Document:

EX-10.49

 

EXHIBIT 10.49

ERIE INDEMNITY COMPANY

LONG-TERM INCENTIVE PLAN

SECTION 1. GENERAL

     1.1 Purpose. The purposes of the Long-Term Incentive Plan (the “Plan”) are:
(a) to enhance the growth and profitability of Erie Indemnity Company, a Pennsylvania business
corporation (the “Company”), and its subsidiaries and affiliates, including Erie Family
Life Insurance Company, and the Erie Insurance Exchange (collectively, the “Erie Insurance
Group”) by providing the incentive of long-term rewards to key employees who are capable of
having a significant impact on the performance of the Company and its subsidiaries and affiliates;
(b) to attract and retain employees of outstanding competence and ability; and (c) to further align
the interests of such employees with those of the shareholders of the Company.

     1.2 Administration of the Plan. The Plan shall be administered by the Executive
Compensation and Development Committee (the “Committee”) of the Company’s Board of
Directors (the “Board”) or other committee appointed by the Board, which shall be comprised
of not less than two members of the Board, each of whom at the time of appointment to the Committee
and at all times during service as a member of the Committee shall be both (1) a “non-employee
director” as then defined under Rule 16b-3 under the Securities Exchange Act of 1934, as amended
(the “Exchange Act”), or any successor rule and (2) an “outside director” as then defined
in the regulations under Section 162(m) of the Internal Revenue Code of 1986, as amended (the
“Code”), or any successor provision. Subject to the provisions of the Plan, the Committee
shall have sole and complete authority to: (i) select Participants after receiving the
recommendations of the management of the Company; (ii) determine the number of Restricted
Performance Shares, as described in Section 2 subject to each grant; (iii) determine the time or
times when grants are to be made or are to be effective, including the Performance Period for each
grant; (iv) determine the terms and conditions, including the Performance Goals, subject to which
grants may be made; (v) extend the term of any grant; (vi) prescribe the form or forms of the
instruments evidencing any grants made hereunder, provided that such forms are consistent with the
Plan; (vii) adopt, amend, and rescind such rules and regulations as, in its opinion, may be
advisable for the administration of the Plan; (viii) construe and interpret the Plan and all rules,
regulations, and instruments utilized thereunder; and (ix) make all determinations deemed advisable
or necessary for the administration of the Plan. All determinations by the Committee shall be
final and binding.

     1.3 Eligibility and Participation. Participation in the Plan shall be limited to
officers (who may also be members of the Board) and other salaried key employees of the Company and
its subsidiaries and affiliates as identified by the Committee to participate in the Plan.
Employees who are granted awards under the Plan are referred to herein as “Participants”.

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     1.4 Shares Available. The aggregate net number of shares of Class A (non-voting)
Common Stock of the Company (the “Common Stock”) which may be paid and as to which grants
of Restricted Performance Shares may be made under the Plan is 1,000,000 shares, subject to
adjustment and substitution as set forth in Section 3. The Company or its agent shall repurchase
outstanding shares of Common Stock in order to satisfy the Company’s obligation under the Plan to
pay awards in shares of Common Stock. If shares of Common Stock are forfeited to the Company
pursuant to the restrictions applicable to Restricted Performance Shares or are withheld or
delivered to the Company in satisfaction of a tax withholding obligation, the shares so forfeited,
withheld or delivered shall again be available for purposes of the Plan.

     1.5 New Participants. Except as provided in this Section 1.5, an employee who is not
a Participant as of the first day of a Performance Period shall not become a Participant for that
Performance Period. New employees of the Company or its subsidiaries and affiliates hired during a
Performance Period, and employees promoted during the Performance Period who were not eligible to
participate in the Plan at the beginning of the Performance Period, may, as determined by the
Committee in its sole discretion, become a Participant during a Performance Period and participate
in the Plan for such Performance Period on a pro-rata basis (based on the number of days in the
Performance Period that such employee is an employee who is deemed eligible to participate in the
Plan); provided, that if the new or promoted employee is a covered employee (as such term is
defined under Section 162(m) of the Code or any successor section thereto and the regulations
thereunder), then the employee shall not be eligible to participate in the Plan unless he or she
becomes a Participant effective not later than 90 days after the beginning of the Performance
Period.

SECTION 2. RESTRICTED PERFORMANCE SHARES

     2.1 Restricted Performance Shares. The Committee is authorized to grant Restricted
Performance Shares to Participants on the following terms and conditions:

          (i) Right to Payment of Shares. Restricted Performance Shares shall represent a
right to receive shares of Common Stock based on the achievement, or the level of
achievement, during a specified Performance Period of one or more Performance Goals
established by the Committee at the time of the award.

          (ii) Terms of Restricted Performance Shares. At the time Restricted Performance
Shares are granted, the Committee shall cause to be set forth in the agreement covering
such award or otherwise in writing (1) the Performance Goals applicable to the award, the
weighting of such goals, and the Performance Period during which the achievement of the
Performance Goals shall be measured, (2) the number of shares of Common Stock which may be
earned by the Participant based on the achievement, or the level of achievement, of the
Performance Goals or the formula by which such amount shall be determined and (3) such
other terms and conditions applicable to the award as the Committee may, in its discretion,
determine to include therein. The terms so established by the Committee shall be objective
such that a third party having knowledge of the relevant facts could determine whether or
not any Performance Goal has been

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achieved, or the extent of such achievement, and the amount, if any, which has been
earned by the Participant based on such performance.

          (iii) Performance Goals. “Performance Goals” shall mean one or more preestablished,
objective measures of performance during a specified “Performance Period”, selected
by the Committee in its discretion. Performance Goals may be based upon one or more of the
following objective performance measures and expressed in either, or a combination of,
absolute or relative values: (i) adjusted combined ratio of property and casualty insurance
operations of Erie Insurance Group, (ii) growth in direct written premiums of Erie
Insurance Group, (iii) the statutory or GAAP combined ratio, loss ratio, expense ratio or
dividend ratio of the property and casualty insurance operations of the Erie Insurance
Group, (iv) net income (including net income before or after taxes and net income before
interest, taxes, depreciation and amortization), net income per share and net income per
share growth rate, (v) operating revenue, net premiums written or net premiums earned, (vi)
operating expenses, cost of management operations or underwriting expenses, (vii) cash
flow, (viii) return on capital, shareholders’ equity, assets or investments, (ix) stock
price, (x) market share or (xi) gross margins. Performance measures may be based on the
performance of the Erie Insurance Group, the Company or a subsidiary or subsidiaries or
affiliate of the Company, a division, department, business unit or other portion thereof, a
product line or products, or any combination the foregoing and/or upon a comparison of such
performance with the performance of a peer group of corporations or other measure selected
or defined by the Committee at the time of making the award of Restricted Performance
Shares. The Committee may in its discretion also determine to use other objective
performance measures as Performance Goals.

          (iv) Committee Certification. Following completion of the applicable Performance
Period, and prior to any payment of shares of Common Stock to the Participant for
Restricted Performance Shares, the Committee shall determine, in accordance with the terms
of the Restricted Performance Shares, and certify in writing whether the applicable
Performance Goal or Goals were achieved, or the level of such achievement, and the number
of shares, if any, earned by the Participant based upon such performance. For this
purpose, approved minutes of the meeting of the Committee at which certification is made
shall be sufficient to satisfy the requirement of a written certification.

          (v) Maximum Individual Payments. The maximum number of shares of Common Stock which
may be earned under the Plan by any single Participant during any one calendar year shall
be limited to 250,000 shares. The limitation in the preceding sentence shall be
interpreted and applied in a manner consistent with Section 162(m) of the Code.

          (vi) Termination of Employment.

	 	(a)  	Death, Disability or Normal or Early Retirement.
If a Participant ceases to be an employee of the Company, its

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	 	   	subsidiaries and affiliates prior to the end of a Performance Period
by reason of death, disability (meaning total and permanent disability
within the meaning of Section 22(e)(3) of the Code) or Normal or Early
Retirement (as defined in the Company’s qualified pension plan for
employees), the Participant may receive all or such portion of his or
her award as may be determined by the Committee in its sole
discretion; provided, that the Participant shall not receive less than
the total number of shares of Common Stock earned pursuant to such
Restricted Performance Shares held by such Participant based upon
performance during the reduced Performance Period which is deemed to
end on the last day of the year in which such termination occurs.
Such award will be paid in the form of shares of Common Stock in the
manner provided for in Section 2.1(vii).

	 	(b)  	Other Terminations. If a Participant ceases to
be an employee of the Company, its subsidiaries and affiliates prior to
the end of a Performance Period for any reason other than death,
disability or Normal or Early Retirement as described in subsection (a),
above, the Participant may receive all or such portion of his or her
award as may be determined by the Committee in its sole discretion;
provided, that a Participant who is terminated for cause (as defined in
such employee’s employment agreement with the Company or its subsidiary
or affiliate, if no such agreement exists, as defined by the Committee)
shall not be entitled to receive payment of any award for any
Performance Period.

          (vii) Payment. As soon as reasonably practicable following the Committee’s
determination and certification, as set forth in Section 2.1(iv), the Company shall pay to
the Participant the number of shares of Common Stock earned pursuant to the award of
Restricted Performance Shares held by the Participant for the relevant Performance Period.

SECTION 3. ADJUSTMENT PROVISIONS

     3.1 Adjustments Generally. If a dividend or other distribution shall be declared upon
the Common Stock payable in shares of Common Stock, the number of shares of Common Stock then
subject to any outstanding Restricted Performance Shares, the number of shares of Common Stock
which may be issued under the Plan but not then subject to outstanding Restricted Performance
Shares and the maximum number of shares as to which Restricted Performance Shares may be granted
and as to which shares may be awarded under Section 2.1(v), shall be adjusted by adding thereto the
number of shares of Common Stock which would have been distributable thereon if such shares had
been outstanding on the date fixed for determining the shareholders entitled to receive such stock
dividend or distribution.

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     3.2 Recapitalizations, Mergers, Etc. If the outstanding shares of Common Stock shall
be changed into or exchangeable for a different number or kind of shares of stock or other
securities of the Company or another corporation, or cash or other property, whether through
reorganization, reclassification, recapitalization, stock split-up, combination of shares, merger
or consolidation, then there shall be substituted for each share of Common Stock subject to any
then outstanding Restricted Performance Share, and for each share of Common Stock which may be
issued under the Plan but which is not then subject to any outstanding Restricted Performance
Share, the number and kind of shares of stock or other securities (and in the case of outstanding
Restricted Performance Share, the cash or other property) into which each outstanding share of the
Common Stock shall be so changed or for which each such share shall be exchangeable.

