exv10w1






Exhibit 10.1




LOAN AGREEMENT




BETWEEN




HILAND HOLDINGS GP, LP

AS BORROWER




AND




COPPERMARK BANK

AS THE BANK




NOVEMBER 23, 2009







 









 








LOAN AGREEMENT




     This Loan Agreement (the “Loan Agreement”) is made November 23, 2009 by and between HILAND
HOLDINGS GP, LP, a Delaware limited partnership (the “Borrower”), and COPPERMARK BANK, an Oklahoma
state banking association (the “Bank”).



WITNESS:




     WHEREAS, the Borrower has requested a Loan, as hereinafter defined, for payment of Borrower’s
loan from Security National Bank of Enid, for attorney and other professional fees, for other
general operating expenses and for payment of advances, if any, under a loan from Harold Hamm to
the Borrower in the amount of $1,500,000.00 and has made, executed and delivered that certain
advancing line of credit promissory note of even date herewith (the “Note”). To secure the Note,
Borrower has executed and delivered to the Bank a pledge and security agreement pledging as
security for the Loan its common units and subordinated units in Hiland Partners, LP.



     WHEREAS, subject to the terms and conditions of this Loan Agreement, and in reliance upon the
representations and warranties made by Borrower herein, the Bank agrees to make the Loan



     NOW, THEREFORE, in consideration of the foregoing premises, the mutual agreements herein
contained and other good and valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, each party hereto agrees as follows:



ARTICLE I

DEFINITIONS AND ACCOUNTING TERMS




     1.1 Certain Defined Terms. As used in this Agreement, the following terms shall have
the following meanings (such meanings to be equally applicable to both the singular and plural
forms of the terms defined):



     “Advance” means an advance of funds by the Bank to the Borrower under the Note.



     “Affiliate” of any Person means any other Person which, directly or indirectly,
controls or is controlled by or is under common control with such Person (excluding any trustee
under, or any committee with responsibility for administering, any Plan). A Person shall be deemed
to be:




          (a) “controlled by” any other Person if such other Person possesses, directly or indirectly,
power: (i) to vote 10% or more of the securities having at the time of any determination hereunder
voting power for the election of directors of such Person; or (ii) to direct or cause the direction
of the management and policies of such Person whether by contract or otherwise; or




          (b) “controlled by” or “under common control with” such other Person if such other Person is
the executor, administrator, or other personal representative of such Person.



     Without limitation, each unit holder holding 10% or more of the securities of the Borrower and
each Subsidiary of the Borrower and each subsidiary of any subsidiary of the Borrower shall be
considered an Affiliate of the Borrower. Notwithstanding the foregoing or anything contained
herein to the contrary, in no event shall Continental Resources, Inc. or any of it affiliates or
subsidiaries be considered an “Affiliate” of Borrower for purposes of this Agreement.



     “Business Day” means a day of the year on which banks are not required or authorized
by law to close.



     “Change in Control” shall be deemed to have occurred if (a) any sale, lease, exchange
or other transfer (in one transaction or a series of related transactions) of all, or substantially
all, of the assets of the Borrower occurs; (b) any “person” as such term is used in Sections 13(d)
and 14(d) of the Securities



 









 







Exchange Act of 1934, as amended (the “Exchange Act”), or two or more persons acting
in concert, (i) is or becomes, directly or indirectly, the “beneficial owner,” as defined in Rule
13d-3 under the Exchange Act, of securities of the Borrower that represent 33% or more of the
combined voting power of the Borrower’s then outstanding securities, or (ii) acquires the power
(whether or not exercised) to elect a majority of the members of the Borrower’s Board of Directors.



     “Closing Date” means the date of this Agreement.



     “Contested in Good Faith” means a matter (a) which is being Contested in Good Faith by
or on behalf of any Person, by appropriate and lawful proceedings diligently conducted, reasonably
satisfactory to the Bank, and for which a reserve has been established in an amount so that no
Material Adverse Effect occurs, (b) in which foreclosure, distraint, sale, forfeiture, levy,
execution or other similar proceedings have not been initiated or have been stayed and continue to
be stayed, and (c) in which a Good Faith contest will not materially detract from the value of the
Collateral, materially jeopardize the rights of the Bank or the Borrower with respect thereto,
materially interfere with the operation by the Borrower of its business, or otherwise have a
Material Adverse Effect.



     “Controlled Group” means the Borrower and any corporation, trade or business that is,
along with the Borrower, a member of a controlled group of corporations or a controlled group of
trades or businesses as described in sections 414(b) and 414(c), respectively, of the Code or in
section 4001 of ERISA.



     “Default” means any Event of Default or any event that would constitute an Event of
Default but for the requirement that notice be given or time elapse or both.



     “ERISA” means the Employee Retirement Income Security Act of 1974, as amended, and any
successor statute of similar import, together with the regulations promulgated thereunder and under
the Internal Revenue Code, in each case as in effect from time to time. References to sections of
ERISA also refer to successor sections.



     “ERISA Event” means, with respect to the Borrower or any Subsidiary, (a) a Reportable
Event (other than a Reportable Event not subject to the provision for 30-day notice to the PBGC
under regulations issued under section 4043 of ERISA), (b) the withdrawal of the Borrower or any
Affiliate from a Plan during a plan year in which it was a “substantial employer” as defined in
section 4001(a)(2) of ERISA if such withdrawal would have a Material Adverse Effect on the
Borrower, or on the Borrower and its Subsidiaries taken as a whole, (c) the filing of a notice of
intent to terminate a Plan under a distress termination or the treatment of a Plan amendment as a
distress termination under section 4041(c) of ERISA, (d) the institution of proceedings to
terminate a Plan by the PBGC under section 4042 of ERISA, (e) the failure to make required
contributions which would result in the imposition of a Lien under section 412 of the Code or
section 302 of ERISA, or (f) any other event or condition which might reasonably be expected to
constitute grounds under section 4042 of ERISA for the termination of, or the appointment of a
trustee to administer, any Plan.



     “Events of Default” has the meaning specified in Section 7.1.



     “Executive Officer” means, as to any Person, the president, the chief financial
officer, the chief executive officer, the general counsel, the treasurer or the secretary.



     “Existing Indebtedness” means the Indebtedness of the Borrower or any Subsidiary
reflected on Schedule 1.1 attached hereto.



     “Financial Statements” means statements of the financial condition of the Borrower
(compiled) at the point in time and for the period indicated in Section 5.1 and consisting
of at least a balance sheet, statement of income, statement of cash flow and related statements of
operations, membership units and other equity, all of which shall be prepared as determined,
recognized and classified using GAAP, as and



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when applicable in comparative form with respect to the corresponding period of the preceding
fiscal period or as otherwise required by Bank.



     “GAAP” means generally accepted accounting principles set forth from time to time in
the opinions and pronouncements of the Accounting Principles Board and the American Institute of
Certified Public Accountants and statements and pronouncements of the Financial Accounting
Standards Board (or agencies with similar functions of comparable stature and authority within the
U.S. accounting profession), which are applicable to the circumstances as of the date of
determination.



     “Governmental Authority” means any nation or government, any state or other political
subdivision thereof, and any entity exercising executive, legislative, judicial, regulatory or
administrative functions of or pertaining to government.



     “Indebtedness” shall mean, with respect to any Person, without duplication, (a) all
liabilities which would appear on a balance sheet of such Person prepared, recognized and
classified using the accounting principles currently used by the Borrower, (b) all obligations of
such Person evidenced by bonds, debentures, promissory notes or such similar evidences of
indebtedness, (c) all other indebtedness of such Person for borrowed money, and (d) all obligations
of others, to the extent any such obligation is secured by a Lien, except a Permitted Lien, on the
assets of such Person (whether or not such Person has assumed or become liable for the obligation
secured by such Lien).



     “Internal Revenue Code” means the Internal Revenue Code of 1986, as amended from time
to time, and the regulations promulgated and rulings issued thereunder.



     “Law” means all ordinances, statutes, rule, regulations, orders, injunctions,
policies, writs or decrees of any Governmental Authority or political subdivision or agency thereof
or any court or similar entity or tribunal established by any thereof.



     “Lien” means, when used with respect to any Person, any interest in any real or
personal property, asset or other right held, owned or being purchased or acquired by such Person
for its own use, consumption or enjoyment which secures payment or performance of any obligation
and shall include any mortgage, lien, pledge, encumbrance, charge, retained title of a conditional
vendor or lessor, or other security agreement, mortgage, deed of trust, chattel mortgage,
assignment, pledge, retention of title, financing or similar statement or notice, or other
encumbrance arising as a matter of law, judicial process or otherwise.



     “Loan Documents” means this Agreement, the Note, each Notice of Advance, the Pledge
Agreement, and all other agreements, instruments, certificates, financing statements, documents,
schedules or other written indicia delivered by the Borrower or any of its Subsidiaries or any
other Person in connection with any of the foregoing.



     “Loan” means the loan from the Bank to Borrower in the principal amount of Five
Million and No/100 Dollars ($5,000,000.00) as evidenced by the Note.



     “Material Adverse Effect” means, the occurrence of an event (including any adverse
determination in any litigation, arbitration, or governmental investigation or proceeding), which
has or could reasonably be expected to have a materially adverse effect on (a) the assets,
business, financial condition or operations of the Borrower and its Subsidiaries taken as a whole;
or (b) the ability of the Borrower to perform any of its payment or other material obligations
under any of the Loan Documents; or (c) the legality, validity, binding effect or enforceability
against the Borrower or any Subsidiary of any Loan Document that by its terms purports to bind the
Borrower or any Subsidiary.



     “Obligations” means without duplication, (a) all indebtedness evidenced by the Note,
and (b) all other obligations and liabilities of the Borrower to the Bank, now existing or
hereafter incurred, whether arising under, out of or in connection with any Loan Document, and with
respect to all of the foregoing to the extent that any of the same includes or refers to the
payment of amounts deemed or constituting



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interest, only so much thereof as shall have accrued, been earned and remains unpaid at each
relevant time.



     “Organization Documents” means, for any corporation or cooperative, the certificate or
articles of incorporation, the bylaws, any certificate of determination or instrument relating to
the rights of preferred shareholders of such corporation, any shareholder rights agreement, and all
applicable resolutions of the board of directors (or any committee thereof) of such corporation.



