exv10w1



 






Exhibit 10.1




FOURTH AMENDMENT TO

SECOND AMENDED AND RESTATED CREDIT AGREEMENT




          This fourth Amendment to Second Amended and Restated Credit Agreement (this
"Amendment”), dated and effective as of March 31, 2005 (the “Amendment Effective Date”), is by and
among KCS Energy, Inc., a Delaware corporation (the “Borrower”), and each of the Lenders party to
that certain Second Amended and Restated Credit Agreement dated as of November 18, 2003, among the
Borrower, the Lenders party thereto, Bank of Montreal, a Canadian chartered bank acting through
certain of its U.S. branches or agencies, as Agent and Collateral Agent, BNP Paribas, as
Documentation Agent and JPMorgan Chase Bank, N.A. (successor by merger to Bank One, NA), as
Syndication Agent (as amended, restated, supplemented or otherwise modified from time to time, the
"Credit Agreement”);



          Whereas, the Borrower has requested that the Credit Agreement be amended to allow
each of KeyBank National Association, Mizuho Corporate Bank, Ltd., SunTrust Bank and The Royal Bank
of Scotland plc (the “New Lenders”) to become “Lenders” party to the Credit Agreement, as set forth
herein;



          Whereas, the Borrower has requested that the Credit Agreement be amended to allow The
Royal Bank of Scotland plc to become a Co-Documentation Agent under the Credit Agreement, as set
forth herein;



          Whereas, giving effect to the foregoing transactions, the Borrower has requested that
the Lenders amend the Credit Agreement to (i) increase the Maximum Commitment Amount, (ii) extend
the Commitment Termination Date and Stated Maturity Date and (iii) permit the Borrower to issue and
incur up to $125.0 million in aggregate principal amount of new funded Indebtedness; and



          Whereas, all of the Lenders (including the New Lenders) have agreed to such
amendments subject to the terms and conditions set forth herein.



          Now Therefore, in consideration of the premises and the mutual covenants,
representations and warranties contained herein, and for other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties hereto, intending to be
legally bound, hereby agree as follows. As used herein, the term “Current Lenders” means the
Lenders identified as the Current Lenders on Schedule I hereto. Capitalized terms used but
not otherwise defined herein shall have the meanings assigned such terms in the Credit Agreement.



     Section 1. Lender Transactions.



          (a) Each Current Lender hereby sells, transfers and assigns to the other Current Lenders and
the New Lenders, and each other Current Lender and each New Lender hereby purchases, assumes and
undertakes from such Current Lender, without recourse and without representation or warranty
(except as provided in this Section 1) a percentage equal to the percentage set forth opposite such
Lender’s name on Schedule I hereto under the column “Commitment Percentages Purchased on
the Amendment Effective Date” of (i) the Commitments, the Loans and rights in respect of
Reimbursement Obligations of such Current Lender and (ii) all related rights, benefits,
obligations, liabilities and indemnities of such Current Lender under and in connection with the
Credit Agreement, each Guaranty, the Mortgages, each other Security Instrument and the other Loan
Documents and all Collateral and other security for the Obligations.



          (b) Upon the effectiveness of this Amendment and by its execution and delivery hereof, each of
the New Lenders shall be a party to the Credit Agreement, shall have all the rights and obligations
of a “Lender” under the Credit Agreement and the other Loan Documents as if each were a signatory
thereto, and shall agree, and does hereby agree, to be bound by the terms and conditions set forth
in the Credit Agreement and the other Loan Documents to which the Lenders are a party, in each
case, as if each were a signatory thereto.



1









 





          (c) Each of the New Lenders hereby represents and warrants as follows: (i) such New Lender
has fully reviewed the terms of the Credit Agreement and the other Loan Documents, copies of which,
together with copies of the documents which were required to be delivered as a condition to the
making of the initial Loans thereunder, have been delivered to such New Lender by the Agent, and
such New Lender has independently and without reliance upon any other Lender, the Agent or the
Collateral Agent, and based on such information as such New Lender has deemed appropriate, made its
own credit analysis and decision to enter into this Amendment and (ii) if such New Lender is not
incorporated, formed or organized under the laws of the United Sates of America or a state thereof,
such New Lender has contemporaneously herewith delivered to the Agent and the Borrower such
documents as are required by Section 4.6 of the Credit Agreement. Each of the New Lenders hereby
(x) appoints and authorizes the Agent and the Collateral Agent to take such action as agent on its
behalf and to exercise such powers and discretion under the Loan Documents as are delegated to the
Agent and the Collateral Agent by the terms thereof, together with such powers and discretion as
are reasonably incidental thereto; and (y) agrees that it will perform in accordance with their
terms all of the obligations that by the terms of the Credit Agreement or any other Loan Document
are required to be performed by it as a Lender.



          (d) Each of the New Lenders and each of the Current Lenders hereby advise each other party
hereto that its respective address for notices, its respective Applicable Lending Office for Base
Rate Loans and its respective Applicable Lending Office LIBO for Rate Loans shall be as set forth
below its name on its respective signature page hereto.



          (e) Upon the effectiveness of this Amendment and by its execution and delivery hereof, Royal
Bank of Scotland shall become a Co-Documentation Agent under the Credit Agreement as if it were a
signatory thereto.



          (f) Renewal Notes. In furtherance of the foregoing transactions, the Borrower shall
execute and deliver to each of the Lenders its replacement promissory notes dated the Amendment
Effective Date in the form of Annexes “A-1” through “A-8” attached hereto (“Renewal Notes”). The
principal amount of each Renewal Note delivered to each Lender shall equal such Lender’s Percentage
Share of the Maximum Commitment Amount. The Renewal Notes shall, upon acceptance by the Lenders,
and as of the Amendment Effective Date constitute replacements and substitutions for the Notes
delivered pursuant to the Credit Agreement. All references in the Credit Agreement and the other
Loan Documents to the Notes shall, from and after the Amendment Effective Date, be deemed to refer
to the Renewal Notes, the same as if such Renewal Notes were the Notes defined, described and
referred to in the Credit Agreement. Upon acceptance of the Renewal Notes, each Current Lender
agrees to return to Borrower its November 18, 2003 Note marked “Renewed and Extended” or to provide
other evidence reasonably satisfactory to the Borrower that the Loans have been renewed (and not
repaid) pursuant to this Amendment and that its existing November 18, 2003 Note has been replaced
in its entirety by its Renewal Note.



          (g) As a result of the transactions effected by this Section 1 and after giving effect to the
other agreements set forth in this Amendment, upon effectiveness of this Amendment, for purposes of
Section 2.1(a) of the Credit Agreement, as amended hereby and for all other purposes of the Credit
Agreement, as amended hereby (including, without limitation, for the purpose of amending the
definition of “Percentage Share”), the Lenders’ respective Percentage Shares and their respective
Revolving Loan Commitments shall be as set forth in Schedule I hereto.



     Section 2. Amendments. The Credit Agreement is hereby amended as follows:



          (a) The definition of “Maximum Commitment Amount” is amended by replacing “$100.0 million”
with “$250.0 million”.



          (b) The definition of “Net Cash Proceeds” is amended by deleting the word “equity”, which
appears in the fourth line thereof in the phrase “such issuance of equity securities”, so that such
phrase shall read “such issuance of securities”.



2









 





          (c) The definition of “Permitted Liens” is amended by replacing clause (f) of such definition
in its entirety with the following:



     (f) (i) the terms of the instruments evidencing the Oil and Gas
Properties of the Borrower or any of its Subsidiaries as in effect
immediately prior to the execution of any Mortgage applicable to such
Property, (ii) existing or future assignments of any Geologist ORRI, (iii)
the terms of the employment or other agreements under which the Borrower or
any Subsidiary is required to assign a Geologist ORRI, (iv) the Star
Production Payments, (v) the Production Payment 2001 Lien and (vi) documents
listed and matters described under the heading “Permitted Encumbrances” or
“Permitted Liens” in an exhibit to any of the Security Instruments;



          (d) The definition of “Stated Maturity Date” is amended by replacing “November 20, 2006” with
“March 31, 2009”.



          (e) The definition of “Permitted Public Debt Refinancing” is amended and restated to read in
its entirety as follows:



     ”Permitted Public Debt Refinancing” shall mean any new
capital markets issuance of equity securities (excluding
common stock but including Preferred Stock) and/or
Indebtedness with respect to which the Net Cash Proceeds of
which are used (a) to pay fees incurred in connection with
such refinancing and (b) to repay (i) any of the Borrower’s
then outstanding Senior Notes (including any Additional
Securities) and any other obligations under the Senior
Indenture and/or (ii) any other Permitted Additional Funded
Indebtedness and which, if issued as Indebtedness, (x) has a
stated or scheduled maturity date no earlier than the later
of (1) the current maturity date of the Indebtedness being
refinanced and (2) September 30, 2009, and (y) is issued
under terms which either are substantially similar to the
terms of the Senior Indenture or are otherwise in a form
approved by the Agent.



          (f) The definition of “Preferred Stock” is amended by replacing “November 30, 2007” with
“September 30, 2009”.



          (g) The definition of “Senior Subordinated Indenture” is hereby deleted from the Credit
Agreement. The Credit Agreement is hereby amended, mutatis mutandis, to delete therefrom all
references to the Senior Subordinated Indenture and the Borrower’s 8? % Senior Subordinated Notes
due 2006.



