10-K

UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 10-K

(Mark One)
þ	ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
	For the fiscal year ended December 31, 2006
o	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

Commission file number: 0-17371

QUEST RESOURCE CORPORATION

(Exact Name of Registrant as Specified in Its Charter)

Nevada (State or Other Jurisdiction of Incorporation or Organization)	90-0196936 (I.R.S. Employer Identification No.)
9520 N. May, Suite 300, Oklahoma City, Oklahoma	73120 (Zip Code)
(Address of Principal Executive Offices)

Registrant’s Telephone Number:

405-488-1304

Securities Registered Pursuant to Section 12(b) of the Exchange Act:

Title of Each Class	Name of Each Exchange on Which Registered
Common Stock	Nasdaq Global Market
Series B Junior Participating Preferred Stock	Nasdaq Global Market

Securities Registered Pursuant to Section 12(g) of the Exchange Act:

None

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.  Yes o      No þ

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Act.  Yes o      No þ

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.  Yes þ     No o

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§229.405 of this chapter) is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of “accelerated filer and large accelerated filer” in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer o          Accelerated filer þ          Non-accelerated filer o

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act).  Yes o      No þ

The aggregate market value of the voting stock held by non-affiliates computed by reference to the last reported sale of the registrant’s common stock on June 30, 2006, the last business day of the registrant’s most recently completed second fiscal quarter, at $13.55 per share was $267,070,066. This figure assumes that only the directors and officers of the registrant, their spouses and controlled corporations were affiliates.

There were 22,206,014 shares outstanding of the registrant’s common stock as of March 6, 2007.

DOCUMENTS INCORPORATED BY REFERENCE

The definitive proxy statement relating to the issuer’s 2007 Annual Meeting of Stockholders is incorporated by reference in Part III to the extent described therein.

TABLE OF CONTENTS

PART I
	ITEMS 1. AND 2.	BUSINESS AND PROPERTIES	1
	ITEM 1A.	RISK FACTORS	22
	ITEM 1B.	UNRESOLVED STAFF COMMENTS	33
	ITEM 3.	LEGAL PROCEEDINGS	33
	ITEM 4.	SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS	33
PART II
	ITEM 5.	MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES	33
	ITEM 6.	SELECTED FINANCIAL DATA	36
	ITEM 7.	MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS	38
	ITEM 7A.	QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK	51
	ITEM 8.	FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA	52
	ITEM 9.	CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE	53
	ITEM 9A.	CONTROLS AND PROCEDURES	53
	ITEM 9B.	OTHER INFORMATION	53
PART III
	ITEM 10.	DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE	54
	ITEM 11.	EXECUTIVE COMPENSATION	54
	ITEM 12.	SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS	54
	ITEM 13.	CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS AND DIRECTOR INDEPENDENCE	54
	ITEM 14.	PRINCIPAL ACCOUNTING FEES AND SERVICES	54
PART IV
	ITEM 15.	EXHIBITS, FINANCIAL STATEMENT SCHEDULES	54
SIGNATURES			55
INDEX TO EXHIBITS			56
First Amendment to Mortgage, Deed of Trust, Security Agreement
Credit Agreement
Guaranty for Credit Agreement
Pledge and Security Agreement - Quest Midstream Partners, L.P.
Pledge and Security Agreement - Bluestem Pipeline, LLC
Mortgage, Assignment, Security Agreement
Mortgage, Assignment, Security Agreement
Statement Regarding Compuation of Ratios
List of Subsidiaries
Consent of Cawley and Gillespie & Associates, Inc.
Consent of Murrell, Hall, McIntosh & Co., PLLP
Certification of CEO Pursuant to Section 302
Certification of CFO Pursuant to Section 302
Certification of CEO Pursuant to Section 906
Certification of CFO Pursuant to Section 906

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PART I

ITEMS 1. AND 2.   DESCRIPTION OF BUSINESS AND PROPERTIES.

The Company and Subsidiaries

Quest Resource Corporation.  Quest Resource Corporation is a Nevada corporation and was incorporated on July 12, 1982. Its principal executive offices are located at 9520 N. May Avenue, Suite 300, Oklahoma City, OK 73120 and its telephone number is (405) 488-1304. Quest Resource Corporation is referred to in this report as the “Company,” “Quest,” “we,” “us” and “our.” The Company is a holding company that conducts its operations primarily through its subsidiaries. Unless otherwise indicated, references to the Company include the Company’s operating subsidiaries.

Quest Cherokee, LLC.  Our principal operating subsidiary is Quest Cherokee, LLC, a Delaware limited liability company (“Quest Cherokee”), which owns all of our natural gas and oil wells and natural gas and oil leases in the Cherokee Basin in southeastern Kansas and northeastern Oklahoma.

Bluestem Pipeline, LLC.  Our natural gas gathering pipeline network is owned by Bluestem Pipeline, LLC, a Delaware limited liability company (“Bluestem”). Bluestem was a wholly-owned subsidiary of Quest Cherokee until the formation and contribution of our midstream assets to Quest Midstream Partners, L.P. on December 22, 2006.

Quest Cherokee Oilfield Service, LLC.  Our field equipment is owned by Quest Cherokee Oilfield Service, LLC, a Delaware limited liability company (“QCOS”). QCOS also employees all of our field level employees and first line supervisors that work on our natural gas and oil wells. QCOS is a wholly-owned subsidiary of Quest Cherokee.

Other Subsidiaries.  Our remaining subsidiaries are:

•  STP Cherokee, LLC, an Oklahoma limited liability company (“STP”),

•  Quest Energy Service, LLC, a Kansas limited liability company (“QES”),

•  Quest Oil & Gas, LLC, a Kansas limited liability company (“QOG”),

•  Producers Service, LLC, a Kansas limited liability company (“PSI”),

•  Ponderosa Gas Pipeline Company, LLC, a Kansas limited liability company (“PGPC”),

•  J-W Gas Gathering, LLC, a Kansas limited liability company (“J-W Gas”),

•  Quest Midstream Partners, L.P., a Delaware limited partnership (“Quest Midstream”), and

•  Quest Midstream GP, LLC, a Delaware limited liability company (“Quest Midstream GP”).

QES, QOG, PGPC and STP are wholly-owned by Quest. PGPC owns all of the outstanding member interests of PSI and PSI is the sole member of J-W Gas. Together these subsidiaries own all of the membership interests in Quest Cherokee. Our executive officers and administrative employees are employed by QES.

On December 13, 2006, we formed Quest Midstream to own and operate our natural gas gathering pipeline system. On December 22, 2006, we transferred Bluestem to Quest Midstream in exchange for 4.9 million class B subordinated units, 35,134 class A subordinated units and a 2% general partner interest. Also on December 22, 2006, Quest Midstream sold 4,864,866 common units, representing an approximate 48.64% interest in Quest Midstream, for $18.50 per common unit, or approximately $90 million of gross proceeds, pursuant to a purchase agreement dated December 22, 2006, to a group of institutional investors led by Alerian Capital Management, LLC, and co-led by Swank Capital, LLC.

Quest Midstream GP, the sole general partner of Quest Midstream, was formed on December 13, 2006. Quest Midstream GP owns 200,000 General Partner Units representing a 2% general partner interest in Quest Midstream. We own 850 Member Interests representing an 85% ownership interest in Quest Midstream GP, Alerian owns 75 Member Interests representing a 7.5% ownership interest in Quest Midstream GP and Swank owns 75 Member Interests representing a 7.5% ownership interest in Quest Midstream GP.

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Quest Midstream GP’s sole business activity is to act as the general partner of Quest Midstream and employs approximately 46 personnel that perform activities primarily related to the pipeline infrastructure.

See “— Recent Developments” for additional information regarding our formation of Quest Midstream.

Change in Fiscal Year.  We elected to change our year-end from May 31 to December 31, effective January 1, 2005. Accordingly, our financial statements included in this report consist of the financial statements for the fiscal year ended May 31, 2004, the seven-month transition period ended December 31, 2004, the calendar year ended December 31, 2005 and the calendar year ended December 31, 2006.

General

A Glossary of Oil and Gas Terms is included in this report beginning on page 21.

We are an independent energy company engaged in the exploration, development and production of natural gas. Our operations are currently focused on the development of coal bed methane or CBM in a 15 county region in southeastern Kansas and northeastern Oklahoma known as the Cherokee Basin. As of December 31, 2006, we had 198.0 Bcfe of net proved reserves with a PV-10 value of $268.1 million. Our reserves are approximately 99% CBM  and 60.4% proved developed. We believe we are the largest producer of natural gas in the Cherokee Basin with an average net daily production of 33.8 mmcfe for the year ended December 31, 2006. Our reserves are long-lived with a reserve life index of 20.3 years.

As of December 31, 2006, we owned the development rights to 523,929 net CBM acres throughout the Cherokee Basin and had developed approximately 46% of our acreage. We presently operate approximately 1,650 producing gas and oil wells. Our undeveloped acreage contains approximately 1,760 proved undeveloped CBM drilling locations. Over 99% of the CBM wells that have been drilled on our acreage to date have been successful. None of our acreage or producing wells is associated with coal mining operations.

In addition to our CBM reserves and acreage, we own and operate through Quest Midstream, a gas gathering pipeline network of approximately 1,600 miles that serves our acreage position. Presently, this system has a maximum daily throughput of 70 mmcf/d and is operating at about 77% capacity. We transport 100% of our production through our gas gathering pipeline network to interstate pipeline delivery points. Approximately 10% of the current volumes transported on our pipeline system are for third parties. As of December 31, 2006, we had an inventory of approximately 250 drilled CBM wells awaiting connection to our gas gathering system. It is our intention to focus on the development of CBM reserves that can be immediately served by our gathering system. In addition, we plan to continue to expand our gathering system through Quest Midstream to serve other areas of the Cherokee Basin where we intend to acquire additional CBM acreage for development.

Summary of Cherokee Basin Properties as of December 31, 2006

Estimated Net Proved Reserves (Bcfe)	198.0
Percent Proved Developed(1)	60.4	%
Producing Gas and Oil Wells (gross)	1,650
Approximate No. Proved Undeveloped Drill Sites (gross)(2)	1,760
Net Developed Acres(3)	241,634
Net Undeveloped Acres(3)	282,295
Total Net Acres	523,929

(1)	We estimate the cost as of December 31, 2006 to fully develop our proved undeveloped and proved developed non-producing reserves on 160 acre spacing excluding abandonment is approximately $322 million, including pipeline expansion through Quest Midstream.
(2)	Assuming wells drilled on undeveloped acreage is on 160 acre spacing.
(3)	Represents acreage with wells drilled on 160 acre spacing locations.

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Recent Drilling and Completion Activity and Pipeline Miles

	12 Months Ended December 31,
	2006			2005			2004
Wells Drilled		622			99			466
Wells Recompleted		125			205			18
Wells Connected		638			233			164
Pipeline Miles		392			120			141
Well Completion %		99	%		98	%		98	%
Total Capital Expenditures — (in thousands)(1)	$	166,801	(2)	$	41,442	(3)	$	53,600

(1)	Capital expenditures represent cash transactions.
(2)	Excludes $5.7 million for other assets.
(3)	Excludes $6.0 million for other assets and $26.1 million for the purchase of Class A units from ArcLight Energy Partners Fund I, L.P., through its wholly-owned subsidiary, Cherokee Energy Partners, LLC (collectively, “ArcLight”), in November 2005.

Recent Developments

Third Lien Credit Facility

On June 9, 2006, we and Quest Cherokee entered into a $75 million six-year Third Lien Term Loan Agreement among us, Quest Cherokee, Guggenheim Corporate Funding, LLC (“Guggenheim”), as administrative agent, and the lenders party thereto that was fully funded at the closing. See Note 3 to our consolidated financial statements included elsewhere in this report for additional information regarding our third lien term loan facility.

Formation of Quest Midstream

On December 13, 2006, we formed Quest Midstream to own and operate our natural gas gathering pipeline system. On December 22, 2006, Quest Midstream sold 4,864,866 common units, representing an approximate 48.64% interest in Quest Midstream, for $18.50 per common unit, or approximately $90 million of gross proceeds, pursuant to a purchase agreement dated December 22, 2006, to a group of institutional investors led by Alerian, and co-led by Swank. The investors consisted of Alerian Opportunity Partners IV, LP (“Alerian”), Swank MLP Convergence Fund, LP (“Swank MLP Fund”), Swank Investment Partners, LP (“SIP”), The Cushing MLP Opportunity Fund I, LP (“Cushing MLP Fund”), The Cushing GP Strategies Fund, LP (“Cushing GP Fund”, together with Swank MLP Fund, SIP and Cushing MLP Fund, “Swank”), Tortoise Capital Resources Corporation (“Tortoise”), Huizenga Opportunity Partners, LP (“Huizenga”) and HCM Energy Holdings, LLC (“HCM” and together with Alerian, Swank, Tortoise and Huizenga, collectively, the “Investors”). In addition, investors that purchased more than $25 million of limited partner interests in Quest Midstream (that is, Alerian and Swank) were able to purchase an aggregate 15% of the member interests of Quest Midstream GP, Quest Midstream’s general partner, for a nominal amount of $150. Quest Midstream GP owns 200,000 general partner units and all of the incentive distribution rights in Quest Midstream and we own 35,134 class A subordinated units and 4,900,000 class B subordinated units. Since we continue to own a majority of the partner interests in Quest Midstream and 85% of the member interests in Quest Midstream GP, the financial statements of Quest Midstream are consolidated with our financial statements.

As part of these transactions, we contributed all of the member interests in Bluestem, which owns our natural gas gathering pipeline system, to Quest Midstream. As a result, Bluestem is now a wholly-owned subsidiary of Quest Midstream.

The proceeds of the offering were used as follows: (i) $40 million was used to repay the outstanding indebtedness under our revolving credit facility, (ii) approximately $5.2 million was used to repay trade payables incurred in connection with the construction and operation of Bluestem’s natural gas gathering pipeline network, (iii) approximately $8 million was used to pay fees and expenses related to these transactions, and (iv) the remaining funds of approximately $36.8 million were distributed to us and will be used for future development and acquisition

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activities in the Cherokee Basin. Of this amount, $15 million was initially to be retained by Quest Midstream as temporary working capital until the partnership obtained its own working capital facility on January 31, 2007, at which time the $15 million was distributed to us.

See our Form 8-K filed December 29, 2006 for additional information regarding the formation of Quest Midstream and the terms of the transaction.

Investors’ Rights Agreement.  In connection with the formation of Quest Midstream, we, Quest Midstream and Quest Midstream GP entered into an investors’ rights agreement dated as of December 22, 2006 with the Investors. Pursuant to the terms of the investors’ rights agreement, Alerian and Swank each received a separate and independent right to designate one natural person to serve as a member of Quest Midstream GP’s board of directors. We have the right to designate the remaining four members of the board of directors of Quest Midstream GP (two of whom must be independent directors). Swank’s right to designate a member of the board of directors terminates upon the completion by Quest Midstream of an initial public offering. In addition, the right to designate a member of Quest Midstream GP’s board of directors terminates as to Alerian or Swank if it ceases to own at least 5% of Quest Midstream’s common units (on a fully diluted basis) that are not held by us and our affiliates.

Subject to certain exceptions set forth in the investors’ rights agreement, if Quest Midstream has not completed an initial public offering by December 22, 2008, then until such time as an initial public offering is completed by Quest Midstream, the Investors, acting by majority vote, may require Quest Midstream GP to effect a sale of either all of Quest Midstream’s assets or partner interests. If the Investors make such an election, Quest Midstream GP will have the right to offer to purchase all of the Investors’ interests in Quest Midstream. If Quest Midstream GP’s offer is not accepted, Quest Midstream GP will be obligated to undertake to solicit offers for all of the assets or partner interests of Quest Midstream as promptly as commercially reasonable with a view to maximizing the aggregate consideration to be received for such sale. The offers must meet certain minimum requirements that are contained in the investors’ rights agreement. If a qualifying offer is accepted by a majority of the Investors, we and the other Investors will be required to participate in the sale. Subject to certain limitations, Quest Midstream GP will have a right of first refusal to match any offer accepted by a majority of the Investors.

If a change of control of us occurs, a majority of Investors will have the right to cause Quest Midstream GP to affect a sale of Quest Midstream following the same procedures described above, if an initial public offering for Quest Midstream is not completed within half of the number of days remaining between the change of control date and December 22, 2008.

In connection with any such sale of the assets or partner interests of Quest Midstream, the Investors will be entitled to a return of their initial investment (plus a 10% premium) and any unpaid distributions before any funds will be distributed to us on account of our general partner and subordinated units. If the sale is not completed within 180 days after the Investors’ inform Quest Midstream GP that they desire to exercise their right to require a sale of Quest Midstream, the premium will increase by 750 basis points each quarter, until it reaches a maximum of 40%.

Subject to certain exceptions, any issuances of additional partner interests by Quest Midstream for less than 115% of the price at which the common units were issued to the Investors will require the consent of the representatives of Swank and Alerian serving on the board of directors of Quest Midstream GP.

If we and our affiliates desire to dispose of all or substantially all of our collective Quest Midstream partner interests and our collective general partner member interests to a non-affiliated third-party, then the Investors will have the right to participate in such transaction. We also have the right to require the Investors to participate in such a transaction if certain conditions are satisfied.

If we desire to sell a majority of our member interests in Quest Midstream GP, Alerian and Swank will have a right of first refusal to acquire the member interests being transferred.

Except for Alerian’s right to designate a member to serve on Quest Midstream GP’s board of directors, the investors’ rights agreement terminates upon the completion of an initial public offering of Quest Midstream, which results in the common units of Quest Midstream being listed on the Nasdaq Global Market or the New York Stock Exchange.

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Omnibus Agreement.  In connection with the transactions contemplated by the purchase agreement, we, Quest Midstream, Quest Midstream GP and Bluestem entered into an omnibus agreement dated as of December 22, 2006. The omnibus agreement governs (i) the obligations of us and our affiliates to refrain from engaging in certain business opportunities that compete with Quest Midstream, (ii) our obligations to indemnify Quest Midstream, Quest Midstream GP and Bluestem against certain environmental and other liabilities that occurred or existed prior to the closing date, (iii) the obligation of Quest Midstream to reimburse us for certain insurance, operating and general and administrative expenses incurred on behalf of Quest Midstream (subject to certain limitations), (iv) a right of first offer allowing Quest Midstream to acquire certain of our assets in the event of a sale or transfer of such assets, and (v) an option allowing Quest Midstream to provide midstream services for any acreage located outside the Cherokee Basin that we or any of our affiliates may acquire in the future.

Midstream Services and Gas Dedication Agreement.  We and Bluestem entered into a midstream services and gas dedication agreement on December 22, 2006. Pursuant to the midstream services agreement, Bluestem agreed to gather and provide certain midstream services to us for all natural gas produced from wells in a 15-county area in Kansas and Oklahoma known as the Cherokee Basin that are connected to Bluestem’s gathering system. The term of the midstream services agreement is ten years, with two additional five-year periods. Under the midstream services agreement, we will pay Bluestem $0.50 per thousand cubic feet (“mcf”) of gas for gathering, dehydration and treating services and $1.10 per mcf of gas for compression services, subject to annual adjustment based on changes in natural gas prices and the producers price index. Such fees are subject to renegotiation in connection with each renewal term.

Bluestem has the option to connect all of the natural gas wells that we develop in the Cherokee Basin to its gathering system. In addition, Bluestem is required to connect to its gathering system, at its expense, any new natural gas well(s) that we complete in the Cherokee Basin if Bluestem would earn a specified internal rate of return from those wells. We also committed to drill a total of 750 new wells in the Cherokee Basin by December 22, 2008.

First Amended and Restated Agreement of Limited Partnership of Quest Midstream Partners, L.P.  In connection with the closing of the purchase agreement, we and Quest Midstream GP entered into the first amended and restated agreement of limited partnership of Quest Midstream Partners, L.P., which sets forth our rights and obligations with respect to Quest Midstream.

Under the partnership agreement, during the subordination period, the common units in Quest Midstream have the right to receive quarterly distributions of available cash from operating surplus (each as defined in the partnership agreement) in an amount equal to the minimum quarterly distribution of $0.425 per common unit plus any arrearages in the payment of the minimum quarterly distribution on the common units from prior quarters, before any distributions of available cash from operating surplus may be made on the subordinated units. No arrearages will be paid on the subordinated units during the subordination period.

The class A subordinated units will automatically convert on a one-for-one basis to common units upon the completion by Quest Midstream of an initial public offering. Generally, the subordination period for the class B subordinated units will extend until the first day of any quarter beginning after December 22, 2013 or, if an initial public offering by Quest Midstream has occurred, the fifth anniversary of the closing of the initial public offering that certain financial tests are met. Generally, upon expiration of the subordination period for the class B subordinated units; each outstanding class B subordinated unit will convert into one common unit and will then participate pro rata with the other common units in distributions of available cash.

If the tests for ending the subordination period are satisfied for any three consecutive four-quarter periods ending on or after the last day of the quarter containing the third anniversary of the initial public offering of Quest Midstream, 25% of the subordinated units will convert into an equal number of common units. Similarly, if those tests are also satisfied for any three consecutive four-quarter periods ending on or after the last day of the quarter containing the fourth anniversary of the initial public offering of Quest Midstream, an additional 25% of the subordinated units will convert into an equal number of common units. The second early conversion of subordinated units may not occur, however, until at least one year following the end of the period for the first early conversion of subordinated units.

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The partnership agreement sets forth the levels of distributions to be made to each of the common unit holders and Quest Midstream GP of available cash from operating surplus for any quarter during and after the subordination period. The partnership agreement provides that Quest Midstream GP initially will be entitled to 2% of all distributions that Quest Midstream makes prior to its liquidation. Quest Midstream GP has the right, but not the obligation, to contribute a proportionate amount of capital to Quest Midstream to maintain its 2% general partner interest if Quest Midstream issues additional units. Quest Midstream GP’s 2% interest, and the percentage of Quest Midstream’s cash distributions to which it is entitled, will be proportionately reduced if Quest Midstream issues additional units in the future and Quest Midstream GP partner does not contribute a proportionate amount of capital to Quest Midstream in order to maintain its 2% general partner interest.

The incentive distribution rights in Quest Midstream represent the right to receive an increasing percentage (13%, 23% and 48%) of quarterly distributions of available cash from operating surplus after the minimum quarterly distribution and certain specified target distribution levels have been achieved. Quest Midstream GP partner currently holds the incentive distribution rights, but may transfer these rights separately from its general partner interest, subject to restrictions in the partnership agreement.

Quest Midstream GP, as the holder of our incentive distribution rights, has the right under the partnership agreement to elect to relinquish the right to receive incentive distribution payments based on the initial cash target distribution levels and to reset, at higher levels, the minimum quarterly distribution amount and cash target distribution levels upon which the incentive distribution payments to Quest Midstream GP would be set. Such reset right may be exercised, without approval of the unit holders or the conflicts committee of Quest Midstream GP, at any time when there are no subordinated units outstanding and Quest Midstream has made cash distributions with respect to the incentive distribution rights at the highest level for each of the prior four consecutive fiscal quarters.

In connection with the resetting of the minimum quarterly distribution amount and the target distribution levels and the corresponding relinquishment by Quest Midstream GP of incentive distribution payments, Quest Midstream GP will be entitled to receive a number of newly issued class C units based on a formula that takes into account the “cash parity” value of the average cash distributions related to the incentive distribution rights received by Quest Midstream GP for the two quarters prior to the reset event as compared to the average cash distributions per common unit during this period.

Following a reset election by Quest Midstream GP, the minimum quarterly distribution amount will be reset to an amount equal to the average cash distribution amount per common unit for the two fiscal quarters immediately preceding the reset election (such amount is referred to as the “reset minimum quarterly distribution”) and the target distribution levels will be reset to be correspondingly higher such that Quest Midstream would distribute all of its available cash from operating surplus for each quarter as set forth in the partnership agreement.

Quest Midstream GP may not be removed except with the vote of two-thirds of all of the outstanding units (including those owned by us and our affiliates).

Amended and Restated Limited Liability Company Agreement of Quest Midstream GP, LLC.  In connection with the closing of the purchase agreement, we, Alerian and Swank entered into the amended and restated limited liability company agreement of Quest Midstream GP, which sets forth our rights and obligations with respect to Quest Midstream GP.

Quest Midstream GP limited liability company agreement requires all available cash (as defined in the agreement) to be distributed each quarter pro rata among the members in proportion to their member interests. Subject to certain exceptions, if Quest Midstream GP issues additional member interests, each member has a pre-emptive right to acquire additional member interests in order to maintain its percentage ownership in Quest Midstream GP.

If a member desires to transfer its member interests in Quest Midstream GP, Quest Midstream GP and then we (in that order) have a right of first refusal to acquire the member interests being transferred.

If we desire to transfer more than 50% of the member interests, then we have the option to require Alerian and Swank to participate in the sale on the same terms (the drag-along right). If we do not exercise our drag-along right, then Alerian and Swank have the right to elect to participate in the transfer on the same terms and conditions (the

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tag-along right). These rights are in addition to those described above with respect to the investors’ rights agreement.

Amendment to Credit Facilities

In addition, on December 22, 2006, we entered into amendments to our current credit facilities. Among other things, the amendments permitted us to transfer the member interests in Bluestem to Quest Midstream, released the security interests of the lenders in the member interests and assets of Bluestem and resulted in the pledge of our class A and class B subordinated partner interests in Quest Midstream and our 85% member interest in Quest Midstream GP as collateral for these credit facilities. In addition, the prepayment premiums for the Second Lien Term Loan and Third Lien Term Loan were amended. See Note 3 to our consolidated financial statements included elsewhere in this report for additional information regarding the amendments to our credit facilities.

Quest Midstream Credit Agreement

On January 31, 2007, Bluestem and Quest Midstream entered into a $75 million five-year revolving credit facility. The Credit Agreement is among Bluestem, as the borrower, Quest Midstream, as a guarantor, Royal Bank of Canada (“RBC”), as administrative agent and collateral agent, and the lenders party thereto. The credit facility is secured by all of the member interests in Bluestem and substantially all of Bluestem’s assets. See our Form 8-K filing dated February 7, 2007 for further information regarding Quest Midstream’s credit facility.

Business Strategy

Our goal is to create stockholder value by investing capital to increase reserves, production and cash flow. We intend to accomplish this goal by focusing on the following key strategies:

•  Accelerate the drilling and development of our acreage position in the Cherokee Basin;

•  Accumulate additional acreage in the Cherokee Basin in areas where management believes the most attractive development opportunities exist;

•  Pursue selected strategic acquisitions in the Cherokee Basin that would add attractive development opportunities and critical gas gathering infrastructure;

•  Expand Quest Midstream’s gas gathering system throughout the Cherokee Basin in order to accommodate the development of a wider acreage footprint;

•  Maintain operational control over our assets whenever possible;

•  Limit our reliance on third party contractors with respect to the completion, stimulation and connection of our wells;

•  Maintain a low cost and efficient operating environment through the use of remote data monitoring technology; and

•  Seek out opportunities to apply our expertise with unconventional resource development in other basins.

Competitive Strengths

•  Experienced management.  Key members of our executive management and technical team have been developing CBM in the Cherokee Basin since 1995.

•  Low geological risk.  The coal seams from which we produce CBM are notable for their consistent thickness and gas content. In addition, extensive drilling dating back 60 to 80 years for the development of oil reserves in the Cherokee Basin gives us access to substantial information related to the coal seams we target. Over 100,000 well bores have penetrated the Cherokee Basin since the 1920s. Data available from the drilling records of these wells allows us to determine the aerial extent, thickness and relative permeability of the coal seams we target for development, which greatly reduces our dry hole risk.

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•  High rate of drilling success.  Over 99% of the CBM wells that have been drilled on our acreage have been, or are capable of being completed as economic producers.

•  Expertise in Cherokee Basin geology.  We have spent several years conducting technical research on historical data related to the development of the Cherokee Basin. From this analysis, we believe we have determined where the most attractive opportunities for CBM development exist within the basin.

•  Large acreage position and inventory of drilling sites.  We have the right to develop 523,939 net CBM acres in the Cherokee Basin. As of December 31, 2006, our acreage was approximately 46% developed and offered approximately 1,760 potential proved undeveloped CBM drilling locations.

•  Availability of significant quantities of low cost acreage.  Presently, several hundred thousand acres of unleased CBM acreage are available in the Cherokee Basin. We believe this acreage generally can be leased for an amount less than acreage in other basins. These circumstances afford us the opportunity to pursue significant organic growth by adding large amounts of undeveloped acreage and CBM drilling locations at a reasonable cost.

•  Competitive advantage of our gas gathering system.  Our gas gathering system provides us with a competitive advantage with respect to third parties seeking to lease acreage that is readily served by our system. The volume take allowance for gas gathering systems in the Cherokee Basin has historically been 30% before royalties. This not only makes development economics less attractive for third party operators to lease land served by our system, it also makes us the most attractive lessee for landowners. The vast geographic extent of our gas gathering system together with our large land position makes it unattractive for third parties to lease proximate acreage and build duplicate gas gathering facilities.

•  Attractive geological characteristics of Cherokee Basin CBM.  Compared to some other basins in the United States where CBM is produced, CBM production in the Cherokee Basin has distinct economic advantages. First, the coal seams in the Cherokee Basin are relatively more permeable and thus tend to produce at a faster rate. This results in a shorter reserve life, the need to drill fewer wells, a faster payout period and a higher present value of reserves. Second, Cherokee Basin coal seams produce relatively less water than coal seams in some other basins. Cherokee Basin CBM wells produce gas immediately, have a shorter dewatering period, and produce less water overall than CBM wells in some other basins.

•  Predictable results of our CBM wells.  Our CBM wells have highly consistent behavior in terms of recoverable reserves, production rates and decline curves, which results in lower development risk.

•  Concentrated ownership and operational control.  We own 100% of the working interest in over 95% of the wells in which we have ownership. As a result of our ownership position, we operate substantially all of the wells in which we own an economic interest.

•  Long-lived reserves.  We believe our reserve life index of 20.3 years is higher than the exploration and production industry average. We believe this long reserve life reduces the reinvestment risk associated with our asset base.

•  Marketing Flexibility.  Our gas gathering system is able to access several interstate pipelines, providing access to major gas demand centers in the central United States.

Cherokee Basin CBM Production

The Cherokee Basin is located in southeastern Kansas and northeastern Oklahoma. Geologically, it is situated between the Forest City Basin to the north, the Arkoma Basin to the south, the Ozark Dome to the east and the Nemaha Ridge to the west. Structurally, the Cherokee Basin is separated from the Forest City Basin by the Bourbon Arch. The Cherokee Basin is a mature producing area with respect to conventional reservoirs such as the Bartlesville sandstones and the Mississippian lime stones, which were developed beginning in the early 1900s.

The Cherokee Basin is part of the Western Interior Coal Region of the central United States. The coal seams we target for development are Pennsylvanian (Desmoinesian-Cherokee Group) in age and are found at depths of 300 to 1,400 feet. The principal formations we target include the Mulky, Weir-Pittsburgh and the Riverton. These coal seams are blanket type deposits, which extend across large areas of the basin. Each of these seams generally range

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from two to five feet thick. Additional minor coal seams such as the Summit, Bevier, Fleming and Rowe are found at varying locations throughout the basin. These seams range in thickness from one to two feet. The coal seams found in the Cherokee Basin are primarily high-volatile A and B bituminous grade with excellent permeability and gas saturations ranging from 150 to 380 scf/ton.

We develop our CBM reserves in the Cherokee Basin on 160 acre spacing. Our wells generally reach total depth in 1.5 days and our average cost for 2006 to drill and complete a well and to build the related pipeline infrastructure was approximately $180,000. We estimate that for 2007, our average cost for drilling and completing a well will be approximately $135,000 and Quest Midstream’s average cost for building the related pipeline infrastructure will be approximately $60,000 per well. We perforate and frac the multiple coal seams present in each well. Our typical Cherokee Basin multi-seam CBM well has net reserves of 130 mmcf. Our general production profile for a CBM well averages an initial 15-20 mcf/d (net), steadily rising for the first 12 months while water is pumped off and the formation pressure is lowered. A period of relatively flat production of 55-60 mcf/d (net) follows the initial de-watering period for a period of approximately 12 months. After 24 months, production begins to decline at an annual rate of 12-14%. The standard economic life is about 14 years. Our completed wells rely on very basic industry technology and are mechanically unchallenging.

Our development activities in the Cherokee Basin also include an active program to recomplete CBM wells that produce from a single coal seam to wells that produce from multiple coal seams. During the year ended December 31, 2006, we recompleted approximately 146 wellbores in Kansas and an additional 5 wellbores in Oklahoma and we had an additional 150 wellbores awaiting recompletion to multi-seam producers. The recompletion strategy is to add 4-5 additional pay zones to each wellbore, in a two-stage process at an average cost of approximately $20,000 per well. Adding new zones to a well has a brief negative effect on production by first taking the well offline to perform the work and then by introducing a second de-watering phase of the newly completed formations. However, in the long term, we believe the impact of the multi-seam recompletions will be positive as a result of an increase in the rate of production and the ultimate recoverable reserves available per well.

Wells are equipped with small pumping units to facilitate the de-watering of the producing coal seams. Generally, upon initial production, a single coal seam will produce 50-60 bbls of water per day. A multi-seam completion produces about 150 bbls of water per day. Eventually, water production subsides to 30-50 bbls per day. Produced water is disposed through injection wells we drill into the underlying Arbuckle formation. One disposal well will generally handle the water produced from 25 producing wells.

Exploration & Production Activities

As of December 31, 2006, we controlled approximately 542,000 gross acres. The petroleum engineering firm of Cawley, Gillespie & Associates, Inc., of Ft. Worth, Texas, estimated our proved oil and natural gas reserves to be as follows as of December 31, 2006: estimated gross natural gas proved reserves of 242.4 Bcf, of which 198.0 Bcf is net to the Company, and estimated proved oil reserves of 40,800 gross (32,272 net) barrels. The present value of these proved reserve assets, discounted at 10% of the future net cash flow from the net natural gas and oil reserves, is $268.1 million, before the effect of income taxes.

As of December 31, 2006, we were producing natural gas from approximately 1,650 wells (gross). Our total daily natural gas sales (including pipeline-earned volume) as of December 31, 2006 were approximately 40.8 mcf/d net (54.4 mcf/d gross).

We have a significant amount of acreage available for development. As of December 31, 2006, we had leases with respect to approximately 283,000 net undeveloped acres. For the year ended December 31, 2006, we drilled approximately 622 gross wells and connected 638 gross wells to our pipeline systems. We intend to drill approximately 550 gross wells annually during 2007 and 2008. We have identified approximately 1,760 proved undeveloped drilling locations and many more probable and possible drilling locations. Management believes that we have the necessary expertise, manpower and equipment capabilities required to carry out these development plans. Management believes that significant additional value will be created if the drilling program continues to be successful in creating new natural gas wells that convert raw acreage into proven natural gas reserves. However, there can be no assurance that we will have the funding required to be able to drill and develop that number of wells during such time frame or as to the number of new wells that will be producing wells.

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Most of this development type of drilling is in areas of known natural gas reserves that involve much lower risk than the exploratory type of drilling that is required when searching for new natural gas reserves. We have enjoyed a new well success rate of over 99%.

Producing Wells and Acreage

The following table sets forth certain information regarding our ownership of productive wells and total acreage, as of December 31, 2006, 2005 and 2004. For purposes of this table, productive wells are wells currently in production and wells capable of production.

	Productive Wells												Leasehold Acreage(2)
	Natural Gas(1)				Oil				Total				Producing(3)				Non-Producing				Total Leased
As of Dec. 31	Gross		Net		Gross		Net		Gross		Net		Gross		Net		Gross		Net		Gross		Net
2004		795		774.3		29		27.9		824		802.2		311,941		291,318		205,230		187,884		517,171		479,202
2005		1,026		999.3		29		27.9		1,055		1,027.2		334,676		310,663		198,569		184,322		533,245		494,985
2006		1,653		1,609.9		29		27.9		1,682		1,637.8		394,795		385,149		147,247		138,780		542,042		523,929

(1)	At December 31, 2006, the Company had approximately 1,270 wells that have multiple producing completions.
(2)	The leasehold acreage data as of December 31, 2006 includes non-producing leasehold acreage in the States of New Mexico, Texas and Pennsylvania of approximately 15,058 gross acres and 14,006 net acres. Approximately 90,000 net acres that was included in the 2005 leasehold acreage amounts has expired and is not included in the December 31, 2006 data.
(3)	Includes acreage held by production under the terms of the lease.

As of December 31, 2006, we had 241,634 net developed acres and 282,922 net undeveloped acres.

During the year ended December 31, 2006, we drilled 622 gross (605.8 net) new wells on our properties, all being natural gas wells. The wells drilled have been evaluated and were included in the year-end reserve report. The oil well count remains constant as we are focusing on adding natural gas reserves. (See “— Summary of New and Abandoned Well Activity”). During the year ended December 31, 2006, we continued to lease additional acreage in certain core development areas of the Cherokee Basin.

Natural Gas and Oil Reserves

The following table summarizes the reserve estimate and analysis of net proved reserves of natural gas and oil as of December 31, 2006, 2005 and 2004 and May 31, 2004, in accordance with Securities and Exchange Commission (“SEC”) guidelines. The data was prepared by the petroleum engineering firm Cawley, Gillespie & Associates, Inc. in Ft. Worth, Texas. The present value of estimated future net revenues from these reserves was calculated on a non-escalated price basis discounted at 10% per year. During 2006, we filed estimates of our natural gas and oil reserves for the year 2005 with the Energy Information Administration of the U.S. Department of Energy on Form EIA-23. The data on Form EIA-23 was presented on a different basis, and included 100% of the natural gas and oil volumes from our operated properties only, regardless of our net interest. The difference between the natural gas and oil reserves reported on Form EIA-23 and those reported in this report exceeds 5%.

	December 31,						May 31,
	2006		2005		2004		2004
Proved Developed Gas Reserves (mcf)		122,390,000		71,638,000		81,467,300		62,558,900
Proved Undeveloped Gas Reserves (mcf)		75,650,000		62,681,000		68,376,600		71,017,300
Total Proved Gas Reserves (mcf)		198,040,000		134,319,000		149,843,900		133,576,200
Proved Developed Oil Reserves (bbl)(1)		32,272		32,269		47,834		57,105
Future Cash Flows Before Income Taxes	$	432,082,000	$	769,677,000	$	611,106,300	$	482,745,600

(1) Although we have proved undeveloped oil reserves, they are insignificant, so no effort was made to calculate such reserves.

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The Company’s total proved reserves increased from 134.5 bcfe as of December 31, 2005 to 198.0 bcfe as of December 31, 2006.

There are numerous uncertainties inherent in estimating natural gas and oil reserves and their values. The reserve data set forth in this report is only an estimate. Reservoir engineering is a subjective process of estimating underground accumulations of natural gas and oil that cannot be measured in an exact manner. The accuracy of any reserve estimate is a function of the quality of available data and of engineering and geological interpretation and judgment. Furthermore, estimates of reserves are subject to revision based upon actual production, results of future development and exploration activities, prevailing natural gas and oil prices, operating costs and other factors, and such revisions can be substantial. Accordingly, reserve estimates often differ from the quantities of natural gas and oil that are ultimately recovered and are highly dependent upon the accuracy of the assumptions upon which they are based. The future net cash flow and present value of future net cash flow amounts are estimates based upon current prices at the time the reports were prepared and do not take into account the effects of our natural gas hedging program.

Our proved reserves will generally decline as they are produced, except to the extent that we conduct revitalization activities, or acquire properties containing proved reserves, or both. To increase reserves and production, we intend to continue our development drilling and re-completion programs, to identify and produce previously overlooked or bypassed zones in shut-in wells, and to a lesser extent, acquire additional properties or undertake other replacement activities. Our current strategy is to increase our reserve base, production and cash flow through the development of our existing natural gas fields and subject to available capital, through the selective acquisition of other promising properties where we can utilize our existing technology and infrastructure. We can give no assurance that our planned development activities will result in significant additional reserves or that we will have success in discovering and producing reserves at economical exploration and development costs. The drilling of new wells is a speculative activity and the possibility always exists that newly drilled wells will be non-productive or fail to produce enough revenue to be commercially worthwhile.

Production Volumes, Sales Prices, and Production Costs

The following tables set forth certain information regarding the natural gas and oil properties owned by us through our subsidiaries. The natural gas and oil production figures reflect the net production attributable to our revenue interest and are not indicative of the total volumes produced by the wells.

					7 Month
					Transition
	Year Ended		Year Ended		Period Ended		Year Ended
	December 31,		December 31,		December 31,		May 31,
Gas Production Statistics	2006		2005		2004		2004(2)
Net gas sales (mcf)		12,282,000		9,565,000		5,013,911		5,530,208
Avg wellhead gas price (per mcf)	$	5.93	$	7.44	$	5.74	$	5.19
Avg wellhead gas price, net (per mcf)(1)	$	4.47	$	4.61	$	4.83	$	5.04
Avg production cost (per mcf)	$	1.29	$	0.99	$	0.72	$	0.92
Avg production and ad valorem
taxes (per mcf)	$	0.55	$	0.58	$	0.35	$	0.33
Net revenue (per mcf)	$	2.63	$	3.04	$	3.76	$	3.79

(1)	Includes hedging gains and losses.
(2)	The natural gas production volumes for the 2004 fiscal year include the Devon asset acquisition beginning December 22, 2003 and the Perkins/Willhite acquisition beginning June 1, 2003.

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					7 Month
					Transition
	Year Ended		Year Ended		Period Ended		Year Ended
	December 31,		December 31,		December 31,		May 31,
Oil Production Statistics	2006		2005		2004		2004
Net oil production (bbls)		9,737		9,241		5,551		8,549
Avg wellhead oil price (per bbl)	$	60.90	$	53.46	$	44.14	$	41.06
Avg production cost (per bbl)	$	21.85	$	19.18	$	16.90	$	16.89
Net revenue (per bbl)	$	39.05	$	34.28	$	27.24	$	24.17

Summary of New and Abandoned Well Activity

For purposes of the table below, the number of wells drilled refers to the number of wells completed at any time during the period, regardless of when drilling was initiated. Most of the wells expected to be drilled in the next year will be of the development category and in the vicinity of our existing or planned construction pipeline network. However, we will devote a small part of our drilling effort into exploratory wells in an attempt to discover new natural gas reserves, which is a high-risk endeavor. Our drilling, re-completion, abandonment, and acquisition activities for the periods indicated are shown below:

							Year Ended						7 Month
	Year Ended						December 31,						Transition Period Ended December 31,
	December 31, 2006 (1)						2005 (1)						2004 (1)						Year Ended May 31, 2004
	Gas						Gas						Gas						Oil						Gas
	Gross			Net			Gross			Net			Gross			Net			Gross			Net			Gross		Net
Exploratory Wells Drilled:
Capable of Production		—			—			—			—			—			—			—			—			—		—
Dry		—			—			—			—			—			—			—			—			—		—
Development Wells Drilled:
Capable of Production		638			621			233			227			117			114			—			—			138		132
Dry		—			—			—			—			—			—			—			—			2		2
Re-completion of Old Wells:
Capable of Production		125			122			205			200			38			38			—			—			—		—
Wells Abandoned		(0	)		(0	)		(0	)		(0	)		(11	)		(11	)		(2	)		(2	)		—		—
Acquired Devon wells 12/22/03		—			—			—			—			—			—			—			—			337		337
Other Wells Acquired		—			—			—			—			11			11			—			—			—		—
Net increase in Capable Wells		638			621			233			227			117			114			(2	)		(2	)		477		471

(1) No change to oil wells for the year ended December 31, 2006 and 2005 or the seven month transition period ended December 31, 2004.

The 638 gross new natural gas wells completed for the year ended December 31, 2006 reflect an average activity level of approximately 53 gross wells per month. We plan to drill and complete an average of approximately 46 gross wells per month for year 2007, subject to capital being available for such expenditures.

During the period from December 31, 2006 through March 6, 2007, we drilled 79 gross wells and connected 74 gross wells. As of March 6, 2007, we were drilling 11 gross wells and approximately 5 gross wells were in the process of being completed.

Delivery Commitments

Natural Gas

We do not have long-term delivery commitments. We market our own natural gas and more than 95% of the natural gas was sold to ONEOK Energy Marketing and Trading Company during 2006. More than 95% of our

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natural gas was sold to ONEOK Energy Marketing and Trading Company in 2005 and in the seven month transition period ended December 31, 2004. More than 90% of our natural gas was sold to ONEOK Energy Marketing and Trading Company during the fiscal year ended May 31, 2004. No other customer of the Company accounted for more than 10% of the consolidated revenues for the years ended December 31, 2006 and 2005, the transition period ended December 31, 2004 or the fiscal year ended May 31, 2004.

Oil

Our oil is currently being sold to Coffeyville Refining. Previously, it had been sold to Plains Marketing, LP. We do not have a long-term contract for our oil sales.

Hedging Activities

We seek to reduce our exposure to unfavorable changes in natural gas prices, which are subject to significant and often volatile fluctuation, through the use of fixed-price contracts. The fixed-price contracts are comprised of energy swaps and collars. These contracts allow us to predict with greater certainty the effective natural gas prices to be received for hedged production and benefit operating cash flows and earnings when market prices are less than the fixed prices provided in the contracts. However, we will not benefit from market prices that are higher than the fixed prices in the contracts for hedged production. Collar structures provide for participation in price increases and decreases to the extent of the ceiling prices and floors provided in those contracts.

The following table summarizes the estimated volumes, fixed prices, fixed-price sales and fair value attributable to the fixed-price contracts as of December 31, 2006. See Note 15 — Derivatives, in notes to consolidated financial statements of this Form 10-K.

	Years Ending December 31,
	2007		2008			Total
	(Dollars in thousands,
	except price data)
Natural Gas Swaps:
Contract vols (MMBtu)		2,354,000		—			2,354,000
Weighted-avg fixed
price per MMBtu(1)	$	7.20		—		$	7.20
Fixed-price sales	$	16,948		—		$	16,948
Fair value, net	$	2,207		—		$	2,207
Natural Gas Collars:
Contract vols (MMBtu):
Floor		8,433,000		7,027,000			15,460,000
Ceiling		8,433,000		7,027,000			15,460,000
Weighted-avg fixed
price per MMBtu(1):
Floor	$	6.63	$	6.54		$	6.59
Ceiling	$	7.54	$	7.53		$	7.54
Fixed-price sales(2)	$	55,890	$	45,973		$	101,863
Fair value, net	$	3,525	$	(2,729	)	$	796
Total Natural Gas
Contracts:
Contract vols (MMBtu)		10,787,000		7,027,000			17,814,000
Weighted-avg fixed
price per MMBtu(1)	$	6.75	$	6.54		$	6.67
Fixed-price sales(2)	$	72,838	$	45,973		$	118,811
Fair value, net	$	5,732	$	(2,729	)	$	3,003

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(1)	The prices to be realized for hedged production are expected to vary from the prices shown due to basis.
(2)	Assumes floor prices for natural gas collar volumes.
(3)	Does not include basis swaps with notional volumes by year, as follows: TBtu; 2007: 1.8 TBtu; 2008: 1.5 TBtu

The estimates of fair value of the fixed-price contracts are computed based on the difference between the prices provided by the fixed-price contracts and forward market prices as of the specified date, as adjusted for basis. Forward market prices for natural gas are dependent upon supply and demand factors in such forward market and are subject to significant volatility. The fair value estimates shown above are subject to change as forward market prices and basis change. See Note 14 — Financial Instruments, in notes to consolidated financial statements of this Form 10-K.

Some of our fixed price contracts are tied to commodity prices on the New York Mercantile Exchange (“NYMEX”), that is, we receive the fixed price amount stated in the contract and pay to our counterparty the current market price for gas as listed on the NYMEX. However, due to the geographic location of our natural gas assets and the cost of transporting the natural gas to another market, the amount that we receive when we actually sell our natural gas is based on the Southern Star Central TX/KS/OK (“Southern Star”) first of month index, with a small portion being sold based on the daily price on the Southern Star index. The difference between natural gas prices on the NYMEX and the price actually received by the Company is referred to as a basis differential. Typically, the price for natural gas on the Southern Star first of the month index is less than the price on the NYMEX due to the more limited demand for natural gas on the Southern Star first of the month index. Recently, the basis differential has been increasingly volatile and has on occasion resulted in us receiving a net price for our natural gas that is significantly below the price stated in the fixed price contract.

Pipeline Operations

Our approximately 1,600 mile gas gathering pipeline network is owned by Bluestem Pipeline. Prior to December 22, 2006, Bluestem was a wholly-owned subsidiary. As discussed in “— Recent Developments”, on December 22, 2006, we formed Quest Midstream and contributed our ownership interest in Bluestem to Quest Midstream in exchange for general and limited partner interests. We own approximately 51% of the partnership interests in Quest Midstream and through our 85% ownership interest in the general partner of Quest Midstream we continue to control the day to day operations of our gas gathering pipeline network.

Our natural gas gathering pipeline network is located in southeastern Kansas and northeastern Oklahoma and provides a market outlet for natural gas in a region of approximately 1,000 square miles in size and has connections to both intrastate and interstate delivery pipelines. As of December 31, 2006, this pipeline network included 15 natural gas compressors that are owned by Bluestem and 68 larger compressors that are rented.

The pipelines gather all of the natural gas produced by us in addition to some natural gas produced by other companies. The pipeline network is a critical asset for our future growth because natural gas gathering pipelines are a costly component of the infrastructure required for natural gas production and such pipelines are not easily constructed. Much of the undeveloped acreage targeted by us for future development is accessible to our existing pipeline network, which management believes is a significant advantage.

We are continuing to expand our pipeline infrastructure through the development of new pipelines and to a lesser extent, through the acquisition of existing pipelines.

The following table sets forth the number of miles of pipeline acquired or constructed during the periods indicated.

					Seven Month
					Transition Period
					Ended		Year Ended
	Year Ended December 31,				December 31,		May 31,
	2006		2005		2004		2004
Miles constructed		392		120		124		5
Miles acquired		—		10		—		300

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The table below sets forth the natural gas volumes transported on our pipeline network during the year ended December 31, 2006 and 2005; the seven-month transition period ended December 31, 2004 and for the fiscal year ended May 31, 2004.

					7 Months
	Year Ended		Year Ended		Ended		Year Ended
	December 31,		December 31,		December 31,		May 31,
	2006		2005		2004		2004
Pipeline Natural Gas Vols (mcf)		16,714,000		13,257,000		7,004,000		8,157,000

The natural gas volumes for the fiscal year ended May 31, 2004 include the Devon asset acquisition beginning December 22, 2003 and the Perkins/Willhite acquisition beginning June 1, 2003. As of December 31, 2006, the total daily capacity was approximately 70 mmcf and the total utilization was approximately 54 mmcf or 77%.

Service Operations

Field operations conducted by our personnel include duties performed by “pumpers” or employees whose primary responsibility is to operate the wells and the pipelines. Other field personnel are experienced and involved in the activities of well servicing, pipeline maintenance, the development and completion of new wells and associated infrastructure, new pipeline construction and the construction of supporting infrastructure for new wells (such as electric service, salt water disposal facilities, and natural gas feeder lines). The primary equipment categories owned by us are trucks, well service rigs, stimulation assets and construction equipment. We utilize third party contractors on an “as needed” basis to supplement our field personnel.

We also provide, on an in-house basis, many of the services required for the completion and maintenance of our CBM wells. Internally sourcing these functions significantly reduces our reliance on third-party contractors, which typically provide these services. We believe this results in reduced delays in executing our plan of development. Also we are able to realize significant cost savings because we can avoid paying price mark-ups and also because we are able to purchase our own supplies at bulk discounts.

We rely on third-party contractors to drill our wells. Once a well is drilled, we run our own casing and do our own cementing work. We also perform our own fracturing and stimulation work. Finally, we complete our own well site construction. We have our own fleet of 20 well service units that we use in the process of completing our wells, and also to perform remedial field operations required to maintain production from our existing wells. We do rely on third party contractors to perform gas gathering system construction activities.

By retaining operational control of our crucial income producing assets, management believes that we are better able to control costs and minimize downtime of these critical assets.

We do not currently provide a material amount of services to unaffiliated companies other than transportation of certain third party production volumes.

Regulation

Federal Regulation of the Gathering and Transportation of Gas

Various aspects of our operations are, or in the future may be, regulated by agencies of the federal government.

Under the Natural Gas Act of 1938, the Federal Energy Regulatory Commission, or the FERC, regulates various aspects of the operations of any “natural gas company,” including the transportation of natural gas, rates and charges, construction of new facilities, extension or abandonment of services and facilities, the acquisition and disposition of facilities, reporting requirements, and similar matters. Section 1(b) of the Natural Gas Act of 1938 exempts natural gas gathering facilities from the jurisdiction of the FERC. We believe our gas gathering system meets the traditional tests which the FERC has used to establish a pipeline’s status as a gatherer under section 1(b) of the Natural Gas Act and are therefore not subject to FERC jurisdiction.

If we were determined to be a natural gas company, our operations would become regulated under the Natural Gas Act. We believe the expenses associated with seeking certificate authority for construction, service and abandonment, establishing rates and a tariff for our gas gathering activities, and meeting the detailed regulatory

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accounting and reporting requirements would substantially increase our operating costs and would adversely affect our profitability.

None of our current activities are subject to such regulation by the FERC.

State Regulation of Natural Gas Gathering Pipelines

Our pipeline operations are currently limited to the States of Kansas and Oklahoma. State regulation of gathering facilities generally includes various safety, environmental and, in some circumstances, nondiscriminatory take requirements, and compliant-based rate regulation. Bluestem is licensed as an operator of a natural gas gathering system with the Kansas Corporation Commission, or KCC, and is required to file periodic information reports with the KCC. We are not required to be licensed as an operator or to file reports in Oklahoma with the Oklahoma Corporation Commission, or OCC.

On those portions of our gas gathering system that are open to third party producers, the producers have the ability to file complaints challenging our gathering rates, terms of services and practice. Our fees, terms and practice must be just, reasonable, not unjustly discriminatory and not duly preferential. If the KCC or the OCC, as applicable, were to determine that the rates charged to a complainant did not meet this standard, the KCC or the OCC, as applicable, would have the ability to adjust our rates with respect to the wells that were the subject of the complaint. We are not aware of any instance in which either the KCC or the OCC has made such a determination in the past.

These regulatory burdens may affect profitability, and management is unable to predict the future cost or impact of complying with such regulations. We do not own any pipelines that provide intrastate natural gas transportation, so state regulation of pipeline transportation does not directly affect our operations. As with the FERC regulation described above, however, state regulation of pipeline transportation may influence certain aspects of our business and the market price for our products.

Sales of Natural Gas

The price at which we buy and sell natural gas currently is not subject to federal regulation and, for the most part, is not subject to state regulation. Our sales of natural gas are affected by the availability, terms and cost of pipeline transportation. As noted above, the price and terms of access to pipeline transportation are subject to extensive federal and state regulation. The FERC is continually proposing and implementing new rules and regulations affecting those segments of the natural gas industry, most notably interstate natural gas transmission companies that remain subject to the FERC’s jurisdiction. These initiatives also may affect the intrastate transportation of natural gas under certain circumstances. The stated purpose of many of these regulatory changes is to promote competition among the various sectors of the natural gas industry, and these initiatives generally reflect more light-handed regulation. We cannot predict the ultimate impact of these regulatory changes to our natural gas marketing operations, and we note that some of the FERC’s more recent proposals may adversely affect the availability and reliability of interruptible transportation service on interstate pipelines. We do not believe that we will be affected by any such FERC action materially differently than other natural gas marketers with whom we compete.

Other

In addition to existing laws and regulations, the possibility exists that new legislation or regulations may be adopted which would have a significant impact on our operations or our customers’ ability to use gas and may require us or our customers to change their operations significantly or incur substantial costs. Additional proposals and proceedings that might affect the gas industry are pending before Congress, FERC, the Minerals Management Service, state commissions and the courts. We cannot predict when or whether any such proposals may become effective. In the past, the natural gas industry has been heavily regulated. There is no assurance that the regulatory approach currently pursued by various agencies will continue indefinitely.

Failure to comply with these laws and regulations may result in the assessment of administrative, civil and/or criminal penalties, the imposition of injunctive relief or both. Moreover, changes in any of these laws and

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regulations could have a material adverse effect on our business. In view of the many uncertainties with respect to current and future laws and regulations, including their applicability to us, we cannot predict the overall effect of such laws and regulations on our future operations.

Management believes that our operations comply in all material respects with applicable laws and regulations and that the existence and enforcement of such laws and regulations have no more restrictive effect on our method of operations than on other similar companies in the energy industry. We have internal procedures and policies to ensure that our operations are conducted in substantial regulatory compliance.

Environmental Matters

The exploration for and production of natural gas and the related operation of pipelines, plants and other facilities for gathering, compressing, dehydrating or treating natural gas and other products is subject to stringent and complex laws and regulations pertaining to health, safety and the environment. As an owner or operator of natural gas wells and related gathering facilities, we must comply with these laws and regulations at the federal, state and local levels. These laws and regulations can restrict or impact our business activities in many ways, such as:

•  restricting the way we handle or dispose of our waste;

•  limiting or prohibiting construction activities in sensitive areas such as areas inhabited by endangered species, wetlands or coastal regions;

•  requiring remedial action to mitigate pollution conditions caused by our operations, or attributable to former operations; and

•  enjoining the operations of facilities deemed in non-compliance with environmental laws and regulations and with permits issued pursuant to such laws and regulations.

Failure to comply with these laws and regulations may trigger a variety of administrative, civil and criminal enforcement measures, including the assessment of monetary penalties, the imposition of remedial requirements, and the issuance of orders enjoining future operations. Certain environmental statutes impose strict, joint and several liability for costs required to clean up and restore sites where hazardous substances have been disposed of or otherwise released. Moreover, it is not uncommon for neighboring landowners and other third parties to file claims for personal injury and property damage allegedly caused by the release of substances or other waste products into the environment.

It is possible that additional environmental regulations will place more restrictions and limitations on activities that may affect our business, and thus there can be no assurance as to the amount or timing of future expenditures for environmental compliance or remediation. We try to anticipate future regulatory requirements that might be imposed and plan accordingly to remain in compliance with changing environmental laws and regulations and to minimize the costs of such compliance.

While it is not possible to quantify the costs of compliance with all applicable federal and state environmental laws, those costs have been and are expected to continue to be significant. Any environmental costs are in addition to well closing costs; property restoration costs; and other, significant, non-capital environmental costs, including costs incurred to obtain and maintain permits, to gather and submit required data to regulatory authorities, to characterize and dispose of wastes and effluents, and to maintain management operational practices with regard to potential environmental liabilities. Compliance with these federal and state environmental laws has substantially increased the cost of gas production, but is, in general, a cost common to all domestic gas producers.

At the present time, we do not believe that compliance with federal, state or local environmental laws and regulations will have a material adverse effect on our business, financial position or results of operations. We cannot assure you, however that future events, such as changes in existing laws, the promulgation of new laws, or the development or discovery of new facts or conditions, will not cause us to incur significant costs. The following is a discussion of the material environmental and safety laws and regulations that relate to the midstream natural gas industry. We believe that we are in substantial compliance with all of these environmental laws and regulations.

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Air Emissions

Our operations are subject to the federal Clean Air Act and comparable state laws and regulations. These laws and regulations regulate emissions of air pollutants from various industrial sources and also impose various monitoring and reporting requirements. Such laws and regulations may require that we obtain pre-approval for the construction or modification of certain projects or facilities expected to produce air emissions or result in the increase of existing air emissions, obtain and strictly comply with air permits containing various emissions and operational limitations, or use specific emission control technologies to limit emissions. Our failure to comply with these requirements could subject us to monetary penalties, injunctions, conditions or restrictions on operations, and potentially criminal enforcement actions. Historically, air pollution control has become more stringent over time. This trend is expected to continue. The cost of technology and systems to control air pollution to meet regulatory requirements is significant today. These costs are expected to increase as air pollution control requirements increase. We believe, however, that our operations will not be materially adversely affected by such requirements, and the requirements are not expected to be any more burdensome to us than to any other similarly situated companies.

Hazardous Waste

Our operations generate wastes, including some hazardous wastes that are subject to the federal Resource Conservation and Recovery Act, or RCRA, and comparable state laws, which impose detailed requirements for the handling, storage, treatment and disposal of hazardous and solid waste. RCRA currently exempts many natural gas gathering and field processing wastes from classification as hazardous waste. Specifically, RCRA excludes from the definition of hazardous waste produced waters and other wastes associated with the exploration, development or production of crude oil and natural gas. However, these oil and gas exploration and production wastes may still be regulated under state law or the less stringent requirements of the Solid Waste Disposal Act. Moreover, ordinary industrial wastes such as paint wastes, waste solvents, laboratory wastes and waste compressor oils may be regulated as hazardous waste. The transportation of natural gas in pipelines may also generate some hazardous wastes that are subject to RCRA or comparable state law requirements.

Site Remediation

The Comprehensive Environmental Response, Compensation and Liability Act of 1980, as amended, or CERCLA, also known as “Superfund,” and comparable state laws impose liability, without regard to fault or the legality of the original conduct, on certain classes of persons responsible for the release of hazardous substances into the environment. Although natural gas is excluded from CERCLA’s definition of “hazardous substance,” in the course of our ordinary operations we generate wastes and materials that fall within the definition of a “hazardous substance.” Under CERCLA, we could be subject to joint and several liability for the costs of cleaning up and restoring sites where hazardous substances have been released, for damages to natural resources and for the costs of certain health studies.

Waste and Storm Water Discharges

Our operations are subject to the Federal Water Pollution Control Act of 1972, as amended, also known as the Clean Water Act, and analogous state laws and regulations. These laws and regulations impose detailed permit requirements and strict controls regarding the discharge of pollutants in waste water and in storm water, including the discharge of dredged or fill material, into waters of the United States. The unpermitted discharge of pollutants, including discharges resulting from a spill or leak incident, is prohibited. Any unpermitted release of pollutants from our pipelines or facilities could result in fines or penalties as well as significant remedial obligations.

Pipeline Safety

Our pipelines are subject to regulation by the U.S. Department of Transportation, or the DOT, under the Natural Gas Pipeline Safely Act of 1968, as amended, or the NGPSA, pursuant to which the DOT has established requirements relating to the design, installation, testing, construction, operation, replacement and management of pipeline facilities. The NGPSA covers the pipeline transportation of natural gas and other gases and requires any

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entity that owns or operates pipeline facilities to comply with the regulations under the NGPSA, to permit access to and allow copying of records and to make certain reports and provide information as required by the Secretary of Transportation. We believe that our pipeline operations are in substantial compliance with applicable NGPSA requirements; however, if new or amended laws and regulations are enacted or existing laws and regulations are reinterpreted, future compliance with the NGPSA could result in increased costs.

Employee Health and Safety

We are subject to the requirements of the Occupational Safety and Health Act, referred to as OSHA, and comparable state laws and standards that regulate the protection of the health and safety of workers. In addition, the OSHA hazard communication standard requires that information be maintained about hazardous materials used or produced in our operations and that this information be provided to employees, federal, state and local government authorities and citizens.

Hydrogen Sulfide

Hydrogen sulfide gas is a byproduct of sour gas treatment. Exposure to unacceptable levels of hydrogen sulfide (known as sour gas) is harmful to humans, and prolonged exposure can result in death. We employ numerous safety precautions to ensure the safety of our employees. There are various federal and state environmental and safety requirements that apply to facilities using or producing hydrogen sulfide gas. Notwithstanding compliance with such requirements, common law causes of action are available to persons damaged by exposure to hydrogen sulfide gas.

Competition

We operate in the highly competitive areas of acquisition and exploration of natural gas properties in which other competing companies may have substantially larger financial resources, operations, staffs and facilities. In seeking to acquire desirable new properties for future exploration we face competition from other natural gas and oil companies. Such companies may be able to pay more for prospective natural gas properties or prospects and to evaluate, bid for and purchase a greater number of properties and prospects than our financial or human resources permit.

Since a significant majority of our pipeline and service operations presently support our exploration and development operations, these aspects of our business do not experience any significant competition.

Employees

At March 6, 2007, we had an experienced staff of 265 field employees in offices located in Chanute and Howard, Kansas and Lenapah, Oklahoma, and 47 pipeline operations employees. Also, at the headquarters office in Oklahoma City, our staff consists of 42 executive and administrative personnel. None of our employees are covered by a collective bargaining agreement. Management considers its relations with our employees to be satisfactory.

Administrative Facilities

The office space for the corporate headquarters for us and our subsidiaries is leased and is located at 9520 N. May Avenue, Suite 300, Oklahoma City, OK 73120.

We also own a building located at 211 West 14th Street in Chanute, Kansas 66720 that is used as an administrative office, an operations terminal and a repair facility.

An office building at 127 West Main in Chanute, Kansas is owned and operated by us as a geological laboratory. We also lease an operational office that is located east of Chanute, Kansas.

Where To Find Additional Information

Additional information about us can be found on our website at www.qrcp.net. We also provide free of charge on our website our filings with the SEC, including our annual reports, quarterly reports, and current reports along with any amendments thereto, as soon as reasonably practicable after we have electronically filed such material with, or furnished it to, the SEC.

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Glossary of Oil and Gas Terms

The terms defined in this section are used throughout this Form 10-K.

Bcf.  Billion cubic feet of natural gas.

Bcfe.  Billion cubic feet equivalent, determined using the ratio of six mcf of natural gas to one bbl of crude oil, condensate or natural gas liquids.

Btu or British Thermal Unit.  The quantity of heat required to raise the temperature of one pound of water by one degree Fahrenheit.

CBM.  Coal bed methane.

Cherokee Basin.  As used in this Form 10-K a ten county region in southeastern Kansas and northeastern Oklahoma.

Completion.  The installation of permanent equipment for the production of oil or natural gas, or in the case of a dry hole, the reporting of abandonment to the appropriate agency.

Developed acreage.  The number of acres that are allocated or assignable to productive wells or wells capable of production.

Development well.  A well drilled within the proved boundaries of an oil or natural gas reservoir with the intention of completing the stratigraphic horizon known to be productive.

Dry hole.  A well found to be incapable of producing hydrocarbons in sufficient quantities such that proceeds from the sale of such production exceed production expenses and taxes.

Exploitation.  Ordinarily considered to be a form of development within a known reservoir.

Exploratory well.  A well drilled to find and produce oil or gas reserves not classified as proved, to find a new reservoir in a field previously found to be productive of oil or gas in another reservoir or to extend a known reservoir.

Farm-in or farm-out.  An agreement under which the owner of a working interest in an oil or gas lease assigns the working interest or a portion of the working interest to another party who desires to drill on the leased acreage. Generally, the assignee is required to drill one or more wells in order to earn its interest in the acreage. The assignor usually retains a royalty or reversionary interest in the lease. The interest received by an assignee is a “farm-in” while the interest transferred by the assignor is a “farm-out.”

Field.  An area consisting of either a single reservoir or multiple reservoirs, all grouped on or related to the same individual geological structural feature and/or stratigraphic condition.

Frac/fracturing.  The method used to increase the deliverability of a well by pumping a liquid or other substance into a well under pressure to crack and prop open the hydrocarbon formation.

Gathering system.  Pipelines and other equipment used to move natural gas from the wellhead to the trunk or the main transmission lines of a pipeline system.

Gross acres or gross wells.  The total acres or wells, as the case may be, in which a working interest is owned.

Highly volatile bituminous coal.  Bituminous coal with a high concentration of methane gas.

Horizon or formation.  The section of rock, from which gas is expected to be produced in commercial quantities.

mcf.  Thousand cubic feet of natural gas.

mcfe.  Thousand cubic feet equivalent, determined using the ratio of six mcf of natural gas to one bbl of crude oil, condensate or natural gas liquids.

MMBtu.  Million British thermal units.

mmcf.  Million cubic feet of natural gas.

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mmcfe.  Million cubic feet equivalent, determined using the ratio of six mcf of natural gas to one bbl of crude oil, condensate or natural gas liquids.

Net acres or net wells.  The sum of the fractional working interests owned in gross acres or well, as the case may be.

NYMEX.  The New York Mercantile Exchange.

Permeability.  The ease of movement of water and/or gases through a soil material.

Perforation.  The making of holes in casing and cement (if present) to allow formation fluids to enter the well bore.

PV-10 or present value of estimated future net revenues.  An estimate of the present value of the estimated future net revenues from proved gas reserves at a date indicated after deducting estimated production and ad valorem taxes, future capital costs and operating expenses, but before deducting any estimates of federal income taxes. The estimated future net revenues are discounted at an annual rate of 10% in accordance with the SEC’s practice, to determine their “present value.” The present value is shown to indicate the effect of time on the value of the revenue stream and should not be construed as being the fair market value of the properties. Estimates of future net revenues are made using oil and natural gas prices and operating costs at the date indicated and held constant for the life of the reserves.

Productive well.  A well that is found to be capable of producing hydrocarbons in sufficient quantities such that proceeds from the sale of such production exceed production expenses and taxes.

Proved developed non-producing reserves.  Proved developed reserves expected to be recovered from zones behind casings in existing wells.

Proved developed reserves.  Proved reserves that can be expected to be recovered from existing wells with existing equipment and operating methods.

Proved reserves.  The estimated quantities of crude oil, natural gas and natural gas liquids that geological and engineering data demonstrate with reasonable certainty to be recoverable in future years from known reservoirs under existing economic and operating conditions.

Proved undeveloped reserves or PUD.  Proved reserves that are expected to be recovered from new wells on undrilled acreage or from existing wells where a relatively major expenditure is required for recompletion.

Reserve life index.  This index is calculated by dividing total proved reserves by the production from the previous year to estimate the number of years of remaining production.

Reservoir.  A porous and permeable underground formation containing a natural accumulation of producible oil and/or gas that is confined by impermeable rock or water barriers and is individual and separate from other reservoirs.

scf.  Standard cubic feet of natural gas.

Shut in.  Stopping an oil or gas well from producing.

Unconventional resource development.  A development in which the targeted reservoirs generally fall into three categories: (1) tight sands, (2) coal beds, and (3) gas shales. The reservoirs tend to cover large areas and lack the readily apparent traps, seals and discrete hydrocarbon-water boundaries that typically define conventional reservoirs. These reservoirs generally require stimulation treatments or other special recovery processes in order to produce economic flow rate.

Undeveloped acreage.  Lease acreage on which wells have not been drilled or completed to a point that would permit the production of commercial quantities of oil or gas regardless of whether or not such acreage contains proved reserves.

Working interest.  The operating interest that gives the owner the right to drill, produce and conduct operating activities on the property and receive a share of production.

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ITEM 1A.   RISK FACTORS.

Risks Related to the Company’s Business

The volatility of natural gas and oil prices could have a material adverse effect on the Company’s business.

The Company’s revenues, profitability and future growth and the carrying value of its natural gas and oil properties depend to a large degree on prevailing natural gas and oil prices. The Company’s ability to maintain or increase its borrowing capacity and to obtain additional capital on attractive terms also substantially depends upon natural gas and oil prices. Prices for natural gas and oil are subject to large fluctuations in response to relatively minor changes in the supply and demand for natural gas and oil, uncertainties within the market and a variety of other factors in large part beyond the Company’s control, such as:

•  the domestic and foreign supply of natural gas and oil;

•  the activities of the Organization of Petroleum Exporting Companies;

•  overall domestic and global economic conditions;

•  the consumption pattern of industrial consumers, electricity generators and residential users;

•  technological advances impacting energy consumption;

•  weather conditions;

•  natural disasters;

•  the political stability in the Middle East and elsewhere;

•  domestic and foreign governmental regulations and taxes;

•  the price of foreign imports; and

•  the price and availability of alternative fuels.

A sharp decline in the price of natural gas and oil prices would result in a commensurate reduction in the Company’s revenues, income and cash flows from the production of natural gas and oil and could have a material adverse effect on the carrying value of the Company’s proved reserves and its borrowing base. In the event prices fall substantially, the Company may not be able to realize a profit from its production and would operate at a loss, and even relatively modest drops in prices can significantly affect the Company’s financial results and impede its growth. In recent decades, there have been periods of both worldwide overproduction and underproduction of hydrocarbons and periods of both increased and relaxed energy conservation efforts. Such conditions have resulted in periods of excess supply of, and reduced demand for, crude oil on a worldwide basis and for natural gas on a domestic basis. These periods have been followed by periods of short supply of, and increased demand for, crude oil and natural gas. The excess or short supply of natural gas and crude oil has placed pressures on prices and has resulted in dramatic price fluctuations even during relatively short periods of seasonal market demand. Lower natural gas and oil prices may not only decrease the Company’s revenues on a per unit basis, but also may reduce the amount of natural gas and oil that the Company can produce economically. This may result in the Company having to make substantial downward adjustments to its estimated proved reserves. If this occurs or if the Company’s estimates of development costs increase, production data factors change or the Company’s exploration results deteriorate, accounting rules may require the Company to write down, as a non-cash charge to earnings, the carrying value of its natural gas and oil properties for impairments. The Company is required to perform impairment tests on its assets whenever events or changes in circumstances lead to a reduction of the estimated useful life or estimated future cash flows that would indicate that the carry amount may not be recoverable or whenever management’s plans change with respect to those assets. The Company may incur impairment charges in the future, which could have a material adverse effect on the Company’s results of operations in the period taken. For the year ended December 31, 2006, the Company recorded a provision for impairment of its gas properties in the amount of $30.7 million.

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Because the Company faces uncertainties in estimating proven recoverable natural gas reserves, you should not place undue reliance on such reserve information.

This Form 10-K contains estimates of natural gas reserves, and the future net cash flows attributable to those reserves, prepared by Cawley, Gillespie & Associates, Inc., the Company’s independent petroleum and geological engineers. There are numerous uncertainties inherent in estimating quantities of proved reserves and cash flows from such reserves, including factors beyond the Company’s control and the control of Cawley, Gillespie & Associates, Inc. Reserve engineering is a subjective process of estimating underground accumulations of natural gas and oil that cannot be measured in an exact manner. The accuracy of an estimate of quantities of reserves, or of cash flows attributable to these reserves, is a function of the available data; assumptions regarding future natural gas and oil prices; expenditures for future development and exploitation activities; and engineering and geological interpretation and judgment. Reserves and future cash flows may also be subject to material downward or upward revisions based upon production history, development and exploitation activities and natural gas and oil prices. Actual future production, revenue, taxes, development expenditures, operating expenses, quantities of recoverable reserves and value of cash flows from those reserves may vary significantly from the assumptions and estimates in this Form 10-K. Any significant variance from these assumptions to actual figures could greatly affect the Company’s estimates of reserves, the economically recoverable quantities of natural gas attributable to any particular group of properties, the classification of reserves based on risk of recovery, and estimates of the future net cash flows. In addition, reserve engineers may make different estimates of reserves and cash flows based on the same available data. The estimated quantities of proved reserves and the discounted present value of future net cash flows attributable to those reserves included in this Form 10-K were prepared by Cawley, Gillespie & Associates, Inc. in accordance with the rules of the SEC, and are not intended to represent the fair market value of such reserves.

The present value of future net cash flows from the Company’s proved reserves is not necessarily the same as the current market value of its estimated natural gas reserves. The Company bases the estimated discounted future net cash flows from its proved reserves on prices and costs. However, actual future net cash flows from the Company’s natural gas and oil properties also will be affected by factors such as:

•  geological conditions;

•  changes in governmental regulations and taxation;

•  assumptions governing future prices;

•  the amount and timing of actual production;

•  availability of funds;

•  future operating and development costs; and

•  capital costs of drilling new wells.

The timing of both the Company’s production and its incurrence of expenses in connection with the development and production of natural gas properties will affect the timing of actual future net cash flows from proved reserves, and thus their actual present value. In addition, the 10% discount factor the Company uses when calculating discounted future net cash flows may not be the most appropriate discount factor based on interest rates in effect from time to time and risks associated with the Company or the natural gas and oil industry in general. In addition, if natural gas prices decline, or our operating expenses increase, by $0.10 per mcf, then the pre-tax PV-10 of the Company’s proved reserves as of December 31, 2006 would decrease from $268.1 million to $263.6 million.

The SEC permits natural gas companies, in their filings with the SEC, to disclose only proved reserves that a company has demonstrated by actual production or conclusive formation tests to be economically and legally producible under existing economic and operating conditions. The SEC’s guidelines strictly prohibit the Company from including “probable reserves” and “possible reserves” in filings with the SEC. The Company also cautions you that the SEC views such “probable” and “possible” reserve estimates as inherently unreliable and these estimates may be seen as misleading to investors unless the reader is an expert in the natural gas industry. Unless you have such expertise, you should not place undo reliance on these estimates. Potential investors should also be aware that such “probable” and “possible” reserve estimates will not be contained in any “resale” or other registration

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statement filed by the Company that offers or sells shares on behalf of purchasers of the Company’s common stock and may have an impact on the valuation of the resale of the shares. The Company undertakes no duty to update this information and does not intend to update the information.

The Company’s future success depends upon its ability to find, develop and acquire additional natural gas reserves that are economically recoverable.

The rate of production from natural gas and oil properties declines as reserves are depleted. As a result, the Company must locate and develop or acquire new natural gas and oil reserves to replace those being depleted by production. The Company must do this even during periods of low natural gas and oil prices when it is difficult to raise the capital necessary to finance activities. The Company’s future natural gas reserves and production and, therefore, the Company’s cash flow and income are highly dependent on its success in efficiently developing and exploiting its current reserves and economically finding or acquiring additional recoverable reserves. The Company may not be able to find and develop or acquire additional reserves at an acceptable cost or have necessary financing for these activities in the future.

The development of natural gas properties involves substantial risks that may result in a total loss of investment.

The business of exploring for and, to a lesser extent, developing and operating natural gas and oil properties involves a high degree of business and financial risks, and thus a substantial risk of investment loss that even a combination of experience, knowledge and careful evaluation may not be able to overcome. The cost of drilling, completing and operating wells is often uncertain, and a number of factors can delay or prevent drilling operations or production, including:

•  unexpected drilling conditions;

•  pressure or irregularities in geologic formations;

•  equipment failures or repairs;

•  difficulty disposing of water produced as part of the coal bed methane production process;

•  title problems;

•  lost or damaged oilfield drilling and service tools;

•  fires, explosions, blowouts, cratering, pollution and other environmental risks or other accidents;

•  adverse weather conditions;

•  regulatory changes;

•  reductions in natural gas and oil prices;

•  pipeline ruptures; and

•  unavailability or high cost of drilling rigs, other field services and equipment.

A productive well may become uneconomic in the event water or other deleterious substances are encountered, which impair or prevent the production of natural gas and/or oil from the well. In addition, production from any well may be unmarketable if it is contaminated with water or other deleterious substances. The Company may drill wells that are unproductive or, although productive, do not produce natural gas and/or oil in economic quantities. Unsuccessful drilling activities could result in higher costs without any corresponding revenues. Acquisition and completion decisions generally are based on subjective judgments and assumptions that are speculative. It is impossible to predict with certainty the production potential of a particular property or well. Furthermore, a successful completion of a well does not ensure a profitable return on the investment.

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Currently the vast majority of the Company’s producing properties are located in the Cherokee Basin of southeastern Kansas and northeastern Oklahoma, making the Company vulnerable to risks associated with having its production concentrated in one area.

The vast majority of the Company’s producing properties are geographically concentrated in the Cherokee Basin of southeastern Kansas and northeastern Oklahoma. As a result of this concentration, the Company may be disproportionately exposed to the impact of delays or interruptions of production from these wells caused by significant governmental regulation, transportation capacity constraints, curtailment of production, natural disasters, adverse weather conditions or interruption of transportation of natural gas produced from the wells in this basin or other events which impact this area.

The Company’s business involves many hazards and operational risks, some of which may not be fully covered by insurance of the Company or the operator of a property. If a significant accident or event occurs that is not fully insured, the Company’s operations and financial results could be adversely affected.

The Company’s operations are subject to hazards and risks inherent in producing and transporting natural gas and oil, including:

•  damage to equipment and surrounding properties caused by tornadoes, floods, fires and other natural disasters and acts of terrorism;

•  inadvertent damage from construction, farm and utility equipment;

•  leaks of natural gas or losses of natural gas as a result of the malfunction of equipment or facilities;

•  fires and explosions; and

•  other hazards that could also result in personal injury and loss of life, pollution and suspension of operations.

Any of these or other similar occurrences could result in the disruption of the Company’s operations, substantial repair costs, personal injury or loss of human life, significant damage to property, environmental pollution, impairment of the Company’s operations and substantial revenue losses.

As protection against operating hazards, the Company maintains insurance coverage against some, but not all, potential losses. In addition, pollution and environmental risks generally are not fully insurable. As a result of market conditions, premiums and deductibles for certain insurance policies can increase substantially, and in some instances, certain insurance may become unavailable or available only for reduced amounts of coverage. Additionally, the Company may elect not to obtain insurance if it believes that the cost of available insurance is excessive relative to the perceived risks presented. Losses could, therefore, occur for uninsurable or uninsured risks or in amounts in excess of existing insurance coverage. Moreover, insurance may not be available in the future at commercially reasonable costs and on commercially reasonable terms. Changes in the insurance markets subsequent to the terrorist attacks on September 11, 2001 and the hurricanes in 2005 have made it more difficult for the Company to obtain certain types of coverage. There can be no assurance that the Company will be able to obtain the levels or types of insurance the Company would otherwise have obtained prior to these market changes or that the insurance coverage the Company does obtain will not contain large deductibles or fail to cover certain hazards or cover all potential losses. As a result, the Company may not be able to renew its existing insurance policies or procure other desirable insurance on commercially reasonable terms, if at all. In addition, the Company believes any operators of its properties or properties in which the Company may acquire an interest will maintain similar insurance coverage. The occurrence of an event that is not covered, or not fully covered, by insurance could have a material adverse effect on the Company’s business, financial condition and results of operation.

The Company’s use of hedging arrangements could result in financial losses or reduce the Company’s income.

The Company currently engages in hedging arrangements to reduce its exposure to fluctuations in the prices of natural gas for a significant portion of its current natural gas production. These hedging arrangements expose the Company to risk of financial loss in some circumstances, including when production is less than expected; the

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counter-party to the hedging contract defaults on its contract obligations; or there is a change in the expected differential between the underlying price in the hedging agreement and the actual prices received. In addition, these hedging arrangements may limit the benefits the Company would otherwise receive from increases in prices for natural gas. See Item 7. “Management’s Discussion and Analysis of Financial Condition Results of Operations — Quantitative and Qualitative Disclosures About Market Risk” and Items 1. and 2. “Description of Business and Properties — Delivery Commitments — Hedging Activities.”

The Company’s natural gas sales are dependent on two customers.

The Company markets its own natural gas and more than 95% of its natural gas was sold to ONEOK Energy Marketing and Trading Company (“ONEOK”) during 2006. Tenaska was added as a purchaser in December 2006 and may purchase 10% or more during year 2007. In the event that ONEOK or Tenaska were to experience financial difficulties or were to no longer purchase the Company’s natural gas, the Company could, in the short term, experience difficulty in its marketing of natural gas, which could adversely affect its results of operations.

The Company incurs risks in acquiring producing properties.

The Company constantly evaluates opportunities to acquire additional natural gas and oil properties and frequently engages in bidding and negotiation for these acquisitions. If successful in this process, the Company may alter or increase its capitalization through the issuance of additional debt or equity securities, the sale of production payments or other measures. Any change in capitalization affects the Company’s risk profile. A change in capitalization, however, is not the only way acquisitions affect the Company’s risk profile. Acquisitions may alter the nature of the Company’s business. This could occur when the character of acquired properties is substantially different from the Company’s existing properties in terms of operating or geologic characteristics.

The Company may incur losses as a result of title deficiencies in the properties in which the Company invests.

If an examination of the title history of a property that the Company has purchased reveals that a natural gas or oil lease has been purchased in error from a person who is not the owner of the mineral interest desired, the Company’s interest would be worthless. In such an instance, the amount paid for such natural gas or oil lease or leases would be lost.

It is the Company’s practice, in acquiring natural gas and oil leases, or undivided interests in natural gas and oil leases, not to undergo the expense of retaining lawyers to examine the title to the mineral interest to be placed under lease or already placed under lease. Rather, the Company will rely upon the judgment of natural gas and oil lease brokers or landmen who perform the fieldwork in examining records in the appropriate governmental office before attempting to acquire a lease in a specific mineral interest.

Prior to the drilling of a natural gas or oil well, however, it is the normal practice in the natural gas and oil industry for the person or Company acting as the operator of the well to obtain a preliminary title review of the spacing unit within which the proposed natural gas or oil well is to be drilled to ensure there are no obvious deficiencies in title to the well. Frequently, as a result of such examinations, certain curative work must be done to correct deficiencies in the marketability of the title, and such curative work entails expense. The work might include obtaining affidavits of heirship or causing an estate to be administered. The Company’s failure to obtain these rights may adversely impact its ability in the future to increase production and reserves.

The Company’s ability to market the natural gas that it produces is essential to its business.

Several factors beyond the Company’s control may materially adversely affect its ability to market the natural gas and oil that it discovers. These factors include the proximity, capacity and availability of natural gas and oil pipelines and processing equipment, the level of domestic production and imports of natural gas and oil, the demand for natural gas and oil by utilities and other end users, the availability of alternative fuel sources, the effect of inclement weather, state and federal regulation of natural gas and oil marketing, market fluctuations of prices, taxes, royalties, land tenure, allowable production and environmental protection. The extent of these factors cannot be

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accurately predicted, but any one or a combination of these factors may result in the Company’s inability to sell its natural gas at prices that would result in an adequate return on its invested capital.

The Company’s operations expose it to significant costs and liabilities with respect to environmental and operational safety matters applicable to natural gas exploration and production operations.

The Company may incur significant costs and liabilities as a result of environmental, health and safety requirements applicable to natural gas exploration and production activities. These costs and liabilities could arise under a wide range of federal, state and local environmental, health and safety laws and regulations, including regulations and enforcement policies, which have tended to become increasingly strict over time. Failure to comply with these laws and regulations may result in the assessment of administrative, civil and criminal penalties, imposition of cleanup and site restoration costs and liens, and to a lesser extent, issuance of injunctions to limit or cease operations. In addition, claims for damages to persons or property may result from environmental and other impacts of the Company’s operations.

The Company is subject to regulation that restricts its ability to discharge water produced as part of its coal bed methane gas production operations. Coal beds frequently contain water that must be removed in order for the gas to detach from the coal and flow to the well bore, and the Company’s ability to remove and dispose of sufficient quantities of water from the coal seam will determine whether or not it can produce gas in commercial quantities. The cost of water disposal, including the cost of complying with regulations concerning water disposal, may adversely affect the Company.

Strict, joint and several liability may be imposed under certain environmental laws, which could cause the Company to become liable for the conduct of others or for consequences of its own actions that were in compliance with all applicable laws at the time those actions were taken. New laws, regulations or enforcement policies could be more stringent and impose unforeseen liabilities or significantly increase compliance costs. The Company does not carry insurance coverage against many of these potential environmental liabilities. Consequently, if the Company would be directly liable for damages resulting from the occurrence of any such event, its financial condition could be negatively impacted and, its ability to execute its business plan could be impaired.

The Company’s operations are also subject to regulation at the state and, in some cases, the county, municipal and local governmental levels. Such regulations include requiring permits for the construction, drilling and operation of wells, maintaining bonding requirements in order to drill or operate wells, regulating the surface use and requiring the restoration of properties upon which wells are drilled, requiring the proper plugging and abandonment of wells, and regulating the disposal of fluids used and produced in connection with operations. The Company’s operations are also subject to various state conservation laws and regulations. These include regulations that may affect the size of drilling and spacing units or proration units, the density of wells which may be drilled, and the mandatory unitization or pooling of gas properties. In addition, state conservation regulations may establish the allowable rates of production from gas wells, may prohibit or regulate the venting or flaring of gas, and may impose certain requirements regarding the ratability of gas production. State regulation of gathering facilities generally includes various safety, environmental and, in some circumstances, nondiscriminatory and non-preferential purchase and/or transportation requirements, but does not generally entail rate regulation. These regulatory burdens may adversely affect the Company’s profitability.

The Company operates in a highly competitive environment and its competitors may have greater resources than the Company.

The natural gas and oil industry is intensely competitive and the Company competes with other companies from various regions of the United States and may compete with foreign companies for domestic sales, many of whom are larger and have greater financial, technological, human and other resources. Many of these companies not only explore for and produce crude oil and natural gas but also carry on refining operations and market petroleum and other products on a regional, national or worldwide basis. Such companies may be able to pay more for productive natural gas and oil properties and exploratory prospects or define, evaluate, bid for and purchase a greater number of properties and prospects than the Company’s financial or human resources permit. In addition, such companies may have a greater ability to continue exploration activities during periods of low hydrocarbon

27

market prices. The Company’s ability to acquire additional properties and to discover reserves in the future will be dependent upon the Company’s ability to evaluate and select suitable properties and to consummate transactions in a highly competitive environment. If the Company is unable to compete, its operating results and financial position may be adversely affected.

The Company may have difficulty managing growth in its business.

Because of the Company’s small size, growth in accordance with its business plans, if achieved, will place a significant strain on the Company’s financial, technical, operational and management resources. As the Company expands its activities and increases the number of projects it is evaluating or in which it participates, there will be additional demands on the Company’s financial, technical and management resources. The failure to continue to upgrade the Company’s technical, administrative, operating and financial control systems or the occurrence of unexpected expansion difficulties, including the recruitment and retention of experienced managers, geoscientists and engineers, could have a material adverse effect on the Company’s business, financial condition and results of operations and the Company’s ability to timely execute its business plan.

The Company’s success depends on its key management personnel, the loss of any of whom could disrupt the Company’s business.

The success of the Company’s operations and activities is dependent to a significant extent on the efforts and abilities of the Company’s management. The loss of services of any of the Company’s key managers could have a material adverse effect on the Company’s business.

Shortages of natural gas and oil field service personnel and equipment could adversely affect the Company’s business.

The demand for qualified and experienced field personnel to drill wells and conduct field operations, geologists, geophysicists, engineers and other professionals in the oil and natural gas industry can fluctuate significantly, often in correlation with oil and natural gas prices, causing periodic shortages. Due to recent high natural gas and oil prices, the Company has experienced shortages of drilling rigs and other equipment, as demand for rigs and equipment has increased along with the number of wells being drilled. Higher natural gas and oil prices generally stimulate increased demand and result in increased prices for drilling rigs, crews and associated supplies, oilfield equipment and services and personnel in the Company’s exploration and production operations. These types of shortages or price increases could significantly decrease the Company’s profit margin, cash flow and operating results or restrict or delay its ability to drill those wells and conduct those operations that it currently has planned and budgeted.

Acquisition of entire businesses may be a component of the Company’s growth strategy in the future and the Company’s failure to complete future acquisitions successfully could reduce its earnings and slow its growth.

The Company might acquire entire businesses in the future. Potential risks involved in the acquisition of such businesses include the inability to continue to identify business entities for acquisition or the inability to make acquisitions on terms that the Company considers economically acceptable. Furthermore, there is intense competition for acquisition opportunities in the Company’s industry. Competition for acquisitions may increase the cost of, or cause the Company to refrain from, completing acquisitions. The Company’s strategy of completing acquisitions is dependent upon, among other things, its ability to obtain debt and equity financing and, in some cases, regulatory approvals. The Company’s ability to pursue its growth strategy may be hindered if the Company is not able to obtain such financing or regulatory approvals. The Company’s ability to grow through acquisitions and manage growth will require the Company to continue to invest in operational, financial and management information systems and to attract, retain, motivate and effectively manage the Company’s employees. The inability to effectively manage the integration of acquisitions could reduce the Company’s focus on subsequent acquisitions and current operations, which, in turn, could negatively impact the Company’s earnings and growth. The Company’s financial position and results of operations may fluctuate significantly from period to period, based on whether or not significant acquisitions are completed in particular periods.

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The Company may not be able to replace its reserves or generate cash flows if the Company is unable to raise capital.

The Company makes, and will continue to make, substantial capital expenditures for the exploration, acquisition and production of natural gas and oil reserves. Historically, the Company has financed these expenditures primarily with cash generated by operations and proceeds from bank borrowings and equity financings. If the Company’s revenues or borrowing base decreases as a result of lower natural gas and oil prices, operating difficulties or declines in reserves, the Company may have limited ability to expend the capital necessary to undertake or complete future drilling programs. Additional debt or equity financing or cash generated by operations may not be available to meet these requirements.

If the Company borrows money to expand its business, the Company will face the risks of leverage.

As of March 12, 2007 the Company had incurred $225 million of indebtedness for borrowed money and $10 million of indebtedness had been incurred by Quest Midstream. The Company anticipates that it may in the future incur additional debt for financing its growth. The Company’s ability to borrow funds will depend upon a number of factors, including the condition of the financial markets. Under certain circumstances, the use of leverage may provide a higher return to you on your investment, but will also create a greater risk of loss to you than if the Company did not borrow. The risk of loss in such circumstances is increased because the Company would be obligated to meet fixed payment obligations on specified dates regardless of the Company’s revenue. If the Company does not make its debt service payments when due, the Company may sustain the loss of its equity investment in any of the Company’s assets securing such debt, upon the foreclosure on such debt by a secured lender. The interest payable on the Company’s debt varies with the movement of interest rates charged by financial institutions. An increase in the Company’s borrowing costs due to a rise in interest rates in the market may reduce the amount of income and cash available for the payment of dividends to the holders of the Company’s common stock.

The Company’s financial position and past financial performance could have the following material adverse consequences for its business:

•  a substantial portion of the Company’s cash flow will be used to service its indebtedness and pay its other liabilities, including distributions to the holders of Quest Midstream’s common units, which will reduce the funds that would otherwise be available to drill additional wells and construct additional pipeline infrastructure;

•  the Company may be unable to obtain additional debt or equity financing or any such financing may be at a higher cost of capital than similarly situated companies with less leverage, thereby reducing funds available for drilling, expansion, working capital and other business needs; and

•  a substantial decrease in the Company’s revenues as a result of lower natural gas and oil prices, decreased production or other factors could make it difficult for it to pay its liabilities or remain in compliance with the covenants in its credit agreements. Any failure by the Company to meet these obligations could result in litigation, non-performance by contract counterparties or bankruptcy.

If the Company fails to maintain an effective system of internal controls, then it may not be able to accurately report its financial results or prevent fraud.

Effective internal controls are necessary for the Company to provide reliable financial reports, prevent fraud and operate successfully as a public company. The Company cannot be certain that its efforts to maintain its internal controls will be successful, that it will be able to maintain adequate controls over its financial processes and reporting in the future or that it will be able to comply with its obligations under Section 404 of the Sarbanes-Oxley Act of 2002. Any failure to develop or maintain effective internal controls or difficulties encountered in implementing or improving the Company’s internal controls could harm its operating results or cause it to fail to meet its reporting obligations. Ineffective internal controls also could cause the Company’s shareholders and potential investors to lose confidence in the Company’s reported financial information, which would likely have a negative effect on the trading price of its common stock.

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The Company’s credit agreements contain operating and financial restrictions that may restrict its business and financing activities.

The operating and financial restrictions and covenants in the Company’s credit agreements could restrict its ability to finance future operations or capital needs or to engage, expand or pursue its business activities or to pay distributions. The Company’s credit agreements restrict its ability to:

•  incur indebtedness;

•  grant liens;

•  make distributions on or redeem or repurchase equity interests;

•  make certain investments, loans or advances;

•  lease equipment;

•  enter into a merger, consolidation or sale of assets;

•  dispose of property;

•  enter into hedging arrangements with certain counterparties;

•  make capital expenditures above specified amounts; and

•  enter into transactions with affiliates.

The Company is also required to comply with certain financial covenants and ratios. The Company’s ability to comply with these restrictions and covenants in the future is uncertain and will be affected by its results of operations and financial conditions and events or circumstances beyond its control. If market or other economic conditions deteriorate, the Company’s ability to comply with these covenants may be impaired. If the Company violates any of the restrictions, covenants, ratios or tests in its credit agreements, a significant portion of its indebtedness may become immediately due and payable, its ability to make distributions will be inhibited and the lenders’ commitment to make further loans to the Company may terminate. The Company might not have, or be able to obtain, sufficient funds to make these accelerated payments. In addition, the Company’s obligations under its credit agreements are secured by substantially all of its assets, and if it is unable to repay indebtedness under its credit agreements, the lenders could seek to foreclose on its assets.

The Company’s credit agreements limit the amounts it can borrow to a borrowing base amount, determined by the lenders in their sole discretion. Outstanding borrowings in excess of the borrowing base will be required to be repaid (1) within 90 days following receipt of notice of the new borrowing base or (2) immediately if the borrowing base is reduced in connection with a sale or disposition of certain properties in excess of 5% of the borrowing base. Additionally, if the lenders’ exposure under letters of credit exceeds the borrowing base after all borrowings under the credit agreements have been repaid, the Company will be required to provide additional cash collateral.

Terrorist attacks, and the threat of terrorist attacks, have resulted in increased costs to the Company’s business. Continued hostilities in the Middle East or other sustained military campaigns may adversely impact the Company’s results of operations.

The long-term impact of terrorist attacks, such as the attacks that occurred on September 11, 2001, and the threat of future terrorist attacks on the Company’s industry in general, and on the Company in particular, is not known at this time. Uncertainty surrounding continued hostilities in the Middle East or other sustained military campaigns may affect the Company’s operations in unpredictable ways, including disruptions of crude oil supplies and markets for refined products, and the possibility that infrastructure facilities could be direct targets of, or indirect casualties of, an act of terror.

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Risks Relating to the Company’s Common Stock

The Company’s stock price may be volatile.

The Company cannot assure you that an active public market for the Company’s common stock will develop in the future. The following factors could affect the Company’s stock price:

•  the Company’s operating and financial performance and prospects;

•  quarterly variations in the rate of growth of the Company’s financial indicators, such as net income per share, net income and revenues;

•  changes in revenue or earnings estimates or publication of research reports by analysts about the Company or the exploration and production industry;

•  liquidity and registering the Company’s common stock for public resale;

•  actual or anticipated variations in the Company’s reserve estimates and quarterly operating results;

•  changes in natural gas and oil prices;

•  speculation in the press or investment community;

•  sales of the Company’s common stock by significant stockholders;

•  actions by institutional investors before disposition of the Company’s common stock;

•  increases in the Company’s cost of capital;

•  changes in applicable laws or regulations, court rulings and enforcement and legal actions;

•  changes in market valuations of similar companies;

•  adverse market reaction to any increased indebtedness the Company incurs in the future;

•  additions or departures of key management personnel;

•  actions by the Company’s stockholders;

•  general market conditions, including fluctuations in and the occurrence of events or trends affecting the price of natural gas and oil; and

•  domestic and international economic, legal and regulatory factors unrelated to the Company’s performance.

It is unlikely that the Company will be able to pay dividends on the common stock.

The Company cannot predict with certainty that its operations will result in sufficient revenues to enable it to operate profitably and with sufficient positive cash flow so as to enable the Company to pay dividends to the holders of common stock. In addition, the Company’s credit facilities generally prohibit it from paying any dividend to the holders of the Company’s common stock without the consent of the lenders under the credit facilities, other than dividends payable solely in equity interests of the Company.

The percentage ownership evidenced by the common stock is subject to dilution.

The Company is authorized to issue up to 200,000,000 shares of common stock and is not prohibited from issuing additional shares of such common stock. Moreover, to the extent that the Company issues any additional common stock, a holder of the common stock is not necessarily entitled to purchase any part of such issuance of stock. The holders of the common stock do not have statutory “preemptive rights” and therefore are not entitled to maintain a proportionate share of ownership by buying additional shares of any new issuance of common stock before others are given the opportunity to purchase the same. Accordingly, you must be willing to assume the risk that your percentage ownership, as a holder of the common stock, is subject to change as a result of the sale of any additional common stock, or other equity interests in the Company subsequent to this offering.

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The common stock is an unsecured equity interest.

As an equity interest, the common stock will not be secured by any of the Company’s assets. Therefore, in the event of the Company’s liquidation, the holders of the common stock will receive a distribution only after all of the Company’s secured and unsecured creditors have been paid in full. There can be no assurance that the Company will have sufficient assets after paying its secured and unsecured creditors to make any distribution to the holders of the common stock.

Provisions in Nevada law could delay or prevent a change in control, even if that change would be beneficial to the Company’s stockholders.

Certain provisions of Nevada law may delay, discourage, prevent or render more difficult an attempt to obtain control of the Company, whether through a tender offer, business combination, proxy contest or otherwise. The provisions of Nevada law are designed to discourage coercive takeover practices and inadequate takeover bids. These provisions are also designed to encourage persons seeking to acquire control of the Company to first negotiate with the Company’s board of directors.

The Nevada Revised Statutes (the “NRS”) contain two provisions, described below as “Combination Provisions” and the “Control Share Act,” that may make more difficult the accomplishment of unsolicited or hostile attempts to acquire control of the Company through certain types of transactions.