     3.3 Spin-Offs, Liquidations, Etc. If the outstanding shares of the Common Stock shall
be changed in value by reason of any spin-off, split-off or split-up, or dividend in partial
liquidation, dividend in property other than cash, or extraordinary distribution to shareholders of
the Common Stock, the Committee shall make any adjustments to any then outstanding Restricted
Performance Share which it determines are equitably required to prevent dilution or enlargement of
the rights of awardees which would otherwise result from any such transaction.

     3.4 No Fractional Shares. No adjustment or substitution provided for in this Section
3.1 shall require the Company to pay or sell a fraction of a share of Common Stock or other
security. Accordingly, all fractional shares of Common Stock or other securities which result from
any such adjustment or substitution shall be eliminated and not carried forward to any subsequent
adjustment or substitution.

SECTION 4. AMENDMENTS TO AND TERMINATION OF THE PLAN

     4.1 Amendment and Termination. The Board may amend, alter, suspend, discontinue or
terminate the Plan without the consent of shareholders or Participants, except that, without the
approval of the shareholders of the Company, no amendment, alteration, suspension, discontinuation
or termination shall be made if shareholder approval is required by any federal or state law or
regulation or by the rules of any stock exchange on which the shares may then be listed, or if the
amendment, alteration or other change materially increases the benefits accruing to Participants,
increases the number of shares available under the Plan or modifies the requirements for
participation under the Plan, or if the Board in its discretion determines that obtaining such
shareholder approval is for any reason advisable; provided, however, that except as provided in
Section 5.15, without the consent of the Participant, no amendment, alteration, suspension,
discontinuation or termination of the Plan may materially and adversely affect the rights of such
Participant under any award theretofore granted to him. The Committee may, consistent with the
terms of the Plan, waive any conditions or rights under, amend any terms of, or amend, alter,
suspend, discontinue or terminate, any award theretofore granted, prospectively or retrospectively;
provided, however, that except as provided in Section 5.15, without the consent of a Participant,
no amendment, alteration, suspension, discontinuation or termination of any award may materially
and adversely affect the rights of such Participant under any award theretofore granted to him.

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SECTION 5. MISCELLANEOUS

     Designation of Beneficiary. A Participant may designate, in a writing delivered to
the Company before his death, a person or persons to receive, in the event of his death, any rights
to which he would be entitled under the Plan. Such designation may be made, revoked or changed by
the Participant at any time before the earlier of death or receipt of any unpaid amounts, but such
designation of beneficiary will not be effective and supersede all prior designations until it is
received and acknowledged by the Committee or its delegate. If the Committee has any doubt as to
the proper beneficiary to receive payments hereunder, the Committee shall have the right to
withhold such payments until the matter is finally adjudicated. However, any payment made in good
faith shall fully discharge the Committee, the Company, its subsidiaries, affiliates and the Board
from all further obligations with respect to that payment.

     5.2 No Right to Employment. Nothing contained in the Plan or any award agreement
shall confer, and no grant of an award shall be construed as conferring, upon any Participant any
right to continue in the employ of the Company, its subsidiaries or affiliates or to interfere in
any way with the right of the Company to terminate his employment at any time or increase or
decrease his compensation from the rate in existence at the time of granting of an award.

     5.3 Nontransferability. A Participant’s rights under the Plan, including the right to
any shares payable, may not be assigned, pledged, or otherwise transferred except, in the event of
a Participant’s death, to his designated beneficiary or, in the absence of such a designation, by
will or the laws of descent and distribution.

     5.4 Relationship to Other Benefits. No payment under the Plan shall be taken into
account in determining any benefits under any retirement, group insurance, or other employee
benefit plan of the Company. The Plan shall not preclude the shareholders of the Company, the
Board or any committee thereof, or the Company from authorizing or approving other employee benefit
plans or forms or incentive compensation, nor shall it limit or prevent the continued operation of
other incentive compensation plans or other employee benefit plans of the Company or the
participation in any such plans by Participants in the Plan.

     5.5 Withholding. To the extent required by applicable Federal, state, local or
foreign law, the Participant or his successor shall make arrangements satisfactory to the Company,
in its discretion, for the satisfaction of any withholding tax obligations that arise in connection
with an award. The Company shall not be required to pay any shares of Common Stock or other
payment under the Plan until such obligations are satisfied. The Company is authorized to withhold
from any award granted or any payment due under the Plan, including from a distribution of shares
of Common Stock, amounts of withholding taxes due with respect to an award, or any payment
thereunder, and to take such other action as the Committee may deem necessary or advisable to
enable the Company and Participants to satisfy obligations for the payment of such taxes. This
authority shall include authority to withhold or receive previously owned shares to satisfy such
tax withholding obligations, provided that shares withheld or delivered to satisfy such obligations
in excess of the minimum required statutory withholding rate must have been held for at least six
months to the extent that the Committee so requires.

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     5.6 Unfunded Status of Awards; Creation of Trusts. The Plan is intended to constitute
an “unfunded” plan for incentive and deferred compensation. With respect to any payments not yet
made to a Participant pursuant to an award, nothing contained in the Plan or any award agreement
shall give any such Participant any rights that are greater than those of a general unsecured
creditor of the Company; provided, however, that the Committee may authorize the creation of trusts
or make other arrangements to meet the Company’s obligations under the Plan to deliver shares
pursuant to any award, which trusts or other arrangements shall be consistent with the “unfunded”
status of the Plan.

     5.7 Deferral. Participants may elect to defer all or a portion (in whole percentages)
of their Restricted Performance Shares for any Performance Period, in accordance with the terms of
a deferral agreement entered into between the Participant and the Company; provided that such
election to defer must be made prior to the commencement of the Performance Period to which such
deferral relates. The Company may require that such deferrals be made in the form of Common Stock
units. No amount in excess of the number of the shares of Common Stock underlying such Restricted
Performance Shares deferred shall be payable to the Participant for such deferral, except for the
dividend equivalent amount for dividends paid on the Company’s outstanding Common Stock during the
deferral period.

     5.8 Expenses. The expenses of administering the Plan shall be borne by the Company.

     5.9 Indemnification. Service on the Committee shall constitute service as a member of
the Board so that members of the Committee shall be entitled to indemnification and reimbursement
as directors of the Company pursuant to its Articles of Incorporation, By-Laws, or resolutions of
its Board or shareholders.

     5.10 Tax Litigation. The Company shall have the right to contest, at its expense, any
tax ruling or decision, administrative or judicial, on any issue that is related to the Plan and
that the Company believes to be important to Participants in the Plan and to conduct any such
contest or any litigation arising therefrom to a final decision.

     5.11 No Right to Awards; No Shareholder Rights. No Participant or employee shall have
any claim to be granted any award under the Plan, and there is no obligation for uniformity of
treatment of Participants and employees. No award shall confer on any Participant any of the
rights of a shareholder of the Company unless and until shares of Common Stock are in fact paid to
such Participant in connection with such award.

     5.12 No Fractional Shares. No fractional shares of Common Stock shall be paid or
delivered pursuant to the Plan or any award. In the event that any award would result in the
issuance of a fractional share of Common Stock, the fractional share shall be rounded up to the
next whole share.

     5.13 Governing Law. The validity, interpretation, construction and effect of the Plan
and any rules and regulations relating to the Plan shall be governed by the laws of the
Commonwealth of Pennsylvania (without regard to the conflicts of laws thereof).

     5.14 Severability. If any provision of the Plan or any award is or becomes or is
deemed invalid, illegal or unenforceable in any jurisdiction, or would disqualify the Plan

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or any award under any law deemed applicable by the Committee, such provision shall be
construed or deemed amended to conform to applicable laws or if it cannot be construed or deemed
amended without, in the determination of the Committee, materially altering the intent of the Plan
or award, it shall be deleted and the remainder of the Plan or award shall remain in full force and
effect; provided, however, that, unless otherwise determined by the Committee, the provision shall
not be construed or deemed amended or deleted with respect to any Participant whose rights and
obligations under the Plan are not subject to the law of such jurisdiction or the law deemed
applicable by the Committee.

     5.15 Certain Restrictions Under Rule 16b-3. Upon the effectiveness of any amendment
to Rule 16b-3, this Plan and any award agreement for an outstanding award held by a Participant
then subject to Section 16 of the Exchange Act shall be deemed to be amended, without further
action on the part of the Committee, the Board or the Participant, to the extent necessary for
awards under the Plan or such award agreement to qualify for the exemption provided by Rule 16b-3,
as so amended, except to the extent any such amendment requires shareholder approval.

     5.16 Registration and Listing Compliance. No award shall be paid and no shares or
other securities shall be distributed with respect to any award in a transaction subject to the
registration requirements of the Securities Act of 1933, as amended, or any state securities law or
subject to a listing requirement under any listing agreement between the Company and any national
securities exchange, and no award shall confer upon any Participant rights to such payment or
distribution until such laws and contractual obligations of the Company have been complied with in
all material respects. Except to the extent required by the terms of an award agreement or another
contract between the Company and the Participant, neither the grant of any award nor anything else
contained herein shall obligate the Company to take any action to comply with any requirements of
any such securities laws or contractual obligations relating to the registration (or exemption
therefrom) or listing of any shares or other securities, whether or not necessary in order to
permit any such payment or distribution.

     5.17 Stock Certificates. All certificates for shares delivered under the terms of the
Plan shall be subject to such stop-transfer orders and other restrictions as the Committee may deem
advisable under federal or state securities laws, rules and regulations thereunder, and the rules
of any national securities exchange or automated quotation system on which shares of Common Stock
are listed or quoted. The Committee may cause a legend or legends to be placed on any such
certificates to make appropriate reference to such restrictions or any other restrictions or
limitations that may be applicable to shares. In addition, during any period in which awards or
shares are subject to restrictions or limitations under the terms of the Plan or any award
agreement, or during any period during which delivery or receipt of an award or shares has been
deferred by the Committee or a Participant, the Committee may require any Participant to enter into
an agreement providing that certificates representing shares payable or paid pursuant to an award
shall remain in the physical custody of the Company or such other person as the Committee may
designate.

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SECTION 6. EFFECTIVE DATE AND TERM OF THE PLAN

     6.1 Effective Date. The effective date and date of adoption of the Plan shall be
March 2, 2004, the date of adoption of the Plan by the Board, provided that the Plan is approved by
a majority of the votes cast at a duly held meeting of shareholders of the Company and any award
granted prior to such shareholder approval shall be subject to and conditioned upon receipt of such
shareholder approval. Notwithstanding anything else contained in the Plan or in any award
agreement, no shares may be distributed pursuant to any award granted under the Plan prior to such
shareholder approval. In the event such shareholder is not obtained, all awards granted under the
Plan shall automatically be deemed void and of no effect. Absent additional shareholder approval,
no Restricted Performance Shares may be granted under the Plan subsequent to the Company’s Annual
Meeting of Shareholders in 2009.

