EXECUTION COPY
WAIVER AND AMENDMENT NO. 1
Dated as of December 22, 2006
to
AMENDED AND RESTATED
SECOND LIEN TERM LOAN AGREEMENT
Dated as of June 9, 2006
THIS WAIVER AND AMENDMENT NO. 1 ("Amendment") is made as of
December
22, 2006 by and among Quest Cherokee, LLC ("Quest Cherokee") and Quest
Resource
Corporation ("QRC"), as borrowers (the "Borrowers"), the financial institutions
from time to time
parties thereto (the
"Lenders")
and Guggenheim Corporate
Funding, LLC, as
administrative agent (the "Administrative Agent") under that
certain Amended and Restated Second Lien Term Loan Agreement dated
as of June 9,
2006 by and among the Borrowers, the Lenders and the Administrative Agent (as
amended, restated
or otherwise modified from time to time, the "Credit
Agreement"). Defined
terms used herein and not otherwise defined herein shall
have the respective meanings given to them in the Credit
Agreement.
WHEREAS, the Borrowers have entered into that certain Contribution,
Conveyance and Assumption Agreement, dated as of December 22, 2006
(as in effect
on the date hereof, the "Contribution Agreement"), among the
Borrowers, Bluestem
Pipeline, LLC
("Bluestem"),
Quest Midstream
Partners, L.P. ("MLP"), Quest
Midstream GP, LLC ("GP"), STP Cherokee, LLC, Quest Oil & Gas, LLC,
Quest Energy
Service, LLC,
Ponderosa Gas Pipeline Company, LLC, Producers Service, LLC,
and
J-W Gas Gathering,
L.L.C., pursuant to
which one hundred percent (100%) of the
outstanding Equity
Interests of Bluestem
will be contributed to MLP, a copy of
which is attached hereto as Annex A;
WHEREAS, in connection
with the transactions contemplated by the
Contribution
Agreement, MLP
will issue 4,864,866 common units of the MLP
representing an
approximate
48.64% interest in the MLP and GP will
issue 150
units of the GP
representing a 15% interest in the GP to certain institutional
investors for
approximately
$90 million pursuant to the terms of a
Purchase
Agreement (a copy of which is attached hereto as Annex C) among
MLP, GP, QRC and
the institutional
investors named therein (the "Purchase Agreement"; the
transactions
contemplated by
the Contribution Agreement and the Purchase
Agreement are referred to herein as the "Midstream
Transaction");
WHEREAS, the Borrowers
have requested that each Lender consent
to
the consummation
of the Midstream
Transaction
and waive compliance with any
violation of the Credit Agreement or the other Loan
Documents that arises
from
consummation of
the Midstream Transaction pursuant to the Contribution
Agreement, the
Purchase Agreement and the other Transaction Documents (as
defined in the Purchase Agreement);
<PAGE>
WHEREAS, the Lenders
consent to the
consummation of the
Midstream
Transaction and waive
compliance with any violation of the Credit Agreement or
the other Loan
Documents that arises
from the consummation
of the Midstream
Transaction pursuant to the Contribution Agreement, the Purchase Agreement and
the other Transaction Documents on the terms and conditions set
forth herein;
WHEREAS, Bluestem and
certain other
Subsidiaries of the
Borrowers
are parties to that certain Guaranty dated as of November 14,
2005 (as amended,
restated, supplemented
or otherwise
modified prior to the date hereof, the
"Guaranty") in favor of the Administrative Agent;
WHEREAS, the
parties hereto have agreed to amend and restate
the
Guaranty in its entirety pursuant to that certain Amended
and Restated Guaranty
dated as of December 22, 2006 (as the same may be amended, restated,
supplemented or otherwise modified from time to time, the "Amended
Guaranty");
WHEREAS, the Borrowers
and the Guarantors, as pledgors, and the
Administrative Agent
are parties to that certain Amended and Restated Security
Agreement dated
as of June 9,
2006 (as amended, restated, supplemented or
otherwise modified prior to the date hereof, the "Security