Restrictions on Certain Combinations Between Nevada Resident Corporations and Interested Stockholders.  The NRS includes the Combination Provisions prohibiting certain “combinations” (generally defined to include certain mergers, disposition of assets transactions, and share issuance or transfer transactions) between a resident domestic corporation and an “interested stockholder” (generally defined to be the beneficial owner of 10% or more of the voting power of the outstanding shares of the corporation), except those combinations which are approved by the board of directors before the interested stockholder first obtained a 10% interest in the corporation’s stock. There are additional exceptions to the prohibition, which apply to combinations if they occur more than three years after the interested stockholder’s date of acquiring shares. The Combination Provisions apply unless the corporation elects against their application in its original articles of incorporation or an amendment thereto. The Company’s restated articles of incorporation do not currently contain a provision rendering the Combination Provisions inapplicable.

Nevada Control Share Act.  Nevada’s Control Share Act imposes procedural hurdles on and curtails greenmail practices of corporate raiders. The Control Share Act temporarily disenfranchises the voting power of “control shares” of a person or group (“Acquiring Person”) purchasing a “controlling interest” in an “issuing corporation” (as defined in the NRS) not opting out of the Control Share Act. In this regard, the Control Share Act will apply to an “issuing corporation”, unless the articles of incorporation or bylaws in effect on the tenth day following the acquisition of a controlling interest provide that it is inapplicable. The Company’s restated articles of incorporation and bylaws do not currently contain a provision rendering the Control Share Act inapplicable.

Under the Control Share Act, an “issuing corporation” is a corporation organized in Nevada which has 200 or more stockholders of record, at least 100 of whom have addresses in that state appearing on the company’s stock ledger, and which does business in Nevada directly or through an affiliated company. The Company’s status at the time of the occurrence of a transaction governed by the Control Share Act (assuming that the Company’s articles of incorporation or bylaws have not theretofore been amended to include an opting out provision) would determine whether the Control Share Act is applicable. The Company does not currently conduct any business in Nevada directly or through an affiliated company.

The Control Share Act requires an Acquiring Person to take certain procedural steps before he or it can obtain the full voting power of the control shares. “Control shares” are the shares of a corporation (1) acquired or offered to be acquired which will enable the Acquiring Person to own a “controlling interest,” and (2) acquired within 90 days immediately preceding that date. A “controlling interest” is defined as the ownership of shares which would enable the Acquiring Person to exercise certain graduated amounts (beginning with one-fifth) of all voting power of the corporation in the election of directors. The Acquiring Person may not vote any control shares without first obtaining approval from the stockholders not characterized as “interested stockholders” (as defined below).

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To obtain voting rights in control shares, the Acquiring Person must file a statement at the principal office of the issuer (“Offeror’s Statement”) setting forth certain information about the acquisition or intended acquisition of stock. The Offeror’s Statement may also request a special meeting of stockholders to determine the voting rights to be accorded to the Acquiring Person. A special stockholders’ meeting must then be held at the Acquiring Person’s expense within 30 to 50 days after the Offeror’s Statement is filed. If a special meeting is not requested by the Acquiring Person, the matter will be addressed at the next regular or special meeting of stockholders.

At the special or annual meeting at which the issue of voting rights of control shares will be addressed, “interested stockholders” may not vote on the question of granting voting rights to control the corporation or its parent unless the articles of incorporation of the issuing corporation provide otherwise. The Company’s restated articles of incorporation and bylaws do not currently contain a provision allowing for such voting power.

If full voting power is granted to the Acquiring Person by the disinterested stockholders, and the Acquiring Person has acquired control shares with a majority or more of the voting power, then (unless otherwise provided in the articles of incorporation or bylaws in effect on the tenth day following the acquisition of a controlling interest) all stockholders of record, other than the Acquiring Person, who have not voted in favor of authorizing voting rights for the control shares, must be sent a notice advising them of the fact and of their right to receive “fair value” for their shares. The Company’s restated articles of incorporation and bylaws do not provide otherwise. By the date set in the dissenter’s notice, which may not be less than 30 nor more than 60 days after the dissenter’s notice is delivered, any such stockholder may demand to receive from the corporation the “fair value” for all or part of his shares. “Fair value” is defined in the Control Share Act as “not less than the highest price per share paid by the Acquiring Person in an acquisition.”

The Control Share Act permits a corporation to redeem the control shares in the following two instances, if so provided in the articles of incorporation or bylaws of the corporation in effect on the tenth day following the acquisition of a controlling interest: (1) if the Acquiring Person fails to deliver the Offeror’s Statement to the corporation within 10 days after the Acquiring Person’s acquisition of the control shares; or (2) an Offeror’s Statement is delivered, but the control shares are not accorded full voting rights by the stockholders. The Company’s restated articles of incorporation and bylaws do not address this matter.

ITEM 1B.   UNRESOLVED STAFF COMMENTS.

None.

ITEM 3.   LEGAL PROCEEDINGS.

See Note 8 — Contingencies, in notes to consolidated financial statements, which is incorporated herein by reference.

ITEM 4.   SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.

No matters were submitted to a vote of security holders during the fourth quarter of 2006.

PART II

ITEM 5.   MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES.

Market Information

Our common stock trades on The Nasdaq Global Market under the symbol “QRCP”. During the period from January 1, 2005 until April 10, 2006, our common stock was traded on the OTC Bulletin Board. Since April 10, 2006, the Company’s common stock has traded on The Nasdaq Global Market or its predecessor, The Nasdaq National Market (collectively, “NASDAQ”).

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The table set forth below lists the range of high and low prices of the Company’s common stock on NASDAQ since April 11, 2006 and high and low bids on the OTC Bulletin Board for each quarter of our last two fiscal years. The high and low bids on the OTC Bulletin Board in the table reflect inter-dealer prices, without retail markup, markdown or commission and may not represent actual transactions. Prices have been adjusted to give effect to the 2.5 to 1.0 reverse stock split that was effective October 31, 2005.

	Fiscal Quarter and Period Ended
	High Price		Low Price
December 31, 2006	$	12.31	$	8.70
September 30, 2006	$	14.50	$	8.18
June 30, 2006	$	17.84	$	12.50
March 31, 2006	$	17.00	$	11.80
December 31, 2005	$	13.88	$	9.58
September 30, 2005	$	10.75	$	6.93
June 30, 2005	$	10.63	$	5.28
March 31, 2005	$	15.63	$	7.88

The closing price for QRCP stock on March 6, 2007 was $8.00.

Record Holders

As of March 6, 2007, there were 22,206,014 shares of common stock issued and outstanding, held of record by approximately 880 shareholders.

Dividends

The payment of dividends on our stock is within the discretion of the board of directors and will depend on our earnings, capital requirements, financial condition and other relevant factors. We have not declared any cash dividends on our common stock for the last two fiscal years and do not anticipate paying any dividends on our common stock in the foreseeable future.

Our ability to pay dividends on our common stock is subject to restrictions contained in our credit facilities. See Item 7. “Management’s Discussion and of Financial Conditions and Results of Operations — Capital Resources and Liquidity” for a discussion of these restrictions.

In addition, the partnership agreement for Quest Midstream restricts the ability of Quest Midstream to pay distributions on the class A and class B subordinated units that we own if the minimum quarterly distribution has not been paid on all of the Quest Midstream common units. See Items 1 and 2 “Description of Business and Properties — Recent Events — First Amended and Restated Agreement of Limited Partnership of Quest Midstream Partners, L.P.” for additional information. The revolving credit facility for Bluestem also restricts the ability of Bluestem to pay any distributions if Bluestem is in default under the credit facility.

Recent Sales of Unregistered Securities

In connection with the amendment to our third lien term loan agreement, on December 22, 2006, we issued 82,500 shares of our common stock to the lenders under that agreement as a portion of the fees owed to such lenders in connection with the amendment. The shares were issued pursuant to Rule 506 of Regulation D under the Securities Act of 1933. In connection with the issuance of these shares, we agreed to file a re-sale shelf registration statement on Form S-3 with respect to these shares as soon as practicable, but in no event later than January 19, 2006.

Purchases of Equity Securities

None.

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STOCK PRICE PERFORMANCE GRAPH

The following graph compares the performance of our Common Stock to a peer group in our SIC code index and to the Nasdaq market index for the past five years. The graph assumes the investment of $100 on December 31, 2001 and the reinvestment of all dividends. The graph shows the value of the investment at the end of each year.

COMPARISON OF 5 YEAR CUMULATIVE TOTAL RETURN*

Among Quest Resource Corp, The NASDAQ Composite Index And A Peer Group

• $100 invested on 12/31/01 in stock or index-including reinvestment of dividends.

Fiscal year ending December 31.

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ITEM 6.   SELECTED FINANCIAL DATA

The following table sets forth selected consolidated financial data of Quest for the years ended December 31, 2006 and 2005, the seven month transition period ended December 31, 2004 and the fiscal years ended May 31, 2004, 2003, and 2002. The data are derived from our audited consolidated financial statements revised to reflect the reclassification of certain items. Comparability between years is affected by (1) changes in the annual average prices for oil and gas, (2) increased production from drilling and development activity and (3) significant acquisitions that were made during the fiscal year ended May 31, 2004. The table should be read in conjunction with “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and our consolidated financial statements, including the notes, appearing in Items 7 and 8 of this report.

							7 Mos Ended
	Year Ended December 31,						December 31,			Year Ended May 31,
	2006			2005			2004			2004			2003			2002
	($ in thousands, except per share data)
Statement of Operations Data:
Revenues:
Oil and gas sales	$	65,551		$	44,565		$	24,201		$	28,147		$	8,345		$	1,699
Gas pipeline revenue		5,014			3,939			1,918			2,707			632			433
Other revenue/expense		(10,314	)		389			37			(843	)		(879	)		303
Total revenues		60,251			48,893			26,156			30,011			8,098			2,435
Costs and expenses:
Oil and gas production		21,208			14,388			5,389			6,835			1,979			593
Pipeline operating		13,247			8,470			3,653			3,506			912			662
General and administrative		8,840			4,802			2,681			2,555			977			370
Provision for impairment of oil and gas properties		30,719			—			—			—			—			—
Depreciation and amortization		28,025			22,199			7,671			7,650			1,822			401
Total costs and expenses		102,039			49,859			19,394			20,546			5,690			2,026
Operating income (loss)		(41,788	)		(966	)		6,762			9,465			2,408			409
Other income (expense):
Change in derivative fair value		16,644			(4,668	)		(1,487	)		(2,013	)		(4,867	)		—
Sale of assets		3			12			—			(6	)		(3	)		—
Interest expense, net		(23,093	)		(26,319	)		(10,138	)		(8,056	)		(727	)		(213	)
Total other expense		(6,446	)		(30,975	)		(11,625	)		(10,075	)		(5,597	)		(213	)
Income (loss) before income taxes		(48,234	)		(31,941	)		(4,863	)		(610	)		(3,189	)		196
Deferred income tax benefit (expense)		—			—			—			245			(374	)		(72	)
Net income (loss) before cumulative effect of accounting change		(48,234	)		(31,941	)		(4,863	)		(365	)		(3,563	)		124
Minority interest in continuing operations of QMP		(244	)		—			—			—			—			—
Cumulative effect of accounting change, net of tax		—			—			—			(28	)		—			—
Net income (loss)		(48,478	)		(31,941	)		(4,863	)		(393	)		(3,563	)		124
Preferred stock dividends		—			(10	)		(6	)		(10	)		(10	)		(10	)
Net income (loss) available to common shareholders	$	(48,478	)	$	(31,951	)	$	(4,869	)	$	(403	)	$	(3,573	)	$	114
Income (loss) per common share:
Basis	$	(2.19	)	$	(3.81	)	$	(0.86	)	$	(0.07	)	$	(0.87	)	$	0.04
Diluted	$	(2.19	)	$	(3.81	)	$	(0.86	)	$	(0.07	)	$	(0.87	)	$	0.04
Cash Flow Data:
Cash provided (used) by operating activities	$	(13,442	)	$	(4,914	)	$	25,484		$	12,197		$	4,211		$	1,306
Cash used in investing activities		172,617			73,601			48,814			146,834			8,804			3,494
Cash provided by financing activities		204,878			74,616			26,280			135,456			7,205			2,077
Balance Sheet Data:
Total assets	$	463,300		$	297,803		$	237,962		$	190,375		$	36,533		$	9,671
Long-term debt, net of current maturities		225,245			100,581			193,984			159,290			16,081			2,167
Stockholders’ equity (deficit)		117,354			115,673			(2,606	)		2,235			11,142			4,612

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Ratio of Earnings to Combined Fixed Charges

							Seven
							Months
							Ended
	Year Ended December 31,						December 31,			Year Ended May 31,
	2006			2005			2004			2004			2003			2002
Earnings:
Income (loss) before income taxes	$	(48,478,000	)	$	(31,941,000	)	$	(4,863,000	)	$	(610,000	)	$	(3,189,000	)	$	196,000
Interest expense(1)		23,483,000			26,365,000			10,147,000			8,057,000			727,000			216,000
Loan cost amortization		1,204,000			5,106,000			530,000			172,000			20,000			—
Earnings	$	(23,791,000	)	$	(470,000	)	$	5,814,000		$	7,619,000		$	(2,442,000	)	$	412,000
Fixed Charges:
Interest expense	$	23,483,000		$	26,365,000		$	10,147,000		$	8,057,000		$	727,000		$	216,000
Loan cost amortization		1,204,000			5,106,000			530,000			172,000			20,000			—
Fixed charges	$	24,687,000		$	31,471,000		$	10,677,000		$	8,229,000		$	747,000		$	216,000
Preferred Stock Dividends	$	—		$	10,000		$	6,000		$	10,000		$	10,000		$	10,000
Ratio of income before taxes		1.0			1.0			1.0			1.7			0.9			1.6
Subtotal-Preferred Dividends	$	—		$	10,000		$	6,000		$	17,000		$	9,000		$	16,000
Combined fixed charges and preferred dividends	$	24,687,000		$	31,481,000		$	10,683,000		$	8,246,000		$	756,000		$	232,000
Ratio of earnings to fixed charges(2)(3)		(1.0	)		(0.0	)		0.5			0.9			(3.3	)		1.9
Insufficient coverage	$	48,478,000		$	31,941,000		$	4,863,000		$	610,000		$	3,189,000		$	—
Ratio of earnings to combined fixed charges and preferred dividends(4)		(1.0	)		(0.0	)		0.5			0.9			(3.2	)		1.8
Insufficient coverage	$	48,478,000		$	31,951,000		$	4,869,000		$	627,000		$	3,198,000		$	—

(1)	Excludes the effect of unrealized gains or losses on interest rate derivatives.
(2)	Fixed charges means the sum of (a) interest expensed and capitalized, (b) amortized premiums, discounts and capitalized expenses related to indebtedness, (c) an estimate of the interest within rental expense, and (d) preference security dividend requirements of consolidated subsidiaries.
(3)	Earnings is the amount resulting from (a) adding (i) pre-tax income from continuing operations, (ii) fixed charges, (iii) amortization of capitalized interest, (iv) distributed income of equity investees, and (v) our share of pre-tax losses of equity investees for which charges arising from guarantees are included in fixed charges and (b) subtracting from the total of the previous items (i) interest capitalized, (ii) preference security dividend requirements of consolidated subsidiaries, and (iii) the minority interest in pre-tax income of subsidiaries that have not incurred fixed charges. Equity investees are investments that we account for using the equity method of accounting.
(4)	Preference security dividend is the amount of pre-tax earnings that is required to pay dividends on outstanding preference securities. The dividend requirement is computed as the amount of the dividend divided by (1 minus the effective income tax rate applicable to continuing operations).

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ITEM 7.   MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.

Financial Data

The following table sets forth certain information regarding the production volumes, oil and gas sales, average sales prices received and expenses for the periods indicated:

	Year Ended						7 Mos Ended			Year Ended
	December 31,									May 31,
	2006			2005			2004			2004
Net Production:
Gas (bcf)		12.29			9.57			5.01			5.53
Oil (bbls)		9,737			9,241			5,551			8,549
Gas equivalent (bcfe)		12.34			9.62			5.05			5.58
Gas and Oil Sales ($ in thousands):
Gas sales	$	72,865		$	71,137		$	28,864		$	27,694
Gas derivatives — gains (loss)	$	(18,119	)	$	(27,066	)	$	(4,908	)	$	102
Total gas sales	$	54,746		$	44,071		$	23,956		$	27,796
Oil sales	$	574		$	494		$	245		$	351
Total gas and oil sales	$	55,320		$	44,565		$	24,201		$	28,147
Avg Sales Price (excluding effects of hedging):
Gas ($ per mcf)	$	5.93		$	7.44		$	5.74		$	5.19
Oil ($ per bbl)	$	60.90		$	53.46		$	44.14		$	41.06
Gas equivalent ($ per mcfe)	$	5.95		$	7.45		$	5.77		$	5.02
Avg Sales Price (including effects of hedging):
Gas ($ per mcf)	$	4.47		$	4.61		$	4.83		$	5.04
Oil ($ per bbl)	$	60.90		$	53.46		$	44.14		$	41.06
Gas equivalent ($ per mcfe)	$	4.48		$	4.63		$	4.79		$	5.04
Expenses ($ per mcfe):
Lifting	$	1.29		$	0.98		$	0.72		$	0.91
Production and property tax	$	0.55		$	0.58		$	0.37		$	0.34
Pipeline operating	$	0.96		$	0.82		$	0.70		$	0.61
General and administrative	$	0.70		$	0.50		$	0.53		$	0.46
Depreciation and amortization	$	2.37		$	2.31		$	1.52		$	1.37
Interest expense	$	1.91		$	2.74		$	2.01		$	1.44
Capital expenditures	$	172,617		$	73,601	(1)	$	48,814		$	146,834	(2)
Miles of Pipeline Constructed		392			120			124			20
Wells Connected (Gross)		638			233			117			477
Wells Drilled (Gross)		622			99			330			153
Producing Gas & Oil Wells (Gross) as of the End of the Period(3)		1,653			1,055			824			707

(1)	includes approximately $26.1 million for Class A Units of Quest Cherokee acquired from ArcLight Energy Partners
(2)	includes approximately $126 million for assets acquired from Devon Energy Production Company, L.P. and Tall Grass Gas Services, L.L.C.
(3)	excludes wells offline for maintenance and/or repairs.

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The following discussion of financial condition and results of operations should be read in conjunction with the consolidated financial statements and the notes to the consolidated financial statements, which are included elsewhere in this report.

Cautionary Statements for Purpose of the “Safe Harbor” Provisions of the Private Securities Litigation Reform Act of 1995

We are including the following discussion to inform you of some of the risks and uncertainties that can affect our company and to take advantage of the “safe harbor” protection for forward-looking statements that applicable federal securities law affords. Various statements this report contains, including those that express a belief, expectation, or intention, as well as those that are not statements of historical fact, are forward-looking statements. These include such matters as:

•  projections and estimates concerning the timing and success of specific projects;

•  financial position;

•  business strategy;

•  budgets;

•  amount, nature and timing of capital expenditures;

•  drilling of wells and construction of pipeline infrastructure;

•  acquisition and development of natural gas and oil properties and related pipeline infrastructure;

•  timing and amount of future production of natural gas and oil;

•  operating costs and other expenses;

•  estimated future net revenues from natural gas and oil reserves and the present value thereof;

•  cash flow and anticipated liquidity; and

•  other plans and objectives for future operations.

When we use the words “believe,” “intend,” “expect,” “may,” “will,” “should,” “anticipate,” “could,” “estimate,” “plan,” “predict,” “project,” or their negatives, or other similar expressions, the statements which include those words are usually forward-looking statements. When we describe strategy that involves risks or uncertainties, we are making forward-looking statements. The forward-looking statements in this report speak only as of the date of this report; we disclaim any obligation to update these statements unless required by securities law, and we caution you not to rely on them unduly. We have based these forward-looking statements on our current expectations and assumptions about future events. While our management considers these expectations and assumptions to be reasonable, they are inherently subject to significant business, economic, competitive, regulatory and other risks, contingencies and uncertainties, most of which are difficult to predict and many of which are beyond our control. All subsequent oral and written forward looking statements attributable to the Company or persons acting on its behalf are expressly qualified in their entirety by these factors. These risks, contingencies and uncertainties relate to, among other matters, the following:

•  our ability to implement our business strategy;

•  the extent of our success in discovering, developing and producing reserves, including the risks inherent in exploration and development drilling, well completion and other development activities, including pipeline infrastructure;

•  fluctuations in the commodity prices for natural gas and crude oil;

•  engineering and mechanical or technological difficulties with operational equipment, in well completions and workovers, and in drilling new wells;

•  land issues;

39

•  the effects of government regulation and permitting and other legal requirements;

•  labor problems;

•  environmental related problems;

•  the uncertainty inherent in estimating future natural gas and oil production or reserves;

•  production variances from expectations;

•  the substantial capital expenditures required for construction of pipelines and the drilling of wells and the related need to fund such capital requirements through commercial banks and/or public securities markets;

•  disruptions, capacity constraints in or other limitations on our pipeline systems;

•  costs associated with perfecting title for natural gas rights and pipeline easements and rights of way in some of our properties;

•  the need to develop and replace reserves;

•  competition;

•  dependence upon key personnel;

•  the lack of liquidity of our equity securities;

•  operating hazards attendant to the natural gas and oil business;

•  down-hole drilling and completion risks that are generally not recoverable from third parties or insurance;

•  potential mechanical failure or under-performance of significant wells;

•  climatic conditions;

•  natural disasters;

•  acts of terrorism;

•  availability and cost of material and equipment;

•  delays in anticipated start-up dates;

•  our ability to find and retain skilled personnel;

•  availability of capital;

•  the strength and financial resources of our competitors; and

•  general economic conditions.

When you consider these forward-looking statements, you should keep in mind these risk factors and the other factors discussed under Item 1A. — “Risk Factors.”

Overview of Company Status

Our strategic positioning in the southeastern Kansas and northeastern Oklahoma natural gas industry has contributed to increases in total revenues and has resulted in a solid foundation for future growth. The increase in total revenues in 2006 as compared to calendar year 2005 resulted from an approximate 28% increase in production volumes, which were partially offset by lower product prices (before hedge settlements) for natural gas.

At December 31, 2006, we had an interest in 1,653 natural gas and oil wells (gross) and natural gas and oil leases on approximately 542,000 gross acres. Management believes that the proximity of the 1,600 miles of Quest Midstream owned pipeline network to these natural gas and oil leases will enable us to develop new producing wells on many of our undeveloped properties. We have currently identified approximately 1,760 additional proved undeveloped natural gas well drilling sites on our proved undeveloped acreage. With approximately 550 wells planned to be drilled during each of 2007 and 2008, we are positioned for significant growth in natural gas

40

production, revenues, and net income. However, no assurance can be given that we will be able to achieve our anticipated rate of growth or that adequate sources of capital will be available.

Significant Developments During the Year Ended December 31, 2006

The results of our drilling and well development program for calendar year 2006 included the drilling of 622 new gas wells (gross), the connecting of 638 new gas wells (gross) into our gas gathering pipeline network, the construction of approximately 392 miles of pipeline infrastructure and the re-completion of 125 wells from single seam to multi-seam wells.

On June 9, 2006, we and Quest Cherokee entered into a $75 million six-year Third Lien Term Loan Agreement among us, Quest Cherokee, Guggenheim Corporate Funding, LLC, as administrative agent, and the lenders party thereto that was fully funded at the closing. See Note 3 to our consolidated financial statements included elsewhere in this report for additional information regarding our third lien term loan facility.

On December 22, 2006, Quest Midstream, a Delaware limited partnership formed to own and operate our natural gas gathering pipeline system, sold 4,864,866 common units, representing an approximate 48.64% interest in Quest Midstream, for $18.50 per common unit, or approximately $90 million, pursuant to a purchase agreement dated December 22, 2006, to a group of institutional investors led by Alerian, and co-led by Swank. See Items 1 and 2, “Description of Business and Properties-Recent Events-Formation of Quest Midstream.”

Results of Operations

Year ended December 31, 2006 compared to the Year ended December 31, 2005

The following discussion of results of operations will compare audited balances for the year ended December 31, 2006 to the audited balances for the year ended December 31, 2005, as follows:

Total revenues of $60.3 million for the year ended December 31, 2006 represents an increase of 23% when compared to total revenues of $48.9 million for the year ended December 31, 2005. The increase in natural gas and oil sales from $44.6 million for the year ended December 31, 2005 to $65.6 million for the year ended December 31, 2006 and the increase in natural gas pipeline revenue from $3.9 million to $5.0 million resulted from the additional wells and pipelines completed during the past twelve months. The additional wells completed contributed to the production of 12,282,000 mcf of net gas for the year ended December 31, 2006, as compared to 9,565,000 net mcf produced for the year ended December 31, 2005. Our product prices before hedge settlements on an equivalent basis (mcfe) decreased from $7.45 mcfe average for the 2005 period to $5.95 mcfe average for the 2006 period. Accounting for hedge settlements, the product prices decreased from $4.63 mcfe average for the 2005 period to $4.48 mcfe average for the 2006 period. With our continuing well development program, management expects the production and pipeline volumes to continue growing in the foreseeable future. We seek to reduce natural gas price volatility through the use of derivative financial instruments or hedges. As of January 1, 2007, we had entered into hedging transactions covering a total of approximately 20 Bcf of natural gas production through December 2008. See Items 1 and 2 “Description of Business and Properties — Delivery Commitments — Hedging Activities” and Notes 14 and 15 to the consolidated financial statements included in this report.

Other expense for the year ended December 31, 2006 was $10.3 million that resulted from a reclassification from gas sales of cash settlements for derivative contracts that did not qualify as cash flow hedges as compared to other revenue of $389,000 for the year ended December 31, 2005, that was primarily the result of an adjustment of overhead fees.

The operating costs for the year ended December 31, 2006 totaled approximately $21.2 million as compared to operating costs of approximately $14.4 million incurred for the year ended December 31, 2005. Operating costs, excluding gross production and ad valorem taxes, were $1.29 per mcf for 2006 compared to $0.99 for the year ended December 31, 2005. Operating costs, inclusive of gross production and ad valorem taxes, were $1.84 per mcf for the 2006 period as compared to $1.57 per mcf for the year ended December 31, 2005 period, representing a 16% increase. Approximately 40% of this increase resulted from increased property taxes on wells and pipelines in the State of Kansas, due to an increase in tax valuations; approximately 15% of the increase was due to increased gross production taxes from increased production volumes and approximately 30% was due to a decrease in the amount of

41

field payroll allocated to capital expenditures due to the limited amount of capital expenditures that we incurred during the fourth quarter of 2006. Approximately 15% is due to an increase in our treating program to reduce pump failures. Pipeline operating costs for the year ended December 31, 2006 totaled approximately $13.2 million ($1.08 per mcf) as compared to pipeline operating costs of $8.5 million ($0.89 per mcf) for the year ended December 31, 2005. Pipeline operating costs, excluding ad valorem taxes, were $0.96 per mcf for 2006 as compared to $0.82 per mcf for 2005. This increase in operating costs was due to the delivery of additional compressors in anticipation of increased pipeline volumes, the number of wells completed and operated during the year, the increased miles of pipeline in service and the increase in property taxes. The increase in depreciation, depletion and amortization to approximately $28.0 million in 2006 from approximately $22.2 million in 2005 is a result of the increased number of producing wells and miles of pipeline developed, the higher volumes of natural gas and oil produced and the resulting increased depletion rate. In 2007, we anticipate these operating costs to decrease on a per mcf basis due to the increased volumes forecasted from new wells completed last year and the new wells to be completed in 2007.

General and administrative expenses increased to approximately $8.8 million for the year ended December 31, 2006 from $4.8 million in the year ended December 31, 2005 due to an increase in board fees, professional fees, Nasdaq listing fees, travel expenses for presentations to increase the visibility of the Company, costs for establishing a Houston office and staffing requirements, increased staffing to support the higher levels of development and operational activity and the added resources to enhance our internal controls and financial reporting to comply with the requirement for the audit of our internal control over financial reporting for the year ended December 31, 2006 required under the Sarbanes-Oxley Act of 2002. See Item 1A. “Risk Factors — Risks Related to the Company’s Business.”

Interest expense decreased to approximately $23.5 million for the year ended December 31, 2006 from $26.4 million for the year ended December 31, 2005 (inclusive of a $4.3 million write-off of debt issue costs realized in connection with the refinancing of our credit facilities in 2005). Excluding the write-off of debt issue costs in 2005, the approximate $1.4 million increase in interest expense in 2006 was due to higher average outstanding borrowings, partially offset by lower average interest rates under our new credit facilities that were entered into in November 2005.

Change in derivative fair value was a non-cash gain of $16.6 million for the year ended December 31, 2006, which included a $12.2 million gain attributable to the change in fair value for certain derivative contracts that did not qualify as cash flow hedges pursuant to SFAS 133 and a gain of $4.4 million relating to hedge ineffectiveness. Change in derivative fair value was a non-cash net loss of $4.7 million for the year ended December 31, 2005, which included an $879,000 net gain attributable to the change in fair value for certain cash flow hedges that did not meet the effectiveness guidelines of SFAS 133 for the period, a $103,000 net gain attributable to the reversal of contract fair value gains and losses recognized in earnings prior to actual settlement, and a loss of $5.7 million relating to hedge ineffectiveness. Amounts recorded in this caption represent non-cash gains and losses created by valuation changes in derivatives that are not entitled to receive hedge accounting. All amounts recorded in this caption are ultimately reversed in this caption over the respective contract term.

We generated a net loss of $65.1 million (including $23.5 million of interest expense and a $30.7 million provision for impairment of oil and gas properties from a full cost pool ceiling write-down) before income taxes and before the change in derivative fair value of $16.6 million non-cash net gain for the year ended December 31, 2006 as compared to a net loss of $27.3 million (including $26.4 million of interest expense) before income taxes and before the change in derivative fair value of $4.7 million non-cash net loss for the year ended December 31, 2005. No income tax expense or benefit resulted for the years ended December 31, 2006 or 2005. The provision for impairment is primarily attributable to declines in estimated reserves due to the prevailing market prices of oil and gas at the measurement date.

We recorded a net loss of $48.5 million for the year ended December 31, 2006 as compared to a net loss of $31.9 million for the year ended December 31, 2005.

42

Year ended December 31, 2005 compared to the Year ended December 31, 2004

Effective January 1, 2005, we changed our fiscal year-end from May 31 to December 31. As a result of this change, we prepared audited financial statements for the seven-month transition period ended December 31, 2004. Accordingly, the following discussion of results of operations will compare audited balances for the year ended December 31, 2005 to the unaudited balances for the year ended December 31, 2004, as follows:

	Years Ended December 31,
	2005			2004
				(Unaudited)
Oil and gas sales	$	44,565,000		$	42,409,000
Gas pipeline revenue		3,939,000			3,290,000
Other revenue and expense		389,000			632,000
Total revenues		48,893,000			46,331,000
Oil and gas production		14,388,000			9,526,000
Pipeline operating		8,470,000			5,702,000
General & administrative expense		4,802,000			4,424,000
Depreciation, depletion & amortization		22,199,000			13,935,000
Total costs and expenses		49,859,000			33,587,000
Operating income (loss)		(966,000	)		12,744,000
Change in derivative fair value		(4,668,000	)		(6,812,000	)
Interest expense		(26,365,000	)		(15,885,000	)
Interest income/other		58,000			8,000
Income (loss) before income taxes		(31,941,000	)		(9,945,000	)
Income tax (expense)		—			—
Net income (loss)	$	(31,941,000	)	$	(9,945,000	)

Total revenues of $48.9 million for the year ended December 31, 2005 represents an increase of 6% when compared to total revenues of $46.3 million for the year ended December 31, 2004. The increase in natural gas and oil sales from $42.4 million for the year ended December 31, 2004 to $44.6 million for the year ended December 31, 2005 and the increase in natural gas pipeline revenue from $3.3 million to $3.9 million resulted from the additional wells and pipelines acquired or completed during the past twelve months. The additional wells acquired or completed contributed to the production of 9,565,000 mcf of net gas for the year ended December 31, 2005, as compared to 8,607,000 net mcf produced for the year ended December 31, 2004. Our product prices before hedge settlements on an equivalent basis (mcfe) increased from $5.63 mcfe average for the 2004 period to $7.45 mcfe average for the 2005 period. Accounting for hedge settlements, the product prices decreased from $4.93 mcfe average for the 2004 period to $4.63 mcfe average for the 2005 period, due to the significant basis differential that occurred in the market during our fourth quarter, resulting from the hurricanes in the United States. Since new well development is once again an ongoing program, management expects the production and pipeline volumes to continue growing in the foreseeable future. We seek to reduce natural gas price volatility through the use of derivative financial instruments or hedges. As of January 1, 2006, we had entered into hedging transactions covering a total of approximately 14 Bcf of natural gas production through December 2008. See Items 1 and 2 “Description of Business and Properties — Company Operations — Exploration & Production Activities — Hedging Activities” and Notes 14 and 15 to the consolidated financial statements included in this report.

Other revenue for the year ended December 31, 2005 was $389,000 as compared to other revenue of $632,000 for the year ended December 31, 2004, resulting from recording the gain or loss on hedge settlements for the two comparative periods.

The operating costs for the year ended December 31, 2005 totaled approximately $14.4 million as compared to operating costs of approximately $9.5 million incurred for the year ended December 31, 2004. Operating costs, excluding gross production and ad valorem taxes, were $0.99 per mcf for 2005 compared to $0.78 for the year ended

43

December 31, 2004. Operating costs, inclusive of gross production and ad valorem taxes, were $1.57 per mcf for the 2005 period as compared to $1.11 per mcf for the year ended December 31, 2004 period, representing a 35% increase. Approximately 30% of this increase resulted from increased property taxes on wells and pipelines in the State of Kansas, due to an increase in tax valuations; approximately 25% of the increase was due to increased gross production taxes from product price increases and approximately 30% was due to a decrease in the amount of field payroll allocated to capital expenditures due to the limited amount of capital expenditures that we could incur under our prior credit facility during the last half of year 2005. Additionally, approximately 3% relates to workers compensation payments made in August 2005 as a result of an audit of our 2004 payroll and approximately 12% is due to an increase in the Company’s treating program to reduce pump failures. Pipeline operating costs for the year ended December 31, 2005 totaled approximately $8.5 million ($0.89 per mcf) as compared to pipeline operating costs of $5.7 million ($0.66 per mcf) for the year ended December 31, 2004. Pipeline operating costs, excluding ad valorem taxes, were $0.82 per mcf for 2005 as compared to $0.64 per mcf for 2004. This increase in operating costs was due to the delivery of additional compressors in anticipation of increased pipeline volumes, the number of wells acquired, completed and operated during the year and the increased miles of pipeline in service. The increase in depreciation, depletion and amortization to approximately $22.2 million in 2005 from approximately $13.9 million in 2004 is a result of the increased number of producing wells and miles of pipeline acquired and developed, the higher volumes of natural gas and oil produced and the resulting increased depletion rate and development costs. In 2006, we anticipate these operating costs to decrease on a per mcf basis due to the increased volumes forecasted from our aggressive development program.

General and administrative expenses increased to approximately $4.8 million for the year ended December 31, 2005 from $4.4 million in the year ended December 31, 2004 due primarily to the increased staffing in the fourth quarter to support the higher levels of development and operational activity and the added resources to enhance the Company’s internal controls and financial reporting in anticipation of the Company having to comply with the requirement for an audit of our internal control over financial reporting for the year ended December 31, 2006 required under the Sarbanes-Oxley Act of 2002. See Item 1A. “Risk Factors — Risks Related to the Company’s Business.”

Interest expense increased to approximately $26.4 million (inclusive of a $4.3 million write off of amortizing bank fees realized in connection with the refinancing of our credit facilities) for the year ended December 31, 2005 from $15.9 million for the year ended December 31, 2004, due to an increase in interest rates and due to the increase in the Company’s outstanding borrowings related to the compounding of interest under the subordinated notes and equipment, development and leasehold expenditures from the Company’s drilling and development program and the associated build out of pipeline systems.

Change in derivative fair value was a non-cash net loss of $4.7 million for the year ended December 31, 2005, which included a $879,000 net gain attributable to the change in fair value for certain cash flow hedges that did not meet the effectiveness guidelines of SFAS 133 for the period, a $103,000 net gain attributable to the reversal of contract fair value gains and losses recognized in earnings prior to actual settlement, and a loss of $5.7 million relating to hedge ineffectiveness. Change in derivative fair value was a non-cash net loss of $6.8 million for the year ended December 31, 2004, which included a $5.0 million net loss attributable to the change in fair value for certain cash flow hedges that did not meet the effectiveness guidelines of SFAS 133 for the period, a $1.4 million net gain attributable to the reversal of contract fair value gains and losses recognized in earnings prior to actual settlement, and a loss of $3.2 million relating to hedge ineffectiveness. Amounts recorded in this caption represent non-cash gains and losses created by valuation changes in derivatives that are not entitled to receive hedge accounting. All amounts recorded in this caption are ultimately reversed in this caption over the respective contract term.

We generated a net loss of $27.3 million (including $26.4 million of interest expense) before income taxes and before the change in derivative fair value of $4.7 million for the year ended December 31, 2005, compared to a net loss of $3.1 million (including $15.9 million of interest expense) before income taxes and before the change in derivative fair value of $6.8 million in the year ended December 31, 2004.

No income tax expense or benefit resulted for the years ended December 31, 2005 or 2004.

We recorded a net loss of $31.9 million for the year ended December 31, 2005 as compared to a net loss of $9.9 million for the year ended December 31, 2004.

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Seven months ended December 31, 2004 compared to the seven months ended December 31, 2003

As a result of the change in our fiscal year effective January 1, 2005, we have prepared financial statements for the seven-month transition period ended December 31, 2004. Accordingly, the following discussion of results of operations will compare audited balances for the seven months ended December 31, 2004 to the unaudited balances for the seven months ended December 31, 2003, as follows:

	Seven Months Ended December 31,
	2004			2003
				(Unaudited)
Oil and gas sales	$	24,201,000		$	8,755,000
Gas pipeline revenue		1,918,000			1,289,000
Other revenue and expense		37,000			(1,356,000	)
Total revenues		26,156,000			8,688,000
Oil and gas production		5,389,000			2,267,000
Pipeline operating		3,653,000			1,140,000
General & administrative expense		2,681,000			831,000
Depreciation, depletion & amortization		7,671,000			2,235,000
Other costs of revenues		—			(8,000	)
Total costs and expenses		19,394,000			6,465,000
Operating income		6,762,000			2,223,000
Change in derivative fair value		(1,487,000	)		3,312,000
Interest expense		(10,147,000	)		(2,377,000	)
Interest income		9,000			—
Income (loss) before income taxes		(4,863,000	)		3,158,000
Income tax (expense)		—			(1,263,000	)
Net income (loss)	$	(4,863,000	)	$	1,895,000

Total revenues of $26.2 million for the seven months ended December 31, 2004 represents an increase of 201% when compared to total revenues of $8.7 million for the seven months ended December 31, 2003. This increase was achieved by a combination of the additional producing wells from the Devon acquisition in December 2003 and the Company’s aggressive new well development program that was in effect during the 2003 and 2004 fiscal years.

The increase in natural gas and oil sales from $8.8 million for the seven months ended December 31, 2003 to $24.2 million for the seven months ended December 31, 2004 and the increase in natural gas pipeline revenue from $1.3 million to $1.9 million resulted from the Devon asset acquisition and the additional wells and pipelines acquired or completed during the twelve month period ended December 31, 2004. The Devon asset acquisition and the additional wells acquired or completed contributed to the production of 5,014,000 mcf of net gas for the seven months ended December 31, 2004, as compared to 1,815,000 net mcf produced for the seven months ended December 31, 2003. Our product prices before hedge settlements on an equivalent basis (mcfe) increased from $4.82 mcfe average for the 2003 period to $5.74 mcfe average for the 2004 period. Accounting for hedge settlements, the product prices increased from $4.08 mcfe average for the 2003 period to $4.83 mcfe average for the 2004 period. Since new well development is once again an ongoing program, management expects the production and pipeline volumes to continue growing in the foreseeable future. We seek to reduce natural gas price volatility through the use of derivative financial instruments or hedges. As of January 1, 2005, we had entered into hedging transactions covering a total of approximately 22.5 Bcf of natural gas production through December 2008. See Items 1 and 2 “Description of Business and Properties — Company Operations — Exploration & Production Activities — Hedging Activities” and Notes 14 and 15 to the consolidated financial statements included in this report.

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Other revenue for the seven months ended December 31, 2004 was $37,000 as compared to other expense of $1.4 million for the seven months ended December 31, 2003, resulting from recording the gain or loss on hedge settlements for the two comparative periods.

The operating costs for the seven months ended December 31, 2004 totaled approximately $5.4 million as compared to operating costs of approximately $2.3 million incurred for the seven months ended December 31, 2003. Operating costs per mcf for the 2004 period were $1.07 per mcf as compared to $1.25 per mcf for the 2003 period, representing a 14% decrease. Pipeline operating costs for the seven months ended December 31, 2004 totaled approximately $3.7 million as compared to pipeline operating costs of $1.1 million incurred for the seven months ended December 31, 2003. The increase in operating costs are due to the Devon asset acquisition and the number of wells acquired, completed and operated during the year and the increased miles of pipeline in service. The increase in depreciation, depletion and amortization to approximately $7.7 million from approximately $2 million is a result of the increased number of producing wells and miles of pipeline acquired and developed, the higher volumes of natural gas and oil produced and the higher cost of properties recorded by application of the purchase method of accounting to record the Devon asset acquisition.

General and administrative expenses increased to approximately $2.7 million for the seven months ended December 31, 2004 from $831,000 in the prior seven month period due primarily to the Devon asset acquisition, the increased staffing to support the higher levels of development and operational activity and the added resources to enhance the Company’s internal controls and financial reporting in anticipation of the Company having to comply with the requirement for an audit of our internal control over financial reporting for the year ended December 31, 2006 required under the Sarbanes-Oxley Act of 2002. See Item 1A. “Risk Factors — Risks Related to the Company’s Business”.

Interest expense increased to approximately $10.1 million for the seven months ended December 31, 2004 from $2.4 million for the seven months ended December 31, 2003, due to the increase in our outstanding borrowings related to the Devon acquisition and equipment, development and leasehold expenditures from our aggressive drilling and development program during the transition period.

Change in derivative fair value was a non-cash net loss of $1.5 million for the seven months ended December 31, 2004, which included a $269,000 net loss attributable to the change in fair value for certain cash flow hedges which did not meet the effectiveness guidelines of SFAS 133 for the period, a $565,000 net gain attributable to the reversal of contract fair value gains and losses recognized in earnings prior to actual settlement, and a loss of $1.8 million relating to hedge ineffectiveness. Change in derivative fair value was a non-cash net gain of $3.3 million for the seven months ended December 31, 2003, which was attributable to the change in fair value of cash flow hedges that did not meet the effectiveness guidelines of SFAS 133 for the period. Amounts recorded in this caption represent non-cash gains and losses created by valuation changes in derivatives that are not entitled to receive hedge accounting. All amounts recorded in this caption are ultimately reversed in this caption over the respective contract term.

We generated a net loss of $3.4 million before income taxes and before the change in derivative fair value of $1.5 million for the seven months ended December 31, 2004, compared to a net loss of $154,000 before income taxes and before the change in derivative fair value of $3.3 million in the previous seven month period.

No income tax expense or benefit resulted for the seven months ended December 31, 2004 compared to income tax expense of $1.3 million for the seven months ended December 31, 2003, inclusive of a tax benefit of approximately $620,000 and the resulting limitation of net operating loss carry forwards, both resulting from the acquisition of STP Cherokee, Inc. in November 2002.

We recorded a net loss of $4.9 million for the seven months ended December 31, 2004 as compared to net income of $1.9 million for the seven months ended December 31, 2003.

Fiscal year ended May 31, 2004 compared to fiscal year ended May 31, 2003

Total revenues of $30 million for the year ended May 31, 2004 represents an increase of 271% when compared to total revenues of $8.1 million for the fiscal year ended May 31, 2003. This increase was achieved by a combination of the additional producing wells from the Devon acquisition in December 2003, the Perkins/Willhite

46

acquisition in June 2003, the STP Cherokee acquisition in November 2002 and the Company’s aggressive new well development program during both periods.

The increase in natural gas and oil sales from $8.3 million in fiscal year 2003 to $28.1 million in fiscal year 2004 and the increase in natural gas pipeline revenue from $632,000 to $2.7 million resulted from the Devon, STP Cherokee and the Perkins/Willhite acquisitions and the additional wells and pipelines acquired or completed during the 2004 fiscal year. The Devon, STP Cherokee and Perkins/Willhite acquisitions and the additional wells acquired or completed contributed to the production of 5,530,208 mcf of net gas in fiscal year 2004, as compared to 1,488,679 net mcf produced in the prior fiscal year. Our product prices on an equivalent basis (mcfe) decreased from $5.30 mcfe average for 2003 to $5.04 average for 2004. Since new well development is once again an ongoing program, management expects the production and pipeline volumes to continue growing in the foreseeable future. We seek to reduce natural gas price volatility through the use of derivative financial instruments or hedges. As of June 1, 2004, we had entered into hedging transactions covering a total of approximately 16.6 Bcf of natural gas production through December 2006. Subsequent to May 31, 2004, in connection with the establishment of new credit facilities with UBS in July 2004, we entered into additional hedging transactions covering approximately 10.2 Bcf of natural gas production through December 2008. See Items 1 and 2 “Description of Business and Properties — Company Operations — Exploration & Production Activities — Hedging Activities” and Notes 14 and 15 to the consolidated financial statements included in this report.

Other expense for the fiscal year ended May 31, 2004 was $843,000 as compared to other expense of $879,000 for the fiscal year ended May 31, 2003, resulting from recording the loss on hedge settlements for the two comparative periods.

The operating costs for fiscal year ended May 31, 2004 totaled approximately $6.8 million as compared to operating costs of approximately $1.9 million incurred for fiscal year ended May 31, 2003. Operating costs per mcf for fiscal year May 31, 2004 were $1.24 per mcf as compared to $1.29 per mcf for fiscal year ended May 31, 2003, representing a 4% decrease. Pipeline operating costs for fiscal year ended May 31, 2004 totaled approximately $3.5 million as compared to pipeline operating costs of $912,000 incurred for fiscal year ended May 31, 2003. The increase in operating costs are due to the Devon, STP Cherokee and Perkins/Willhite acquisitions and the number of wells acquired, completed and operated during the year and the increased miles of pipeline in service. The increase in depreciation, depletion and amortization to approximately $7.7 million from approximately $1.8 million is a result of the increased number of producing wells and miles of pipelines acquired and developed, the higher volumes of natural gas and oil produced and the higher cost of properties recorded by application of the purchase method of accounting to record the Devon, STP Cherokee and Perkins/Willhite acquisitions.

General and administrative expenses increased to approximately $2.6 million in fiscal year 2004 from $977,000 in the prior year due primarily to the Devon, STP and Perkins/Willhite acquisitions, the increased staffing to support the higher levels of development and operational activity and the added resources to enhance the Company’s internal controls and financial reporting.

Interest expense increased to approximately $8.1 million for fiscal year 2004 from $727,000 for fiscal year 2003, due to the increase in the Company’s outstanding borrowings related to the Devon, STP and Perkins/Willhite acquisitions and equipment, development and leasehold expenditures and the expense of $1 million related to the refinancing of the Company’s credit facilities that were in place at the time of the Devon acquisition.

Change in derivative fair value was a non-cash net loss of $2 million for the fiscal year ended May 31, 2004, which included a $1.7 million net loss attributable to the change in fair value for certain cash flow hedges that did not meet the effectiveness guidelines of SFAS 133 for the fiscal year, a $888,000 net gain attributable to the reversal of contract fair value gains and losses recognized in earnings prior to actual settlement, and a loss of $1.2 million relating to hedge ineffectiveness. Change in derivative fair value was a non-cash net loss of $4.9 million for the year ended May 31, 2003, which was attributable to the change in fair value of cash flow hedges that did not meet the effectiveness guidelines of SFAS 133 for the year. Amounts recorded in this caption represent non-cash gains and losses created by valuation changes in derivatives which are not entitled to receive hedge accounting. All amounts recorded in this caption are ultimately reversed in this caption over the respective contract term.

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We generated income of $1.4 million before income taxes and before the change in derivative fair value of $2 million for fiscal year 2004, compared to income of approximately $1.7 million before income taxes and before the change in derivative fair value of $4.9 million in the previous fiscal year.

The income tax benefit for the fiscal year ended May 31, 2004 was $245,000 compared to the income tax expense of $374,000 for the fiscal year ended May 31, 2003, inclusive of a tax benefit of approximately $620,000 and the resulting limitation of net operating loss carry forwards, both resulting from the STP Cherokee acquisition.

We recorded a net loss of $393,000 for fiscal year 2004 as compared to a net loss of approximately $3.6 million for fiscal year 2003.

Capital Resources and Liquidity

Analysis of cash flows.  The following analysis of cash flows will compare audited balances for the year ended December 31, 2006 to the audited balances for the year ended December 31, 2005, as follows:

	Year Ended
	December 31,
	2006			2005
	($ in thousands)
Cash flows from operating activities:
Net income (loss)	$	(48,478	)	$	(31,941	)
Adjustments to reconcile net income (loss) to cash Provided by operations:
Depreciation and depletion		30,898			22,949
Write down of gas properties		30,719			—
Accrued interest subordinated note		—			9,586
Change in derivative fair value		(16,644	)		4,668
Stock issued for retirement plan		428			266
Stock issued for director fees		429			19
Stock awards granted to employees		779			352
Amortization of loan origination fees		1,204			5,106
Amortization of gas swap fees		208			—
Amortization of deferred hedging gains		(328	)		(831	)
Bad debt expense		37			192
Minority interest		244			—
Other		(3	)		56
Change in assets and liabilities:
Restricted cash		(17,275	)		(4,318	)
Accounts receivable		(219	)		(3,646	)
Other receivables		(29	)		181
Other current assets		894			(1,695	)
Inventory		(37	)		(2,499	)
Accounts payable		2,400			(4,957	)
Revenue payable		(505	)		1,537
Accrued expenses		1,836			61
Net cash provided by (used in) operating activities		(13,442	)		(4,914	)
Cash flows from investing activities:
Other assets		(5,712	)		(6,071	)
Equipment, development and leasehold costs		(166,905	)		(67,530	)
Net cash used in investing activities		(172,617	)		(73,601	)

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	Year Ended
	December 31,
	2006			2005
	($ in thousands)
Cash flows from financing activities:
Proceeds from bank borrowings		200,170			100,103
Repayments of note borrowings		(31,339	)		(135,565	)
Repayment of revolver note		(44,250	)		—
Proceeds from subordinated debt		—			15,000
Repayment of subordinated debt		—			(83,912	)
Refinancing costs — Guggenheim		(4,568	)		(5,892	)
Refinancing costs — UBS		—			(380	)
Proceeds from Quest Midstream LP		84,187			—
Dividends paid		—			(10	)
Change in other long-term liabilities		167			—
Proceeds from issuance of common stock		511			185,272
Net cash provided by financing activities		204,878			74,616
Net increase (decrease) in cash		18,819			(3,899	)
Cash, beginning of period		2,559			6,458
Cash, end of period	$	21,378		$	2,559

At December 31, 2006, we had current assets of $59.9 million, working capital (current assets minus current liabilities, excluding the short-term derivative asset and liability of $10.8 million and $5.2 million, respectively) of $37.7 million and had used $13.5 million net cash from operations during the year ended December 31, 2006.

During the year ended December 31, 2006, a total of approximately $172.6 million was invested in new natural gas wells and properties, new pipeline facilities, and other additional capital items. This investment was funded through approximately $40 million of the net proceeds from the issuance of common units of Quest Midstream to a group of investors, $200 million of bank borrowings during 2006 and $511,000 from the issuance of common stock. Net cash used by operating activities increased substantially from $4.9 million for the year ended December 31, 2005 to $13.5 million of net cash used for the year ended December 31, 2006 due primarily to an increase in operating costs and the fact that we expanded our operations during 2006.

Our working capital (current assets minus current liabilities, excluding the short-term derivative asset and liability of $10.8 million and $5.2 million, respectively) was $37.7 million at December 31, 2006, compared to working capital of $3.1 million, (excluding the short-term derivative asset and liability of $95,000 and $38.2 million, respectively) at December 31, 2005. The change in working capital is due to the formation of Quest Midstream in December 2006 and the issuance of common units in Quest Midstream to a group of investors for approximately $90 million before expenses. Additionally, inventory, accounts payable and accrued expenses balances increased as we expanded our operations.

During 2007, we intend to focus on drilling and completing approximately 550 additional new wells. We also currently intend to drill approximately 550 wells during 2008. Management currently estimates that it will require over the next two years a capital investment of approximately $113 million per year to drill and develop these wells and for the pipeline expansion to connect the new wells to our existing gas gathering pipeline network. Management currently estimates that it will be able to drill and develop the approximately 550 new wells planned for 2007 utilizing cash flow from operations, remaining cash from the Quest Midstream transaction, available borrowings under the revolving credit facility and/or the sale of additional equity interests. In addition, in the near term, we intend to fund additional pipeline expansion to connect these new wells to our gas gathering system with Bluestem’s new $75 million revolving credit facility that was closed in January 2007. The Company intends to finance capital expenditures during 2008 utilizing a combination of cash flow from operations, additional borrowings and/or the sale of equity. However, no assurances can be given that such sources will be sufficient to fund the proposed capital expenditures. We are currently

49

seeking to raise additional equity capital to decrease the amount of our debt as a percentage of our total capitalization. However, there can be no assurance that we will be able to obtain such additional equity capital on terms that are favorable to us.

Other Long-Term Indebtedness

At December 31, 2006, $569,000 of notes payable to banks and finance companies were outstanding and are secured by equipment and vehicles, with payments due in monthly installments through October 2013 with interest ranging from 5.5% to 11.5% per annum.

Contractual Obligations

Future payments due on our contractual obligations as of December 31, 2006 are as follows:

	Total		2007		2008-2009		2010-2011		Thereafter
First Lien Term Note	$	50,000,000	$	—	$	—	$	50,000,000	$	—
Second Lien Term Note		100,000,000		—		—		100,000,000		—
Third Lien Term Note		75,000,000		—		—		—		75,000,000
Revolver(1)		—		—		—		—		—
Asset retirement obligations		1,410,000		—		—		—		1,410,000
Drilling contractor		11,030,000		6,789,000		4,241,000		—		—
Notes payable		569,000		324,000		140,000		13,000		92,000
Lease obligations		351,000		150,000		142,000		59,000		—
Derivatives		12,693,000		5,244,000		7,449,000		—		—
Total	$	251,053,000	$	12,507,000	$	11,972,000	$	150,072,000	$	76,502,000

(1) We have a $50 million revolving credit facility that matures on November 14, 2010. As of December 31, 2006, no amounts were borrowed under this facility.

Critical Accounting Policies

Certain amounts included in or affecting our consolidated financial statements and related disclosures must be estimated, requiring us to make certain assumptions with respect to values or conditions that cannot be known with certainty at the time the financial statements are prepared. These estimates and assumptions affect the amounts we report for assets and liabilities and our disclosure of contingent assets and liabilities at the date of our financial statements. We routinely evaluate these estimates, utilizing historical experience, consultation with experts and other methods we consider reasonable in the particular circumstances. Nevertheless, actual results may differ significantly from our estimates. Any effects on our business, financial position or results of operations resulting from revisions to these estimates are recorded in the period in which the facts that give rise to the revision become known.

In preparing our consolidated financial statements and related disclosures, we must use estimates in determining the economic useful lives of our assets, the fair values used to determine possible asset impairment charges, provisions for uncollectible accounts receivable, exposures under contractual indemnifications and various other recorded or disclosed amounts. However, we believe that certain accounting policies are of more significance in our consolidated financial statement preparation process than others, which policies are discussed following. See also Note 1 to the consolidated financial statements for a summary of our significant accounting policies.

Estimated Net Recoverable Quantities of Natural Gas and Oil.  We use the full cost method of accounting for our natural gas and oil producing activities. The full cost method inherently relies on the estimation of proved reserves, both developed and undeveloped. The existence and the estimated amount of proved reserves affect, among other things, the amount and timing of costs depleted or amortized into income and the presentation of supplemental information on oil and gas producing activities. The expected future cash flows to be generated by

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natural gas and oil producing properties used in testing for impairment of such properties also rely in part on estimates of net recoverable quantities of natural gas and oil.

Our estimation of net recoverable quantities of natural gas and oil is a highly technical process. Independent natural gas and oil consultants have reviewed the estimates of proved reserves of natural gas and crude oil that we have attributed to our net interest in natural gas and oil properties as of December 31, 2006.

Proved reserves are the estimated quantities of natural gas and oil that geologic and engineering data demonstrates with reasonable certainty to be recoverable in future years from known reservoirs under existing economic and operating conditions. Estimates of proved reserves may change, either positively and negatively, as additional information becomes available and as contractual, economic and political conditions change.

Hedging Activities.  We engage in a hedging program to mitigate our exposure to fluctuations in commodity prices and we believe that these hedges are generally effective in realizing this objective. However, the accounting standards regarding hedge accounting are very complex, and even when we engage in hedging transactions that are effective economically, these transactions may not be considered effective for accounting purposes. Accordingly, our financial statements may reflect some volatility due to these hedges, even when there is no underlying economic impact at that point. Generally, the financial statement volatility arises from an accounting requirement to recognize changes in values of financial instruments while not concurrently recognizing the values of the underlying transactions being hedged.

In addition, it is not always possible for us to engage in a hedging transaction that completely mitigates our exposure to commodity prices. For example, when we purchase a commodity at one location and sell it at another, we may be unable to hedge completely our exposure to a differential in the price of the product between these two locations. Even when we cannot enter into a completely effective hedge, we often enter into hedges that are not completely effective in those instances where we believe to do so would be better than not hedging at all. Our financial statements may reflect a gain or loss arising from an exposure to commodity prices for which we are unable to enter into a completely effective hedge.

Legal Matters.  We are subject to litigation and regulatory proceedings as a result of our business operations and transactions. We utilize internal personnel and external counsel in evaluating our potential exposure to adverse outcomes from orders, judgments or settlements. To the extent that actual outcomes differ from our estimates, or additional facts and circumstances cause us to revise our estimates, our earnings will be affected. We expense legal costs as incurred, and all recorded legal liabilities are revised as better information becomes available.

Environmental Matters.  With respect to our environmental exposure, we utilize both internal staff and external experts to assist us in identifying environmental issues and in estimating the costs and timing of remediation efforts. We routinely conduct reviews of potential environmental issues and claims that could impact our assets or operations. Often, as the remediation evaluation and effort progresses, additional information is obtained, requiring revisions to estimated costs. These revisions are reflected in our income in the period in which they are reasonably determinable.

Off-balance Sheet Arrangements

At December 31, 2006, we did not have any relationships with unconsolidated entities or financial partnerships, such as entities often referred to as structured finance or special purpose entities, which would have been established for the purpose of facilitating off-balance sheet arrangements or other contractually narrow or limited purposes. In addition, we do not engage in trading activities involving non-exchange traded contracts. As such, we are not exposed to any financing, liquidity, market, or credit risk that could arise if we had engaged in such activities.

ITEM 7A.   QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.

See Notes 14 and 15 to our consolidated financial statements which are included elsewhere in this report and incorporated herein by reference.

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ITEM 8.   FINANCIAL STATEMENTS.

Please see the accompanying financial statements attached hereto beginning on page F-1.

INDEX TO FINANCIAL STATEMENTS

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM	F-1
CONSOLIDATED BALANCE SHEETS	F-3
CONSOLIDATED STATEMENTS OF OPERATIONS	F-4
CONSOLIDATED STATEMENTS OF CASH FLOWS	F-5
CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY	F-6
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS	F-7

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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and Stockholders

Quest Resource Corporation

We have audited the accompanying consolidated balance sheets of QUEST RESOURCE CORPORATION and subsidiaries as of December 31, 2006 and 2005, and the related consolidated statements of operations, stockholders’ equity, and cash flows for the year ended December 31, 2006 and 2005, the seven months ended December 31, 2004 and the year ended May 31, 2004. These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits.

Consolidated Financial Statements

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the consolidated financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the consolidated financial position of Quest Resource Corporation and subsidiaries as of December 31, 2006 and 2005 and 2004, and the consolidated results of their operations and cash flows for the year ended December 31, 2005, the seven months ended December 31, 2004 and the year ended May 31, 2004, in conformity with accounting principles generally accepted in the United States of America.

Internal Control Over Financial Reporting

Also, in our opinion, management’s assessment, included in Management’s Report on Internal Control Over Financial Reporting appearing under Item 9A, that the Company maintained effective internal control over financial reporting as of December 31, 2006 based on criteria established in Internal Control — Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO), is fairly stated, in all material respects, based on those criteria. Furthermore, in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2006, based on criteria established in Internal Control — Integrated Framework issued by the COSO. The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting. Our responsibility is to express opinions on management’s assessment and on the effectiveness of the Company’s internal control over financial reporting based on our audit. We conducted our audit of internal control over financial reporting in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. An audit of internal control over financial reporting includes obtaining an understanding of internal control over financial reporting, evaluating management’s assessment, testing and evaluating the design and operating effectiveness of internal control, and performing such other procedures as we consider necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinions.

F-1

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

/s/  MURRELL, HALL, MCINTOSH & CO., PLLP

Oklahoma City, Oklahoma

March 7, 2007

F-2

QUEST RESOURCE CORPORATION AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

	December 31,			December 31,
	2006			2005
	($ in thousands)
ASSETS
Current assets:
Cash	$	21,378		$	2,559
Restricted cash		21,592			4,318
Accounts receivable, trade		9,840			9,658
Other receivables		371			343
Other current assets		1,068			1,936
Inventory		5,632			2,782
Short-term derivative asset		10,795			95
Total current assets		70,676			21,691
Property and equipment, net of accumulated depreciation of $5,107,000 and $2,114,000		16,212			13,490
Pipeline assets, net of accumulated depreciation of $6,104,000 and $3,598,000		127,690			60,150
Pipeline assets under construction		880			12,699
Oil and gas properties:
Properties being amortized		316,780			201,788
Properties not being amortized		9,545			18,285
		326,325			220,073
Less: Accumulated depreciation, depletion, amortization and impairment		(92,732	)		(36,703	)
Net property, plant and equipment		233,593			183,370
Other assets, net		9,467			6,310
Long-term derivative asset		4,782			93
Total assets	$	463,300		$	297,803
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	14,778		$	12,381
Revenue payable		4,540			5,044
Accrued expenses		2,525			649
Current portion of notes payable		324			407
Short-term derivative liability		5,244			38,195
Total current liabilities		27,411			56,676
Non-current liabilities:
Long-term derivative liability		7,449			23,723
Asset retirement obligation		1,410			1,150
Notes payable		225,569			100,988
Less current maturities		(324	)		(407	)
Non-current liabilities		234,104			125,454
Minority interest in QMLP		84,431			—
Total liabilities		345,946			182,130
Commitments and contingencies		—			—
Stockholders’ equity:
10% convertible preferred stock, $.001 par value, 50,000,000 shares authorized, 0 and 0 shares issued and outstanding at December 31, 2006 and 2005		—			—
Common stock, $.001 par value, 200,000,000 and 380,000,000 shares authorized at December 31, 2006 and 2005, 22,206,014 and 22,072,383 shares issued and outstanding at December 31, 2006 and 2005		22			22
Additional paid-in capital		205,994			203,434
Accumulated other comprehensive income (loss)		428			(47,171	)
Accumulated deficit		(89,090	)		(40,612	)
Total stockholders’ equity		117,354			115,673
Total liabilities and stockholders’ equity	$	463,300		$	297,803

The accompanying notes are an integral part of these consolidated financial statements

F-3

QUEST RESOURCE CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

							Seven Months
	Year Ended			Year Ended			Ended			Year Ended
	December 31,			December 31,			December 31,			May 31,
	2006			2005			2004			2004
	($ in thousands, except per share data)
Revenue:
Oil and gas sales	$	65,551		$	44,565		$	24,201		$	28,147
Gas pipeline revenue		5,014			3,939			1,918			2,707
Other revenue and expense		(10,314	)		389			37			(843	)
Total revenues		60,251			48,893			26,156			30,011
Costs and expenses:
Oil and gas production		21,208			14,388			5,389			6,835
Pipeline operating		13,247			8,470			3,653			3,506
General and administrative expenses		8,840			4,802			2,681			2,555
Provision — impairment of gas properties		30,719			—			—			—
Depreciation, depletion and amortization		28,025			22,199			7,671			7,650
Total costs and expenses		102,039			49,859			19,394			20,546
Operating income (loss)		(41,788	)		(966	)		6,762			9,465
Other income (expense):
Change in derivative fair value		16,644			(4,668	)		(1,487	)		(2,013	)
Sale of assets		3			12			—			(6	)
Interest expense		(23,483	)		(26,365	)		(10,147	)		(8,057	)
Interest income		390			46			9			1
Total other income and expense		(6,446	)		(30,975	)		(11,625	)		(10,075	)
Loss before income taxes		(48,234	)		(31,941	)		(4,863	)		(610	)
Deferred income tax benefit (expense)		—			—			—			245
Net loss before cumulative effect of accounting change		(48,234	)		(31,941	)		(4,863	)		(365	)
Minority interest in continuing operations of QMLP		(244	)		—			—			—
Cumulative effect of accounting change, net of income tax of $19,000		—			—			—			(28	)
Net loss		(48,478	)		(31,941	)		(4,863	)		(393	)
Preferred stock dividends		—			(10	)		(6	)		(10	)
Net loss available to common shareholders	$	(48,478	)	$	(31,951	)	$	(4,869	)	$	(403	)
Loss per common share:
Basic	$	(2.19	)	$	(3.81	)	$	(0.86	)	$	(0.07	)
Diluted	$	(2.19	)	$	(3.81	)	$	(0.86	)	$	(0.07	)
Weighted average common and common equivalent shares outstanding:
Basic		22,100,753			8,390,092			5,661,352			5,558,352
Diluted		22,100,753			8,390,092			5,661,352			5,588,352

The accompanying notes are an integral part of these consolidated financial statements

F-4

QUEST RESOURCE CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

							Seven Months
	Year Ended			Year Ended			Ended			Year Ended
	December 31,			December 31,			December 31,			May 31,
	2006			2005			2004			2004
	($ in thousands)
Cash flows from operating activities:
Net (loss)	$	(48,478	)	$	(31,941	)	$	(4,863	)	$	(393	)
Adjustments to reconcile net (loss) to cash provided by operations:
Depreciation		5,496			2,315			846			835
Depletion		25,402			20,634			7,187			6,802
Write down of gas properties		30,719			—			—			—
Accrued interest		—			9,586			4,866			3,459
Change in derivative fair value		(16,644	)		4,668			1,487			2,013
Cumulative effect-accounting change		—			—			—			47
Deferred income taxes		—			—			—			(263	)
Accretion of line of credit		—			—			—			1,204
Stock issued for retirement plan		428			266			—			121
Stock options granted for director fees		429			—			—			—
Stock issued for audit committee fees		—			19			62			—
Stock awards granted to employees		779			352			—			—
Stock issued for services		—			—			—			94
Amortization of loan origination fees		1,204			5,106			530			172
Amortization of gas swap fees		208			—			—			—
Amortization of deferred hedging gains		(328	)		(831	)		163			—
Bad debt expense		37			192			—			—
Minority interest		244			—			—			—
Other		(3	)		56			28			44
Change in assets and liabilities:
Restricted cash		(17,275	)		(4,318	)		—			—
Accounts receivable		(219	)		(3,646	)		893			(4,751	)
Other receivables		(29	)		181			85			(1,432	)
Other current assets		894			(1,695	)		16			(257	)
Inventory		(37	)		(2,499	)		208			(244	)
Accounts payable		2,400			(4,957	)		13,628			2,302
Revenue payable		(505	)		1,537			222			2,221
Accrued expenses		1,836			61			126			223
Net cash provided by (used in) operating activities		(13,442	)		(4,914	)		25,484			12,197
Cash flows from investing activities:
Acquisition of proved oil and gas properties-Devon		—			—			—			(111,849	)
Acquisition of gas gathering pipeline — Devon		—			—			—			(21,964	)
Other assets		(5,712	)		(6,071	)		(527	)		(393	)
Equipment, development and leasehold		(166,905	)		(67,530	)		(48,287	)		(12,628	)
Net cash used in investing activities		(172,617	)		(73,601	)		(48,814	)		(146,834	)
Cash flows from financing activities:
Proceeds from bank borrowings		200,170			100,103			136,118			105,000
Repayments of note borrowings		(31,339	)		(135,565	)		(104,732	)		(21,682	)
Repayment of revolver note		(44,250	)		—			—			—
Proceeds from Quest Midstream		84,187			—			—			—
Proceeds from subordinated debt		—			15,000			—			51,000
Repayment of subordinated debt		—			(83,912	)		—			—
Refinancing costs — Guggenheim		(4,568	)		(5,892	)		—			—
Refinancing costs — UBS		—			(380	)		(4,942	)		—
Dividends paid		—			(10	)		(6	)		—
Change in other long-term liabilities		167			—			(638	)		638
Proceeds from issuance-common stock		511			185,272			480			500
Net cash provided by financing activities		204,878			74,616			26,280			135,456
Net increase (decrease) in cash		18,819			(3,899	)		2,950			819
Cash, beginning of period		2,559			6,458			3,508			2,689
Cash, end of period	$	21,378		$	2,559		$	6,458		$	3,508

The accompanying notes are an integral part of these consolidated financial statements

F-5

QUEST RESOURCE CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
FOR THE YEARS ENDED DECEMBER 31, 2006 AND 2005,
THE SEVEN MONTHS ENDED DECEMBER 31, 2004
AND THE YEAR ENDED MAY 31, 2004

													Accumulated
						Preferred		Common		Additional			Other
	Preferred			Common		Stock		Stock		Paid-in			Comprehensive			Accumulated
	Shares			Shares		Par Value		Par Value		Capital			Income (Loss)			Deficit			Total
	($ in thousands, except per share amounts)
Balance, May 31, 2004		10,000			5,645,077	$	—	$	6	$	16,650		$	(10,629	)	$	(3,792	)	$	2,235
Comprehensive income:
Net loss																	(4,863	)		(4,863	)
Other comprehensive loss, net of tax:
Change in fixed-price contract and other derivative fair value														(5,258	)					(5,258	)
Reclassification adjustments-contract settlements														4,744						4,744
Total comprehensive loss																				(5,377	)
Dividends on preferred stock																	(6	)		(6	)
Stock sales for cash					48,000						480									480
Stock issued for services					6,800						62									62
Balance, December 31, 2004		10,000			5,699,877	$	—	$	6	$	17,192		$	(11,143	)	$	(8,661	)	$	(2,606	)
Comprehensive income:
Net loss																	(31,941	)		(31,941	)
Other comprehensive loss, net of tax:
Change in fixed-price contract and other derivative fair value														(63,924	)					(63,924	)
Reclassification adjustments-contract settlements														27,896						27,896
Total comprehensive loss																				(67,969	)
Dividends on preferred stock																	(10	)		(10	)
Equity offering					15,258,164				15		183,257									183,272
Conversion of preferred stock		(10,000	)		16,000															—
Stock sales for cash					400,000						2,000									2,000
Stock issued for exercise of warrant					639,840				1		(1	)								—
Stock issued to employees 401(k) plan					49,842						495									495
Stock awards granted to employees											427									427
Stock issued for services					8,660						64									64
Balance, December 31, 2005		—			22,072,383	$	—	$	22	$	203,434		$	(47,171	)	$	(40,612	)	$	115,673
Comprehensive income:
Net loss																	(48,478	)		(48,478	)
Other comprehensive loss, net of tax:
Change in fixed-price contract and other derivative fair value														39,710						39,710
Reclassification adjustments-contract settlements														7,889						7,889
Total comprehensive loss																				(879	)
Equity offering costs											(393	)								(393	)
Stock awards granted to employees											1,012									1,012
Stock options granted to directors											430									430
Stock issued to employees 401(k) plan					51,131						607									607
Stock issued to refinance debt					82,500						904									904
Balance, December 31, 2006		—			22,206,014	$	—	$	22	$	205,994		$	428		$	(89,090	)	$	117,354

The accompanying notes are an integral part of these consolidated financial statements

F-6

QUEST RESOURCE CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

QUEST RESOURCE CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

1.   Basis of Presentation and Summary of Significant Accounting Policies

Nature of Business

Quest Resource Corporation (the “Company”) is an independent energy company with an emphasis on the acquisition, production, transportation, exploration, and development of natural gas (coal bed methane) in southeastern Kansas and northeastern Oklahoma. Quest operations are currently focused on developing coal bed methane gas production in a ten county region that is served by a pipeline network owned through Quest Midstream.

Principles of Consolidation and Subsidiaries

Subsidiaries.  The Company’s subsidiaries consist of:

•  STP Cherokee, LLC, an Oklahoma limited liability company (“STP”),

•  Quest Energy Service, LLC, a Kansas limited liability company (“QES”),

•  Quest Oil & Gas, LLC, a Kansas limited liability company (“QOG”),

•  Producers Service, LLC, a Kansas limited liability company (“PSI”),

•  Ponderosa Gas Pipeline Company, LLC, a Kansas limited liability company (“PGPC”),

•  J-W Gas Gathering, LLC, a Kansas limited liability company (“J-W Gas”),

•  Quest Cherokee, LLC, a Delaware limited liability company (“Quest Cherokee”),

•  Quest Cherokee Oilfield Service, LLC, a Delaware limited liability company (“QCOS”),

•  Quest Midstream Partners, L.P., a Delaware limited partnership (“Quest Midstream”),

•  Quest Midstream GP, LLC, a Delaware limited liability company (“Quest Midstream GP”), and

•  Bluestem Pipeline, LLC, a Delaware limited liability company (“Bluestem”).

Exploration and Production Assets

All of the Company’s natural gas and oil wells and natural gas and oil leasehold interests are owned by Quest Cherokee.

Quest Cherokee was formed on December 22, 2003 to own and operate the Company’s oil and gas properties in the Cherokee Basin of southeastern Kansas and northeastern Oklahoma. Upon its formation, QES, QOG, PGPC, STP, PSI and J-W Gas contributed all of their natural gas and oil properties in the Cherokee Basin with an agreed upon value of $51 million in exchange for all of the membership interests in Quest Cherokee. The transfer of these properties was treated as a corporate restructuring. For financial reporting purposes, the properties transferred to Quest Cherokee by the Company and its subsidiaries, were transferred at historical cost.

Subsequent to the formation of Quest Cherokee, Cherokee Energy Partners, LLC, a wholly owned subsidiary of ArcLight Energy Partners Fund I, L.P. (“ArcLight”), purchased a $51 million of 15% junior subordinated promissory notes of Quest Cherokee at par. In connection with the purchase of the subordinated promissory notes, the original limited liability company agreement for Quest Cherokee was amended and restated to, among other things, provide for Class A units and Class B units of membership interest, and ArcLight acquired all of the Class A units of Quest Cherokee in exchange for $100. The existing membership interests in Quest Cherokee owned by the Company’s subsidiaries were converted into all of the Class B units. Effective November 14, 2005, the Company affected a buy out of the ArcLight investment that included the purchase of the Class A units held by ArcLight and Quest Cherokee is now a wholly-owned, indirect subsidiary of the Company. The membership interests of Quest

F-7

Cherokee are owned by QES, QOG, PGPC, STP, PSI and J-W Gas. QES, QOG, PGPC and STP are wholly-owned by the Company. PGPC is the sole member of PSI and PSI is the sole member of J-W Gas.

Quest Cherokee is the sole member of QCOS. QCOS owns all of the Company’s oilfield service equipment and vehicles and employs all of the Company’s field level employees and first line supervisors that work on the Company’s natural gas and oil wells.

QES employs all of the Company’s non-field employees that work on the Company’s natural gas and oil wells. STP owns properties located in Texas and Oklahoma outside of the Cherokee Basin, and QES and STP own certain equipment used at the corporate headquarters offices.

Gas Gathering Pipeline Network.

Our natural gas gathering pipeline network is owned by Bluestem. Bluestem was a wholly-owned subsidiary of Quest Cherokee until the formation and contribution of our mid-stream assets to Quest Midstream on December 22, 2006.

On December 13, 2006, we formed Quest Midstream to own and operate our natural gas gathering pipeline system. On December 22, 2006, we transferred Bluestem to Quest Midstream in exchange for 4.9 million class B subordinated units, 35,134 class A subordinated units and a 2% general partner interest. Also on December 22, 2006, Quest Midstream sold 4,864,866 common units, representing an approximate 48.64% interest in Quest Midstream, for $18.50 per common unit, or approximately $90 million, pursuant to a purchase agreement dated December 22, 2006, to a group of institutional investors led by Alerian Capital Management, LLC, and co-led by Swank Capital, LLC.

Quest Midstream GP, the sole general partner of Quest Midstream, was formed on December 13, 2006. Quest Midstream GP owns 200,000 General Partner Units representing a 2% general partner interest in Quest Midstream. The Company owns 850 Member Interests representing an 85% ownership interest in Quest Midstream GP, Alerian owns 75 Member Interests representing a 7.5% ownership interest in Quest Midstream GP and Swank owns 75 Member Interests representing a 7.5% ownership interest in Quest Midstream GP.

Quest Midstream GP’s sole business activity is to act as the general partner of Quest Midstream and employs approximately 46 personnel that perform activities primarily related to the pipeline infrastructure.

Financial reporting by the Company’s subsidiaries is consolidated into one set of financial statements with the Company.

Terms of Subordinated Promissory Notes.  Prior to November 14, 2005, the subordinated promissory notes of Quest Cherokee accrued interest at the rate of 15% per annum and had a maturity date of October 22, 2010. Interest on the subordinated promissory notes was payable on January 31, April 30, July 31 and October 31 of each year. Quest Cherokee had the option to pay accrued interest on the subordinated promissory notes by issuing additional subordinated promissory notes as payment for the accrued interest. The subordinated promissory notes were paid in full on November 14, 2005.

Consolidation Policy.  Investee companies in which the Company directly or indirectly owns more than 50% of the outstanding voting securities or those in which the Company has effective control over are generally accounted for under the consolidation method of accounting. Under this method, an Investee company’s balance sheet and results of operations are reflected within the Company’s Consolidated Financial Statements. All significant intercompany accounts and transactions have been eliminated. Minority interests in the net assets and earnings or losses of a consolidated Investee are reflected in the caption “Minority interest” in the Company’s Consolidated Balance Sheet and Statement of Operations. Minority interest adjusts the Company’s consolidated results of operations to reflect only the Company’s share of the earnings or losses of the consolidated Investee company. Upon dilution of control below 50%, the accounting method is adjusted to the equity or cost method of accounting, as appropriate, for subsequent periods.

F-8

Financial reporting by the Company’s subsidiaries is consolidated into one set of financial statements for QRC.

Use of Estimates

The preparation of financial statements in conformity with generally accepted accounting principles requires us to make estimates and assumptions that affect the amounts reported in the consolidated financial statements and accompanying notes. Actual results could differ from those estimates.

Basis of Accounting

The Company’s financial statements are prepared using the accrual method of accounting. Revenues are recognized when earned and expenses when incurred.

Cash Equivalents

For purposes of the consolidated financial statements, the Company considers investments in all highly liquid instruments with original maturities of three months or less at date of purchase to be cash equivalents.

Uninsured Cash Balances

The Company maintains its cash balances at several financial institutions. Accounts at the institutions are insured by the Federal Deposit Insurance Corporation up to $100,000. The Company’s cash balances typically are in excess of this amount.

Accounts Receivable

The Company conducts the majority of its operations in the States of Kansas and Oklahoma and operates exclusively in the natural gas and oil industry. The Company’s joint interest and natural gas and oil sales receivables are generally unsecured; however, the Company has not experienced any significant losses to date. Receivables are recorded at the estimate of amounts due based upon the terms of the related agreements.

Management periodically assesses the Company’s accounts receivable and establishes an allowance for estimated uncollectible amounts. Accounts determined to be uncollectible are charged to operations when that determination is made.

Inventory

Inventory, which is included in current assets, includes tubular goods and other lease and well equipment which we plan to utilize in our ongoing exploration and development activities and is carried at the lower of cost or market using the specific identification method.

Concentration of Credit Risk

A significant portion of the Company’s liquidity is concentrated in cash and derivative contracts that enable the Company to hedge a portion of its exposure to price volatility from producing natural gas and oil. These arrangements expose the Company to credit risk from its counterparties. The Company’s accounts receivable are primarily from purchasers of natural gas and oil products. Natural gas sales to one purchaser (ONEOK) accounted for more than 95% of total natural gas and oil revenues for the years ended December 31, 2006 and 2005 and for the seven months ended December 31, 2004 and 90% for the fiscal year ended May 31, 2004. The industry concentration has the potential to impact the Company’s overall exposure to credit risk, either positively or negatively, in that the Company’s customers may be similarly affected by changes in economic, industry or other conditions.

F-9

Natural Gas and Oil Properties

The Company follows the full cost method of accounting for natural gas and oil properties, prescribed by the Securities and Exchange Commission (“SEC”). Under the full cost method, all acquisition, exploration, and development costs are capitalized. The Company capitalizes internal costs including: salaries and related fringe benefits of employees directly engaged in the acquisition, exploration and development of natural gas and oil properties, as well as other directly identifiable general and administrative costs associated with such activities.

All capitalized costs of natural gas and oil properties, including the estimated future costs to develop proved reserves, are amortized on the units-of-production method using estimates of proved reserves. Investments in unproved reserves and major development projects are not amortized until proved reserves associated with the projects can be determined or until impairment occurs. If the results of an assessment indicate that the properties are impaired, the amount of the impairment is added to the capitalized costs to be amortized. Abandonment’s of natural gas and oil properties are accounted for as adjustments of capitalized costs; that is, the cost of abandoned properties is charged to the full cost pool and amortized.

Under the full cost method, the net book value of natural gas and oil properties, less related deferred income taxes, may not exceed a calculated “ceiling”. The ceiling is the estimated after-tax future net revenue from proved natural gas and oil properties, discounted at 10% per annum plus the lower of cost or fair market value of unproved properties adjusted for the present value of all future oil and gas hedges. In calculating future net revenues, prices and costs in effect at the time of the calculation are held constant indefinitely, except for changes that are fixed and determinable by existing contracts. The net book value is compared to the ceiling on a quarterly basis. The excess, if any, of the net book value above the ceiling is required to be written off as an expense.

As of December 31, 2006, the Company’s net book value of oil and gas properties exceeded the ceiling. Accordingly, a provision for impairment was recognized in the fourth quarter of 2006 of $30.7 million. The provision for impairment is primarily attributable to declines in the prevailing market prices of oil and gas at the measurement date.

Sales of proved and unproved properties are accounted for as adjustments of capitalized costs with no gain or loss recognized, unless such adjustments would significantly alter the relationship between the capitalized costs and proved reserves of natural gas and oil, in which case the gain or loss is recognized in income.

Other Property and Equipment

Other property and equipment is reviewed on an annual basis for impairment and as of December 31, 2006, the Company had not identified any such impairment. Repairs and maintenance are charged to operations when incurred and improvements and renewals are capitalized.

Other property and equipment are stated at cost. Depreciation is calculated using the straight-line method for financial reporting purposes and accelerated methods for income tax purposes.

The estimated useful lives are as follows:

Pipeline	15 to 40 years
Buildings	25 years
Equipment	10 years
Vehicles	7 years

Debt Issue Costs

Included in other assets are costs associated with bank credit facilities. The remaining unamortized debt issue costs at December 31, 2006 and 2005 totaled $9.1 million and $5.8 million, respectively, and are being amortized over the life of the credit facilities.

F-10

Other Dispositions

Upon disposition or retirement of property and equipment other than natural gas and oil properties, the cost and related accumulated depreciation are removed from the accounts and the gain or loss thereon, if any, is credited or charged to income.

Marketable Securities

In accordance with Statement of Financial Accounting Standards (“SFAS”) 115, Accounting for Certain Investments in Debt and Equity Securities, the Company classifies its investment portfolio according to the provisions of SFAS 115 as either held to maturity, trading, or available for sale. At December 31, 2006 and 2005, the Company did not have any investments in its investment portfolio classified as available for sale and held to maturity.

Income Taxes

The Company accounts for income taxes pursuant to the provisions of the SFAS 109, Accounting for Income Taxes, which requires an asset and liability approach to calculating deferred income taxes. The asset and liability approach requires the recognition of deferred tax liabilities and assets for the expected future tax consequences of temporary differences between the carrying amounts and the tax basis of assets and liabilities. The provision for income taxes differ from the amounts currently payable because of temporary differences (primarily intangible drilling costs and the net operating loss carry forward) in the recognition of certain income and expense items for financial reporting and tax reporting purposes.

Earnings Per Common Share

SFAS 128, Earnings Per Share, requires presentation of “basic” and “diluted” earnings per share on the face of the statements of operations for all entities with complex capital structures. Basic earnings per share is computed by dividing net income by the weighted average number of common shares outstanding for the period. Diluted earnings per share reflects the potential dilution that could occur if securities or other contracts to issue common stock were exercised or converted during the period. Dilutive securities having an anti-dilutive effect on diluted earnings per share are excluded from the calculation. See Note 9 — Earnings Per Share, for a reconciliation of the numerator and denominator of the basic and diluted earnings per share computations.

Reverse Stock Split

In October 2005, the Company’s board of directors approved a 2.5 to 1 reverse stock split, and a proportionate reduction of the authorized number of shares, of the Company’s common stock. In addition, the reverse stock split resulted in a reclassification from common stock to additional paid-in capital to reflect the adjusted share amount as the par value of the Company’s common stock remained at $0.001. On October 31, 2005, the reverse stock split became effective. All share and per share data information in this Form 10-K, and the financial statements included herein, for all periods have been retroactively restated to reflect the reverse stock split.

Fair Value of Financial Instruments

The Company’s financial instruments consist of cash, receivables, deposits, hedging contracts, accounts payable, accrued expenses and notes payable. The carrying amount of cash, receivables, deposits, accounts payable and accrued expenses approximates fair value because of the short-term nature of those instruments. The hedging contracts are recorded in accordance with the provisions of SFAS 133, Accounting for Derivative Instruments and Hedging Activities. The carrying amounts for notes payable approximate fair value due to the variable nature of the interest rates of the notes payable.

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Stock-Based Compensation

Stock Awards.  The Company granted shares of common stock to certain employees in October, November and December, 2006 and in October 2005. The shares are subject to pro rata vesting which ranges from 0 to 4 years. During this vesting period, the fair value of the stock awards granted is recognized pro rata as compensation expense. To the extent the compensation expense relates to employees directly involved in acquisition, exploration and development activities, such amounts are capitalized to oil and gas properties. Amounts not capitalized to oil and gas properties are recognized in general and administrative expenses.

Stock Options.  Effective January 1, 2006, the Company adopted SFAS No. 123 (Revised 2004), Share-Based Payment, which requires that compensation related to all stock-based awards, including stock options, be recognized in the financial statements based on their estimated grant-date fair value. We have previously recorded stock compensation pursuant to the intrinsic value method under APB Opinion No. 25, whereby compensation was recorded related to performance share and unrestricted share awards and no compensation was recognized for most stock option awards. We are using the modified prospective application method of adopting SFAS No. 123R, whereby the estimated fair value of unvested stock awards granted prior to January 1, 2006 will be recognized as compensation expense in periods subsequent to December 31, 2005, based on the same valuation method used in our prior pro forma disclosures. We have estimated expected forfeitures, as required by SFAS No. 123R, and we are recognizing compensation expense only for those awards expected to vest. Compensation expense is amortized over the estimated service period, which is the shorter of the award’s time vesting period or the derived service period as implied by any accelerated vesting provisions when the common stock price reaches specified levels. All compensation must be recognized by the time the award vests. The cumulative effect of initially adopting SFAS No. 123R was immaterial.

The following are pro forma net income and earnings per share for the year ended December 31, 2005, the seven months ended December 31, 2004, and the year ended May 31, 2004, as if stock-based compensation had been recorded at the estimated fair value of stock awards at the grant date, as prescribed by SFAS No. 123, Accounting for Stock-Based Compensation:

				Seven Months
	Year Ended			Ended			Year Ended
	December 31,			December 31,			May 31,
	2005			2004			2004
Net loss, as reported	$	(31,941,000	)	$	(4,863,000	)	$	(393,000	)
Deduct: Total stock-based employee compensation expense determined under fair value based method for all awards, net of related tax effects		(328,000	)		—			—
Pro forma net loss	$	(32,269,000	)	$	(4,863,000	)	$	(393,000	)
Loss per share:
Basic — as reported	$	(3.81	)	$	(0.86	)	$	(0.07	)
Basic — pro forma	$	(3.85	)	$	(0.86	)	$	(0.07	)
Diluted — as reported	$	(3.81	)	$	(0.86	)	$	(0.07	)
Diluted — pro forma	$	(3.85	)	$	(0.86	)	$	(0.07	)

Accounting for Derivative Instruments and Hedging Activities

The Company seeks to reduce its exposure to unfavorable changes in natural gas prices by utilizing energy swaps and collars (collectively, “fixed-price contracts”). The Company also enters into interest rate swaps and caps to reduce its exposure to adverse interest rate fluctuations. The Company has adopted SFAS 133, as amended by

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SFAS 138, Accounting for Derivative Instruments and Hedging Activities, which contains accounting and reporting guidelines for derivative instruments and hedging activities. It requires that all derivative instruments be recognized as assets or liabilities in the statement of financial position, measured at fair value. The accounting for changes in the fair value of a derivative depends on the intended use of the derivative and the resulting designation. Designation is established at the inception of a derivative, but re-designation is permitted. For derivatives designated as cash flow hedges and meeting the effectiveness guidelines of SFAS 133, changes in fair value are recognized in other comprehensive income until the hedged item is recognized in earnings. Hedge effectiveness is measured at least quarterly based on the relative changes in fair value between the derivative contract and the hedged item over time. Any change in fair value resulting from ineffectiveness is recognized immediately in earnings.

Pursuant to the provisions of SFAS 133, all hedging designations and the methodology for determining hedge ineffectiveness must be documented at the inception of the hedge, and, upon the initial adoption of the standard, hedging relationships must be designated anew. Based on the interpretation of these guidelines by the Company, the changes in fair value of all of its derivatives during the period from June 1, 2003 to December 22, 2003 were required to be reported in results of operations, rather than in other comprehensive income. Also, all changes in fair value of the Company’s interest rate swaps and caps are reported in results of operations rather than in other comprehensive income because the critical terms of the interest rate swaps and caps do not comply with certain requirements set forth in SFAS 133.

Although the Company’s fixed-price contracts and interest rate swaps and caps may not qualify for special hedge accounting treatment from time to time under the specific guidelines of SFAS 133, the Company has continued to refer to these contracts in this document as hedges inasmuch as this was the intent when such contracts were executed, the characterization is consistent with the actual economic performance of the contracts, and the Company expects the contracts to continue to mitigate its commodity price and interest rate risks in the future. The specific accounting for these contracts, however, is consistent with the requirements of SFAS 133. See Note 15 — Derivatives.

The Company has established the fair value of all derivative instruments using estimates determined by its counterparties and subsequently evaluated internally using established index prices and other sources. These values are based upon, among other things, futures prices, volatility, and time to maturity and credit risk. The values reported in the financial statements change as these estimates are revised to reflect actual results, changes in market conditions or other factors.

Asset Retirement Obligations

The Company has adopted SFAS 143, Accounting for Asset Retirement Obligations. SFAS 143 requires companies to record the fair value of a liability for an asset retirement obligation in the period in which it is incurred and a corresponding increase in the carrying amount of the related long-lived asset. Over time, the liability is accreted to its present value each period, and the capitalized cost is depreciated over the useful life of the related asset. Upon settlement of the liability, an entity either settles the obligation for its recorded amount or incurs a gain or loss upon settlement.

The Company’s asset retirement obligations relate to the plugging and abandonment of natural gas and oil properties. The Company is unable to predict if and when its pipelines would become completely obsolete and require decommissioning. Accordingly, the Company has recorded no liability or corresponding asset for the pipelines in conjunction with the adoption of SFAS 143 because the future dismantlement and removal dates of the Company’s assets and the amount of any associated costs are indeterminable.

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Reclassification

Certain reclassifications have been made to the prior year’s financial statements in order to conform to the current presentation. The effect of the 2.5 to 1 reverse stock split was rolled back to all prior periods included in these adjusted financial statements.

2.   Acquisitions

Quest Cherokee acquired certain assets from Faith Well Service on November 30, 2005 in the amount of $1.5 million. The assets consisted of service rigs and related equipment. The acquisition was funded with a portion of the net proceeds from the private placement of common stock that closed on November 14, 2005.

In November, 2005, the Company purchased all of the Class A units in Quest Cherokee from ArcLight for approximately $26.1 million of which $2.1 million was allocated to non-producing leasehold, $17 million was allocated to wells and $7 million was allocated to pipeline assets. The $26.1 million purchase price for the Class A units was arrived at through negotiations between the Company and ArcLight.

The Company acquired approximately 10 miles of pipeline and 2,340 acres of leasehold from Venture Independent Petroleum during 2005 for $365,000.

The Company acquired certain assets from Consolidated Oil Well Services on September 15, 2004 in the amount of $4.1 million. The assets consisted of cementing, acidizing and fracturing equipment and a related office building and storage facility in Chanute, Kansas. The acquisition was funded with a portion of the remaining net proceeds from a $120 million term loan that closed in June 2004.

The Company acquired approximately 80 miles of an inactive oil pipeline for approximately $1 million on August 10, 2004. Additionally, the Company acquired 8 wells and approximately 8,000 acres in the Cherokee Basin on August 6, 2004 for $750,000. These acquisitions were funded with a portion of the remaining net proceeds from a $120 million term loan that closed in June 2004.

On December 10, 2003, the Company entered into an asset purchase agreement with Devon Energy Production Company, L.P. and Tall Grass Gas Services, LLC (collectively, “Devon”) to acquire certain natural gas properties located in Kansas and Oklahoma for a total consideration of $126 million, subject to certain purchase price adjustments. The acquisition was finalized on December 22, 2003. At the closing, the Company transferred all of its rights and obligations under the asset purchase agreement to Quest Cherokee.

At the time of closing, Devon had not received consents to the assignment of certain of the leases from the lessors on natural gas leases with an allocated value of approximately $12.3 million. As a result, Quest Cherokee and Devon entered into a Holdback Agreement pursuant to the terms of which Quest Cherokee paid approximately $113.4 million of the purchase price at the closing and agreed to pay the allocated value of the remaining properties at such time as Devon received the consents to assignment for those leases. Subsequent to closing, Quest Cherokee paid approximately $9.6 million in February 2004, $2.6 million in May 2004 and $0.6 million in September 2004.

At the time of acquisition, the acquired assets had approximately 95.9 Bcfe of estimated proved reserves, 91.7 Bcfe of estimated probable reserves and 72.2 Bcfe of estimated possible reserves. The assets included approximately 372,000 gross (366,000 net) acres of natural gas leases, 418 gross (325 net) natural gas wells and 207 miles of natural gas gathering pipelines. At the time of acquisition, the Devon assets were producing an average of approximately 19,600 mcf per day.

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In accordance with the terms of the asset purchase agreement, the purchase price, including approximately $7.7 million of transaction fees and $1.7 million of assumed hedging liabilities was allocated as follows:

Proved producing properties	$	54,528,000
Proved undeveloped properties		38,649,000
Undeveloped properties		20,422,000
Pipelines		21,964,000
Other		9,000
Total	$	135,572,000

Effective June 1, 2003, PGPC and the Company consummated a Stock Purchase Agreement with Perkins Oil Enterprises, Inc. and E. Wayne Willhite Energy, L.L.C. pursuant to the terms of which the Company and PGPC acquired from Perkins Oil Enterprises and E. Wayne Willhite Energy all of the capital stock of PSI in exchange for 200,000 shares of the common stock of the Company, which was valued at $1.2 million. At the time of the acquisition, PSI owned all of the issued and outstanding membership interests of J-W Gas and a 5-year contract right to operate a lease on a 78-mile natural gas pipeline and J-W Gas owned approximately 200 miles of natural gas gathering lines in southeast Kansas. These assets were subsequently transferred to Quest Cherokee as part of the restructuring of the Company’s operations in anticipation of the Devon asset acquisition.

Also effective June 1, 2003, QOG closed on a Purchase and Sale Agreement with James R. Perkins Energy, L.L.C. and E. Wayne Willhite Energy, L.L.C. and J-W Gas pursuant to the terms of which QOG acquired 53 natural gas and oil leases and related assets in Chautauqua, Elk, and Montgomery Counties, Kansas for $2,000,000. Both of these June 6, 2003 transactions were completed effective as of June 1, 2003. The cash portion of the purchase price was funded with borrowings under the Company’s then existing credit facilities. These assets were also subsequently transferred to Quest Cherokee as part of the restructuring of the Company’s operations in anticipation of the Devon asset acquisition.

In accordance with the terms of the asset purchase agreement, the purchase price, current assets and certain assumed liabilities were allocated as follows:

Current assets	$	604,000
Property and equipment		1,177,000
Natural gas and oil properties		2,040,000
Current liabilities		(669,000	)
Long-term debt		(112,000	)
Net assets acquired	$	3,040,000

F-15

Pro Forma Summary Data (unaudited)

The following pro forma summary data for the fiscal year ending May 31, 2004 presents the consolidated results of operations as if the Devon asset acquisition made on December 22, 2003 and the Perkins/Willhite acquisition made on June 1, 2003 had occurred on June 1, 2003. These pro forma results have been prepared for comparative purposes only and do not purport to be indicative of what would have occurred had the acquisitions been made at June 1, 2003 or of results that may occur in the future.

	Year Ended
	May 31,
	2004
Proforma revenue	$	45,241,000
Proforma net income (loss)	$	2,311,000
Proforma net income (loss) per share	$	.17

3.   Long-Term Debt

Long-term debt consists of the following:

	December 31,		December 31,
	2006		2005
Senior credit facilities	$	225,000,000	$	100,000,000
Notes payable to banks and finance companies, secured by equipment and vehicles, due in installments through October 2013 with interest ranging from 5.5% to 11.5% per annum		569,000		988,000
Total long-term debt		225,569,000		100,988,000
Less — current maturities		324,000		407,000
Total long term debt, net of current maturities	$	225,245,000	$	100,581,000

The aggregate scheduled maturities of notes payable and long-term debt for the five years ending December 31, 2011 and thereafter were as follows as of December 31, 2006:

2007	$	324,000
2008		110,000
2009		30,000
2010		50,007,000
2011		100,006,000
Thereafter		75,092,000
	$	225,569,000

Credit Facilities — Guggenheim

As of December 31, 2006, the Company’s credit facilities consisted of a $100 million Senior Credit Agreement between the Company and Quest Cherokee, Guggenheim Corporate Funding, LLC (“Guggenheim”), as administrative agent and syndication agent, and the lenders party thereto, a $100 million Second Lien Term Loan Agreement between the Company, Quest Cherokee, Guggenheim, as Administrative Agent, and the lenders party thereto and a $75 million Third Lien Term Loan Agreement between the Company, Quest Cherokee, Guggenheim, as Administrative Agent, and the lenders party thereto.

The Senior Credit Agreement consists of a five year $50 million revolving credit facility and a five year $50 million first lien term loan. The first lien term loan was fully drawn as of February 14, 2006. The Second Lien

F-16

Term Loan Agreement consists of a six year $100 million second lien term loan that was fully funded at the closing of the Second Lien Term Loan Agreement on November 14, 2005. The Third Lien Term Loan Agreement consists of a six year $75 million third lien term loan that was fully funded at the closing of the Third Lien Term Loan Agreement on June 9, 2006.

Availability under the revolving credit facility is tied to a borrowing base that will be redetermined by the lenders every six months taking into account the value of the Company’s reserves and such other information (including, without limitation, the status of title information with respect to the Company’s natural gas and oil properties and the existence of any other indebtedness) as the administrative agent deems appropriate and consistent with its normal oil and gas lending criteria as it exists at the particular time. The unanimous consent of the lenders is required to increase the borrowing base and the consent of 662/3% of the lenders is required to decrease or maintain the borrowing base. In addition, the Company or the lenders may each request a special redetermination of the borrowing base once every 12 months. The outstanding principal balance of the first lien term loan and any outstanding letters of credit will be reserved against the borrowing base in determining availability under the revolving credit facility. As of December 31, 2006, the borrowing base under the revolving credit facility was $100 million.

The Company pays a commitment fee equal to 0.75% on the difference between $50 million and the outstanding balance of borrowings and letters of credit under the revolving credit facility.

Interest accrues on the revolving credit facility at LIBOR plus 1.75% or the base rate plus 0.75%, at our option. Interest accrues on the first lien term loan at LIBOR plus 3.25% or the base rate plus 2.50%, at our option. Interest accrues on the second lien term loan at LIBOR plus 5.50%. Interest accrues on the third lien term loan at LIBOR plus 8.00%.