90AMENDMENT NO. 2 AND WAIVER TO
                                CREDIT AGREEMENT
                                ----------------

           This AMENDMENT NO. 2 (this "Amendment"), dated as of February 22,
2005, to the CREDIT AGREEMENT, dated as of July 22, 2004 (the "Credit
Agreement") among Quest Cherokee, LLC, a Delaware limited liability company (the
"Borrower"), the guarantors party thereto and the Lenders (such term and each
other capitalized term used but not defined herein having the meaning given it
in the Credit Agreement, as amended) party thereto, UBS Securities LLC, as
Arranger, Bookmanager, Documentation Agent and Syndication Agent, UBS AG,
Stamford Branch, as Issuing Bank, LC Facility Issuing Bank, Administrative
Agent and Collateral Agent, and UBS Loan Finance LLC, as Swingline Lender, is
entered into by and among the Borrower, the Guarantors and the several Lenders
that have executed a signature page hereto.

                               R E C I T A L S:
                               ----------------

           A. Section 11.02 of the Credit Agreement provides that the Credit
Agreement may be amended with the consent of the Borrower and the Required
Lenders.

           B. The Borrower, the Agents and the Lenders wish to amend the Credit
Agreement to allow the Borrower to issue an additional $12.0 million of
Subordinated Notes, which amendment includes $5.0 million of Subordinated Notes
issued on February 11, 2005, and for the Term B Commitment to be increased by
$5.0 million such that the total the Term B Commitment will be $124.7 million.

           C. The undersigned Lenders collectively constitute the Required
Lenders and, with respect to the increase in the Term B Commitment, the Term B
Lenders party hereto agree to provide Additional Term B Commitments in the
amount set forth next to their name on the signature page hereto.

           D. The Requisite Lenders waive the Default or Events of Default of
the Credit Agreement outstanding as of the date detailed in Section Two of this
Amendment.

           E. The Borrower and the undersigned Lenders hereby agree to amend the
Credit Agreement on the terms and to the extent set forth herein.

                              A G R E E M E N T :
                              -------------------

           NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereby agree as
follows:

           SECTION 1. Amendments.  The following amendments to the Credit
Agreement shall be effective as of the Amendment No. 2 Effective Date:

           (a) Section 1.01 of the Credit Agreement is hereby amended by
inserting the following definitions in alphabetical order:

<PAGE>
                                      -2-

      "'Additional Subordinated Notes' shall mean an aggregate of $12.0 million
of Borrower's 15% Junior Subordinated Notes due 2010 issued pursuant to the
Additional Subordinated Notes Agreement (plus the amount of any interest paid in
kind which may be added to the principal of such Subordinated Notes)."

      "'Additional Subordinated Notes Agreement' shall mean the Amended and
Restated Note Purchase Agreement between Borrower and Cherokee Energy Partners
LLC dated as of February 11, 2005 and substantially in the form attached hereto
as Annex A and as thereafter amended from time to time subject to the
requirements of this Agreement."

      "'Additional Term B Commitment' shall mean, with respect to each Lender,
the commitment, if any, of such Lender to make an Additional Term B Loan
hereunder on the Amendment No. 2 Effective Date in the amount set forth on the
signature page to Amendment No. 2 to the Credit Agreement executed and delivered
by such Lender (as adjusted by the Administrative Agent if necessary), or in the
Assignment and Assumption pursuant to which such Lender shall have assumed its
Additional Term B Commitment, as the same may be (a) reduced from time to time
pursuant to Section 2.07 and (b) reduced or increased from time to time pursuant
to assignments by or to such Lender pursuant to Section 11.04. The aggregate
amount of the Lenders' Additional Term B Commitments is $5.0 million."

      "'Additional Term B Loan' shall mean a loan made by the Lenders to
Borrower pursuant to Section 2.01(a)(ii). Each Additional Term B Loan shall
either be an ABR Term Loan or a Eurodollar Term B Loan."

      "'Amendment No. 2 Effective Date' shall mean the date the conditions
precedent contained in Section 3 of Amendment No. 2 to the Credit Agreement
are satisfied in all respects."

      "'Original Subordinated Notes' shall mean an aggregate of $51.0 million of
Borrower's 15% Junior Subordinated Notes due 2010 issued pursuant to the
Original Subordinated Notes Agreement (plus the amount of any interest paid in
kind which may be added to the principal of such Subordinated Notes)."

      "'Original Subordinated Notes Agreement' shall mean the Note Purchase
Agreement between Borrower and Cherokee Energy Partners LLC dated as of December
22, 2003 pursuant to which the Original Subordinated Notes were issued and as
thereafter amended from time to time subject to the requirements of this
Agreement."

      "'Original Term B Commitment' shall mean, with respect to each Lender, the
commitment, if any, of such Lender to make an Original Term B Loan hereunder on
the Closing Date in the amount set forth on Schedule I to the Lender Addendum
executed and delivered by such Lender, or in the Assignment and Assumption
pursuant to which such Lender shall have assumed its Original Term B
Commitment, as applicable, as the same may be (a) reduced from time to time
pursuant to Section 2.07 and (b) reduced or increased from time to time pursuant
to assignments by or to such Lender pursuant to Section 11.04. The aggregate
amount of the Lenders' Original Term B Commitments was $120.0 million."

      "'Original Term B Loan' shall mean a loan made by the Lenders to Borrower
pursuant to Section 2.01(a)(i). Each Original Term B Loan shall be either an
ABR Term Loan or a Eurodollar Term B Loan."

<PAGE>
                                      -3-

      "'Wells In-Progress' shall mean a well that has been drilled but has not
yet been connected to the Borrower's gathering system."

           (b) Section 1.01 of the Credit Agreement is hereby amended by adding
the following to the end of the definition of "Applicable Margin":

"provided, however, that until such time as the Borrower's Total Leverage Ratio
as of any Test Period (as set forth in a Compliance Certificate delivered
pursuant to Section 5.01(d) and effective as of the date of such delivery) is
less than 4.0 to 1.0, the Applicable Margin, with respect to any Term B Loan,
Revolving Loan or, for purposes of Section 2.05(d), LC Facility Letter of
Credit, as the case may be, shall be the applicable basis points set forth
below under the appropriate caption

                                         Eurodollar      ABR
                                         ----------      ---

           Term B Loans                      475         375
           Revolving Loans                   450         350
           LC Facility Letter of Credit      475         375"

           (c) Section 1.01 of the Credit Agreement is hereby amended by
deleting each of the following definitions and replacing it with the following:

      "'Capital Expenditures' shall mean, for any period, without duplication,
the cash expenditures made or Indebtedness incurred during such period for the
property, plant and equipment and the work-in-progress as reflected on the
consolidated balance sheet of the Borrower and its Subsidiaries, determined in
accordance with GAAP, but excluding (i) expenditures made in connection with the
replacement, substitution or restoration of property pursuant to Section
2.10(f), (ii) any portion of such increase attributable solely to acquisitions
of property, plant and equipment in Permitted Acquisitions and (iii)
expenditures made with the proceeds of the Original Term B Loan. For the
avoidance of doubt, the acquisition of undeveloped oil and gas leasehold
interests in the Cherokee Basin shall be considered Capital Expenditures."

      "'Consolidated EBITDA' shall mean, for any period, Consolidated Net Income
for such period, adjusted by (x) adding thereto, in each case only to the extent
(and in the same proportion) deducted in determining such Consolidated Net
Income (and with respect to the portion of Consolidated Net Income attributable
to any Subsidiary of Borrower only if a corresponding amount would be permitted
at the date of determination to be distributed to Borrower by such Subsidiary
without prior approval (that has not been obtained), pursuant to the terms of
its Organizational Documents and all agreements, instruments, judgments,
decrees, orders, statutes, rules and regulations applicable to such Subsidiary
or its equityholders):

           (a) Consolidated Interest Expense and interest expense on the
      Subordinated Notes for such period,

           (b) Consolidated Amortization Expense for such period,

<PAGE>
                                      -4-

           (c) Consolidated Depreciation Expense for such period,

           (d) Consolidated Tax Expense for such period,

           (e) costs and expenses directly incurred in connection with the
      Transactions (not to exceed $6.3 million), and

           (f) the aggregate amount of all other non-cash items reducing
      Consolidated Net Income (excluding any non-cash charge that results in an
      accrual of a reserve for cash charges in any future period) for such
      period, and

(y) subtracting therefrom, in each case only to the extent (and in the same
proportion) added in determining Consolidated Net Income, (i) the aggregate
amount of all non-cash items increasing Consolidated Net Income (other than the
accrual of revenue or recording of receivables in the ordinary course of
business) for such period and (ii) any general and administrative expenses that
are capitalized and added to the gross property, plant and equipment account
during such period under the full cost method of accounting.

      Other than for purposes of calculating Excess Cash Flow, Consolidated
EBITDA shall be calculated on a Pro Forma Basis to give effect to any Permitted
Acquisition and Asset Sales (other than any dispositions in the ordinary course
of business) consummated at any time on or after the first day of the Test
Period thereof as if each such Permitted Acquisition had been effected on the
first day of such period and as if each such Asset Sale had been consummated on
the day prior to the first day of such period.

      "'Excess Cash Flow Period' shall mean (i) the period taken as one
accounting period from July 1, 2004 and ending on December 31, 2004 and (ii)
thereafter the two fiscal quarter periods ending at the end of Borrower's second
and fourth quarters."

      "'Financial Officer' shall mean with respect to any person, the chief
financial officer or the chief executive officer of such person."

      "'Subordinated Notes' shall mean, collectively, the Original Subordinated
Notes and the Additional Subordinated Notes."

      "'Subordinated Notes Agreement' shall mean, collectively, the Original
Subordinated Notes Agreement and the Additional Subordinated Notes Agreement.

      "'Term B Commitment' shall mean, collectively, the Original Term B
Commitment and the Additional Term B Commitment."

      "'Term B Loan' shall mean, collectively, the Original Term B Loans and the
Additional Term B Loans."

      "'Total Net Debt' shall mean, at any time, (a) the total principal amount
of Indebtedness of Borrower and its Subsidiaries at such time (excluding the
aggregate principal amount of Subordinated Notes and Indebtedness of the type
described in clauses (j) and (k) (except to the extent of any unreimbursed
drawings thereunder) and (h) of the definition of such term), less (b) the
amount, not in excess of $10.0

<PAGE>
                                      -5-

million, of unrestricted cash on hand at Borrower and the Subsidiary Guarantors.
The fact that the Collateral Agent holds a Lien against funds on deposit in
accounts will not cause such funds to be considered restricted for purposes of
this definition."

