, ANY RIGHT IT MAY HAVE TO
CLAIM OR RECOVER IN ANY SUCH ACTION ANY SPECIAL, EXEMPLARY, PUNITIVE OR
CONSEQUENTIAL DAMAGES, OR DAMAGES OTHER THAN, OR IN ADDITION TO, ACTUAL DAMAGES;
PROVIDED THAT THE WAIVER CONTAINED IN THIS SECTION 10.18 SHALL NOT APPLY TO THE
EXTENT THAT THE PARTY AGAINST WHOM DAMAGES ARE SOUGHT HAS ENGAGED IN GROSS
NEGLIGENCE OR WILLFUL MISCONDUCT.
     10.19. Release. As additional consideration for the execution, delivery and
performance of this Agreement by the parties hereto and to induce the
Administrative Agent, the Collateral Agent and the Lenders to enter into this
Agreement, the Borrowers warrant and represent to the Administrative Agent, the
Collateral Agent and the Lenders that no facts, events, statuses or conditions
exist or have existed which, either now or with the passage of time or giving of
notice, or both, constitute or will constitute a basis for any claim or cause of
action against the Administrative Agent, the Collateral Agent or any Lender or
any defense to (i) the payment of Obligations under the Revolving Notes and/or
the Loan Documents, or (ii) the performance of any of its obligations with
respect to the Revolving Notes and/or the Loan Documents. In the event any such
facts, events, statuses or conditions exist or have existed, Borrowers
unconditionally and irrevocably hereby RELEASE, RELINQUISH and forever DISCHARGE
Administrative Agent, the Collateral Agent and the Lenders, as well as their
predecessors, successors, assigns, agents, officers, directors, shareholders,
employees and representatives, of and from any and all claims, demands, actions
and causes of action of any and every kind or character, past or present, which
any Borrower may have against any of them or their predecessors, successors,
assigns, agents, officers, directors, shareholders, employees and
representatives arising out of or with respect to (a) any right or power to
bring any claim for usury or to pursue any cause of action based on any claim of
usury, and (b) any and all transactions relating to the Loan Documents occurring
prior to the date hereof, including any loss, cost or damage, of any kind or
character, arising out of or in any way connected with or in any way resulting
from the acts, actions or omissions of any of them, and their predecessors,
successors, assigns, agents, officers, directors, shareholders, employees and
representatives, including any breach of fiduciary duty, breach of any duty of
fair dealing, breach of confidence, breach of funding
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commitment, undue influence, duress, economic coercion, conflict of interest,
negligence, bad faith, malpractice, intentional or negligent infliction of
mental distress, tortious interference with contractual relations, tortious
interference with corporate governance or prospective business advantage, breach
of contract, deceptive trade practices, libel, slander or conspiracy, but in
each case only to the extent permitted by applicable Law.
     10.20. Time of the Essence. Time is of the essence of the Loan Documents.
     10.21. Release of Liens on KPC Pipeline. The Administrative Agent and the
Lenders agree to release and discharge, from any lien securing the Indebtedness
under this Agreement, the KPC Pipeline and the KPC Pipeline LLC equity
contemporaneously with the release of the first lien held by RBC as collateral
agent (or its successor) for the benefit of the KPC Lenders.
     10.22. Amendment and Restatement. Pursuant to (i) the Assignment of First
Lien Notes, on the Closing Date, $105,741,852.80 of the outstanding amount of
principal and interest owing by MidContinent under the Prior First Lien Credit
Agreement and the notes issued pursuant thereto has been refinanced, renewed,
rearranged and extended by Loans under this Agreement, (ii) the Assignment of
Second Lien Notes, Liens and Security Interest, on the Closing Date,
$30,220,618.53 of the outstanding amount of principal and interest owing by
MidContinent under the Prior Second Lien Credit Agreement and the notes issued
pursuant thereto has been refinanced, renewed, rearranged and extended by Loans
under this Agreement and (iii) the Assignment of Midstream Notes, Liens and
Security Interest, on the Closing Date, $89,001,098.16 of the outstanding amount
of principal and interest owing by PESC and MidContinent (successor by merger to
Bluestem) under the Prior Midstream Credit Agreement and the notes issued
pursuant thereto has been refinanced, renewed, rearranged and extended by Loans
under this Agreement.
     (a) This Agreement amends and restates in its entirety the Prior First Lien
Credit Agreement and the Prior Second Lien Credit Agreement and amends and
restates in part the Prior Midstream Credit Agreement. The Revolving Notes
amend, restate, rearrange, extend and renew the Indebtedness under the Prior
First Lien Credit Agreement, Prior Second Lien Credit Agreement and in part
under the Prior Midstream Credit Agreement. The Lenders are subrogated to the
rights of the lenders under the Prior First Lien Credit Agreement, Prior Second
Lien Credit Agreement and the Prior Midstream Credit Agreement to the extent of
the Indebtedness rearranged hereby. All liens and security interests created and
existing under the Prior First Lien Credit Agreement, the Prior Second Lien
Credit Agreement and, accept for a first lien on the KPC Pipeline, the Prior
Midstream Credit Agreement shall continue in force and effect to secure the
Obligations of the Borrowers to the Lenders pursuant to the Revolving Notes and
this Agreement, and each Borrower hereby ratifies, adopts and confirms all such
prior liens and security interests.
     10.23. Termination of Revolving Commitments Under Original Credit
Agreement. As of the Closing Date, the Revolving Commitments under the Prior
Credit Agreements are terminated and the Administrative Agent and the Lenders
hereby waive any right to receive prior notice of such termination. Each Lender
agrees upon the Closing Date to return to the Borrowers with reasonable
promptness all “Notes” as defined under the Prior Credit Agreements which were
delivered by the Borrowers (or any of their predecessors) in exchange for new
Notes to be issued pursuant to this Agreement.
     10.24. No Novation, Etc. To the extent of the Aggregate Commitment
outstanding under the First Lien Credit Agreement in the amount of $250,000,000,
under the Second Lien Credit Agreement in the amount of $30,220,618.53 and under
the Midstream Credit Agreement in the amount of $89,001,098.16, nothing
contained herein shall be deemed a novation of or a repayment or new advance
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of any obligation of any Borrower thereunder. Only to the extent of an increase
in the Aggregate Revolving Commitment over that amount shall there be deemed to
be a new advance by the Lenders to the Borrowers under this Agreement. The
Indebtedness owing under the Prior Credit Agreements is renewed, rearranged,
extended and carried forward by this Agreement (to the extent aforesaid) and all
of the liens and security interests securing the “Obligations” as defined in the
Prior Credit Agreements are carried forward and secure, without interruption or
loss or priority, the Obligations under this Agreement.
     10.25. Joint and Several Liability. (a) Each of the Borrowers acknowledges
and agrees that it is the intent of the parties that each such Borrower be
primarily liable for the Obligations as a joint and several obligor. It is the
intention of the parties that with respect to liability of any Borrower
hereunder arising solely by reason of its being jointly and severally liable for
Credit Extensions, the obligations of such Borrower shall be absolute,
unconditional and irrevocable irrespective of:
     (i) any lack of validity, legality or enforceability of this Agreement, any
Revolving Note, or any other Loan Document as to any Borrower, as the case may
be;
     (ii) the failure of the Administrative Agent, Collateral Agent or any
Lender or any holder of any Revolving Note;
     (a) to enforce any right or remedy against any Borrower, as the case may
be, or any other Person (including any Guarantor) under the provisions of this
Agreement, such Revolving Note, any other Loan Document or otherwise; or
     (b) to exercise any right or remedy against any Guarantor of, or Collateral
securing, the Obligations;
     (iii) any change in the time, manner or place of payment of, or in any
other term of, all or any of the Obligations, or any other extension, compromise
or renewal of any Obligations;
     (iv) any reduction, limitation, impairment or termination of any
Obligations with respect to any Borrower, as the case may be, for any reason,
including any claim of waiver, release, surrender, alteration or compromise, and
shall not be subject to (and each of the Borrowers hereby waives any right to or
claim of) any defense (other than the defense of payment in full of the
Obligations) or setoff, counterclaim, recoupment or termination whatsoever by
reason of the invalidity, illegality, nongenuineness, irregularity, compromise,
unenforceability of, or any other event or occurrence affecting, any Obligations
with respect to any Borrower, as the case may be;
     (v) any addition, exchange, release, surrender or nonperfection of any
Collateral, or any amendment to or waiver or release or addition of, or consent
to departure from, any Guaranty, held by any Lender or any holder of the
Revolving Notes or any security interest or Lien securing any of the
Obligations; or
     (vi) any other circumstance which might otherwise constitute a defense
(other than the defense of payment in full of the Obligations) available to, or
a legal or equitable discharge of, any Borrower, as the case may be, or any
Guarantor.
     (b) Each of the Borrowers agrees that its joint and several liability
hereunder shall continue to be effective or be reinstated, as the case may be,
if at any time any payment (in whole or in part) of any of the Obligations is
rescinded or must be restored by any Lender or any holder of any Revolving Note,
Borrowing Base
Credit Agreement