The revolving credit facility and the first lien term loan may be prepaid, without any premium or penalty, at any time. The second lien term loan may be repaid at any time, subject to the payment of a prepayment premium described below. The third lien term loan may not be repaid prior to June 10, 2007. Thereafter, the third lien term loan may be repaid at any time, subject to the payment of a prepayment premium described below.

Each of the Company’s subsidiaries has guaranteed all obligations under these credit agreements. The revolving credit facility and the first lien term loan are secured by a first priority lien on substantially all of the assets of the Company and its subsidiaries. The second lien term loan is secured by a second priority lien on substantially all of the assets of the Company and its subsidiaries. The third lien term loan is secured by a third priority lien on substantially all of the assets of the Company and its subsidiaries.

The credit agreements also secure on a pari passu basis hedging agreements entered into with lenders, their affiliates and other approved counterparties if the hedging agreements state that they are secured by the credit facilities. Approved counterparties are generally entities that have an A rating from Standard & Poor’s or an A2 rating from Moody’s, or whose obligations under the hedging agreements are guaranteed by an entity with such a rating. As of December 31, 2006, all of the Company’s natural gas swap and collar hedging agreements were secured on a pari passu basis with the revolving credit facility.

The Company and Quest Cherokee are required to make certain representations and warranties that are customary for credit agreements of this type. The credit agreements also contain affirmative and negative covenants that are customary for credit agreements of this type. The covenants in the credit agreements include, without limitation: performance of obligations; delivery of financial statements, other financial information, production reports and information regarding swap agreements; delivery of notices of default and other material developments; operation of properties in accordance with prudent industry practice and in compliance with applicable laws; maintenance of satisfactory insurance; compliance with laws; inspection of books and properties; continued perfection of security interests in existing and subsequently acquired collateral; further assurances; payment of taxes and other preferred claims; compliance with environmental laws and delivery of notices related thereto; delivery of reserve reports; limitations on dividends and other distributions on, and redemptions and repurchases of,

F-17

capital stock and other equity interests; limitations on liens; limitations on loans and investments; limitations on debt, guarantees and hedging arrangements; limitations on mergers, acquisitions and asset sales; limitations on transactions with affiliates; limitations on dissolution; limitations on changes in business conducted by us and our subsidiaries; limitations on the right to enter into hedging arrangements; and prohibitions against agreements limiting any subsidiaries’ right to pay dividends or make distributions; as well as certain financial covenants.

The financial covenants applicable to the credit agreements require that:

•  the Company’s minimum net sales volumes will not be less than:

  1,890 mmcf for the quarter ended March 31, 2006;

  2,380 mmcf for the quarter ended June 30, 2006;

  3,080 mmcf for the quarter ended September 30, 2006; and

  3,430 mmcf for the quarter ended December 31, 2006.

•  the Company’s ratio of total net debt to EBITDA for each quarter ending on the dates set forth below will not be more than:

  4.5 to 1.0 for the quarter ended March 31, 2007;

  4.25 to 1.0 for the quarter ended June 30, 2007;

  4.00 to 1.0 for the quarter ended September 30, 2007;

  3.75 to 1.0 for the quarter ended December 31, 2007;

  3.50 to 1.0 for the quarter ended March 31, 2008;

  3.25 to 1.0 for the quarter ended June 30, 2008; and

  3.00 to 1.0 for any quarter ended on or after September 30, 2008.

•  for the Senior Credit Agreement, the Company is required to maintain a ratio of PV-10 value for all of its proved reserves to indebtedness under the Senior Credit Agreement (excluding obligations under hedging agreements secured by the Senior Credit Agreement) of not less than 2.0 to 1.0.

•  for the Second and Third Lien Term Loan Agreements, the Company’s ratio of PV-10 value for all of its proved reserves to total net debt must not be less than 1.5 to 1.

Under all three credit agreements “PV-10 value” is generally defined as the future cash flows from the Company’s proved reserves (based on the NYMEX three-year pricing strip and taking into account the effects of its hedge agreements) discounted at 10%.

EBITDA is generally defined in all three of the credit agreements as consolidated net income plus interest, income taxes, depreciation, depletion, amortization and other non-cash charges (including unrealized losses on hedging agreements), plus costs and expenses directly incurred in connection with the credit agreements, the private equity transaction and the buy-out of ArcLight’s investment in Quest Cherokee and any write-off of prior debt issue costs, minus all non-cash income (including unrealized gains on hedging agreements). The EBITDA for each quarter will be multiplied by four in calculating the above ratios.

Total net debt is generally defined as funded debt, less cash and cash equivalents, reimbursement obligations under letters of credit and certain surety bonds.

Events of default under the credit agreements are customary for transactions of this type and include, without limitation, non-payment of principal when due, non-payment of interest, fees and other amounts for a period of three business days after the due date, representations and warranties not being correct in any material respect when

F-18

made, non-performance of covenants after any applicable grace period, certain acts of bankruptcy or insolvency, cross defaults to other material indebtedness and change in control. Under both credit agreements, a change in control will generally be deemed to have occurred if any person or group acquires more than 35% of the Company’s outstanding common stock or a majority of the Company’s directors have either not been nominated or appointed by its board of directors. If an event of default has occurred and is continuing, the interest rate on the credit agreements will increase by 2.5%.

In connection with the formation of Quest Midstream, L.P. on December 22, 2006, the Company entered into amendments to each of the credit agreements. Among other things, the amendments permitted the Company to transfer the member interests in Bluestem to Quest Midstream, released the security interests of the lenders in the member interests and assets of Bluestem and resulted in the pledge of the Company’s class A and class B subordinated limited partner interests in Quest Midstream and the Company’s 85% member interest in Quest Midstream GP as collateral for the credit facilities.

In connection with the amendments, the prepayment provisions of the second and third lien term loans were amended. After giving effect to the amendments, the prepayment provisions are as follows: If the Company prepays second lien term loan during the 12 months beginning on (i) November 15, 2006, the Company will pay a 3.5% premium, (ii) November 15, 2007, the Company will pay a 2.25% premium, and (iii) November 15, 2008, the Company will pay a 1.124% premium. Thereafter, the Company may repay the second lien term loan at any time without any premium or prepayment penalty. The third lien term loan may not be repaid prior to June 10, 2007. If the Company prepays the third lien term loan during the 12 months beginning on (i) June 10, 2007, the Company will pay a 2.5% premium, (ii) June 10, 2008, the Company will pay a 1.25% premium, and (iii) June 10, 2009, the Company will pay a 0.5% premium. Thereafter, the Company may repay the third lien term loan at any time without any premium or prepayment penalty.

Other Long-Term Indebtedness

$569,000 of notes payable to banks and finance companies were outstanding at December 31, 2006 and are secured by equipment and vehicles, with payments due in monthly installments through October 2013 with interest ranging from 5.5% to 11.5% per annum.

4.   Stockholders’ Equity

Common Stock Transactions

The Company has authorized 200,000,000 shares of common stock and 50,000,000 shares of preferred stock. As of December 31, 2006, there were 22,206,014 shares of common stock outstanding and no shares of preferred stock outstanding. During the year ended December 31, 2006, the Company recorded the following transactions:

1)	Issued 51,131 shares of common stock valued at $607,431 as an employer contribution to the Company’s 401(k) plan.
2)	Issued 82,500 shares of common stock valued at $904,200 for credit agreement waiver fees.

The following transactions were recorded in the Company’s financial statements during the year ended December 31, 2005.

1)	Issued 639,840 shares of common stock upon the exercise by Wells Fargo Energy Capital of a warrant that was issued in connection with a prior credit facility (no cash was received by the Company in connection with this exercise).
2)	Issued 3,200 shares of common stock to compensate a director for audit committee service valued at $19,000.
3)	Issued 5,460 shares of common stock to one individual for services rendered valued at $45,000.

F-19

4)	Issued 400,000 shares of common stock for $2.0 million in cash.
5)	Issued 15,258,144 shares of common stock in the November 14, 2005 private placement for gross proceeds of $198.4 million.
6)	Issued 16,000 shares of common stock upon the conversion of 10,000 shares of Series A preferred stock.
7)	Issued 49,842 shares of common stock valued at $495,000 as an employer contribution to the Company’s 401(k) plan.

The following transactions were recorded in the Company’s financial statements during the seven-month transition period ended December 31, 2004.

1)	Issued 6,800 shares of common stock to compensate a director for audit committee service valued at $62,000.
2)	Issued 48,000 shares of common stock for $480,000 in cash.

The following transactions were recorded in the Company’s financial statements during the fiscal year ended May 31, 2004.

1)	Issued 200,000 shares of common stock in connection with the Perkins/Willhite acquisition.
2)	Issued 28,404 shares of common stock upon the conversion of $180,000 in convertible debentures.
3)	Issued 13,260 shares of common stock to four individuals for services rendered valued at $94,000.
4)	Issued 58,823 shares of common stock for $500,000 in cash.
5)	Issued 32,355 shares of common stock valued at $121,000 as an employer contribution to the Company’s 401(k) plan.

Stock Awards.  The Company granted shares of common stock to certain employees in October, November and December, 2006 and October 2005. The shares are subject to pro rata vesting which ranges from 0 to 4 years. During this vesting period, the fair value of the stock awards granted is recognized pro rata as compensation expense. To the extent the compensation expense relates to employees directly involved in acquisition, exploration and development activities, such amounts are capitalized to oil and gas properties. Amounts not capitalized to oil and gas properties are recognized in general and administrative expenses. At December 31, 2006 and 2005, the Company recognized $1,063,000 and $427,000 of total compensation related to stock awards. Of these amounts, $779,000 and $352,000 were reflected in general and administrative expenses as compensation expense with the remaining $284,000 and $75,000 capitalized to oil and gas properties.

Stock Options.  On October 14, 2005, the Company granted stock options in the amount of 250,000 shares of its common stock to its five non-employee directors. Each non-employee director received a grant of 50,000 shares of common stock, of which 10,000 shares were immediately vested and the remaining 40,000 shares will vest 10,000 shares per year over the next four years, provided that the director is still serving on the Board of Directors at the time of the vesting of the remaining stock options. The exercise price of the grants equaled the closing stock price on October 14, 2005.

During 2006, two of the directors resigned. Each resigning director forfeited options to acquire 30,000 shares that were unvested at the time of resignation. The remaining 20,000 options expired in 2007 (90 days after the date of resignation) without being exercised.

F-20

A summary of the status of the Company’s stock options as of December 31, 2006, and changes during the year then ended is presented below.

	Year Ended December 31, 2006
			Weighted-Average
	Shares		Exercise Price
Outstanding at beginning of year		250,000	$	10.00
Granted		—		—
Exercised		—		—
Canceled/Forfeited		60,000	$	10.00
Outstanding at end of year		190,000	$	10.00
Exercisable at end of year		80,000	$	10.00
Weighted-average fair value of options granted during year	$	10.00

Outstanding options to acquire 250,000 shares of common stock at December 31, 2006 had an exercise price of $10.00, a weighted-average exercise price of $10.00, and had a weighted-average remaining contractual life of 8.9 years.

Series A Preferred Stock

The Company has authorized 50,000,000 preferred shares of stock. During the year ended May 31, 2000, the Company issued a total of 10,000 shares of Series A Preferred Stock to two individuals for a total of $100,000. Each share of Series A Preferred Stock is convertible into 1.6 shares of common stock. The Series A Preferred Stock has an annual cash dividend of $1.00 per share. During December 2005, all 10,000 shares of Series A Preferred Stock were converted to 16,000 shares of common stock.

Other Comprehensive Income (Loss)

The components of other comprehensive income (loss) and related tax effects for the years ended December 31, 2006 and 2005, the seven-month transition period ended December 31, 2004 and the fiscal year ended May 31, 2004 are shown as follows:

	Gross			Tax Effect		Net of Tax
Year Ended December 31, 2006:
Change in fixed-price contract and other derivative fair value	$	39,710,000		$	—	$	39,710,000
Reclassification adjustments — contract settlements		7,889,000			—		7,889,000
	$	47,599,000		$	—	$	47,599,000
Year Ended December 31, 2005:
Change in fixed-price contract and other derivative fair value	$	(63,924,000	)	$	—	$	(63,924,000	)
Reclassification adjustments — contract settlements		27,896,000			—		27,896,000
	$	(36,028,000	)	$	—	$	(36,028,000	)

F-21

	Gross			Tax Effect			Net of Tax
Seven Months Ended December 31, 2004:
Change in fixed-price contract and other derivative fair value	$	(5,258,000	)	$	—		$	(5,258,000	)
Reclassification adjustments — contract settlements		4,744,000			—			4,744,000
	$	(514,000	)	$	—		$	(514,000	)
Year Ended May 31, 2004:
Change in fixed-price contract and other derivative fair value	$	(11,132,000	)	$	(1,088,000	)	$	(10,044,000	)
Reclassification adjustments — contract settlements		(649,000	)		(64,000	)		(585,000	)
	$	(11,781,000	)	$	(1,152,000	)	$	(10,629,000	)

5.   Income Taxes

The components of income tax expense for the years ended December 31, 2006 and 2005, for the seven-month transition period ended December 31, 2004 and for the fiscal year ended May 31, 2004 are as follows:

					Seven Months
	Year Ended		Year Ended		Ended		Year Ended
	December 31, 2006		December 31, 2005		December 31, 2004		May 31, 2004
Current tax expense:
Federal	$	—	$	—	$	—	$	—
State		—		—		—		—
		—		—		—		—
Deferred tax expense:
Federal		—		—		—		(208,000	)
State		—		—		—		(37,000	)
		—		—		—		(245,000	)
	$	—	$	—	$	—	$	(245,000	)

F-22

Reconciliations of income tax at the statutory rate to the Company’s effective rate for the years ended December 31, 2006 and 2005, for the seven-month transition period ended December 31, 2004 and for the fiscal year ended May 31, 2004 are as follows:

							Seven Months
	Year Ended			Year Ended			Ended			Year Ended
	December 31,			December 31,			December 31,			May 31,
	2006			2005			2004			2004
Computation of income tax expense (benefit) at statutory rate	$	(16,968,000	)	$	(9,984,000	)	$	(1,685,000	)	$	(208,000	)
Tax effect of state income tax expense (benefit)		(1,697,000	)		(1,109,000	)		(187,000	)		(37,000	)
Increase in carryover depletion in excess of cost		(1,147,000	)		(170,000	)		(608,000	)		—
Book depreciation and depletion in excess of tax		6,287,000			(3,302,000	)		(456,000	)		(2,686,000	)
Tax gain not recognized for financial reporting purposes		4,620,000			—			—			—
Book gain in excess of tax on derivative transactions		(6,551,000	)		5,733,000			1,410,000			2,752,000
Other items and prior year true up		1,062,000			—			—			—
Tax Benefit		(14,394,000	)		(8,832,000	)		(1,526,000	)		(179,000	)
Less: Valuation allowance		14,394,000			8,832,000			1,526,000			179,000
	$	—		$	—		$	—		$	—

The following temporary differences gave rise to the net deferred tax liabilities at December 31, 2006, 2005 and 2004 and at May 31, 2004:

							Seven Months
	Year Ended			Year Ended			Ended			Year Ended
	December 31,			December 31,			December 31,			May 31,
	2006			2005			2004			2004
Deferred income tax assets, current:
Hedging contracts expenses per books but deferred for income tax reporting purposes	$	—		$	9,895,000		$	4,162,000		$	2,752,000
Total current deferred income tax assets		—			9,895,000			4,162,000			2,752,000
Deferred income tax assets, non-current:
Net operating loss carryforwards		28,643,000			16,849,000			8,961,000			4,715,000
Percentage depletion carryforwards		1,947,000			800,000			608,000			—
Total deferred income tax assets — non-current		30,590,000			17,649,000			9,569,000			4,715,000
Total deferred income tax assets		30,590,000			27,544,000			13,731,000			7,467,000
Deferred income tax liability, current:
Hedging contract income per books but deferred for income tax reporting purposes, net of other comprehensive income		(946,000	)		—			—			—
Total current deferred income tax liability		(946,000	)		—			—			—
Deferred income tax liability, long-term:
Book basis in property and equipment in excess of income tax basis		(111,000	)		(12,405,000	)		(7,424,000	)		(2,686,000	)
Total deferred income tax liability — long-term		(111,000	)		(12,405,000	)		(7,424,000	)		(2,686,000	)
Total deferred income tax liability		(1,057,000	)		(12,405,000	)		(7,424,000	)		(2,686,000	)
Net deferred income tax asset		29,533,000			15,139,000			6,307,000			4,781,000
Less: Valuation allowance		(29,533,000	)		(15,139,000	)		(6,307,000	)		(4,781,000	)
Total deferred tax (liability) asset	$	—		$	—		$	—		$	—

F-23

At December 31, 2006, the Company had federal income tax net operating loss (NOL) carryforwards of approximately $74,000,000. The NOL carryforwards expire from 2021 through 2025. The value of these carryforwards depends on the ability of the Company to generate taxable income.

The ability of the Company to utilize NOL carryforwards to reduce future federal taxable income and federal income tax of the Company is subject to various limitations under the Internal Revenue Code of 1986, as amended. The utilization of such carryforwards may be limited upon the occurrence of certain ownership changes, including the issuance or exercise of rights to acquire stock, the purchase or sale of stock by 5% stockholders, as defined in the Treasury regulations, and the offering of stock by the Company during any three-year period resulting in an aggregate change of more than 50% in the beneficial ownership of the Company.

The Company completed a private placement of its common stock on November 14, 2005. In connection with this offering, 15,258,144 shares of common stock were issued. This issuance may constitute an “owner shift” as defined in the Regulations under 1.382-2T. This event will subject approximately $40,000,000 of NOL’s to limitations under Section 382. The current annual limitation on NOL’s incurred prior the owner shift is expected to be $4,000,000. NOL’s incurred after November 14, 2005 will not be limited.

6.   Related Party Transactions

None.

7.   Supplemental Cash Flow Information

					Seven Months
	Year Ended				Ended		Year Ended
	December 31,				December 31,		May 31,
	2006		2005		2004		2004
Cash paid for interest	$	20,418,000	$	10,315,000	$	4,760,000	$	3,354,000
Cash paid for income taxes	$	—	$	—	$	—	$	—

Supplementary Information:

During the year ended December 31, 2006, non-cash investing and financing activities were as follows:

1) Issued 82,500 shares of common stock for credit agreement waiver fees valued at $904,200.

2) Issued stock to the Company’s 401(k) plan valued at $607,000 as an employer contribution.

3) Issued common units in Quest Midstream Partners, L.P. for approximately $90 million, before expenses.

During the year ended December 31, 2005, non-cash investing and financing activities were as follows:

1) Issued 3,200 shares of common stock to compensate a director for audit committee service valued at $19,000.

2) Issued stock for services rendered valued at $45,000.

3) Issued stock to the Company’s 401(k) plan valued at $495,000 as an employer contribution.

4) Recorded non-cash additions to net natural gas and oil properties of $211,000 pursuant to SFAS 143.

F-24

During the seven-month transition period ended December 31, 2004, non-cash investing and financing activities are as follows:

1) Issued 6,800 common stock shares to compensate a director for audit committee service valued at $62,000.

2) Recorded non-cash additions to net natural gas and oil properties of $126,000 pursuant to SFAS 143.

During the fiscal year ended May 31, 2004, non-cash investing and financing activities are as follows:

1) Issued stock upon conversion of $180,000 of convertible debentures.

2) Issued stock to acquire assets valued at $1,200,000.

3) Issued stock for services rendered valued at $94,000.

4) Issued stock to the Company’s 401(k) plan valued at $121,000 as an employer contribution.

5) Recorded non-cash additions to net natural gas and oil properties of $624,000 pursuant to SFAS 143.

8.   Contingencies

Quest Cherokee, LLC (“Quest Cherokee”), STP Cherokee, Inc. (“STP”), and Bluestem Pipeline, LLC (“Bluestem”) have been named defendants in a lawsuit (Case #CJ-2003-30) filed by plaintiffs, Eddie R. Hill, et al, on September 27, 2003 in the District Court for Craig County, Oklahoma. Plaintiffs are royalty owners who are alleging underpayment of royalties owed them by STP and Quest Cherokee. Bluestem owns the gathering system that is used to gather gas from the wells in issue. The plaintiffs also allege, among other things, that STP and Quest Cherokee have engaged in self-dealing, have breached their fiduciary duties to the plaintiffs and have acted fraudulently towards the plaintiffs. Plaintiffs also allege that the gathering fees and related charges imposed by Bluestem should not be deducted by STP and Quest Cherokee in paying royalties. The plaintiffs are seeking unspecified actual and punitive damages as a result of the alleged conduct by STP, Quest Cherokee, and Bluestem. Discovery is ongoing and defendants intend to defend vigorously against these claims.

STP, Inc., STP Cherokee, Inc., and Bluestem have been named defendants in a lawsuit (Case No. CJ-2005-143) by plaintiffs John C. Kirkpatrick, et ux., in the District Court for Craig County, Oklahoma. Plaintiffs allege that STP, Inc., et al., through Bluestem, sold natural gas from wells owned by the plaintiffs to Quest Cherokee without proper notice to plaintiffs. Plaintiffs have requested an accounting and stated that if plaintiffs have suffered any damages for failure to properly pay royalties, plaintiffs have a right to recover those damages. Plaintiffs have not quantified their alleged damages. Discovery is ongoing and defendants are vigorously contesting the plaintiffs’ claims.

Quest Cherokee and Bluestem were named as defendants in a lawsuit (Case No. 04-C-100-PA) filed by plaintiff Central Natural Resources, Inc. on September 1, 2004 in the District Court of Labette County, Kansas. Central Natural Resources owns the coal underlying numerous tracts of land in Labette County, Kansas. Quest Cherokee has obtained oil and gas leases from the owners of the oil, gas, and minerals other than coal underlying some of that land and has drilled wells that produce coal bed methane gas on that land. Bluestem purchases and gathers the gas produced by Quest Cherokee. Plaintiff alleges that it is entitled to the coal bed methane gas produced and revenues from these leases and that Quest Cherokee is a trespasser. Plaintiff is seeking quiet title and an equitable accounting for the revenues from the coal bed methane gas produced. Plaintiff has alleged that Bluestem converted the gas and seeks an accounting for all gas purchased by Bluestem from the wells in issue. Quest Cherokee contends it has valid leases with the owners of the coal bed methane gas rights. The issue is whether the coal bed methane gas is owned by the owner of the coal rights or by the owners of the gas rights. If Quest Cherokee prevails on that issue, then the plaintiff’s claims against Bluestem fail. All issues relating to ownership of the coal bed methane gas and damages have been bifurcated. Cross motions for summary judgment on the ownership of the coal bed methane were filed by Quest Cherokee and the plaintiff, with summary judgment being awarded in Quest

F-25

Cherokee’s favor. The plaintiff has appealed the summary judgment and that appeal is pending. Quest Cherokee and Bluestem intend to defend vigorously against these claims.

Quest Cherokee was named as a defendant in a lawsuit (Case No. CJ-06-07) filed by plaintiff Central Natural Resources, Inc. on January 17, 2006, in the District Court of Craig County, Oklahoma. Bluestem is not a party to this lawsuit. Central Natural Resources owns the coal underlying approximately 2,250 acres of land in Craig County, Oklahoma. Quest Cherokee has obtained oil and gas leases from the owners of the oil, gas, and minerals other than coal underlying those lands, and has drilled and completed 20 wells that produce coal bed methane gas on those lands. Plaintiff alleges that it is entitled to the coal bed methane gas produced and revenues from these leases and that Quest Cherokee is a trespasser. Plaintiff seeks to quiet its alleged title to the coal bed methane and an accounting of the revenues from the coal bed methane gas produced by Quest Cherokee. Quest Cherokee contends it has valid leases from the owners of the coal bed methane gas rights. The issue is whether the coal bed methane gas is owned by the owner of the coal rights or by the owners of the gas rights. Quest Cherokee has answered the petition and discovery is ongoing. Quest Cherokee intends to defend vigorously against these claims.

Quest Cherokee was named as a defendant in a lawsuit (Case No. 05 CV 41) filed by Labette Energy, LLC in the district court of Labette County, Kansas. Plaintiff claims to own a 3.2 mile gas gathering pipeline in Labette County, Kansas, and that Quest Cherokee used that pipeline without plaintiff’s consent. Plaintiff also contends that the defendants slandered its alleged title to that pipeline and suffered damages from the cancellation of their proposed sale of that pipeline. Plaintiff claims that they were damaged in the amount of $202,375. Discovery in that case is ongoing and Quest Cherokee intend to defend vigorously against the plaintiff’s claims.

Quest Energy Service, Inc. (“QES”) was named as a defendant in a lawsuit (Case No. 2006 CV 103) filed by Western Uniform and Towel Service, Inc. in the district court of Neosho County, Kansas. Plaintiff contends that QES has failed to pay for goods and services provided by the Plaintiff, and that QES wrongfully terminated certain contracts with the plaintiff to provide uniforms and merchandise to QES. Plaintiff has claimed damages of $464,267.33 for breach of contract, and $53,448.70 for lost goods. Discovery in that case is ongoing. QES intends to defend vigorously against plaintiff’s claims.

Bluestem and Quest Cherokee were named as defendants in a lawsuit (Case No. CJ-2007-325) filed by Devonian Enterprises, Inc. d/b/a Permian Land Company (“Permian”) in the district court of Oklahoma County, Oklahoma. Permian has asserted claims against Quest Cherokee and Bluestem in the amount of $521,252.88 for land services allegedly rendered to Quest Cherokee and Bluestem by Permian and for which no payment has purportedly been received by Permian. Quest Cherokee and Bluestem have asserted counterclaims against Permian for breach of contract and negligence, among other theories, due to Permian’s failure to file acquired instruments of record and deliver such records to Quest Cherokee and Bluestem, which has caused Quest Cherokee and Bluestem to incur unnecessary costs to re-acquire such instruments. In addition, Permian failed to ascertain whether or not minerals were leased or otherwise burdened and acquired oil and gas leases for Quest Cherokee and Bluestem, which were, in fact, burdened, causing Quest Cherokee and Bluestem to incur thousands of dollars in curative costs to acquire title to such minerals. Further, without approval, Permian inserted non-standard construction completion penalty provisions into said rights-of-way and easements, forcing Quest Cherokee and Bluestem to incur thousands of dollars in damages resulting from the unauthorized construction penalty provisions. Finally, Plaintiff has failed to return confidential information to Quest Cherokee and Bluestem pursuant to the parties’ written confidentiality and non-disclosure agreement. Quest Cherokee and Bluestem seek an undetermined amount of damages, injunctive relief, and an accounting to determine whether and to what extent Permian charged excessive fees for purported services it provided. Discovery is ongoing. Quest Cherokee and Bluestem intend to defend vigorously against Permian’s claims.

Quest Cherokee is a counterclaim defendant in a lawsuit (Case No. 2006 CV 74) filed by Quest Cherokee in district court of Labette County, Kansas. Quest Cherokee filed that lawsuit seeking a declaratory judgment that several oil and gas leases owned by Quest Cherokee are valid and in effect. In the counterclaim, defendants allege that those leases have expired by their terms and have been forfeited by Quest Cherokee. Defendants seek a

F-26

declaration that those leases are null and void, statutory damages of $100, and their attorney’s fees. Discovery in that case is ongoing. Quest Cherokee intends to vigorously defend against those counterclaims.

The Company, from time to time, may be subject to legal proceedings and claims that arise in the ordinary course of its business. Although no assurance can be given, management believes, based on its experiences to date, that the ultimate resolution of such items will not have a material adverse impact on the Company’s business, financial position or results of operations. Like other natural gas and oil producers and marketers, the Company’s operations are subject to extensive and rapidly changing federal and state environmental regulations governing air emissions, wastewater discharges, and solid and hazardous waste management activities. Therefore it is extremely difficult to reasonably quantify future environmental related expenditures.

9.   Earnings Per Share

SFAS 128 requires a reconciliation of the numerator and denominator of the basic and diluted earnings per share (EPS) computations. The following securities were not included in the calculation of diluted earnings per share because their effect was anti-dilutive:

•  For the year ended December 31, 2006, dilutive shares do not include stock awards of 5,000 shares of common stock because the effects were antidilutive.

•  For the year ended December 31, 2006, dilutive shares do not include options to purchase 11,000 shares of common stock because the effects were antidilutive.

•  For the year ended December 31, 2005, dilutive shares do not include stock awards of 1,000 shares of common stock because the effects were antidilutive.

•  For the year ended December 31, 2005, dilutive shares do not include options to purchase 12,000 shares of common stock because the effects were antidilutive.

•  For the seven-month transition period ended December 31, 2004 and for the fiscal year ended May 31, 2004, dilutive shares do not include outstanding warrants to purchase 640,000 shares of common stock at an exercise price of $0.0025 because the effects were antidilutive.

•  For the seven-month transition period ended December 31, 2004 and for the fiscal year ended May 31, 2004, dilutive shares do not include the assumed conversion of the outstanding 10% preferred stock (convertible into 16,000 common shares) because the effects were antidilutive.

•  For the seven-month transition period ended December 31, 2004 and for the fiscal year ended May 31, 2004, dilutive shares do not include the assumed conversion of convertible debt (convertible into 4,000 common shares in the transition period ended December 31, 2004 and 8,000 common shares in fiscal 2004) because the effects were antidilutive.

F-27

The following reconciles the components of the EPS computation:

						Per Share
	Income			Shares		Amount
	(Numerator)			(Denominator)
For the year ended December 31, 2006:
Net loss	$	(48,478,000	)
Basic EPS income available to common shareholders	$	(48,478,000	)		22,100,753	$	(2.19	)
Effect of dilutive securities:
None		—			—
Diluted EPS income available to common shareholders	$	(48,478,000	)		22,100,753	$	(2.19	)
For the year ended December 31, 2005:
Net loss	$	(31,941,000	)
Preferred stock dividends		(10,000	)
Basic EPS income available to common shareholders	$	(31,951,000	)		8,390,092	$	(3.81	)
Effect of dilutive securities:
None		—			—
Diluted EPS income available to common shareholders	$	(31,951,000	)		8,390,092	$	(3.81	)
For the seven months ended December 31, 2004:
Net loss	$	(4,863,000	)
Preferred stock dividends		(6,000	)
Basic EPS income available to common shareholders	$	(4,869,000	)		5,661,352	$	(0.86	)
Effect of dilutive securities:
None		—			—
Diluted EPS income available to common shareholders	$	(4,869,000	)		5,661,352	$	(0.86	)
For the fiscal year ended May 31, 2004:
Income (loss) before cumulative effect of accounting change, net of tax	$	(365,000	)
Preferred stock dividends		(10,000	)
Basic EPS income available to common shareholders
Before cumulative effect of accounting change, net of tax	$	(375,000	)		5,588,352	$	(0.07	)
Effect of dilutive securities:
None		—			—
Diluted EPS income available to common shareholders	$	(375,000	)		5,588,352	$	(0.07	)

F-28

10.   Asset Retirement Obligation

As described in Note 1, effective June 1, 2003, the Company adopted SFAS 143, Accounting for Asset Retirement Obligations. Upon adoption of SFAS 143, the Company recorded a cumulative effect to net income of ($28,000) net of tax, or ($0.00) per share. Additionally, the Company recorded an asset retirement obligation liability of $254,000 and an increase to net properties and equipment of $207,000.

The following table provides a roll forward of the asset retirement obligations for the years ended December 31, 2006 and 2005 and for the seven months ended December 31, 2004:

							Seven Months
	Year Ended			Year Ended			Ended
	December 31,			December 31,			December 31,
	2006			2005			2004
Asset retirement obligation beginning balance	$	1,150,000		$	871,000		$	717,000
Liabilities incurred		175,000			217,000			129,000
Liabilities settled		(7,000	)		(6,000	)		(3,000	)
Accretion expense		92,000			68,000			28,000
Revisions in estimated cash flows		—			—			—
Asset retirement obligation ending balance	$	1,410,000		$	1,150,000		$	871,000

11.   Company Benefit Plan

The Company has adopted a 401(K) profit sharing plan with an effective date of June 1, 2001. The plan covers all eligible employees. During the years ended December 31, 2006 and 2005, employees contributed $490,880 and $298,937, respectively to the plan and the Company contributed 51,131 and 49,842 shares of its common stock to the plan. The Company valued the 2006 and 2005 common stock contribution at $607,000 and $495,000, respectively, of which $428,000 and $266,000, respectively, was included as an expense in the statement of operations and $179,000 and $229,000, respectively, was included in oil and gas properties. During the seven-month transition period ended December 31, 2004 and the fiscal year ended May 31, 2004, the employee contributions to the plan were $115,231 and $97,631, respectively, and the Company contributed 32,355 shares of its common stock to the plan. The Company valued the 2004 common stock contribution at $121,000 and included this amount as an expense in the statement of operations. There is a graduated vesting schedule with the employee becoming fully vested after six years of service.

12.   Operating Leases

The Company leases natural gas compressors. Terms of these leases call for a minimum obligation of six months and are month to month thereafter. As of December 31, 2006 and 2005, the Company’s monthly obligation under these leases totaled $736,000 and $490,000, respectively.

Additionally, the minimum annual rental commitments as of December 31, 2006 under non-cancellable office space leases are as follows: 2007 — $150,000; 2008 — $142,000 and 2009 — $59,000.

13.   Major Purchasers

The Company’s natural gas and oil production is sold under contracts with various purchasers. Natural gas sales to one purchaser approximated 95% of total natural gas and oil revenues for the years ended December 31, 2006 and 2005 and for the seven-month transition period ended December 31, 2004 and 90% for the fiscal year ended May 31, 2004.

F-29

14.   Financial Instruments

The following information is provided regarding the estimated fair value of the financial instruments, including derivative assets and liabilities as defined by SFAS 133 that the Company held as of December 31, 2006 and 2005 and the methods and assumptions used to estimate their fair value:

	December 31, 2006						December 31, 2005
	Carrying			Fair			Carrying			Fair
	Amount			Value			Amount			Value
Derivative assets:
Interest rate swaps and caps	$	197,000		$	197,000		$	188,000		$	188,000
Basis swaps	$	62,000		$	62,000		$	—		$	—
Fixed-price natural gas swaps	$	2,207,000		$	2,207,000		$	—		$	—
Fixed-price natural gas collars	$	13,111,000		$	13,111,000		$	—		$	—
Derivative liabilities:
Basis swaps	$	(377,000	)	$	(377,000	)	$	—		$	—
Fixed-price natural gas swaps	$	—		$	—		$	(31,185,000	)	$	(31,185,000	)
Fixed-price natural gas collars	$	(12,316,000	)	$	(12,316,000	)	$	(30,733,000	)	$	(30,733,000	)
Credit facilities	$	(225,000,000	)	$	(225,000,000	)	$	(100,000,000	)	$	(100,000,000	)
Other financing agreements	$	(569,000	)	$	(569,000	)	$	(988,000	)	$	(988,000	)

The carrying amount of cash, receivables, deposits, accounts payable and accrued expenses approximates fair value due to the short maturity of those instruments. The carrying amounts for notes payable approximate fair value due to the variable nature of the interest rates of the notes payable.

The fair value of all derivative instruments as of December 31, 2006 and 2005 was based upon estimates determined by the Company’s counterparties and subsequently evaluated internally using established index prices and other sources. These values are based upon, among other things, futures prices, volatility, and time to maturity and credit risk. The values reported in the financial statements change as these estimates are revised to reflect actual results, changes in market conditions or other factors. See Note 15 — Derivatives.

Derivative assets and liabilities reflected as current in the December 31, 2006 and 2005 balance sheets represent the estimated fair value of fixed-price contract and interest rate cap settlements scheduled to occur over the subsequent twelve-month period based on market prices for natural gas and fluctuations in interest rates as of the balance sheet date. The offsetting increase in value of the hedged future production has not been accrued in the accompanying balance sheet, creating the appearance of a working capital deficit from these contracts. The contract settlement amounts are not due and payable until the monthly period that the related underlying hedged transaction occurs. In some cases the recorded liability for certain contracts significantly exceeds the total settlement amounts that would be paid to a counterparty based on prices and interest rates in effect at the balance sheet date due to option time value. Since the Company expects to hold these contracts to maturity, this time value component has no direct relationship to actual future contract settlements and consequently does not represent a liability that will be settled in cash or realized in any way.

F-30

15.   Derivatives

Natural Gas Hedging Activities

The Company seeks to reduce its exposure to unfavorable changes in natural gas prices, which are subject to significant and often volatile fluctuation, through the use of fixed-price contracts. The fixed-price contracts are comprised of energy swaps and collars. These contracts allow the Company to predict with greater certainty the effective natural gas prices to be received for hedged production and benefit operating cash flows and earnings when market prices are less than the fixed prices provided in the contracts. However, the Company will not benefit from market prices that are higher than the fixed prices in the contracts for hedged production. Collar structures provide for participation in price increases and decreases to the extent of the ceiling and floor prices provided in those contracts. For the years ended December 31, 2006 and 2005, the seven months ended December 31, 2004 and the fiscal year ended May 31, 2004, fixed-price contracts hedged approximately 61.0%, 89.0%, 85.0% and 83.0%, respectively, of the Company’s natural gas production. As of December 31, 2006, fixed-price contracts are in place to hedge 20.1 Bcf of estimated future natural gas production. Of this total volume, 10.8 Bcf are hedged for 2007 and 9.3 Bcf thereafter.

For energy swap contracts, the Company receives a fixed price for the respective commodity and pays a floating market price, as defined in each contract (generally a regional spot market index or in some cases, NYMEX future prices), to the counterparty. The fixed-price payment and the floating-price payment are netted, resulting in a net amount due to or from the counterparty. Natural gas collars contain a fixed floor price (put) and ceiling price (call) (generally a regional spot market index or in some cases, NYMEX future prices). If the market price of natural gas exceeds the call strike price or falls below the put strike price, then the Company receives the fixed price and pays the market price. If the market price of natural gas is between the call and the put strike price, then no payments are due from either party.

The following table summarizes the estimated volumes, fixed prices, fixed-price sales and fair value attributable to the fixed-price contracts as of December 31, 2006. See “— Market Risk.”

	Years Ending December 31,
	2007		2008			Total
	(Dollars in thousands, except price data)
Natural Gas Swaps:
Contract vols (MMBtu)		2,354,000		—			2,354,000
Weighted-avg fixed price per MMBtu(1)	$	7.20		—		$	7.20
Fixed-price sales	$	16,948		—		$	16,948
Fair value, net	$	2,207		—		$	2,207
Natural Gas Collars:
Contract vols (MMBtu):
Floor		8,433,000		7,027,000			15,460,000
Ceiling		8,433,000		7,027,000			15,460,000
Weighted-avg fixed price per MMBtu(1):
Floor	$	6.63	$	6.54		$	6.59
Ceiling	$	7.54	$	7.53		$	7.54
Fixed-price sales(2)	$	55,890	$	45,973		$	101,863
Fair value, net	$	3,525	$	(2,729	)	$	796
Total Natural Gas Contracts:
Contract vols (MMBtu)		10,787,000		7,027,000			17,814,000
Weighted-avg fixed price per MMBtu(1)	$	6.75	$	6.54		$	6.67
Fixed-price sales(2)	$	72,838	$	45,973		$	118,811
Fair value, net	$	5,732	$	(2,729	)	$	3,003

F-31

(1)	The prices to be realized for hedged production are expected to vary from the prices shown due to basis.
(2)	Assumes floor prices for natural gas collar volumes.
(3)	Does not include basis swaps with notional volumes by year, as follows: TBtu; 2007: 1.8 TBtu; 2008: 1.5 TBtu

The estimates of fair value of the fixed-price contracts are computed based on the difference between the prices provided by the fixed-price contracts and forward market prices as of the specified date, as adjusted for basis. Forward market prices for natural gas are dependent upon supply and demand factors in such forward market and are subject to significant volatility. The fair value estimates shown above are subject to change as forward market prices and basis change. See Note 14 — Financial Instruments.

All fixed-price contracts have been approved by the Company’s board of directors. The differential between the fixed price and the floating price for each contract settlement period multiplied by the associated contract volume is the contract profit or loss. For fixed-price contracts qualifying as cash flow hedges pursuant to SFAS 133, the realized contract profit or loss is included in oil and gas sales in the period for which the underlying production was hedged. For the years ended December 31, 2006 and 2005, the seven-month transition period ended December 31, 2004 and the fiscal year ended May 31, 2004, oil and gas sales included $7.9 million, $27.9 million, $4.7 million and $649,000, respectively, of net losses associated with realized losses under fixed-price contracts.

For contracts that did not qualify as cash flow hedges, the realized contract profit and loss is included in other revenue and expense in the period for which the underlying production was hedged. For the years ended December 31, 2006 and 2005, the seven months ended December 31, 2004 and the year ended May 31, 2004, other revenue and expense included $10.2 million, $0, $105,000 and $1.5 million, respectively, of net losses associated with realized losses under fixed-price contracts.

For fixed-price contracts qualifying as cash flow hedges, changes in fair value for volumes not yet settled are shown as adjustments to other comprehensive income. For those contracts not qualifying as cash flow hedges, changes in fair value for volumes not yet settled are recognized in change in derivative fair value in the statement of operations. The fair value of all fixed-price contracts are recorded as assets or liabilities in the balance sheet.

Based upon market prices at December 31, 2006, the estimated amount of unrealized gains for fixed-price contracts shown as adjustments to other comprehensive income that are expected to be reclassified into earnings as actual contract cash settlements are realized within the next 12 months is $5.3 million.

Interest Rate Hedging Activities

The Company has entered into interest rate caps designed to hedge the interest rate exposure associated with borrowings under its credit facilities. All interest rate caps have been approved by the Company’s board of directors. The excess, if any, of the floating rate over the interest rate cap multiplied by the notional amount is the cap gain. This gain is included in interest expense in the period for which the interest rate exposure was hedged.

For interest rate caps qualifying as cash flow hedges, changes in fair value of the derivative instruments are shown as adjustments to other comprehensive income. For those interest rate caps not qualifying as cash flow hedges, changes in fair value of the derivative instruments are recognized in change in derivative fair value in the statement of operations. All changes in fair value of the Company’s interest rate swaps and caps are reported in results of operations rather than in other comprehensive income because the critical terms of the interest rate swaps and caps do not comply with certain requirements set forth in SFAS 133. The fair value of all interest rate swaps and caps are recorded as assets or liabilities in the balance sheet. Based upon market prices at December 31, 2006, the estimated amount of unrealized gains for interest rate caps shown as adjustments to change in derivative fair value in the statement of operations that are expected to be reclassified into earnings as actual contract cash settlements are realized within the next 12 months is $197,000.

F-32

The following table summarizes the notional amounts, interest rates and the fair value attributable to the interest rate caps as of December 31, 2006.

			Fixed				Fair Value as of
		Notional	Rate/Cap			Floating	December 31,
Instrument Type	Term	Amount(1)	Rate			Rate	2006
Interest Rate Cap	Jan. 2007 - Sept. 2007	$98,705,000 $70,174,600		5.000	%	3-month LIBOR	$	197,000

(1) Represents the maximum and minimum notional amounts that are hedged during the period.

In connection with entering into the Company’s existing credit facilities on November 14, 2005, the Company terminated an interest rate swap with a notional amount ranging from $53.9 million to $58.3 million in exchange for a termination payment of $379,000. The proceeds were booked as an increase to other revenue and expense in the fourth quarter of 2005.

Change in Derivative Fair Value

Change in derivative fair value in the statements of operations for the years ended December 31, 2006 and 2005, the seven-month transition period ended December 31, 2004 and the fiscal year ended May 31, 2004 are comprised of the following:

						Seven Months
	Year Ended		Year Ended			Ended			Year Ended
	December 31,		December 31,			December 31,			May 31,
	2006		2005			2004			2004
Change in fair value of derivatives not qualifying as cash flow hedges	$	12,233,000	$	879,000		$	(269,000	)	$	(1,740,000	)
Amortization of derivative fair value gains and losses recognized in earnings prior to actual cash settlements		—		103,000			565,000			888,000
Ineffective portion of derivatives qualifying as cash flow hedges		4,411,000		(5,650,000	)		(1,783,000	)		(1,161,000	)
	$	16,644,000	$	(4,668,000	)	$	(1,487,000	)	$	(2,013,000	)

The amounts recorded in change in derivative fair value do not represent cash gains or losses. Rather, they are temporary valuation swings in the fair value of the contracts. All amounts initially recorded in this caption are ultimately reversed within this same caption over the respective contract terms.

Credit Risk

Energy swaps and collars and interest rate swaps and caps provide for a net settlement due to or from the respective party as discussed previously. The counterparties to the derivative contracts are a financial institution and a major energy corporation. Should a counterparty default on a contract, there can be no assurance that we would be able to enter into a new contract with a third party on terms comparable to the original contract. The Company has not experienced non-performance by its counterparties.

Cancellation or termination of a fixed-price contract would subject a greater portion of the Company’s natural gas production to market prices, which, in a low price environment, could have an adverse effect on its future operating results. Cancellation or termination of an interest rate swap or cap would subject a greater portion of the Company’s long-term debt to market interest rates, which, in an inflationary environment, could have an adverse effect on its future net income. In addition, the associated carrying value of the derivative contract would be removed from the balance sheet.

F-33

Market Risk

The differential between the floating price paid under each energy swap or collar contract and the price received at the wellhead for our production is termed “basis” and is the result of differences in location, quality, contract terms, timing and other variables. For instance, some of our fixed price contracts are tied to commodity prices on the New York Mercantile Exchange (“NYMEX”), that is, we receive the fixed price amount stated in the contract and pay to our counterparty the current market price for gas as listed on the NYMEX. However, due to the geographic location of our natural gas assets and the cost of transporting the natural gas to another market, the amount that we receive when we actually sell our natural gas is based on the Southern Star Central TX/KS/OK (“Southern Star”) first of month index, with a small portion being sold based on the daily price on the Southern Star index. The difference between natural gas prices on the NYMEX and the price actually received by the Company is referred to as a basis differential. Typically, the price for natural gas on the Southern Star first of the month index is less than the price on the NYMEX due to the more limited demand for natural gas on the Southern Star first of the month index. Recently, the basis differential has been increasingly volatile and has on occasion resulted in us receiving a net price for our natural gas that is significantly below the price stated in the fixed price contract.

The effective price realizations that result from the fixed-price contracts are affected by movements in this basis differential. Basis movements can result from a number of variables, including regional supply and demand factors, changes in the portfolio of the Company’s fixed-price contracts and the composition of its producing property base. Basis movements are generally considerably less than the price movements affecting the underlying commodity, but their effect can be significant. Recently, the basis differential has been increasingly volatile and has on occasion resulted in the Company receiving a net price for its natural gas that is significantly below the price stated in the fixed price contract.

Changes in future gains and losses to be realized in natural gas and oil sales upon cash settlements of fixed-price contracts as a result of changes in market prices for natural gas are expected to be offset by changes in the price received for hedged natural gas production.

16.  SFAS 69 Supplemental Disclosures (Unaudited)

Net Capitalized Costs

The Company’s aggregate capitalized costs related to natural gas and oil producing activities are summarized as follows:

	December 31,
	2006			2005
Natural gas and oil properties and related lease equipment:
Proved	$	316,780,000		$	201,788,000
Unproved		9,545,000			18,285,000
		326,325,000			220,073,000
Accumulated depreciation, depletion and impairment		(92,732,000	)		(36,703,000	)
Net capitalized costs	$	233,593,000		$	183,370,000

Unproved properties not subject to amortization consisted mainly of leasehold acquired through acquisitions. The Company will continue to evaluate its unproved properties; however, the timing of the ultimate evaluation and disposition of the properties has not been determined.

F-34

Costs Incurred

Costs incurred in natural gas and oil property acquisition, exploration and development activities that have been capitalized are summarized as follows:

	Year Ended December 31,
	2006		2005
Acquisition of properties proved and unproved	$	—	$	—
Development costs		105,917,000		29,283,000	(1)
	$	105,917,000	$	29,283,000

(1) Development costs for the year ended December 31, 2005 do not include the buy out of the ArcLight units of $19.1 million.

Results of Operations for Natural Gas and Oil Producing Activities

The Company’s results of operations from natural gas and oil producing activities are presented below for the years ended December 31, 2006 and 2005, the transition period ended December 31, 2004 and the fiscal year ended May 31, 2004. The following table includes revenues and expenses associated directly with the Company’s natural gas and oil producing activities. It does not include any interest costs and general and administrative costs and, therefore, is not necessarily indicative of the contribution to consolidated net operating results of the Company’s natural gas and oil operations.

							Seven Months
							Ended			Year Ended
	Year Ended December 31,						December 31,			May 31,
	2006			2005			2004			2004
Production revenues	$	65,551,000		$	44,565,000		$	24,201,000		$	28,147,000
Production costs		(21,208,000	)		(14,388,000	)		(5,389,000	)		(6,835,000	)
Depreciation and depletion		(25,238,000	)		(20,634,000	)		(7,187,000	)		(6,802,000	)
		19,105,000			9,543,000			11,625,000			14,510,000
Imputed income tax provision(1)		(7,642,000	)		(3,817,000	)		(4,650,000	)		(5,804,000	)
Results of operations for natural gas/oil producing activity	$	11,463,000		$	5,726,000		$	6,975,000		$	8,706,000

(1) The imputed income tax provision is hypothetical (at the statutory rate) and determined without regard to the Company’s deduction for general and administrative expenses, interest costs and other income tax credits and deductions, nor whether the hypothetical tax provision will be payable.

F-35

Natural Gas and Oil Reserve Quantities

The following schedule contains estimates of proved natural gas and oil reserves attributable to the Company. Proved reserves are estimated quantities of natural gas and oil that geological and engineering data demonstrate with reasonable certainty to be recoverable in future years from known reservoirs under existing economic and operating conditions. Proved developed reserves are those that are expected to be recovered through existing wells with existing equipment and operating methods. Reserves are stated in thousand cubic feet (mcf) of natural gas and barrels (bbl) of oil. Geological and engineering estimates of proved natural gas and oil reserves at one point in time are highly interpretive, inherently imprecise and subject to ongoing revisions that may be substantial in amount. Although every reasonable effort is made to ensure that the reserve estimates are accurate, by their nature reserve estimates are generally less precise than other estimates presented in connection with financial statement disclosures.

	Gas – mcf			Oil – bbls
Proved reserves:
Balance, December 31, 2004		149,843,900			47,834
Purchase of reserves-in-place		—			—
Extensions and discoveries		—			—
Revisions of previous estimates		(5,959,600	)		(6,324	)
Production		(9,565,000	)		(9,241	)
Balance, December 31, 2005		134,319,300			32,269
Purchase of reserves-in-place		—			—
Extensions and discoveries		76,002,842			9,740
Revisions of previous estimates		—			—
Production		(12,282,142	)		(9,737	)
Balance, December 31, 2006		198,040,000			32,272
Proved developed reserves:
Balance, December 31, 2004		81,467,220			47,834
Balance, December 31, 2005		71,638,250			32,269
Balance, December 31, 2006		93,914,350			32,272

F-36

Standardized Measure of Discounted Future Net Cash Flows

The following schedule presents the standardized measure of estimated discounted future net cash flows from the Company’s proved reserves for the years ended December 31, 2006 and 2005, the seven-month transition period ended December 31, 2004 and for the fiscal year ended May 31, 2004. Estimated future cash flows are based on independent reserve data. Because the standardized measure of future net cash flows was prepared using the prevailing economic conditions existing at December 31, 2006, 2005 and 2004 and May 31, 2004, it should be emphasized that such conditions continually change. Accordingly, such information should not serve as a basis in making any judgment on the potential value of the Company’s recoverable reserves or in estimating future results of operations.

							Seven Months
							Ended			Year Ended
	Year Ended December 31,						December 31,			May 31,
	2006			2005			2004			2004
Future production revenues(1)	$	1,197,198,000		$	1,258,579,000		$	959,591,000		$	796,329,000
Future production costs		(638,844,000	)		(366,474,000	)		(274,015,000	)		(264,810,000	)
Future development costs		(126,272,000	)		(122,428,000	)		(74,470,000	)		(48,773,000	)
Future cash flows before income taxes		432,082,000			769,677,000			611,106,000			482,746,000
Future income tax		(67,982,000	)		(205,561,000	)		(160,734,000	)		(128,000,000	)
Future net cash flows		364,100,000			564,116,000			450,372,000			354,746,000
Effect of discounting future annual cash flows at 10%		(138,205,000	)		(210,446,000	)		(154,769,000	)		(120,802,000	)
Standardized measure of discounted net cash flows before hedges		225,895,000			353,670,000			295,603,000			233,944,000
Future hedge settlements		2,687,000			(61,918,000	)		(22,477,000	)		(19,788,000	)
Standardized measure of discounted net cash flows after hedges	$	228,582,000		$	291,752,000		$	273,126,000		$	214,156,000

(1) The weighted average natural gas and oil wellhead prices used in computing the Company’s reserves were $6.00 per mcf and $58.06 per bbl at December 31, 2006; $9.22 per mcf and $55.69 per bbl at December 31, 2005; and $6.30 per mcf and $41.07 per bbl at December 31, 2004 and $5.95 per mcf and $35.25 per bbl at May 31, 2004.

F-37

The principal changes in the standardized measure of discounted future net cash flows relating to proven natural gas and oil properties were as follows:

							Seven Months
							Ended			Year Ended
	Year Ended December 31,						December 31,			May 31,
	2006			2005			2004			2004
Sales and transfers of natural gas and oil, net of production costs	$	(25,796,000	)	$	(25,646,000	)	$	(18,419,000	)	$	(21,312,000	)
Net changes in prices and production costs		(457,808,000	)		171,468,000			45,264,000			7,461,000
Acquisitions of natural gas and oil in place — less related production costs		—			—			—			217,924,000
Extensions and discoveries, less related production costs		128,620,000			—			46,686,000			19,956,000
Revisions of previous quantity estimates less related production costs		(4,121,000	)		(51,760,000	)(1)		5,004,000			22,722,000
Accretion of discount		7,053,000			8,832,000			4,609,000			3,917,000
Net change in income taxes		137,579,000			(44,827,000	)		(21,485,000	)		(63,792,000	)
Total change in standardized measure of discounted future net cash flows	$	(214,473,000	)	$	58,067,000		$	61,659,000		$	186,876,000

(1)  — includes $30.1 million related to increase in future development costs.

The following schedule contains a comparison of the standardized measure of discounted future net cash flows to the net carrying value of proved natural gas and oil properties at December 31, 2006, 2005 and 2004:

					Seven Months
	Year Ended				Ended
	December 31,				December 31,
	2006		2005		2004
Standardized measure of discounted future net cash flows	$	225,895,000	$	353,670,000	$	295,603,000
Proved natural gas & oil property, net of accumulated depletion		223,943,000		165,085,000		138,358,000
Standardized measure of discounted future net cash flows in excess of net carrying value of proved natural gas & oil properties	$	1,952,000	$	188,585,000	$	157,245,000

F-38

17.   Comparison of Certain Financial Data Due To Change in Fiscal Year End

Seven months ended December 31, 2004 compared to the seven months ended December 31, 2003

The Company changed its fiscal year-end from May 31 to December 31, effective January 1, 2005. As a result of this change, the Company has prepared financial statements for the seven-month transition period ended December 31, 2004. Accordingly, the following results of operations compares audited balances for the seven months ended December 31, 2004 to the unaudited balances for the seven months ended December 31, 2003.

	Seven Months
	Ended
	December 31,
	2004			2003
				(Unaudited)
Oil and gas sales	$	24,201,000		$	8,755,000
Gas pipeline revenue		1,918,000			1,289,000
Other revenue and expense		37,000			(1,356,000	)
Total revenues		26,156,000			8,688,000
Oil and gas production		5,389,000			2,267,000
Pipeline operating		3,653,000			1,140,000
General & administrative expense		2,681,000			831,000
Depreciation, depletion & amortization		7,671,000			2,235,000
Other costs of revenues		—			(8,000	)
Total costs and expenses		19,394,000			6,465,000
Operating income		6,762,000			2,223,000
Change in derivative fair value		(1,487,000	)		3,312,000
Interest expense		(10,147,000	)		(2,377,000	)
Interest income		9,000			—
Income (loss) before income taxes		(4,863,000	)		3,158,000
Deferred income tax (expense)		—			(1,263,000	)
Net income (loss) before cumulative effect of accounting change		(4,863,000	)		1,895,000
Cumulative effect of accounting change, net of income tax of $19,000		—			(28,000	)
Net loss		(4,863,000	)		1,867,000
Preferred stock dividends		(6,000	)		(6,000	)
Net loss available to common shareholders	$	(4,869,000	)	$	1,861,000
Loss per common share — basic:
Loss before cumulative effect of accounting change	$	(0.86	)	$	0.34
Cumulative effect of accounting change		—			(0.01	)
	$	(0.86	)	$	0.33
Loss per common share — diluted:
Loss before cumulative effect of accounting change	$	(0.86	)	$	0.30
Cumulative effect of accounting change		—			—
	$	(0.86	)	$	0.30
Weighted average common and common equivalent shares outstanding:
Basic		5,661,352			5,568,730
Diluted		5,661,352			6,229,315

F-39

The following analysis of cash flows compares the audited seven months ended December 31, 2004 to the seven months ended December 31, 2003.

	Seven Months Ended December 31,
	2004			2003
				(Unaudited)
Cash flows from operating activities:
Net income (loss)	$	(4,863,000	)	$	1,895,000
Adjustments to reconcile net income (loss) to cash provided by operations:
Depreciation & depletion		8,033,000			2,235,000
Accrued interest subordinated notes		4,866,000			210,000
Change in derivative fair value		1,487,000			(3,312,000	)
Cumulative effect of accounting change		—			47,000
Deferred income taxes		—			1,263,000
Accretion of line of credit		—			1,204,000
Stock issued for services		—			62,000
Stock issued for director fees		62,000			—
Amortization of loan origination fees		530,000			172,000
Other		191,000			—
Change in assets and liabilities:
Accounts receivable		893,000			(2,397,000	)
Other receivables		85,000			—
Other current assets		16,000			—
Inventory		208,000			130,000
Accounts payable		13,628,000			1,201,000
Revenue payable		222,000			836,000
Accrued expenses		126,000			—
Net cash provided by operating activities		25,484,000			3,546,000
Cash flows from investing activities:
Acquisition of proved gas & oil properties-Devon		—			(111,220,000	)
Acquisition of gas gathering pipelines-Devon		—			(21,864,000	)
Equipment, development & leasehold costs		(48,287,000	)		(6,425,000	)
Other assets		(527,000	)		(188,000	)
Net cash used in investing activities		(48,814,000	)		(139,697,000	)
Cash flows from investing activities:
Long-term debt		136,118,000			89,450,000
Repayments of note borrowings		(104,732,000	)		(19,500,000	)
Proceeds from subordinated debt		—			51,000,000
Refinancing costs-UBS		(4,942,000	)		—
Accounts payable-Devon holdback		—			12,417,000
Dividends paid		(6,000	)		(5,000	)
Proceeds from the issuance of common stock		480,000			500,000
Change in other long-term liabilities		(638,000	)		—
Net cash provided by financing activities		26,280,000			133,862,000
Net increase in cash		2,950,000			(2,289,000	)
Cash, beginning of period		3,508,000			2,689,000
Cash, end of period	$	6,458,000		$	400,000

F-40

18.   Quarterly Financial Data (unaudited)

Summarized unaudited quarterly financial data for 2006, 2005 and 2004 are as follows:

	Quarters Ended
	December 31,			September 30,			June 30,			March 31,
	2006			2006			2006			2006
Total revenues	$	17,710,000		$	16,705,000		$	13,716,000		$	12,120,000
Gross profit (loss)(1)(2)		(33,696,000	)		(2,785,000	)		(3,209,000	)		(2,098,000	)
Net income (loss)(3)		(41,342,000	)		(10,073,000	)		(5,780,000	)		8,717,000
Net income (loss) per common share:
Basic	$	(1.87	)	$	(0.46	)	$	(0.26	)	$	0.39
Diluted	$	(1.87	)	$	(0.46	)	$	(0.26	)	$	0.39

	Quarters Ended
	December 31,			September 30,			June 30,			March 31,
	2005			2005			2005			2005
Total revenues	$	10,333,000		$	13,506,000		$	13,003,000		$	12,051,000
Gross profit(1)(2)		(9,787,000	)		2,040,000			3,134,000			3,647,000
Net loss(3)		(24,683,000	)		(4,253,000	)		(1,907,000	)		(1,098,000	)
Net loss per common share:
Basic	$	(1.67	)	$	(0.64	)	$	(0.30	)	$	(0.19	)
Diluted	$	(1.67	)	$	(0.64	)	$	(0.30	)	$	(0.19	)

	Quarters Ended
	December 31,			September 30,			June 30,		March 31,
	2004			2004			2004		2004
Total revenues	$	11,924,000		$	11,520,000		$	11,339,000	$	11,548,000
Gross profit(1)		2,283,000			3,367,000			3,447,000		3,647,000
Net income (loss)(4)		(4,791,000	)		(191,000	)		683,000		(5,646,000	)
Net earnings (loss) per common share:
Basic	$	(0.84	)	$	(0.03	)	$	0.12	$	(1.01	)
Diluted	$	(0.84	)	$	(0.03	)	$	0.09	$	(1.01	)

(1)	Total revenue less operating costs.
(2)	The decrease in gross profit in the fourth quarter of December 2005 is the result of an increase in depletion expense and the decrease in gross profit in the fourth quarter of December 2006 is the result of the $30.6 million impairment recorded due to a write down of our gas properties resulting from the ceiling test.
(3)	The decrease in net income in the third quarter is primarily attributable to change in derivative fair value. The decrease in net income in the fourth quarter is attributable to change in derivative fair value and an increase in depletion expense.
(4)	The decrease in net income in the first and fourth quarters is primarily attributable to change in derivative fair value.

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19.   Recent Accounting Pronouncements

The Financial Accounting Standards Board recently issued the following standards which the Company reviewed to determine the potential impact on our financial statements upon adoption.

In December 2004, the Financial Accounting Standards Board (FASB) issued SFAS No. 123(R), Share-Based Payment, which revised SFAS 123, Accounting for Stock-Based Compensation. This statement establishes standards for the accounting for transactions in which an entity exchanges its equity instruments for goods or services. SFAS 123(R) requires a public entity to measure the cost of employee services received in exchange for an award of equity instruments based on the grant-date fair value of the award. This statement is effective as of the beginning of the first annual reporting period that begins after June 15, 2005. Since the issuance of SFAS 123(R), three FASB Staff Positions (FSPs) have been issued regarding SFAS 123(R): FSP FAS 123(R)-1 — Classification and Measurement of Freestanding Financial Instruments Originally Issued in Exchange for Employee Services under FASB Statement No. 123(R), FSP FAS 123(R)-2 — Practical Accommodation to the Application of Grant Date as Defined in FASB Statement No. 123(R), and FSP FAS 123(R)-3 — Transition Election Related to Accounting for the Tax Effects of Share-Based Payment Awards. These FSPs will be applicable upon the initial adoption of FAS 123(R). The effect of SFAS 123(R) is more fully described in Note 1.

In March 2005, the FASB issued FASB Interpretation No. (FIN) 47, Accounting for Conditional Asset Retirement Obligations. FIN 47 specifies the accounting treatment for conditional asset retirement obligations under the provisions of SFAS 143. FIN 47 is effective no later than the end of the fiscal year ending after December 15, 2005. The Company adopted this statement effective December 31, 2005. Implementation of FIN 47 did not have a material effect on our financial statements.

In May 2005, the FASB issued SFAS No. 154, Accounting Changes and Error Corrections, a replacement of APB Opinion No. 20 and FASB Statement No. 3. SFAS 154 requires retrospective application to prior period financial statements for changes in accounting principle, unless it is impracticable to determine either the period-specific effects or the cumulative effect of the change. SFAS 154 also requires that retrospective application of a change in accounting principle be limited to the direct effects of the change. Indirect effects of a change in accounting principle should be recognized in the period of the accounting change. SFAS 154 is effective for accounting changes made in fiscal years beginning after December 15, 2005. The impact of SFAS 154 will depend on the nature and extent of any voluntary accounting changes and correction of errors after the effective date, but the Company does not currently expect SFAS 154 to have a material impact on our financial statements.

In June 2005, the EITF reached a consensus on Issue No. 04-10, Determining Whether to Aggregate Operating Segments That Do Not Meet the Quantitative Thresholds. EITF Issue 04-10 confirmed that operating segments that do not meet the quantitative thresholds can be aggregated only if aggregation is consistent with the objective and basic principles of SFAS 131, Disclosure about Segments of an Enterprise and Related Information. The consensus in this issue should be applied for fiscal years ending after September 30, 2005, and the corresponding information for earlier periods, including interim periods, should be restated unless it is impractical to do so. The adoption of EITF Issue 04-10 is not expected to have a material impact on our disclosures.

In September 2005, the Emerging Issues Task Force (EITF) reached a consensus on Issue No. 04-13, Accounting for Purchases and Sales of Inventory with the Same Counterparty. EITF Issue 04-13 requires that purchases and sales of inventory with the same counterparty in the same line of business should be accounted for as a single non-monetary exchange, if entered into in contemplation of one another. The consensus is effective for inventory arrangements entered into, modified or renewed in interim or annual reporting periods beginning after March 15, 2006. The adoption of EITF Issue 04-13 is not expected to have a material impact on our financial statements.

In February 2006, the FASB issued Statement No. 155, “Accounting for Certain Hybrid Financial Instruments” (“SFAS No. 155”), which amends FASB Statements No. 133 and 140. SFAS No. 155 permits fair value remeasurement for any hybrid financial instrument containing an embedded derivative that would otherwise require

F-42

bifurcation, and broadens a Qualified Special Purpose Entity’s permitted holdings to include passive derivative financial instruments that pertain to other derivative financial instruments. SFAS No. 155 is effective for all financial instruments acquired, issued or subject to a remeasurement event occurring after the beginning of an entity’s first fiscal year beginning after September 15, 2006. SFAS No. 155 has no current applicability to the Company’s financial statements. Management plans to adopt SFAS No. 155 on January 1, 2007 and it is anticipated that the initial adoption of this statement will not have a material impact on the Company’s financial position, results of operations, or cash flows.

In June 2006, the FASB issued Interpretation 48, “Accounting for Uncertainty in Income Taxes” (“FIN 48”), an interpretation of FASB Statement No. 109, “Accounting for Income Taxes.” FIN 48 clarifies the accounting and reporting for income taxes where interpretation of the law is uncertain. FIN 48 prescribes a comprehensive model for the financial statement recognition, measurement, presentation and disclosure of income tax uncertainties with respect to positions taken or expected to be taken in income tax returns. FIN 48 is effective for fiscal years beginning after December 15, 2006 and has no current applicability to the Company’s financial statements. Management plans to adopt FIN 48 on January 1, 2007 and it is anticipated that the initial adoption of FIN 48 will not have a material impact on the Company’s financial position, results of operations, or cash flows.

In September 2006, the FASB issued Statement No. 157, “Fair Value Measurements” (“SFAS No. 157”). SFAS No. 157 addresses how companies should measure fair value when they are required to use a fair value measure for recognition or disclosure purposes under GAAP. SFAS No. 157 defines fair value, establishes a framework for measuring fair value and expands the required disclosures about fair value measurements. SFAS No. 157 is effective for fiscal years beginning after November 15, 2007, with earlier adoption permitted. Management is assessing the impact of the adoption of SFAS No. 157.

In September 2006, the FASB issued Statement No. 158, “Employers’ Accounting for Defined Benefit Pension and Other Postretirement Plans” (“SFAS No. 158”), an amendment of FASB Statements No. 87, 88, 106 and 132(R). SFAS No. 158 requires (a) recognition of the funded status (measured as the difference between the fair value of the plan assets and the benefit obligation) of a benefit plan as an asset or liability in the employer’s statement of financial position, (b) measurement of the funded status as of the employer’s fiscal year-end with limited exceptions, and (c) recognition of changes in the funded status in the year in which the changes occur through comprehensive income. The requirement to recognize the funded status of a benefit plan and the disclosure requirements are effective as of the end of the fiscal year ending after December 15, 2006. The requirement to measure the plan assets and benefit obligations as of the date of the employer’s fiscal year-end statement of financial position is effective for fiscal years ending after December 15, 2008. SFAS No. 158 has no current applicability to the Company’s financial statements. Management plans to adopt SFAS No. 158 on December 31, 2006 and it is anticipated the adoption of SFAS No. 158 will not have a material impact to the Company’s financial position, results of operations, or cash flows.

In September 2006, the Securities Exchange Commission issued Staff Accounting Bulletin No. 108 (“SAB No. 108”). SAB No. 108 addresses how the effects of prior year uncorrected misstatements should be considered when quantifying misstatements in current year financial statements. SAB No. 108 requires companies to quantify misstatements using a balance sheet and income statement approach and to evaluate whether either approach results in quantifying an error that is material in light of relevant quantitative and qualitative factors. When the effect of initial adoption is material, companies will record the effect as a cumulative effect adjustment to beginning of year retained earnings and disclose the nature and amount of each individual error being corrected in the cumulative adjustment. SAB No. 108 will be effective beginning January 1, 2007 and it is anticipated that the initial adoption of SAB No. 108 will not have a material impact on the Company’s financial position, results of operations, or cash flows.

In February 2007, the FASB issued Statement No. 159, “The Fair Value Option for Financial Assets and Financial Liabilities” (“SFAS No. 159”), an amendment of FASB Statement No. 115. SFAS No. 159 addresses how companies should measure many financial instruments and certain other items at fair value. The objective is to

F-43

mitigate volatility in reported earnings caused by measuring related assets and liabilities differently without having to apply complex hedge accounting provisions. SFAS No. 159 is effective for fiscal years beginning after November 15, 2007, with earlier adoption permitted. Management is assessing the impact of the adoption of SFAS No. 159.

20.   Subsequent Events

On January 31, 2007, our majority-owned subsidiary, Quest Midstream Partners, and its wholly-owned subsidiary, Bluestem, entered into a new credit agreement consisting of a five-year $75 million revolving credit facility. The Credit Agreement is among Bluestem, as the borrower, Quest Midstream, as a guarantor, Royal Bank of Canada, as administrative agent and collateral agent, and the lenders party thereto. Upon closing of this credit facility, $5 million was drawn as the initial borrowing. Further information regarding this transaction is disclosed above in Note 1.

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ITEM 9.   CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE.

None.

ITEM 9A.   CONTROLS AND PROCEDURES

Conclusion Regarding the Effectiveness of Disclosure Controls and Procedures

Under the supervision and with the participation of our management, including our Chief Executive Officer (our principal executive officer) and our Chief Financial Officer (our principal financial officer), we evaluated the effectiveness of our disclosure controls and procedures (as defined under Rule 13a-15(e) and 15d-15(e) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”)). Based on this evaluation, our Chief Executive Officer and our Chief Financial Officer believe that the disclosure controls and procedures as of December 31, 2006 were effective to ensure that information we are required to disclose in the reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms and are effective to ensure that information required to be disclosed by us is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure.     .

Management’s Annual Report on Internal Control Over Financial Reporting

Our management is responsible for establishing and maintaining adequate internal control over financial reporting. Internal control over financial reporting is a process designed by, or under the supervision of, the Company’s principal executive and principal financial officers and implemented by the Company’s Board of Directors, management and other personnel, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles and includes those policies and procedures that: (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the Company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the Company are being made only in accordance with authorizations of management and directors of the Company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the Company’s assets that could have a material effect on the financial statements. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

Under the supervision and with the participation of our management, including our principal executive officer and principal financial officer, we conducted an evaluation of the effectiveness of our internal control over financial reporting based on the framework in Internal Control — Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission. Based on our evaluation, our management concluded that our internal control over financial reporting was effective as of December 31, 2006.

Our management’s assessment of the effectiveness of our internal control over financial reporting as of December 31, 2006 has been audited by Murrell, Hall, McIntosh & Co., PLLP, an independent registered public accounting firm, as stated in their report which is included herein.

Changes in Internal Controls

There were no changes in our internal control over financial reporting during the quarter ended December 31, 2006 that materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

ITEM 9B.   OTHER INFORMATION.

None.

53

PART III

ITEM 10.   DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE.

The information required by this Item is incorporated herein by reference from our definitive Proxy Statement for our 2007 Annual Meeting of Stockholders to be filed with the SEC pursuant to Regulation 14A within 120 days after the end of our year ended December 31, 2006.

ITEM 11.   EXECUTIVE COMPENSATION.

The information required by this Item is incorporated herein by reference from our definitive Proxy Statement for our 2007 Annual Meeting of Stockholders to be filed with the SEC pursuant to Regulation 14A within 120 days after the end of our year ended December 31, 2006.

ITEM 12.   SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS.

The information required by this Item is incorporated herein by reference from our definitive Proxy Statement for our 2007 Annual Meeting of Stockholders to be filed with the SEC pursuant to Regulation 14A within 120 days after the end of our year ended December 31, 2006.

ITEM 13.   CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE.

The information required by this Item is incorporated herein by reference from our definitive Proxy Statement for our 2007 Annual Meeting of Stockholders to be filed with the SEC pursuant to Regulation 14A within 120 days after the end of our year ended December 31, 2006.

ITEM 14.   PRINCIPAL ACCOUNTING FEES AND SERVICES.

The information required by this Item is incorporated herein by reference from our definitive Proxy Statement for our 2007 Annual Meeting of Stockholders to be filed with the SEC pursuant to Regulation 14A within 120 days after the end of our year ended December 31, 2006.

PART IV

ITEM 15.   EXHIBITS, FINANCIAL STATEMENT SCHEDULES.

(a)(1) and (2) Financial Statements and Financial Statement Schedules.  See “Index to Financial Statements” set forth on page 52 of this Form 10-K.

(a)(3) Index to Exhibits.  Exhibits requiring attachment pursuant to Item 601 of Regulation S-K are listed in the Index to Exhibits beginning on page 56 of this Form 10-K that is incorporated herein by reference.

54

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this annual report on Form 10-K to be signed on its behalf by the undersigned, thereunto duly authorized this 16th day of March, 2007.

Quest Resource Corporation

/s/  Jerry D. Cash

Jerry D. Cash

Chief Executive Officer

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.

Signature	Title	Date
/s/  Jerry D. Cash Jerry D. Cash	Director and Chief Executive Officer (principal executive officer)	March 16, 2007
/s/  Jon H. Rateau Jon H. Rateau	Director	March 16, 2007
/s/  John C. Garrison John C. Garrison	Director	March 16, 2007
/s/  James B. Kite, Jr. James B. Kite, Jr.	Director	March 16, 2007
/s/  David E. Grose David E. Grose	Principal Financial and Accounting Officer	March 16, 2007

55

INDEX TO EXHIBITS

Exhibit No.			Description
	2	.1*	Contribution, Conveyance and Assumption Agreement by and among Quest Midstream Partners, L.P., Quest Midstream GP, LLC, Quest Resource Corporation, Quest Cherokee, LLC, Bluestem Pipeline, LLC and the other subsidiaries of Quest Resource Corporation designated therein entered into on December 22, 2006, but effective as of December 1, 2006 (incorporated herein by reference to Exhibit 10.5 to the Company’s Current Report on Form 8-K filed on December 29, 2006).
	3	.1*	The Company’s Restated Articles of Incorporation (incorporated herein by reference to Exhibit 3.1 to the Company’s Registration Statement on Form 8-A12G/A (Amendment No. 2) filed on December 7, 2005).
	3	.2*	Certificate of Designations for Series B Junior Participating Preferred Stock (incorporated herein by reference to Exhibit 3.1 to the Company’s Current Report on Form 8-K filed on June 1, 2006).
	3	.3*	Amendment to the Company’s Restated Articles of Incorporation (incorporated herein by reference to Exhibit 3.1 to the Company’s Current Report on Form 8-K filed on June 6, 2006).
	3	.4*	The Second Amended and Restated Bylaws of the Company (incorporated herein by reference to Exhibit 3.1 to the Company’s Current Report on Form 8-K filed on October 18, 2005).
	4	.1*	Specimen of certificate for shares of Common Stock (incorporated herein by reference to Exhibit 4.1 to the Company’s Registration Statement on Form 8-A12G/A (Amendment No. 2) filed on December 7, 2005).
	4	.2*	Rights Agreement dated as of May 31, 2006, between Quest Resource Corporation and UMB Bank, n.a., which includes as Exhibit A, the Certificate of Designations Preferences and Rights of Series B Preferred Stock, as Exhibit B, the Form of Rights Certificate, and as Exhibit C, the Summary of Rights to Purchase Preferred Stock (incorporated herein by reference to Exhibit 4.1 to the Company’s Current Report on Form 8-K filed on June 1, 2006).
	4	.3*	Amended and Restated Senior Credit Agreement by and among Quest Resource Corporation, Quest Cherokee, LLC, Guggenheim Corporate Funding, LLC, and the Lenders party thereto, dated as of the 7th day of February, 2006 (incorporated herein by reference to Exhibit 4.2 to the Company’s Annual Report on 10-K filed on March 31, 2006).
	4	.4*	Amendment No. 1 to Amended and Restated Senior Credit Agreement by and among Quest Resource Corporation, Quest Cherokee, LLC, Guggenheim Corporate Funding, LLC, and the Lenders party thereto, dated as of the 9th day of June, 2006 (incorporated herein by reference to Exhibit 4.1 to the Company’s Current Report on Form 8-K filed on June 14, 2006).
	4	.5*	Waiver and Amendment No. 2 dated as of December 22, 2006 by and among Quest Cherokee, LLC and Quest Resource Corporation, as borrowers, the financial institutions from time to time parties thereto and Guggenheim Corporate Funding, LLC, as administrative agent under that certain Amended and Restated Senior Credit Agreement dated as of February 7, 2006 by and among Quest Cherokee, LLC and Quest Resource Corporation, the financial institutions from time to time parties thereto and Guggenheim Corporate Funding, LLC, as administrative agent (incorporated herein by reference to Exhibit 10.9 to the Company’s Current Report on Form 8-K filed on December 29, 2006).
	4	.6*	Second Amended and Restated Security Agreement dated as of December 22, 2006 made by Quest Cherokee, LLC and Quest Resource Corporation and the Guarantors listed on the signature pages thereto or from time to time party thereto by execution of a Joinder Agreement in favor of Guggenheim Corporate Funding, LLC, in its capacity as Administrative Agent for the benefit of the Secured Parties under the Senior Credit Agreement (incorporated herein by reference to Exhibit 10.12 to the Company’s Current Report on Form 8-K filed on December 29, 2006).
	4	.7*	Amended and Restated Guaranty dated as of December 22, 2006, by each of J-W Gas Gathering, L.L.C., Ponderosa Gas Pipeline Company, LLC, Producers Service, LLC, Quest Cherokee Oilfield Service, LLC, Quest Energy Service, LLC, Quest Oil & Gas, LLC, and STP Cherokee, LLC, in favor of Guggenheim Corporate Funding, LLC, as administrative agent for the benefit of the secured parties under the Amended and Restated Security Agreement for the Senior Credit Agreement (incorporated herein by reference to Exhibit 10.15 to the Company’s Current Report on Form 8-K filed on December 29, 2006).

56

Exhibit No.			Description
	4	.8*	Second Amended and Restated Intercreditor Agreement by and among Quest Resource Corporation, Quest Cherokee, LLC, STP Cherokee, Inc., Quest Oil & Gas Corporation, Quest Energy Service, Inc., Ponderosa Gas Pipeline Company, Inc., Producers Service Incorporated, J-W Gas Gathering, L.L.C., Bluestem Pipeline, LLC, Quest Cherokee Oilfield Service, LLC, and Guggenheim Corporate Funding, LLC, dated as of the 9th day of June, 2006 (incorporated herein by reference to Exhibit 4.8 to the Company’s Current Report on Form 8-K filed on June 14, 2006).
	4	.9*	Mortgage, Deed of Trust, Security Agreement, Financing Statement and Assignment of Production by Quest Cherokee, LLC, to Guggenheim Corporate Funding, LLC, dated November 14, 2005 (incorporated herein by reference to Exhibit 4.9 to the Company’s Registration Statement on Form S-1 filed on December 12, 2005).
	4	.10	First Amendment to Mortgage, Deed of Trust, Security Agreement, Financing Statement and Assignment of Production by Quest Cherokee, LLC to Guggenheim Corporate Funding, LLC, dated July 31, 2006.
	4	.11*	Amended and Restated Second Lien Term Loan Agreement by and among Quest Cherokee, LLC, Quest Resource Corporation, Guggenheim Corporate Funding, LLC, and the Lenders party thereto, dated as of the 9th day of June, 2006 (incorporated herein by reference to Exhibit 4.2 to the Company’s Current Report on Form 8-K filed on June 14, 2006).
	4	.12*	Waiver and Amendment No. 1 dated as of December 22, 2006 by and among Quest Cherokee, LLC and Quest Resource Corporation, as borrowers, the financial institutions from time to time parties thereto and Guggenheim Corporate Funding, LLC, as administrative agent under that certain Amended and Restated Second Lien Term Loan Agreement dated as of June 9, 2006 by and among Quest Cherokee, LLC and Quest Resource Corporation, the financial institutions from time to time parties thereto and Guggenheim Corporate Funding, LLC, as administrative agent (incorporated herein by reference to Exhibit 10.10 to the Company’s Current Report on Form 8-K filed on December 29, 2006).
	4	.13*	Second Amended and Restated Security Agreement dated as of December 22, 2006 made by Quest Cherokee, LLC and Quest Resource Corporation and the Guarantors listed on the signature pages thereto or from time to time party thereto by execution of a Joinder Agreement in favor of Guggenheim Corporate Funding, LLC, in its capacity as Administrative Agent for the benefit of the Secured Parties under the Second Lien Term Loan (incorporated herein by reference to Exhibit 10.13 to the Company’s Current Report on Form 8-K filed on December 29, 2006).
	4	.14*	Amended and Restated Guaranty dated as of December 22, 2006, by each of J-W Gas Gathering, L.L.C., Ponderosa Gas Pipeline Company, LLC, Producers Service, LLC, Quest Cherokee Oilfield Service, LLC, Quest Energy Service, LLC, Quest Oil & Gas, LLC, and STP Cherokee, LLC, in favor of Guggenheim Corporate Funding, LLC, as administrative agent for the benefit of the secured parties under the Second Amended and Restated Security Agreement for the Second Lien Term Loan (incorporated herein by reference to Exhibit 10.16 to the Company’s Current Report on Form 8-K filed on December 29, 2006).
	4	.15*	Third Lien Term Loan Agreement by and among Quest Cherokee, LLC, Quest Resource Corporation, Guggenheim Corporate Funding, and the Lenders party thereto, dated as of the 9th day of June, 2006 (incorporated herein by reference to Exhibit 4.5 to the Company’s Current Report on Form 8-K filed on June 14, 2006).
	4	.16*	Waiver and Amendment No. 1 dated as of December 22, 2006 by and among Quest Cherokee, LLC and Quest Resource Corporation, as borrowers, the financial institutions from time to time parties thereto and Guggenheim Corporate Funding, LLC, as administrative agent under that certain Third Lien Term Loan Agreement dated as of June 9, 2006, by and among Quest Cherokee, LLC and Quest Resource Corporation, the financial institutions from time to time parties thereto and Guggenheim Corporate Funding, LLC, as administrative agent (incorporated herein by reference to Exhibit 10.11 to the Company’s Current Report on Form 8-K filed on December 29, 2006).
	4	.17*	Amended and Restated Security Agreement dated as of December 22, 2006 made by Quest Cherokee, LLC and Quest Resource Corporation and the Guarantors listed on the signature pages thereto or from time to time party thereto by execution of a Joinder Agreement in favor of Guggenheim Corporate Funding, LLC, in its capacity as Administrative Agent for the benefit of the Secured Parties for the Third Lien Term Loan (incorporated herein by reference to Exhibit 10.14 to the Company’s Current Report on Form 8-K filed on December 29, 2006).

57

Exhibit No.			Description
	4	.18*	Amended and Restated Guaranty dated as of December 22, 2006, by each of J-W Gas Gathering, L.L.C., Ponderosa Gas Pipeline Company, LLC, Producers Service, LLC, Quest Cherokee Oilfield Service, LLC, Quest Energy Service, LLC, Quest Oil & Gas, LLC, and STP Cherokee, LLC, in favor of Guggenheim Corporate Funding, LLC, as administrative agent for the benefit of the secured parties under the Amended and Restated Security Agreement for the Third Lien Term Loan (incorporated herein by reference to Exhibit 10.17 to the Company’s Current Report on Form 8-K filed on December 29, 2006).
	4	.19	Credit Agreement dated as of January 31, 2007, by and among Bluestem Pipeline, LLC, Quest Midstream Partners, L.P., Royal Bank of Canada, and the Lenders party thereto.
	4	.20	Guaranty for Credit Agreement by Quest Midstream Partners, L.P. in favor of Royal Bank of Canada, dated as of January 31, 2007.
	4	.21	Pledge and Security Agreement for Credit Agreement by Quest Midstream Partners, L.P. for the benefit of Royal Bank of Canada, dated as of January 31, 2007.
	4	.22	Pledge and Security Agreement for Credit Agreement by Bluestem Pipeline, LLC for the benefit of Royal Bank of Canada, dated as of January 31, 2007.
	4	.23	Mortgage, Assignment, Security Agreement, Fixture Filing and Financing Statement (KS) by Bluestem Pipeline, LLC to Royal Bank of Canada, dated January 31, 2007.
	4	.24	Mortgage, Assignment, Security Agreement, Fixture Filing and Financing Statement (OK) by Bluestem Pipeline, LLC to Royal Bank of Canada, dated January 31, 2007.
	10	.1*	Employment Agreement dated as of October 17, 2005 between the Company and Jerry D. Cash (incorporated herein by reference to Exhibit 10.1 to the Company’s Registration Statement on Form S-1 filed on December 12, 2005).
	10	.2*	Employment Agreement dated as of October 17, 2005 between the Company and David Grose (incorporated herein by reference to Exhibit 10.2 to the Company’s Registration Statement on Form S-1 filed on December 12, 2005).
	10	.3*	Non-Competition Agreement by and between Quest Resource Corporation, Quest Cherokee, LLC, Cherokee Energy Partners LLC, Quest Oil & Gas Corporation, Quest Energy Service, Inc., STP Cherokee, Inc., Ponderosa Gas Pipeline Company, Inc., Producers Service Incorporated and J-W Gas Gathering, L.L.C., dated as of the 22nd day of December, 2003 (incorporated herein by reference to Exhibit 10.6 to the Company’s Current Report on Form 8-K filed on January 6, 2004).
	10	.4*	Interest Rate Cap Transaction Agreements between Quest Cherokee, LLC and UBS AG London Branch dated September 21, 2004 (incorporated herein by reference to Exhibit 10.4 to the Company’s Quarterly Report on Form 10-QSB filed on February 24, 2005).
	10	.5*	Summary of director compensation arrangements (incorporated herein by reference to Exhibit 10.5 to the Company’s Registration Statement on Form S-1 filed on December 12, 2005).
	10	.6*	Management Annual Incentive Plan (incorporated herein by reference to Appendix B to the Company’s Proxy Statement filed May 3, 2006).
	10	.7*	Company’s 2005 Omnibus Stock Award Plan (incorporated herein by reference to Exhibit 10.7 to the Company’s Registration Statement on Form S-1 filed on December 12, 2005).
	10	.8*	Form of the Company’s 2005 Omnibus Stock Award Plan Nonqualified Stock Option Agreement (incorporated herein by reference to Exhibit 10.8 to the Company’s Registration Statement on Form S-1 filed on December 12, 2005).
	10	.9*	Form of the Company’s 2005 Omnibus Stock Award Plan Bonus Shares Award Agreement (incorporated herein by reference to Exhibit 10.9 to the Company’s Registration Statement on Form S-1 filed on December 12, 2005).
	10	.10*	Form of Indemnification Agreement with Directors and Executive Officers (incorporated herein by reference to Exhibit 10.11 to the Company’s Annual Report on Form 10-K filed on March 31, 2006).

58

Exhibit No.			Description
	10	.11*	Purchase Agreement dated as of December 22, 2006, by and among Quest Midstream Partners, L.P., Quest Midstream GP, LLC, Quest Resource Corporation, Alerian Opportunity Partners IV, LP, Swank MLP Convergence Fund, LP, Swank Investment Partners, LP, The Cushing MLP Opportunity Fund I, LP, The Cushing GP Strategies Fund, LP, Tortoise Capital Resources Corporation, Huizenga Opportunity Partners, LP and HCM Energy Holdings, LLC (incorporated herein by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed on December 29, 2006).
	10	.12*	Investors’ Rights Agreement dated as of December 22, 2006, by and among Quest Midstream Partners, L.P., Quest Midstream GP, LLC, Quest Resource Corporation, Alerian Opportunity Partners IV, LP, Swank MLP Convergence Fund, LP, Swank Investment Partners, LP, The Cushing MLP Opportunity Fund I, LP, The Cushing GP Strategies Fund, LP, Tortoise Capital Resources Corporation, Huizenga Opportunity Partners, LP and HCM Energy Holdings, LLC (incorporated herein by reference to Exhibit 10.2 to the Company’s Current Report on Form 8-K filed on December 29, 2006).
	10	.13*	Omnibus Agreement dated as of December 22, 2006, by and among Quest Resource Corporation, Quest Midstream GP, LLC, Bluestem Pipeline, LLC and Quest Midstream Partners, L.P. (incorporated herein by reference to Exhibit 10.3 to the Company’s Current Report on Form 8-K filed on December 29, 2006).
	10	.14*	Registration Rights Agreement dated as of December 22, 2006, by and among Quest Midstream Partners, L.P., Alerian Opportunity Partners IV, LP, Swank MLP Convergence Fund, LP, Swank Investment Partners, LP, The Cushing MLP Opportunity Fund I, LP, The Cushing GP Strategies Fund, LP, Tortoise Capital Resources Corporation, Huizenga Opportunity Partners, LP and HCM Energy Holdings, LLC (incorporated herein by reference to Exhibit 10.4 to the Company’s Current Report on Form 8-K filed on December 29, 2006).
	10	.15*	Midstream Services and Gas Dedication Agreement between Bluestem Pipeline, LLC and Quest Resource Corporation entered into on December 22, 2006, but effective as of December 1, 2006 (incorporated herein by reference to Exhibit 10.6 to the Company’s Current Report on Form 8-K filed on December 29, 2006).
	10	.16*	First Amended and Restated Agreement of Limited Partnership of Quest Midstream Partners, L.P. (incorporated herein by reference to Exhibit 10.7 to the Company’s Current Report on Form 8-K filed on December 29, 2006).
	10	.17*	Amended and Restated Limited Liability Company Agreement of Quest Midstream GP, LLC (incorporated herein by reference to Exhibit 10.8 to the Company’s Current Report on Form 8-K filed on December 29, 2006).
	12	.1	Statement regarding computation of ratios.
	21	.1	List of subsidiaries.
	23	.1	Consent of Cawley and Gillespie & Associates, Inc.
	23	.2	Consent of Murrell, Hall, McIntosh & Co., PLLP.
	31	.1	Certification by Chief Executive Officer pursuant to Rule 13a-14(a) or 15d-14(a) of the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
	31	.2	Certification by Chief Financial Officer pursuant to Rule 13a-14(a) or 15d-14(a) of the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
	32	.1	Certification by Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
	32	.2	Certification by Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

* Incorporated by reference.

59

EX-4.10

Exhibit 4.10

Comments to Exhibits

STATE OF KANSAS   }
Chautauqua County       }      Fee: $160.00

This instrument was filed for record this 10 day of August  , 2006 at 2:20 o’clock PM and duly recorded
in book 132 of records on page 715

Amount of Indebtedness :$ See Affidavit

Registration Tax: $ See Affidavit
Number: 7593

Laura C. Beeson REGISTER OF DEEDS

First Amendment to
Mortgage, Deed of Trust, Security Agreement,
Financing Statement and Assignment of Production

     This FIRST AMENDMENT TO MORTGAGE, DEED OF TRUST, SECURITY AGREEMENT, FINANCING STATEMENT AND ASSIGNMENT OF PRODUCTION (hereinafter called the “Amendment”) is dated effective as of July 31, 2006, from QUEST CHEROKEE, LLC, a Delaware limited liability company (“Mortgagor”), whose mailing address is 9520 North May. Suite 300, Oklahoma City, Oklahoma 73120 to GUGGENHEIM CORPORATE FUNDING, LLC, as Collateral Agent (as defined in the Mortgage) for Secured Parties (as defined in the Mortgage) (“Mortgagee”) whose address is 135 East 57^th Street, 23^rd Floor, New York, New York, 10022.

W I T N E S S E T H

RECITALS

     A. Mortgagor has heretofore executed in favor of Mortgagee a certain Mortgage, Deed of Trust, Security Agreement, Financing Statement and Assignment of Production (as amended from time to time, the “Mortgage”), dated and recorded as set forth on Schedule I attached hereto and made a part hereof for all purposes, and covering the Mortgaged Properties described on Exhibit A attached hereto and made a part hereof for all purposes. Capitalized terms used herein but not otherwise defined shall have the respective meanings set forth in the Mortgage; and

     B. The Mortgage was executed and delivered to secure the payment and performance of certain indebtedness and other obligations of Mortgagor, as more fully described in the Mortgage pursuant to the terms and conditions of that certain Senior Revolving Credit Agreement dated as of November 14, 2005, by and among Mortgagor and Quest Resource Corporation, collectively as borrower, the Senior Lenders, and Mortgagee, as Administrative Agent for the Senior Lenders (as such may be amended, modified or restated from time to time, the “Senior Revolving Credit Agreement”) and that certain Second Lien Term Loan Agreement, dated as of November 14, 2005, by and among Mortgagor and Quest Resource Corporation, collectively as borrower, the Subordinate Lenders, and Mortgagee, as Administrative Agent for the Subordinate Lenders (as such may be amended, modified or restated from time to time, the “Second Lien Term Loan Agreement,” the Senior Revolving Credit Agreement and Second Lien Term Loan Agreement are herein referred to as the “Original Credit Agreement”); and

     C. Mortgagor and Quest Resource Corporation, collectively as borrower, the lenders from time to time party thereto (the “Third Lien Lenders”), and Mortgagee, as Administrative Agent for the Third Lien Lenders have entered into that certain Third Lien Term Loan Agreement (as such may be amended, modified or restated from time to time, the “Third Lien Term Loan Agreement”, and, together

1

with the Original Credit Agreement, the “Credit Agreement”), dated as of June 9, 2006, whereby the Third Lien Lenders have advanced an additional Seventy Five Million Dollars ($75,000,000) to Mortgagor and pursuant to which Mortgagee has required that Mortgagor amend the Mortgage as herein provided.

     D. Mortgagor desires to mortgage, grant, and convey unto Mortgagee as additional security those interests in oil and gas leaseholds described in Exhibit B hereto, which is incorporated by reference herein, and the parties desire that the Mortgage be amended to reflect the addition of such properties.

     THEREFORE, in order to comply with the terms and conditions of the Credit Agreement and for other good and sufficient consideration received, Mortgagor does hereby modify, amend, and ratify the Mortgage as set forth herein:

ARTICLE I
AMENDMENT

     1.1 The definition of “Credit Agreement” in Section 1.1 of the Mortgage is hereby deleted in its entirety and replaced with the following:

     “Credit Agreement” means collectively (i) that certain Senior Revolving Credit Agreement, dated as of November 14, 2005 (as amended, modified or restated from time to time), by and among Mortgagor and Quest Resource Corporation, collectively as borrower, the Senior Lenders, and Guggenheim Corporate Funding, LLC, as Administrative Agent for the Senior Lenders, (ii) that certain Second Lien Term Loan Agreement, dated as of November 14, 2005 (as amended, modified or restated from time to time), by and among Mortgagor and Quest Resource Corporation, collectively as borrower, the Subordinate Lenders, and Guggenheim Corporate Funding, LLC, as Administrative Agent for the Subordinate Lenders, and (iii) that certain Third Lien Term Loan Agreement, dated June 9, 2006 (as amended, modified or restated from time to time, the “Third Lien Term Loan Agreement”) by and among Mortgagor and Quest Resource Corporation, collectively as borrower, each of the Third Lien Lenders from time to time party thereto, and Guggenheim Corporate Funding, LLC, as Administrative Agent for the Third Lien Lenders.”

     1.2 The definition of “Intercreditor Agreement” in Section 1.1 of the Mortgage is hereby deleted in its entirety and replaced with the following:

     ““Intercreditor Agreement” means that certain Intercreditor Agreement dated as of November 14, 2005 (as amended, modified or restated from time to time), between the Senior Lenders, the Subordinate Lenders, the Administrative Agents under the Original Credit Agreement and such other parties from time to time a party thereto.”

     1.3 The definition of “Secured Parties” in Section 1.1 of the Mortgage is hereby deleted in its entirety and replaced with the following:

     ““Secured Parties” means, collectively, the Administrative Agents under the Credit Agreement, each other Agent, the Senior Lenders, the Subordinate Lenders, the Third Lien Lenders and each party to a Swap Agreement that is included within the definition of Secured Indebtedness.”

2

     1.4 The following definition is inserted in Section 1.1 of the Mortgage where appropriate:

     “Third Lien Lenders” means the Lenders, as defined under the Third Lien Term Loan Agreement.”

     1.5 Section 7.16 of the Mortgage is deleted in its entirety and replaced with the following:

     “Future Advances; Maximum Secured Amount. This Mortgage covers not only the proceeds of the Loans, but all advances hereafter made by Lenders to or for the benefit of Mortgagor (the “Future Advances”), including, without limitation, any amounts advanced by Lenders in satisfying, on Mortgagor’s behalf, any of Mortgagor’s Obligations, and any advances made in accordance herewith by Mortgagee or any Secured Party to protect its security, and any other advances by Mortgagee or any Secured Party, which shall not in the aggregate exceed $275,000,000. The maximum amount secured hereby may be advanced and repaid, and again advanced and repaid from time to time, in Secured Parties’ sole and absolute discretion, and this Mortgage shall become enforceable upon recording and shall have priority over all other parties whose rights arose after the recording hereof, with respect to all funds advanced by any Secured Party to Mortgagor, regardless of whether such funds were advanced before or after the arising of such other party’s rights. Nothing herein shall be interpreted as requiring any Secured Party to make any Future Advances hereunder. The maximum amount secured by this Mortgage at any one time shall be $275,000,000.”

ARTICLE II
ADDITIONS TO MORTGAGED PROPERTIES

     2.1 Mortgagor, for and in consideration of the sum of One Dollar ($1.00) and other valuable considerations and for the purpose of further security for the payment of the indebtedness, liabilities, and obligations set forth in the Mortgage, and in any amendments or supplements thereto, has granted, bargained, sold, conveyed, mortgaged, and warranted, and does by these presents grant, bargain, sell, convey, mortgage, and warrant, unto Mortgagee, its successors in title and assigns, with power of sale (to the extent permitted by applicable law), with warranties and covenants of title only to the extent provided in the Mortgage and in the Credit Agreement, all of Mortgagor’s right, title and interest, whether now owned or hereafter acquired, in all of the hereinafter described properties, rights and interests; and, insofar as such properties, rights and interests consist of equipment, general intangibles, accounts, contract rights, inventory, goods, chattel paper, instruments, documents, money, fixtures, as-extracted collateral, proceeds and products of collateral or any other Personal Property of a kind or character defined in or subject to the applicable provisions of the Code, Mortgagor hereby grants to Mortgagee a security interest therein, whether now owned or hereafter acquired, namely:

     (1) all of those certain Oil and Gas Leases and Lands (all such Oil and Gas Leases and Lands being, from and after the date of this Amendment, included within the term “Subject Interests” as used in the Mortgage and herein) which are described in Exhibit B and/or to which reference may be made in Exhibit B and/or which are covered by any of the leases described in Exhibit B, which Exhibit B is, from and after the date of this Amendment, made a part of the Mortgage for all purposes, and is incorporated herein by reference as fully as if copied at length in the body of this Amendment at this point;

3

     (2) all rights, titles and estates now owned or hereafter acquired by Mortgagor in and to (A) any and all properties now or hereafter pooled or unitized with any of the Subject Interests described above, and (B) all presently existing or future operating agreements and unitization, communitization and pooling agreements and the units operated thereby to the extent the same relate to all or any part of the Subject Interests described above, including, without limitation, all units formed under or pursuant to any applicable laws (the rights, titles, interests and estates described in this clause (B) also being, from and after the date of this Amendment, included within the term “Subject Interests” as used in the Mortgage and herein);

     (3) all presently existing and future agreements entered into between Mortgagor and any third party that provide for the acquisition by Mortgagor of any interest in any of the properties or interests specifically described in Exhibit B or which relate to any of the properties or interests specifically described in Exhibit B;

     (4) the Hydrocarbons (including inventory) which are in, under, upon, produced or to be produced from or attributable to the Lands described above from and after the date of this Amendment;

     (5) the Accounts and the Contract Rights pertaining to any of the aforesaid;

     (6) the Operating Equipment pertaining to any of the aforesaid;

     (7) the Well Data pertaining to any of the aforesaid;

     (8) the rights and security interests of Mortgagor held by Mortgagor to secure the obligation of the first purchaser to pay the purchase price of the Hydrocarbons described above;

     (9) all surface leases, rights-of-way, franchises, easements, servitudes, licenses, privileges, tenements, hereditaments, and appurtenances now existing or in the future obtained in connection with any of the aforesaid, and all other items of value and incident thereto which Mortgagor may, at any time, have or be entitled to; and

     (10) all or any different and additional rights of any nature, of value or convenience in the enjoyment, development, operation or production in any wise, of any property or interest included in any of the foregoing clauses, and in all revenues, income, rents, issues, profits and other benefits arising therefrom or from any contract now in existence or hereafter entered into pertaining thereto, and in all rights and claims accrued or to accrue from the removal by anyone of Hydrocarbons from, or other act causing damage to, any of such properties or interests.

