exv10w10



 




Exhibit
10.10



PLEDGE AND SECURITY AGREEMENT





(QUEST RESOURCE CORPORATION)





     THIS PLEDGE AND SECURITY AGREEMENT (herein referred to as this “Security Agreement”) is
executed as of November 15, 2007, by QUEST RESOURCE CORPORATION, a Nevada corporation (“Debtor”),
whose address is 210 Park Avenue, Suite 2750, Oklahoma City, Oklahoma 73120, for the benefit of
ROYAL BANK OF CANADA (in its capacity as “Administrative Agent” and “Collateral Agent” for the
Secured Parties, as such term is defined in the Credit Agreement (hereafter defined)), as “Secured
Party,” whose address is Royal Bank Plaza, P.O. Box 50, 200 Bay Street, 12th Floor, South Tower,
Toronto, Ontario M5J 2W7.



 RECITALS





     WHEREAS, pursuant to that certain Credit Agreement dated of even date herewith (as the same
may hereafter be amended, supplemented and restated, the “Credit Agreement”), among Debtor, the
various financial institutions that are, or may from time to time become, parties thereto
(individually a “Lender” and collectively the “Lenders”) and Royal Bank of Canada, as
administrative agent (in such capacity, the “Administrative Agent”) and as collateral agent (in
such capacity, the “Collateral Agent”), the Lenders have agreed to make Loans for the account of
the Debtor;




     WHEREAS, Debtor has duly authorized the execution, delivery and performance of this Security
Agreement;




     WHEREAS, this Security Agreement is integral to the transactions contemplated by the Loan
Documents, and the execution and delivery of this Security Agreement is a condition precedent to
the Lenders’ obligations to extend credit under the Loan Documents; and




     ACCORDINGLY, for valuable consideration, the receipt and adequacy of which are hereby
acknowledged, Debtor and Secured Party hereby agree as follows:




     1. REFERENCE TO CREDIT AGREEMENT. The terms, conditions, and provisions of the Credit
Agreement are incorporated herein by reference, the same as if set forth herein verbatim, which
terms, conditions, and provisions shall continue to be in full force and effect hereunder so long
as the Lenders are obligated to lend under the Credit Agreement and thereafter until the
Obligations are paid and performed in full (except as provided in Sections 10.01(d) and 10.01(e) of
the Credit Agreement).




     2. CERTAIN DEFINITIONS. Unless otherwise defined herein, or the context hereof otherwise
requires, each term defined in the Credit Agreement or in the UCC is used in this Security
Agreement with the same meaning; provided that, if the definition given to such term in the Credit
Agreement conflicts with the definition given to such term in the UCC, the definition in the Credit
Agreement shall control to the extent legally allowable; and if any definition given to such term
in Chapter 9 of the UCC conflicts with the definition given to such term in any other chapter of
the UCC, the Chapter 9 definition shall prevail. As used herein, the following terms have the
meanings indicated:



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     Collateral has the meaning set forth in Paragraph 4 hereof.




     Collateral Note Security has the meaning set forth in Paragraph 4 hereof.




     Collateral Notes has the meaning set forth in Paragraph 4 hereof.




     Control Agreement means, with respect to any Collateral consisting of investment property,
Deposit Accounts, electronic chattel paper, and letter-of-credit rights, an agreement evidencing
that Secured Party has “control” (as defined in the UCC) of such Collateral.




     Copyrights has the meaning set forth in Paragraph 4 hereof.




     Credit Agreement has the meaning set forth in the first recital.




     Deposit Accounts has the meaning set forth in Paragraph 4 hereof.




     Intellectual Property has the meaning set forth in Paragraph 4 hereof.




     Lender means, individually, or Lenders means, collectively, on any date of determination, the
Administrative Agent and Lenders, and their permitted successors and assigns.




     Material Agreements has the meaning set forth in Paragraph 4 hereof.




     Obligations means, collectively, (a) the Obligations as such term is defined in the Credit
Agreement, and (b) all indebtedness, liabilities, and obligations of Debtor arising under this
Security Agreement; it being the intention and contemplation of Debtor and Secured Party that
future advances will be made by one or more Lenders to the Debtor for a variety of purposes.




     Obligor means any Person obligated with respect to any of the Collateral, whether as an
account debtor, obligor on an instrument, issuer of securities, or otherwise.




     Partnerships/Limited Liability Companies shall mean: (a) those partnerships and limited
liability companies listed on Annex B-1 attached hereto and incorporated herein by reference, as
such partnerships or limited liability companies exist or may hereinafter be restated, amended, or
restructured; (b) any partnership, joint venture, or limited liability company in which Debtor
shall, at any time, become a limited or general partner, venturer, or member; or (c) any
partnership, joint venture, or corporation formed as a result of the restructure, reorganization,
or amendment of the Partnerships/Limited Liability Companies.




     Partnership/Limited Liability Company Agreements shall mean: (a) those agreements listed on
Annex B-1 attached hereto and incorporated herein by reference (together with any modifications,
amendments, or restatements thereof); and (b) partnership agreements, joint venture agreements, or
organizational agreements for any of the partnerships, joint ventures, or limited liability
companies described in clause (b) of the definition of “Partnerships/Limited Liability Companies”
above (together with any modifications, amendments or restatements



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thereof), and “Partnership/Limited Liability Company Agreement” means any one of the
Partnership/Limited Liability Company Agreements.




     Partnership/Limited Liability Company Interests shall mean all of Debtor’s Rights,
title and interest now or hereafter accruing under the Partnership/Limited Liability
Company Agreements with respect to all distributions, allocations, proceeds, fees,
preferences, payments, or other benefits, which Debtor now is or may hereafter become
entitled to receive with respect to such interests in the Partnerships/Limited Liability
Companies and with respect to the repayment of all loans now or hereafter made by Debtor to
the Partnerships/Limited Liability Companies.




     Patents has the meaning set forth in Paragraph 4 hereof.




     Pledged Securities means, collectively, the Pledged Shares and any other Collateral
constituting securities.




     Pledged Shares has the meaning set forth in Paragraph 4 hereof.




     Rights means rights, remedies, powers, privileges and benefits.




     Security Interest means the security interest granted and the pledge and assignment
made under Paragraph 3 hereof.




     Trademarks has the meaning set forth in Paragraph 4 hereof.




     UCC means the Uniform Commercial Code, including each such provision as it may
subsequently be renumbered, as enacted in the State of New York or other applicable
jurisdiction, as amended at the time in question.




     3. SECURITY INTEREST. In order to secure the full and complete payment and performance of the
Obligations when due, Debtor hereby grants to Secured Party a Security Interest in all of Debtor’s
Rights, titles, and interests in and to the Collateral and pledges, collaterally transfers, and
assigns the Collateral to Secured Party, all upon and subject to the terms and conditions of this
Security Agreement. Such Security Interest is granted and pledge and assignment are made as
security only and shall not subject Secured Party to, or transfer or in any way affect or modify,
any obligation of Debtor with respect to any of the Collateral or any transaction involving or
giving rise thereto. If the grant, pledge, or collateral transfer or assignment of any specific
item of the Collateral is expressly prohibited by any contract, license, law or regulation, then
the Security Interest created hereby nonetheless remains effective to the extent allowed by the UCC
or other applicable Law, but is otherwise limited by that prohibition.




     4. COLLATERAL. As used herein, the term “Collateral” means the following items and types of
property, wherever located, now owned or in the future existing or acquired by Debtor, and all
proceeds and products thereof, and any substitutes or replacements therefor:



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     (a) all personal property and fixture property of every kind and nature including, without
limitation, all accounts, chattel paper (whether tangible or electronic), goods (including
inventory, equipment, and any accessions thereto), software, instruments, investment property,
documents, deposit accounts, money, commercial tort claims, letters of credit and letter-of-credit
rights, supporting obligations, Tax refunds, and general intangibles (including payment
intangibles);




     (b) all Rights, titles, and interests of Debtor in and to all outstanding stock, equity, or
other investment securities owned by Debtor, including, without limitation, all capital stock of
each Subsidiary of Debtor set forth on Annex B-1 (“Pledged Shares”);




     (c) all Rights, titles, and interests of Debtor in and to all promissory notes and other
instruments payable to Debtor, including, without limitation, all inter-company notes from
Subsidiaries and those set forth on Annex B-1 (“Collateral Notes”) and all Rights, titles,
interests, and Liens Debtor may have, be, or become entitled to under all present and future loan
agreements, security agreements, pledge agreements, deeds of trust, mortgages, guarantees, or other
documents assuring or securing payment of or otherwise evidencing the Collateral Notes, including,
without limitation, those set forth on Annex B-1 (“Collateral Note Security”);




     (d) the Partnership/Limited Liability Company Interests and all Rights of Debtor with respect
thereto, including, without limitation, all Partnership/Limited Liability Company Interests set
forth on Annex B-1 and all of Debtor’s distribution rights, income rights, liquidation interest,
accounts, contract rights, general intangibles, notes, instruments, drafts, and documents relating
to the Partnership/Limited Liability Company Interests;




     (e) (i) all copyrights (whether statutory or common law, registered or unregistered), works
protectable by copyright, copyright registrations, copyright licenses, and copyright applications
of Debtor, including, without limitation, all of Debtor’s Right, title, and interest in and to all
copyrights registered in the United States Copyright Office or anywhere else in the world and also
including, without limitation, the copyrights set forth on Annex B-2; (ii) all renewals,
extensions, and modifications thereof, (iii) all income, licenses, royalties, damages, profits, and
payments relating to or payable under any of the foregoing; (iv) the Right to sue for past,
present, or future infringements of any of the foregoing; and (v) all other rights and benefits
relating to any of the foregoing throughout the world; in each case, whether now owned or hereafter
acquired by Debtor (“Copyrights”);




     (f) (i) all patents, patent applications, patent licenses, and patentable inventions of
Debtor, including, without limitation, registrations, recordings, and applications thereof in the
United States Patent and Trademark Office or in any similar office or agency of the United States
of America, any state thereof or any other country or any political subdivision thereof including,
without limitation, those set forth on Annex B-2, and all of the inventions and improvements
described and claimed therein; (ii) all continuations, divisions, renewals, extensions,
modifications, substitutions, reexaminations, continuations-in-part, or reissues of any of the
foregoing; (iii) all income, royalties, profits, damages, awards, and payments relating to or
payable under any of the foregoing; (iv) the right to sue for past, present, and future
infringements



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of any of the foregoing; and (v) all other rights and benefits relating to any of the foregoing
throughout the world; in each case, whether now owned or hereafter acquired by Debtor
(“Patents”);