Agreement");
WHEREAS, the
parties hereto have agreed to amend and restate
the
Security Agreement in
its entirety pursuant
to that certain Second Amended and
Restated Security Agreement dated as of December 22, 2006 (as
amended, restated,
supplemented or
otherwise modified
from time to time,
the "Amended
Security
Agreement");
WHEREAS, Section 12.02(b) of the Credit Agreement, Section 12 of
the
Guaranty and Section 11.5 of the Security Agreement require the written
consent
of each Lender in connection with the release of any
Guarantor under the Loan
Documents;
WHEREAS, the Borrowers
have requested that each Lender consent
to
authorize the Administrative Agent to (A) release Bluestem from
its obligations
under the Guaranty, the Security Agreement and the other Loan
Documents to which
it is a party, (B) release all liens and security interests granted to or held
by the Administrative Agent in the assets of Bluestem, (C) release the lien and
security interests granted to or held by the Administrative Agent
in 100% of the
Equity Interests
of Bluestem, and the Lenders have agreed to provide such
consent on the terms and conditions set forth herein, and (D) enter
into (i) the
Amended Guaranty and (ii) the Amended Security Agreement; and
WHEREAS, the
Borrowers,
the Lenders party hereto and the
Administrative Agent
have agreed to amend the Credit Agreement on the terms and
conditions set forth herein;
NOW, THEREFORE,
in consideration of the premises set
forth above,
the terms and conditions contained herein, and other good and valuable
consideration, the receipt and sufficiency of which are hereby
acknowledged, the
Borrowers, the Lenders party hereto and the Administrative Agent
hereby agree as
follows.
2
<PAGE>
1. Waiver. Subject to the satisfaction of the conditions precedent
set
forth in Section 5 below, each Lender hereby agrees to waive any violation
of
the Credit Agreement or the other Loan Documents that results from
consummation
of the transaction described in the Contribution Agreement, the Purchase
Agreement and
the other Transaction Documents and consents to (i) the
consummation of the
Midstream Transaction
pursuant to (and in
accordance with
the Contribution
Agreement and the Purchase Agreement) and (ii) the other
transactions contemplated by the other Transaction Documents
pursuant to (and in
accordance with) the other Transaction Documents.
2. Guaranty
and Loan Documents. Upon the effectiveness of this
Amendment and upon (i) the consummation of the Midstream
Transaction,
and (ii)
the other transactions
contemplated by the other Transaction Documents, in each
case pursuant
to (and in
accordance
with) the Contribution Agreement, the
Purchase Agreement
and the other
Transaction
Documents,
each Lender
hereby
authorizes the Administrative Agent to (A) release Bluestem from
its obligations
under the Guaranty, the Security Agreement and the other Loan
Documents to which
it is a party, (B) release all liens and security interests granted to or held
by the Administrative Agent in the assets of Bluestem, (C) release
the liens and
security interests granted to or held by the Administrative Agent
in 100% of the
Equity Interests of
Bluestem, and (D)
enter into (i) the Amended Guaranty and
(ii) the Amended Security Agreement.
3. Amendments to Credit Agreement. Subject to the satisfaction of
the
conditions precedent
set forth in
Section 5 below,
the Credit
Agreement is
hereby amended as follows:
(a) Section 1.01 of the Credit Agreement is hereby amended by
deleting
the definition
of "Guarantors" now contained therein and to substitute
the
following therefor:
"Guarantors" means, each of the following: STP Cherokee,
LLC, Quest Oil & Gas, LLC, Quest Energy Service, LLC, Ponderosa Gas
Pipeline Company, LLC,
Producers Service,
LLC, J-W Gas
Gathering,
L.L.C. and Quest Cherokee Oilfield Service, LLC.