     From and after the date of this Mortgage, (a) all of the aforesaid properties, rights and interests, together with any and all substitutions, replacements, corrections or amendments thereto, or renewals, extensions or ratifications thereof, or of any instrument relating thereto, and together with any additions thereto which may be subjected to the Lien of the Mortgage by means of any amendments or supplements thereto, shall be included within the term “Mortgaged Property” as used in the Mortgage and herein, and (b) all references in the Mortgage to “Exhibit A” shall be deemed to be references to both Exhibit A and Exhibit B hereto.

     Subject, however, to (i) Permitted Encumbrances, and (ii) the condition that Mortgagee shall not be liable in any respect for the performance of any covenant or obligation of Mortgagor with respect to the Mortgaged Property.

4

     TO HAVE AND TO HOLD the Mortgaged Property unto Mortgagee and its successors, legal representatives and assigns, forever, subject to Section 7.3 of the Mortgage, to secure, in each such instance, the payment and performance of the Secured Indebtedness and the Obligations.

ARTICLE III
REPRESENTATIONS, WARRANTIES AND COVENANTS

     3.1 As partial consideration for the modifications and amendments made hereby, and without limiting the representations, warranties, covenants and agreements contained in the Credit Agreement, the Mortgage, or any of the Loan Documents, Mortgagor represents and warrants to, and covenants and agrees with, the Mortgagee so long as the Indebtedness, or any part thereof, remains unpaid, as follows:

     (a) Mortgagor affirms the representations, warranties, covenants and agreements in the Mortgage as of the date of this Amendment;

     (b) The Mortgagee’s execution and delivery of this instrument is not intended to, and shall not be construed as, a waiver or an estoppel of any of the Mortgagee’s rights or remedies under the Mortgage as modified and amended hereby;

     (c) The liens and security interests granted, conveyed and assigned under the Mortgage as amended hereby, are and remain first priority perfected liens and security interests securing payment of all of Mortgagor’s Obligations under the Credit Agreement, and

     (d) From time to time, as requested, Mortgagor shall execute and deliver to Mortgagee such other and further documents and instruments evidencing and pertaining to the Credit Agreement, the Mortgage, the Notes, or any other Loan Documents, or any other instrument related to or executed in connection with any other of the foregoing documents.

ARTICLE IV
MISCELLANEOUS PROVISIONS

     4.1 The terms, provisions, covenants and conditions hereof shall be binding upon, and inure to the benefit of, Mortgagor, Mortgagee, and their respective successors, legal representatives, and assigns, subject to the restrictions on assignment set forth in the Credit Agreement.

     4.2 This Amendment shall be considered as a modification, amendment and ratification of the Mortgage, and the Mortgage, as herein expressly modified and amended, is hereby ratified, approved and confirmed in every respect. This instrument shall not constitute or be deemed to be a novation or discharge of the Mortgage or any indebtedness secured thereby. All liens and security interest created, extended or renewed by the Mortgage are hereby extended, renewed and carried forward by this instrument and incorporated herein. All references to the Mortgage in any documents heretofore or hereafter executed shall be deemed to refer to the Mortgage as modified and amended hereby.

     4.3 For the convenience of the parties, and for purposes of recordation, this Amendment may be executed in any number of counterparts, each of which shall for all purposes be deemed an original, and all of which are identical except that, to facilitate recordation of this Mortgage in any particular county, a counterpart of this Amendment may have annexed thereto as Exhibit A and Exhibit B, only the portions or divisions containing specific descriptions of the Mortgaged Property relating to the Oil and Gas Leases and Lands located in such county and may omit counterpart portions of Exhibit A and

5

Exhibit B which describe properties situated in counties other than the county in which such counterpart is to be recorded. Whenever a recorded counterpart of this Amendment contains specific descriptions which are less than all of the descriptions contained in any full counterpart lodged with Mortgagee, the omitted descriptions are hereby included by reference in such recorded counterpart as if such recorded counterpart conformed to any full counterpart lodged with Mortgagee.

     THIS INSTRUMENT SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE UNITED STATES AND STATE OF TEXAS, EXCEPT TO THE EXTENT REQUIRED BY LOCAL LAW OF THE STATE WHEREIN MORTGAGED PROPERTIES ARE LOCATED.

     NOTICE: THIS AMENDMENT AND ALL OTHER DOCUMENTS RELATING TO THE CREDIT AGREEMENT CONSTITUTE A WRITTEN LOAN AGREEMENT WHICH REPRESENTS THE FINAL AGREEMENT BETWEEN THE PARTIES AND MAY NOT BE SUPERSEDED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS OR SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES.

[SIGNATURE PAGE FOLLOWS]

6

EXECUTED on and effective as of the date first written above.

MORTGAGOR:
QUEST CHEROKEE, LLC,
a Delaware limited liability company
By	/s/ Jerry D. Cash
	Name: Jerry D. Cash
	Title: Manager

STATE OF OKLAHOMA	§
	§
COUNTY OF OKLAHOMA	§

     This instrument was acknowledged before me on this 31 day of July, 2006, by Jerry D. Cash, Manager of Quest Cherokee, LLC, on behalf of said limited liability company.

	/s/ Bree M Stewart
	Notary Public in and for the State of Oklahoma
My Commission Expires:
7/27/09
(SEAL)	(SEAL)

[Additional Signature Page Follows]

Mortgagor’s Signature Page — First Amendment to
Mortgage, Deed of Trust, Security Agreement, Financing Statement and Assignment of Production

MORTGAGEE:
GUGGENHEIM CORPORATE FUNDING, LLC,
By	/s/ Todd Boehly
	Name: Todd Boehly
	Title: Managing Partner

STATE OF NEW YORK	§
	§
COUNTY OF NEW YORK	§

     This instrument was acknowledged before me on this 14 day of July, 2006, by Todd Boehly, Managing partner of Guggenheim Corporate Funding, LLC, on behalf of said limited liability company.

	/s/ Emily Curtis
	Notary Public in and for the State of New York
My Commission Expires:
10/31/09
(SEAL)

Emily Curtis
Notary Public, State of New York
No. 01CU6136150
Qualified in Kings County
Commission Expires Oct. 31, 2009

Mortgagee’s Signature Page — First Amendment to
Mortgage, Deed of Trust, Security Agreement, Financing Statement and Assignment of Production

SCHEDULE I
TO
FIRST AMENDMENT TO MORTGAGE, DEED OF TRUST, SECURITY AGREEMENT,
FINANCING STATEMENT AND ASSIGNMENT OF PRODUCTION

	Filing	Filing
Document	Jurisdiction	Date	Recording Information
Mortgage, Deed of Trust, Security Agreement, Financing Statement and Assignment of Production	Chautauqua County, KS	11/14/2005	Book 129, Page 442
Mortgage, Deed of Trust, Security Agreement, Financing Statement and Assignment of Production	Elk County, KS	11/14/2005	Book 114, Page 700
Mortgage, Deed of Trust, Security Agreement, Financing Statement and Assignment of Production	Labette County, KS	11/14/2005	Book 26, Page 358, #0022983
Mortgage, Deed of Trust, Security Agreement, Financing Statement and Assignment of Production	Montgomery County, KS	11/14/2005	Book 553, Page 81
Mortgage, Deed of Trust, Security Agreement, Financing Statement and Assignment of Production	Neosho County, KS	11/14/2005	Volume 358, Page 1
Mortgage, Deed of Trust, Security Agreement, Financing Statement and Assignment of Production	Wilson County, KS	11/14/2005	Book 290, Page 258
Mortgage, Deed of Trust, Security Agreement, Financing Statement and Assignment of Production	Woodson County, KS	11/14/2005	Book 99, Page 198
Mortgage, Deed of Trust, Security Agreement, Financing Statement and Assignment of Production	Craig County, OK	11/14/2005	Book 0546, Page 665
Mortgage, Deed of Trust, Security Agreement, Financing Statement and Assignment of Production	Nowata County, OK	11/14/2005	Book 0737, Page 1

Schedule I— First Amendment to
Mortgage, Deed of Trust, Security Agreement, Financing Statement and Assignment of Production

EX-4.19

Exhibit 4.19

EXECUTION

CREDIT AGREEMENT

among

BLUESTEM PIPELINE, LLC,
as the Borrower,

QUEST MIDSTREAM PARTNERS, L.P.,
as a Guarantor

ROYAL BANK OF CANADA,
as Administrative Agent and Collateral Agent

and

The Lenders Party Hereto

$75,000,000

SENIOR CREDIT FACILITY

RBC CAPITAL MARKETS
As Lead Arranger and Sole Bookrunner

Dated as of January 31, 2007

TABLE OF CONTENTS

	Page
ARTICLE I. DEFINITIONS AND ACOUNTING TERMS		1
1.01 Defined Terms		1
1.02 Other Interpretive Provisions		21
1.03 Accounting Terms		22
1.04 Rounding		22
1.05 References to Agreements and Laws		22
ARTICLE II. THE COMMITMENTS AND BORROWINGS		22
2.01 Revolving Loans		22
2.02 Commitment Increase		22
2.03 Borrowings, Conversions and Continuations of Loans		23
2.04 Prepayments		25
2.05 Reduction or Termination of Commitments		26
2.06 Repayment of Revolving Loans		26
2.07 Interest		26
2.08 Fees		27
2.09 Computation of Interest and Fees		27
2.10 Evidence of Debt		27
2.11 Payments Generally		28
2.12 Sharing of Payments		30
2.13 Priority of Hedging Obligations		31
2.14 Letters of Credit		31
ARTICLE III TAXES, YIELD PROTECTION AND ILLEGALITY		37
3.01 Taxes		37
3.02 Illegality		40
3.03 Inability to Determine Rates		40
3.04 Increased Cost and Reduced Return; Capital Adequacy; Reserves on Eurodollar Rate Loans		40
3.05 Compensation for Losses		41
3.06 Matters Applicable to all Requests for Compensation		42
3.07 Survival		42
3.08 Mitigation Obligations		42
ARTICLE IV. CONDITIONS PRECEDENT TO CREDIT EXTENSION		42
4.01 Conditions Precedent to Initial Credit Extension		42
4.02 Conditions to all Credit Extensions		45
4.03 Conditions Precedent to Funding Loans for Acquisitions		45
ARTICLE V REPRESENTATIONS AND WARRANTIES		45
5.01 Existence; Qualification and Power; Compliance with Laws		45
5.02 Authorization; No Contravention		46
5.03 Governmental Authorization		46
5.04 Binding Effect		46

i

	Page
5.05 Financial Statements; No Material Adverse Effect		47
5.06 Litigation		47
5.07 No Default		47
5.08 Ownership of Property; Liens		47
5.09 Environmental Compliance		47
5.10 Insurance		48
5.11 Taxes		48
5.12 ERISA Compliance		48
5.13 Subsidiaries and other Investments		48
5.14 Margin Regulations; Investment Company Act; Use of Proceeds		49
5.15 Disclosure		49
5.16 Labor Matters		49
5.17 Compliance with Laws		49
5.18 Third Party Approvals		49
5.19 Solvency		49
5.20 Collateral		50
ARTICLE VI. AFFIRMATIVE COVENANTS		50
6.01 Financial Statements		50
6.02 Certificates; Other Information		51
6.03 Notices		51
6.04 Payment of Obligations		52
6.05 Preservation of Existence, Etc.		52
6.06 Maintenance of Assets and Business		52
6.07 Maintenance of Insurance		53
6.08 Compliance with Laws and Contractual Obligations		53
6.09 Books and Records		53
6.10 Inspection Rights		53
6.11 Compliance with ERISA		54
6.12 Use of Proceeds		54
6.13 Material Agreements		54
6.14 Guaranties		54
6.15 Further Assurances; Additional Collateral		54
6.16 Clean Down Period		55
6.17 Fiscal Year		55
ARTICLE VII NEGATIVE COVENANTS		56
7.01 Liens		56
7.02 Investments		58
7.03 Hedging Agreements		58
7.04 Indebtedness		58
7.05 Lease Obligations		59
7.06 Fundamental Changes		60
7.07 Dispositions		60
7.08 Restricted Payments; Distributions and Redemptions		60
7.09 ERISA		61
7.10 Nature of Business; Capital Expenditures; Risk Management		61
7.11 Transactions with Affiliates		61

ii

	Page
7.12 Burdensome Agreements		61
7.13 Use of Proceeds		62
7.14 Material Agreements		62
7.15 Financial Covenants		62
ARTICLE VIII. EVENTS OF DEFAULT AND REMEDIES		62
8.01 Events of Default		62
8.02 Remedies Upon Event of Default		65
8.03 Application of Funds		66
ARTICLE IX. ADMINISTRATIVE AGENT		66
9.01 Appointment and Authorization of Agents; Lender Hedging Agreements		66
9.02 Delegation of Duties		67
9.03 Default; Collateral		67
9.04 Liability of Agents		68
9.05 Reliance by Administrative Agent		69
9.06 Notice of Default		69
9.07 Credit Decision; Disclosure of Information by Administrative Agent		69
9.08 Indemnification of Agents		70
9.09 Administrative Agent in its Individual Capacity		70
9.10 Successor Administrative Agent and Collateral Agent		71
9.11 Other Agents; Arranger		71
9.12 Administrative Agent May File Proofs of Claim		71
ARTICLE X MISCELLANEOUS		72
10.01 Amendments, Release of Collateral, Etc		72
10.02 Notices and Other Communications; Facsimile Copies		74
10.03 No Waiver; Cumulative Remedies		75
10.04 Attorney Costs; Expenses and Taxes		75
10.05 Indemnification		76
10.06 Payments Set Aside		77
10.07 Successors and Assigns		77
10.08 Confidentiality		80
10.09 Set-off		80
10.10 Interest Rate Limitation		80
10.11 Counterparts		81
10.12 Integration		81
10.13 Survival of Representations and Warranties		81
10.14 Severability		81
10.15 Replacement of Lenders		81
10.16 Governing Law		82
10.17 Waiver of Right to Trial by Jury, Etc		83
10.18 No General Partner’s Liability		83
10.19 ENTIRE AGREEMENT		83

iii

	Page
SCHEDULES
2.01   Commitments 7.01   Existing Liens 7.04   Indebtedness 10.02 Addresses for Notices to Borrower, Guarantors and Administrative Agent
EXHIBITS
Exhibit: Form of:
A-1 Borrowing Notice
A-2 Conversion/Continuation Notice
A-3 Repayment Notice
B     Revolving Note
C     Compliance Certificate pursuant to Section 6.02(a)
D     Assignment and Assumption

iv

CREDIT AGREEMENT

     THIS CREDIT AGREEMENT (“Agreement”) is entered into as of January 31, 2007, among BLUESTEM PIPELINE, LLC, a Delaware limited liability company (the “Borrower”), QUEST MIDSTREAM PARTNERS, L.P., a Delaware master limited partnership (the “MLP”), each lender from time to time party hereto (collectively, the “Lenders” and individually, “Lender”), ROYAL BANK OF CANADA, as Administrative Agent and Collateral Agent.

     The Borrower has requested that the Lenders provide a secured revolving credit facility and the Lenders are willing to do so on the terms and conditions set forth herein.

     In consideration of the mutual covenants and agreements herein contained, the parties hereto covenant and agree as follows:

ARTICLE I.
DEFINITIONS AND ACCOUNTING TERMS

     1.01 Defined Terms.

     As used in this Agreement, the terms defined in the introductory paragraph hereof shall have the meanings therein indicated and the following terms shall have the meanings set forth below:

     Acquisition means any transaction or series of related transactions for the purpose of, or resulting in, directly or indirectly, (a) the acquisition by a Company of all or substantially all of the assets located in the United States of a Person or of any business or division of a Person; (b) the acquisition by a Company of more than 50% of any class of Voting Stock (or similar ownership interests) of any Domestic Person; or (c) a merger, consolidation, amalgamation, or other combination by a Company with another Person if a Company is the surviving entity, provided that, (i) in any merger involving the Borrower, the Borrower must be the surviving entity; and (ii) in any merger involving a Wholly-Owned Subsidiary and another Subsidiary, a Wholly-Owned Subsidiary shall be the survivor.

     Acquisition Adjustment Period means, if the Borrower or one of its Subsidiaries makes a Permitted Acquisition for a Purchase Price in excess of $10,000,000 and after giving effect thereto the Leverage Ratio would be greater than 4.0 to 1.0, the period from the date such Permitted Acquisition is closed until the first to occur of (i) the closing of a public or private primary equity offering by the MLP and (ii) the last day of the third full fiscal quarter following the closing date of such Permitted Acquisition; provided that another Acquisition Adjustment Period shall not commence until the current Acquisition Adjustment Period shall have terminated and there shall have been at least one fiscal quarter when there was no Acquisition Adjustment Period in effect and during such fiscal quarter when no Acquisition Adjustment Period was in effect the MLP and its Subsidiaries were in compliance with Section 7.15.

     Administrative Agent means Royal Bank of Canada in its capacity as administrative agent under any of the Loan Documents, or any successor administrative agent.

     Administrative Agent’s Office means the Administrative Agent’s address and, as appropriate, account as set forth on Schedule 10.02, or such other address or account as the Administrative Agent may from time to time notify to the Borrower and the Lenders.

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     Administrative Details Form means the Administrative Details Reply Form furnished by a Lender to the Administrative Agent in connection with this Agreement.

     Affiliate means, as to any Person, any other Person directly or indirectly controlling, controlled by, or under direct or indirect common control with, such Person. A Person shall be deemed to be controlled by any other Person if such other Person possesses, directly or indirectly, power to direct or cause the direction of the management and policies of such Person whether by contract or otherwise.

     Agent/Arranger Fee Letter has the meaning specified in Section 2.08(b).

     Agent-Related Persons means the Administrative Agent (including any successor administrative agent), the Collateral Agent (including any successor collateral agent) and their respective Affiliates (including the officers, directors, employees, agents and attorneys-in-fact of such Person).

     Aggregate Commitment means collectively the Commitments of all the Lenders and as of the Closing Date is $75,000,000.

     Agreement means this Credit Agreement.

     Applicable Rate means the following percentages per annum set forth in the table below, on any date of determination, with respect to the Type of Credit Extension or commitment fee that corresponds to the Leverage Ratio at such date of determination, as calculated based on the quarterly Compliance Certificate most recently delivered pursuant to Section 6.02(a):

		Commitment		Letter of Credit
Pricing		Fee +		and Eurodollar Rate		Base Rate +
Level	Leverage Ratio	(basis points)		+ (basis points)		(basis points)
1	Less than 2.50:1.00		30.0		125.0		25.0
2	Less than 3.00:1.00 but greater than or equal to 2.50:1.00		37.5		150.0		50.0
3	Less than 3.50:1.00 but greater than or equal to 3.00:1.00		37.5		175.0		75.0
4	Greater than or equal to 3.50:1.00		50.0		200.0		100.0

     During any Acquisition Adjustment Period, the Applicable Rate for Eurodollar Rate Loans, Base Rate Loans and Letters of Credit for Pricing Level 4 will increase by 0.25% per annum (25 basis points) over the otherwise applicable amount set forth above.

     Any increase or decrease in the Applicable Rate resulting from a change in the Leverage Ratio shall become effective as of the first day of the fiscal quarter of the Borrower immediately following the date of a Compliance Certificate delivered pursuant to Section 6.02(a); provided, however, that if no Compliance Certificate is delivered during a fiscal quarter when due in accordance with such Section,

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Pricing Level 4 shall apply as of the first day of such following fiscal quarter. The Applicable Rate in effect from the Closing Date through March 31, 2007 shall be based upon Pricing Level 1.

     Approved Fund means any Fund that is administered or managed by a Lender, an Affiliate of a Lender, or an entity or an Affiliate of an entity that administers or manages a Lender.

     Arranger means RBC Capital Markets in its capacity as lead arranger and sole bookrunner.

     Assignment and Assumption means an Assignment and Assumption substantially in the form of Exhibit D.

     Attorney Costs means and includes the reasonable fees and disbursements of any law firm or other external counsel and the reasonable allocated cost of internal legal services and disbursements of internal counsel.

     Attributable Indebtedness means, on any date, (a) in respect of any Capital Lease of any Person, the capitalized amount thereof that would appear on a balance sheet of such Person prepared as of such date in accordance with GAAP, and (b) in respect of any Synthetic Lease Obligation, the capitalized amount of the remaining lease payments under the relevant lease that would appear on a balance sheet of such Person prepared as of such date in accordance with GAAP if such lease were accounted for as a capital lease.

     Authorizations means all filings, recordings, and registrations with, and all validations or exemptions, approvals, orders, authorizations, consents, franchises, licenses, certificates, and permits from, any Governmental Authority.

     Base Rate means for any day a fluctuating rate per annum equal to the higher of (a) the Federal Funds Rate plus ¹/2 of 1% and (b) the rate of interest in effect for such day as publicly announced from time to time by the Administrative Agent as its “prime rate.” Such rate is a rate set by the Administrative Agent based upon various factors including the Administrative Agent’s costs and desired return, general economic conditions and other factors, and is used as a reference point for pricing some loans, which may be priced at, above, or below such announced rate. Any change in such rate announced by the Administrative Agent shall take effect at the opening of business on the day specified in the public announcement of such change.

     Base Rate Loan means a Revolving Loan that bears interest based on the Base Rate.

     Board means the Board of Governors of the Federal Reserve System of the United States.

     Borrower Affiliate means the Borrower, the General Partner, the MLP, and each of their respective Subsidiaries.

     Borrowing means a borrowing consisting of simultaneous Revolving Loans of the same Type and having the same Interest Period made by each of the Lenders pursuant to Section 2.01.

     Borrowing Notice means a notice of (a) a Borrowing, (b) a conversion of Revolving Loans from one Type to the other, or (c) a continuation of Revolving Loans as the same Type, pursuant to Section 2.03(a), which, if in writing, shall be substantially in the form of Exhibit A-1 or A-2, as applicable.

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     Business Day means any day other than a Saturday, Sunday, or other day on which commercial banks are authorized to close under the Laws of New York, or are in fact closed and, if such day relates to any Eurodollar Rate Loan, means any such day on which dealings in Dollar deposits are conducted by and between banks in the applicable offshore Dollar interbank market.

     Capital Expenditure by a Person means an expenditure (determined in accordance with GAAP) for any fixed asset owned by such Person for use in the operations of such Person having a useful life of more than one year, or any improvements or additions thereto.

     Capital Lease means any capital lease or sublease which should be capitalized on a balance sheet in accordance with GAAP.

     Cash Adjusted Consolidated Funded Debt means, as of any date of determination, for the MLP and its Subsidiaries on a consolidated basis, the excess of (a) Consolidated Funded Debt over (b) cash of the MLP and its Subsidiaries deposited in an account with the Administrative Agent (or another financial institution acceptable to the Administrative Agent) subject to a control agreement in favor of the Administrative Agent or, at the Administrative Agent’s discretion, cash of the MLP and its Subsidiaries reflected on the MLP’s consolidated balance sheet and otherwise subjected to a Lien in favor of the Administrative Agent and not otherwise pledged or subject to any claim or encumbrance of any third party.

     Cash Collateralize means to pledge and deposit with or deliver to the Administrative Agent, for the benefit of the L/C Issuer and the Lenders and their Affiliates, as collateral for the L/C Obligations, cash and deposit account balances pursuant to documentation in form and substance satisfactory to the Administrative Agent and the L/C Issuer (which documents hereby are consented to by the Lenders).

     Cash Equivalents means:

     (a) United States Dollars;

     (b) direct general obligations, or obligations of, or obligations fully and unconditionally guaranteed as to the timely payment of principal and interest by, the United States or any agency or instrumentality thereof having remaining maturities of not more than thirteen (13) months, but excluding any such securities whose terms do not provide for payment of a fixed dollar amount upon maturity or call for redemptions;

     (c) certificates of deposit and eurodollar-time deposits with remaining maturities of thirteen (13) months or less, bankers acceptances with remaining maturities not exceeding one hundred eighty (180) days, overnight bank deposits and other similar short term instruments, in each case with any domestic commercial bank having capital and surplus in excess of $250,000,000 and having a rating of at least “A2” by Moody’s and at least “A” by S&P;

     (d) repurchase obligations with a remaining term of not more than thirteen (13) months for underlying securities of the types described in (b) and (c) above entered into with any financial institution meeting the qualifications in (c) above;

     (e) commercial paper (having remaining maturities of not more than two hundred seventy (270) days) of any Person rated “P-1” or better by Moody’s or “A-1” or the equivalent by S&P;

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     (f) money market funds that (i) comply with the criteria set forth in SEC Rule 2a-7 under the Investment Company Act of 1940, as amended, (ii) are rated AAA by S&P and Aaa by Moody’s and (iii) have portfolio assets of at least $5,000,000,000; and

     (g) money market mutual or similar funds having assets in excess of $100,000,000, at least 95% of the assets of which are comprised of assets specified in clause (a) through (f) above, except that with respect to the maturities of the assets included in such funds the requirements of clauses (a) through (f) shall not be applied to the individual assets included in such funds but to the weighted-average maturity of all assets included in such funds.

     Change of Control means (a) Quest Parent shall fail to own, directly or indirectly, or fail to have voting control over, at least 51% of the equity interest of the General Partner, (b) any Person, entity or group (other than a Quest Party) acquires beneficial ownership (within the meaning of Rule 13d-3 of the Securities and Exchange Commission under the Securities Exchange Act of 1934) of 51% or more of the equity interests in the MLP, (c) the MLP shall fail to own, directly or indirectly, 100% of the equity interests in the Borrower, or (e) a Parent Change of Control shall occur.

     Change in Law means (a) the adoption of any law, rule or regulation after the date of this Agreement, (b) any change in any law, rule or regulation or in the interpretation or application thereof by any Governmental Authority after the date of this Agreement or (c) compliance by any Lender or the L/C Issuer (or, for purposes of Section 3.04(b), by any Lending Office of such Lender or by such Lender’s or the L/C Issuer’s holding company, if any) with any request, guideline or directive (whether or not having the force of law) of any Governmental Authority made or issued after the date of this Agreement.

     Clean Down Period has the meaning set forth in Section 6.16.

     Closing Date means the first date all the conditions precedent in Section 4.01 and Section 4.02 are satisfied or waived (or, in the case of Sections 4.01(f) and (g), waived by the Person entitled to receive the applicable payment).

     Code means the Internal Revenue Code of 1986.

     Collateral means all property and interests in property and proceeds thereof now owned or hereafter acquired by the MLP, the Borrower, and their respective Subsidiaries in or upon which a Lien now or hereafter exists in favor of the Lenders or their Affiliates, or the Administrative Agent or Collateral Agent on behalf of the Lenders, including, but not limited to substantially all of the assets (including stock and other equity interests) of the MLP, the Borrower, and their respective Subsidiaries, whether under this Agreement, the Collateral Documents, or under any other document executed by any Borrower Affiliate and delivered to the Administrative Agent or the Lenders, except as provided herein. Collateral does not include any Excluded Assets.

     Collateral Agent means Royal Bank of Canada in its capacity as collateral agent under any of the Loan Documents, or any successor collateral agent.

     Collateral Documents means (a) each Guaranty, Security Agreement and Mortgage, and all other security agreements, deeds of trust, mortgages, chattel mortgages, assignments, pledges, guaranties, extension agreements and other similar agreements or instruments executed by the Borrower, the MLP, any Guarantor, or any of their respective Subsidiaries for the benefit of the Lenders and their Affiliates now or hereafter delivered to the Lenders or the Administrative Agent pursuant to or in connection with

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the transactions contemplated hereby, and all financing statements (or comparable documents now or hereafter filed in accordance with the Uniform Commercial Code or comparable law) against the Borrower, the MLP, any Guarantor, or any of their respective Subsidiaries as debtor in favor of the Lenders or their Affiliates, or the Administrative Agent for the benefit of the Lenders and their Affiliates as secured party to secure or guarantee the payment of any part of the Obligations or the performance of any other duties and obligations of Borrower under the Loan Documents, whenever made or delivered, and (b) any amendments, supplements, modifications, renewals, replacements, consolidations, substitutions, restatements, continuations, and extensions of any of the foregoing.

     Commitment means, as to each Lender, its obligation to make Revolving Loans to the Borrower pursuant to Section 2.01 and to purchase participations in L/C Obligations pursuant to Section 2.14, in an aggregate principal amount at any one time outstanding not to exceed the amount stated beside such Lender’s name on the most-recently amended Schedule 2.01 to this Agreement (which amount is subject to increase, reduction, or cancellation in accordance with the Loan Documents).

     Company and Companies means, on any date of determination thereof, the MLP, the Borrower and each of their respective Subsidiaries.

     Compensation Period has the meaning set forth in Section 2.11(e)(ii).

     Compliance Certificate means a certificate substantially in the form of Exhibit C.

     Consolidated Annualized EBITDA means, for the MLP and its Subsidiaries on a consolidated basis (a) for the fiscal quarter ended March 31, 2007, Consolidated EBITDA for the three month period ended March 31, 2007 multiplied by 4, (b) for the fiscal quarter ended June 30, 2007, Consolidated EBITDA for the six month period ended June 30, 2007 multiplied by 2, (c) for the fiscal quarter ended September 30, 2007, Consolidated EBITDA for the nine month period ended September 30, 2007 multiplied by 1.33, and (d) for the fiscal quarter ended December 31, 2007, Consolidated EBITDA for the twelve month period ended December 31, 2007; provided, for covenant compliance purposes associated with any Compliance Certificate delivered before delivery of the Compliance Certificate for the fiscal quarter-ended March 31, 2007, if fiscal quarter-end numbers are not available, then the most recently completed three month period numbers that are available will be used to determine Consolidated Annualized EBITDA.

     Consolidated EBITDA means, for any period, for the MLP and its Subsidiaries on a consolidated basis, an amount equal to the sum of (a) Consolidated Net Income, (b) Consolidated Interest Charges, (c) the amount of taxes, based on or measured by income, used or included in the determination of such Consolidated Net Income, (d) the amount of depreciation, depletion, and amortization expense deducted in determining such Consolidated Net Income, and (e) other non-cash charges and expenses, including, without limitation, non-cash charges and expenses relating to Swap Contracts or resulting from accounting convention changes, of the MLP and its Subsidiaries on a consolidated basis, all determined in accordance with GAAP.

     Consolidated Funded Debt means, as of any date of determination, for the MLP and its Subsidiaries on a consolidated basis, the sum of (a) the outstanding principal amount of all obligations and liabilities, whether current or long-term, for borrowed money (including Obligations hereunder, but excluding all reimbursement obligations relating to outstanding but undrawn letters of credit), (b) Attributable Indebtedness pertaining to Capital Leases, (c) Attributable Indebtedness pertaining to

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Synthetic Lease Obligations, and (d) without duplication, all Guaranty Obligations with respect to Indebtedness of the type specified in subsections (a) through (c) above.

     Consolidated Interest Charges means, for any period, for the MLP and its Subsidiaries on a consolidated basis, the sum of (a) all interest, premium payments, fees, charges and related expenses of the MLP and its Subsidiaries in connection with Indebtedness (net of interest rate Swap Contract settlements) (including capitalized interest), in each case to the extent treated as interest in accordance with GAAP, and (b) the portion of rent expense of the MLP and its Subsidiaries with respect to such period under Capital Leases that is treated as interest in accordance with GAAP.

     Consolidated Net Income means, for any period, for the MLP and its Subsidiaries on a consolidated basis, the net income or net loss of the MLP and its Subsidiaries from continuing operations, provided that there shall be excluded from such net income (to the extent otherwise included therein): (a) the income (or loss) of any entity other than a Subsidiary in which the MLP or any Subsidiary has an ownership interest, except to the extent that any such income has been actually received by the MLP or such Subsidiary in the form of cash dividends or similar cash distributions; (b) net extraordinary gains and losses (other than, in the case of losses, losses resulting from charges against net income to establish or increase reserves for potential environmental liabilities and reserves for exposure under rate cases), (c) any gains or losses attributable to non-cash write-ups or write-downs of assets, (d) proceeds of any insurance on property, plant or equipment other than business interruption insurance, (e) any gain or loss, net of taxes, on the sale, retirement or other disposition of assets (including the capital stock or other equity ownership of any other Person, but excluding the sale of inventories in the ordinary course of business), and (f) the cumulative effect of a change in accounting principles.

     Contractual Obligation means, as to any Person, any provision of any security issued by such Person or of any agreement, instrument or other undertaking to which such Person is a party or by which it or any of its property is bound.

     Contribution Agreement means the Contribution, Conveyance and Assumption Agreement dated as of December 22, 2006 among the MLP, Borrower and various other parties thereto.

     Credit Extension means each of the following: (a) a Borrowing and (b) an L/C Credit Extension.

     Debtor Relief Laws means the Bankruptcy Code of the United States, and all other liquidation, conservatorship, bankruptcy, assignment for the benefit of creditors, moratorium, rearrangement, receivership, insolvency, reorganization, or similar debtor relief Laws of the United States or other applicable jurisdictions from time to time in effect and affecting the rights of creditors generally.

     Default means any event that, with the giving of any notice, the passage of time, or both, would be an Event of Default.

     Default Rate means an interest rate equal to (a) the Base Rate plus (b) the Applicable Rate, if any, applicable to Base Rate Loans plus (c) 2% per annum; provided, however, that with respect to a Eurodollar Rate Loan, the Default Rate shall be an interest rate equal to the interest rate (including any Applicable Rate) otherwise applicable to such Eurodollar Rate Loan plus 2% per annum, in each case to the fullest extent permitted by applicable Laws.

     Disposition or Dispose means the sale, transfer, license or other disposition (including any sale and leaseback transaction) of any property (including stock, partnership and other equity interests) by any

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Person of property owned by such Person, including any sale, assignment, transfer or other disposal, with or without recourse, of any notes or accounts receivable or any rights and claims associated therewith. For the avoidance of doubt, a Restricted Payment is not a Disposition.

     Dollar and $ means lawful money of the United States.

     Domestic Person means any corporation, general partnership, limited partnership, limited liability partnership, or limited liability company that is organized under the laws of the United States or any state thereof or the District of Columbia.

     Eligible Assignee means (a) a Lender, (b) an Affiliate of a Lender, (c) an Approved Fund, and (d) any other Person (other than a natural Person) approved by the Administrative Agent and, unless an Event of Default has occurred and is continuing, the Borrower (the Borrower’s approval not to be unreasonably withheld, conditioned or delayed); provided that notwithstanding the foregoing, “Eligible Assignee” shall not include the Borrower, the MLP, any Quest Party, or any of their respective Affiliates or Subsidiaries.

     Environmental Law means any applicable Law that relates to (a) the condition or protection of air, groundwater, surface water, soil, or other environmental media, (b) the environment, including natural resources or any activity which affects the environment, (c) the regulation of any pollutants, contaminants, wastes, substances, and Hazardous Substances, including, without limitation, the Comprehensive Environmental Response, Compensation, and Liability Act (42 U.S.C. §9601 et seq.) (“CERCLA”), the Clean Air Act (42 U.S.C. § 7401 et seq.), the Federal Water Pollution Control Act, as amended by the Clean Water Act (33 U.S.C. § 1251 et seq.), the Federal Insecticide, Fungicide, and Rodenticide Act (7 U.S.C. § 136 et seq.), the Emergency Planning and Community Right to Know Act of 1986 (42 U.S.C. § 1100 1 et seq.), the Hazardous Materials Transportation Act (49 U.S.C. § 1801 et seq.), the National Environmental Policy Act of 1969 (42 U.S.C. § 4321 et seq.), the Oil Pollution Act (33 U.S.C. § 2701 et seq.), the Resource Conservation and Recovery Act (42 U.S.C. § 6901 et seq.), the Rivers and Harbors Act (33 U.S.C. §401 et seq.), the Safe Drinking Water Act (42 U.S.C. § 201 and § 300f et seq.), the Solid Waste Disposal Act, as amended by the Resource Conservation and Recovery Act of 1976 and the Hazardous and Solid Waste Amendments of 1984 (42 U.S.C. § 6901 et seq.), the Toxic Substances Control Act (15 U.S.C. § 2601 et seq.), and analogous state and local Laws, as any of the foregoing may have been and may be amended or supplemented from time to time, and any analogous enacted or adopted Law, or (d) the Release or threatened Release of Hazardous Substances.

     ERISA means the Employee Retirement Income Security Act of 1974 and any regulations issued pursuant thereto.

     ERISA Affiliate means any trade or business (whether or not incorporated) under common control with the Borrower within the meaning of Section 414(b) or (c) of the Code (and Sections 414(m) and (o) of the Code for purposes of provisions of this Agreement relating to obligations imposed under Section 412 of the Code).

     ERISA Event means (a) a Reportable Event with respect to a Pension Plan; (b) a withdrawal by the Borrower or any ERISA Affiliate from a Pension Plan subject to Section 4063 of ERISA during a plan year in which it was a substantial employer (as defined in Section 4001(a)(2) of ERISA) or a cessation of operations that is treated as such a withdrawal under Section 4062(e) of ERISA; (c) a complete or partial withdrawal by the Borrower or any ERISA Affiliate from a Multiemployer Plan or notification that a Multiemployer Plan is in reorganization; (d) the filing of a notice of intent to terminate, the treatment of a Plan amendment as a termination under Sections 4041 or 4041A of ERISA, or the commencement of

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proceedings by the PBGC to terminate a Pension Plan or Multiemployer Plan; (e) an event or condition which might reasonably be expected to constitute grounds under Section 4042 of ERISA for the termination of, or the appointment of a trustee to administer, any Pension Plan or Multiemployer Plan; or (f) the imposition of any liability under Title IV of ERISA, other than PBGC premiums due but not delinquent under Section 4007 of ERISA, upon the Borrower or any ERISA Affiliate.

     Eurodollar Rate means for any Interest Period with respect to any Eurodollar Rate Loan:

     (a) the rate per annum equal to the rate determined by the Administrative Agent to be the offered rate that appears on the page of the LIBOR I screen (or any successor thereto) that displays an average British Bankers Association Interest Settlement Rate for deposits in Dollars (for delivery on the first day of such Interest Period) with a term equivalent to such Interest Period, determined as of approximately 11:00 a.m. (London time) two Business Days prior to the first day of such Interest Period, or

     (b) if the rate referenced in the preceding subsection (a) does not appear on such page or service or such page or service shall cease to be available, the rate per annum equal to the rate determined by the Administrative Agent to be the offered rate on such other page or other service that displays an average British Bankers Association Interest Settlement Rate for deposits in Dollars (for delivery on the first day of such Interest Period) with a term equivalent to such Interest Period, determined as of approximately 11:00 a.m. (London time) two Business Days prior to the first day of such Interest Period, or

     (c) if the rates referenced in the preceding subsections (a) and (b) are not available, the rate per annum determined by the Administrative Agent as the rate of interest (rounded upward to the next 1/100th of 1%) at which deposits in Dollars for delivery on the first day of such Interest Period in same day funds in the approximate amount of the Eurodollar Rate Loan being made, continued or converted by the Administrative Agent and with a term equivalent to such interest Period would be offered by the Administrative Agent’s London Branch to major banks in the offshore Dollar market at their request at approximately 11:00 a.m. (London time) two Business Days prior to the first day of such Interest Period.

     Eurodollar Rate Loan means a Revolving Loan that bears interest at a rate based on the Eurodollar Rate.

     Event of Default means any of the events or circumstances specified in Article VIII.

     Evergreen Letter of Credit has the meaning specified in Section 2.14(b)(iii).

     Excluded Assets means any contracts, agreements or permits as to which the granting of a security interest in same would cause a default, termination or penalty thereunder or under any applicable requirement of a Governmental Authority.

     Facility means the credit facility as described in and subject to the limitations set forth in Section 2.01.

     Federal Funds Rate means, for any day, the rate per annum (rounded upwards to the nearest 1/100 of 1%) equal to the weighted average of the rates on overnight Federal funds transactions with members of the Federal Reserve System arranged by Federal funds brokers on such day, as published by

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the Federal Reserve Bank on the Business Day next succeeding such day; provided that (a) if such day is not a Business Day, the Federal Funds Rate for such day shall be such rate on such transactions on the next preceding Business Day as so published on the next succeeding Business Day, and (b) if no such rate is so published on such next succeeding Business Day, the Federal Funds Rate for such day shall be the average rate charged to the Administrative Agent on such day on such transactions as determined by the Administrative Agent.

     Foreign Lender means any Lender that is organized under the laws of a jurisdiction other than that in which the Borrower is resident for tax purposes. For purposes of this definition, the United States, each State thereof and the District of Columbia shall be deemed to constitute a single jurisdiction.

     Fund means any Person (other than a natural person) that is (or will be) engaged in making, purchasing, holding or otherwise investing in commercial loans and similar extensions of credit in the ordinary course of its business.

     GAAP means generally accepted accounting principles set forth in the opinions and pronouncements of the Accounting Principles Board and the American Institute of Certified Public Accountants and statements and pronouncements of the Financial Accounting Standards Board and the Public Company Accounting Oversights Board or such other principles as may be approved by a significant segment of the accounting profession, that are applicable to the circumstances as of the date of determination, consistently applied. If at any time any change in GAAP would affect the computation of any financial ratio or requirement set forth in any Loan Document, and either the Borrower or the Required Lenders shall so request, the Administrative Agent, the Lenders and the Borrower shall negotiate in good faith to amend such ratio or requirement to preserve the original intent thereof in light of such change in GAAP (subject to the approval of the Required Lenders); provided that, until so amended, (a) such ratio or requirement shall continue to be computed in accordance with GAAP prior to such change therein and (b) the Borrower shall provide to the Administrative Agent and the Lenders financial statements and other documents required under this Agreement or as reasonably requested hereunder setting forth a reconciliation between calculations of such ratio or requirement made before and after giving effect to such change in GAAP.

     General Partner means Quest Midstream GP, LLC, a Delaware limited liability company, the sole general partner of the MLP.

     Governmental Authority means any nation or government, any state or other political subdivision thereof, any agency, authority, instrumentality, regulatory body, court, administrative tribunal, central bank or other legal entity exercising executive, legislative, judicial, taxing, regulatory or administrative powers or functions of or pertaining to government.

     Guarantors means any Person, including the MLP and every present and future Subsidiary of Borrower and the MLP, which undertakes to be liable for all or any part of the Obligations by execution of a Guaranty, or otherwise.

     Guaranty means a Guaranty now or hereafter made by any Guarantor in favor of the Administrative Agent on behalf of the Lenders, including the MLP Guaranty and any Subsidiary Guaranty, each in form and substance acceptable to the Administrative Agent.

     Guaranty Obligation means, as to any Person, (a) any obligation, contingent or otherwise, of such Person guaranteeing or having the economic effect of guaranteeing any Indebtedness or other

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payment obligation of another Person (the “primary obligor”) in any manner, whether directly or indirectly, and including any obligation of such Person, direct or indirect, (i) to purchase or pay (or advance or supply funds for the purchase or payment of) such Indebtedness or other payment obligation, (ii) to purchase or lease property, securities or services for the purpose of assuring the obligee in respect of such Indebtedness or other payment obligation of the payment of such Indebtedness or other payment obligation, (iii) to maintain working capital, equity capital or any other financial statement condition or liquidity of the primary obligor so as to enable the primary obligor to pay such Indebtedness or other payment obligation, or (iv) entered into for the purpose of assuring in any other manner the obligees in respect of such Indebtedness or other payment obligation of the payment thereof or to protect such obligees against loss in respect thereof (in whole or in part), or (b) any Lien on any assets of such Person securing any Indebtedness or other payment obligation of any other Person, whether or not such Indebtedness or other payment obligation is assumed by such Person; provided, however, that the term “Guaranty Obligation” shall not include endorsements of instruments for deposit or collection in the ordinary course of business. The amount of any Guaranty Obligation shall be deemed to be the lesser of (a) an amount equal to the stated or determinable outstanding amount of the related primary obligation and (b) the maximum amount for which such guaranteeing Person may be liable pursuant to the terms of the instrument embodying such Guaranty Obligation, unless the outstanding amount of such primary obligation and the maximum amount for which such guaranteeing Person may be liable are not stated or determinable, in which case the amount of such Guaranty Obligation shall be the maximum reasonably anticipated liability in respect thereof as determined by the guaranteeing Person in good faith.

     Hazardous Substance means any substance that poses a threat to, or is regulated to protect, human health, safety, public welfare, or the environment, including without limitation: (a) any “hazardous substance,” “pollutant” or “contaminant,” and any “petroleum” or “natural gas liquids” as those terms are defined or used under Section 101 of the Comprehensive Environmental Response, Compensation and Liability Act of 1980, as amended ( 42 U.S.C. §§ 9601 et seq.) (CERCLA), (b) “solid waste” as defined by the federal Solid Waste Disposal Act (42 U. S.C. § § 6901 et seq.), (c) asbestos or a material containing asbestos, (d) any material that contains lead or lead-based paint, (e) any item or equipment that contains or is contaminated by polychlorinated biphenyls, (f) any radioactive material, (g) urea formaldehyde, (h) putrescible materials, (i) infectious materials, (j) toxic microorganisms, including mold, or (k) any substance the presence or Release of which requires reporting, investigation or remediation under any Environmental Law.

     Honor Date has the meaning set forth in Section 2.14(c)(i).

     Increase Effective Date has the meaning set forth in Section 2.02(d).

     Indebtedness means, as to any Person at a particular time, all of the following:

     (a) all obligations of such Person for borrowed money and all obligations of such Person evidenced by bonds, debentures, notes, loan agreements or other similar instruments;

     (b) the face amount of all letters of credit (including standby and commercial), banker’s acceptances, surety bonds, and similar instruments issued for the account of such Person, and, without duplication, all drafts drawn and unpaid thereunder;

     (c) whether or not so included as liabilities in accordance with GAAP, all obligations of such Person to pay the deferred purchase price of property or services, other than trade accounts payable in the ordinary course of business not overdue by more than 90 days, and

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Indebtedness of others (excluding prepaid interest thereon) secured by a Lien on property owned or being purchased by such Person, whether or not such Indebtedness shall have been assumed by such Person or is limited in recourse;

     (d) all obligations of such Person under conditional sales or other title retention agreements relating to property acquired by such Person;

     (e) Capital Leases and Synthetic Lease Obligations; and

     (f) all Guaranty Obligations of such Person in respect of any of the foregoing.

     For all purposes hereof, the Indebtedness of any Person shall include the Indebtedness of any partnership or joint venture in which such Person is a general partner, unless such Indebtedness is expressly made non-recourse to such Person except for customary exceptions acceptable to the Required Lenders. The amount of any Capital Lease or Synthetic Lease Obligation as of any date shall be deemed to be the amount of Attributable Indebtedness in respect thereof as of such date. In addition, the determination of Indebtedness of the MLP, the Borrower and/or their Subsidiaries shall be made on a consolidated basis without taking into account any Indebtedness owed by any such Person to any other such Person.

     Indemnified Liabilities has the meaning set forth in Section 10. 05.

     Indemnitees has the meaning set forth in Section 10.05.

     Insurance Payment means any payment by an insurance company or other surety on account of property damage or casualty loss to any property of the MLP, the Borrower or any of its Subsidiaries.

     Interest Coverage Ratio means for any relevant period and as of any determination date, as calculated based on the quarterly compliance certificate most recently delivered pursuant to Section 6.02(a) for the MLP and its Subsidiaries, the ratio of (a) Consolidated EBITDA for the such period ending on the determination date to (b) Consolidated Interest Charges during such period.

     Interest Payment Date means, (a) as to any Revolving Loan other than a Base Rate Loan, the last day of each Interest Period applicable to such Revolving Loan; provided, however, that if any Interest Period for a Eurodollar Rate Loan exceeds three months, the respective dates that fall every three months after the beginning of such Interest Period shall also be Interest Payment Dates; and (b) as to any Base Rate Loan, the last Business Day of each March, June, September and December and the Maturity Date.

     Interest Period means, as to each Eurodollar Rate Loan, the period commencing on the date such Eurodollar Rate Loan is disbursed or converted to or continued as a Eurodollar Rate Loan and ending on the date one, two, three or six months thereafter, as selected by the Borrower in its Borrowing Notice; provided that:

     (i) any Interest Period that would otherwise end on a day that is not a Business Day shall be extended to the next succeeding Business Day unless, in the case of a Eurodollar Rate Loan, such Business Day falls in another calendar month, in which case such Interest Period shall end on the next preceding Business Day;

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     (ii) any Interest Period pertaining to a Eurodollar Rate Loan that begins on the last Business Day of a calendar month (or on a day for which there is no numerically corresponding day in the calendar month at the end of such Interest Period) shall end on the last Business Day of the calendar month at the end of such Interest Period; and

     (iii) no Interest Period shall extend beyond the Maturity Date.

     Investment means, as to any Person, any acquisition or investment by such Person, whether by means of (a) the purchase or other acquisition of capital stock or other securities of another Person, (b) a loan, advance or capital contribution to, guaranty of Indebtedness of, or purchase or other acquisition of any other Indebtedness or equity participation or interest in, another Person, including any partnership or joint venture interest in such other Person, or (c) the purchase or other acquisition (in one transaction or a series of transactions) of assets of another Person that constitute a business unit. For purposes of covenant compliance, the amount of any Investment shall be the amount actually invested, without adjustment for subsequent increases or decreases in the value of such Investment, less all returns of principal or equity thereon, and shall, if made by the transfer or exchange of property other than cash be deemed to have been made in an amount equal to the fair market value of such property.

     IRS means the United States Internal Revenue Service.

     ISDA means the International Swaps and Derivatives Association, Inc.

     Laws means, collectively, all applicable international, foreign, federal, state and local statutes, treaties, rules, regulations, ordinances, codes and administrative or judicial precedents or authorities, including the interpretation or administration thereof by any Governmental Authority charged with the enforcement, interpretation or administration thereof, and all applicable administrative orders, licenses, authorizations and permits of, any Governmental Authority.

     L/C Advance means, with respect to each Lender, such Lender’s participation in any L/C Borrowing in accordance with its Pro Rata Share.

     L/C Borrowing means an extension of credit resulting from a drawing under any Letter of Credit which has not been reimbursed on the date when made or refinanced as a Borrowing.

     L/C Credit Extension means, with respect to any Letter of Credit, the issuance thereof or extension of the expiry date thereof, or the renewal or increase of the amount thereof.

     L/C Issuer means Royal Bank of Canada in its capacity as issuer of Letters of Credit hereunder, or any successor issuer of Letters of Credit hereunder which is a Lender or an Affiliate of a Lender.

     L/C Obligations means, as at any date of determination, the aggregate undrawn face amount of all outstanding Letters of Credit plus the aggregate of all Unreimbursed Amounts, including all L/C Borrowings.

     Lender has the meaning specified in the introductory paragraph hereto and, as the context requires, includes the L/C Issuer.

     Lender Hedging Agreement means a Swap Contract between a Company and a Lender or an Affiliate of a Lender.

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     Lending Office means, as to any Lender, the office or offices of such Lender set forth on its Administrative Details Form, or such other office or offices as a Lender may from time to time notify the Borrower and the Administrative Agent.

     Letter of Credit means any standby letter of credit issued hereunder.

     Letter of Credit Application means an application and agreement for the issuance or amendment of a letter of credit in the form from time to time in use by the L/C Issuer.

     Letter of Credit Expiration Date means January 26, 2012.

     Letter of Credit Sublimit means an amount equal to the lesser of (i) the Aggregate Commitment and (ii) $10,000,000.

     Leverage Ratio means, for the MLP and its Subsidiaries on a consolidated basis, the ratio, as calculated based on the quarterly compliance certificate most recently delivered pursuant to Section 6.02(a), of (a) Cash Adjusted Consolidated Funded Debt as of the determination date to (b) Consolidated EBITDA (or Consolidated Annualized EBITDA for periods ending on or before December 31, 2007).

     Lien means any mortgage, pledge, hypothecation, assignment, deposit arrangement, encumbrance, lien (statutory or other), charge, or preference, priority or other security interest or preferential arrangement of any kind or nature whatsoever to secure or provide for payment of any obligation of any Person (including any conditional sale or other title retention agreement, any financing lease having substantially the same economic effect as any of the foregoing, and the filing of any financing statement under the Uniform Commercial Code or comparable Laws of any jurisdiction, other than any financing statement filed as a notice filing), including the interest of a purchaser of accounts receivable.

     Loan Documents means this Agreement, each Revolving Note, each of the Collateral Documents, the Agent/Arranger Fee Letter, each Borrowing Notice, each Compliance Certificate, the Guaranties, each Letter of Credit Application, and each other agreement, document or instrument delivered by any Loan Party or any of their respective Subsidiaries from time to time in connection with this Agreement and the Revolving Notes.

     Loan Party means each of the Borrower, each Guarantor, and each other entity that is an Affiliate of the Borrower that executes one or more Loan Documents.

     Material Adverse Effect means: (a) a material adverse change in, or a material adverse effect upon, the operations, business, properties or financial condition of the MLP and its Subsidiaries taken as a whole; (b) a material adverse effect on the ability of the Borrower to perform its obligations under the Loan Documents to which it is a party; or (c) a material adverse effect upon the legality, validity, binding effect or enforceability against the Borrower or any other Loan Party of any Loan Documents.

     Material Agreements means the following: (a) the Omnibus Agreement dated as of December 22, 2006 among Quest Parent, General Partner, Borrower and the MLP, (b) the Contribution Agreement, (c) Midstream Services and Gas Dedication Agreement dated as of December 22, 2006 among Borrower and Quest Parent and (d) Investors’ Rights Agreement, dated as of December 22, 2006 by and among the MLP, the General Partner, Quest Parent and the investors named therein, and any agreement or

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agreements entered into in replacement or substitution of any of the forgoing. “Material Agreement” means each of such Material Agreements.

     Maturity Date means (a) January 31, 2012, or (b) such earlier effective date of any other termination, cancellation, or acceleration of the Aggregate Commitment under this Agreement.

     Maximum Amount and Maximum Rate respectively mean, for each Lender, the maximum non-usurious amount and the maximum non-usurious rate of interest which, under applicable Law, such Lender is permitted to contract for, charge, take, reserve, or receive on the Obligations.

     Maximum Annual Funded Distribution Amount means at any one time outstanding, a maximum amount equal to the greater of (i) $5,000,000 and (ii) the product obtained by multiplying the MLP’s most recently declared quarterly distribution per unit by the number of MLP units then outstanding on the declaration date.

     Midstream Businesses means gathering, transportation, fractionation, processing, marketing, and storage of natural gas, crude oil, natural gas liquids and other liquid and gaseous hydrocarbons and businesses closely related to the foregoing.

     MLP Guaranty means the MLP Guaranty made by the MLP as of the Closing Date in favor of the Administrative Agent on behalf of the Lenders in form and substance acceptable to the Administrative Agent.

     Moody’s means Moody’s Investors Service, Inc.

     Mortgaged Properties means collectively all the Mortgaged Property as defined in the Mortgages and Mortgaged Property individual means any one of such Mortgaged Properties.

     Mortgages means the mortgages, deeds of trust, or similar instruments executed by any of the Loan Parties in favor of Administrative Agent, for the benefit of the Lenders, and all supplements, assignments, amendments, and restatements thereto (or any agreement in substitution therefor, and Mortgage means each of such Mortgages).

     Multiemployer Plan means any employee benefit plan of the type described in Section 4001(a)(3) of ERISA, to which the Borrower or any ERISA Affiliate makes or is obligated to make contributions, or during the preceding three calendar years, has made or been obligated to make contributions.

     Net Cash Proceeds means (a) any Insurance Payment and (b) with respect to any Disposition, cash (including any cash received by way of deferred payment as and when received) received by the MLP, the Borrower or any of its Subsidiaries in connection with and as consideration therefor, on or after the date of consummation of such transaction, after (i) deduction of Taxes payable in connection with or as a result of such transaction, and (ii) payment of all usual and customary brokerage commissions and all other reasonable fees and expenses related to such transaction (including, without limitation, reasonable attorneys’ fees and closing costs incurred in connection with such transaction)

     Nonrenewal Notice Date has the meaning specified in Section 2.14(b)(iii).

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     Obligations means all advances to, and debts, liabilities, obligations, covenants and duties of, any Loan Party arising under any Loan Document, whether direct or indirect (including those acquired by assumption), absolute or contingent, due or to become due, now existing or hereafter arising and including interest that accrues after the commencement by or against any Loan Party of any proceeding under any Debtor Relief Laws naming such Person as the debtor in such proceeding. In addition, all references to the “Obligations” in the Collateral Documents and in Sections 2.13 and 10.09 of this Agreement shall, in addition to the foregoing, also include all present and future indebtedness, liabilities, and obligations (and all renewals and extensions thereof or any part thereof) now or hereafter owed to any Lender or any Affiliate of a Lender arising pursuant to any Lender Hedging Agreement.

     Obligor means the Borrower or any other Person (other than the Administrative Agent, Collateral Agent or any Lender) obligated under any Loan Document.

     Organization Documents means, (a) with respect to any corporation, the certificate or articles of incorporation and the bylaws; (b) with respect to any limited liability company, the certificate of formation and operating agreement; and (c) with respect to any partnership, joint venture, trust or other form of business entity, the partnership, joint venture or other applicable agreement of formation and any agreement, instrument, filing or notice with respect thereto filed in connection with its formation with the secretary of state or other department in the state of its formation, in each case as amended from time to time.

     Other Taxes has the meaning specified in Section 3. 01(b).

     Outstanding Amount on any date (i) with respect to Revolving Loans, means the aggregate principal amount thereof after giving effect to any Borrowings and prepayments or repayments occurring on such date, (ii) with respect to any L/C Obligations, the amount of such L/C Obligations on such date after giving effect to any L/C Credit Extension occurring on such date and any other changes in the aggregate amount of the L/C Obligations as of such date, including as a result of any reimbursements of outstanding unpaid drawings under any Letters of Credit or any reductions in the maximum amount available for drawing under Letters of Credit taking effect on such date, and (iii) for purposes of Section 2.11(d) with respect to Obligations under a Lender Hedging Agreement, means the amount then due and payable under such Lender Hedging Agreement.

     Parent Change of Control means the acquisition by any Person, or two or more Persons acting in concert, of beneficial ownership (within the meaning of Rule 13d-3 of the Securities and Exchange Commission under the Securities Exchange Act of 1934) of 50% or more of the outstanding shares of Voting Stock of Quest Parent; provided, however, that a merger of Quest Parent into another entity in which the other entity is the survivor shall not be deemed a Parent Change of Control if Quest Parent’s stockholders of record as constituted immediately prior to such acquisition hold more than 50% of the outstanding shares of Voting Stock of the surviving entity.

     Parent Credit Agreement means collectively (i) that certain Amended and Restated Senior Credit Agreement, dated as of February 7, 2006 among Quest Parent and Quest Cherokee, LLC (“Quest Cherokee”), as borrowers, Guggenheim Corporate Funding, LLC (“Guggenheim”) as administrative agent and syndication agent, and the other lenders party thereto, as amended, (ii) that certain Amended and Restated Second Lien Term Loan Agreement, dated as of June 9, 2006 among Quest Parent and Quest Cherokee, as borrowers, Guggenheim as administrative agent, and the other lenders party thereto, as amended, and (iii) that certain Third Lien Term Loan Agreement, dated as of June 9, 2006 among

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Quest Parent and Quest Cherokee, as borrowers, Guggenheim as administrative agent, and the other lenders party thereto, as amended.

     Participant has the meaning specified in Section 10.07(d).

     Partnership Agreement (MLP) means the First Amended and Restated Agreement of Limited Partnership of the MLP dated effective December 22, 2006.

     PBGC means the Pension Benefit Guaranty Corporation.

     Pension Plan means any “employee pension benefit plan” (as such term is defined in Section 3(2)(A) of ERISA), other than a Multiemployer Plan, that is subject to Title IV of ERISA and is sponsored or maintained by the Borrower or any ERISA Affiliate or to which the Borrower or any ERISA Affiliate contributes or has an obligation to contribute, or in the case of a multiple employer plan (as described in Section 4064(a) of ERISA) has made contributions at any time during the immediately preceding five plan years.

     Permitted Acquisition means any Acquisition by the Borrower or a Subsidiary of the Borrower resulting in ownership of assets inside the United States, or of equity interests in a Domestic Person or a non-Domestic Person whose business operations and assets are located in the U.S.; provided, however, that the following requirements have been satisfied:

     (i) if such Acquisition results in the Borrower’s ownership of a Subsidiary, the Borrower shall have complied with the requirements of Sections 6.14 and 6.15 as of the date of such Acquisition;

     (ii) with respect to Acquisitions involving acquisitions of an equity interest, such Acquisition shall have been approved or consented to by the board of directors or similar governing entity of the Person being acquired; and

     (iii) as of the closing of such Acquisition no Default or Event of Default shall exist or occur as a result of, and after giving effect to, such Acquisition.

     Permitted Liens means Liens permitted under Section 7.01 as described in such Section.

     Person means any individual, trustee, corporation, general partnership, limited partnership, limited liability company, joint stock company, trust, unincorporated organization, bank, business association, firm, joint venture or Governmental Authority.

     Plan means any “employee benefit plan” (as such term is defined in Section 3(3) of ERISA) established by the Borrower or any ERISA Affiliate.

     Pro Rata Share means, at any date of determination, for any Lender, the percentage (carried out to the ninth decimal place) that its Commitment bears to the Aggregate Commitment.

     Purchase Price means, with respect to any Acquisition, all direct, indirect, and deferred cash and non-cash payments made to or for the benefit of the Person being acquired (or whose assets are being acquired), its shareholders, officers, directors, employees, or Affiliates in connection with such Acquisition, including, without limitation, the amount of any Indebtedness being assumed in connection

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with such Acquisition and (subject to the limitations on Indebtedness hereunder) seller financing, payments under non-competition or consulting agreements entered into in connection with such Acquisition and similar agreements, all non-cash consideration and the value of any stock, options, or warrants or other rights to acquire stock issued as part of the consideration in such transaction.

     Quarterly Borrower Distributions means with respect to the Borrower, the distributions by the Borrower to the MLP for the purpose of providing funds to the MLP constituting Available Cash (as defined in the Partnership Agreement (MLP)) for distribution to the MLP’s equity owners.

     Quarterly MLP Distributions means with respect to the MLP, the distributions by the MLP of Available Cash (as defined in the Partnership Agreement (MLP)) to the MLP’s equity owners.

     Quest Parent means Quest Resource Corporation, a Nevada corporation.

     Quest Party means Quest Parent or any Subsidiary of Quest Parent, other than the General Partner, the MLP, the Borrower and its Subsidiaries.

     Reduction Amount has the meaning set forth in the definition of “Triggering Sale”.

     Register has the meaning set forth in Section 10.07(c).

     Reinvested means used for Capital Expenditures or Acquisitions in connection with the Midstream Business of a Company.

     Reinvestment Certificate means with respect to any Triggering Sale, a certificate of a Responsible Officer of the Borrower delivered pursuant to Section 6.02(e) detailing how the Reduction Amount corresponding to such Triggering Sale has been Reinvested and the portion of such Reduction Amount which has not been Reinvested.

     Related Parties means, with respect to any specified Person, such Person’s Affiliates and the respective directors, officers, employees, agents and advisors of such Person and such Person’s Affiliate.

     Release means any spilling, leaking, pumping, pouring, emitting, emptying, discharging, injecting, escaping, leaching, dumping, disposal, deposit, dispersal, migrating, or other movement into the air, ground, or surface water, or soil.

     Reportable Event means any of the events set forth in Section 4043(c) of ERISA, other than events for which the 30 day notice period has been waived.

     Request for Credit Extension means (a) with respect to a Borrowing, conversion or continuation of Revolving Loans, a Borrowing Notice, and (b) with respect to an L/C Extension, a Letter of Credit Application.

     Required Lenders means (a) on any date of determination on and after the Closing Date and prior to the date of the initial Borrowing under this Agreement, those Lenders holding more than 66+2/3% of the Aggregate Commitment, (b) on any date of determination on and after the date of the initial Borrowing under this Agreement, those Lenders holding more than 66+2/3% of the Outstanding Amount of Revolving Loans.

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     Repayment Notice means a notice of repayment of a Borrowing pursuant to Section 2.04(a), which, if in writing, shall be substantially in the form of Exhibit A-3.

     Responsible Officer means the president, chief executive officer, executive vice president, senior vice president, vice president, chief financial officer, controller, treasurer or assistant treasurer of a Person. Any document delivered hereunder that is signed by a Responsible Officer of a Loan Party shall be conclusively presumed to have been authorized by all necessary corporate, partnership, limited liability company, and/or other action on the part of such Loan Party and such Responsible Officer shall be conclusively presumed to have acted on behalf of such Loan Party.

     Restricted Payment by a Person means any dividend or other distribution (whether in cash, securities or other property) with respect to any equity interest in such Person, or any payment (whether in cash, securities or other property), including any sinking fund or similar deposit on account of the purchase, redemption, retirement, acquisition, cancellation or termination of any such equity interest or of any option, warrant or other right to acquire any such equity interest.

     Revolving Loan means an extension of revolving credit by a Lender to the Borrower pursuant to Section 2.01.

     Revolving Note means a revolving promissory note of Borrower in substantially the form of Exhibit B, evidencing the obligation of Borrower to repay the Revolving Loans and all renewals and extensions of all or any part thereof and “Revolving Notes” collectively means all of such promissory notes.

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

     S&P means Standard & Poor’s Rating Services, a division of The McGraw-Hill Companies, Inc.

     Security Agreements means, collectively, the security agreements, or similar instruments, executed by any of the Loan Parties in favor of the Administrative Agent for the benefit of the Lenders and their Affiliates, in form and substance acceptable to the Administrative Agent, and all supplements, assignments, amendments, and restatements thereto (or any agreement in substitution therefore), and “Security Agreement” means each of such Security Agreements.

     Subsidiary of a Person means a corporation, partnership, joint venture, limited liability company or other business entity of which a majority of the shares of securities or other interests having ordinary voting power for the election of directors or other governing body (other than securities or interests having such power only by reason of the happening of a contingency) are at the time beneficially owned, or the management of which is otherwise controlled, directly, or indirectly through one or more intermediaries, or both, by such Person. Unless otherwise specified, all references herein to a “Subsidiary” or to “Subsidiaries” shall refer to a Subsidiary or Subsidiaries of the Borrower.

     Subsidiary Guaranty means any Subsidiary Guaranty made by a Subsidiary of the Borrower or the MLP in favor of the Administrative Agent on behalf of the Lenders, in form and substance acceptable to the Administrative Agent.

     Subordinated Indebtedness has the meaning set forth in Section 7.04(c).

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     Swap Contract means (a) any and all interest rate swap transactions, basis swaps, credit derivative transactions, forward rate transactions, commodity swaps, commodity options, forward commodity contracts, equity or equity index swaps or options, bond or bond price or bond index swaps or options or forward bond or forward bond price or forward bond index transactions, interest rate options, forward foreign exchange transactions, cap transactions, floor transactions, collar transactions, currency swap transactions, cross-currency rate swap transactions, currency options, spot contracts, or any other similar transactions or any combination of any of the foregoing (including any options to enter into any of the foregoing), whether or not any such transaction is governed by or subject to any master agreement, and (b) any and all transactions of any kind, and the related confirmations, which are subject to the terms and conditions of, or governed by, any form of master agreement published by the International Swaps and Derivatives Association, Inc., any International Foreign Exchange Master Agreement, or any other master agreement (any such master agreement, together with any related schedules, a “Master Agreement”), including any such obligations or liabilities under any Master Agreement.

     Swap Termination Value means, in respect of any one or more Swap Contracts, after taking into account the effect of any legally enforceable netting agreement relating to such Swap Contracts, (a) for any date on or after the date such Swap Contracts have been closed out and termination value(s) determined in accordance therewith, such termination value(s), and (b) for any date prior to the date referenced in clause (a) the amount(s) determined as the mark-to-market value(s) for such Swap Contracts, as determined based upon one or more mid-market or other readily available quotations provided by any recognized dealer in such Swap Contracts (which may include any Lender).

     Synthetic Lease Obligation means the monetary obligation of a Person under (a) a so-called synthetic or tax retention lease, or (b) an agreement for the use or possession of property creating obligations that do not appear on the balance sheet of such Person but which are depreciated for tax purposes by such Person.

     Taxes has the meaning set forth in Section 3.01(a).

     Threshold Amount at any time means an amount equal to five (5%) of the Borrower’s consolidated assets measured as of the close of the then most recent fiscal quarter end.

     Triggering Sale means receipt of any Insurance Payment and any Disposition (including sales of stock or other equity interests of Subsidiaries) (other than a Disposition permitted by Section 7.07(a), (b)) or (c)) by the Borrower or any Subsidiary of the Borrower to any other Person (other than to the Borrower or to a Wholly-Owned Subsidiary of the Borrower) with respect to which the Net Cash Proceeds realized by any Company for such Disposition and from any Insurance Payments, when aggregated with the Net Cash Proceeds from all such other Dispositions by all Companies occurring since the Closing Date and all Insurance Payments received by all Companies since the Closing Date less any amounts that have been Reinvested, equals or exceeds the Threshold Amount. The portion of the Net Cash Proceeds in excess of the Threshold Amount is herein called the “Reduction Amount.”

     Triggering Sale Certificate means with respect to any Triggering Sale, a certificate of a Responsible Officer of the Borrower delivered pursuant to Section 6.02(d) identifying such Triggering Sale and specifying the date of receipt by a Company of such Reduction Amount and the amount of such Reduction Amount.

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     Type means, with respect to a Revolving Loan, its character as a Base Rate Loan or a Eurodollar Rate Loan.

     Unfunded Pension Liability means the excess of a Pension Plan’s benefit liabilities under Section 4001(a)(16) of ERISA, over the current value of that Pension Plan’s assets, determined in accordance with the assumptions used for funding the Pension Plan pursuant to Section 412 of the Code for the applicable plan year.

     United States or U.S. means the United States of America, its fifty states and the District of Columbia.

     Unreimbursed Amount has the meaning set forth in Section 2.14(c)(i).

     Voting Stock means the capital stock (or equivalent thereof) of any class or kind, of a Person, the holders of which are entitled to vote for the election of directors, managers, or other voting members of the governing body of such Person.

     Wholly-Owned when used in connection with a Person means any Subsidiary of such Person of which all of the issued and outstanding equity interests (except shares required as directors’ qualifying shares) shall be owned by such Person or one or more of its Wholly-Owned Subsidiaries.

     Working Capital/Distribution Loan means a Revolving Loan which is used solely for the purpose of (i) financing working capital or (ii) funding a Quarterly Borrower Distribution to the MLP.

     1.02 Other Interpretive Provisions.

     (a) The meanings of defined terms are equally applicable to the singular and plural forms of the defined terms.

     (b) (i) The words “herein” and “hereunder” and words of similar import when used in any Loan Document shall refer to such Loan Document as a whole and not to any particular provision thereof.

     (ii) Unless otherwise specified herein, Article, Section, Exhibit and Schedule references are to this Agreement.

     (iii) The term “including” is by way of example and not limitation.

     (iv) The term “documents” includes any and all instruments, documents, agreements, certificates, notices, reports, financial statements and other writings, however evidenced.

     (c) In the computation of periods of time from a specified date to a later specified date, the word “from” means “from and including;” the words “to” and “until” each mean “to but excluding;” and the word “through” means “to and including.”

     (d) Section headings herein and in the other Loan Documents are included for convenience of reference only and shall not affect the interpretation of this Agreement or any other Loan Document.

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     1.03 Accounting Terms. All accounting terms not specifically or completely defined herein shall be construed in conformity with, and all financial data required to be submitted pursuant to this Agreement shall be prepared in conformity with, GAAP applied on a consistent basis, as in effect from time to time, applied in a manner consistent with that used in preparing the audited financial statements, except as otherwise specifically prescribed herein.

     1.04 Rounding. Any financial ratios required to be maintained by the Borrower pursuant to this Agreement shall be calculated by dividing the appropriate component by the other component, carrying the result to one place more than the number of places by which such ratio is expressed herein and rounding the result up or down to the nearest number (with a rounding-up if there is no nearest number).

     1.05 References to Agreements and Laws. Unless otherwise expressly provided herein, (a) references to agreements (including the Loan Documents) and other contractual instruments shall be deemed to include all subsequent amendments, restatements, extensions, supplements and other modifications thereto, but only to the extent that such amendments, restatements, extensions, supplements and other modifications are not prohibited by any Loan Document; and (b) references to any Law shall include all statutory and regulatory provisions consolidating, amending, replacing, supplementing or interpreting such Law.

ARTICLE II.
THE COMMITMENTS AND BORROWINGS

     2.01 Revolving Loans. Subject to and in reliance upon the terms, conditions, representations, and warranties in the Loan Documents, each Lender severally, but not jointly, agrees to make revolving loans (each such revolving loan a “Revolving Loan”) to Borrower from time to time on any Business Day during the period from the Closing Date to the Maturity Date, in an aggregate amount not to exceed at any time outstanding the amount of such Lender’s Pro Rata Share of one or more Borrowings not to exceed, when aggregated with the Outstanding Amount of the L/C Obligations, such Lender’s Commitment. Such Borrowings may be repaid and reborrowed from time to time in accordance with the terms and provisions of the Loan Documents; provided that, each such Borrowing must occur on a Business Day and no later than the Business Day immediately preceding the Maturity Date.

2.02 Commitment Increase.

     (a) Request for Increase. Upon notice to the Administrative Agent, the Borrower may request from time to time an increase in the Aggregate Commitment by an amount in the aggregate not exceeding $50,000,000; provided that any such increased Aggregate Commitment shall be secured pari passu with the Obligations. At the time of sending such notice, the Borrower (in consultation with the Administrative Agent) shall specify the time period within which each Lender that is invited to participate in the increased Facility is requested to respond (which shall in no event be less than 15 Business Days from the date of delivery of such notice). The Borrower may also invite additional Eligible Assignees to become Lenders pursuant to a joinder agreement in form and substance satisfactory to the Administrative Agent and its counsel.

     (b) Elections to Increase. Each Lender and additional Eligible Assignee invited to participate shall notify the Administrative Agent within such time period whether or not it agrees to participate in the increase in the Aggregate Commitment (such election to be at the sole discretion of each Lender and additional Eligible Assignee) and, if so, by what amount. Any Lender or additional Eligible Assignee not

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responding within such time period shall be deemed to have declined to participate in the increase in the Aggregate Commitment.

     (c) Notification by Administrative Agent. The Administrative Agent shall notify the Borrower, each Lender and each additional Eligible Assignee of the responses to the request made hereunder to increase the Aggregate Commitment.

     (d) Effective Date and Allocations. If the Aggregate Commitment is increased in accordance with this Section, the Administrative Agent and the Borrower shall determine the effective date (the “Increase Effective Date”) and the final allocation of such increase. The Administrative Agent shall promptly notify the Borrower, Lenders and additional Eligible Assignees of the final allocation of such increase and the Increase Effective Date.

     (e) Conditions to Effectiveness of Increase. As conditions precedent to such increase, the terms and documentation in respect thereof shall be satisfactory to the Administrative Agent and the Borrower shall deliver to the Administrative Agent a certificate of each Loan Party dated as of the Increase Effective Date signed by a Responsible Officer of such Loan Party (i) certifying and attaching the resolutions adopted by such Loan Party approving or consenting to such increase, and (ii) in the case of the Borrower, certifying that, before and after giving effect to such increase, (A) no Default or Event of Default exists or would exist immediately after giving effect to the increase in the Aggregate Commitment, (B) the representations and warranties contained in Article V and the other Loan Documents are true and correct in all material respects on and as of the Increase Effective Date, except to the extent that such representations and warranties specifically refer to an earlier date, in which case they are true and correct in all material respects as of such earlier date, and except that for purposes of this Section 2.02, the representations and warranties contained in subsection (a) of Section 5.05 shall be deemed to refer to the most recent financial statements furnished pursuant to clauses (a) and (b), respectively, of Section 6.01, and (C) all financial covenants in Section 7.15 would be satisfied on a pro forma basis as of the most recent testing date after giving effect to actual Credit Extensions on the Increase Effective Date.

     (f) Conflicting Provisions. This Section shall supersede any provisions in Sections 2.12 or 10.01 to the contrary.

     2.03 Borrowings, Conversions and Continuations of Loans.

     (a) Each Borrowing, each conversion of Revolving Loans from one Type to the other, and each continuation of Revolving Loans as the same Type shall be made upon the Borrower’s irrevocable notice to the Administrative Agent, which may be given by telephone. Each such notice must be received by the Administrative Agent not later than noon, New York time, (i) three Business Days prior to the requested date of any Borrowing of, conversion to or continuation of Eurodollar Rate Loans, and (ii) one Business Day prior to the conversion of Eurodollar Rate Loans to Base Rate Loans, or the requested date of any Borrowing of Base Rate Loans. Each such telephonic notice must be confirmed promptly by delivery to the Administrative Agent of a written Borrowing Notice, appropriately completed and signed by a Responsible Officer of the Borrower. Each Borrowing of, conversion to or continuation of Eurodollar Rate Loans shall be in a principal amount of $1,000,000 or a whole multiple of $500,000 in excess thereof. Each Borrowing of or conversion to Base Rate Loans shall be in a principal amount of $1,000,000 or a whole multiple of $500,000 in excess thereof; provided that any Base Rate Loan may be in an aggregate amount that is equal to the entire unused balance of the Aggregate Commitment or that is required to finance the Unreimbursed Amount as provided in Section 2.14(c)(i). Each Borrowing Notice (whether telephonic or written) shall specify (i) whether the Borrower is requesting a Borrowing, a

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conversion of Revolving Loans from one Type to the other, or a continuation of Revolving Loans as the same Type, (ii) the requested date of the Borrowing, conversion or continuation, as the case may be (which shall be a Business Day), (iii) the principal amount of Revolving Loans to be borrowed, converted or continued, (iv) the Type of Loans to be borrowed or to which existing Revolving Loans are to be converted, and (v) if applicable, the duration of the Interest Period with respect thereto. If the Borrower fails to specify a Type of Revolving Loan in a Borrowing Notice or if the Borrower fails to give a timely notice requesting a conversion or continuation, then the applicable Revolving Loans shall be made or continued as, or converted to, Base Rate Loans. Any such automatic conversion to Base Rate Loans shall be effective as of the last day of the Interest Period then in effect with respect to the applicable Eurodollar Rate Loans. If the Borrower requests a Borrowing of, conversion to, or continuation of Eurodollar Rate Loans in any such Borrowing Notice, but fails to specify an Interest Period, it will be deemed to have specified an Interest Period of one month.

     (b) Following receipt of a Borrowing Notice, the Administrative Agent shall promptly notify each Lender of its Pro Rata Share of the applicable Borrowing, and if no timely notice of a conversion or continuation is provided by the Borrower, the Administrative Agent shall notify each Lender of the details of any automatic conversion to Base Rate Loans described in the preceding subsection. In the case of a Borrowing, each Lender shall make the amount of its Revolving Loan available to the Administrative Agent in immediately available funds at the Administrative Agent’s Office not later than noon, New York time, on the Business Day specified in the applicable Borrowing Notice. Upon satisfaction of the applicable conditions set forth in Sections 4.01, 4.02 and 4.03, as applicable, the Administrative Agent shall make all funds so received available to the Borrower in like funds as received by the Administrative Agent either by (i) crediting the account of the Borrower on the books of the Administrative Agent with the amount of such funds or (ii) wire transfer of such funds, in each case in accordance with instructions provided to the Administrative Agent by the Borrower; provided, however, that if, on the date of the Borrowing there are L/C Borrowings outstanding, then the proceeds of such Borrowing shall be applied, first, to the payment in full of any such L/C Borrowings, and second, to the Borrower as provided above.

     (c) Except as otherwise provided herein, a Eurodollar Rate Loan may be continued or converted only on the last day of the Interest Period for such Eurodollar Rate Loan. During the existence of an Event of Default, no Revolving Loans may be requested as, converted to or continued as Eurodollar Rate Loans without the consent of the Required Lenders, and the Required Lenders may demand that any or all of the then outstanding Eurodollar Rate Loans be converted immediately to Base Rate Loans. The Administrative Agent shall promptly notify the Borrower and the Lenders of the interest rate applicable to any Eurodollar Rate Loan upon determination of such interest rate. The determination of the Eurodollar Rate by the Administrative Agent shall be conclusive in the absence of manifest error.

     (e) After giving effect to all Borrowings, all conversions of Revolving Loans from one Type to the other, and all continuations of Revolving Loans as the same Type, there shall not be more than six (6) Interest Periods in effect at any given time with respect to Revolving Loans.

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     2.04 Prepayments.

     (a) Optional Prepayments. The Borrower may, upon delivery of a Repayment Notice to the Administrative Agent, at any time or from time to time voluntarily prepay in whole or in part Revolving Loans outstanding under the Facility without premium or penalty; provided that (i) such notice must be received by the Administrative Agent not later than noon, New York time, (A) three Business Days prior to any date of prepayment of Eurodollar Rate Loans, and (B) the date of prepayment of Base Rate Loans; (ii) any prepayment of Eurodollar Rate Loans shall be in a principal amount of $1,000,000 or a whole multiple of $500,000 in excess thereof; and (iii) any prepayment of Base Rate Loans shall be in a principal amount of $1,000,000 or a whole multiple of $500,000 in excess thereof. Each such notice shall specify the date and amount of such prepayment and the Type(s) of Revolving Loans to be prepaid. The Administrative Agent will promptly notify each Lender of its receipt of each such notice, and of such Lender’s Pro Rata Share of such prepayment. If such notice is given by the Borrower, the Borrower shall make such prepayment and the payment amount specified in such notice shall be due and payable on the date specified therein. Any prepayment of a Eurodollar Rate Loan shall be accompanied by all accrued interest thereon, together with any additional amounts required pursuant to Section 3.05. Each such prepayment shall be applied to the Revolving Loans of the Lenders in accordance with their respective Pro Rata Shares.

     Unless a Default or Event of Default has occurred and is continuing or would arise as a result thereof, any payment or prepayment of the Revolving Loans may be reborrowed by Borrower, subject to the terms and conditions hereof.

     (b) Mandatory Prepayments from Net Cash Proceeds.

     (i) If any portion of the Reduction Amount from any Triggering Sale (including any deferred purchase price therefor) has not been Reinvested within 180 days from the receipt by such Company of such Reduction Amount (including receipt of any deferred payments for any such Triggering Sale or portion thereof, if and when received), then on the Business Day following such 180th day, the Aggregate Commitment shall be automatically and permanently reduced, and the Revolving Loans shall be prepaid, in an amount equal to the portion of the Reduction Amount that is not so Reinvested and on such date the Borrower shall also prepay the Revolving Loans or Cash Collateralize the L/C Obligations if required by Section 2.04(c). Net Cash Proceeds from Insurance Payments and Dispositions that equal, when aggregated with Net Cash Proceeds from all Insurance Payments and Dispositions since the Closing Date, less amounts that have been Reinvested, an amount less than the Threshold Amount shall not be required to be used for mandatory prepayments or commitment reductions pursuant to this Section 2.04(b).

     (ii) Upon receipt by any Company of any Reduction Amount, the Borrower shall deliver a Triggering Sale Certificate to the Administrative Agent pursuant to Section 6.02(d).

     (iii) The prepayments and commitment reductions provided for in this Section 2.04(b) shall be applied as follows, unless an Event of Default has occurred and is continuing or would arise as a result thereof (whereupon the provisions of Section 2.11(d) shall apply): (A) first, to repay any outstanding fees, costs or expenses owing to Administrative Agent or any Lender, including Attorney Costs, (B) second, as a payment of all Unreimbursed Amounts then outstanding, until paid in full, and (C), third, as a repayment of the unpaid principal balance of

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the Revolving Loans, first to Base Rate Loans, until paid in full, and then to Eurodollar Rate Loans, with a corresponding reduction in the Aggregate Commitment if not Reinvested within 180 days following its receipt by a Company.

     (c) Mandatory Payments/Reductions. If for any reason the Outstanding Amount of all Revolving Loans and L/C Obligations at any time exceeds the Aggregate Commitment then in effect, the Borrower shall immediately prepay Revolving Loans and/or Cash Collateralize the L/C Obligations in an aggregate amount equal to such excess.

     (d) Prepayments: Interest/Consequential Loss. All prepayments under this Section 2.04 shall be made together with accrued interest to the date of such prepayment on the principal amount prepaid and any amounts due under Section 3.05.

     2.05 Reduction or Termination of Commitments. The Borrower may, upon notice to the Administrative Agent, terminate the Aggregate Commitment or permanently reduce the Aggregate Commitment to an amount not less than the sum of the Outstanding Amount of the then existing (i) unpaid principal balance of the Revolving Loans and (ii) L/C Obligations; provided that (i) any such notice shall be received by the Administrative Agent not later than noon, three Business Days prior to (or if all the outstanding Borrowings are Base Rate Loans, no later than noon on) the date of termination or reduction, and (ii) any such partial reduction shall be in an aggregate amount of $3,000,000 or any whole multiple of $500,000 in excess thereof. The Administrative Agent shall promptly notify the Lenders of any such notice of reduction or termination. Once reduced in accordance with this Section, the Aggregate Commitment may not be increased. Any reduction of the Aggregate Commitment shall be applied to the Commitment of each Lender according to its Pro Rata Share. Except in connection with a termination or reduction of the entire Aggregate Commitment, all commitment fees on the portion of the Aggregate Commitment so terminated which have accrued to the effective date of any termination of the Aggregate Commitment shall at Administrative Agent’s option either be paid on the effective date of such termination or on the date when such commitment fee would otherwise be due.

     2.06 Repayment of Revolving Loans. The Borrower shall repay to the Lenders on the Maturity Date the aggregate principal amount of Revolving Loans outstanding on such date.

     2.07 Interest. (a) Subject to the provisions of subsection (b) below, (i) each Eurodollar Rate Loan shall bear interest on the outstanding principal amount thereof for each Interest Period at a rate per annum equal to the Eurodollar Rate for such Interest Period plus the Applicable Rate and (ii) each Base Rate Loan shall bear interest on the outstanding principal amount thereof from the applicable borrowing date at a rate per annum equal to the Base Rate plus the Applicable Rate.

     (b) While any Event of Default exists or after acceleration (i) the Borrower shall pay interest on the principal amount of all outstanding Obligations at a fluctuating interest rate per annum at all times equal to the Default Rate to the fullest extent permitted by applicable Law, and (ii) accrued and unpaid interest on past due amounts (including interest on past due interest, to the extent allowed by Law) shall be due and payable upon demand.

     (c) Interest on each Revolving Loan shall be due and payable in arrears on each Interest Payment Date applicable thereto and at such other times as may be specified herein. Interest hereunder shall be due and payable in accordance with the terms hereof before and after judgment, and before and after the commencement of any proceeding under any Debtor Relief Law.

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     (d) If the designated rate applicable to any Borrowing exceeds the Maximum Rate, the rate of interest on such Borrowing shall be limited to the Maximum Rate, but any subsequent reductions in such designated rate shall not reduce the rate of interest thereon below the Maximum Rate until the total amount of interest accrued thereon equals the amount of interest which would have accrued thereon if such designated rate had at all times been in effect. In the event that at maturity (stated or by acceleration), or at final payment of the Outstanding Amount of any Revolving Loans or L/C Obligations, the total amount of interest paid or accrued is less than the amount of interest which would have accrued if such designated rates had at all times been in effect, then, at such time and to the extent permitted by Law, the Borrower shall pay an amount equal to the difference between (a) the lesser of the amount of interest which would have accrued if such designated rates had at all times been in effect and the amount of interest which would have accrued if the Maximum Rate had at all times been in effect, and (b) the amount of interest actually paid or accrued on such Outstanding Amount.

     2.08 Fees. (a) Commitment Fee. The Borrower shall pay to the Administrative Agent for the account of each Lender in accordance with its Pro Rata Share, a commitment fee equal to the Applicable Rate times the actual daily amount by which the Aggregate Commitment (subject to reduction pursuant to Sections 2.04 and 2.05) exceeds the sum of (i) the Outstanding Amount of Revolving Loans plus (ii) the Outstanding Amount of L/C Obligations. The commitment fee shall accrue at all times from the Closing Date until the Maturity Date and shall be due and payable quarterly in arrears on the last Business Day of each March, June, September and December, commencing with the first such date to occur after the Closing Date, and on the Maturity Date. The commitment fee shall be calculated quarterly in arrears. The commitment fee shall accrue at all times, including at any time during which one or more of the conditions in Article IV is not met.

     (b) Arranger’s and Administrative Agent’s Fees. On the Closing Date, the Borrower shall pay certain fees to the Arranger and Administrative Agent to be shared among them and the Borrower shall pay certain fees to the Administrative Agent for the Administrative Agent’s own account as an administrative agency fee, in the amounts and at the times specified in the letter agreement dated January 16, 2007 (the “Agent/Arranger Fee Letter”), between the Borrower and Royal Bank of Canada. Such fees shall be fully earned when paid and shall be nonrefundable for any reason whatsoever. Additionally, Borrower shall pay to the Administrative Agent for the Administrative Agent’s own account the fees in the amounts and on the dates specified in the Agent/Arranger Fee Letter.

     2.09 Computation of Interest and Fees. Computation of interest on Base Rate Loans shall be calculated on the basis of a year of 365 or 366 days, as the case may be, and the actual number of days elapsed. Computation of all other types of interest and all fees shall be calculated on the basis of a year of 360 days and the actual number of days elapsed, which results in a higher yield to the payee thereof than a method based on a year of 365 or 366 days. Interest shall accrue on each Revolving Loan for the day on which the Revolving Loan is made, and shall not accrue on a Revolving Loan, or any portion thereof, for the day on which the Revolving Loan or such portion is paid; provided that any Revolving Loan that is repaid on the same day on which it is made shall bear interest for one day.

     2.10 Evidence of Debt. (a) The Revolving Loans made by each Lender shall be evidenced by one or more accounts or records maintained by such Lender and by the Administrative Agent in the ordinary course of business. The accounts or records maintained by the Administrative Agent and each Lender shall be conclusive absent manifest error of the amount of the Revolving Loans made by the Lenders to the Borrower and the interest and payments thereon. Any failure so to record or any error in doing so shall not, however, limit or otherwise affect the obligation of the Borrower hereunder to pay any

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amount owing with respect to the Revolving Loans or the L/C Obligations. In the event of any conflict between the accounts and records maintained by any Lender and the accounts and records of the Administrative Agent in respect of such matters, the accounts and records of such Lender shall control. Upon the request of any Lender made through the Administrative Agent, such Lender’s Revolving Loans may be evidenced by one or more Revolving Notes. Each Lender may attach schedules to its Revolving Note(s) and endorse thereon the date, Type (if applicable), amount and maturity of the applicable Revolving Loans and payments with respect thereto.

     (b) In addition to the accounts and records referred to in subsection (a), each Lender and the Administrative Agent shall maintain in accordance with its usual practice accounts or records evidencing the purchases and sales by such Lender of participations in Letters of Credit. In the event of any conflict between the accounts and records maintained by the Administrative Agent and the accounts and records of any Lender in respect of such matters, the accounts and records of the Administrative Agent shall control.

     2.11 Payments Generally. (a) All payments to be made by the Borrower shall be made without condition or deduction for any counterclaim, defense, recoupment or setoff. Except as otherwise expressly provided herein, all payments by the Borrower hereunder shall be made to the Administrative Agent, for the account of the respective Lenders to which such payment is owed, at the Administrative Agent’s Office in Dollars and in immediately available funds not later than noon, New York time, on the date specified herein. The Administrative Agent will promptly distribute to each Lender its Pro Rata Share (or other applicable share as provided herein) of such payment in like funds as received by wire transfer to such Lender’s Lending Office. All payments received by the Administrative Agent after noon, New York time, shall be deemed received on the next succeeding Business Day and any applicable interest or fee shall continue to accrue.

     (b) Subject to the definition of “Interest Period,” if any payment to be made by the Borrower shall come due on a day other than a Business Day, payment shall be made on the next following Business Day, and such extension of time shall be reflected in computing interest or fees, as the case may be.

     (c) If no Event of Default exists and if no order of application is otherwise specified in the Loan Documents, payments and prepayments of the Obligations shall be applied first to fees, second to accrued interest then due and payable on the Outstanding Amount of Revolving Loans and L/C Obligations, and then to the remaining Obligations in the order and manner as Borrower may direct.

     (d) If at any time insufficient funds are received by and available to the Administrative Agent to pay fully the Obligations, or if an Event of Default exists, any payment or prepayment shall be applied in the following order: (i) to the payment of enforcement expenses incurred by the Administrative Agent, including Attorney Costs; (ii) to the ratable payment of all other fees, expenses, indemnities and other amounts (including amounts payable under Article III) for which the Administrative Agent or Lenders have not been paid or reimbursed in accordance with the Loan Documents (as used in this Section 2.11(d)(ii), a “ratable payment” for any Lender or the Administrative Agent shall be, on any date of determination, that proportion which the portion of the total fees, expenses, indemnities and other amounts owed to such Lender or the Administrative Agent bears to the total aggregate fees, expenses and indemnities owed to all Lenders and the Administrative Agent on such date of determination); (iii) to the ratable payment of accrued and unpaid Letter of Credit fees and accrued and unpaid interest on the Outstanding Amount of Revolving Loans and the Outstanding Amount of Obligations under Lender

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Hedging Agreements (it being understood that for purposes of this clause (iii) the Outstanding Amount of Obligations under Lender Hedging Agreements refers only to payments owing pursuant to Section 2(a) of the 2002 Master Agreement form promulgated by the ISDA (or equivalent type payment obligation if some other form of Swap Contract is in effect)(as used in this Section 2.11(d)(iii), “ratable payment” means, for any Lender (or Lender Affiliate, in the case of Lender Hedging Agreements), on any date of determination, that proportion which the accrued and unpaid Letter of Credit fees and accrued and unpaid interest on the Outstanding Amount of Revolving Loans and the Outstanding Amount of Obligations under Lender Hedging Agreements owed to such Lender (or Lender Affiliate, in the case of Lender Hedging Agreements) bears to the total accrued and unpaid Letter of Credit fees and accrued and unpaid interest on the Outstanding Amount of Revolving Loans and the Outstanding Amount of Obligations under Lender Hedging Agreements owed to all Lenders (and Affiliates, in the case of Lender Hedging Agreements)); (iv) to the ratable payment of the Outstanding Amount of L/C Borrowings and Revolving Loans and the Outstanding Amount of Obligations under Lender Hedging Agreements (it being understood that for purposes of this clause (iv) the Outstanding Amount of Obligations under Lender Hedging Agreements refers to payments owing in connection with an Early Termination Amount as defined in the 2002 Master Agreement form promulgated by the ISDA (or equivalent type payment obligation if some other form of Swap Contract is in effect)(as used in this Section 2.11(d)(iv), “ratable payment” means for any Lender (or Lender Affiliate, in the case of Lender Hedging Agreements), on any date of determination, that proportion which the Outstanding Amount of L/C Borrowings and Revolving Loans and the Outstanding Amount of Obligations under Lender Hedging Agreements owed to such Lender (or Lender Affiliate, in the case of Lender Hedging Agreements) bears to the Outstanding Amount of L/C Borrowings and Revolving Loans and the Outstanding Amount of Obligations under Lender Hedging Agreements owed to all Lenders)(and Affiliates, in the case of Lender Hedging Agreements)); (v) to Cash Collateralize the Letters of Credit; and (vi) to the payment of the remaining Obligations, if any, in the order and manner the Required Lenders deem appropriate. Subject to Section 2.14(g), amounts used to Cash Collateralize the aggregate undrawn amount of Letters of Credit pursuant to clause (v) above shall be applied to satisfy drawings under such Letters of Credit as they occur. If any amount remains on deposit as Cash Collateral after all Letters of Credit have either been fully drawn or expired, such remaining amount shall be applied to the other Obligations, if any, in the order set forth above.

     (e) Unless the Borrower or any Lender has notified the Administrative Agent prior to the date any payment is required to be made by it to the Administrative Agent hereunder, that the Borrower or such Lender, as the case may be, will not make such payment, the Administrative Agent may assume that the Borrower or such Lender, as the case may be, has timely made such payment and may (but shall not be so required to), in reliance thereon, make available a corresponding amount to the Person entitled thereto. If and to the extent that such payment was not in fact made to the Administrative Agent in immediately available funds, then:

     (i) if the Borrower failed to make such payment, each Lender shall forthwith on demand repay to the Administrative Agent the portion of such assumed payment that was made available to such Lender in immediately available funds, together with interest thereon in respect of each day from and including the date such amount was made available by the Administrative Agent to such Lender to the date such amount is repaid to the Administrative Agent in immediately available funds, at the Federal Funds Rate from time to time in effect; and

     (ii) if any Lender failed to make such payment, such Lender shall forthwith on demand pay to the Administrative Agent the amount thereof in immediately available funds, together with interest thereon for the period from the date such amount was made available by the

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Administrative Agent to the Borrower to the date such amount is recovered by the Administrative Agent (the “Compensation Period”) at a rate per annum equal to the Federal Funds Rate from time to time in effect. If such Lender pays such amount to the Administrative Agent, then such amount shall constitute such Lender’s Revolving Loan, included in the applicable Borrowing. If such Lender does not pay such amount forthwith upon the Administrative Agent’s demand therefor, the Administrative Agent may make a demand therefor upon the Borrower, and the Borrower shall pay such amount to the Administrative Agent, together with interest thereon for the Compensation Period at a rate per annum equal to the rate of interest applicable to the applicable Borrowing. Nothing herein shall be deemed to relieve any Lender from its obligation to fulfill its Commitment or to prejudice any rights which the Administrative Agent or the Borrower may have against any Lender as a result of any default by such Lender hereunder.

     A notice of the Administrative Agent to any Lender with respect to any amount owing under this subsection (e) shall be conclusive, absent manifest error.

     (f) If any Lender makes available to the Administrative Agent funds for any Revolving Loan to be made by such Lender as provided in the foregoing provisions of this Article II, and the conditions to the applicable Borrowing set forth in Article IV are not satisfied or waived in accordance with the terms hereof, the Administrative Agent shall return such funds (in like funds as received from such Lender) to such Lender, without interest.

     (g) The obligations of the Lenders hereunder to make Revolving Loans are several and not joint. The failure of any Lender to make any Revolving Loan on any date required hereunder shall not relieve any other Lender of its corresponding obligation to do so on such date, and no Lender shall be responsible for the failure of any other Lender to so make its Revolving Loan or purchase its participation.

     (h) Nothing herein shall be deemed to obligate any Lender to obtain the funds for any Revolving Loan in any particular place or manner or to constitute a representation by any Lender that it has obtained or will obtain the funds for any Revolving Loan in any particular place or manner.

     2.12 Sharing of Payments. If, other than as expressly provided elsewhere herein, any Lender shall obtain on account of the Revolving Loans made by it, or the participations in the L/C Obligations, any payment (whether voluntary, involuntary, through the exercise of any right of set-off, or otherwise) in excess of its ratable share (or other share contemplated hereunder) thereof, such Lender shall immediately (a) notify the Administrative Agent, of such fact, and (b) purchase from the other Lenders such participations in the Revolving Loans made by them, and/or such subparticipations in the participations in L/C Obligations held by them, as shall be necessary to cause such purchasing Lender to share the excess payment in respect of such Revolving Loan or such participations, as the case may be, pro rata with each of them; provided, however, that if all or any portion of such excess payment is thereafter recovered from the purchasing Lender, such purchase shall to that extent be rescinded and each other Lender shall repay to the purchasing Lender the purchase price paid therefor, together with an amount equal to such paying Lender’s ratable share (according to the proportion of (i) the amount of such paying Lender’s required repayment to (ii) the total amount so recovered from the purchasing Lender) of any interest or other amount paid or payable by the purchasing Lender in respect of the total amount so recovered. The Borrower agrees that any Lender so purchasing a participation from another Lender may, to the fullest extent permitted by law, exercise all its rights of payment (including the right of set-off, but subject to Section 10.09) with respect to such participation as fully as if such Lender were the direct creditor of the

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Borrower in the amount of such participation. The Administrative Agent will keep records (which shall be conclusive and binding in the absence of manifest error) of participations purchased under this Section and will in each case notify the Lenders following any such purchases or repayments. Each Lender that purchases a participation pursuant to this Section shall from and after such purchase have the right to give all notices, requests, demands, directions and other communications under this Agreement with respect to the portion of the Obligations purchased to the same extent as though the purchasing Lender were the original owner of the Obligations purchased.