103

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

 

upon the insolvency, bankruptcy or reorganization of any Borrower, as the case
may be, as though such payment had not been made;
     (c) Each of the Borrowers hereby expressly waives: (i) notice of the
Lenders’ acceptance of this Agreement; (ii) notice of the existence or creation
or non-payment of all or any of the Obligations other than notices expressly
provided for in this Agreement; (iii) presentment, demand, notice of dishonor,
protest, and all other notices whatsoever other than notices expressly provided
for in this Agreement; (iv) any claim or defense based on an election of
remedies; and (v) all diligence in collection or protection of or realization
upon the Obligations or any part thereof, any obligation hereunder, or any
security for or guaranty of any of the foregoing.
     (d) No delay on any of the Administrative Agent’s, Collateral Agent’s or
any Secured Party’s part in the exercise of any right or remedy shall operate as
a waiver thereof, and no single or partial exercise by any of the foregoing of
any right or remedy shall preclude other or further exercise thereof or the
exercise of any other right or remedy. No action of any of the Administrative
Agent, Collateral Agent or Secured Parties permitted hereunder shall in any way
affect or impair any such party’s rights or any Obligations under this
Agreement.
     (e) Each of the Borrowers hereby represents and warrants to each of the
Administrative Agent and Lenders that it now has and will continue to have
independent means of obtaining information concerning the other Borrower’s
affairs, financial condition and business. Neither the Administrative Agent nor
any Lender shall have any duty or responsibility to provide any Borrower with
any credit or other information concerning such other Borrower’s affairs,
financial condition or business which may come into the Administrative Agent’s
or Lender’s possession.
     (f) Each of the Borrowers represents and warrants (i) that the business
operations of the Borrowers are interrelated and that the business operations of
the Borrowers complement one another, and such entities have a common business
purpose, and (ii) that, to permit their uninterrupted and continuous operations,
such entities now require and will from time to time hereafter require funds and
credit accommodations for general business purposes and (iii) that the proceeds
of Credit Extensions hereunder will directly or indirectly benefit the Borrowers
hereunder, severally and jointly, regardless of which Borrower receives part or
all of the proceeds of such Credit Extension.
     (g) Notwithstanding anything to the contrary contained herein, it is the
intention of the Borrowers, the Administrative Agent and the Lenders that the
amount of the respective Borrower’s obligations hereunder shall be in, but not
in excess of, the maximum amount thereof not subject to avoidance or recovery by
operation of any applicable Debtor Relief Law. To that end, but only in the
event and to the extent that the Borrowers’ respective obligations hereunder or
any payment made pursuant thereto would, but for the operation of the foregoing
proviso, be subject to avoidance or recovery under any applicable Debtor Relief
Law, the amount of the Borrowers’ respective obligations hereunder shall be
limited to the largest amount which, after giving effect thereto, would not,
under applicable Debtor Relief Laws, render the Borrower’s respective
obligations hereunder unenforceable or avoidable or subject to recovery under
applicable Debtor Relief Laws. To the extent any payment actually made hereunder
exceeds the limitation contained in this Section 10.25(g), then the amount of
such excess shall, from and after the time of payment by the Borrowers (or any
of them), be reimbursed by the Lenders upon demand by such Borrowers. The
foregoing proviso is intended solely to preserve the rights of the
Administrative Agent and the Lenders hereunder against the Borrowers to the
maximum extent permitted by applicable Debtor Relief Laws and neither any
Borrower nor any Guarantor nor any other Person shall have any right or claim
under this Section 10.25(g) that would not otherwise be available under
applicable Debtor Relief Laws.
Borrowing Base
Credit Agreement