     “Permitted Indebtedness” means: (i) any accounts payable, taxes, insurance, operating
expenses and all other general and administrative expenses of the Borrower incurred in the normal
course of business operations, such obligations being in amounts and of the types as are consistent
with those identified in the latest financial statements of the Borrower; (ii) any existing
indebtedness secured by any Permitted Lien; (iii) any other Debt not to exceed $50,000 without
prior written approval of the Bank, reasonably exercised; (iv) existing indebtedness which has been
disclosed to the Bank from the Borrower to the partners of the Borrower so long as the promissory
notes evidencing said indebtedness are subordinated; (v) any indebtedness pursuant to leases or
lease purchase agreements in connection with the Borrower’s operations and (vi) any other Debt
approved in writing by the Bank.



     “Permitted Liens” means (a) liens for Taxes incurred in the course of business (which
are not yet due or are being Contested in Good Faith); (b) liens in connection with workers’
compensation, unemployment insurance or other social security (other than Liens created by Section
4068 of ERISA) old-age pension or public liability obligations which are not yet due or are being
Contested in Good Faith; (c) other Liens affecting the Collateral existing as of the Closing Date
and disclosed on Schedule 4.15 attached hereto under the heading “Permitted Liens”; (d)
liens created in favor of the Bank and other Liens expressly permitted under the Security
Instruments; (e) liens arising in the ordinary course of business from pledges or deposits to
secure public or statutory obligations, or deposits to secure (or in lieu of) surety, stay, appeal
or customs bonds; encumbrances consisting of easements, zoning restrictions, of other restrictions
on the use of property, provided that such encumbrances do not materially impair the use of such
property for the purposes intended, and none of which are violated by existing or proposed
structure or land use, and such other material encumbrances as have been disclosed to and approved
by Bank in writing; (f) Good Faith deposits in connection with bids, tenders, contracts or leases,
performance or other similar bonds; (g) liens arising from services or materials provided In the
ordinary course of business that are being Contested in Good Faith; (h) statutory operators’,
vendors’, repairmen’s, mechanics’, suppliers’, workers’, materialmen’s, construction, or other like
liens with respect to obligations not overdue or being Contested in Good Faith, (i) contractual
liens that arise in the ordinary course of business under operating agreements, joint venture
agreements, oil and gas partnership agreements, oil and gas leases, farm-out agreements, division
orders, contracts for the sale, transportation or exchange of oil and natural gas, unitization and
pooling declarations and agreements, area of mutual interest agreements, overriding royalty
agreements, marketing agreements, processing agreements, net profits agreements, development
agreements, gas balancing or deferred production agreements, injection, repressuring and recycling
agreements, salt water or other disposal agreements, seismic or other geophysical permits or
agreements, and other agreements which are usual and customary in the oil and gas business and are
for claims which are not delinquent or which are being Contested in Good Faith, and (j) liens
pursuant to leases or lease purchase agreements in connection with the Borrower’s operations.



     “Person” means an individual, partnership, corporation (including a business trust),
joint stock company, trust, unincorporated association, joint venture, limited liability company or
other entity, or a government or any political subdivision or agency thereof.



     “Plan” means any “employee pension benefit plan,” as such term is defined in ERISA,
which is subject to Title IV of ERISA (other than a Multiemployer Plan), and as to which any entity
in the Controlled Group has or may have any liability, including any liability by reason of having
been a substantial



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employer within the meaning of section 4063 of ERISA for any time within the preceding five
years or by reason of being deemed to be a contributing sponsor under section 4069 of ERISA.



     “Pledge Agreement” has the meaning specified in Section 3.1.1(e).



     “Pledged Collateral Market Value” means the cumulative value of the following in each
case owned by the Borrower and its Subsidiaries: (a) the Hiland Common Units (as defined in Section
3.1.1(e) below), (b) the Hiland Subordinated Units (as defined in Section 3.1.1(e) below) and (c)
any assets acquired after the Closing Date in which a security interest has been granted to the
Bank and perfected, in each case, pursuant to the terms hereof. For purposes of this definition,
the value of (i) the Hiland Common Units on any date shall be the closing price for such Hiland
Common Units as reflected on the NASDAQ securities exchange on such date, (ii) the Hiland
Subordinated Units on any date shall be deemed to equal 85% of the value of the Hiland Common Units
on such date and (iii) the assets referred to in clause (c) above shall be the fair market value of
such assets as reasonably valued by the Bank and subject to third-party verification as deemed
necessary by the Administrative Agent.



     “Requirement of Law” for any Person means the Organization Documents of such Person,
and any law, treaty, rule, ordinance or regulation or determination of an arbitrator or a court or
other governmental authority, in each case applicable to or binding upon such Person or any of its
property or to which such Person or any of its property is subject.



     “Subsidiary” means a Person of which the indicated Person and/or its other
Subsidiaries, individually or in the aggregate, own, directly or indirectly, such number of
outstanding shares or other equity interests as have at the time of any determination hereunder
more than 50% of the ordinary voting power; provided that, Hiland Partners, LP, a Delaware limited
partnership and its subsidiaries and Hiland Partners GP, LLC, a Delaware limited liability company
and its subsidiaries shall not be considered “Subsidiary” for the purposes of this Agreement.,
“Subsidiary” means a direct or indirect Subsidiary of the Borrower.



     “Welfare Plan” means any “employee welfare benefit plan” as such term is defined in
ERISA, as to which the Borrower has any liability.



     1.2 Computation of Periods. In this Agreement in the computation of periods from a
specified date to a later specified date, the word “from” means “from and including” and the words
“to” and “until” each mean “to but excluding”.



     1.3 Conventions. Unless otherwise defined or the context otherwise requires, all
financial and accounting terms used herein or in any of the Loan Documents or any certificate or
other document made or delivered pursuant hereto shall be defined in accordance with GAAP, as the
context may require. When used in this Agreement, the term “financial statements” shall include
the notes and schedules thereto, except that Borrower shall not be required to furnish notes and
schedules with any Quarterly Statement. When used herein, the terms “best knowledge of” or “to the
best knowledge of” any Person shall mean matters within the actual knowledge of such Person (or an
Executive Officer or general partner of such Person) or which should have been known by such Person
after reasonable inquiry. The definition of any agreement, instrument or document shall also
include any amendment or modification of or supplement to the same. References to the Borrower or
any Subsidiary shall also include its permitted successors and assigns.



     1.4 Schedules. In the event that the Borrower does not complete the Schedules
attached hereto by either noting “None” or providing specific details, any blank Schedules shall be
deemed to be a representation by the Borrower that “None” is the appropriate disclosure.



     1.5 Construction. This Agreement and the other Loan Documents have been reviewed and
negotiated by sophisticated parties with access to legal counsel, and no rule of construction shall
apply hereto or thereto which would require or allow any Loan Document to be construed against any
party because of its role in drafting such Loan Document. All indemnification and release of
liability provisions



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of this Agreement shall be construed broadly (and not narrowly) in favor of the Persons
receiving the indemnification or release of liability.



ARTICLE II

THE LOAN




     2.1. The Loan. Subject to the terms and conditions of this Agreement, and in reliance
upon the representations and warranties made by the Borrower herein, the Bank agrees to extend the
following Loan. From time to time hereafter, the Bank may make additional loans or financial
accommodations to the Borrower and the terms of this Agreement shall apply to any such additional
loans or financial accommodations.



          2.1.1 Advancing Line of Credit. The advancing line of credit to the Borrower shall be
evidenced by this Agreement and by the Note in the face amount of Five Million and No/100 Dollars
($5,000,000.00) with interest as set forth therein and a maturity date of April 2, 2010. IT IS
EXPRESSLY UNDERSTOOD AND AGREED THAT ALL UNPAID OUTSTANDING PRINCIPAL AND ACCRUED BUT UNPAID
INTEREST AND ANY OTHER CHARGES SHALL BE DUE AND PAYABLE ON THE MATURITY DATE. NOTWITHSTANDING THE
MATURITY DATE, THE NOTE SHALL BE DUE AND PAYABLE NO LATER THAN THE DATE OF ANY MERGER OF HILAND
PARTNERS, LP, THE EFFECT OF WHICH IS THAT THE UNITS IN HILAND PARTNERS, LP BECOME PRIVATELY HELD
AND ARE NO LONGER PUBLICLY TRADED. All computations by the Bank shall be conclusive and binding
for all purposes absent manifest error. Both principal and interest are payable in lawful money of
the United States of America and in immediately available funds.



          2.1.2 Use of Proceeds. The proceeds of the Loan shall be available, and the Borrower
agrees that it shall use the Loan proceeds, for payment of Borrower’s loan from Security National
Bank of Enid, for attorney and professional fees and other general operating expenses and for
payment of a advances, if any, under a loan from Harold Hamm to the Borrower in the amount of
$1,500,000.00.



          2.1.3 Fee. To compensate the Bank for the costs of the extension of credit hereunder,
at closing, the Borrower shall pay a one-eighth percent (1/8%) fee on $5,000,000.00.



          2.1.4 Advances. All Advances shall be requested by the Borrower using the form of the
Request for Advance attached hereto as Exhibit “2.3”.



          2.1.5 Notice of Advance. The Borrower shall give the Bank notice of borrowing prior
to 12:00 noon CST at least one (1) day before the requested Advance. Each request shall be deemed
a representation, warranty, acknowledgment and agreement by the Borrower as to the matters which
are required for an Advance.



          2.1.6 Conditions Precedent to Advance. Each Advance is subject to the Bank’s
reasonable approval and shall be subject to the following conditions. A waiver of any condition to
any Advance shall not constitute a waiver as to any subsequent Advance.



               2.1.6.1 Representations and Warranties. With respect to each Advance, the
representations and warranties of the Borrower under this Loan Agreement and in each Loan Document
are true and correct in all material respects as of such date, as if then made.



               2.1.6.2 No Event of Default. No Event of Default shall have occurred and be
continuing nor shall any event have occurred or failed to occur which, with the passage of time or
service of notice or both would constitute an Event of Default under this Agreement or under the
Note.



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               2.1.6.3 Fees. All accrued fees and expenses of the Bank (including the accrued fees
and expenses of counsel to the Bank) have been paid.



     2.2 Making of Payments. All payments (including prepayments) made by the Borrower on
account of the Note shall be made to the Bank at its offices at 3333 N.W. Expressway, Oklahoma
City, Oklahoma, or at P.O. Box 25676, Oklahoma City, Oklahoma 73125-0676, before 12:00 p.m., local
time, in lawful money of the United States of America and in immediately available funds. If any
payment under the Note shall be due and payable on a day other than a Business Day, the maturity
thereof shall be extended to the next succeeding Business Day and, with respect to payments of
principal, interest thereon shall be payable at the then applicable rate during such extension.