     2.13 Priority of Hedging Obligations. Any amounts received in satisfaction of any Obligations arising under the Loan Documents, including, without limitation, Obligations under this Agreement and Obligations under any Lender Hedging Agreement shall rank pari passu in right of payment and shall be used to repay such Obligations on a pro rata basis, unless specified otherwise in Section 2.11(d).

     2.14 Letters of Credit. (a) The Letter of Credit Commitment.

     (i) Subject to the terms and conditions set forth herein, (A) the L/C Issuer agrees, in reliance upon the agreements of the other Lenders set forth in this Section 2.14, (1) from time to time on any Business Day during the period from the Closing Date until the Letter of Credit Expiration Date, to issue Letters of Credit for the account of the Borrower (and such Letters of Credit may be issued for the benefit of the Borrower, the MLP, any of their respective Subsidiaries or the General Partner), and to amend or renew Letters of Credit previously issued by it, in accordance with subsection (b) below, and (2) to honor drafts under the Letters of Credit; and (B) the Lenders severally agree to participate in Letters of Credit issued for the account of the Borrower; provided that the L/C Issuer shall not be obligated to make any L/C Credit Extension with respect to any Letter of Credit, and no Lender shall be obligated to participate in any Letter of Credit, if as of the date of such L/C Credit Extension, (x) the Outstanding Amount of all L/C Obligations and all Revolving Loans would exceed the Aggregate Commitment, (y) the aggregate Outstanding Amount of the Revolving Loans of any Lender, plus such Lender’s Pro Rata Share of the Outstanding Amount of all L/C Obligations would exceed such Lender’s Commitment, or (z) the Outstanding Amount of the L/C Obligations would exceed the Letter of Credit Sublimit. Within the foregoing limits, and subject to the terms and conditions hereof, the Borrower’s ability to obtain Letters of Credit shall be fully revolving, and accordingly the Borrower may, during the foregoing period, obtain Letters of Credit to replace Letters of Credit that have expired or that have been drawn upon and reimbursed.

     (ii) The L/C Issuer shall be under no obligation to issue any Letter of Credit if:

     (A) any order, judgment or decree of any Governmental Authority or arbitrator shall by its terms purport to enjoin or restrain the L/C Issuer from issuing such Letter of Credit, or any Law applicable to the L/C Issuer or any request or directive (whether or not having the force of law) from any Governmental Authority with jurisdiction over the L/C Issuer shall prohibit, or request that the L/C Issuer refrain from, the issuance of letters of credit generally or such Letter of Credit in particular or shall impose upon the L/C Issuer with respect to such Letter of Credit any restriction, reserve or capital requirement (for which the L/C Issuer is not otherwise compensated hereunder) not in effect on the Closing Date, or shall impose upon the L/C Issuer any unreimbursed loss, cost or expense which was not applicable on the Closing Date and which the L/C

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Issuer in good faith deems material to it; provided, however, if any of the forgoing occur, then the Borrower may, at its sole expense and effort, upon notice to L/C Issuer and Administrative Agent, require the L/C Issuer to resign as L/C Issuer and a new replacement L/C Issuer be appointed, which new replacement L/C Issuer shall be reasonably acceptable to the Administrative Agent.

     (B) subject to Section 2.14(b)(iii), the expiry date of such requested Letter of Credit would occur more than twelve months after the date of issuance or last renewal, unless the Required Lenders have approved such expiry date;

     (C) the expiry date of such requested Letter of Credit would occur after the Letter of Credit Expiration Date, unless all the Lenders have approved such expiry date;

     (D) the issuance of such Letter of Credit would violate one or more policies of the L/C Issuer generally applicable to all borrowers; or

     (E) such Letter of Credit is in a face amount less than $100,000 (unless upon Borrower’s request the L/C Issuer agrees to issue a Letter of Credit for a lesser amount), or is to be used for a purpose other than as described in Section 6.12 or is denominated in a currency other than Dollars.

     (iii) The L/C Issuer shall be under no obligation to amend any Letter of Credit if (A) the L/C Issuer would have no obligation at such time to issue such Letter of Credit in its amended form under the terms hereof, or (B) the beneficiary of such Letter of Credit does not accept the proposed amendment to such Letter of Credit.

     (iv) The L/C Issuer shall act on behalf of the Lenders with respect to any Letters of Credit issued by it and the documents associated therewith, and the L/C Issuer shall have all of the benefits and immunities (A) provided to the Administrative Agent in Article IX with respect to any acts taken or omissions suffered by the L/C Issuer in connection with Letters of Credit issued by it or proposed to be issued by it and L/C Issuer documents pertaining to such Letters of Credit as fully as if the term “Administrative Agent” as used in Article IX included the L/C Issuer with respect to such acts or omissions, and (B) as additionally provided herein with respect to the L/C Issuer.

     (b) Procedures for Issuance and Amendment of Letters of Credit; Evergreen Letters of Credit.

     (i) Each Letter of Credit shall be issued or amended, as the case may be, upon the request of the Borrower delivered to the L/C Issuer (with a copy to the Administrative Agent) in the form of a Letter of Credit Application, appropriately completed and signed by a Responsible Officer of the Borrower. Such Letter of Credit Application must be received by the L/C Issuer and the Administrative Agent not later than noon, New York time, at least two Business Days (or such later date and time as the L/C Issuer may agree in a particular instance in its sole discretion) prior to the proposed issuance date or date of amendment, as the case may be. In the case of a request for an initial issuance of a Letter of Credit, such Letter of Credit Application shall specify in form and detail satisfactory to the L/C Issuer: (A) the proposed issuance date of the requested Letter of Credit (which shall be a Business Day); (B) the amount thereof; (C) the expiry date thereof; (D) the name and address of the beneficiary thereof; (E) the documents to be presented

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by such beneficiary in case of any drawing thereunder; (F) the full text of any certificate to be presented by such beneficiary in case of any drawing thereunder; and (G) such other matters as the L/C Issuer may require. In the case of a request for an amendment of any outstanding Letter of Credit, such Letter of Credit Application shall specify in form and detail satisfactory to the L/C Issuer (A) the Letter of Credit to be amended; (B) the proposed date of amendment thereof (which shall be a Business Day); (C) the nature of the proposed amendment; and (D) such other matters as the L/C Issuer may require.

     (ii) Promptly after receipt of any Letter of Credit Application, the L/C Issuer will confirm with the Administrative Agent (by telephone or in writing) that the Administrative Agent has received a copy of such Letter of Credit Application from the Borrower and, if not, the L/C Issuer will provide the Administrative Agent with a copy thereof. Upon receipt by the L/C Issuer of confirmation from the Administrative Agent that the requested issuance or amendment is permitted in accordance with the terms hereof, then, subject to the terms and conditions hereof, the L/C Issuer shall, on the requested date, issue a Letter of Credit for the account of the Borrower or enter into the applicable amendment, as the case may be, in each case in accordance with the L/C Issuer’s usual and customary business practices. Immediately upon the issuance of each Letter of Credit, each Lender shall be deemed to, and hereby irrevocably and unconditionally agrees to, purchase from the L/C Issuer a participation in such Letter of Credit in an amount equal to the product of such Lender’s Pro Rata Share times the amount of such Letter of Credit.

     (iii) If the Borrower so requests in any applicable Letter of Credit Application, the L/C Issuer may, in its sole and absolute discretion, agree to issue a Letter of Credit that has automatic renewal provisions (each, an “Evergreen Letter of Credit”); provided that any such Evergreen Letter of Credit must permit the L/C Issuer to prevent any such renewal at least once in each twelve-month period (commencing with the date of issuance of such Letter of Credit) by giving prior notice to the beneficiary thereof not later than a day (the “Nonrenewal Notice Date”) in each such twelve-month period to be agreed upon at the time such Letter of Credit is issued. Unless otherwise directed by the L/C Issuer, the Borrower shall not be required to make a specific request to the L/C Issuer for any such renewal. Once an Evergreen Letter of Credit has been issued, the L/C Issuer shall permit the renewal of such Letter of Credit unless the L/C Issuer has received notice on or before the Business Day immediately preceding the Nonrenewal Notice Date from any Lender stating that one or more of the applicable conditions specified in Section 4.02 is not then satisfied or the L/C Issuer would not then be required to issue a replacement Letter of Credit pursuant to this Section 2.14.

     (iv) Promptly after its delivery of any Letter of Credit or any amendment to a Letter of Credit to an advising bank with respect thereto or to the beneficiary thereof, the L/C Issuer will also deliver to the Borrower and the Administrative Agent a true and complete copy of such Letter of Credit or amendment.

     (c) Drawings and Reimbursements; Funding of Participations.

     (i) Upon any drawing under any Letter of Credit, the L/C Issuer shall notify the Borrower and the Administrative Agent thereof. Not later than noon, New York time, on the date of any payment by the L/C Issuer under a Letter of Credit (each such date, an “Honor Date”), the Borrower shall reimburse the L/C Issuer through the Administrative Agent in an

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amount equal to the amount of such drawing. If the Borrower fails to so reimburse the L/C Issuer by such time, the Administrative Agent shall promptly notify each Lender of the Honor Date, the amount of the unreimbursed drawing (the “Unreimbursed Amount”), and such Lender’s Pro Rata Share thereof. In such event, the Borrower shall be deemed to have requested a Borrowing of Base Rate Loans to be disbursed on the Honor Date in an amount equal to the Unreimbursed Amount, without regard to the minimum and multiples specified in Section 2.03 for the principal amount of Base Rate Loans, but subject to the amount of the unutilized portion of the Aggregate Commitment and the conditions set forth in Section 4.02 (other than the delivery of a Borrowing Notice) and the failure of the Borrower to so reimburse the Administrative Agent shall not be deemed a Default or an Event of Default. Any notice given by the L/C Issuer or the Administrative Agent pursuant to this Section 2.14(c)(i) may be given by telephone if immediately confirmed in writing; provided that the lack of such an immediate confirmation shall not affect the conclusiveness or binding effect of such notice.

     (ii) Each Lender (including the Lender acting as L/C Issuer) shall upon any notice pursuant to Section 2.14(c)(i) make funds available to the Administrative Agent for the account of the L/C Issuer at the Administrative Agent’s Office in an amount equal to its Pro Rata Share of the Unreimbursed Amount not later than 11:00 a.m., New York time, on the Business Day specified in such notice by the Administrative Agent, whereupon, subject to the provisions of Section 2.14(c)(iii), each Lender that so makes funds available shall be deemed to have made a Base Rate Loan to the Borrower in such amount. The Administrative Agent shall remit the funds so received to the L/C Issuer.

     (iii) With respect to any Unreimbursed Amount that is not fully refinanced by a Borrowing of Base Rate Loans because the conditions set forth in Section 4.02 cannot be satisfied or for any other reason, the Borrower shall be deemed to have incurred from the L/C Issuer an L/C Borrowing in the amount of the Unreimbursed Amount that is not so refinanced, which L/C Borrowing shall be due and payable on demand (together with interest) and shall bear interest at the Default Rate. In such event, each Lender’s payment to the Administrative Agent for the account of the L/C Issuer pursuant to Section 2.14(c) (ii) shall be deemed payment in respect of its participation in such L/C Borrowing and shall constitute an L/C Advance from such Lender in satisfaction of its participation obligation under this Section 2.14.

     (iv) Until each Lender funds its Revolving Loan or L/C Advance pursuant to this Section 2.14(c) to reimburse the L/C Issuer for any amount drawn under any Letter of Credit, interest in respect of such Lender’s Pro Rata Share of such amount shall be solely for the account of the L/C Issuer.

     (v) Each Lender’s obligation to make Revolving Loans or L/C Advances to reimburse the L/C Issuer for amounts drawn under Letters of Credit, as contemplated by this Section 2.14(c), shall be absolute and unconditional and shall not be affected by any circumstance, including (A) any set-off, counterclaim, recoupment, defense or other right which such Lender may have against the L/C Issuer, the Borrower or any other Person for any reason whatsoever; (B) the occurrence or continuance of a Default or Event of Default, or (C) any other occurrence, event or condition, whether or not similar to any of the foregoing. Any such reimbursement shall not relieve or otherwise impair the obligation of the Borrower to reimburse the L/C Issuer for the amount of any payment made by the L/C Issuer under any Letter of Credit, together with interest as provided herein.

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     (vi) If any Lender fails to make available to the Administrative Agent for the account of the L/C Issuer any amount required to be paid by such Lender pursuant to the foregoing provisions of this Section 2.14(c) by the time specified in Section 2.14(c)(ii), the L/C Issuer shall be entitled to recover from such Lender (acting through the Administrative Agent), on demand, such amount with interest thereon for the period from the date such payment is required to the date on which such payment is immediately available to the L/C Issuer at a rate per annum equal to the Federal Funds Rate from time to time in effect. A certificate of the L/C Issuer submitted to any Lender (through the Administrative Agent) with respect to any amounts owing under this clause (vi) shall be conclusive absent manifest error.

     (d) Repayment of Participations.

     (i) At any time after the L/C Issuer has made a payment under any Letter of Credit and has received from any Lender such Lender’s L/C Advance in respect of such payment in accordance with Section 2.14(c), if the Administrative Agent receives for the account of the L/C Issuer any payment related to such Letter of Credit (whether directly from the Borrower or otherwise, including proceeds of cash Collateral applied thereto by the Administrative Agent), or any payment of interest thereon, the Administrative Agent will distribute to such Lender its Pro Rata Share thereof in the same funds as those received by the Administrative Agent.

     (ii) If any payment received by the Administrative Agent for the account of the L/C Issuer pursuant to Section 2.14(c)(i) is required to be returned, each Lender shall pay to the Administrative Agent for the account of the L/C Issuer its Pro Rata Share thereof on demand of the Administrative Agent, plus interest thereon from the date of such demand to the date such amount is returned by such Lender, at a rate per annum equal to the Federal Funds Rate from time to time in effect.

     (e) Obligations Absolute. The obligation of the Borrower to reimburse the L/C Issuer for each drawing under each Letter of Credit, and to repay each L/C Borrowing and each drawing under a Letter of Credit that is refinanced by a Borrowing of Revolving Loans, shall be absolute, unconditional and irrevocable, and shall be paid strictly in accordance with the terms of this Agreement under all circumstances, including the following:

     (i) any lack of validity or enforceability of such Letter of Credit, this Agreement, or any other agreement or instrument relating thereto;

     (ii) the existence of any claim, counterclaim, set-off, defense or other right that the Borrower may have at any time against any beneficiary or any transferee of such Letter of Credit (or any Person for whom any such beneficiary or any such transferee may be acting), the L/C Issuer or any other Person, whether in connection with this Agreement, the transactions contemplated hereby or by such Letter of Credit or any agreement or instrument relating thereto, or any unrelated transaction;

     (iii) any draft, demand, certificate or other document presented under such Letter of Credit proving to be forged, fraudulent, invalid or insufficient in any respect or any statement therein being untrue or inaccurate in any respect; or any loss or delay in the transmission or otherwise of any document required in order to make a drawing under such Letter of Credit;

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     (iv) any payment by the L/C Issuer under such Letter of Credit against presentation of a draft or certificate that does not strictly comply with the terms of such Letter of Credit; or any payment made by the L/C Issuer under such Letter of Credit to any Person purporting to be a trustee in bankruptcy, debtor-in-possession, assignee for the benefit of creditors, liquidator, receiver or other representative of or successor to any beneficiary or any transferee of such Letter of Credit, including any arising in connection with any proceeding under any Debtor Relief Law; or

     (v) any other circumstance or happening whatsoever, whether or not similar to any of the foregoing, that might otherwise constitute a defense available to, or a discharge of, the Borrower.

     The Borrower shall promptly examine a copy of each Letter of Credit and each amendment thereto that is delivered to it and, in the event of any claim of noncompliance with the Borrower’s instructions or other irregularity, the Borrower will immediately notify the L/C Issuer. The Borrower shall be conclusively deemed to have waived any such claim against the L/C Issuer and its correspondents unless such notice is given as aforesaid.

     (f) Role of L/C Issuer. Each Lender and the Borrower agree that, in paying any drawing under a Letter of Credit, the L/C Issuer shall not have any responsibility to obtain any document (other than any sight draft, certificates and documents expressly required by the Letter of Credit) or to ascertain or inquire as to the validity or accuracy of any such document or the authority of the Person executing or delivering any such document. No Agent-Related Person nor any of the respective correspondents, participants or assignees of the L/C Issuer shall be liable to any Lender for (i) any action taken or omitted in connection herewith at the request or with the approval of the Lenders or the Required Lenders, as applicable, (ii) any action taken or omitted in the absence of gross negligence or willful misconduct; or (iii) the due execution, effectiveness, validity or enforceability of any document or instrument related to any Letter of Credit or Letter of Credit Application. The Borrower hereby assumes all risks of the acts or omissions of any beneficiary or transferee with respect to its use of any Letter of Credit; provided, however, that this assumption is not intended to, and shall not, preclude the Borrower’s pursuing such rights and remedies as it may have against the beneficiary or transferee at law or under any other agreement. No Agent-Related Person, nor any of the respective correspondents, participants or assignees of the L/C Issuer, shall be liable or responsible for any of the matters described in clauses (i) through (v) of Section 2.14(e); provided, however, that anything in such clauses to the contrary notwithstanding, the Borrower may have a claim against the L/C Issuer, and the L/C Issuer may be liable to the Borrower, to the extent, but only to the extent, of any direct, as opposed to consequential or exemplary, damages suffered by the Borrower which the Borrower proves were caused by the L/C Issuer’s willful misconduct or gross negligence or the L/C Issuer’s willful failure to pay under any Letter of Credit after the presentation to it by the beneficiary of a sight draft and certificate(s) strictly complying with the terms and conditions of a Letter of Credit. In furtherance and not in limitation of the foregoing, the L/C Issuer may accept documents that appear on their face to be in order, without responsibility for further investigation, regardless of any notice or information to the contrary, and the L/C Issuer shall not be responsible for the validity or sufficiency of any instrument transferring or assigning or purporting to transfer or assign a Letter of Credit or the rights or benefits thereunder or proceeds thereof, in whole or in part, which may prove to be invalid or ineffective for any reason.

     (g) Cash Collateral. Upon the request of the Administrative Agent, (i) if the L/C Issuer has honored any full or partial drawing request under any Letter of Credit and such drawing has resulted in an

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L/C Borrowing, or (ii) if, as of the Letter of Credit Expiration Date, any Letter of Credit may for any reason remain outstanding and partially or wholly undrawn, the Borrower shall immediately Cash Collateralize the then Outstanding Amount of all L/C Obligations (in an amount equal to such Outstanding Amount). The Borrower hereby grants the Administrative Agent, for the benefit of the L/C Issuer and the Lenders, a Lien on all such cash and deposit accounts at any Lender.

     (h) Applicability of ISP98. Unless otherwise expressly agreed by the L/C Issuer and the Borrower when a Letter of Credit is issued, the rules of the “International Standby Practices 1998” published by the Institute of International Banking Law & Practice (or such later version thereof as may be in effect at the time of issuance) shall apply to each Letter of Credit.

     (i) Letter of Credit Fees. The Borrower shall pay to the Administrative Agent for the account of each Lender in accordance with its Pro Rata Share a Letter of Credit fee for each Letter of Credit issued equal to the Applicable Rate times the actual daily undrawn amount under each Letter of Credit. Such fee for each Letter of Credit shall be due and payable on the last Business Day of each March, June, September and December, commencing with the first such date to occur after the issuance of such Letter of Credit, and on the Letter of Credit Expiration Date.

     (j) Fronting Fee and Documentary and Processing Charges Payable to L/C Issuer. The Borrower shall pay directly to the L/C Issuer for its own account a fronting fee in an amount with respect to each Letter of Credit issued equal to the greater of (i) $500 and (ii) ¹/4 of 1% (25 basis points) calculated on the face amount thereof. In addition, the Borrower shall pay directly to the L/C Issuer for its own account the customary issuance, presentation, amendment and other processing fees, and other standard costs and charges, of the L/C Issuer relating to letters of credit as from time to time in effect. Such fees and charges are due and payable on demand and are nonrefundable.

     (k) Conflict with Letter of Credit Application. In the event of any conflict between the terms hereof and the terms of any Letter of Credit Application, the terms hereof shall control.

     (l) Letters of Credit Issued for MLP, Subsidiaries or General Partner. Notwithstanding that a Letter of Credit issued or outstanding hereunder is in support of any obligations of, or is for the account of, the MLP, any of its or the Borrower’s respective Subsidiaries or the General Partner, the Borrower shall be obligated to reimburse the L/C Issuer hereunder for any and all drawings under such Letter of Credit. The Borrower hereby acknowledges that the issuance of Letters of Credit in support of any obligation of, or for the account of the MLP, any of its or the Borrower’s respective Subsidiaries or the General Partner inures to the benefit of the Borrower, and that the Borrower’s business derives substantial benefits from the businesses of the MLP, its and the Borrower’s respective Subsidiaries and the General Partner.

ARTICLE III.
TAXES, YIELD PROTECTION AND ILLEGALITY

     3.01 Taxes.

     (a) Any and all payments by the Borrower to or for the account of the Administrative Agent or any Lender under any Loan Document shall be made free and clear of and without deduction for any and all present or future taxes, duties, levies, imposts, deductions, assessments, fees, withholdings or similar charges, and all liabilities with respect thereto; excluding, in the case of the Administrative Agent

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and each Lender, taxes imposed on or measured by its net income (including any franchise taxes imposed on or measured by its net income), by the jurisdiction (or any political subdivision thereof) under the Laws of which the Administrative Agent or such Lender, as the case may be, is organized or maintains its Lending Office (all such non-excluded taxes, duties, levies, imposts, deductions, assessments, fees, withholdings or similar charges, and liabilities being hereinafter referred to as “Taxes”). If the Borrower shall be required by any Laws to deduct any Taxes from or in respect of any sum payable under any Loan Document to the Administrative Agent or any Lender, (i) the sum payable shall be increased as necessary so that after making all required deductions (including deductions applicable to additional sums payable under this Section), each of the Administrative Agent and such Lender receives an amount equal to the sum it would have received had no such deductions been made, (ii) the Borrower shall make such deductions, and (iii) the Borrower shall pay the full amount deducted to the relevant taxation authority or other authority in accordance with applicable Laws.

     (b) In addition, the Borrower agrees to pay any and all present or future stamp, mortgage, court or documentary taxes and any other excise or property taxes or charges or similar levies which arise from any payment made under any Loan Document or from the execution, delivery, performance, enforcement or registration of, or otherwise with respect to, any Loan Document (hereinafter referred to as “Other Taxes”).

     (c) If the Borrower shall be required to deduct or pay any Taxes or Other Taxes from or in respect of any sum payable under any Loan Document to the Administrative Agent or any Lender, the Borrower shall also pay to the Administrative Agent (for the account of such Lender) or to such Lender, at the time interest is paid, such additional amount that such Lender specifies as necessary to preserve the after-tax yield (after factoring in all taxes, including taxes imposed on or measured by net income) such Lender would have received if such Taxes or Other Taxes had not been imposed.

     (d) The Borrower agrees to indemnify the Administrative Agent and each Lender for (i) the full amount of Taxes and Other Taxes (including any Taxes or Other Taxes imposed or asserted by any jurisdiction on amounts payable under this Section) paid by the Administrative Agent and such Lender, and (ii) amounts payable under Section 3.01(c) and (iii) any liability (including penalties, interest and expenses) arising therefrom or with respect thereto, except to the extent such sums are determined by a court of competent jurisdiction by final and non-appealable judgment to have resulted from the gross negligence or willful misconduct of the Administrative Agent, the L/C Issuer or such Lender, as applicable. Neither the Administrative Agent, the L/C Issuer nor any Lender shall be entitled to receive any payment with respect to any indemnity claim under this Section 3.01 with respect to Taxes or Other Taxes that are incurred or accrued more than 180 days prior to the date such party gives notice and demand with respect thereto to the Borrower. Payment under this subsection (d) shall be made within 30 days after the date the Lender or the Administrative Agent makes a demand therefor.

     (e) As soon as practicable after any payment of indemnified Taxes or Other Taxes by the Borrower to a Governmental Authority, the Borrower shall deliver to the Administrative Agent the original or a certified copy of a receipt issued by such Governmental Authority evidencing such payment, a copy of the return reporting such payment or other evidence of such payment reasonably satisfactory to the Administrative Agent.

     (f) Any Foreign Lender that is entitled to an exemption from or reduction of withholding tax under the Law of the jurisdiction in which the Borrower is resident for tax purposes, or any treaty to which such jurisdiction is a party, with respect to payments hereunder or under any other Loan Document

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shall deliver to the Borrower (with a copy to the Administrative Agent), at the time or times prescribed by applicable Law or reasonably requested by the Borrower or the Administrative Agent, such properly completed and executed documentation prescribed by applicable law, or reasonably requested by Borrower, as will permit such payments to be made without withholding or at a reduced rate of withholding. In addition, any Lender, if requested by the Borrower or the Administrative Agent, shall deliver such other documentation prescribed by applicable law or reasonably requested by the Borrower or the Administrative Agent as will enable the Borrower or the Administrative Agent to determine whether or not such Lender is subject to backup withholding or information reporting requirements.

     Without limiting the generality of the foregoing, in the event that the Borrower is resident for tax purposes in the United States, any Foreign Lender shall deliver to the Borrower and the Administrative Agent (in such number of copies as shall be requested by the recipient) on or prior to the date on which such Foreign Lender becomes a Lender under this Agreement (and from time to time thereafter upon the request of the Borrower or the Administrative Agent, but only if such Foreign Lender is legally entitled to do so), whichever of the following is applicable:

     (i) duly completed copies of Internal Revenue Service Form W-8BEN claiming eligibility for benefits of an income tax treaty to which the United States is a party;

     (ii) duly completed copies of Internal Revenue Service Form W-8ECI;

     (iii) in the case of a Foreign Lender claiming the benefits of the exemption for portfolio interest under section 881(c) of the Code, (x) a certificate to the effect that such Foreign Lender is not (A) a “bank” within the meaning of section 881(c)(3)(A) of the Code, (B) a “10 percent shareholder” of the Borrower within the meaning of section 881(c)(3)(B) of the Code, or (C) a “controlled foreign corporation” described in section 881(c)(3)(C) of the Code and (y) duly completed copies of Internal Revenue Service Form W-8BEN; or

     (iv) any other form prescribed by applicable Law as a basis for claiming exemption from or a reduction in United States Federal withholding tax duly completed together with such supplementary documentation as may be prescribed by applicable Law to permit the Borrower to determine the withholding or deduction required to be made.

     (f) If the Administrative Agent, any Lender or the L/C Issuer determines, in its sole discretion, that it has received a refund of any Taxes or Other Taxes as to which it has been indemnified by the Borrower or with respect to which the Borrower has paid additional amounts pursuant to this Section, it shall pay to the Borrower an amount equal to such refund (but only to the extent of indemnity payments made, or additional amounts paid, by the Borrower under this Section with respect to the Taxes or Other Taxes giving rise to such refund), net of all out-of-pocket expenses of the Administrative Agent, such Lender or the L/C Issuer, as the case may be, and without interest (other than any interest paid by the relevant Governmental Authority with respect to such refund); provided that the Borrower, upon the request of the Administrative Agent, such Lender or the L/C Issuer, agrees to repay the amount paid over to the Borrower (plus any penalties, interest or other charges imposed by the relevant Governmental Authority) to the Administrative Agent, such Lender or the L/C Issuer in the event the Administrative Agent, such Lender or the L/C Issuer is required to repay such refund to such Governmental Authority. This subsection shall not be construed to require the Administrative Agent, any Lender or the L/C Issuer to make available its tax returns (or any other information relating to its taxes that it deems confidential) to the Borrower or any other Person.

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     3.02 Illegality. If any Lender determines that any Change in Law has made it unlawful for any Lender or its applicable Lending Office to make, maintain or fund Eurodollar Rate Loans, or materially restricts the authority of such Lender to purchase or sell, or to take deposits of, Dollars in the applicable offshore Dollar market, or to determine or charge interest rates based upon the Eurodollar Rate, then, on notice thereof by such Lender to the Borrower through the Administrative Agent, any obligation of such Lender to make or continue Eurodollar Rate Loans or to convert Base Rate Loans to Eurodollar Rate Loans shall be suspended until such Lender notifies the Administrative Agent and the Borrower that the circumstances giving rise to such determination no longer exist. Upon receipt of such notice, the Borrower shall, upon demand from such Lender (with a copy to the Administrative Agent), prepay or, if applicable, convert all Eurodollar Rate Loans of such Lender to Base Rate Loans, either on the last day of the Interest Period thereof, if such Lender may lawfully continue to maintain such Eurodollar Rate Loans to such day, or immediately, if such Lender may not lawfully continue to maintain such Eurodollar Rate Loans. Upon any such prepayment or conversion, the Borrower shall also pay interest on the amount so prepaid or converted. Each Lender agrees to designate a different Lending Office if such designation will avoid the need for such notice and will not, in the reasonable judgment of such Lender, otherwise be materially disadvantageous to such Lender.

     3.03 Inability to Determine Rates. If the Administrative Agent determines in connection with any request for a Eurodollar Rate Loan or a conversion to or continuation thereof that (a) Dollar deposits are not being offered to banks in the applicable offshore Dollar market for the applicable amount and Interest Period of such Eurodollar Rate Loan, or adequate and reasonable means do not exist for determining the Eurodollar Rate for such Eurodollar Rate Loan, or (b) if the Required Lenders determine and notify the Administrative Agent that the Eurodollar Rate for such Eurodollar Rate Loan does not adequately and fairly reflect the cost to the Lenders of funding such Eurodollar Rate Loan, then the Administrative Agent will promptly notify the Borrower and all Lenders. Thereafter, the obligation of the Lenders to make or maintain Eurodollar Rate Loans shall be suspended until the Administrative Agent revokes such notice. Upon receipt of such notice, the Borrower may revoke any pending request for a Borrowing, conversion or continuation of Eurodollar Rate Loans or, failing that, will be deemed to have converted such request into a request for a Borrowing of Base Rate Loans in the amount specified therein.

     3.04 Increased Cost and Reduced Return; Capital Adequacy; Reserves on Eurodollar Rate Loans.

     (a) If any Lender or the L/C Issuer determines that as a result of a Change in Law, or such Lender’s or L/C Issuer’s compliance therewith, there shall be any increase in the cost to such Lender or L/C Issuer of agreeing to make or making, funding or maintaining Eurodollar Rate Loans or to increase the cost to such Lender or the L/C Issuer of participating in, issuing or maintaining any Letter of Credit, or a reduction in the amount received or receivable by such Lender or L/C Issuer in connection with any of the foregoing (excluding for purposes of this subsection (a) any such increased costs or reduction in amount resulting from (i) Taxes or Other Taxes (as to which Section 3.01 shall govern), (ii) changes in the basis of taxation of overall net income or overall gross income by the United States or any foreign jurisdiction or any political subdivision of either thereof under the Laws of which such Lender or L/C Issuer is organized or has its Lending Office, and (iii) reserve requirements contemplated by Section 3.04(c) utilized, as to Eurodollar Rate Loans, in the determination of the Eurodollar Rate), then from time to time upon demand of such Lender or L/C Issuer (with a copy of such demand to the Administrative Agent), the Borrower shall pay to such Lender or L/C Issuer, as the case may be, such additional amounts as will compensate such Lender or L/C Issuer for such increased cost or reduction.

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     (b) If any Lender determines a Change in Law has the effect of reducing the rate of return on the capital of such Lender or any corporation controlling such Lender as a consequence of such Lender’s obligations hereunder (taking into consideration its policies with respect to capital adequacy and such Lender’s desired return on capital, then from time to time upon demand of such Lender (with a copy of such demand to the Administrative Agent), the Borrower shall pay to such Lender such additional amounts as will compensate such Lender for such reduction.

     (c) The Borrower shall pay to each Lender, as long as such Lender shall be required under regulations of the Board to maintain reserves with respect to liabilities or assets consisting of or including Eurocurrency funds or deposits (currently known as “Eurocurrency liabilities”), additional costs on the unpaid principal amount of each Eurodollar Rate Loan equal to the actual costs of such reserves allocated to such Revolving Loan by such Lender (as determined by such Lender in good faith, which determination shall be conclusive), which shall be due and payable on each date on which interest is payable on such Revolving Loan; provided the Borrower shall have received at least 15 days’ prior notice (with a copy to the Administrative Agent) of such additional interest from such Lender. If a Lender fails to give notice 15 days prior to the relevant Interest Payment Date, such additional interest shall be due and payable 15 days from receipt of such notice.

     (d) Failure or delay on the part of any Lender or the L/C Issuer to demand compensation pursuant to this Section shall not constitute a waiver of such Lender’s or the L/C Issuer’s right to demand such compensation; provided that the Borrower shall not be required to compensate a Lender or the L/C Issuer pursuant to this Section for any increased costs or reductions incurred more than 180 days prior to the date that such Lender or the L/C Issuer, as the case may be, notifies the Borrower of the Change in Law giving rise to such increased costs or reductions and of such Lender’s or the L/C Issuer’s intention to claim compensation therefor; provided further that, if the Change in Law giving rise to such increased costs or reductions is retroactive, then the 180-day period referred to above shall be extended to include the period of retroactive effect thereof.

     3.05 Compensation for Losses. Upon demand of any Lender (with a copy to the Administrative Agent) from time to time, the Borrower shall promptly compensate such Lender for and hold such Lender harmless from any loss, cost or expense incurred by it as a result of:

     (a) any continuation, conversion, payment or prepayment of any Revolving Loan other than a Base Rate Loan on a day other than the last day of the Interest Period for such Revolving Loan (whether voluntary, mandatory, automatic, by reason of acceleration, or otherwise); or

     (b) any failure by the Borrower (for a reason other than the failure of such Lender to make a Revolving Loan) to prepay, borrow, continue or convert any Revolving Loan other than a Base Rate Loan on the date or in the amount notified by the Borrower; including any loss of anticipated profits and any loss or expense arising from the liquidation or reemployment of funds obtained by it to maintain such Revolving Loan or from fees payable to terminate the deposits from which such funds were obtained. The Borrower shall also pay any customary administrative fees charged by such Lender in connection with the foregoing.

     For purposes of calculating amounts payable by the Borrower to the Lenders under this Section 3.05, each Lender shall be deemed to have funded each Eurodollar Rate Loan made by it at the Eurodollar Rate for such Revolving Loan by a matching deposit or other borrowing in the applicable offshore Dollar

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interbank market for a comparable amount and for a comparable period, whether or not such Eurodollar Rate Loan was in fact so funded.

     3.06 Matters Applicable to all Requests for Compensation. A certificate of the Administrative Agent or any Lender claiming compensation under this Article III and setting forth the additional amount or amounts to be paid to it hereunder shall be conclusive in the absence of manifest error. In determining such amount, the Administrative Agent or such Lender may use any reasonable averaging and attribution methods.

     3.07 Survival. All of the Borrower’s obligations under this Article III shall survive termination of the Aggregate Commitment and payment in full of all the other Obligations.

     3.08 Mitigation Obligations. If any Lender or L/C Issuer requests compensation under Section 3.04, or if the Borrower is required to pay any additional amount to any Lender, L/C Issuer or any Governmental Authority for the account of any Lender or L/C Issuer, as applicable, pursuant to Section 3.01, then such Lender or L/C Issuer shall use reasonable efforts to designate a different lending office for funding or booking its Revolving Loans or issuing Letters of Credit hereunder or to assign its rights and obligations hereunder to another of its offices, branches or affiliates, if, in the judgment of such Lender or L/C Issuer, such designation or assignment (i) would eliminate or reduce amounts payable pursuant to Section 3.01 or Section 3.04, as the case may be, in the future and (ii) would not subject such Lender or L/C Issuer to any un-reimbursed cost or expense and would not otherwise be disadvantageous to such Lender or L/C Issuer. The Borrower hereby agrees to pay all reasonable costs and expenses incurred by any Lender or L/C Issuer in connection with any such designation or assignment.

ARTICLE IV.
CONDITIONS PRECEDENT TO CREDIT EXTENSION

     4.01 Conditions Precedent to Initial Credit Extension. The obligation of the L/C Issuer and each Lender to make its initial Credit Extension hereunder is subject to satisfaction of the following conditions precedent:

     (a) The Administrative Agent’s receipt of the following, each of which shall be originals or facsimiles (followed promptly by originals) and unless otherwise specified, each properly executed by a Responsible Officer of the signing Loan Party or other Person party thereto, each dated the Closing Date (or, in the case of certificates of governmental officials, a recent date before the Closing Date), and each in form and substance reasonably satisfactory to the Administrative Agent and its legal counsel:

     (i) executed counterparts of this Agreement, the MLP Guaranty, Mortgages from any Loan Party covering Mortgaged Properties if deemed advisable by Administrative Agent or its counsel, the Security Agreements and all other Collateral Documents as deemed advisable by the Administrative Agent or its counsel, each dated as of the Closing Date;

     (ii) Revolving Notes executed by the Borrower in favor of each Lender requesting such Revolving Notes, each Revolving Note in a principal amount equal to such Lender’s Commitment, and each Revolving Note dated as of the Closing Date;

     (iii) such certificates of resolutions or other action, incumbency certificates and/or other certificates of officers of each Loan Party as the Administrative Agent may require to establish the identities of and verify the authority and capacity of each officer thereof authorized

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to act in connection with this Agreement and the other Loan Documents to which such Loan Party is a party;

     (iv) such evidence as the Administrative Agent may reasonably require to verify that each Loan Party is duly organized or formed, validly existing, and in good standing in the jurisdiction of its organization;

     (v) a certificate signed by a Responsible Officer of the Borrower certifying (A) that the representations and warranties contained in Article V are true and correct in all respects on and as of the Closing Date, (B) that no default or event of default had occurred and was continuing under the Parent Credit Agreement as of the Closing Date and no Default or Event of Default will exist immediately after closing and the initial Credit Extension under this Agreement, (C) since December 31, 2005 there has occurred no material adverse change in (x) the business, assets, liabilities (actual or contingent), operations or financial condition of the Borrower and Guarantors, taken as a whole, or (y) any of the businesses, assets or liabilities acquired or assumed or being acquired or assumed by the Borrower, (D) that as of the Closing Date there are no environmental or legal issues affecting any Loan Party or any of the Collateral which could reasonably be expected to have a Material Adverse Effect, (E) all necessary governmental and third party approvals necessary or required for any Loan Party to enter into this Agreement or any of the Loan Documents has been obtained, and (F) no action, suit, investigation or proceeding is pending or, to the knowledge of such Responsible Officer, threatened in any court or before any arbitrator or governmental authority by or against the Borrower, any Guarantor, the General Partner, or any of their respective properties, that (x) could reasonably be expected to materially and adversely affect the Borrower and the Guarantors, taken as a whole, or (z) seeks to affect or pertains to any transaction contemplated hereby or the ability of the Borrower or any Guarantor to perform its obligations under the Loan Documents;

     (vi) a certificate of a Responsible Officer (a) of the Borrower demonstrating on a pro forma basis, after giving effect to the transactions contemplated by this Agreement, an Interest Coverage Ratio of not less than 3.0 to 1.0 and a Leverage Ratio of not more than 4.0 to 1.0, (b) of the Borrower as to the satisfaction of all conditions specified in this Section 4.01 and Section 4.02, (c) providing a five-year financial forecast for the MLP on a consolidated basis, (d) providing a five-year financial forecast for Quest Parent on a consolidated basis, and (e) providing such other financial information as the Administrative Agent may reasonably request;

     (vii) a certificate of a Responsible Officer of the Borrower certifying that to the Responsible Officer’s knowledge neither the Borrower and its Subsidiaries on a consolidated basis nor the MLP and its Subsidiaries on a consolidated basis are “insolvent” as such term is used and defined in (i) the United States Bankruptcy Code or (ii) the New York Uniform Fraudulent Transfer Act, in form and substance satisfactory to the Arranger; and

     (viii) such other assurances, certificates, documents, consents or opinions as the Administrative Agent reasonably may require.

     (b) The Arranger’s receipt, in form and substance reasonably satisfactory to the Arranger, of a reserve report dated December 31, 2005 prepared by Cawley Gillespie & Associates, Inc. on oil and natural gas reserves owned by Quest Parent.

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     (c) The Arranger’s receipt, in form and substance reasonably satisfactory to the Arranger, of a reserve report dated June 30, 200 prepared by Quest Parent on its oil and natural gas reserves.

     (d) The Arranger’s receipt, in form and substance reasonably satisfactory to the Arranger, of an evaluation and financial analysis prepared by Barnes & Click, Inc. on the MLP.

     (e) An opinion from counsel to each Loan Party and the General Partner, in form and substance satisfactory to the Administrative Agent and its counsel.

     (f) Any fees due and payable at the Closing Date shall have been paid including, without limitation, payment of fees and expenses pursuant to the Agent/Arranger Fee Letter.

     (g) The Borrower shall have paid Attorney Costs of the Administrative Agent to the extent invoiced prior to, or on, the Closing Date.

     (h) The Administrative Agent’s receipt of Collateral Documents, executed by each Company that has assets or conducts business, in appropriate form for recording, where necessary, together with:

     (i) such Lien searches as the Administrative Agent shall have reasonably requested, and such termination statements or other documents as may be necessary to confirm that the Collateral is subject to no other Liens (other than Permitted Liens) in favor of any Persons;

     (ii) funds sufficient to pay any filing or recording tax or fee in connection with any and all UCC-1 financing statements and fees associated with the filing of the Mortgages, including any mortgage tax;

     (iii) evidence that the Administrative Agent has been named as mortgagee or additional insured under all policies of casualty insurance pertaining to the Collateral and all general liability policies;

     (iv) certificates evidencing all of the issued and outstanding shares of capital stock, partnership interests, or membership interests pledged pursuant thereto, which certificates shall in each case be accompanied by undated stock powers duly executed in blank, or, if any securities pledged pursuant thereto are uncertificated securities, confirmation and evidence satisfactory to the Administrative Agent that the security interest in such uncertificated securities has been transferred to and perfected by the Administrative Agent for the benefit of the Lenders in accordance with the Uniform Commercial Code; and

     (v) evidence that all other actions reasonably necessary or, in the opinion of the Administrative Agent or the Lenders, desirable to perfect and protect the first priority Lien created by the Collateral Documents (except to the extent otherwise permitted hereunder), and to enhance the Administrative Agent’s ability to preserve and protect its interests in and access to the Collateral, have been taken.

     (i) The Administrative Agent’s receipt (with sufficient copies for all Lenders) of the certificate of formation of the Borrower, together with all amendments, certified by an appropriate governmental officer in its jurisdiction of organization, as well as any other information required by Section 326 of the USA Patriot Act or necessary for the Administrative Agent or any Lender to verify the identity of Borrower as required by Section 326 of the USA Patriot Act.

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     The Administrative Agent shall notify the Borrower and the Lenders of the Closing Date, and such notice shall be conclusive and binding.

     4.02 Conditions to all Credit Extensions. The obligation of each Lender to honor any Borrowing Notice for a Credit Extension and the obligation of the L/C Issuer to issue any Letter of Credit is subject to the following conditions precedent:

     (a) The representations and warranties of the Loan Parties contained in Article V, or which are contained in any document furnished at any time under or in connection herewith, including, but not limited to the Collateral Documents, shall be true and correct in all material respects on and as of the date such Revolving Loan is made or such Letter of Credit is issued except to the extent that such representations and warranties specifically refer to an earlier date, in which case they shall be true and correct in all material respects as of such earlier date.

     (b) No Default or Event of Default shall exist or would result from such proposed Revolving Loan or L/C Credit Extension.

     (c) The Administrative Agent and, if applicable, the L/C Issuer, shall have received a Request for Credit Extension and, if applicable, a Letter of Credit Application in accordance with the requirements hereof.

     (d) The Administrative Agent shall have received, in form and substance reasonably satisfactory to it, such other assurances, certificates, documents or consents related to the foregoing as the Administrative Agent or the Required Lenders reasonably may require.

     Each Request for Credit Extension submitted by the Borrower shall be deemed to be a representation and warranty that the conditions specified in Section 4.02(b) have been satisfied on and as of the date of the applicable Credit Extension.

     4.03 Conditions Precedent to Funding Loans for Acquisitions. The obligation of each Lender to fund its portion of any Revolving Loan to finance a Permitted Acquisition shall be subject to satisfaction of the conditions precedent set forth in Section 4.02(b) and to the additional condition precedent that if the purchase price for such Permitted Acquisition exceeds $10,000,000, then the Borrower shall deliver to the Administrative Agent and the Lenders at least five Business Days before any requested Revolving Loan to fund a Permitted Acquisition (i) audited financial statements of the Person or business proposed to be acquired (or if audited financial statements are unavailable, such unaudited financial statements pertaining to the Person or business proposed to be acquired as shall be satisfactory in form and substance to the Administrative Agent and (ii) a Compliance Certificate demonstrating pro forma compliance with the financial covenants set forth in Section 7.15.

ARTICLE V.
REPRESENTATIONS AND WARRANTIES

     Each of the Borrower and the MLP represents and warrants to the Administrative Agent and the Lenders that:

     5.01 Existence; Qualification and Power; Compliance with Laws. As of the Closing Date, the Borrower is a direct wholly-owned subsidiary of the MLP and Quest Parent owns at least 51% of the

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General Partner. The General Partner and each Loan Party (a) is a corporation, partnership or limited liability company duly organized or formed, validly existing and in good standing under the Laws of the jurisdiction of its incorporation or organization, (b) has all requisite power and authority and all governmental licenses, authorizations, consents and approvals to own its assets, carry on its business and to execute, deliver, and perform its obligations under the Loan Documents to which it is a party, (c) is duly qualified and is licensed and in good standing under the Laws of each jurisdiction where its ownership, lease or operation of properties or the conduct of its business requires such qualification or license, except in each case referred to in clause (a), (b) or (c), to the extent that failure to do so could not reasonably be expected to have a Material Adverse Effect, (d) is not a Person (I) whose property or interest in property is blocked or subject to blocking pursuant to Section 1 of Executive Order 13224 of September 23, 2001 Blocking Property and Prohibiting Transactions With Persons Who Commit, Threaten to Commit, or Support Terrorism (66 Fed. Reg. 49079 (2001)), or (II) who engages in any dealings or transactions prohibited by Section 2 of such executive order, or is otherwise associated with any such person in any manner violative of Section 2, or (III) on the list of Specially Designated Nationals and Blocked Persons or subject to the limitations or prohibitions under any other U.S. Department of Treasury’s Office of Foreign Assets Control regulation or executive order, and (f) is in compliance, in all material respects, with (A) the Trading with the Enemy Act, as amended, and each of the foreign assets control regulations of the United States Treasury Department (31 CFR, Subtitle B, Chapter V, as amended) and any other enabling legislation or executive order relating thereto, and (B) the Uniting And Strengthening America By Providing Appropriate Tools Required To Intercept And Obstruct Terrorism (USA Patriot Act of 2001). No part of the proceeds of the Revolving Loans or L/C Credit Extensions will be used, directly or indirectly, for any payments to any governmental official or employee, political party, official of a political party, candidate for political office, or anyone else acting in an official capacity, in order to obtain, retain or direct business or obtain any improper advantage, in violation of the United States Foreign Corrupt Practices Act of 1977, as amended.

     5.02 Authorization; No Contravention. The execution, delivery and performance by each Loan Party of each Loan Document to which such Person is party, have been duly authorized by all necessary corporate or other organizational action, and do not and will not: (a) contravene the terms of any of such Person’s Organization Documents; (b) conflict with or result in any breach or contravention of, or the creation of any Lien under, any material Contractual Obligation (other than the Liens created under the Loan Documents) to which such Person is a party or any order, injunction, writ or decree of any Governmental Authority to which such Person or its property is subject; or (c) violate any Law except in each case referred to in clause (b) or (c), to the extent that any such conflict, breach, contravention, creation or violation could not reasonably be expected to have a Material Adverse Effect.

     5.03 Governmental Authorization. No approval, consent, exemption, authorization, or other action by, or notice to, or filing with, any Governmental Authority, except for the filings in connection with the granting or continuation of security interests pursuant to the Collateral Documents or filings to maintain the existence, foreign qualification and good standing of the General Partner and the Loan Parties, is necessary or required in connection with the execution, delivery or performance by any Loan Party of this Agreement or any other Loan Document.

     5.04 Binding Effect. This Agreement has been, and each other Loan Document, when delivered hereunder, will have been duly executed and delivered by each Loan Party that is party thereto. This Agreement constitutes, and each other Loan Document when so delivered will constitute, a legal, valid and binding obligation of such Loan Party, enforceable against each Loan Party that is party thereto in accordance with its terms, subject to applicable bankruptcy, insolvency, reorganization, moratorium or

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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.

     5.05 Financial Statements; No Material Adverse Effect.

     (a) The financial statements delivered to the Lenders pursuant to Sections 6.01(a) and (b) for periods commencing with the period beginning January 1, 2007 will be prepared in accordance with GAAP consistently applied throughout the period covered thereby, except as otherwise expressly noted therein. Such financial statements will: (i) fairly present in all material respects the financial condition of the MLP and its Subsidiaries as of the date thereof and their results of operations for the period covered thereby in accordance in all material respects with GAAP consistently applied throughout the period covered thereby, except as otherwise expressly noted therein, subject in the case of quarterly financial statements delivered pursuant to Section 6.01(b) to year-end audit adjustments and the absence of footnotes; and (ii) show all material indebtedness and other liabilities of the MLP and its Subsidiaries as of the date thereof required to be reflected therein in accordance with GAAP consistently applied throughout the period covered thereby.

     (b) Since December 31, 2005, there has been no event or circumstance that has or could reasonably be expected to have a Material Adverse Effect.

     5.06 Litigation. There are no actions, suits, proceedings, claims or disputes pending or, to the knowledge of the MLP or the Borrower, threatened or contemplated in writing, at law, in equity, in arbitration or before any Governmental Authority, by or against the Borrower or any Borrower Affiliate or against any of their properties or revenues which (a) seek to affect or pertain to this Agreement or any other Loan Document, the borrowing of Revolving Loans, the use of the proceeds thereof, or the issuance of Letters of Credit hereunder, or (b) could reasonably be expected to have a Material Adverse Effect.

     5.07 No Default. Neither the Borrower nor any Borrower Affiliate is in default under or with respect to any Contractual Obligation which could be reasonably expected to have a Material Adverse Effect. No Default or Event of Default has occurred and is continuing or would result from the consummation of the transactions contemplated by this Agreement or any other Loan Document. There is no default under any Material Agreement, which could reasonably be expected to have a Material Adverse Effect.

     5.08 Ownership of Property; Liens. Each Loan Party and its Subsidiaries have good title to, or valid leasehold interests in, all its real and personal property necessary or used in the ordinary conduct of its business, except for such defects in title as would not, individually or in the aggregate, have a Material Adverse Effect, and the property of the MLP, the Borrower and their respective Subsidiaries is subject to no Liens, other than Permitted Liens.

     5.09 Environmental Compliance. The MLP and the Borrower have reasonably concluded that (a) there are no claims alleging potential liability under or responsibility for violation of any Environmental Law except any such claims that could not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect, (b) there is no environmental condition or circumstance, such as the presence or Release of any Hazardous Substance, on any property owned, operated or used by the Borrower or any Borrower Affiliate that could reasonably be expected to have a Material Adverse Effect, and (c) there is no violation by the Borrower or any Borrower Affiliate of any Environmental Law, except for such violations as could not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect.

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     5.10 Insurance. The properties of the Borrower and the Borrower Affiliates are insured with financially sound and reputable insurance companies not Affiliates of the Borrower, in such amounts, with such deductibles and covering such risks as are consistent with past practice.

     5.11 Taxes. The Borrower and the Borrower Affiliates have filed all federal, state and other material tax returns and reports required to be filed, and have paid all federal, state and other material taxes, assessments, fees and other governmental charges levied or imposed upon them or their properties, income or assets otherwise due and payable, except those which are being contested in good faith by appropriate proceedings and for which adequate reserves have been provided in accordance with GAAP or to the extent that the failure to do so could not reasonably be expected to result in a Material Adverse Effect. To the knowledge of the Borrower, there is no proposed tax assessment against any Borrower Affiliate or any of their respective Subsidiaries that would, if made, have a Material Adverse Effect.

     5.12 ERISA Compliance. The representations and warranties set forth in this Section 5.12 shall apply only if the Borrower or an ERISA Affiliate establishes a Plan.

     (a) Each Plan is in compliance in all material respects with the applicable provisions of ERISA, the Code and other federal or state Laws except to the extent that noncompliance could not reasonably be expected to have a Material Adverse Effect. Each Plan that is intended to qualify under Section 401(a) of the Code has received a favorable determination letter from the IRS, an application for such a letter is currently being processed by the IRS with respect thereto or the Plan utilizes a prototype form plan document and the prototype plan’s sponsor has received a favorable opinion or advisory letter from the IRS upon which the Company may rely, and, to the knowledge of the MLP and the Borrower, nothing has occurred which would prevent, or cause the loss of, such qualification, except to the extent that nonqualification could not reasonably be expected to have a Material Adverse Effect. The Borrower and each ERISA Affiliate have made all required contributions to each Plan subject to Section 412 of the Code, and no application for a funding waiver or an extension of any amortization period pursuant to Section 412 of the Code has been made with respect to any Plan, except to the extent that nonpayment could not reasonably be expected to have a Material Adverse Effect.

     (b) There are no pending or, to the knowledge of the MLP or the Borrower, threatened claims, actions or lawsuits, or action by any Governmental Authority, with respect to any Plan that could reasonably be expected to have a Material Adverse Effect. Neither the MLP nor the Borrower nor any ERISA Affiliate has engaged in or knowingly permitted to occur and, to the Borrower’s and the MLP’s knowledge, no other party has engaged in or permitted to occur any prohibited transaction or violation of the fiduciary responsibility rules with respect to any Plan that has resulted or could reasonably be expected to result in a Material Adverse Effect.

     (c) (i) No ERISA Event has occurred or is reasonably expected to occur that could reasonably be expected to have a Material Adverse Effect; (ii) no Pension Plan has any Unfunded Pension Liability that (when aggregated with any other Unfunded Pension Liability) has resulted or could reasonably be expected to result in a Material Adverse Effect; and (iii) neither the Borrower nor any ERISA Affiliate has engaged in a transaction that could be subject to Sections 4069 or 4212(c) of ERISA that could reasonably be expected to have a Material Adverse Effect.

     5.13 Subsidiaries and other Investments. As of the Closing Date, the Borrower will have no Subsidiaries, and will have no equity investment in any other corporation or other entity. From and after the Closing Date, the MLP has no Subsidiaries other than the Borrower and the Borrower’s Subsidiaries.

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     5.14 Margin Regulations; Investment Company Act; Use of Proceeds.

     (a) Neither the Borrower nor any Borrower Affiliate is engaged nor will it engage, principally or as one of its important activities, in the business of purchasing or carrying margin stock (within the meaning of Regulation U issued by the Board), or extending credit for the purpose of purchasing or carrying margin stock.

     (b) Neither the Borrower nor any Borrower Affiliate, no Person controlling the Borrower or any Borrower Affiliate, or any Subsidiary thereof is or is required to be registered as an “investment company” under the Investment Company Act of 1940.

     (c) The Borrower will use all proceeds of Credit Extension in the manner set forth in Section 6.12.

     5.15 Disclosure. All material factual information hereto furnished by or on behalf of the MLP and Borrower in writing to the Administrative Agent or any Lender for purposes of or in connection with this Agreement or any transaction contemplated hereby, as modified or supplemented by other information so furnished, is true and accurate in all material respects, and such information is not, or shall not be, as the case may be, incomplete by omitting to state any material fact necessary to make such information, in light of the circumstances under which it was made, not misleading. All estimates and projections delivered to the Administrative Agent or any Lender were based upon information that was available at the time such estimates or projections were prepared and believed to be correct and upon assumptions believed to be reasonable at that time; however, the Borrower does not warrant that such estimates and projections will ultimately prove to have been accurate.

     5.16 Labor Matters. To the Borrower’s and the MLP’s knowledge, there are no actual or threatened strikes, labor disputes, slowdowns, walkouts, or other concerted interruptions of operations that could reasonably be expected to have a Material Adverse Effect.

     5.17 Compliance with Laws. Except with respect to Environmental Laws and Laws relating to taxes and employee benefits (which are covered by Sections 5.09, 5.11 and 5.12, respectively), neither the Borrower nor any Borrower Affiliate is in violation of any Laws, other than such violations which could not, individually or collectively, reasonably be expected to have a Material Adverse Effect. Neither the Borrower nor any Borrower Affiliate has received notice alleging any noncompliance with any Laws, except for such noncompliance which no longer exists, or which non-compliance could not reasonably be expected to have a Material Adverse Effect.

     5.18 Third Party Approvals. No approval, consent, exemption, authorization, or other action by, or notice to, or filing with, any party that is not a party to this Agreement is necessary or required in connection with the execution, delivery or performance by any Loan Party of this Agreement or any other Loan Document except where obtained or where the failure to receive such approval, consent, exemption, authorization, or the failure to do such other action by, or provide such notice could not reasonably be expected to have a Material Adverse Effect; and provided, however, that the transfer of rights in certain Collateral consisting of rights under contracts to a foreclosure purchaser may, in some instances, require the consent of third parties who have rights in such Collateral.

     5.19 Solvency. Neither the Borrower and its Subsidiaries on a consolidated basis nor the MLP and its Subsidiaries on a consolidated basis are “insolvent” as such term is used and defined in (i) the United States Bankruptcy Code or (ii) the New York Uniform Fraudulent Transfer Act.

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     5.20 Collateral. (a) The provisions of each of the Collateral Documents are effective to create in favor of the Administrative Agent for the benefit of the Lenders, a legal valid and enforceable first priority security interest in all right, title and interest of each Loan Party in the Collateral described therein, except as otherwise permitted hereunder; and financing statements have been filed in the offices in all of the jurisdictions listed in the schedule to all Security Agreements and Mortgages.

     (b) All representations and warranties of each Loan Party thereto contained in the Collateral Documents are true and correct in all material respects.

     (c) None of the terms or provisions of any indenture, mortgage, deed of trust, agreement or other instrument to which the Borrower or any Borrower Affiliate is a party or by which the Borrower or any Borrower Affiliate or the property of the Borrower or any Borrower Affiliate is bound prohibit the filing or recordation of any of the Loan Documents or any other action which is necessary or appropriate in connection with the perfection of the Liens on material assets evidenced and created by any of the Loan Documents.

ARTICLE VI.
AFFIRMATIVE COVENANTS

     So long as any Lender shall have any Commitment hereunder, or any Revolving Loan or other Obligation (other than contingent indemnity obligations and obligations under Lender Hedging Agreements) shall remain unpaid or unsatisfied, or any Letter of Credit shall remain outstanding (unless such Letter of Credit has been Cash Collateralized), each of the Borrower and the MLP shall, and shall cause each of their Subsidiaries to:

     6.01 Financial Statements. Deliver to the Administrative Agent, in form and detail reasonably satisfactory to the Administrative Agent and the Required Lenders:

     (a) as soon as available, but in any event within 90 days after the end of each fiscal year of the MLP (beginning with the 2007 fiscal year), consolidated balance sheets of the MLP and its Subsidiaries as at the end of such fiscal year, and the related statements of income and cash flows for such fiscal year (provided, that if the MLP is a public company, such financial statements shall be required to be furnished no later than the date that the MLP is required to timely file its annual report on Form 10-K or Form 10-KSB with the Securities Exchange Commission (taking into account any extension of time available under Rule 12b-25 under the Securities Exchange Act of 1934)), setting forth in each case in comparative form the figures for the previous fiscal year of the MLP, if any, all in reasonable detail, audited and accompanied by a report and opinion of Murrell, Hall, McIntosh & Co., PLLP, or other independent certified public accountants reasonably acceptable to the Required Lenders, which report and opinion shall be prepared in accordance with GAAP and shall not be subject to any qualifications or exceptions as to the scope of the audit nor to any qualifications and exceptions not reasonably acceptable to the Required Lenders;

     (b) as soon as available, but in any event within 45 days after the end of each of the first three fiscal quarters of each fiscal year of the MLP, an unaudited consolidated balance sheet of the MLP and its Subsidiaries as at the end of such fiscal quarter, and the related statements of income and cash flows for such fiscal quarter and for the portion of the MLP’s fiscal year then ended (provided, that if the MLP is a public company, such financial statements shall be required to be furnished no later than the date that the MLP is required to timely file its quarterly report on Form 10-Q or Form 10-QSB with the Securities Exchange Commission (taking into account any extension of time available under Rule 12b-25

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under the Securities Exchange Act of 1934)), setting forth in each case in comparative form the figures for the corresponding fiscal quarter of the previous fiscal year of the MLP and the corresponding portion of the previous fiscal year of the MLP, if any, all in reasonable detail and certified by a Responsible Officer of the Borrower, as fairly presenting in all material respects the financial condition, results of operations and cash flows of the MLP and its Subsidiaries in accordance with GAAP, subject only to normal year-end audit adjustments and the absence of footnotes;

     (c) within 45 days after the end of each fiscal year, Borrower shall deliver a one year projection/budget for the MLP for the year following such fiscal year.

     6.02 Certificates; Other Information. Deliver to the Administrative Agent, in form and detail reasonably satisfactory to the Administrative Agent and the Required Lenders:

     (a) concurrently with the delivery of the financial statements referred to in Sections 6.01(a) and (b), a duly completed Compliance Certificate in form of Exhibit C signed by a Responsible Officer of the Borrower and a Responsible Officer of the MLP;

     (b) promptly upon request, copies of each annual report, proxy or financial statement or other report or written communication sent to the equity owners of the MLP, and copies of all annual, regular, periodic and special reports and registration statements which the MLP may file or be required to file with the Securities and Exchange Commission under Section 13 or 15(d) of the Securities Exchange Act of 1934, and not otherwise required to be delivered to the Administrative Agent pursuant hereto;

     (c) promptly after execution thereof, copies of Material Agreements and any material amendment thereto;

     (d) no later than ten (10) days after any Company’s receipt of any Reduction Amount resulting from a Triggering Sale, a Triggering Sale Certificate relating to such Triggering Sale;

     (e) no later than one hundred eighty (180) days after any Company’s receipt of any Reduction Amount resulting from a Triggering Sale, a Reinvestment Certificate relating to such Triggering Sale; and

     (f) promptly, such additional information (that is in the possession of the Borrower or that may be readily produced by the Borrower without undue effort or expense) regarding the business, financial or corporate affairs of any Loan Party as the Administrative Agent, at the request of any Lender, may from time to time reasonably request, which information may include copies of any detailed audit reports, if any, management letters or recommendations submitted to the board of directors or managers (or the audit committee of the board of directors or managers) of the MLP by independent accountants in connection with the accounts or books of the MLP or any of its Subsidiaries, or any audit of any of them.

     6.03 Notices. Promptly notify the Administrative Agent:

     (a) of the occurrence of any Default or Event of Default, as soon as possible but in any event within ten (10) days after Borrower has knowledge thereof;

     (b) of any matter that has resulted or could reasonably be expected to result in a Material Adverse Effect, including any of the following events if such has resulted or could reasonably be expected to result in a Material Adverse Effect: (i) breach or non-performance of, or any default under, a

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Contractual Obligation of any Loan Party; (ii) any litigation, investigation by or required by a Governmental Authority, proceeding or suspension of licenses or permits between any Loan Party and any Governmental Authority; and (iii) any dispute, litigation, investigation or proceeding involving any Loan Party related to any Environmental Law;

     (c) of any litigation, investigation or proceeding known to and affecting the Borrower or any Borrower Affiliate in which (i) the amount involved exceeds (individually or collectively) $1,000,000, or (ii) injunctive relief or other relief is sought, which could be reasonably expected to have a Material Adverse Effect;

     (d) of any material change in accounting policies or financial reporting practices by the Borrower or the MLP; and

     (e) written notice at least ten (10) days written before any proposed (A) relocation of any Loan Party’s principal place of business or chief executive office, (B) change of any Loan Party’s name, identity, or corporate, partnership or limited liability company structure, (C) relocation of the place where the books and records concerning a Loan Party’s accounts are kept, (D) relocation of any Loan Party’s Collateral (other than delivery of inventory in the ordinary course of business to third party contractors for processing and sales of inventory in the ordinary course of business or as permitted by any Loan Document) to a location not described on Annex A to the Security Agreement to which such Loan Party is a party, and (E) change of any Loan Party’s jurisdiction of organization or organizational identification number, as applicable.

     Each notice pursuant to this Section shall be accompanied by a statement of a Responsible Officer of the Borrower setting forth details of the occurrence referred to therein and stating what action the Borrower has taken and proposes to take with respect thereto. Each notice pursuant to Section 6.03(a) shall describe with particularity any and all provisions of this Agreement or other Loan Document that have been breached.

     6.04 Payment of Obligations. Pay and discharge as the same shall become due and payable (a) the Obligations, (b) all tax liabilities, assessments and governmental charges or levies upon it or its properties or assets and (c) all lawful claims which, if unpaid, would by law become a Lien upon its property; except, in the case of clause (b) or (c), where (x) the validity thereof are being contested in good faith by appropriate proceedings and (y) adequate reserves in accordance with GAAP are being maintained by the appropriate Loan Party.

     6.05 Preservation of Existence, Etc. (a) Preserve, renew and maintain in full force and effect its legal existence and good standing under the Laws of the jurisdiction of its organization, except in a transaction permitted by Sections 7.06 and 7.07, and (b) take all reasonable action to maintain all rights, privileges, permits, licenses and franchises material to the conduct of its business, except in a transaction permitted by Sections 7.06 and 7.07, except where the failure to do so in each case could not reasonably be expected to have a Material Adverse Effect.

     6.06 Maintenance of Assets and Business. (a) Keep all property material to the conduct of its business in good working order and condition (ordinary wear and tear excepted) and make all necessary repairs thereto and replacements thereof; (b) do all things necessary to obtain, renew, extend, and continue in effect all Authorizations which may at any time and from time to time be necessary for the operation of its business in compliance with applicable Law, except where the failure to so maintain, renew, extend, or continue in effect could not reasonably be expected to have a Material Adverse Effect;

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(c) preserve or renew all of its registered patents, trademarks, trade names and service marks, the non-preservation of which could reasonably be expected to have a Material Adverse Effect; and (d) use the standard of care typical in the industry in the operation and maintenance of its facilities.

     6.07 Maintenance of Insurance. (a) Maintain with responsible insurance companies insurance with respect to its properties and business (including business interruption insurance) against such casualties and contingencies and of such types and in such amounts as is customary in the case of similar businesses and which is reasonably acceptable to the Administrative Agent and will (i) furnish to the Administrative Agent on each anniversary of the Closing Date a certificate or certificates of insurance from the applicable insurance company evidencing the existence of insurance required to be maintained by this Agreement and the other Loan Documents and evidencing that Administrative Agent is listed as mortgagee on property insurance (except as to properties owned by Quest Parent or a Subsidiary of Quest Parent (other than the MLP and its Subsidiaries) and the Administrative Agent and Lenders are additional insureds on liability insurance, and (ii) upon request of the Administrative Agent, furnish to each Lender at reasonable intervals a certificate of an Authorized Officer of the Borrower setting forth the nature and extent of all insurance maintained in accordance with this Section.

     (b) (i) Except as the Administrative Agent may otherwise consent to in writing, Borrower will, and will cause each of its Subsidiaries to, forthwith upon receipt, transmit and deliver to the Administrative Agent, in the form received, all cash, checks, drafts, chattel paper and other instruments or writings for the payment of money (properly endorsed, where required, so that such items may be collected by the Administrative Agent) which may be received by the Borrower at any time in full or partial payment of amounts due under any insurance policy in an amount in excess of $1,000,000. Except as the Administrative Agent may otherwise consent in writing, any such items which may be received by the Borrower in excess of $1,000,000 will not be commingled with any other of its funds or property, but will be held separate and apart from its own funds or property and upon express trust for the Administrative Agent until delivery is made to the Administrative Agent.

     6.08 Compliance with Laws and Contractual Obligations. (a) Comply in all material respects with the requirements of all Laws (including Environmental Laws) applicable to it or to its business or property, except in such instances in which (i) such requirement of Law is being contested in good faith or a bona fide dispute exists with respect thereto, or (ii) the failure to comply therewith could not be reasonably expected to have a Material Adverse Effect; and (b) comply with all Contractual Obligations, except if the failure to comply therewith could not be reasonably expected to have a Material Adverse Effect.

     6.09 Books and Records. Maintain (a) proper books of record and account, in which full, true and correct entries in conformity with GAAP consistently applied shall be made of all financial transactions and matters involving its assets and business, and (b) maintain such books of record and account in material conformity with all applicable requirements of any Governmental Authority having regulatory jurisdiction over it.

     6.10 Inspection Rights. Permit representatives and independent contractors of the Administrative Agent and each Lender to visit and inspect any of its properties, to examine its corporate, financial and operating records, and make copies thereof or abstracts therefrom, and to discuss its affairs, finances and accounts with its officers and independent public accountants, at such reasonable times during normal business hours and as often as may be reasonably desired, upon reasonable advance notice to the Borrower; provided, however, that when an Event of Default exists the Administrative Agent or any

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Lender (or any of their respective representatives or independent contractors) may do any of the foregoing at the expense of the Borrower at any time during normal business hours and without advance notice. Additionally, Administrative Agent may, at the request of the Required Lenders, conduct or cause to be conducted a commercial field examination of the Borrower’s and its Subsidiaries’ financial and accounting records and Borrower shall pay the cost of such commercial field examination; provided so long as no Event of Default shall exist and be continuing, no more than one such commercial field examination shall be undertaken at the Borrower’s expense during any period of twelve consecutive months and the Borrower shall not be obligated to pay more than $20,000 for any such annual commercial field examination.

     6.11 Compliance with ERISA. With respect to each Plan maintained by a Company, do each of the following: (a) maintain each Plan in compliance in all material respects with the applicable provisions of ERISA, the Code and other federal or state Laws, (b) cause each Plan which is qualified under Section 401(a) of the Code to maintain such qualification; and (c) make all required contributions to any Plan subject to Section 412 of the Code, except to the extent that noncompliance, with respect to each event listed above, could not be reasonably expected to have a Material Adverse Effect

     6.12 Use of Proceeds. Use proceeds of the Facility to (i) finance general company purposes of the Borrower and its Subsidiaries, (ii) finance Permitted Acquisitions and Capital Expenditures by the Borrower and its Subsidiaries of Persons or assets subject to compliance with this Agreement, including Sections 7.02 and 7.10, (iii) issue Letters of Credit, (iv) finance working capital and fund Quarterly Borrower Distributions to the extent permitted by Section 7.08(b) in an amount not to exceed the Maximum Annual Funded Distribution Amount during any twelve consecutive month period, (v) fund on a one time basis a distribution to Quest Parent pursuant to Section 3.2 of the Contribution Agreement which shall not exceed $15,000,000, and (vi) pay fees, costs and expenses owed pursuant to this Agreement.

     6.13 Material Agreements. Enforce the obligations of parties to the Material Agreements, except where such failure could not reasonably be expected to have a Material Adverse Effect.

     6.14 Guaranties. As an inducement to the Administrative Agent and Lenders to enter into this Agreement, cause each Subsidiary and the MLP and its Subsidiaries to execute and deliver to Administrative Agent a Guaranty executed by the Borrower’s Subsidiaries and the MLP’s Subsidiaries (other than the Borrower), and a Guaranty executed by the MLP, each in form and substance reasonably satisfactory to the Administrative Agent, providing for the guaranty of payment and performance of the Obligations. In addition, within thirty (30) days after the formation or acquisition of any Subsidiary of the Borrower or MLP, cause such Subsidiary to execute and deliver to the Administrative Agent (a) a Guaranty in form and substance reasonably satisfactory to the Administrative Agent, providing for the guaranty of payment and performance of the Obligations, (b) Collateral Documents in form and substance reasonably satisfactory to the Administrative Agent creating liens and security interests in all assets and properties of such Subsidiary and in the equity interests in such Subsidiary, subject to Permitted Liens, and (c) certified copies of such Subsidiary’s Organization Documents and opinions of counsel with respect to such Subsidiary and such Guaranty, and (d) such other documents and instruments as may be required with respect to such Subsidiary pursuant to Section 6.15.

     6.15 Further Assurances; Additional Collateral. (a) The Borrower and the MLP shall cause the MLP and each Subsidiary of the Borrower or the MLP to take such actions and to execute and deliver such documents and instruments as the Administrative Agent shall require to ensure that the

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Administrative Agent on behalf of the Lenders shall, at all times, have received currently effective duly executed Loan Documents granting Liens and security interests in substantially all of the assets of the MLP and each Subsidiary of the Borrower and the MLP, including all capital stock, partnership, joint venture, membership interests, or other equity interests except for (i) any motor vehicle or other equipment that has a certificate of title and a fair market value of less than $50,000, (ii) Excluded Assets and (iii) those properties and assets as to which the Administrative Agent shall determine in its sole discretion (in consultation with the Borrower) that the costs of obtaining such security interest are excessive in relation to the value of the security to be afforded thereby; provided, that with respect to rights of way, easements, leases or other similar property interests acquired by any Loan Party after the date hereof, the Loan Parties shall promptly grant to the Collateral Agent as additional security for the Obligations, within 60 days after each June 30^th and December 31^st, a security interest in and Mortgage on each right of way, easement, lease or other similar property interest acquired by any Loan Party during the six month period ended on such June 30 or December 31, as applicable, and not constituting an Excluded Asset.

     (b) In connection with the actions required pursuant to the foregoing subsection (a), the Borrower and the MLP shall cause the MLP and each Subsidiary of the Borrower and the MLP to execute and deliver such stock certificates, blank stock powers, evidence of corporate authorization, opinions of counsel, current valuations, evidence of title, and other documents, and shall use commercially reasonable efforts to obtain third party consents, as shall be reasonably requested by the Administrative Agent, in each case in form and substance reasonably satisfactory to the Administrative Agent.

     (c) The Liens required by this Section 6.15 shall be first priority Liens in favor of the Administrative Agent for the benefit of the Lenders, subject to no other Liens except Permitted Liens of the type described in Section 7.01. The Liens required by this Section 6.15 shall be perfected Liens in favor of the Administrative Agent for the benefit of the Lenders in all collateral to the extent perfection has or will occur by (i) the filing of a Uniform Commercial Code financing statement in the relevant jurisdiction, (ii) filing or recording a mortgage in real property records of the county in which such real property or fixtures is located, (iii) possession or control or (iv) the notation on a certificate of title. If the Administrative Agent shall determine that, as of any date, the Borrower or the MLP shall have failed to comply with this Section 6.15, the Administrative Agent may (and at the direction of the Required Lenders, shall) notify the Borrower in writing of such failure and, within 30 days from and after receipt of such written notice by the Borrower, the Borrower shall execute and deliver to the Administrative Agent supplemental or additional Loan Documents, in form and substance satisfactory to the Administrative Agent and its counsel, securing payment of the Revolving Notes and the other Obligations and covering additional assets and properties not then encumbered by any Loan Documents (together with such other information, as may be requested by the Administrative Agent, each of which shall be in form and substance reasonably satisfactory to the Administrative Agent) such that the Administrative Agent shall have received currently effective duly executed and perfected Collateral Documents encumbering substantially all of the assets of the MLP, Borrower and their respective Subsidiaries as required by Section 6.15(a).

     6.16 Clean Down Period. During each calendar year during the term of this Agreement, there shall be a period of fifteen (15) consecutive days (the “Clean Down Period”) during which (a) there are no Working Capital/Distribution Loans outstanding, and (b) no Working Capital/Distribution Loans will be made.

     6.17 Fiscal Year. The MLP shall maintain its December 31 fiscal year end.

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ARTICLE VII.
NEGATIVE COVENANTS

     So long as any Lender shall have any Commitment hereunder, or any Revolving Loan or other Obligations (other than contingent indemnity obligations and obligations under Lender Hedging Agreements) shall remain unpaid or unsatisfied, or any Letter of Credit shall remain outstanding (unless such Letter of Credit has been Cash Collateralized), each of the MLP and the Borrower agree that they shall not, nor shall they permit any of their respective Subsidiaries to, directly or indirectly:

     7.01 Liens. Create, incur, assume or suffer to exist, any Lien upon any of its property, assets or revenues, whether now owned or hereafter acquired, other than the following:

     (a) Liens pursuant to any Loan Document;

     (b) Liens existing on the Closing Date and listed on Schedule 7.01 to this Agreement and any renewals or extensions thereof; provided that the property covered thereby is not increased, the amount of the Indebtedness secured thereby is not increased, and any renewal or extension of the obligations secured or benefited thereby is permitted under this Agreement;

     (c) Liens for taxes not yet due or which are being contested in good faith and by appropriate proceedings, if adequate reserves with respect thereto are maintained on the books of the applicable Person in accordance with GAAP;

     (d) carriers’, warehousemen’s, mechanics’, materialmen’s, repairmen’s or other like Liens arising in the ordinary course of business which are not overdue for a period of more than 30 days or which are being contested in good faith and by appropriate proceedings, if adequate reserves with respect thereto are maintained on the books of the applicable Person;

     (e) pledges or deposits in the ordinary course of business in connection with workers’ compensation, unemployment insurance and other social security legislation;

     (f) deposits to secure the performance of bids, trade contracts (other than for borrowed money), leases, statutory obligations, surety and appeal bonds, performance bonds and other obligations of a like nature, in each case incurred in the ordinary course of business;

     (g) easements, rights-of-way, restrictions and other encumbrances affecting real property which do not, taken as a whole, materially detract from the value of the Mortgaged Properties subject thereto or materially interfere with the ordinary conduct of the business of the applicable Person;

     (h) judgment Liens not giving rise to an Event of Default;

     (i) any Lien existing on any asset (other than stock of a Subsidiary) prior to acquisition thereof by the MLP, the Borrower or any of their respective Subsidiaries; provided that (i) no such Lien shall be extended to cover property other than the asset being acquired, and (ii) such Lien was not created in contemplation of or in connection with such acquisition;

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     (j) Liens securing Capital Lease obligations; provided that the Indebtedness in respect of such Capital Lease obligations is permitted under Section 7.04(f);

     (k) purchase money Liens upon or in any property acquired, constructed or improved by Borrower or any of its Subsidiaries (placed on such property at the time of such acquisition or the completion of the construction or improvement or within 90 days thereafter) to secure the deferred portion of the purchase price of such property or to secure Indebtedness incurred to finance the acquisition, construction or improvement of such property; provided that (i) no such Lien shall be extended to cover property other than the property being acquired, constructed or improved and (ii) the Indebtedness thereby secured is permitted by Section 7.04(e);

     (l) Liens reserved in or exercisable under any lease or sublease to which the Borrower or a Subsidiary is a lessee which secure the payment of rent or compliance with the terms of such lease or sublease; provided, that the rent under such lease or sublease is not then overdue and the Borrower or Subsidiary is in material compliance with the terms and conditions thereof;

     (m) any interest or title of a lessor under any lease entered into by the Borrower or any Subsidiary in the ordinary course of its business and covering only the assets so leased, and any interest of a landowner in the case of easements entered into by the Borrower or any of its Subsidiaries in the ordinary course of its business and covering only the property subject to the easement;

     (n) Liens securing obligations (other than obligations representing Indebtedness for borrowed money) under operating, reciprocal easement or similar agreements entered into in the ordinary course of business of the Borrower and its Subsidiaries;

     (o) licenses of patents, trademarks and other intellectual property rights granted by the Borrower or any of its Subsidiaries in the ordinary course of business and not interfering in any material respect with the ordinary conduct of the business of the Borrower and its Subsidiaries;

     (p) Liens arising solely by virtue of any statutory or common law provision relating to banker’s liens, rights of set-off or similar rights and remedies and burdening only deposit accounts or other funds maintained with a creditor depository institution;

     (q) Liens on any additions, improvements, replacements, repairs, fixtures, appurtenances or component parts thereof attaching to or required to be attached to property or assets pursuant to the terms of any mortgage, pledge agreement, security agreement or other similar instrument, creating a Lien upon such property or asset otherwise permitted under this Section;

     (r) Liens securing an obligation of a third party neither created, assumed nor Guaranteed by the Borrower or any Subsidiary upon lands over which easements or similar rights are acquired by the Borrower or any Subsidiary in the ordinary course of business of the Borrower or any Subsidiary;

     (s) the rights of the investors under that certain Investors’ Rights Agreement, dated as of December 22, 2006 by and among the MLP, the General Partner, Quest Parent and the investors named therein;

     (t) any Liens arising out of the refinancing, extension, renewal or refunding of any Indebtedness secured by any Lien permitted by any of the foregoing clauses of this Section, provided that such Indebtedness is not increased except for increases in an amount equal to a reasonable premium

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or other reasonable amount paid, and fees and expenses reasonably incurred, in connection with such extension, renewal, refinancing, or replacement and in an amount equal to any existing commitments unutilized thereunder, and is not secured by any additional assets; and

     (u) Liens incurred in the ordinary course of business in connection with margin requirements under Swap Contracts not to exceed in the aggregate $1,000,000 at any time outstanding.

     7.02 Investments. Make or own any Investments, except:

     (a) Investments existing on the Closing Date and listed in Section (b) of Schedule 5.13;

     (b) Cash Equivalents;

     (c) Investments constituting Indebtedness permitted under Section 7.04(b);

     (d) Investments by the MLP in the Borrower;

     (e) Investments by the Borrower and its Subsidiaries in any Subsidiary of the Borrower that, prior to such Investment, is a Guarantor and Investments by Subsidiaries in the Borrower;

     (f) Permitted Acquisitions by the Borrower or its Subsidiaries;

     (g) Guarantees of Indebtedness permitted under Section 7.04;

     (h) Swap Contracts permitted under Section 7.03;

     (i) Investments consisting of extensions of credit, including without limitation, in the nature of accounts receivable, arising from the grant of trade credit or prepayments or similar transactions entered into in the ordinary course of business and investments by the Borrower or any Subsidiary in satisfaction or partial satisfaction thereof from financially troubled account debtors to prevent or limit financial loss;

     (j) endorsements for collection or deposit in the ordinary course of business; and

     (k) Investments not otherwise permitted by this Section 7.02 in an aggregate amount not to exceed $2,500,000 at anytime outstanding.

     7.03 Hedging Agreements. Enter into any Swap Contracts other than in the ordinary course of business for the purpose of protecting against fluctuations in interest rates, commodity prices, or foreign exchange rates and not for purposes of speculation; provided that the Swap Contract shall not contain any provision exonerating the non-defaulting party from its obligation to make payments on outstanding transactions to the defaulting party.

     7.04 Indebtedness.

     Create, incur, or assume any Indebtedness except:

     (a) Indebtedness incurred pursuant to the Loan Documents;

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     (b) Indebtedness owed by a Subsidiary to the Borrower or to a Wholly-Owned Subsidiary or by the Borrower to a Wholly-Owned Subsidiary of the Borrower; provided, that, in each such case such Indebtedness is evidenced by a promissory note which has been pledged to secure the Obligations and is in the possession of the Administrative Agent;

     (c) other Indebtedness of the Borrower and the MLP (“Subordinated Indebtedness”) subordinated to the Obligations pursuant to a subordination agreement in form and substance satisfactory to the Administrative Agent in its sole discretion; provided that such Subordinated Indebtedness shall bear a market rate of interest, shall not contain financial or other affirmative or negative covenants more restrictive than those set forth in this Agreement and shall not require any payment of principal earlier than ninety (90) days after the Maturity Date;

     (d) obligations (contingent or otherwise) of the Borrower, the MLP or any Subsidiary existing or arising under any Swap Contract to the extent permitted by Section 7.03;

     (e) Indebtedness of the MLP, the Borrower and their respective Subsidiaries in respect of purchase money obligations for fixed or capital assets within the limitations set forth in Section 7.01(k); provided, however, that the aggregate amount of such Indebtedness at any one time outstanding shall not exceed $5,000,000;

     (f) Indebtedness of the MLP, the Borrower or any of their respective Subsidiaries in respect of Capital Lease obligations; provided that, such Capital Lease obligations will not require the payment of an aggregate amount in excess of [$2,000,000] annually; and provided that any Capital Lease obligation relating to compressors or compression equipment shall be excluded from this subsection and dealt with in Section 7.05;

     (g) Indebtedness consisting of surety bonds that the Borrower or any Subsidiary is required to obtain in order to comply with applicable Law or the requirements of any Governmental Authority;

     (h) Indebtedness secured by any Lien permitted under Section 7.01(i); provided, however, that the aggregate amount of such Indebtedness at any one time outstanding shall not exceed $5,000,000; and

     (i) other Indebtedness of the MLP, the Borrower and their respective Subsidiaries not to exceed $5,000,000 in the aggregate principal amount outstanding at any time;

provided, that if any Indebtedness is incurred pursuant to this Section 7.04, immediately after such Indebtedness is created, incurred or assumed, no Default or Event of Default shall exist.

     7.05 Lease Obligations. Create or suffer to exist any obligations for the payment of rent for any property under operating leases or agreements to lease, except for (i) operating leases (or Capital Lease obligations) for compressors and compression equipment and services; provided that, such operating leases (or Capital Lease obligations) will not require annual aggregate payments in excess of $25,000,000 (excluding escalations resulting from a rise in the consumer price or similar index), exclusive of expenses for maintenance, repairs, insurance, taxes, assessments and similar changes, and (ii) other operating leases (other than those constituting Synthetic Lease Obligations) entered into or assumed by the MLP, the Borrower or any of their respective Subsidiaries prior to the date hereof or after the date hereof in the ordinary course of business or entered into or assumed in connection with any Permitted Acquisition; provided that, such other operating leases will not require the payment of an aggregate

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amount of payments in excess of (excluding escalations resulting from a rise in the consumer price or similar index) $2,000,000 annually, exclusive of expenses for maintenance, repairs, insurance, taxes, assessments and similar changes.

     7.06 Fundamental Changes. Merge or consolidate with or into, or convey, transfer, lease or otherwise Dispose of (whether in one transaction or in a series of related transactions) all or substantially all of its assets (whether now owned or hereafter acquired) to or in favor of any Person; except that, so long as no Default or Event of Default exists or would result therefrom:

     (a) any Person may merge into the Borrower; provided that the Borrower is the surviving entity;

     (b) any Subsidiary may merge with (i) the Borrower; provided that the Borrower shall be the continuing or surviving Person, or (ii) any one or more Subsidiaries; provided that when any Wholly-Owned Subsidiary is merging with another Subsidiary, a Wholly-Owned Subsidiary shall be the continuing or surviving Person;

     (c) any Subsidiary may sell all or substantially all of its assets (upon voluntary liquidation or otherwise), to the Borrower or to another Subsidiary; provided that if the seller in such a transaction is a Wholly-Owned Subsidiary, then the purchaser must also be a Wholly-Owned Subsidiary; and

     (d) any Person (other than the Borrower or a Subsidiary of the Borrower) may merge into any Subsidiary; provided that such Subsidiary is the surviving entity.

     7.07 Dispositions.

     Make any Disposition or enter into any agreement to make any Disposition, except:

     (a) Dispositions by the MLP, the Borrower or any of their respective Subsidiaries of inventory in the ordinary course of business;

     (b) Dispositions of property by any Subsidiary to the Borrower, or by any Subsidiary or by the Borrower, to a Wholly-Owned Subsidiary that is a Guarantor;

     (c) other Dispositions for fair market value; provided no Default or Event of Default then exists or arises as a result thereof; and provided that if the Disposition is for cash and a prepayment is required by Section 2.04(b)(i), the Borrower shall make such prepayment in accordance with such Section;

     (d) Dispositions of property that is no longer commercially viable to maintain or obsolete, surplus or worn-out property; or

     (e) Dispositions permitted under Section 7.06.

     7.08 Restricted Payments; Distributions and Redemptions. Declare or make, directly or indirectly, any Restricted Payment, or incur any obligation (contingent or otherwise) to do so, except that:

     (a) each Subsidiary may make Restricted Payments to the Borrower and to Wholly-Owned Subsidiaries of the Borrower;

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     (b) the Borrower may declare, make or incur a liability to make Quarterly Borrower Distributions; provided, that at the time each such Quarterly Borrower Distribution is made no Event of Default exists or would result therefrom;

     (c) the MLP may declare, make or incur a liability to make Quarterly MLP Distributions of Available Cash as defined in the Partnership Agreement (MLP) to the extent such Quarterly MLP Distributions in any fiscal quarter do not exceed, in the aggregate, the Available Cash as defined in the Partnership Agreement (MLP) for the immediately preceding fiscal quarter and are made in accordance with the Partnership Agreement (MLP); provided, that at the time each such Quarterly MLP Distribution is made no Default or Event of Default exists or would result therefrom; and

     (d) the Borrower may fund on a one time basis a distribution to Quest Parent pursuant to Section 3.2 of the Contribution Agreement which shall not exceed $15,000,000.

     7.09 ERISA. At any time engage in a transaction which could be subject to Section 4069 or 4212(c) of ERISA, or knowingly permit any Plan maintained by a Company to: (a) engage in any non-exempt "prohibited transaction” (as defined in Section 4975 of the Code); (b) fail to comply with ERISA or any other applicable Laws; or (c) incur any material “accumulated funding deficiency” (as defined in Section 302 of ERISA), which, with respect to each event listed above, could be reasonably expected to have a Material Adverse Effect.

     7.10 Nature of Business; Capital Expenditures; Risk Management. Engage in any line of business other than the Midstream Business, or make any Capital Expenditures or Permitted Acquisitions permitted by Section 7.02 except in connection with the Midstream Business. In addition to the foregoing, the MLP may not engage in any business other than the ownership of the Borrower and the operation of the MLP. Without the written approval of the Administrative Agent, neither the Borrower nor the MLP may materially change its risk management policy.

     7.11 Transactions with Affiliates. Sell, lease or otherwise transfer any property or assets to, or purchase, lease or otherwise acquire any property or assets from, or otherwise engage in any other transactions with, any of its Affiliates, except (i) transactions between or among the MLP, the Borrower and its Wholly-Owned Subsidiaries not involving any other Affiliate, (ii) any Restricted Payment permitted by Section 7.08, (iii) transactions pursuant to the Material Agreements, the Partnership Agreement (MLP) or the Amended and Restated Limited Liability Company Agreement of the General Partner dated as of December 22, 2006, and (iv) in the ordinary course of business at prices and on terms and conditions not less favorable to the MLP, the Borrower or such Subsidiary, as applicable, than could be obtained on an arm’s length basis from unrelated third parties.

     7.12 Burdensome Agreements. Enter into any Contractual Obligation that limits the ability of any Subsidiary to make Restricted Payments to the Borrower or to otherwise transfer property to the Borrower; provided that (i) the foregoing shall not apply to restrictions and conditions imposed by applicable Law or by this Agreement, (ii) the foregoing shall not apply to customary restrictions and conditions contained in agreements relating to the sale of a Subsidiary pending such sale, provided such restrictions and conditions apply only to the Subsidiary that is to be sold and such sale is permitted hereunder, and (iii) the foregoing shall not apply to restrictions and conditions contained in the documentation evidencing any Indebtedness permitted hereunder. Notwithstanding the foregoing, (i) documents governing a Capitalized Lease or a purchase money Lien permitted by Sections 7.01(j) and (k) may prohibit other Liens on the asset encumbered by such Lien.

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     7.13 Use of Proceeds. Use the proceeds of any Revolving Loan for purposes other than those permitted by Section 6.12, or use the proceeds of any Revolving Loan, whether directly or indirectly, and whether immediately, incidentally or ultimately, to purchase or carry margin stock (within the meaning of Regulation U of the Board) or to extend credit to others for the purpose of purchasing or carrying margin stock or to refund indebtedness originally incurred for such purpose.

     7.14 Material Agreements. Permit (a) any amendment to any Borrower Organization Document or any Material Agreement, if such amendment could reasonably be expected to (y) have a Material Adverse Effect on the ability of the Borrower or any Guarantor to perform its obligations under the Loan Documents to which it is a party or (z) otherwise materially adversely affect the Lenders, or (b) any assignment of any Material Agreement if such assignment could reasonably be expected to materially adversely affect the Lenders or have a Material Adverse Effect on the ability of the Borrower or any other Loan Party to perform its obligations under the Loan Documents to which it is a party.

     7.15 Financial Covenants.

     (a) Interest Coverage Ratio. Permit the Interest Coverage Ratio at any fiscal quarter-end, commencing with the quarter-ended March 31, 2007, to be less than the ratio of 3.0 to 1.0; provided during the first (2007) fiscal year, this covenant will be tested on a cumulative quarterly basis and thereafter, commencing with the quarter-ended March 31, 2008, on a rolling four quarter basis.

     (b) Leverage Ratio. Permit the Leverage Ratio at any fiscal quarter-end, commencing with the quarter-ended March 31, 2007, to be greater than 4.0 to 1.0; unless such quarter-end occurs during any Acquisition Adjustment Period, in which case the Leverage Ratio cannot be greater than 4.5 to 1.0.

     (c) Adjustments for Permitted Acquisitions. For purposes of determining compliance with Sections 7.15(a) and (b):

     (i) Consolidated EBITDA (and Consolidated Annualized EBITDA) shall be calculated after giving effect, on a pro forma basis (in a manner reasonably acceptable to the Administrative Agent) for the four consecutive fiscal quarters most recently completed (or subject to the methodology used to calculate Consolidated Annualized EBITDA, if applicable), to any Permitted Acquisition occurring during such period, as if such Permitted Acquisition occurred on the first day of such period.

     (ii) If, in connection with a Permitted Acquisition, any Indebtedness is incurred or assumed by a Company, then Consolidated Interest Charges shall be calculated, on a pro forma basis (in a manner reasonably acceptable to the Administrative Agent) for the four quarters most recently completed (or on a basis consistent with the calculation of the Interest Coverage Ratio), as if such Indebtedness had been incurred on the first day of such period.

ARTICLE VIII.
EVENTS OF DEFAULT AND REMEDIES

     8.01 Events of Default. Any of the following shall constitute an Event of Default:

     (a) Non-Payment . The Borrower fails to pay (i) when and as required to be paid herein, any amount of principal of any Revolving Loan or any L/C Obligation or (ii) within three Business Days after

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the same becomes due, any interest on any Revolving Loan, any L/C Obligation, any commitment or other fee due hereunder, or any other amount payable hereunder or under any other Loan Document; or

     (b) Specific Covenants. The Borrower fails to perform or observe any term, covenant or agreement contained in any of Section 6.03(a), 6.05 (with respect to the Borrower’s existence), 6.12, or Article VII; or

     (c) Other Defaults. Any Loan Party fails to perform or observe any other covenant or agreement (not specified in subsection (a) or (b) above) contained in any Loan Document on its part to be performed or observed and such failure continues for 30 days after the date notice has been given to the Borrower by the Administrative Agent or a Lender; or

     (d) Representations and Warranties. Any representation or warranty made or deemed made by the Borrower or any other Loan Party herein, in any other Loan Document, or in any document delivered in connection herewith or therewith proves to have been incorrect in any material respect when made or deemed made; or

     (e) Cross-Default. (i) The Borrower or any Borrower Affiliate (A) fails to make any payment when due (whether by scheduled maturity, required prepayment, acceleration, demand, or otherwise) in respect of any Indebtedness or Guaranty Obligation in respect of Indebtedness (other than Indebtedness under Swap Contracts) having an aggregate principal amount (or, in the case of a Capitalized Lease or a Synthetic Lease Obligation, Attributable Indebtedness) (including undrawn or available amounts and including amounts owing to all creditors under any combined or syndicated credit arrangement) of more than (individually or collectively) $5,000,000, or (B) fails to observe or perform any other agreement or condition relating to any such Indebtedness or Guaranty Obligation in respect of Indebtedness or contained in any instrument or agreement evidencing, securing or relating thereto, or any other event occurs, the effect of which default or other event is to cause, or to permit the holder or holders of such Indebtedness, the lessor under such Synthetic Lease Obligation or the beneficiary or beneficiaries of such Guaranty Obligation (or a trustee or agent on behalf of such holder or holders or beneficiary or beneficiaries) to cause, with the giving of notice if required, such Indebtedness to be demanded or to become due or to be repurchased or redeemed (automatically or otherwise) prior to its stated maturity, or such Guaranty Obligation to become payable or cash collateral in respect thereof to be demanded; provided that this clause (e)(i)(B) shall not apply to secured Indebtedness that becomes due as a result of the voluntary sale or transfer of the property or assets securing such Indebtedness; or (ii) (A) there occurs under any Swap Contract an Early Termination Date (as defined in such Swap Contract) resulting from any event of default under such Swap Contract as to which the Borrower or any Borrower Affiliate is the Defaulting Party (as defined in such Swap Contract) and the Swap Termination Value owed by the Borrower or any Borrower Affiliate as a result thereof is greater than (individually or collectively) $5,000,000, or (B) there occurs under any Swap Contract an Early Termination Date (as defined in such Swap Contract) resulting from any Termination Event (as so defined) under such Swap Contract as to which the Borrower or any Borrower Affiliate is an Affected Party (as so defined) and the Early Termination Amount owed by the Borrower and Borrower Affiliate as a result thereof is greater than (individually or collectively) $5,000,000 and such amount is not paid when due under such Swap Contract; or

     (f) Insolvency Proceedings, Etc. (i) The Borrower or any Borrower Affiliate institutes or consents to the institution of any proceeding under any Debtor Relief Law, or makes an assignment for the benefit of creditors; or applies for or consents to the appointment of any receiver, trustee, custodian,

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conservator, liquidator, rehabilitator or similar officer for it or for all or any material part of its property or takes any action to effect any of the foregoing; or (ii) any receiver, trustee, custodian, conservator, liquidator, rehabilitator or similar officer is appointed without the application or consent of such Person and the appointment continues undischarged or unstayed for 60 calendar days; or (iii) any proceeding under any Debtor Relief Law relating to any such Person or to all or any part of its property is instituted without the consent of such Person and continues undismissed or unstayed for 60 calendar days, or an order for relief is entered in any such proceeding; or

     (g) Inability to Pay Debts; Attachment. (i) The Borrower or any Borrower Affiliate becomes unable or admits in writing its inability or fails generally to pay its debts as they become due, or (ii) any writ or warrant of attachment or execution or similar process is issued or levied against property which is a material part of the property of the Borrower and its Subsidiaries taken as a whole, and is not released, vacated or fully bonded within 45 days after its issue or levy; or

     (h) Judgments. There is entered against the Borrower or any Borrower Affiliate (i) a final non-appealable judgment or order for the payment of money in an aggregate amount exceeding (individually or collectively) $5,000,000 (to the extent not covered by third-party insurance as to which the insurer does not dispute coverage), or (ii) any non-monetary final non-appealable judgment that has or could reasonably be expected to have a Material Adverse Effect and, in either case, (A) enforcement proceedings are commenced by any creditor upon such judgment or order and is not released, vacated or fully bonded within 60 days after its attachment or levy; or (B) there is a period of 60 consecutive days during which a stay of enforcement of such judgment, by reason of a pending appeal or otherwise, is not in effect; or

     (i) ERISA. (i) If the Borrower, any Borrower Affiliate or any of their ERISA Affiliates maintains any Pension Plan or any Multiemployer Plan, an ERISA Event occurs with respect to a Pension Plan or Multiemployer Plan which has resulted or could reasonably be expected to result in liability of the Borrower or any Borrower Affiliate under Title IV of ERISA to the Pension Plan, Multiemployer Plan or the PBGC in an aggregate amount in excess of $1,000,000, or (ii) if there is any Multiemployer Plan, the Borrower, any Borrower Affiliate or any ERISA Affiliate thereof fails to pay when due, after the expiration of any applicable grace period, any installment payment with respect to its withdrawal liability under Section 4201 of ERISA under a Multiemployer Plan in an aggregate amount in excess of $1,000,000; or

     (j) Invalidity of Loan Documents. Any Loan Document, at any time after its execution and delivery and for any reason other than the agreement of all the Lenders or termination of all Commitments and satisfaction in full of all the Obligations, ceases to be in full force and effect, or is declared by a court of competent jurisdiction to be null and void, invalid or unenforceable in any material respect; or any Loan Party denies that it has any or further liability or obligation under any Loan Document, or purports to revoke, terminate or rescind any Loan Document; provided, however, that the foregoing shall not apply to the Guaranty and other Collateral Documents of any Subsidiary that is Disposed of by the Borrower in accordance with the provisions of this Agreement; or

     (k) Change of Control. There occurs any Change of Control; or

     (l) Dissolution. The Borrower or any Borrower Affiliate shall dissolve, liquidate, or otherwise terminate its existence, except as permitted in Section 7.06; or

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     (m) Material Agreements. (i) Termination of any Material Agreement, or any material provision of any of the foregoing if such termination could reasonably be expected to have a Material Adverse Effect and such agreement or provision is not replaced (prior to such cessation) in a manner satisfactory to the Administrative Agent; or (ii) default by any Person in the performance or observance of any material term of any Material Agreement which is not cured within the applicable cure period specified in such Material Agreement, if such default could reasonably be expected to have a Material Adverse Effect; or

     (n) Collateral; Impairment of Security, etc. (i) Any provision of any Loan Document shall for any reason cease to be valid and binding on or enforceable against a Loan Party or any Loan Party shall so state in writing or bring an action to limit its obligations or liabilities thereunder; or (ii) any Collateral Document shall for any reason (other than pursuant to the terms thereof) cease to create a valid security interest in the Collateral purported to be covered thereby or such security interest shall for any reason (other than as permitted herein or in any Collateral Document) cease to be a perfected and first priority security interest subject to Permitted Liens; provided, however, that the foregoing shall not apply to the Guaranty and other Collateral Documents of any Subsidiary that is Disposed of by the Borrower in accordance with the provisions of this Agreement.