     (g) (i) all trademarks, trademark licenses, trade names, corporate names, company names,
business names, fictitious business names, trade styles, service marks, certification marks,
collective marks, logos, other business identifiers, all registrations, recordings, and
applications thereof including, without limitation, registrations, recordings, and applications in
the United States Patent and Trademark Office or in any similar office or agency of the United
States, any state thereof or any other country or any political subdivision thereof including,
without limitation, those set forth on Annex B-2; (ii) all reissues, extensions, and renewals
thereof; (iii) all income, royalties, damages, and payments now or hereafter relating to or payable
under any of the foregoing including, without limitation, damages or payments for past or future
infringements of any of the foregoing; (iv) the right to sue for past, present, and future
infringements of any of the foregoing; (v) all rights corresponding to any of the foregoing
throughout the world; and (vi) all goodwill associated with and symbolized by any of the foregoing,
in each case, whether now owned or hereafter acquired by Debtor (“Trademarks”, and collectively
with the Copyrights and the Patents, the “Intellectual Property”);




     (h) (i) all of Debtor’s Rights, titles, and interests in, to, and under those contracts
pursuant to which a default in or breach of the performance or observance of any provision could
reasonably be expected to result in the opinion of the Secured Party in a Material Adverse Effect
(the “Material Agreements”) including, without limitation, all Rights of Debtor to receive moneys
due and to become due under or pursuant to the Material Agreements; (ii) all rights of Debtor to
receive proceeds of any insurance, indemnity, warranty, or guaranty with respect to the Material
Agreements; (iii) all claims of Debtor for damages arising out of or for breach of or default under
the Material Agreements; and (iv) all rights of Debtor to compel performance and otherwise exercise
all rights and remedies under the Material Agreements;




     (i) all present and future automobiles, trucks, truck tractors, trailers, semi-trailers, or
other motor vehicles or rolling stock, now owned or hereafter acquired by such Debtor
(collectively, the “Vehicles”);




     (j) any and all material deposit accounts, bank accounts, investment accounts, or securities
accounts, now owned or hereafter acquired or opened by Debtor including, without limitation, any
such accounts set forth on Annex B-1, and any account which is a replacement or substitute for any
of such accounts, together with all monies, instruments, certificates, checks, drafts, wire
transfer receipts, and other property deposited therein and all balances therein (the “Deposit
Accounts”);




     (k) all permits, licenses and other authorizations (“Authorizations”) issued by any
governmental authority, to the extent and only to the extent that the grant of a security interest
in any such Authorization does not result in the forfeiture of, or default under, any such
Authorization;



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     (l) all present and future distributions, income, increases, profits, combinations,
reclassifications, improvements, and products of, accessions, attachments, and other additions
to, tools, parts, and equipment used in connection with, and substitutes and replacements for,
all or part of the Collateral described above;



     (m) all present and future accounts, contract rights, general intangibles, chattel paper,
documents, instruments, cash and noncash proceeds, and other Rights arising from or by virtue
of, or from the voluntary or involuntary sale or other disposition of, or collections with
respect to, or insurance proceeds payable with respect to, or proceeds payable by virtue of
warranty or other claims against the manufacturer of, or claims against any other Person with
respect to, all or any part of the Collateral heretofore described in this clause or otherwise;
and



     (n) all present and future security for the payment to Debtor or any Subsidiary of any of
the Collateral described above and goods which gave or will give rise to any such Collateral or
are evidenced, identified, or represented therein or thereby.


The description of the Collateral contained in this Paragraph 4 shall not be deemed to permit any
action by this Security Agreement or by the terms incorporated in this Security Agreement.





     5. REPRESENTATIONS AND WARRANTIES. Debtor represents and warrants to
Secured Party that:




     (a) Credit Agreement. Certain representations and warranties in the Credit Agreement are
applicable to Debtor or its assets or operations, and each such representation is true and
correct, in all material respects.




     (b) Binding Obligation/Perfection. This Security Agreement creates a legal, valid, and
binding Lien in and to the Collateral in favor of Secured Party and enforceable against Debtor.
For Collateral in which the Security Interest may be perfected by the filing of Financing
Statements pursuant to Article 9 of the UCC, once those Financing Statements have been properly
filed in the jurisdictions described on Annex A hereto, the Security Interest in that
Collateral will be fully perfected and the Security Interest will constitute a first-priority
Lien on such Collateral, subject only to Permitted Liens. With respect to Collateral consisting
of investment property (other than Pledged Securities covered by Paragraph 5(j)), Deposit
Accounts, electronic chattel paper, letter-of-credit rights, and instruments, upon the delivery
of such Collateral to Secured Party or delivery of an executed Control Agreement with respect
to such Collateral, the Security Interest in that Collateral will be fully perfected and the
Security Interest will constitute a first-priority Lien on such Collateral, subject only to
Permitted Liens. None of the Collateral has been delivered nor control with respect thereto
given to any Person other than the Administrative Agent. Other than the Financing Statements
and Control Agreements with respect to this Security Agreement, there are no other financing
statements or control agreements covering any Collateral, other than those evidencing Permitted
Liens. The creation of the Security Interest does not require the consent of any Person that
has not been obtained.



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     (c) Debtor Information. Debtor’s exact legal name, mailing address, jurisdiction of
organization, type of entity, and state issued organizational identification number are as set
forth on Annex A hereto.




     (d) Location/Fixtures. (i) Debtor’s place of business and chief executive office is where
Debtor is entitled to receive notices hereunder; the present and foreseeable location of debtor’s
books and records concerning any of the Collateral that is accounts is as set forth on Annex A
hereto, and the location of all other Collateral, including, without limitation, Debtor’s inventory
and equipment (but excluding fixtures) is as set forth on Annex A hereto; and, except as noted on
Annex A hereto, all such books, records, and Collateral are in Debtor’s possession, and (ii)
substantially all the Collateral that is or may be fixtures is located on or affixed to the real
property described in deeds of trust or mortgages executed by Debtor in favor of Secured Party
pursuant to the Credit Agreement or on Annex A hereto.




     (e) Governmental Authority. Other than the filing of Financing Statements contemplated hereby,
appropriate filings to perfect the Security Interest in the Intellectual Property and the notation
of a Lien in favor of the Secured Party on any motor vehicle certificate of title, no
Authorization, approval, or other action by, and no notice to or filing with, any Governmental
Authority is required either (i) for the pledge by Debtor of the Collateral pursuant to this
Security Agreement or for the execution, delivery, or performance of this Security Agreement by
Debtor, or (ii) for the exercise by Secured Party of the voting or other Rights provided for in
this Security Agreement or the remedies in respect of the Collateral pursuant to this Security
Agreement (except as may be required in connection with the disposition of the Pledged Securities
by Laws affecting the offering and sale of securities generally).




     (f) Maintenance of Collateral. All tangible Collateral which is useful in and necessary to
Debtor’s business is in good repair and condition, ordinary wear and tear excepted.




     (g) Liens. Debtor owns, leases or has valid rights to use all presently existing Collateral,
and will acquire or lease all hereafter-acquired Collateral, free and clear of all Liens, except
Permitted Liens.




     (h) Collateral. Annex B-1 accurately lists all Collateral Notes, Collateral Note Security,
Pledged Shares, Partnership/Limited Liability Company Interests, commercial tort claims, and
Deposit Accounts.




     (i) Instruments, Chattel Paper, Collateral Notes, and Collateral Note Security. All material
instruments and chattel paper including, without limitation, the Collateral Notes, have been
delivered to Secured Party, together with corresponding endorsements duly executed by Debtor in
favor of Secured Party, and such endorsements have been duly and validly executed and are binding
and enforceable against Debtor in accordance with their terms. Each material Collateral Note and
the documents evidencing the Collateral Note Security are in full force and effect; there have been
no renewals or extensions of, or amendments, modifications, or supplements which would materially
adversely affect such Collateral Notes or Collateral Note Security; and no “default” or “event of
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Collateral Note or documents evidencing the Collateral Note Security. Debtor has good title to the
Collateral Notes and Collateral Note Security, and such Collateral Notes and Collateral Note
Security are free from any claim for credit, deduction, or allowance of an Obligor and free from
any defense, condition, dispute, setoff, or counterclaim which could materially adversely affect
the value thereof, and there is no extension or indulgence with respect thereto.




     (j) Pledged Securities, Pledged Shares. All Collateral that is Pledged Shares is duly
authorized, validly issued, fully paid, and non-assessable (except to the extent required by
applicable Law), and the transfer thereof is not subject to any restrictions, other than
restrictions imposed hereunder and by applicable securities and corporate Laws or Permitted Liens.
The Pledged Securities securing the Obligations as defined in the Credit Agreement include 100% of
the issued and outstanding common stock or other equity interests owned by Debtor of each
Subsidiary of Debtor. Debtor has good title to the Pledged Securities, free and clear of all Liens
and encumbrances thereon (except for the Security Interest created hereby or Permitted Liens), and
has delivered to Secured Party (i) all stock certificates, or other instruments or documents
representing or evidencing the Pledged Securities, together with corresponding assignment or
transfer powers duly executed in blank by Debtor, and such powers have been duly and validly
executed and are binding and enforceable against Debtor in accordance with their terms or (ii) to
the extent such Pledged Securities are uncertificated, an executed Acknowledgment of Pledge in the
form of Annex D with respect to such Pledged Securities. The pledge of the Pledged Securities in
accordance with the terms hereof creates a valid and perfected first priority security interest in
the Pledged Securities securing payment of the Obligations, subject to Permitted Liens.




     (k) Partnership/Limited Liability Company Interests. Each Partnership/Limited Liability
Company issuing a Partnership/Limited Liability Company Interest, is duly organized, currently
existing, and in good standing in the jurisdiction of its formation; there have been no material
amendments, modifications, or supplements to any agreement or certificate creating any
Partnership/Limited Liability Company or any material contract relating to the Partnerships/Limited
Liability Companies, of which Secured Party has not been advised in writing; no event of default,
default, breach, or potential default has occurred and is continuing under any Partnership/Limited
Liability Company Agreement, except for such defaults or breaches that would not reasonably be
expected to result in a Material Adverse Effect; and no approval or consent of the partners of any
Partnership/Limited Liability Company is required as a condition to the validity and enforceability
of the Security Interest created hereby or the consummation of the transactions contemplated hereby
which has not been duly obtained by Debtor. Debtor has good title to the Partnership/Limited
Liability Company Interests free and clear of all Liens and encumbrances (except for the Security
Interest granted hereby or Permitted Liens). The Partnership/Limited Liability Company Interests
are validly issued, fully paid, and nonassessable (except to the extent required by applicable Law)
and are not subject to statutory, contractual, or other restrictions governing their transfer,
ownership, or control, except as set forth in the applicable Partnership/Limited Liability Company
Agreements or applicable securities Laws or Permitted Liens. All capital contributions required to
be made by the terms of the Partnership/Limited Liability Company Agreements for each
Partnership/Limited Liability Company have been made. The Partnership/Limited Liability Company
Interests of Quest Energy Partners, L.P., Quest Midstream GP, LLC, Quest Energy GP, LLC and Quest
Midstream



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Partners, L.P. are evidenced by certificates but no other Partnership/Limited Liability Company
Interests are evidenced by certificates.