104

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

 

     10.26. ENTIRE AGREEMENT. THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS
REPRESENT 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 ORAL AGREEMENTS BETWEEN THE PARTIES.
REMAINDER OF PAGE INTENTIONALLY LEFT BLANK.
SIGNATURE PAGES FOLLOW.
Borrowing Base
Credit Agreement

105

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

 

IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly
executed as of the date first above written.

          POSTROCK ENERGY SERVICES CORPORATION,
as a Borrower
 
       
By:
  /s/ David C. Lawler           David C. Lawler, President and Chief Executive
Officer
 
        POSTROCK MIDCONTINENT PRODUCTION, LLC,
as a Borrower,
 
        By:   POSTROCK ENERGY SERVICES CORPORATION,
Its sole member
 
       
 
  By:   /s/ David C. Lawler
 
       
 
      David C. Lawler, President
and Chief Executive Officer

Borrowing Base
Credit Agreement

Signature Page 1

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

 

      ROYAL BANK OF CANADA,
as Administrative Agent and Collateral Agent
 
   
By:
  /s/ Susan Khokher
 
   
Name:
  Susan Khokher
 
   
Title:
  Manager, Agency
 
   

Borrowing Base
Credit Agreement

Signature Page 2

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

 

      ROYAL BANK OF CANADA, as Lender
and L/C Issuer
 
   
By:
  /s/ Leslie P. Vowell
 
   
 
  Leslie P. Vowell
 
  Attorney-in-Fact

Borrowing Base
Credit Agreement

Signature Page 3

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

 

      SUNTRUST BANK,
as Lender
 
   
By:
  /s/ Janet R. Naifeh
 
   
Name:
  Janet R. Naifeh
 
   
Title:
  Senior Vice President
 
   

Borrowing Base
Credit Agreement

Signature Page 4

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

 

      KEYBANK NATIONAL ASSOCIATION,
as Lender
 
   
By:
  /s/ Robert F. Pollis, Jr.
 
   
Name:
  Robert F. Pollis, Jr.
 
   
Title:
  Senior Vice President
 
   

Borrowing Base
Credit Agreement

Signature Page 5

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

 

      U.S. BANK NATIONAL ASSOCIATION,
as Lender
 
   
By:
  /s/ Saqib Khawaja
 
   
Name:
  Saqib Khawaja
 
   
Title:
  Vice President
 
   

Borrowing Base
Credit Agreement

Signature Page 6

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

 

      SOCIÉTÉ GÉNÉRALE,
as Lender
 
   
By:
  /s/ Cameron Null
 
   
Name:
  Cameron Null 
 
   
Title:
  Vice President 
 
   

Borrowing Base
Credit Agreement

Signature Page 7

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

 

      WELLS FARGO BANK, N.A.,
as Lender
 
   
By:
  /s/ Ronald F. Bentien, Jr. 
 
   
Name:
  Ronald F. Bentien, Jr. 
 
   
Title:
  Director 
 
   

Borrowing Base
Credit Agreement

Signature Page 8

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

 

      COMERICA BANK, as Lender
 
   
By:
  /s/ James A. Morgan 
 
   
Name:
  James A. Morgan 
 
   
Title:
  Vice President 
 
   

Borrowing Base
Credit Agreement

Signature Page 9

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

 

      RZB FINANCE, LLC, as Lender
 
   
By:
  /s/ John A. Valiska
 
   
Name:
  John A. Valiska
 
   
Title:
  First Vice President
 
   
 
   
By:
  /s/ Christoph Hoedl
 
   
Name:
  Christoph Hoedl
 
   
Title:
  First Vice President
 
   

Borrowing Base
Credit Agreement

Signature Page 10

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

 

      COMPASS BANK, as Lender
 
   
By:
  /s/ John W. Wood
 
   
Name:
  John W. Wood
 
   
Title:
  Vice President
 
   

Borrowing Base
Credit Agreement

Signature Page 11

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

 

      BNP PARIBAS,
as Lender
 
   
By:
  /s/ Larry Robinson
 
   
Name:
  Larry Robinson
 
   
Title:
  Director
 
   
 