     2.3 Maximum Lawful Interest. It is not the intention of the Bank or the Borrower to
violate the laws of any applicable jurisdiction relating to usury or other restrictions on the
maximum lawful interest rate. The Loan Documents and all other agreements between the Borrower and
the Bank, whether now existing or hereafter arising and whether written or oral, are hereby limited
so that in no event shall the interest paid or agreed to be paid to the Bank for use, forbearance
or detention of money loaned, or for the payment or performance of any covenant or obligation
contained herein or in any other Loan Document exceed the maximum amount permissible under
applicable law. If from any circumstances the Bank shall ever receive anything of value deemed
interest under applicable law which would exceed interest at the highest lawful rate, such
excessive interest shall be applied to the reduction of the principal amount owing hereunder, and
not to the payment of interest, or if such excessive interest exceeds any unpaid balance of
principal, such excess shall be refunded to the Borrower. All sums paid or agreed to be paid to
the Bank for the use, forbearance or detention of the Loan evidenced by the Note shall, to the
extent permitted by applicable law, be amortized, prorated, allocated and spread throughout the
full term of the affected Note until payment in full, so that the rate of interest on account of
such Note is uniform throughout the term thereof. This Section 2.3 shall control every
other provision of the Loan Documents and all other agreements between the Bank and the Borrower
contemplated hereby.



     2.4 Prepayments. The Borrower shall have the right at any time, or from time to time,
to prepay without premium or penalty, all or any part of the loan balance outstanding on the Note;
provided however, that no such prepayment shall, until all Obligations are fully paid and
satisfied, excuse the payment as it becomes due of any payment provided for herein. All prepayments
made pursuant to this Section 2.4 shall be applied first to accrued and unpaid interest,
any costs, and then to the principal balance.



     2.5 Pledge of and Security Interest in Accounts and Right of Offset or Lien. As
security for the payment and/or performance hereunder, the Borrower hereby transfers, assigns, and
pledges to the Bank and/or grants to the Bank a security interest in all funds of the Borrower now
or hereafter or from time to time on deposit with the Bank, with such interest of the Bank to be
retransferred, reassigned and/or released by the Bank, as the case may be, at the expense of the
Borrower upon payment in full. The aforementioned lien shall not apply to funds contained in any
account, including any drilling or escrow account, of the Borrower held for the benefit of or in
trust for any third party including royalty, overriding royalty, or working interest owners other
than Borrower. All remedies as secured party or assignee of such funds shall be exercisable,
subject to applicable notice and cure periods provided in this Agreement, by the Bank upon the
occurrence of any Event of Default, regardless of whether the exercise of any such remedy would
result in any penalty or loss of interest or profit with respect to any withdrawal of funds
deposited in a time deposit account prior to the maturity thereof. Furthermore, the Borrower
hereby grants to the Bank the right, exercisable, subject to applicable notice and cure periods
provided in this Agreement, at such time as any Obligation shall mature, whether by acceleration of
maturity or otherwise, of offset or banker’s lien against all funds of the Borrower now or
hereafter or from time to time on deposit with the Bank, to the extent of the Indebtedness
regardless of whether the exercise of any such remedy would result in any penalty or loss of
interest or profit with respect to any withdrawal of funds deposited in a time deposit account
prior to the maturity thereof.



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ARTICLE III

CONDITIONS TO EFFECTIVENESS AND LENDING




     3.1. Conditions Precedent to Effectiveness of this Agreement. The obligations of the
Bank to enter into this Agreement and to make the Loan are subject to the satisfaction of the
following conditions precedent unless waived in writing by Bank:



     3.1.1 Receipt of Loan Documents and Other Items. The Bank shall have no obligation
under this Agreement unless and until all matters incident to the consummation of the transactions
contemplated herein, including, without limitation, the Bank shall have received, reviewed and
approved the following documents and other items, appropriately executed when necessary and, where
applicable, acknowledged, all in form and substance satisfactory in the Good Faith judgment of the
Bank and dated, where applicable, of even date herewith or a date prior thereto (unless
specifically noted below to the contrary) and acceptable in the Good Faith judgment of the Bank:




(a) Multiple original counterparts of this Agreement, as reasonably requested by the Bank;




(b) The Note executed by the Borrower;




(c) Copies of the organizational documents of the Borrower;




(d) Original of the authorization approving the borrowing, the Loan Documents and
authorizing the transactions contemplated herein duly adopted by the Borrower, and that such
authorization with respect to such transactions has not been amended, modified, or revoked
in any respect, and is in full force and effect as of the date of such authorization;




(e) A pledge and security agreement, pledging 2,321,471 common units of Hiland Partners, LP,
a Delaware limited partnership (the ‘Hiland Common Units”) and 3,060,000 subordinated units
of Hiland Partners, LP, a Delaware limited partnership (the “Hiland Subordinated Units”),
all owned by the Borrower, in form and substance acceptable to the Bank (as amended, the
“Pledge Agreement”), duly executed by the Borrower.




(f) If required by the Bank, a security agreement, granting the Bank a first-priority
security interest in the collateral described therein, in form and substance acceptable to
the Bank (as amended, the “Security Agreement”), duly executed by the Borrower.




(g) Evidence that all other action that the Bank may deem necessary or desirable in order to
perfect and protect the first priority liens and security interests created under the
Security Agreement, including, without limitation, the filing of Uniform Commercial Code
financing statements and the delivery to the Bank of certificates covering the common units
and subordinated units intended to be subject to a first-priority pledge under the terms of
the Pledge Agreement together with executed stock powers.




(h) Certified copies of the resolutions of the Board of Directors of the Borrower approving
the Loan Documents, and of all documents evidencing other necessary corporate action and
governmental approvals, if any, with respect to the Loan Documents.




(i) A certificate of the Secretary or an Assistant Secretary of the Borrower certifying the
names and true signatures of the officers of such party authorized to sign the Loan
Documents and the other documents to be delivered hereunder, together with Organization
Documents and Certificates of Good Standing.




(j) A copy of the draft audited Consolidated balance sheets of the Borrower and its
Subsidiaries as of Fiscal Year ending December 31, 2008, and the related Consolidated
statements of income and cash flows for such Fiscal Year all prepared in accordance with
GAAP



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(subject to normal year-end adjustments and except that footnote and schedule disclosure may
be abbreviated), accompanied by the certification of the chief executive officer, chief
financial officer or treasurer of the Borrower that to the best knowledge and belief of the
Borrower all such financial statements are complete and correct and present fairly in
accordance with GAAP (subject to normal year-end adjustments) the Consolidated results of
operations and cash flows of the Borrower as at the end of such Fiscal Year and that the
audited version of such financial statements will not be materially different.




(k) A copy (certified by the Borrower as true and complete) of the existing documents
evidencing the Existing Indebtedness.




(l) The Bank shall have received any schedules (satisfactory to the Bank) to this Agreement,
in form and substance satisfactory to the Bank.




(m) The Borrower shall have established a deposit account at the Bank.




(n) The Bank shall have received such other documents, or such other action shall have been
taken, in connection with the foregoing, as the Bank may reasonably request.



     3.1.2 Representations and Warranties. The representations and warranties of the
Borrower under this Agreement are true and correct in all material respects as of such date, as if
then made.



     3.1.3 No Event of Default. No Event of Default shall have occurred and be continuing
and no event shall have occurred or failed to occur which, with the passage of time or service of
notice or both, would constitute an Event of Default.



ARTICLE IV

REPRESENTATIONS AND WARRANTIES




     4. Representations and Warranties of the Borrower. To induce the Bank to enter into
this Agreement and to make the Loan, the Borrower represents and warrants to the Bank (which
representations and warranties shall survive the delivery of the Loan Documents) that:



     4.1 Due Authorization and Existence. The Borrower and each Subsidiary (i) is a
corporation, limited liability company or partnership duly organized, validly existing and (to the
extent applicable) in good standing under the laws of its jurisdiction of formation, (ii) is duly
qualified to do business and (to the extent applicable) in good standing in each jurisdiction
where, because of the nature of its activities or properties, such qualification is required except
where the failure to qualify would not have a Material Adverse Effect, (iii) has the requisite
corporate power and authority and the right to own and operate its properties, to lease the
property it operates under lease, and to conduct its business as now and proposed to be conducted,
and (iv) has obtained all material licenses, permits, consents or approvals from or by, and has
made all filings with, and given all notices to, all Governmental Authorities having jurisdiction,
to the extent required for such ownership, operation and conduct (including, without limitation,
the consummation of the transactions contemplated by this Agreement) as to each of the foregoing,
except where the failure to do so would not have a Material Adverse Effect. The execution,
delivery and performance by the Borrower of the Loan Documents, and the consummation of the
transactions contemplated thereby are within its respective corporate powers and have been duly
authorized by all necessary corporate action (including, without limitation, shareholder approval,
if required). The Borrower has received all other material consents and approvals (if any shall be
required) necessary for such execution, delivery and performance, and such execution, delivery and
performance do not and will not contravene or conflict with, or create a Lien or right of
termination or acceleration under, any Requirement of Law or Contractual Obligation binding upon
the Borrower. Each of this Agreement and each other Loan Document is (or when executed and
delivered will be) the legal, valid, and binding obligation of such of the Borrower enforceable in
accordance with such agreements’ respective term, except (i) as limited by applicable bankruptcy,
insolvency, reorganization, moratorium, and other laws of general application



10









 







affecting creditors’ rights generally and (ii) as limited by laws relating to the availability of
specific performance, injunctive relief or other equitable remedies; provided that the
Borrower assumes for purposes of this Section 4.1 that this Agreement and the other Loan
Documents have been validly executed and delivered by each of the parties thereto other than the
Borrower and its Subsidiaries.



     4.2 Consents, Conflicts and Creation of Liens. The execution and delivery by the
Borrower of the Loan Documents and the performance (except upon the occurrence of an Event of
Default) of the Obligations of the Borrower do not and will not (a) require the consent of any
Governmental Authority, (b) contravene or conflict with any Requirement of Law which contravention
or conflict would have a Material Adverse Effect, (c) contravene or conflict with any indenture,
instrument or other agreement to which the Borrower is a party or by which any property of the
Borrower may be presently bound or encumbered, or (d) result in or require the creation or
imposition of any Lien in, upon or of any property of the Borrower under any such indenture,
instrument or other agreement, other than the Loan Documents.