(b) Section 1.01 of the Credit Agreement is hereby amended to delete
the definition
of "Pipeline" now contained therein and to substitute the
following therefor:
"Pipeline" means any
pipeline owned and operated by the
Borrowers or their Subsidiaries.
(c) Section 1.01 of the Credit Agreement is hereby amended to delete the last
sentence of
the definition of "Subsidiary" now contained therein and to
substitute the following therefore:
"Unless otherwise
indicated herein,
each reference to
the term `Subsidiary' shall mean a Subsidiary of one of the
Borrowers;
provided however,
that
for the purposes of this
Agreement,
`Subsidiary' shall not include Quest Midstream Partners,
Quest Midstream GP, or their respective subsidiaries."
3
<PAGE>
(d) Section 1.01 of the Credit Agreement is hereby amended to add
the
following sentence at the end of the definition of "Consolidated
Net Income" now
contained therein:
"Notwithstanding
the foregoing, the net income or loss of
Quest Midstream
Partners, Quest
Midstream GP and their
subsidiaries
shall not be included in the Consolidated Net Income of Borrowers
even
though such net income or loss is consolidated with the net income or
loss of Borrowers for
purposes of GAAP,
except to the extent
of the
amount of dividends or distributions actually paid in cash during
such
period by Quest Midstream Partners, Quest Midstream GP or their
subsidiaries to Borrowers or their Consolidated Subsidiaries, as the
case may be."
(e) Section 1.01 of the Credit Agreement is hereby amended to
include
the following definitions in the appropriate alphabetical
order:
"Contribution
Agreement" means that
certain
Contribution,
Conveyance and
Assumption Agreement,
dated as of December
22, 2006,
among the Borrowers, Bluestem Pipeline, LLC, Quest Midstream
Partners,
Quest Midstream GP,
STP Cherokee, LLC,
Quest Oil & Gas,
LLC, Quest
Energy Service, LLC,
Ponderosa Gas Pipeline
Company, LLC,
Producers
Service, LLC,
and J-W Gas
Gathering,
L.L.C., attached hereto as
Exhibit H.
"Pledged Interests"
shall have the meaning set forth in the
Security Agreement.
"Purchase Agreement"
means that certain Purchase Agreement,
dated as of December 22, 2006, among Quest Midstream Partners, Quest
Midstream GP, QRC, and
the institutional
investors named therein,
attached hereto as Exhibit I.
"Quest Midstream
Partners" means Quest Midstream Partners,
L.P., a Delaware limited partnership.
"Quest Midstream
GP" means Quest Midstream GP, LLC, a
Delaware limited liability company.
"Restrictions on Pledged Interests" means, with respect to
Pledged Interests in Quest Midstream Partners and Quest Midstream
GP,
rights and claims of third parties to such Pledged Interests created
under the
organizational
documents of Quest
Midstream Partners or
Quest Midstream
GP or under
the Investors' Rights Agreement (as
defined in the Purchase Agreement).
"Transaction
Documents" shall have the meaning set forth in
the Purchase Agreement.
(f) Section 9.03 of the Credit Agreement is hereby amended to add
the
following clause (j) immediately after the existing clause (i):
"(j) Restrictions on Pledged Interests."
4
<PAGE>
(g) Section 3.04(a)(ii) is hereby amended by deleting the current
text
of and substituting the following therefore:
(ii) at any time after the first anniversary of the Effective
Date, optional prepayments shall be made at the prices (expressed
as
percentages of the outstanding principal amount) set forth below,
if
prepaid during each successive 12-month period beginning on
November
15 of each year indicated below:
Year
Prepayment Price
------
------------------
2006
103.5%
2007
102.25%
2008
101.125%
2009 and thereafter
100%
provided that, in any event, each prepayment is in an amount that
is
an integral multiple of $1,000,000 and not less than $1,000,000,
or
if such amount
is less than
$1,000,000, the
outstanding
principal
amount of the Loans.