          (h) The following new definitions of “Additional Securities”, “Geologist ORRI”, “Original
Securities”, “Permitted Additional Funded Indebtedness”, “Senior Indenture”, “Senior Notes” and
“Subordinated Indebtedness” are hereby inserted into the Credit Agreement in the appropriate
alphabetical order:



     ”Additional Securities” has the meaning assigned
thereto in the Senior Indenture.



     ”Geologist ORRI” means an overriding royalty interest
in any Oil and Gas Property that is payable to one or more
geologists employed or retained by the Borrower or any
Subsidiary pursuant to any prior, existing or future
employment agreement, insofar and only insofar as (a) such
overriding royalty interest does not exceed two percent (2%)
of 8/8ths, proportionately reduced to the granting party’s
working or leasehold interest in the Oil and Gas Property in
question and (b) giving effect to such overriding royalty
interest does not cause



3









 





the granting parties’ Net Revenue Interest (as such term is
defined in the applicable Mortgage executed by the Borrower
or the Subsidiary in question) in such Oil and Gas Property
to be less than the scheduled Net Revenue Interest set forth
in the applicable Mortgage.



     ”Original Securities” means the Initial Securities,
together with the Exchange Securities, as each such term is
defined in the Senior Indenture.



     ”Permitted Additional Funded Indebtedness” shall mean
any new issuance or incurrence after March 31, 2005 of
Indebtedness for money borrowed (including any such
Indebtedness which may be issued as senior Indebtedness or
senior Subordinated Indebtedness or Indebtedness convertible
into any equity interests) which either (a)(1) has a stated
or scheduled maturity date no earlier than September 30,
2009, and (2) is issued under terms which either are
substantially similar to the terms of the Senior Indenture
or are otherwise in a form approved by the Agent, or (b) is
issued as Additional Securities.



     ”Senior Indenture” shall mean the Indenture dated as of
April 1, 2004, by and among the Borrower, the Guarantors (as
such term is defined therein) and U.S. Bank National
Association, as Trustee, relating to the Senior Notes, as
hereafter amended or otherwise modified from time to time in
a manner not prohibited hereby.



     ”Senior
Notes” means the Borrower’s 7 1/8 % Senior Notes
due 2012 issued under the Senior Indenture in the original
aggregate principal amount of $175,000,000, together with
any Exchange Securities (within the meaning of the Senior
Indenture) issued thereunder and any Additional Securities.



     ”Subordinated Indebtedness” shall mean Indebtedness for
money borrowed which is subordinated, upon terms approved by
the Agent, in right of payment to the payment of all
Obligations.



          (i) Section 2.7(e) of the Credit Agreement is amended to read in it entirety as follows:



     ”(e) In the event of the issuance by the Borrower or
any of its Subsidiaries of any Indebtedness permitted
pursuant to Section 8.1(d), the then current Borrowing Base
shall be reduced automatically and immediately, on the date
of issuance of such Indebtedness, as follows: (i) until such
time as both (A) the Production Payment 2001 Lien shall have
been released in the manner described in the definition of
“Applicable Margin”, and (B) the Borrowing Base shall have
been redetermined to reflect the first priority of the
Collateral Agent’s Liens (subject to Permitted Liens and
Lien permitted under Section 8.3) under the Mortgages on the
Star Properties, by an amount equal to 20% of the Net Cash
Proceeds (if any), from the aggregate stated principal
amount of such issuance, which are not applied (as evidenced
by a certificate delivered by the Borrower to the Agent,
which certificate the Borrower agrees to deliver promptly
upon such issuance) to refinance any of the Senior Notes or
any outstanding Permitted Additional Funded Indebtedness or
any outstanding Permitted Public Debt Refinancing, and (ii)
thereafter, by an amount equal to 50% of such Net Cash



4









 





Proceeds (if any) which are not so applied (as so evidenced
by a Borrower certificate).”



          (j) Section 5.2(f)(ii) is amended and restated to read in its entirety as follows:



"(ii) the Senior Indenture, or any other indenture governing
any Indebtedness permitted by Section 8.1(d), and such Loan
and all Liens created by any of the Security Instruments
shall not be prohibited thereunder;”



          (k) Section 8.1(c) is amended and restated to read in its entirety as follows:



     ”(c) up to $175.0 million in aggregate principal amount
of Original Securities plus accrued interest thereon;”



          (l) Section 8.1(d) is amended and restated to read in its entirety as follows:



     ”(d) any (i) Permitted Additional Funded Indebtedness;
provided, however, the aggregate outstanding principal
amount thereof shall not exceed $125.0 million and (ii)
Indebtedness issued in a Permitted Public Debt Refinancing;
provided further, however, that the issuance or incurrence
of Permitted Additional Funded Indebtedness, or any portion
of Indebtedness issued in a Permitted Public Debt
Refinancing, the Net Cash Proceeds of which are not applied
to refinance any of the Senior Notes or any outstanding
Permitted Additional Funded Indebtedness or any outstanding
Permitted Public Debt Refinancing, shall automatically and
immediately upon the issuance thereof reduce the then
current Borrowing Base in accordance with Section 2.7(e).”



          (m) Section 8.2(c) is hereby amended and restated to read in its entirety as follows:



     ”(c) obligations under guaranties by and contribution
obligations by and among any Subsidiaries that are
guarantors of Indebtedness under the Senior Indenture, or
any indenture, agreement or other instrument governing or
evidencing Permitted Additional Funded Indebtedness or
Permitted Public Debt Refinancing that constitutes
Indebtedness;”



          (n) Section 8.3(b) is hereby amended and restated to read in its entirety as follows:



     ”(b) Liens on the Net Cash Proceeds of any Permitted
Public Debt Refinancing or any Permitted Additional Funded
Indebtedness pending application to the Indebtedness being
refinanced with such proceeds;”



          (o) Section 8.4(d) is amended and restated to read in its entirety as follows:



”, or (d) the holders of the Senior Notes (including any
Additional Securities) as evidenced by Section 4.5 of the
Senior Indenture, or the holders of any Permitted Additional
Funded Indebtedness or Indebtedness issued in a Permitted
Public Debt Refinancing, as evidenced by an “equal and
ratable negative pledge” provision of the type set forth in
such Section 4.5 or as evidenced by any provision(s)
otherwise approved by the Agent.”



5









 





          (p) Section 8.5 is amended by replacing clause (d) in its entirety with the following:



"(d) (i) sales, transfers or other dispositions by the
Borrower to a Subsidiary Guarantor or by a Subsidiary
Guarantor to the Borrower or another Subsidiary Guarantor,
and (ii) assignments or transfers of any Geologist ORRI.”



          (q) Section 8.12 is amended and restated to read in its entirety as follows:



     “8.12. Other Funded Indebtedness; Production
Payments. With respect to the Senior Indenture or the
Senior Notes (including any Additional Securities) (a)
materially amend or modify any of the terms or provisions
thereof, or (b) otherwise amend or modify any such terms if
such amendment or modifications would have the effect of (i)
accelerating the stated maturity date of the principal
amount thereof, or any scheduled interest payment thereon,
(ii) increasing the principal amount thereof if such
increase would cause the aggregate principal amount
outstanding of all of the Senior Notes, together with
(without duplication) all then outstanding Permitted
Additional Funded Indebtedness and Permitted Public Debt
Refinancing constituting Indebtedness, to exceed $300.0
million in the aggregate, (iii) causing, or purporting to
cause, the Liens securing the Obligations no longer to be
“Permitted Liens” (as defined in the Senior Indenture), or
(iv) providing any Lien for the benefit of the holders
thereof, except to the extent permitted by Section 4.5 or
Article VIII of the Senior Indenture as in effect at March
31, 2005 (it being understood in all events that no Lien
which would cause the Borrower to be required to grant a
Lien under such Section 4.5 may be granted if prohibited by
any term of this Agreement). With respect to any Permitted
Additional Funded Indebtedness and any Permitted Public Debt
Refinancing that constitutes Indebtedness, the Borrower
shall not amend or modify any of the terms or provisions
thereof in a manner that would cause such Indebtedness no
longer to comply with the definition herein of “Permitted
Additional Funded Indebtedness” and “Permitted Public Debt
Refinancing”, respectively. The Borrower shall not make,
and shall not permit any Subsidiary to make, any payments,
whether in cash, evidences of Indebtedness or other
Property, on or with respect to any Subordinated
Indebtedness, unless, but only to the extent, such payment
would be permitted to be made pursuant to and not result in
any violation of the subordination provisions applicable
thereto. The Borrower shall not, and shall not permit any
Subsidiary to, (a) prepay, redeem, purchase or defease (1)
any Subordinated Indebtedness (except with proceeds of a
Permitted Public Debt Refinancing or Permitted Additional
Funded Indebtedness or with the Net Cash Proceeds from the
issuance of equity securities, which, if Preferred Stock, is
issued in compliance with Section 2.7(f)), or (2)
any of the Senior Notes, or any Permitted Additional Funded
Indebtedness or any Indebtedness issued in a Permitted
Public Debt Refinancing which in either case is not
Subordinated Indebtedness, other than, in each such case in
this clause 2, (x) with the Net Cash Proceeds of any
Permitted Additional Funded Indebtedness and/or any
Permitted Public Debt Refinancing, (y) with the Net Cash
Proceeds from the issuance of equity securities, which, if
Preferred Stock, is issued in compliance with Section
2.7(f) or (z) pursuant to a purchase offer required
under the terms of the



6









 





indenture or other agreement governing such Indebtedness, or
(b) renew, rearrange or amend or modify the Production
Payment 2001 Facility other than (i) as required or
contemplated under the express terms of the contracts and
agreements constituting such facility, and (ii) as required
to effect a purchase (in whole or in part) by either the
Borrower or one or more of its Subsidiary Guarantors of one
or both of the Star Production Payments and the termination
or amendment of contracts and agreements relating to the
Star Properties and required by any such purchase.”