     (1) Accounts. All Collateral that is accounts, contract rights, chattel paper, instruments,
payment intangibles, or general intangibles is free from any claim for credit, deduction, or
allowance of an Obligor, from any defense, condition, dispute, setoff, or counterclaim
(collectively “Deductions”), and there is no extension or indulgence with respect thereto, except
to the extent such Deductions, extensions and indulgences could not reasonably be expected to have
a Material Adverse Effect.




     (m) Deposit Accounts. With respect to the Deposit Accounts, (i) Debtor maintains each Deposit
Account with the banks listed on Annex B-1 hereto, (ii) upon request by the Administrative Agent,
Debtor shall use its reasonable efforts to, within thirty (30) days of such request, cause each
such bank to acknowledge to Secured Party that each such Deposit Account is subject to the Security
Interest and Liens herein created, that the pledge of such Deposit Account has been recorded in the
books and records of such bank, and that Secured Party shall have “control” (as defined in the UCC)
over such Deposit Account, and (iii) Debtor has the legal Right to pledge and assign to Secured
Party the funds deposited and to be deposited in each such Deposit Account.




     (n)
Intellectual Property.




     (i) All of the Intellectual Property is subsisting, valid, and enforceable (except
where any failure to be subsisting, valid and enforceable would not reasonably be expected
to have a Material Adverse Effect). The information contained on Annex B-2 hereto is true,
correct and complete. All issued Patents, Patent applications, registered Trademarks,
Trademark applications, registered Copyrights, and Copyright applications of Debtor are
identified on Annex B-2 hereto.




     (ii) Except for off-the-shelf software and other Intellectual Property of which Debtor
is a licensee (as to which this representation is inapplicable), Debtor is the sole and
exclusive owner of, the entire and unencumbered Right, title, and interest in and to the
Intellectual Property owned by Debtor free and clear of any Liens including, without
limitation, any pledges, assignments, licenses, user agreements, and covenants by Debtor
not to sue third Persons, other than Permitted Liens or licenses permitted by Paragraph
8(c).




     (iii) As of the date hereof, to Debtor’s knowledge, no third party is infringing any
of Debtor’s Rights under the Intellectual Property.




     (iv) Debtor has performed and will continue to perform all acts and has paid and will
continue to pay all required fees and Taxes to maintain each material item of the
Intellectual Property in full force and effect throughout the world, as applicable.



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     (v) Each of the Patents and Trademarks identified on Annex B-2 hereto, to the
extent required in Debtor’s reasonable business judgment, has been properly
registered with the United States Patent and Trademark Office and in corresponding
offices throughout the world (where appropriate) and each of the Copyrights
identified on Annex B-2 hereto has been properly registered with the United States
Copyright Office and in corresponding offices throughout the world (where
appropriate).




     (vi) As of the date hereof, to Debtor’s knowledge, no claims with respect to
the Intellectual Property have been asserted and are pending (i) to the effect that
the sale, licensing, pledge, or use of any of the products of Debtor’s business
infringes any other party’s valid copyright, trademark, service mark, trade secret,
or other intellectual property Right, (ii) against the use by Debtor of any
Intellectual Property used in the Debtor’s business as currently conducted, or
(iii) challenging the ownership or use by Debtor of any of the Intellectual
Property that Debtor purports to own or use.


The foregoing representations and warranties will be true and correct in all material respects with
respect to any additional Collateral or additional specific descriptions of certain Collateral
delivered to Secured Party in the future by Debtor. The failure of any of these representations or
warranties or any description of Collateral therein to be accurate or complete shall not impair the
Security Interest in any such Collateral.





     6. COVENANTS. So long as any Lenders are committed to make Credit Extensions under the Credit
Agreement, and until the Obligations are paid and performed in full (except as provided in Sections
10.01(d) and 10.01(e) of the Credit Agreement), Debtor covenants and agrees with Secured Party that
Debtor will:




     (a) Credit Agreement. (i) Comply with, perform, and be bound by all applicable
covenants and agreements in the Credit Agreement, each of which is hereby ratified and
confirmed.




     (b) Books and Records Concerning Collateral; Inspection Rights. Debtor shall comply
with the provisions of Section 6.09 and 6.10 regarding records concerning and inspection
rights relating to the Collateral. In addition, from time to time at the request of Secured
Party deliver to Secured Party such information regarding Debtor that is in the possession
of Debtor as Secured Party may reasonably request.




     (c) Annexes. Together with the delivery of compliance certificates pursuant to Section
6.02(a) of the Credit Agreement, update all annexes hereto if any information therein shall
become inaccurate or incomplete and such updated Annexes shall replace the existing Annexes
for all purposes of this Agreement. Notwithstanding any other provision herein, Debtor’s
failure to describe any Collateral required to be listed on any annex hereto shall not
impair Secured Party’s Security Interest in the Collateral.




     (d) Perform Obligations. Perform all of Debtor’s duties under and in connection with
each transaction to which the Collateral, or any material part thereof, relates, in the
ordinary



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course of business except when in Debtor’s business judgment non-performance is justified.
Notwithstanding anything to the contrary contained herein, (i) Debtor shall remain liable under the
contracts, agreements, documents, and instruments included in the Collateral to the extent set
forth therein to perform all of its duties and obligations thereunder to the same extent as if this
Security Agreement had not been executed, (ii) the exercise by Secured Party of any of its Rights
or remedies hereunder shall not release Debtor from any of its duties or obligations under the
contracts, agreements, documents, and instruments included in the Collateral, and (iii) Secured
Party shall not have any indebtedness, liability, or obligation under any of the contracts,
agreements, documents, and instruments included in the Collateral by reason of this Security
Agreement, and Secured Party shall not be obligated to perform any of the obligations or duties of
Debtor thereunder or to take any action to collect or enforce any claim for payment assigned
hereunder.




     (e) Intentionally Deleted.




     (f) Collateral in Trust. Hold in trust (and not commingle with other assets of Debtor) for
Secured Party all Collateral that is chattel paper, instruments, Collateral Notes, Pledged
Securities, or documents at any time received by Debtor, and promptly deliver same to Secured
Party, unless Secured Party at its option (which may be evidenced only by a writing signed by
Secured Party stating that Secured Party elects to permit Debtor to so retain) permits Debtor to
retain the same, but any chattel paper, instruments, Collateral Notes, Pledged Securities, or
documents so retained shall be marked to state that they are assigned to Secured Party; each such
instrument shall be endorsed to the order of Secured Party (but the failure of same to be so marked
or endorsed shall not impair the Security Interest thereon).




     (g) Control. Execute all documents and take any action required by Secured Party in order for
Secured Party to obtain “control” (as defined in the UCC) with respect to Collateral consisting of
Deposit Accounts, investment property, uncertificated Pledged Securities, and letter-of-credit
rights. If Debtor at any time holds or acquires an interest in any electronic chattel paper or any
“transferable record,” as that term is defined in the federal Electronic Signatures in Global and
National Commerce Act, or in the Uniform Electronic Transactions Act as in effect in any relevant
jurisdiction, promptly notify Secured Party thereof and, at the request of Secured Party, take such
action as Secured Party may reasonably request to vest in Secured Party control under the UCC of
such electronic chattel paper or control under the federal Electronic Signatures in Global and
National Commerce Act or, as the case may be, the Uniform Electronic Transactions Act, as so in
effect in such jurisdiction, of such transferable record.




     (h) Further Assurances. At Debtor’s expense and Secured Party’s request, before or after a
Default or Event of Default: (i) file or cause to be filed such applications and take such other
actions as Secured Party may request to obtain the consent or approval of any Governmental
Authority to Secured Party’s Rights hereunder including, without limitation, the Right to sell all
the Collateral upon an Event of Default without additional consent or approval from such
Governmental Authority (and, because Debtor agrees that Secured Party’s remedies at Law for failure
of Debtor to comply with this provision would be inadequate and that such failure would not be
adequately compensable in damages, Debtor agrees that its covenants in this



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provision may be specifically enforced); (ii) from time to time promptly execute and deliver to
Secured Party all such other assignments, certificates, supplemental documents, and financing
statements, and do all other acts or things as Secured Party may reasonably request in order to
more fully create, evidence, perfect, continue, and preserve the priority of the Security Interest
and to carry out the provisions of this Security Agreement; and (iii) pay all filing fees in
connection with any financing, continuation, or termination statement or other instrument with
respect to the Security Interests.




     (i) Encumbrances. Not create, permit, or suffer to exist, and shall defend the Collateral
against, any Lien or other encumbrance on the Collateral, other than Permitted Liens, and shall
defend Debtor’s Rights in the Collateral and Secured Party’s Security Interest in the Collateral
against the claims and demands of all Persons except those holding or claiming Permitted Liens.
Debtor shall do nothing to impair the Rights of Secured Party in the Collateral.




     (j) Estoppel and Other Agreements and Matters. Upon the reasonable request of Secured Party,
either (i) use commercially reasonable efforts to cause the landlord or lessor for each location
where any of its inventory or equipment is maintained to execute and deliver to Secured Party an
estoppel and subordination agreement in such form as may be reasonably acceptable to Secured Party
and its counsel, or (ii) deliver to Secured Party a legal opinion or other evidence (in each case
that is reasonably satisfactory to Secured Party and it counsel) that neither the applicable lease
nor the Laws of the jurisdiction in which that location is situated provide for contractual, common
Law, or statutory landlord’s Liens that is senior to or pari passu with the Security Interest.




     (k) Fixtures. For any Collateral that is a fixture or an accession which has been attached to
real estate or other goods prior to the perfection of the Security Interest, use commercially
reasonable efforts to furnish to Secured Party, upon reasonable demand, a disclaimer of interest in
each such fixture or accession and a consent in writing to the Security Interest of Secured Party
therein, signed by all Persons having any interest in such fixture or accession by virtue of any
interest in the real estate or other goods to which such fixture or accession has been attached.




     (l) Certificates of Title. Upon the request of Secured Party, if a certificate of title is
issued or outstanding with respect to any Vehicle or other Collateral with a fair market value of
at least $50,000, cause the Security Interest to be properly noted thereon.




     (m) Warehouse Receipts Non-Negotiable. If any warehouse receipt or receipt in the nature of a
warehouse receipt is issued in respect of any of the Collateral, agree that such warehouse receipt
or receipt in the nature thereof shall not be “negotiable” (as such term is used in Section 7-104
of the UCC) unless such warehouse receipt or receipt in the nature thereof is delivered to Secured
Party.




     (n) Impairment of Collateral. Not use any material portion of the Collateral, or permit the
same to be used, for any unlawful purpose, in any manner that is reasonably likely to materially
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inconsistent with the provisions or requirements of any policy of insurance thereon nor affix or
install any accessories, equipment, or device on the Collateral or on any component thereof if such
addition will materially impair the original intended function or use of the Collateral or such
component.




     (o) Collateral Notes and Collateral Note Security. Without the prior written consent of
Secured Party not (i) materially modify or substitute, or permit material modification or
substitution of, any Collateral Note or any document evidencing the Collateral Note Security, if
the effect thereof would be to materially adversely affect the value of the Collateral Notes and
Collateral Note Security taken as a whole, or (ii) release any material portion of any Collateral
Note Security unless paid in full or otherwise specifically required by the terms thereof, except
in the exercise of the Debtor’s reasonable business judgment.