   
By:
  /s/ Betsy Jocher
 
   
Name:
  Betsy Jocher
 
   
Title:
  Director
 
   

Borrowing Base
Credit Agreement

Signature Page 12

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

 

      BANK OF OKLAHOMA, N.A.,
as a Lender
 
   
By:
  /s/ Timothy F. Sheehan
 
   
Name:
  Timothy F. Sheehan
 
   
Title:
  Senior Vice President
 
   

Borrowing Base
Credit Agreement

Signature Page 13

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

 

      AMEGY BANK NATIONAL ASSOCIATION,
as Lender
 
   
By:
  /s/ Terry Owen McCarter
 
   
Name:
  Terry Owen McCarter
 
   
Title:
  Senior Vice President
 
   

Borrowing Base
Credit Agreement

Signature Page 14

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

 

EXHIBIT A-1
FORM OF BORROWING NOTICE
Date:                     , _____

To:   Royal Bank of Canada, as Administrative Agent

Ladies and Gentlemen:
     Reference is made to that certain Second Amended and Restated Credit
Agreement, dated as of ______, 2010 (as amended, restated, extended,
supplemented or otherwise modified in writing from time to time, the
“Agreement;” the terms defined therein being used herein as therein defined),
among PostRock Energy Services Corporation, a Delaware corporation, and PostRock
MidContinent Production, LLC, a Delaware limited liability company
(collectively, the “Borrowers”), and Royal Bank of Canada, as Administrative
Agent, and the Lenders from time to time party thereto.
     The undersigned hereby requests:

I.   FACILITY

  1.   Status Information for the Facility

  (a)   Amount of Facility: $350,000,000     (b)   Revolving Loans outstanding
prior to the Borrowing requested herein: $                         (c)   Letters
of Credit outstanding prior to the Borrowing requested herein;
$                         (d)   Principal amount of Revolving Loans available to
be borrowed is (A) the lesser of 1(a) and the Borrowing Base as of the most
recent determination date minus (B) the sum of (1(b) and 1(c):
$                    

  2.   Amount of Borrowing: $                         3(a)   Initial Borrowing
Base as of Closing Date: $225,000,000     3(b)   Borrowing Base as of most
recent redetermination: $                         4.   Requested date of
Borrowing:                     , 201_; must be prior to Maturity Date.     5.  
Requested Type of Loan and applicable Dollar amount:

  (a)   Base Rate Loan for $                         (b)   Eurodollar Rate Loan
with Interest Period of:

       
(i) one month for
  $                        
(ii) two months for
  $                        
(iii) three months for
  $                        
(iv) six months for
  $                      

Exhibit A-1
Form of Borrowing Notice

Page 1

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

 

  6.   Purpose of Revolving Loan:

  ___   To finance working capital and general company purposes of the
Borrowers, including the acquisition, development, exploitation and exploration
of Oil and Gas Properties and the Midstream Businesses     ___   To pay fees,
costs and expenses owed pursuant to the Agreement     ___   To finance Permitted
Acquisitions     ___   To issue Letters of Credit     ___   To pay principal and
interest on the Secured Pipeline Loan or to make permitted Transfer Payments and
Restricted Payments     ___   To rearrange Indebtedness.

     The undersigned hereby certifies that the following statements will be true
on the date of the proposed Borrowing(s) after giving effect thereto and to the
application of the proceeds therefrom:
          (a) the representations and warranties of the Borrowers contained in
Article V of the Agreement are true and correct in all material respects as
though made on and as of such date (except such representations and warranties
which expressly refer to an earlier date, which are true and correct in all
material respects as of such earlier date);
          (b) the amount of the requested Borrowing, when added to Revolving
Loans outstanding prior to the Borrowing and Letters of Credit will not exceed
the lesser of (i) Borrowing Base and (ii) the Aggregate Revolving Commitment;
and
          (c) no Default or Event of Default has occurred and is continuing, or
would result from such proposed Borrowing(s).
Exhibit A-1
Form of Borrowing Notice

Page 2

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

 

     The Borrowing requested herein complies with Sections 2.01, 2.02 and 2.03
of the Agreement, as applicable.

                  POSTROCK ENERGY SERVICES CORPORATION,
as a Borrower    
 
           
 
  By:        
 
     
 
David C. Lawler, President and Chief Executive Officer     

                      POSTROCK MIDCONTINENT PRODUCTION, LLC,
as a Borrower,    
 
                    By:   POSTROCK ENERGY SERVICES CORPORATION,
Its sole member    
 
               
 
      By:        
 
               
 
          David C. Lawler, President    
 
          and Chief Executive Officer    

Exhibit A-1
Form of Borrowing Notice

Page 3

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

 

EXHIBIT A-2
FORM OF CONVERSION/CONTINUATION NOTICE
Date:                     , ____

TO:   Royal Bank of Canada, as Administrative Agent

Ladies and Gentlemen:
     Reference is made to that certain Second Amended and Restated Credit
Agreement, dated as of ______, 2010 (as amended, restated, extended,
supplemented or otherwise modified in writing from time to time, the
“Agreement;” the terms defined therein being used herein as therein defined),
among PostRock Energy Services Corporation, a Delaware corporation, and PostRock
MidContinent Production, LLC, a Delaware limited liability company
(collectively, the “Borrowers”), and Royal Bank of Canada, as Administrative
Agent, and the Lenders from time to time party thereto.
     The undersigned hereby requests:

I.   FACILITY

  1.   Amount of [conversion] [continuation]: $                         2.  
Existing rate: Check applicable blank

  (a)   Base Rate
                                                                     (b)  
Eurodollar Rate Loan with         Interest Period of:

