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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.
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<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."
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<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."
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<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)"
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<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).
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<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]
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<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
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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
------------------------------- -------------------------------
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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>
------------------------------- -------------------------------
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ORIGINAL
BORROWER PRINCIPAL
LENDER AMOUNT COLLATERAL NEGATIVE PLEDGE
------------------------------- -------------------------------
--------------- ----------------------
-----------------------------
other goods put on the
vehicle and all money
or goods received for
the vehicle
------------------------------- -------------------------------
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-----------------------------
Equipment Lease. - lessee
Quest Cherokee Oilfield $19,393
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