     (p) Securities. Except as permitted by the Credit Agreement, not sell, exchange, or otherwise
dispose of, or grant any option, warrant, or other Right with respect to, any of the Pledged
Securities; and take any action requested by Secured Party to allow Secured Party to fully enforce
its Security Interest in the Pledged Securities including, without limitation, the filing of any
claims with any court, liquidator, trustee, custodian, receiver, or other like person or party.




     (q) Depository Bank. With respect to any Deposit Accounts, (i) maintain the Deposit Accounts
at the banks (a “Depository Bank”) described on Annex B-1 or such additional depository banks as
described in the notices given pursuant to clause (iv) of this Section 6(q) as have complied with
item (iv) hereof, (ii) upon request of the Secured Party, deliver to each depository bank a letter
in the form of Annex C hereto with respect to Secured Party’s Rights in such Deposit Account (or on
such other reasonable form as may be provided by the Depository Bank) and use commercially
reasonable efforts to obtain the execution of such letter by each Depository Bank that the pledge
of such Deposit Account has been recorded in the books and records of such bank and that Secured
Party shall have dominion and control over such Deposit Account; (iii) upon request of the Secured
Party, deliver to Secured Party all certificates or instruments, if any, now or hereafter
representing or evidencing the Deposit Accounts, accompanied by duly executed instruments of
transfer or assignment in blank, all in form and substance reasonably satisfactory to Secured
Party; and (iv) notify Secured Party upon establishing any additional Deposit Accounts and, at the
request of Secured Party, use commercially reasonable efforts to obtain from such depository bank
an executed letter substantially in the form of Annex C (or on such other reasonable form as may be
provided by the Depository Bank) and deliver the same to Secured Party. Secured Party agrees not to
exercise control over such Deposit Account unless an Event of Default shall have occurred and be
continuing.




     (t) Marking of Chattel Paper. At the request of Secured Party, not create any chattel paper
without placing a legend on the chattel paper acceptable to Secured Party indicating that Secured
Party has a security interest in the chattel paper.




     (u) Modification of Accounts. In accordance with prudent business practices, endeavor to
collect or cause to be collected from each account debtor under its accounts, as and



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when due, any and all amounts owing under such accounts. Except in the ordinary course of business
consistent with prudent business practices and industry standards, without the prior written
consent of Secured Party, Debtor shall not (i) grant any extension of time for any payment with
respect to any of the accounts, (ii) compromise, compound, or settle any of the accounts for less
than the full amount thereof, (iii) release, in whole or in part, any Person liable for payment of
any of the accounts, (iv) allow any credit or discount for payment with respect to any account
other than trade discounts granted in the ordinary course of business, (v) release any Lien or
guaranty securing any account, or (vi) modify or substitute, or permit the modification or
substitution of, any contract to which any of the Collateral which is accounts relates.




     (v) Intellectual Property.




     (i) Prosecute diligently all applications in respect of Intellectual Property, now or
hereafter pending;




     (ii) Except to the extent not required in Debtor’s reasonable business judgment, make
federal applications on all of its unpatented but patentable inventions and all of its
registrable but unregistered Copyrights and Trademarks;




     (iii) Preserve and maintain all of its material Rights in the Intellectual Property
and protect the Intellectual Property from infringement, unfair competition, cancellation,
or dilution by all appropriate action necessary in Debtor’s reasonable business judgment
including, without limitation, the commencement and prosecution of legal proceedings to
recover damages for infringement and to defend and preserve its rights in the Intellectual
Property;




     (iv) Not abandon any of the Intellectual Property necessary to the conduct of its
business in the exercise of Debtor’s reasonable business judgment;




     (v) Maintain the quality of any and all products and services with respect to which
the Intellectual Property is used;




     (vi) Not enter into any agreement including, but not limited to any licensing
agreement, that is or may be inconsistent with Debtor’s obligations under this Security
Agreement or any of the other Loan Documents;




     (vii) Give Secured Party prompt written notice if Debtor shall obtain Rights to or
become entitled to the benefit of any Intellectual Property not identified on Annex B-2
hereto; and




     (viii) If a Default or Event of Default exists, use its reasonable efforts to obtain
any consents, waivers, or agreements necessary to enable Secured Party to exercise its
rights and remedies with respect to the Intellectual Property.



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     7. DEFAULT; REMEDIES. If an Event of Default exists, Secured Party may, at its election (but
subject to the terms and conditions of the Credit Agreement), exercise any and all Rights available
to a secured party under the UCC and other applicable law, in addition to any and all other Rights
afforded by the Loan Documents, at law, in equity, or otherwise including, without limitation, (a)
requiring Debtor to assemble all or part of the Collateral and make it available to Secured Party
at a place to be designated by Secured Party which is reasonably convenient to Debtor and Secured
Party, (b) to the extent permitted by Debtor’s insurance carrier, surrendering any policies of
insurance on all or part of the Collateral and receiving and applying the unearned premiums as a
credit on the Obligations, (c) applying by appropriate judicial proceedings for appointment of a
receiver for all or part of the Collateral (and Debtor hereby consents to any such appointment),
and (d) applying to the Obligations any cash held by Secured Party under this Security Agreement,
including, without limitation, any cash in the Cash Collateral Account (defined in Section 8(h)).




     (a) Notice. Reasonable notification of the time and place of any public sale of the
Collateral, or reasonable notification of the time after which any private sale or other
intended disposition of the Collateral is to be made, shall be sent to Debtor and to any
other Person entitled to notice under the UCC; provided that, if any of the Collateral
threatens to decline speedily in value or is of the type customarily sold on a recognized
market, Secured Party may sell or otherwise dispose of the Collateral without notification,
advertisement, or other notice of any kind. It is agreed that notice sent or given not less
than ten Business Days prior to the taking of the action to which the notice relates is
reasonable notification and notice for the purposes of this subparagraph.




     (b) Condition of Collateral; Warranties. Secured Party has no obligation to clean-up
or otherwise prepare the Collateral for sale. Secured Party may sell the Collateral without
giving any warranties as to the Collateral. Secured Party may specifically disclaim any
warranties of title or the like. This procedure will not be considered to affect adversely
the commercial reasonableness of any sale of the Collateral.




     (c) Compliance with Other Laws. Secured Party may comply with any applicable state or
federal law requirements in connection with a disposition of the Collateral and compliance
will not be considered to adversely affect the commercial reasonableness of any sale of the
Collateral.




     (d) Sales of Pledged Securities.




     (i) Debtor agrees that, because of the Securities Act of 1933, as amended, or
the rules and regulations promulgated thereunder (collectively, the “Securities
Act”), or any other Laws or regulations, and for other reasons, there may be legal
or practical restrictions or limitations affecting Secured Party in any attempts to
dispose of certain portions of the Pledged Securities and for the enforcement of
its Rights. For these reasons, Secured Party is hereby authorized by Debtor, but
not obligated, upon the occurrence and during the continuation of
an Event of Default, to sell all or any part of the Pledged Securities at
private sale, subject to an investment letter or in any other manner which will not
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in accordance with the Securities Act or any other Laws or regulations, at a reasonable
price at such private sale or other distribution in the manner mentioned above. Debtor
understands that Secured Party may in its discretion approach a limited number of potential
purchasers and that a sale under such circumstances may yield a lower price for the Pledged
Securities, or any part thereof, than would otherwise be obtainable if such Collateral were
either offered to a larger number of potential purchasers, registered under the Securities
Act, or sold in the open market. Debtor agrees that any such private sale made under this
Paragraph 7(d) shall be deemed to have been made in a commercially reasonable manner, and
that Secured Party has no obligation to delay the sale of any Pledged Securities to permit
the issuer thereof to register it for public sale under any applicable federal or state
securities Laws.




     (ii) Secured Party is authorized, in connection with any such sale, (A) to restrict
the prospective bidders on or purchasers of any of the Pledged Securities to a limited
number of sophisticated investors who will represent and agree that they are purchasing for
their own account for investment and not with a view to the distribution or sale of any of
such Pledged Securities, and (B) to impose such other limitations or conditions in
connection with any such sale as Secured Party reasonably deems necessary in order to
comply with applicable Law. Debtor covenants and agrees that it will execute and deliver
such documents and take such other action as Secured Party reasonably deems necessary in
order that any such sale may be made in compliance with applicable Law. Upon any such sale,
Secured Party shall have the Right to deliver, assign, and transfer to the purchaser
thereof the Pledged Securities so sold. Each purchaser at any such sale shall hold the
Pledged Securities so sold absolutely free from any claim or Right of Debtor of whatsoever
kind, including any equity or Right of redemption of Debtor. Debtor, to the extent
permitted by applicable Law, hereby specifically waives all Rights of redemption, stay, or
appraisal which it has or may have under any Law now existing or hereafter enacted.




     (iii) Debtor agrees that ten days’ written notice from Secured Party to Debtor of
Secured Party’s intention to make any such public or private sale or sale at a broker’s
board or on a securities exchange shall constitute reasonable notice under the UCC. Such
notice shall (A) in case of a public sale, state the time and place fixed for such sale,
(B) in case of sale at a broker’s board or on a securities exchange, state the board or
exchange at which such a sale is to be made and the day on which the Pledged Securities, or
the portion thereof so being sold, will first be offered to sale at such board or exchange,
and (C) in the case of a private sale, state the day after which such sale may be
consummated. Any such public sale shall be held at such time or times within ordinary
business hours and at such place or places as Secured Party may fix in the notice of such
sale. At any such sale, the Pledged Securities may be sold in one lot as an entirety or in
separate parcels, as Secured Party may reasonably determine. Secured Party shall not be
obligated to make any such sale pursuant to any such notice. Secured Party may, without
notice or publication, adjourn any public or private sale or cause the same to be adjourned
from time to time by announcement at the time and place fixed for the sale, and such sale
may be made at any time or place to which the same may be so adjourned.



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     (iv) In case of any sale of all or any part of the Pledged Securities on credit or for
future delivery, the Pledged Securities so sold may be retained by Secured Party until the
selling price is paid by the purchaser thereof, but Secured Party shall not incur any
liability in case of the failure of such purchaser to take up and pay for the Pledged
Securities so sold and in case of any such failure, such Pledged Securities may again be
sold upon like notice. Secured Party, instead of exercising the power of sale herein
conferred upon it, may proceed by a suit or suits at Law or in equity to foreclose the
Security Interests and sell the Pledged Securities, or any portion thereof, under a
judgment or decree of a court or courts of competent jurisdiction.