     4.3 Valid and Binding Obligations. All of the Loan Documents, when duly executed and
delivered by the Borrower will be the legal, valid and binding obligations of the Borrower
enforceable against the Borrower by the Bank in accordance with the respective terms, except as
limited by equitable principles and applicable liquidation, conservatorship, bankruptcy,
moratorium, arrangement, receivership, insolvency, reorganization or similar laws from time-to-time
affecting the rights of creditors generally.



     4.4 Title to Collateral. All of the Collateral is free and clear of all Liens, except
Permitted Liens, and the Borrower has good and indefeasible title to such Collateral.



     4.5 Liabilities, Litigation, and Restrictions. Other than as disclosed under the
heading “Liabilities” on Schedule 4.5 hereto, the Borrower has no liabilities, direct or
contingent, which may materially and adversely affect their respective business, operations or
ownership of the Collateral. Except as set forth under the heading “Litigation” on Schedule
4.5 hereto, no Litigation of any nature affecting the Borrower is pending before any Tribunal
or, to the best knowledge of the Borrower, threatened against or affecting the Borrower, as the
case may be, which might reasonably be expected to result in any material impairment of its
ownership of any Collateral or to have a Material Adverse Effect. No unusual or unduly burdensome
restriction, restraint or hazard exists by contract, Requirement of Law, or otherwise relative to
the business or operations of the Borrower or the ownership of a material portion of the Collateral
other than such as relates generally to Persons engaged in business activities similar to those
conducted by the Borrower.



     4.6 Authorizations and Consents. No authorization, consent, approval, exemption,
franchise, permit or license of, or filing with, any Governmental Authority, Tribunal or any other
Person is required to authorize, or is otherwise required in connection with, the valid execution
and delivery by the Borrower of the Loan Documents, or any instrument contemplated hereby or
thereby, the repayment by the Borrower of the Note and the interest and fees provided in the Loan
Documents and this Agreement, or the performance (except in the Event of Default) by the Borrower
of the Obligations.



     4.7 Compliance with Laws. The Borrower and the Collateral are in compliance in all
material respects with all applicable law, rule, regulation, order or decree, including, without
limitation, Environmental Laws and ERISA.



     4.8 Proper Filing of Tax Returns and Payment of Taxes Due. The Borrower has duly and
properly filed all United States income tax returns and all other tax returns which are required to
be filed by each, have paid all taxes due except such as are being Contested in Good Faith and as
to which adequate provisions and disclosures have been made. The charges and reserves of the
Borrower with respect to taxes and other governmental charges are adequate, and the Borrower has no
knowledge of any deficiency or additional assessment in a material amount in connection with taxes,
assessments, or charges not provided for on its books.



11









 





     4.9 Environmental Law. Except as disclosed on Schedule 4.9, under the heading
“Environmental Matters”, the Borrower has not received notice or otherwise learned of (A) any
Environmental Liability which could individually or in the aggregate have a Material Adverse Effect
arising in connection with (i) any non-compliance with or violation of the requirements of any
Environmental Law or (ii) the release or threatened release of any toxic or hazardous waste into
the environment, (B) any threatened or actual liability in connection with the release or
threatened release of any toxic or hazardous waste into the environment which could individually or
in the aggregate have a Material Adverse Effect or (C) any federal or state investigation
evaluating whether any remedial action is needed to respond to a release or threatened release of
any toxic or hazardous waste into the environment for which the Borrower is or may be liable.



     4.10 No Material Misstatements. No information, exhibit, statement or report
furnished to the Bank by or at the direction of the Borrower in connection with this Agreement
contains any material misstatement of fact or omits to state a material fact necessary to make the
statements contained therein not misleading as of the date made or deemed made.



     4.11 Location of Business and Office. The principal place of business and chief
executive office of the Borrower is located at 205 West Maple, Suite 1100, Enid, Oklahoma 73701, or
at such other location as the Borrower may have, by proper written notice hereunder, advised the
Bank.



     4.12 Security Instruments. The provisions of the Security Instruments are effective
to create in favor of the Bank legal, valid and enforceable Liens, except as limited by equitable
principles and applicable liquidation, conservatorship, bankruptcy, moratorium, arrangement,
receivership, insolvency, reorganization or similar laws from time-to-time affecting the rights of
creditors generally, in all right, title and interest of the Borrower in the Collateral described
therein, which Liens, assuming the accomplishment of recording and filing in accordance with
applicable Laws prior to the intervention of rights of other Persons, shall constitute fully
perfected first priority Liens on all right, title and interest of the Borrower in the Collateral
described therein, subject to Permitted Liens.



     4.13 Defaults. The Borrower is not in default and no event or circumstance has
occurred which, but for the passage of time or the giving of notice or both, would constitute a
default under any loan or credit agreement, indenture, mortgage, deed of trust, security agreement
or other agreement or instrument to which the Borrower is a party in any respect. No Event of
Default hereunder has occurred and is continuing.



     4.14 Use of Proceeds; Margin Stock. The Borrower will use the proceeds of the Note
solely for the purposes described herein. None of such proceeds will be used for the purpose of
purchasing or carrying any “margin stock” as defined in Regulation U or Regulation X of the Board
of Governors of the Federal Reserve System (12 C.F.R. Part 221), or for the purpose of reducing or
retiring any debt which was originally incurred to purchase or carry a margin stock or for any
other purpose which might constitute this transaction a “purpose credit” within the meaning of such
Regulations. The Borrower is not engaged principally or as one of its important activities in the
business of extending credit for the purpose of purchasing or carrying any “margin stock” as
defined in such Regulations, or for the purpose of reducing or retiring any indebtedness which was
originally incurred to purchase or carry a margin stock or for any other purpose which might
constitute this transaction a “purpose credit” within the meaning of said Regulations. Neither the
Borrower nor any Person acting on behalf of the Borrower, has taken or will take any action which
might cause the Note hereunder or under any of the Security Instruments, including this Agreement,
to violate said Regulations or any other regulation of the Board of Governors of the Federal
Reserve System or to violate the Securities Exchange Act of 1934 or any rule or regulation
thereunder, in each case as now in effect or as the same may hereafter be in effect.



     4.15 Liens. Except for Permitted Liens or as set forth on Schedule 4.15, the
Collateral is free and clear of all Liens and encumbrances.



     4.16 Books of Account. All books of account of the Borrower and each Subsidiary fully
and fairly disclose all of the transactions, properties, assets, investments, liabilities and
obligations of the



12









 







Borrower and each such Subsidiary in all material respects and all of such books of account are in
the possession of the Borrower and each such Subsidiary and are true, correct and complete in all
material respects.



     4.17 Financial Statements. With respect to any representation and warranty which is
deemed to be made after the date hereof by the Borrower, the balance sheet and statements of
operations, of shareholders’ equity and of cash flow, which as of such date shall most recently
have been furnished by or on behalf of the Borrower to the Bank for the purposes of or in
connection with this Agreement or any transaction contemplated hereby, shall have been prepared in
accordance with GAAP consistently applied (except as disclosed therein and, in the case of interim
financial statements, for the absence of footnote disclosures), and shall present fairly the
Consolidated financial condition of the corporations covered thereby as at the dates thereof for
the periods then ended, subject, in the case of quarterly financial statements, to normal year-end
audit adjustments. There has been no change in the business, assets, operations or financial
condition of the Borrower or any Subsidiary which has had or could reasonably be expected to have a
Material Adverse Effect from that shown on the Borrower’s audited consolidated financial statements
dated September 30, 2009, the Subsidiaries’ Annual Statements dated December 31, 2008, all of which
statements have been furnished to the Bank.



     4.18 Litigation and Contingent Liabilities. Except as set forth (including estimates
of the dollar amounts involved) in Schedule 4.18, no claim, litigation (including, without
limitation, derivative actions), arbitration, governmental investigation or proceeding or inquiry
is pending or threatened against the Borrower or any of its Subsidiaries (i) which would, if
adversely determined, have a Material Adverse Effect or (ii) which relates to any of the
transactions contemplated hereby. Other than any liability incident to such claims, litigation or
proceedings, the Borrower has no material Contingent Liabilities not provided for or referred to in
the financial statements delivered pursuant to Sections 3.1.1(j) and 5.1.



     4.19 Employee Benefit Plans. All welfare plans and all pension plans, within the
meaning of sections 3(1) and (2) of ERISA, respectively, to the knowledge of the Borrower, are
maintained with respect to employees of the Borrower or its Subsidiaries.



     4.20 Accuracy of Information. All factual written information furnished heretofore or
contemporaneously herewith by or on behalf of the Borrower or any of its Subsidiaries to the Bank
for purposes of or in connection with this Agreement or any of the transactions contemplated
hereby, as supplemented to the date hereof, is and all other such factual written information
hereafter furnished by or on behalf of the Borrower or any of its Subsidiaries (including, without
limitation, information such as notice of judgments involving the officers and directors of the
Borrower and its Subsidiaries) to the Bank will be true and accurate in every material respect on
the date as of which such information is dated or certified and not incomplete by omitting to state
any material fact necessary to make such information not misleading.



     4.21 Taxes. Each of the Borrower and each of its Subsidiaries has filed all tax
returns that are required to be filed by it, and has paid or provided adequate reserves for the
payment of all material taxes, including, without limitation, all payroll taxes and federal and
state withholding taxes, and all assessments payable by it that have become due, other than (a)
those that are not yet delinquent or that are disclosed on Schedule 4.21 and are being contested in
good faith by appropriate proceedings and with respect to which reserves have been established and
are being maintained, in accordance with GAAP or (b) those which the failure to file or pay would
not have a Material Adverse Effect. Except as set forth in Schedule 4.21, there is no
ongoing audit or, to the Borrower’s knowledge, other governmental investigation of the tax
liability of the Borrower or any of its Subsidiaries and there is no unresolved claim by a taxing
authority concerning the Borrower’s or any such Subsidiary’s tax liability, for any period for
which returns have been filed or were due. As used in this Section 4.21, the term “taxes”
includes all taxes of any nature whatsoever and however denominated, including, without limitation,
excise, import, governmental fees, duties and all other charges, as well as additions to tax,
penalties and interest thereon, imposed by any government or instrumentality, whether federal,
state, local, foreign or other.