           (d) Section 2.01(a) of the Credit Agreement is hereby amended by
replacing it with the following:

      "(a) (i) to make an Original Term B Loan to Borrower on the Closing Date
in the principal amount not to exceed such Lender's Original Term B Commitment
and, at any time and from time to time during the LC Facility Availability
Period, to the extent provided in clause (ii) to the proviso of Section 2.18(e),
to make an Original Term B Loan in an aggregate principal amount at any time
outstanding that will not result in such Lender's LC Facility LC Exposure
exceeding such Lender's original LC Facility Commitment and (ii) to make an
Additional Term B Loan to Borrower on the Amendment No. 2 Effective Date with
the principal amount not to exceed such Lender's Additional Term B Commitment;"

           (e) The first paragraph of Section 2.03 of the Credit Agreement is
amended by replacing it with the following:

"To request any Borrowing, Borrower shall deliver, by hand delivery or telecopy,
a duly completed and executed Borrowing Request to the Administrative Agent,
executed by a Financial Officer of the Borrower (i) in the case of a Eurodollar
Borrowing, not later than 11:00 a.m., New York City time, four (4) Business Days
before the date of the proposed Borrowing or (ii) in the case of an ABR
Borrowing, not later than 11:00 a.m., New York City time, two (2) Business Day
before the date of the proposed Borrowing (other than any advance made under
the Swingline Commitment). Each Borrowing Request shall be irrevocable and shall
specify the following information in compliance with Section 2.02:

           (a) whether the requested Borrowing is to be a Borrowing of Revolving
      Loans or Term B Loans;

           (b) the aggregate amount of such Borrowing;

           (c) the date of such Borrowing, which shall be a Business Day;

           (d) whether such Borrowing is to be an ABR Borrowing or a Eurodollar
      Borrowing; provided that Eurodollar Borrowings shall not be available
      until the earlier of (i) August 31, 2004 and (ii) the date on which the
      Syndication Agent shall have notified Borrower that a Successful
      Syndication has been achieved; provided, further, however, that if on
      August 31, 2004, the Syndication Agent shall not have notified Borrower
      that a Successful Syndication has been achieved, then Borrower shall only
      be entitled to select Interest Periods for Eurodollar Borrowings of one
      month until it has been so notified;

           (e) in the case of a Eurodollar Borrowing, the initial Interest
      Period to be applicable thereto, which shall be a period contemplated by
      the definition of the term "Interest Period";

           (f) the location and number of Borrower's account to which funds are
      to be disbursed, which shall comply with the requirements of Section
      2.02(c);

<PAGE>
                                      -6-

           (g) that the conditions set forth in Sections 4.02(b)-(d) have been
      satisfied as of the date of the notice;

           (h) the proposed use of proceeds of such Borrowing;

           (i) the Borrower's cash balance as of the close of the Business Day
      immediately preceding the date of such Borrowing Request;

           (j) if the borrowing request is made (i) before January 1, 2007, the
      fiscal quarter-to-date Capital Expenditures (through the end of the month
      for which the Borrower has delivered financial statements pursuant to
      Section 5.01(c)), together with the amount of permitted Capital
      Expenditures for the applicable quarter, or (ii) on or after January 1,
      2007, the Excess Cash Flow Period-to-date Capital Expenditures (through
      the end of the month for which the Borrower has delivered financial
      statements pursuant to Section 5.01(c)), together with the amount of
      permitted Capital Expenditures for the applicable Excess Cash Flow Period;

           (k) a report of gross production volume for each of the last 30 days;

           (l) a calculation of the 20-day average gross production figures
      using the highest production results achieved for any 20 of the last 30
      days ("Average Production"); and

           (m) during calendar year 2005, a summary of wells drilled since
      January 1, 2005, classifying wells according to one of two types: (i) one
      of 26 wells "carried over" from the 2004 drilling budget or (ii) one of
      up to 150 wells (in addition to the 26 wells described in clause (i)
      above) after the Drilling Recommencement Date.

           (f) Section 2.17(a) of the Credit Agreement is hereby amended by
replacing the "$10.0 million" in clause (i) with $500,000."

           (g) Section 3.12 of the Credit Agreement is amended by deleting it in
its entirety and replacing it with the following:

      "SECTION 3.12 Use of Proceeds. Subject to the provisions of Section 5.08,
Borrower will use the proceeds of (a) the Original Term B Loans to effect the
Refinancing, pay related fees, commissions and expenses, and for working capital
and general corporate purposes (including to effect Permitted Acquisitions),
(b) the Revolving Loans and Swingline Loans after the Closing Date for working
capital and general corporate purposes (including to effect Permitted
Acquisitions), it being understood that no Revolving Loans shall be made on the
Closing Date, (c) the LC Facility Letter of Credit to provide credit support for
certain Commodity Hedging Obligations and (d) the Additional Term Loan B Loans
to repay $3.0 million of Revolving Loans outstanding on the Amendment No. 2
Effective Date and the remainder for working capital and capital expenditures."

           (h) Section 5.01(a) of the Credit Agreement is amended by deleting
clause (ii) thereof in its entirety and replacing it with the following:

           "(ii)a management report in a form reasonably satisfactory to the
Administrative Agent setting forth, on a consolidated basis, the financial
condition, results of operations and cash flows as of the

<PAGE>
                                      -7-

end of and for such fiscal year and, commencing with the fiscal year ended
December 31, 2005, a comparison of the financial condition, results of
operations and cash flows for such fiscal year to the previous fiscal year and
to the budgeted amounts,"

           (i) Section 5.01(c) of the Credit Agreement is amended by deleting it
in its entirety and replacing it with the following:

      "(c) Monthly Reports. Within 45 days after the end of each of the first
two months of each fiscal quarter beginning with January, 2005, (i) the
consolidated balance sheet of Borrower as of the end of such month and the
related consolidated statements of operations, cash flows and members' equity of
Borrower for such month and for the then elapsed portion of the fiscal year, in
comparative form (including operational and statistical information consistent
with internal and industry wide reporting standards in form reasonably
satisfactory to the Administrative Agent), with the consolidated statements of
operations and cash flows for the comparable periods in the previous fiscal year
and budgeted amounts, accompanied by a certificate of a Financial Officer
stating that such financial statements fairly present, in all material respects,
the consolidated results of operations and cash flows of Borrower as of the date
and for the periods specified in accordance with GAAP consistently applied,
subject to normal year-end audit adjustments, (ii) a management report in a
form substantially similar to the existing "Monthly Operating and Financial
Report" provided to the Borrower's Board of Managers and reasonably satisfactory
to the Administrative Agent setting forth, on a consolidated basis, the
financial condition, results of operations and cash flows for such month and for
the then elapsed portion of the fiscal year compared in reasonable detail to
the comparable periods in the previous fiscal year; provided that such monthly
report shall include, without limitation, a comparison and a discussion of
actual financial, drilling, completion, production and pricing results to the
monthly budgeted amounts."

           (j) Section 5.01(h) of the Credit Agreement is amended by deleting it
in its entirety and replacing as follows:

      "(h) Budgets. No later than 30 days prior to the first day of each fiscal
year of Borrower (i) a budget in form reasonably satisfactory to the
Administrative Agent (including budgeted statements of operations and cash
flows for each of Borrower's business units and balance sheets) for the next two
fiscal years prepared on a monthly basis for the first year addressed therein,
and a quarterly basis for the second year addressed therein and (ii) projections
on an annual basis through the Final Maturity Date, with appropriate
presentation and discussion of the principal assumptions upon which such budgets
and projections are based, accompanied by the statement of a Financial Officer
of Borrower to the effect that each of the budget and projections of Borrower is
a reasonable estimate for the period covered thereby."

           (k) Section 5.01(l)(i) of the Credit Agreement is amended by deleting
it in its entirety and replacing as follows:

      "(i) As soon as available and in any event by March 31 and August 15 of
each year, commencing January 1, 2005, Borrower shall deliver to the
Administrative Agent and each Lender a Reserve Report prepared as of the
immediately preceding December 31 and June 30, respectively; provided, that such
Reserve Report shall provide data on a monthly basis for the first twelve months
covered therein."

           (l) Section 5.01(l) of the Credit Agreement is amended by adding a
new Section 5.01(l)(iv) as follows:

<PAGE>
                                      -8-

      "(iv) Beginning February 28, 2005, not later than 5:00 p.m. New York City
time on the Monday following the preceding week, the Borrower shall provide a
weekly production report to the Administrative Agent, which report shall be in
a form reasonably satisfactory to the Administrative Agent."

           (m) Section 5.07(a) of the Credit Agreement is amended by deleting it
in its entirety and replacing it with the following:

      "(a) Keep proper books of record and account in which full, true and
correct entries in conformity with GAAP and all Requirements of Law are made of
all dealings and transactions in relation to its business and activities. Each
Company will permit any representatives designated by the Administrative Agent
or any Lender to visit and inspect the financial records and the property of
such Company at reasonable times and as often as reasonably requested and to
make extracts from and copies of such financial records, and permit any
representatives designated by the Administrative Agent or any Lender to discuss
the affairs, finances, accounts, condition and Mineral Interests of any Company
with the officers and employees thereof and advisors therefor (including
without limitation the Approved Petroleum Engineer and independent accountants).
The Administrative Agent shall have the right, at the Borrower's expense, to
hire an independent petroleum engineer to review, among other things, the
Reserve Report delivered pursuant to Section 5.01(l), the work of the Approved
Petroleum Engineer and the Borrower's reserves; provided that in connection
with employing any such independent petroleum engineer, the Administrative Agent
may, at its option, elect to (i) coemploy the Borrower's Approved Petroleum
Engineer or (ii) hire its own reserve engineer. Borrower shall, and shall use
its reasonable efforts to cause the Approved Petroleum Engineer to, cooperate
fully in connection with any such review."

           (n) Section 5.07 of the Credit Agreement is amended by adding the
following as a new Section 5.07(c):

      "(c) The Administrative Agent shall have the right, in consultation with
the Borrower and at the Borrower's expense, to, from time to time, hire an
independent consultant to review, among other things, the Borrower's business,
financial controls and operations. Borrower shall, and shall use its reasonable
efforts to cause its accountants and other advisors to, cooperate fully in
connection with any such review."

           (o) Section 5.08 of the Credit Agreement is amended by adding the
following as a new second paragraph thereto:

      "Notwithstanding the foregoing, until the later of (i) the first Test
Period for which the Borrower has delivered a Compliance Certificate certifying
that the Borrower's Total Leverage Ratio is less than 3.5 to 1.0 after giving
effect to such Borrowing and (ii) December 31, 2005, the proceeds of the
Revolving Loans may be used for working capital purposes only."