          (r) Section 11.1 is amended by inserting the following phrase in clause (b) of the proviso
after the reference to “Article III”:



”, release the Liens created by the Security Instruments
with respect to all or substantially all of the Collateral
or release the Subsidiary Guaranty of any Subsidiary
Guarantor that is a Material Subsidiary”



     Section 3. Borrowing Base. The Agent hereby notifies the Borrower that the Applicable
Lenders have approved a Borrowing Base of $185.0 million as of the Amendment Effective Date, which
shall be the Borrowing Base until the scheduled Borrowing Base redetermination in connection with
the Reserve Report dated as of July 1, 2005 delivered pursuant to Section 7.5(b) of the Credit
Agreement.



     Section 4. Amendment and Ratification. Upon the effectiveness hereof as provided in
Section 5, this Amendment shall be deemed to be an amendment to the Credit Agreement, and the
Credit Agreement, as modified hereby, is hereby ratified, approved and confirmed to be in full
force and effect in each and every respect. Except as expressly provided by the amendments set
forth in Section 2 and the notice provided in Section 3 hereof, the execution, delivery and
effectiveness of this Amendment shall not operate as a waiver of any right, power or remedy of any
Lender, the Agent, the Collateral Agent, any Co-Documentation Agent or the Syndication Agent, nor
constitute a waiver of any provision of any of the Loan Documents. All references to the Credit
Agreement in any other document, instrument, agreement or writing shall hereafter be deemed to
refer to the Credit Agreement as amended hereby.



     Section 5. Conditions to Effectiveness.



          (a) This Amendment shall become effective as of the Amendment Effective Date when the Agent
has confirmed (and has so notified the Borrower) that (i) all conditions precedent set forth in
Section 5(b) have been satisfied and (ii) counterparts hereof have been duly executed by the
Borrower and all of the Lenders and delivered to the Agent. The Agent agrees to give the Borrower
prompt written confirmation of the effectiveness hereof.



          (b) The Borrower shall have delivered, or cause to have been delivered, the instruments
described below duly executed and where applicable, acknowledged by the Borrower or Subsidiary
Guarantor(s) party thereto prior to effectiveness of this Amendment:



     (i) multiple original counterparts of this Amendment, in such number as
may be requested by the Agent;



     (ii) the eight (8) Renewal Notes;



     (iii) amendments to each of the Mortgages, in form reasonably
acceptable to the Agent, to reflect the transactions and agreements
contemplated by this Amendment, in such numbers as may be requested by the
Agent;



7









 





     (iv) certificates of the relevant secretary or assistant secretary of
each of the Borrower and each Subsidiary Guarantor certifying as to the
absence of any change in their respective Articles or Certificates of
Incorporation and bylaws since November 18, 2003 or, in the case of any
which have been amended since November 18, 2003, certifying as to the
correctness and completeness of the copies thereof attached to such
certificate;



     (v) certificates of incumbency and specimen signatures of all officers
of the Borrower and each Subsidiary Guarantor who are authorized to execute
this Amendment and the other Loan Documents contemplated by this Section 5
on behalf of such Persons, each such certificate being executed by the
secretary or an assistant secretary of the Borrower or such Subsidiary
Guarantor, as the case may be;



     (vi) copies of corporate resolutions approving this Amendment and the
other Loan Documents contemplated by this Section 5 and authorizing the
transactions contemplated herein and therein, duly adopted by the respective
boards of directors of the Borrower and each Subsidiary Guarantor,
accompanied by certificates of the secretary or an assistant secretary of
the Borrower or such Subsidiary Guarantor, as the case may be, to the effect
that such copies are true and correct copies of resolutions duly adopted at
a meeting or by unanimous consent of the board of directors of the Borrower
or such Subsidiary Guarantor, as the case may be, and that such resolutions
constitute all the resolutions adopted with respect to such transactions,
have not been amended, modified, or revoked in any respect, and are in full
force and effect as of the date of such certificate;



     (vii) results of searches of the UCC records for the Borrower and each
Subsidiary Guarantor of the State where such Person is located (within the
meaning of the UCC) from a source acceptable to the Agent and reflecting no
Liens against any of the Collateral other than Liens in favor of the Agent
or the Collateral Agent (or their predecessors in interest), other than
Permitted Liens and Liens permitted under Section 8.3 of the Credit
Agreement;



     (viii) the opinion of counsel to the Borrower and the Subsidiary
Guarantors, in the form attached hereto as Annex B, with such changes
thereto as may be approved by the Agent;



     (ix) opinions of special counsel in the states of California,
Louisiana, Michigan, Mississippi, New Mexico, Oklahoma, Texas and Wyoming,
concerning the sufficiency of the Mortgages in each such state, giving
effect to the execution and delivery of the amendments thereto referred to
in clause (iii) of this Section 5(b), in form and substance reasonably
acceptable to the Agent;



     (x) payment of all fees due and payable by the Borrower hereunder and
under the other Loan Documents and reimbursement from the Borrower, or legal
counsel for the Agent shall have received payment from the Borrower, for (i)
all reasonable fees and expenses of counsel to the Agent for which the
Borrower is responsible pursuant to applicable provisions of this Amendment
and for which invoices have been presented as of or prior to the Amendment
Effective Date, and (ii) unless filing and recordation is agreed to be the
responsibility of the Borrower, estimated fees charged by filing officers
and other public officials incurred or to be incurred in connection with the
filing and recordation of the amendments to the Mortgages referred to in
clause (iii) of this Section 5(b), for which invoices have been presented as
of or prior to the Amendment Effective Date;



8









 





     (xi) a letter by an Executive Officer of the Borrower updating the
Supplemental Disclosure Letter, in form and substance acceptable to the
Agent; and



     (xii) a certificate of the Chief Financial Officer of the Borrower
attaching a copy of the Senior Indenture, and certifying that (A) the
incurrence of Indebtedness hereunder up to the Revolving Period Commitment
Amount (after giving effect to the notice in Section 3 hereof) is permitted
as of the date hereof by the Senior Indenture and (B) the Liens created
under the Security Instruments constitute “Permitted Liens” thereunder (as
such term is defined therein), showing all relevant calculations.



     Section 6. Representations and Warranties. The Borrower hereby represents and
warrants that, as of the Amendment Effective Date, after giving effect to this Amendment:



          (a) Due Authorization; Valid Execution and Delivery. The execution and delivery by
the Borrower of this Amendment, the execution and delivery of the consent and agreement hereto by
the Subsidiary Guarantors, the borrowings under the Credit Agreement, as amended hereby, the
execution and delivery by the Borrower of the Renewal Notes and by the Borrower and each of the
Subsidiary Guarantors of the other Loan Documents required under Section 5 hereof to be executed
and delivered in connection herewith, the repayment of the Renewal Notes and interest and fees
provided for in the Renewal Notes and the Credit Agreement, as amended hereby, and the granting,
ratification, confirmation and affirmation of the Liens and the performance of all obligations of
the Borrower and each of the Subsidiary Guarantors under the Loan Documents are within the power of
the Borrower or such Subsidiary Guarantor, as the case may be, have been duly authorized by all
necessary corporate action by the Borrower or such Subsidiary Guarantor, as the case may be, and
this Amendment, the Renewal Notes and the other Loan Documents required under Section 5 hereof to
be executed and delivered in connection herewith have been duly and validly executed and delivered
by the Borrower and each Subsidiary Guarantor, as applicable, and do not (a) require the consent of
any Governmental Authority to be obtained by the Borrower or such Subsidiary Guarantor, as
applicable, (b) contravene or conflict with any Requirement of Law applicable to the Borrower or
such Subsidiary Guarantor, as the case may be, or the articles or certificate of incorporation,
bylaws, or other organizational or governing documents of the Borrower or such Subsidiary
Guarantor, as the case may be, (c) contravene or conflict with any indenture, instrument, or other
agreement, including, without limitation, the Senior Indenture, to which the Borrower or any
Subsidiary Guarantor, as the case may be, is a party or by which any Property of the Borrower or
any Subsidiary Guarantor, as the case may be, may be bound or encumbered, except as could not
reasonably be expected to have a Material Adverse Effect, (d) contravene or conflict with any
indenture, instrument, or other agreement by which any item of Collateral is bound or to which any
such item of Collateral is subject, except as could not reasonably be expected to have a Material
Adverse Effect, or (e) result in or require the creation or imposition of any Lien in, upon or of
any Property of the Borrower or any Subsidiary Guarantor, as the case may be, under any such
indenture, instrument, or other agreement, other than the Loan Documents.