Accrued and unpaid
interest on the
principal
amount prepaid, all
outstanding and unpaid
fees and expenses,
and
the prepayment
price set forth in
this Section 3.04(a),
shall be
paid on the prepayment date.
(h) Section 9.05 of the Credit Agreement is hereby amended to add
the
following clause (n) immediately after the existing clause (m):
"(n) Those transactions contemplated by the Contribution
Agreement, the
Purchase Agreement and the other Transaction
Documents."
(i) Section
9.12 of the Credit
Agreement is hereby amended to (i)
delete the word "and" before clause (e) appearing therein and (ii) insert the
following clause (f) at the end thereof:
"; and (f) sales contemplated under the Purchase
Agreement and the other Transaction Documents."
Section 9.14
clause (a) of the Credit Agreement is
hereby amended and restated in its entirety as follows:
"(a) Investments under Section 9.05(i) and (n)"
5
<PAGE>
(j) Section 9.14 of the Credit Agreement is hereby further
amended to
delete the word
"and" before clause (c) appearing therein and insert the
following clause (d) at the end thereof:
", and (d) the transactions contemplated by the
Contribution
Agreement, the
Purchase Agreement and the other
Transaction Documents."
(k) Section 9.16 of the Credit Agreement is hereby amended to delete
the period appearing at the end of such section and insert the
following:
", other than the Restrictions on Pledged Interests."
(l) The Credit
Agreement is hereby
amended to add a true and correct
copy of the Contribution Agreement as Exhibit H to the Credit
Agreement.
(m) The Credit
Agreement is hereby
amended to add a true and correct
copy of the Purchase Agreement as Exhibit I to the Credit
Agreement.
(n) The Schedules
to the Credit Agreement are hereby amended by
deleting the existing Schedules and substituting the attached Annex
B therefore.
4. Amendment Fee. In
consideration for the
Lenders' consent to
this
Amendment, the
Borrowers hereby agree to pay to the Administrative Agent, for
the benefit of the Lenders under the Credit Agreement, a fee equal to .75% of
the aggregate amount of each Lender's Commitment.
5. Conditions of Effectiveness. The effectiveness of this Amendment
is
subject to the satisfaction of the conditions precedent that the
Administrative
Agent shall have received (i) counterparts of this Amendment duly executed by
the Borrowers, the Lenders and the Administrative Agent, (ii) the
payment of all
fees in accordance with this Amendment and (iii) each of the
documents listed on
Annex D attached hereto.
6. Representations
and Warranties of the Borrowers. The Borrowers
hereby represent and warrant as follows:
(a) This Amendment and the Credit Agreement as amended hereby,
constitute legal,
valid and binding obligations of the Borrowers and are
enforceable against
the Borrowers in
accordance with their
terms, subject to
applicable bankruptcy,
insolvency,
reorganization,
moratorium
or other laws
affecting creditors'
rights generally and subject to general
principles
of
equity, regardless of whether considered in a proceeding in equity
or at law.
(b) As of the date
hereof and
giving effect to the terms of this
Amendment, (i)
there exists no Default or Event of Default and (ii) the
representations and
warranties
of the Borrowers set forth in the Credit
Agreement and each other Loan Document shall be true and correct in
all material
respects as of the date hereof (except those representations and warranties
which are limited to a specific date, which are true and correct in
all material
respects as of such
date and those representations and warranties already
qualified with respect
to materiality,
which shall be true
and correct in all
respects).
6
<PAGE>
7. Reference to and Effect on the Credit Agreement.
(a) Upon the
effectiveness of this
Amendment, each
reference to the
Credit Agreement in
the Credit Agreement
or any other Loan Document shall mean
and be a reference to the Credit Agreement as amended hereby.
(b) Except as specifically amended above, the Credit Agreement and
all
other documents,
instruments
and agreements executed and/or delivered in
connection therewith
shall remain in full force and effect and are hereby
ratified and confirmed.