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     4.22 Compliance with Laws. Neither the Borrower nor any of its Subsidiaries, by
virtue of consummating the transactions evidenced by the Loan Documents or otherwise, is in
violation of any law, ordinance, rule, regulation, order, policy, guideline or other requirement of
any Governmental Authority, if the effect of such violation could reasonably be expected to have a
Material Adverse Effect and, to the best of the Borrower’s knowledge, no such violation has been
alleged and each of the Borrower and its Subsidiaries (i) has filed in a timely manner all reports,
documents and other materials required to be filed by it with any Governmental Authority, and the
information contained in each of such filings is true, correct and complete in all material
respects and (ii) has retained all records and documents required to be retained by it pursuant to
any law, ordinance, rule, regulation, order, policy, guideline or other requirement of any
Governmental Authority, if the failure to so retain such records and documents could reasonably be
expected to have a Material Adverse Effect.



     4.23 No Defaults. No event of default (or other event authorizing the creditor to
accelerate indebtedness) has occurred under any credit agreement or other agreement.



ARTICLE V

COVENANTS OF THE BORROWER




     5. Affirmative Covenants. So long as any portion of any Loan or Advance shall remain
unpaid or the Bank shall have any commitment to make an Advance hereunder, the Borrower will and
will cause each of its Subsidiaries, as applicable, to:



     5.1 Financial Statements on the Borrower and Subsidiaries. As soon as available, and
in no event later than 90 days of the end of each fiscal year, the Borrower shall deliver to the
Bank a copy of its annual consolidated audited Financial Statement. As to Borrower, concurrent
with the submission of a Financial Statement or a tax return, a Compliance Certificate executed by
a Manager of Borrower stating that such Manager, after due inquiry, has no knowledge of a Default
or an Event of Default.



     5.2 Additional Information. The Borrower shall furnish to the Bank, promptly upon the
reasonable request of the Bank, such additional financial or other information concerning the
assets, liabilities, operations and transactions of the Borrower as the Bank may from time to time
reasonably request; and notify the Bank not less than ten (10) Business Days prior to the
occurrence of any condition or event that may change the proper location for the filing of any
financing statement or other public notice or recording for the purpose of perfecting a Lien in any
Collateral, including, without limitation, any change in the state of organization.



     5.3 Notice of Default, Etc. Immediately after an Executive Officer of the Borrower
knows or has reason to know of the existence of any Default or Event of Default, or any development
or other information which would have a Material Adverse Effect, telephonic or e-mail notice
specifying the nature of such Default or Event of Default or development or information, including
the anticipated effect thereof, which notice shall be promptly confirmed in writing by the Borrower
by certified or registered mail, recognized courier, hand delivery or telecopier within two (2)
Business Days.



     5.4 Notice of Litigation and ERISA. Promptly upon learning of the occurrence of any
of the following, written notice thereof, describing the same and the steps being taken by the
Borrower with respect thereto: (A) the institution of, or any adverse determination in, any
litigation, arbitration proceeding or governmental proceeding (including any Internal Revenue
Service or Department of Labor proceeding with respect to any Plan or Welfare Plan) which could, if
adversely determined, be reasonably expected to have a Material Adverse Effect and which is not
Ordinary Course Litigation, (B) an ERISA Event, and an event with respect to any Plan which could
result in the incurrence by the Borrower or any of its Subsidiaries of any material liability
(other than a liability for contributions or premiums), fine or penalty, (C) the commencement of
any dispute which might lead to the modification, transfer, revocation, suspension or termination
of this Agreement or any Loan Document or (D) any other event which could be reasonably expected to
have a Material Adverse Effect.



14









 





     5.5 New Subsidiaries. Promptly upon formation or acquisition of any Subsidiary,
written notice of the name, purpose and capitalization of such Subsidiary and whether such
Subsidiary is a Material Subsidiary; and cause such Subsidiary, to become a party to the Guaranty,
pledge the shares of such Subsidiary pursuant to the terms of the Pledge Agreement, and take such
other actions in connection therewith, as may be requested by the Bank.



     5.6 Corporate Existence; Foreign Qualification. Do and cause to be done at all times
all things necessary to (i) maintain and preserve (in the existing jurisdiction of incorporation)
the corporate existence of the Borrower and each Material Subsidiary of the Borrower, and (ii) be,
and ensure that each Material Subsidiary of the Borrower is, duly qualified to do business and (to
the extent applicable) be in good standing as a foreign corporation in each jurisdiction where the
nature of its business makes such qualification necessary unless the failure to be so qualified
would not have a Material Adverse Effect.



     5.7 Books, Records, Inspections and Collateral. (i) Maintain, and cause each of its
Subsidiaries to maintain, materially complete and accurate books and records in accordance with
GAAP and in addition, with respect to each Subsidiary, (ii) permit, and cause each of its
Subsidiaries to permit, access at reasonable times by the Bank to its books and records, (iii)
permit, and cause each of its Subsidiaries to permit, the Bank or its designated representative to
inspect during normal business hours its properties and operations, (iv) permit, and cause each of
its Subsidiaries to permit, the Bank to discuss its business, operations and financial condition
with its officers and its independent accountants, and (v) maintain, and cause each of its
Subsidiaries to maintain all material books and records and all collateral described in the
Security Agreements only at the headquarters office of the Borrower.



     5.8 Insurance. Maintain, and cause each of its Material Subsidiaries to maintain,
insurance policies to such extent and against such hazards and liabilities as in effect on the date
hereof and as otherwise may be required by the Bank or by law or as may be customarily maintained
by prudent companies similarly situated.



     5.9 Taxes and Liabilities. Pay, and cause each of its Subsidiaries to pay, when due
all material taxes, assessments and other material liabilities except as contested in good faith
and by appropriate proceedings with respect to which reserves have been established, and are being
maintained, in accordance with GAAP except where failure to pay would not have a Material Adverse
Effect.



     5.10 Employee Benefit Plans. Maintain, and cause each of its Subsidiaries to
maintain, each Plan and Welfare Plan in compliance in all material respects with all applicable
Requirements of Law except where failure to so comply would not have a Material Adverse Effect.



     5.11 Compliance with Laws. Comply, and cause each of its Subsidiaries to comply, (i)
with all federal and local laws, rules and regulations related to its businesses, and (ii) with all
Contractual Obligations binding upon such entity, except in each case where failure to so comply
would not in the aggregate have a Material Adverse Effect.



     5.12 Conduct of Business. Engage, and cause each Material Subsidiary to engage, in
insurance business and related activities in all material respects (including without limitation
lines of insurance underwritten) the same as presently engaged in.



     5.13 Costs and Expenses. (a) Regardless of whether any Loan may be extended, the
Borrower agrees to pay from time to time on demand all reasonable costs and expenses of the Bank in
connection with the preparation, execution, delivery, administration, modification and amendment of
this Agreement, the other Loan Documents and the other documents to be delivered thereunder,
including, without limitation, (A) all due diligence, syndication (including printing, distribution
and Bank meetings) transportation, computer, duplication, appraisal, consultant, filing, and audit
expenses and (B) the fees and expenses of counsel for the Bank with respect thereto and with
respect to advising the Bank as to its rights and responsibilities under this Agreement. The
Borrower further agrees to pay on demand all costs and expenses of the Bank (including, without
limitation, counsel fees and expenses), in connection with



15









 







the enforcement (whether through negotiations, legal proceedings or otherwise) of this
Agreement, the other Loan Documents and the other documents to be delivered hereunder, including,
without limitation, reasonable fees and expenses of counsel for the Bank in connection with the
enforcement of rights under this Section 5.13.



     5.14 Depository Accounts. The Borrower shall establish a depository account at the
Bank.



ARTICLE VI

NEGATIVE COVENANTS




     6 Negative Covenants. So long as any Advance shall remain unpaid or the commitment to
make any Advance remains in effect, the Borrower will and will cause each of its Subsidiaries, as
applicable, to:



     6.1 Mergers, Consolidations and Sales. Without the Bank’s written consent, Borrower
shall not, and not permit any of its Subsidiaries to, (i) merge or consolidate, or purchase or
otherwise acquire all or substantially all of the assets or stock of any class of, or any
partnership or joint venture interest in, any other Person (other than a newly formed Subsidiary or
the acquisition of a Subsidiary which complies with clause (B) of this Section 6.1 or the
acquisition of shares of a Subsidiary held by minority shareholders), or (ii) in the case of any
Subsidiary, issue capital stock to any person other than the Borrower, or (iii) sell, transfer,
pledge, convey, repurchase, retire (except as required by applicable law) or otherwise grant an
interest in any capital stock, or (iv) sell, transfer, pledge, convey, lease or otherwise convey an
interest in all or any substantial part of its assets (including without limitation the capital
stock of Subsidiaries) other than any sale, transfer, conveyance or lease in the ordinary course of
business or any sale or assignment of receivables; except for (A) any such merger or consolidation
of any direct wholly owned Subsidiary of the Borrower into, with or to Borrower or any other direct
wholly owned Subsidiary, (B) purchases or acquisitions which otherwise comply with the terms hereof
provided (x) no Default or Event of Default has occurred and is continuing or would result
therefrom and (y) the purchase price for any single purchase or acquisition does not exceed 10% of
Net Worth minus all amounts which in accordance with GAAP would be characterized as intangible
assets (including goodwill) as of the date of such purchase or acquisition (calculated on a pro
forma basis giving effect to such acquisition or purchase) and (z) the aggregate purchase price of
all purchases and acquisitions after the Effective Date does not exceed 20% of Net Worth minus all
amounts which in accordance with GAAP would be characterized as intangible assets (including
goodwill) and (C) sales of assets and capital stock of Subsidiaries that are not Material
Subsidiaries, provided that as to (A), (B) and (C) above, no Default or Event of Default
has occurred and is continuing.



     6.2 Other Agreements. Not, and not permit any of its Subsidiaries to, enter into any
agreement containing any provision which would be materially violated or materially breached by the
performance of obligations hereunder or under any instrument or document delivered or to be
delivered by it hereunder or in connection herewith.



     6.3 Transactions with Affiliates. Not, and not permit any Subsidiary to, enter into,
or cause, suffer or permit to exist, directly or indirectly, any arrangement, transaction or
contract with any of its Affiliates unless such arrangement, transaction or contract is on an arm’s
length basis; provided that (i) transactions between the Borrower and any wholly-owned Subsidiary
of the Borrower, or between any wholly-owned Subsidiaries of the Borrower, and (ii) investments
described in clause (i) of the definition of “Permitted Investments” shall be excluded from the
restrictions set forth in this Section 6.3.