     8.02 Remedies Upon Event of Default. If any Event of Default occurs and is continuing, the Administrative Agent shall, at the request of, or may, with the consent of, the Required Lenders:

     (a) declare the Commitment of each Lender to make Revolving Loans and any obligation of the L/C Issuer to make L/C Credit Extensions to be terminated, whereupon such Commitments and obligations shall be terminated;

     (b) declare the unpaid principal amount of all outstanding Revolving Loans, all interest accrued and unpaid thereon, and all other amounts owing or payable hereunder or under any other Loan Document to be immediately due and payable, without presentment, demand, protest, notice of intent to accelerate, notice of acceleration or other notice of any kind, all of which are hereby expressly waived by the Borrower;

     (c) declare that an amount equal to the then Outstanding Amount of all L/C Obligations be immediately due and payable by the Borrower, without presentment, demand, protest, notice of intent to accelerate, notice of acceleration or other notice of any kind, all of which are hereby expressly waived by the Borrower, and require that the Borrower deliver such payments to the Administrative Agent to Cash Collateralize the L/C Obligations (in an amount equal to the then Outstanding Amount thereof); and

     (d) exercise on behalf of itself and the Lenders all rights and remedies available to it and the Lenders under the Loan Documents or applicable Law;

provided, however, that upon the occurrence of any event specified in subsection (f) of Section 8.01, the obligation of each Lender to make Revolving Loans and any obligation of the L/C Issuer to make L/C Credit Extensions shall automatically terminate, the unpaid principal amount of all outstanding Revolving Loans and all interest and other amounts as aforesaid shall automatically become due and payable, and an amount equal to the then Outstanding Amount of all L/C Obligations shall be deemed to be forthwith due and owing by the Borrower to the L/C Issuer and the Lenders as of the date of such occurrence and the Borrower’s obligation to pay such amounts shall be absolute and unconditional, without regard to whether any beneficiary of any such Letter of Credit has attempted to draw down all or a portion of such amount under the terms of a Letter of Credit and, to the fullest extent permitted by applicable Law, shall not be

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subject to any defense or be affected by a right of set-off, counterclaim or recoupment which the Borrower may now or hereafter have against any such beneficiary, the L/C Issuer, the Administrative Agent, the Lenders or any other Person for any reason whatsoever. Such payments shall be delivered to and held by the Administrative Agent as cash collateral securing the L/C Obligations.

     8.03 Application of Funds. After the exercise of remedies provided for in Section 8.02 (or after the Revolving Loans have automatically become immediately due and payable and the L/C Obligations have automatically been required to be Cash Collateralized as set forth in the proviso to Section 8.02), any amounts received on account of the Obligations shall be applied by the Administrative Agent as set forth in Section 2.11(d).

ARTICLE IX.
ADMINISTRATIVE AGENT

     9.01 Appointment and Authorization of Agents; Lender Hedging Agreements. (a) Each Lender hereby irrevocably (subject to Section 9.10) appoints, designates and authorizes the Administrative Agent to take such action on its behalf under the provisions of this Agreement and each other Loan Document and to exercise such powers and perform such duties as are expressly delegated to it by the terms of this Agreement or any other Loan Document, together with such powers as are reasonably incidental thereto. Notwithstanding any provision to the contrary contained elsewhere herein or in any other Loan Document, the Administrative Agent shall not have any duties or responsibilities, except those expressly set forth herein, nor shall the Administrative Agent have or be deemed to have any fiduciary relationship with any Lender or participant, and no implied covenants, functions, responsibilities, duties, obligations or liabilities shall be read into this Agreement or any other Loan Document or otherwise exist against the Administrative Agent. Without limiting the generality of the foregoing sentence, the use of the term “agent” herein and in the other Loan Documents with reference to the Administrative Agent or Collateral Agent is not intended to connote any fiduciary or other implied (or express) obligations arising under agency doctrine of any applicable Law. Instead, such term is used merely as a matter of market custom, and is intended to create or reflect only an administrative relationship between independent contracting parties.

     (b) The L/C Issuer shall act on behalf of the Lenders with respect to any Letters of Credit issued by it and the documents associated therewith until such time (and except for so long) as the Administrative Agent may agree at the request of the Required Lenders to act for the L/C Issuer with respect thereto; provided, however, that the L/C Issuer shall have all of the benefits and immunities (i) provided to the Administrative Agent in this Article IX with respect to any acts taken or omissions suffered by the L/C Issuer in connection with Letters of Credit issued by it or proposed to be issued by it and the application and agreements for letters of credit pertaining to the Letters of Credit as fully as if the term “Administrative Agent” as used in this Article IX included the L/C Issuer with respect to such acts or omissions, and (ii) as additionally provided herein with respect to the L/C Issuer.

     (c) To the extent any Lender or any Affiliate of a Lender is a party to a Lender Hedging Agreement and accepts the benefits of the Liens in the Collateral arising pursuant to the Collateral Documents, such Lender (for itself and on behalf of any such Affiliates) shall be deemed (i) to appoint the Administrative Agent and Collateral Agent, as its nominee and agent, to act for and on behalf of such Lender or Affiliate thereof in connection with the Collateral Documents and (ii) to be bound by the terms of this Article IX.

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     9.02 Delegation of Duties. The Administrative Agent may execute any of its duties under this Agreement or any other Loan Document by or through agents (including the Collateral Agent), employees or attorneys-in-fact and shall be entitled to advice of counsel and other consultants or experts concerning all matters pertaining to such duties. Administrative Agent shall not be responsible for the negligence or misconduct of any agent or attorney-in-fact that it selects in the absence of gross negligence or willful misconduct.

     9.03 Default; Collateral. (a) Upon the occurrence and continuance of a Default or Event of Default, the Lenders agree to promptly confer in order that Required Lenders or the Lenders, as the case may be, may agree upon a course of action for the enforcement of the rights of the Lenders; and the Administrative Agent shall be entitled to refrain from taking any action (without incurring any liability to any Person for so refraining) unless and until the Administrative Agent shall have received instructions from Required Lenders. All rights of action under the Loan Documents and all right to the Collateral, if any, hereunder may be enforced by the Administrative Agent and any suit or proceeding instituted by the Administrative Agent in furtherance of such enforcement shall be brought in its name as the Administrative Agent without the necessity of joining as plaintiffs or defendants any other Lender, and the recovery of any judgment shall be for the benefit of the Lenders (and, with respect to Lender Hedging Agreements, Affiliates, if applicable) subject to the expenses of the Administrative Agent. In actions with respect to any property of the Borrower or any other Obligor, the Administrative Agent is acting for the ratable benefit of each Lender (and, with respect to Lender Hedging Agreement, Affiliates, if applicable). Any and all agreements to subordinate (whether made heretofore or hereafter) other indebtedness or obligations of Borrower to the Obligations shall be construed as being for the ratable benefit of each Lender (and, with respect to Lender Hedging Agreement, Affiliates, if applicable).

     (b) Each Lender authorizes and directs the Administrative Agent to enter into the Collateral Documents on behalf of and for the benefit of the Lenders (and, with respect to Lender Hedging Agreements, Affiliates, if applicable)(or if previously entered into, hereby ratifies the Administrative Agent’s previously entering into such agreements and Collateral Documents).

     (c) Except to the extent unanimity (or other percentage set forth in Section 10.1) is required hereunder, each Lender agrees that any action taken by the Required Lenders in accordance with the provisions of the Loan Documents, and the exercise by the Required Lenders of the power set forth herein or therein, together with such other powers as are reasonably incidental thereto, shall be authorized and binding upon all of the Lenders.

     (d) The Administrative Agent is hereby authorized on behalf of the Lenders, without the necessity of any notice to or further consent from any Lender, from time to time to take any action with respect to any Collateral or Collateral Documents which may be necessary to perfect and maintain perfected the Liens upon the Collateral granted pursuant to the Collateral Documents.

     (e) The Administrative Agent shall have no obligation whatsoever to any Lender or to any other Person to assure that the Collateral exists or is owned by any Obligor or is cared for, protected, or insured or has been encumbered or that the Liens granted to the Administrative Agent herein or pursuant thereto have been properly or sufficiently or lawfully created, perfected, protected, or enforced, or are entitled to any particular priority, or to exercise at all or in any particular manner or under any duty of care, disclosure, or fidelity, or to continue exercising, any of the Rights granted or available to the Administrative Agent in this Section 9.03 or in any of the Collateral Documents; it being understood and agreed that in respect of the Collateral, or any act, omission, or event related thereto, the Administrative

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Agent may act in any manner it may deem appropriate, in its sole discretion, given the Administrative Agent’s own interest in the Collateral as one of the Lenders and that the Administrative Agent shall have no duty or liability whatsoever to any Lender, other than to act without gross negligence or willful misconduct.

     (f) The Lenders hereby irrevocably authorize the Administrative Agent, at its option and in its discretion, to release any Lien granted to or held by the Administrative Agent upon any Collateral: (i) constituting property in which no Obligor owned an interest at the time the Lien was granted or at any time thereafter; (ii) constituting property leased or granted to an Obligor under a lease, easement or right-of-way which has expired or been terminated in a transaction permitted under the Loan Document or is about to expire and which has not been, and is not intended by such Obligor to be, renewed; and (iii) consisting of an instrument evidencing Indebtedness pledged to the Administrative Agent (for the benefit of the Lenders), if the Indebtedness evidenced thereby has been paid in full. In addition, the Lenders irrevocably authorize the Administrative Agent to release Liens upon Collateral as contemplated in Section 10.01(c) or (d), or if approved, authorized, or ratified in writing by the requisite Lenders. Upon request by the Administrative Agent at any time, the Lenders will confirm in writing the Administrative Agent’s authority to release particular types or items of Collateral pursuant to this Section 9.03.

     (g) In furtherance of the authorizations set forth in this Section 9.03, each Lender hereby irrevocably appoints the Administrative Agent its attorney-in-fact, with full power of substitution, for and on behalf of and in the name of each such Lender (i) to enter into Collateral Documents (including, without limitation, any appointments of substitute trustees under any Collateral Documents), (ii) to take action with respect to the Collateral and Collateral Documents to perfect, maintain, and preserve Lenders’ Liens, and (iii) to execute instruments of release or to take other action necessary to release Liens upon any Collateral to the extent authorized in paragraph (f) hereof. This power of attorney shall be liberally, not restrictively, construed so as to give the greatest latitude to the Administrative Agent’s power, as attorney, relative to the Collateral matters described in this Section 9.03. The powers and authorities herein conferred on the Administrative Agent may be exercised by the Administrative Agent through any Person who, at the time of the execution of a particular instrument, is an officer of the Administrative Agent (or any Person acting on behalf of the Administrative Agent pursuant to a valid power of attorney). The power of attorney conferred by this Section 9.03(g) to the Administrative Agent is granted for valuable consideration and is coupled with an interest and is irrevocable so long as the Obligations, or any part thereof, shall remain unpaid or the Lenders have any Commitment hereunder.

     9.04 Liability of Agents. No Agent-Related Person shall (a) be liable for any action taken or omitted to be taken by any of them under or in connection with this Agreement or any other Loan Document or the transactions contemplated hereby (except for its own gross negligence or willful misconduct in connection with its duties expressly set forth herein), or (b) be responsible in any manner to any Lender or participant for any recital, statement, representation or warranty made by any Loan Party or any officer thereof, contained herein or in any other Loan Document, or in any certificate, report, statement or other document referred to or provided for in, or received by Administrative Agent under or in connection with, this Agreement or any other Loan Document, or the validity, effectiveness, genuineness, enforceability or sufficiency of this Agreement or any other Loan Document, or for the creation, perfection or priority of any Liens purported to be created by any of the Loan Documents, or the validity, genuineness, enforceability, existence, value or sufficiency of any collateral security, or to make any inquiry respecting the performance by the Borrower of its obligations hereunder or under any other Loan Document, or for any failure of any Loan Party or any other party to any Loan Document to perform its obligations hereunder or thereunder. No Agent-Related Person shall be under any obligation to any

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Lender or participant to ascertain or to inquire as to the observance or performance of any of the agreements contained in, or conditions of, this Agreement or any other Loan Document, or to inspect the properties, books or records of any Loan Party or any Affiliate thereof.

     9.05 Reliance by Administrative Agent. (a) The Administrative Agent shall be entitled to rely, and shall be fully protected in relying, upon any writing, communication, signature, resolution, representation, notice, consent, certificate, affidavit, letter, facsimile, or telephone message, statement or other document or conversation believed by it to be genuine and correct and to have been signed, sent or made by the proper Person or Persons, and upon advice and statements of legal counsel (including counsel to any Loan Party), independent accountants and other experts selected by the Administrative Agent. The Administrative Agent shall be fully justified in failing or refusing to take any action under any Loan Document unless it shall first receive such advice or concurrence of the Required Lenders as it deems appropriate and, if it so requests, it shall first be indemnified to its satisfaction by the Lenders against any and all liability and expense which may be incurred by it by reason of taking or continuing to take any such action. The Administrative Agent shall in all cases be fully protected in acting, or in refraining from acting, under this Agreement or any other Loan Document in accordance with a request or consent of the Required Lenders or all the Lenders, if required hereunder, and such request and any action taken or failure to act pursuant thereto shall be binding upon all the Lenders and participants. Where this Agreement expressly permits or prohibits an action unless the Required Lenders otherwise determine, the Administrative Agent shall, and in all other instances, the Administrative Agent may, but shall not be required to, initiate any solicitation for the consent or a vote of the Lenders.

     (b) For purposes of determining compliance with the conditions specified in Section 4.01, each Lender that has funded its Pro Rata Share of the Borrowing(s) on the Closing Date (or, if there is no Borrowing made on such date, each Lender other than Lenders who gave written objection to the Administrative Agent prior to such date) shall be deemed to have consented to, approved or accepted or to be satisfied with, each document or other matter either sent by the Administrative Agent to such Lender for consent, approval, acceptance or satisfaction, or required hereunder to be consented to or approved by or acceptable or satisfactory to a Lender.

     9.06 Notice of Default. The Administrative Agent shall not be deemed to have knowledge or notice of the occurrence of any Default or Event of Default, except with respect to defaults in the payment of principal, interest and fees required to be paid to the Administrative Agent for the account of the Lenders, unless the Administrative Agent shall have received written notice from a Lender or the Borrower referring to this Agreement, describing such Default or Event of Default and stating that such notice is a “notice of default.” The Administrative Agent will notify the Lenders of its receipt of any such notice. The Administrative Agent shall take such action with respect to such Default or Event of Default as may be directed by the Required Lenders in accordance with Article VIII; provided, however, that unless and until the Administrative Agent has received any such direction, the Administrative Agent may (but shall not be obligated to) take such action, or refrain from taking such action, with respect to such Default or Event of Default as it shall deem advisable or in the best interest of the Lenders.

     9.07 Credit Decision; Disclosure of Information by Administrative Agent. Each Lender acknowledges that no Agent-Related Person has made any representation or warranty to it, and that no act by the Administrative Agent hereinafter taken, including any consent to and acceptance of any assignment or review of the affairs of any Loan Party or any Affiliate thereof, shall be deemed to constitute any representation or warranty by any Agent-Related Person to any Lender as to any matter, including whether Agent-Related Persons have disclosed material information in their possession. Each

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Lender represents to the Administrative Agent that it has, independently and without reliance upon any Agent-Related Person and based on such documents and information as it has deemed appropriate, made its own appraisal of and investigation into the business, prospects, operations, property, financial and other condition and creditworthiness of the Loan Parties and their respective Subsidiaries, and all applicable bank or other regulatory Laws relating to the transactions contemplated hereby, and made its own decision to enter into this Agreement and to extend credit to the Borrower hereunder. Each Lender also represents that it will, independently and without reliance upon any Agent-Related Person and based on such documents and information as it shall deem appropriate at the time, continue to make its own credit analysis, appraisals and decisions in taking or not taking action under this Agreement and the other Loan Documents, and to make such investigations as it deems necessary to inform itself as to the business, prospects, operations, property, financial and other condition and creditworthiness of the Borrower and the other Loan Parties. Except for notices, reports and other documents expressly required to be furnished to the Lenders by the Administrative Agent herein, the Administrative Agent shall not have any duty or responsibility to provide any Lender with any credit or other information concerning the business, prospects, operations, property, financial and other condition or creditworthiness of any of the Loan Parties or any of their respective Affiliates which may come into the possession of any Agent Related Person.

     9.08 Indemnification of Agents. Whether or not the transactions contemplated hereby are consummated, the Lenders shall indemnify upon demand each Agent-Related Person (to the extent not reimbursed by or on behalf of any Loan Party and without limiting the obligation of any Loan Party to do so), pro rata, and hold harmless each Agent-Related Person from and against any and all Indemnified Liabilities incurred by it; provided, however, that no Lender shall be liable for the payment to any Agent-Related Person of any portion of such Indemnified Liabilities resulting from such Person’s gross negligence or willful misconduct; provided, however, that no action taken in accordance with the directions of the Required Lenders shall be deemed to constitute gross negligence or willful misconduct for purposes of this Section. Without limitation of the foregoing, each Lender shall reimburse the Administrative Agent upon demand for its ratable share of any costs or out-of-pocket expenses (including Attorney Costs) incurred by the Administrative Agent in connection with the preparation, execution, delivery, administration, modification, amendment or enforcement (whether through negotiations, legal proceedings or otherwise) of, or legal advice in respect of rights or responsibilities under, this Agreement, any other Loan Document, or any document contemplated by or referred to herein, to the extent that the Administrative Agent is not reimbursed for such expenses by or on behalf of the Borrower. The undertaking in this Section shall survive termination of the Commitments, the payment of all Obligations hereunder and the resignation or replacement of the Administrative Agent.

     9.09 Administrative Agent in its Individual Capacity. Royal Bank of Canada and its Affiliates may make loans to, accept deposits from, acquire equity interests in and generally engage in any kind of banking, trust, financial advisory, underwriting or other business with each of the Loan Parties and their respective Affiliates as though Royal Bank of Canada were not the Administrative Agent, Collateral Agent or the L/C Issuer hereunder and without notice to or consent of the Lenders. The Lenders acknowledge that, pursuant to such activities, Royal Bank of Canada or its Affiliates may receive information regarding any Loan Party or its Affiliates (including information that may be subject to confidentiality obligations in favor of such Loan Party or such Affiliate) and acknowledge that the Administrative Agent shall be under no obligation to provide such information to them. With respect to its Revolving Loans, Royal Bank of Canada shall have the same rights and powers under this Agreement as any other Lender and may exercise such rights and powers as though it were not the Administrative

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Agent, Collateral Agent or the L/C Issuer, and the terms “Lender” and “Lenders” include Royal Bank of Canada in its individual capacity.

     9.10 Successor Administrative Agent and Collateral Agent.

     (a) The Administrative Agent may resign as Administrative Agent upon 30 days’ notice to the Lenders with a copy of such notice to the Borrower. If the Administrative Agent resigns under this Agreement, the Required Lenders shall appoint from among the Lenders a successor administrative agent for the Lenders which successor administrative agent shall be consented to by the Borrower at all times other than during the existence of an Event of Default (which consent of the Borrower shall not be unreasonably withheld or delayed). If no successor administrative agent is appointed prior to the effective date of the resignation of the Administrative Agent, the Administrative Agent may appoint, after consulting with the Lenders and the Borrower, a successor administrative agent from among the Lenders. Upon the acceptance of its appointment as successor administrative agent hereunder, such successor administrative agent shall succeed to all the rights, powers and duties of the retiring Administrative Agent and the term “Administrative Agent” shall mean such successor administrative agent and the retiring Administrative Agent’s appointment, powers and duties as Administrative Agent shall be terminated. After any retiring Administrative Agent’s resignation hereunder as Administrative Agent, the provisions of this Article IX and Sections 10.04 and 10.13 shall inure to its benefit as to any actions taken or omitted to be taken by it while it was Administrative Agent under this Agreement. If no successor administrative agent has accepted appointment as Administrative Agent by the date which is 30 days following a retiring Administrative Agent’s notice of resignation, the retiring Administrative Agent’s resignation shall nevertheless thereupon become effective and the Lenders shall perform all of the duties of the Administrative Agent hereunder until such time, if any, as the Required Lenders appoint a successor agent as provided for above.

     (b) The Collateral Agent may resign as Collateral Agent upon 30 days’ notice to the Administrative Agent with a copy of such notice to the Borrower. If the Collateral Agent resigns under this Agreement, the Administrative Agent shall designate a successor collateral agent. Upon the acceptance of its appointment as successor collateral agent hereunder, such successor collateral agent shall succeed to all the rights, powers and duties of the retiring Collateral Agent and the term “Collateral Agent” shall mean such successor collateral agent and the retiring Collateral Agent’s appointment, powers and duties as Collateral Agent shall be terminated. After any retiring Collateral Agent’s resignation hereunder as Collateral Agent, the provisions of this Article IX and Sections 10.04 and 10.13 shall inure to its benefit as to any actions taken or omitted to be taken by it while it was Collateral Agent under this Agreement.

     9.11 Other Agents; Arrangers. None of the Lenders or other Persons identified on the facing page or signature pages of this Agreement as a “syndication agent,” as a “documentation agent,” any other type of agent (other than the Administrative Agent), “arranger,” or “bookrunner” shall have any right, power, obligation, liability, responsibility or duty under this Agreement other than those applicable to all Lenders as such. Without limiting the foregoing, none of the Lenders so identified shall have or be deemed to have any fiduciary relationship with any Lender. Each Lender acknowledges that it has not relied, and will not rely, on any of the Lenders so identified in deciding to enter into this Agreement or in taking or not taking action hereunder.

     9.12 Administrative Agent May File Proofs of Claim. In case of the pendency of any receivership, insolvency, liquidation, bankruptcy, reorganization, arrangement, adjustment, composition

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or other judicial proceeding relative to any Loan Party, the Administrative Agent (irrespective of whether the principal of any Revolving Loan or L/C Obligation shall then be due and payable as herein expressed or by declaration or otherwise and irrespective of whether the Administrative Agent shall have made any demand on the Borrower) shall be entitled and empowered, by intervention in such proceeding or otherwise

     (i) to file and prove a claim for the whole amount of the principal and interest owing and unpaid in respect of the Revolving Loans, L/C Obligations and all other Obligations that are owing and unpaid and to file such other documents as may be necessary or advisable in order to have the claims of the Lenders, the L/C Issuer and the Administrative Agent (including any claim for the reasonable compensation, expenses, disbursements and advances of the Lenders, the L/C Issuer and the Administrative Agent and their respective agents and counsel and all other amounts due the Lenders, the L/C Issuer and the Administrative Agent under Sections 2.14(i) and (j), 2.08 10.04 and 10.05) allowed in such judicial proceeding; and

     (ii) to collect and receive any monies or other property payable or deliverable on any such claims and to distribute the same;

and any custodian, receiver, assignee, trustee, liquidator, sequestrator or other similar official in any such judicial proceeding is hereby authorized by each Lender and the L/C Issuer to make such payments to the Administrative Agent and, in the event that the Administrative Agent shall consent to the making of such payments directly to the Lenders and the L/C Issuer, to pay to the Administrative Agent any amount due for the reasonable compensation, expenses, disbursements and advances of the Administrative Agent and its agents and counsel, and any other amounts due the Administrative Agent under Sections 2.08, 10.04 and 10.05.

     Nothing contained herein shall be deemed to authorize the Administrative Agent to authorize or consent to or accept or adopt on behalf of any Lender or the L/C Issuer any plan of reorganization, arrangement, adjustment or composition affecting the Obligations or the rights of any Lender or to authorize the Administrative Agent to vote in respect of the claim of any Lender in any such proceeding.

ARTICLE X.
MISCELLANEOUS

     10.01 Amendments, Release of Collateral, Etc. (a) No amendment or waiver of any provision of this Agreement or any other Loan Document, and no consent to any departure by the Borrower or any other Loan Party therefrom, shall be effective unless in writing signed by the Required Lenders and the Borrower or the applicable Loan Party, as the case may be, and acknowledged by the Administrative Agent, and each such waiver or consent shall be effective only in the specific instance and for the specific purpose for which given; provided, however, that no such amendment, waiver or consent shall, unless in writing and signed by each of the Lenders directly affected thereby and by the Borrower, and acknowledged by the Administrative Agent, do any of the following:

     (i) extend or increase the Commitment of any Lender (or reinstate any Commitment terminated pursuant to Section 8.02);

     (ii) postpone or delay any date fixed by this Agreement or any other Loan Document for any payment or mandatory prepayment of principal, interest, fees or other amounts due to the Lenders (or any of them) hereunder or under any other Loan Document;

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     (iii) reduce the principal of, or the rate of interest specified herein on, any Revolving Loan or L/C Borrowing or (subject to clause (ii) of the proviso below) any fees or other amounts payable hereunder or under any other Loan Document; provided, however, that only the consent of the Required Lenders shall be necessary to (A) amend the definition of “Default Rate” or to waive any obligation of the Borrower to pay interest at the Default Rate or (B) to amend any financial covenant hereunder (or any defined term used therein) even if the effect of such amendment would be to reduce the rate of interest on any Revolving Loan or L/C Borrowing or to reduce any fee payable hereunder;

     (iv) change the percentage of the Aggregate Commitment or of the aggregate unpaid principal amount of the Revolving Loans and L/C Obligations which is required for the Lenders or any of them to take any action hereunder;

     (v) change the Pro Rata Share of any Lender (except as otherwise results from an increase in the Aggregate Commitment pursuant to Section 2.02 which increase is subject to the provisions of Section 2.02 but is not otherwise subject to the consent of the Required Lenders or any Lender);

     (vi) release a material amount of Collateral or release any Guarantor from a Guaranty (except in connection with a Disposition permitted under Section 7.07 or as otherwise permitted under this Section 10.01); or

     (vii) amend this Section, or Section 2.12, or any provision herein providing for unanimous consent or other action by all the Lenders;

and, provided further: (i) no amendment, waiver or consent shall, unless in writing and signed by the L/C Issuer in addition to the Required Lenders or all the Lenders, as the case may be, affect the rights or duties of the L/C Issuer under this Agreement or any Letter of Credit Application relating to any Letter of Credit issued or to be issued by it; (ii) no amendment, waiver or consent shall, unless in writing and signed by the Administrative Agent in addition to the Required Lenders or all the Lenders, as the case may be, affect the rights or duties of the Administrative Agent under this Agreement or any other Loan Document; and (iii) the Agent/Arranger Fee Letter may be amended, or rights or privileges thereunder waived, in a writing executed only by the parties thereto. Notwithstanding anything to the contrary herein, any Lender that has failed to fund any portion of the Revolving Loans or participation in L/C Obligations required to be funded by it hereunder shall not have any right to approve or disapprove any amendment, waiver or consent hereunder, except that the Pro Rata Share of such Lender may not be increased without the consent of such Lender.

     (b) Any amendment to any Loan Document which purports to (i) decrease the amount of any mandatory prepayment or commitment reduction required by Section 2.04 or (ii) change this Section 10.01(b), must be by an instrument in writing executed by Borrower, the Administrative Agent, and the Required Lenders.

     (c) Upon any sale, transfer, or Disposition of Collateral which is permitted pursuant to the Loan Documents, and upon 5 Business Days’ prior written request by the Borrower (which request must be accompanied by (i) true and correct copies of all material documents of transfer or Disposition, including any contract of sale, (ii) a preliminary closing statement and instructions to the title company, if any, (iii) all requested release instruments in form and substance satisfactory to the Administrative Agent and (iv) if required, written consent of the requisite Lenders), the Administrative Agent shall (and is

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hereby irrevocably authorized by the Lenders to) execute such documents as may be necessary to evidence the release of Liens granted to the Administrative Agent for the benefit of the Lenders pursuant hereto in such Collateral. The Administrative Agent shall not be required to execute any release instruments on terms which, in the Administrative Agent’s opinion, would expose the Administrative Agent to liability or create any obligation or entail any consequence other than the release of Liens without recourse or warranty. No such release shall impair the Administrative Agent’s Lien on the proceeds of sale of such Collateral.

     (d) If all outstanding Revolving Loans and other Obligations (other than contingent indemnity obligations) have been indefeasibly paid in full (or, with respect to L/C Obligations, Cash Collateralized) and the Commitments have terminated or have been reduced to zero, and, subject to Section 10.01(e) all Lender Hedging Agreement have terminated, the Administrative Agent agrees to, and the Lenders hereby instruct the Administrative Agent to, at the Borrower’s expense, execute and authorize such releases of the Collateral Documents as the Borrower shall reasonably request and this Agreement shall be deemed terminated except that such termination shall not relieve the Borrower of any obligation to make any payments to the Administrative Agent or any Lender required by any Loan Document to the extent accruing, or relating to an event occurring, prior to such termination.

     (e) Notwithstanding any provision herein to the contrary, if the Commitments have been terminated, and the only outstanding Obligations (other than contingent indemnity obligations and L/C Obligations that are Cash Collateralized) are amounts owed pursuant to one or more Lender Hedging Agreements, the Administrative Agent will, and is hereby authorized to, (A) release the Liens created under the Loan Documents and (B) release all Guaranties of the Borrower; provided, that contemporaneously with such release, (i) the Borrower (and, if applicable, any Loan Party that is a party to such Lender Hedging Agreements) (A) executes a margin agreement in form and substance acceptable to such Lender(s) (or its Affiliates) that are parties to such Lender Hedging Agreements (the “Lender Counterparties”) and (B), if required, provides collateral in the form of cash or a letter of credit having an aggregate value acceptable to such Lender Counterparties, and (ii) if such Lender Hedging Agreement is executed by a Subsidiary of the Borrower and the Borrower and the MLP are not parties thereto, the Borrower and the MLP execute a guaranty covering such Subsidiary’s obligations thereunder, such guaranty to be in form and substance satisfactory to the Lender Counterparties. Any release under this Section 10.01(e) must be in writing and signed by the Administrative Agent.

     10.02 Notices and Other Communications; Facsimile Copies.

     (a) General. Unless otherwise expressly provided herein, all notices and other communications provided for hereunder and under the other Loan Documents shall be in writing (including by facsimile transmission) and mailed, faxed or delivered, to the address, facsimile number or (subject to subsection (c) below) electronic mail address specified for notices on Schedule 10.02 (for the Borrower, any Guarantor and the Administrative Agent) or on the Administrative Details Form (for the other Lenders); or, in the case of the Borrower, the Guarantors, the Administrative Agent, or the L/C Issuer, to such other address as shall be designated by such party in a notice to the other parties, and in the case of any other party, to such other address as shall be designated by such party in a notice to the Borrower, the Administrative Agent and the L/C Issuer. All such notices and other communications shall be deemed to be given or made upon the earlier to occur of (i) actual receipt by the intended recipient and (ii) (A) if delivered by hand or by courier, when signed for by the intended recipient; (B) if delivered by mail, four Business Days after deposit in the mails, postage prepaid; (C) if delivered by facsimile, when sent and receipt has been confirmed by telephone; and (D) if delivered by electronic mail (which form of

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delivery is subject to the provisions of subsection (c) below), when delivered; provided, however, that notices and other communications to the Administrative Agent or the L/C Issuer pursuant to Article II shall not be effective until actually received by such Person. Any notice or other communication permitted to be given, made or confirmed by telephone hereunder shall be given, made or confirmed by means of a telephone call to the intended recipient at the number specified in accordance with this Section, it being understood and agreed that a voicemail message shall in no event be effective as a notice, communication or confirmation hereunder.

     (b) Effectiveness of Facsimile Documents and Signatures. Loan Documents may be transmitted and/or signed by facsimile. The effectiveness of any such documents and signatures shall, subject to applicable Law, have the same force and effect as manually-signed originals and shall be binding on all Loan Parties, the Administrative Agent and the Lenders. The Administrative Agent may also require that any such documents and signatures be confirmed by a manually-signed original thereof; provided, however, that the failure to request or deliver the same shall not limit the effectiveness of any facsimile document or signature.

     (c) Limited Use of Electronic Mail. Electronic mail and internet and intranet websites may be used only to distribute routine communications, such as financial statements and other information, and to distribute Loan Documents for execution by the parties thereto, and shall not be recognized hereunder for any other purpose.

     (d) Reliance by Administrative Agent and Lenders. The Administrative Agent and the Lenders shall be entitled to rely and act upon any notices (including telephonic Borrowing Notices) purportedly given by or on behalf of the Borrower even if (i) such notices were not made in a manner specified herein, were incomplete or were not preceded or followed by any other form of notice specified herein, or (ii) the terms thereof, as understood by the recipient, varied from any confirmation thereof. The Borrower shall indemnify each Agent-Related Person and each Lender from all losses, costs, expenses and liabilities resulting from the reliance by such Person on each notice purportedly given by or on behalf of the Borrower. All telephonic notices to and other communications with the Administrative Agent may be recorded by the Administrative Agent, and each of the parties hereto hereby consents to such recording.

     10.03 No Waiver; Cumulative Remedies. No failure by any Lender or the Administrative Agent to exercise, and no delay by any such Person in exercising, any right, remedy, power or privilege hereunder shall operate as a waiver thereof; nor shall any single or partial exercise of any right, remedy, power or privilege hereunder preclude any other or further exercise thereof or the exercise of any other right, remedy, power or privilege. The rights, remedies, powers and privileges herein or therein provided are cumulative and not exclusive of any rights, remedies, powers and privileges provided by law.

     10.04 Attorney Costs; Expenses and Taxes. The Borrower agrees (a) to pay or reimburse the Administrative Agent for all reasonable costs and expenses incurred in connection with the development, preparation, negotiation, syndication, administration and execution of this Agreement and the other Loan Documents, including the filing, recording, refiling or rerecording of any Mortgage, any pledge agreement and any Security Agreement and/or any Uniform Commercial Code financing statements relating thereto and all amendments, supplements and modifications to any thereof and any and all other documents or instruments of further assurance required to be filed or recorded or refiled or rerecorded by the terms hereof or of any mortgage, any pledge agreement or any security agreement, and any amendment, waiver, consent or other modification of the provisions hereof and thereof (whether or not

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the transactions contemplated hereby or thereby are consummated), and the consummation and administration of the transactions contemplated hereby and thereby, including all Attorney Costs, and (b) to pay or reimburse the Administrative Agent and each Lender for all costs and expenses incurred in connection with the enforcement, attempted enforcement, or preservation of any rights or remedies under this Agreement or the other Loan Documents (including all such costs and expenses incurred during any workout or restructuring in respect of the Obligations and during any legal proceeding, including any proceeding under any Debtor Relief Law), including all Attorney Costs. The foregoing costs and expenses shall include all search, filing, recording, title insurance and appraisal charges and fees and taxes related thereto, and other out-of-pocket expenses incurred by the Administrative Agent and the cost of independent public accountants and other outside experts retained by the Administrative Agent or any Lender. The agreements in this Section shall survive the termination of the Commitments and repayment of all the other Obligations.

     10.05 Indemnification. Whether or not the transactions contemplated hereby are consummated, each of the Borrower, the MLP and each other Guarantor (by execution of a Guaranty), jointly and severally, agrees to indemnify, save and hold harmless each Agent-Related Person, the Administrative Agent, the Collateral Agent, the Arrangers, each Lender, the L/C Issuer and their respective Affiliates, directors, officers, employees, counsel, agents and attorneys-in-fact (collectively the “Indemnitees”) from and against: (a) any and all claims, demands, actions or causes of action that are asserted against any Indemnitee by any Person (other than the Administrative Agent or any Lender) relating directly or indirectly to a claim, demand, action or cause of action that such Person asserts or may assert against any Loan Party, any Affiliate of any Loan Party or any of their respective officers or directors, arising out of or relating to, the Loan Documents, the Commitments, the use or contemplated use of the proceeds of any Revolving Loans, or the relationship of any Loan Party, the Administrative Agent, the Collateral Agent, the Lenders and the L/C Issuer under this Agreement or any other Loan Document; (b) any and all claims, demands, actions or causes of action that may at any time (including at any time following repayment of the Obligations and the resignation of the Administrative Agent or the replacement of any Lender) be asserted or imposed against any Indemnitee by any Person or by the Borrower or any other Loan Party, arising out of or relating to, the Loan Documents, the Commitments, the use or contemplated use of the proceeds of any Revolving Loans, or the relationship of any Loan Party, the Administrative Agent, the Collateral Agent, the Lenders and the L/C Issuer under this Agreement or any other Loan Document; (c) without limiting the foregoing, any and all claims, demands, actions or causes of action, judgments and orders, penalties and fines that are asserted or imposed against any Indemnitee, (i) under the application of any Environmental Law applicable to the MLP, the Borrower or any of their respective Subsidiaries or any of their properties or assets, including the treatment or disposal of Hazardous Substances on any of their properties or assets, (ii) as a result of the breach or non-compliance by the MLP, the Borrower or any of their respective Subsidiaries with any Environmental Law applicable to the MLP, the Borrower or any of their respective Subsidiaries, (iii) due to past ownership by the MLP, the Borrower or any of their respective Subsidiaries of any of their properties or assets or past activity on any of their properties or assets which, though lawful and fully permissible at the time, could result in present liability, (iv) due to the presence, use, storage, treatment or disposal of Hazardous Substances on or under, or the escape, seepage, leakage, spillage, discharge, emission or Release from, any of the properties owned or operated by the MLP, the Borrower or any of their respective Subsidiaries (including any liability asserted or arising under any Environmental Law), regardless of whether caused by, or within the control of, the MLP, the Borrower or any of their respective Subsidiaries, or (v) due to any other environmental, health or safety condition in connection with the Loan Documents; (d) any administrative or investigative proceeding by any Governmental Authority arising out of or related to a claim, demand, action or cause of action described in subsection

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(a), (b) or (c) above; and (e) any and all liabilities (including liabilities under indemnities), losses, costs, damages or expenses (including Attorney Costs and settlement costs) that any Indemnitee suffers or incurs as a result of the assertion of any foregoing claim, demand, action, cause of action or proceeding, or as a result of the preparation of any defense in connection with any foregoing claim, demand, action, cause of action or proceeding, in all cases, WHETHER OR NOT ARISING OUT OF THE STRICT LIABILITY OR NEGLIGENCE OF AN INDEMNITEE, and whether or not an Indemnitee is a party to such claim, demand, action, cause of action or proceeding (all the foregoing, collectively, the “Indemnified Liabilities”); provided that no Indemnitee shall be entitled to indemnification for any claim to the extent caused by its own gross negligence or willful misconduct. The agreements in this Section shall survive and continue for the benefit of the Indemnitees at all times after the Borrower’s acceptance of the Lenders’ Commitments under this Agreement, whether or not the Closing Date shall occur and shall survive the termination of the Commitments and repayment of all the other Obligations.

     10.06 Payments Set Aside. To the extent that the Borrower makes a payment to the Administrative Agent or any Lender, or the Administrative Agent or any Lender exercises its right of setoff, and such payment or the proceeds of such set-off or any part thereof is subsequently invalidated, declared to be fraudulent or preferential, set aside or required (including pursuant to any settlement entered into by the Administrative Agent or such Lender in its discretion) to be repaid to a trustee, receiver or any other party, in connection with any proceeding under any Debtor Relief Law or otherwise, then (a) to the extent of such recovery, the obligation or part thereof originally intended to be satisfied shall be revived and continued in full force and effect as if such payment had not been made or such setoff had not occurred, and (b) each Lender severally agrees to pay to the Administrative Agent upon demand its applicable share of any amount so recovered from or repaid by the Administrative Agent, plus interest thereon from the date of such demand to the date such payment is made at a rate per annum equal to the Federal Funds Rate from time to time in effect.

     10.07 Successors and Assigns.

     (a) The provisions of this Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective successors and assigns permitted hereby, except that neither the Borrower nor the MLP may assign or otherwise transfer any of its rights or obligations hereunder without the prior written consent of each Lender and no Lender may assign or otherwise transfer any of its rights or obligations hereunder except (i) to an Eligible Assignee in accordance with the provisions of paragraph (b) of this Section, (ii) by way of participation in accordance with the provisions of paragraph (d) of this Section or (iii) by way of pledge or assignment of a security interest subject to the restrictions of paragraph (f) of this Section (and any other attempted assignment or transfer by any party hereto shall be null and void). Nothing in this Agreement, expressed or implied, shall be construed to confer upon any Person (other than the parties hereto, their respective successors and assigns permitted hereby, Participants to the extent provided in paragraph (d) of this Section and, to the extent expressly contemplated hereby, the Related Parties of each of the Administrative Agent and the Lenders) any legal or equitable right, remedy or claim under or by reason of this Agreement.

     (b) Any Lender may at any time assign to one or more Eligible Assignees all or a portion of its rights and obligations under this Agreement (including all or a portion of its Commitment and the Revolving Loans (including for purposes of this subsection (b), participations in L/C Obligations) at the time owing to it); provided that:

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     except in the case of an assignment of the entire remaining amount of the assigning Lender’s Commitment and the Revolving Loans at the time owing to it or in the case of an assignment to a Lender or an Affiliate of a Lender or an Approved Fund with respect to a Lender, the aggregate amount of the Commitment (which for this purpose includes Revolving Loans outstanding thereunder) or, if the applicable Commitment is not then in effect, the outstanding principal balance of the Revolving Loan of the assigning Lender subject to each such assignment (determined as of the date the Assignment and Assumption with respect to such assignment is delivered to the Administrative Agent or, if “Trade Date” is specified in the Assignment and Assumption, as of the Trade Date) shall not be less than $5,000,000, unless each of the Administrative Agent and, so long as no Event of Default has occurred and is continuing, the Borrower otherwise consent (Borrower’s consent not to be unreasonably withheld, conditioned or delayed);

     (i) each partial assignment shall be made as an assignment of a proportionate part of all the assigning Lender’s rights and obligations under this Agreement with respect to the Revolving Loan or the Commitment assigned;

     (ii) any assignment of a Commitment must be approved by the Administrative Agent and L/C Issuer unless the Person that is the proposed assignee is itself a Lender (whether or not the proposed assignee would otherwise qualify as an Eligible Assignee); and

     (iii) the parties to each assignment shall execute and deliver to the Administrative Agent an Assignment and Assumption, together with a processing and recordation fee of $3,500, and the Eligible Assignee, if it shall not be a Lender, shall deliver to the Administrative Agent an Administrative Details Form.

Subject to acceptance and recording thereof by the Administrative Agent pursuant to paragraph (c) of this Section, from and after the effective date specified in each Assignment and Assumption, the Eligible Assignee thereunder shall be a party to this Agreement and, to the extent of the interest assigned by such Assignment and Assumption, have the rights and obligations of a Lender under this Agreement, and the assigning Lender thereunder shall, to the extent of the interest assigned by such Assignment and Assumption, be released from its obligations under this Agreement (and, in the case of an Assignment and Assumption covering all of the assigning Lender’s rights and obligations under this Agreement, such Lender shall cease to be a party hereto) but shall continue to be entitled to the benefits of Sections 3.07, 10.04 and 10.05 with respect to facts and circumstances occurring prior to the effective date of such assignment. Any assignment or transfer by a Lender of rights or obligations under this Agreement that does not comply with this paragraph shall be treated for purposes of this Agreement as a sale by such Lender of a participation in such rights and obligations in accordance with paragraph (d) of this Section.

     (c) The Administrative Agent, acting solely for this purpose as an agent of the Borrower, shall maintain at one of its offices a copy of each Assignment and Assumption delivered to it and a register for the recordation of the names and addresses of the Lenders, and the Commitments of, and principal amounts of the Revolving Loans and L/C Obligations owing to, each Lender pursuant to the terms hereof from time to time (the “Register”). The entries in the Register shall be conclusive absent manifest error, and the Borrower, the Administrative Agent and the Lenders may treat each Person whose name is recorded in the Register pursuant to the terms hereof as a Lender hereunder for all purposes of

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this Agreement, notwithstanding notice to the contrary. The Register shall be available for inspection by the Borrower and any Lender, at any reasonable time and from time to time upon reasonable prior notice.

     (d) Any Lender may at any time, without the consent of, or notice to, the Borrower or the Administrative Agent, sell participations to any Person (other than a natural person or the Borrower or any of the Borrower’s Affiliates or Subsidiaries) (each, a “Participant”) in all or a portion of such Lender’s rights and/or obligations under this Agreement (including all or a portion of its Commitment and/or the Revolving Loans (including such Lender’s participation in L/C Obligations) owing to it); provided that (i) such Lender’s obligations under this Agreement shall remain unchanged, (ii) such Lender shall remain solely responsible to the other parties hereto for the performance of such obligations and (iii) the Borrower, the Administrative Agent and the other Lenders shall continue to deal solely and directly with such Lender in connection with such Lender’s rights and obligations under this Agreement. Any agreement or instrument pursuant to which a Lender sells such a participation shall provide that such Lender shall retain the sole right to enforce this Agreement and to approve any amendment, modification or waiver of any provision of this Agreement; provided that such agreement or instrument may provide that such Lender will not, without the consent of the Participant, agree to any amendment, modification or waiver that would (i) postpone any date upon which any payment of money is scheduled to be paid to such Participant, (ii) reduce the principal, interest, fees or other amounts payable to such Participant, or (iii) release the MLP from its Guaranty. Subject to subsection (e) of this Section, the Borrower agrees that each Participant shall be entitled to the benefits of Sections 3.01, 3.04 and 3.05 to the same extent as if it were a Lender and had acquired its interest by assignment pursuant to subsection (b) of this Section; provided said Participant agrees to be subject to Sections 3.08 and 10.15 as though it were a Lender. To the extent permitted by law, each Participant also shall be entitled to the benefits of Section 10.09 as though it were a Lender; provided such Participant agrees to be subject to Section 2.12 as though it were a Lender.

     (e) A Participant shall not be entitled to receive any greater payment under Section 3.01 or 3.04 than the applicable Lender would have been entitled to receive with respect to the participation sold to such Participant, unless the sale of the participation to such Participant is made with the Borrower’s prior written consent. A Participant that would be a Foreign Lender if it were a Lender shall not be entitled to the benefits of Section 3.01 unless the Borrower is notified of the participation sold to such Participant and such Participant agrees, for the benefit of the Borrower, to comply with Section 3.01 as though it were a Lender.

     (f) Any Lender may at any time pledge or assign a security interest in all or any portion of its rights under this Agreement (including under its Revolving Notes, if any) to secure obligations of such Lender, including any pledge or assignment to secure obligations to a Federal Reserve Bank; provided that no such pledge or assignment shall release a Lender from any of its obligations hereunder or substitute any such pledgee or assignee for such Lender as a party hereto.

     (g) If the consent of the Borrower to an assignment or to an Eligible Assignee is required hereunder (including a consent to an assignment which does not meet the minimum assignment threshold specified in clause (i) of the proviso to the first sentence of Section 10.07(b)), the Borrower shall be deemed to have given its consent five Business Days after the date notice thereof has been delivered by the assigning Lender (through the Administrative Agent) unless such consent is expressly refused by the Borrower prior to such fifth Business Day.

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     (h) Notwithstanding anything to the contrary contained herein, if at any time Royal Bank of Canada assigns all of its Commitment and Revolving Loans pursuant to subsection (b) above, Royal Bank of Canada may, upon 30 days’ notice to the Borrower and the Lenders, resign as L/C Issuer. In the event of any such resignation as L/C Issuer, the Borrower shall be entitled to appoint from among the Lenders a successor L/C Issuer hereunder; provided, however, that no failure by the Borrower to appoint any such successor shall affect the resignation of Royal Bank of Canada as L/C Issuer. Royal Bank of Canada shall retain all the rights and obligations of the L/C Issuer hereunder with respect to all Letters of Credit outstanding as of the effective date of its resignation as L/C Issuer and all L/C Obligations with respect thereto (including the right to require the Lenders to make Base Rate Loans or fund participations in Unreimbursed Amounts pursuant to Section 2.14(c)).

     10.08 Confidentiality. Each Lender agrees that it will not disclose without the prior consent of the Borrower (other than to directors, officers, employees, auditors, accountants, counsel or other professional advisors of the Administrative Agent or any Lender) any information with respect to the MLP, the Borrower or any of their respective Subsidiaries, which is furnished pursuant to this Agreement; provided that any Lender may disclose any such information (a) as has become generally available to the public, (b) as may be required or appropriate in any report, statement or testimony submitted to or required by any municipal, state or federal regulatory body having or claiming to have jurisdiction over such Lender or submitted to or required by the Board or the Federal Deposit Insurance Corporation or similar organizations (whether in the United States or elsewhere) or their successors, (c) as may be required or appropriate in response to any summons or subpoena in connection with any litigation, (d) in order to comply with any law, order, regulation or ruling applicable to such Lender, (e) to any Eligible Assignee of or Participant in, or any prospective Eligible Assignee of or Participant in, any of its rights or obligations under this Agreement; provided that such Eligible Assignee or Participant or prospective Eligible Assignee or Participant executes an agreement containing provisions substantially similar to those contained in this Section 10.08, (f) in connection with the exercise of any remedy by such Lender if an Event of Default pertaining to the Loan Documents has occurred and is continuing, (g) in connection with any litigation involving such Lender pertaining to the Loan Documents, (h) to any Lender or the Administrative Agent, or (i) to any Affiliate of any Lender (it being understood that the Persons to whom such disclosure is made will be informed of the confidential nature of such information and obligated to keep such information confidential).

     10.09 Set-off. In addition to any rights and remedies of the Lenders provided by law, upon the occurrence and during the continuance of any Event of Default, each Lender is authorized at any time and from time to time, without prior notice to the MLP, the Borrower or any other Loan Party, any such notice being waived by the MLP, the Borrower (on its own behalf and on behalf of each Loan Party) to the fullest extent permitted by law, to set off and apply any and all deposits (general or special, time or demand, provisional or final) at any time held by, and other indebtedness at any time owing by, such Lender to or for the credit or the account of the respective Loan Parties against any and all Obligations owing to the Administrative Agent and the Lenders, now or hereafter existing, irrespective of whether or not the Administrative Agent or such Lender shall have made demand under this Agreement or any other Loan Document and although such Obligations may be contingent or unmatured. Each Lender agrees promptly to notify the Borrower and the Administrative Agent after any such set-off and application made by such Lender; provided, however, that the failure to give such notice shall not affect the validity of such set-off and application.

     10.10 Interest Rate Limitation. Regardless of any provision contained in any Loan Document, neither the Administrative Agent nor any Lender shall ever be entitled to contract for, charge,

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take, reserve, receive, or apply, as interest on all or any part of the Obligations, any amount in excess of the Maximum Rate, and, if any Lender ever does so, then such excess shall be deemed a partial prepayment of principal and treated hereunder as such and any remaining excess shall be refunded to the Borrower. In determining if the interest paid or payable exceeds the Maximum Rate, the Borrower and the Lenders shall, to the maximum extent permitted under applicable Law, (a) treat all Borrowings as but a single extension of credit (and the Lenders and the Borrower agree that such is the case and that provision herein for multiple Borrowings is for convenience only), (b) characterize any nonprincipal payment as an expense, fee, or premium rather than as interest, (c) exclude voluntary prepayments and the effects thereof, and (d) amortize, prorate, allocate, and spread the total amount of interest throughout the entire contemplated term of the Obligations. However, if the Obligations are paid and performed in full prior to the end of the full contemplated term thereof, and if the interest received for the actual period of existence thereof exceeds the Maximum Amount, the Lenders shall refund such excess, and, in such event, the Lenders shall not, to the extent permitted by Law, be subject to any penalties provided by any Laws for contracting for, charging, taking, reserving or receiving interest in excess of the Maximum Amount.

     10.11 Counterparts. This Agreement may be executed in one or more counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument.

     10.12 Integration. This Agreement, together with the other Loan Documents, comprises the complete and integrated agreement of the parties on the subject matter hereof and thereof and supersedes all prior agreements, written or oral, on such subject matter. In the event of any conflict between the provisions of this Agreement and those of any other Loan Document, the provisions of this Agreement shall control; provided that the inclusion of supplemental rights or remedies in favor of the Administrative Agent or the Lenders in any other Loan Document shall not be deemed a conflict with this Agreement. Each Loan Document was drafted with the joint participation of the respective parties thereto and shall be construed neither against nor in favor of any party, but rather in accordance with the fair meaning thereof.

     10.13 Survival of Representations and Warranties. All representations and warranties made hereunder and in any other Loan Document or other document delivered pursuant hereto or thereto or in connection herewith or therewith shall survive the execution and delivery hereof and thereof. Such representations and warranties have been or will be relied upon by the Administrative Agent and each Lender, regardless of any investigation made by the Administrative Agent or any Lender or on their behalf and notwithstanding that the Administrative Agent or any Lender may have had notice or knowledge of any Default or Event of Default at the time of any Borrowing, and shall continue in full force and effect as long as any Revolving Loan or any other Obligation shall remain unpaid or unsatisfied.

     10.14 Severability. Any provision of this Agreement and the other Loan Documents to which the Borrower is a party that 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 provisions thereof, and any such prohibition or unenforceability in any jurisdiction shall not invalidate or render unenforceable such provision in any other jurisdiction.

     10.15 Replacement of Lenders. If (i) any Lender fails or refuses to consent to any requested amendment or waiver pursuant to Section 10.01, (ii) any Lender requests compensation under Section 3.04, or if the Borrower is required to pay any additional amount to any Lender or any Governmental Authority for the account of any Lender pursuant to Section 3.01, (iii) any Lender is in breach of any of

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its obligations under this Agreement or (iv) if any other circumstance exists hereunder that gives the Borrower the right to replace a Lender as a party hereto, then the Borrower may, at its sole expense and effort, upon notice to such Lender and the Administrative Agent, require such Lender to assign and delegate, without recourse (in accordance with and subject to the restrictions contained in, and consents required by, Section 10.07), all of its interests, rights and obligations under this Agreement and the related Loan Documents to an Eligible Assignee that shall assume such obligations (which assignee may be another Lender, if a Lender accepts such assignment); provided that:

     (a) the Borrower shall have paid to the Administrative Agent the assignment fee specified in Section 10.07(b)(iii);

     (b) such Lender shall have received payment of an amount equal to the outstanding principal of its Revolving Loans, L/C Advances, L/C Borrowings, accrued interest thereon, accrued fees and all other amounts payable to it hereunder and under the other Loan Documents (including any amounts under Section 3.05) from the assignee (to the extent of such outstanding principal and accrued interest and fees) or the Borrower (in the case of all other amounts) such payment being at par, with no premium or discount;

     (c) in the case of any such assignment resulting from a claim for compensation under Section 3.04 or payments required to be made pursuant to Section 3.01, such assignment will result in a reduction in such compensation or payments thereafter; and

     (d) such assignment does not conflict with applicable Laws.

     A Lender shall not be required to make any such assignment or delegation if, prior thereto, as a result of a waiver by such Lender or otherwise, the circumstances entitling the Borrower to require such assignment and delegation cease to apply.

     10.16 Governing Law.

     (a) THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK APPLICABLE TO AGREEMENTS MADE AND TO BE PERFORMED ENTIRELY WITHIN SUCH STATE; PROVIDED THAT THE ADMINISTRATIVE AGENT AND EACH LENDER SHALL RETAIN ALL RIGHTS ARISING UNDER UNITED STATES FEDERAL LAW.

     (b) EACH COMPANY AND OTHER PARTY HERETO, AND EACH GUARANTOR, BY EXECUTION OF A GUARANTY, AGREES TO THIS SECTION 10.16(b). ANY LEGAL ACTION OR PROCEEDING WITH RESPECT TO THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT MAY BE BROUGHT IN THE COURTS OF THE STATE OF NEW YORK SITTING IN THE BOROUGH OF NEW YORK OR OF THE UNITED STATES FOR THE SOUTHERN DISTRICT OF NEW YORK AND APPELLATE COURTS FROM ANY THEREOF, AND BY EXECUTION AND DELIVERY OF THIS AGREEMENT, THE BORROWER, THE ADMINISTRATIVE AGENT AND EACH LENDER CONSENTS, AND BY EXECUTION OF A GUARANTY, EACH GUARANTOR CONSENTS, FOR ITSELF AND IN RESPECT OF ITS PROPERTY, TO THE NON-EXCLUSIVE JURISDICTION OF THOSE COURTS. THE BORROWER, EACH GUARANTOR, THE ADMINISTRATIVE AGENT AND EACH LENDER (1) IRREVOCABLY WAIVES ANY OBJECTION, INCLUDING ANY OBJECTION TO THE LAYING OF VENUE OR BASED ON THE GROUNDS OF FORUM NON CONVENIENS, WHICH IT MAY NOW OR HEREAFTER HAVE TO

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THE BRINGING OF ANY ACTION OR PROCEEDING IN SUCH JURISDICTION IN RESPECT OF ANY LOAN DOCUMENT OR OTHER DOCUMENT RELATED THERETO, AND (2) IRREVOCABLY CONSENTS TO THE SERVICE OF PROCESS OUT OF ANY OF THE AFOREMENTIONED COURTS IN ANY SUCH ACTION OR PROCEEDING BY THE MAILING OF COPIES THEREOF BY CERTIFIED MAIL, RETURN RECEIPT REQUESTED, POSTAGE PREPAID, AT ITS ADDRESS FOR NOTICES DESIGNATED HEREIN. THE BORROWER, EACH GUARANTOR, THE ADMINISTRATIVE AGENT AND EACH LENDER WAIVES PERSONAL SERVICE OF ANY SUMMONS, COMPLAINT OR OTHER PROCESS, WHICH MAY BE MADE BY ANY OTHER MEANS PERMITTED BY THE LAW OF SUCH STATE.

     10.17 Waiver of Right to Trial by Jury, Etc. EACH PARTY TO THIS AGREEMENT AND EACH GUARANTOR, BY EXECUTION OF A GUARANTY, HEREBY (a) EXPRESSLY AND IRREVOCABLY WAIVES ANY RIGHT TO TRIAL BY JURY OF ANY CLAIM, DEMAND, ACTION OR CAUSE OF ACTION ARISING UNDER ANY LOAN DOCUMENT OR IN ANY WAY CONNECTED WITH OR RELATED OR INCIDENTAL TO THE DEALINGS OF THE PARTIES TO THE LOAN DOCUMENTS OR ANY OF THEM WITH RESPECT TO ANY LOAN DOCUMENT, OR THE TRANSACTIONS RELATED THERETO, IN EACH CASE WHETHER NOW EXISTING OR HEREAFTER ARISING, AND WHETHER FOUNDED IN CONTRACT OR TORT OR OTHERWISE; AND EACH PARTY HEREBY AGREES AND CONSENTS THAT ANY SUCH CLAIM, DEMAND, ACTION OR CAUSE OF ACTION SHALL BE DECIDED BY COURT TRIAL WITHOUT A JURY, AND THAT ANY PARTY TO THIS AGREEMENT MAY FILE AN ORIGINAL COUNTERPART OR A COPY OF THIS SECTION WITH ANY COURT AS WRITTEN EVIDENCE OF THE CONSENT OF EACH PARTY TO THIS AGREEMENT AND EACH GUARANTOR TO THE WAIVER OF THEIR RIGHT TO TRIAL BY JURY; AND (b) EXPRESSLY AND IRREVOCABLY WAIVES, TO THE MAXIMUM EXTENT NOT PROHIBITED BY LAW, ANY RIGHT IT MAY HAVE TO CLAIM OR RECOVER IN ANY SUCH ACTION ANY SPECIAL, EXEMPLARY, PUNITIVE OR CONSEQUENTIAL DAMAGES, OR DAMAGES OTHER THAN, OR IN ADDITION TO, ACTUAL DAMAGES; PROVIDED THAT THE WAIVER CONTAINED IN THIS SECTION 10.17(b) SHALL NOT APPLY TO THE EXTENT THAT THE PARTY AGAINST WHOM DAMAGES ARE SOUGHT HAS ENGAGED IN GROSS NEGLIGENCE OR WILLFUL MISCONDUCT.

     10.18 No General Partner’s Liability. The Administrative Agent and the Lenders agree for themselves and their respective successors and assigns, including any subsequent holder of any Revolving Note, that no claim under this Agreement, under the Guaranty executed on behalf of the MLP, or under any other Loan Document shall be made against the General Partner, and that no judgment, order or execution entered in any suit, action or proceeding, whether legal or equitable, hereunder, on such Guaranty, or on any other Loan Document shall be obtained or enforced, against the General Partner or its assets for the purpose of obtaining satisfaction and payment of amounts owed under this Agreement, such Guaranty or any other Loan Document. Nothing in this Section 10.18, however, shall be construed so as to prevent the Administrative Agent, any Lender or any other holder of any Revolving Note from commencing any action, suit or proceeding with respect to or causing legal papers to be served upon the General Partner for the sole purpose of obtaining jurisdiction over the MLP.

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

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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed as of the date first above written.

BLUESTEM PIPELINE, LLC,
a Delaware limited liability company, as Borrower
By:	QUEST MIDSTREAM PARTNERS, L.P.
	its Sole Member
By:	QUEST MIDSTREAM GP, LLC,
	Its General Partner
	By:	/s/ Jerry D. Cash
		Jerry D. Cash
		Chief Executive Officer
QUEST MIDSTREAM PARTNERS, L.P.,
a Delaware limited partnership, as a Guarantor
By:	QUEST MIDSTREAM GP, LLC,
	its General Partner
	By:	/s/ Jerry D. Cash
		Jerry D. Cash
		Chief Executive Officer

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Signature Page 1

ROYAL BANK OF CANADA, as Administrative Agent and Collateral Agent
By:	/s/ David Wheatley
Name:		David Wheatley
Title:		Manager, Agency

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Signature Page 2

ROYAL BANK OF CANADA, as Lender and L/C Issuer
By:	/s/ Jason York
	Jason York
	Authorized Signatory

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Signature Page 3

COMERICA BANK, as Lender
By:	/s/ Peter Sefzik
Name:		Peter Sefzik
Title:		Vice President

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Signature Page 4

FORTIS CAPITAL CORP., as Lender
By:	/s/ Casey Lowary
Name:		Casey Lowary
Title:		Senior Vice President
By:	/s/ Deirdre Sanborn
Name:		Deirdre Sanborn
Title:		Senior Vice President

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Signature Page 5

U.S. BANK NATIONAL ASSOCIATION, as Lender
By:	/s/ Justin M. Alexander
Name:		Justin M. Alexander
Title:		Vice President

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Signature Page 6

WELLS FARGO BANK, N.A., as Lender
By:	/s/ Dustin S. Hansen
Name:		Dustin S. Hansen
Title:		Vice President

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Signature Page 7

SCHEDULE 2.01

COMMITMENTS

Lender	Commitment
Royal Bank of Canada	$	16,000,000.00
Comerica Bank	$	15,000,000.00
Fortis Capital Corp.	$	15,000,000.00
U.S. Bank National Association	$	15,000,000.00
Wells Fargo Bank, N.A.	$	14,000,000.00
TOTAL:	$	75,000,000.00

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Schedule 2.01

SECTION 7.01

EXISTING LIENS

None

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Schedule 7.01

SCHEDULE 7.04

INDEBTEDNESS

None

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Schedule 7.04

SCHEDULE 10.02

ADDRESSES FOR NOTICES TO BORROWER,
GUARANTORS AND ADMINISTRATIVE AGENT

ADDRESS FOR NOTICES TO BORROWER
BLUESTEM PIPELINE, LLC.
c/o Quest Midstream Partners, L.P.
9520 N. May Avenue, Suite 300
Oklahoma City, Oklahoma 73120
Attn: Chief Executive Officer
Telephone: (405) 488-1304
Facsimile: (405) 840-9897

ADDRESS FOR NOTICES TO GUARANTORS
Quest Midstream Partners, L.P.
9520 N. May Avenue, Suite 300
Oklahoma City, Oklahoma 73120
Attn: Chief Executive Officer
Telephone: (405) 488-1304
Facsimile: (405) 840-9897

ADDRESSES FOR ROYAL BANK OF CANADA

Royal Bank of Canada’s Lending Office:
Royal Bank of Canada
New York Branch
One Liberty Plaza, 3^rd Floor
New York, New York 10006-1404
Attention: Manager, Loans Administration
Telephone: (212) 428-6332
Facsimile: (212) 428-2372

For matters related to letters of credit:
Attention: Manager, Trade Products
Telephone: (212) 428-6235
Facsimile: (212) 428-3015

in each case with a copy to:
Royal Bank of Canada
2800 Post Oak Boulevard
3900 Williams Tower
Houston, Texas 77056
Attention: Jason York
Telephone: (713) 403-5679
Facsimile: (713) 403-5624
Electronic Mail: Jason.York@rbccm.com

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Schedule 10.2 Page 2

Administrative Agent’s Office:
Royal Bank of Canada
Agency Services Group
Royal Bank Plaza
P. O. Box 50, 200 Bay Street
12^th Floor, South Tower
Toronto, Ontario M5J 2W7
Attention: Manager Agency
Telephone: (416) 842-3901
Facsimile: (416) 842-4023

Wiring Instructions:
JPMorgan Chase Bank, New York, New York
ABA 021-000021
For account Royal Bank of Canada, New York
Swift Code: ROYCUS3X
A/C 920-1033363
For further credit to A/C 293-746-4, Transit 1269
Ref: Bluestem Pipeline
Attn: Agency Services

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Schedule 10.2 Page 2

EXHIBIT A-1

FORM OF BORROWING NOTICE

Date:                     , _____

To:          Royal Bank of Canada, as Administrative Agent

Ladies and Gentlemen:

     Reference is made to that certain Credit Agreement, dated as of January ___, 2007 (as amended, restated, extended, supplemented or otherwise modified in writing from time to time, the “Agreement;” the terms defined therein being used herein as therein defined), among Bluestem Pipeline, LLC, a Delaware limited liability company (the “Borrower”), Quest Midstream Partners, L.P., a Delaware limited partnership (the “MLP”), Royal Bank of Canada, as Administrative Agent, and the Lenders from time to time party thereto.

     The undersigned hereby requests:

I. FACILITY

1.	Status Information for the Facility
	(a)	Amount of Facility: $75,000,000
	(b)	Revolving Loans outstanding prior to the Borrowing requested herein: $
	(c)	Letters of Credit outstanding prior to the Borrowing requested herein: $
	(d)	Principal amount of Revolving Loans available to be borrowed (1(a) minus the sum of 1(b) and 1(c)): $
2.	Amount of Borrowing: $
3.	Requested date of Borrowing:                     , 200_.
4.	Requested Type of Loan and applicable Dollar amount:
	(a)	Base Rate Loan for $
	(b)	Eurodollar Rate Loan with Interest Period of:
		(i)	one month for	$
		(ii)	two months for	$
		(iii)	three months for	$
		(iv)	six months for	$

Exhibit A-1 Page 1
Form of Borrowing Notice

5.	Purpose of Revolving Loan:
	___	To finance Permitted Acquisitions
	___	To finance Capital Expenditures
	___	To fund working capital in the amount of $                     and/or fund a Quarterly Borrower Distribution (Section 6.12(iv) of the Agreement) in the amount of $
	___	To fund on a one time basis a distribution to Quest Parent pursuant to Section 3.2 of the Contribution Agreement which shall not exceed $15,000,000
	___	To pay fees, costs and expenses owed pursuant to the Agreement

     The undersigned hereby certifies that the following statements will be true on the date of the proposed Borrowing(s) after giving effect thereto and to the application of the proceeds therefrom:

          (a) the representations and warranties of the Borrower and the MLP contained in Article V of the Agreement are true and correct in all material respects as though made on and as of such date (except such representations and warranties which expressly refer to an earlier date, which are true and correct in all material respects as of such earlier date);

          (b) no Default or Event of Default has occurred and is continuing, or would result from such proposed Borrowing(s); and

          (c) if the Borrowing is to finance a Permitted Acquisition, audited financial statements or if audited financial statements are unavailable, historical financial statements pertaining to the Person or business proposed to be acquired with the proceeds of such Borrowing, if required pursuant to Section 4.03 of the Agreement, have been delivered to the Administrative Agent and the Lenders at least five Business Days prior to the date hereof.

     The Borrowing requested herein complies with Sections 2.01 and 2.03 of the Agreement, as applicable.

BLUESTEM PIPELINE, LLC,
a Delaware limited liability company, as Borrower
By	QUEST MIDSTREAM PARTNERS, L.P.,
	its Sole Member
By	QUEST MIDSTREAM GP, LLC, its
	General Partner
By:
Name:
Title:

Exhibit A-1 Page 2
Form of Borrowing Notice

EXHIBIT A-2

FORM OF CONVERSION/CONTINUATION NOTICE

Date:                     , ____

TO:          Royal Bank of Canada, as Administrative Agent

Ladies and Gentlemen:

     Reference is made to that certain Credit Agreement, dated as of January ___, 2007 (as amended, restated, extended, supplemented or otherwise modified in writing from time to time, the “Agreement;” the terms defined therein being used herein as therein defined), among Bluestem Pipeline, LLC, a Delaware limited liability company (the “Borrower”), Quest Midstream Partners, L.P., a Delaware limited partnership (the “MLP”), Royal Bank of Canada, as Administrative Agent, and the Lenders from time to time party thereto.

     The undersigned hereby requests:

I. FACILITY

1.	Amount of [conversion] [continuation]: $
2.	Existing rate:                                 Check applicable blank
	(a)	Base Rate
	(b)	Eurodollar Rate Loan with
		Interest Period of:
		(i)	one month
		(ii)	two months
		(iii)	three months
		(iv)	six months
3.	If a Eurodollar Rate Loan, date of the last day of the Interest Period for such Loan:                     , 200_.
The Revolving Loan described above is to be [converted] [continued] as follows:
4.	Requested date of [conversion] [continuation]:                     , 200_.
5.	Requested Type of Loan and applicable Dollar amount:
	(a)	Base Rate Loan for $
	(b)	Eurodollar Rate Loan with Interest Period of:
		(i)	one month for	$
		(ii)	two months for	$
		(iii)	three months for	$

Exhibit A-2 Page 1
Form of Conversion/Continuation Notice

(iv) six months for $                    

     The [conversion] [continuation] requested herein complies with Sections 2.01 and 2.03 of the Agreement, as applicable.

BLUESTEM PIPELINE, LLC,
a Delaware limited liability
company, as Borrower
By	QUEST MIDSTREAM PARTNERS, L.P.,
	its Sole Member
By	QUEST MIDSTREAM GP, LLC, its
	General Partner
By:
Name:
Title:

Exhibit A-2 Page 2
Form of Conversion/Continuation Notice

EXHIBIT A-3

FORM OF REPAYMENT NOTICE

Date:                     , _____

To: Royal Bank of Canada, as Administrative Agent

Ladies and Gentlemen:

     Reference is made to that certain Credit Agreement, dated as of January ___, 2007 (as amended, restated, extended, supplemented or otherwise modified in writing from time to time, the “Agreement;” the terms defined therein being used herein as therein defined), among Bluestem Pipeline, LLC, a Delaware limited liability company (the “Borrower”), Quest Midstream Partners, L.P., a Delaware limited partnership (the “MLP”), Royal Bank of Canada, as Administrative Agent, and the Lenders from time to time party thereto.

     The undersigned hereby is repaying the Facility as follows:

I. FACILITY

1.	Revolving Loans outstanding prior to the repayment referred to herein: $
2.	Amount of repayment: $
3.	Date of repayment:                     , 200_.
4.	Type of Loan and amount to which repayment applies:

(a)	Base Rate Loan for $
(b)	Eurodollar Rate Loan with Interest Period of:

(i)	one month               $
(ii)	two months             $
(iii)	three months           $
(iv)	six months              $

5. Purpose of Revolving Loan being repaid:

___ Originally borrowed to finance Permitted Acquisitions

___ Originally borrowed to finance Capital Expenditures

___ Originally borrowed to fund working capital

Exhibit A-3 Page 1
Form of Repayment Notice

___ Originally borrower to fund a Quarterly Borrower Distribution (Section 6.12(iv) of the Agreement)

___ Originally borrowed to pay fees, costs and expenses owed pursuant to the Agreement

     The repayment referred to herein complies with Section 2.04 of the Agreement.

BLUESTEM PIPELINE, LLC, a Delaware limited liability company, as Borrower
By	QUEST MIDSTREAM PARTNERS, L.P.,
	its Sole Member
By	QUEST MIDSTREAM GP, LLC, its
	General Partner
By:
Name:
Title:

Exhibit A-3 Page 2
Form of Repayment Notice

EXHIBIT B

FORM OF REVOLVING NOTE

$                     January ___, 2007

     FOR VALUE RECEIVED, the undersigned (the “Borrower”), hereby promises to pay to the order of                      (the “Lender”), on the Maturity Date (as defined in the Credit Agreement referred to below) the principal amount of                      Dollars ($                    ), or such lesser principal amount of Revolving Loans made by Lender under the Facility (both as defined in such Credit Agreement) due and payable by the Borrower to the Lender on the Maturity Date under that certain Credit Agreement, dated as of even date herewith (as amended, restated, extended, supplemented or otherwise modified in writing from time to time, the “Credit Agreement”; the terms defined therein being used herein as therein defined), among the Borrower, Quest Midstream Partners, L.P., a Delaware limited partnership, the Lenders from time to time party thereto, and Royal Bank of Canada, as Administrative Agent.

     The Borrower promises to pay interest on the unpaid principal amount of each Revolving Loan from the date of such Revolving Loan until such principal amount is paid in full, at such interest rates, and at such times as are specified in the Credit Agreement. All payments of principal and interest shall be made to the Administrative Agent for the account of the Lender in Dollars in immediately available funds to the account designated by the Administrative Agent in the Credit Agreement. If any amount is not paid in full when due hereunder, such unpaid amount shall bear interest, to be paid upon demand, from the due date thereof until the date of actual payment (and before as well as after judgment) computed at the per annum rate set forth in the Credit Agreement.

     This Revolving Note is one of the Revolving Notes referred to in the Credit Agreement, is entitled to the benefits thereof and is subject to optional and mandatory prepayment in whole or in part as provided therein. This Revolving Note is also entitled to the benefits of each Guaranty. Upon the occurrence and continuation of one or more of the Events of Default specified in the Credit Agreement, all amounts then remaining unpaid on this Revolving Note shall become, or may be declared to be, immediately due and payable all as provided in the Credit Agreement. Revolving Loans made by the Lender shall be evidenced by one or more loan accounts or records maintained by the Lender in the ordinary course of business. The Lender may also attach schedules to this Revolving Note and endorse thereon the date, amount and maturity of its Revolving Loans and payments with respect thereto.

     This Revolving Note is a Loan Document and is subject to Section 10.10 of the Credit Agreement, which is incorporated herein by reference the same as if set forth herein verbatim.

     The Borrower, for itself, its successors and assigns, hereby waives diligence, presentment, protest and demand and notice of protest, notice of intent to accelerate, notice of acceleration, demand, dishonor and non-payment of this Revolving Note.

Exhibit B-1 Page 1
Form of Revolver Note

     THIS REVOLVING NOTE SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK.

BLUESTEM PIPELINE, LLC, a Delaware limited liability company, as Borrower
By	QUEST MIDSTREAM PARTNERS, L.P., its Sole Member
By	QUEST MIDSTREAM GP, LLC, its General Partner
By:
Name:
Title:

Exhibit B-1 Page 2
Form of Revolver Note

EXHIBIT C

FORM OF COMPLIANCE CERTIFICATE
(Pursuant to Section 6.02 of the Agreement)

Financial Statement Date:                     , ___

To:       Royal Bank of Canada, as Administrative Agent

Ladies and Gentlemen:

     Reference is made to that certain Credit Agreement, dated as of January ___, 2007 (as amended, restated, extended, supplemented or otherwise modified in writing from time to time, the “Agreement;” the terms defined therein being used herein as therein defined), among Bluestem Pipeline, LLC, a Delaware limited liability company (the “Borrower”), Quest Midstream Partners, L.P., a Delaware limited partnership, the Lenders from time to time party thereto, and Royal Bank of Canada, as Administrative Agent. Capitalized terms used herein but not defined herein shall have the meaning set forth in the Agreement.

     The undersigned Responsible Officers hereby certify as of the date hereof that they are the                      of the General Partner of the MLP and the                      of the Borrower, and that, as such, they are authorized to execute and deliver this Certificate to the Administrative Agent on the behalf of the MLP and the Borrower, and that:

     [Use the following for fiscal year-end financial statements]

     Attached hereto as Schedule 1 are the year-end audited consolidated financial statements of the MLP and its Subsidiaries required by Section 6.01(a) of the Agreement for the fiscal year of the MLP ended as of the above date, together with the report and opinion of an independent certified public accountant required by such section; and

     [Use the following for fiscal quarter-end financial statements]

     Attached hereto as Schedule 1 are, the unaudited consolidated financial statements of the MLP and its Subsidiaries required by Section 6.01(b) of the Agreement for the fiscal quarter of the MLP ended as of the above date and the portion of the MLP’s fiscal year then ended, together with a certificate of a Responsible Officer of the MLP or the Borrower, as applicable, stating that such financial statements fairly present the financial condition, results of operations and cash flows of the MLP and the Borrower, as applicable, and their respective Subsidiaries in accordance with GAAP as at such date and for such period, subject only to normal year-end audit adjustments and the absence of footnotes.

     [Use the following for both fiscal year-end and quarter-end financial statements]

     1. The undersigned has reviewed and is familiar with the terms of the Agreement and has made, or has caused to be made under his/her supervision, a detailed review of the transactions and condition (financial or otherwise) of the Borrower during the accounting period covered by the attached financial statements.

     2. A review of the activities of the MLP and the Borrower during such fiscal period has been made under the supervision of the undersigned with a view to determining whether during such

Exhibit C Page 1
Form of Compliance Certificate

fiscal period the MLP and the Borrower performed and observed all their respective Obligations under the Loan Documents, and no Default or Event of Default has occurred and is continuing except as follows (list of each such Default or Event of Default and include the information required by Section 6.03 of the Credit Agreement):

     3. The covenant analyses and information set forth on Schedule 2 attached hereto are true and accurate on and as of the date of this Certificate.

     IN WITNESS WHEREOF, the undersigned has executed this Certificate as of                     ,                     .

BLUESTEM PIPELINE, LLC, a Delaware limited liability company, as Borrower
By	QUEST MIDSTREAM PARTNERS, L.P., its Sole Member
By	QUEST MIDSTREAM GP, LLC, Its General Partner
By:
Name:
Title:

Exhibit C Page 2
Form of Compliance Certificate

For the Quarter/Year ended
                     (“Statement Date”)

SCHEDULE 2
to the Compliance Certificate
($ in 000’s)

I.	Section 7.15(a) – Interest Coverage Ratio.
A.	Consolidated EBITDA for four consecutive fiscal quarters ending on the Statement Date (“Subject Period”) (see Credit Agreement definition of “Consolidated EBITDA”)(prior to March 31, 2008, use quarter-by-quarter cumulative Consolidated EBITDA):
	1.	Consolidated EBITDA for Subject Period (prior to pro forma adjustments for Permitted Acquisitions pursuant to Section 7.15(c)):	$
	2.	Pro forma adjustments to EBITDA for Permitted Acquisitions during the Subject Period (Section 7.15(c)), giving effect to such Permitted Acquisitions on a pro forma basis for the Subject Period as if such Permitted Acquisitions occurred on the first day of the Subject Period:	$
	3.	Consolidated EBITDA including pro forma adjustments for Permitted Acquisitions (Lines I.A.1 +I.A.2):	$
B.	Consolidated Interest Charges for the Subject Period
	1.	Consolidated Interest Charges for the four consecutive fiscal quarters ending on the Statement Date (prior to March 31, 2008, use quarter-by-quarter cumulative Consolidated Interest Charges):	$
	2.	Pro forma adjustment for Consolidated Interest Charges during the four consecutive fiscal quarters ending on the Statement Date (Section 7.15(c)):	$
	3.	Consolidated Interest Charges including pro forma adjustments for Permitted Acquisitions (Lines I.B.1 + I.B.2):	$
C.	Interest Coverage Ratio
	1.	Consolidated EBITDA adjusted for Permitted Acquisitions (Line I.A.3):	$
	2.	Consolidated Interest Charges adjusted for Permitted Acquisitions (Line I.B.3):	$
	3.	Imputed interest charges on Synethetic Lease Obligations of the MLP and its Subsidiaries for the Subject Period:	$
	4.	Interest Coverage Ratio: (Line I.C.1) divided by (Lines I.C.2 + I.C.3):	___ to 1.0
		Is the Interest Coverage Ratio less than 3.0 to 1.0?	Yes/No

Exhibit C Page 3
Form of Compliance Certificate

II.	Section 7.15(b) – Leverage Ratio.
A.	Cash Adjusted Consolidated Funded Debt
	1.	Consolidated Funded Debt on Statement Date (borrowed money Indebtedness, letter of credit reimbursement obligations, Capital Leases, Synethetic Leases, Guaranty Obligations)	$
	2.	Cash of MLP and its Subsidiaries deposited with Administrative Agent (or another approved financial institution) subject to control agreement or otherwise pledged	$
	3.	Line II.A.1 minus II.A.2	$
B.	Consolidated Annualized EBITDA (for use for Statement Dates prior to March 31, 2008)
	1.	Consolidated EBITDA for the 3-month period ended March 31, 2007 multiplied by 4 (including pro forma adjustments for Permitted Acquisitions):	$
	2.	Consolidated EBITDA for the 6-month period ended June 30, 2007 multiplied by 2 (including pro forma adjustments for Permitted Acquisitions):	$
	3.	Consolidated EBITDA for the 9-month period ended September 30, 2007 multiplied by 1.33 (including pro forma adjustments for Permitted Acquisitions):	$
	4.	Consolidated EBITDA for the 12-month period ended December 31, 2007 (including pro forma adjustments for Permitted Acquisitions):	$
	5.	Leverage Ratio: (Line II.A.3) divided by (Line II.B.1, 2, 3 or 4, as appropriate):	___ to 1.0
	6.	Is the Interest Coverage Ratio less than 4.0 to 1.0?	Yes/No
	7.	Is an Acquisition Adjustment Period in effect on Statement Date?	Yes/No
	8.	If answer to Line II.B.7 is Yes, is the Interest Coverage Ratio less than 4.5 to 1.0?	Yes/No
C.	Consolidated EBITDA (for use for Statement Dates on and after March 31, 2008)
	1.	Consolidated EBITDA (including pro forma adjustments for Permitted Acquisitions) (Line I.A.3 above)	$
	2.	Leverage Ratio: (Line II.A.3) divided by (Line II.C.1):	___ to 1.0
	3.	Is the Interest Coverage Ratio less than 4.0 to 1.0?	Yes/No
	4.	Is an Acquisition Adjustment Period in effect on Statement Date?	Yes/No
	5.	If answer to Line II.B.7 is Yes, is the Interest Coverage Ratio less than 4.5 to 1.0?	Yes/No

Exhibit C Page 4
Form of Compliance Certificate

EXHIBIT D

FORM OF ASSIGNMENT AND ASSUMPTION

     This Assignment and Assumption (the “Assignment and Assumption”) is dated as of the Effective Date set forth below and is entered into by and between [Insert name of Assignor] (the “Assignor”) and [Insert name of Assignee] (the “Assignee”). Capitalized terms used but not defined herein shall have the meanings given to them in the Credit Agreement identified below (as may be amended, the “Credit Agreement”), receipt of a copy of which is hereby acknowledged by the Assignee. The Standard Terms and Conditions set forth in Annex I attached hereto are hereby agreed to and incorporated herein by reference and made a part of this Assignment and Assumption as if set forth herein in full.

     For an agreed consideration, the Assignor hereby irrevocably sells and assigns to the Assignee, and the Assignee hereby irrevocably purchases and assumes from the Assignor, subject to and in accordance with the Standard Terms and Conditions and the Credit Agreement, as of the Effective Date inserted by the Administrative Agent as contemplated below (i) all of the Assignor’s rights and obligations in its capacity as a Lender under the Credit Agreement and any other documents or instruments delivered pursuant thereto to the extent related to the amount and percentage interest identified below of all of such outstanding rights and obligations of the Assignor under the respective facilities identified below and (ii) to the extent permitted to be assigned under applicable law, all claims, suits, causes of action and any other right of the Assignor (in its capacity as a Lender) against any Person, whether known or unknown, arising under or in connection with the Credit Agreement, any other documents or instruments delivered pursuant thereto or the loan transactions governed thereby or in any way based on or related to any of the foregoing including, but not limited to, contract claims, tort claims, malpractice claims, statutory claims and all other claims at law or in equity related to the rights and obligations sold and assigned pursuant to clause (i) above (the rights and obligations sold and assigned pursuant to clauses (i) and (ii) above being referred to herein collectively as the “Assigned Interest”). Such sale and assignment is without recourse to the Assignor and, except as expressly provided in this Assignment and Assumption, without representation or warranty by the Assignor.

1.	Assignor:
2.	Assignee:
		[and is an Affiliate/Approved Fund of [identify Lender]
3.	Borrower(s):	Bluestem Pipeline, LLC
4.	Administrative Agent:	Royal Bank of Canada, as the administrative agent under the Credit Agreement
5.	Credit Agreement:	The $75,000,000 Credit Agreement dated as of January ___, 2007 among Bluestem Pipeline, LLC, Quest Midstream Partners, L.P., the Lenders parties thereto, and Royal Bank of Canada, as Administrative Agent.

Exhibit D Page 1
Form of Assignment and Assumption

6. Assigned Interest:

	Aggregate Amount of	Amount of	Percentage Assigned of
	Commitment/Loans for	Commitment/Loans	Commitment/Loans
	all Lenders*	Assigned*
Revolving Loans:	$	$		%
Total:	$	$		%

[7. Trade Date:                      ]

Effective Date:                     , 20___ [ TO BE INSERTED BY ADMINISTRATIVE AGENT AND WHICH SHALL BE THE EFFECTIVE DATE OF RECORDATION OF TRANSFER IN THE REGISTER THEREFOR.]

The terms set forth in this Assignment and Assumption are hereby agreed to:

ASSIGNOR
[NAME OF ASSIGNOR]
By:
	Title:
ASSIGNEE
[NAME OF ASSIGNEE]
By:
	Title:

*Amount to be adjusted by the counterparties to take into account any payments or prepayments made between the Trade Date and the Effective Date.

Consented to and Accepted:
[NAME OF ADMINISTRATIVE AGENT], as		[NAME OF L/C ISSUER], as
Administrative Agent		L/C Issuer
By		By
	Title:

[Consented to:]

Exhibit D Page 2
Form of Assignment and Assumption

BLUESTEM PIPELINE, LLC, a Delaware limited liability
company

By:	QUEST MIDSTREAM PARTNERS, L.P., its Sole Member
By:	QUEST MIDSTREAM GP, LLC, its General Partner
By
Name:
Title:

Exhibit D Page 3
Form of Assignment and Assumption

ANNEX 1
TO ASSIGNMENT AND ASSUMPTION
STANDARD TERMS AND CONDITIONS FOR
ASSIGNMENT AND ASSUMPTION

1. Representations and Warranties.

          1.1 Assignor. The Assignor: (a) represents and warrants that (i) it is the legal and beneficial owner of the Assigned Interest, (ii) the Assigned Interest is free and clear of any lien, encumbrance or other adverse claim and (iii) it has full power and authority, and has taken all action necessary, to execute and deliver this Assignment and Assumption and to consummate the transactions contemplated hereby; and (b) assumes no responsibility with respect to (i) any statements, warranties or representations made in or in connection with the Credit Agreement or any other Loan Document, (ii) the execution, legality, validity, enforceability, genuineness, sufficiency or value of the Loan Documents or any collateral thereunder, (iii) the financial condition of the Borrower, any of its Subsidiaries or Affiliates or any other Person obligated in respect of any Loan Document or (iv) the performance or observance by the Borrower, any of its Subsidiaries or Affiliates or any other Person of any of their respective obligations under any Loan Document.

          1.2. Assignee. The Assignee: (a) represents and warrants that (i) it has full power and authority, and has taken all action necessary, to execute and deliver this Assignment and Assumption and to consummate the transactions contemplated hereby and to become a Lender under the Credit Agreement, (ii) it meets all requirements of an Eligible Assignee under the Credit Agreement (subject to receipt of such consents as may be required under the Credit Agreement), (iii) from and after the Effective Date, it shall be bound by the provisions of the Credit Agreement as a Lender thereunder and, to the extent of the Assigned Interest, shall have the obligations of a Lender thereunder, (iv) it has received a copy of the Credit Agreement, together with copies of the most recent financial statements delivered pursuant to Section 6.01 thereof, as applicable, and such other documents and information as it has deemed appropriate to make its own credit analysis and decision to enter into this Assignment and Assumption and to purchase the Assigned Interest on the basis of which it has made such analysis and decision independently and without reliance on the Administrative Agent or any other Lender, and (v) if it is a Foreign Lender, attached to the Assignment and Assumption is any documentation required to be delivered by it pursuant to the terms of the Credit Agreement, duly completed and executed by the Assignee; and (b) agrees that (i) it will, independently and without reliance on the Administrative Agent, the Assignor or any other Lender, and based on such documents and information as it shall deem appropriate at the time, continue to make its own credit decisions in taking or not taking action under the Loan Documents, and (ii) it will perform in accordance with their terms all of the obligations which by the terms of the Loan Documents are required to be performed by it as a Lender.

     2. Payments. From and after the Effective Date, the Administrative Agent shall make all payments in respect of the Assigned Interest (including payments of principal, interest, fees and other amounts) to the Assignor for amounts which have accrued to but excluding the Effective Date and to the Assignee for amounts which have accrued from and after the Effective Date.

3. General Provisions. This Assignment and Assumption shall be binding upon, and inure to the benefit of, the parties hereto and their respective successors and assigns. This Assignment and

Exhibit D Page 4
Form of Assignment and Assumption

Assumption may be executed in any number of counterparts, which together shall constitute one instrument. Delivery of an executed counterpart of a signature page of this Assignment and Assumption by telecopy shall be effective as delivery of a manually executed counterpart of this Assignment and Assumption. This Assignment and Assumption shall be governed by, and construed in accordance with, the law of the State of New York.

Exhibit D Page 5
Form of Assignment and Assumption

EX-4.20

Exhibit 4.20

GUARANTY

     THIS GUARANTY (this “Guaranty”), dated as of January 31, 2007, is made by QUEST MIDSTREAM PARTNERS, L.P., a Delaware limited partnership (the “Guarantor”), in favor of ROYAL BANK OF CANADA, as administrative agent for the Lenders (as defined below).

W I T N E S S E T H:

     WHEREAS, pursuant to that certain Credit Agreement dated as of January 31, 2007 (as the same may hereafter be amended, supplemented and restated, the “Credit Agreement”), among Bluestem Pipeline, LLC, a Delaware limited liability company (the “Borrower”), Guarantor, the various financial institutions that are, or may from time to time become, parties thereto (individually a “Lender” and collectively the “Lenders”) and Royal Bank of Canada, as administrative agent and collateral agent (in its capacity as administrative agent, the “Administrative Agent”), the Lenders have agreed to make Credit Extensions for the account of the Borrower; and

     WHEREAS, as a condition precedent to the making of Credit Extensions under and as defined in the Credit Agreement, the Guarantor is required to execute and deliver this Guaranty; and

     WHEREAS, the Guarantor has duly authorized the execution, delivery and performance of this Guaranty; and

     WHEREAS, the Guarantor owns all of the membership interests in the Borrower and controls the management of the Borrower; and

     WHEREAS, it is in the best interests of the Guarantor to execute this Guaranty inasmuch as the Guarantor will derive substantial direct and indirect benefits from the extensions of credit made from time to time to or for the account of the Borrower;

     NOW THEREFORE, for good and valuable consideration, the receipt of which is hereby acknowledged, and in order to induce the Lenders to make Credit Extensions to the Borrower pursuant to the Credit Agreement by fulfilling the requirements of the Credit Agreement, the Guarantor agrees, for the benefit of each Lender, as follows:

ARTICLE I

DEFINITIONS

     SECTION 1.1 Certain Terms. The following capitalized terms when used in this Guaranty, including its preamble and recitals, shall have the following meanings (such definitions to be equally applicable to the singular and plural forms thereof):

     “Administrative Agent” is defined in the first recital.

     “Borrower” is defined in the first recital.

     “Commitments” means each Commitment as defined in the Credit Agreement.

     “Credit Extensions” means each Credit Extension as defined in the Credit Agreement.

     “Guarantor” is defined in the preamble.

MLP Guaranty

Page 1

     “Guaranty” is defined in the preamble.

     “Lenders” is defined in the first recital.

     “Loan Documents” means the Loan Documents as defined in the Credit Agreement.

     “Note” means each Revolving Note as defined in the Credit Agreement.

     “Obligations” means the Obligations as defined in the Credit Agreement.

     “Obligor” means the Borrower or any other Person (other than the Administrative Agent or any Lender) obligated under any Loan Document.

     “Required Lenders” means the Required Lenders as defined in the Credit Agreement.

     “Taxes” is defined in clause (a) of Section 2. 7.

     “UCC” means the Uniform Commercial Code as in effect in the State of New York.

     SECTION 1.2 Credit Agreement Definitions. Unless otherwise defined herein or the context otherwise requires, capitalized terms used in this Guaranty, including its preamble and recitals, have the meanings provided in the Credit Agreement,

     SECTION 1.3 UCC Definitions. Unless otherwise defined herein or the context otherwise requires, terms for which meanings are provided in the UCC are used in this Guaranty, including its preamble and recitals, with such meanings.

ARTICLE II

GUARANTY PROVISIONS

     SECTION 2.1 Guaranty. The Guarantor hereby absolutely, unconditionally, and irrevocably (1) guarantees the full and punctual payment when due, whether at stated maturity, by required prepayment, declaration, acceleration, demand or otherwise, of all Obligations of the Borrower and each other Obligor now or hereafter existing under each of the Credit Agreement, the Notes and each other Loan Document to which the Borrower or such other Obligor is or may become a party, whether for principal, interest, fees, expenses or otherwise (including all such amounts which would become due but for the operation of the automatic stay under Section 362(a) of the United States Bankruptcy Code, 11 U.S.C. §362(a), and the operation of Sections 502(b) and 506(b) of the United States Bankruptcy Code, 11 U.S.C. §502(b) and §506(b)), and (2) indemnifies and holds harmless each Lender and each holder of a Note for any and all costs and expenses (including reasonable attorney’s fees and expenses) incurred by such Lender or such holder, as the case may be, in enforcing any rights under this Guaranty; provided however, that the Guarantor shall be liable under this Guaranty for the maximum amount of such liability that can be hereby incurred without rendering this Guaranty, as it relates to the Guarantor, voidable under applicable law relating to fraudulent conveyance or fraudulent transfer, and not for any greater amount. This Guaranty constitutes a guaranty of payment when due and not of collection, and the Guarantor specifically agrees that it shall not be necessary or required that any Lender or any holder of any Note exercise any right, assert any claim or demand or enforce any remedy whatsoever against the Borrower or any other Obligor (or any other Person) before or as a condition to the obligations of the Guarantor hereunder.

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     SECTION 2.2 Acceleration of Guaranty. The Guarantor agrees that, in the event of the occurrence of any event of the type described in Section 8.01(f) of the Credit Agreement, with respect to the Borrower, any other Obligor or the Guarantor, and if such event shall occur at a time when any of the Obligations may not then be due and payable, the Guarantor will pay to the Lenders forthwith the full amount which would be payable hereunder by the Guarantor if all such Obligations were then due and payable.

     SECTION 2.3 Guaranty Absolute, etc. This Guaranty shall in all respects be a continuing, absolute, unconditional and irrevocable guaranty of payment, and shall remain in full force and effect until all Obligations (other than contingent indemnity obligations) of the Borrower and each other Obligor have been paid in full (or, in the case of L/C Obligations, Cash Collateralized), all obligations of the Guarantor hereunder shall have been paid in full, all Commitments shall have terminated and, except as provided in Section 10.01(e) of the Credit Agreement, all Lender Hedging Agreements have terminated. Guarantor may not rescind or revoke its obligations hereunder. The Guarantor guarantees that the Obligations of the Borrower and each other Obligor will be paid strictly in accordance with the terms of the Credit Agreement and each other Loan Document under which they arise, regardless of any law, regulation or order now or hereafter in effect in any jurisdiction affecting any of such terms or the rights of any Lender or any holder of any Note with respect thereto. The liability of the Guarantor under this Guaranty shall be absolute, unconditional and irrevocable irrespective of: (1) any lack of validity, legality or enforceability of the Credit Agreement, any Note or any other Loan Document; (2) the failure of any Lender or any holder of any Note (a) to assert any claim or demand or to enforce any right or remedy against the Borrower, any other Obligor or any other Person (including any other guarantor) under the provisions of the Credit Agreement, any Note, any other Loan Document or otherwise, or (b) to exercise any right or remedy against any other guarantor of, or collateral securing, any Obligations of the Borrower or any other Obligor; (3) any change in the time, manner or place of payment of, or in any other term of, all or any of the Obligations of the Borrower or any other Obligor, or any other extension, compromise or renewal of any Obligations of the Borrower or any other Obligor; (4) any reduction, limitation, impairment or termination of any Obligations of the Borrower or any other Obligor for any reason, including any claim of waiver, release, surrender, alteration or compromise, and shall not be subject to (and the Guarantor hereby waives any right to or claim of) any defense or setoff, counterclaim, recoupment or termination whatsoever by reason of the invalidity, illegality, nongenuineness, irregularity, compromise, unenforceability of, or any other event or occurrence affecting, any Obligations of the Borrower, any other Obligor or otherwise; (5) any amendment to, rescission, waiver, or other modification of, or any consent to departure from, any of the terms of the Credit Agreement, any Note or any other Loan Document; (6) any addition, exchange, release, surrender or non-perfection of any collateral, or any amendment to or waiver or release or addition of, or consent to departure from, any other guaranty, held by any Lender or any holder of any Note securing any of the Obligations of the Borrower or any other Obligor; (7) the insolvency or bankruptcy of, or similar event affecting, the Borrower or any other Obligor; or (8) any other circumstance which might otherwise constitute a defense available to, or a legal or equitable discharge of, the Borrower, any other Obligor, any surety or any guarantor. Guarantor waives all rights and defenses which may arise with respect to any of the foregoing, and Guarantor waives any right to revoke this Guaranty with respect to future indebtedness.

     SECTION 2.4 Reinstatement. The Guarantor agrees that this Guaranty shall continue to be effective or be reinstated, as the case may be, if at any time any payment (in whole or in part) of any of the Obligations is rescinded or must otherwise be restored by any Lender or any holder of any Note, upon the insolvency, bankruptcy or reorganization of the Borrower, any other Obligor or otherwise, all as though such payment had not been made.

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     SECTION 2.5 Waiver, etc. The Guarantor hereby waives promptness, diligence, notice of acceptance and any other notice with respect to any of the Obligations of the Borrower or any other Obligor and this Guaranty and any requirement that the Administrative Agent, any other Lender or any holder of any Note protect, secure, perfect or insure any security interest or Lien, or any property subject thereto, or exhaust any right or take any action against the Borrower, any other Obligor or any other Person (including any other guarantor) or entity or any collateral securing the Obligations of the Borrower or any other Obligor, as the case may be.

     SECTION 2.6 Waiver of Subrogation. Until the Obligations are paid in full, all Commitments have terminated and all Lender Hedging Agreements have terminated, the Guarantor shall not enforce or exercise any claim or other rights which it may now or hereafter acquire against the Borrower or any other Obligor that arise from the existence, payment, performance or enforcement of the Guarantor’s obligations under this Guaranty or any other Loan Document, including any right of subrogation, reimbursement, exoneration, or indemnification, any right to participate in any claim or remedy of the Lenders against the Borrower or any other Obligor or any collateral which the Administrative Agent now has or hereafter acquires, whether or not such claim, remedy or right arises in equity, or under contract, statute or common law, including the right to take or receive from the Borrower or any other Obligor, directly or indirectly, in cash or other property or by set-off or in any manner, payment or security on account of such claim or other rights. If any amount shall be paid to the Guarantor in violation of the preceding sentence, such amount shall be deemed to have been paid to the Guarantor for the benefit of, and held in trust for, the Lenders, and shall forthwith be paid to the Administrative Agent for the benefit of the Lenders to be credited and applied upon the Obligations, whether matured or unmatured. The Guarantor acknowledges that it will receive direct and indirect benefits from the financing arrangements contemplated by the Credit Agreement and that the waiver set forth in this Section is knowingly made in contemplation of such benefits.