          (b) Valid and Binding Obligations. Upon the execution and delivery of this Amendment,
the Credit Agreement, as amended hereby is, and each other Loan Document to which the Borrower or
any Subsidiary Guarantor, as the case may be, is a party, is the legal, valid, and binding
obligation of the Borrower or such Subsidiary Guarantor which is a party thereto, enforceable
against the Borrower or such Subsidiary Guarantor, as the case may be, in accordance with its
respective terms except as limited by bankruptcy, insolvency or similar laws affecting generally
the rights of creditors and general principles of equity, whether applied by a court of law or
equity.



          (c) Authorizations; Consents. Except for the filings contemplated by the opinions
described in Section 5(b)(ix) above, no authorization, consent, approval, exemption, franchise,
permit, or license of, or filing with, any Governmental Authority or any other Person is required
to be obtained by the Borrower or any Subsidiary of the Borrower to authorize, or is otherwise
required in connection with, the valid execution and delivery by the Borrower or any Subsidiary
Guarantor of this Amendment or any Loan Documents required under Section 5 hereof, the repayment by
the Borrower of the Renewal Notes and interest and fees provided in the Renewal Notes and the
Credit Agreement, as amended hereby, or the performance by the Borrower and the Subsidiary
Guarantors of the Obligations.



9









 





          (d) Existing Indebtedness. As of the Amendment Effective Date, except for
Indebtedness reflected in the most recent annual audited consolidated Financial Statements of the
Borrower and its Subsidiaries delivered to the Agent pursuant to Section 7.3 of the Credit
Agreement, the Borrower and its Subsidiaries have no Indebtedness other than Indebtedness set forth
in Schedule II under the heading “Existing Indebtedness” (which schedule shows the
aggregate principal amounts of the Indebtedness disclosed thereon, other than intercompany
Indebtedness, as of February 28, 2005).



          (e) Gas Contracts. Except (i) as set forth in Schedule II under the heading
“Gas Contracts,” as of the Amendment Effective Date, the Borrower is not obligated, and no
Subsidiary of the Borrower is obligated, in any material respect, by virtue of any prepayment made
under any contract containing a “take-or-pay” or “prepayment” provision or under any similar
agreement to deliver hydrocarbons produced from or allocated to any of the Mortgaged Property at
some future date without receiving full payment therefor within 90 days of delivery, and (ii) as
set forth in Schedule II under the heading “Gas Imbalances”, as of February 28, 2005, none
of the Borrower or any Subsidiary of the Borrower has produced gas, in any material amount, subject
to, and none of the Borrower, any Subsidiary of the Borrower or any of the Mortgaged Properties is
subject to, balancing rights of third parties or subject to balancing duties under governmental
requirements.



          (f) Contingent Obligations. As of the Amendment Effective Date, except for Contingent
Obligations reflected in the most recent annual audited consolidated Financial Statements of the
Borrower and its Subsidiaries delivered to the Agent pursuant to Section 7.3 of the Credit
Agreement, the Borrower has no Contingent Obligations other than those set forth in Schedule
II under the heading “Contingent Obligations”.



          (g) Subsidiaries. As of the Amendment Effective Date, the Borrower has no
Subsidiaries other than those set forth in Exhibit X to the Credit Agreement under the heading
“Subsidiaries”. As of the Amendment Effective Date, none of the Borrower or any Subsidiary of the
Borrower is a general partner or joint venturer or has partnership or joint venture interests in
any Person other than those set forth in such Exhibit X. All of the Subsidiaries listed on such
Exhibit X are wholly-owned (directly or indirectly) by the Borrower.



          (h) Security Instruments. Upon the execution and delivery of the instruments
described in Section 5(b)(iii), the Security Instruments executed and delivered by the Borrower or
any Subsidiary Guarantor as of the Amendment Effective Date create in favor of the Collateral Agent
legal, valid and enforceable Liens in all right, title and interest of such Person in the
Collateral described therein, securing all Obligations under the Credit Agreement, as amended
hereby, and under the Renewal Notes and the other Loan Documents. No filing or other action is
required under the UCC or the Uniform Commercial Code as in effect at the Amendment Effective Date
in the States of Texas and Delaware in order to continue the perfection and priority of the Liens
in favor of the Collateral Agent granted under the Security Instruments described in clauses (ii),
(iii) and (vi) of Section 5.1(a) of the Credit Agreement and heretofore perfected by the filing of
UCC financing statements. Except for the filing and recordation of the instruments described in
Section 5(b)(iii) and except as disclosed in the opinions described in Section 5(b)(ix) above, no
filing or other action is required in order to continue the perfection and priority of the Liens in
favor of the Collateral Agent granted under the Mortgages.



          (i) Bring-Down of Representations and Warranties. The representations and warranties
of the Borrower and each Subsidiary Guarantor contained in the Loan Documents are correct in all
material respects on and as of the Amendment Effective Date (other than those representations and
warranties that expressly relate solely to a specific earlier date, which shall remain correct as
of such earlier date), as though made on and as of such date.



          (j) No Default or Event of Default. No event has occurred and is continuing which
constitutes a Default, an Event of Default or both.



     Section 7. Governing Law. This Amendment and the rights and obligations of the
parties hereunder shall be construed and enforced in accordance with and be governed by the laws of
the State of Illinois.



10









 





     Section 8. Costs and Expenses. The Borrower shall pay all reasonable costs and
expenses incurred by the Agent in connection with the preparation, negotiation and execution of
this Amendment, including, without limitation, the reasonable costs and fees of the Agent’s legal
counsel.



     Section 9. Counterparts. This Amendment may be executed in any number of counterparts
and by different parties hereto in separate counterparts, each of which when so executed shall be
deemed to be an original and all of which taken together shall constitute one and the same
agreement.



     Section 10. Facsimile Transmission of Signature. Any party to this Amendment may
indicate its intention to be bound by its execution and delivery of this Amendment by its signature
to the signature page hereof and the delivery of the signature page hereof to the other parties or
their respective representatives by facsimile transmission or telecopy. The delivery of a party’s
signature on the signature page by facsimile transmission or telecopy shall have the same force and
effect as if such party signed and delivered this Amendment in person.



[Signature Pages Follow]




11









 








          In Witness Whereof, the parties hereto have caused this Amendment to be duly executed
and delivered by their respective duly authorized officers as of the date first set forth above, to
be effective as of the Amendment Effective Date.



	 	 	 	 	 	 	 
	 	 	BORROWER:
	 
	 	 	 	 	 	 
	 	 	KCS ENERGY, INC.
	 
	 	 	 	 	 	 
	 	 	By:	 	/s/ J.T. Leary
	 	 	 	 	 
	

	 	 	 	Name:
	 	J.T. Leary
	

	 	 	 	 	 	 
	

	 	 	 	Title:
	 	Vice President & CFO
	

	 	 	 	 	 	 






Fourth Amendment to Second Amended and Restated Credit Agreement

Signature Page





 










 






	 	 	 	 	 	 	 
	 	 	LENDERS:
	 
	 	 	 	 	 	 
	 	 	BANK OF MONTREAL, acting through its U.S.
branches and agencies, including its
Chicago, Illinois branch, as a Lender,
the Agent and Collateral Agent

	 
	 	 	 	 	 	 
	 	 	By:	 	/s/ Joseph A. Bliss
	 	 	 	 	 
	

	 	 	 	Name:
	 	Joseph A. Bliss
	

	 	 	 	Title:
	 	Director
	 
	 	 	 	 	 	 
	 	 	Address:	 	115 South LaSalle Street
	

	 	 	 	 	 	11th Floor West
	

	 	 	 	 	 	Chicago, Illinois 60603
	 
	 	 	 	 	 	 
	 	 	Facsimile No.:(312) 750-3456
	 
	 	 	 	 	 	 
	 	 	Attention: Terri Perez-Ford, Specialist
	 
	 	 	 	 	 	 
	 	 	with copy to:
	 
	 	 	 	 	 	 
	 	 	Bank of Montreal
	 	 	Houston Agency
	 	 	700 Louisiana Street
	 	 	4400 Bank of America Center
	 	 	Houston, Texas 77002
	 
	 	 	 	 	 	 
	 	 	Facsimile No.:(713) 223-4007
	 
	 	 	 	 	 	 
	 	 	Attention: Joseph A. Bliss
	 
	 	 	 	 	 	 
	 	 	Applicable Lending Office
for Base Rate Loans and
LIBO Rate Loans:
	 
	 	 	 	 	 	 
	 	 	Address:	 	115 South LaSalle Street,
	

	 	 	 	 	 	11th Floor West
	

	 	 	 	 	 	Chicago, Illinois 60603
	 
	 	 	 	 	 	 
	 	 	Facsimile No.: (312) 750-3456
	 
	 	 	 	 	 	 
	 	 	Attention:	 	Terri Perez-Ford, Specialist






Fourth Amendment to Second Amended and Restated Credit Agreement

Signature Page




 









 








	 	 	 	 	 	 	 
	 	 	BNP PARIBAS, as a Lender and Co-Documentation
Agent
	 
	 	 	 	 	 	 
	 	 	By:	 	/s/ Douglas R. Liftman
	 	 	 	 	 
	

	 	 	 	Name:
	 	Douglas R. Liftman
	

	 	 	 	 	 	 
	

	 	 	 	Title:
	 	Managing Director
	

	 	 	 	 	 	 
	 
	 	 	 	 	 	 
	 	 	By:	 	/s/ Polly Schott
	 	 	 	 	 
	