     (v) Without limiting the foregoing, or imposing upon Secured Party any obligations or
duties not required by applicable Law, Debtor acknowledges and agrees that, in foreclosing
upon any of the Pledged Securities, or exercising any other Rights or remedies provided
Secured Party hereunder or under applicable Law, Secured Party may, but shall not be
required to, (A) qualify or restrict prospective purchasers of the Pledged Securities by
requiring evidence of sophistication or creditworthiness, and requiring the execution and
delivery of confidentiality agreements or other documents and agreements as a condition to
such prospective purchasers’ receipt of information regarding the Pledged Securities or
participation in any public or private foreclosure sale process, (B) provide to prospective
purchasers business and financial information regarding Debtor and its Subsidiaries
available in the files of Secured Party at the time of commencing the foreclosure process,
without the requirement that Secured Party obtain, or seek to obtain, any updated business
or financial information or verify, or certify to prospective purchasers, the accuracy of
any such business or financial information, or (C) offer for sale and sell the Pledged
Securities with or without first employing an appraiser, investment banker, or broker with
respect to the evaluation of the Pledged Securities, the solicitation of purchasers for
Pledged Securities, or the manner of sale of Pledged Securities.




     (e) Application of Proceeds. Secured Party shall apply the proceeds of any sale or other
disposition of the Collateral under this Paragraph 7 in the following order: first, to the payment
of all expenses incurred in retaking, holding, and preparing any of the Collateral for sale(s) or
other disposition, in arranging for such sale(s) or other disposition, and in actually selling or
disposing of the same (all of which are part of the Obligations); second, toward repayment of
amounts expended by Secured Party under Paragraph 8; and third, toward payment of the balance of
the Obligations in the order and manner specified in the Credit Agreement. Any surplus remaining
shall be delivered to Debtor or as a court of competent jurisdiction may direct. If the proceeds
are insufficient to pay the Obligations in full, Debtor shall remain liable for any deficiency.




     (f) Sales on Credit. If Secured Party sells any of the Collateral upon credit, Debtor will be
credited only with payments actually made by the purchaser, received by the Secured Party, and
applied to the indebtedness of the purchaser. In the event the purchaser fails to pay for the
Collateral, Secured Party may resell the Collateral.



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8. OTHER RIGHTS OF SECURED PARTY.




     (a) Performance. If Debtor fails to keep the Collateral in good repair, working order, and
condition, as required by the Loan Documents, or fails to pay when due all Taxes on any of the
Collateral in the manner required by the Loan Documents, or fails to preserve the priority of the
Security Interest in any of the Collateral, or fails to keep the Collateral insured as required by
the Loan Documents, or otherwise fails to perform any of its obligations under the Loan Documents
with respect to the Collateral, then Secured Party may, at its option, but without being required
to do so, make such repairs, pay such Taxes, prosecute or defend any suits in relation to the
Collateral, or insure and keep insured the Collateral in any amount deemed appropriate by Secured
Party, or take all other action which Debtor is required, but has failed or refused, to take under
the Loan Documents. Any sum which may be expended or paid by Secured Party under this subparagraph
(including, without limitation, court costs and reasonable attorneys’ fees) shall bear interest
from the dates of expenditure or payment at the Default Rate until paid and, together with such
interest, shall be payable by Debtor to Secured Party upon demand and shall be part of the
Obligations.



     (b) Collection. If an Event of Default exists and upon notice from Secured Party, each Obligor
with respect to any payments on any of the Collateral (including, without limitation, dividends and
other distributions with respect to the Pledged Securities and Partnership/Limited Liability
Company Interests, payments on Collateral Notes, insurance proceeds payable by reason of loss or
damage to any of the Collateral, or payments or distributions with respect to Deposit Accounts) is
hereby authorized and directed by Debtor to make payment directly to Secured Party, regardless of
whether Debtor was previously making collections thereon. Subject to Paragraph 8(f) hereof, until
such notice is given, Debtor is authorized to retain and expend all payments made on Collateral. If
an Event of Default exists, Secured Party shall have the Right in its own name or in the name of
Debtor to compromise or extend time of payment with respect to all or any portion of the Collateral
for such amounts and upon such terms as Secured Party may determine; to demand, collect, receive,
receipt for, sue for, compound, and give acquittances for any and all amounts due or to become due
with respect to Collateral; to take control of cash and other proceeds of any Collateral; to
endorse the name of Debtor on any notes, acceptances, checks, drafts, money orders, or other
evidences of payment on Collateral that may come into the possession of Secured Party; to sign the
name of Debtor on any invoice or bill of lading relating to any Collateral, on any drafts against
Obligors or other Persons making payment with respect to Collateral, on assignments and
verifications of accounts or other Collateral and on notices to Obligors making payment with
respect to Collateral; to send requests for verification of obligations to any Obligor; and to do
all other acts and things necessary to carry out the intent of this Security Agreement. If an Event
of Default exists and any Obligor fails or refuses to make payment on any Collateral when due,
Secured Party is authorized, in its sole discretion, either in its own name or in the name of
Debtor, to take such action as Secured Party shall deem appropriate for the collection of any
amounts owed with respect to Collateral or upon which a delinquency exists. Regardless of any other
provision hereof, however, Secured Party shall never be liable for its failure to collect, or for
its failure to exercise diligence in the collection of, any amounts owed with respect to
Collateral, nor shall it be under any duty whatsoever to anyone except Debtor to account for funds
that it shall actually receive hereunder. Without limiting the



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generality of the foregoing, Secured Party shall have no responsibility for ascertaining any
maturities, calls, conversions, exchanges, offers, tenders, or similar matters relating to any
Collateral, or for informing Debtor with respect to any of such matters (irrespective of whether
Secured Party actually has, or may be deemed to have, knowledge thereof). The receipt of Secured
Party to any Obligor shall be a full and complete release, discharge, and acquittance to such
Obligor, to the extent of any amount so paid to Secured Party.




     (c) Intellectual Property. For purposes of enabling Secured Party to exercise its Rights and
remedies under this Security Agreement and enabling Secured Party and its successors and assigns to
enjoy the full benefits of the Collateral, Debtor hereby grants to Secured Party an irrevocable,
nonexclusive license (exercisable without payment of royalty or other compensation to Debtor) to
use, license, or sublicense any of the Intellectual Property. Debtor shall provide Secured Party
with reasonable access to all media in which any of the Intellectual Property may be recorded or
stored and all computer programs used for the completion or printout thereof. This license shall
also inure to the benefit of all successors, assigns, and transferees of Secured Party. If an Event
of Default exists, Secured Party may require that Debtor assign all of its Right, title, and
interest in and to the Intellectual Property or any part thereof to Secured Party or such other
Person as Secured Party may designate pursuant to documents satisfactory to Secured Party. If no
Default or Event of Default exists, Debtor shall have the exclusive, non-transferable Right and
license to use the Intellectual Property in the ordinary course of business and the exclusive Right
to grant to other Persons licenses and sublicenses with respect to the Intellectual Property for
full and fair consideration.



     (d) Record Ownership of Securities. If an Event of Default exists, Secured Party at any time
may have any Collateral that is Pledged Securities and that is in the possession of Secured Party,
or its nominee or nominees, registered in its name, or in the name of its nominee or nominees, as
Secured Party; and, as to any Collateral that is Pledged Securities so registered, Secured Party
shall execute and deliver (or cause to be executed and delivered) to Debtor all such proxies,
powers of attorney, dividend coupons or orders, and other documents as Debtor may reasonably
request for the purpose of enabling Debtor to exercise the voting Rights and powers which it is
entitled to exercise under this Security Agreement or to receive the dividends and other
distributions and payments in respect of such Collateral that is Pledged Securities or proceeds
thereof which it is authorized to receive and retain under this Security Agreement.



     (e) Voting of Securities. As long as no Event of Default exists, Debtor is entitled to
exercise all voting Rights pertaining to any Pledged Securities and Partnership/Limited Liability
Company Interests; provided however, that no vote shall be cast or consent, waiver, or ratification
given or action taken without the prior written consent of Secured Party which would be
inconsistent with or violate any provision of this Security Agreement or any other Loan Document;
and provided further that Debtor shall give Secured Party at least five Business Days’ prior
written notice in the form of an officers’ certificate of the manner in which it intends to
exercise, or the reasons for refraining from exercising, any voting or other consensual Rights
pertaining to the Collateral or any part thereof which might have a Material Adverse Effect on the
value of the Collateral or any part thereof. If an Event of Default exists and if Secured Party
elects to exercise such Right, the Right to vote any Pledged Securities shall be vested exclusively



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in Secured Party. To this end, Debtor hereby irrevocably constitutes and appoints Secured Party the
proxy and attorney-in-fact of Debtor, with full power of substitution, to vote, and to act with
respect to, any and all Collateral that is Pledged Securities standing in the name of Debtor or
with respect to which Debtor is entitled to vote and act, subject to the understanding that such
proxy may not be exercised unless an Event of Default exists. The proxy herein granted is coupled
with an interest, is irrevocable, and shall continue until the Obligations have been paid and
performed in full.




     (f) Certain Proceeds. Notwithstanding any contrary provision herein, any and all




     (i) dividends, interest, or other distributions paid or payable other than in cash in
respect of, and instruments and other property received, receivable, or otherwise
distributed in respect of, or in exchange for, any Collateral;




     (ii) dividends, interest, or other distributions hereafter paid or payable in cash in
respect of any Collateral in connection with a partial or total liquidation or dissolution,
or in connection with a reduction of capital, capital surplus, or paid-in-surplus;




     (iii) cash paid, payable, or otherwise distributed in redemption of, or in exchange
for, any Collateral; and




     (iv) dividends, interest, or other distributions paid or payable in violation of the
Loan Documents,


shall be part of the Collateral hereunder, and shall, if received by Debtor, be held in trust for
the benefit of Secured Party, and shall forthwith be delivered to Secured Party (accompanied by
proper instruments of assignment and/or stock and/or bond powers executed by Debtor in accordance
with Secured Party’s instructions) to be held subject to the terms of this Security Agreement. Any
cash proceeds of Collateral which come into the possession of Secured Party during the continuance
of an Event of Default (including, without limitation, insurance proceeds) may, at Secured Party’s
option, be applied in whole or in part to the Obligations (to the extent then due), be released in
whole or in part to or on the written instructions of Debtor for any general or specific purpose,
or be retained in whole or in part by Secured Party as additional Collateral. Any cash Collateral
in the possession of Secured Party may be invested by Secured Party in certificates of deposit
issued by Secured Party (if Secured Party issues such certificates) or by any state or national
bank having combined capital and surplus greater than $100,000,000 with a short term rating from
Moody’s and S&P of P-1 and A-1+, respectively, or in securities issued or guaranteed by the United
States or any agency thereof. Secured Party shall never be obligated to make any such investment
and shall never have any liability to Debtor for any loss which may result therefrom. All interest
and other amounts earned from any investment of Collateral may be dealt with by Secured Party in
the same manner as other cash Collateral. Except as specifically provided herein, the provisions of
this subparagraph are applicable whether or not a Default or Event of Default exists.