     SECTION 2.7 Payments Free and Clear of Taxes, etc. The Guarantor hereby agrees that:

     (a) All payments by the Guarantor hereunder shall be made in accordance with Section 3.01 of the Credit Agreement free and clear of and without deduction for any and all present or future taxes, duties, levies, imposts, deductions, assessments, fees, withholdings or similar charges, and all liabilities with respect thereto; excluding, in the case of the Administrative Agent and each Lender, taxes imposed on or measured by its net income (including any franchise taxes imposed on or measured by its net income), by the jurisdiction (or any political subdivision thereof) under the Laws of which the Administrative Agent or such Lender, as the case may be, is organized or maintains its Lending Office (all such non-excluded taxes, duties, levies, imposts, deductions, assessments, fees, withholdings or similar charges, and liabilities being hereinafter referred to as “Taxes”). In the event that any withholding or deduction from any payment to be made by the Guarantor hereunder is required in respect of any Taxes pursuant to any applicable law, rule or regulation, then the Guarantor will (i) pay directly to the relevant authority the full amount required to be so withheld or deducted; (ii) promptly forward to such Lender an official receipt or other documentation satisfactory to such Lender evidencing such payment to such authority; and (iii) pay to such Lender such additional amount or amounts as is necessary to ensure that the net amount actually received by such Lender will equal the full amount such Lender would have received had no such withholding or deduction been required. Moreover, if any Taxes are directly asserted against any Lender with respect to any payment received by such Lender hereunder, such Lender may pay such Taxes and the Guarantor will promptly pay such additional amounts (including, if incurred as a result of Guarantor’s or the Borrower’s action, omission or delay, any penalties, interest or expenses) as is necessary in order that the net amount received by such Lender after the payment of such Taxes (including any Taxes on such additional amount) shall equal the amount such Lender would have received had such Taxes not been asserted.

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     (b) If the Guarantor fails to pay any Taxes when due to the appropriate taxing authority or fails to remit to any Lender the required receipts or other required documentary evidence, the Guarantor shall indemnify such Lender for any incremental Taxes, interest or penalties that may become payable by such Lender as a result of any such failure.

     (c) Without prejudice to the survival of any other agreement of the Guarantor hereunder, the agreements and obligations of the Guarantor contained in this Section 2.7 shall survive the payment in full of the principal of and interest on the Revolving Loan.

     SECTION 2.8 Subordination. Guarantor hereby subordinates and makes inferior to the Obligations any and all indebtedness now or at any time hereafter owed by the Borrower or other Obligor to the Guarantor. Guarantor agrees that if any Event of Default has occurred and is continuing under the Credit Agreement, it will not permit the Borrower to repay such indebtedness or any part thereof and it will not accept payment from the Borrower of such indebtedness or any part thereof without the prior written consent of the Required Lenders. If Guarantor receives any such payment without the prior required written consent, the amount so paid shall be held in trust for the benefit of the Lenders, shall be segregated from the other funds of such Guarantor, and shall forthwith be paid over to the Administrative Agent to be held by the Administrative Agent as collateral for, or then or at any time thereafter applied in whole or in part by the Administrative Agent against, all or any portions of the Obligations, whether matured or unmatured, in such order as the Administrative Agent shall elect.

ARTICLE III

MISCELLANEOUS PROVISIONS

     SECTION 3.1 Loan Document. This Guaranty is a Loan Document executed pursuant to the Credit Agreement and shall (unless otherwise expressly indicated herein) be construed, administered and applied in accordance with the terms and provisions thereof.

     SECTION 3.2 Releases. At such time as the Revolving Loan shall have been paid in full (other than contingent indemnity obligations and, with respect to L/C Obligations, if they have been Cash Collateralized), the Commitments have been terminated, and, subject to Section 10.01(e) of the Credit Agreement, no Lender Hedging Agreements are outstanding, the Administrative Agent shall, at the request and expense of the Guarantor following such termination, promptly execute and deliver to the Guarantor such documents and instruments as the Guarantor shall reasonably request to evidence termination and release of this Guaranty.

     SECTION 3.3 Administrative Agent and Lenders; Successors and Assigns.

     (a) The Administrative Agent is Administrative Agent for each Lender under the Credit Agreement. All rights granted to Administrative Agent under or in connection with this Guaranty are for each Lender’s ratable benefit. The Administrative Agent may, without the joinder of any Lender, exercise any rights in Administrative Agent’s or Lenders’ favor under or in connection with this Guaranty. The Administrative Agent’s and each Lender’s rights and obligations vis-a-vis each other may be subject to one or more separate agreements between those parties. However, the Guarantor is not required to inquire about any such agreement and is not subject to any terms of it unless the Guarantor specifically enters into such agreement. Therefore, neither Guarantor nor its successors or assigns is entitled to any benefits or provisions of any such separate agreement nor is it entitled to rely upon or raise as a defense any party’s failure or refusal to comply with the provisions of any such agreement.

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     (b) This Guaranty benefits the Administrative Agent, the Lenders, and their respective successors and assigns and binds Guarantor and its successors and assigns. Upon appointment of any successor Administrative Agent under the Credit Agreement, all of the rights of Administrative Agent under this Guaranty automatically vests in that new Administrative Agent as successor Administrative Agent on behalf of Lenders without any further act, deed, conveyance, or other formality other than that appointment. The rights of the Administrative Agent and the Lenders under this Guaranty may be transferred with any assignment of the obligations hereby guaranteed pursuant to and in accordance with the terms of the Credit Agreement. The Credit Agreement contains provisions governing assignments of the obligations guaranteed under this Guaranty.

     SECTION 3.4 Amendments, etc. No amendment to or waiver of any provision of this Guaranty, nor consent to any departure by the Guarantor herefrom, shall in any event be effective unless the same shall be in writing and signed by or on behalf of the party against whom it is sought to be enforced and is in conformity with the requirements of Section 10.01 of the Credit Agreement. Each such waiver or consent shall be effective only in the specific instance and for the specific purpose for which given.

     SECTION 3.5 Addresses for Notices to the Guarantor. All notices and other communications hereunder to the Guarantor shall be in writing and mailed or delivered to it, addressed to it at the address set forth below or at such other address as shall be designated by the Guarantor in a written notice to the Administrative Agent at the address specified in the Credit Agreement complying as to delivery with the terms of this Section. All such notices and other communications shall, when mailed, be effective when deposited in the mail, addressed as aforesaid. Address for notices:

9520 N. May Avenue, Suite 300
Oklahoma City, Oklahoma 73120
Attn: Chief Executive Officer
Telephone: (405) 488-1304
Facsimile: (405) 840-9897

     SECTION 3.6 No Waiver; Remedies. In addition to, and not in limitation of, Section 2.3 and Section 2.5, no failure on the part of any Lender or any holder of a Note to exercise, and no delay in exercising, any right hereunder shall operate as a waiver thereof, nor shall any single or partial exercise of any right hereunder preclude any other or further exercise thereof or the exercise of any other right. The remedies herein provided are cumulative and not exclusive of any remedies provided by law.

     SECTION 3.7 Section Captions. Section captions used in this Guaranty are for convenience of reference only, and shall not affect the construction of this Guaranty.

     SECTION 3.8 Setoff. In addition to, and not in limitation of, any rights of any Lender or any holder of a Note under applicable law, upon the occurrence and during the continuance of an Event of Default under or as defined in the Credit Agreement, each Lender and each such holder shall be entitled to exercise (for the benefit of all Lenders pursuant to Section 10.09 of the Credit Agreement) any right of offset or banker’s lien against each and every account and other property or interest that the Guarantor may now or hereafter have with, or which is now or hereafter in the possession of, any such Lender, to the extent of the full amount of the Obligations.

     SECTION 3.9 Severability. Wherever possible, each provision of this Guaranty shall be interpreted in such manner as to be effective and valid under applicable law, but if any provision of this Guaranty shall be prohibited by or invalid under such law, such provision shall be ineffective to the extent

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of such prohibition or invalidity, without invalidating the remainder of such provision or the remaining provisions of this Guaranty.

     SECTION 3.10 Governing Law.

     (a) THIS GUARANTY SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK APPLICABLE TO AGREEMENTS MADE AND TO BE PERFORMED ENTIRELY WITHIN SUCH STATE; PROVIDED THAT THE ADMINISTRATIVE AGENT AND EACH LENDER SHALL RETAIN ALL RIGHTS ARISING UNDER UNITED STATES FEDERAL LAW.

     (b) GUARANTOR AGREES ANY LEGAL ACTION OR PROCEEDING WITH RESPECT TO THIS GUARANTY OR ANY OTHER LOAN DOCUMENT MAY BE BROUGHT IN THE COURTS OF THE STATE OF NEW YORK SITTING IN THE BOROUGH OF NEW YORK OR OF THE UNITED STATES FOR THE SOUTHERN DISTRICT OF NEW YORK AND APPELLATE COURTS FROM ANY THEREOF, AND BY EXECUTION AND DELIVERY OF THIS GUARANTY, THE GUARANTOR CONSENTS, FOR ITSELF AND IN RESPECT OF ITS PROPERTY, TO THE NON-EXCLUSIVE JURISDICTION OF THOSE COURTS. THE GUARANTOR (1) IRREVOCABLY WAIVES ANY OBJECTION, INCLUDING ANY OBJECTION TO THE LAYING OF VENUE OR BASED ON THE GROUNDS OF FORUM NON CONVENIENS, WHICH IT MAY NOW OR HEREAFTER HAVE TO THE BRINGING OF ANY ACTION OR PROCEEDING IN SUCH JURISDICTION IN RESPECT OF ANY LOAN DOCUMENT OR OTHER DOCUMENT RELATED THERETO, AND (2) IRREVOCABLY CONSENTS TO THE SERVICE OF PROCESS OUT OF ANY OF THE AFOREMENTIONED COURTS IN ANY SUCH ACTION OR PROCEEDING BY THE MAILING OF COPIES THEREOF BY CERTIFIED MAIL, RETURN RECEIPT REQUESTED, POSTAGE PREPAID, AT ITS ADDRESS FOR NOTICES DESIGNATED HEREIN. THE GUARANTOR WAIVES PERSONAL SERVICE OF ANY SUMMONS, COMPLAINT OR OTHER PROCESS, WHICH MAY BE MADE BY ANY OTHER MEANS PERMITTED BY THE LAW OF SUCH STATE.

     SECTION 3.11 Waiver of Jury Trial, Etc. THE GUARANTOR HEREBY (a) EXPRESSLY AND IRREVOCABLY WAIVES ANY RIGHT TO TRIAL BY JURY OF ANY CLAIM, DEMAND, ACTION OR CAUSE OF ACTION ARISING UNDER ANY LOAN DOCUMENT OR IN ANY WAY CONNECTED WITH OR RELATED OR INCIDENTAL TO THE DEALINGS OF THE PARTIES TO THE LOAN DOCUMENTS OR ANY OF THEM WITH RESPECT TO ANY LOAN DOCUMENT, OR THE TRANSACTIONS RELATED THERETO, IN EACH CASE WHETHER NOW EXISTING OR HEREAFTER ARISING, AND WHETHER FOUNDED IN CONTRACT OR TORT OR OTHERWISE; AND GUARANTOR HEREBY AGREES AND CONSENTS THAT ANY SUCH CLAIM, DEMAND, ACTION OR CAUSE OF ACTION SHALL BE DECIDED BY COURT TRIAL WITHOUT A JURY, AND THAT ADMINISTRATIVE AGENT OR ANY LENDER MAY FILE AN ORIGINAL COUNTERPART OR A COPY OF THIS SECTION WITH ANY COURT AS WRITTEN EVIDENCE OF THE CONSENT OF GUARANTOR TO THE WAIVER OF ITS RIGHT TO TRIAL BY JURY; AND (b) EXPRESSLY AND IRREVOCABLY WAIVES, TO THE MAXIMUM EXTENT NOT PROHIBITED BY LAW, ANY RIGHT IT MAY HAVE TO CLAIM OR RECOVER IN ANY SUCH ACTION ANY SPECIAL, EXEMPLARY, PUNITIVE OR CONSEQUENTIAL DAMAGES, OR DAMAGES OTHER THAN, OR IN ADDITION TO, ACTUAL DAMAGES; PROVIDED THAT THE WAIVER CONTAINED IN THIS SECTION 3.11 SHALL NOT APPLY TO THE EXTENT THAT THE PARTY AGAINST WHOM DAMAGES ARE SOUGHT HAS ENGAGED IN GROSS NEGLIGENCE OR WILLFUL MISCONDUCT.

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     SECTION 3.12 Entire Agreement. THIS GUARANTY AND THE OTHER LOAN DOCUMENTS REPRESENT THE FINAL AGREEMENT BETWEEN THE PARTIES AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS, OR SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES. THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES.

[REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK
SIGNATRUES BEGIN ON NEXT PAGE.]

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

QUEST MIDSTREAM PARTNERS, L.P.,
a Delaware limited partnership, as Guarantor
	By:	Quest Midstream GP, LLC,
		its General Partner
		By:	/s/ Jerry D. Cash
			Jerry D. Cash
			Chief Executive Officer

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EX-4.21

Exhibit 4.21

PLEDGE AND SECURITY AGREEMENT

(Quest Midstream Partners, L.P.)

     THIS PLEDGE AND SECURITY AGREEMENT (herein referred to as this “Security Agreement”) is executed as of January 31, 2007, by QUEST MIDSTREAM PARTNERS, L.P. a Delaware limited partnership (“Debtor”), whose address is 9520 N. May Avenue, Suite 300, Oklahoma City, Oklahoma 73120, for the benefit of ROYAL BANK OF CANADA (in its capacity as “Administrative Agent” and “Collateral Agent” for the Lenders (hereafter defined)), as “Secured Party,” whose address is Royal Bank Plaza, P.O. Box 50, 200 Bay Street, 12th Floor, South Tower, Toronto, Ontario M5J 2W7.

RECITALS

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

     WHEREAS, as of the date hereof, Debtor owns all of the membership interest in the Borrower and controls the management of the Borrower;

     WHEREAS, Debtor has agreed to guarantee the obligations of the Borrower under the Credit Agreement and to secure its guaranteed obligations by the pledge of its assets hereunder;

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

     WHEREAS, it is in the best interests of the Debtor to execute a Guaranty of the Obligations as herein defined and this Security Agreement inasmuch as the Debtor will derive substantial direct and indirect benefits from the Credit Extensions made from time to time to the Borrower by the Lenders pursuant to the Credit Agreement;

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

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

     1. REFERENCE TO CREDIT AGREEMENT. The terms, conditions, and provisions of the Credit Agreement are incorporated herein by reference, the same as if set forth herein verbatim, which terms, conditions, and provisions shall continue to be in full force and effect hereunder so long as the

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Lenders are obligated to lend under the Credit Agreement and thereafter until the Obligations are paid and performed in full (except as provided in Sections 10.01(d) and 10.01(e) of the Credit Agreement).

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

     Borrower has the meaning set forth in the first recital.

     Collateral has the meaning set forth in Paragraph 4 hereof.

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

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

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

     Copyrights has the meaning set forth in Paragraph 4 hereof.

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

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

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

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

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

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

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

     Partnerships/Limited Liability Companies shall mean: (a) those partnerships and limited liability companies listed on Annex B-1 attached hereto and incorporated herein by reference, as

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such partnerships or limited liability companies exist or may hereinafter be restated, amended, or restructured; (b) any partnership, joint venture, or limited liability company in which Debtor shall, at any time, become a limited or general partner, venturer, or member; or (c) any partnership, joint venture, or corporation formed as a result of the restructure, reorganization, or amendment of the Partnerships/Limited Liability Companies.

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

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

     Patents has the meaning set forth in Paragraph 4 hereof.

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

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

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

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

     Trademarks has the meaning set forth in Paragraph 4 hereof.

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

     3. SECURITY INTEREST. In order to secure the full and complete payment and performance of the Obligations when due, Debtor hereby grants to Secured Party a Security Interest in all of Debtor’s Rights, titles, and interests in and to the Collateral and pledges, collaterally transfers, and assigns the Collateral to Secured Party, all upon and subject to the terms and conditions of this Security Agreement. Such Security Interest is granted and pledge and assignment are made as security only and shall not subject Secured Party to, or transfer or in any way affect or modify, any obligation of Debtor with respect to any of the Collateral or any transaction involving or giving rise thereto. If the grant,

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pledge, or collateral transfer or assignment of any specific item of the Collateral is expressly prohibited by any contract, license, law or regulation, then the Security Interest created hereby nonetheless remains effective to the extent allowed by the UCC or other applicable Law, but is otherwise limited by that prohibition.

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

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

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

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

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

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

     (f) (i) all patents, patent applications, patent licenses, and patentable inventions of Debtor, including, without limitation, registrations, recordings, and applications thereof in the

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United States Patent and Trademark Office or in any similar office or agency of the United States of America, any state thereof or any other country or any political subdivision thereof including, without limitation, those set forth on Annex B-2, and all of the inventions and improvements described and claimed therein; (ii) all continuations, divisions, renewals, extensions, modifications, substitutions, reexaminations, continuations-in-part, or reissues of any of the foregoing; (iii) all income, royalties, profits, damages, awards, and payments relating to or payable under any of the foregoing; (iv) the right to sue for past, present, and future infringements of any of the foregoing; and (v) all other rights and benefits relating to any of the foregoing throughout the world; in each case, whether now owned or hereafter acquired by Debtor (“Patents”);

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

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

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

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

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

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

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

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

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

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

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

     (b) Binding Obligation/Perfection. This Security Agreement creates a legal, valid, and binding Lien in and to the Collateral in favor of Secured Party and enforceable against Debtor. For Collateral in which the Security Interest may be perfected by the filing of Financing Statements pursuant to Article 9 of the UCC, once those Financing Statements have been properly filed in the jurisdictions described on Annex A hereto, the Security Interest in that Collateral will be fully perfected and the Security Interest will constitute a first-priority Lien on such Collateral, subject only to Permitted Liens. With respect to Collateral consisting of investment property (other than Pledged Securities covered by Paragraph 5(j)), Deposit Accounts, electronic chattel paper, letter-of-credit rights, and instruments, upon the delivery of such Collateral to Secured Party or delivery of an executed Control Agreement with respect to such Collateral, the Security Interest in that Collateral will be fully perfected and the Security Interest will constitute a first-priority Lien on such Collateral, subject only to Permitted Liens. None of the Collateral has been delivered nor control with respect thereto given to any Person other than the Administrative Agent. Other than the Financing Statements and Control Agreements with respect to this Security Agreement, there are no other financing statements or control agreements covering any Collateral, other than those evidencing Permitted Liens. The

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creation of the Security Interest does not require the consent of any Person that has not been obtained.

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

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

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

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

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

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

     (i) Instruments, Chattel Paper, Collateral Notes, and Collateral Note Security. All material instruments and chattel paper including, without limitation, the Collateral Notes, have been delivered to Secured Party, together with corresponding endorsements duly executed by Debtor in favor of Secured Party, and such endorsements have been duly and validly executed and are binding and enforceable against Debtor in accordance with their terms. Each material Collateral Note and the documents evidencing the Collateral Note Security are in full force and effect; there have been no renewals or extensions of, or amendments, modifications, or supplements which would materially adversely affect such Collateral Notes or Collateral Note

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Security; and no “default” or “event of default” has occurred and is continuing under any such Collateral Note or documents evidencing the Collateral Note Security. Debtor has good title to the Collateral Notes and Collateral Note Security, and such Collateral Notes and Collateral Note Security are free from any claim for credit, deduction, or allowance of an Obligor and free from any defense, condition, dispute, setoff, or counterclaim which could materially adversely affect the value thereof, and there is no extension or indulgence with respect thereto.

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

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

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

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

     (n) Intellectual Property.

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

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

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

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

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

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

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

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

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

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

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

     (d) Perform Obligations. Perform all of Debtor’s duties under and in connection with each transaction to which the Collateral, or any material part thereof, relates, in the ordinary course of business except when in Debtor’s business judgment non-performance is justified. Notwithstanding anything to the contrary contained herein, (i) Debtor shall remain liable under the contracts, agreements, documents, and instruments included in the Collateral to the extent set forth therein to perform all of its duties and obligations thereunder to the same extent as if this Security Agreement had not been executed, (ii) the exercise by Secured Party of any of its Rights or remedies hereunder shall not release Debtor from any of its duties or obligations under the contracts, agreements, documents, and instruments included in the Collateral, and (iii) Secured Party shall not have any indebtedness, liability, or obligation under any of the contracts, agreements, documents, and instruments included in the Collateral by reason of this Security Agreement, and Secured Party shall not be obligated to perform any of the obligations or duties

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of Debtor thereunder or to take any action to collect or enforce any claim for payment assigned hereunder.

     (e) Intentionally Deleted.

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

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

     (h) Further Assurances. At Debtor’s expense and Secured Party’s request, before or after a Default or Event of Default: (i) file or cause to be filed such applications and take such other actions as Secured Party may request to obtain the consent or approval of any Governmental Authority to Secured Party’s Rights hereunder including, without limitation, the Right to sell all the Collateral upon an Event of Default without additional consent or approval from such Governmental Authority (and, because Debtor agrees that Secured Party’s remedies at Law for failure of Debtor to comply with this provision would be inadequate and that such failure would not be adequately compensable in damages, Debtor agrees that its covenants in this provision may be specifically enforced); (ii) from time to time promptly execute and deliver to Secured Party all such other assignments, certificates, supplemental documents, and financing statements, and do all other acts or things as Secured Party may reasonably request in order to more fully create, evidence, perfect, continue, and preserve the priority of the Security Interest and to carry out the provisions of this Security Agreement; and (iii) pay all filing fees in connection with any financing, continuation, or termination statement or other instrument with respect to the Security Interests.

     (i) Encumbrances. Not create, permit, or suffer to exist, and shall defend the Collateral against, any Lien or other encumbrance on the Collateral, other than Permitted Liens, and shall defend Debtor’s Rights in the Collateral and Secured Party’s Security Interest in the

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Collateral against the claims and demands of all Persons except those holding or claiming Permitted Liens. Debtor shall do nothing to impair the Rights of Secured Party in the Collateral.

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

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

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

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

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

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

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

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

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

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

     (v) Intellectual Property.

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

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

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

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

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

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

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

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

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

     (a) Notice. Reasonable notification of the time and place of any public sale of the Collateral, or reasonable notification of the time after which any private sale or other intended disposition of the Collateral is to be made, shall be sent to Debtor and to any other Person entitled to notice under the UCC; provided that, if any of the Collateral threatens to decline speedily in value or is of the type customarily sold on a recognized market, Secured Party may sell or

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otherwise dispose of the Collateral without notification, advertisement, or other notice of any kind. It is agreed that notice sent or given not less than ten Business Days prior to the taking of the action to which the notice relates is reasonable notification and notice for the purposes of this subparagraph.

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

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

     (d) Sales of Pledged Securities.

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

     (ii) Secured Party is authorized, in connection with any such sale, (A) to restrict the prospective bidders on or purchasers of any of the Pledged Securities to a limited number of sophisticated investors who will represent and agree that they are purchasing for their own account for investment and not with a view to the distribution or sale of any of such Pledged Securities, and (B) to impose such other limitations or conditions in connection with any such sale as Secured Party reasonably deems necessary in order to comply with applicable Law. Debtor covenants and agrees that it will execute and deliver such documents and take such other action as Secured Party reasonably

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deems necessary in order that any such sale may be made in compliance with applicable Law. Upon any such sale, Secured Party shall have the Right to deliver, assign, and transfer to the purchaser thereof the Pledged Securities so sold. Each purchaser at any such sale shall hold the Pledged Securities so sold absolutely free from any claim or Right of Debtor of whatsoever kind, including any equity or Right of redemption of Debtor. Debtor, to the extent permitted by applicable Law, hereby specifically waives all Rights of redemption, stay, or appraisal which it has or may have under any Law now existing or hereafter enacted.

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

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

     (v) Without limiting the foregoing, or imposing upon Secured Party any obligations or duties not required by applicable Law, Debtor acknowledges and agrees that, in foreclosing upon any of the Pledged Securities, or exercising any other Rights or remedies provided Secured Party hereunder or under applicable Law, Secured Party may, but shall not be required to, (A) qualify or restrict prospective purchasers of the Pledged Securities by requiring evidence of sophistication or creditworthiness, and requiring the execution and delivery of confidentiality agreements or other documents and agreements as a condition to such prospective purchasers’ receipt of information regarding the Pledged Securities or participation in any public or private foreclosure sale process, (B) provide to prospective purchasers business and financial information regarding Debtor and its Subsidiaries available in the files of Secured Party at the time of commencing the

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foreclosure process, without the requirement that Secured Party obtain, or seek to obtain, any updated business or financial information or verify, or certify to prospective purchasers, the accuracy of any such business or financial information, or (C) offer for sale and sell the Pledged Securities with or without first employing an appraiser, investment banker, or broker with respect to the evaluation of the Pledged Securities, the solicitation of purchasers for Pledged Securities, or the manner of sale of Pledged Securities.

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

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

     8. OTHER RIGHTS OF SECURED PARTY.

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

     (b) Collection. If an Event of Default exists and upon notice from Secured Party, each Obligor with respect to any payments on any of the Collateral (including, without limitation, dividends and other distributions with respect to the Pledged Securities and Partnership/Limited Liability Company Interests, payments on Collateral Notes, insurance proceeds payable by reason of loss or damage to any of the Collateral, or payments or distributions with respect to Deposit Accounts) is hereby authorized and directed by Debtor to make payment directly to Secured

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Party, regardless of whether Debtor was previously making collections thereon. Subject to Paragraph 8(f) hereof, until such notice is given, Debtor is authorized to retain and expend all payments made on Collateral. If an Event of Default exists, Secured Party shall have the Right in its own name or in the name of Debtor to compromise or extend time of payment with respect to all or any portion of the Collateral for such amounts and upon such terms as Secured Party may determine; to demand, collect, receive, receipt for, sue for, compound, and give acquittances for any and all amounts due or to become due with respect to Collateral; to take control of cash and other proceeds of any Collateral; to endorse the name of Debtor on any notes, acceptances, checks, drafts, money orders, or other evidences of payment on Collateral that may come into the possession of Secured Party; to sign the name of Debtor on any invoice or bill of lading relating to any Collateral, on any drafts against Obligors or other Persons making payment with respect to Collateral, on assignments and verifications of accounts or other Collateral and on notices to Obligors making payment with respect to Collateral; to send requests for verification of obligations to any Obligor; and to do all other acts and things necessary to carry out the intent of this Security Agreement. If an Event of Default exists and any Obligor fails or refuses to make payment on any Collateral when due, Secured Party is authorized, in its sole discretion, either in its own name or in the name of Debtor, to take such action as Secured Party shall deem appropriate for the collection of any amounts owed with respect to Collateral or upon which a delinquency exists. Regardless of any other provision hereof, however, Secured Party shall never be liable for its failure to collect, or for its failure to exercise diligence in the collection of, any amounts owed with respect to Collateral, nor shall it be under any duty whatsoever to anyone except Debtor to account for funds that it shall actually receive hereunder. Without limiting the generality of the foregoing, Secured Party shall have no responsibility for ascertaining any maturities, calls, conversions, exchanges, offers, tenders, or similar matters relating to any Collateral, or for informing Debtor with respect to any of such matters (irrespective of whether Secured Party actually has, or may be deemed to have, knowledge thereof). The receipt of Secured Party to any Obligor shall be a full and complete release, discharge, and acquittance to such Obligor, to the extent of any amount so paid to Secured Party.

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

     (d) Record Ownership of Securities. If an Event of Default exists, Secured Party at any time may have any Collateral that is Pledged Securities and that is in the possession of

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

     (e) Voting of Securities. As long as no Event of Default exists, Debtor is entitled to exercise all voting Rights pertaining to any Pledged Securities and Partnership/Limited Liability Company Interests; provided however, that no vote shall be cast or consent, waiver, or ratification given or action taken without the prior written consent of Secured Party which would be inconsistent with or violate any provision of this Security Agreement or any other Loan Document; and provided further that Debtor shall give Secured Party at least five Business Days’ prior written notice in the form of an officers’ certificate of the manner in which it intends to exercise, or the reasons for refraining from exercising, any voting or other consensual Rights pertaining to the Collateral or any part thereof which might have a Material Adverse Effect on the value of the Collateral or any part thereof. If an Event of Default exists and if Secured Party elects to exercise such Right, the Right to vote any Pledged Securities shall be vested exclusively in Secured Party. To this end, Debtor hereby irrevocably constitutes and appoints Secured Party the proxy and attorney-in-fact of Debtor, with full power of substitution, to vote, and to act with respect to, any and all Collateral that is Pledged Securities standing in the name of Debtor or with respect to which Debtor is entitled to vote and act, subject to the understanding that such proxy may not be exercised unless an Event of Default exists. The proxy herein granted is coupled with an interest, is irrevocable, and shall continue until the Obligations have been paid and performed in full.

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

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

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

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

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

shall be part of the Collateral hereunder, and shall, if received by Debtor, be held in trust for the benefit of Secured Party, and shall forthwith be delivered to Secured Party (accompanied by

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

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

     (h) Cash Collateral Account. If an Event of Default exists and is continuing, Secured Party shall have, and Debtor hereby grants to Secured Party, the Right and authority to transfer all funds on deposit in the Deposit Accounts to a Cash Collateral Account (herein so called) maintained with a depository institution acceptable to Secured Party and subject to the exclusive direction, domain, and control of Secured Party, and no disbursements or withdrawals shall be permitted to be made by Debtor from such Cash Collateral Account. Such Cash Collateral Account shall be subject to the Security Interest and Liens in favor of Secured Party herein created, and Debtor hereby grants a security interest to Secured Party on behalf of Lenders in and to, such Cash Collateral Account and all checks, drafts, and other items ever received by Debtor for deposit therein. Furthermore, if an Event of Default exists, Secured Party shall have the Right,

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at any time in its discretion without notice to Debtor, (i) to transfer to or to register in the name of Secured Party or any Lender or nominee any certificates of deposit or deposit instruments constituting Deposit Accounts and shall have the Right to exchange such certificates or instruments representing Deposit Accounts for certificates or instruments of smaller or larger denominations and (ii) to take and apply against the Obligations any and all funds then or thereafter on deposit in the Cash Collateral Account or otherwise constituting Deposit Accounts.

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

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

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

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

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

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

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

     (vii) (A) to direct account debtors and any other parties liable for any payment under any of the Collateral to make payment of any and all monies due and to become due thereunder directly to Secured Party or as Secured Party shall direct; (B) to receive payment of and receipt for any and all monies, claims, and other amounts due and to

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become due at any time in respect of or arising out of any Collateral; (C) to sign and endorse any invoices, freight or express bills, bills of lading, storage or warehouse receipts, drafts against debtors, assignments, proxies, stock powers, verifications, and notices in connection with accounts and other documents relating to the Collateral; (D) to commence and prosecute any suit, action, or proceeding at Law or in equity in any court of competent jurisdiction to collect the Collateral or any part thereof and to enforce any other Right in respect of any Collateral; (E) to defend any suit, action, or proceeding brought against Debtor with respect to any Collateral; (F) to settle, compromise, or adjust any suit, action, or proceeding described above and, in connection therewith, to give such discharges or releases as Secured Party may deem appropriate; (G) to exchange any of the Collateral for other property upon any merger, consolidation, reorganization, recapitalization, or other readjustment of the issuer thereof and, in connection therewith, deposit any of the Collateral with any committee, depositary, transfer agent, registrar, or other designated agency upon such terms as Secured Party may determine; (H) to add or release any guarantor, endorser, surety, or other party to any of the Collateral; (I) to renew, extend, or otherwise change the terms and conditions of any of the Collateral; (J) to endorse Debtor’s name on all applications, documents, papers, and instruments necessary or desirable in order for Secured Party to use or maintain any of the Intellectual Property; (K) to make, settle, compromise or adjust any claims under or pertaining to any of the Collateral (including claims under any policy of insurance); (L) to execute on behalf of Debtor any financing statements or continuation statements with respect to the Security Interests created hereby, and to do any and all acts and things to protect and preserve the Collateral including, without limitation, the protection and prosecution of all Rights included in the Collateral; and (M) to sell, transfer, pledge, convey, make any agreement with respect to or otherwise deal with any of the Collateral as fully and completely as though Secured Party were the absolute owner thereof for all purposes, and to do, at Secured Parry’s option and Debtor’s expense, at any time, or from time to time, all acts and things which Secured Party deems necessary to protect, preserve, maintain, or realize upon the Collateral and Secured Party’s security interest therein.

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

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

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Person, and forthwith furnish to Secured Party evidence satisfactory to Secured Party that such payment has been made from the funds so provided.

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

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

     9. MISCELLANEOUS.

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

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

     (c) Term; Release of Liens. The Administrative Agent shall release the Liens created by this Security Agreement in accordance with Section 10.01 of the Credit Agreement; provided that no Obligor, if any, on any of the Collateral shall ever be obligated to make inquiry as to the termination of this Security Agreement, but shall be fully protected in making payment directly to Secured Party until actual notice of such total payment of the Obligations is received by such Obligor. At such time as the Liens created by this Security Agreement are to be released pursuant to this paragraph, Secured Party shall, at the request and expense of the Debtor following such termination, promptly deliver to the Debtor any Collateral held by the Secured Party hereunder, and promptly execute and deliver to such Debtor such documents and instruments as the Debtor shall reasonably request to evidence such termination and release as provided in the Credit Agreement. In addition, if any of the Collateral shall be sold, transferred, assigned or otherwise disposed of by the Debtor in a transaction permitted by the Credit Agreement, then the Secured Party, at the request and expense of the Debtor, shall promptly execute and deliver releases as provided in the Credit Agreement.

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

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thereto, exceeds the amount permitted by Law, the act of creating the Obligations, or any part thereof, is ultra vires, or the officers, partners, or trustees creating same acted in excess of their authority, or for any other reason; or (ix) if any payment by any party obligated with respect thereto is held to constitute a preference under applicable Laws or for any other reason Secured Party or any Lender is required to refund such payment or pay the amount thereof to someone else.

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

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

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

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

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

     (i) Secured Party is the agent for each Lender under the Credit Agreement and each Affiliate of a Lender party to any Lender Hedging Agreement, the Security

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

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

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

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

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

9520 N. May Avenue, Suite 300
Oklahoma City, Oklahoma 73120
Attn: Chief Executive Officer
Facsimile: (405) 840-9897
Telephone: (405) 488-1304

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

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

QUEST MIDSTREAM PARTNERS, L.P.,
a Delaware limited partnership, as Guarantor
	By:	Quest Midstream GP, LLC,
		its General Partner
		By:	/s/ Jerry D. Cash
			Jerry D. Cash
			Chief Executive Officer

Signature page

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ANNEX A TO SECURITY AGREEMENT

DEBTOR INFORMATION AND LOCATION OF COLLATERAL

A.	Exact Legal Name of Debtor:	Quest Midstream Partners, L.P.
B.	Mailing Address of Debtor:	9520 N. May Avenue
		Suite 300
		Oklahoma City, Oklahoma 73120
C.	Type of Entity:	limited partnership
D.	Jurisdiction of Organization:	Delaware
E.	State Issued Organizational
	Identification Number:	4266820
F.	Tax ID Number:	20-8056691
G.	Location of Books and Records:	9520 N. May Avenue
		Suite 300
		Oklahoma City, Oklahoma 73120
H.	Location of Collateral:	9520 N. May Avenue
		Suite 300
		Oklahoma City, Oklahoma 73120
I.	Location of Real Property:	None
J.	Jurisdiction(s) for Filing Financing Statements:	Delaware
	Fixture filings in the relevant counties in which the properties are located:	None

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ANNEX B-1 TO SECURITY AGREEMENT

COLLATERAL DESCRIPTIONS

A.	Collateral Notes and Collateral Note Security:
	None.
B.	Pledged Shares:
	None.
C.	Partnership/Limited Liability Company Interests:
	100% of the limited liability company membership interest in Bluestem Pipeline, LLC, a Delaware limited liability company
D.	Agreements:
	Bluestem Partners, LLC Limited Liability Company Agreement
E.	Commercial Tort Claims:
	None.
F.	Deposit Accounts (including name of bank address and account number).
	Account no. 805481093 at Bank of Oklahoma.

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ANNEX B-2 TO SECURITY AGREEMENT

INTELLECTUAL PROPERTY

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

..

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ANNEX C TO SECURITY AGREEMENT

DEPOSIT ACCOUNT CONTROL AGREEMENT

                    , 20__

                                       & nbsp;
                                        
                                        

Ladies and Gentlemen:

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

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

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

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

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

Pledgor:

[NAME OF ENTITY]

By:
	Name:
	Title:

Pledgee:

ROYAL BANK OF CANADA,
as Administrative Agent

By:
	Name:
	Title:

Acknowledged and Agreed on                     , 200_:

Depository Bank:

[NAME OF ENTITY]

By:
	Name:
	Title:

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ANNEX D TO SECURITY AGREEMENT

ACKNOWLEDGMENT OF PLEDGE

PARTNERSHIP/LIMITED LIABILITY COMPANY:                                         
INTEREST OWNER:                                         

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

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

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

Remainder of Page Intentionally Blank.
Signature Page to Follow.

Annex D - Page 1

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

By:

Name:

Title:

[PARTNERSHIP/LIMITED LIABILITY
COMPANY]

By:
	as [General Partner] [Manager]

By:
	Name:
	Title:

Annex D - Page 2

EX-4.22

Exhibit 4.22

PLEDGE AND SECURITY AGREEMENT

(Bluestem Pipeline, LLC)

     THIS PLEDGE AND SECURITY AGREEMENT (herein referred to as this “Security Agreement”) is executed as of January 31, 2007, by BLUESTEM PIPELINE, LLC, a Delaware limited liability company (“Debtor”), whose address is 9520 N. May Avenue, Suite 300, Oklahoma City, Oklahoma 73120, for the benefit of ROYAL BANK OF CANADA (in its capacity as “Administrative Agent” and “Collateral Agent” for the Lenders (hereafter defined)), as “Secured Party,” whose address is Royal Bank Plaza, P.O. Box 50, 200 Bay Street, 12th Floor, South Tower, Toronto, Ontario M5J 2W7.

RECITALS

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

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

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

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

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

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

         Collateral has the meaning set forth in Paragraph 4 hereof.

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

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

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

     Copyrights has the meaning set forth in Paragraph 4 hereof.

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

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

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

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

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

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

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

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

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

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

     Patents has the meaning set forth in Paragraph 4 hereof.

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

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

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

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

     Trademarks has the meaning set forth in Paragraph 4 hereof.

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

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

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

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

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

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

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

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

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

     (g) (i) all trademarks, trademark licenses, trade names, corporate names, company names, business names, fictitious business names, trade styles, service marks, certification marks, collective marks, logos, other business identifiers, all registrations, recordings, and applications thereof including, without limitation, registrations, recordings, and applications in the United States Patent and Trademark Office or in any similar office or agency of the United States, any

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state thereof or any other country or any political subdivision thereof including, without limitation, those set forth on Annex B-2; (ii) all reissues, extensions, and renewals thereof; (iii) all income, royalties, damages, and payments now or hereafter relating to or payable under any of the foregoing including, without limitation, damages or payments for past or future infringements of any of the foregoing; (iv) the right to sue for past, present, and future infringements of any of the foregoing; (v) all rights corresponding to any of the foregoing throughout the world; and (vi) all goodwill associated with and symbolized by any of the foregoing, in each case, whether now owned or hereafter acquired by Debtor (“Trademarks”, and collectively with the Copyrights and the Patents, the “Intellectual Property”);

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

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

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

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

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

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

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

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

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

     (a) Credit Agreement. The representations and warranties in the Credit Agreement applicable to the Debtor or its assets or operations are true and correct in all material respects.

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

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

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

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

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

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

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

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

     (j) Pledged Securities, Pledged Shares. All Collateral that is Pledged Shares is duly authorized, validly issued, fully paid, and non-assessable (except to the extent required by applicable Law), and the transfer thereof is not subject to any restrictions, other than restrictions imposed hereunder and by applicable securities and corporate Laws or Permitted Liens. The Pledged Securities securing the Obligations as defined in the Credit Agreement include 100% of the issued and outstanding common stock or other equity interests owned by the Debtor of each Subsidiary of the Debtor. Debtor has good title to the Pledged Securities, free and clear of all Liens and encumbrances thereon (except for the Security Interest created hereby or Permitted Liens), and has delivered to Secured Party (i) all stock certificates, or other instruments or documents representing or evidencing the Pledged Securities, together with corresponding

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assignment or transfer powers duly executed in blank by Debtor, and such powers have been duly and validly executed and are binding and enforceable against Debtor in accordance with their terms or (ii) to the extent such Pledged Securities are uncertificated, an executed Acknowledgment of Pledge with respect to such Pledged Securities. The pledge of the Pledged Securities in accordance with the terms hereof creates a valid and perfected first priority security interest in the Pledged Securities securing payment of the Obligations, subject to Permitted Liens.

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

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

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

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     (n) Intellectual Property.

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

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

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

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

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

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

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

     6. COVENANTS. So long as any Lenders are committed to make Credit Extensions under the Credit Agreement, and until the Obligations are paid and performed in full (except as provided in

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Sections 10.01(d) and 10.01(e) of the Credit Agreement), Debtor covenants and agrees with Secured Party that Debtor will:

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

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

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

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

     (e) Intentionally Deleted.

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

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

     (h) Further Assurances. At Debtor’s expense and Secured Party’s request, before or after a Default or Event of Default: (i) file or cause to be filed such applications and take such other actions as Secured Party may request to obtain the consent or approval of any Governmental Authority to Secured Party’s Rights hereunder including, without limitation, the Right to sell all the Collateral upon an Event of Default without additional consent or approval from such Governmental Authority (and, because Debtor agrees that Secured Party’s remedies at Law for failure of Debtor to comply with this provision would be inadequate and that such failure would not be adequately compensable in damages, Debtor agrees that its covenants in this provision may be specifically enforced); (ii) from time to time promptly execute and deliver to Secured Party all such other assignments, certificates, supplemental documents, and financing statements, and do all other acts or things as Secured Party may reasonably request in order to more fully create, evidence, perfect, continue, and preserve the priority of the Security Interest and to carry out the provisions of this Security Agreement; and (iii) pay all filing fees in connection with any financing, continuation, or termination statement or other instrument with respect to the Security Interests.

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

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

     (k) Fixtures. For any Collateral that is a fixture or an accession which has been attached to real estate or other goods prior to the perfection of the Security Interest, use commercially reasonable efforts to furnish to Secured Party, upon reasonable demand, a

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disclaimer of interest in each such fixture or accession and a consent in writing to the Security Interest of Secured Party therein, signed by all Persons having any interest in such fixture or accession by virtue of any interest in the real estate or other goods to which such fixture or accession has been attached.

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

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

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

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

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

     (q) Depository Bank. With respect to any Deposit Accounts, (i) maintain the Deposit Accounts at the banks (a “depository bank”) described on Annex B-1 or such additional depository banks as described in the notices given pursuant to clause (iv) of this Section 6(s) as have complied with item (iv) hereof, (ii) upon request of the Secured Party, deliver to each depository bank a letter in the form of Annex C hereto with respect to Secured Party’s Rights in such Deposit Account and use commercially reasonable efforts to obtain the execution of such letter by each depository bank that the pledge of such Deposit Account has been recorded in the books and records of such bank and that Secured Party shall have dominion and control over such Deposit Account; (iii) upon request of the Secured Party, deliver to Secured Party all certificates or instruments, if any, now or hereafter representing or evidencing the Deposit Accounts,

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accompanied by duly executed instruments of transfer or assignment in blank, all in form and substance reasonably satisfactory to Secured Party; and (iv) notify Secured Party upon establishing any additional Deposit Accounts and, at the request of Secured Party, use commercially reasonable efforts to obtain from such depository bank an executed letter substantially in the form of Annex C and deliver the same to Secured Party. Secured Party agrees not to exercise control over such Deposit Account unless an Event of Default shall have occurred and be continuing.

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

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

     (v) Intellectual Property.

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

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

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

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

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

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

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

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

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

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

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

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

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     (d) Sales of Pledged Securities.

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

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

     (iii) Debtor agrees that ten days’ written notice from Secured Party to Debtor of Secured Party’s intention to make any such public or private sale or sale at a broker’s board or on a securities exchange shall constitute reasonable notice under the UCC. Such notice shall (A) in case of a public sale, state the time and place fixed for such sale, (B) in case of sale at a broker’s board or on a securities exchange, state the board or exchange at which such a sale is to be made and the day on which the Pledged Securities, or the portion thereof so being sold, will first be offered to sale at such board or exchange, and

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(C) in the case of a private sale, state the day after which such sale may be consummated. Any such public sale shall be held at such time or times within ordinary business hours and at such place or places as Secured Party may fix in the notice of such sale. At any such sale, the Pledged Securities may be sold in one lot as an entirety or in separate parcels, as Secured Party may reasonably determine. Secured Party shall not be obligated to make any such sale pursuant to any such notice. Secured Party may, without notice or publication, adjourn any public or private sale or cause the same to be adjourned from time to time by announcement at the time and place fixed for the sale, and such sale may be made at any time or place to which the same may be so adjourned.

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

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

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

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jurisdiction may direct. If the proceeds are insufficient to pay the Obligations in full, Debtor shall remain liable for any deficiency.

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

     8. OTHER RIGHTS OF SECURED PARTY.

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

     (b) Collection. If an Event of Default exists and upon notice from Secured Party, each Obligor with respect to any payments on any of the Collateral (including, without limitation, dividends and other distributions with respect to the Pledged Securities and Partnership/Limited Liability Company Interests, payments on Collateral Notes, insurance proceeds payable by reason of loss or damage to any of the Collateral, or payments or distributions with respect to Deposit Accounts) is hereby authorized and directed by Debtor to make payment directly to Secured Party, regardless of whether Debtor was previously making collections thereon. Subject to Paragraph 8(f) hereof, until such notice is given, Debtor is authorized to retain and expend all payments made on Collateral. If an Event of Default exists, Secured Party shall have the Right in its own name or in the name of Debtor to compromise or extend time of payment with respect to all or any portion of the Collateral for such amounts and upon such terms as Secured Party may determine; to demand, collect, receive, receipt for, sue for, compound, and give acquittances for any and all amounts due or to become due with respect to Collateral; to take control of cash and other proceeds of any Collateral; to endorse the name of Debtor on any notes, acceptances, checks, drafts, money orders, or other evidences of payment on Collateral that may come into the possession of Secured Party; to sign the name of Debtor on any invoice or bill of lading relating to any Collateral, on any drafts against Obligors or other Persons making payment with respect to Collateral, on assignments and verifications of accounts or other Collateral and on notices to Obligors making payment with respect to Collateral; to send requests for verification of obligations to any Obligor; and to do all other acts and things necessary to carry out the intent of this Security Agreement. If an Event of Default exists and any Obligor fails or refuses to make payment on any Collateral when due, Secured Party is authorized, in its sole discretion, either in

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its own name or in the name of Debtor, to take such action as Secured Party shall deem appropriate for the collection of any amounts owed with respect to Collateral or upon which a delinquency exists. Regardless of any other provision hereof, however, Secured Party shall never be liable for its failure to collect, or for its failure to exercise diligence in the collection of, any amounts owed with respect to Collateral, nor shall it be under any duty whatsoever to anyone except Debtor to account for funds that it shall actually receive hereunder. Without limiting the generality of the foregoing, Secured Party shall have no responsibility for ascertaining any maturities, calls, conversions, exchanges, offers, tenders, or similar matters relating to any Collateral, or for informing Debtor with respect to any of such matters (irrespective of whether Secured Party actually has, or may be deemed to have, knowledge thereof). The receipt of Secured Party to any Obligor shall be a full and complete release, discharge, and acquittance to such Obligor, to the extent of any amount so paid to Secured Party.

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

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

     (e) Voting of Securities. As long as no Event of Default exists, Debtor is entitled to exercise all voting Rights pertaining to any Pledged Securities and Partnership/Limited Liability Company Interests; provided however, that no vote shall be cast or consent, waiver, or ratification given or action taken without the prior written consent of Secured Party which would be inconsistent with or violate any provision of this Security Agreement or any other Loan Document; and provided further that Debtor shall give Secured Party at least five Business Days’ prior written notice in the form of an officers’ certificate of the manner in which it intends to

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exercise, or the reasons for refraining from exercising, any voting or other consensual Rights pertaining to the Collateral or any part thereof which might have a Material Adverse Effect on the value of the Collateral or any part thereof. If an Event of Default exists and if Secured Party elects to exercise such Right, the Right to vote any Pledged Securities shall be vested exclusively in Secured Party. To this end, Debtor hereby irrevocably constitutes and appoints Secured Party the proxy and attorney-in-fact of Debtor, with full power of substitution, to vote, and to act with respect to, any and all Collateral that is Pledged Securities standing in the name of Debtor or with respect to which Debtor is entitled to vote and act, subject to the understanding that such proxy may not be exercised unless an Event of Default exists. The proxy herein granted is coupled with an interest, is irrevocable, and shall continue until the Obligations have been paid and performed in full.

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

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

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

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

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

shall be part of the Collateral hereunder, and shall, if received by Debtor, be held in trust for the benefit of Secured Party, and shall forthwith be delivered to Secured Party (accompanied by proper instruments of assignment and/or stock and/or bond powers executed by Debtor in accordance with Secured Party’s instructions) to be held subject to the terms of this Security Agreement. Any cash proceeds of Collateral which come into the possession of Secured Party during the continuance of an Event of Default (including, without limitation, insurance proceeds) may, at Secured Party’s option, be applied in whole or in part to the Obligations (to the extent then due), be released in whole or in part to or on the written instructions of Debtor for any general or specific purpose, or be retained in whole or in part by Secured Party as additional Collateral. Any cash Collateral in the possession of Secured Party may be invested by Secured Party in certificates of deposit issued by Secured Party (if Secured Party issues such certificates) or by any state or national bank having combined capital and surplus greater than $100,000,000 with a short term rating from Moody’s and S&P of P-1 and A-1+, respectively, or in securities issued or guaranteed by the United States or any agency thereof. Secured Party shall never be obligated to make any such investment and shall never have any liability to Debtor for any loss which may result therefrom. All interest and other amounts earned from any investment of Collateral may be dealt with by Secured Party in the same manner as other cash Collateral.

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Except as specifically provided herein, the provisions of this subparagraph are applicable whether or not a Default or Event of Default exists.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

     (1) Indemnification. Debtor hereby assumes all liability for the Collateral, for the Security Interest, and for any use, possession, maintenance, and management of, all or any of the Collateral including, without limitation, any Taxes arising as a result of, or in connection with, the transactions contemplated herein, and agrees to assume liability for, and to indemnify and hold Secured Party and each Lender harmless from and against, any and all claims, causes of action, or liability, for injuries to or deaths of Persons and damage to property, howsoever arising from or incident to such use, possession, maintenance, and management, whether such Persons be agents or employees of Debtor or of third parties, or such damage be to property of Debtor or of

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

     9. MISCELLANEOUS.

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

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

     (c) Term; Release of Liens. The Administrative Agent shall release the Liens created by this Security Agreement in accordance with Section 10.01 of the Credit Agreement; provided that no Obligor, if any, on any of the Collateral shall ever be obligated to make inquiry as to the termination of this Security Agreement, but shall be fully protected in making payment directly to Secured Party until actual notice of such total payment of the Obligations is received by such Obligor. At such time as the Liens created by this Security Agreement are to be released pursuant to this paragraph, Secured Party shall, at the request and expense of the Debtor following such termination, promptly deliver to the Debtor any Collateral held by the Secured Party hereunder, and promptly execute and deliver to such Debtor such documents and instruments as the Debtor shall reasonably request to evidence such termination and release as provided in the Credit Agreement. In addition, if any of the Collateral shall be sold, transferred,

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assigned or otherwise disposed of by the Debtor in a transaction permitted by the Credit Agreement, then the Secured Party, at the request and expense of the Debtor, shall promptly execute and deliver releases as provided in the Credit Agreement.

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

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

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

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

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

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

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

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

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

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

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

9520 N. May Avenue, Suite 300
Oklahoma City, Oklahoma 73120
Attn: Chief Executive Officer
Facsimile: (405) 840-9897
Telephone: (405) 488-1304

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

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

BLUESTEM PIPELINE, LLC,
a Delaware limited liability company
By:	Quest Midstream Partners, L.P.,
	a Delaware limited partnership,
	its Sole Member

By:	Quest Midstream GP, LLC
	its General Partner

By:	/s/ Jerry D. Cash
	Jerry D. Cash
	Chief Executive Officer

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ANNEX A TO SECURITY AGREEMENT

DEBTOR INFORMATION AND LOCATION OF COLLATERAL

A.	Exact Legal Name of Debtor:	Bluestem Pipeline, LLC
B.	Mailing Address of Debtor:	9520 N. May Avenue
		Suite 300
		Oklahoma City, Oklahoma 73120
C.	Type of Entity:	limited liability company
D.	Jurisdiction of Organization:	Delaware
E.	State Issued Organizational
	Identification Number:	3740038
F.	Tax ID Number:	20-0481979
G.	Location of Books and Records:	9520 N. May Avenue
		Suite 300
		Oklahoma City, Oklahoma 73120
H.	Location of Collateral:	9520 N. May Avenue
		Suite 300
		Oklahoma City, Oklahoma 73120
I.	Location of Real Property:	Real Property is located in the following counties:
		Kansas — Chautauqua, Elk, Cowley, Labette, Montgomery, Neosho, Wilson, Allen, Greenwood, Woodson and Butler
		Oklahoma — Craig and Nowata
J.	Jurisdiction(s) for Filing
	Financing Statements:	Delaware
	Fixture filings in the relevant counties in which the properties are located:	Kansas — Chautauqua, Elk, Cowley, Labette, Montgomery, Neosho, Wilson. Allen, Greenwood, Woodson and Butler
		Oklahoma — Craig and Nowta

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ANNEX B-1 TO SECURITY AGREEMENT

COLLATERAL DESCRIPTIONS

A.	Collateral Notes and Collateral Note Security:
	None
B.	Pledged Shares:
	None
C.	Partnership/Limited Liability Company Interests:
	None
D.	Commercial Tort Claims:
	None
F.	Deposit Accounts (including name of bank address and account number).
	Account no. 6303733728 with JPMorgan Chase Bank.

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ANNEX B-2 TO SECURITY AGREEMENT

INTELLECTUAL PROPERTY

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

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ANNEX C TO SECURITY AGREEMENT

DEPOSIT ACCOUNT CONTROL AGREEMENT

                    , 20                    

Ladies and Gentlemen:

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

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

1. The Depository Bank is instructed to register the pledge on its books and hold the Collateral in a pledged status account.

2. The Depository Bank is instructed to deliver to Pledgee copies of monthly statements on the account(s) identified below:

3. The Account will be styled:

4. All dividends, interest, gains, and other profits on the Collateral will be reported in the name and tax identification number of Pledgor.

5. If so notified by Pledgee, the Depository Bank will not, without the prior written consent of Pledgee, allow any of the Collateral or any interest therein to be sold, transferred, or withdrawn by or for the benefit of Pledgor.

6. This letter agreement gives Pledgee “control” of the Account and the Collateral. The Depository Bank agrees to comply with any order or instruction from Pledgee as to the withdrawal or disposition of any funds from time to time credited to the Account, or as to any other matters relating to the Collateral, without the further consent of Pledgor. The Depository Bank shall be

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fully entitled to rely upon such instructions from Pledgee even if such instructions are contrary to any instructions or demands that Pledgor may give to the Depository Bank.

7. Pledgee agrees to indemnify and hold the Depository Bank, its officers and employees, harmless from and against any and all claims, causes of action, liabilities, lawsuits, demands, and/or damages, including, without limitation any and all costs, including court costs and reasonable attorneys’ fees, that may arise or result from the Depository Bank complying with the instructions and orders of Pledgee given in connection with Pledgee’s exercise of its control over and secured rights in the Account and the Collateral except to the extent that such claims, causes of action, liabilities, lawsuits, demands, and/or damages are found in a final, non-appealable judgment by a court of competent jurisdiction to have resulted from the gross negligence or willful misconduct of the Depository Bank.

8. Pledgor agrees to indemnify and hold the Depository Bank, its officers and employees, harmless from and against any and all claims, causes of action, liabilities, lawsuits, demands, and/or damages, including, without limitation, any and all costs, including court costs and reasonable attorneys’ fees, that may arise or result from the Depository Bank entering into and performing its obligations under this letter agreement except to the extent that such claims, causes of action, liabilities, lawsuits, demands, and/or damages are found in a final, non-appealable judgment by a court of competent jurisdiction to have resulted from the gross negligence or willful misconduct of the Depository Bank.

9. The Depository Bank represents that it has not received notice regarding any lien, encumbrance, or other claim to the Account or the Collateral from any person other than pursuant to this letter agreement and has not entered into another agreement with any other party to act on such party’s instructions with respect to the Account. The Depository Bank further agrees not to enter into any such agreement with any other party.

10. The Depository Bank subordinates’ to the security interest of Pledgee any right of recoupment or set-off, or to assert any security interest or other lien, that it may at any time have against or in any of the Collateral on account of any credit or other obligations owed to the Depository Bank by Pledgor or any other person. The Depository Bank may, however, from time to time debit the Account for any of its customary charges in maintaining the Account or for reimbursement for the reversal of any provisional credits granted by the Depository Bank to the Account, to the extent, in each case, that Pledgor has not separately paid or reimbursed Depository Bank therefor.

11. To the extent a conflict exists between the terms of this letter agreement and any account agreement between Pledgor and the Depository Bank, the terms of this letter agreement will control.

12. The terms of this letter agreement will in no way be modified except by a writing signed by all parties hereto.

13. Each of the parties executing this letter agreement represents that he has the proper authority to execute this letter agreement.

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

Pledgor:

[NAME OF ENTITY]

By:
	Name:
	Title:

Pledgee:

ROYAL BANK OF CANADA,
as Administrative Agent

By:
	Name:
	Title:

Acknowledged and Agreed on                                        , 200                    :

Depository Bank:

[NAME OF ENTITY]

By:
	Name:
	Title:

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ANNEX D TO SECURITY AGREEMENT

ACKNOWLEDGMENT OF PLEDGE

PARTNERSHIP/LIMITED LIABILITY COMPANY:                                                             
INTEREST OWNER:                                                            

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

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

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

Remainder of Page Intentionally Blank.
Signature Page to Follow.

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

By:

Name:

Title:

[PARTNERSHIP/LIMITED LIABILITY COMPANY]
By:
	as [General Partner] [Manager]
By:
	Name:
	Title:

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EX-4.23

Exhibit 4.23

WHEN RECORDED OR FILED,	THIS DOCUMENT PREPARED
RETURN TO:	BY:
Thompson & Knight L.L.P.	Robert C. Shearer
333 Clay Street, Suite 3300	Thompson & Knight L.L.P.
Houston, Texas 77002	333 Clay Street, Suite 3300
Attention: Robert C. Shearer	Houston, Texas 77002
Telephone: (713) 951-5896	Telephone: (713) 951-5896

MORTGAGE, ASSIGNMENT, SECURITY AGREEMENT,
FIXTURE FILING AND FINANCING STATEMENT
FROM
BLUESTEM PIPELINE, LLC
TO
ROYAL BANK OF CANADA, ADMINISTRATIVE AND COLLATERAL AGENT

Dated January 31, 2007

MAXIMUM SECURED AMOUNT. NOTWITHSTANDING ANY PROVISION HEREOF TO THE CONTRARY, THE OUTSTANDING INDEBTEDNESS SECURED BY THIS INSTRUMENT AND ITS COUNTERPARTS SHALL NOT, AT ANY TIME OR FROM TIME TO TIME, EXCEED AN AGGREGATE MAXIMUM AMOUNT OF $75,000,000. THE INDEBTEDNESS IS SECURED BY PROPERTIES IN THE STATE OF KANSAS AND IN THE STATE OF OKLAHOMA. THE PROPERTIES IN THE STATE OF KANSAS ARE IN MORE THAN ONE COUNTY. AN AFFIDAVIT OF EVEN DATE WITH THIS INSTRUMENT WILL BE PREPARED BY THE MORTGAGOR ALLOCATING THE VALUES OF THE PROPERTIES BETWEEN THE STATES AND AMONG THE COUNTIES. THE TERMS OF THE AFFIDAVIT ARE INCORPORATED HEREIN.

A CARBON, PHOTOGRAPHIC, FACSIMILE, OR OTHER REPRODUCTION OF THIS INSTRUMENT IS SUFFICIENT AS A FINANCING STATEMENT. THIS INSTRUMENT CONTAINS AFTER-ACQUIRED PROPERTY PROVISIONS, SECURES PAYMENT OF FUTURE ADVANCES, AND COVERS PROCEEDS OF COLLATERAL. THIS INSTRUMENT SECURES AN OBLIGATION THAT MAY INCREASE OR DECREASE FROM TIME TO TIME. THIS INSTRUMENT, WHICH COVERS GOODS WHICH ARE OR ARE TO BECOME FIXTURES RELATED TO THE REAL PROPERTY DESCRIBED HEREIN, IS TO BE FILED FOR RECORD, AMONG OTHER PLACES, IN THE REAL ESTATE OR COMPARABLE RECORDS OF THE COUNTIES REFERENCED IN EXHIBITS A, B, C AND D HERETO AND SUCH FILING WHERE ALLOWED BY APPLICABLE LAW SHALL SERVE, AMONG OTHER PURPOSES, AS A FIXTURE FILING. THE MORTGAGOR HAS AN INTEREST OF RECORD IN THE REAL ESTATE AND IMMOVABLE PROPERTY CONCERNED, WHICH INTEREST IS DESCRIBED IN SECTION 1.1 OF THIS INSTRUMENT.

MORTGAGE, ASSIGNMENT,
SECURITY AGREEMENT, FIXTURE FILING
AND FINANCING STATEMENT
(this “Mortgage”)

ARTICLE I.

GRANTING CLAUSES; SECURED INDEBTEDNESS

     Section 1.1. Grant of Mortgage. Bluestem Pipeline, LLC, a Delaware limited liability company (herein called “Mortgagor”), for and in consideration of the sum of Ten Dollars ($10.00) to Mortgagor, in hand paid, and in order to secure the payment of the secured indebtedness hereinafter referred to and the performance of the obligations, covenants, agreements, warranties, and undertakings of Mortgagor hereinafter described, does hereby MORTGAGE AND WARRANT to Royal Bank of Canada, as administrative agent and collateral agent (subject to Section 5.28 hereof, hereinafter referred to as the “Agent”), for the benefit of the Lenders (as hereinafter defined), with respect to the following (the “Mortgaged Properties”):

     A. Those certain tracts of land (the “Fee Lands”), and other interests in land described in Exhibit A and/or in Exhibit B, attached hereto and made a part hereof (such Fee Lands and the lands covered by the other interests in lands being herein collectively called the “Plant Sites”), together with all plants, batteries, injector stations, truck stations, warehouses, offices, pumps, pump stations, pipelines, heaters, compressors, equipment and other fixtures, personal property and improvements (whether now owned or hereafter acquired by operation of law or otherwise) located on or under the Plant Sites (collectively the “Plant Facilities”) or used, held for use in connection with, or in any way related to the Pipeline Systems (as hereinafter defined), the plants, equipment, compressors, fixtures, personal/movable property and improvements described or depicted in Exhibit C hereto (the Plant Sites and the Plant Facilities are herein sometimes collectively called the “Plants”);

     B. The rights, interests and estates created under those certain servitudes, easements, rights of way, privileges, franchises, prescriptions, licenses, leases, permits, deeds, assignments and/or other rights described in Exhibit B, attached hereto and made a part hereof, and all of Mortgagor’s right, title and interest (whether now owned or hereafter acquired by operation of law or otherwise) in any servitudes, easements, rights of way, privileges, franchises, prescriptions, licenses, leases, permits and/or other rights in and to any land, in any county and section shown on Exhibit B even though they may be incorrectly described in or omitted therefrom, together with any amendments, renewals, extensions, supplements, modifications or other agreements related to the foregoing, and further together with any other servitudes, easements, rights of way, privileges, prescriptions, franchises, licenses, permits, deeds, assignments and/or other rights (whether presently existing or hereafter created and whether now owned or hereafter acquired by operation of law or otherwise) used, held for use in connection with, or in any way related to the Pipeline Systems (as hereinafter defined), the Plants,

and/or pipelines transporting natural gas, natural gas liquids, and/or other hydrocarbons to, from or between Pipeline Systems and/or the Plants (the rights, interests and estates described in this item B are herein collectively called the “Servitudes”);

     C. All other right, title and interest of Mortgagor of whatever kind or character (whether now owned or hereafter acquired by operation of law or otherwise) in and to (i) the Plants, the Fee Lands, and/or the Servitudes, and (ii) the lands described or referred to in Exhibit A and/or Exhibit B (or described in any of the instruments described or referred to in Exhibit A and/or Exhibit B);

     D. Without limitation of the foregoing, those certain transportation, gathering and transmission systems described and/or depicted on Exhibit C, attached hereto and made a part hereof, and all pipes, valves, gauges, meters and other measuring equipment, regulators, heaters, extractors, tubing, pipelines, fuel lines, facilities, improvements, fittings, materials and other improvements, fixtures, equipment, inventory, goods, and/or personal/movable property (whether now owned or hereafter acquired by operation of law or otherwise, and including, without limitation, those more particularly described in Exhibit C hereto) located on or under the Servitudes, and/or in or on or otherwise related to the transportation, gathering and transmission systems described and/or depicted on Exhibit C (the properties, rights and interests described in this item D are herein collectively called the “Pipeline Systems”);

     E. All of Mortgagor’s right, title and interest (whether now owned or hereafter acquired by operation of law or otherwise) in and to all improvements, fixtures, and other real/immovable and/or personal/movable property (including, without limitation, all equipment, inventory, goods, tanks, pipelines, flow lines, gathering lines, compressors, dehydration units, separators, meters, metering stations, buildings, fittings, pipe, pipe connector, valves, regulators, drips, storage facilities, absorbers, heaters, dehydrators, and power and telephone lines) located on or under, or which in any way relate to, the Plants, the Servitudes and/or the Pipeline Systems excluding however all water lines and water pipes not owned by Mortgagor located on or under, or which in any way relate to, the Plants, the Servitudes and/or the Pipeline Systems;

     F. All of Mortgagor’s right, title and interest, whether presently existing or hereafter created and whether now owned or hereafter acquired by operation of law or otherwise, in and to:

     (i) all purchase, sale, gathering, processing, transportation, storage and other contracts or agreements covering or otherwise relating to the ownership or operation of the Plants, the Servitudes and/or the Pipeline Systems, and/or to the purchase, sale or transportation of natural gas, natural gas liquids, and/or other hydrocarbons, or to the separation, treatment, stabilization and/or processing of the same;

     (ii) all of Mortgagor’s rights under or arising out of any agreement under which any of the Property, as hereinafter defined, was acquired, including without limitation any and all representations, warranties, or covenants and any

and all rights of indemnity or to rebate of the purchase price; all equipment leases, maintenance agreements, electrical supply contracts, option agreements, and other contracts and/or agreements, whether now existing or hereafter entered into, which cover, affect, or otherwise relate to the Plants, the Servitudes and/or the Pipeline Systems, and/or any of the other Mortgaged Properties described above, or to the purchase, sale, transportation, gathering, separation, treatment, stabilization, dehydration, processing, delivery and/or redelivery of natural gas, natural gas liquids, and/or other hydrocarbons transported, gathered, separated, treated, stabilized, dehydrated, processed, delivered and/or redelivered by or in the Plants and/or the Pipeline Systems;

(the contractual rights, contracts and other agreements described in this item F are herein sometimes collectively called the “Contracts”); and

     G. All rights, estates, powers and privileges appurtenant to the foregoing rights, interests and properties.

     This Mortgage is upon the statutory mortgage condition for the breach of which this Mortgage is subject to foreclosure as provided by law.

     TO HAVE AND TO HOLD the Mortgaged Properties unto Agent, and Agent’s representatives, successors and assigns (such assigns as permitted by the Credit Agreement, as hereinafter defined), for the benefit of the Lenders and upon the terms, provisions and conditions herein set forth. All references herein to the Agent are to such Agent and its successors in its capacity as administrative agent and collateral agent and not to any of the other agents specified in the Credit Agreement.

     Section 1.2. Grant of Security Interest. In order to further secure the payment of the secured indebtedness hereinafter referred to and the performance of the obligations, covenants, agreements, warranties and undertakings of Mortgagor hereinafter described, Mortgagor hereby grants to Agent for the benefit of the Lenders (as defined in Section 1.3 below) a security interest in the entire interest of Mortgagor (whether now owned or hereafter acquired by operation of law or otherwise) in and to all of the following:

     (a) to the extent a security interest may be created therein, the Mortgaged Properties;

     (b) all payments received in lieu of performance which are related to the Mortgaged Properties (regardless of whether such payments accrued, and/or the events which gave rise to such payments occurred, on or before or after the date hereof) including, without limitation, firm or prepaid transportation payments and similar payments, payments received in settlement of or pursuant to a judgment rendered with respect to firm transportation or similar obligations or other obligations under a contract, and payments received in buyout or buydown or other settlement of a contract) and/or imbalances in deliveries (the payments described in this subsection (b) being herein called “Payments in Lieu”);

     (c) all equipment, inventory, improvements, fixtures, accessions, goods (including oil, gas or other hydrocarbons owned by Mortgagor) and other personal property or movable property of whatever nature now or hereafter used or held for use in connection with the operation of the Mortgaged Properties or the treating, handling, separation, stabilization, storing, processing, heating, transporting, gathering or marketing of crude oil, natural gas or other liquid or gaseous products (which crude oil, natural gas and other liquid or gaseous products are hereinafter called “Products”) and all licenses and permits of whatever nature now or hereafter used or held for use in connection with the Mortgaged Properties or in connection with the operation thereof or the treating, handling, separation, stabilization, storing, processing, heating, transporting, gathering or marketing of Products, and all renewals or replacements of the foregoing or substitutions for the foregoing;

     (d) all accounts, receivables, contract rights, choses in action (i.e., rights to enforce contracts or to bring claims thereunder), commercial tort claims, deposit accounts and general intangibles of whatever nature related to the Mortgaged Properties, the operation thereof, or the treating, handling, separation, stabilization, storing, processing, transporting, gathering or marketing of Products and including, without limitation, any of the same relating to payment of proceeds thereof or to payment of amounts which could constitute Payments in Lieu;

     (e) all rights and interests of Mortgagor under any present or future hedge or swap agreements, cap, floor, collar, exchange, forward or other hedge or protection agreements or transactions, or any option with respect to any such agreement or transaction now existing or hereafter entered into by or on behalf of Mortgagor;

     (f) all engineering, accounting, title, legal, and other technical or business data concerning the Mortgaged Properties, the treating, handling, separation, stabilization, storing, processing, transporting, gathering or marketing of Products or any other item of Property (as hereinafter defined) which are now or hereafter in the possession of Mortgagor or in which Mortgagor can otherwise grant a security interest, and all books, files, records, magnetic media, software and other forms of recording or obtaining access to such data;

     (g) all money, documents, instruments, chattel paper (including, without limitation, electronic chattel paper and tangible chattel paper), rights to payment evidenced by chattel paper, certificated securities, uncertificated securities, investment property, commercial tort claims, deposit accounts, accounts, goods, inventory, equipment, contract rights, payable intangibles, general intangibles, rights to proceeds of written letters of credit, letter-of-credit rights, supporting obligations and rights to payment of money (all of the properties, rights and interests described in subsections (a), (b), (c), (d), (e) and (f) above and this subsection (g) being herein sometimes collectively called the “Collateral”; and

     (h) all proceeds of the Collateral, whether such proceeds or payments are goods, money, documents, instruments, chattel paper, securities, accounts, payment intangibles, general intangibles, fixtures, real/immovable property, personal/movable

property or other assets (the Mortgaged Properties, the Collateral and the proceeds of the Collateral being herein sometimes collectively called the “Property”).

     Except as otherwise expressly provided in this Mortgage, all terms in this Mortgage relating to the Collateral and the grant of the foregoing security interest which are defined in the applicable Uniform Commercial Code (the “UCC”) shall have the meanings assigned to them in Article 9 (or, absent definition in Article 9, in any other Article) of the UCC, as those meanings may be amended, revised or replaced from time to time. Notwithstanding the foregoing, the parties intend that the terms used herein which are defined in the UCC have, at all times, the broadest and most inclusive meanings possible. Accordingly, if the UCC shall in the future be amended or held by a court to define any term used herein more broadly or inclusively than the UCC in effect on the date of this Mortgage, then such term, as used herein, shall be given such broadened meaning. If the UCC shall in the future be amended or held by a court to define any term used herein more narrowly, or less inclusively, than the UCC in effect on the date of this Mortgage, such amendment or holding shall be disregarded in defining terms used in this Mortgage. With respect to the security interest granted herein, Mortgagor is the debtor, Agent (for the benefit of the Lenders) is the secured party, and their respective addresses are set forth at the end of this Mortgage. If the grant, pledge, or collateral transfer or assignment of any specific item of the Mortgaged Property or Collateral is expressly prohibited by any contract, license, law or regulation, then the Mortgage and/or security interest created hereby nonetheless remains effective to the extent allowed by the UCC or other applicable Law, but is otherwise limited by that prohibition.

     Section 1.3. Loan Documents, Other Obligations. This Mortgage is made by Mortgagor to secure and enforce the payment and performance of the Obligations as defined in that certain Credit Agreement of even date herewith, between Mortgagor and Royal Bank of Canada, individually and as administrative agent and collateral agent for the benefit of the lenders now or hereafter party thereto and for any affiliate of a lender who enters into any present or future hedge or swap agreements, cap, floor, collar, exchange, forward or other hedge or protection agreements or transactions with or on behalf of Mortgagor (hereinafter collectively called the “Lenders”), together with all supplements thereto, all amendments or modifications thereof, and all agreements given in substitution therefor or in restatement, renewal or extension thereof, in whole or in part (such Credit Agreement as the same may from time to time be supplemented, amended or modified, and all other agreements given in substitution therefor or in restatement, renewal or extension thereof, in whole or in part, being herein called the “Credit Agreement”).

     Section 1.4. Secured Indebtedness. The indebtedness referred to in Section 1.3, and all renewals, extensions and modifications thereof, and all substitutions therefor, in whole or in part, are herein sometimes referred to as the “secured indebtedness” or the “indebtedness secured hereby”.

     Section 1.5. Maximum Secured Amount. Notwithstanding any provision hereof to the contrary, the outstanding indebtedness secured by Property located in the State of Kansas shall not, at any time or from time to time, exceed an aggregate maximum amount of $75,000,000.

ARTICLE II.

REPRESENTATIONS, WARRANTIES AND COVENANTS

     Section 2.1. Representations, Warranties and Covenants. Mortgagor represents and warrants, and covenants, as applicable, as follows:

     (a) Title and Permitted Encumbrances. Mortgagor has, and Mortgagor covenants to maintain, good and defensible title to the Property, free and clear of all liens, security interests, and encumbrances except for Permitted Liens (as defined in the Credit Agreement).

Mortgagor will warrant and defend title to the Property, subject as aforesaid, against the claims and demands of all persons claiming or to claim the same or any part thereof. Except to the extent permitted in the Credit Agreement, Mortgagor further binds and obligates itself not to sell, mortgage, or encumber any of the Property to the prejudice of this act. Upon request by Agent, Mortgagor will, subject to the Credit Agreement, deliver to Agent schedules of all internal and third party information identifying the Mortgaged Properties (such as, for example, internal identification names and numbers used by Mortgagor in accounting for revenues, costs, and joint interest transactions attributable to the Mortgaged Properties).

     (b) Location of Personal or Movable Property. Except as provided for in Section 2.1(c) of this Mortgage or in the Credit Agreement, the equipment, inventory, improvements, fixtures, goods and other tangible personal/movable property forming a part of the Property and used or useful thereto in the conduct of its business is, and will remain located on the Mortgaged Properties, except for that portion thereof which is or shall be located elsewhere (including that usually located on the Mortgaged Properties but temporarily located elsewhere) in the course of the normal operation of the Property.

     (c) Sale or Disposal. Mortgagor will not, without the prior written consent of Agent, sell, exchange, lease, transfer, or otherwise dispose of, or cease to operate (or be operator of) or abandon, any part of, or interest in, the Property other than as provided in the Credit Agreement.

     (d) Defense of Mortgage. If the validity or priority of this Mortgage or of any rights, titles, liens or security interests created or evidenced hereby with respect to the Property or any part thereof or the title of Mortgagor to the Property shall be endangered or questioned or shall be attacked directly or indirectly or if any legal proceedings are instituted against Mortgagor with respect thereto, and an officer of Mortgagor has knowledge thereof, Mortgagor will give prompt written notice thereof to Agent and, at Mortgagor’s own cost and expense and at the request of Agent, will diligently endeavor to cure any defect that may be developed or claimed, and will take all necessary and proper steps for the defense of such legal

proceedings including, but not limited to, the employment of counsel, the prosecution or defense of litigation and the release or discharge of all adverse claims, and if Agent (whether or not named as a party to legal proceedings with respect thereto), in good faith believes that Mortgagor is not diligently pursuing its obligations as required by the preceding clause and that it must intervene to pursue such defense, then it is hereby authorized and empowered to take such additional steps as in its judgment may be necessary or proper for the defense of any such legal proceedings or such protection of the validity or priority of this Mortgage and the rights, titles, liens and security interests created or evidenced hereby including, but not limited to, the employment of independent counsel, the prosecution or defense of litigation, the compromise or discharge of any adverse claims made with respect to the Property, the purchase of any tax title and the removal of prior liens or security interests, and all expenditures so made of every kind and character shall be a demand obligation (which obligation Mortgagor hereby expressly promises to pay) owing by Mortgagor to Agent and shall bear interest on the unpaid portion thereof from the date expended until paid at the Default Rate (as such term is defined in the Credit Agreement), and the party incurring such expenses shall be subrogated to all rights of the person receiving such payment. Agent shall give notice to the Mortgagor of any such additional steps, but in no case shall Agent be required to notify Mortgagor prior to taking such steps, nor shall Agent ever be required to obtain consent or permission from Mortgagor to take such steps.

     (e) Fees and Expenses; Indemnity. Mortgagor will reimburse Agent and each Lender (for purposes of this paragraph, the terms “Agent,” and “Lender” shall include the directors, officers, employees, counsel, agents and attorneys-in-fact of Agent and each Lender, respectively, and any persons or entities owned or controlled by or affiliated with Agent or any Lender, respectively) for all expenditures, including reasonable attorneys’ fees and expenses as and to the extent provided in Section 10.04 of the Credit Agreement and to indemnify and hold harmless such parties as and to the extent provided in Section 10.05 of the Credit Agreement.

     (f) Insurance. Mortgagor will carry insurance as provided in the Credit Agreement. In the event of any loss under any insurance policies so carried by Mortgagor, Agent shall, after it has determined in its sole judgment that Mortgagor has failed to commence or diligently pursue efforts to collect the same, have the right (but not the obligation) to make proof of loss and collect the same, and all amounts so received shall be applied toward costs, charges and expenses (including reasonable attorneys’ fees), if any, incurred in the collection thereof, then to the order of Mortgagor for use for repairs and replacement of any loss, unless a default is then continuing and in which case, then shall be applied to matured secured indebtedness as prescribed by the Credit Agreement, and any excess proceeds shall be paid to the order of Mortgagor for use for repairs and replacement of any loss. In the preceding instances and during the continuance of a default, Agent is hereby authorized but not obligated to enforce in its name or in the name of Mortgagor payment of any or all of said policies or settle or compromise any claim in respect thereof, and to collect and make receipts for the proceeds thereof and, in and during such events, Agent is hereby appointed Mortgagor’s agent and attorney-in-fact to endorse any check or draft payable to Mortgagor in order to collect the proceeds of insurance. In the event of foreclosure of this Mortgage, or other transfer of title to the Property in extinguishment in whole or in part of the secured indebtedness, all right, title and interest of Mortgagor in and to such policies then in force

concerning the Property and all proceeds payable thereunder shall thereupon vest in the purchaser at such foreclosure or other transferee in the event of such other transfer of title. Mortgagor acknowledges and agrees that it has been informed by Agent that, although Mortgagor is required to purchase insurance for the Property, Mortgagor may purchase that insurance from the insurance company or agent of its choice, and cannot be required by Agent, as a condition of any transaction, to purchase or renew any policy of insurance covering the Property through any particular insurance company, agent, solicitor, or broker.

     (g) Further Assurances. Mortgagor will, on request of Agent: (i) promptly correct any defect, error or omission which may be discovered in the contents of this Mortgage, or in any other Loan Document to which Mortgagor is a party, or in the execution or acknowledgment of this Mortgage or any other Loan Document to which Mortgagor is a party; (ii) execute, acknowledge, deliver and record and/or file such further instruments (including, without limitation, further deeds of trust, mortgages, security agreements, financing statements, continuation statements, and assignments of production and/or rents, accounts, funds, contract rights, general intangibles, and proceeds) and do such further acts as may be necessary, desirable or proper to carry out more effectively the purposes of this Mortgage and the other Loan Documents to which Mortgagor is a party and to more fully identify and subject to the liens and security interests hereof any property intended to be covered hereby, including specifically, but without limitation, any renewals, additions, substitutions, replacements, or appurtenances to the Property; and (iii) execute, acknowledge, deliver, and file and/or record any document or instrument (including specifically any financing statement) desired by Agent to protect the lien or the security interest hereunder against the rights or interests of third persons. Mortgagor shall pay all costs in connection with the foregoing.

     (l) Name and Place of Business and Formation. Except as disclosed in the Credit Agreement, Mortgagor has not, during the preceding five years, been known by or used any other corporate or partnership, trade or fictitious name. Mortgagor will not cause or permit any change to be made in its name, identity, state of formation or corporate, limited liability company or partnership structure, or its federal employer identification number unless Mortgagor shall have notified Agent of such change no later than thirty (30) days prior to the effective date of such change, and thereafter shall promptly take all action required by Agent for the purpose of further perfecting or protecting the liens and security interests in the Property created hereby. Mortgagor’s exact name is the name set forth in this Mortgage. Mortgagor’s location is as follows: Mortgagor is a registered organization which is organized under the laws of one of the states comprising the United States (e.g. corporation, limited partnership, registered limited liability partnership or limited liability company). Mortgagor is located (as determined pursuant to the UCC) in the state under the laws in which it was organized, which is Delaware. Mortgagor’s principal place of business and chief executive office, and the place where Mortgagor keeps its books and records concerning the Property has for the preceding four months, been, and continues to be (unless Mortgagor notifies Agent of any change as hereinabove provided in writing at least thirty (30) days prior to the date of such change) the address set forth opposite the signature of Mortgagor to this Mortgage.

     (m) Not a Foreign Person. Mortgagor is not a “foreign person” within the meaning of the Internal Revenue Code of 1986, as amended, (hereinafter called the “Code”), Sections 1445 and 7701 (i.e. Mortgagor is not a non-resident alien, foreign corporation, foreign partnership, foreign trust or foreign estate as those terms are defined in the Code and any regulations promulgated thereunder).

     Section 2.2. Compliance by Operator. As to any part of the Properties which is operated by a party other than Mortgagor, Mortgagor agrees to take all such action and to exercise all rights and remedies as are available to Mortgagor (including, but not limited to, all rights under any operating agreement) which are reasonable and prudent (financially, operationally, or otherwise) to cause the party who is the operator of such Property to comply with the covenants and agreements contained herein. However, nothing contained herein shall be construed to permit Mortgagor to relinquish its position as Operator.

     Section 2.3. Performance on Mortgagor’s Behalf. Mortgagor agrees that, if Mortgagor fails to perform any act or to take any action which hereunder Mortgagor is required to perform or take, or to pay any money which hereunder Mortgagor is required to pay, Agent, in Mortgagor’s name or its own name, may, but shall not be obligated to, perform or cause to be performed such act or take such action or pay such money after notice of such payment is given to Mortgagor, and any expenses so incurred by Agent, and any money so paid by Agent shall be a demand obligation owing by Mortgagor to Agent (which obligation Mortgagor hereby expressly promises to pay) and Agent, upon making such payment, shall be subrogated to all of the rights of the person, corporation or body politic receiving such payment. Each amount due and owing by Mortgagor to Agent and/or any Lender pursuant to this Mortgage shall bear interest on the unpaid amount thereof each day, from the date of such expenditure or payment until paid, at the Default Rate (as defined in the Credit Agreement); all such amounts, together with such interest thereon, shall be a part of the secured indebtedness and shall be secured by this Mortgage.

ARTICLE III.

ASSIGNMENT OF REVENUES, ACCOUNTS, AND PROCEEDS

     Section 3.1. Assignment. Mortgagor does hereby absolutely and unconditionally assign, transfer and set over to Agent all rents, issues, profits, revenue, income and other benefits derived from the Mortgaged Properties or arising from the operation thereof or from any of the Contracts (herein sometimes collectively called the “Revenues”), together with the immediate and continuing right to collect and receive such Revenues. Mortgagor directs and instructs any and all payors of Revenues to pay to Agent all of the Revenues until such time as such payors have been furnished with evidence that all secured indebtedness has been paid and that this Mortgage has been released. Mortgagor agrees that no such payors of such Revenues shall have any responsibility for the application of any funds paid to Agent. Notwithstanding the foregoing, Mortgagor shall be permitted to continue to receive all Revenues and Agent shall not request that such Revenues be paid to Agent unless and until a default shall have occurred and be continuing.

     Section 3.2. Effectuating Payment of Revenues to Agent. Independent of the foregoing provisions and authorities herein granted, Mortgagor agrees, if a default has occurred

and is continuing, to execute and deliver any and all instruments that may be requested by Agent or that may be required by any payor of Revenues for the purpose of effectuating payment of the Revenues to Agent. If under any existing agreements any Revenues are required to be paid by the payor to Mortgagor so that under such existing agreements payment cannot be made of such Revenues to Agent, Mortgagor’s interest in all Revenues under such agreements and in all other Revenues which for any reason may be paid to Mortgagor shall, when received by Mortgagor, constitute trust funds in Mortgagor’s hands and, if a default has occurred and is continuing, shall be upon request immediately paid over to Agent. Without limitation upon any of the foregoing, Mortgagor hereby constitutes and appoints Agent as Mortgagor’s special attorney-in-fact (with full power of substitution, either generally or for such periods or purposes as Agent may from time to time prescribe) in the name, place and stead of Mortgagor to do any and every act and exercise any and every power that Mortgagor might or could do or exercise personally with respect to all Revenues (the same having been assigned by Mortgagor to Agent pursuant to Section 3.1 hereof), expressly inclusive, but not limited to, the right, power and authority to:

     (a) Execute and deliver in the name of Mortgagor any and all instruments of every nature that may be requested or required by any party for the purposes of effectuating payment of the Revenues to Agent or which Agent may otherwise deem necessary or appropriate to effect the intent and purposes of the assignment contained in Section 3.1; and

     (b) If under any agreements any Revenues are required to be paid by the payor to Mortgagor so that under such agreements payment cannot be made of such Revenues to Agent, to make, execute and enter into such agreements as are necessary to direct Revenues to be payable to Agent;

giving and granting unto said attorney-in-fact full power and authority to do and perform any and every act and thing whatsoever necessary and requisite to be done as fully and to all intents and purposes, as Mortgagor might or could do if personally present; and Mortgagor shall be bound thereby as fully and effectively as if Mortgagor had personally executed, acknowledged and delivered any of the foregoing certificates or documents. The powers and authorities herein conferred upon Agent may be exercised by Agent through any person who, at the time of the execution of the particular instrument, is an officer of Agent. The power of attorney herein conferred is granted for valuable consideration and is coupled with an interest and is irrevocable so long as the secured indebtedness, or any part thereof, shall remain unpaid. All persons dealing with Agent or any substitute shall be fully protected in treating the powers and authorities conferred by this paragraph as continuing in full force and effect until advised by Agent that all the secured indebtedness is fully and finally paid. Agent may, but shall not be obligated to, take such action as it deems appropriate in an effort to collect the Revenues and any reasonable expenses (including reasonable attorney’s fees) so incurred by Agent shall be a demand obligation of Mortgagor and shall be part of the secured indebtedness, and shall bear interest each day, from the date of such expenditure or payment until paid, at the Default Rate (as such term is defined in the Credit Agreement). Mortgagor agrees not to exercise the foregoing power of attorney unless a default has occurred and is continuing.

     Section 3.3. Application of Revenues. After a default hereunder has occurred and for so long as it continues, all Revenues from time to time paid to the Agent shall be applied by it

toward the payment of all secured indebtedness (principal, interest, attorneys’ fees and other fees and expenses) at such times and in such manner and order as is provided in the Credit Agreement.

     Section 3.4. Release From Liability; Indemnification. Agent and its successors and assigns are hereby released and absolved from all liability for failure to enforce collection of the Revenues, and from all other responsibility in connection therewith, except the responsibility of each to account to Mortgagor for funds actually received by each. Mortgagor agrees to indemnify and hold harmless Agent (for purposes of this paragraph, the term “Agent” shall include the directors, officers, employees, counsel, agents and attorneys-in-fact of Agent and any persons or entities owned or controlled by or affiliated with Agent) from and against all claims, demands, liabilities, losses, damages (including without limitation consequential damages), causes of action, judgments, penalties, costs and expenses (including without limitation reasonable attorneys’ fees and expenses) imposed upon, asserted against or incurred or paid by Agent by reason of the assertion that Agent received, either before or after payment in full of the secured indebtedness, Revenues claimed by third persons, and Agent shall have the right to defend against any such claims or actions, employing attorneys of its own selection, and if not furnished with indemnity satisfactory to it, Agent shall have the right to compromise and adjust any such claims, actions and judgments, and in addition to the rights to be indemnified as herein provided, all amounts paid by Agent in compromise, satisfaction or discharge of any such claim, action or judgment, and all court costs, attorneys’ fees and other expenses of every character expended by Agent pursuant to the provisions of this section shall be a demand obligation (which obligation Mortgagor hereby expressly promises to pay) owing by Mortgagor to Agent and shall bear interest, from the date expended until paid, at the Default Rate (as such term is defined in the Credit Agreement). The foregoing indemnities shall not terminate upon the Release Date or upon the release, foreclosure or other termination of this Mortgage but will survive the Release Date, foreclosure of this Mortgage or conveyance in lieu of foreclosure, and the repayment of the secured indebtedness and the discharge and release of this Mortgage and the other documents evidencing and/or securing the secured indebtedness. WITHOUT LIMITATION, IT IS THE INTENTION OF MORTGAGOR AND MORTGAGOR AGREES THAT THE FOREGOING RELEASES AND INDEMNITIES SHALL APPLY TO EACH INDEMNIFIED PARTY WITH RESPECT TO ALL CLAIMS, DEMANDS, LIABILITIES, LOSSES, DAMAGES (INCLUDING WITHOUT LIMITATION CONSEQUENTIAL DAMAGES), CAUSES OF ACTION, JUDGMENTS, PENALTIES, COSTS AND EXPENSES (INCLUDING WITHOUT LIMITATION REASONABLE ATTORNEYS’ FEES AND EXPENSES) WHICH IN WHOLE OR IN PART ARE CAUSED BY OR ARISE OUT OF THE NEGLIGENCE OF SUCH (AND/OR ANY OTHER) INDEMNIFIED PARTY. However, such indemnities shall not apply to any particular indemnified party (but shall apply to the other indemnified parties) to the extent the subject of the indemnification is caused by or arises out of the gross negligence or willful misconduct of such particular indemnified party.

     Section 3.5. Mortgagor’s Absolute Obligation to Pay and Perform Obligations. Nothing herein contained shall detract from or limit the obligations of Mortgagor to make prompt payment of and performance of secured indebtedness and other obligations at the time and in the manner provided in the Loan Documents, regardless of whether the

Revenues herein assigned are sufficient to pay same, and the rights under this Article III shall be cumulative of all other rights under the Loan Documents.

     Section 3.6. Change of Purchaser. To the extent applicable, and if a default has occurred hereunder and is continuing, should any person now or hereafter purchasing or taking production related to any Pipeline System fail to make payment promptly to Agent of the related production proceeds, Agent shall, subject to then existing contractual prohibitions, have the right to make, or to require Mortgagor to make, a change of purchaser, and the right to designate or approve the new purchaser, and Agent shall have no liability or responsibility in connection therewith so long as ordinary care is used in making such designation.

ARTICLE IV.

REMEDIES UPON DEFAULT

     Section 4.1. Default. The term “default” as used in this Mortgage shall mean occurrence of an “Event of Default” as defined in the Credit Agreement.

     Section 4.2. Acceleration of Secured Indebtedness. As more fully described in the Credit Agreement, during the continuance of a default, Agent may at any time and may from time to time without notice to Mortgagor or any other person declare any or all of the secured indebtedness immediately due and payable and all such secured indebtedness shall thereupon be immediately due and payable, without presentment, demand, protest, notice of protest, declaration or notice of acceleration or intention to accelerate, putting the mortgage in default, dishonor, notice of dishonor or any other notice or declaration of any kind, all of which are hereby expressly waived by Mortgagor, and the liens evidenced hereby shall be subject to foreclosure in any manner provided for herein or provided for by law as Agent may elect.

     Section 4.3. Pre-Foreclosure Remedies. During the continuance of a default, Agent is authorized, prior or subsequent to the institution of any foreclosure proceedings, and, to the extent allowed under applicable law, to enter upon the Property, or any part thereof, and to take possession of the Property and all books and records relating thereto, and to exercise without interference from Mortgagor any and all rights which Mortgagor has with respect to the management, possession, operation, protection or preservation of the Property. If necessary to obtain the possession provided for above, Agent may invoke any and all legal remedies to dispossess Mortgagor including, but not limited to, summary proceeding or restraining order. Mortgagor agrees to peacefully surrender possession of the Property upon default if requested. All costs, expenses and liabilities of every character incurred by Agent in managing, operating, maintaining, protecting or preserving the Property shall constitute a demand obligation (which obligation Mortgagor hereby expressly promises to pay) owing by Mortgagor to Agent and shall bear interest from date of expenditure until paid at the Default Rate (as such term is defined in the Credit Agreement), all of which shall constitute a portion of the secured indebtedness and shall be secured by this Mortgage and by any other instrument securing the secured indebtedness. In connection with any action taken by Agent pursuant to this Section 4.3, AGENT SHALL NOT BE LIABLE FOR ANY LOSS SUSTAINED BY MORTGAGOR RESULTING FROM ANY ACT OR OMISSION OF AGENT (INCLUDING AGENT’S OWN SIMPLE NEGLIGENCE) IN MANAGING THE PROPERTY UNLESS SUCH

LOSS IS CAUSED BY THE GROSS NEGLIGENCE, WILLFUL MISCONDUCT OR BAD FAITH OF AGENT, nor shall Agent be obligated to perform or discharge any obligation, duty or liability of Mortgagor arising under any agreement forming a part of the Property or arising under any Permitted Lien or otherwise arising. Mortgagor hereby assents to, ratifies and confirms any and all actions of Agent with respect to the Property taken under this Section 4.3.

     Section 4.4. Foreclosure.

     (a) During the continuance of a default, this Mortgage may be foreclosed as to the Mortgaged Properties, or any part thereof, in any manner permitted by applicable law.

     (b) Mortgagor specifically requests that a copy of any notice of default and a copy of any notice of sale under this Mortgage be mailed to Mortgagor at the address for Mortgagor specified in this Mortgage.

     (c) During the continuance of a default, Agent may exercise its rights of enforcement with respect to the Collateral under the Uniform Commercial Code of the State of Kansas, as amended, or under the Uniform Commercial Code or any other statute in force in any state to the extent the same is applicable law. Cumulative of the foregoing and the other provisions of this Section 4.4:

     (i) to the extent permitted by law, Agent may enter upon the Mortgaged Properties or otherwise upon Mortgagor’s premises to take possession of, assemble and collect the Collateral or to render it unusable; and

     (ii) Agent may require Mortgagor to assemble the Collateral and make it available at a place Agent designates which is mutually convenient to allow Agent to take possession or dispose of the Collateral; and

     (iii) written notice mailed to Mortgagor as provided herein at least ten (10) Business Days (as such term is defined in the Credit Agreement, and as so defined, it is used in this Mortgage) prior to the date of public sale of the Collateral or prior to the date after which private sale of the Collateral will be made shall constitute reasonable notice; and

     (iv) in the event of a foreclosure of the liens and/or security interests evidenced hereby, the Collateral, or any part thereof, and the Mortgaged Properties, or any part thereof, may, at the option of Agent, be sold, as a whole or in parts, together or separately (including, without limitation, where a portion of the Mortgaged Properties is sold, the Collateral related thereto may be sold in connection therewith); and

     (v) the expenses of sale provided for in clause FIRST of Section 4.6 shall include the reasonable expenses of retaking the Collateral, or any part thereof, holding the same and preparing the same for sale or other disposition; and

     (vi) should, under this subsection, the Collateral be disposed of other than by sale, any proceeds of such disposition shall be treated under Section 4.6 as if the same were sales proceeds.

     (d) To the extent permitted by applicable law, the sale hereunder of less than the whole of the Property shall not exhaust the powers of sale herein granted with respect to personal property or the right to judicial foreclosure, and successive sale or sales may be made until the whole of the Property shall be sold, and, if the proceeds of such sale of less than the whole of the Property shall be less than the aggregate of the indebtedness secured hereby and the expense of conducting such sale, this Mortgage and the liens and security interests hereof shall remain in full force and effect as to the unsold portion of the Property just as though no sale had been made; provided, however, that Mortgagor shall never have any right to require the sale of less than the whole of the Property. In the event any sale hereunder is not completed or is defective in the opinion of Agent, such sale shall not exhaust the powers of sale hereunder with respect to personal property or the right to judicial foreclosure, and Agent shall have the right to cause a subsequent sale or sales to be made. Any sale may be adjourned by announcement at the time and place appointed for such sale without further notice except as may be required by law. The Agent acting under power of sale with respect to personal property may appoint or delegate any one or more persons as agent to perform any act or acts necessary or incident to any sale held by it (including, without limitation, the posting of notices and the conduct of sale), and such appointment need not be in writing or recorded. Any and all statements of fact or other recitals made in any deed or deeds, or other instruments of transfer, given in connection with a sale as to nonpayment of the secured indebtedness or as to the occurrence of any default, or as to all of the secured indebtedness having been declared to be due and payable, or as to the request to sell, or as to notice of time, place and terms of sale and the properties to be sold having been duly given, or as to any other act or thing having been duly done, shall be taken as prima facie evidence of the truth of the facts so stated and recited. Notwithstanding any reference herein to the Credit Agreement or any other Loan Document, all persons dealing with the Mortgaged Properties shall be entitled to rely on any document, or certificate, of the Agent as to the occurrence of an event, such as a default, and shall not be charged with or forced to review any provision of any other document to determine the accuracy thereof. With respect to any sale held in foreclosure of the liens and/or security interests covered hereby, it shall not be necessary for the Agent, any public officer acting under execution or order of the court or any other party to have physically present or constructively in his/her or its possession, either at the time of or prior to such sale, the Property or any part thereof.

     Section 4.5. Receiver. In addition to all other remedies herein provided for, Mortgagor agrees that Agent shall, as a matter of right during the continuance of a default, be entitled to the appointment of a receiver or receivers for all or any part of the Property, whether such receivership be incident to a proposed sale (or sales) of such property or otherwise, and without regard to the value of the Property or the solvency of any person or persons liable for the payment of the indebtedness secured hereby, and Mortgagor does hereby consent to the appointment of such receiver or receivers, waives any and all defenses to such appointment, and agrees not to oppose any application therefor by Agent, and agrees that such appointment shall in

no manner impair, prejudice or otherwise affect the rights of Agent under Article III hereof. Mortgagor expressly waives notice of a hearing for appointment of a receiver and the necessity for bond or an accounting by the receiver. Nothing herein is to be construed to deprive Agent or any Lender of any other right, remedy or privilege it may now or hereafter have under the law to have a receiver appointed. Any money advanced by Agent in connection with any such receivership shall be a demand obligation (which obligation Mortgagor hereby expressly promises to pay) owing by Mortgagor to Agent and shall bear interest, from the date of making such advancement by Agent until paid, at the rate described in Section 2.3 hereof.

     Section 4.6. Proceeds of Foreclosure. The proceeds of any sale held in foreclosure of the liens and/or security interests evidenced hereby shall be applied, to the extent permitted by applicable law:

     FIRST, to the payment of all necessary costs and expenses incident to such foreclosure sale, including but not limited to all court costs and charges of every character in the event foreclosed by suit or any judicial proceeding;

     SECOND, to the payment of the secured indebtedness (including specifically without limitation the principal, interest and attorneys’ fees due and unpaid on the Obligations and the amounts due and unpaid and owed under this Mortgage) in such manner and order as the Agent shall deem advisable; and

     THIRD, the remainder, if any there shall be, shall be paid to Mortgagor, or to Mortgagor’s representatives, successors or assigns, or such other persons as may be entitled thereto by law.