           (p) Section 6.01(c) of the Credit Agreement is amended by deleting it
in its entirety and replacing it with the following:

      "(c) the Subordinated Notes; provided that the aggregate principal amount
of such Subordinated Note does not exceed $63,000,000 (plus the amount of any
interest paid in kind which may be added to the principal of such Subordinated
Notes) at any time;"

<PAGE>
                                      -9-

           (q) The Credit Agreement shall be amended by adding a new Section
5.17 as follows:

           "Section 5.17. Repricing Fee. Pay each Term B Lender a repricing fee
of 1.0% of the outstanding Term B Loans held by such Lender upon any repricing
of the Applicable Margin on Term B Loans on or prior to the first anniversary of
the Amendment No. 2 Effective Date."

           (r) Section 6.10(a) of the Credit Agreement is amended by deleting it
in its entirety and replacing it with the following:

      "(a) Maximum Total Leverage Ratio. Permit the Total Leverage Ratio for any
Test Period ending on the dates set forth in the table below to exceed the
ratio set forth opposite such period in the table below:

          ---------------------------------------------------
             Test Period Ending              Leverage Ratio
             ------------------              --------------
          ---------------------------------------------------
          March 31, 2005                        5.50 to 1.0
          ---------------------------------------------------
          June 30, 2005                         5.00 to 1.0
          ---------------------------------------------------
          September 30, 2005                    4.50 to 1.0
          ---------------------------------------------------
          December 31, 2005                     3.80 to 1.0
          ---------------------------------------------------
          March 31, 2006                        3.30 to 1.0
          ---------------------------------------------------
          June 30, 2006                         2.90 to 1.0
          ---------------------------------------------------
          September  30,  2006 and thereafter   2.50 to 1.0
          ---------------------------------------------------

           (s) Section 6.10(c) of the Credit Agreement is amended by deleting it
in its entirety and replacing it with the following:

      (c) Minimum Interest Coverage Ratio. Permit the Consolidated Interest
Coverage Ratio for any Test Period (i) ending in 2005 to be less than 2.7 to 1.0
and (ii) thereafter to be less than 3.5 to 1.0.

           (t) Section 6.10(d) of the Credit Agreement is amended by deleting it
in its entirety and replacing it with the following:

      (d) Minimum Fixed Charge Coverage Ratio. Permit the Consolidated Fixed
Charge Coverage Ratio for any Test Period (i) in 2006 ending on or prior to
September 30, 2006 to be less than 1.0 to 1.0, (ii) ending December 31, 2006 to
be less than 1.1 to 1.0, (iii) ending in 2007 to be less than 1.25 to 1.0 and
(iv) thereafter to be less than 1.5 to 1.0.

           (u) Section 6.10(e) of the Credit Agreement is amended by deleting it
in its entirety and replacing it with the following:

      (e) Limitation on Capital Expenditures. Permit the aggregate amount of
Capital Expenditures for any quarter ending on the date set forth in the table
below to exceed the amount set forth opposite such period below:

<PAGE>
                                      -10-

          -------------------------------------------------
                  Quarter Ending       Amount (in millions)
                  --------------       --------------------
          -------------------------------------------------
          March 31, 2005                       $15.0
          -------------------------------------------------
          June 30, 2005                        $7.25
          -------------------------------------------------
          September 30, 2005                   $9.5
          -------------------------------------------------
          December 31, 2005                   $13.25
          -------------------------------------------------
          March 31, 2006                      $10.00
          -------------------------------------------------
          June 30, 2006                       $10.00
          -------------------------------------------------
          September 30, 2006                  $10.00
          -------------------------------------------------
          December 31, 2006                   $10.00
          -------------------------------------------------

and, commencing January 1, 2007, permit the aggregate amount of Capital
Expenditures in any Excess Cash Flow Period to exceed Budgeted Capital
Expenditures for such Excess Cash Flow Period; provided such amount for any
Excess Cash Flow Period shall be increased by an amount, if any, equal to (i)
the amount of Net Cash Proceeds of Excluded Issuances designated for Capital
Expenditures for such Excess Cash Flow Period and (ii) the portion of Excess
Cash Flow not required to be applied to Loans pursuant to Section 2.10(g) for
the immediately preceding Excess Cash Flow Period or used to pay a Dividend or
Subordinated Note payment pursuant to Section 6.08(c).

           During any quarter between January 1, 2005 and December 31, 2006,
permitted Capital Expenditures shall be increased by the difference between the
sum of the quarterly maximum Capital Expenditures amounts for each quarter
between January 1, 2005 and the current quarter and the cumulative Capital
Expenditures made between January 1, 2005 and the current quarter.

           At the request of Borrower, and upon demonstration by Borrower to the
Administrative Agent of Borrower's compelling need to make Capital Expenditures
in excess of the limitations referred to in this Section 6.10(e), the
Administrative Agent in its sole discretion shall be entitled to approve an
increase in the Capital Expenditures limitations for any Excess Cash Flow Period
set forth above of up to 5% of the aggregate amount set forth above with respect
to such Excess Cash Flow Period."

           (v) The Credit Agreement shall be amended by adding a new Section
6.22 as follows:

           "SECTION 6.22 Drilling. From and after January 1, 2005, Borrower
shall not drill any new wells (other than the 26 wells originally budgeted to be
drilled during December 2004) until (i) at least 200 wells have been connected
to Borrower's gathering system since January 1, 2005 and (ii) gross daily
production is at least 43mmcfe/d for any 20 of the last 30 days (the "Drilling
Recommencement Date"). Following the Drilling Recommencement Date and prior to
January 1, 2006, Borrower shall drill no more than 150 new wells; provided that
following March 1, 2005 in no event shall the number of Wells InProgress as of
the end of any month exceed 250."

<PAGE>
                                      -11-

           (w) Section 11.03(a) of the Credit Agreement is amended by adding the
following language after the word "appraisers" and before the words "or other
advisors" in the first sentence following clause (iv):

      ", independent petroleum engineers."

           (x) Schedule 1.01(c) (Subsidiary Guarantors) is replaced by the new
Schedule 1.01(c) attached hereto as Annex I.

           (y) Exhibit C is replaced by the new Exhibit C attached hereto as
Annex II.

           (z) Exhibit D is replaced by the new Exhibit D attached hereto as
Annex III.

           (aa) Exhibit E is replaced by the new Exhibit E attached hereto as
Annex IV.

           SECTION 2.Waiver. Borrower has requested and the Lenders agree,
subject to the satisfaction of the conditions set forth in Section 3, to waive
the Defaults or Event of Defaults caused by Borrower not complying with the
following sections of the Credit Agreement:

           (a) The Maximum Total Leverage Ratio requirement contained in Section
6.10(a) for the Test Period ending November 30, 2004.

           (b) The Minimum Interest Coverage Ratio requirement contained in
Section 6.10(c) for the Test Period ending November 30, 2004.

           (c) The requirement to pay the Default Rate of interest pursuant to
Section 2.06.

           (d) The budget delivery provision of Section 5.01(h).

           (e) If the Additional Subordinated Notes issued pursuant to the
Additional Subordinated Notes Agreement are deemed not to have been incurred
pursuant to Section 6.01(f) or Section 6.01(k), the incurrence of such
Indebtedness and the failure to comply with the mandatory prepayment provisions
set forth in Section 2.10(d).

           SECTION 3.Conditions to Effectiveness. This Amendment shall become
effective when, and only when and if:

           (a) the Administrative Agent (or its counsel) shall have received
from (A) Lenders constituting (i) the Requisite Lenders and (ii) those Term B
Lenders representing the entire amount of the Additional Term B Loan Commitment
and (B) each of the other parties hereto, either (i) a counterpart of this
Amendment signed on behalf of such party or (ii) written evidence satisfactory
to the Administrative Agent (which may include telecopy transmission of a signed
signature page of this Amendment) that such party has signed a counterpart of
this Amendment;

           (b) the representations and warranties set forth in Section 4 hereof
are true and correct in all material respects;

<PAGE>
                                      -12-

           (c) Borrower has paid the Administrative Agent (i) for the account of
the Lenders, an amount equal to 0.125% of the aggregate principal amount of the
Loans held by the Lenders who provide a consent (but not with respect to any
Additional Term B Commitment) and (ii) all reasonable costs and expenses of the
Administrative Agent in connection with the preparation, execution and delivery
of this Amendment other instruments and documents to be delivered hereunder, if
any (including, without limitation, the reasonable fees and expenses of Cahill
Gordon & Reindel LLP, counsel to the Administrative Agent) in accordance with
the terms of Section 11.03 of the Credit Agreement;

           (d) Borrower shall have paid the fees set forth in the arrangement
letter related to this Amendment.

           (e) all corporate and other proceedings taken or to be taken in
connection with this Amendment and all documents incidental thereto, whether or
not referred to herein, shall be reasonably satisfactory in form and substance
to the Administrative Agent;

           (f) after giving effect to the Amendment, no Default or Event of
Default has occurred and is continuing;

           (g) the Borrower shall have received at least $7.0 million of gross
proceeds from the issuance of Additional Subordinated Notes; and

           (h) the Borrower shall deliver any other certificates or
documentation the Administrative Agent may reasonably request.

           SECTION 4.Representations and Warranties; No Default. The Borrower
hereby confirms that, after giving effect to this Amendment, no Default or
Event of Default exists under the Credit Agreement and hereby affirms and
restates the representations and warranties made by it in the Credit Agreement
and confirms that all such representations and warranties are true and correct
in all material respects as of the date hereof, except to the extent that any
such representation and warranty specifically relates to an earlier date.

           SECTION 5.Miscellaneous.

           (a) This Amendment relates only to the specific matters covered
herein and shall not constitute a consent to or waiver or modification of any
other provision, term or condition of the Credit Agreement.

           (b) All terms, provisions, covenants, representations, warranties,
agreements and conditions contained in the Credit Agreement shall remain in full
force and effect except as expressly provided herein.

           (c) From and after the effectiveness of this Amendment, each
reference in the Credit Agreement to "this Agreement," "hereof," "herein,"
"hereby" or words of like import shall be deemed to be a reference to the Credit
Agreement as amended by this Amendment.

<PAGE>
                                      -13-

           (d) This Amendment may be executed in any number of counterparts and
by different parties hereto in separate counterparts, each of which when so
executed and delivered shall be deemed an original, but all such counterparts
together shall constitute but one and the same instrument.

           (e) Any provision of this Amendment which is prohibited or
unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective
to the extent of such prohibition or unenforceability without invalidating the
remaining portions hereof or affecting the validity or enforceability of such
provisions in any other jurisdiction.