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     (g) Use and Operation of Collateral. Should any Collateral come into the possession of Secured
Party, Secured Party may use or operate such Collateral for the purpose of preserving it or its
value pursuant to the order of a court of appropriate jurisdiction or in accordance with any other
Rights held by Secured Party in respect of such Collateral. Debtor covenants to promptly reimburse
and pay to Secured Party, at Secured Party’s request, the amount of all reasonable expenses
(including, without limitation, the cost of any insurance and payment of Taxes or other charges)
incurred by Secured Party in connection with its custody and preservation of Collateral, and all
such expenses, costs, Taxes, and other charges shall bear interest at the Default Rate until repaid
and, together with such interest, shall be payable by Debtor to Secured Party upon demand and shall
become part of the Obligations. However, the risk of accidental loss or damage to, or diminution in
value of, Collateral is on Debtor, and Secured Party shall have no liability whatever for failure
to obtain or maintain insurance, nor to determine whether any insurance ever in force is adequate
as to amount or as to the risks insured. With respect to Collateral that is in the possession of
Secured Party, Secured Party shall have no duty to fix or preserve Rights against prior parties to
such Collateral and shall never be liable for any failure to use diligence to collect any amount
payable in respect of such Collateral, but shall be liable only to account to Debtor for what it
may actually collect or receive thereon. The provisions of this subparagraph are applicable whether
or not an Event of Default exists.



     (h) Cash Collateral Account. If an Event of Default exists and is continuing, Secured Party
shall have, and Debtor hereby grants to Secured Party, the Right and authority to transfer all
funds on deposit in the Deposit Accounts to a Cash Collateral Account (herein so called) maintained
with a depository institution acceptable to Secured Party and subject to the exclusive direction,
domain, and control of Secured Party, and no disbursements or withdrawals shall be permitted to be
made by Debtor from such Cash Collateral Account. Such Cash Collateral Account shall be subject to
the Security Interest and Liens in favor of Secured Party herein created, and Debtor hereby grants
a security interest to Secured Party on behalf of Lenders in and to, such Cash Collateral Account
and all checks, drafts, and other items ever received by Debtor for deposit therein. Furthermore,
if an Event of Default exists, Secured Party shall have the Right, at any time in its discretion
without notice to Debtor, (i) to transfer to or to register in the name of Secured Party or any
Lender or nominee any certificates of deposit or deposit instruments constituting Deposit Accounts
and shall have the Right to exchange such certificates or instruments representing Deposit Accounts
for certificates or instruments of smaller or larger denominations and (ii) to take and apply
against the Obligations any and all funds then or thereafter on deposit in the Cash Collateral
Account or otherwise constituting Deposit Accounts.



     (i) Power of Attorney. Debtor hereby irrevocably constitutes and appoints Secured Party and
any officer or agent thereof, with full power of substitution, as its true and lawful
attorney-in-fact with full irrevocable power and authority in the name of Debtor or in its own
name, to take after the occurrence and during the continuance of an Event of Default any and all
action and to execute any and all documents and instruments which Secured Party at any time and
from time to time deems necessary or desirable to accomplish the purposes of this Security
Agreement and, without limiting the generality of the foregoing, Debtor hereby gives Secured Party
the power and Right on behalf of Debtor and in its own name to do any of the following



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from time to time after the occurrence and during the continuance of an Event of Default without
notice to or the consent of Debtor:





     (i) to transfer any and all funds on deposit in the Deposit Accounts to the Cash
Collateral Account as set forth in herein;




     (ii) to receive, endorse, and collect any drafts or other instruments or documents in
connection with clause (b) above and this clause (i);




     (iii) to use the Intellectual Property or to grant or issue any exclusive (if Debtor
has exclusive rights to such Intellectual Property) or non-exclusive license under the
Intellectual Property to anyone else, and to perform any act necessary for the Secured
Party to assign, pledge, convey, or otherwise transfer title in or dispose of the
Intellectual Property to any other Person;




     (iv) to demand, sue for, collect, or receive, in the name of Debtor or in its own
name, any money or property at any time payable or receivable on account of or in exchange
for any of the Collateral and, in connection therewith, endorse checks, notes, drafts,
acceptances, money orders, documents of title or any other instruments for the payment of
money under the Collateral or any policy of insurance;




     (v) to pay or discharge taxes, Liens, or other encumbrances levied or placed on or
threatened against the Collateral;




     (vi) to notify post office authorities to change the address for delivery of mail to
Debtor to an address designated by Secured Party and to receive, open, and dispose of mail
addressed to Debtor; and




     (vii) (A) to direct account debtors and any other parties liable for any payment under
any of the Collateral to make payment of any and all monies due and to become due
thereunder directly to Secured Party or as Secured Party shall direct; (B) to receive
payment of and receipt for any and all monies, claims, and other amounts due and to become
due at any time in respect of or arising out of any Collateral; (C) to sign and endorse any
invoices, freight or express bills, bills of lading, storage or warehouse receipts, drafts
against debtors, assignments, proxies, stock powers, verifications, and notices in
connection with accounts and other documents relating to the Collateral; (D) to commence
and prosecute any suit, action, or proceeding at Law or in equity in any court of competent
jurisdiction to collect the Collateral or any part thereof and to enforce any other Right
in respect of any Collateral; (E) to defend any suit, action, or proceeding brought against
Debtor with respect to any Collateral; (F) to settle, compromise, or adjust any suit,
action, or proceeding described above and, in connection therewith, to give such discharges
or releases as Secured Party may deem appropriate; (G) to exchange any of the Collateral
for other property upon any merger, consolidation, reorganization, recapitalization, or
other readjustment of the issuer thereof and, in connection therewith, deposit any of the
Collateral with any committee, depositary, transfer agent, registrar, or



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other designated agency upon such terms as Secured Party may determine; (H) to add or
release any guarantor, endorser, surety, or other party to any of the Collateral; (I) to
renew, extend, or otherwise change the terms and conditions of any of the Collateral; (J)
to endorse Debtor’s name on all applications, documents, papers, and instruments necessary
or desirable in order for Secured Party to use or maintain any of the Intellectual
Property; (K) to make, settle, compromise or adjust any claims under or pertaining to any
of the Collateral (including claims under any policy of insurance); (L) to execute on
behalf of Debtor any financing statements or continuation statements with respect to the
Security Interests created hereby, and to do any and all acts and things to protect and
preserve the Collateral including, without limitation, the protection and prosecution of
all Rights included in the Collateral; and (M) to sell, transfer, pledge, convey, make any
agreement with respect to or otherwise deal with any of the Collateral as fully and
completely as though Secured Party were the absolute owner thereof for all purposes, and to
do, at Secured Parry’s option and Debtor’s expense, at any time, or from time to time, all
acts and things which Secured Party deems necessary to protect, preserve, maintain, or
realize upon the Collateral and Secured Party’s security interest therein.


This power of attorney is a power coupled with an interest and shall be irrevocable. Secured Party
shall be under no duty to exercise or withhold the exercise of any of the Rights, powers,
privileges, and options expressly or implicitly granted to Secured Party in this Security
Agreement, and shall not be liable for any failure to do so or any delay in doing so. Neither
Secured Party nor any Person designated by Secured Party shall be liable for any act or omission or
for any error of judgment or any mistake of fact or Law. This power of attorney is conferred on
Secured Party solely to protect, preserve, maintain, and realize upon its Security Interest in the
Collateral. Secured Party shall not be responsible for any decline in the value of the Collateral
and shall not be required to take any steps to preserve rights against prior parties or to protect,
preserve, or maintain any Lien given to secure the Collateral.





     (j) Purchase Money Collateral. To the extent that Secured Party or any Lender has advanced or
will advance funds to or for the account of Debtor to enable Debtor to purchase or otherwise
acquire Rights in Collateral, Secured Party or such Lender, at its option, may pay such funds (i)
directly to the Person from whom Debtor will make such purchase or acquire such Rights, or (ii) to
Debtor, in which case Debtor covenants to promptly pay the same to such Person, and forthwith
furnish to Secured Party evidence satisfactory to Secured Party that such payment has been made
from the funds so provided.




     (k) Subrogation. If any of the Obligations are given in renewal or extension or applied toward
the payment of indebtedness secured by any Lien, Secured Party shall be, and is hereby, subrogated
to all of the Rights, titles, interests, and Liens securing the indebtedness so renewed, extended,
or paid.




     (l) Indemnification. Debtor hereby assumes all liability for the Collateral, for the Security
Interest, and for any use, possession, maintenance, and management of, all or any of the Collateral
including, without limitation, any Taxes arising as a result of, or in connection with, the
transactions contemplated herein, and agrees to assume liability for, and to indemnify and



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hold Secured Party and each Lender harmless from and against, any and all claims, causes of action,
or liability, for injuries to or deaths of Persons and damage to property, howsoever arising from
or incident to such use, possession, maintenance, and management, whether such Persons be agents or
employees of Debtor or of third parties, or such damage be to property of Debtor or of others.
Debtor agrees to indemnify, save, and hold Secured Party and each Lender harmless from and against,
and covenants to defend Secured Party and each Lender against, any and all losses, damages, claims,
costs, penalties, liabilities, and expenses (collectively, “Claims”), including, without
limitation, court costs and attorneys’ fees, and any of the foregoing arising from the negligence
of Secured Party or any Lender, or any of their respective officers, employees, agents, advisors,
employees, or representatives, howsoever arising or incurred because of, incident to, or with
respect to Collateral or any use, possession, maintenance, or management thereof; provided however,
that the indemnity set forth in this Paragraph 8(l) will not apply to Claims caused by the gross
negligence or willful misconduct of Secured Party or any Lender.




9. MISCELLANEOUS.




     (a) Continuing Security Interest. This Security Agreement creates a continuing security
interest in the Collateral and shall (i) remain in full force and effect until the termination of
the obligations of Lenders to make Credit Extensions under the Loan Documents and the payment in
full of the Obligations (other than any contingent indemnity obligations or, in the case of L/C
Obligations, Cash Collateralized) and compliance with Section 10.01(e) of the Credit Agreement with
respect to Outstanding Swap Contracts secured by any Loan Document; and (ii) inure to the benefit
of and be enforceable by Secured Party, Lenders, and their respective successors, transferees, and
assigns. Without limiting the generality of the foregoing clause (ii), Secured Party and Lenders
may assign or otherwise transfer any of their respective Rights under this Security Agreement to
any other Person in accordance with the terms and provisions of Section 10.07 of the Credit
Agreement, and to the extent of such assignment or transfer such Person shall thereupon become
vested with all the Rights and benefits in respect thereof granted herein or otherwise to Secured
Party or Lenders, as the case may be. Upon payment in full of the Obligations (other than any
contingent indemnity obligations or, in the case of L/C Obligation, Cash Collateralized) and
compliance with Section 10.01(e) of the Credit Agreement with respect to Outstanding Swap Contracts
secured by any Loan Document, Debtor shall be entitled to the return, upon its request and at its
expense, of such of the Collateral as shall not have been sold or otherwise applied pursuant to the
terms hereof.