(c) The execution,
delivery and effectiveness of this Amendment shall
not operate
as a waiver of any
right, power or remedy of the
Administrative
Agent or the Lenders,
nor (except as expressly provided herein) constitute a
waiver of any
provision of the Credit Agreement or any other documents,
instruments and agreements executed and/or delivered in connection
therewith.
8. Governing Law. THIS AMENDMENT SHALL BE CONSTRUED IN ACCORDANCE
WITH
AND GOVERNED BY THE LAWS OF THE STATE OF NEW YORK.
9. Headings. Section
headings in this
Amendment are included
herein
for convenience
of reference only and shall not constitute a part of this
Amendment for any other purpose.
10. Counterparts. This Amendment may be executed by one or more of
the
parties hereto
on any number of separate counterparts, and all of said
counterparts taken
together shall be deemed to constitute one and the same
instrument.
[Signature Pages Follow]
7
<PAGE>
IN WITNESS WHEREOF,
this Amendment has been duly executed as of the
day and year first above written.
BORROWERS:
QUEST CHEROKEE, LLC
By: /s/ Jerry D. Cash
-------------------------------------
Jerry D. Cash,
Chief Executive Officer and President
QUEST RESOURCE CORPORATION
By: /s/ Jerry D. Cash
-------------------------------------
Jerry D. Cash,
Chief Executive Officer and President
<PAGE>
ADMINISTRATIVE AGENT:
GUGGENHEIM CORPORATE FUNDING,
LLC, as Administrative Agent, Syndication
Agent, Sole Lead Arranger and Sole Bookrunner
By: /s/
Todd Boehly
---------------------------------------
Name: Todd Boehly
Title: Managing Partner
<PAGE>
LENDERS:
MASSACHUSETTS MUTUAL LIFE INSURANCE COMPANY
By: Babson Capital
Management LLC as
Investment Adviser
By: /s/ Thomas M.
Finke
-------------------------------------
Name: Thomas M. Finke
Title: Managing Director
<PAGE>
LENDERS:
DEL MAR MASTER FUND LTD.
By: Del Mar Asset Management, L.P.
By: /s/ Marc V.
Simons
-------------------------------------
Name: Marc V.
Simons
Title: Director
<PAGE>
LENDERS:
SEAL ROCK OFFSHORE FUNDING, L.L.C.
By: Farallon Capital Management, LLC, its manager
By: /s/ Monica R. Landry
-------------------------------------------
Name: Monica R. Landry
Title: Managing Member
<PAGE>
LENDERS:
SPF CDO I, LLC
By: /s/ Richard Petrilli
-------------------------------------------
Name: Richard Petrilli
Title: Authorized Signatory
<PAGE>
LENDERS:
FIELD POINT II, LTD.
By: /s/ Richard Petrilli
-------------------------------------------
Name: Richard Petrilli
Title: Authorized Signatory
<PAGE>
LENDERS:
FIELD POINT IV, LTD
By: /s/ Richard Petrilli
-------------------------------------------
Name: Richard Petrilli
Title: Authorized Signatory
<PAGE>
LENDERS:
FIELD POINT III, LTD
By: /s/ Richard Petrilli
-------------------------------------------
Name: Richard Petrilli
Title: Authorized Signatory
<PAGE>
LENDERS:
WELLS FARGO ENERGY CAPITAL, INC.
By: /s/ Clayton R. Taylor
-------------------------------------------
Name: Clayton R. Taylor
Title: Vice President
<PAGE>
LENDERS:
DELLACAMERA CAPITAL MASTER FUND, LTD.
By: /s/ Ralph Della Camera, Jr.
-------------------------------------------
Name: Ralph Della Camera, Jr.
