JACKSON~QLLY - Public Service Commission of West Virginia

JACKSON~QLLY AlTORNEYS AT LAW PLLC

500 LEE STREET EAST SUITE 1600 BO. SOX 553 CHARLESTON, &ST VIRGTNIA 25322 t TELEPHUNE: 304-340-1000 TELECUPIER 304-340-1 I30 www.j&sonkelly corn

Direct Dial No. (304) 340-1251

E-mail: ccallask2,iacksonkellv.com State Bar ID No. 599 1

Fax NO. (304) 340-1080

February 12,2010

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Via Hand Delivery Sandra Squire, Executive Secretary Public Service Commission of WV 201 Brooks Street Charleston, West Virginia 25323

Re: Mountaineer Gas Company 2009 Rule 30C Application Case No. 09-1268-G-30C

Dear Ms. Squire:

Enclosed please find an original and twelve copies of the pre-filed direct testimony of Mountaineer Gas Company. This testimony includes that of Thomas D. Westfall and Tom M. Taylor, Copies of this testimony have been provided to counsel of record.

Please file this letter and the testimony and circulate the twelve additional copies of both to the appropriate parties at the Commission. We also ask that you date stamp the extra copies provided and return them with our messenger. As always, we appreciate your assistance in this matter.

las

CLC/mb Enclosures cc: David A. Sade, Esq. (w/enc.)

C. Terry Owen, Esq. (w/enc.) George A. Patterson, Esq. (w/enc.) Thomas M. Taylor (w/enc.) Thomas D. Westfall (w/enc.) Dale P. Lee (w/enc.)

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Clarksburg, W Martinsburg, W Morgantown, W Wheeling, WV Denver, CU Lexington, KY Pittsburgh, PA Washington, DC

http://ccallask2,iacksonkellv.com

PUBLIC SERVICE COMMISSION OF WEST VIRGINIA

CHARLESTON

CASE NO. 09-1268-G-30C

MOUNTAINEER GAS COMPANY, a public utility, Kanawha County.

Application to change rates effective November 1,2009, pursuant to Rule 30C, General Order No. 183.4, Purchased Gas Application.

DIRECT TESTIMONY OF

THOMAS D. WESTFALL

February 12,2010

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Direct Testimony of Thomas D. Westfall Mountaineer Gas Company Case No. 09-1268-G-30C Page 1 of 14

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PLEASE STATE YOUR NAME AND BUSINESS ADDRESS.

My name is Thomas D. Westfall and my business address is 2401 Sissonville Drive,

Charleston, West Virginia 253 12-1336.

BY WHOM ARE YOU EMPLOYED AND IN WHAT CAPACITY?

I am employed by Mountaineer Gas Company (“Mountaineer”) as General Manager. My

responsibilities include Gas Supply, Transportation and Exchange, Gas System

Operations, and Customer Relations.

PLEASE DESCRIBE YOUR PROFESSIONAL EXPERIENCE AND EDUCATIONAL

BACKGROUND.

I have a Bachelor of Science in Mechanical Engineering and a Masters of Science in

Engineering Management, I have been employed by Mountaineer Gas Company for

approximately 15 years in various operations and management roles.

PLEASE DESCRIBE THE PURPOSE OF YOUR TESTIMONY.

My testimony will serve two purposes.

First, I will summarize Mountaineer’s position on the Staffs recommendation for

Mountaineer’s final PGA rate, as expressed in the Staffs Final Joint Staff

Memorandum filed on February 2,2010 (“Final Staff Memo”).

Next, I will present Mountaineer’s position in response to the Consumer Advocate

Division’s allegation, first advanced in Case No. 08-1 304-G-30C, Mountaineer’s

2008 30C case (“2008 30C Case”), that Mountaineer was imprudent in its gas

hedging decision in November and December 2007, and that the Commission

should impose a penalty of over $1.6 million on Mountaineer for its allegedly

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imprudent actions (as outlined in the 2008 30C Case, the “CAD Penalty

Recommendation”). I will explain why Mountaineer declined to execute certain

hedging transactions that were prompted by Mountaineer’s Planalytics Gas Buyer

computer program (“Gas Buyer”) in November and December 2007, and show the

Commission why these decisions were prudent. In doing so, I will: (i) summarize

the CAD’S position on this issue, as Mountaineer understands it from the 2008

30C Case; (ii) describe Mountaineer’s use of Gas Buyer and explain some of Gas

Buyer’s capabilities and limitations; (iii) identi9 the storage constraints facing

Mountaineer at the time; and (iv) explain why Mountaineer’s decision not to

accept these prompts was, in view of Mountaineer’s circumstances and the

information available at the time, a prudent course of action. In his direct

testimony, Tom Taylor, Mountaineer’s president, will elaborate on the financial

circumstances with which Mountaineer was confronted in late 2007 that also bore

on Mountaineer’s gas procurement and storage strategies during that period.