     6.4 Liens. Not create or permit to exist any Lien on any assets of the Borrower
(including, without limitation, the capital stock of the Subsidiaries) or any of the Borrower’s
Subsidiaries, now or hereafter existing or acquired, or on the capital stock of any of the
Borrower’s Subsidiaries, except the following: (A) Liens for current taxes not delinquent or for
taxes being contested in good faith and by appropriate proceedings and with respect to which
adequate reserves have been established, and are being maintained, in accordance with GAAP, (B)
easements, party wall agreements, rights of way, restrictions, minor defects or irregularities in
title and other similar Liens not interfering in any material



16









 







respect with the ordinary course of the business of the Borrower and its Subsidiaries taken as a
whole; (C) Liens in connection with the acquisition of fixed assets after the date hereof and
attaching only to the property being acquired, (D) Liens incurred in the ordinary course of
business in connection with workers’ compensation, unemployment insurance or other forms of
governmental insurance or benefits and Liens pursuant to letters of credit or other security
arrangements in connection with such insurance or benefits, (E) mechanics’, workers’,
materialmen’s, landlord liens and other like Liens for amounts payable by the Borrower or its
Subsidiaries, arising in the ordinary course of business in respect of obligations which are not
delinquent or which are being contested in good faith and by appropriate proceedings and with
respect to which adequate reserves have been established, and are being maintained, in accordance
with GAAP, (F) Permitted Liens in effect on the date hereof; (G) attachments, judgments and other
similar Liens for sums payable by the Borrower or its Subsidiaries not exceeding $50,000 in the
aggregate at any one time; (H) attachments, judgments and other similar Liens for sums exceeding
the $50,000 limit described in clause (G), the execution or other enforcement of such Liens is
effectively stayed and claims secured thereby are being actively contested in good faith and by
appropriate proceedings and have been bonded off; and (I) Liens pursuant to the Loan Documents.



     6.5 Restrictions on Negative Pledge Agreements. Not, and not permit any of its
Subsidiaries to, enter into or assume any agreement, other than any Loan Document, that places any
restrictions upon the right of the Borrower or any of its Subsidiaries to sell, pledge or otherwise
dispose of any material portion of its properties now owned or hereafter acquired, provided,
however, the foregoing restriction shall not apply to Hiland Partners, LP or any of its
subsidiaries.



     6.6 No Amendment of Certain Documents. Not enter into or permit any amendment,
modification or waiver of or supplement to the Organization Documents that would (i) create or
amend redemption provisions applicable to the Borrower’s capital units to provide for mandatory
redemption or redemption at the option of the holder prior to the repayment of the Loans, or (ii)
in any other manner be materially adverse to the interests of the Bank.



     6.7 Subsidiaries. Not permit any Subsidiaries to (i) expend cash other than in the
ordinary course of operations (including payment of claims) and loans to the Borrower during any
Fiscal Year of the Borrower in excess of $500,000; or (ii) enter into, or cause, suffer or permit
to exist, directly or indirectly, any arrangement, transaction (other than loans to Borrower
permitted under (i)) or contract unless such arrangement, transaction or contract (A) is on an
arm’s length basis, and (B) shall not be in connection with the making of any loans or advances or
the issuance of any guarantees to or for the benefit of any Affiliate or otherwise; provided,
however, this Section 6.7 shall not affect any Subsidiaries’ ability to declare and pay
dividends to the Borrower.



ARTICLE VII

EVENTS OF DEFAULT




     7.1 Events of Default. If any of the following events (“Events of Default”)
shall occur and be continuing:



     (a) Default shall be made in the payment by Borrower when due of any installment of principal
or interest under this Agreement, the Note, any Obligation, or any Fee, or the principal balance
due under the Loan exceeds the Pledged Collateral Market Value;



     (b) An Event of Default as defined in any Loan Document shall have occurred;



     (c) Default shall be made by the Borrower in the due observance or performance of any of its
obligations, covenants or agreements contained in any of the Loan Documents;



     (d) Any representation or warranty made by the Borrower in any of the Loan Documents proves to
have been untrue in any material respect or any representation, statement (including Financial
Statements), certificate or data furnished or made to the Bank in connection herewith proves to
have been untrue in any material respect as of the date the facts therein set forth were stated or
certified;



17









 





     (e) Default shall be made by the Borrower or any Subsidiary (as principal or other surety) in
the payment or performance of any bond, debenture, note or other evidence of indebtedness or under
any credit agreement, loan agreement, indenture, promissory note or similar agreement or instrument
executed in connection with any of the foregoing, and such default would cause a Material Adverse
Effect and shall remain unremedied beyond the applicable grace period, if any, with respect thereto
and such default is not being Contested in Good Faith by the Borrower or the Subsidiary;



     (f) The Borrower shall (i) apply for or consent to the appointment of a receiver, trustee or
liquidator of it or all or a substantial part of its assets, (ii) file a voluntary petition
commencing an Insolvency Proceeding concerning the Borrower, (iii) make a general assignment for
the benefit of creditors, (iv) be unable, or admit in writing its inability, to pay its debts
generally as they become due, or (v) file an answer admitting the material allegations of a
petition filed against it in any Insolvency Proceeding;



     (g) An order, judgment or decree shall be entered against the Borrower by any court of
competent jurisdiction or by any other duly authorized authority, on the petition of a creditor or
otherwise, granting relief in any Insolvency Proceeding or approving a petition seeking
reorganization or an arrangement of its debts or appointing a receiver, trustee, conservator,
custodian or liquidator of it or all or any substantial part of its assets and such order, judgment
or decree shall not be dismissed or stayed within sixty (60) days after the issuance and entry
thereof;



     (h) The levy against any material portion of the property of the Borrower or any execution,
garnishment, attachment, sequestration or other writ or similar proceeding which is not permanently
dismissed or discharged within 30 days after the levy and which could reasonably be expected to
have a Material Adverse Effect;



     (i) A final and non-appealable order, judgment or decree with respect to the Collateral,
unless such claim, litigation or expenditure with respect to other property of the Borrower would
not cause a Material Adverse Effect, shall be entered against the Borrower for money damages and/or
Indebtedness in an amount in excess of $500,000 which is not otherwise covered by insurance for
100% of the judgment in excess of $500,000 and such order, judgment or decree shall not be paid,
dismissed or the execution thereof stayed within 60 days;



     (j) Any charges are filed or any other action or proceeding is instituted by any Governmental
Authority against the Borrower under the Racketeering Influence and Corrupt Organizations Statute
(18 U.S.C. § 1961 et seq. the result of which could be the forfeiture or transfer of any material
property of the Borrower subject to a lien in favor of the Bank without (i) satisfaction or
provision for satisfaction of such Lien, or (ii) such forfeiture or transfer of such property being
expressly made subject to such Lien;



     (k) The Borrower shall have (i) concealed, removed or diverted, or permitted to be concealed,
removed or diverted, any part of its property, with intent to hinder, delay or defraud its
creditors or any of them; (ii) made or suffered a transfer of any of its property which may be
fraudulent under any bankruptcy, fraudulent conveyance or similar Law; (iii) made any transfer of
its property to or for the benefit of a creditor at a time when other creditors, similarly situated
have not been paid with the intent to hinder, delay or defraud its creditors or any of them; or
(iv) shall have suffered or permitted, while insolvent, any creditor to obtain a Lien upon any of
its property through legal proceedings or distraint which is not vacated within 30 days from the
date thereof;



     (l) Any Security Instrument shall for any reason not, or cease to, create valid and perfected
first-priority Liens against the Pledged Collateral covered thereby;



     (m) A contribution failure occurs with respect to any Plan sufficient to give rise to a Lien
against the Borrower or any of its Subsidiaries under section 302(f)(1) of ERISA (as in effect on
the



18









 







Effective Date) or withdrawal by one or more companies in the Controlled Group from one or more
Multiemployer Plans to which it or they have an obligation to contribute and the withdrawal
liability (without unaccrued interest) to Multiemployer Plans as a result of such withdrawal or
withdrawals (including any outstanding withdrawal liability that the Controlled Group has incurred
on the date of such withdrawal) is $100,000 or more;



     (n) Any change is made in applicable Law that restricts the authority of any Subsidiary to
issue dividends which restriction is reasonably likely to have a Material Adverse Effect on the
ability of the Borrower to perform its obligations hereunder; or



     (o) A default or event of default shall have occurred and be continuing in any other agreement
between the Borrower or any Affiliate of Borrower as obligor and the Bank as obligee; or then, and
in any such event, the Bank (i) by notice to the Borrower, may declare the obligation to make
Advances and/or Loans to be terminated, whereupon the same shall forthwith terminate, and (ii) by
notice to the Borrower, may declare the Loans, all interest thereon and all other amounts payable
under this Agreement to be forthwith due and payable, whereupon the Loans, all such interest and
all such amounts shall become and be forthwith due and payable, without presentment, demand,
protest or further notice of any kind, all of which are hereby expressly waived by the Borrower;
provided, however, that in the event of an actual or deemed entry of an order for
relief with respect to the Borrower under the United States Bankruptcy Code, (A) the obligation of
the Bank to make Advances and/or Loans shall automatically be terminated and (B) the Loans, all
such interest and all such amounts shall automatically become and be due and payable, without
presentment, demand, protest or any notice of any kind, all of which are hereby expressly waived by
the Borrower. In addition, if any Event of Default has occurred and is continuing, the Bank may
exercise any of its rights provided in the Pledge Agreement, the Guaranties, the Security
Agreements, the Assignment Agreement and each other Loan Document or available under the Uniform
Commercial Code or other applicable Laws. Without limitation, the Bank may appoint a receiver or
trustee to assume control over all or any part of the business or assets of the Borrower or any of
its Subsidiaries (subject only to any restrictions that may be imposed by the Authority).



     (p) The dissolution or loss of legal existence of the Borrower;



     (r) A Change in Control shall occur; or



     (s) The Hiland Common Units cease to be publicly traded.