Title: Managing Member
<PAGE>
LENDERS:
ORPHEUS HOLDINGS LLC
By: Guggenheim Investment Management, LLC
as its Manager
By: /s/ Michael Damaso
-------------------------------------------
Name: Michael Damaso
Title: Managing Director
<PAGE>
LENDERS:
ORPHEUS FUNDING LLC
By: Guggenheim Investment Management, LLC
as its Manager
By: /s/ Michael Damaso
-------------------------------------------
Name: Michael Damaso
Title: Managing Director
<PAGE>
Annex A
to
Waiver and Amendment
No. 1 to the Amended and Restated Second Lien Term Loan
Agreement
Contribution Agreement
[Attached as Exhibit 10.5 to the Form 8-K
filed by Quest Resource Corporation on December 29, 2006]
<PAGE>
Annex B
to
Waiver and Amendment
No. 1 to the Amended and Restated Second Lien Term Loan
Agreement
Schedules to Credit Agreement
Schedule 7.03
-------------
Consents and Approvals
None.
<PAGE>
Schedule 7.05
-------------
Litigation
None, other than those disclosed in QRC's filings with the
Securities and
Exchange Commission.
<PAGE>
Schedule 7.14
-------------
Liens
<TABLE>
<CAPTION>
------------------------------- -------------------------------
--------------- ----------------------
-----------------------------
ORIGINAL
BORROWER
PRINCIPAL
LENDER
AMOUNT
COLLATERAL
NEGATIVE PLEDGE
------------------------------- -------------------------------
--------------- ----------------------
-----------------------------
<S>
<C>
<C>
<C>
<C>
Quest Energy Service, Inc. Merle
Kelly Ford, Inc.
$22,139.00 2002 Ford
F-150
Must keep vehicle "free from
the claims of others"
------------------------------- -------------------------------
--------------- ----------------------
-----------------------------
Used 2003 Ford F-250 Must keep vehicle "free
from
Quest Energy Service, Inc. Merle
Kelly Ford, Inc.
$21,930.22 Truck
the claims of others"
------------------------------- -------------------------------
--------------- ----------------------
-----------------------------
$19,393.65
(36 month
Equipment Lease. - lessee
Quest Cherokee Oilfield
term ($2,000 2005 Ford F-150
does not have any "right,
Service, LLC (Lessee)
Total Leasing (Lessor)
residual
Truck (leased
title or interest in the
value at end vehicle)
vehicle"
of 36 months)
------------------------------- -------------------------------
--------------- ----------------------
-----------------------------
2004 Toyota Tacoma
along with any
accessories and
equipment installed
Quest Energy Service, Inc. Quality
Toyota, Inc.
$26,358.88 in the
vehicle and May not sell or
transfer the
any replacement
vehicle without Seller's
parts installed in prior written
consent.
the vehicle
------------------------------- -------------------------------
--------------- ----------------------
-----------------------------
2000 Ford Truck
Super Duty 8800 and
all goods put on the
Quest Energy Service, Inc. Merle
Kelly Ford, Inc.
$39,493.08 vehicle as
well as
all money or goods Must keep
vehicle "free from
received from the the claims
of others"
vehicle
------------------------------- -------------------------------
--------------- ----------------------
-----------------------------
Quest Energy Service, Inc. Merle
Kelly Ford, Inc.
$33,329.69 2001 Ford
Truck
Must keep vehicle "free from
F-150 Crew and all the claims of
others"
parts or
------------------------------- -------------------------------
--------------- ----------------------
-----------------------------
<PAGE>
------------------------------- -------------------------------
--------------- ----------------------
-----------------------------
ORIGINAL
BORROWER
PRINCIPAL
LENDER
AMOUNT
COLLATERAL
NEGATIVE PLEDGE
------------------------------- -------------------------------
--------------- ----------------------
-----------------------------
other goods put on the
vehicle and all money
or goods received for
the vehicle
------------------------------- -------------------------------
--------------- ----------------------
-----------------------------
Equipment Lease. - lessee
Quest Cherokee Oilfield
$19,393.65
does not have any "right,
Service, LLC. (Lessee)
(original
title or interest in the
Total Leasing (Lessor)
value)