	 	 	 	Name:
	 	Polly Schott
	

	 	 	 	 	 	 
	

	 	 	 	Title:
	 	Vice President
	

	 	 	 	 	 	 
	 
	 	 	 	 	 	 
	 	 	Address:	 	919 Third Avenue
	

	 	 	 	 	 	New York, New York 10022
	 
	 	 	 	 	 	 
	 	 	Facsimile No.:(212) 841-2683
	 
	 	 	 	 	 	 
	 	 	Attention: Cory Lantin
	 
	 	 	 	 	 	 
	 	 	with a copy to:
	 
	 	 	 	 	 	 
	 	 	BNP Paribas
	 	 	1200 Smith Street, Suite 3100
	 	 	Houston, Texas 77002
	 
	 	 	 	 	 	 
	 	 	Facsimile No.: (713) 659-6915
	 	 	Attention: Doug Liftman
	 
	 	 	 	 	 	 
	 	 	Applicable Lending Office
for Base Rate Loans and
LIBO Rate Loans:
	 
	 	 	 	 	 	 
	 	 	Address:	 	919 Third Avenue
	

	 	 	 	 	 	New York, New York 10022
	 
	 	 	 	 	 	 
	 	 	Facsimile No.: (212) 841-2683
	 
	 	 	 	 	 	 
	 	 	Attention:	 	Cory Lantin






Fourth Amendment to Second Amended and Restated Credit Agreement

Signature Page




 









 








	 	 	 	 	 	 	 
	 	 	JPMORGAN CHASE BANK, N.A. (successor by merger
to Bank One, NA), as a Lender and Syndication
Agent
	 
	 	 	 	 	 	 
	 	 	By:	 	/s/ Jo Linda Papadakis
	 	 	 	 	 
	

	 	 	 	Name:
	 	Jo Linda Papadakis
	

	 	 	 	 	 	 
	

	 	 	 	Title:
	 	Associate Director
	

	 	 	 	 	 	 
	 
	 	 	 	 	 	 
	 	 	Address:	 	1 Bank One Plaza
	

	 	 	 	 	 	IL1-0634
	

	 	 	 	 	 	Chicago, IL 60670
	 
	 	 	 	 	 	 
	 	 	Facsimile No.: (312) 385-7095
	 
	 	 	 	 	 	 
	 	 	Attention:	 	Susan Dugan
	 
	 	 	 	 	 	 
	 	 	with copy to:
	 
	 	 	 	 	 	 
	 	 	Address:	 	600 Travis, 20th Floor
	

	 	 	 	 	 	Houston, Texas 77002
	 
	 	 	 	 	 	 
	 	 	Facsimile No.: (713) 216-7770
	 
	 	 	 	 	 	 
	 	 	Attention:	 	Jo Linda Papadakis
	 
	 	 	 	 	 	 
	 	 	Applicable Lending Office
for Base Rate Loans and
LIBO Rate Loans:
	 
	 	 	 	 	 	 
	 	 	Address:	 	1 Bank One Plaza
	

	 	 	 	 	 	IL1-0634
	

	 	 	 	 	 	Chicago, IL 60670
	 
	 	 	 	 	 	 
	 	 	Facsimile No.: (312) 385-7095
	 
	 	 	 	 	 	 
	 	 	Attention:	 	Susan Dugan






Fourth Amendment to Second Amended and Restated Credit Agreement

Signature Page




 









 








	 	 	 	 	 	 	 
	 	 	STERLING BANK
	 
	 	 	 	 	 	 
	 	 	By:	 	/s/ C. Scott Wilson
	 	 	 	 	 
	

	 	 	 	Name:
	 	C. Scott Wilson
	

	 	 	 	Title:
	 	Senior Vice President
	 
	 	 	 	 	 	 
	 	 	Address:	 	2500 N. Loop West, Suite 100
	

	 	 	 	 	 	Houston, Texas 77092
	 
	 	 	 	 	 	 
	 	 	Facsimile No.:(713) 507-7948
	 
	 	 	 	 	 	 
	 	 	Attention:	 	C. Scott Wilson
	 
	 	 	 	 	 	 
	 	 	Applicable Lending Office
for Base Rate Loans and
LIBO Rate Loans:
	 
	 	 	 	 	 	 
	 	 	Address:	 	2550 N. Loop West, Suite 100
	

	 	 	 	 	 	Houston, Texas 77092
	 
	 	 	 	 	 	 
	 	 	Facsimile No.: (713) 507-7908
	 
	 	 	 	 	 	 
	 	 	Attention: Cheri Allen






Fourth Amendment to Second Amended and Restated Credit Agreement

Signature Page




 









 








	 	 	 	 	 	 	 
	 	 	THE ROYAL BANK OF SCOTLAND PLC, as a Lender
and Co-Documentation Agent
	 
	 	 	 	 	 	 
	 	 	By:	 	/s/ James R. McBride
	 	 	 	 	 
	

	 	 	 	Name:
	 	James R. McBride
	

	 	 	 	Title:
	 	Managing Director
	 
	 	 	 	 	 	 
	 	 	Address:	 	600 Travis, Suite 6500
	

	 	 	 	 	 	Houston, Texas 77002
	 
	 	 	 	 	 	 
	 	 	Facsimile No.:(713) 221-2428
	 
	 	 	 	 	 	 
	 	 	Attention:	 	Bobby Poirrier
	 
	 	 	 	 	 	 
	 	 	Applicable Lending Office
for Base Rate Loans and
LIBO Rate Loans:
	 
	 	 	 	 	 	 
	 	 	Address:	 	101 Park Avenue, 12th Floor
	

	 	 	 	 	 	New York, New York 10178
	 
	 	 	 	 	 	 
	 	 	Facsimile No.: (212) 401-1336
	 
	 	 	 	 	 	 
	 	 	Attention:	 	Mariana Spiridon






Fourth Amendment to Second Amended and Restated Credit Agreement

Signature Page




 









 








	 	 	 	 	 	 	 
	 	 	KEY BANK NATIONAL ASSOCIATION
	 
	 	 	 	 	 	 
	 	 	By:	 	/s/ Thomas Rajan
	 	 	 	 	 
	

	 	 	 	Name:
	 	Thomas Rajan
	

	 	 	 	Title:
	 	Vice President
	 
	 	 	 	 	 	 
	 	 	Address:	 	8117 Preston Rd #440
	

	 	 	 	 	 	MailCode — TX-07-14-0600
	

	 	 	 	 	 	Dallas, TX 75225
	 
	 	 	 	 	 	 
	 	 	Facsimile No.:(214) 414-2580
	 
	 	 	 	 	 	 
	 	 	Attention:	 	Thomas Rajan or Jason T. Meek
	 
	 	 	 	 	 	 
	 	 	Applicable Lending Office
for Base Rate Loans and
LIBO Rate Loans:
	 
	 	 	 	 	 	 
	 	 	Address:	 	127 Public Square
	

	 	 	 	 	 	Cleveland, OH 44114
	 
	 	 	 	 	 	 
	 	 	Facsimile No.: (216) 689-5962
	 
	 	 	 	 	 	 
	 	 	Attention:	 	Yvette Dyson-Owens






Fourth Amendment to Second Amended and Restated Credit Agreement

Signature Page




 









 








	 	 	 	 	 	 	 
	 	 	MIZUHO CORPORATE BANK, LTD.
	 
	 	 	 	 	 	 
	 	 	By:	 	/s/ Takahiko Ueda
	 	 	 	 	 
	

	 	 	 	Name:
	 	Takahiko Ueda
	 

	 	 	 	Title:
	 	Deputy General Manager
	 
	 	 	Address:	 	1251 Avenue of the Americas
	

	 	 	 	 	 	New York, New York 10020
	 
	 	 	Facsimile No.: (212) 282-4488
	 
	 	 	 	 	 	 
	 	 	Attention:	 	Leon Mo
	 
	 	 	 	 	 	 
	 	 	Applicable Lending Office
for Base Rate Loans and
LIBO Rate Loans:
	 
	 	 	 	 	 	 
	 	 	Address:	 	1800 Plaza Ten,
	

	 	 	 	 	 	Harborside Financial Center
	

	 	 	 	 	 	Jersey City, New Jersey 07311
	 
	 	 	 	 	 	 
	 	 	Facsimile No.: (201) 626-9141/ 9942
	 
	 	 	 	 	 	 
	 	 	Attention: Hema Divatia






Fourth Amendment to Second Amended and Restated Credit Agreement

Signature Page




 









 








	 	 	 	 	 	 	 
	 	 	SUNTRUST BANK
	 
	 	 	 	 	 	 
	 	 	By:	 	/s/ Sean Roche
	 	 	 	 	 
	

	 	 	 	Name:
	 	Sean Roche
	

	 	 	 	Title:
	 	Vice President
	 
	 	 	 	 	 	 
	 	 	Address:	 	303 Peachtree Street
	

	 	 	 	 	 	10th Floor, MC 1929
	

	 	 	 	 	 	Atlanta, GA 30308
	 
	 	 	 	 	 	 
	 	 	Facsimile No.: (404) 827-6270
	 
	 	 	 	 	 	 
	 	 	Attention:	 	Jim Warren
	 
	 	 	 	 	 	 
	 	 	Applicable Lending Office
for Base Rate Loans and
LIBO Rate Loans:
	 
	 	 	 	 	 	 
	 	 	Address:	 	303 Peachtree Street
	

	 	 	 	 	 	10th Floor
	

	 	 	 	 	 	Atlanta, GA 30308
	 
	 	 	 	 	 	 
	 	 	Facsimile No.: (404) 230-1940
	 
	 	 	 	 	 	 
	 	 	Attention:	 	Tina Marie Edwards






Fourth Amendment to Second Amended and Restated Credit Agreement

Signature Page




 









 








Consent and Agreement as of the Amendment Effective Date



Each Subsidiary Guarantor executes this Consent and
Agreement to the Fourth Amendment to the Second Amended and
Restated Credit Agreement (the “Fourth Amendment”) in the
space provided below to evidence its consent to the Fourth
Amendment, and each of the undersigned Subsidiary Guarantors
hereby renews and affirms its Subsidiary Guaranty of the
Obligations, giving effect to the Fourth Amendment, and the
Liens created and granted by it in each Security Instrument,
and agrees that the Fourth Amendment shall in no manner
affect or impair such Subsidiary Guaranty or Liens, all of
which continue to be valid and subsisting as the enforceable
obligations of such Subsidiary Guarantor.