STAFF’S RECOMMENDATION ON FINAL PGA RATE

Q. DOES MOUNTAINEER SUPPORT THE STAFF RECOMMENDATION AND

ACCEPT THE STAFF-PROPOSED FINAL RATE?

A. Yes. Finalizing the interim rate is appropriate, as prices have not changed significantly

since the interim rates were implemented. Moreover, the rates Staff recommended are

sufficient to enable Mountaineer to recover its estimated purchased gas costs going

forward.

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CAD PENALTY RECOMMENDATION

Background

TO PROVIDE SOME BACKGROUND FOR THIS DISCUSSION, PLEASE BRIEFLY

DESCRIBE THE GAS BUYER PROGRAM.

Mountaineer has implemented a robust gas hedging program for many years. To assist in

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its gas hedging decisions, Mountaineer subscribes a service known as “EnergyBuyerB.”

EnergyBuyerB, which was also referred to as “Gas Buyer” in testimony filed in the 2008

30C Case,’ is a service provided by Planalytics, Inc., that tracks and analyzes various

factors that influence natural gas prices and produces specific purchasing suggestions or

“prompts” to either “buy” an available contract for future delivery of gas or “wait” for a

change in the market. When Gas Buyer does not issue enough “buy” prompts to enable

Mountaineer to meet its monthly purchase goals, the program is recommending

Mountaineer wait and make the purchase at the first of month index price.

Gas Buyer does not establish Mountaineer’s monthly purchasing goals. Rather,

Mountaineer establishes goals for the number of gas purchase contracts that it believes

will be required to meet projected customer demand over a twelve-month period, and

then uses Gas Buyer to assist in making decisions about which contracts for future

delivery of gas should be purchased. In order to allow for unforeseeable changes in

Note that the CAD sometimes referred to “Gas Buyer” as “Planalytics” in the pre-filed testimony and briefs it submitted in the 2008 30C Case. For consistency between the records developed in this case and the 2008 30C Case, Mountaineer will continue to refer to it as “Gas Buyer.”

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throughput - or the total gas sales and transportation volume flowing through

Mountaineer’s distribution network at any given time - Mountaineer usually sets its

monthly purchase goals at 75% of the gas it will require from the Columbia System. The

remaining 25% is typically acquired through a combination of withdrawals of stored gas

or purchases of flowing gas at current market prices.

PLEASE DESCRIBE IN GENERAL TERMS THE RATIONALE UNDERLYING THE

CAD PENALTY RECOMMENDATION.

In November and December 2007, Mountaineer determined, in response to storage

constraints, debt concerns, and its financial condition, that a temporary reduction in its

hedging program was necessary to deal with those concerns and maintain its financial

position. This reduction was effected through Mountaineer’s decision not to accept Gas

Buyer prompts for March and April of 2008 (the “2007 Prompts”).2 The CAD has alleged

that Mountaineer’s decision not to follow the 2007 Prompts was “influenced more by a

desire to improve its bottom line than by its obligation to secure the lowest priced

available gas,” and has recommended that a $1.7 million penalty be assessed to

Mountaineer’s recovery of its gas purchase costs during the 2007-2008 ACA period.

Direct Testimony of Randall R. Short, 2008 30C Case (“2008 Short Direct”) at 5. Randy

Short, a witness for the CAD at the time of the hearing on Mountaineer’s final rates in the

In November and December of 2007, Mountaineer received a total of thirty-four “purchase” prompts for March 2008 and seventeen “purchase” prompts for April 2008. See testimony of Mountaineer witness Tom Westfall from the evidentiary hearing held on May 8, 2009 in the 2008 30C Case (“2008 30C Hearing Transcript at 20 (Westfall)”).

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2008 30C Case, described the methodology he used to asrive at the $1.7 million figure.

2008 Short Direct at 7-8.3

Mountaineer’s Use of Gas Buyer

WHAT ARE THE LIMITATIONS OF THE GAS BUYER PROGRAM?

In this particular case, Gas Buyer’s most relevant limitations are that it does not (1)

estimate or provide assistance in estimating the variable levels of demand Mountaineer

will have to meet or (2) account for Mountaineer’s resulting physical storage levels and

storage limitations. Instead, Gas Buyer simply issues a recommendation to “buy” or

“wait” based on what it determines is the lowest available price of gas. 2008 30C Hearing

Transcript at 52 (Westfall). The prompts issued by Gas Buyer, in short, depend on the

utility’s determination of how many forward contracts it needs in a given period.

PLEASE DESCRIBE THE METHODOLOGY MOUNTAINEER USES TO

DETERMINE ITS MONTHLY PURCHASE GOALS.

First, Mountaineer uses its historical gas supply needs to generate an estimate of its total

monthly requirements for each month of the upcoming year. As I stated earlier,

Mountaineer typically aims to purchase 75% of each monthly requirement via futures

contracts with the assistance of Gas Buyer and fill the remaining 25% with gas purchased

at the first of month index price.

In the 2008 30C Case, the Staff took no position on the CAD Penalty Recommendation, and certainly offered no evidence in support of the CAD’S argument that Mountaineer’s actions had been imprudent. Since Mr. Short is now an employee of the Staff rather than the CAD, Mountaineer does not know whether Mr. Short will offer the same testimony on behalf of the Staff.

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Mountaineer adjusts these goals as more detailed or more current information

becomes available. Such adjustments are frequently necessary since the exclusive use of

historical data does not account for new trends or unexpected changes in demand.

Mountaineer typically compensates for this inaccuracy by increasing or decreasing the

amount of gas it purchases at the first of month index price.

As I describe below, in October 2007, concerns about Mountaineer’s debt

covenants and storage capacity led Mountaineer to revise its purchase goals downward to

70% of the previously-established goals and aim for a storage target of zero by April 1,

2008. See Exhibit TDW-1. This decision reduced, for example, Mountaineer’s original

goal of 70 contracts for March 2008 to 49 contracts. In the 2008 30C Case, Mr. Short

questioned this decision, effectively arguing that once Mountaineer had initially

established a monthly contract goal, it must adhere to that goal and blindly follow the

prompts issued by Gas Buyera4

DID MOUNTAINEER USE GAS BUYER TO HEDGE MOST OF ITS .OTHER

PURCHASE REQUIREMENTS DURING THE ACA PERIOD AT ISSUE HERE?

Absolutely. Even after accounting for Mountaineer’s decision not to follow the 2007

Prompts, Mountaineer used Gas Buyer to hedge over 70% of its purchase requirements

during the 2007/2008 ACA period.

2008 30C Hearing Transcript at 79 (Short) (“I would just question why you would just step away from [Gas Buyer]. You’d got expert advice coming to you from a program that we’ve agreed should serve as a guideline for your decisions.”).

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Direct Testimony of Thomas D. Westfall Mountaineer Gas Company Case No. 09-1268-0-30C Page 7 of 14

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Storage Limitations

PLEASE SUMMARIZE THE ROLE THAT STORAGE LIMITATIONS PLAYED IN

MOUNTAINEER’S HEDGING DECISIONS IN LATE 2007.

Mountaineer’s storage is provided by Columbia Gas Transmission, LLC (“Columbia”)

pursuant to Columbia’s applicable tariff filed with the Federal Energy Regulatory

Commission, a copy of which is attached as Exhibit TDW-2. Mountaineer is required to

comply with storage constraints on the Columbia Gas Transmission System (“Columbia

System”) or face severe financial penal tie^.^ Unfortunately, demand volatility and the

nature of the Columbia System make it extremely difficult to predict the amount of

available storage capacity Mountaineer will have access to in a given month. To fully

understand these difficulties, one must have a general understanding of how the Columbia

System works.

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Mountaineer has contracted with Columbia for “no notice” service - or service

that allows Mountaineer to nominate its all of its deliveries directly to its city gate (or

delivery point). The difference between the amount of gas Mountaineer nominates for

delivery to its city gate and what actually flows through the city gate determines the

See Exhibit TDW-2; see also 2008 Westfall Direct at 5 . As I indicated at page 5 of that 5

testimony,

The limitations that have to be managed are the maximum and minimum storage level at the beginning of each month, the maximum and minimum withdrawal or injection each month, and the maximum withdrawal or injection each day. The penalties provided in the tariff for failure to meet each of these limitations are substantial. Mountaineer continuously evaluates its storage position and its flowing gas in an effort to meet these guidelines.

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amount of gas that Mountaineer either injects or withdraws from storage. In general,

while approximately 60% of daily volume is reliably known on a daily basis as a result of

telemetering larger delivery points, the cumulative total of the actual monthly volumes

through all meters in any month is not known until approximately the gth day of the

following month. As a result, Mountaineer must estimate its throughput and, in turn, its

storage usage on a daily basis. These estimates are what Mountaineer compares to its

existing Gas Buyer goals to determine if the goal is appropriate.

PLEASE DESCRIBE THE PROCESS MOUNTAINEER USED TO ESTIMATE ITS

THROUGHPUT AND STORAGE USAGE IN 2007.

In 2007, Mountaineer generated estimates of its throughput and available storage capacity.

I have attached as Exhibit TDW-3 the spreadsheet we used to estimate our throughput and

storage usage for November 2007. Exhibit TDW-3 displays the actual throughput data

that Mountaineer received from Columbia on or about the gth day of December, 2007.

Prior to the receipt of the actual numbers from Columbia, Mountaineer based its estimates

of throughput on weather forecasts and historical data. Mountaineer then compared its

estimated throughput (including spindown deliveries and transportation customer activity)

to the amount of gas it had purchased and nominated for delivery through the Columbia

System. The difference between these two figures, as stated above, resulted in either an

injection of gas into or withdrawal of gas from storage. Ultimately, this process resulted

in an estimate of the amount of gas Mountaineer would have in storage on any given day

in an upcoming period.

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The estimated amount of storage gas was, in turn, compared to the Storage

Contract Quantity (“SCQ”), or storage limit. Mountaineer’s storage limits for 2007, as

well as monthly and daily injection and withdrawal constraints are depicted on Exhibit

TDW-4. The ultimate results of this process are depicted in the next-to-last and final

columns of Exhibit TDW-3, which display Mountaineer’s estimated remaining storage

capacity in (Dth) and the estimated percentage of Mountaineer’s storage capacity that will

be in use on a given day.

While Mountaineer strives to generate accurate estimates of throughput and future

storage usage, the results of this process are often inaccurate. Estimates of throughput

can, for example, be off by as much ai 0.5 Bcf in any given month. There are simply too

many variables at play - weather, sales volume, and transportation customer activity, for

example - for Mountaineer to generate consistently precise and accurate estimates of its

throughput and, in turn, its storage utilization months in advance.

WHAT ARE THE CONSEQUENCES OF OVERESTIMATING STORAGE

CAPACITY?

Overestimating available storage capacity could result in substantial penalties and can

result in the confiscation of any “excess” gas. See Exhibit TDW-4. As Mr. Taylor

describes in his direct testimony, Mountaineer’s financial situation would have made such

penalties devastating in late 2007, and Mountaineer had no basis for certainty that its

financial situation would change significantly by March and April 2008.

HAS MOUNTAINEER EVER EXCEEDED ITS MAXIMUM STORAGE CAPACITY?

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Yes. In October 2007, Mountaineer exceeded is maximum storage level and was

penalized over $2,000,000 by Columbia. See Exhibit TDW-5. Fortunately, in that

particular instance, Mountaineer was able to negotiate the removal of the penalties by

arguing that Columbia accepted and validated Mountaineer’s estimates of throughput and

storage capacity in throughout October 2007 and that it was therefore improper for

Columbia to impose penalties based on actual figures. See Exhibit TDW-6. Columbia,

however, offered no guarantee that it would waive the penalty if we violated the storage

limitations again. In any event, I view this incident as a cautionary tale and a standing

example of the importance of generating conservative estimates of Mountaineer’s

available storage capacity.

IN YOUR DIRECT TESTIMONY IN THE 2008 30C CASE, DID YOU POINT TO

WEATHER CONDITIONS IN LATE 2007 AS ANOTHER FACTOR IN

MOUNTAINEER’S DECISION-MAKING?

I noted that each November and December, Mountaineer has to evaluate the upcoming

months based on weather, sales, and transportation activity to determine if it is prepared to

meet the storage limitations. Mountaineer conducted this same review in late 2007:

In October and December of 2007, Mountaineer experienced much warmer than normal temperatures and, therefore, lower than normal sales. November 2007 was close to normal weather. Given the warmer than normal trend of the weather and the downward trend in sales volume, Mountaineer had to carefully consider its purchases for the following months, recognizing that if the warmer than normal weather and lower than normal sales trends continued, it would likely have to make adjustments to its purchases to stay within the storage limitations. At that point, the rational course of action was to reduce purchases for the following months on the basis that it is generally better to buy gas at market price when it is needed than to take the chance of incurring severe penalties for having too

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Direct Testimony of Thomas D. Westfall Mountaineer Gas Company Case No. 09-1268-G-30C Page 1 1 of 14

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much gas in storage and/or having to sell off flowing gas at a loss. Also, given what appeared at the time to be a seasonal rise in gas prices, it would be expected that March and April 2008 prices historically would be less than the prices being prompted during the months of November and December. Under these circumstances, Mountaineer prudently decided to not act upon the remaining prompts provided by the Gas Buyer software, but to make the appropriate level of purchases needed at the time at market based First of Month Index prices.