     
(i) one month
   
 
     
(ii) two months
   
 
     
(iii) three months
   
 
     
(iv) six months
   
 
   

  3.   If a Eurodollar Rate Loan, date of the last day of the Interest Period
for such Loan:                     , 201_.         The Revolving Loan described
above is to be [converted] [continued] as follows:     4.   Requested date of
[conversion] [continuation]:                     , 201_.     5.   Requested Type
of Loan and applicable Dollar amount:

  (a)   Base Rate Loan for $                         (b)   Eurodollar Rate Loan
with Interest Period of:

     
(i) one month for
  $                      
(ii) two months for
  $                      
(iii) three months for
  $                      
(iv) six months for
  $                    

Exhibit A-2
Form of Conversion/Continuation Notice

Page 1

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

 

     The [conversion] [continuation] requested herein complies with
Sections 2.01 and 2.03 of the Agreement, as applicable.
          For all Borrowings (applicable Borrower only):

                  POSTROCK ENERGY SERVICES CORPORATION,
as a Borrower    
 
           
 
  By:        
 
     
 
David C. Lawler, President and Chief Executive Officer    

                      POSTROCK MIDCONTINENT PRODUCTION, LLC,
as a Borrower,    
 
                    By:   POSTROCK ENERGY SERVICES CORPORATION,
Its sole member    
 
               
 
      By:        
 
               
 
          David C. Lawler, President    
 
          and Chief Executive Officer    

Exhibit A-2
Form of Conversion/Continuation Notice

Page 2

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

 

EXHIBIT A-3
FORM OF REPAYMENT NOTICE
Date: ____________,  _____
To: Royal Bank of Canada, as Administrative Agent
Ladies and Gentlemen:
     Reference is made to that certain Second Amended and Restated Credit
Agreement, dated as of ______, 2010 (as amended, restated, extended,
supplemented or otherwise modified in writing from time to time, the
“Agreement;” the terms defined therein being used herein as therein defined),
among PostRock Energy Services Corporation, a Delaware corporation and PostRock
MidContinent Production, LLC, a Delaware limited liability company
(collectively, the “Borrowers”), and Royal Bank of Canada, as Administrative
Agent, and the Lenders from time to time party thereto.
     The undersigned applicable Borrower/s hereby are repaying the Facility as
follows:

I.   FACILITY

  1.   Revolving Loans outstanding prior to the repayment referred to herein:
$__________     2.   Amount of repayment: $__________     3.   Date of
repayment: _______________, 201_.     4.   Type of Loan and amount to which
repayment applies:

  (a)   Base Rate Loan for $__________     (b)   Eurodollar Rate Loan with
Interest Period of:

  (i)   one month           $__________     (ii)   two months
        $__________     (iii)   three months       $__________     (iv)   six
months          $__________

    The repayment referred to herein complies with Section 2.04 of the
Agreement.

For all Borrowings (applicable Borrower/s only):

            POSTROCK ENERGY SERVICES CORPORATION,
as a Borrower
    By:                  David C. Lawler, President and Chief Executive Officer 
         

Exhibit A-3
Form of Repayment Notice

Page 1

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

 

                      POSTROCK MIDCONTINENT PRODUCTION, LLC,
as a Borrower,    
 
                    By:   POSTROCK ENERGY SERVICES CORPORATION,         Its sole
member    
 
               
 
      By:        
 
         
 
David C. Lawler, President
and Chief Executive Officer    

Exhibit A-3
Form of Repayment Notice

Page 2

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

 

EXHIBIT B
FORM OF REVOLVING NOTE

      $_____________________   _________, 2010

     FOR VALUE RECEIVED, the undersigned (the “Borrowers”), hereby jointly and
severally promise to pay to the order of _____________________ (the “Lender”),
on the Maturity Date (as defined in the Credit Agreement referred to below) the
principal amount of _______________ Dollars ($__________), or such lesser
principal amount of Revolving Loans made by Lender under the Facility (both as
defined in such Credit Agreement) due and payable by the Borrowers to the Lender
on the Maturity Date under that certain Second Amended and Restated Credit
Agreement, dated as of even date herewith (as amended, restated, extended,
supplemented or otherwise modified in writing from time to time, the “Credit
Agreement”; the terms defined therein being used herein as therein defined),
among PostRock Energy Services Corporation, a Delaware corporation, and PostRock
MidContinent Production, LLC, a Delaware limited liability company, as Borrowers
and Royal Bank of Canada, as Administrative Agent and Collateral Agent, and the
Lenders from time to time party thereto.
     The Borrowers promise to pay interest on the unpaid principal amount of
each Revolving Loan from the date of such Revolving Loan until such principal
amount is paid in full, at such interest rates, and at such times as are
specified in the Credit Agreement. All payments of principal and interest shall
be made to the Administrative Agent for the account of the Lender in Dollars in
immediately available funds to the account designated by the Administrative
Agent in the Credit Agreement. If any amount is not paid in full when due
hereunder, such unpaid amount shall bear interest, to be paid upon demand, from
the due date thereof until the date of actual payment (and before as well as
after judgment) computed at the per annum rate set forth in the Credit
Agreement.
     This Revolving Note is one of the Revolving Notes referred to in the Credit
Agreement, is entitled to the benefits thereof and is subject to optional and
mandatory prepayment in whole or in part as provided therein. This Revolving
Note is also entitled to the benefits of each Guaranty and the Collateral
Documents. Upon the occurrence and continuation of one or more of the Events of
Default specified in the Credit Agreement, all amounts then remaining unpaid on
this Revolving Note shall become, or may be declared to be, immediately due and
payable all as provided in the Credit Agreement. Revolving Loans made by the
Lender shall be evidenced by one or more loan accounts or records maintained by
the Lender in the ordinary course of business. The Lender may also attach
schedules to this Revolving Note and endorse thereon the date, amount and
maturity of its Revolving Loans and payments with respect thereto.
     This Revolving Note is a Loan Document and is subject to Section 10.10 of
the Credit Agreement, which is incorporated herein by reference the same as if
set forth herein verbatim.
     Each Borrower, for itself, its successors and assigns, hereby waives
diligence, presentment, protest and demand and notice of protest, notice of
intent to accelerate, notice of acceleration, demand, dishonor and non-payment
of this Revolving Note.
Exhibit B
Form of Revolver Note