	 	 	 	 	 
	SUBSIDIARY GUARANTORS:	 	 
	 
	 	 	 	 
	KCS RESOURCES, INC.	 	 
	 
	 	 	 	 
	By:

	 	/s/ J.T. Leary


	 	 
	Name:

	 	J.T. Leary


	 	 
	Title:

	 	Vice President & CFO


	 	 
	 
	 	 	 	 
	KCS ENERGY SERVICES, INC.	 	 
	 
	 	 	 	 
	By:

	 	/s/ J.T. Leary


	 	 
	Name:

	 	J.T. Leary


	 	 
	Title:

	 	Vice President & CFO


	 	 
	 
	 	 	 	 
	MEDALLION CALIFORNIA PROPERTIES COMPANY	 	 
	 
	 	 	 	 
	By:

	 	/s/ J.T. Leary


	 	 
	Name:

	 	J.T. Leary


	 	 
	Title:

	 	Vice President & CFO


	 	 
	 
	 	 	 	 
	PROLIQ, INC.	 	 
	 
	 	 	 	 
	By:

	 	/s/ Frederick Dwyer


	 	 
	Name:

	 	Frederick Dwyer


	 	 
	Title:

	 	Vice President & Secretary


	 	 






Consent and Agreement to the Fourth Amendment to

Second Amended and Restated Credit Agreement

Signature Page




 









 








SCHEDULE I




	 	 	 	 	 	 	 	 	 
	 	 	Commitment	 	 	 
	 	 	Percentages	 	 	 
	 	 	Purchased on the	 	 	 
	 	 	Amendment Effective	 	 	 
	 	 	Date and Percentage	 	Revolving Loan	 
	Lender	 	Shares	 	Commitments	 
	 
	CURRENT LENDERS:
	 	 	 	 	 	 	 	 
	Bank of Montreal
	 	 	17.20	%	 	$	43,000,000	 
	BNP Paribas
	 	 	15.20	%	 	$	38,000,000	 
	JPMorgan Chase Bank, N.A.
(successor by merger to Bank
One, NA)
	 	 	15.20	%	 	$	38,000,000	 
	Sterling Bank
	 	 	9.30	%	 	$	23,250,000	 
	NEW LENDERS:
	 	 	 	 	 	 	 	 
	The Royal Bank of Scotland plc
	 	 	15.20	%	 	$	38,000,000	 
	KeyBank National Association
	 	 	9.30	%	 	$	23,250,000	 
	Mizuho Corporate Bank, Ltd.
	 	 	9.30	%	 	$	23,250,000	 
	SunTrust Bank
	 	 	9.30	%	 	$	23,250,000	 
	 
	 	 	100.000000	%	 	$	250,000,000	 






 









 






Schedule II




Existing Indebtedness

(Section 6(d))

As of February 28, 2005




	 	 	 	 	 
	Production Payment 2001 Obligations
	 	$	14,224,138	 
	($3,101,627 less than reflected in the most
recent annual audited consolidated Financial
Statements of the Borrower and its Subsidiaries
delivered to the Agent).





Intercompany Indebtedness.





 










 






Schedule II




Gas Contracts

(Section 6(e))




None





 









 








ANNEX “A-1”




PROMISSORY NOTE




			
	$43,000,000
	 	March 31, 2005






     FOR VALUE RECEIVED, the undersigned (“Maker,”) promises to pay to the order of Bank of
Montreal, a Canadian chartered bank acting through certain of its U.S. branches or subsidiaries
(“Payee”), at the banking quarters in Chicago, Illinois specified in the Credit Agreement (as
hereinafter defined) of Payee, the sum of FORTY THREE MILLION AND NO/100 DOLLARS ($43,000,000), or
so much thereof as may be advanced and outstanding against this Note pursuant to the Second Amended
and Restated Credit Agreement dated as of November 18, 2003 by and among Maker, the Lenders party
thereto, Bank of Montreal, a Canadian chartered bank acting through certain of its U.S. branches
and agencies, as Agent and Collateral Agent (in such capacities, the “Agent”), BNP Paribas, as
Documentation Agent, and JPMorgan Chase Bank, N.A. (successor by merger to Bank One, NA), as
Syndication Agent (in such capacity, the “Syndication Agent”) (the “Original Credit Agreement”; and
as amended, restated, or supplemented through the Fourth Amendment thereto referred to below and as
hereafter amended, restated or supplemented from time to time, the “Credit Agreement”; defined
terms from which are used herein with the meaning assigned thereto in the Credit Agreement, unless
expressly provided to the contrary herein), together with interest at the rates, and subject to the
limitations and calculated as provided in the Credit Agreement. The principal and interest
hereunder shall be due and payable on the dates and in the amounts as are specified in the Credit
Agreement.



     Reference is hereby made to the Credit Agreement for matters governed thereby, including,
without limitation, certain events which will entitle the holder hereof to accelerate the maturity
of all amounts due hereunder.



     This Note is issued and delivered under the Fourth Amendment to Second Amended and Restated
Credit Agreement of even date herewith among Maker, the Lenders party thereto, the Agent, BNP
Paribas and The Royal Bank of Scotland plc, as Co-Documentation Agents, and the Syndication Agent
and represents a renewal, replacement and extension of the Indebtedness heretofore represented by
the Notes issued by Maker under the Original Credit Agreement. Subject to compliance with
applicable provisions of the Credit Agreement, Maker may at any time pay the full amount or any
part of this Note without the payment of any premium or fee, but such payment shall not, until this
Note is fully paid and satisfied, excuse the payment as it becomes due of any other payment on this
Note.



     Without being limited thereto or thereby, this Note is secured by the Security Instruments.



[SIGNATURES ON NEXT PAGE]




 









 








     THIS NOTE SHALL BE GOVERNED BY AND CONSTRUED AND ENFORCED IN ACCORDANCE WITH THE LAWS OF THE
STATE OF ILLINOIS.


	 	 	 	 	 
	 	KCS ENERGY, INC.

 	 
	 	By:  	 	 
	 	 	 	 
	 	 	 	 




 









 






	 	 	 	 	 



ANNEX “A-2”




PROMISSORY NOTE




			
	$38,000,000
	 	March 31, 2005






     FOR VALUE RECEIVED, the undersigned (“Maker,”) promises to pay to the order of BNP Paribas
(“Payee”), at the banking quarters in Chicago, Illinois specified in the Credit Agreement (as
hereinafter defined) of Bank of Montreal, a Canadian chartered bank acting through certain of its
U.S. branches or subsidiaries, the sum of THIRTY EIGHT MILLION AND NO/100 DOLLARS ($38,000,000), or
so much thereof as may be advanced and outstanding against this Note pursuant to the Second Amended
and Restated Credit Agreement dated as of November 18, 2003 by and among Maker, the Lenders party
thereto, Bank of Montreal, a Canadian chartered bank acting through certain of its U.S. branches or
subsidiaries, as Agent and Collateral Agent (in such capacities, the “Agent”), BNP Paribas, as
Documentation Agent, and JPMorgan Chase Bank, N.A. (successor by merger to Bank One, NA), as
Syndication Agent (in such capacity, the “Syndication Agent”) (the “Original Credit Agreement”; and
as amended, restated, or supplemented through the Fourth Amendment thereto referred to below and as
hereafter amended, restated or supplemented from time to time, the “Credit Agreement,” defined
terms from which are used herein with the meaning assigned thereto in the Credit Agreement, unless
expressly provided to the contrary herein), together with interest at the rates, and subject to the
limitations and calculated as provided in the Credit Agreement. The principal and interest
hereunder shall be due and payable on the dates and in the amounts as are specified in the Credit
Agreement.



     Reference is hereby made to the Credit Agreement for matters governed thereby, including,
without limitation, certain events which will entitle the holder hereof to accelerate the maturity
of all amounts due hereunder.



     This Note is issued and delivered under the Fourth Amendment to Second Amended and Restated
Credit Agreement of even date herewith among Maker, the Lenders party thereto, the Agent, BNP
Paribas and The Royal Bank of Scotland plc, as Co-Documentation Agents, and the Syndication Agent
and represents a renewal, replacement and extension of the Indebtedness heretofore represented by
the Notes issued by Maker under the Original Credit Agreement. Subject to compliance with
applicable provisions of the Credit Agreement, Maker may at any time pay the full amount or any
part of this Note without the payment of any premium or fee, but such payment shall not, until this
Note is fully paid and satisfied, excuse the payment as it becomes due of any other payment on this
Note.