     7.2 Remedies.



     (a) Upon the occurrence of an Event of Default specified in Subsection 7.1(a), upon
ten (10) days’ written notice, all Obligations shall automatically become immediately due and
payable, without presentment, demand, protest, notice of protest, default or dishonor, notice of
intent to accelerate maturity, notice of acceleration of maturity or other notice of any kind,
except as may be provided to the contrary elsewhere herein, all of which are hereby expressly
waived by the Borrower. Nothing contained in this Section 7.2 shall be construed to limit
or amend in any way the Events of Default enumerated in the Note, or any other Loan Documents
executed in connection with the transaction contemplated herein.



     Upon the occurrence and during the continuance of any Event of Default under Subsection
7.1(a), the Bank is hereby authorized at any time and from time to time, without notice to the
Borrower (any such notice being expressly waived by the Borrower), to set-off and apply any and all
deposits (general or special, time or demand, provisional or final) of the Borrower to the extent
held by the Bank to or for the account of the Borrower against any and all of the Indebtedness of
the Borrower under the Note, irrespective of whether or not the Bank shall have made any demand
under the Security Instruments, including this Agreement or the Note and although such Indebtedness
may be unmatured. Any amount setoff by the Bank shall be applied against the Indebtedness owed the
Bank by the Borrower pursuant to this Agreement and the Note. The Bank agrees promptly to notify
the Borrower, after any such setoff and application, provided that the failure to give such notice
shall not affect the validity of such setoff and application. The rights of the Bank under this
Section 7.2 are in addition to other rights and



19









 







remedies (including, without limitation, other rights of set-off which the Bank may have). Within
five (5) Business Days after any such set-off or appropriation by the Bank, the Bank shall give the
Borrower written notice thereof. However, a failure to give such notice will not affect the
validity of the set-off or appropriation.



     (b) Upon the occurrence of any Event of Default, other than those specified in Subsection
7.1(a), the Borrower shall have thirty (30) days after receiving written notification of the Event
of Default to cure such Default but, during such cure period, the Bank will not, as a result of
such Default, accelerate the Note or exercise any of its rights pursuant to the Loan Documents, and
notwithstanding Section 7.1, such Default will not constitute an “Event of Default”, unless
such Default is not remedied to the reasonable satisfaction of Bank within 30 days after the
Borrower’s receipt of such written notification. In the event the Borrower shall fail to
effectuate such a cure, the Bank may declare all Obligations immediately due and payable, without
presentment, demand, protest, notice of protest, default or dishonor, notice of intent to
accelerate maturity, notice of acceleration of maturity or other notice of any kind, except as may
be provided to the contrary elsewhere herein, all of which are hereby expressly waived by the
Borrower, and in such event, the Bank is hereby authorized at any time and from time to time,
without notice to the Borrower (any such notice being expressly waived by the Borrower), to setoff
and apply any and all deposits (general or special, time or demand, provisional or final) held by
the Bank containing funds of the Borrower to the extent of the Obligations.



     (c) Subject to the provisions of this Agreement, upon the occurrence of any Event of Default,
which is not cured within any applicable cure period, the Bank may, in addition to the foregoing,
exercise any or all of its rights and remedies provided by Law or pursuant to the Loan Documents.



ARTICLE VIIi

MISCELLANEOUS




     9.1 Transfers and Participations. The Bank may, at any time, sell, transfer, assign
or grant participations in the Obligations or any portion thereof; and the Bank may forward to each
transferee and each prospective transferee all documents and information relating to such
Obligations, whether furnished by the Borrower or otherwise obtained, as the Bank determines
necessary or desirable so long as responsibility, administrative or otherwise, for the Loan remains
with the Bank. The Borrower agrees that each transferee, regardless of the nature of any transfer
to it, may exercise all rights (including, without limitation, rights of set-off) with respect to
the Obligations held by it as fully as if such transferee were the direct holder thereof, subject
to any agreements between such transferee and the transferor to such transferee. The Bank agrees
that each such transferee shall assume all of the obligations of the Bank pursuant to the Loan
Documents.



     9.2 Survival of Representations Warranties and Covenants. All representations and
warranties of the Borrower and all covenants and agreements herein made shall survive the execution
and delivery of this Agreement, the Note and the Security Instruments and shall remain in force and
effect so long as any Obligation is outstanding.



     9.3 Notices and Other Communications. Except as to verbal notices expressly
authorized herein, which verbal notices shall be confirmed in writing, all notices, requests and
communications hereunder shall be in writing (including by telegraph or telecopy). Unless otherwise
expressly provided herein, any such notice, request, demand or other communication shall be deemed
to have been duly given or made when delivered by hand, or, in the case of delivery by mail,
deposited in the mail, certified mail, return receipt requested, postage prepaid, or, in the case
of overnight courier service when delivered to the courier service, when receipt thereof is
addressed as follows:




	 	(a)	 	If to the Bank, to:
	 
	 	 	 	Coppermark Bank

3333 N.W. Expressway

P.O. Box 25676





20









 






	 	 	 	Oklahoma City, OK 73125-0676

Attn: Chris Mostek, Vice President

Fax (405) 858-8118




21









 












	 	(b)	 	If to the Borrower, to:
	 
	 	 	 	Hiland Holdings GP, LP

P.O. Box 5103

Enid, Oklahoma 73702-5103

Attn: Chief Financial Officer

Fax (580) 616-2080




Any party may, by proper written notice hereunder to the other, change the individuals or addresses
to which such notices to it shall thereafter be sent.




     9.4 Parties in Interest. Subject to applicable restrictions contained herein, all
covenants and agreements herein contained by or on behalf of the Borrower or the Bank shall be
binding upon and inure to the benefit of the Borrower or the Bank, as the case may be, and their
respective heirs, legal representatives, successors and assigns.



     9.5 Rights of Third Parties. All provisions herein are imposed solely and exclusively
for the benefit of the Bank, the Borrower. No other Person shall, have any right, benefit,
priority or interest hereunder or as a result hereof or have standing to require satisfaction of
provisions hereof in accordance with their terms, and any or all of such provisions may be freely
waived in whole or in part by the Bank at any time if in its sole discretion it deems it advisable
to do so.



     9.6 Articles and Sections. This Agreement, for convenience only, has been divided
into Articles and Sections and it is understood that the rights and other legal relations of the
parties hereto shall be determined from this instrument as an entirety and without regard to the
aforesaid division into Articles and Sections and without regard to headings prefixed to such
Articles or Sections.



     9.7 Number and Gender. Whenever the context requires, reference herein made to the
single number shall be understood to include the plural; and likewise, the plural shall be
understood to include the singular. Definitions of terms defined in the singular or plural shall be
equally applicable to the plural or singular, as the case may be, unless otherwise indicated. Words
denoting sex shall be construed to include the masculine, feminine and neuter, when such
construction is appropriate; and specific enumeration shall not exclude the general but shall be
construed as cumulative.



     9.8 Renewals and Extensions. All provisions of this Agreement relating to the Note
shall apply with equal force and effect to each promissory note hereafter executed or issued which
in whole or in part represents a renewal or extension of any part of the Obligations of the
Borrower under this Agreement, the Note, or any other Loan Document.



     9.9 No Waiver; Rights Cumulative. No course of dealing on the part of the Bank, its
officers or employees, nor any failure or delay by the Bank with respect to exercising any of its
rights under any Loan Document shall operate as a waiver thereof. The rights of the Bank under the
Loan Documents shall be cumulative and the exercise or partial exercise of any such right shall not
preclude the exercise of any other right.



     9.10 Incorporation of Exhibits. The Exhibits attached to this Agreement are
incorporated herein and shall be considered a part of this Agreement for all purposes.



     9.11 Survival Upon Unenforceability. In the event any one or more of the provisions
contained in any of the Loan Documents or in any other instrument referred to herein or executed in
connection with the Obligations shall, for any reason, be held to be invalid, illegal or
unenforceable in any respect, such invalidity, illegality or unenforceability shall not affect any
other provision of any Loan Document or of any other instrument referred to herein or executed in
connection with such Obligations.



22









 





     9.12 Amendments or Modifications. Neither this Agreement nor any provision hereof may
be changed, waived, discharged or terminated orally, but only by an instrument in writing signed by
the party against whom enforcement of the change, waiver, discharge or termination is sought.



     9.13 Controlling Provision Upon Conflict. In the event of a conflict between the
provisions of this Agreement and those of any other Loan Document, the provisions of this Agreement
shall control.



     9.14 Time of Essence. Time is of the essence of this Agreement and of each provision
hereof.



     9.15 Disposition of Collateral. Notwithstanding any term or provision, express or
implied, in any of the Security Instruments, the realization, liquidation, foreclosure or any other
disposition on or of any or all of the Collateral shall be in the order and manner and determined
in the sole discretion of the Bank; provided however, that in no event shall the Bank violate
applicable Law or exercise rights and remedies other than those provided in such Security
Instruments or otherwise existing at Law or in equity.



     9.16 Lack of Relationship. The relationship between the Borrower and the Bank is, and
shall at all times remain, solely that of borrower and lender, and Bank neither undertakes nor
assumes any responsibility or duty to the Borrower to review, inspect, supervise, pass judgment
upon, or inform the Borrower of any matter in connection with any phase of the Borrower’s business,
operations, or condition, financial or otherwise. Borrower shall rely entirely upon its own
judgment with respect to such matters, and any review, inspection, supervision, exercise of
judgment, or information supplied to the Borrower by the Bank in connection with any such matter is
for the protection of the Bank, and neither the Borrower nor any third party are entitled to rely
thereon.



     9.17 GOVERNING LAW. THIS AGREEMENT AND THE LOAN DOCUMENTS SHALL BE DEEMED TO BE MADE
UNDER AND SHALL BE CONSTRUED IN ACCORDANCE WITH, AND GOVERNED BY, THE STATE OF OKLAHOMA AND THE
SUBSTANTIVE LAWS OF SUCH STATE AND THE APPLICABLE FEDERAL LAWS OF THE UNITED STATES OF AMERICA IN
THE VALIDITY, CONSTRUCTION, ENFORCEMENT, AND INTERPRETATION OF THIS AGREEMENT AND THE LOAN
DOCUMENTS, EXCEPT TO THE EXTENT THAT THE LAWS OF ANY JURISDICTION WHERE COLLATERAL IS LOCATED
REQUIRE APPLICATION OF SUCH LAWS WITH RESPECT TO SUCH COLLATERAL.