Page 1

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

 

     THIS REVOLVING NOTE SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH
THE LAWS OF THE STATE OF NEW YORK.

                      POSTROCK ENERGY SERVICES CORPORATION,
as a Borrower    
 
               
 
  By:                                   David C. Lawler, President and Chief
Executive Officer    
 
                    POSTROCK MIDCONTINENT PRODUCTION, LLC,
as a Borrower,    
 
                    By:   POSTROCK ENERGY SERVICES CORPORATION,         Its sole
member    
 
               
 
      By:        
 
         
 
David C. Lawler, President
and Chief Executive Officer    

Exhibit B
Form of Revolver Note

Page 2

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

 

EXHIBIT C
FORM OF COMPLIANCE CERTIFICATE
(Pursuant to Section 6.02 of the Agreement)
Financial Statement Date: ___________, ____
To: Royal Bank of Canada, as Administrative Agent
Ladies and Gentlemen:
     Reference is made to that certain Second Amended and Restated Credit
Agreement, dated as of ______, 2010 (as amended, restated, extended,
supplemented or otherwise modified in writing from time to time, the
“Agreement;” the terms defined therein being used herein as therein defined),
among PostRock Energy Services Corporation, a Delaware corporation, and PostRock
MidContinent Production, LLC, a Delaware limited liability company
(collectively, the “Borrowers”), and Royal Bank of Canada, as Administrative
Agent, and the Lenders from time to time party thereto.
     Capitalized terms used herein but not defined herein shall have the meaning
set forth in the Agreement.
     The undersigned Responsible Officers hereby certify as of the date hereof
that they are the ___________________________ of the Borrowers, and that, as
such, they are authorized to execute and deliver this Certificate to the
Administrative Agent on the behalf of the Borrowers, and that:
     [Use the following for fiscal year-end financial statements]
     Attached hereto as Schedule 1 are the year-end audited consolidated
financial statements of Parent and its Subsidiaries and the consolidating
financial statements of Parent and its Subsidiaries required by Section 6.01(a)
of the Agreement for the fiscal year of Parent ended as of the above date,
together with the report and opinion of an independent certified public
accountant required by such section; and
     [Use the following for fiscal quarter-end financial statements]
     Attached hereto as Schedule 1 are, the unaudited consolidated financial
statements of Parent and its Subsidiaries and the consolidating financial
statements of Parent and its Subsidiaries required by Section 6.01(b) of the
Agreement for the fiscal quarter of Parent ended as of the above date and the
portion of Parent’s fiscal year then ended, together with a certificate of a
Responsible Officer of Parent, stating that such financial statements fairly
present the financial condition, results of operations and cash flows of Parent
and its Subsidiaries (including the Borrowers), as applicable, in accordance
with GAAP as at such date and for such period, subject only to normal year-end
audit adjustments and the absence of footnotes.
     [Use the following for both fiscal year-end and quarter-end financial
statements]
     1. The undersigned has reviewed and is familiar with the terms of the
Agreement and has made, or has caused to be made under his/her supervision, a
detailed review of the transactions and condition (financial or otherwise) of
Parent and the Borrowers during the accounting period covered by the attached
financial statements.
Exhibit C
Form of Compliance Certificate

Page 1

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

 

     2. A review of the activities of Parent and the Borrowers during such
fiscal period has been made under the supervision of the undersigned with a view
to determining whether during such fiscal period Parent and the Borrowers
performed and observed all their respective Obligations under the Loan
Documents, and no Default or Event of Default has occurred and is continuing
except as follows (list of each such Default or Event of Default and include the
information required by Section 6.03 of the Credit Agreement):
     3. The covenant analyses and information set forth on Schedule 2 attached
hereto are true and accurate on and as of the date of this Certificate.
     IN WITNESS WHEREOF, the undersigned has executed this Certificate as of
___________, _______.

                      POSTROCK ENERGY SERVICES CORPORATION,
as a Borrower    
 
               
 
  By:                                        David C. Lawler, President and
Chief Executive Officer    
 
                    POSTROCK MIDCONTINENT PRODUCTION, LLC,
as a Borrower,    
 
                    By:   POSTROCK ENERGY SERVICES CORPORATION,         Its sole
member    
 
               
 
      By:        
 
         
 
David C. Lawler, President
and Chief Executive Officer    

Exhibit C
Form of Compliance Certificate

Page 2

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For the Quarter/Year ended
_______________________ (“Statement Date”)
SCHEDULE 2
to the Compliance Certificate
($ in 000’s)

              I.   Section 7.16(a) — Current Ratio    
 
  A.   Consolidated current assets (plus unused Borrowing Base availability) as
at most recent Financial Statement Date:   $_________
 
  B.   Consolidated current liabilities as at most recent Financial Statement
Date:   $_________
 
  C.   Is ratio of I.A. to I.B greater than to 1.0 to 1.0   Yes/No          II.
  Section 7.16(b) — Interest Coverage Ratio.    
 
            A.   Adjusted Consolidated EBITDA for four consecutive fiscal
quarters ending on the Statement Date (“Subject Period”) (see Credit Agreement
definition of “Consolidated EBITDA” and “Adjusted Consolidated EBITDA”):    
 
  1.   Consolidated EBITDA for Subject Period (prior to pro forma adjustments
for Material Dispositions pursuant to Section 7.15 (d) and Permitted
Acquisitions and Material Acquisitions pursuant to Section 7.15(e)):  
$_________
 
  2.   Pro forma adjustments to EBITDA for Material Dispositions during the
Subject Period (Section 7.15(d)), giving effect to such Material Dispositions on
a pro forma basis for the Subject Period as if such Material Dispositions
occurred on the first day of the Subject Period:   $_________
 
  3.   Pro forma adjustments to EBITDA for Permitted Acquisitions and Material
Acquisitions during the Subject Period (Section 7.15(e)), giving effect to such
Permitted Acquisitions and Material Acquisitions on a pro forma basis for the
Subject Period as if such Permitted Acquisitions and Material Acquisitions
occurred on the first day of the Subject Period:   $_________
 
  4.   Consolidated EBITDA including pro forma adjustments for Material
Dispositions, Permitted Acquisitions, and Material Acquisitions (Lines II.A.
1-4):   $_________
 
           
 
          $_________
B.
           
 
  1.   Adjusted Consolidated EBITDA (Line II.A.4):   $_________
 
  2.   Consolidated Interest Charges (Line II.B.2):   $_________
 
  3.   Imputed interest charges on Synthetic Lease Obligations of Borrowers and
their Subsidiaries for the Subject Period: (Line II.B.3)   $_________
 
  4.   Interest Coverage Ratio: (Line II.B.1) divided by (Lines II.B.2 +
II.B.3):   ____ to 1.0
 
           
 
      Is the Interest Coverage Ratio greater than 3.0 to 1.0?   Yes/No         
 
            III.   Section 7.16(c) — Leverage Ratio.    

Exhibit C
Form of Compliance Certificate

Page 3

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              A.   Cash Adjusted Consolidated Funded Debt    
 
  1.   Cash Adjusted Consolidated Funded Debt on Statement Date (borrowed money
Indebtedness, letter of credit reimbursement obligations, Capital Leases,
Synthetic Leases, Guaranty Obligations less cash on deposit under control
agreement)   $_________
 
            B.   Adjusted Consolidated EBITDA    
 
  1.   Adjusted Consolidated EBITDA (Line II.A.4 above)    
 
  2   Total Leverage Ratio: (Line III.A.1) divided by (Line III.B.1):   ____ to
1.0
 
           
 
  3.   Is the Leverage Ratio less than 4.5 to 1.0 in Q3 2010 to Q1 2011, less
than 4.0 to 1.0 in Q2 2011 to Q1 2012, or less than 3.5 to 1.0 from Q2-2012 to
Maturity?   Yes/No         

Exhibit C
Form of Compliance Certificate

Page 4

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EXHIBIT D
FORM OF ASSIGNMENT AND ASSUMPTION
     This Assignment and Assumption (the “Assignment and Assumption”) is dated
as of the Effective Date set forth below and is entered into by and between
[Insert name of Assignor] (the “Assignor”) and [Insert name of Assignee] (the
“Assignee”). Capitalized terms used but not defined herein shall have the
meanings given to them in the Credit Agreement identified below (as may be
amended, the “Credit Agreement”), receipt of a copy of which is hereby
acknowledged by the Assignee. The Standard Terms and Conditions set forth in
Annex I attached hereto are hereby agreed to and incorporated herein by
reference and made a part of this Assignment and Assumption as if set forth
herein in full.
     For an agreed consideration, the Assignor hereby irrevocably sells and
assigns to the Assignee, and the Assignee hereby irrevocably purchases and
assumes from the Assignor, subject to and in accordance with the Standard Terms
and Conditions and the Credit Agreement, as of the Effective Date inserted by
the Administrative Agent as contemplated below (i) all of the Assignor’s rights
and obligations in its capacity as a Lender under the Credit Agreement and any
other documents or instruments delivered pursuant thereto to the extent related
to the amount and percentage interest identified below of all of such
outstanding rights and obligations of the Assignor under the respective
facilities identified below and (ii) to the extent permitted to be assigned
under applicable law, all claims, suits, causes of action and any other right of
the Assignor (in its capacity as a Lender) against any Person, whether known or
unknown, arising under or in connection with the Credit Agreement, any other
documents or instruments delivered pursuant thereto or the loan transactions
governed thereby or in any way based on or related to any of the foregoing
including, but not limited to, contract claims, tort claims, malpractice claims,
statutory claims and all other claims at law or in equity related to the rights
and obligations sold and assigned pursuant to clause (i) above (the rights and
obligations sold and assigned pursuant to clauses (i) and (ii) above being
referred to herein collectively as the “Assigned Interest”). Such sale and
assignment is without recourse to the Assignor and, except as expressly provided
in this Assignment and Assumption, without representation or warranty by the
Assignor.

                 
 
    1.     Assignor:    
 
               
 
    2.     Assignee:    
 
              [and is an Affiliate/Approved Fund of [identify Lender]
 
               
 
    3.     Borrowers:   PostRock Energy Services Corporation, a Delaware
corporation, and PostRock MidContinent Production, LLC, a Delaware limited
liability company
 
               
 
    4.     Administrative Agent:   Royal Bank of Canada, as the administrative
agent under the Credit Agreement
 
               
 
    5.     Credit Agreement:   Second Amended and Restated Credit Agreement,
dated as of ______, 2010 among the Borrowers, and Royal Bank of Canada, as
Administrative Agent, and the Lenders from time to time party thereto

Exhibit D

 

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    6.     Assigned Interest:    

                              Aggregate Amount of   Amount of        
Commitment/Loans for   Commitment/Loans   Percentage Assigned of     all
Lenders*   Assigned*   Commitment/Loans
Revolving Loans:
  $       $         %  
Total:
  $       $         %  

[7. Trade Date: ________________ ]
Effective Date: __________ ____, 201_ [TO BE INSERTED BY ADMINISTRATIVE AGENT
AND WHICH SHALL BE THE EFFECTIVE DATE OF RECORDATION OF TRANSFER IN THE REGISTER
THEREFOR.]
The terms set forth in this Assignment and Assumption are hereby agreed to:

                  ASSIGNOR         [NAME OF ASSIGNOR]    
 
           
 
  By:        
 
  Name:  
 
   
 
  Title:        
 
                ASSIGNEE         [NAME OF ASSIGNEE]    
 
           
 
  By:        
 
  Name:  
 
   
 
  Title:        

 

*   Amount to be adjusted by the counterparties to take into account any
payments or prepayments made between the Trade Date and the Effective Date.

              Consented to and Accepted:        
 
            [NAME OF ADMINISTRATIVE AGENT], as   [NAME OF L/C ISSUER], as
Administrative Agent   L/C Issuer
 
           
By
      By    
 
           
 
  Title:        

Exhibit D

 

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

 

[Consented to:]

                      POSTROCK ENERGY SERVICES CORPORATION,
as a Borrower    
 
               
 
  By:                                   David C. Lawler, President and Chief
Executive Officer    
 
                    POSTROCK MIDCONTINENT PRODUCTION, LLC,         as a
Borrower,    
 
                    By:   POSTROCK ENERGY SERVICES CORPORATION,         Its sole
member    
 
               
 
      By:        
 
         
 
   
 
          David C. Lawler, President and Chief Executive Officer    

Exhibit D

 

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ANNEX 1
TO ASSIGNMENT AND ASSUMPTION
STANDARD TERMS AND CONDITIONS FOR
ASSIGNMENT AND ASSUMPTION
1. Representations and Warranties.
          1.1 Assignor. The Assignor: (a) represents and warrants that (i) it is
the legal and beneficial owner of the Assigned Interest, (ii) the Assigned
Interest is free and clear of any lien, encumbrance or other adverse claim and
(iii) it has full power and authority, and has taken all action necessary, to
execute and deliver this Assignment and Assumption and to consummate the
transactions contemplated hereby; and (b) assumes no responsibility with respect
to (i) any statements, warranties or representations made in or in connection
with the Credit Agreement or any other Loan Document, (ii) the execution,
legality, validity, enforceability, genuineness, sufficiency or value of the
Loan Documents or any collateral thereunder, (iii) the financial condition of
the Borrowers, any of their Subsidiaries or Affiliates or any other Person
obligated in respect of any Loan Document or (iv) the performance or observance
by the Borrowers, any of their Subsidiaries or Affiliates or any other Person of
any of their respective obligations under any Loan Document.
          1.2. Assignee. The Assignee: (a) represents and warrants that (i) it
has full power and authority, and has taken all action necessary, to execute and
deliver this Assignment and Assumption and to consummate the transactions
contemplated hereby and to become a Lender under the Credit Agreement, (ii) it
meets all requirements of an Eligible Assignee under the Credit Agreement
(subject to receipt of such consents as may be required under the Credit
Agreement), (iii) from and after the Effective Date, it shall be bound by the
provisions of the Credit Agreement as a Lender thereunder and, to the extent of
the Assigned Interest, shall have the obligations of a Lender thereunder,
(iv) it has received a copy of the Credit Agreement, together with copies of the
most recent financial statements delivered pursuant to Section 6.01 thereof, as
applicable, and such other documents and information as it has deemed
appropriate to make its own credit analysis and decision to enter into this
Assignment and Assumption and to purchase the Assigned Interest on the basis of
which it has made such analysis and decision independently and without reliance
on the Administrative Agent or any other Lender, and (v) if it is a Foreign
Lender, attached to the Assignment and Assumption is any documentation required
to be delivered by it pursuant to the terms of the Credit Agreement, duly
completed and executed by the Assignee; and (b) agrees that (i) it will,
independently and without reliance on the Administrative Agent, the Assignor or
any other Lender, and based on such documents and information as it shall deem
appropriate at the time, continue to make its own credit decisions in taking or
not taking action under the Loan Documents, and (ii) it will perform in
accordance with their terms all of the obligations which by the terms of the
Loan Documents are required to be performed by it as a Lender.
     2. Payments. From and after the Effective Date, the Administrative Agent
shall make all payments in respect of the Assigned Interest (including payments
of principal, interest, fees and other amounts) to the Assignor for amounts
which have accrued to but excluding the Effective Date and to the Assignee for
amounts which have accrued from and after the Effective Date.
     3. General Provisions. This Assignment and Assumption shall be binding
upon, and inure to the benefit of, the parties hereto and their respective
successors and assigns. This Assignment and Assumption may be executed in any
number of counterparts, which together shall constitute one instrument. Delivery
of an executed counterpart of a signature page of this Assignment and Assumption
by telecopy shall be effective as delivery of a manually executed counterpart of
this Assignment and Assumption. This Assignment and Assumption shall be governed
by, and construed in accordance with, the law of the State of New York.
Exhibit D