     Without being limited thereto or thereby, this Note is secured by the Security Instruments.



[SIGNATURES ON NEXT PAGE]




 









 








     THIS NOTE SHALL BE GOVERNED BY AND CONSTRUED AND ENFORCED IN ACCORDANCE WITH THE LAWS OF THE
STATE OF ILLINOIS.


	 	 	 	 	 
	 	KCS ENERGY, INC.

 	 
	 	By:  	 	 
	 	 	 	 
	 	 	 	 




 









 






	 	 	 	 	 



ANNEX “A-3”




PROMISSORY NOTE




			
	$38,000,000
	 	March 31, 2005






     FOR VALUE RECEIVED, the undersigned (“Maker,”) promises to pay to the order of JPMorgan Chase
Bank, N.A. (successor by merger to Bank One, NA) (“Payee”), at the banking quarters in Chicago,
Illinois specified in the Credit Agreement (as hereinafter defined) of Bank of Montreal, a Canadian
chartered bank acting through certain of its U.S. branches or subsidiaries, the sum of THIRTY EIGHT
MILLION AND NO/100 DOLLARS ($38,000,000), or so much thereof as may be advanced and outstanding
against this Note pursuant to the Second Amended and Restated Credit Agreement dated as of November
18, 2003 by and among Maker, the Lenders party thereto, Bank of Montreal, a Canadian chartered bank
acting through certain of its U.S. branches or subsidiaries, as Agent and Collateral Agent (in such
capacities, the “Agent”), BNP Paribas, as Documentation Agent, and JPMorgan Chase Bank, N.A., as
Syndication Agent (in such capacity, the “Syndication Agent”) (the “Original Credit Agreement”; and
as amended, restated, or supplemented through the Fourth Amendment thereto referred to below and as
hereafter amended, restated or supplemented from time to time, the “Credit Agreement,” defined
terms from which are used herein with the meaning assigned thereto in the Credit Agreement, unless
expressly provided to the contrary herein), together with interest at the rates, and subject to the
limitations and calculated as provided in the Credit Agreement. The principal and interest
hereunder shall be due and payable on the dates and in the amounts as are specified in the Credit
Agreement.



     Reference is hereby made to the Credit Agreement for matters governed thereby, including,
without limitation, certain events which will entitle the holder hereof to accelerate the maturity
of all amounts due hereunder.



     This Note is issued and delivered under the Fourth Amendment to Second Amended and Restated
Credit Agreement of even date herewith among Maker, the Lenders party thereto, the Agent, BNP
Paribas and The Royal Bank of Scotland plc, as Co-Documentation Agents, and the Syndication Agent
and represents a renewal, replacement and extension of the Indebtedness heretofore represented by
the Notes issued by Maker under the Original Credit Agreement. Subject to compliance with
applicable provisions of the Credit Agreement, Maker may at any time pay the full amount or any
part of this Note without the payment of any premium or fee, but such payment shall not, until this
Note is fully paid and satisfied, excuse the payment as it becomes due of any other payment on this
Note.



     Without being limited thereto or thereby, this Note is secured by the Security Instruments.



[SIGNATURES ON NEXT PAGE]




 









 








     THIS NOTE SHALL BE GOVERNED BY AND CONSTRUED AND ENFORCED IN ACCORDANCE WITH THE LAWS OF THE
STATE OF ILLINOIS.


	 	 	 	 	 
	 	KCS ENERGY, INC.

 	 
	 	By:  	 	 
	 	 	 	 
	 	 	 	 




 









 






	 	 	 	 	 



ANNEX “A-4”




PROMISSORY NOTE




			
	$23,250,000
	 	March 31, 2005






     FOR VALUE RECEIVED, the undersigned (“Maker,”) promises to pay to the order of Sterling Bank
(“Payee”), at the banking quarters in Chicago, Illinois specified in the Credit Agreement (as
hereinafter defined) of Bank of Montreal, a Canadian chartered bank acting through certain of its
U.S. branches or subsidiaries, the sum of TWENTY THREE MILLION TWO HUNDRED AND FIFTY THOUSAND AND
NO/100 DOLLARS ($23,250,000), or so much thereof as may be advanced and outstanding against this
Note pursuant to the Second Amended and Restated Credit Agreement dated as of November 18, 2003 by
and among Maker, the Lenders party thereto, Bank of Montreal, a Canadian chartered bank acting
through certain of its U.S. branches or subsidiaries, as Agent and Collateral Agent (in such
capacities, the “Agent”), BNP Paribas, as Documentation Agent, and JPMorgan Chase Bank, N.A.
(successor by merger to Bank One, NA), as Syndication Agent (in such capacity, the “Syndication
Agent”) (the “Original Credit Agreement”; and as amended, restated, or supplemented through the
Fourth Amendment thereto referred to below and as hereafter amended, restated or supplemented from
time to time, the “Credit Agreement,” defined terms from which are used herein with the meaning
assigned thereto in the Credit Agreement, unless expressly provided to the contrary herein),
together with interest at the rates, and subject to the limitations and calculated as provided in
the Credit Agreement. The principal and interest hereunder shall be due and payable on the dates
and in the amounts as are specified in the Credit Agreement.



     Reference is hereby made to the Credit Agreement for matters governed thereby, including,
without limitation, certain events which will entitle the holder hereof to accelerate the maturity
of all amounts due hereunder.



     This Note is issued and delivered under the Fourth Amendment to Second Amended and Restated
Credit Agreement of even date herewith among Maker, the Lenders party thereto, the Agent, BNP
Paribas and The Royal Bank of Scotland plc, as Co-Documentation Agents, and the Syndication Agent
and represents a renewal, replacement and extension of the Indebtedness heretofore represented by
the Notes issued by Maker under the Original Credit Agreement. Subject to compliance with
applicable provisions of the Credit Agreement, Maker may at any time pay the full amount or any
part of this Note without the payment of any premium or fee, but such payment shall not, until this
Note is fully paid and satisfied, excuse the payment as it becomes due of any other payment on this
Note.



     Without being limited thereto or thereby, this Note is secured by the Security Instruments.



[SIGNATURES ON NEXT PAGE]




 









 








     THIS NOTE SHALL BE GOVERNED BY AND CONSTRUED AND ENFORCED IN ACCORDANCE WITH THE LAWS OF THE
STATE OF ILLINOIS.


	 	 	 	 	 
	 	KCS ENERGY, INC.

 	 
	 	By:  	 	 
	 	 	 	 
	 	 	 	 




 









 






	 	 	 	 	 



ANNEX “A-5”




PROMISSORY NOTE




			
	$38,000,000
	 	March 31, 2005






     FOR VALUE RECEIVED, the undersigned (“Maker,”) promises to pay to the order of The Royal Bank
of Scotland plc (“Payee”), at the banking quarters in Chicago, Illinois specified in the Credit
Agreement (as hereinafter defined) of Bank of Montreal, a Canadian chartered bank acting through
certain of its U.S. branches or subsidiaries, the sum of THIRTY EIGHT MILLION AND NO/100 DOLLARS
($38,000,000), or so much thereof as may be advanced and outstanding against this Note pursuant to
the Second Amended and Restated Credit Agreement dated as of November 18, 2003 by and among Maker,
the Lenders party thereto, Bank of Montreal, a Canadian chartered bank acting through certain of
its U.S. branches or subsidiaries, as Agent and Collateral Agent (in such capacities, the “Agent”),
BNP Paribas, as Documentation Agent, and JPMorgan Chase Bank, N.A. (successor by merger to Bank
One, NA), as Syndication Agent (in such capacity, the “Syndication Agent”) (the “Original Credit
Agreement”; and as amended, restated, or supplemented through the Fourth Amendment thereto referred
to below and as hereafter amended, restated or supplemented from time to time, the “Credit
Agreement,” defined terms from which are used herein with the meaning assigned thereto in the
Credit Agreement, unless expressly provided to the contrary herein), together with interest at the
rates, and subject to the limitations and calculated as provided in the Credit Agreement. The
principal and interest hereunder shall be due and payable on the dates and in the amounts as are
specified in the Credit Agreement.



     Reference is hereby made to the Credit Agreement for matters governed thereby, including,
without limitation, certain events which will entitle the holder hereof to accelerate the maturity
of all amounts due hereunder.



     This Note is issued and delivered under the Fourth Amendment to Second Amended and Restated
Credit Agreement of even date herewith among Maker, the Lenders party thereto, the Agent, BNP
Paribas and The Royal Bank of Scotland plc, as Co-Documentation Agents, and the Syndication Agent
and represents a renewal, replacement and extension of the Indebtedness heretofore represented by
the Notes issued by Maker under the Original Credit Agreement. Subject to compliance with
applicable provisions of the Credit Agreement, Maker may at any time pay the full amount or any
part of this Note without the payment of any premium or fee, but such payment shall not, until this
Note is fully paid and satisfied, excuse the payment as it becomes due of any other payment on this
Note.



     Without being limited thereto or thereby, this Note is secured by the Security Instruments.