     9.18 JURISDICTION AND VENUE. EACH OF THE PARTIES HERETO IRREVOCABLY AND
UNCONDITIONALLY SUBMITS TO THE NONEXCLUSIVE JURISDICTION IN COURTS HAVING SITUS IN OKLAHOMA CITY,
OKLAHOMA COUNTY,OKLAHOMA FOR ALL ACTIONS OR PROCEEDINGS WITH RESPECT TO, ARISING DIRECTLY OR
INDIRECTLY IN CONNECTION WITH, OUT OF, RELATED TO OR FROM THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT
AND HEREBY WAIVE ANY RIGHTS TO TRANSFER OR CHANGE THE JURISDICTION OR VENUE OF ANY LITIGATION
BROUGHT BY THE BANK IN ACCORDANCE WITH THIS SECTION.



     9.19 NO DAMAGES. THE BORROWER CONFIRMS AND ACKNOWLEDGES THAT IT DOES NOT HAVE, AND IS
NOT AWARE OF, ANY CLAIMS, CAUSES OF ACTION, DAMAGES, COSTS, EXPENSES OR LOSSES OF ANY KIND OR
NATURE BY REASON OF OR ARISING OUT OF ANY ACT, OCCURRENCE, TRANSACTION, OR OMISSION OF THE BANK IN
CONNECTION WITH THIS AGREEMENT, THE NOTE OR WITH THE LOAN DOCUMENTS. THE BANK SHALL NOT BE LIABLE
TO THE BORROWER (WHETHER IN CONTRACT, TORT, OR OTHERWISE) FOR ANY SPECIAL, INDIRECT, CONSEQUENTIAL,
PUNITIVE, OR EXEMPLARY DAMAGES, HOWEVER ARISING, FOR ANY OTHER ACTION TAKEN OR OMITTED WITH RESPECT
TO THIS AGREEMENT OR THE LOAN DOCUMENTS.



     9.20 WAIVER OF RIGHTS TO JURY TRIAL. TO THE FULLEST EXTENT PERMITTED BY LAW, AND AS
SEPARATELY BARGAINED-FOR CONSIDERATION TO THE BANK, THE BORROWER HEREBY KNOWINGLY, VOLUNTARILY,
INTENTIONALLY, IRREVOCABLY AND UNCONDITIONALLY WAIVES ANY RIGHT TO A TRIAL BY JURY IN ANY ACTION OR
PROCEEDING



23









 







TO ENFORCE OR DEFEND ANY RIGHTS UNDER THIS AGREEMENT, THE NOTE, THE PLEDGE AGREEMENT, OR ANY OTHER
LOAN DOCUMENT, OR UNDER ANY AMENDMENT, INSTRUMENT, DOCUMENT OR AGREEMENT TO THE FOREGOING LOAN
DOCUMENTS OR WHICH MAY IN THE FUTURE BE DELIVERED IN CONNECTION WITH OR RELATING THERETO, OR
ARISING FROM THE LENDING RELATIONSHIP WHICH IS THE SUBJECT OF THIS AGREEMENT AND AGREES THAT ANY
SUCH ACTION OR PROCEEDING SHALL BE TRIED BEFORE A COURT AND NOT BEFORE A JURY.



     9.21 Entire Agreement. This Agreement constitutes the entire Agreement among the
parties hereto with respect to the parties hereof and shall supersede any prior agreement between
the parties hereto, whether written or oral, relating to the subject hereof. Furthermore, in this
regard, this written Agreement and the other written Loan Documents represent, collectively, the
final agreement between the parties and may not be contradicted by evidence of prior,
contemporaneous, or subsequent oral agreements of the parties. There are no unwritten agreements
between the parties.



     IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed by their
respective officers thereunto duly authorized, as of the date first above written.



	 	 	 	 	 
	 	Hiland Holdings GP, LP

a Delaware limited partnership

 	 
	 	By:  	Hiland Partners GP Holdings, LLC,
 	 
	 	 	a Delaware limited liability company 	 
	 	 	its general partner 	 
	 
	 	 	 
	 	By:  	/s/  Matthew S. Harrison
 	 
	 	 	Matthew S. Harrison 	 
	 	 	Vice President-Finance, Chief Financial

Officer and Secretary 	 
	 
	 	Coppermark Bank

 	 
	 	By:  	/s/  Chris Mostek
 	 
	 	 	Chris Mostek, Vice President 	 
	 	 	 	 
	 




24











 





Schedule 1.1




Existing Indebtedness




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






 









 






Schedule 4.5




Liabilities




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






Litigation




     Three putative unitholder class action lawsuits have been filed relating to the Hiland
Partners Merger and the Hiland Holdings Merger. These lawsuits are as follows: (i) Robert
Pasternack v. Hiland Partners, LP et al., In the Court of Chancery of the State of Delaware, Civil
Action No. 4397-VCS; (ii) Andrew Jones v. Hiland Partners, LP et al., In the Court of Chancery of
the State of Delaware, Civil Action No. 4558-VCS; and (iii) Arthur G. Rosenberg v. Hiland Partners,
LP et al., In the District Court of Garfield County, State of Oklahoma, Case No. C3-09-211-02. The
lawsuits name as defendants the Partnership, Hiland Partners, the general partner of each of the
Partnership and Hiland Partners, and the members of the board of directors of each of the
Partnership and Hiland Partners. The lawsuits challenge both the Hiland Partners Merger and the
Hiland Holdings Merger. The lawsuits allege claims of breach of the Partnership Agreement and
breach of fiduciary duty on behalf of (i) a purported class of common unitholders of the
Partnership and (ii) a purported class of our common unitholders of Hiland Partners.



     On July 10, 2009, the court in which the Oklahoma case is pending granted our motion to stay
the Oklahoma lawsuit in favor of the Delaware lawsuits. On July 31, 2009, the plaintiff in the
first-filed Delaware case (Pasternack) filed an Amended Class Action Complaint and a motion to
enjoin the mergers. This Amended Class Action Complaint alleges, among other things, that (i) the
original consideration and revised consideration offered by the Hamm Parties is unfair and
inadequate, (ii) the members of the conflicts committees of the general partner of each of the
Partnership and Hiland Partners that were charged with reviewing the proposals and making a
recommendation to each committee’s respective board of directors lacked any meaningful
independence, (iii) the defendants acted in bad faith in recommending and approving the Hiland
Partners Merger or the Hiland Holdings Merger, and (iv) the disclosures in the Preliminary Proxy
Statement filed by the Partnership and Hiland Partners are materially misleading. The Pasternack
plaintiff seeks to preliminarily enjoin the defendants from proceeding with or consummating the
mergers and seeks an order requiring defendants to supplement the Preliminary Proxy Statement with
certain information. On August 13, 2009, the Partnership, Hiland Partners and certain individual
defendants moved to dismiss the claims added in the July 31, 2009 Amended Class Action Complaint.
The plaintiffs moved to expedite proceedings on September 4, 2009. On September 4, 2009, the
plaintiffs filed a motion to expedite the proceedings. On September 9, 2009, the Delaware Chancery
Court requested that the defendants file a response to plaintiffs’ motion that same day and set a
hearing on plaintiffs’ motion for September 11, 2009. Defendants responded to plaintiffs’ motion as
ordered by the Court, and, following the hearing on September 11, 2009, plaintiffs’ motion to
expedite the proceedings was denied.



     We cannot predict the outcome of these lawsuits, or others, nor can we predict the amount of
time and expense that will be required to resolve the lawsuits.



 









 





Schedule 4.15




Permitted Liens




NONE




 









 





Schedule 4.18




Litigation/Contingent Matters




     Three putative unitholder class action lawsuits have been filed relating to the Hiland
Partners Merger and the Hiland Holdings Merger. These lawsuits are as follows: (i) Robert
Pasternack v. Hiland Partners, LP et al., In the Court of Chancery of the State of Delaware, Civil
Action No. 4397-VCS; (ii) Andrew Jones v. Hiland Partners, LP et al., In the Court of Chancery of
the State of Delaware, Civil Action No. 4558-VCS; and (iii) Arthur G. Rosenberg v. Hiland Partners,
LP et al., In the District Court of Garfield County, State of Oklahoma, Case No. C3-09-211-02. The
lawsuits name as defendants the Partnership, Hiland Partners, the general partner of each of the
Partnership and Hiland Partners, and the members of the board of directors of each of the
Partnership and Hiland Partners. The lawsuits challenge both the Hiland Partners Merger and the
Hiland Holdings Merger. The lawsuits allege claims of breach of the Partnership Agreement and
breach of fiduciary duty on behalf of (i) a purported class of common unitholders of the
Partnership and (ii) a purported class of our common unitholders of Hiland Partners.



     On July 10, 2009, the court in which the Oklahoma case is pending granted our motion to stay
the Oklahoma lawsuit in favor of the Delaware lawsuits. On July 31, 2009, the plaintiff in the
first-filed Delaware case (Pasternack) filed an Amended Class Action Complaint and a motion to
enjoin the mergers. This Amended Class Action Complaint alleges, among other things, that (i) the
original consideration and revised consideration offered by the Hamm Parties is unfair and
inadequate, (ii) the members of the conflicts committees of the general partner of each of the
Partnership and Hiland Partners that were charged with reviewing the proposals and making a
recommendation to each committee’s respective board of directors lacked any meaningful
independence, (iii) the defendants acted in bad faith in recommending and approving the Hiland
Partners Merger or the Hiland Holdings Merger, and (iv) the disclosures in the Preliminary Proxy
Statement filed by the Partnership and Hiland Partners are materially misleading. The Pasternack
plaintiff seeks to preliminarily enjoin the defendants from proceeding with or consummating the
mergers and seeks an order requiring defendants to supplement the Preliminary Proxy Statement with
certain information. On August 13, 2009, the Partnership, Hiland Partners and certain individual
defendants moved to dismiss the claims added in the July 31, 2009 Amended Class Action Complaint.
The plaintiffs moved to expedite proceedings on September 4, 2009. On September 4, 2009, the
plaintiffs filed a motion to expedite the proceedings. On September 9, 2009, the Delaware Chancery
Court requested that the defendants file a response to plaintiffs’ motion that same day and set a
hearing on plaintiffs’ motion for September 11, 2009. Defendants responded to plaintiffs’ motion as
ordered by the Court, and, following the hearing on September 11, 2009, plaintiffs’ motion to
expedite the proceedings was denied.



     We cannot predict the outcome of these lawsuits, or others, nor can we predict the amount of
time and expense that will be required to resolve the lawsuits.



 









 





Schedule 4.9




Environmental Matters




NONE





 









 








Schedule 4.21




Taxes




NONE