     Section 4.7. Lender as Purchaser. Any party constituting a Lender shall have the right to become the purchaser at any sale held in foreclosure of the liens and/or security interests evidenced hereby, and any party constituting a Lender which is purchasing at any such sale shall have the right to credit upon the amount of the bid made therefor, to the extent necessary to satisfy such bid, the secured indebtedness owing to such party, or if such party holds less than all of such indebtedness, the pro rata part thereof owing to such party, accounting to all other parties constituting Lenders who are not joining in such bid in cash for the portion of such bid or bids apportionable to such non-bidding Lender or Lenders.

     Section 4.8. Foreclosure as to Matured Debt. Upon the occurrence and continuance of a default, Agent shall have the right to proceed with foreclosure of the liens and/or security interests evidenced hereby without declaring the entire secured indebtedness due, and in such event, any such foreclosure sale may be made subject to the unmatured part of the secured indebtedness and shall not in any manner affect the unmatured part of the secured indebtedness, but as to such unmatured part, this Mortgage shall remain in full force and effect just as though no sale had been made. The proceeds of such sale shall be applied as provided in Section 4.6 except that the amount paid under clause SECOND thereof shall be only the matured portion of the secured indebtedness and any proceeds of such sale in excess of those provided for in clauses FIRST and SECOND (modified as provided above) shall be applied as provided in clause THIRD of Section 4.6 hereof. Several sales may be made hereunder without exhausting the right of sale for any unmatured part of the secured indebtedness.

     Section 4.9. Remedies Cumulative. All remedies herein provided for are cumulative of each other and of all other remedies existing at law or in equity and are cumulative of any and all other remedies provided for in any other Loan Document, and, in addition to the remedies herein provided, there shall continue to be available all such other remedies as may now or hereafter exist at law or in equity for the collection of the secured indebtedness and the enforcement of the covenants herein and the foreclosure of the liens and/or security interests evidenced hereby, and the resort to any remedy provided for hereunder or under any such other Loan Document or provided for by law shall not prevent the concurrent or subsequent employment of any other appropriate remedy or remedies.

     Section 4.10. Discretion as to Security. Agent may resort to any security given by this Mortgage or to any other security now existing or hereafter given to secure the payment of the secured indebtedness, in whole or in part, and in such portions and in such order as may seem best to Agent in its sole and uncontrolled discretion, and any such action shall not in any way be considered as a waiver of any of the rights, benefits, liens or security interests evidenced by this Mortgage.

     Section 4.11. Mortgagor’s Waiver of Certain Rights. To the full extent Mortgagor may do so, Mortgagor agrees that Mortgagor will not at any time insist upon, plead, claim or take the benefit or advantage of any law now or hereafter in force providing for any appraisement, valuation, stay, extension or redemption, and Mortgagor, for Mortgagor, Mortgagor’s representatives, successors and assigns, and for any and all persons ever claiming any interest in the Property, to the extent permitted by applicable law, hereby waives and releases all rights of appraisement, valuation, stay of execution, redemption (including rights of redemption under K.S.A. 60-2414 and any other applicable statute or laws), notice of intention to mature or declare due the whole of the secured indebtedness, notice of election to mature or declare due the whole of the secured indebtedness and all rights to a marshaling of assets of Mortgagor, including the Property, or to a sale in inverse order of alienation in the event of foreclosure of the liens and/or security interests hereby created. Mortgagor shall not have or assert any right under any statute or rule of law pertaining to the marshaling of assets, sale in inverse order of alienation, the exemption of homestead, or other matters whatever to defeat, reduce or affect the right under the terms of this Mortgage to a sale of the Property for the collection of the secured indebtedness without any prior or different resort for collection, or the right under the terms of this Mortgage to the payment of the secured indebtedness out of the proceeds of sale of the Property in preference to every other claimant whatever. If any law referred to in this section and now in force, of which Mortgagor or Mortgagor’s representatives, successors or assigns or any other persons claiming any interest in the Mortgaged Properties or the Collateral might take advantage despite this section, shall hereafter be repealed or cease to be in force, such law shall not thereafter be deemed to preclude the application of this section.

     Section 4.12. Mortgagor as Tenant Post-Foreclosure. In the event there is a foreclosure sale hereunder and at the time of such sale Mortgagor or Mortgagor’s representatives, successors or assigns or any other persons claiming any interest in the Property by, through or under Mortgagor are occupying or using the Property, or any part thereof, each and all shall immediately become the tenant of the purchaser at such sale, which tenancy shall be a tenancy from day to day, terminable at the will of either landlord or tenant, at a reasonable rental per day based upon the value of the property occupied, such rental to be due daily to the purchaser. To

the extent permitted by applicable law, the purchaser at such sale shall, notwithstanding any language herein apparently to the contrary, have the sole option to demand immediate possession following the sale or to permit the occupants to remain as tenants at will. In the event the tenant fails to surrender possession of said property upon demand, the purchaser shall be entitled to institute and maintain a summary action for possession of the property (such as an action for forcible entry and detainer) in any court having jurisdiction.

     Section 4.15. Limitations under Applicable Law. The terms of this Article IV and Lender’s and/or Agent’s exercise of the terms thereof are and shall be limited by applicable law.

ARTICLE V.

MISCELLANEOUS

     Section 5.1. Scope of Mortgage. This Mortgage is a mortgage of both real/immovable and personal/movable property, a security agreement, a financing statement and an assignment, and also covers proceeds and fixtures and all rights as set out herein.

     Section 5.2. Effective as a Financing Statement. This Mortgage covers goods which are or are to become fixtures related to the real/immovable property described herein, and this Mortgage shall be effective as a financing statement filed as a fixture filing with respect to all fixtures included within the Property. This Mortgage is to be filed for record in the real/immovable property records of each county where any part of the Mortgaged Properties is situated, and may also be filed in the offices of the Bureau of Land Management, the General Land Office, or the Minerals Management Service or any relevant federal or state agency (or any successor agencies). This Mortgage shall also be effective as a financing statement covering any other Property and may be filed in any other appropriate filing or recording office, as well as in the appropriate office(s) of any jurisdiction in order to perfect the security interests in the Property. The mailing address of Mortgagor is the address of Mortgagor set forth at the end of this Mortgage and the address of Agent from which information concerning the security interests hereunder may be obtained is the address of Agent set forth at the end of this Mortgage. Nothing contained in this paragraph shall be construed to limit the scope of this Mortgage nor its effectiveness as a financing statement covering any type of Property.

     Section 5.3. Reproduction of Mortgage as Financing Statement. A carbon, photographic, facsimile or other reproduction of this Mortgage or of any financing statement relating to this Mortgage shall be sufficient as a financing statement for any purpose. Without limiting any other provision herein, Mortgagor hereby authorizes Agent to file, in any filing or recording office, one or more financing statements and any renewal or continuation statements thereof, describing the Property, including, without limitation, a financing statement covering “all assets of Mortgagor and all proceeds therefrom.”

     Section 5.4. Notice to Account Debtors. In addition to, but without limitation of, the rights granted in Article III hereof, Agent may, at any time after a default has occurred that is continuing, notify the account debtors or obligors of any accounts, chattel paper, negotiable instruments or other evidences of indebtedness included in the Collateral to pay Agent directly.

     Section 5.5. Waivers. Agent may at any time and from time to time in writing waive compliance by Mortgagor with any covenant herein made by Mortgagor to the extent and in the manner specified in such writing, or consent to Mortgagor’s doing any act which hereunder Mortgagor is prohibited from doing, or to Mortgagor’s failing to do any act which hereunder Mortgagor is required to do, to the extent and in the manner specified in such writing, or release any part of the Property or any interest therein from the lien and security interest of this Mortgage (and/or terminate the assignment provided for in Article III). Any party liable, either directly or indirectly, for the secured indebtedness or for any covenant herein or in any other Loan Document may be released from all or any part of such obligations without impairing or releasing the liability of any other party. No such act shall in any way impair any rights or powers hereunder except to the extent specifically agreed to in such writing.

     Section 5.6. No Impairment of Security. To the extent permitted by applicable law, the lien, security interest and other security rights hereunder shall not be impaired by any indulgence, moratorium or release which may be granted including, but not limited to, any renewal, extension or modification which may be granted with respect to any secured indebtedness, or any surrender, compromise, release, renewal, extension, exchange or substitution which may be granted in respect of the Property, or any part thereof or any interest therein, or any release or indulgence granted to any endorser, guarantor or surety of any secured indebtedness.

     Section 5.7. Acts Not Constituting Waiver. Any default may be waived without waiving any other prior or subsequent default. Any default may be remedied without waiving the default remedied. Neither failure to exercise, nor delay in exercising, any right, power or remedy upon any default shall be construed as a waiver of such default or as a waiver of the right to exercise any such right, power or remedy at a later date. No single or partial exercise of any right, power or remedy hereunder shall exhaust the same or shall preclude any other or further exercise thereof, and every such right, power or remedy hereunder may be exercised at any time and from time to time. No modification or waiver of any provision hereof nor consent to any departure by Mortgagor therefrom shall in any event be effective unless the same shall be in writing and signed by Agent and then such waiver or consent shall be effective only in the specific instances, for the purpose for which given and to the extent therein specified. No notice to nor demand on Mortgagor in any case shall of itself entitle Mortgagor to any other or further notice or demand in similar or other circumstances. Acceptance of any payment in an amount less than the amount then due on any secured indebtedness shall be deemed an acceptance on account only and shall not in any way excuse the existence of a default hereunder.

     Section 5.8. Mortgagor’s Successors. In the event the ownership of the Property or any part thereof becomes vested in a person other than Mortgagor, then, without notice to Mortgagor, such successor or successors in interest may be dealt with, with reference to this Mortgage and to the indebtedness secured hereby, in the same manner as with Mortgagor, without in any way vitiating or discharging Mortgagor’s liability hereunder or for the payment of the indebtedness or performance of the obligations secured hereby. No transfer of the Property, no forbearance, and no extension of the time for the payment of the indebtedness secured hereby, shall operate to release, discharge, modify, change or affect, in whole or in part, the liability of Mortgagor hereunder or for the payment of the indebtedness or performance of the obligations

secured hereby, or the liability of any other person hereunder or for the payment of the indebtedness secured hereby.

     Section 5.9. Place of Payment. All secured indebtedness which may be owing hereunder at any time by Mortgagor shall be payable at the places designated in the Credit Agreement (or if no such designation is made, at the address of Agent indicated at the end of this Mortgage), or at such other place as Agent may designate in writing.

     Section 5.10. Subrogation to Existing Liens. To the extent that proceeds of the Borrowings (as defined in the Credit Agreement) are used to pay indebtedness secured by any outstanding lien, security interest, charge or prior encumbrance against the Property, such proceeds have been advanced at Mortgagor’s request, and the party or parties advancing the same shall be subrogated to any and all rights, security interests and liens owned by any owner or holder of such outstanding liens, security interests, charges or encumbrances, irrespective of whether said liens, security interests, charges or encumbrances are released, and it is expressly understood that, in consideration of the payment of such indebtedness, Mortgagor hereby waives and releases all demands and causes of action for offsets and payments to, upon and in connection with the said indebtedness.

     Section 5.11. Application of Payments to Certain Indebtedness. If any part of the secured indebtedness cannot be lawfully secured by this Mortgage or if any part of the Property cannot be lawfully subject to the lien and security interest hereof to the full extent of such indebtedness, then all payments made shall be applied on said indebtedness first in discharge of that portion thereof which is not secured by this Mortgage.

     Section 5.12. Compliance With Usury Laws. It is the intent of Mortgagor, Agent and each Lender and all other parties to the Loan Documents to contract in strict compliance with applicable usury law from time to time in effect. In furtherance thereof, it is stipulated and agreed that none of the terms and provisions contained herein or in the other Loan Documents shall ever be construed to create a contract to pay, for the use, forbearance or detention of money, interest in excess of the maximum amount of interest permitted to be collected, charged, taken, reserved or received by applicable law from time to time in effect.

     Section 5.13. Release of Mortgage. If all of the secured indebtedness be paid, and no further obligation shall exist to provide credit or advance funds to Mortgagor or the maker of any promissory note (or other obligor with respect to other indebtedness) secured hereby, then, at Mortgagor’s request this Mortgage shall be released, in due form and, if permitted under applicable law, at Mortgagor’s cost; provided, however, that, notwithstanding such release, certain indemnifications, and other rights, which are provided herein or in the Credit Agreement to continue following the release hereof shall continue in effect unaffected by such release but shall not survive as indebtedness secured hereby; and provided further that if any payment to any Lender is held to constitute a preference or a voidable transfer under applicable state or federal laws or if for any other reason any Lender is required to refund such payment to the payor thereof or pay the amount thereof to any third party, this Mortgage, if not previously transferred by Agent, shall be reinstated to the extent of such payment or payments.

     Section 5.14. Notices. All notices, requests, consents, demands and other communications required or permitted hereunder or under any other Loan Document shall be in writing and shall be given in accordance with the notice provisions in the Credit Agreement. Notwithstanding the foregoing, or anything else in the Loan Documents which may appear to the contrary, any notice given in connection with a foreclosure of the liens and/or security interests created hereunder, or otherwise in connection with the exercise by Agent or any Lender of their respective rights hereunder or under any other Loan Document, which is given in a manner permitted by applicable law shall constitute proper notice; without limitation of the foregoing, notice given in a form required or permitted by statute shall (as to the portion of the Property to which such statute is applicable) constitute proper notice.

     Section 5.15. Invalidity of Certain Provisions. A determination that any provision of this Mortgage is unenforceable or invalid shall not affect the enforceability or validity of any other provision and the determination that the application of any provision of this Mortgage to any person or circumstance is illegal or unenforceable shall not affect the enforceability or validity of such provision as it may apply to other persons or circumstances.

     Section 5.16. Gender; Titles. Within this Mortgage, words of any gender shall be held and construed to include any other gender, and words in the singular number shall be held and construed to include the plural, unless the context otherwise requires. Titles appearing at the beginning of any subdivisions hereof are for convenience only, do not constitute any part of such subdivisions, and shall be disregarded in construing the language contained in such subdivisions.

     Section 5.17. Recording. Mortgagor will cause this Mortgage and all amendments and supplements thereto and substitutions therefor and all financing statements and continuation statements relating thereto to be recorded, filed, re-recorded and refiled in such manner and in such places as Agent shall reasonably request and will pay all applicable recording, filing, re-recording and refiling taxes, fees and other charges.

     Section 5.18. Reporting Compliance. Mortgagor agrees to comply with any and all reporting requirements applicable to the transaction pursuant to the Credit Agreement and secured by this Mortgage that are set forth in any law, statute, ordinance, rule, regulation, order or determination of any governmental authority, and further agrees upon request of Agent to furnish Agent with evidence of such compliance.

     Section 5.19. Certain Consents. Except where otherwise expressly provided herein, in any instance hereunder where the approval, consent or the exercise of judgment of Agent or any Lender is required, the granting or denial of such approval or consent and the exercise of such judgment shall be within the sole discretion of such party, and such party shall not, for any reason or to any extent, be required to grant such approval or consent or exercise such judgment in any particular manner, regardless of the reasonableness of either the request or the judgment of such party.

     Section 5.20. Certain Obligations of Mortgagor. Without limiting Mortgagor’s obligations hereunder, Mortgagor’s liability hereunder and the indebtedness secured hereby shall extend to and include all post petition interest, expenses, and other duties and liabilities with

respect to Mortgagor’s obligations hereunder which would be owed but for the fact that the same may be unenforceable due to the existence of a bankruptcy, reorganization or similar proceeding.

     Section 5.21. Authority of Agent. The Lenders may, by agreement among them, provide for and regulate the exercise of rights and remedies hereunder, but, unless and until modified to the contrary in writing signed by all such persons and recorded in the same counties as this Mortgage is recorded, (i) all persons other than Mortgagor and its affiliates shall be entitled to rely on the releases, waivers, consents, approvals, notifications and other acts (including, without limitation, the bidding in of all or any part of the secured indebtedness held by any one or more Lenders, whether the same be conducted under the provisions hereof or otherwise) of Agent, without inquiry into any such agreements or the existence of required consent or approval of any Lenders and without the joinder of any party other than Agent in such releases, waivers, consents, approvals, notifications or other acts and (ii) all notices, requests, consents, demands and other communications required or permitted to be given hereunder may be given to Agent.

     Section 5.22. Counterparts. This Mortgage may be executed in several counterparts, all of which are identical, except that (a) to facilitate recordation, certain counterparts hereof may include only those portions of Exhibits A, B and C which contain descriptions of the properties located in (or otherwise subject to the recording or filing requirements and/or protections of the recording or filing acts or regulations of) the recording jurisdiction in which the particular counterpart is to be recorded, and other portions of Exhibits A, B and C shall be included in such counterparts by reference only, and (b) the execution of this Mortgage by Mortgagor may not be witnessed on those counterparts hereof containing descriptions of Mortgaged Properties located in states where witnesses are not required and/or encouraged by applicable law. All of such counterparts together shall constitute one and the same instrument. Complete counterpart originals of this Mortgage containing the entire Exhibits A, B and C D have been retained by Mortgagor and Agent.

     Section 5.23. No Merger. If both the lessor’s and lessee’s estates under any lease or any portion thereof that constitutes a part of the Mortgaged Properties at any time become vested in one owner, this Mortgage and the lien created hereby shall not be destroyed or terminated by application of the doctrine of merger and, in such event, Agent on behalf of the Lenders shall continue to have and enjoy all the rights and privileges of a mortgagee as to the separate estates. In addition, upon the foreclosure of the lien created by this Mortgage on the Mortgaged Properties pursuant to the provisions hereof, any leases or subleases then existing and created by Mortgagor shall not be destroyed or terminated by application of the law of merger or as a matter of law or otherwise as a result of such foreclosure unless Mortgagee or any purchaser at any such foreclosure sale shall so elect. No act by or on behalf of Agent or any such purchaser shall constitute a termination of any lease or sublease unless Agent or such purchaser shall give written notice thereof to such tenant or subtenant.

     Section 5.24. Successors and Assigns. The terms, provisions, covenants, representations, indemnifications and conditions hereof shall be binding upon Mortgagor, and the successors and assigns of Mortgagor, and shall inure to the benefit of Agent and each Lender and their respective successors and assigns, and shall constitute covenants running with the Mortgaged Properties. Should the agency under which Agent serves be terminated, or otherwise

cease to exist, the Lenders (including the respective successor and assigns of each Lender) shall be deemed to be the successors to Agent. All references in this Mortgage to Borrower, Mortgagor, Agent or Lenders shall be deemed to include all such successors and assigns.

     Section 5.25. FINAL AGREEMENT OF THE PARTIES. THE WRITTEN LOAN DOCUMENTS REPRESENT THE FINAL AGREEMENT BETWEEN THE PARTIES AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS, OR SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES. THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES.

     Section 5.26. CHOICE OF LAW. WITHOUT REGARD TO PRINCIPLES OF CONFLICTS OF LAW, THIS MORTGAGE SHALL BE CONSTRUED AND ENFORCED IN ACCORDANCE WITH AND GOVERNED BY THE LAWS OF THE STATE OF NEW YORK APPLICABLE TO CONTRACTS MADE AND TO BE PERFORMED ENTIRELY WITHIN SUCH STATE AND THE LAWS OF THE UNITED STATES OF AMERICA, EXCEPT THAT TO THE EXTENT THAT THE LAW OF A STATE IN WHICH A PORTION OF THE PROPERTY IS LOCATED (OR WHICH IS OTHERWISE APPLICABLE TO A PORTION OF THE PROPERTY) NECESSARILY OR APPROPRIATELY GOVERNS WITH RESPECT TO PROCEDURAL AND SUBSTANTIVE MATTERS RELATING TO THE CREATION, PERFECTION AND ENFORCEMENT OF THE LIENS, SECURITY INTERESTS AND OTHER RIGHTS AND REMEDIES OF THE AGENT OR THE LENDERS GRANTED HEREIN, THE LAW OF SUCH STATE SHALL APPLY AS TO THAT PORTION OF THE PROPERTY LOCATED IN (OR WHICH IS OTHERWISE SUBJECT TO THE LAWS OF) SUCH STATE.

     Section 5.27. Reliance. Notwithstanding any reference to the Credit Agreement or any other instrument, all persons shall be fully authorized to rely upon certificates of the Agent as to the occurrence or non-occurrence of any event or the existence or non-existence of any fact under the Credit Agreement or any other instrument including but not limited to the occurrence of any default, and no person shall have any obligation to determine the correctness of any matter stated in any such certificate.

     Section 5.28. Agent and Lenders. On the date hereof, Royal Bank of Canada is the “Administrative Agent” and “Collateral Agent” under the Credit Agreement and also one of the Lenders thereunder. It is hereby contemplated that additional persons shall or may hereafter become Lenders under the Credit Agreement, and in such event: (a) all references herein to Lender or Lenders shall refer to any person included within the definition of Lenders, as used in the Credit Agreement, and (b) all references herein to Agent shall refer to Royal Bank of Canada in its capacity as Administrative Agent and Collateral Agent under the Credit Agreement, together with its successors in such capacity, and Royal Bank of Canada, in its capacity as Administrative Agent and Collateral Agent, shall have all authority, without the need to secure the consent or joinder of any Lenders under the Credit Agreement, to perform any acts and/or enforce any remedies afforded Agent hereunder, including without limitation any remedies afforded Agent under Article IV hereof, and to receive any notices or payments (including without limitation payment of amounts pursuant to Article III hereof), on behalf of the Lenders

under the Credit Agreement, and (c) any rights, titles, liens and security interests in or relating to the Property shall be automatically held, upon and subject to the terms of the Credit Agreement, by Royal Bank of Canada, as Agent, for the benefit of all Lenders under the Credit Agreement, and any rights and remedies afforded Agent hereunder (including without limitation any of same relating to indemnities) shall be automatically held and exercised, upon and subject to the terms of the Credit Agreement, by Royal Bank of Canada as Administrative Agent and Collateral Agent for all Lenders under the Credit Agreement.

     Section 5.29. Time is of the essence. Time is of the essence

     *[The remainder of this page is intentionally left blank]

     IN WITNESS WHEREOF, Mortgagor, acting by and through its duly authorized officer, has executed this Mortgage on the date of its acknowledgment.

MORTGAGOR:
BLUESTEM PIPELINE, LLC, a Delaware limited liability company,
By:	Quest Midstream Partners, L.P., a Delaware limited partnership, its Sole Member
	By:	Quest Midstream GP, LLC, a Delaware limited liability company, its General Partner
		By:	/s/ Jerry D. Cash
			Jerry D. Cash
			Chief Executive Officer

The address of Mortgagor is:	The address of Agent is:
Bluestem Pipeline, LLC	Royal Bank of Canada
c/o Quest Resource Corporation	Royal Bank Plaza
9520 N. May Avenue, Suite 300	200 Bay Street
Oklahoma City, OK 73120	12th Floor, South Tower
Attention: Jerry D. Cash	Toronto, Ontario M5J 2W7
	Attention: Manager Agency
	This instrument prepared by:
	Robert C. Shearer
	Thompson & Knight L.L.P.
	333 Clay Street, Suite 3300
	Houston, Texas 77002

Signature Page

Kansas Mortgage

ACKNOWLEDGMENT

STATE OF OKLAHOMA	§
	§
COUNTY OF OKLAHOMA	§

     BE IT REMEMBERED THAT I, the undersigned authority, a notary public duly qualified, commissioned, sworn and acting in and for the county and state aforesaid, and being authorized in such county and state to take acknowledgments, hereby certify that, on this ___ day of January, 2007 there personally appeared before me and known to me (or satisfactorily proven) to be the person described in the foregoing instrument: Jerry D. Cash, as Chief Executive Officer of Quest Midstream GP, LLC, a Delaware limited liability company, the general partner of Quest Midstream Partners, L.P., a Delaware limited partnership, the Sole Member of Bluestem Pipeline, LLC, a Delaware limited liability company, known to me to be such person, such limited liability company being a party to the foregoing instrument.

KANSAS The foregoing instrument was acknowledged before me on this day by Jerry D. Cash, Chief Executive Officer of Quest Midstream GP, LLC, a Delaware limited liability company, the general partner of Quest Midstream Partners, L.P., a Delaware limited partnership, the Sole Member of Bluestem Pipeline, LLC, a Delaware limited liability company on behalf of said limited liability company.

     IN TESTIMONY AND WITNESS WHEREOF, I have hereunto set my hand and official seal in the City of Oklahoma City, Oklahoma County, Oklahoma, on the day and year first above written.

	/s/ Nancy Daniel
	NOTARY PUBLIC, State of Oklahoma
My commission expires: 10-2-09
[SEAL]

Acknowledgment Page

Kansas Mortgage

LIST OF EXHIBITS

Exhibit A	Fee Lands
Exhibit B	Servitudes
Exhibit C	Facilities and Pipelines Systems

EX-4.24

Exhibit 4.24

WHEN RECORDED OR FILED,	THIS DOCUMENT PREPARED
RETURN TO:	BY:
Thompson & Knight L.L.P.	Robert C. Shearer
333 Clay Street, Suite 3300	Thompson & Knight L.L.P.
Houston, Texas 77002	333 Clay Street, Suite 3300
Attention: Robert C. Shearer	Houston, Texas 77002
Telephone: (713) 951-5896	Telephone: (713) 951-5896

MORTGAGE, ASSIGNMENT, SECURITY AGREEMENT,
FIXTURE FILING AND FINANCING STATEMENT
FROM
BLUESTEM PIPELINE, LLC
TO
ROYAL BANK OF CANADA, ADMINISTRATIVE AND COLLATERAL AGENT

Dated January 31, 2007

A CARBON, PHOTOGRAPHIC, FACSIMILE, OR OTHER REPRODUCTION OF THIS INSTRUMENT IS SUFFICIENT AS A FINANCING STATEMENT. THIS INSTRUMENT CONTAINS AFTER-ACQUIRED PROPERTY PROVISIONS, SECURES PAYMENT OF FUTURE ADVANCES, AND COVERS PROCEEDS OF COLLATERAL. THIS INSTRUMENT SECURES AN OBLIGATION THAT MAY INCREASE OR DECREASE FROM TIME TO TIME. THIS INSTRUMENT, WHICH COVERS GOODS WHICH ARE OR ARE TO BECOME FIXTURES RELATED TO THE REAL PROPERTY DESCRIBED HEREIN, IS TO BE FILED FOR RECORD, AMONG OTHER PLACES, IN THE REAL ESTATE OR COMPARABLE RECORDS OF THE COUNTIES REFERENCED IN EXHIBITS A, B, C AND D HERETO AND SUCH FILING WHERE ALLOWED BY APPLICABLE LAW SHALL SERVE, AMONG OTHER PURPOSES, AS A FIXTURE FILING. THE MORTGAGOR HAS AN INTEREST OF RECORD IN THE REAL ESTATE AND IMMOVABLE PROPERTY CONCERNED, WHICH INTEREST IS DESCRIBED IN SECTION 1.1 OF THIS INSTRUMENT. A POWER OF SALE HAS BEEN GRANTED IN THIS MORTGAGE (AS HEREINAFTER DEFINED). IN CERTAIN JURISDICTIONS WHERE THIS INSTRUMENT MAY BE FILED, A POWER OF SALE MAY ALLOW AGENT (AS HEREINAFTER DEFINED) TO TAKE THE MORTGAGED PROPERTIES (AS HEREINAFTER DEFINED) AND SELL THEM (OR TO CAUSE THE MORTGAGED PROPERTIES TO BE SOLD) WITHOUT GOING TO COURT IN A FORECLOSURE ACTION UPON DEFAULT BY THE MORTGAGOR (AS SUCH TERMS DEFAULT AND MORTGAGOR ARE HEREINAFTER DEFINED) UNDER THIS MORTGAGE.

THIS INSTRUMENT MAY CONSTITUTE THE GRANTING OF A SECURITY INTEREST BY A TRANSMITTING UTILITY WITHIN THE MEANING OF TITLE 12A, §1-9-102(80) AND §1-9-501(b) OF THE OKLAHOMA STATUTES.

MORTGAGE, ASSIGNMENT,
SECURITY AGREEMENT, FIXTURE FILING
AND FINANCING STATEMENT
(this “Mortgage”)

ARTICLE I.

GRANTING CLAUSES; SECURED INDEBTEDNESS

     Section 1.1. Grant of Mortgage. Bluestem Pipeline, LLC, a Delaware limited liability company (herein called “Mortgagor”), for and in consideration of the sum of Ten Dollars ($10.00) to Mortgagor, in hand paid, and in order to secure the payment of the secured indebtedness hereinafter referred to and the performance of the obligations, covenants, agreements, warranties, and undertakings of Mortgagor hereinafter described, does hereby MORTGAGE AND WARRANT to Royal Bank of Canada, as administrative agent and collateral agent (subject to Section 5.28 hereof, hereinafter referred to as the “Agent”), for the benefit of the Lenders (as hereinafter defined), and grants to Agent a POWER OF SALE (pursuant to this Mortgage and as allowed by applicable law) with respect to the following (the “Mortgaged Properties”):

     A. Those certain tracts of land (the “Fee Lands”), and other interests in land described in Exhibit A and/or in Exhibit B, attached hereto and made a part hereof (such Fee Lands and the lands covered by the other interests in lands being herein collectively called the “Plant Sites”), together with all plants, batteries, injector stations, truck stations, warehouses, offices, pumps, pump stations, pipelines, heaters, compressors, equipment and other fixtures, personal property and improvements (whether now owned or hereafter acquired by operation of law or otherwise) located on or under the Plant Sites (collectively the “Plant Facilities”) or used, held for use in connection with, or in any way related to the Pipeline Systems (as hereinafter defined), the plants, equipment, compressors, fixtures, personal/movable property and improvements described or depicted in Exhibit C hereto (the Plant Sites and the Plant Facilities are herein sometimes collectively called the “Plants”);

     B. The rights, interests and estates created under those certain servitudes, easements, rights of way, privileges, franchises, prescriptions, licenses, leases, permits, deeds, assignments and/or other rights described in Exhibit B, attached hereto and made a part hereof, and all of Mortgagor’s right, title and interest (whether now owned or hereafter acquired by operation of law or otherwise) in any servitudes, easements, rights of way, privileges, franchises, prescriptions, licenses, leases, permits and/or other rights in and to any land, in any county and section shown on Exhibit B even though they may be incorrectly described in or omitted therefrom, together with any amendments, renewals, extensions, supplements, modifications or other agreements related to the foregoing, and further together with any other servitudes, easements, rights of way, privileges, prescriptions, franchises, licenses, permits, deeds, assignments and/or other rights (whether presently existing or hereafter created and whether now owned or hereafter acquired by operation of law or otherwise) used, held for use in connection

with, or in any way related to the Pipeline Systems (as hereinafter defined), the Plants, and/or pipelines transporting natural gas, natural gas liquids, and/or other hydrocarbons to, from or between Pipeline Systems and/or the Plants (the rights, interests and estates described in this item B are herein collectively called the “Servitudes”);

     C. All other right, title and interest of Mortgagor of whatever kind or character (whether now owned or hereafter acquired by operation of law or otherwise) in and to (i) the Plants, the Fee Lands, and/or the Servitudes, and (ii) the lands described or referred to in Exhibit A and/or Exhibit B (or described in any of the instruments described or referred to in Exhibit A and/or Exhibit B);

     D. Without limitation of the foregoing, those certain transportation, gathering and transmission systems described and/or depicted on Exhibit C, attached hereto and made a part hereof, and all pipes, valves, gauges, meters and other measuring equipment, regulators, heaters, extractors, tubing, pipelines, fuel lines, facilities, improvements, fittings, materials and other improvements, fixtures, equipment, inventory, goods, and/or personal/movable property (whether now owned or hereafter acquired by operation of law or otherwise, and including, without limitation, those more particularly described in Exhibit C hereto) located on or under the Servitudes, and/or in or on or otherwise related to the transportation, gathering and transmission systems described and/or depicted on Exhibit C (the properties, rights and interests described in this item D are herein collectively called the “Pipeline Systems”);

     E. All of Mortgagor’s right, title and interest (whether now owned or hereafter acquired by operation of law or otherwise) in and to all improvements, fixtures, and other real/immovable and/or personal/movable property (including, without limitation, all equipment, inventory, goods, tanks, pipelines, flow lines, gathering lines, compressors, dehydration units, separators, meters, metering stations, buildings, fittings, pipe, pipe connector, valves, regulators, drips, storage facilities, absorbers, heaters, dehydrators, and power and telephone lines) located on or under, or which in any way relate to, the Plants, the Servitudes and/or the Pipeline Systems excluding however all water lines and water pipes not owned by Mortgagor located on or under, or which in any way relate to, the Plants, the Servitudes and/or the Pipeline Systems;

     F. All of Mortgagor’s right, title and interest, whether presently existing or hereafter created and whether now owned or hereafter acquired by operation of law or otherwise, in and to:

     (i) all purchase, sale, gathering, processing, transportation, storage and other contracts or agreements covering or otherwise relating to the ownership or operation of the Plants, the Servitudes and/or the Pipeline Systems, and/or to the purchase, sale or transportation of natural gas, natural gas liquids, and/or other hydrocarbons, or to the separation, treatment, stabilization and/or processing of the same;

     (ii) all of Mortgagor’s rights under or arising out of any agreement under which any of the Property, as hereinafter defined, was acquired, including

without limitation any and all representations, warranties, or covenants and any and all rights of indemnity or to rebate of the purchase price; all equipment leases, maintenance agreements, electrical supply contracts, option agreements, and other contracts and/or agreements, whether now existing or hereafter entered into, which cover, affect, or otherwise relate to the Plants, the Servitudes and/or the Pipeline Systems, and/or any of the other Mortgaged Properties described above, or to the purchase, sale, transportation, gathering, separation, treatment, stabilization, dehydration, processing, delivery and/or redelivery of natural gas, natural gas liquids, and/or other hydrocarbons transported, gathered, separated, treated, stabilized, dehydrated, processed, delivered and/or redelivered by or in the Plants and/or the Pipeline Systems;

     (the contractual rights, contracts and other agreements described in this item F are herein sometimes collectively called the “Contracts”); and

     G. All rights, estates, powers and privileges appurtenant to the foregoing rights, interests and properties.

     This Mortgage is upon the statutory mortgage condition for the breach of which this Mortgage is subject to foreclosure as provided by law.

     TO HAVE AND TO HOLD the Mortgaged Properties unto Agent, and Agent’s representatives, successors and assigns (such assigns as permitted by the Credit Agreement, as hereinafter defined), for the benefit of the Lenders and upon the terms, provisions and conditions herein set forth. All references herein to the Agent are to such Agent and its successors in its capacity as administrative agent and collateral agent and not to any of the other agents specified in the Credit Agreement.

     Section 1.2. Grant of Security Interest. In order to further secure the payment of the secured indebtedness hereinafter referred to and the performance of the obligations, covenants, agreements, warranties and undertakings of Mortgagor hereinafter described, Mortgagor hereby grants to Agent for the benefit of the Lenders (as defined in Section 1.3 below) a security interest in the entire interest of Mortgagor (whether now owned or hereafter acquired by operation of law or otherwise) in and to all of the following:

     (a) to the extent a security interest may be created therein, the Mortgaged Properties;

     (b) all payments received in lieu of performance which are related to the Mortgaged Properties (regardless of whether such payments accrued, and/or the events which gave rise to such payments occurred, on or before or after the date hereof) including, without limitation, firm or prepaid transportation payments and similar payments, payments received in settlement of or pursuant to a judgment rendered with respect to firm transportation or similar obligations or other obligations under a contract, and payments received in buyout or buydown or other settlement of a contract) and/or imbalances in deliveries (the payments described in this subsection (b) being herein called “Payments in Lieu”);

     (c) all equipment, inventory, improvements, fixtures, accessions, goods (including oil, gas or other hydrocarbons owned by Mortgagor) and other personal property or movable property of whatever nature now or hereafter used or held for use in connection with the operation of the Mortgaged Properties or the treating, handling, separation, stabilization, storing, processing, heating, transporting, gathering or marketing of crude oil, natural gas or other liquid or gaseous products (which crude oil, natural gas and other liquid or gaseous products are hereinafter called “Products”) and all licenses and permits of whatever nature now or hereafter used or held for use in connection with the Mortgaged Properties or in connection with the operation thereof or the treating, handling, separation, stabilization, storing, processing, heating, transporting, gathering or marketing of Products, and all renewals or replacements of the foregoing or substitutions for the foregoing;

     (d) all accounts, receivables, contract rights, choses in action (i.e., rights to enforce contracts or to bring claims thereunder), commercial tort claims, deposit accounts and general intangibles of whatever nature related to the Mortgaged Properties, the operation thereof, or the treating, handling, separation, stabilization, storing, processing, transporting, gathering or marketing of Products and including, without limitation, any of the same relating to payment of proceeds thereof or to payment of amounts which could constitute Payments in Lieu;

     (e) all rights and interests of Mortgagor under any present or future hedge or swap agreements, cap, floor, collar, exchange, forward or other hedge or protection agreements or transactions, or any option with respect to any such agreement or transaction now existing or hereafter entered into by or on behalf of Mortgagor;

     (f) all engineering, accounting, title, legal, and other technical or business data concerning the Mortgaged Properties, the treating, handling, separation, stabilization, storing, processing, transporting, gathering or marketing of Products or any other item of Property (as hereinafter defined) which are now or hereafter in the possession of Mortgagor or in which Mortgagor can otherwise grant a security interest, and all books, files, records, magnetic media, software and other forms of recording or obtaining access to such data;

     (g) all money, documents, instruments, chattel paper (including, without limitation, electronic chattel paper and tangible chattel paper), rights to payment evidenced by chattel paper, certificated securities, uncertificated securities, investment property, commercial tort claims, deposit accounts, accounts, goods, inventory, equipment, contract rights, payable intangibles, general intangibles, rights to proceeds of written letters of credit, letter-of-credit rights, supporting obligations and rights to payment of money (all of the properties, rights and interests described in subsections (a), (b), (c), (d), (e) and (f) above and this subsection (g) being herein sometimes collectively called the “Collateral”; and

     (h) all proceeds of the Collateral, whether such proceeds or payments are goods, money, documents, instruments, chattel paper, securities, accounts, payment intangibles, general intangibles, fixtures, real/immovable property, personal/movable

property or other assets (the Mortgaged Properties, the Collateral and the proceeds of the Collateral being herein sometimes collectively called the “Property”).

Except as otherwise expressly provided in this Mortgage, all terms in this Mortgage relating to the Collateral and the grant of the foregoing security interest which are defined in the applicable Uniform Commercial Code (the “UCC”) shall have the meanings assigned to them in Article 9 (or, absent definition in Article 9, in any other Article) of the UCC, as those meanings may be amended, revised or replaced from time to time. Notwithstanding the foregoing, the parties intend that the terms used herein which are defined in the UCC have, at all times, the broadest and most inclusive meanings possible. Accordingly, if the UCC shall in the future be amended or held by a court to define any term used herein more broadly or inclusively than the UCC in effect on the date of this Mortgage, then such term, as used herein, shall be given such broadened meaning. If the UCC shall in the future be amended or held by a court to define any term used herein more narrowly, or less inclusively, than the UCC in effect on the date of this Mortgage, such amendment or holding shall be disregarded in defining terms used in this Mortgage. With respect to the security interest granted herein, Mortgagor is the debtor, Agent (for the benefit of the Lenders) is the secured party, and their respective addresses are set forth at the end of this Mortgage. If the grant, pledge, or collateral transfer or assignment of any specific item of the Mortgaged Property or Collateral is expressly prohibited by any contract, license, law or regulation, then the Mortgage and/or security interest created hereby nonetheless remains effective to the extent allowed by the UCC or other applicable Law, but is otherwise limited by that prohibition.

     Section 1.3. Loan Documents, Other Obligations. This Mortgage is made by Mortgagor to secure and enforce the payment and performance of the Obligations as defined in that certain Credit Agreement of even date herewith, between Mortgagor and Royal Bank of Canada, individually and as administrative agent and collateral agent for the benefit of the lenders now or hereafter party thereto and for any affiliate of a lender who enters into any present or future hedge or swap agreements, cap, floor, collar, exchange, forward or other hedge or protection agreements or transactions with or on behalf of Mortgagor (hereinafter collectively called the “Lenders”), together with all supplements thereto, all amendments or modifications thereof, and all agreements given in substitution therefor or in restatement, renewal or extension thereof, in whole or in part (such Credit Agreement as the same may from time to time be supplemented, amended or modified, and all other agreements given in substitution therefor or in restatement, renewal or extension thereof, in whole or in part, being herein called the “Credit Agreement”).

     Section 1.4. Secured Indebtedness. The indebtedness referred to in Section 1.3, and all renewals, extensions and modifications thereof, and all substitutions therefor, in whole or in part, are herein sometimes referred to as the “secured indebtedness” or the “indebtedness secured hereby”.

ARTICLE II.

REPRESENTATIONS, WARRANTIES AND COVENANTS

     Section 2.1. Representations, Warranties and Covenants. Mortgagor represents and warrants, and covenants, as applicable, as follows:

     (a) Title and Permitted Encumbrances. Mortgagor has, and Mortgagor covenants to maintain, good and defensible title to the Property, free and clear of all liens, security interests, and encumbrances except for Permitted Liens (as defined in the Credit Agreement).

Mortgagor will warrant and defend title to the Property, subject as aforesaid, against the claims and demands of all persons claiming or to claim the same or any part thereof. Except to the extent permitted in the Credit Agreement, Mortgagor further binds and obligates itself not to sell, mortgage, or encumber any of the Property to the prejudice of this act. Upon request by Agent, Mortgagor will, subject to the Credit Agreement, deliver to Agent schedules of all internal and third party information identifying the Mortgaged Properties (such as, for example, internal identification names and numbers used by Mortgagor in accounting for revenues, costs, and joint interest transactions attributable to the Mortgaged Properties).

     (b) Location of Personal or Movable Property. Except as provided for in Section 2.1(c) of this Mortgage or in the Credit Agreement, the equipment, inventory, improvements, fixtures, goods and other tangible personal/movable property forming a part of the Property and used or useful thereto in the conduct of its business is, and will remain located on the Mortgaged Properties, except for that portion thereof which is or shall be located elsewhere (including that usually located on the Mortgaged Properties but temporarily located elsewhere) in the course of the normal operation of the Property.

     (c) Sale or Disposal. Mortgagor will not, without the prior written consent of Agent, sell, exchange, lease, transfer, or otherwise dispose of, or cease to operate (or be operator of) or abandon, any part of, or interest in, the Property other than as provided in the Credit Agreement.

     (d) Defense of Mortgage. If the validity or priority of this Mortgage or of any rights, titles, liens or security interests created or evidenced hereby with respect to the Property or any part thereof or the title of Mortgagor to the Property shall be endangered or questioned or shall be attacked directly or indirectly or if any legal proceedings are instituted against Mortgagor with respect thereto, and an officer of Mortgagor has knowledge thereof, Mortgagor will give prompt written notice thereof to Agent and, at Mortgagor’s own cost and expense and at the request of Agent, will diligently endeavor to cure any defect that may be developed or claimed, and will take all necessary and proper steps for the defense of such legal proceedings including, but not limited to, the employment of counsel, the prosecution or defense of litigation and the release or discharge of all adverse claims, and if Agent (whether or not named as a party to legal proceedings with respect thereto), in good faith believes that Mortgagor is not diligently

pursuing its obligations as required by the preceding clause and that it must intervene to pursue such defense, then it is hereby authorized and empowered to take such additional steps as in its judgment may be necessary or proper for the defense of any such legal proceedings or such protection of the validity or priority of this Mortgage and the rights, titles, liens and security interests created or evidenced hereby including, but not limited to, the employment of independent counsel, the prosecution or defense of litigation, the compromise or discharge of any adverse claims made with respect to the Property, the purchase of any tax title and the removal of prior liens or security interests, and all expenditures so made of every kind and character shall be a demand obligation (which obligation Mortgagor hereby expressly promises to pay) owing by Mortgagor to Agent and shall bear interest on the unpaid portion thereof from the date expended until paid at the Default Rate (as such term is defined in the Credit Agreement), and the party incurring such expenses shall be subrogated to all rights of the person receiving such payment. Agent shall give notice to the Mortgagor of any such additional steps, but in no case shall Agent be required to notify Mortgagor prior to taking such steps, nor shall Agent ever be required to obtain consent or permission from Mortgagor to take such steps.

     (e) Fees and Expenses; Indemnity. Mortgagor will reimburse Agent and each Lender (for purposes of this paragraph, the terms “Agent,” and “Lender” shall include the directors, officers, employees, counsel, agents and attorneys-in-fact of Agent and each Lender, respectively, and any persons or entities owned or controlled by or affiliated with Agent or any Lender, respectively) for all expenditures, including reasonable attorneys’ fees and expenses as and to the extent provided in Section 10.04 of the Credit Agreement and to indemnify and hold harmless such parties as and to the extent provided in Section 10.05 of the Credit Agreement.

     (f) Insurance. Mortgagor will carry insurance as provided in the Credit Agreement. In the event of any loss under any insurance policies so carried by Mortgagor, Agent shall, after it has determined in its sole judgment that Mortgagor has failed to commence or diligently pursue efforts to collect the same, have the right (but not the obligation) to make proof of loss and collect the same, and all amounts so received shall be applied toward costs, charges and expenses (including reasonable attorneys’ fees), if any, incurred in the collection thereof, then to the order of Mortgagor for use for repairs and replacement of any loss, unless a default is then continuing and in which case, then shall be applied to matured secured indebtedness as prescribed by the Credit Agreement, and any excess proceeds shall be paid to the order of Mortgagor for use for repairs and replacement of any loss. In the preceding instances and during the continuance of a default, Agent is hereby authorized but not obligated to enforce in its name or in the name of Mortgagor payment of any or all of said policies or settle or compromise any claim in respect thereof, and to collect and make receipts for the proceeds thereof and, in and during such events, Agent is hereby appointed Mortgagor’s agent and attorney-in-fact to endorse any check or draft payable to Mortgagor in order to collect the proceeds of insurance. In the event of foreclosure of this Mortgage, or other transfer of title to the Property in extinguishment in whole or in part of the secured indebtedness, all right, title and interest of Mortgagor in and to such policies then in force concerning the Property and all proceeds payable thereunder shall thereupon vest in the

purchaser at such foreclosure or other transferee in the event of such other transfer of title. Mortgagor acknowledges and agrees that it has been informed by Agent that, although Mortgagor is required to purchase insurance for the Property, Mortgagor may purchase that insurance from the insurance company or agent of its choice, and cannot be required by Agent, as a condition of any transaction, to purchase or renew any policy of insurance covering the Property through any particular insurance company, agent, solicitor, or broker.

     (g) Further Assurances. Mortgagor will, on request of Agent: (i) promptly correct any defect, error or omission which may be discovered in the contents of this Mortgage, or in any other Loan Document to which Mortgagor is a party, or in the execution or acknowledgment of this Mortgage or any other Loan Document to which Mortgagor is a party; (ii) execute, acknowledge, deliver and record and/or file such further instruments (including, without limitation, further deeds of trust, mortgages, security agreements, financing statements, continuation statements, and assignments of production and/or rents, accounts, funds, contract rights, general intangibles, and proceeds) and do such further acts as may be necessary, desirable or proper to carry out more effectively the purposes of this Mortgage and the other Loan Documents to which Mortgagor is a party and to more fully identify and subject to the liens and security interests hereof any property intended to be covered hereby, including specifically, but without limitation, any renewals, additions, substitutions, replacements, or appurtenances to the Property; and (iii) execute, acknowledge, deliver, and file and/or record any document or instrument (including specifically any financing statement) desired by Agent to protect the lien or the security interest hereunder against the rights or interests of third persons. Mortgagor shall pay all costs in connection with the foregoing.

     (h) Name and Place of Business and Formation. Except as disclosed in the Credit Agreement, Mortgagor has not, during the preceding five years, been known by or used any other corporate or partnership, trade or fictitious name. Mortgagor will not cause or permit any change to be made in its name, identity, state of formation or corporate, limited liability company or partnership structure, or its federal employer identification number unless Mortgagor shall have notified Agent of such change no later than thirty (30) days prior to the effective date of such change, and thereafter shall promptly take all action required by Agent for the purpose of further perfecting or protecting the liens and security interests in the Property created hereby. Mortgagor’s exact name is the name set forth in this Mortgage. Mortgagor’s location is as follows: Mortgagor is a registered organization which is organized under the laws of one of the states comprising the United States (e.g. corporation, limited partnership, registered limited liability partnership or limited liability company). Mortgagor is located (as determined pursuant to the UCC) in the state under the laws in which it was organized, which is Delaware. Mortgagor’s principal place of business and chief executive office, and the place where Mortgagor keeps its books and records concerning the Property has for the preceding four months, been, and continues to be (unless Mortgagor notifies Agent of any change as hereinabove provided in writing at least thirty (30) days prior to the date of such change) the address set forth opposite the signature of Mortgagor to this Mortgage.

     (i) Not a Foreign Person. Mortgagor is not a “foreign person” within the meaning of the Internal Revenue Code of 1986, as amended, (hereinafter called the “Code”), Sections 1445 and 7701 (i.e. Mortgagor is not a non-resident alien, foreign corporation, foreign partnership, foreign trust or foreign estate as those terms are defined in the Code and any regulations promulgated thereunder).

     Section 2.2. Compliance by Operator. As to any part of the Properties which is operated by a party other than Mortgagor, Mortgagor agrees to take all such action and to exercise all rights and remedies as are available to Mortgagor (including, but not limited to, all rights under any operating agreement) which are reasonable and prudent (financially, operationally, or otherwise) to cause the party who is the operator of such Property to comply with the covenants and agreements contained herein. However, nothing contained herein shall be construed to permit Mortgagor to relinquish its position as Operator.

     Section 2.3. Performance on Mortgagor’s Behalf. Mortgagor agrees that, if Mortgagor fails to perform any act or to take any action which hereunder Mortgagor is required to perform or take, or to pay any money which hereunder Mortgagor is required to pay, Agent, in Mortgagor’s name or its own name, may, but shall not be obligated to, perform or cause to be performed such act or take such action or pay such money after notice of such payment is given to Mortgagor, and any expenses so incurred by Agent, and any money so paid by Agent shall be a demand obligation owing by Mortgagor to Agent (which obligation Mortgagor hereby expressly promises to pay) and Agent, upon making such payment, shall be subrogated to all of the rights of the person, corporation or body politic receiving such payment. Each amount due and owing by Mortgagor to Agent and/or any Lender pursuant to this Mortgage shall bear interest on the unpaid amount thereof each day, from the date of such expenditure or payment until paid, at the Default Rate (as defined in the Credit Agreement); all such amounts, together with such interest thereon, shall be a part of the secured indebtedness and shall be secured by this Mortgage.

ARTICLE III.

ASSIGNMENT OF REVENUES, ACCOUNTS, AND PROCEEDS

     Section 3.1. Assignment. Mortgagor does hereby absolutely and unconditionally assign, transfer and set over to Agent all rents, issues, profits, revenue, income and other benefits derived from the Mortgaged Properties or arising from the operation thereof or from any of the Contracts (herein sometimes collectively called the “Revenues”), together with the immediate and continuing right to collect and receive such Revenues. Mortgagor directs and instructs any and all payors of Revenues to pay to Agent all of the Revenues until such time as such payors have been furnished with evidence that all secured indebtedness has been paid and that this Mortgage has been released. Mortgagor agrees that no such payors of such Revenues shall have any responsibility for the application of any funds paid to Agent. Notwithstanding the foregoing, Mortgagor shall be permitted to continue to receive all Revenues and Agent shall not request that such Revenues be paid to Agent unless and until a default shall have occurred and be continuing.

     Section 3.2. Effectuating Payment of Revenues to Agent. Independent of the foregoing provisions and authorities herein granted, Mortgagor agrees, if a default has occurred

and is continuing, to execute and deliver any and all instruments that may be requested by Agent or that may be required by any payor of Revenues for the purpose of effectuating payment of the Revenues to Agent. If under any existing agreements any Revenues are required to be paid by the payor to Mortgagor so that under such existing agreements payment cannot be made of such Revenues to Agent, Mortgagor’s interest in all Revenues under such agreements and in all other Revenues which for any reason may be paid to Mortgagor shall, when received by Mortgagor, constitute trust funds in Mortgagor’s hands and, if a default has occurred and is continuing, shall, upon request be immediately paid over to Agent. Without limitation upon any of the foregoing, Mortgagor hereby constitutes and appoints Agent as Mortgagor’s special attorney-in-fact (with full power of substitution, either generally or for such periods or purposes as Agent may from time to time prescribe) in the name, place and stead of Mortgagor to do any and every act and exercise any and every power that Mortgagor might or could do or exercise personally with respect to all Revenues (the same having been assigned by Mortgagor to Agent pursuant to Section 3.1 hereof), expressly inclusive, but not limited to, the right, power and authority to:

     (a) Execute and deliver in the name of Mortgagor any and all instruments of every nature that may be requested or required by any party for the purposes of effectuating payment of the Revenues to Agent or which Agent may otherwise deem necessary or appropriate to effect the intent and purposes of the assignment contained in Section 3.1; and

     (b) If under any agreements any Revenues are required to be paid by the payor to Mortgagor so that under such agreements payment cannot be made of such Revenues to Agent, to make, execute and enter into such agreements as are necessary to direct Revenues to be payable to Agent;

giving and granting unto said attorney-in-fact full power and authority to do and perform any and every act and thing whatsoever necessary and requisite to be done as fully and to all intents and purposes, as Mortgagor might or could do if personally present; and Mortgagor shall be bound thereby as fully and effectively as if Mortgagor had personally executed, acknowledged and delivered any of the foregoing certificates or documents. The powers and authorities herein conferred upon Agent may be exercised by Agent through any person who, at the time of the execution of the particular instrument, is an officer of Agent. The power of attorney herein conferred is granted for valuable consideration and is coupled with an interest and is irrevocable so long as the secured indebtedness, or any part thereof, shall remain unpaid. All persons dealing with Agent or any substitute shall be fully protected in treating the powers and authorities conferred by this paragraph as continuing in full force and effect until advised by Agent that all the secured indebtedness is fully and finally paid. Agent may, but shall not be obligated to, take such action as it deems appropriate in an effort to collect the Revenues and any reasonable expenses (including reasonable attorney’s fees) so incurred by Agent shall be a demand obligation of Mortgagor and shall be part of the secured indebtedness, and shall bear interest each day, from the date of such expenditure or payment until paid, at the Default Rate (as such term is defined in the Credit Agreement). Mortgagor agrees not to exercise the foregoing power of attorney unless a default has occurred and is continuing.

     Section 3.3. Application of Revenues. After a default hereunder has occurred and for so long as it continues, all Revenues from time to time paid to the Agent shall be applied by it

toward the payment of all secured indebtedness (principal, interest, attorneys’ fees and other fees and expenses) at such times and in such manner and order as is provided in the Credit Agreement.

     Section 3.4. Release From Liability; Indemnification. Agent and its successors and assigns are hereby released and absolved from all liability for failure to enforce collection of the Revenues, and from all other responsibility in connection therewith, except the responsibility of each to account to Mortgagor for funds actually received by each. Mortgagor agrees to indemnify and hold harmless Agent (for purposes of this paragraph, the term “Agent” shall include the directors, officers, employees, counsel, agents and attorneys-in-fact of Agent and any persons or entities owned or controlled by or affiliated with Agent) from and against all claims, demands, liabilities, losses, damages (including without limitation consequential damages), causes of action, judgments, penalties, costs and expenses (including without limitation reasonable attorneys’ fees and expenses) imposed upon, asserted against or incurred or paid by Agent by reason of the assertion that Agent received, either before or after payment in full of the secured indebtedness, Revenues claimed by third persons, and Agent shall have the right to defend against any such claims or actions, employing attorneys of its own selection, and if not furnished with indemnity satisfactory to it, Agent shall have the right to compromise and adjust any such claims, actions and judgments, and in addition to the rights to be indemnified as herein provided, all amounts paid by Agent in compromise, satisfaction or discharge of any such claim, action or judgment, and all court costs, attorneys’ fees and other expenses of every character expended by Agent pursuant to the provisions of this section shall be a demand obligation (which obligation Mortgagor hereby expressly promises to pay) owing by Mortgagor to Agent and shall bear interest, from the date expended until paid, at the Default Rate (as such term is defined in the Credit Agreement). The foregoing indemnities shall not terminate upon the Release Date or upon the release, foreclosure or other termination of this Mortgage but will survive the Release Date, foreclosure of this Mortgage or conveyance in lieu of foreclosure, and the repayment of the secured indebtedness and the discharge and release of this Mortgage and the other documents evidencing and/or securing the secured indebtedness. WITHOUT LIMITATION, IT IS THE INTENTION OF MORTGAGOR AND MORTGAGOR AGREES THAT THE FOREGOING RELEASES AND INDEMNITIES SHALL APPLY TO EACH INDEMNIFIED PARTY WITH RESPECT TO ALL CLAIMS, DEMANDS, LIABILITIES, LOSSES, DAMAGES (INCLUDING WITHOUT LIMITATION CONSEQUENTIAL DAMAGES), CAUSES OF ACTION, JUDGMENTS, PENALTIES, COSTS AND EXPENSES (INCLUDING WITHOUT LIMITATION REASONABLE ATTORNEYS’ FEES AND EXPENSES) WHICH IN WHOLE OR IN PART ARE CAUSED BY OR ARISE OUT OF THE NEGLIGENCE OF SUCH (AND/OR ANY OTHER) INDEMNIFIED PARTY. However, such indemnities shall not apply to any particular indemnified party (but shall apply to the other indemnified parties) to the extent the subject of the indemnification is caused by or arises out of the gross negligence or willful misconduct of such particular indemnified party.

     Section 3.5. Mortgagor’s Absolute Obligation to Pay and Perform Obligations. Nothing herein contained shall detract from or limit the obligations of Mortgagor to make prompt payment of and performance of secured indebtedness and other obligations at the time and in the manner provided in the Loan Documents, regardless of whether the

Revenues herein assigned are sufficient to pay same, and the rights under this Article III shall be cumulative of all other rights under the Loan Documents.

     Section 3.6. Change of Purchaser. To the extent applicable, and if a default has occurred hereunder and is continuing, should any person now or hereafter purchasing or taking production related to any Pipeline System fail to make payment promptly to Agent of the related production proceeds, Agent shall, subject to then existing contractual prohibitions, have the right to make, or to require Mortgagor to make, a change of purchaser, and the right to designate or approve the new purchaser, and Agent shall have no liability or responsibility in connection therewith so long as ordinary care is used in making such designation.

     Section 3.7. Rights Under Oklahoma Oil and Gas Owners’ Lien Act. Mortgagor hereby grants, sells, assigns and sets over unto Agent during the term hereof, all of Mortgagor’s rights and interests pursuant to the provisions of the Oil and Gas Owners’ Lien Act (OKLA. STAT. tit. 52, §§548.1-548.6 (the “Oklahoma Act”), hereby vesting in Agent all of Mortgagor’s rights as an interest owner to the continuing security interest in and lien upon the oil or gas severed or the proceeds of sale. Agent may, at its option, file the verified notice of lien in order to perfect such lien, but shall not be obligated to make such filing and shall not be held liable to Mortgagor for any act or omission pursuant to the Oklahoma Act.

ARTICLE IV.

REMEDIES UPON DEFAULT

     Section 4.1. Default. The term “default” as used in this Mortgage shall mean occurrence of an “Event of Default” as defined in the Credit Agreement.

     Section 4.2. Acceleration of Secured Indebtedness. As more fully described in the Credit Agreement, during the continuance of a default, Agent may at any time and may from time to time without notice to Mortgagor or any other person declare any or all of the secured indebtedness immediately due and payable and all such secured indebtedness shall thereupon be immediately due and payable, without presentment, demand, protest, notice of protest, declaration or notice of acceleration or intention to accelerate, putting the mortgage in default, dishonor, notice of dishonor or any other notice or declaration of any kind, all of which are hereby expressly waived by Mortgagor, and the liens evidenced hereby shall be subject to foreclosure in any manner provided for herein or provided for by law as Agent may elect.

     Section 4.3. Pre-Foreclosure Remedies. During the continuance of a default, Agent is authorized, prior or subsequent to the institution of any foreclosure proceedings, and, to the extent allowed under applicable law, to enter upon the Property, or any part thereof, and to take possession of the Property and all books and records relating thereto, and to exercise without interference from Mortgagor any and all rights which Mortgagor has with respect to the management, possession, operation, protection or preservation of the Property. If necessary to obtain the possession provided for above, Agent may invoke any and all legal remedies to dispossess Mortgagor including, but not limited to, summary proceeding or restraining order. Mortgagor agrees to peacefully surrender possession of the Property upon default if requested. All costs, expenses and liabilities of every character incurred by Agent in managing, operating,

maintaining, protecting or preserving the Property shall constitute a demand obligation (which obligation Mortgagor hereby expressly promises to pay) owing by Mortgagor to Agent and shall bear interest from date of expenditure until paid at the Default Rate (as such term is defined in the Credit Agreement), all of which shall constitute a portion of the secured indebtedness and shall be secured by this Mortgage and by any other instrument securing the secured indebtedness. In connection with any action taken by Agent pursuant to this Section 4.3, AGENT SHALL NOT BE LIABLE FOR ANY LOSS SUSTAINED BY MORTGAGOR RESULTING FROM ANY ACT OR OMISSION OF AGENT (INCLUDING AGENT’S OWN SIMPLE NEGLIGENCE) IN MANAGING THE PROPERTY UNLESS SUCH LOSS IS CAUSED BY THE GROSS NEGLIGENCE, WILLFUL MISCONDUCT OR BAD FAITH OF AGENT, nor shall Agent be obligated to perform or discharge any obligation, duty or liability of Mortgagor arising under any agreement forming a part of the Property or arising under any Permitted Lien or otherwise arising. Mortgagor hereby assents to, ratifies and confirms any and all actions of Agent with respect to the Property taken under this Section 4.3.

     Section 4.4. Foreclosure.

     (a) During the continuance of a default, this Mortgage may be foreclosed as to the Mortgaged Properties, or any part thereof, in any manner permitted by applicable law.

     (i) As to Mortgaged Properties located in the State of Oklahoma, Mortgagor hereby confers on Agent the power to sell the Mortgaged Properties in accordance with the Oklahoma Power of Sale Mortgage Foreclosure Act (OKLA. STAT. tit. 46, §§41-49), as the same may be amended from time to time. Mortgagor hereby represents and warrants that this Mortgage transaction does not involve a consumer loan as said term is defined in Section 3-104 of Title 14A of the Oklahoma Statutes, that this Mortgage does not secure an extension of credit made primarily for agricultural purposes as defined in paragraph 4 of Section 1-301 of Title 14A of the Oklahoma Statutes, and that this Mortgage is not a mortgage on the Mortgagor’s homestead; and

A POWER OF SALE HAS BEEN GRANTED IN THIS MORTGAGE. A POWER OF SALE MAY ALLOW AGENT TO TAKE THE MORTGAGED PROPERTIES AND SELL THEM (OR TO CAUSE THE MORTGAGED PROPERTIES TO BE SOLD) WITHOUT GOING TO COURT IN A FORECLOSURE ACTION UPON DEFAULT BY MORTGAGOR UNDER THIS MORTGAGE, IF PERMITTED UNDER APPLICABLE LAW.

     (b) Mortgagor specifically requests that a copy of any notice of default and a copy of any notice of sale under this Mortgage be mailed to Mortgagor at the address for Mortgagor specified in this Mortgage.

     (c) During the continuance of a default, Agent may exercise its rights of enforcement with respect to the Collateral under the Uniform Commercial Code of the State of Oklahoma, as amended, or under the Uniform Commercial Code or any other statute in force in any state to the extent the same is applicable law. Cumulative of the foregoing and the other provisions of this Section 4.4:

     (i) to the extent permitted by law, Agent may enter upon the Mortgaged Properties or otherwise upon Mortgagor’s premises to take possession of, assemble and collect the Collateral or to render it unusable; and

     (ii) Agent may require Mortgagor to assemble the Collateral and make it available at a place Agent designates which is mutually convenient to allow Agent to take possession or dispose of the Collateral; and

     (iii) written notice mailed to Mortgagor as provided herein at least ten (10) Business Days (as such term is defined in the Credit Agreement, and as so defined, it is used in this Mortgage) prior to the date of public sale of the Collateral or prior to the date after which private sale of the Collateral will be made shall constitute reasonable notice; and

     (iv) in the event of a foreclosure of the liens and/or security interests evidenced hereby, the Collateral, or any part thereof, and the Mortgaged Properties, or any part thereof, may, at the option of Agent, be sold, as a whole or in parts, together or separately (including, without limitation, where a portion of the Mortgaged Properties is sold, the Collateral related thereto may be sold in connection therewith); and

     (v) the expenses of sale provided for in clause FIRST of Section 4.6 shall include the reasonable expenses of retaking the Collateral, or any part thereof, holding the same and preparing the same for sale or other disposition; and

     (vi) should, under this subsection, the Collateral be disposed of other than by sale, any proceeds of such disposition shall be treated under Section 4.6 as if the same were sales proceeds.

     (d) To the extent permitted by applicable law, the sale hereunder of less than the whole of the Property shall not exhaust the powers of sale herein granted or the right to judicial foreclosure, and successive sale or sales may be made until the whole of the Property shall be sold, and, if the proceeds of such sale of less than the whole of the Property shall be less than the aggregate of the indebtedness secured hereby and the expense of conducting such sale, this Mortgage and the liens and security interests hereof shall remain in full force and effect as to the unsold portion of the Property just as though no sale had been made; provided, however, that Mortgagor shall never have any right to require the sale of less than the whole of the Property. In the event any sale hereunder is not completed or is defective in the opinion of Agent, such sale shall not exhaust the powers of sale hereunder or the right to judicial foreclosure, and Agent shall have the right to cause a subsequent sale or sales to be made. Any sale may be adjourned by announcement at the time and place appointed for such sale without further notice except as may be required by law. The Agent acting under power of sale may appoint or delegate any one or more persons as agent to perform any act or acts necessary or incident to any sale held by it (including, without limitation, the posting of notices and the conduct of sale), and such appointment need not be in writing or recorded. Any and all statements of fact or other recitals made in any deed or deeds, or other instruments of

transfer, given in connection with a sale as to nonpayment of the secured indebtedness or as to the occurrence of any default, or as to all of the secured indebtedness having been declared to be due and payable, or as to the request to sell, or as to notice of time, place and terms of sale and the properties to be sold having been duly given, or as to any other act or thing having been duly done, shall be taken as prima facie evidence of the truth of the facts so stated and recited. Notwithstanding any reference herein to the Credit Agreement or any other Loan Document, all persons dealing with the Mortgaged Properties shall be entitled to rely on any document, or certificate, of the Agent as to the occurrence of an event, such as a default, and shall not be charged with or forced to review any provision of any other document to determine the accuracy thereof. With respect to any sale held in foreclosure of the liens and/or security interests covered hereby, it shall not be necessary for the Agent, any public officer acting under execution or order of the court or any other party to have physically present or constructively in his/her or its possession, either at the time of or prior to such sale, the Property or any part thereof.

     Section 4.5. Receiver. In addition to all other remedies herein provided for, Mortgagor agrees that Agent shall, as a matter of right during the continuance of a default, be entitled to the appointment of a receiver or receivers for all or any part of the Property, whether such receivership be incident to a proposed sale (or sales) of such property or otherwise, and without regard to the value of the Property or the solvency of any person or persons liable for the payment of the indebtedness secured hereby, and Mortgagor does hereby consent to the appointment of such receiver or receivers, waives any and all defenses to such appointment, and agrees not to oppose any application therefor by Agent, and agrees that such appointment shall in no manner impair, prejudice or otherwise affect the rights of Agent under Article III hereof. Mortgagor expressly waives notice of a hearing for appointment of a receiver and the necessity for bond or an accounting by the receiver. Nothing herein is to be construed to deprive Agent or any Lender of any other right, remedy or privilege it may now or hereafter have under the law to have a receiver appointed. Any money advanced by Agent in connection with any such receivership shall be a demand obligation (which obligation Mortgagor hereby expressly promises to pay) owing by Mortgagor to Agent and shall bear interest, from the date of making such advancement by Agent until paid, at the rate described in Section 2.3 hereof.

     Section 4.6. Proceeds of Foreclosure. The proceeds of any sale held in foreclosure of the liens and/or security interests evidenced hereby shall be applied, to the extent permitted by applicable law:

     FIRST, to the payment of all necessary costs and expenses incident to such foreclosure sale, including but not limited to all court costs and charges of every character in the event foreclosed by suit or any judicial proceeding;

     SECOND, to the payment of the secured indebtedness (including specifically without limitation the principal, interest and attorneys’ fees due and unpaid on the Obligations and the amounts due and unpaid and owed under this Mortgage) in such manner and order as the Agent shall deem advisable; and

     THIRD, the remainder, if any there shall be, shall be paid to Mortgagor, or to Mortgagor’s representatives, successors or assigns, or such other persons as may be entitled thereto by law.

     Section 4.7. Lender as Purchaser. Any party constituting a Lender shall have the right to become the purchaser at any sale held in foreclosure of the liens and/or security interests evidenced hereby, and any party constituting a Lender which is purchasing at any such sale shall have the right to credit upon the amount of the bid made therefor, to the extent necessary to satisfy such bid, the secured indebtedness owing to such party, or if such party holds less than all of such indebtedness, the pro rata part thereof owing to such party, accounting to all other parties constituting Lenders who are not joining in such bid in cash for the portion of such bid or bids apportionable to such non-bidding Lender or Lenders.

     Section 4.8. Foreclosure as to Matured Debt. Upon the occurrence and continuance of a default, Agent shall have the right to proceed with foreclosure of the liens and/or security interests evidenced hereby without declaring the entire secured indebtedness due, and in such event, any such foreclosure sale may be made subject to the unmatured part of the secured indebtedness and shall not in any manner affect the unmatured part of the secured indebtedness, but as to such unmatured part, this Mortgage shall remain in full force and effect just as though no sale had been made. The proceeds of such sale shall be applied as provided in Section 4.6 except that the amount paid under clause SECOND thereof shall be only the matured portion of the secured indebtedness and any proceeds of such sale in excess of those provided for in clauses FIRST and SECOND (modified as provided above) shall be applied as provided in clause THIRD of Section 4.6 hereof. Several sales may be made hereunder without exhausting the right of sale for any unmatured part of the secured indebtedness.

     Section 4.9. Remedies Cumulative. All remedies herein provided for are cumulative of each other and of all other remedies existing at law or in equity and are cumulative of any and all other remedies provided for in any other Loan Document, and, in addition to the remedies herein provided, there shall continue to be available all such other remedies as may now or hereafter exist at law or in equity for the collection of the secured indebtedness and the enforcement of the covenants herein and the foreclosure of the liens and/or security interests evidenced hereby, and the resort to any remedy provided for hereunder or under any such other Loan Document or provided for by law shall not prevent the concurrent or subsequent employment of any other appropriate remedy or remedies.

     Section 4.10. Discretion as to Security. Agent may resort to any security given by this Mortgage or to any other security now existing or hereafter given to secure the payment of the secured indebtedness, in whole or in part, and in such portions and in such order as may seem best to Agent in its sole and uncontrolled discretion, and any such action shall not in any way be considered as a waiver of any of the rights, benefits, liens or security interests evidenced by this Mortgage.

     Section 4.11. Mortgagor’s Waiver of Certain Rights. To the full extent Mortgagor may do so, Mortgagor agrees that Mortgagor will not at any time insist upon, plead, claim or take the benefit or advantage of any law now or hereafter in force providing for any appraisement, valuation, stay, extension or redemption, and Mortgagor, for Mortgagor, Mortgagor’s

representatives, successors and assigns, and for any and all persons ever claiming any interest in the Property, to the extent permitted by applicable law, hereby waives and releases all rights of appraisement, valuation, stay of execution, redemption (including rights of redemption under any applicable statute or laws), notice of intention to mature or declare due the whole of the secured indebtedness, notice of election to mature or declare due the whole of the secured indebtedness and all rights to a marshaling of assets of Mortgagor, including the Property, or to a sale in inverse order of alienation in the event of foreclosure of the liens and/or security interests hereby created. Mortgagor shall not have or assert any right under any statute or rule of law pertaining to the marshaling of assets, sale in inverse order of alienation, the exemption of homestead, or other matters whatever to defeat, reduce or affect the right under the terms of this Mortgage to a sale of the Property for the collection of the secured indebtedness without any prior or different resort for collection, or the right under the terms of this Mortgage to the payment of the secured indebtedness out of the proceeds of sale of the Property in preference to every other claimant whatever. If any law referred to in this section and now in force, of which Mortgagor or Mortgagor’s representatives, successors or assigns or any other persons claiming any interest in the Mortgaged Properties or the Collateral might take advantage despite this section, shall hereafter be repealed or cease to be in force, such law shall not thereafter be deemed to preclude the application of this section.

     Section 4.12. Mortgagor as Tenant Post-Foreclosure. In the event there is a foreclosure sale hereunder and at the time of such sale Mortgagor or Mortgagor’s representatives, successors or assigns or any other persons claiming any interest in the Property by, through or under Mortgagor are occupying or using the Property, or any part thereof, each and all shall immediately become the tenant of the purchaser at such sale, which tenancy shall be a tenancy from day to day, terminable at the will of either landlord or tenant, at a reasonable rental per day based upon the value of the property occupied, such rental to be due daily to the purchaser. To the extent permitted by applicable law, the purchaser at such sale shall, notwithstanding any language herein apparently to the contrary, have the sole option to demand immediate possession following the sale or to permit the occupants to remain as tenants at will. In the event the tenant fails to surrender possession of said property upon demand, the purchaser shall be entitled to institute and maintain a summary action for possession of the property (such as an action for forcible entry and detainer) in any court having jurisdiction.

     Section 4.15. Waiver of Oklahoma Appraisement. As to Property situated in or otherwise subject to the laws of the State of Oklahoma, appraisement of the Property is hereby waived (or not) at the option of Agent, such option to be exercised at the time judgment is rendered in any foreclosure hereof or at any time prior thereto.

     Section 4.16. Limitations under Applicable Law. The terms of this Article IV and Lender’s and/or Agent’s exercise of the terms thereof are and shall be limited by applicable law.

ARTICLE V.

MISCELLANEOUS

     Section 5.1. Scope of Mortgage. This Mortgage is a mortgage of both real/immovable and personal/movable property, a security agreement, a financing statement and an assignment, and also covers proceeds and fixtures and all rights as set out herein.

     Section 5.2. Effective as a Financing Statement. This Mortgage covers goods which are or are to become fixtures related to the real/immovable property described herein, and this Mortgage shall be effective as a financing statement filed as a fixture filing with respect to all fixtures included within the Property. This Mortgage is to be filed for record in the real/immovable property records of each county where any part of the Mortgaged Properties is situated, the Oklahoma Secretary of State pursuant to Okla. Stat. tit. 46, § 17, and may also be filed in the offices of the Bureau of Land Management, the General Land Office, or the Minerals Management Service or any relevant federal or state agency (or any successor agencies). This Mortgage shall also be effective as a financing statement covering any other Property and may be filed in any other appropriate filing or recording office, as well as in the appropriate office(s) of any jurisdiction in order to perfect the security interests in the Property. The mailing address of Mortgagor is the address of Mortgagor set forth at the end of this Mortgage and the address of Agent from which information concerning the security interests hereunder may be obtained is the address of Agent set forth at the end of this Mortgage. Nothing contained in this paragraph shall be construed to limit the scope of this Mortgage nor its effectiveness as a financing statement covering any type of Property. This Mortgage is to be filed with the office of the Secretary of State of the State of Oklahoma pursuant to Okla. Stat. tit 46 § 17; however, Mortgagor disclaims status as a “public service corporation” as defined in Article IX, Section 34 of the Oklahoma Constitution.

     Section 5.3. Reproduction of Mortgage as Financing Statement. A carbon, photographic, facsimile or other reproduction of this Mortgage or of any financing statement relating to this Mortgage shall be sufficient as a financing statement for any purpose. Without limiting any other provision herein, Mortgagor hereby authorizes Agent to file, in any filing or recording office, one or more financing statements and any renewal or continuation statements thereof, describing the Property, including, without limitation, a financing statement covering “all assets of Mortgagor and all proceeds therefrom.”

     Section 5.4. Notice to Account Debtors. In addition to, but without limitation of, the rights granted in Article III hereof, Agent may, at any time after a default has occurred that is continuing, notify the account debtors or obligors of any accounts, chattel paper, negotiable instruments or other evidences of indebtedness included in the Collateral to pay Agent directly.

     Section 5.5. Waivers. Agent may at any time and from time to time in writing waive compliance by Mortgagor with any covenant herein made by Mortgagor to the extent and in the manner specified in such writing, or consent to Mortgagor’s doing any act which hereunder Mortgagor is prohibited from doing, or to Mortgagor’s failing to do any act which hereunder Mortgagor is required to do, to the extent and in the manner specified in such writing, or release any part of the Property or any interest therein from the lien and security interest of this Mortgage (and/or terminate the assignment provided for in Article III). Any party liable, either directly or indirectly, for the secured indebtedness or for any covenant herein or in any other

Loan Document may be released from all or any part of such obligations without impairing or releasing the liability of any other party. No such act shall in any way impair any rights or powers hereunder except to the extent specifically agreed to in such writing.

     Section 5.6. No Impairment of Security. To the extent permitted by applicable law, the lien, security interest and other security rights hereunder shall not be impaired by any indulgence, moratorium or release which may be granted including, but not limited to, any renewal, extension or modification which may be granted with respect to any secured indebtedness, or any surrender, compromise, release, renewal, extension, exchange or substitution which may be granted in respect of the Property, or any part thereof or any interest therein, or any release or indulgence granted to any endorser, guarantor or surety of any secured indebtedness.

     Section 5.7. Acts Not Constituting Waiver. Any default may be waived without waiving any other prior or subsequent default. Any default may be remedied without waiving the default remedied. Neither failure to exercise, nor delay in exercising, any right, power or remedy upon any default shall be construed as a waiver of such default or as a waiver of the right to exercise any such right, power or remedy at a later date. No single or partial exercise of any right, power or remedy hereunder shall exhaust the same or shall preclude any other or further exercise thereof, and every such right, power or remedy hereunder may be exercised at any time and from time to time. No modification or waiver of any provision hereof nor consent to any departure by Mortgagor therefrom shall in any event be effective unless the same shall be in writing and signed by Agent and then such waiver or consent shall be effective only in the specific instances, for the purpose for which given and to the extent therein specified. No notice to nor demand on Mortgagor in any case shall of itself entitle Mortgagor to any other or further notice or demand in similar or other circumstances. Acceptance of any payment in an amount less than the amount then due on any secured indebtedness shall be deemed an acceptance on account only and shall not in any way excuse the existence of a default hereunder.

     Section 5.8. Mortgagor’s Successors. In the event the ownership of the Property or any part thereof becomes vested in a person other than Mortgagor, then, without notice to Mortgagor, such successor or successors in interest may be dealt with, with reference to this Mortgage and to the indebtedness secured hereby, in the same manner as with Mortgagor, without in any way vitiating or discharging Mortgagor’s liability hereunder or for the payment of the indebtedness or performance of the obligations secured hereby. No transfer of the Property, no forbearance, and no extension of the time for the payment of the indebtedness secured hereby, shall operate to release, discharge, modify, change or affect, in whole or in part, the liability of Mortgagor hereunder or for the payment of the indebtedness or performance of the obligations secured hereby, or the liability of any other person hereunder or for the payment of the indebtedness secured hereby.

     Section 5.9. Place of Payment. All secured indebtedness which may be owing hereunder at any time by Mortgagor shall be payable at the places designated in the Credit Agreement (or if no such designation is made, at the address of Agent indicated at the end of this Mortgage), or at such other place as Agent may designate in writing.

     Section 5.10. Subrogation to Existing Liens. To the extent that proceeds of the Borrowings (as defined in the Credit Agreement) are used to pay indebtedness secured by any outstanding lien, security interest, charge or prior encumbrance against the Property, such proceeds have been advanced at Mortgagor’s request, and the party or parties advancing the same shall be subrogated to any and all rights, security interests and liens owned by any owner or holder of such outstanding liens, security interests, charges or encumbrances, irrespective of whether said liens, security interests, charges or encumbrances are released, and it is expressly understood that, in consideration of the payment of such indebtedness, Mortgagor hereby waives and releases all demands and causes of action for offsets and payments to, upon and in connection with the said indebtedness.

     Section 5.11. Application of Payments to Certain Indebtedness. If any part of the secured indebtedness cannot be lawfully secured by this Mortgage or if any part of the Property cannot be lawfully subject to the lien and security interest hereof to the full extent of such indebtedness, then all payments made shall be applied on said indebtedness first in discharge of that portion thereof which is not secured by this Mortgage.

     Section 5.12. Compliance With Usury Laws. It is the intent of Mortgagor, Agent and each Lender and all other parties to the Loan Documents to contract in strict compliance with applicable usury law from time to time in effect. In furtherance thereof, it is stipulated and agreed that none of the terms and provisions contained herein or in the other Loan Documents shall ever be construed to create a contract to pay, for the use, forbearance or detention of money, interest in excess of the maximum amount of interest permitted to be collected, charged, taken, reserved or received by applicable law from time to time in effect.

     Section 5.13. Release of Mortgage. If all of the secured indebtedness be paid, and no further obligation shall exist to provide credit or advance funds to Mortgagor or the maker of any promissory note (or other obligor with respect to other indebtedness) secured hereby, then, at Mortgagor’s request this Mortgage shall be released, in due form and, if permitted under applicable law, at Mortgagor’s cost; provided, however, that, notwithstanding such release, certain indemnifications, and other rights, which are provided herein or in the Credit Agreement to continue following the release hereof shall continue in effect unaffected by such release but shall not survive as indebtedness secured hereby; and provided further that if any payment to any Lender is held to constitute a preference or a voidable transfer under applicable state or federal laws or if for any other reason any Lender is required to refund such payment to the payor thereof or pay the amount thereof to any third party, this Mortgage, if not previously transferred by Agent, shall be reinstated to the extent of such payment or payments.

     Section 5.14. Notices. All notices, requests, consents, demands and other communications required or permitted hereunder or under any other Loan Document shall be in writing and shall be given in accordance with the notice provisions in the Credit Agreement. Notwithstanding the foregoing, or anything else in the Loan Documents which may appear to the contrary, any notice given in connection with a foreclosure of the liens and/or security interests created hereunder, or otherwise in connection with the exercise by Agent or any Lender of their respective rights hereunder or under any other Loan Document, which is given in a manner permitted by applicable law shall constitute proper notice; without limitation of the foregoing,

notice given in a form required or permitted by statute shall (as to the portion of the Property to which such statute is applicable) constitute proper notice.

     Section 5.15. Invalidity of Certain Provisions. A determination that any provision of this Mortgage is unenforceable or invalid shall not affect the enforceability or validity of any other provision and the determination that the application of any provision of this Mortgage to any person or circumstance is illegal or unenforceable shall not affect the enforceability or validity of such provision as it may apply to other persons or circumstances.

     Section 5.16. Gender; Titles. Within this Mortgage, words of any gender shall be held and construed to include any other gender, and words in the singular number shall be held and construed to include the plural, unless the context otherwise requires. Titles appearing at the beginning of any subdivisions hereof are for convenience only, do not constitute any part of such subdivisions, and shall be disregarded in construing the language contained in such subdivisions.

     Section 5.17. Recording. Mortgagor will cause this Mortgage and all amendments and supplements thereto and substitutions therefor and all financing statements and continuation statements relating thereto to be recorded, filed, re-recorded and refiled in such manner and in such places as Agent shall reasonably request and will pay all applicable recording, filing, re-recording and refiling taxes, fees and other charges.

     Section 5.18. Reporting Compliance. Mortgagor agrees to comply with any and all reporting requirements applicable to the transaction pursuant to the Credit Agreement and secured by this Mortgage that are set forth in any law, statute, ordinance, rule, regulation, order or determination of any governmental authority, and further agrees upon request of Agent to furnish Agent with evidence of such compliance.

     Section 5.19. Certain Consents. Except where otherwise expressly provided herein, in any instance hereunder where the approval, consent or the exercise of judgment of Agent or any Lender is required, the granting or denial of such approval or consent and the exercise of such judgment shall be within the sole discretion of such party, and such party shall not, for any reason or to any extent, be required to grant such approval or consent or exercise such judgment in any particular manner, regardless of the reasonableness of either the request or the judgment of such party.

     Section 5.20. Certain Obligations of Mortgagor. Without limiting Mortgagor’s obligations hereunder, Mortgagor’s liability hereunder and the indebtedness secured hereby shall extend to and include all post petition interest, expenses, and other duties and liabilities with respect to Mortgagor’s obligations hereunder which would be owed but for the fact that the same may be unenforceable due to the existence of a bankruptcy, reorganization or similar proceeding.

     Section 5.21. Authority of Agent. The Lenders may, by agreement among them, provide for and regulate the exercise of rights and remedies hereunder, but, unless and until modified to the contrary in writing signed by all such persons and recorded in the same counties as this Mortgage is recorded, (i) all persons other than Mortgagor and its affiliates shall be entitled to rely on the releases, waivers, consents, approvals, notifications and other acts (including, without limitation, the bidding in of all or any part of the secured indebtedness held

by any one or more Lenders, whether the same be conducted under the provisions hereof or otherwise) of Agent, without inquiry into any such agreements or the existence of required consent or approval of any Lenders and without the joinder of any party other than Agent in such releases, waivers, consents, approvals, notifications or other acts and (ii) all notices, requests, consents, demands and other communications required or permitted to be given hereunder may be given to Agent.

     Section 5.22. Counterparts. This Mortgage may be executed in several counterparts, all of which are identical, except that (a) to facilitate recordation, certain counterparts hereof may include only those portions of Exhibits A, B and C which contain descriptions of the properties located in (or otherwise subject to the recording or filing requirements and/or protections of the recording or filing acts or regulations of) the recording jurisdiction in which the particular counterpart is to be recorded, and other portions of Exhibits A, B and C shall be included in such counterparts by reference only, and (b) the execution of this Mortgage by Mortgagor may not be witnessed on those counterparts hereof containing descriptions of Mortgaged Properties located in states where witnesses are not required and/or encouraged by applicable law. All of such counterparts together shall constitute one and the same instrument. Complete counterpart originals of this Mortgage containing the entire Exhibits A, B and C have been retained by Mortgagor and Agent.

     Section 5.23. No Merger. If both the lessor’s and lessee’s estates under any lease or any portion thereof that constitutes a part of the Mortgaged Properties at any time become vested in one owner, this Mortgage and the lien created hereby shall not be destroyed or terminated by application of the doctrine of merger and, in such event, Agent on behalf of the Lenders shall continue to have and enjoy all the rights and privileges of a mortgagee as to the separate estates. In addition, upon the foreclosure of the lien created by this Mortgage on the Mortgaged Properties pursuant to the provisions hereof, any leases or subleases then existing and created by Mortgagor shall not be destroyed or terminated by application of the law of merger or as a matter of law or otherwise as a result of such foreclosure unless Mortgagee or any purchaser at any such foreclosure sale shall so elect. No act by or on behalf of Agent or any such purchaser shall constitute a termination of any lease or sublease unless Agent or such purchaser shall give written notice thereof to such tenant or subtenant.

     Section 5.24. Successors and Assigns. The terms, provisions, covenants, representations, indemnifications and conditions hereof shall be binding upon Mortgagor, and the successors and assigns of Mortgagor, and shall inure to the benefit of Agent and each Lender and their respective successors and assigns, and shall constitute covenants running with the Mortgaged Properties. Should the agency under which Agent serves be terminated, or otherwise cease to exist, the Lenders (including the respective successor and assigns of each Lender) shall be deemed to be the successors to Agent. All references in this Mortgage to Borrower, Mortgagor, Agent or Lenders shall be deemed to include all such successors and assigns.

     Section 5.25. FINAL AGREEMENT OF THE PARTIES. THE WRITTEN LOAN DOCUMENTS REPRESENT THE FINAL AGREEMENT BETWEEN THE PARTIES AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS, OR SUBSEQUENT ORAL AGREEMENTS OF THE

PARTIES. THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES.

     Section 5.26. CHOICE OF LAW. WITHOUT REGARD TO PRINCIPLES OF CONFLICTS OF LAW, THIS MORTGAGE SHALL BE CONSTRUED AND ENFORCED IN ACCORDANCE WITH AND GOVERNED BY THE LAWS OF THE STATE OF NEW YORK APPLICABLE TO CONTRACTS MADE AND TO BE PERFORMED ENTIRELY WITHIN SUCH STATE AND THE LAWS OF THE UNITED STATES OF AMERICA, EXCEPT THAT TO THE EXTENT THAT THE LAW OF A STATE IN WHICH A PORTION OF THE PROPERTY IS LOCATED (OR WHICH IS OTHERWISE APPLICABLE TO A PORTION OF THE PROPERTY) NECESSARILY OR APPROPRIATELY GOVERNS WITH RESPECT TO PROCEDURAL AND SUBSTANTIVE MATTERS RELATING TO THE CREATION, PERFECTION AND ENFORCEMENT OF THE LIENS, SECURITY INTERESTS AND OTHER RIGHTS AND REMEDIES OF THE AGENT OR THE LENDERS GRANTED HEREIN, THE LAW OF SUCH STATE SHALL APPLY AS TO THAT PORTION OF THE PROPERTY LOCATED IN (OR WHICH IS OTHERWISE SUBJECT TO THE LAWS OF) SUCH STATE.

     Section 5.27. Reliance. Notwithstanding any reference to the Credit Agreement or any other instrument, all persons shall be fully authorized to rely upon certificates of the Agent as to the occurrence or non-occurrence of any event or the existence or non-existence of any fact under the Credit Agreement or any other instrument including but not limited to the occurrence of any default, and no person shall have any obligation to determine the correctness of any matter stated in any such certificate.

     Section 5.28. Agent and Lenders. On the date hereof, Royal Bank of Canada is the “Administrative Agent” and “Collateral Agent” under the Credit Agreement and also one of the Lenders thereunder. It is hereby contemplated that additional persons shall or may hereafter become Lenders under the Credit Agreement, and in such event: (a) all references herein to Lender or Lenders shall refer to any person included within the definition of Lenders, as used in the Credit Agreement, and (b) all references herein to Agent shall refer to Royal Bank of Canada in its capacity as Administrative Agent and Collateral Agent under the Credit Agreement, together with its successors in such capacity, and Royal Bank of Canada, in its capacity as Administrative Agent and Collateral Agent, shall have all authority, without the need to secure the consent or joinder of any Lenders under the Credit Agreement, to perform any acts and/or enforce any remedies afforded Agent hereunder, including without limitation any remedies afforded Agent under Article IV hereof, and to receive any notices or payments (including without limitation payment of amounts pursuant to Article III hereof), on behalf of the Lenders under the Credit Agreement, and (c) any rights, titles, liens and security interests in or relating to the Property shall be automatically held, upon and subject to the terms of the Credit Agreement, by Royal Bank of Canada, as Agent, for the benefit of all Lenders under the Credit Agreement, and any rights and remedies afforded Agent hereunder (including without limitation any of same relating to indemnities) shall be automatically held and exercised, upon and subject to the terms of the Credit Agreement, by Royal Bank of Canada as Administrative Agent and Collateral Agent for all Lenders under the Credit Agreement.

     Section 5.29. Time is of the essence. Time is of the essence

*[The remainder of this page is intentionally left blank]

     IN WITNESS WHEREOF, Mortgagor, acting by and through its duly authorized officer, has executed this Mortgage on the date of its acknowledgment.

MORTGAGOR:
BLUESTEM PIPELINE, LLC, a Delaware limited liability company,
By:	Quest Midstream Partners, L.P., a Delaware limited partnership, its Sole Member
	By:	Quest Midstream GP, LLC, a Delaware limited liability company, its General Partner
		By:	/s/ Jerry D. Cash
			Jerry D. Cash
			Chief Executive Officer

The address of Mortgagor is:	The address of Agent is:
Bluestem Pipeline, LLC	Royal Bank of Canada
c/o Quest Resource Corporation	Royal Bank Plaza
9520 N. May Avenue, Suite 300	200 Bay Street
Oklahoma City, OK 73120	12th Floor, South Tower
Attention: Jerry D. Cash	Toronto, Ontario M5J 2W7
	Attention: Manager Agency
	This instrument prepared by:
	Robert C. Shearer
	Thompson & Knight L.L.P.
	333 Clay Street, Suite 3300
	Houston, Texas 77002

Signature Page

Oklahoma Mortgage

ACKNOWLEDGMENT

STATE OF OKLAHOMA	§ §
COUNTY OF OKLAHOMA	§

     BE IT REMEMBERED THAT I, the undersigned authority, a notary public duly qualified, commissioned, sworn and acting in and for the county and state aforesaid, and being authorized in such county and state to take acknowledgments, hereby certify that, on this ___ day of January, 2007 there personally appeared before me and known to me (or satisfactorily proven) to be the person described in the foregoing instrument: Jerry D. Cash, as Chief Executive Officer of Quest Midstream GP, LLC, a Delaware limited liability company, the general partner of Quest Midstream Partners, L.P., a Delaware limited partnership, the Sole Member of Bluestem Pipeline, LLC, a Delaware limited liability company, known to me to be such person, such limited liability company being a party to the foregoing instrument.

OKLAHOMA The foregoing instrument was acknowledged before me on this day by Jerry D. Cash, Chief Executive Officer of Quest Midstream GP, LLC, a Delaware limited liability company, the general partner of Quest Midstream Partners, L.P., a Delaware limited partnership, the Sole Member of Bluestem Pipeline, LLC, a Delaware limited liability company on behalf of said limited liability company.

     IN TESTIMONY AND WITNESS WHEREOF, I have hereunto set my hand and official seal in the City of Oklahoma City, Oklahoma County, Oklahoma, on the day and year first above written.

	/s/ Nancy Daniel
	NOTARY PUBLIC, State of Oklahoma
My commission expires: 10-2-09
[SEAL]

Acknowledgment Page

Oklahoma Mortgage

LIST OF EXHIBITS

Exhibit A	Fee Lands
Exhibit B	Servitudes
Exhibit C	Facilities and Pipelines Systems

EX-12.1

Exhibit 12

Ratio of Earnings to Combined Fixed Charges

							Seven
							Months
							Ended
	Year Ended December 31,						December 31,			Year Ended May 31,
	2006			2005			2004			2004			2003			2002
Earnings:
Income (loss) before income taxes	$	(48,478,000	)	$	(31,941,000	)	$	(4,863,000	)	$	(610,000	)	$	(3,189,000	)	$	196,000
Interest expense(1)		23,483,000			26,365,000			10,147,000			8,057,000			727,000			216,000
Loan cost amortization		1,204,000			5,106,000			530,000			172,000			20,000			—
Earnings	$	(23,791,000	)	$	(470,000	)	$	5,814,000		$	7,619,000		$	(2,442,000	)	$	412,000
Fixed Charges:
Interest expense	$	23,483,000		$	26,365,000		$	10,147,000		$	8,057,000		$	727,000		$	216,000
Loan cost amortization		1,204,000			5,106,000			530,000			172,000			20,000			—
Fixed charges	$	24,687,000		$	31,471,000		$	10,677,000		$	8,229,000		$	747,000		$	216,000
Preferred Stock Dividends	$	—		$	10,000		$	6,000		$	10,000		$	10,000		$	10,000
Ratio of income before taxes		1.0			1.0			1.0			1.7			0.9			1.6
Subtotal-Preferred Dividends	$	—		$	10,000		$	6,000		$	17,000		$	9,000		$	16,000
Combined fixed charges and preferred dividends	$	24,687,000		$	31,481,000		$	10,683,000		$	8,246,000		$	756,000		$	232,000
Ratio of earnings to fixed charges(2)(3)		(1.0	)		(0.0	)		0.5			0.9			(3.3	)		1.9
Insufficient coverage	$	48,478,000		$	31,941,000		$	4,863,000		$	610,000		$	3,189,000		$	—
Ratio of earnings to combined fixed charges and preferred dividends(4)		(1.0	)		(0.0	)		0.5			0.9			(3.2	)		1.8
Insufficient coverage	$	48,478,000		$	31,951,000		$	4,869,000		$	627,000		$	3,198,000		$	—

(1)	Excludes the effect of unrealized gains or losses on interest rate derivatives.
(2)	Fixed charges means the sum of (a) interest expensed and capitalized, (b) amortized premiums, discounts and capitalized expenses related to indebtedness, (c) an estimate of the interest within rental expense, and (d) preference security dividend requirements of consolidated subsidiaries.
(3)	Earnings is the amount resulting from (a) adding (i) pre-tax income from continuing operations, (ii) fixed charges, (iii) amortization of capitalized interest, (iv) distributed income of equity investees, and (v) our share of pre-tax losses of equity investees for which charges arising from guarantees are included in fixed charges and (b) subtracting from the total of the previous items (i) interest capitalized, (ii) preference security dividend requirements of consolidated subsidiaries, and (iii) the minority interest in pre-tax income of subsidiaries that have not incurred fixed charges. Equity investees are investments that we account for using the equity method of accounting.
(4)	Preference security dividend is the amount of pre-tax earnings that is required to pay dividends on outstanding preference securities. The dividend requirement is computed as the amount of the dividend divided by (1 minus the effective income tax rate applicable to continuing operations).

EX-21.1

Exhibit 21.1

List of Subsidiaries

Quest Midstream GP, LLC, a Delaware limited liability company

Quest Midstream Partners, L.P., a Delaware limited partnership

Quest Cherokee, LLC, a Delaware limited liability company

Bluestem Pipeline, LLC, a Delaware limited liability company

Quest Energy Service, LLC, a Kansas limited liability company

Ponderosa Gas Pipeline Company, LLC, a Kansas limited liability company

Quest Oil & Gas, LLC, a Kansas limited liability company

STP Cherokee, LLC, an Oklahoma limited liability company

Producers Service, LLC, a Kansas limited liability company

J-W Gas Gathering, L.L.C., a Kansas limited liability company

Quest Cherokee Oilfield Service, LLC, a Delaware limited liability company

EX-23.1

Exhibit 23.1

CONSENT OF INDEPENDENT PETROLEUM ENGINEER

     As independent petroleum engineers, we hereby consent to the use of our name included herein or incorporated by reference in this Form 10-K by Quest Resource Corporation and to the reference to our estimates of reserves and present value of future net reserves as of December 31, 2006, into Quest Resource Corporation’s previously filed Registration Statements on Form S-8 (File Nos. 333-74560, 333-70431 and 333-132979) and Form S-3 (File Nos. 333-133243, 333-134216 and 333-140116).

Cawley and Gillespie & Associates, Inc.
Petroleum Engineers

Ft. Worth, Texas

March 15, 2007

EX-23.2

Exhibit 23.2

CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

     We hereby consent to the incorporation in the previously filed Registration Statements on Form S-8 of Quest Resource Corporation (the “Company”) (File Nos. 333-74560, 333-70431 and 333-132979) and Form S-3 (File Nos. 333-133243, 333-134216 and 333-140116) of our report dated March 7, 2007 related to the consolidated financial statements of the Company as of December 31, 2006 and 2005 and for the years ended December 31, 2006 and 2005, the seven months ended December 31, 2004, and the fiscal year ended May 31, 2004 which appear in the Company’s Form 10-K for the year ended December 31, 2006.

/s/ Murrell, Hall, McIntosh & Co., PLLP

Oklahoma City, Oklahoma

March 15, 2007

EX-31.1

QUEST RESOURCE CORPORATION

ANNUAL CERTIFICATION

Exhibit 31.1

	I, Jerry D. Cash, certify that:
1.	I have reviewed this annual report on Form 10-K of Quest Resource Corporation;
2.	Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3.	Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4.	The registrant’s other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have:

a)	designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
b)	evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
c)	disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officers and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a)	all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
b)	any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: March 16, 2007

By:	/s/ Jerry D. Cash
	Jerry D. Cash
	Chief Executive Officer

EX-31.2

QUEST RESOURCE CORPORATION

ANNUAL CERTIFICATION

Exhibit 31.2

	I, David Grose, certify that:
1.	I have reviewed this annual report on Form 10-K of Quest Resource Corporation;
2.	Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3.	Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4.	The registrant’s other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have:

a)	designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
b)	evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
c)	disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officers and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a)	all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
b)	any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: March 16, 2007

By:	/s/ David E. Grose
	David E. Grose
	Chief Financial Officer

EX-32.1

QUEST RESOURCE CORPORATION

Exhibit 32.1

CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

     In connection with the Annual Report of Quest Resource Corporation (the “Company”) on Form 10-K for the period ended December 31, 2006, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Jerry D. Cash, Chief Executive Officer, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

1.	The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and
2.	The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

By:	/s/ Jerry D. Cash
	Jerry D. Cash
	Chief Executive Officer
	March 16, 2007

EX-32.2

QUEST RESOURCE CORPORATION

Exhibit 32.2

CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

     In connection with the Annual Report of Quest Resource Corporation (the “Company”) on Form 10-K for the period ended December 31, 2006, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, David E. Grose, Chief Financial Officer, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

1.	The fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and
2.	The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

By:	/s/ David E. Grose
	David E. Grose
	Chief Financial Officer
	March 16, 2007