           (f) This Amendment shall be binding upon the Borrower, the
Guarantors, the Agents and the Lenders and their respective successors and
assigns, and shall inure to the benefit of the Borrower, the Guarantors, the
Agents and the Lenders and the successors and assigns of the Agents and the
Lenders. Except as hereby amended, the Credit Agreement shall remain in full
force and effect and is hereby ratified and confirmed in all respects.

           (g) This Amendment shall be governed by, and construed in accordance
with, the laws of the State of New York without regard to principles of conflict
of laws.

<PAGE>

           IN WITNESS WHEREOF, the Borrower and each of the undersigned Agents
and Lenders have caused this Amendment to be duly executed and delivered by
their duly authorized officers as of the date first above written.

                               QUEST CHEROKEE, LLC

                               By: /s/ Jerry D. Cash
                                   -------------------------------------
                                   Name:  Jerry D. Cash
                                   Title: CEO

                               BLUESTEM PIPELINE, LLC
                                 by Quest Cherokee, LLC, its sole member

                               By: /s/ Jerry D. Cash
                                   -------------------------------------
                                   Name:  Jerry D. Cash
                                   Title: CEO

                               QUEST OILFIELD SERVICE, LLC
                                 by Quest Cherokee, LLC, its sole member

                               By: /s/ Jerry D. Cash
                                   -------------------------------------
                                   Name:  Jerry D. Cash
                                   Title: CEO

<PAGE>

                               UBS SECURITIES LLC, as Arranger, Syndication
                                 Agent and Documentation Agent

                               By: /s/ Vincent A. Repaci
                                   -------------------------------------
                                   Name:  Vincent A. Repaci
                                   Title: Executive Director

                               By: /s/ Warren Jervey
                                   -------------------------------------
                                   Name:  Warren Jervey
                                   Title: Director and Counsel
                                          Region Americas Legal

<PAGE>

                               UBS AG, STAMFORD BRANCH, as Issuing Bank, LC
                               Facility Issuing Bank, Administrative Agent and
                                Collateral Agent

                               By: /s/ Wilfred V. Saint
                                   -------------------------------------
                                   Name:  Wilfred V. Saint
                                   Title: Director

                               By: /s/ Richard L. Tavrow
                                   -------------------------------------
                                   Name:  Richard L. Tavrow
                                   Title: Director

<PAGE>

                               UBS LOAN FINANCE LLC, as Swingline Lender

                               By: /s/ Wilfred V. Saint
                                   -------------------------------------
                                   Name:  Wilfred V. Saint
                                   Title: Director

                               By: /s/ Richard L. Tavrow
                                   -------------------------------------
                                   Name:  Richard L. Tavrow
                                   Title: Director

<PAGE>

                               UBS LOAN FINANCE LLC, as a Lender

                               By: /s/ Wilfred V. Saint
                                   -------------------------------------
                                   Name:  Wilfred V. Saint
                                   Title: Director

                               By: /s/ Richard L. Tavrow
                                   -------------------------------------
                                   Name:  Richard L. Tavrow
                                   Title: Director

                               UBS AG, STAMFORD BRANCH, as a Lender

                               By: /s/ Wilfred V. Saint
                                   -------------------------------------
                                   Name:  Wilfred V. Saint
                                   Title: Director

                               By: /s/ Richard L. Tavrow
                                   -------------------------------------
                                   Name:  Richard L. Tavrow
                                   Title: Director

<PAGE>

                               AMMC CDO II, LIMITED
                                By: American Money Management Corp.,
QUEST CHEROKEE                      as Collateral Manager, as a Term B Lender

                               By: /s/ Chester M. Eng
                                   -------------------------------------
                                   Name:  Chester M. Eng
                                   Title: Senior Vice President

                               AMMC CLO III, LIMITED
                                By: American Money Management Corp.,
QUEST CHEROKEE                      as Collateral Manager, as a Term B Lender

                               By: /s/ Chester M. Eng
                                   -------------------------------------
                                   Name:  Chester M. Eng
                                   Title: Senior Vice President

                               AMMC CLO IV, LIMITED
                                By: American Money Management Corp.,
QUEST CHEROKEE                     as Collateral Manager, as a Term B Lender

                               By: /s/ Chester M. Eng
                                   -------------------------------------
                                   Name:  Chester M. Eng
                                   Title: Senior Vice President

<PAGE>

                                Erste Bank der Oesterreichischen Sparkassen AG,
                                   as a Term B Lender

                                By: /s/ Bryan J. Lynch
                                    -------------------------------------
                                    Name:  Bryan J. Lynch
                                    Title: 1st Vice President

                                By: /s/ Patrick W. Kunkel
                                    -------------------------------------
                                    Name:  Patrick W. Kunkel
                                    Title: Director

                                By: Callidus Debt Partners CDO Fund I, Ltd.
                                        By: Its Collateral Manager,
                                    Callidus Capital Management, LLC,
                                    as a Lender

                                By: /s/ Mavis Taintor
                                    --------------------------------------
                                    Name:  Mavis Taintor
                                    Title: Senior Managing Director

<PAGE>

                                By: Callidus Debt Partners CLO Fund II, Ltd.
                                        By: Its Collateral Manager,
                                    Callidus Capital Management, LLC,
                                    as a Lender

                                By: /s/ Mavis Taintor
                                    --------------------------------------
                                    Name:  Mavis Taintor
                                    Title: Senior Managing Director

                                By: Callidus Debt Partners CLO Fund IIII, Ltd.
                                        By: Its Collateral Manager,
                                    Callidus Capital Management, LLC,
                                    as a Lender

                                By: /s/ Mavis Taintor
                                    --------------------------------------
                                    Name:  Mavis Taintor
                                    Title: Senior Managing Director

<PAGE>

Dated this 18th day of February, 2005.

                                NATIONWIDE MUTUAL INSURANCE COMPANY

                                By: /s/ Thomas S. Leggett
                                    --------------------------------------
                                    Name:  Thomas S. leggett
                                    Title: Associate Vice President
                                           Public Bonds

Dated this 18th day of February, 2005.

                                NATIONWIDE MUTUAL FIRE INSURANCE COMPANY

                                By: /s/ Thomas S. Leggett
                                    --------------------------------------
                                    Name:  Thomas S. leggett
                                    Title: Associate Vice President
                                           Public Bonds

Dated this 18th day of February, 2005.

                                NATIONWIDE LIFE INSURANCE COMPANY

                                By: /s/ Thomas S. Leggett
                                    --------------------------------------
                                    Name:  Thomas S. leggett
                                    Title: Associate Vice President
                                           Public Bonds

                                Oppenheimer Senior Floating Rate Fund,
                                as a Lender

                                By: /s/ Lisa Chaffee
                                    -------------------------------------
                                    Name:  Lisa Chaffee
                                    Title: AVP

<PAGE>

                                HUDSON STRAITS CLO 2004, LTD.
                                By Royal Bank of Canada as Collateral Manager,
                                as a Term B Lender

                                By: /s/ Sanjai Bhonsle
                                    ------------------------------------
                                    Name:  Sanjai Bhonsle
                                    Title: Authorized Signatory

                                SEQUILS-Glace Bay, Ltd.
                                By Royal Bank of Canada as Colleral Manager,
                                as a Term B Lender

                                By: /s/ Sanjai Bhonsle
                                    ------------------------------------
                                    Name:  Sanjai Bhonsle
                                    Title: Authorized Signatory

                                FOXE BASIN CLO 2003, LTD.
                                By Roayl Bank of Canada as Collateral Manager,
                                as a Term B Lender

                                By: /s/ Sanjai Bhonsle
                                    ------------------------------------
                                    Name:  Sanjai Bhonsle
                                    Title: Authorized Signatory

<PAGE>

                                Venture CDO 2002, Limited, as a Lender
                                  By its investment advisor, MJX Asset
                                  Management LLC

                                By: /s/ Martin F. Davey
                                    ------------------------------------
                                    Name:  Martin F. Davey
                                    Title: Director

                                Venture II CDO 2002, Limited, as a Lender
                                  By its investment advisor, MJX Asset
                                  Management LLC

                                By: /s/ Martin F. Davey
                                    ------------------------------------
                                    Name:  Martin F. Davey
                                    Title: Director

                                Venture III CDO Limited, as a Lender
                                  By its investment advisor, MJX Asset
                                  Management LLC

                                By: /s/ Martin F. Davey
                                    ------------------------------------
                                    Name:  Martin F. Davey
                                    Title: Director

<PAGE>

                                Venture IV CDO Limited, as a Lender
                                  By its investment advisor, MJX Asset
                                  Management LLC

                                By: /s/ Martin F. Davey
                                    ------------------------------------
                                    Name:  Martin F. Davey
                                    Title: Director

                                Vista Leveraged Income Fund, as a Term B Lender
                                  By its investment advisor, MJX Asset
                                  Management LLC

                                By: /s/ Martin F. Davey
                                    ------------------------------------
                                    Name:  Martin F. Davey
                                    Title: Director

                                TRS Callisto LLC, as a Lender

                                By: /s/ Alice L. Wagner
                                    ------------------------------------
                                    Name:  Alice L. Wagner
                                    Title: Vice President

<PAGE>

                                Hamilton Floating Rate Fund, LLC,
                                as a Term B Lender

                                By: /s/ Dean Stephan
                                    ------------------------------------
                                    Name:  Dean Stephan
                                    Title: Managing Director

                                DEBT STRATEGIES FUND, INC.

                                By: /s/ Kevin Booth
                                    ------------------------------------
                                    Name:  Kevin Booth
                                    Title: Authorized Signatory

<PAGE>

                                SENIOR HIGH INCOME PORTOLIO, INC.

                                By: /s/ Kevin Booth
                                    ------------------------------------
                                    Name:  Kevin Booth
                                    Title: Authorized Signatory

                                Diversified Income Strategic Portfolio, Inc.