[SIGNATURES ON NEXT PAGE]




 









 








     THIS NOTE SHALL BE GOVERNED BY AND CONSTRUED AND ENFORCED IN ACCORDANCE WITH THE LAWS OF THE
STATE OF ILLINOIS.


	 	 	 	 	 
	 	KCS ENERGY, INC.

 	 
	 	By:  	 	 
	 	 	 	 
	 	 	 	 




 









 






	 	 	 	 	 



ANNEX “A-6”




PROMISSORY NOTE




			
	$23,250,000
	 	March 31, 2005






     FOR VALUE RECEIVED, the undersigned (“Maker,”) promises to pay to the order of KeyBank
National Association (“Payee”), at the banking quarters in Chicago, Illinois specified in the
Credit Agreement (as hereinafter defined) of Bank of Montreal, a Canadian chartered bank acting
through certain of its U.S. branches or subsidiaries, the sum of TWENTY THREE MILLION TWO HUNDRED
AND FIFTY THOUSAND AND NO/100 DOLLARS ($23,250,000), or so much thereof as may be advanced and
outstanding against this Note pursuant to the Second Amended and Restated Credit Agreement dated as
of November 18, 2003 by and among Maker, the Lenders party thereto, Bank of Montreal, a Canadian
chartered bank acting through certain of its U.S. branches or subsidiaries, as Agent and Collateral
Agent (in such capacities, the “Agent”), BNP Paribas, as Documentation Agent, and JPMorgan Chase
Bank, N.A. (successor by merger to Bank One, NA), as Syndication Agent (in such capacity, the
“Syndication Agent”) (the “Original Credit Agreement”; and as amended, restated, or supplemented
through the Fourth Amendment thereto referred to below and as hereafter amended, restated or
supplemented from time to time, the “Credit Agreement,” defined terms from which are used herein
with the meaning assigned thereto in the Credit Agreement, unless expressly provided to the
contrary herein), together with interest at the rates, and subject to the limitations and
calculated as provided in the Credit Agreement. The principal and interest hereunder shall be due
and payable on the dates and in the amounts as are specified in the Credit Agreement.



     Reference is hereby made to the Credit Agreement for matters governed thereby, including,
without limitation, certain events which will entitle the holder hereof to accelerate the maturity
of all amounts due hereunder.



     This Note is issued and delivered under the Fourth Amendment to Second Amended and Restated
Credit Agreement of even date herewith among Maker, the Lenders party thereto, the Agent, BNP
Paribas and The Royal Bank of Scotland plc, as Co-Documentation Agents, and the Syndication Agent
and represents a renewal, replacement and extension of the Indebtedness heretofore represented by
the Notes issued by Maker under the Original Credit Agreement. Subject to compliance with
applicable provisions of the Credit Agreement, Maker may at any time pay the full amount or any
part of this Note without the payment of any premium or fee, but such payment shall not, until this
Note is fully paid and satisfied, excuse the payment as it becomes due of any other payment on this
Note.



     Without being limited thereto or thereby, this Note is secured by the Security Instruments.



[SIGNATURES ON NEXT PAGE]




 









 








     THIS NOTE SHALL BE GOVERNED BY AND CONSTRUED AND ENFORCED IN ACCORDANCE WITH THE LAWS OF THE
STATE OF ILLINOIS.


	 	 	 	 	 
	 	KCS ENERGY, INC.

 	 
	 	By:  	 	 
	 	 	 	 
	 	 	 	 




 









 






	 	 	 	 	 



ANNEX “A-7”




PROMISSORY NOTE




			
	$23,250,000
	 	March 31, 2005






     FOR VALUE RECEIVED, the undersigned (“Maker,”) promises to pay to the order of Mizuho
Corporate Bank, Ltd. (“Payee”), at the banking quarters in Chicago, Illinois specified in the
Credit Agreement (as hereinafter defined) of Bank of Montreal, a Canadian chartered bank acting
through certain of its U.S. branches or subsidiaries, the sum of TWENTY THREE MILLION TWO HUNDRED
AND FIFTY THOUSAND AND NO/100 DOLLARS ($23,250,000), or so much thereof as may be advanced and
outstanding against this Note pursuant to the Second Amended and Restated Credit Agreement dated as
of November 18, 2003 by and among Maker, the Lenders party thereto, Bank of Montreal, a Canadian
chartered bank acting through certain of its U.S. branches or subsidiaries, as Agent and Collateral
Agent (in such capacities, the “Agent”), BNP Paribas, as Documentation Agent, and JPMorgan Chase
Bank, N.A. (successor by merger to Bank One, NA), as Syndication Agent (in such capacity, the
“Syndication Agent”) (the “Original Credit Agreement”; and as amended, restated, or supplemented
through the Fourth Amendment thereto referred to below and as hereafter amended, restated or
supplemented from time to time, the “Credit Agreement,” defined terms from which are used herein
with the meaning assigned thereto in the Credit Agreement, unless expressly provided to the
contrary herein), together with interest at the rates, and subject to the limitations and
calculated as provided in the Credit Agreement. The principal and interest hereunder shall be due
and payable on the dates and in the amounts as are specified in the Credit Agreement.



     Reference is hereby made to the Credit Agreement for matters governed thereby, including,
without limitation, certain events which will entitle the holder hereof to accelerate the maturity
of all amounts due hereunder.



     This Note is issued and delivered under the Fourth Amendment to Second Amended and Restated
Credit Agreement of even date herewith among Maker, the Lenders party thereto, the Agent, BNP
Paribas and The Royal Bank of Scotland plc, as Co-Documentation Agents, and the Syndication Agent
and represents a renewal, replacement and extension of the Indebtedness heretofore represented by
the Notes issued by Maker under the Original Credit Agreement. Subject to compliance with
applicable provisions of the Credit Agreement, Maker may at any time pay the full amount or any
part of this Note without the payment of any premium or fee, but such payment shall not, until this
Note is fully paid and satisfied, excuse the payment as it becomes due of any other payment on this
Note.



     Without being limited thereto or thereby, this Note is secured by the Security Instruments.



[SIGNATURES ON NEXT PAGE]




 









 








     THIS NOTE SHALL BE GOVERNED BY AND CONSTRUED AND ENFORCED IN ACCORDANCE WITH THE LAWS OF THE
STATE OF ILLINOIS.


	 	 	 	 	 
	 	KCS ENERGY, INC.

 	 
	 	By:  	 	 
	 	 	 	 
	 	 	 	 




 









 






	 	 	 	 	 



ANNEX “A-8”




PROMISSORY NOTE




			
	$23,250,000
	 	March 31, 2005






     FOR VALUE RECEIVED, the undersigned (“Maker,”) promises to pay to the order of SunTrust Bank
(“Payee”), at the banking quarters in Chicago, Illinois specified in the Credit Agreement (as
hereinafter defined) of Bank of Montreal, a Canadian chartered bank acting through certain of its
U.S. branches or subsidiaries, the sum of TWENTY THREE MILLION TWO HUNDRED AND FIFTY THOUSAND AND
NO/100 DOLLARS ($23,250,000), or so much thereof as may be advanced and outstanding against this
Note pursuant to the Second Amended and Restated Credit Agreement dated as of November 18, 2003 by
and among Maker, the Lenders party thereto, Bank of Montreal, a Canadian chartered bank acting
through certain of its U.S. branches or subsidiaries, as Agent and Collateral Agent (in such
capacities, the “Agent”), BNP Paribas, as Documentation Agent, and JPMorgan Chase Bank, N.A.
(successor by merger to Bank One, NA), as Syndication Agent (in such capacity, the “Syndication
Agent”) (the “Original Credit Agreement”; and as amended, restated, or supplemented through the
Fourth Amendment thereto referred to below and as hereafter amended, restated or supplemented from
time to time, the “Credit Agreement,” defined terms from which are used herein with the meaning
assigned thereto in the Credit Agreement, unless expressly provided to the contrary herein),
together with interest at the rates, and subject to the limitations and calculated as provided in
the Credit Agreement. The principal and interest hereunder shall be due and payable on the dates
and in the amounts as are specified in the Credit Agreement.



     Reference is hereby made to the Credit Agreement for matters governed thereby, including,
without limitation, certain events which will entitle the holder hereof to accelerate the maturity
of all amounts due hereunder.



     This Note is issued and delivered under the Fourth Amendment to Second Amended and Restated
Credit Agreement of even date herewith among Maker, the Lenders party thereto, the Agent, BNP
Paribas and The Royal Bank of Scotland plc, as Co-Documentation Agents, and the Syndication Agent
and represents a renewal, replacement and extension of the Indebtedness heretofore represented by
the Notes issued by Maker under the Original Credit Agreement. Subject to compliance with
applicable provisions of the Credit Agreement, Maker may at any time pay the full amount or any
part of this Note without the payment of any premium or fee, but such payment shall not, until this
Note is fully paid and satisfied, excuse the payment as it becomes due of any other payment on this
Note.



     Without being limited thereto or thereby, this Note is secured by the Security Instruments.



[SIGNATURES ON NEXT PAGE]




 









 








     THIS NOTE SHALL BE GOVERNED BY AND CONSTRUED AND ENFORCED IN ACCORDANCE WITH THE LAWS OF THE
STATE OF ILLINOIS.


	 	 	 	 	 
	 	KCS ENERGY, INC.

 	 
	 	By: