EXECUTION COPY
PURCHASE AGREEMENT
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 XXXXXXX MLP OPPORTUNITY FUND I, LP,
THE XXXXXXX XX STRATEGIES FUND, LP,
TORTOISE CAPITAL RESOURCES CORPORATION,
XXXXXXXX OPPORTUNITY PARTNERS, LP,
AND
HCM ENERGY HOLDINGS, LLC
December 22, 2006
TABLE OF CONTENTS
Page
ARTICLE I. DEFINITIONS AND INTERPRETATIONS.............................2
1.1. Definitions. .............................................2
1.2. Interpretations. .........................................2
ARTICLE II. PURCHASE AND SALE OF COMMON UNITS AND MEMBER INTERESTS.....2
2.1. Purchase and Sale of Common Units. .......................2
2.2. Purchase and Sale of Member Interests. ...................2
2.3. Time and Place of Closing. ...............................3
2.4. Deliveries at Closing. ...................................3
ARTICLE III. REPRESENTATIONS AND WARRANTIES OF ISSUER..................5
3.1. Organization; Qualification. .............................5
3.2. Authority; Enforceability ................................6
3.3. No Violation; Consents and Approvals.......................6
3.4. Capitalization.............................................8
3.5. No Subsidiaries............................................8
3.6. GP Formation and Ownership.................................8
3.7. Ownership of GP Interest in Issuer.........................9
3.8. Incentive Distribution Rights..............................9
3.9. Class A Subordinated Units and Class B Subordinated Units..9
3.10. Ownership of Bluestem......................................9
3.11. Issuance of the Indicated Units and Indicated Member
Interests..................................................9
3.12. Financial Statements......................................10
3.13. Accounting Firm...........................................11
3.14. Absence of Certain Changes or Events......................11
3.15. Compliance with Law.......................................11
3.16. No Default................................................12
3.17. Real Property; Rights of Way..............................12
3.18. Personal Property.........................................13
3.19. Insurance.................................................13
3.20. Environmental Matters.....................................13
3.21. Material Contracts........................................14
3.22. Legal Proceedings.........................................15
3.23. Permits...................................................15
3.24. Taxes.....................................................15
3.25. Employee Benefit Plans....................................15
3.26. Affiliate Contracts; Sufficiency of Assets................16
3.27. Restrictions on Distributions.............................17
3.28. Private Placement.........................................17
3.29. Registration Rights.......................................17
3.30. Investment Company........................................17
3.31. No Side Agreements........................................17
3.32. Qualifying Income.........................................17
3.33. Disclosure................................................18
3.34. Brokers' Fee..............................................18
3.35. Books and Records; Internal Controls......................18
3.36. No Labor Dispute..........................................18
3.37. Acquisition...............................................18
3.38. Independent Petroleum Engineer............................18
ARTICLE IV. REPRESENTATIONS AND WARRANTIES OF BUYER...................19
4.1. Organization..............................................19
4.2. Authority Relative to this Agreement......................19
4.3. Consents and Approvals; No Violation......................19
4.4. Acquisition for Investment; Due Diligence.................20
4.5. No Side Agreements........................................20
4.6. Brokers' Fee..............................................20
ARTICLE V. COVENANTS OF THE PARTIES...................................21
5.1. Expenses..................................................21
5.2. Partnership Matters.......................................21
5.3. GP Matters................................................22
5.4. Use of Proceeds from Sale of the Indicated Units..........23
5.5. Integration...............................................24
5.6. Further Assurances........................................24
5.7. Public Statements.........................................24
5.8. No Implied Representations................................24
5.9. Independent Nature of Buyer's Obligations and Rights......25
5.10. Tax Shield................................................26
5.11. Tax Opinion...............................................26
5.12. CygNet Software License...................................26
ARTICLE VI. INDEMNIFICATION...........................................26
6.1. Survival..................................................26
6.2. Indemnification Obligations of QRC, Issuer and GP.........27
6.3. Indemnification Obligations of Buyer......................27
6.4. Indemnification Procedures and Limitations................27
ARTICLE VII. MISCELLANEOUS PROVISIONS.................................30
7.1. Amendment and Modification................................30
7.2. Waiver of Compliance; Consents............................30
7.3. Notices...................................................30
7.4. Assignment................................................30
7.5. Governing Law.............................................31
7.6. Facsimiles; Counterparts..................................31
7.7. Entire Agreement..........................................31
7.8. Severability..............................................31
7.9. Third Party Beneficiaries.................................31
Schedule 3.3 - Consents and Approvals
Schedule 3.9 - Class A and B Subordinated Units
Schedule 3.11(c) - Transfer Restrictions
Schedule 3.12(b) - Pro-Forma Balance Sheet
Schedule 3.14 - Absence of Changes
Schedule 3.15 - Compliance with Law
Schedule 3.16 - No Default
Schedule 3.19 - Insurance
Schedule 3.20(b) - Notification of Non-Compliance with Environmental Law
Schedule 3.20(d) - Releases
Schedule 3.21 - Material Contracts
Schedule 3.25 - Benefit Plans
Schedule 3.26 - Affiliate Contracts
Schedule 3.34 - Brokers' Fee
Exhibit A - Definitions; Interpretations
Exhibit B - Contribution Agreement
Exhibit C - Registration Rights Agreement
Exhibit D - Investors' Rights Agreement
Exhibit E - Opinion of Xxxxx Xxxxx LLP
Exhibit F - Opinion of Xxxxxxx Xxxxxxxx Xxxxxx LLP
Exhibit G - Opinion of Xxxxxxx Brignone
Exhibit H - Midstream Agreement
Exhibit I - Omnibus Agreement
PURCHASE AGREEMENT
This PURCHASE AGREEMENT, dated as of December 22, 2006 (this "Agreement"),
is made and entered into by and among Quest Midstream Partners, L.P., a Delaware
limited partnership ("Issuer"), Quest Midstream GP, LLC, a Delaware limited
liability company ("GP"), Quest Resource Corporation, a Nevada corporation
("QRC"), Alerian Opportunity Partners IV, LP, a Delaware limited partnership
("Alerian"), Swank MLP Convergence Fund, LP, a Texas limited partnership ("Swank
MLP Fund"), Swank Investment Partners, LP, a Texas limited partnership ("SIP"),
The Xxxxxxx MLP Opportunity Fund I, LP, a Delaware limited partnership ("Xxxxxxx
MLP Fund"), The Xxxxxxx XX Strategies Fund, LP, ("Xxxxxxx XX Fund", together
with Swank MLP Fund, SIP and Xxxxxxx MLP Fund, "Swank"), Tortoise Capital
Resources Corporation, a Maryland corporation ("Tortoise"), Xxxxxxxx Opportunity
Partners, LP, a Delaware limited partnership ("Xxxxxxxx") and HCM Energy
Holdings, LLC, an Illinois limited liability company ("HCM"). Alerian, Swank,
Tortoise, Xxxxxxxx and HCM are sometimes referred to herein individually as a
"Buyer" and collectively as the "Buyers."
WHEREAS, on the terms and conditions contained in this Agreement and
pursuant to Section 4(2) of the Securities Act of 1933, as amended (the
"Securities Act") and Rule 506 of Regulation D promulgated under the Securities
Act, each Buyer desires to purchase from Issuer, and Issuer desires to issue and
sell to such Buyer the number of the Issuer's Common Units specified for each
Buyer in Section 2.1 of this Agreement; and Alerian and Swank each desire to
purchase from GP, and GP desires to issue and sell to such Buyer, the number of
the GP's Member Interests specified for such Buyer in Section 2.2 of this
Agreement;
WHEREAS, it is a condition to the obligations of the Buyers hereunder that
the transactions (the "Acquisition") contemplated by that certain Contribution
Agreement, dated as of the date hereof, by and among Issuer, Bluestem, QRC and
the other parties thereto, which is attached hereto as Exhibit B (the
"Contribution Agreement"), be consummated simultaneously with or prior to the
transactions contemplated hereby;
WHEREAS, Issuer desires to sell up to 4,864,866 Common Units and GP
desires to sell 15% of the Member Interests in the GP and the Buyers desire to
purchase such Common Units from Issuer and such Member Interests from GP in
accordance with the provisions of this Agreement; and
WHEREAS, Issuer has agreed to provide Buyers with certain registration
rights with respect to the Common Units acquired pursuant to this Agreement;
NOW THEREFORE, in consideration of the mutual covenants, representations,
warranties and agreements contained herein, and of other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, and
intending to be legally bound hereby, the parties hereto hereby agree as
follows:
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ARTICLE I.
DEFINITIONS AND INTERPRETATIONS
1.1. Definitions. Unless otherwise provided to the contrary in this
Agreement, capitalized terms in this Agreement have the meanings set forth in
the Section 1.1 of Exhibit A.
1.2. Interpretations. Unless expressly provided to the contrary in this
Agreement, this Agreement shall be interpreted in accordance with the provisions
set forth in Section 1.2 of Exhibit A.
ARTICLE II.
PURCHASE AND SALE OF COMMON UNITS
AND MEMBER INTERESTS
2.1. Purchase and Sale of Common Units. Upon the terms contained in this
Agreement, each Buyer, severally and not jointly, hereby agrees to purchase from
Issuer, and Issuer agrees to issue and sell to each Buyer, the number of Common
Units set forth below opposite such Buyer's name (such number of Common Units to
be purchased by each respective Buyer is referred to as the "Indicated Units").
Each Buyer will pay a purchase price of $18.50 per Common Unit for its Indicated
Units resulting in an aggregate purchase price for each Buyer in the amount
indicated below.
Number of Common Aggregate
Units ("Indicated Purchase Price For
Buyer Units") Common Units
------------------------ ------------------ -------------------
Alerian ................ 1,891,892 $ 35,000,002.00
Xxxxxxx MLP Fund ....... 1,046,622 $ 19,362,507.00
Swank MLP Fund ......... 575,000 $ 10,637,500.00
Tortoise ............... 945,946 $ 17,500,001.00
Xxxxxxxx ............... 216,216 $ 3,999,996.00
HCM..................... 189,190 $ 3,500,015.00
-------------- -------------------
TOTAL .............. 4,864,866 $ 90,000,021.00
============== ===================
2.2. Purchase and Sale of Member Interests. Upon the terms contained in
this Agreement, Alerian and Swank agree to purchase from GP and GP agrees to
issue and sell to each such Buyer, the number of Member Interests set forth
below opposite such Buyer's name (such number of Member Interests to be
purchased by each respective Buyer is referred to as the "Indicated Member
Interests"). Alerian and Swank will pay a purchase price of $1.00 per Member
Interest for its Indicated Member Interests, resulting in an aggregate purchase
price for each of Alerian and Swank in the amount indicated below.
2
Aggregate
Number of Member Purchase Price
Interests ("Indicated For Member
Buyer Member Interests") Interests
---------------------- --------------------- --------------
Alerian ............ 75 $ 75
Swank MLP Fund ..... 30 $ 30
Xxxxxxx MLP Fund ... 30 $ 30
Xxxxxxx XX Fund .... 10 $ 10
SIP ................ 5 $ 5
--------------------- --------------
TOTAL .......... 150 $ 150
===================== ==============
The sum of the aggregate purchase prices to be paid by each respective Buyer for
Common Units (as reflected in Section 2.1) and Member Interests (as reflected in
Section 2.2) is referred to as the "Indicated Purchase Price."
2.3. Time and Place of Closing. Completion of the transactions referred to
in this Article II (the "Closing") will take place at the offices of Xxxxxxx
Xxxxxxxx Xxxxxx LLP, 0000 Xxxxxx Xxxxxx, Xxxxxx Xxxx, Xxxxxxxx on the date
hereof. Such date is referred to as the "Closing Date."
2.4. Deliveries at Closing. At the Closing, subject to the terms and
conditions hereof, the following shall occur:
(a) Each Buyer shall deliver, or cause to be delivered:
(i) the Indicated Purchase Price for the Indicated Units and
the Indicated Member Interests (if any) to be purchased by such Buyer,
such delivery to be made by wire transfer of immediately available funds
to an account designated by GP;
(ii) the Registration Rights Agreement in the form of Exhibit
C (the Registration Rights Agreement"), which shall have been duly
executed by such Buyer;
(iii) the Partnership Agreement, which shall have been duly
executed by such Buyer;
(iv) the Investors' Rights Agreement, in the form and
substance attached hereto as Exhibit D (the "Investors' Rights
Agreement"), which shall have been duly executed by such Buyer; and
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(v) with respect to Alerian and Swank only, the GP Limited
Liability Company Agreement, which shall have been duly executed by
Alerian and Swank.
(b) GP, Issuer and, where applicable, QRC shall deliver,
or cause to be delivered, to each Buyer:
(i) the Indicated Units to be purchased by such Buyer by
delivery of certificates evidencing such Indicated Units at the Closing
meeting the requirements of the Partnership Agreement, all free and clear
of any liens, encumbrances, security interests, equities, charges or
claims of any other Person or other restrictions whatsoever (other than
those arising under the Partnership Agreement or state or federal
securities laws), and subject to the terms and conditions thereof;
(ii) certificates of the Secretary of State of the State of
Delaware, each dated a recent date, that each of the Partnership Parties
is in good standing;
(iii) an opinion addressed to such Buyer from Xxxxx Xxxxx LLP,
dated as of the Closing, in the form and substance attached hereto as
Exhibit E;
(iv) an opinion addressed to such Buyer from Xxxxxxx Xxxxxxxx
Xxxxxx LLP, dated as of the Closing, in the form and substance attached
hereto as Exhibit F;
(v) an opinion addressed to such Buyer from Xxxxxxx Brignone,
dated as of the Closing, in the form and substance attached hereto as
Exhibit G;
(vi) the Registration Rights Agreement, which shall have been
duly executed by Issuer;
(vii) a certificate signed on behalf of each of QRC, GP and
Issuer indicating that the transactions contemplated by the Acquisition
have been consummated in accordance with the terms of the Contribution
Agreement;
(viii) the Partnership Agreement, which shall have been duly
executed by Issuer and GP;
(ix) the Investors' Rights Agreement, which shall have been
duly executed by Issuer, GP and QRC;
(x) the GP Limited Liability Company Agreement, which shall
have been duly authorized by QRC, Swank and Alerian.
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(c) The following shall be executed by the parties thereto:
(i) the Midstream Services and Gas Dedication
Agreement, in the form and substance attached hereto as Exhibit H (the
"Midstream Agreement"), which shall have been duly executed by Bluestem
Pipeline, LLC ("Bluestem") and QRC; and
(ii) the Omnibus Agreement, in the form attached hereto
as Exhibit I (the "Omnibus Agreement"), which shall have been duly
executed by Issuer, GP, Bluestem and QRC;
(d) The parties shall each deliver such other certificates,
consents and documents required to be delivered by such party at or prior
to the Closing Date pursuant to this Agreement or otherwise required in
connection herewith.
ARTICLE III.
REPRESENTATIONS AND WARRANTIES OF ISSUER
Except as set forth in the Disclosure Schedule, Issuer, GP and QRC,
jointly and severally, hereby represent and warrant to each Buyer that, after
giving effect to the Acquisition and the issuance and sale of the Indicated
Units and the Indicated Member Interests, as of the Closing, as follows:
3.1. Organization; Qualification. Issuer has not conducted any operations
(excluding the operations of Bluestem since the date of the Acquisition) prior
to the Closing Date, other than organizational activities and activities related
to the transactions contemplated by the Transaction Documents (the
"Transactions"). QRC is a corporation duly incorporated, validly existing and in
good standing under the laws of the State of Nevada and has all requisite
corporate power and authority to own, lease and operate it properties and to
carry on its business as is now being conducted. GP is a limited liability
company duly organized, validly existing and in good standing under the laws of
the State of Delaware and has all requisite limited liability company power and
authority to own, lease and operate its properties and to carry on its business
as is contemplated subsequent to the Closing Date and to act as general partner
of Issuer. Issuer is a limited partnership duly organized, validly existing and
in good standing under the laws of the State of Delaware and has all requisite
limited partnership power and authority to own, lease, and operate its
properties and to carry on its business as is contemplated subsequent to the
Closing Date. Bluestem is a wholly-owned Subsidiary of Issuer. Bluestem is a
limited liability company duly organized, validly existing and in good standing
under the laws of the State of Delaware and has all requisite limited liability
company power and authority to own, lease and operate its properties and to
carry on its business as is now being conducted. Issuer, GP and Bluestem are
referred to collectively herein as the "Partnership Parties" and the Partnership
Parties and QRC are referred to collectively herein as the "Quest Parties." Each
of the Quest Parties is duly qualified,
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registered or licensed to do business as a corporation, foreign limited
partnership or limited liability company, as the case may be, and is in good
standing in each jurisdiction in which the property owned, leased or operated by
it or the nature of the business conducted by it makes such qualification
necessary, except where the failure to be so duly qualified, registered or
licensed and in good standing (i) in the case of the Partnership Parties, would
not have or be reasonably expected to have, individually or in the aggregate, a
material adverse effect upon the business, financial condition or results of
operations of the Partnership Parties, taken as a whole, except for any effect
resulting from changes in general economic, political or business conditions
which affect the Partnership Parties in a similar manner to their competitors (a
"Material Adverse Effect") or subject the Partnership Parties or the holders of
Common Units to any material liability or disability, and (ii) in the case of
QRC, would not have or be reasonably expected to have, individually or in the
aggregate, a material adverse effect upon the business, financial condition or
results of operations of QRC and its subsidiaries, taken as a whole, except for
any effect resulting from changes in general economic, political or business
conditions which affect QRC and its Subsidiaries in a similar manner to their
competitors (a "QRC Material Adverse Effect").
3.2. Authority; Enforceability. Each of the Quest Parties has the
corporate, limited partnership or limited liability company, as the case may be,
power and authority to execute and deliver the Transaction Documents to which it
is a party, and to consummate the Transactions. The execution and delivery by
each of the Quest Parties of the Transaction Documents to which it is a party,
and the consummation by each such Quest Party of the Transactions have been duly
and validly authorized by such Quest Party and no other limited partnership or
limited liability company, as the case may be, proceedings on the part of such
Quest Party is necessary to authorize the Transaction Documents or to consummate
the transactions contemplated hereby or thereby. Each of the Transaction
Documents to which each Quest Party is a party have been duly executed and
delivered by such Quest Party and, each Transaction Document constitutes the
valid and binding agreement of each Quest Party thereto, and is enforceable
against each Quest Party thereto in accordance with its terms, except that such
enforceability may be limited by (i) applicable bankruptcy, insolvency,
fraudulent transfer, reorganization, moratorium and similar laws relating to or
affecting creditors' rights generally and by general principles of equity
(regardless of whether such enforceability is considered in a proceeding in
equity or at law) and (ii) public policy, applicable law relating to fiduciary
duties and indemnification and contribution and an implied covenant of good
faith and fair dealing.
3.3. No Violation; Consents and Approvals.
(a) The offering, issuance and sale by Issuer of the Indicated Units
being delivered at the Closing Date, the offering, issuance and sale by GP
of the Indicated Member Interests being delivered at the Closing Date, the
execution, delivery and performance of the Transaction Documents by the
Quest Parties that are party thereto and the consummation by the Quest
Parties that
6
are party thereto of the Transactions do not and will not: (i) result in
any breach of any provision of the articles of incorporation, certificate
of formation, partnership agreement or other organizational or charter
documents of any of the Quest Parties; (ii) constitute a default (or an
event that with notice or lapse of time or both would become a default)
under, or give rise to any right of termination, cancellation, amendment or
acceleration (with or without notice, lapse of time or both) under any of
the terms, conditions or provisions of any note, bond, mortgage, indenture,
license, agreement or other instrument or obligation to which a Quest Party
is a party or by which any property or asset of the Quest Parties is bound
or affected, except to the extent that such default, termination,
amendment, acceleration or cancellation right would not have or be
reasonably expected to have, individually or in the aggregate, a Material
Adverse Effect or a QRC Material Adverse Effect, as the case may be, except
disclosed in Section 3.3 of the Disclosure Schedule; (iii) result in a
violation of any law, statute, rule, regulation, order, judgment,
injunction, decree or other restriction of any court or governmental
authority to which any of the Quest Parties is subject (including federal
and state securities laws and regulations) or by which any property or
asset of the Quest Parties is bound or affected, except to the extent that
such violation would not have or be reasonably expected to have,
individually or in the aggregate, a Material Adverse Effect or a QRC
Material Adverse Effect, as the case may be; or (iv) except as set forth in
the Transaction Documents, result or will result in the creation or
imposition of any lien, charge or encumbrance upon any property or assets
of any of the Partnership Parties, which liens would have, individually or
in the aggregate, a Material Adverse Effect or a QRC Material Adverse
Effect, as the case may be.
(b) No declaration, filing or registration with, or notice to, or
authorization, consent or approval of any Governmental Authority is
necessary for the offering, issuance and sale by the Issuer of the
Indicated Units, the offering, issuance and sale by GP of the Indicated
Member Interests being delivered at the Closing Date, or for the
consummation by the Quest Parties of the transactions contemplated by the
Transaction Documents, other than (i) any required filings or registrations
required pursuant to state or federal securities laws, rules or regulations
or pursuant to the rules of any stock exchange in connection with the
performance of the terms of the Registration Rights Agreement, (ii) for
such consents that have been obtained or made; (iii) such declarations,
filings, registrations, notices, authorizations, consents or approvals
which, if not obtained or made, would not have or be reasonably expected to
have, individually or in the aggregate, a Material Adverse Effect or a QRC
Material Adverse Effect, as the case may be; and (iv) for such consents
which (A) are of a routine or administrative nature, (B) are not
customarily obtained or made prior to the consummation of transactions such
as those contemplated by the Transaction Documents and (C) are expected in
the reasonable judgment of GP or the Issuer to
7
be obtained or made in the ordinary course of business subsequent to the
consummation of the Transactions.
3.4. Capitalization.
--------------
(a) Immediately after the Closing, the only issued and outstanding
limited partner interests of Issuer will consist of 4,864,866 Common Units
representing an approximate 48.65% limited partner interest in Issuer,
35,134 Class A Subordinated Units representing an approximately 0.35%
limited partner interest in Issuer, 4,900,000 Class B Subordinated Units
representing a 49.00% limited partner interest in Issuer and the Incentive
Distribution Rights. The only issued and outstanding general partner
interests of the Issuer are the 200,000 General Partner Units representing
a 2% general partner interest in Issuer. All outstanding Common Units,
Class A Subordinated Units, Class B Subordinated Units and Incentive
Distribution Rights and the partnership interests represented thereby, have
been duly authorized and, when paid for, issued and delivered pursuant to
this Agreement, will be validly issued in accordance with the Partnership
Agreement and are fully paid (to the extent required under the Partnership
Agreement) and nonassessable (except as such nonassessability may be
affected by Section 17-607 and Section 17-804 of the Delaware LP Act).
(b) Immediately after the Closing, the only issued and outstanding
equity interests of GP will consist of 1,000 Membership Interests. All
outstanding Membership Interests, have been duly authorized and, when paid
for, issued and delivered pursuant to this Agreement, will be validly
issued in accordance with the GP Limited Liability Company Agreement and
are fully paid (to the extent required under the GP Limited Liability
Company Agreement) and nonassessable (except as such nonassessability may
be affected by Section 18-607 and Section 18-804 of the Delaware LLC Act).
3.5. No Subsidiaries. Except for (i) GP's ownership of 200,000 General
Partner Units representing a 2% general partner interest in Issuer and the
Incentive Distribution Rights and (ii) Issuer's ownership of a 100% membership
interest in Bluestem, neither GP nor Issuer own or hold any equity ownership
interest in any other Person.
3.6. GP Formation and Ownership. GP was formed on December 13, 2006 and has
not engaged in any business activity other than organizational activities and
activities related to the Transactions. Upon Closing, QRC will own 850 Member
Interests representing an 85% ownership interest in GP, Alerian will own 75
Member Interests representing a 7.5% ownership interest in GP and Swank will own
75 Member Interests representing a 7.5% ownership interest in GP.
8
3.7. Ownership of GP Interest in Issuer. GP is the sole general partner of
Issuer and owns 200,000 General Partner Units representing a 2% general partner
interest in Issuer; such General Partner Units have been duly authorized and
validly issued in accordance with the Partnership Agreement; and GP owns such
General Partner Units free and clear of all liens, encumbrances, security
interests, equities, charges and other claims (except for the requirements of
applicable securities laws on transferability and for the restrictions and
requirements of the Transaction Documents).
3.8. Incentive Distribution Rights. Upon Closing, GP will own all of the
Incentive Distribution Rights. GP will own such Incentive Distribution Rights
free and clear of all liens, encumbrances, security interests, equities, charges
and other claims (except for the requirements of applicable securities laws on
transferability and for the restrictions and requirements of the Transaction
Documents).
3.9. Class A Subordinated Units and Class B Subordinated Units. Upon
consummation of the Acquisition, QRC will own 35,134 Class A Subordinated Units
representing a 0.35% limited partner interest in Issuer and 4,900,000 Class B
Subordinated Units representing a 49.00% limited partner interest in Issuer.
Except as set forth in Section 3.9 of the Disclosure Schedule, QRC will own such
Class A Subordinated Units and Class B Subordinated Units free and clear of all
liens, encumbrances, security interests, equities, charges and other claims
(except for the requirements of applicable securities laws on transferability
and for the restrictions and requirements of the Transaction Documents).
3.10. Ownership of Bluestem. Upon the consummation of the Acquisition,
Issuer will be the sole member of Bluestem with a 100% membership interest in
Bluestem; such membership interest has been duly authorized and validly issued
in accordance with the Bluestem Limited Liability Company Agreement and is fully
paid (to the extent required under the Bluestem Limited Liability Company
Agreement) and nonassessable (except as such nonassessability may be affected by
Section 18-607 and Section 18-804 of the Delaware LLC Act); and Issuer will own
such membership interest free and clear of all liens, encumbrances, security
interests, equities, charges or claims (except for the requirements of
applicable securities laws on transferability and the restrictions and
requirements of the Bluestem Limited Liability Company Agreement).
3.11. Issuance of the Indicated Units and Indicated Member Interests.
--------------------------------------------------------------
(a) The Indicated Units, and the limited partner interests represented
thereby are duly authorized and, when issued and paid for in accordance
with this Agreement, will be duly and validly issued, fully paid and
nonassessable (except as such nonassessability may be affected by Section
17-607 and Section 17-804 of the Delaware LP Act), free and clear of any
liens (other than those arising under the Transaction Documents or those
created by the Buyers).
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(b) The Indicated Member Interests, and the equity interest in the GP
represented thereby are duly authorized and, when issued and paid for in
accordance with this Agreement, will be duly and validly issued, fully paid
and nonassessable (except as such nonassessability may be affected by
Section 18-607 and Section 18-804 of the Delaware LLC Act), free and clear
of any liens (other than those arising under the Transaction Documents or
those created by the Buyers).
(c) Except as provided in the Transaction Documents and further except
as provided in Section 3.11(c) of the Disclosure Schedule, there are no
outstanding options, warrants, or securities, rights or obligations
convertible into or exercisable or exchangeable for, or any right to
subscribe for or acquire, any equity securities of any of the Partnership
Parties, or contracts, commitments, understandings or arrangements by which
the Partnership Parties are or may become bound to issue additional equity
securities of any of the Partnership Parties, or securities or rights
convertible or exchangeable into equity securities of any of the
Partnership Parties nor is there any restriction upon the voting or
transfer (except for the requirements of applicable securities laws) of any
equity securities of any of the Partnership Parties. Except as provided in
the Transaction Documents, there are no anti-dilution or price adjustment
provisions contained in (i) the Indicated Units issued by Issuer (or in any
agreement providing rights to holders of the Common Units) and (ii) the
Indicated Member Interest issued by GP (or in any agreement providing
rights to holders of Member Interests). The issuance and sale of the
Indicated Units will not obligate Issuer to issue Common Units to any
Person (other than the Buyers) and issuance and sale of the Purchased
Indicated Member Interests will not obligate GP to issue Member Interests
to any Person (other than the Buyers).
3.12. Financial Statements.
--------------------
(a) Issuer has made available to Buyers the Financial Statements. The
Financial Statements were prepared in accordance with GAAP, consistently
applied (except as disclosed in the footnotes thereto), and fairly present,
in all material respects, the financial position and results of operations
of QRC as of the dates thereof and for the periods covered thereby,
subject, however, with respect to any unaudited balance sheet or statements
of income and cash flows, to the absence of footnotes and to normal,
year-end adjustments.
(b) Attached as Section 3.12(b) of the Disclosure Schedule is (i) a
pro-forma balance sheet of Issuer as of October 31, 2006, prepared on a
consolidated basis (the "Pro-Forma Balance Sheet"). The Pro-Forma Balance
Sheet has been prepared in accordance with GAAP and fairly present, in all
material respects, the financial position of Issuer as of October 31, 2006
as adjusted (and after giving effect to) the completion of the sale and
issuance of the Common Units
10
contemplated in this Agreement and the application of the proceeds of such
sale by Issuer (including the retention of $15,000,000 of the proceeds
pursuant to Section 5.4(a) hereof and transfer of proceeds to QRC and
certain of its Affiliates pursuant to Section 5.4(b) hereof).
(c) As of the Closing Date (after giving to effect of the transactions
contemplated hereby), Bluestem will have no indebtedness for borrowed
money, accounts payable or accrued expenses other than the Assumed
Liabilities (as defined in the Contribution Agreement), expenses associated
with the Transactions and expenses incurred or accrued in the ordinary
course of business after December 1, 2006.
3.13. Accounting Firm. Murrell, Hall, XxXxxxxx & Co., PLLP, who has
certified the Financial Statements, is an independent registered public
accounting firm with respect to QRC, Issuer, GP and Bluestem, as would be
required under the Securities Act if the Indicated Units and the Indicated
Member Interests were being offered pursuant to an effective registration
statement under the Securities Act.
3.14. Absence of Certain Changes or Events. Except for the Transactions and
further except as set forth in Section 3.14 of the Disclosure Schedule, since
December 31, 2005, (a) none of the Partnership Parties has incurred any
liability or obligation, indirect, direct or contingent (including off-balance
sheet obligations), or entered into any transactions, not in the ordinary course
of business, that, singly or in the aggregate, is material to the Partnership
Parties, taken as a whole, (b) except as a result of this offering, there has
not been any material change in the capitalization, or material increase in the
short-term debt or long-term debt, of Issuer and Bluestem, taken as a whole, and
(c) there has not been any event or occurrence that constitutes or could
reasonably be expected to constitute a Material Adverse Effect or a QRC Material
Adverse Effect.
3.15. Compliance with Law. Except for Environmental Laws, Permits and Tax
matters, which are the subject of Section 3.20, Section 3.23 and Section 3.24,
respectively, and except as set forth in Section 3.15 of the Disclosure
Schedule, the Partnership Parties have complied with all laws, rules and
regulations of any Governmental Authority applicable to its properties, assets
and business, except where such noncompliance would not have or be reasonably
expected to have, individually or in the aggregate, a Material Adverse Effect.
The Partnership Parties have not received written notice of any violation of any
such law, statute, ordinance, rule or regulation, except for notifications of
violations which would not have or be reasonably expected to have, individually
or in the aggregate, a Material Adverse Effect. None of the Partnership Parties
is in default of any order, writ, judgment, award, injunction or decree of any
Governmental Authority applicable to its business, except for defaults which
would not have or be reasonably expected to have, individually or in the
aggregate, a Material Adverse Effect.
11
3.16. No Default. Except as set forth in Schedule 3.16 of the Disclosure
Schedule, none of the Partnership Parties (i) is in violation of its certificate
of limited partnership, certificate of formation, partnership agreement or other
organizational or charter documents, (ii) is in default (and no event has
occurred which, with notice or lapse of time or both, would become a default)
under, or give to others any rights of termination, amendment, acceleration or
cancellation (with or without notice, lapse of time or both) of, any agreement,
credit facility, debt or other instrument (evidencing a debt or other obligation
of the Partnership Parties) to which a Partnership Party is a party or by which
any property or asset of the Partnership Parties is bound or affected except for
any of the foregoing that would not have, or be reasonably expected to have, a
Material Adverse Effect, or (iii) is in violation of any law, statute, rule,
regulation, order, judgment, injunction, decree or other restriction of any
court or governmental authority to which any of the Partnership Parties is
subject (including, without limitation, federal and state securities laws and
regulations) or by which any property or asset of the Partnership Parties is
bound or affected, which violation would reasonably be expected to have,
individually or in the aggregate, a Material Adverse Effect, or could materially
impair the ability of any of the Partnership Parties to perform their
obligations under the Transaction Documents. To Issuer's Knowledge, no third
party to any agreement, credit facility, debt or other instrument (evidencing a
debt or other obligation of the Partnership Parties) to which any of the
Partnership Parties is a party or by which any of them is bound or to which any
of their properties is subject, is in default under any such agreement, which
default would, if continued, have a Material Adverse Effect.
3.17. Real Property; Rights of Way.
----------------------------
(a) Bluestem does not own fee simple title to any land.
(b) Except as would not have, or be reasonably expected to have, a
Material Adverse Effect: (i) all leases of real property under which
Bluestem is a tenant are in full force and effect and constitute valid and
binding obligations of the respective parties thereto; (ii) there currently
are not any defaults under such leases by Bluestem or, to Issuer's
Knowledge, by any other party thereto; (iii) no event has occurred which
(whether with or without notice, lapse of time or the happening or
occurrence of any other event) would constitute a default under such leases
entitling the lessor to terminate the lease; and (iv) the continuation,
validity and effectiveness of all such leases under the current rentals and
other current terms thereof will in no way be affected by the transactions
contemplated by this Agreement.
(c) Bluestem has such consents, easements, rights-of-way or licenses
from any person ("rights-of-way") as are necessary to conduct its business
as currently contemplated, and except for such rights-of-way which, if not
obtained, would not have, individually or in the aggregate, a Material
Adverse Effect; Bluestem has fulfilled and performed all its material
obligations with respect to
12
such rights-of-way and no event has occurred which allows, or after notice
or lapse of time would allow, revocation or termination thereof or would
result in any impairment of the rights of the holder of any such
rights-of-way, except for such revocations, terminations and impairments
that would not have a Material Adverse Effect.
3.18. Personal Property. Bluestem has good title to all the personal
property assets (including pipelines and equipment), tangible or
intangible, shown on the Pro-Forma Balance Sheet. None of such assets are
subject to any (i) contracts of sale or lease, except contracts for the
sale of inventory in the ordinary and regular course of business, or (ii)
security interests, encumbrances, liens or charges of any kind or
character. Except as set forth in Section 3.18 of the Disclosure Schedule
and further except as would not have, or be reasonably expected to have, a
Material Adverse Effect, (A) all personal property leases are in full force
and effect and constitute valid and binding obligations of the respective
parties thereto; (B) there have not been and there currently are not any
defaults thereunder by Bluestem or, to Issuer's Knowledge, any other party
thereto; (C) no event has occurred which (whether with or without notice,
lapse of time or the happening or occurrence of any other event) would
constitute a default thereunder entitling the lessor to terminate the
lease; and (D) the continuation, validity and effectiveness of all such
leases under the current rentals and other current terms thereof will in no
way be affected by the Transactions.
3.19. Insurance. Set forth as Section 3.19 of the Disclosure Schedule
is a schedule of all material policies of fire, liability, workers'
compensation and other forms of insurance purchased or held by and insuring
the Partnership Parties. Each insurance policy listed in Section 3.19 of
the Disclosure Schedule is in full force and effect, all premiums with
respect thereto have been paid, and no written notice of cancellation or
termination has been received with respect to any such policy which was not
replaced on substantially similar terms prior to the date of such
cancellation.
3.20. Environmental Matters.
---------------------
(a) The Partnership Parties have obtained and filed, and are in
compliance in all material respects with, all permits, licenses and
governmental authorizations required for the Partnership Parties to operate
their businesses under applicable Environmental Laws (the "Environmental
Permits"), and all Environmental Permits are valid and currently in full
force and effect, and there are no conditions or circumstances that would
result in the revocation or suspension of the Environmental Permits or that
would preclude the renewal of the Environmental Permits except as would not
have or be reasonably expected to have a Material Adverse Effect; and the
Partnership Parties are, and during the relevant time periods specified in
the applicable statutes of limitations, have been in compliance with
applicable Environmental Laws except as would not have or be reasonably
expected to have a Material Adverse Effect.
13
(b) Except as set forth in Section 3.20(b) of the Disclosure Schedule,
the Partnership Parties have not received any written request for
information, or been notified in writing that it is a potentially
responsible party, under CERCLA or any similar Environmental Law.
(c) Except as would not have or be reasonably expected to have a
Material Adverse Effect, the Partnership Parties have not entered into or
agreed to any consent decree or order, and are not subject to any judgment,
decree, or judicial order relating to compliance with any Environmental Law
or to investigation or cleanup of Hazardous Substances under any
Environmental Law, and the Partnership Parties and their business,
operations and properties are not subject to any existing, pending or, to
the Issuer's Knowledge, threatened action, suit, investigation, inquiry or
proceeding by or before any Governmental Authority pursuant to any
Environmental Law.
(d) Except as set forth in Section 3.20(d) of the Disclosure Schedule,
there has been no release of Hazardous Substances into the environment in
connection with the properties, business or operations of the Partnership
Parties for which remedial or corrective action may be required under
Environmental Laws, and there has been no exposure of any person or
property to any Hazardous Substances from or in connection with the
properties, business or operations of the Partnership Parties that could
reasonably be expected to form the basis of a claim for damages or
compensation.
(e) The Partnership Parties have made available to Buyers all internal
and external environmental studies, reports, audits and assessments and all
correspondence on substantial environmental matters related to the
Partnership Parties' properties, business or operations in the possession
of the Partnership Parties
(f) The representations and warranties made in this Section 3.20 are
Issuer's exclusive representations and warranties relating to environmental
matters.
3.21. Material Contracts. Except as set forth on Section 3.21 of the
Disclosure Schedule (a) each Material Contract is valid, binding and enforceable
in accordance with its terms, and is in full force and effect, (b) none of the
Partnership Parties or QRC has received any notice of default of any Partnership
Party, QRC or their Affiliates under any Material Contract in the 12-month
period prior to the date of this Agreement, (c) there are no uncured defaults of
any Partnership Party, QRC or their Affiliates under any Material Contract that
would give the counterparty thereof the right to terminate such Material
Contract, and (d) to the Issuer's Knowledge, there are no material defaults by
any of the counterparties to such Material Contracts, in each case under clauses
(a) through (d)
14
above, except as would not have or be reasonably expected to have,
individually or in the aggregate, a Material Adverse Effect.
3.22. Legal Proceedings. There are no claims, actions, or proceedings
pending or threatened and, to the Issuer's Knowledge, there are no events or
conditions existing that could give rise to any claim, action or proceeding
against the Partnership Parties, QRC or their Affiliates by or before any
Governmental Authority, that would result, individually or in the aggregate, in
any losses, claims, damages, liabilities, costs and expenses (including, without
limitation, attorneys' fees), interest, penalties, judgments and settlements to
the Partnership Parties in excess of $300,000.
3.23. Permits. Each of QRC and Bluestem has all material permits, licenses,
franchises and other governmental authorizations, consents and approvals, other
than with respect to Environmental Laws, necessary to operate its business as
presently operated (collectively, "Permits"), except where the failure to have
such Permits would not have or be reasonably expected to have (a) with respect
to Bluestem, individually or in the aggregate, a Material Adverse Effect or (b)
with respect to QRC, individually or in the aggregate, a QRC Material Adverse
Effect. Neither QRC nor Bluestem has received any written notification that it
is in violation of any Permits, except for notifications of violations which
would not have or be reasonably expected to have (a) with respect to Bluestem,
individually or in the aggregate, a Material Adverse Effect or (b) with respect
to QRC, individually or in the aggregate, a QRC Material Adverse Effect. Each of
QRC and Bluestem is in compliance with all Permits, except where such
noncompliance would not have or be reasonably expected to have (a) with respect
to Bluestem, individually or in the aggregate, a Material Adverse Effect or (b)
with respect to QRC, individually or in the aggregate, a QRC Material Adverse
Effect.
3.24. Taxes. The Partnership Parties have, in respect of their business,
filed all Tax Returns required to be filed other than those Tax Returns the
failure of which to file would not have or be reasonably expected to have,
individually or in the aggregate, a Material Adverse Effect; to Issuer's
Knowledge, such Tax Returns are true, correct and complete in all material
respects; and the Partnership Parties have paid in full all Taxes shown to be
due on such Tax Returns. None of the Partnership Parties have received any
written notice of deficiency or assessment from any taxing authority with
respect to liabilities for material Taxes of the Partnership Parties, which have
not been fully paid or finally settled, unless being contested in good faith
through appropriate proceedings and for which adequate reserves are presented on
the Financial Statements. There are no outstanding agreements or waivers
extending the applicable statutory periods of limitation for Taxes associated
with Partnership Parties' business for any period. Issuer has been recently
formed and intends to be treated as a partnership for U.S. federal income Tax
purposes and Issuer has not made any election to be treated as an association
taxable as a corporation.
15
3.25. Employee Benefit Plans.
----------------------
(a) Section 3.25 of the Disclosure Schedule sets forth a list of each
plan, program and arrangement, whether written or unwritten, that is
sponsored, maintained or contributed to by any Quest Party or any of their
Affiliates for the benefit of current or former employees of a Quest Party,
that provides for pension, retirement, profit-sharing, savings, bonus,
deferred or incentive compensation, including, without limitation, any
restricted stock/unit, stock/unit option or stock/unit appreciation right
benefit plan (each a "Benefit Plan). Section 3.25 of the Disclosure
Schedule identifies any Benefit Plan that is sponsored or maintained by a
Partnership Party.
(b) With respect to each Benefit Plan and any Benefit Plan previously
sponsored, maintained or contributed to by any Quest Party or their
Affiliates, no event has occurred, and there exists no condition or set of
circumstances in connection with which any Partnership Party could,
directly or indirectly (through any entity which is under common control
with a Quest Party within the meaning of Code section 414(b), (c), (m), (o)
or (t)) be subject to any material liability under ERISA, the Code or any
other applicable law, except liability for benefits claims and funding
obligations payable in the ordinary course.
(c) None of the Quest Parties contributes to or has an obligation to
contribute to, and has not at any time within six (6) years prior to the
date of the Acquisition contributed to or had an obligation to contribute
to, a "multiemployer plan" within the meaning of Section 3(37) of ERISA or
a plan subject to Title IV of ERISA. No Benefit Plan provides or promises
to provide retiree medical, dental or life insurance benefits to any
current or former employee of any Quest Party, other than pursuant to the
continuation coverage requirements of Section 4980B of the Code and
Sections 601 - 608 of ERISA..
(d) In connection with the consummation of the transactions
contemplated by this Acquisition, no payments of money or other property,
acceleration of benefits, or provisions of other rights have or will be
made hereunder, under any agreement contemplated herein, or under the
Benefit Plans that would be reasonably likely to result in imposition of
the sanctions imposed under Sections 280G and 4999 of the Code, whether or
not some other subsequent action or event would be required to cause such
payment, acceleration, or provision to be triggered.
3.26. Affiliate Contracts; Sufficiency of Assets. Except as set forth in
Section 3.26 of the Disclosure Schedule and in the Transaction Documents, there
are no material contracts, agreements, loans, understandings, leases, subleases,
mortgages, instruments, licenses, commitments or binding arrangements, express
or implied, oral or written, between the Partnership Parties, on the one hand,
and QRC or any of its
16
Affiliates (excluding GP, Issuer and Bluestem), on the other hand. All of the
assets necessary for the conduct of the Partnership Parties' business are owned,
leased or licensed by the Partnership Parties, and none of such assets are owned
by or leased or licensed to QRC or its Affiliates (excluding GP, Issuer and
Bluestem), except as set forth in Section 3.26 of the Disclosure Schedule. There
are no outstanding loans, advances (except normal advances for business expenses
in the ordinary course of business) or guarantees of indebtedness by any
Partnership Party to or for the benefit of any of the officers or directors of
any Partnership Party or their respective family members.
3.27. Restrictions on Distributions. Neither Issuer nor Bluestem has
entered into any agreement that restricts or prohibits its ability to pay cash
distributions (other than any such restrictions contained in the Partnership
Agreement or the Bluestem Limited Liability Company Agreement).
3.28. Private Placement. Assuming the accuracy of the representations and
warranties of the Buyers contained in this Agreement, the offer, sale and
issuance of (i) the Indicated Units and the Indicated Member Interests to the
Buyers and (ii) 35,134 Class A Subordinated Units and 4,900,000 Class B
Subordinated Units to QRC are exempt from the registration requirements of the
Securities Act, and the securities laws of any state having jurisdiction with
respect thereto, and none of the Partnership Parties has taken or will take any
action that would cause the loss of such exemption.
3.29. Registration Rights. Except as provided in the Registration Rights
Agreement and the Partnership Agreement, Issuer has not granted or agreed to
grant to any Person any rights (including "piggy-back" registration rights) to
have any Common Units or other securities of any of the Partnership Parties
registered with the Commission. GP has not granted or agreed to grant to any
Person any rights (including "piggy-back" registration rights) to have any
Member Interests or other securities of any of the Partnership Parties
registered with the Commission.
3.30. Investment Company. None of the Partnership Parties is now, and after
the sale of the Indicated Units to be sold by Issuer hereunder, the sale of
Indicated Member Interests to be sold by GP hereunder and the application of the
net proceeds from such sale will be, an "investment company" or a company
"controlled by" an "investment company" within the meaning of the Investment
Company Act of 1940, as amended.
3.31. No Side Agreements. There are no other agreements by, between or
among the Partnership Parties or their Affiliates, on the one hand, and any
Buyers or its Affiliates, on the other hand, with respect to the transactions
contemplated hereby, nor have any promises or inducements been made between or
among such parties with respect to future transactions.
17
3.32. Qualifying Income. The gross income of the Issuer earned pursuant to
the Midstream Agreement will constitute "qualifying income," within the meaning
of Section 7704(d) of the Code (as currently in effect).
3.33. Disclosure. To Issuer's Knowledge all material information regarding
the current or historical operation of Issuer's business provided to Buyers in
the electronic data room made available in connection with their due diligence
investigation of Issuer is true and correct in all material respects as of the
dates when such information was prepared; provided however, that no
representation or warranty is made with respect to any "forward looking"
statements regarding the business or prospects of Issuer, including any
projections of future revenues, business, expenses, distributions or operations,
and any such representations or warranties are expressly disclaimed.
3.34. Brokers' Fee. Except as set forth in Section 3.34 of the Disclosure
Schedule, no broker, finder or similar intermediary has acted for or on behalf
of, or is entitled to any broker, finder or similar fee or other commission from
Issuer or any of its Affiliates in connection with this Agreement or the
transactions contemplated hereby.
3.35. Books and Records; Internal Controls. Each of the Partnership Parties
(i) makes and keeps books, records and accounts, which, in reasonable detail,
accurately and fairly reflect the transactions and dispositions of assets and
(ii) maintains systems of internal accounting controls sufficient to provide
reasonable assurances that (A) transactions are executed in accordance with
management's general or specific authorization; (B) transactions are recorded as
necessary to permit preparation of financial statements in conformity with
generally accepted accounting principles and to maintain accountability for
assets; (C) access to assets is permitted only in accordance with management's
general or specific authorization; and (D) the recorded accountability for
assets is compared with existing assets at reasonable intervals and appropriate
action is taken with respect to any differences.
3.36. No Labor Dispute. No labor disturbance by the employees of any of the
Partnership Parties exists or, to Issuer's Knowledge, is imminent that could
reasonably be expected to have a Material Adverse Effect.
3.37. Acquisition. Each of the transactions contemplated by the Acquisition
has been consummated (other than any actions that are described in the
Contribution Agreement to be completed after the Closing).
3.38. Independent Petroleum Engineer. Xxxxxx, Xxxxxxxxx & Associates, Inc.,
is, as, of the date hereof, an independent petroleum engineer with respect to
QRC. The information underlying the estimates of reserves of the QRC and its
subsidiaries, which was supplied by QRC to Xxxxxx, Xxxxxxxxx & Associates, Inc.
for purposes of preparing the reserve reports and estimates of QRC, including,
without limitation, production, costs of operation and development, current
prices for production, agreements relating to
18
current and future operations and sales of production, was true and correct in
all material respects on the dates such estimates were made and such information
was supplied and was prepared in accordance with customary industry practices;
QRC is not aware of any facts or circumstances that would result in a material
adverse change in the reserves, or the present value of future net cash flows
therefrom, as reflected in reserve estimates provided by QRC to the Buyers.
ARTICLE IV.
REPRESENTATIONS AND WARRANTIES OF BUYER
Each Buyer hereby severally represents and warrants to Issuer (as to
itself, and not with respect to any other Buyer), as of the date of this
Agreement, as follows:
4.1. Organization. Buyer is duly organized, validly existing and in good
standing under the laws of the State of its incorporation or formation and has
the power and authority to own, lease and operate its properties and to carry on
its business as now being conducted.
4.2. Authority Relative to this Agreement. Buyer has the power and
authority to execute and deliver the Transaction Documents to which it is a
party and to consummate the Transactions. The execution and delivery by Buyer of
the Transaction Documents to which it is a party and the consummation by Buyer
of the Transactions have been duly and validly authorized by Buyer and no other
proceedings on the part of Buyer are necessary to authorize the Transaction
Documents to which it is a party or to consummate the Transactions. Each of the
Transaction Documents to which such Buyer is a party has been duly executed and
delivered by Buyer, and assuming that such Transaction Documents constitute
valid and binding agreements of Issuer and GP (as applicable), constitute valid
and binding agreements of Buyer, and are enforceable against Buyer in accordance
with their terms, except that such enforceability may be limited by applicable
bankruptcy, insolvency, moratorium or other similar laws affecting or relating
to enforcement of creditors' rights generally or general principles of equity.
4.3. Consents and Approvals; No Violation.
------------------------------------
(a) The execution and delivery of each Transaction Document to which
it is a Party by Buyer and the consummation by Buyer of the Transactions
will not (i) conflict with or result in any breach of any provision of the
articles of incorporation or bylaws (or similar organizational documents)
of Buyer, (ii) result in a default (or give rise to any right of
termination, cancellation or acceleration) under any of the terms,
conditions or provisions of any material note, bond, mortgage, indenture,
license, agreement or other instrument or obligation to which Buyer is a
party or by which its assets may be bound, or (iii) violate any order,
injunction, decree, statute, rule or regulation applicable to Buyer,
except, in the case of clauses (ii) and (iii) above, for defaults (or
rights of termination,
19
cancellation or acceleration) or violations which would not or would not be
reasonably expected to, individually or in the aggregate, materially impair
Buyer's ability to perform its obligations under each Transaction Document
to which it is a Party or consummate the Transactions.
(b) No declaration, filing or registration with, or notice to, or
authorization, consent or approval of any Governmental Authority is
necessary for the consummation by Buyer of the Transactions, other than
such declarations, filings, registrations, notices, authorizations,
consents or approvals which, if not obtained or made, would not or would
not be reasonably expected to, individually or in the aggregate, materially
impair Buyer's ability to perform its obligations under each Transaction
Document to which it is a Party or consummate the Transactions.
4.4. Acquisition for Investment; Due Diligence. Buyer is an informed and
sophisticated purchaser experienced in financial and business matters and the
evaluation and investment in businesses such as the Issuer as contemplated
hereunder. Buyer is an "accredited investor" as that term is defined in Rule 501
of Regulation D promulgated under the Securities Act. Buyer is acquiring the
Indicated Units and the Indicated Member Interests (if any) for investment and
not with a view toward or for sale in connection with any distribution thereof,
or with any present intention of distributing or selling such Indicated Units or
Indicated Member Interests (if any). Buyer agrees that its Indicated Units and
the Indicated Member Interests (if any) may not be sold, transferred, offered
for sale, pledged, hypothecated or otherwise disposed of (i) except in
accordance with the requirements of the Partnership Agreement or the GP Limited
Liability Company Agreement, as the case may be, or (ii) without registration
under the Securities Act, as amended, except pursuant to an exemption from such
registration available under such Act. Buyer has undertaken such investigation
and has been provided with and has evaluated such documents and information as
it has deemed necessary to enable it to make an informed and intelligent
decision with respect to the execution, delivery and performance of this
Agreement. Buyer has been furnished the materials relating to Buyer's purchase
of the Indicated Units and the Indicated Member Interests (if any) that it has
requested, and Issuer and GP have provided Buyer the opportunity to ask
questions of the officers and management employees of the Partnership Parties
and QRC and to acquire additional information about the Partnership Parties and
their respective financial condition.
4.5. No Side Agreements. There are no other agreements by, between or among
Buyer or its Affiliates, on the one hand, and any Partnership Parties or their
Affiliates, on the other hand, with respect to the transactions contemplated
hereby, nor have any promises or inducements been made between or among such
parties with respect to future transactions.
20
4.6. Brokers' Fee. No broker, finder or similar intermediary has acted for
or on behalf of, or is entitled to any broker, finder or similar fee or other
commission from Buyer or any of its Affiliates in connection with this Agreement
or the transactions contemplated hereby.
ARTICLE V.
COVENANTS OF THE PARTIES
5.1. Expenses. Except to the extent otherwise specifically provided herein,
all costs and expenses incurred in connection with the Transaction Documents and
the Transactions contemplated thereby shall be borne by the party incurring such
costs and expenses; provided, however, that if any action at law or equity is
necessary to enforce or interpret the terms of the Transaction Documents, the
prevailing party shall be entitled to reasonable attorney's fees, costs and
necessary disbursements in addition to any other relief to which such party may
be entitled; and provided further, that promptly following Closing, Issuer will,
upon request from Alerian (and receipt of documentation reflecting the legal
costs incurred), reimburse and pay to Alerian up to $75,000 of the legal
expenses incurred by Alerian in connection with completing the transactions
contemplated by this Agreement.
5.2. Partnership Matters. Each Buyer hereby agrees to become a limited
partner of Issuer and to be bound by all of the terms and conditions of the
Partnership Agreement, including, without limitation, the granting to the
General Partner of Issuer the power of attorney provided for in Section 2.6 of
the Partnership Agreement. Buyer understands that the Indicated Units are being
offered in a transaction not involving a public offering within the meaning of
the Securities Act and that the offer and sale of the Indicated Units has not
been registered under the Securities Act and, unless so registered, the
Indicated Units may not be sold except as permitted in the following sentence.
Buyer agrees that, if in the future Buyer decides to offer, resell, pledge or
otherwise transfer such Indicated Units, such Indicated Units may be offered,
resold, pledged or otherwise transferred only (a) to Issuer or a subsidiary
thereof, (b) pursuant to a registration statement that has been declared
effective under the Securities Act, or (c) pursuant to an available exemption
from the registration requirements of the Securities Act, subject in each of the
foregoing cases to any requirement of law that the disposition of Buyer's
property be at all times within Buyer's control and subject to compliance with
any applicable securities laws of any jurisdiction. Buyer agrees not to engage
in hedging transactions with regard to the Indicated Units unless in compliance
with the Securities Act. At Closing, Issuer will deliver to each Buyer one or
more certificates, in the form adopted by Issuer, representing the Indicated
Units purchased at the Closing by such Buyer. Buyer agrees to the imprinting, so
long as the restrictions described in the legend are applicable, of the
following legend on any certificate evidencing Indicated Units:
THESE SECURITIES HAVE NOT BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE
COMMISSION OR THE
21
SECURITIES COMMISSION OF ANY STATE IN RELIANCE UPON AN EXEMPTION FROM
REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES
ACT"), AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO AN
EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO AN
AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE
REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND IN ACCORDANCE WITH
APPLICABLE STATE SECURITIES LAWS. NOTWITHSTANDING THE FOREGOING, THESE
SECURITIES MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT OR
OTHER LOAN OR FINANCING ARRANGEMENT SECURED BY SUCH SECURITIES.
Certificates evidencing Indicated Units shall not be required to contain such
legend or any other legend following any sale of such Indicated Units pursuant
to an effective registration statement or Rule 144, or the restrictions
described in the legend are no longer applicable. Buyer may request Issuer to
remove the legend described above from the certificates evidencing the Indicated
Units by submitting to Issuer such certificates, together with an opinion of
counsel reasonably satisfactory to Issuer to the effect that such restrictions
are no longer applicable under the Securities Act or applicable state laws, as
the case may be.
5.3. GP Matters. Alerian and Swank each hereby agree to become a member of
GP and to be bound by all of the terms and conditions of the GP Limited
Liability Company Agreement. Alerian and Swank understand that the Indicated
Member Interests are being offered in a transaction not involving a public
offering within the meaning of the Securities Act and that the offer and sale of
the Indicated Member Interests has not been registered under the Securities Act
and, unless so registered, the Indicated Member Interests may not be sold except
as permitted in the following sentence. Each of Alerian and Swank severally
agree that, if in the future such Buyer decides to offer, resell, pledge or
otherwise transfer the Indicated Member Interests held by it, such Indicated
Member Interests may be offered, resold, pledged or otherwise transferred only
(a) to GP or a subsidiary thereof, (b) pursuant to a registration statement that
has been declared effective under the Securities Act, or (c) pursuant to an
available exemption from the registration requirements of the Securities Act,
subject in each of the foregoing cases to any requirement of law that the
disposition of such Buyer's property be at all times within such Buyer's control
and subject to compliance with any applicable securities laws of any
jurisdiction. Each of Alerian and Swank severally agree not to engage in hedging
transactions with regard to the Indicated Member Interests held by it unless in
compliance with the Securities Act. At Closing, GP will deliver to each of
Alerian and Swank one or more certificates, in the form adopted by GP,
representing the Indicated Member Interests purchased at the Closing by such
Buyer. Each of Alerian and
22
Swank agrees to the imprinting, so long as the restrictions described in the
legend are applicable, of the following legend on any certificate evidencing
Indicated Member Interests:
THESE SECURITIES HAVE NOT BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE
COMMISSION OR THE SECURITIES COMMISSION OF ANY STATE IN RELIANCE UPON AN
EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED
(THE "SECURITIES ACT"), AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD
EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE
SECURITIES ACT OR PURSUANT TO AN AVAILABLE EXEMPTION FROM, OR IN A
TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE
SECURITIES ACT AND IN ACCORDANCE WITH APPLICABLE STATE SECURITIES LAWS.
NOTWITHSTANDING THE FOREGOING, THESE SECURITIES MAY BE PLEDGED IN
CONNECTION WITH A BONA FIDE MARGIN ACCOUNT OR OTHER LOAN OR FINANCING
ARRANGEMENT SECURED BY SUCH SECURITIES.
Certificates evidencing Indicated Member Interests shall not be required to
contain such legend or any other legend following any sale of such Indicated
Member Interests pursuant to an effective registration statement or Rule 144, or
if the restrictions described in the legend are no longer applicable. Each of
Alerian and Swank may request GP to remove the legend described above from the
certificates evidencing the Indicated Member Interests by submitting to GP such
certificates, together with an opinion of counsel reasonably satisfactory to GP
to the effect that such restrictions are no longer applicable under the
Securities Act or applicable state laws, as the case may be.
5.4. Use of Proceeds from Sale of the Indicated Units.
------------------------------------------------
(a) The parties agree that $15,000,000 of the proceeds received by
Issuer in connection with the issuance and sale of the Indicated Units
pursuant to this Agreement will be retained by the Issuer as working
capital until such time as the Partnership Parties enter into a credit
facility or other arrangement entered into by one or more of the
Partnership Parties subsequent to the Closing Date that will provide Issuer
with an ability to make borrowings used solely for working capital purposes
or to pay distributions to the limited partners of Issuer; provided that
the terms and conditions of such facility shall be approved by the Investor
Representatives (an "Approved Working Capital Facility").
(b) Each Buyer acknowledges and the parties agree that $23,807,877 of
the proceeds received by Issuer in connection with the issuance and sale of
the
23
Indicated Units pursuant to this Agreement will be transferred or
distributed to QRC (or its designated Affiliates) and will not be retained
by or available for the use of Issuer. Upon distribution of such proceeds
to QRC (or its designated Affiliates), such proceeds (net of all
non-duplicative transaction expenses) will only be used to fund development
and acquisitions in the Cherokee Basin by QRC and its Affiliates (unless
the Investor Representatives have approved another use). Each Buyer hereby
consents to and approves such transfer, disposition and use.
(c) The remaining $51,192,123 of the proceeds received by Issuer in
connection with the issuance and sale of the Indicated Units pursuant to
this Agreement shall be used by the Issuer to pay transaction expenses
associated with the Transactions ("Transaction Expenses"), repay the
Assumed Liabilities and to repay the Opco Revolver Debt (as defined in the
Contribution Agreement). Upon the entry by the Partnership Parties into an
Approved Working Capital Facility, the proceeds retained by Issuer pursuant
to Section 5.4(a) above, plus or minus the amount by which Transaction
Expenses are less than or exceed, as the case may be, $6,000,000, will be
transferred or distributed to QRC (or its designated Affiliates) and will
not be available for use by Issuer. Upon distribution of such proceeds to
QRC (or its designated Affiliates), such proceeds (net of any
non-duplicative transaction expenses) will only be used to fund development
and acquisitions in the Cherokee Basin by QRC and its Affiliates (unless
the Investor Representatives have approved another use). Each Buyer hereby
consents to and approves such transfer, disposition and use.
5.5. Integration. Issuer shall not, and shall use its commercially
reasonable efforts to ensure that none of Issuer, GP or any Affiliate of Issuer
or GP shall, sell, offer for sale or solicit offers to buy or otherwise
negotiate in respect of any security (as defined in Section 2 of the Securities
Act) that would be integrated with the offer or sale of the Indicated Units or
the Indicated Member Interests to Buyer in a manner that would require the
registration under the Securities Act of the sale of the Indicated Units or the
Indicated Member Interests.
5.6. Further Assurances. Subject to the terms and conditions of this
Agreement, each of the parties hereto shall use all commercially reasonable
efforts to take, or cause to be taken, all action, and to do, or cause to be
done, all things necessary, proper or advisable under applicable laws and
regulations to consummate and make effective the issuance and sale of the
Indicated Units and Indicated Member Interests pursuant to this Agreement.
5.7. Public Statements. The parties shall consult with each other prior to
issuing any public announcement, statement or other disclosure with respect to
this Agreement or the transactions contemplated hereby and neither the Issuer
and GP on one hand nor the Buyers on the other shall issue any such public
announcement, statement or other disclosure without having first received the
written consent of the Buyers on one
24
hand or Issuer on the other, except as may be required by law.
5.8. No Implied Representations. Each Buyer hereby acknowledges and agrees
that none of QRC, Issuer, GP or their Affiliates or any other Person has made or
is making any representation or warranty whatsoever, express or implied, at law
or in equity, except those representations and warranties of QRC, Issuer and GP
explicitly set forth in Article III of this Agreement and in the other
Transaction Documents. Without limiting the generality of the foregoing, except
as explicitly set forth in Article III of this Agreement, none of QRC, Issuer,
GP or their Affiliates or any other Person has made or is making any
representation, express or implied, with respect to QRC, Issuer, GP, Bluestem,
their respective businesses or any of their assets, liabilities or operations,
their past, current or future financial condition, profitability or performance,
the value of any of their assets, the merchantability, suitability or fitness
for a particular purpose or quality with respect to any of their assets or the
condition or workmanship thereof or the absence of any defects therein (whether
latent or patent), and any such other representations or warranties are hereby
expressly disclaimed.
5.9. Independent Nature of Buyer's Obligations and Rights. The obligations
of each Buyer under this Agreement or the Registration Rights Agreement are
several and not joint with the obligations of any other present or subsequent
purchaser of the Indicated Units or Indicated Member Interests, as the case may
be, and each Buyer shall not be responsible in any way for the performance of
the obligations of any other Buyer under any agreement to purchase Indicated
Units or Indicated Member Interests, as the case may be. The decision of each
Buyer to purchase Indicated Units or Indicated Member Interests, as the case may
be, pursuant to this Agreement has been made by such Buyer independently of any
other Buyer of the Indicated Units or Indicated Member Interests, as the case
may be, and independently of any information, materials, statements or opinions
as to the business, affairs, operations, assets, properties, liabilities,
results of operations, condition (financial or otherwise) or prospects of the
Partnership Parties that may have been made or given by any other Buyer of the
Indicated Units or Indicated Member Interests, as the case may be, or by any
agent or employee of any such Buyer, and no Buyer or any of its agents or
employees shall have any liability to any other Buyer (or any other Person)
relating to or arising from any such information, materials, statements or
opinions. Nothing contained herein or in the Registration Rights Agreement, and
no action taken by any Buyer pursuant thereto, shall be deemed to constitute
such Buyer as a partnership, an association, a joint venture or any other kind
of entity, or create a presumption that such Buyer is in any way acting in
concert or as a group with respect to such obligations or the transactions
contemplated by this Agreement or the Registration Rights Agreement. Each Buyer
acknowledges that no other Buyer of the Indicated Units or Indicated Member
Interests, as the case may be, has acted as agent for such Buyer in connection
with making its investment hereunder and that no other Buyer will be acting as
agent of such Buyer in connection with monitoring its investment hereunder. Each
Buyer shall be entitled to independently protect and enforce its rights,
including without limitation the rights arising out of this Agreement or
25
out of the Registration Rights Agreement, and it shall not be necessary for any
other Buyer of the Indicated Units or Indicated Member Interests, as the case
may be, to be joined as an additional party in any proceeding for such purpose.
Each Buyer represents that it has been represented by its own separate legal
counsel in its review and negotiations of this Agreement and the Registration
Rights Agreement.
5.10. Tax Shield. The amount of the Issuer's federal taxable income
allocated to each Buyer, on a cumulative basis, for the period from the
Effective Date to December 31, 2007, will be 20% or less of the amount of cash
distributed to such Buyer with respect to such period.
5.11. Tax Opinion. No later than January 30, 2007, Issuer will deliver to
Buyers the opinion of Xxxxx Xxxxx to the effect that 90% or more of the gross
income of Issuer, based on pro forma income for the nine months ending September
30, 2006, will constitute "qualifying income," within the meaning of Section
7704(d) of the Code (as currently in effect).
5.12. CygNet Software License. Within 30 days after the Closing Date, Opco
will obtain a consent to the assignment of the CygNet Software End-User License
Agreement between Opco and Quest Cherokee, LLC.
ARTICLE VI.
INDEMNIFICATION
6.1. Survival.
--------
(a) The representations and warranties of the parties contained in
Articles III and IV shall, subject to Section 6.1(c), survive the Closing
until the date that is one year after the Closing Date, with the exception
that the representations and warranties in (i) Sections 3.20, 3.25, 3.28,
3.29, 3.30 and 3.31 shall survive until the date that is three years after
the Closing Date, (ii) Section 3.24 shall survive until the expiration of
the applicable statute of limitations and (iii) Sections 3.1 through 3.11
and 4.1, 4.2, 4.3 and 4.4 shall survive perpetually.
(b) All covenants and agreements contained herein that by their terms
are to be performed in whole or in part, or which prohibit actions,
subsequent to the Closing, shall survive the Closing in accordance with
their terms.
(c) The period of time a representation or warranty or covenant or
agreement survives the Closing pursuant to this Section 6.1 shall be the
"Survival Period" with respect to such representation or warranty or
covenant or agreement. In the event notice of any claim for indemnification
under this Article VI shall have been given within the applicable Survival
Period and such claim has not been finally resolved by the expiration of
such Survival Period, the representations or warranties or covenants or
agreements that are the subject of
26
such claim shall survive, but only to the extent of and in the amount of
the claim as made prior to the expiration of the Survival Period, until
such claim is finally resolved.
6.2. Indemnification Obligations of QRC, Issuer and GP.
-------------------------------------------------
(a) Subject to the terms of this Article VI, notwithstanding any
termination of this Agreement, QRC, Issuer and GP shall, during the
applicable Survival Period, jointly and severally, indemnify and hold
harmless each Buyer, the directors, partners, member, agents, investment
advisors of each of them, each Person who controls any Buyer (within the
meaning of Section 15 of the Securities Act or Section 20 of the Exchange
Act) and the officers, directors, partners, members, agents and employees
of each such controlling Person (collectively, the "Buyer Indemnitees"), to
the fullest extent permitted by law, from and against any losses, claims,
damages, liabilities, costs and expenses (including, without limitation,
attorneys' fees), interest, penalties, judgments and settlements
(collectively, "Losses") incurred, arising out of or relating to (i) any
breach of any of the representations or warranties (in each case, when
made) of QRC, Issuer and GP in Article III, and (ii) any breach of any of
the covenants or agreements of QRC, Issuer or GP in this Agreement that by
their terms are to be performed in whole or in part, or which prohibit
actions, subsequent to the Closing Date.
(b) In no event shall the amount of Losses for which QRC, Issuer and
GP (collectively, the "Seller Indemnitors") are collectively obligated to
indemnify the Buyer Indemnitees pursuant to Section 6.2(a) exceed the Total
Invested Amount.
6.3. Indemnification Obligations of Buyer. From and after the Closing,
subject to the terms of this Article VI, each Buyer shall during the applicable
Survival Period, severally and not jointly, indemnify and hold harmless QRC,
Issuer and GP, the directors, partners, members, agents, investment advisors of
each of them, each Person who controls any Buyer (within the meaning of Section
15 of the Securities Act or Section 20 of the Exchange Act) and the officers,
directors, partners, members, agents and employees of each such controlling
Person, to the fullest extent permitted by law, from and against Losses
incurred, arising out of or relating to (i) any breach of any of the
representations or warranties (in each case, when made) of such Buyer in Article
IV and (ii) any breach of any of the covenants or agreements of such Buyer in
this Agreement that by their terms are to be performed in whole or in part, or
which prohibit actions, subsequent to the Closing Date; provided, however, that
the liability of each Buyer for all claims hereunder shall not exceed the
Indicated Purchase Price of such Buyer calculated in accordance with Section
2.2.
27
6.4. Indemnification Procedures and Limitations.
------------------------------------------
(a) In the event that any action, suit, claim or proceeding is
commenced by a third party involving a claim for which a party required to
provide indemnification hereunder (an "Indemnifying Party") may be liable
to a party entitled to indemnification (an "Indemnified Party") hereunder
(a "Third Party Claim"), the Indemnified Party shall promptly notify the
Indemnifying Party in writing of such Third Party Claim indicating the
nature of such claim and the basis therefore (the "Claim Notice") and the
Indemnifying Party shall assume the defense thereof, including the
employment of counsel reasonably satisfactory to the Indemnified Party and
the payment of all fees and expenses incurred in connection with defense
thereof; provided, that no failure -------- of any Indemnified Party to
give such Claim Notice and no delay on the part of the Indemnified Party in
giving any such Claim Notice shall relieve the Indemnifying Party of any
indemnification obligation hereunder except (and only) to the extent that
it shall be finally determined by a court of competent jurisdiction (which
determination is not subject to appeal or further review) that such failure
shall have proximately and materially adversely prejudiced the Indemnifying
Party.
(b) An Indemnified Party shall have the right to employ separate
counsel in any such Proceeding and to participate in the defense thereof,
but the fees and expenses of such counsel shall be at the expense of such
Indemnified Party or Parties unless: (i) the Indemnifying Party has agreed
in writing to pay such fees and expenses; (ii) the Indemnifying Party shall
have failed promptly to assume the defense of such Proceeding and to employ
counsel reasonably satisfactory to such Indemnified Party in any such
Proceeding; or (iii) the named parties to any such Proceeding (including
any impleaded parties) include both such Indemnified Party and the
Indemnifying Party, and such Indemnified Party shall have been advised by
counsel that a conflict of interest is likely to exist if the same counsel
were to represent such Indemnified Party and the Indemnifying Party (in
which case, if such Indemnified Party notifies the Indemnifying Party in
writing that it elects to employ separate counsel at the expense of the
Indemnifying Party, such counsel shall be at the expense of the
Indemnifying Party). It being understood, however, that the Indemnifying
Party shall not, in connection with any one such Proceeding, be liable for
the fees and expenses of more than one separate firm of attorneys at any
time for all Indemnified Parties, which firm shall be appointed by a
majority of the Indemnified Parties; provided, however, that in the case a
single firm of attorneys would be inappropriate due to actual or potential
differing interests or conflicts between such Indemnified Parties and any
other party represented by such counsel in such Proceeding or otherwise,
then the Indemnifying Party shall be liable for the fees and expenses of
one additional firm of attorneys with respect to such Indemnified Parties.
The Indemnifying Party shall not be liable for any settlement of any such
Proceeding effected without its written consent, which consent shall not be
unreasonably
28
withheld. No Indemnifying Party shall, without the prior written consent of
the Indemnified Party, effect any settlement of any pending Proceeding in
respect of which any Indemnified Party is a party, unless such settlement
includes an unconditional release of such Indemnified Party from all
liability on claims that are the subject matter of such Proceeding and does
not contain any admission of wrongdoing or illegal conduct.
(c) All reasonable fees and expenses of the Indemnified Party
(including reasonable fees and expenses to the extent incurred in
connection with investigating or preparing to defend such Proceeding in a
manner not inconsistent with this Section) shall be paid to the Indemnified
Party, as incurred, within ten Business Days of written notice thereof to
the Indemnifying Party (regardless of whether it is ultimately determined
that an Indemnified Party is not entitled to indemnification hereunder;
provided, -------- that the Indemnifying Party may require such Indemnified
Party to undertake to reimburse all such fees and expenses to the extent it
is finally judicially determined that such Indemnified Party is not
entitled to indemnification hereunder).
(d) In calculating amounts payable to an Indemnified Party, the amount
of any indemnified Losses shall be determined without duplication of any
other Loss for which an indemnification claim has been made or could be
made under any other representation, warranty, covenant, or agreement and
shall be computed net of (i) payments recovered by the Indemnified Party
under any insurance policy with respect to such Losses, (ii) any prior or
subsequent recovery by the Indemnified Party from any Person with respect
to such Losses.
(e) Notwithstanding any other provision of this Agreement, in no event
shall Issuer, GP or any Buyer be liable for punitive damages or any
special, incidental, indirect or consequential damages of any kind or
nature, regardless of the form of action through which such damages are
sought.
(f) Except for a claim of fraud, the remedies provided in this Article
VI (including specific performance, as discussed in Section 6.4 (g) below)
shall be the sole and exclusive remedies of the parties, from and after the
Closing Date, with respect to this Agreement and the transactions
contemplated hereby.
(g) In addition to being entitled to exercise all rights provided
herein, including recovery of damages, the Buyers and Issuer and GP will be
entitled to specific performance under this Agreement or the Registration
Rights Agreement. The parties agree that monetary damages may not be
adequate compensation for any loss incurred by reason of any breach of
obligations described in the foregoing sentence and hereby agree to waive
in any action for specific performance of any such obligation the defense
that a remedy at law would be adequate.
29
ARTICLE VII.
MISCELLANEOUS PROVISIONS
7.1. Amendment and Modification. Subject to applicable law, this Agreement
may be amended, modified or supplemented only by written agreement of Issuer, GP
and the Buyers.
7.2. Waiver of Compliance; Consents. Except as otherwise provided in this
Agreement, any failure of any of the parties to comply with any obligation,
covenant, agreement or condition herein may be waived by the party entitled to
the benefits thereof only by a written instrument signed by the party granting
such waiver, but such waiver or failure to insist upon strict compliance with
such obligation, covenant, agreement or condition shall not operate as a waiver
of, or estoppel with respect to, any subsequent or other failure.
7.3. Notices. All notices and other communications hereunder shall be in
writing and shall be deemed given if delivered personally or by facsimile
transmission, or mailed by a nationally recognized overnight courier or
registered or certified mail (return receipt requested), postage prepaid, to the
parties at the following addresses (or at such other address for a party as
shall be specified by like notice, provided, that notices of a change of address
shall be effective only upon receipt thereof):
(a) If to Issuer or GP, to:
Quest Midstream Partners, L.P.
0000 X. Xxx Xxxxxx, Xxxxx 000
Xxxxxxxx Xxxx, Xxxxxxxx 00000
Attention: President
Telecopy: 000-000-0000
with copies (which shall not constitute notice) to:
Xxxxxxx Xxxxxxxx Xxxxxx LLP
0000 Xxxxxx Xxxxxx, Xxxxx 0000
Xxxxxx Xxxx, Xxxxxxxx 00000-0000
Attention: Xxxxxxx X. Xxxxxxxxxx, Esq.
Telecopy: 000-000-0000
(b) if to a Buyer, addressed to the address set forth on the
signature page hereto.
7.4. Assignment. This Agreement shall be binding upon and inure to the
benefit of the parties and their successors and permitted assigns. Issuer may
not assign this Agreement or any rights or obligations hereunder without the
prior written consent of two-thirds of the Buyers. GP may not assign this
Agreement or any rights or obligations
30
hereunder without the prior written consent of Alerian and Swank. All or any
portion the Indicated Units or Indicated Member Interests purchased by such
Buyer pursuant to this Agreement may be sold, assigned or pledged by Buyer,
subject to compliance with applicable securities laws, the terms of this
Agreement and the terms of the Partnership Agreement or the GP Limited Liability
Company Agreement, as applicable. All or any portion of the rights and
obligations of the Buyers under this Agreement may not be transferred by any
Buyer without the written consent of GP or Issuer, unless such transfer is to an
Affiliate of such Buyer in which case written consent shall not be required.
7.5. Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of New York without regard to principles
of conflicts of laws.
7.6. Facsimiles; Counterparts. This Agreement may be executed by facsimile
signatures by any party and such signature shall be deemed binding for all
purposes hereof, without delivery of an original signature being thereafter
required. This Agreement may be executed in one or more counterparts, each of
which, when executed, shall be deemed to be an original and all of which
together shall constitute one and the same document.
7.7. Entire Agreement. This Agreement, the Partnership Agreement and the
Registration Rights Agreement constitute the entire agreement and understanding
of the parties with respect to the subject matter hereof and supersedes all
prior agreements and understandings between the parties with respect to such
subject matter.
7.8. Severability. Whenever possible, each provision or portion of any
provision of this Agreement will be interpreted in such manner as to be
effective and valid under applicable law but if any provision or portion of any
provision of this Agreement is held to be invalid, illegal or unenforceable in
any respect under any applicable law or rule in any jurisdiction, such
invalidity, illegality or unenforceability will not affect any other provision
or portion of any provision in such jurisdiction, and this Agreement will be
reformed, construed and enforced in such jurisdiction as if such invalid,
illegal or unenforceable provision or portion of any provision had never been
contained herein.
7.9. Third Party Beneficiaries. This Agreement shall be binding upon and
inure solely to the benefit of the parties hereto and their respective
successors and assigns. None of the provisions of this Agreement shall be for
the benefit of or enforceable by any third party, including any creditor of any
party or any of their Affiliates. No such third party shall obtain any right
under any provision of this Agreement or shall by reasons of any such provision
make any claim in respect of any liability (or otherwise) against either party
hereto; provided, however, that each Person named as receiving the benefits of
the indemnification provided in Sections 6.2 and 6.3 is an intended third party
beneficiary
31
pursuant to the provisions of Sections 6.2 and 6.3 and may enforce the
provisions of such sections directly against the parties with obligations
thereunder.
[Signature pages follow]
32
IN WITNESS WHEREOF, Issuer and Buyer have caused this Agreement to be
signed by their respective duly authorized officers as of the date first above
written.
QUEST MIDSTREAM PARTNERS, L.P.
By: Quest Midstream GP, LLC,
its general partner
By: /s/ Xxxxx X. Xxxx
------------------------
Name: Xxxxx X. Xxxx
Title: Chief Executive Officer
QUEST MIDSTREAM GP, LLC
By: /s/ Xxxxx X. Xxxx
------------------------------
Name: Xxxxx X. Xxxx
Title: Chief Executive Officer
QUEST RESOURCE CORPORATION
By: /s/ Xxxxx X. Xxxx
------------------------------
Name: Xxxxx X. Xxxx
Title: Chief Executive Officer
ALERIAN OPPORTUNITY PARTNERS IV, LP
By: ALERIAN OPPORTUNITY
ADVISORS IV, LLC
its general partner
By: /s/ Xxxxxxx Xxxxxxx
------------------------
Name: Xxxxxxx Xxxxxxx
Title: Managing Member
Address for Notice:
Alerian Capital Management
00 Xxxxxxxxxxx Xxxxx, 00xx Xxxxx
Xxx Xxxx, XX 00000
Attention: Xxxxxxx Xxxxxxx
SWANK MLP CONVERGENCE FUND, LP
By: SWANK ENERGY INCOME ADVISORS, L.P.
its general partner
By: SWANK CAPITAL, LLC
its general partner
By: /s/ Xxxxx X. Xxxxx
------------------------
Name: Xxxxx X. Xxxxx
Title: Manager
Address for Notice:
Swank Capital, LLC
Xxx Xxxx Xxxxxx, Xxxxx 000
Xxxxxx, XX 00000
SWANK INVESTMENT PARTNERS, LP
By: SWANK ENERGY INCOME ADVISORS, L.P.
its general partner
By: SWANK CAPITAL, LLC
its general partner
By: /s/ Xxxxx X. Xxxxx
------------------------
Name: Xxxxx X. Xxxxx
Title: Manager
Address for Notice:
Swank Capital, LLC
Xxx Xxxx Xxxxxx, Xxxxx 000
Xxxxxx, XX 00000
THE XXXXXXX MLP OPPORTUNITY FUND I, LP
By: CARBON COUNTY PARTNERS I, LP
its general partner
By: CARBON COUNTY GP I, LLC
its general partner
By: /s/ Xxxxx X. Xxxxx
------------------------
Name: Xxxxx X. Xxxxx
Title: Manager
Address for Notice:
Swank Capital, LLC
Xxx Xxxx Xxxxxx, Xxxxx 000
Xxxxxx, XX 00000
THE XXXXXXX XX STRATEGIES FUND, LP
By: CARBON COUNTY PARTNERS I, LP
its general partner
By: CARBON COUNTY GP I, LLC
its general partner
By: /s/ Xxxxx X. Xxxxx
------------------------
Name: Xxxxx X. Xxxxx
Title: Manager
Address for Notice:
Swank Capital, LLC
Xxx Xxxx Xxxxxx, Xxxxx 000
Xxxxxx, XX 00000
TORTOISE CAPITAL RESOURCES CORPORATION
By: /s/ Xxxxx X. Xxxxxxx
------------------------------
Name: Xxxxx X. Xxxxxxx
Title: President
Address for Notice:
Tortoise Capital Resources Corporation
00000 Xxxxxx Xxxx., Xxxxx 000
Xxxxxxxx Xxxx, XX 00000
XXXXXXXX OPPORTUNITY
PARTNERS, LP
By: Xxxxxxxx Opportunity Partners GP, LLC,
its General Partner
By: /s/ Xxxxxx X. Xxxxx
--------------------------------
Name: Xxxxxx X. Xxxxx
Title: Manager
Address for Notice:
c/o Huizenga Capital Management
0000 Xxxx Xxxx, Xxxxx 000
Xxx Xxxxx, XX 00000
HCM ENERGY HOLDINGS, LLC
By: /s/ Xxxxx X. Xxxxxxxx
---------------------------------
Name: Xxxxx X. Xxxxxxxx
Title: Manager
Address for Notice:
c/o Huizenga Capital Management
0000 Xxxx Xxxx, Xxxxx 000
Xxx Xxxxx, XX 00000
DISCLOSURE SCHEDULE
The Purchase Agreement, dated as of December 22, 2006 (the
"Agreement") by and among Quest Midstream Partners, L.P., Quest Midstream GP,
LLC, Quest Resource Corporation, Alerian Opportunity Partners IV, L.P., Swank
MLP Convergence Fund, LP, Swank Investment Partners, LP, The Xxxxxxx MLP
Opportunity Fund I, LP, The Xxxxxxx XX Strategies Fund, LP, Tortoise Capital
Resources Corporation, Xxxxxxxx Opportunity Partners, LP and HCM Energy
Holdings, LLC, sets forth certain information or agreements to be disclosed in
the Disclosure Schedule pursuant to the Agreement.
The contents of this Disclosure Schedule are qualified in their
entirety by reference to the specific provisions of the Agreement.
Any disclosure of a matter, fact or circumstance in this Disclosure
Schedule shall not establish, or constitute an admission of, (i) the materiality
of such matter, fact or circumstance, (ii) whether or not such matter, fact or
circumstance rises to the level of any materiality or "Material Adverse Effect"
or "QRC Material Adverse Effect" standard for purposes of the Agreement or this
Disclosure Schedule, or (iii) whether or not such matter, fact or circumstance
is in the "ordinary course of business." Moreover, the disclosure of a matter,
fact or circumstance in this Disclosure Schedule shall not be deemed an
admission of any obligation or liability to any third party. Descriptions or
references of particular contracts, agreements, notices or similar documents
herein are qualified in their entirety by reference to such documents.
Any matter specifically disclosed in any section or subsection of this
Disclosure Schedule shall be considered disclosed only with respect to the
specific section or subsection of this Disclosure Schedule where the disclosure
appears and to any other section or subsection of this Disclosure Schedule
cross-referenced by such disclosure. Any introductory language or headings in
this Disclosure Schedule are inserted for convenience only and do not create,
and should not be deemed to create, a different standard for disclosure than the
language set forth in the Agreement.
Terms used in this Disclosure Schedule and not otherwise defined
herein or therein shall have the meanings assigned thereto in the Agreement.
INDEX OF SCHEDULES
Schedule 3.3 - Consents and Approvals
Schedule 3.9 - Class A and B Subordinated Units
Schedule 3.11(c) - Transfer Restrictions
Schedule 3.12(b) - Pro-Forma Balance Sheet
Schedule 3.14 - Absence of Changes
Schedule 3.15 - Compliance with Law
Schedule 3.16 - No Default
Schedule 3.19 - Insurance
Schedule 3.20(b) - Notification of Non-Compliance with Environmental Law
Schedule 3.20(d) - Releases
Schedule 3.21 - Material Contracts
Schedule 3.25 - Benefit Plans
Schedule 3.26 - Affiliate Contracts
Schedule 3.34 - Brokers' Fee
Schedule 3.3
Consents and Approvals
----------------------
1. The Transactions require the consent of the lenders under the Guggenheim
Credit Facilities (defined below). For purposes of this Disclosure
Schedule, the "Guggenheim Credit Facilities" mean the credit facilities of
QRC and Quest Cherokee, LLC ("Quest Cherokee") consisting of: (i) the $100
million Amended and Restated Senior Credit Agreement, dated as of February
7, 2006, among Quest Cherokee and QRC, as borrowers, Guggenheim, as
administrative agent and syndication agent, and the lenders party thereto
(the "Senior Credit Agreement"); (ii) the $100 million Amended and Restated
Second Lien Term Loan Agreement, dated as of June 9, 2006, among Quest
Cherokee and QRC, as borrowers, Guggenheim, as administrative agent and
syndication agent, and the lenders party thereto (the "Second Lien Term
Loan Agreement"); and (iii) the $75 million Third Lien Term Loan Agreement
dated as of June 9, 2006, among Quest Cherokee and QRC, as borrowers,
Guggenheim, as administrative agent and syndication agent, and the lenders
party thereto (the "Third Lien Term Loan Agreement", and, together with the
Senior Credit Agreement and the Second Lien Term Loan Agreement, the
"Credit Agreements") and (iv) the guaranties and collateral agreements
securing each of the Credit Agreements. In connection with the closing of
the Transactions, the Guggenheim Credit Facilities are being amended to
permit the Transactions.
2. The Cygnet Software End-User License Agreement between CygNet Software,
Inc. ("CygNet") and Quest Cherokee requires consent to assignment, which
has not been obtained. Cygnet has advised QRC that CygNet will approve the
assignment once the proper paperwork has been completed.
Schedule 3.9
Class A and B Subordinated Units
--------------------------------
QRC's Class A Subordinated Units and Class B Subordinated Units will be
pledged as collateral to secure the Guggenheim Credit Facilities.
Schedule 3.11(c)
Transfer Restrictions
---------------------
QRC's ability to transfer its Subordinated Units is limited by the terms of
the Guggenheim Credit Facilities.
Schedule 3.12(b)
Pro-Forma Balance Sheet
-----------------------
Bluestem
Pro forma balance sheet as of October 31,
2006
Proforma AJE'S
Oct. 31,2006 DR CR As adjusted
Cash $2,167,000 15,000,000 aa $17,167,000
A/R - oil/gas sales 6,379,000 6,379,000 A -
Inventory 3,604,000 3,604,000
Prepaids 111,000 111,000
Pipelines/equipment 126,563,000 24,533,000 25,027,000 126,069,000
Total assets $138,824,000 $39,533,000 $31,406,000 $146,951,000
Accounts payable $5,634,000 5,634,000 F - $-
Revenue payable 3,021,000 3,021,000 B - -
GPT payable 610,000 610,000 C - -
Ad valorem payable 1,387,000 1,387,000 F - -
Interco 112,268,000 112,268,000 D - -
Payable to sponsor - 15,000,000 aa 15,000,000
Class A Subordinated Units 42,876,000
Class B Subordinated Units
Common Units - Quest Group
Common Units - Outside investors 87,360,000
General Partner Units 1,715,000
Equity 15,904,000 - 116,047,000 A,B,C,D,E
Total liab/equity $138,824,000 $122,920,000 $131,047,000 $146,951,000
Proforma AJE's:
aa - working capital retained by MLP
A - eliminate oil/gas receivable
B - eliminate oil/gas revenue payable
C - eliminate gpt payable
D - eliminate intercompany account
E - working capital payable to sponsor
Schedule 3.14
Absence of Changes
------------------
1. Bluestem is either a direct party, or its pipeline assets may be
subject, to the pending or threatened cases described on Schedule 3.22.
2. On June 9, 2006, QRC and Quest Cherokee increased the Guggenheim Credit
Facilities from $200 million to $275 million, as part of entering into the Third
Lien Term Loan Agreement. As part of the Transactions, Bluestem will (1) become
an obligor with respect to $40 million of the outstanding indebtedness under the
revolving credit facility that is part of the Senior Credit Agreement, (2) repay
the $40 million and (3) be released from any obligations under the Guggenheim
Credit Facilities.
3. Bluestem is a party to an Agreement of Sale and Purchase, dated
September 20, 2005, with Southern Star Gas Pipeline, Inc. ("Southern Star"),
pursuant to which Bluestem would acquire approximately 12 miles of pipeline from
Southern Star for approximately $1 million. On June 22, 2006 Bluestem was issued
a Declaratory Order by the Federal Energy Regulatory Commission ("FERC"), in
which FERC granted Bluestem's petition requesting a finding that upon Bluestem's
acquisition of pipeline facilities from Southern Star, Bluestem's ownership and
use of the facilities will be exempt from FERC's jurisdiction pursuant to
Section 1(b) of the Natural Gas Act. This transaction is expected to close in
the first calendar quarter of 2007.
Schedule 3.15
Compliance with Law
-------------------
See the disclosures in Schedule 3.22.
Schedule 3.16
No Default
----------
See the disclosures in Schedule 3.3 with respect to Item 2 only and Schedule
3.22.
Schedule 3.19
Insurance
---------
Quest Resource Corp.
PROPERTY INSURANCE CONTINUED
EXTENSIONS OF COVERAGES:
25% of the Building Limit Newly Acquired or Constructed Buildings
of Insurance or $500,000
whichever is less.
25% of the Personal Personal Property at Newly Acquired or
Property Limit of Insurance Constructed Buildings
or $100,000 whichever is
less.
10% of the Building Limit Building Ordinance
of Insurance or $500,000
whichever is less.
$25,000 Electronic Data Processing Equipment and Media
$10,000 Your Property away from premises
$10,000 Pollutant Clean-up and Removal
$10,000 Debris Removal
$ 5,000 Personal Property In Transit
$ 5,000 Valuable Papers and Records
$ 5,000 Personal Property of Others
$ 5,000 Fire Department Service Charges
DEDUCTIBLE: $1,000
Quest Resource Corp.
COMMERCIAL GENERAL LIABILITY PROPOSAL OUTLINE
COVERAGE WRITTEN ON: Occurrence Form
COVERAGE LIMITS
--------------------------------------------- --------------
LIABILITY:
General Aggregate Limit $2,000,000
Products/Completed Operations Aggregate Limit $1,000,000
Personal/Advertising Injury Limit $1,000,000
Each Occurrence $1,000,000
Fire Damage Limit - Any One Fire $ 100,000
Medical Expense Limit - Any One Person $ 10,000
COVERAGES INCLUDED:
Premises/Operations
Products/Completed Operations
Independent Contractors
Personal/Advertising Injury
Medical Payments
Blanket Contractual Liability
Fire Damage Legal Liability
Employees as Additional Insured
Host Liquor Liability
Incidental Medical Malpractice Liability
Broad Form Property Damage Liability
Non-Owned Watercraft Liability (Under 26 Feet)
Limited Worldwide Products Liability
Extended Bodily Injury Liability (Assault and Battery)
New Entity Coverage For 90 Days
ENDORSEMENTS:
Underground Resources Limit $1,000,000
Bodily Injury & Property Damage Deductible $ 2,500
Quest Resource Corp.
COMMERCIAL AUTOMOBILE POLICY OUTLINE
COVERAGE
-------------------------
LIABILITY:
Bodily Injury and Property Damage $1,000,000 CSL Ea. Accident
Medical Payments $2,000 Each Person
Uninsured Motorist $1,000,000 Each Accident
COVERAGE APPLICABLE TO
----------------------------------- ----------------------------------------
Liability: Any Auto
Hired Autos
Non-Owned Autos
Medical Payments: Autos Specified on Schedule
Uninsured Motorists: All Owned Autos
Underinsured Motorists:
Comprehensive: Per Schedule
Hired Autos Included
Collision: Per Schedule
Hired Autos Included
Quest Resource Corp.
EQUIPMENT FLOATER LIMITS
TYPE OF EQUIPMENT DEDUCTIBLE
----------------------------------- ----------------------------------------
Contractor's Equipment Coverage - 5% Deductible with $2,500 Minimum
$4,313,341 - Per Schedule & $10,000 Maximum
Actual Cash Value
UNSCHEDULED EQUIPMENT
MAXIMUM AMOUNT OF % CO-
DESCRIPTION ITEM AMOUNT INSURANCE INSURANCE
---------------------------- -------------- ------------- ---------------
Newly Acquired $100,000 80%
Equipment of Others $100,000 80%
Rental Expense $ 25,000 80%
Employee Tools $ 10,000 80%
Quest Resource Corp.
UMBRELLA LIABILITY PROPOSAL
Insurer: St. Xxxx Surplus Lines
Policy Term: 12/19/05 to 12/19/06
COVERAGE LIMIT PER
---------------------------- ------------- -------------------------
Limit of Liability: $10,000,000 Each Occurrence
$10,000,000 Annual Aggregate
Self Insured Retention: $ 10,000
Coverage Extension: Indemnifies sums insured is legally obligated
to pay by reason of legal or contractual
liability for damages due to bodily injury or
property damage to third parties. This coverage
is excess over scheduled underlying general
liability, auto liability and employers
liability subject to same conditions
and exclusions.
QUEST RESOURCE CORP.
POLLUTION LIABILITY
Company: Chubb Group Insurance
Coverage: We will pay for those sums that the insured becomes legally
obligated to pay as compensatory damages because of "bodily injury" or "property
damage." Subject to policy conditions and exclusions. (SEE POLICY FOR
EXCLUSIONS)
Limits: $1,000,000 Each Pollution Limit
$2,000,000 Aggregate Limit
Deductible: $ 10,000 Per Pollution Claim
Retro Date: December 19, 2003
Conditions: THIS IS A CLAIMS MADE POLICY. Except as otherwise provided it
applies only to claims made against the insured during the policy period. Please
read your policy carefully.
[graphic omitted] AMERICAN INTERNATIONAL COMPANIES
[ ] AIU Insurance Company [ ] Granite State Insurance Company
[ ] American Home Assurance Company [ ] Illinois National Insurance Company
[ ] American International South Insurance Company [X] National Union Fire Insurance Co. of Pittsburgh, Pa.
[ ] Birmingham Fire Insurance Company of Pennsylvania [ ] New Hampshire Insurance Company
(each of the above being a capital stock company)
POLICY NUMBER: 000-00-00 REPLACEMENT OF POLICY NUMBER: 000-00-00
EXECUTIVE AND ORGANIZATION LIABILITY INSURANCE POLICY
NOTICE: COVERAGES A, B AND C ARE CLAIMS MADE. THE COVERAGE OF THIS POLICY IS
GENERALLY LIMITED TO LIABILITY FOR CLAIMS THAT ARE FIRST MADE AGAINST THE
INSUREDSAND CRISIS FIRST OCCURRING DURING THE POLICY PERIOD AND REPORTED IN
WRITING TO THE INSURER PURSUANT TO THE TERMS HEREIN. PLEASE READ THIS POLICY
CAREFULLY AND REVIEW ITS COVERAGE WITH YOUR INSURANCE AGENT OR BROKER.
NOTICE: AMOUNTS INCURRED FOR LEGALDEFENSE SHALL REDUCE THE LIMIT OF LIABILITY
AVAILABLE TO PAY JUDGMENTS OR SETTLEMENTS, AND SHALL BE APPLIED AGAINST THE
RETENTION AMOUNT.
NOTICE: THE INSURER DOES NOT ASSUME ANY DUTY TO DEFEND. THE INSURER MUST ADVANCE
DEFENSE COSTS, EXCESS OF THE APPLICABLERETENTION, PURSUANT TO THE TERMS HEREIN
PRIOR TO THE FINAL DISPOSITION OF A CLAIM.
NOTICE: TERMS APPEARING IN BOLD FACE TYPE HAVE SPECIAL MEANING. SEE CLAUSE 2 OF
THE POLICY.
DECLARATIONS
ITEMS
1 NAMED ENTITY: QUEST RESOURCE CORPORATION
(herein "Named Entity")
1(a) MAILING ADDRESS: 0000 X. XXX XXXXXX
XXXXX 000
XXXXXXXX XXXX, XX 00000
1(b) STATE OF INCORPORATION/FORMATION: Nevada
2 POLICY PERIOD: From: March 10, 2006 To: March 10, 2007
12:01 A.M. standard time at the address stated in Item 1(a)
3 POLICY AGGREGATE LIMIT OF LIABILITY
(herein "Limit of Liability")
For all Loss, in the aggregate, under this policy
including Defense Costs: $10,000,000
4 RETENTION: Not applicable to Non-indemnifiable Loss and certain
Defense Costs -
(See Clause 6 for details.)
4(a) Securities Claims: $250,000 4(b) Employment Practices
Claims: $100,000
4(c) All other Claims: $100,000
ITEMS (continued)
5 CONTINUITY DATE (herein "Continuity Date")
5(a) Coverages A and B, other than 5(b) Outside Entity The date on which
Outside Entity Executive Executive coverage, the Insured Person
coverage: March 10, 2005 including Coverage C: first served as an
Outside Entity
Executive of such
Outside Entity.
5(c) Coverage D: March 10, 2005
6 PREMIUM: $141,750
Premium for Certified Acts of Terrorism Coverage under Terrorism Risk
Insurance Xxx 0000: Not applicable, coverage rejected by insured. Any coverage
provided for losses caused by an act of terrorism as defined by TRIA (TRIA
Losses) may be partially reimbursed by the United States under a formula
established by TRIA as follows: 90% of TRIA Losses in excess of the insurer
deductible mandated by TRIA, the deductible to be based on a percentage of the
insurer's direct earned premiums for the year preceding the act of terrorism.
A copy of the TRIA disclosure sent with the original quote is attached
hereto.
7 CRISISFUNDsm limit:
Additional CRISISFUNDsm
7(a) Crisis Loss: $0 7(b) for Delisting Crisis Loss: $0
8 NAME AND
ADDRESS OF INSURER (herein "Insurer"):
National Union Fire Insurance Company of Pittsburgh, Pa.
000 Xxxxx Xxxxxx
Xxx Xxxx, XX 00000
This policy is issued only by the insurance company
indicated in this Item 8.
Schedule 3.20(b)
Notice of Non-Compliance with Environmental Laws
------------------------------------------------
1. Bluestem received a Notice of Violation from the Oklahoma Department of
Environmental Quality, dated May 27, 2005, regarding compliance with Permit
2001-133-C (M-1) at the West Lenapah Compressor Station.
2. Bluestem received a Notice of Violation from the Oklahoma Department of
Environmental Quality, dated August 23, 2005, regarding permit compliance at the
Xxxxxx Tap Compressor Station.
3. Bluestem received a Notice of Violation from the Oklahoma Department of
Environmental Quality, dated October 14, 2005, regarding permit compliance at
the R&H Farmland Compressor Station.
Schedule 3.20(d)
Releases
--------
See the matters disclosed in the following environmental reports of O & G
Environmental Consulting, LLC made available to Buyers:
(a) Report dated September of 2002;
(b) Report dated May of 2003; and
(c) Two reports dated December of 2003.
Schedule 3.21
Material Contracts
------------------
1. See Schedule 3.3 with respect to Item 2 only.
Schedule 3.25
Benefit Plans
-------------
Quest Resource Corporation 401(k) Profit Sharing Plan
Quest Resource Corporation 2005 Omnibus Stock Award Plan
Quest Resource Corporation Management Annual Incentive Plan
Schedule 3.26
Affiliate Contracts
-------------------
1. The Gas Gathering Agreement, dated December 22, 2003, between Quest
Cherokee and Bluestem will be terminated upon consummation of the Transactions.
2. Issuer and Bluestem will use various vehicles and other filed equipment
owned or leased by QRC and its Affiliates.
3. Assets owned, leased or licensed by QRC and its affiliates will be used
in providing general administrative services to the Partnership Parties.
4. See Schedule 3.3 with respect to Item 2 only.
Schedule 3.34
Brokers' Fee
------------
In connection with the closing of the Transactions, broker, finder or
similar fees or commissions will be paid to the following parties:
1. Friedman, Billings, Xxxxxx & Co., Inc.--$4,500,000
2. Xxxxxxx Xxxx & Company L.L.C.--$375,000
3. X.X. Xxxxxxx & Sons, Inc.--$375,000
EXHIBIT A
1.1 Definitions. As used in this Agreement, the following terms have the
meanings specified or referred to in this Section 1.1:
(1) "Acquisition" shall have the meaning set forth in the recitals to
this Agreement.
(2) "Affiliate" means a Person that directly, or indirectly through
one or more intermediaries, controls, or is controlled by, or is under common
control with, a specified Person. A Person shall be deemed to control another
Person if such first Person possesses, directly or indirectly, the power to
direct, or cause the direction of, the management and policies of such other
Person, whether through the ownership of voting securities, by contract or
otherwise.
(3) "Agreement" shall have the meaning set forth in the preamble to
this Agreement.
(4) "Alerian" shall have the meaning set forth in the preamble to this
Agreement.
(5) "Approved Working Capital Facility" shall have the meaning set
forth in Section 5.4(a).
(6) "Benefit Plans" shall have the meaning set forth in Section
3.25(a).
(7) "Bluestem" shall have the meaning set forth in Section 2.4(c)(i).
(8) "Bluestem Limited Liability Company Agreement" shall mean the
Limited Liability Company Agreement of Bluestem, dated as of December 15, 2003.
(9) "Buyer" and "Buyers" shall have the meanings set forth in the
preamble to this Agreement.
(10) "Buyer Indemnitees" shall have the meaning set forth in Section
6.2(a).
(11) "CERCLA" means the Comprehensive Environmental Response,
Compensation and Liability Act of 1980, 42 U.S.C. ss. 9601, et seq., as amended.
(12) "Class A Subordinated Unit" shall have the meaning set forth in
the Partnership Agreement.
(13) "Class B Subordinated Unit" shall have the meaning set forth in
the Partnership Agreement.
(14) "Closing" shall have the meaning set forth in Section 2.3.
(15) "Closing Date" shall have the meaning set forth in Section 2.3.
A-i
(16) "Code" means the Internal Revenue Code of 1986, as amended.
(17) "Common Unit" shall have the meaning set forth in the Partnership
Agreement.
(18) "Contribution Agreement" shall have the meaning set forth in the
recitals to this Agreement.
(19) "Xxxxxxx XX Fund" shall have the meaning set forth in the
preamble of this Agreement.
(20) "Xxxxxxx MLP Fund" shall have the meaning set forth in the
preamble of this Agreement.
(21) "Delaware LP Act" means the Delaware Revised Uniform Limited
Partnership Act, as amended from time to time.
(22) "Disclosure Schedule" means the disclosure schedule of Issuer and
GP referred to in, and delivered pursuant to, this Agreement.
(23) "Environmental Laws" means all federal, state and local laws,
regulations, rules, ordinances, codes, decrees, judgments, directives, or
judicial or administrative orders relating to pollution or protection of the
environment, natural resources or human health and safety, including laws
relating to Hazardous Substances (including ambient air, surface water,
groundwater, land, surface and subsurface strata) or otherwise relating to the
manufacture, processing, distribution, use, treatment, storage, transport or
handling of Hazardous Substances, laws relating to record keeping, notification,
disclosure and reporting requirements respecting Hazardous Substances, and laws
relating to the management and use of natural resources.
(24) "Environmental Permits" shall have the meaning set forth in
Section 3.13(a).
(25) "ERISA" means the Employee Retirement Income Security Act of 1974
and the rules and regulations promulgated thereunder.
(26) "FERC" means the Federal Energy Regulatory Commission or any
successor thereto.
(27) "Financial Statements" means (i) the audited balance sheet of QRC
as at December 31, 2005 and the audited statement of income and cash flows of
QRC for the fiscal year then ended, and (ii) the unaudited balance sheet of QRC
as at September 30, 2006 and the unaudited statement of income and cash flows of
QRC for the nine (9) month period then ended, including, in each case, the notes
thereto.
(28) "GAAP" means generally accepted accounting principles as used in
the United States in effect from time to time.
A-ii
(29) "General Partner Unit" shall have the meaning set forth in the
Partnership Agreement.
(30) "Governmental Authority" means any executive, legislative,
judicial, regulatory or administrative agency, body, commission, department,
board, court, tribunal, arbitrating body or authority of the United States or
any foreign country, or any state, local or other governmental subdivision
thereof.
(31) "GP Limited Liability Company Agreement shall mean the Amended
and Restated Limited Liability Company Agreement of GP, dated as of the date
hereof.
(32) "Hazardous Substances" means (i) any petrochemical or petroleum
products, radioactive materials, explosive materials, asbestos in any form that
is or could become friable, urea formaldehyde foam insulation and transformers
or other equipment that contain dielectric fluid which may contain levels of
polychlorinated biphenyls, (ii) any chemicals, materials or substances defined
as or included in the definition of "hazardous substances," "hazardous wastes,"
"hazardous materials," "restricted hazardous materials," "extremely hazardous
substances," "toxic substances," "contaminants" or "pollutants" or words of
similar meaning and regulatory effect under Environmental Laws or (iii) any
other chemical, material or substance, exposure to which is prohibited, limited
or regulated by any applicable Environmental Law.
(33) "HCM" shall have the meaning set forth in the preamble to this
Agreement.
(34) "Xxxxxxxx" shall have the meaning set forth in the preamble to
this Agreement.
(35) "Incentive Distribution Rights" shall have the meaning set forth
in the Partnership Agreement.
(36) "Indicated Units" shall have the meaning set forth in Section
2.1.
(37) "Indicated Purchase Price" shall have the meaning set forth in
Section 2.2.
(38) "Indemnified Party" shall have the meaning set forth in Section
6.4(a).
(39) "Indemnifying Party" shall have the meaning set forth in Section
6.4(a).
(40) "Indicated Member Interests" shall have the meaning set forth in
Section 2.2.
(41) "Investor Representatives" shall mean the members of the Board of
Directors of GP designated by Swank and Alerian pursuant to the terms of the
Investors' Rights Agreement.
A-iii
(42) "Investors' Rights Agreement" shall have the meaning set forth in
Section 2.4(a)(iv).
(43) "Issuer" shall have the meaning set forth in the preamble to this
Agreement.
(44) "Issuer's Knowledge" means the actual knowledge of an executive
officer of QRC or the Partnership Parties after reasonable inquiry. For purposes
of this definition the executive officers of QRC and the Partnership Parties are
Xxxxx Xxxx, Xxxxx Xxxxx and Xxxxx Xxxxxx.
(45) "Losses" shall have the meaning set forth in Section 6.2(a).
(46) "Material Adverse Effect" shall have the meaning set forth in
Section 3.1.
(47) "Material Contracts" shall mean, as of the date of this
Agreement, all contracts, agreements, personal property leases, commitments,
understandings or instruments of any Partnership Party or by which any
Partnership Party is bound with a value in excess of $250,000 or with annual
payments greater than $100,000, other than any leases.
(48) "Midstream Agreement" shall have the meaning set forth in Section
4.3(b)(viii).
(49) "Omnibus Agreement" shall have the meaning set forth in Section
2.4(b)(ix).
(50) "Partnership Agreement" shall mean the Amended and Restated
Agreement of Limited Partnership of Quest Midstream Partners, L.P. dated as of
the date hereof.
(51) "Partnership Parties" shall have the meaning set forth in Section
3.1.
(52) "Permits" shall have the meaning set forth in Section 3.21.
(53) "Person" means any individual, partnership, joint venture,
corporation, limited liability company, limited liability partnership, trust,
unincorporated organization or Governmental Authority or any department or
agency thereof.
(54) "Pro-Forma Balance Sheet" shall have the meaning set forth in
Section 3.12(b).
(55) "QRC" shall have the meaning set forth in the preamble to this
Agreement.
(56) "QRC Material Adverse Effect" shall have the meaning set forth in
Section 3.1.
(57) "Quest Parties" shall have the meaning set forth in Section 3.1.
(58) "Registration Rights Agreement" shall have the meaning set forth
in Section 2.4(a)(ii).
X-xx
(00) "Seller Indemnitors" shall have the meaning set forth in Section
6.2(b).
(60) "SIP" shall have the meaning set forth in the preamble to this
Agreement.
(61) "Subordinated Units" shall mean the Class A Subordinated Units
and the Class B Subordinated Units.
(62) "Subsidiary" of any Person (the "Subject Person") means any
Person, whether incorporated or unincorporated, of which (i) at least 50% of the
securities or ownership interests having by their terms ordinary voting power to
elect a majority of the board of directors or other Persons performing similar
functions, (ii) a general partner interest or (iii) a managing member interest,
is directly or indirectly owned or controlled by the Subject Person or by one or
more of its respective Subsidiaries.
(63) "Survival Period" shall have the meaning set forth in Section
6.1(c).
(64) "Swank" shall have the meaning set forth in the preamble to this
Agreement.
(65) "Swank MLP Fund" shall have the meaning set forth in the preamble
to this Agreement.
(66) "Tax" means any tax, charge, fee, levy, penalty or other
assessment imposed by any U.S. federal, state, local or foreign taxing
authority, including any excise, property, income, sales, transfer, franchise,
payroll, withholding, social security or other tax, including any interest,
penalties or additions attributable thereto.
(67) "Tax Return" means any return, report, information return,
declaration, claim for refund or other document (including any related or
supporting information) supplied or required to be supplied to any authority
with respect to Taxes and including any supplement or amendment thereof.
(68) "Tortoise" shall have the meaning set forth in the preamble to
this Agreement.
(69) "Total Invested Amount" shall mean the sum of the aggregate
purchase prices paid by the Buyers for the purchase of Common Units, as shown in
Section 2.1.
(70) "Transaction Documents" shall mean this Agreement, the
Partnership Agreement, the GP Limited Liability Company Agreement, the Bluestem
Limited Liability Company Agreement, the Registration Rights Agreement, the
Investors' Rights Agreement, the Contribution Agreement, the Midstream
Agreement, the Omnibus Agreement and any other documents or agreements executed
in connection with the transactions contemplated hereunder.
(71) "Transaction Expenses" shall have the meaning set forth in
Section 5.4(c).
(72) "Transactions" shall have the meaning set forth in Section 3.1.
A-v
(73) "Working Capital" shall mean the Partnership Parties' combined
current assets minus current liabilities as determined in accordance with GAAP.
1.2 Interpretations. Unless expressly provide for elsewhere in this
Agreement, this Agreement shall be interpreted in accordance with the following
provisions:
(1) no consideration may be given to the captions of the articles,
sections or subsections, or to the Table of Contents, all of which are inserted
for convenience in locating the provisions of this Agreement and not as an aid
in its construction;
(2) no consideration may be given to the fact or presumption that one
party had a greater or lesser hand in drafting this Agreement;
(3) examples are not to be construed to limit, expressly or by
implication, the matter they illustrate;
(4) the word "includes" and its derivatives means "includes, but is
not limited to," and corresponding derivative expressions;
(5) a defined term has its defined meaning throughout this Agreement
and each exhibit and schedule to this Agreement, regardless of whether it
appears before or after the place where it is defined;
(6) the meanings of the defined terms are applicable to both the
singular and plural forms thereof;
(7) all references to prices, values or monetary amounts refer to
United States dollars;
(8) all references to articles, sections, subsections, paragraphs,
clauses, exhibits or schedules refer to articles, sections, subsections,
paragraphs and clauses of this Agreement, and to exhibits or schedules attached
to this Agreement, unless expressly provided otherwise;
(9) each exhibit and schedule to this Agreement is a part of this
Agreement and references to the term "Agreement" are deemed to include each such
exhibit and schedule to this Agreement except to the extent that the context
indicates otherwise, but if there is any conflict or inconsistency between the
main body of this Agreement and any exhibit or schedule, the provisions of the
main body of this Agreement will prevail;
(10) the words "this Agreement," "herein," "hereby," "hereunder," and
words of similar import refer to this Agreement as a whole and not to any
particular article, section, subsection or other subdivision, unless expressly
so limited;
(11) the word "or" is disjunctive but not necessarily exclusive; and
(12) all references to agreements or Laws are deemed to refer to such
agreements or Laws as amended or as in effect at the applicable time.
A-vi
EXHIBIT B
---------
[Attached as Exhibit 10.5 to the Form 8-K
filed by Quest Resource Corporation on December 29, 2006]
EXHIBIT C
---------
[Attached as Exhibit 10.4 to the Form 8-K
filed by Quest Resource Corporation on December 29, 2006]
EXHIBIT D
---------
[Attached as Exhibit 10.2 to the Form 8-K
filed by Quest Resource Corporation on December 29, 2006]
EXHIBIT E
---------
Legal Opinion of Xxxxx Xxxxx
XXXXX XXXXX LLP
December 22, 2006
077617.0102
Alerian Opportunity Partners IV, LP
c/o Alerian Opportunity Advisors IV, LLC
00 Xxxxxxxxxxx Xxxxx, Xxxxx 0000
Xxx Xxxx, XX 00000
Swank MLP Convergence Fund, XX
Xxxxx Investment Partners, LP
The Xxxxxxx MLP Opportunity Fund I, LP
The Xxxxxxx XX Strategies Fund, LP
c/o Swank Capital, LLC
Xxx Xxxx Xxx, Xxxxx 000
Xxxxxx, XX 00000
Tortoise Capital Resources Corporation
00000 Xxxxxx Xxxx., Xxxxx 000
Xxxxxxxx Xxxx, XX 00000
Xxxxxxxx Opportunity Partners, LP
HCM Energy Holdings, LLC
c/o Huizenga Capital Management
0000 Xxxx Xxxx, Xxxxx 000
Xxx Xxxxx, XX 00000
Quest Midstream Partners, L.P.
Ladies and Gentlemen:
This opinion is provided to you pursuant to Section 2.4(b)(iii)
of the Purchase Agreement dated December 22, 2006 (the "Purchase Agreement"),
among Quest Midstream Partners, L.P., a Delaware limited partnership ("Issuer"),
Quest Midstream GP, LLC, a Delaware limited liability company ("GP"), Quest
Resource Corporation, a Nevada corporation ("QRC"), and Alerian Opportunity
Partners IV, LP, Swank MLP Convergence Fund, LP, Swank Investment Partners, LP,
The Xxxxxxx MLP Opportunity Fund I, LP, The Xxxxxxx XX Strategies Fund, LP,
Tortoise Capital Resources Corporation, Xxxxxxxx Opportunity Partners, LP and
HCM Energy Holdings, LLC (collectively, the "Buyers"), pursuant to which the
Buyers have agreed to purchase from Issuer, an aggregate of 4,864,866 common
units in Issuer (the "Common Units") and a 15% membership interest in GP (the
"Member Interest," and
XXXXX XXXXX LLP
Alerian Opportunity Partners IV, LP, et al. December 22, 2006
Page 2
collectively with the Common Units, the "Purchased Units"). Capitalized terms
used herein without definition shall have the respective meanings assigned to
them in the Purchase Agreement.
As a basis for the opinions hereinafter expressed, we have examined
originals, or copies certified or otherwise identified, of the following:
(i) the Purchase Agreement;
(ii) the First Amended and Restated Agreement of Limited Partnership
of Issuer dated as of the date hereof, among QRC and GP (the "Partnership
Agreement");
(iii) the Amended and Restated Limited Liability Company Agreement of
GP dated as of the date hereof, among QRC, Swank MLP Convergence Fund, LP,
Swank Investment Partners, LP, The Xxxxxxx MLP Opportunity Fund I, LP, The
Xxxxxxx XX Strategies Fund, LP and Alerian Opportunity Partners IV, LP (the
"GP Limited Liability Company Agreement");
(iv) the Contribution, Conveyance and Assumption Agreement dated as of
the date hereof, by and among Issuer, Bluestem Pipeline, LLC ("Bluestem"),
QRC, Quest Cherokee, LLC, STP Cherokee, LLC, Quest Oil & Gas, LLC, Quest
Energy Service, LLC, Ponderosa Gas Pipeline Company, LLC, Producers Service
LLC and X-X Gas Gathering, LLC (the "Contribution Agreement");
(v) the Registration Rights Agreement dated as of the date hereof,
among Issuer and the Buyers (the "Registration Rights Agreement");
(vi) the Investors' Rights Agreement dated as of the date hereof among
Issuer, GP, QRC and the Buyers (the "Investors Rights Agreement");
(vii) the Midstream Services and Gas Dedication Agreement dated as of
the date hereof, among QRC and Bluestem (the "Midstream Agreement");
(viii) the Omnibus Agreement dated as of the date hereof, among
Issuer, GP and Bluestem (the "Omnibus Agreement" and collectively with the
Purchase Agreement, the Partnership Agreement, the GP Limited Liability
Company Agreement, the Contribution Agreement, the Registration Rights
Agreement, the Investors' Rights Agreement and the Midstream Agreement, the
"Transaction Documents");
(ix) the certificate of limited partnership of Issuer as amended to
date, and the certificate of formation of GP as amended to date;
XXXXX XXXXX LLP
Alerian Opportunity Partners IV, LP, et al. December 22, 2006
Page 3
(x) partnership records of Issuer, including certain resolutions duly
adopted by the Board of Directors of the General Partner, as furnished to
us by Issuer;
(xi) limited liability company records of GP, including certain
resolutions duly adopted by the Board of Directors of the General Partner,
as furnished to us by GP;
(xii) certificates of public officials and of representatives of QRC,
Issuer, GP and Bluestem; and
(xiii) statutes and other instruments and documents as we have deemed
necessary or advisable for purposes of the opinions expressed below.
On the basis of the foregoing, and subject to the limitations,
exceptions, qualifications and assumptions set forth herein, we are of the
opinion that:
1. GP is a limited liability company duly formed, validly existing
and in good standing under the laws of the State of Delaware and has all
requisite limited liability company power and authority to own, lease and
operate its properties and to carry on its business as is contemplated to be
conducted subsequent to the Closing Date and to act as general partner of
Issuer. Issuer is a limited partnership duly formed, validly existing and in
good standing under the laws of the State of Delaware and has all requisite
limited partnership power and authority to own, lease, and operate its
properties and to carry on its business as is contemplated to be conducted
subsequent to the Closing Date. Each of GP and Issuer is duly qualified,
registered or licensed to do business as a foreign limited partnership or
limited liability company, as the case may be, and is in good standing under the
laws of each jurisdiction set forth next to its name on Annex I to this opinion.
2. Each of GP and Issuer has the limited liability company or
limited partnership, as the case may be, power and authority to execute and
deliver the Transaction Documents to which it is a party and to consummate the
Transactions. The execution and delivery by each of GP and Issuer of the
Transaction Documents to which it is a party and the consummation by GP and
Issuer of the Transactions have been duly and validly authorized by GP and
Issuer, and no other limited liability company or limited partnership, as the
case may be, proceedings on the part of GP or Issuer is necessary to authorize
the Transaction Documents or to consummate the transactions contemplated
thereby. Each of the Transaction Documents to which GP or Issuer is a party has
been duly executed and delivered by such party and each Transaction Document
constitutes the valid and binding agreement of the Quest Parties party thereto,
and is enforceable against the Quest Parties in accordance with its terms,
subject to (i) applicable bankruptcy, insolvency, fraudulent transfer,
reorganization, moratorium and similar laws relating to or affecting creditors'
rights generally and by general principles of equity (regardless of whether such
enforceability is considered in a proceeding in equity or at law) and
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Alerian Opportunity Partners IV, LP, et al. December 22, 2006
Page 4
(ii) public policy, applicable law relating to fiduciary duties and
indemnification and contribution and an implied covenant of good faith and fair
dealing.
3. GP is the sole general partner of Issuer and, upon Closing, will
own 200,000 General Partner Units representing a 2% general partner interest in
Issuer; such General Partner Units have been duly authorized and validly issued
in accordance with the Partnership Agreement; and GP owns such General Partner
Units free and clear of all liens, encumbrances (except for the requirements of
applicable securities laws and restrictions and requirements on transferability
described in the Transaction Documents), security interests, charges and other
claims (i) in respect of which a financing statement under the Uniform
Commercial Code of Delaware naming GP as debtor is on file as of a recent date
in the office of the Secretary of State of the State of Delaware or (ii)
otherwise known to us, without independent investigation, other than those
created by or arising under the Delaware Revised Uniform Limited Partnership Act
(the "Delaware LP Act").
4. Upon Closing, GP will own the Incentive Distribution Rights free
and clear of all liens, encumbrances (except for the requirements of applicable
securities laws and restrictions and requirements on transferability described
in the Transaction Documents), security interests, charges and other claims (i)
in respect of which a financing statement under the Uniform Commercial Code of
Delaware naming GP as debtor is on file as of a recent date in the office of the
Secretary of State of the State of Delaware or (ii) otherwise known to us,
without independent investigation, other than those created by or arising under
the Delaware LP Act.
5. Immediately after the Closing, the only issued and outstanding
limited partner interests of Issuer will consist of 4,864,866 Common Units,
35,134 Class A Subordinated Units, 4,900,000 Class B Subordinated Units and the
Incentive Distribution Rights. All outstanding Common Units, Class A
Subordinated Units, Class B Subordinated Units and Incentive Distribution Rights
and the partnership interests represented thereby have been duly authorized and,
when paid for, issued and delivered pursuant to the Purchase Agreement and
Contribution Agreement, will be validly issued in accordance with the
Partnership Agreement and will be fully paid (to the extent required under the
Partnership Agreement) and nonassessable (except as such nonassessability may be
affected by Section 17-607 and Section 17-804 of the Delaware LP Act), free and
clear of any liens (other than those arising under the Transaction Documents or
those created by the Buyers) encumbrances (except for the requirements of
applicable securities laws and restrictions and requirements on transferability
described in the Transaction Documents), security interests, charges and other
claims (i) in respect of which a financing statement under the Uniform
Commercial Code of Delaware naming GP as debtor is on file as of a recent date
in the office of the Secretary of State of the State of Delaware or (ii)
otherwise known to us, without independent investigation, other than those
created by or arising under the Delaware LLC Act.
XXXXX XXXXX LLP
Alerian Opportunity Partners IV, LP, et al. December 22, 2006
Page 5
6. Upon Closing, QRC will own 850 Member Interests in GP, ACM will
own 75 Member Interests in GP and Swank will own 75 Member Interests in GP. The
Member Interests, and the equity interest in GP represented thereby, have been
duly authorized and, when paid for, issued and delivered pursuant to the
Purchase Agreement, will be validly issued in accordance with the GP Limited
Liability Company Agreement and will be fully paid (to the extent required under
the GP Limited Liability Company Agreement) and nonassessable (except as such
nonassessability may be affected by Section 18-607 and Section 18-804 of the
Delaware Limited Liability Company Act (the "Delaware LLC Act")), free and clear
of any liens (other than those arising under the Transaction Documents or those
created by the Buyers) encumbrances (except for the requirements of applicable
securities laws and restrictions and requirements on transferability described
in the Transaction Documents), security interests, charges and other claims (i)
in respect of which a financing statement under the Uniform Commercial Code of
Delaware naming QRC as debtor is on file as of a recent date in the office of
the Secretary of State of the State of Delaware or (ii) otherwise known to us,
without independent investigation, other than those created by or arising under
the Delaware LLC Act.
7. To our knowledge, there are no outstanding options, warrants, or
securities, rights or obligations convertible into or exercisable or
exchangeable for, or any right to subscribe for or acquire, any equity
securities of GP or Issuer, nor any restriction upon the voting or transfer
(except for the requirements of applicable securities laws) of any equity
securities of any of GP or Issuer, other than those contained in the Transaction
Documents. To our knowledge, other than those contained in the Transaction
Documents, there are no antidilution or price adjustment provisions applicable
to Issuer's or the GP's securities.
8. The offering, issuance and sale by Issuer of the Common Units
being delivered at the Closing Date, the offering, issuance and sale by GP of
the Member Interests being delivered at the Closing Date, the execution,
delivery and performance by GP and Issuer of the Transaction Documents to which
they are parties and the consummation by GP and Issuer of the Transactions do
not and will not: (i) result in any breach of any provision of GP's and Issuer's
certificate of formation, certificate of limited partnership, limited liability
agreement or partnership agreement, as applicable; (ii) constitute a default (or
an event that with notice or lapse of time or both would become a default), give
rise to any right of termination, cancellation, amendment or acceleration (with
or without notice, lapse of time or both), or, except as set forth in the
Transaction Documents, result in a lien, under any of the agreements set forth
on Annex II to this opinion; (Hi) result in a violation of the Delaware LLC Act,
the Delaware LP Act, federal law or any order, judgment, injunction, decree or
other restriction of any court or governmental authority known to us to which GP
and Issuer is subject or by which any property or asset of GP and Issuer is
bound or affected, which conflicts, defaults, terminations, amendments,
acceleration or cancellation rights, breaches, violations or liens in the case
of clauses (ii) or (Hi) would have, individually or in the aggregate, a Material
Adverse Effect, as the case may be; provided, however, that no opinion is
expressed pursuant to this paragraph with respect to federal or state securities
laws and other anti-fraud statutes rules or regulation.
XXXXX XXXXX LLP
Alerian Opportunity Partners IV, LP, et al. December 22, 2006
Page 6
9. No declaration, filing or registration with, or notice to, or
authorization, consent or approval of any Governmental Authority under the
Delaware LP Act, the Delaware LLC Act or federal law is necessary for the
offering, issuance and sale by Issuer of the Common Units being delivered at the
Closing Date, the offering, issuance and sale by GP of the Member Interests
being delivered at the Closing Date, the execution, delivery and performance by
GP and Issuer of the Transaction Documents to which they are parties and the
consummation by GP and Issuer of the Transactions, other than (i) any required
filings or registrations required pursuant to state or federal securities laws,
rules or regulations, or pursuant to the rules of any stock exchange in
connection with the performance of the terms of the Registration Rights
Agreement, as to which we do not express an opinion, (ii) for such consents that
have been obtained or made, and (iii) for such declarations, filings,
registrations, notices, authorizations, consents or approvals which, if not
obtained or made, would not have or be reasonably expected to have, individually
or in the aggregate, a Material Adverse Effect.
10. Neither the GP nor Issuer is an "investment company" within the
meaning of the Investment Company Act of 1940, as amended.
11. The issuance and sale of the Purchased Units pursuant to the
Purchase Agreement is exempt from the registration requirements of the
Securities Act of 1933, as amended.
The opinions set forth above are subject to the following assumptions,
qualifications and limitations:
A. We have assumed due authorization, execution and delivery of the
Transaction Documents by all parties except for GP and Issuer.
B. We have assumed due incorporation or formation of all Quest
Parties except for GP and Issuer.
C. As to matters of fact, we have assumed that all representations
and warranties made by the Quest Parties and Buyers in the Purchase Agreement
are true and correct.
D. We have relied, without independent investigation, with respect to
matters of fact, upon certificates of officers and employees of the Quest
Parties and upon information obtained from public officials.
E. We have assumed that all documents submitted to us as originals
are authentic, that all copies submitted to us conform to the originals thereof,
and that the signatures on all documents examined by us are genuine.
XXXXX XXXXX LLP
Alerian Opportunity Partners IV, LP, et al. December 22, 2006
Page 7
F. With respect to the opinions expressed in paragraph 1 as to the
due qualification or registration as a foreign limited partnership or limited
liability company, as the case may be, of Issuer and GP, we have based our
opinions solely on certificates of foreign . qualification or registration
provided by the Secretary of State of the states listed on Annex 1.
G. With respect to the opinions expressed in clause (i) of paragraphs
3, 4, 5 and 6, respectively, we have based our opinions solely on reports, dated
as of recent dates, purporting to describe all financing statements on file as
of the dates specified therein in the office of the Secretary of the State of
Delaware naming Issuer and GP, or one of more or them, as debtors.
H. With respect to the opinion expressed in paragraph 2, we express
no opinion as to the enforceability of: (i) any severability, reformation,
release, indemnification, contribution or exculpation provisions contained in
the Transaction Documents; (ii) any provision of the Transaction Documents
purporting to impose restrictions on competition; (iii) any mediation or
arbitration provisions contained in the Transaction Documents; (iv) any
provision of the Transaction Documents requiring that amendments be in writing;
(v) any provision of the Transaction Documents in which the parties thereto
agree to agree in the future on an item, event, provision, treatment or
modification; (vi) any provision of the Transaction Documents purporting to
disclaim express or implied warranties; or (vii) provisions purporting to waive
rights to notices, objections, demands, legal defenses or other rights or
benefits that cannot be waived under applicable law.
I. In expressing our opinion in paragraph 9 we do not intend to
express any opinion as to the matters addressed in our opinion in paragraph 11.
In the foregoing opinions and statements, phrases such as "to our
knowledge" and "known to us," and references to facts or matters coming "to our
attention," and any phrases or references with equivalent wording, refer to the
conscious awareness of information by the lawyers of our firm who have prepared
this opinion, signed this opinion or have been actively involved in assisting
and advising Issuer or GP in connection the offer and sale of the Purchased
Units.
The opinions set forth above are limited in all respects to the
federal laws of the United States of America, the Delaware LP Act and the
Delaware LLC Act, in each case as published and in effect on the date hereof,
and we express no opinion as to the law of any other jurisdiction. Further, we
do not express any opinion with respect to the title of any of the Quest Parties
to any of their respective real or personal property purported to be transferred
by the Contribution Agreement, nor with respect to the accuracy of the
descriptions or references to any real or personal property, and we assume that
the descriptions of interests in real or personal property described in the
Contribution Agreement are accurate and describe the interests to be conveyed
thereby (and that references in the Contribution Agreement to other instruments
of
XXXXX XXXXX LLP
Alerian Opportunity Partners IV, LP, et al. December 22, 2006
Page 8
record are correct and that such recorded instruments contain legally sufficient
property descriptions). Further, we do not express any opinion with respect to
(i) any permits to own or operate any real or personal property or (ii) state or
local taxes or tax statutes to which any of the limited partners of Issuer or
any of the Quest Parties may be subject.
This opinion letter is being furnished to you in connection with the
offer and sale of the Purchased Units and may be relied upon only by you. No
other use or distribution of this opinion letter may be made without our prior
written consent. This opinion speaks as of the date hereof, and we disclaim any
obligation to update this opinion.
Very truly yours,
/s/ Xxxxx Xxxxx L.L.P.
JD/LLT/EFG
XXXXX XXXXX LLP
Alerian Opportunity Partners IV, LP, et al. December 22, 2006
Page 9
Annex I
Foreign Qualifications
Entity State(s) of Foreign Qualification
---------------------------------- ----------------------------------
Issuer............................ Kansas
Oklahoma
GP............................... Kansas
Oklahoma
XXXXX XXXXX LLP
Alerian Opportunity Partners IV, LP, et al. December 22, 2006
Page 10
Annex II
Material Contracts
1 Purchase Agreement
2. Partnership Agreement
3 GP Limited Liability Company Agreement
4. Registration Rights Agreement
5. Investors' Rights Agreement
6. Contribution Agreement
7. Midstream Agreement
8. Omnibus Agreement
EXHIBIT F
---------
Opinion of Xxxxxxx Xxxxxxxx Xxxxxx LLP
[GRAPHIC OMITTED]
December 22, 2006
TO: THE OPINION RECIPIENTS LISTED ON SCHEDULE I ATTACHED HERETO
Re: Quest Midstream Partners, L.P.
Ladies & Gentlemen:
We have acted as counsel for Quest Resource Corporation, a Nevada
corporation ("QRC"), Bluestem Pipeline, LLC, a Delaware limited liability
company ("Bluestem"), and Quest Cherokee, LLC, a Delaware limited liability
company ("Quest Cherokee"), in connection with the Purchase Agreement (the
"Purchase Agreement") dated as of December 22, 2006 among Quest Midstream
Partners, L.P. ("MLP"), Quest Midstream GP, LLC ("GP"), QRC, Alerian Opportunity
Partners IV, LP ("Alerian"), Swank MLP Convergence Fund, LP ("Swank MLP Fund"),
Swank Investment Partners, LP ("Swank Investment Partners"), The Xxxxxxx MLP
Opportunity Fund I, LP ("Xxxxxxx MLP Fund"), The Xxxxxxx XX Strategies Fund, LP
("Xxxxxxx XX Fund"), Tortoise Capital Resources Corporation ("Tortoise"),
Xxxxxxxx Opportunity Partners, LP ("Xxxxxxxx") and HCM Energy Holdings, LLC
("HCM" and together with Alerian, Swank MLP Fund, Swank Investment Partners,
Xxxxxxx MLP Fund, Xxxxxxx XX Fund, Tortoise and Xxxxxxxx, collectively, the
"Investors") and the related Transaction Documents (defined below). This opinion
letter is delivered to you at the request of QRC pursuant to Section 2.4(b) of
the Purchase Agreement. Capitalized terms used but not defined herein have the
meanings assigned to them in the Purchase Agreement.
Our opinions and statements expressed herein are restricted to matters
governed by (a) with respect to the opinions and confirmations given as to
Bluestem set forth in opinion paragraphs 1 (first sentence), 2, 5, 6(i), 6(iii),
7 and 8, and the opinions given as to Quest Cherokee set forth in opinion
paragraphs 1 (first sentence) and 2, the Delaware Limited Liability Company Act,
6 Del. Code Xxx. xx.xx. 18-101 et seq., (b) with respect to the opinions and
confirmations set forth in opinion paragraphs 6(iii) and 7, the federal laws of
the United States of America, and (c) with respect to the opinion set forth in
opinion paragraph 3, the laws of the State of Kansas. Except as indicated in the
preceding sentence, we express no opinion as to any matter arising under the
laws of any other jurisdiction, including, without limitation, the statutes,
ordinances, rules and regulations of counties, towns, municipalities and special
political subdivisions of the State of Kansas. To the extent
that any agreement, certificate, document, decree, order, pleading, record or
paper covered by, or reviewed or otherwise relied upon by us in connection with
giving, a particular opinion or confirmation set forth in this opinion letter
(each, a "Reviewed Document") is governed by or subject to the laws of any state
or other jurisdiction not specified above in this paragraph with respect to such
opinion or confirmation, we have assumed that the laws of such state or
jurisdiction (without regard to conflicts of law principles) are substantively
identical to the laws of the State of Kansas.
In connection with this opinion letter, we have examined originally
executed counterparts or other copies identified to our satisfaction of the
following documents:
(a) the Purchase Agreement;
(b) the Investors' Rights Agreement dated as of the date hereof among MLP,
GP, QRC and the Investors;
(c) the Contribution, Conveyance and Assumption Agreement dated as of the
date hereof (the "Contribution Agreement") among MLP, GP, QRC,
Bluestem and the Subsidiaries of QRC designated therein;
(d) the First Amended and Restated Agreement of Limited Partnership of
Quest Midstream Partners, L.P. dated as of the date hereof among GP,
QRC, and the Investors;
(e) the Omnibus Agreement dated as of the date hereof (the "Omnibus
Agreement") among MLP, GP, Bluestem and QRC;
(f) the Midstream Services and Gas Dedication Agreement dated as of the
date hereof (the "Midstream Services Agreement") between Bluestem and
QRC;
(g) the Amended and Restated Limited Liability Company Agreement of Quest
Midstream GP, LLC dated as of the date hereof among QRC, Alerian,
Swank MLP Fund, Swank Investment Partners, Xxxxxxx MLP Fund, and
Xxxxxxx XX Fund;
(h) the Registration Rights Agreement dated as of the date hereof among
MLP and the Investors;
(i) the certificates of formation, the limited liability company
agreements and the authorizing resolutions of Quest Cherokee, Bluestem
and GP listed on Annex I.A. attached hereto, in each case certified to
us as of the date hereof by Xxxxx X. Xxxx and Xxxxx X. Xxxxx;
(j) the certificate of limited partnership, the agreement of limited
partnership and the authorizing resolutions of MLP listed on Annex
I.A. attached hereto, certified to us as of the date hereof by Xxxxx
X. Xxxx and Xxxxx X. Xxxxx;
(k) the Certificates of Good Standing with respect to QRC, Bluestem and
Quest Cherokee listed on Annex I.B. attached hereto;
(l) the written reports from CT Corporation of its search of the records
of the Office of the Secretary of State of the State of Nevada with
respect to financing statements filed against the name of QRC under
the Uniform Commercial Code of Nevada as of December 13, 2006 (the
"Nevada Search") and its search of the records of the Office of the
Secretary of State of the State of Delaware with respect to financing
statements filed against the name of MLP under the Uniform Commercial
Code of Delaware as of December 11, 2006 (the "Delaware Search");
(m) three (3) letters of release, each dated as of the date hereof
(collectively, the "Release Letters") addressed to Bluestem, Quest
Cherokee and QRC, acknowledged by Quest Cherokee and QRC and signed by
Guggenheim Corporate Funding, LLC ("Guggenheim"), as Administrative
Agent, which separately pertain to each of the three (3) existing
credit facilities defined in Schedule 3.3 of the Disclosure Schedule
(and also for purposes of this opinion letter) as the "Guggenheim
Credit Facilities"; and
(n) such other agreements, certificates, documents, records and papers
including, without limitation, certificates of public officials and
certificates of representatives of QRC or Bluestem, as we have deemed
appropriate, in our professional judgment, to give the opinions and
confirmations set forth below.
The documents specified in items (a) through (h) above are hereinafter
collectively called the "Transaction Documents" and individually, a "Transaction
Document"; and the Transaction Documents and the Release Letters are hereinafter
collectively called the "Subject Documents" and individually, a "Subject
Document."
In issuing this opinion letter, with your permission, we have assumed,
without independent investigation on our part, that (a) each Reviewed Document
submitted to us as an original is authentic; (b) each Reviewed Document
submitted to us as a certified, conformed, telecopied, photostatic, electronic
or execution copy conforms to the original of such document, and each such
original is authentic; (c) all signatures appearing on Reviewed Documents are
genuine; (d) each party to a Subject Document (other than Bluestem or Quest
Cherokee) has the requisite power and authority (corporate, limited liability,
partnership or other) to execute, deliver and perform its obligations under such
Subject Document; (e) the execution, delivery and performance of each Subject
Document have been duly authorized by all requisite
corporate, limited liability, partnership or other action on the part of, and
each Subject Document has been duly executed and delivered by, the parties
thereto other than Bluestem and Quest Cherokee, and each Subject Document (other
than the Midstream Services Agreement) is, under all applicable laws, the valid
and binding obligation of the parties thereto enforceable against such parties
in accordance with its terms; (f) all natural persons who have signed or will
sign any of the Reviewed Documents had, or will have, as the case may be, the
legal capacity to do so at the time of such signature; (g) excluding Reviewed
Documents, there is no agreement, understanding, course of dealing or
performance, usage of trade or writing defining, supplementing, amending,
modifying, waiving or qualifying the terms of any of the Subject Documents; (h)
there has not been any mutual mistake of fact or misunderstanding, fraud, duress
or undue influence in connection with the transactions contemplated by the
Subject Documents (collectively, the "Transactions"); (i) the conduct of all of
the parties and their respective agents in connection with the Subject Documents
has complied with any requirement of good faith and fair dealing; (j) in all
executed copies of the Subject Documents delivered in connection with the
closing of the Transactions, all blank spaces have been or shall be properly
completed and all exhibits and schedules referred to therein have been or shall
be attached in their final forms, and none of the completions or attachments are
or shall be inconsistent with the forms which we have reviewed; and (k) the
statements, recitals, representations and warranties as to manners of fact set
forth in the Subject Documents are accurate and complete.
Based upon the foregoing, and subject to the assumptions, qualifications
and limitations set forth herein, we are of the opinion that as of this date:
1. Each of Bluestem and Quest Cherokee is a limited liability company duly
formed, validly existing and in good standing under the laws of the State of
Delaware and has all requisite limited liability company power and authority to
own, lease and operate its properties, and to carry on its business as is now
being conducted, as described in QRC's Form 10-K for the year ended December 31,
2005, as amended, or in any subsequent filings with the Securities and Exchange
Commission pursuant to the Securities Exchange Act of 1934 (collectively, the
"SEC Filings"). Based solely upon our review of the Certificates of Good
Standing regarding Bluestem identified on Annex I.B. hereto, Bluestem is
qualified to do business as a foreign limited liability company, and is in good
standing, under the laws of the State of Kansas and the State of Oklahoma. Based
solely upon our review of the Certificates of Good Standing regarding Quest
Cherokee identified on Annex I.B. hereto, Quest Cherokee is qualified to do
business as a foreign limited liability company, and is in good standing, under
the laws of the State of Kansas and the State of Oklahoma. Based solely upon our
review of the Certificates of Good Standing regarding QRC identified on Annex
I.B. hereto, QRC is qualified to do business as a foreign corporation, and is in
good standing, under the laws of the State of Kansas and the State of Oklahoma.
2. Each of Bluestem and Quest Cherokee has the limited liability company
power and authority to execute and deliver the Transaction Documents to
which it is a party and to consummate the Transactions of Bluestem or Quest
Cherokee, as applicable, thereunder. The execution and delivery by each of
Bluestem and Quest Cherokee of the Transaction Documents to which it is a party,
and the consummation by each of Bluestem and Quest Cherokee of its Transactions
thereunder, have been duly and validly authorized by Bluestem or Quest Cherokee,
as applicable, and no other limited liability company proceedings on the part of
Bluestem or Quest Cherokee are necessary to authorize the Transaction Documents
to which it is a party or to consummate the Transactions of Bluestem or Quest
Cherokee, as applicable, contemplated thereby. Each of the Transaction Documents
to which Bluestem or Quest Cherokee is a party has been duly executed and
delivered by Bluestem or Quest Cherokee, as applicable.
3. The Midstream Services Agreement constitutes the valid and binding
agreement of Bluestem and QRC and is enforceable against Bluestem and QRC in
accordance with its terms.
4. Upon the consummation of the Acquisition, QRC will own the Class A
Subordinated Units and the Class B Subordinated Units of MLP free and clear of
all liens, encumbrances, security interests, charges and other claims (except
for the requirements of applicable securities laws on transferability and for
the restrictions and requirements contained in the Transaction Documents) (i) in
respect of which a financing statement under the Uniform Commercial Code of
Nevada naming QRC as debtor is on file as of a recent date in the Office of the
Secretary of State of the State of Nevada (based solely upon our review of the
Nevada Search) or (ii) otherwise known to us, without independent investigation,
other than those created by or arising under the Delaware LP Act, and except, in
the case of either (i) or (ii), security interests in favor of Guggenheim as
agent for the lenders under the Guggenheim Credit Facilities.
5. Upon the consummation of the Acquisition, MLP will be the sole member of
Bluestem with a 100% membership interest in Bluestem; such membership interest
has been duly authorized and validly issued in accordance with the Bluestem
Limited Liability Company Agreement and is fully paid (to the extent required
under the Bluestem Limited Liability Company Agreement) and nonassessable
(except as such nonassessability may be affected by Section 18-607 and Section
18-804 of the Delaware Limited Liability Company Act); and upon the consummation
of the Acquisition and upon the effectiveness of the Release Letters, MLP will
own such membership interest free and clear of all liens, encumbrances, security
interests, charges or claims (except for the requirements of applicable
securities laws on transferability and the restrictions and requirements
contained in the Bluestem Limited Liability Company Agreement) (i) in respect of
which a financing statement under the Uniform Commercial Code of Delaware naming
MLP as debtor is on file as of a recent date in the Office of the Secretary of
State of State of Delaware (based solely upon our review of the Delaware Search)
or (ii) otherwise
known to us, without independent investigation, other than those created by or
arising under the Delaware Limited Liability Company Act.
6. The execution and delivery by each of QRC and Bluestem of each
Transaction Document to which it is a party do not, and the performance of its
obligations and the consummation of the Transactions of QRC or Bluestem, as
applicable, thereunder will not: (i) with respect to Bluestem, conflict with, or
result in a breach of any provision of, the certificate of formation of Bluestem
and the Bluestem Limited Liability Company Agreement; (ii) constitute a default
(or an event that with notice or lapse of time or both would become a default),
give rise to any right of termination, cancellation, amendment or acceleration
(with or without notice, lapse of time or both), or result in a lien on any of
the equity interests in MLP, GP or Bluestem or any of their assets, under any of
the agreements set forth on Annex II to this opinion letter, except as set forth
in the Transaction Documents and except for security interests and liens on any
equity interests in MLP or GP owned by the Quest Entities (as defined in the
Omnibus Agreement) in favor of Guggenheim as agent for the lenders under the
Guggenheim Credit Facilities; or (iii) result in a violation of the Delaware
Limited Liability Company Act or federal law or any order, judgment, injunction
or decree, of which we have knowledge, of any court or other governmental
authority to which QRC or Bluestem is subject or by which any property or asset
of QRC or Bluestem is bound or affected; which defaults, rights of termination,
cancellation, amendment or acceleration, liens or violations in the case of
clause (ii) or (iii) above would have, individually or in the aggregate, a
Material Adverse Effect or a QRC Material Adverse Effect, as the case may be;
provided, however, that no opinion is expressed pursuant to this paragraph with
respect to federal or state securities laws or other anti-fraud statutes, rules
or regulations.
7. No declaration, filing or registration with, or notice to, or
authorization, consent or approval of, any Governmental Authority under the
Delaware Limited Liability Company Act or federal law is necessary for the
execution and delivery by QRC or Bluestem of, and the performance of its
obligations under, the Transaction Documents to which it is a party or for the
consummation by QRC or Bluestem of the Transactions contemplated by such
Transaction Documents, other than (i) required filings or registrations required
pursuant to state or federal securities laws, rules or regulations, as to which
we do not express an opinion, or pursuant to the rules or any stock exchange in
connection with the performance of the terms of the Registration Rights
Agreement, (ii) such consents as have been obtained or made, (iii) such
declarations, filings, registrations, notices, authorizations, consents or
approvals which, if not obtained, made or given, would not have or be reasonably
expected to have, individually or in the aggregate, a Material Adverse Effect,
and (iv) such consents which (A) are of a routine or administrative nature, (B)
are not customarily obtained or made prior to the consummation of transactions
such as those contemplated by the Transaction Documents and (C) are expected in
the reasonable judgment of QRC or Bluestem, as
applicable, to be obtained or made in the ordinary course of business subsequent
to the consummation of the Transactions.
8. There are no outstanding options, warrants, script rights to subscribe
to, calls or commitments of any character whatsoever relating to, or securities,
rights or obligations convertible into or exercisable or exchangeable for, or
any right to subscribe for or acquire, any equity securities of Bluestem, nor is
there any restriction upon the voting or transfer of any equity securities of
Bluestem, pursuant to the Bluestem Limited Liability Company Agreement.
9. Upon the effectiveness of the Release Letters, the liens and security
interests on the equity interests in Bluestem and its assets in favor of
Guggenheim as agent for the lenders under the Guggenheim Credit Facilities shall
be released.
Our opinions and confirmations set for above are subject to the following
additional qualifications and limitations:
A. The enforceability of the Midstream Services Agreement is subject to the
effect of applicable bankruptcy, insolvency, reorganization, receivership,
arrangement, moratorium, assignment for the benefit of creditors and other
similar laws affecting the rights and remedies of creditors. This qualification
includes, without limitation, the avoidance, fraudulent transfer and preference
provisions of the federal Bankruptcy Code of 1978 (11 U.S.C. xx.xx. 101 et.
seq.), as amended, and the fraudulent transfer and conveyance laws of the State
of Kansas, and we render no opinion that any transaction provided for in the
Midstream Services Agreement would not be subject to avoidance or otherwise
adversely affected under such provisions or laws.
B. The enforceability of the Midstream Services Agreement is subject to the
effect of principles or equity (including those respecting the availability of
specific performance), whether considered in a proceeding at law or in equity,
and the limitations imposed by applicable procedural requirements of applicable
state or federal law.
C. The enforceability of the Midstream Services Agreement is subject to the
effect of generally applicable rules of law that (i) limit or deny the
enforceability of provisions purporting to waive defenses or rights or the
obligations of good faith, fair dealing, diligence and reasonableness or (ii)
may, where a portion of the contract may be unenforceable, limit the
enforceability of the balance of the contract to circumstances in which the
unenforceable portion is not an essential part of the transaction or contract.
D. We express no opinion as to the enforceability of (i) any contractual
provision which either directly or indirectly limits or tends to limit the time
in which any suit or action may be instituted by a party and (ii) any
contractual provision which requires a party to execute and deliver additional
agreements or instruments
other than agreements or instruments which are limited in effect to effectuating
the express terms of the Midstream Services Agreement and do not extend or
modify such terms.
E. The enforceability of any provision in the Midstream Services Agreement
for the payment of costs of collection (including attorney fees) is subject to
judicial discretion. Without limiting the generality of the foregoing
qualification, any such provision is unenforceable if either (i) a court
determines that the amount of collection costs provided for or sought is
unreasonable or (ii) the Midstream Services Agreement provides for, or a party
seeks to recover, (x) costs incurred by a salaried employee of such party or its
assignee or (y) payment of the attorney fees and collection agency fees.
F. The enforceability of the Midstream Services Agreement in accordance
with its terms is subject to the authority of the Kansas Corporation Commission
(the "KCC") under applicable Kansas statutes and regulations to review any fee,
term or practice being used by a person offering "gas gathering services" in
order to determine whether that fee, term or practice is just, reasonable, not
unjustly discriminatory and not unjustly preferential. Kan. Stat. Xxx. ss.
55-1,104. See also, Kan. Admin. Reg. xx.xx. 82-3-802(b) & (k). As used in those
statutory and regulatory provisions, the term "gas gathering services" means the
gathering and preparation of natural gas for transportation, whether such
services are performed for hire or in connection with the purchase of natural
gas for resale. Kan. Stat. Xxx. ss. 55-1,101(a)(1).
G. For purposes of our opinions in opinion paragraphs 6(iii) and 7 above,
the reference to "federal law" shall mean the statutory laws, rules and
regulations of the United States of America that in our experience are normally
applicable to transactions of the type contemplated by the Transaction
Documents.
H. With respect to our opinions in opinion paragraphs 5 and 9 above, each
of the Release Letters provides that the release of liens and security interests
thereunder shall be effective upon receipt by Guggenheim of (i) fully executed
copies of such Release Letter, the Amendment (as defined in such Release Letter)
and each of the documents listed on Annex D to such Amendment, and (ii) the
payment of all fees in accordance with such Amendment.
I. In connection with any matters confirmed by us with respect to the
existence or absence of facts, conditions or circumstances, the words "to our
knowledge", "of which we have knowledge", "known to us", and words of similar
import mean that in the course of performing legal services on behalf of QRC or
Bluestem, we are without conscious awareness of facts or other information that
such confirmed matters are untrue, and in preparing this opinion letter, we have
not undertaken any independent verification of such confirmed matters beyond our
recollection of legal services currently and previously performed by us for QRC
and Bluestem, and have made no investigation or inquiry with QRC, Bluestem or
any
other persons regarding such confirmed matters except as stated above in this
opinion letter. For purposes of the preceding sentence, the terms "to our
knowledge", "of which we have knowledge", "known to us" and similar phrases
refer to the actual present knowledge of those lawyers of Xxxxxxx Xxxxxxxx
Xxxxxx LLP who have devoted substantive attention to the matters relating to the
Transaction Documents and the other transactions of QRC and Bluestem occurring
on the date hereof, and not to the knowledge of Xxxxxxx Xxxxxxxx Xxxxxx LLP as a
firm or its partners or employees generally.
J. We express no opinion with respect to (i) any federal or state laws,
rules or regulations governing the issuance or sale of securities, (ii) any
federal or state environmental laws, rules or regulations or (iii) the
application of any income tax or other tax laws (federal or state) or any
federal or state tax consequences of any of the Transactions.
K. Our opinions set forth in this opinion letter are based upon the facts
in existence and the laws in effect on the date hereof, and we expressly
disclaim any obligation to update or supplement our opinions in response to
changes in the law becoming effective hereafter or future events or
circumstances affecting the Transactions.
This opinion letter is solely for the benefit of the addressees hereof in
connection with the Transactions and may not be relied upon for any other
purpose or by any other person for any purpose, without in each instance our
prior written consent. We understand that this opinion letter may be included in
closing binders with respect to the Transactions.
Very truly yours,
XXXXXXX XXXXXXXX XXXXXX LLP
/s/ Xxxxxxx Xxxxxxxx Xxxxxx LLP
SCHEDULE I
Opinion Recipients of Opinion Letter of Xxxxxxx Xxxxxxxx Xxxxxx LLP dated
December 22, 2006 Re: Quest Midstream Partners, L.P.
Alerian Opportunity Partners IV, LP
c/o Alerian Capital Management
00 Xxxxxxxxxxx Xxxxx, 00xx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
Swank MLP Convergence Fund, LP
c/o Swank Capital, LLC
Xxx Xxxx Xxxxxx, Xxxxx 000
Xxxxxx, Xxxxx 00000
The Xxxxxxx MLP Opportunity Fund I, LP
c/o Swank Capital, LLC
Xxx Xxxx Xxxxxx, Xxxxx 000
Xxxxxx, Xxxxx 00000
The Xxxxxxx XX Strategies Fund, LP
c/o Swank Capital, LLC
Xxx Xxxx Xxxxxx, Xxxxx 000
Xxxxxx, Xxxxx 00000
Swank Investment Partnership, LP
c/o Swank Capital, LLC
Xxx Xxxx Xxxxxx, Xxxxx 000
Xxxxxx, Xxxxx 00000
Tortoise Capital Resources Corporation
00000 Xxxxxx Xxxx., Xxxxx 000
Xxxxxxxx Xxxx, Xxxxxx 00000
Xxxxxxxx Opportunity Partners, LP
c/o Huizenga Capital Management
0000 Xxxx Xxxx, Xxxxx 000
Xxxxxxxx, Xxxxxxxx 00000
HCM Energy Holdings, LLC
c/o Huizenga Capital Management
0000 Xxxx Xxxx, Xxxxx 000
Xxxxxxxx, Xxxxxxxx 00000
Annex I.A.
----------
Authority Documents
-------------------
(i) Certificate of Formation of Quest Cherokee;
(ii) Second Amended and Restated Limited Liability Company Agreement of Quest
Cherokee, dated as of November 14, 2005;
(iii) Statement of Unanimous Consent of the Sole Manager of Quest Cherokee
relating to, among other things, the execution, delivery and performance
of the Contribution Agreement by both Quest Cherokee and Bluestem;
(iv) Certificate of Formation of Bluestem;
(v) Limited Liability Company Agreement of Bluestem dated December 15, 2003;
(vi) Statement of Unanimous Consent of the Sole Member of Bluestem relating
to, among other things, the execution, delivery and performance of the
Contribution Agreement by Bluestem;
(vii) Certificate of Formation of GP;
(viii) Limited Liability Company Agreement of GP dated as of December 13, 2006;
(ix) Statement of Unanimous Consent of the Board of Directors of GP relating
to, to, among other things, the execution, delivery and performance of
the Midstream Services Agreement and the Omnibus Agreement by both GP
and MLP;
(x) Certificate of Limited Partnership of MLP;
(xi) Agreement of Limited Partnership of MLP dated as of December 13, 2006;
and
(xii) Statement of Unanimous Consent of the Sole Member of Bluestem relating
to, among other things, the execution, delivery and performance of the
Midstream Services Agreement and the Omnibus Agreement by Bluestem.
Annex I.B.
----------
Certificates of Good Standing
-----------------------------
Quest Resource Corporation
Certificate of Good Standing as a foreign corporation dated as of December
18, 2006 from the Kansas Secretary of State.
Certificate of Good Standing as a foreign corporation dated as of December
18, 2006 from the Oklahoma Secretary of State.
Bluestem Pipeline, LLC
Certificate of Good Standing as a domestic limited liability company dated as
of December 11, 2006 from the Delaware Secretary of State.
Certificate of Good Standing as a foreign limited liability company dated as
of December 18, 2006 from the Kansas Secretary of State.
Certificate of Good Standing as a foreign limited liability company dated as
of December 18, 2006 from the Oklahoma Secretary of State.
Quest Cherokee, LLC
Certificate of Good Standing as a domestic limited liability company dated as
of December 11, 2006 from the Delaware Secretary of State.
Certificate of Good Standing as a foreign limited liability company dated as
of December 18, 2006 from the Kansas Secretary of State.
Certificate of Good Standing as a foreign limited liability company dated as
of December 18, 2006 from the Oklahoma Secretary of State.
Annex II
--------
Material Contracts
------------------
1. The agreements or other instruments which have been filed as exhibits to
the SEC Filings (as defined above in the opinion letter).
2. Gas Compressor Equipment Master Rental Agreement, dated January 16,
2004, between Universal Compression, Inc. and Bluestem Pipeline, LLC.
3. Gas Compressor / Production Equipment Master Rental & Servicing
Agreement, dated June 24, 2004, between Hanover Compression Limited Partnership
and or its affiliate Hanover/Xxxxx Limited Partnership and Bluestem Pipeline,
LLC.
4. Agreement for the Sale and Purchase for the Petrolia - Ft. Xxxxx
Pipeline (Lines YC, YBA & DI), dated September 20, 2005, between Southern Star
Central Gas Pipeline, Inc. and Bluestem Pipeline, LLC.
EXHIBIT G
---------
Opinion of Xxxxxxx Xxxxxxxx
XXXXXXX BRIGNONE
ATTORNEYS AT LAW
000 Xxxxx Xxxxxx Xxxxxx
Xxxxx 0000
Xxx Xxxxx, Xxxxxx 00000
(000) 000-0000 Fax (000) 000-0000
xxx.xxxxxxxxxx.xxx
December 22, 2006
To the Investors listed on Schedule I hereto
Ladies and Gentlemen:
We have acted as special Nevada counsel to Quest Resource Corporation, a
Nevada corporation (the "Company"), in connection with the execution and
delivery of that certain Purchase Agreement, dated as of December 22, 2006 (the
"Purchase Agreement"), by and among the Company, Quest Midstream Partners, L.P.
("MLP"), Quest Midstream OP, LLC ("GP"), Alerian Opportunity Partners IV, LP
("Alerian"), Swank MLP Convergence Fund, LP ("Swank MLP Fund"), Swank Investment
Partners, LP ("SIP"), The Xxxxxxx MLP Opportunity Fund I, LP ("Xxxxxxx MLP
Fund"), The Xxxxxxx OP Strategies Fund, LP ("Xxxxxxx OP Fund"), Tortoise Capital
Resources Corporation ("Tortoise"), Xxxxxxxx Opportunity Partners, LP
("Xxxxxxxx") and HCM Energy Holdings, LLC ("HCM", and together with Alerian,
Swank MLP Fund, SIP, Xxxxxxx MLP Fund, Xxxxxxx OP Fund, Tortoise and Xxxxxxxx,
the "Investors"). This opinion is being issued and delivered to you at the
request of the Company pursuant to Section 2.4(b) of the Purchase Amendment.
Capitalized terms used herein, unless otherwise defined, shall have the meanings
ascribed to them in the Purchase Agreement.
As special Nevada counsel, and for the purpose of rendering this opinion,
we have examined originals, or copies certified or otherwise identified to our
satisfaction as being true copies, of the following records, documents,
instruments and certificates:
(i) the Purchase Agreement;
(ii) the Investors' Rights Agreement;
(iii) the Contribution Agreement;
(iv) the Partnership Agreement;
(v) the Omnibus Agreement;
(vi) the Midstream Services Agreement and Gas Dedication Agreement,
dated as of the date hereof, but effective December I, 2006,
between Bluestem Pipeline, LLC and the Company (the "Midstream
Agreement");
XXXXXXX BRIGNONE
Attorneys At Law
The Investors listed on Schedule 1 hereto
December 22, 2006
Page 2 of 6
(vii) the Registration Rights Agreement;
(viii) the GP Limited Liability Company Agreement;
(ix) the Articles of Incorporation and Bylaws of the Company, each as
amended to date (the "Company Governing Documents");
(x) such corporate records, proceedings, minutes, consents, actions
and resolutions of the Board of Directors and stockholders of the
Company as we have deemed necessary or appropriate as a basis for
the opinions expressed below including, without limitation, those
resolutions of the Board of Directors authorizing the execution,
delivery and performance by the Company of the Transaction
Documents (as defined below) and the consummation of the
transactions contemplated thereby (the "Transactions");
(xi) the Certificate of Existence with Status in Good Standing issued
by the office of the Secretary of State of Nevada as of December
15, 2006, with respect to the good standing in Nevada of the
Company on that date; and
(xii) the certificate of an officer of the Company, of even date
herewith, with respect to certain factual matters, and all other
certificates of officers of the Company delivered on behalf of
the Company in connection with the Transactions (collectively,
the "Officer's Certificates").
The Purchase Agreement, the Investors' Rights Agreement, the Contribution
Agreement, the Partnership Agreement, the Omnibus Agreement, the Midstream
Agreement, the Registration Rights Agreement, and the OP Limited Liability
Company Agreement are hereinafter referred to collectively as the "Transaction
Documents".
We have not participated in the preparation or negotiation of the
Transaction Documents and have not assisted the Company in its activities
relative to the Transactions. We have made only such legal and factual
examinations and inquiries as we have deemed necessary or appropriate for
purposes of this opinion. We have been furnished with, and with your consent
have relied upon, the Officer's Certificates and other certificates and
assurances of officers and other representatives of the Company and of public
officials as we have deemed necessary or appropriate for the purpose of
rendering the opinions set forth herein. As to questions of fact material to our
opinions, we have relied upon the statements of fact and the representations and
warranties as to tactual matters contained in the documents we have examined;
however, except as otherwise expressly indicated, we have not been requested to
conduct, nor have we undertaken, any independent investigation to verity the
content or veracity thereof or to
XXXXXXX XXXXXXXX
Attorneys At Law
The Investors listed on Schedule 1 hereto
December 22, 2006
Page 3 of 6
determine the accuracy of any statement, and no inference as to our knowledge of
any matters of fact should be drawn from the fact of our representation of the
Company.
Without limiting the generality of the foregoing, in rendering this
opinion, we have, with your permission, assumed without independent verification
that (i) the statements of fact and all representations and warranties of any
party set forth in the Transaction Documents are accurate, true and correct as
to factual matters; (ii) each natural person executing a document has sufficient
legal capacity to do so; (iii) all documents that we examined accurately
describe and contain the mutual understanding of the parties and there are no
oral or written agreements or understandings, and there is no course of prior
dealing between any of the parties, that would in any manner vary or supplement
the terms and provisions of the documents, or of the relationships set forth
therein, or which would constitute a waiver of any of the provisions thereof by
the actions or conduct of the parties or otherwise, or which would have an
effect on the opinions rendered herein; (iv) all documents submitted to us as
originals arc authentic, the signatures on such documents are genuine, and all
documents submitted to us as certified, conformed, photostatic, electronic or
facsimile copies conform to the original document; (v) the obligations of each
party set forth in the Transaction Documents are its legal, valid, and binding
obligations, enforceable in accordance with their respective terms; (vi) all
necessary authorizations, approvals, actions, orders, permits and consents from,
and notices to or filings with, any governmental authority in a jurisdiction
other than Nevada or any third party in connection with the execution, delivery
and performance by each of the parties to the Transaction Documents have been
obtained, taken, received or made, and are in full force and effect; and (vii)
all corporate records made available to us by the Company and all public records
we have reviewed are accurate and complete.
Whenever a statement herein is qualified by the phrase "to our knowledge"
or "known to us" or a similar phrase, we have, with your consent, advised you
concerning only the conscious awareness of facts in the possession of those
attorneys who are currently members of or associated with this firm and who have
performed legal services on behalf of the Company in connection with the
Transactions, and which knowledge we have recognized as being pertinent to the
matters set forth herein.
As used herein, all references to (i) "Applicable Nevada Law" are
references to those statutes, rules and regulations of the State of Nevada as in
effect on the day of this opinion, which, in our experience, are customarily
applicable both to transactions of the type contemplated by the Transaction
Documents and to general business corporations that are not engaged in regulated
business activities; (ii) "Nevada Governmental Authorities" are references to
the governmental and regulatory authorities, bodies, instrumentalities and
agencies and courts of the State of Nevada, excluding its political subdivisions
and local agencies; and (iii) "Applicable Nevada Orders" are references to any
judgments, orders, decrees, writs or
XXXXXXX BRIGNONE
Attorneys At Law
The Investors listed on Schedule 1 hereto
December 22, 2006
Page 4 of 6
injunctions issued by any Nevada Governmental Authorities under Applicable
Nevada Law known to us, without investigation or inquiry, to be binding upon the
Company or to which the Company is subject.
We are qualified to practice law in the State of Nevada. The opinions set
forth herein are expressly limited to the effect on the Transactions only of the
internal corporate laws of the State of Nevada and we do not purport to be
experts on, or to express any opinion with respect to the applicability thereto,
or to the effect thereon, of, the laws of any other jurisdiction or as to
matters of local law or the laws of local governmental departments or agencies
within the State of Nevada. We express no opinion herein concerning, and we
assume no responsibility as to laws or judicial decisions related to, or any
orders, consents or other authorizations or approvals as may be required by, any
federal laws, including any federal securities laws or regulations, or any state
securities or "Blue Sky" laws or regulations.
Based upon the foregoing, and subject to the qualifications, exceptions and
assumptions set forth herein, we are of the opinion that:
1. The Company is duly organized as a corporation, validly existing and in
good standing under the Jaws of the State of Nevada, and has the requisite
corporate power and authority to own, lease and/or operate its properties and to
conduct its business as currently conducted.
2. The Company has the corporate power and authority to execute and deliver
the Transaction Documents to which it is a party and to consummate the
Transactions. The execution and delivery by the Company of the Transaction
Documents to which it is a party and the consummation of the Transactions have
been duly authorized by the Company. Each of the Transaction Documents to which
the Company is a party have been duly executed and delivered by the Company.
3. The execution and delivery by the Company, and the performance by the
Company of its obligations under, each of the Transaction Documents to which it
is a party, and the consummation of the Transactions do not (a) breach or
contravene the Company Governing Documents, (b) violate any Applicable Nevada
Law, or (c) violate any Applicable Nevada Orders.
4. No declaration, filing or registration with, or notice to, or consent,
approval, authorization or exemption from or of: any Nevada Governmental
Authorities is necessary under Applicable Nevada Law for the issuance and sale
of the Indicated Units by Issuer or the Indicated Member Interests by GP, or fur
the consummation by the Company of the Transactions, other than (i) any required
filings or registrations required pursuant to state or federal securities laws,
rules or regulations (as to which we express no opinion), or pursuant to
XXXXXXX XXXXXXXX
Attorneys At Law
The Investors listed on Schedule 1 hereto
December 22, 2006
Page 5 of 6
the rules of any stock exchange in connection with the performance of the terms
of the Registration Rights Agreement (as to which we express no opinion), (ii)
such consents that have been obtained or made and (iii) such declarations,
filings, registrations, notices, authorizations, consents or approvals which, if
not obtained or made, would not have or be reasonably expected to have,
individually or in the aggregate, a Material Adverse Effect or a QRC Material
Adverse Effect.
In our opinion paragraph 1 above, with respect to the description of the
properties and business of the Company, we have relied only on the Officer's
Certificates and we have conducted no independent investigation nor made any
inquiry with respect thereto.
The opinions expressed herein are based upon the Applicable Nevada Law in
effect and the facts in existence as of the date of this letter. In delivering
this letter to you, we assume no obligation, and we advise you that we shall
make no effort, to update the opinions set forth herein, to conduct any inquiry
into the continued accuracy of such opinions, or to apprise any addressee
hereof, its counsel, or assignees of any facts, matters, transactions, events or
occurrences taking place, and of which we may acquire knowledge, after the date
of this letter, or of any change in any such Applicable Nevada Law or any facts
occurring after the date of this letter, which may affect the opinions set forth
herein. No opinions are offered or implied as to any matter, and no inference
may be drawn, beyond the strict scope of the specific issues expressly addressed
by the opinions herein.
This opinion is solely for your benefit, information and use in connection
with the closing of the Transactions as required by the Purchase Agreement. This
opinion may not be relied upon for any other purpose, or relied upon by, quoted
from, or referred, circulated or furnished to, any other person, firm or entity,
for any purpose without our prior written consent in each instance.
Very truly yours,
XXXXXXX BRIGNONE
/s/ Xxxxxxx Xxxxxxxx
XXXXXXX XXXXXXXX
Attorneys At Law
SCHEDULE I
INVESTORS
-----------------------------------------
Alerian Opportunity Partners IV, LP
c/o Alerian Capital Management
00 Xxxxxxxxxxx Xxxxx, 00xx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
-----------------------------------------
Swank MLP Convergence Fund, LP
c/o Swank Capital, LLC
Xxx Xxxx Xxxxxx, Xxxxx 000
Xxxxxx. Xxxxx 00000
-----------------------------------------
Swank Investment Partners, LP
c/o Swank Capital, LLC
Xxx Xxxx Xxxxxx, Xxxxx 000
Xxxxxx, Xxxxx 00000
-----------------------------------------
The Xxxxxxx MLP Opportunity Fund I, LP
c/o Swank Capital, LLC
Xxx Xxxx Xxxxxx, Xxxxx 000
Xxxxxx, Xxxxx 00000
-----------------------------------------
The Xxxxxxx OP Strategies Fund, LP
c/o Swank Capital, LLC
Xxx Xxxx Xxxxxx, Xxxxx 000
Xxxxxx, Xxxxx 00000
-----------------------------------------
Tortoise Capital Resources Corporation
00000 Xxxxxx Xxxx., Xxxxx 000
Xxxxxxxx Xxxx, Xxxxxx 00000
-----------------------------------------
Huizenga Opportunity Partners, LP
c/o Huizenga Capital Management
0000 Xxxx Xxxx, Xxxxx 000
Xxxxxxxx, Xxxxxxxx 00000
------------------------------------------
HCM Energy Holdings, LLC
c/o Huizenga Capital Management
0000 Xxxx Xxxx, Xxxxx 000
Xxxxxxxx, Xxxxxxxx 00000
-----------------------------------------
EXHIBIT H
---------
[Attached as Exhibit 10.6 to the Form 8-K
filed by Quest Resource Corporation on December 29, 2006]
EXHIBIT I
---------
[Attached as Exhibit 10.3 to the Form 8-K
filed by Quest Resource Corporation on December 29, 2006]