                                By: /s/ Kevin Booth
                                    ------------------------------------
                                    Name:  Kevin Booth
                                    Title: Authorized Signatory

                                Merrill Lynch Global Investment Series:
                                Income Strategies Portfolio
                                By: Merrill Lynch Investment Managers, L.P.
                                    as Investment Advisor

                                By: /s/ Kevin Booth
                                    ------------------------------------
                                    Name:  Kevin Booth
                                    Title: Authorized Signatory

                                CITICORP INSURANCE AND INVESTMENT TRUST

                                By: Travelers Asset Management Investment
                                    Company, LLC, as a Term B Lender

                                By: /s/ Allen R. Cantrell
                                    ------------------------------------
                                    Name:  Allen R. Cantrell
                                    Title: Investment Officer

<PAGE>

                                THE TRAVELERS INSURANCE COMPANY,
                                as a Term B Lender

                                By: /s/ Allen R. Cantrell
                                    ------------------------------------
                                    Name:  Allen R. Cantrell
                                    Title: Investment Officer

                                STONE TOWER CLO II LTD, as a Term B Lender

                                By: Stone Tower Debt Advisors LLC,
                                    as Collateral Manager

                                By: /s/ W. Anthony Edson
                                    -------------------------------------
                                    Name:  W. Anthony Edson
                                    Title: Authorized Signatory

                                New York Life Insurance Company,
                                as a Term B Lender

                                By: /s/ F. David Melka
                                    -------------------------------------
                                    Name:  F. David Melka
                                    Title: Investment Vice President

<PAGE>

                                New York Life Insurance and Annuity Corporation,
                                as a Term B Lender
                                By: New York Life Investment Management LLC
                                    Its Investment Manager

                                By: /s/ F. David Melka
                                    -------------------------------------
                                    Name:  F. David Melka
                                    Title: Director

                                ELF Funding Trust III, as a Term B Lender
                                By: New York Life Investment Management LLC
                                    as Attorney-In-Fact

                                By: /s/ F. David Melka
                                    -------------------------------------
                                    Name:  F. David Melka
                                    Title: Director

<PAGE>

                                NYLIM Flatiron CLO 2003-1, Ltd.,
                                as a Term B Lender
                                By: New York Life Investment Management LLC
                                    as Collateral Manager and Attorney-In-Fact

                                By: /s/ F. David Melka
                                    -------------------------------------
                                    Name:  F. David Melka
                                    Title: Director

                                NYLIM Flatiron CLO 2004-1, Ltd.,
                                as a Term B Lender
                                By: New York Life Investment Management LLC
                                    as Collateral Manager and Attorney-In-Fact

                                By: /s/ F. David Melka
                                    -------------------------------------
                                    Name:  F. David Melka
                                    Title: Director

<PAGE>

                                MainStay Floating Rate Fund, a series of
                                Eclipse Funds Inc., as a Term B Lender
                                By: New York Life Investment Management LLC

                                By: /s/ F. David Melka
                                    -------------------------------------
                                    Name:  F. David Melka
                                    Title: Director

                                Citigroup Investments Corporate Loan Fund Inc.
                                By: Travelers Asset Management International
                                    Company LLC

                                By: /s/ Roger Yee
                                    -------------------------------------
                                    Name:  Roger Yee
                                    Title: Roger Yee, VP
                                           Alternative Investment Strategies
                                           399 Park Ave./7th FL/Zn. 2
                                           Ph: (212) 559-9186

                                LANDMARK IV CDO LIMITED
                                By: Aladdin Capital Management LLC, as manager,
                                    as a Term B Lender

                                By: /s/ Angela Bozorgmir
                                    ---------------------------------------
                                    Name:  Angela Bozorgmir
                                    Title: Director

                                LONG LANE MASTER TRUST II, as a Term B Lender

                                By: /s/ Diana M. Himes
                                    ----------------------------------------
                                    Name: Diana M. Himes
                                    Title: Authorized Agent

<PAGE>

                                                                         ANNEX I

                                Schedule 1.01(c)
                                       to
                                Credit Agreement

                              Subsidiary Guarantor

Bluestem Pipeline, LLC

Quest Oilfield Service, LLC

<PAGE>

                                                                        ANNEX II
                                                                       EXHIBIT C

                                    [Form of]
                                BORROWING REQUEST

UBS AG, Stamford Branch,
    as Administrative Agent for
the Lenders referred to below,
677 Washington Boulevard
Stamford, Connecticut  06901

Attention: [                 ]

                             Re: Quest Cherokee, LLC

                                                                          [Date]

Ladies and Gentlemen:

           Reference is made to the Credit Agreement dated as of July 22, 2004
(as amended, amended and restated, supplemented or otherwise modified from time
to time, the "Credit Agreement") among QUEST CHEROKEE, LLC, a Delaware limited
liability company ("Borrower"), the Guarantors (such term and each other
capitalized term used but not defined herein having the meaning given it in
Article I of the Credit Agreement), the Lenders, UBS SECURITIES LLC, as lead
arranger (in such capacity, "Arranger"), documentation agent (in such capacity,
"Documentation Agent") and syndication agent (in such capacity, "Syndication
Agent"), UBS LOAN FINANCE LLC, as swingline lender (in such capacity,
"Swingline Lender"), and UBS AG, STAMFORD BRANCH, as administrative agent (in
such capacity, "Administrative Agent") for the Lenders, collateral agent (in
such capacity, "Collateral Agent") for the Secured Parties and Issuing Bank.
Borrower hereby gives you notice pursuant to Section 2.03 of the Credit
Agreement that it requests a Borrowing under the Credit Agreement, and in that
connection sets forth below the terms on which such Borrowing is requested to be
made:

(A)  Class of Borrowing                 [Revolving Borrowing]
                                        [Term B Borrowing]

(B)  Principal amount of Borrowing1     ____________________

________________________
1    ABR and Eurodollar Loans must be in an amount that is at least $1,000,000
     and an integral multiple of $500,000 or equal to the remaining available
     balance of the applicable Commitments.

<PAGE>

(C)  Date of Borrowing (which is a Business Day)

(D)  Type of Borrowing [ABR] [Eurodollar]2

(E)  Interest Period and the last day thereof3

(F)  Funds are requested to be disbursed to Borrower's account with UBS AG,
     Stamford Branch (Account No. ).

(G)  Proposed use of proceeds: _____________________________________________

(H)  Borrower's cash balance as of the close of the Business Day immediately
     preceding the date hereof:_____________________________________________

(I)  (1) [[For periods prior to January 1, 2007] Quarter-to-date Capital
     Expenditures (through the most recent month for which financial statements
     have been delivered under Section 5.01(c))] [[Thereafter] Excess Cash Flow
     Period-to-date Capital Expenditures (through the most recent month for
     which financial statements have been delivered under Section 5.01(c))]:
     ___________________________________

     (2) Comparison of number in (1) to permitted amount for the quarter or
     Excess Cash Flow Period as set forth in Section 6.10(e):
     __________________________________________

(J)  Gross production volume for each of the last 30 days (please attach a
     list)

(K)  20-day average gross production using the highest production results
     achieved during any 20 of the last 30 days:____________________________

(L)  For use only during calendar year 2005, please attach a list showing a
     summary of wells drilled since January 1, 2005, classifying wells
     according to one of two types: (i) one of 26 wells "carried over" from the
     2004 drilling budget or (ii) one of up to 150 wells drilled (in addition
     to the 26 wells described in clause (i) above) after the Drilling
     Recommencement Date.

           Borrower hereby represents and warrants that the conditions to
lending specified in Sections 4.02(b), (c) and (d) of the Credit Agreement are
satisfied as of the date hereof.

________________________
2    Shall be ABR for Swingline Loans.

3    Shall be subject to the definition of "Interest Period"in the Credit
     Agreement.

<PAGE>

                               QUEST CHEROKEE, LLC

                               By:
                                  ---------------------------------
                                    Title:  [Financial Officer]

<PAGE>

                                                                       ANNEX III
                                                                       EXHIBIT D

                                    [Form of]
                             COMPLIANCE CERTIFICATE

           I, [ ], the [Financial Officer] of Quest Cherokee, LLC (in such
capacity and not in my individual capacity), hereby certify that, with respect
to that certain Credit Agreement dated as of July 22, 2004 (as it may be
amended, modified, extended or restated from time to time, the "Credit
Agreement"; all of the defined terms in the Credit Agreement are incorporated
herein by reference) among QUEST CHEROKEE, LLC, a Delaware limited liability
company, as borrower (the "Borrower"), the Guarantors party thereto, the Lenders
party thereto, UBS SECURITIES LLC, as Arranger, Documentation Agent and
Syndication Agent, UBS LOAN FINANCE LLC, as Swingline lender and UBS AG,
STAMFORD BRANCH, as Administrative Agent and Collateral Agent:

           a. Attached hereto as Schedule 1 are detailed calculations4
      demonstrating compliance by Borrower with Section 6.10 and Section 5.08
      of the Credit Agreement. Borrower is in compliance with such Sections as
      of the date hereof. Attached hereto as Schedule 2 are detailed
      calculations setting forth the Borrower's Excess Cash Flow.5 Attached
      hereto as Schedule 3 is the report of [accounting firm].6

           b. The Borrower was in compliance with each of the covenants set
      forth in Section 6.10 of the Credit Agreement [at all times during and]
      since [ ].

________________________
4    To accompany annual and quarterly financial statements only. Which
     calculations shall be in reasonable detail satisfactory to the
     Administrative Agent and shall include, among other things, an explanation
     of the methodology used in such calculations and a breakdown of the
     components of such calculations.

5    To be provided during the Excess Cash Flow Period.

6    To accompany annual financial statements only. The report must opine or
     certify that, with respect to its regular audit of such financial
     statements, which audit was conducted in accordance with GAAP, the
     accounting firm obtained no knowledge that any Default has occurred or, if
     in the opinion of such accounting firm such a Default has occurred,
     specifying the nature and extent thereof.

<PAGE>

           c. No Default has occurred under the Credit Agreement which has not
      been previously disclosed, in writing, to the Administrative Agent
      pursuant to a Compliance Certificate.7

           d. Attached hereto as Schedule 4 is a list of all wells that have
      been connected to the Borrower's gathering system, information relating to
      Borrower's gross daily gas production and a list of all new wells drilled,
      in each case, for the applicable period and Wells-In-Progress as of the
      end of the applicable period. Borrower is in compliance with the provision
      of Section 6.22.

________________________
7     If a Default shall have occurred, an explanation specifying the nature and
      extent of such Default shall be provided on a separate page together with
      an explanation of the corrective action taken or proposed to be taken with
      respect thereto (include, as applicable, information regarding actions, if
      any, taken since prior certificate).

<PAGE>

Dated this [    ] day of [                 ], 20[  ].