     (b) Reference to Miscellaneous Provisions. This Security Agreement is one of the “Loan
Documents” referred to in the Credit Agreement, and all provisions relating to Loan Documents set
forth in Article X of the Credit Agreement are incorporated herein by reference, the same as if set
forth herein verbatim.



     (c) Term; Release of Liens. The Administrative Agent shall release the Liens created by this
Security Agreement in accordance with Section 10.01 of the Credit Agreement; provided that no
Obligor, if any, on any of the Collateral shall ever be obligated to make inquiry as to the
termination of this Security Agreement, but shall be fully protected in making payment directly to
Secured Party until actual notice of such total payment of the Obligations is received by such



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Obligor. At such time as the Liens created by this Security Agreement are to be released pursuant
to this paragraph, Secured Party shall, at the request and expense of the Debtor following such
termination, promptly deliver to Debtor any Collateral held by the Secured Party hereunder, and
promptly execute and deliver to Debtor such documents and instruments as Debtor shall reasonably
request to evidence such termination and release as provided in the Credit Agreement. In addition,
if any of the Collateral shall be sold, transferred, assigned or otherwise disposed of by Debtor in
a transaction permitted by the Credit Agreement, then the Secured Party, at the request and expense
of Debtor, shall promptly execute and deliver releases as provided in the Credit Agreement.




     (d) Actions Not Releases. The Security Interest and Debtor’s obligations and Secured Party’s
Rights hereunder shall not be released, diminished, impaired, or adversely affected by the
occurrence of any one or more of the following events: (i) the taking or accepting of any other
security or assurance for any or all of the Obligations; (ii) any release, surrender, exchange,
subordination, or loss of any security or assurance at any time existing in connection with any or
all of the Obligations; (iii) the modification of, amendment to, or waiver of compliance with any
terms of any of the other Loan Documents without the notification or consent of Debtor, except as
required therein (the Right to such notification or consent being herein specifically waived by
Debtor); (iv) the insolvency, bankruptcy, or lack of corporate or trust power of any party at any
time liable for the payment of any or all of the Obligations, whether now existing or hereafter
occurring; (v) any renewal, extension, or rearrangement of the payment of any or all of the
Obligations, either with or without notice to or consent of debtor, or any adjustment, indulgence,
forbearance, or compromise that may be granted or given by Secured Party or any Lender to Debtor;
(vi) any neglect, delay, omission, failure, or refusal of Secured Party or any Lender to take or
prosecute any action in connection with any other agreement, document, guaranty, or instrument
evidencing, securing, or assuring the payment of all or any of the Obligations; (vii) any failure
of Secured Party or any Lender to notify Debtor of any renewal, extension, or assignment of the
Obligations or any part thereof, or the release of any Collateral or other security, or of any
other action taken or refrained from being taken by Secured Party or any Lender against Debtor or
any new agreement between or among Secured Party or one or more Lenders and Debtor, it being
understood that except as expressly provided herein, neither Secured Party nor any Lender shall be
required to give Debtor any notice of any kind under any circumstances whatsoever with respect to
or in connection with the Obligations including, without limitation, notice of acceptance of this
Security Agreement or any Collateral ever delivered to or for the account of Secured Party
hereunder; (viii) the illegality, invalidity, or unenforceability of all or any part of the
Obligations against any party obligated with respect thereto by reason of the fact that the
Obligations, or the interest paid or payable with respect thereto, exceeds the amount permitted by
Law, the act of creating the Obligations, or any part thereof, is ultra vires, or the officers,
partners, or trustees creating same acted in excess of their authority, or for any other reason; or
(ix) if any payment by any party obligated with respect thereto is held to constitute a preference
under applicable Laws or for any other reason Secured Party or any Lender is required to refund
such payment or pay the amount thereof to someone else.



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     (e) Waivers. Except to the extent expressly otherwise provided herein or in other Loan
Documents and to the fullest extent permitted by applicable Law, Debtor waives (i) any Right to
require Secured Party or any Lender to proceed against any other Person, to exhaust its Rights in
Collateral, or to pursue any other Right which Secured Party or any Lender may have; (ii) with
respect to the Obligations, presentment and demand for payment, protest, notice of protest and
nonpayment, and notice of the intention to accelerate; and (iii) all Rights of marshaling in
respect of any and all of the Collateral.



     (f) Financing Statement; Authorization. Secured Party shall be entitled at any time to file
this Security Agreement or a carbon, photographic, or other reproduction of this Security
Agreement, as a financing statement, but the failure of Secured Party to do so shall not impair the
validity or enforceability of this Security Agreement. Debtor hereby irrevocably authorizes Secured
Party at any time and from time to time to file in any UCC jurisdiction any initial or other
financing statements and amendments thereto that (i) indicate the Collateral (A) as “all assets of
Debtor” or words of similar effect, regardless of whether any particular asset comprised in the
Collateral falls within the scope of Article 9 of the UCC of the state or such jurisdiction or
whether such assets are included in the Collateral hereunder, or (B) as being of an equal or lesser
scope or with greater detail, and (ii) contain any other information required by Article 9 of the
UCC of the state or such jurisdiction for the sufficiency or filing office acceptance of any
financing statement or amendment, including (A) whether Debtor is an organization, the type of
organization, and any organization identification number issued to Debtor and, (B) in the case of a
financing statement filed as a fixture filing or indicating Collateral that is as-extracted
collateral or timber to be cut, a sufficient description of real property to which the Collateral
relates. Debtor agrees to furnish any such information to Secured Party promptly upon request.



     (g) Amendments. This Security Agreement may be amended only by an instrument in writing
executed jointly by Debtor and Secured Party, and supplemented only by documents delivered or to be
delivered in accordance with the express terms hereof.



     (h) Multiple Counterparts. This Security Agreement has been executed in a number of identical
counterparts, each of which shall be deemed an original for all purposes and all of which
constitute, collectively, one agreement; but, in making proof of this Security Agreement, it shall
not be necessary to produce or account for more than one such counterpart.



     (i) Parties Bound; Assignment. This Security Agreement shall be binding on Debtor and Debtor’s
legal representatives, successors, and assigns and shall inure to the benefit of Secured Party and
Secured Party’s successors and assigns.




     (i) Secured Party is the agent for each Lender under the Credit Agreement and each
Affiliate of a Lender party to any Lender Hedging Agreement, the Security Interest and all
Rights granted to Secured Party hereunder or in connection herewith are for the ratable
benefit of each Lender and each such Affiliate, and Secured Party may, without the joinder
of any Lender or any such Affiliate, exercise any and all Rights in favor of Secured Party
or Lenders or any such Affiliates hereunder, including, without limitation, conducting any
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releases hereof, amendments or modifications hereto, or consents or waivers
hereunder. The Rights of each Lender or any such Affiliate vis-à-vis Secured Party
and each other Lender or any such Affiliate may be subject to one or more separate
agreements between or among such parties, but Debtor need not inquire about any
such agreement or be subject to any terms thereof unless Debtor specifically joins
therein; and consequently, neither Debtor nor Debtor’s legal representatives,
successors, and assigns shall be entitled to any benefits or provisions of any such
separate agreements or be entitled to rely upon or raise as a defense, in any
manner whatsoever, the failure or refusal of any party thereto to comply with the
provisions thereof.




     (ii) Debtor may not, without the prior written consent of Secured Party,
assign any Rights, duties, or obligations hereunder.



     (j)
Governing Law. The substantive laws of the State of New York, except to the extent
the laws of another jurisdiction govern the creation, perfection, validity, or enforcement
of liens under this Security Agreement, and the applicable federal laws of the United
States, shall govern the validity, construction, enforcement and interpretation of this
security agreement and all of the other loan documents.



     (k) The provisions of Section 10.10 of the Credit Agreement are incorporated herein as
if set forth herein.



     (l) All notices given pursuant hereto shall be given in the manner set forth in the
Credit Agreement, if to Secured Party, to the address of Secured Party therein set forth
and if to Debtor, to the following address:


210 Park Avenue, Suite 2750

Oklahoma City, Oklahoma 73102



Facsimile: (405) 840-9897

Telephone: (405) 488-1304




     THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS REPRESENT THE FINAL AGREEMENT BETWEEN THE PARTIES
AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS, OR SUBSEQUENT ORAL AGREEMENTS OF
THE PARTIES. THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES.



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     IN WITNESS WHEREOF, Debtor has caused this Security Agreement to be duly executed and
delivered by an officer duly authorized as of the date first above written.



	 	 	 	 	 
	 	QUEST RESOURCE CORPORATION,

a Nevada corporation

 	 
	 	By:  	Jerry D. Cash,
 	 
	 	 	Jerry D. Cash, Chief Executive Officer 	 
	 	 	 	 
	 





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ANNEX A TO SECURITY AGREEMENT




DEBTOR INFORMATION AND LOCATION OF COLLATERAL



A. Exact Legal Name of Debtor: Quest Resource Corporation.



B. Mailing Address of Debtor: 210 Park Avenue, Suite 2750, Oklahoma City, Oklahoma 73102.



C. Type of Entity: corporation.



D. Jurisdiction of Organization: Nevada.



E. State Issued Organizational Identification Number: C4082-1982.



F. Tax ID Number: 90-0196936.



G. Location of Books and Records: 210 Park Avenue, Suite 2750, Oklahoma City, Oklahoma 73102.



H. Location of Collateral: 210 Park Avenue, Suite 2750, Oklahoma City, Oklahoma 73102



I. Location of Real Property: None.



J. Jurisdiction(s) for Filing Financing Statements: Nevada.




K. Fixture filings in the relevant counties in which the properties are located: None.




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ANNEX B-1 TO SECURITY AGREEMENT




COLLATERAL DESCRIPTIONS





	A.	 	Collateral Notes and Collateral Note Security: None
	 
	B.	 	Pledged Shares: None.
	 
	C.	 	Partnership/Limited Liability Company Interests:






	 	•	 	100% of the issued and outstanding membership interests in Quest Oil & Gas, LLC, a
Kansas limited liability company.
	 
	 	•	 	100% of the issued and outstanding membership interests in Quest Energy Service, LLC,
a Kansas limited liability company.
	 
	 	•	 	1,836,521 Common Units (and up to 1,365,000 additional Common Units, depending upon
whether Underwriter in QELP IPO exercises its over-allotment right) and 8,857,981
Subordinated Units in Quest Energy Partners, L.P., a Delaware limited partnership.
	 
	 	•	 	100% of the issued and outstanding membership interests in Quest Energy GP, LLC, a
Delaware limited liability company.
	 
	 	•	 	850 Units in Quest Midstream GP, LLC, a Delaware limited liability company.
	 
	 	•	 	35,134 Class A Subordinated Units and 4,900,000 Class B Subordinated Units in Quest
Midstream Partners, L.P., a Delaware limited partnership.






	D.	 	Agreements:






	 	•	 	Operating Agreement of Quest Energy Service, LLC dated
December 18, 2006.
	 
	 	•	 	Operating Agreement of Quest Oil & Gas, LLC dated
December 18, 2006.
	 
	 	•	 	Amended and Restated Limited Liability Company Agreement of Quest Energy GP, LLC
dated November 15, 2007.
	 
	 	•	 	First Amended and Restated Limited Partnership Agreement of Quest Energy Partners,
L.P. dated November 15, 2007.
	 
	 	•	 	Second Amended and Restated Limited Partnership Agreement of Quest Midstream
Partners, L.P. dated November 1, 2007.
	 
	 	•	 	Amended and Restated Limited Liability Company Agreement of Quest Midstream GP, LLC,
dated December 22, 2006.





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	E.	 	Commercial Tort Claims: None

	 
	F.	 	Deposit Accounts (including name of bank, address and account number):






	 	•	 	Account #814172369 at the Bank of Oklahoma.
	 
	 	•	 	Account #814171588 at the Bank of Oklahoma.





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ANNEX B-2 TO SECURITY AGREEMENT




INTELLECTUAL PROPERTY





	1.	 	Registered Copyrights and Copyright Applications: None
	 
	2.	 	Issued Patents and Patent Applications: None
	 
	3.	 	Registered Trademarks and Trademark Applications: None





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ANNEX C TO SECURITY AGREEMENT 




DEPOSIT ACCOUNT CONTROL AGREEMENT




                    ,
20___




                                                            




                                                            




                                                            




Ladies and Gentlemen:




This letter is to notify you (the
“Depository Bank”) 
that, pursuant to that certain Pledge and
Security Agreement dated as of _____,
200__ (as amended,
modified, supplemented, or restated from time to
time, the
“Security Agreement”),
          
                    
          
, a company organized under the laws of
          
           (the
“Pledgor”), 
has granted to Royal Bank of Canada as Administrative Agent and
Collateral Agent (“Pledgee”) a first priority security interest in and lien upon, (a) Account No.
                    
(the “Account) maintained by Pledgor with you, (b) any extensions or renewals of the
Account if the Account is one which may be extended or renewed, and (c) all of Pledgor’s right,
title, and interest (whether now existing or hereafter created or arising) in and to the Account,
all sums from time to time on deposit therein, credited thereto, or payable thereon, all
instruments, documents, certificates, and other writings evidencing the Account, and any and all
proceeds of any thereof (the items described in clauses (a), (b) and (c) being herein collectively
called the “Collateral”),


In connection therewith, the parties hereto agree (which agreement by Pledgor will be construed as
instructions to the Depository Bank):





	1.	 	The Depository Bank is instructed to register the pledge on its books and hold the Collateral
in a pledged status account.
	 
	2.	 	The Depository Bank is instructed to deliver to Pledgee copies of monthly statements on the
account(s) identified below:
	 
	3.	 	The Account will be styled:
	 
	4.	 	All dividends, interest, gains, and other profits on the Collateral will be reported in the
name and tax identification number of Pledgor.
	 
	5.	 	If so notified by Pledgee, the Depository Bank will not, without the prior written consent of
Pledgee, allow any of the Collateral or any interest therein to be sold, transferred, or
withdrawn by or for the benefit of Pledgor.
	 
	6.	 	This letter agreement gives Pledgee “control” of the Account and the Collateral. The
Depository Bank agrees to comply with any order or instruction from Pledgee as to the
withdrawal or disposition of any funds from time to time credited to the Account, or as to any
other matters relating to the Collateral, without the further consent of Pledgor. The
Depository Bank shall be





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	 	 	fully entitled to rely upon such instructions from Pledgee even if such instructions
are contrary to any instructions or demands that Pledgor may give to the Depository Bank.
	 
	7.	 	Pledgee agrees to indemnify and hold the Depository Bank, its officers and employees,
harmless from and against any and all claims, causes of action, liabilities, lawsuits,
demands, and/or damages, including, without limitation any and all costs, including court
costs and reasonable attorneys’ fees, that may arise or result from the Depository Bank
complying with the instructions and orders of Pledgee given in connection with Pledgee’s
exercise of its control over and secured rights in the Account and the Collateral except to
the extent that such claims, causes of action, liabilities, lawsuits, demands, and/or damages
are found in a final, non-appealable judgment by a court of competent jurisdiction to have
resulted from the gross negligence or willful misconduct of the Depository Bank.
	 
	8.	 	Pledgor agrees to indemnify and hold the Depository Bank, its officers and employees,
harmless from and against any and all claims, causes of action, liabilities, lawsuits,
demands, and/or damages, including, without limitation, any and all costs, including court
costs and reasonable attorneys’ fees, that may arise or result from the Depository Bank
entering into and performing its obligations under this letter agreement except to the extent
that such claims, causes of action, liabilities, lawsuits, demands, and/or damages are found
in a final, non-appealable judgment by a court of competent jurisdiction to have resulted from
the gross negligence or willful misconduct of the Depository Bank.
	 
	9.	 	The Depository Bank represents that it has not received notice regarding any lien,
encumbrance, or other claim to the Account or the Collateral from any person other than
pursuant to this letter agreement and has not entered into another agreement with any other
party to act on such party’s instructions with respect to the Account. The Depository Bank
further agrees not to enter into any such agreement with any other party.
	 
	10.	 	The Depository Bank subordinates’ to the security interest of Pledgee any right of recoupment
or set-off, or to assert any security interest or other lien, that it may at any time have
against or in any of the Collateral on account of any credit or other obligations owed to the
Depository Bank by Pledgor or any other person. The Depository Bank may, however, from time to
time debit the Account for any of its customary charges in maintaining the Account or for
reimbursement for the reversal of any provisional credits granted by the Depository Bank to
the Account, to the extent, in each case, that Pledgor has not separately paid or reimbursed
Depository Bank therefor.
	 
	11.	 	To the extent a conflict exists between the terms of this letter agreement and any account
agreement between Pledgor and the Depository Bank, the terms of this letter agreement will
control.
	 
	12.	 	The terms of this letter agreement will in no way be modified except by a writing signed by
all parties hereto.
	 
	13.	 	Each of the parties executing this letter agreement represents that he has the proper
authority to execute this letter agreement.





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IN WITNESS WHEREOF, Pledgor and Pledgee have agreed to the terms of this letter
agreement as of the date first indicated above.



Pledgor:




[NAME OF ENTITY]




	 	 	 	 	 	 	 
	By:

	 	 	 	 	 	 
	 	 	 	 	 
	 

	 	Name:	 	 	 	 
	 

	 	 	 	 	 	 
	 

	 	Title:	 	 	 	 
	 

	 	 	 	 	 	 





Pledgee:




ROYAL BANK OF CANADA,

as Administrative Agent




	 	 	 	 	 	 	 
	By:

	 	 	 	 	 	 
	 	 	 	 	 
	 

	 	Name:	 	 	 	 
	 

	 	 	 	 	 	 
	 

	 	Title:	 	 	 	 
	 

	 	 	 	 	 	 





Acknowledged
and Agreed on _____, 200 __:




Depository Bank: 

[NAME OF ENTITY]




	 	 	 	 	 	 	 
	By:

	 	 	 	 	 	 
	 	 	 	 	 
	 

	 	Name:	 	 	 	 
	 

	 	 	 	 	 	 
	 

	 	Title:	 	 	 	 
	 

	 	 	 	 	 	 





QRC Pledge and

Security Agreement




Annex C - Page 3




 









 






ANNEX D TO SECURITY AGREEMENT




ACKNOWLEDGMENT OF PLEDGE



PARTNERSHIP/LIMITED LIABILITY COMPANY:                                                             



INTEREST OWNER:                                                             




     BY THIS ACKNOWLEDGMENT OF PLEDGE, dated as of                                         ,
200_,        
         
         
                (the “Partnership/Limited Liability
Company”) hereby
acknowledges the pledge in favor of Royal Bank of Canada
(“Pledgee”), in its capacity as
Administrative Agent and Collateral Agent for certain Lenders and as Secured Party under that
certain Pledge and Security Agreement dated as of                      , 200_
(as amended, modified,
supplemented, or restated from time to time, the “Security Agreement”),
 against, and a security
interest in favor of Pledgee in, all of        
              
              
     ’s (the “Interest Owner”)
Rights in connection with any partnership interest in the Partnership/Limited Liability Company now
and hereafter owned by the Interest Owner (“Partnership/Limited Liability Company Interest”).



     A. Pledge Records. The Partnership/Limited Liability Company has identified Pledgee’s
interest in all of the Interest Owner’s Right, title, and interest in and to all of the Interest
Owner’s Partnership/Limited Liability Company Interest as subject to a pledge and security interest
in favor of Pledgee in the Partnership/Limited Liability Company records.



     B. Partnership/Limited Liability Company Distributions, Accounts, and Correspondence.
The Partnership/Limited Liability Company hereby acknowledges that (i) all
proceeds, distributions, and other amounts payable to the Interest Owner, including, without
limitation, upon the termination, liquidation, and dissolution of the Partnership/Limited Liability
Company shall be paid and remitted to the Pledgee upon demand, (ii) all funds in deposit accounts
shall be held for the benefit of Pledgee, and (iii) all future correspondence, accountings of
distributions, and tax returns of the Partnership/Limited Liability Company shall be provided to
the Pledgee. The Partnership/Limited Liability Company acknowledges and accepts such direction and
hereby agrees that it shall, upon the written demand by the Administrative Agent, pay directly to
the Administrative Agent at its offices at Royal Bank Plaza, P.O. Box
50, 200 Bay Street,
12th Floor, South Tower, Toronto, Ontario M5J 2W7 any and all distributions, income, and
cash flow arising from the Partnership/Limited Liability Company Interests whether payable in cash,
property or otherwise, subject to and in accordance with the terms and conditions of the
Partnership/Limited Liability Company Agreement. The Pledgee may from time to time notify the
Partnership/Limited Liability Company of any change of address to which such amounts are to be
paid.



Remainder of Page Intentionally Blank.

Signature Page to Follow.




Annex D - Page 1




 









 






     EXECUTED as of the date first stated in this Acknowledgment of Pledge.



	 	 	 	 	 	 	 
	 

	 	By:
	 	 	 	 
	 

	 	 	 	 	 	 
	 

	 	Name:	 	 	 	 
	 

	 	 	 	 	 	 
	 

	 	Title:	 	 	 	 
	 

	 	 	 	 	 	 
	 
	 	 	 	 	 	 
	 	 	[PARTNERSHIP/LIMITED LIABILITY COMPANY]
	 
	 	 	 	 	 	 
	 

	 	By:	 	 	 	 
	 

	 	 	 	 	 	 
	 

	 	 	 	as [General Partner] [Manager]	 	 






	 	 	 	 	 	 	 	 	 
	 

	 	By:
	 	 	 	 	 	 
	 	 	 	 	 	 	 
	 

	 	 	 	Name:	 	 	 	 
	 

	 	 	 	 	 	 	 	 
	 

	 	 	 	Title:	 	 	 	 
	 

	 	 	 	 	 	 	 	 





Annex D - Page 2