                               [                               ]
                               By:
                                  ----------------------------
                                  Name:
                                  Title:   [Financial Officer]

<PAGE>

                                   SCHEDULE 1
                                   ----------

                               Financial Covenants

     (A) Maximum Total Leverage Ratio:  Total
         Net Debt to Consolidated EBITDA

     Total Net Debt for the four quarter period
     ended [          ], 20[  ]                                 ________________

     Consolidated EBITDA                                        ________________

     Calculation of Consolidated EBITDA:

       Consolidated Net Income for such period,

         (1) plus, in each case only to the extent (and
          in the same proportion) deducted in determining
          such Consolidated Net Income:

             (a) Consolidated Interest Expense and interest
             expense on the Subordinated Notes for such
             period, calculation:

             total consolidated interest expense under GAAP,
             plus or less, without duplication.

           plus imputed interest on Capital
             Lease Obligations and Attributable
             Indebtedness of Borrower and its
             Subsidiaries for such period;

           plus commissions, discounts and other fees and
             charges owed by Borrower or any of its
             Subsidiaries with respect to letters of credit
             securing financial obligations, bankers'
             acceptance financing and receivables financings
             for such period;

           plus amortization of debt issuance costs, debt
             discount or premium and other financing fees
             and expenses incurred by Borrower or any of its
             Subsidiaries for such period;

           plus cash contributions to any employee stock
             ownership plan or similar trust made by Borrower
             or any

<PAGE>

             of its Subsidiaries to the extent such
             contributions are used by such plan or trust to
             pay interest or fees to any person (other than
             Borrower or a Wholly Owned Subsidiary) in
             connection with Indebtedness incurred by such plan
             or trust for such period;

           plus all interest paid or payable with respect to
             discontinued operations of Borrower or any of
             its Subsidiaries for such period;

           plus the interest portion of any deferred payment
             obligations of Borrower or any of its Subsidiaries
             for such period;

           plus all interest on any Indebtedness of Borrower or
             any of its Subsidiaries of the type described in
             clause (f) or (k) of the definition of
             "Indebtedness" for such period;

           less debt issuance costs, debt discount or premium
             and other financing fees and expenses directly
             related to the Transactions;

           less unrealized gains and losses with respect to
             Hedging Agreements; and

           less interest expense on the Subordinated Notes
             for such period.

           subtotal of Consolidated Interest Expense            ________________

             (b) plus interest expense on the Subordinated
             Notes for such period,                             ________________

             (c) plus the amortization expense of Borrower
             and its Subsidiaries for such period, determined
             on a consolidated basis in accordance with GAAP,   ________________

             (d) plus the depreciation expense of Borrower
             and its Subsidiaries for such period, determined
             on a consolidated basis in accordance with GAAP,   ________________

<PAGE>

             (e) plus the tax expense of Borrower and its
             Subsidiaries, for such period, determined on a
             consolidated basis in accordance with GAAP,        ________________

             (f) plus costs and expenses directly incurred
             in connection with the Transactions (not to
             exceed $6.3 million),                              ________________

             (g) plus the aggregate amount of all other
             non-cash items reducing Consolidated Net Income
             (excluding any non-cash charge that results
             in an accrual of a reserve for cash charges in
             any future period) for such period, and

       (2)   subtracting therefrom, in each case only to the
             extent (and in the same proportion) added in
             determining Consolidated Net Income, (i) the
             aggregate amount of all non-cash items
             increasing Consolidated Net Income (other than
             the accrual of revenue or recording of receivables
             in the ordinary course of business)for such period ________________
             and (ii) any general and administrative expenses
             that are capitalized and added to the gross
             property, plant and equipment account during such
             period under the full cost method of accounting.

     Consolidated EBITDA                                        ________________

     Total Net Debt to Consolidated EBITDA                      [  ]:1.0

     Covenant Requirement                                       No more than
                                                                 [ ]:1.0

<PAGE>

     (B)   Minimum Asset Coverage Ratio: PV-10 Value to Total
           Net Debt:                                            _______ : 1.0

<PAGE>

     (C)   Minimum Interest Coverage Ratio:
           Consolidated EBITDA to Consolidated
           Interest Expense

     Consolidated EBITDA (calculated in
     accordance with clause (A))                                ________________

     Consolidated Interest Expense (calculated
     in accordance with clause (A))                             ________________

           Consolidated EBITDA to Consolidated
             Interest Expense                                   [    ]:1.0

           Covenant Requirement                                 Greater than or
                                                                equal to   :1.0

<PAGE>

     (D)   Minimum Consolidated Fixed Charge
           Ratio:  Consolidated EBITDA to
           Consolidated Fixed Charges

     Consolidated EBITDA (calculated in accordance with
     clause (A))                                                ________________

     Consolidated Fixed Charges Calculation is
     Consolidated Interest Expense plus Consolidated
     Fixed Charges

     Consolidated Interest Expense (calculated
     in accordance with Clause (A))                             ________________

     Consolidated Fixed Charges calculation:

           Consolidated Interest Expense for such period;

           plus the aggregate amount of Capital Expenditures
             for such period (other than to the extent
             financed by Excluded Issuances or out of that
             portion of Excess Cash Flow not required to be
             applied to the Term B Loans pursuant to Section
             2.10(g));

           plus all cash payments in respect of income taxes
             made during such period (net of any cash refund
             in respect of income taxes actually received
             during such period);

           plus the principal amount of all scheduled
             amortization payments on all Indebtedness
             (including the principal component of all
             Capital Lease Obligations) of Borrower and its
             Subsidiaries for such period (as determined on
             the first day of the respective period);

           plus the product of (i) all dividend payments on
             any series of Disqualified Capital Stock of
             Borrower or any of its Subsidiaries (other than
             dividend payments to Borrower or any of its
             Subsidiaries) multiplied by (ii) a fraction,
             the numerator of which is one and the denominator
             of which is one minus the then current combined
             federal, state and local statutory tax rate of
             Borrower and its Subsidiaries, expressed as a
             decimal; and

           plus the product of (i) all cash dividend payments
             on any Preferred Stock (other than Disqualified
             Capital

<PAGE>

             Stock) of Borrower or any of its Subsidiaries
             (other than dividend payments to Borrower or any
             of its Subsidiaries) multiplied by (ii) a
             fraction, the numerator of which is one and the
             denominator of which is one minus the then current
             combined federal, state and local statutory tax
             rate of Borrower and its Subsidiaries, expressed
             as a decimal.

     Consolidated Fixed Charges Expense.                        ________________

     Consolidated EBITDA to Consolidated Fixed
     Charges                                                    [    ]:1.0

          Covenant Requirement                                  Greater than or
                                                                equal to
                                                                [    ]:1.0

<PAGE>

     (E)   Maximum Capital Expenditures

             Capital Expenditures                               ________________

             Covenant Requirement                               No more than [ ]

<PAGE>

     (F)   Prior to December 31, 2005, Revolving
           Loan Use of Proceeds

        Total Leverage Ratio is:

        Total Net Debt : Consolidated EBITDA

     Total Net Debt for the four quarter period
     ended [          ], 20[  ]                                 ________________

     Consolidated EBITDA (calculated in
     accordance with clause (A))                                ________________

                Total Net Debt to Consolidated EBITDA           [   ]:1.0

                Covenant Requirement                            Less than
                                                                3.5:1.0

<PAGE>

                                   SCHEDULE 2
                                   ----------

     Excess Cash Flow Calculation:

     Net cash from operating activities for the Excess
     Cash Flow Period                                           ________________

           less principal payments of Term B Loans required
             by Section 2.09(a) that are actually made
             during such period;

           less the lower of actual Capital Expenditures and
             Budgeted Capital Expenditures during such period;
             and

           less Permitted Tax Distributions that are paid
             during such period or will be paid within six
             months after the close of such period.

     Excess Cash Flow                                           ________________

<PAGE>

                                   SCHEDULE 3
                                   ----------

                  [Report of accounting firm, if applicable]

<PAGE>

                                   SCHEDULE 4
                                   ----------

                                    [Attach:

1. a list of all wells connected to the Borrower's gathering system during the
   applicable period;
2. a report on Borrower's gross daily gas production for the applicable period;
3. a list of all new wells drilled for the applicable period; and
4. all Wells-In-Progress as of the end of the applicable period.]

<PAGE>

                                                                        ANNEX IV
                                                                       EXHIBIT E

                                    [Form of]
                            INTEREST ELECTION REQUEST

UBS AG, Stamford Branch,
    as Administrative Agent
677 Washington Boulevard
Stamford, Connecticut  06901

Attention:  [                 ]

                                                                          [Date]

                             Re: Quest Cherokee, LLC

Ladies and Gentlemen:

           This Interest Election Request is delivered to you pursuant to
Section 2.08 of the Credit Agreement dated as of July 22, 2004 (as amended,
amended and restated, supplemented or otherwise modified from time to time, the
"Credit Agreement") among QUEST CHEROKEE, LLC, a Delaware limited liability
company ("Borrower"), the Guarantors (such term and each other capitalized term
used but not defined herein having the meaning given it in Article I thereof),
the Lenders, UBS SECURITIES LLC, as lead arranger (in such capacity,
"Arranger"), documentation agent (in such capacity, "Documentation Agent") and
syndication agent (in such capacity, "Syndication Agent"), UBS LOAN FINANCE
LLC, as swingline lender (in such capacity, "Swingline Lender"), and UBS AG,
STAMFORD BRANCH, as administrative agent (in such capacity, "Administrative
Agent") for the Lenders, collateral agent (in such capacity, "Collateral Agent")
for the Secured Parties and Issuing Bank.

           Borrower hereby requests that on [__________]8 (the "Interest
Election Date"),

           1. $[__________] of the presently outstanding principal amount of the
      Loans originally made on [__________],

________________________
8       Shall be a Business Day that is (a) the date hereof in the case of a
        conversion into ABR Loans to the extent this Interest Election Request
        is delivered to the Administrative Agent prior to 11:00 a.m., New York
        City time on the date hereof, otherwise the Business Day following the
        date of delivery hereof and (b) three Business Days following the date
        hereof in the case of a conversion into/continuation of Eurodollar
        Loans to the extent this Interest Election Request is delivered to the
        Administrative Agent prior to 11:00 a.m. New York City time on the
        date hereof, otherwise the fourth Business Day following the date of
        delivery hereof, in each case.

<PAGE>

           2. and all presently being maintained as [ABR Loans] [Eurodollar
      Loans],

           3. be [converted into] [continued as],

           4. [Eurodollar Loans having an Interest Period of
      [one/two/three/six[/nine] months] [ABR Loans].

           The undersigned hereby certifies that the following statements are
true on the date hereof, and will be true on the proposed Interest Election
Date, both before and after giving effect thereto and to the application of the
proceeds therefrom:

           (a) the foregoing [conversion] [continuation] complies with the terms
      and conditions of the Credit Agreement (including, without limitation,
      Section 2.08 of the Credit Agreement); and

           (b) no Default has occurred and is continuing, or would result from
      such proposed [conversion] [continuation].9

                            [Signature Page Follows]

________________________
9       If a Default shall have occurred, an explanation specifying the nature
        and extent of such Default shall be provided on a separate page
        together with an explanation of the corrective action taken or
        proposed to be taken with respect thereto.

<PAGE>

           Borrower has caused this Interest Election Request to be executed and
delivered by its duly authorized officer as of the date first written above.

                               QUEST CHEROKEE, LLC

                               By:
                                    -----------------------------------
                                    Name:
                                    Title:

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00078-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00078-of-00352.parquet"}]]