2008 Westfall Direct at 5-6.

HOW DO YOU RESPOND TO THE CAD’S ASSERTIONS THAT MOUNTAINEER

COULD HAVE FOLLOWED THE 2007 PROMPTS WITHOUT VIOLATING THE

COLUMBIA SYSTEM’S STORAGE CAPACITY LIMITATIONS?

First of all, the CAD correctly observed in the 2008 30C Case that Mountaineer could

have followed the 2007 Prompts without violating the Columbia System’s storage limits.6

Of course, in reaching this conclusion, the CAD enjoyed access to perfectly accurate

information regarding Mountaineer’s throughput and available storage capacity,

something Mountaineer did not have when the relevant decisions were made. With the

benefit of hindsight, it is not difficult to quantify Mountaineer’s storage capacity: if one

has an accurate “snapshot” of Mountaineer’s operational situation in a given period,

calculating available storage capacity is simply a matter of doing the math.

DID MOUNTAINEER’S PREFERENCE FOR CONSERVATIVE ESTIMATES OF

FUTURE STORAGE CAPACITY PLAY A ROLE IN ITS DECISION TO IGNORE

THE 2007 PROMPTS?

See CAD Reply Brief dated May 22,2009,2008 30C Case, at 7-8. 6

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Yes. Conservatism is generally the correct approach, and this was especially true at the

end of October 2007 as Mountaineer reached and briefly exceeded its maximum allowable

storage limit. See Exhibit TDW-3. The uncertainty of Mountaineer’s storage usage

estimates, combined with the downward trend in sales volume, factored into

Mountaineer’s decision to revise its purchase goals for March and April 2008 downward.

We reasoned that it was better to purchase gas at the market price in March and April

2008 on an as-needed basis, rather than to risk incurring severe penalties for having too

much gas in storage.

IN LATE 2007, WERE THERE TIMES DURING WHICH THE FUTURES PRICE OF

NATURAL GAS FOR MARCH AND APRIL 2008 WAS LOWER THAN THE

WEIGHTED AVERAGE COST OF GAS (“WACOG”) FOR THE GAS

MOUNTAINEER HAD IN STORAGE?

Yes. This comparison, however, has very limited applicability to this discussion. I was

surprised that the CAD chose to argue in the 2008 30C Case that seasonal prices for the

summer of 2008, as shown in Gas Buyer’s NYMEX strips in November and December

2007, were reliable indicators of what those prices eventually would be.7 There is no

basis on which to draw this conclusion; the CAD certainly appreciates that as the months

roll along, eventual NYMEX prices can vary substantially from the prices incorporated

into futures contracts available months before. Exhibit TDW-7 compares the NYMEX

See CAD Initial Brief dated May 18,2009 in 2008 30C Case at 9-10. 7

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futures price of gas for future delivery and the ultimate settlement price for 2007 and 2008

and displays the consistent, and often substantial, differences in these two figures.

HOW DO YOU RESPOND TO THE CAD’S SUGGESTION THAT MOUNTAINEER

FABRICATED ITS EXPLANATION OF ITS RELATIVELY LOW 2008 STORAGE

BALANCE?

I object to the CAD’S insinuation that Mountaineer “fabricated” any aspect of its

explanation of its storage strategy, or that its decision-making in December 2007 was

guided by motives other than to observe its storage limitations and debt restrictions and

preserve its financial integrity. The CAD seems determined to find dishonesty or some

nefarious motive behind Mountaineer’s decision to not follow the 2007 Prompts.8 These

accusations are baseless, and I strongly object to any implication of impropriety on

Mountaineer’s part.

DO YOU HAVE ANY CONCLUDING THOUGHTS?

In its decision-making during November and December 2007, Mountaineer exercised the

flexibility that it must have to evaluate and manage its forward purchases, including

potential changes in the variables that affect its estimating process, and to set and adjust

its goals for gas purchase contracts accordingly.

See, e.g., CAD Exceptions to the May 29,2009 Recommended Decision, 2008 30C Case (“CAD Exceptions”) at 9 (referring to Mountaineer’s concerns about its storage capacity as a “post-hoc fabrication” because “it is only in the last year that the balance has been reduced to such a low level”); 2008 Short Direct at 5 (stating that Mountaineer’s decision not to follow the 2007 prompts was motivated by a desire to improve its bottom line); CAD Initial Brief, 2008 30C Case at 22 (stating that Mountaineer was motivated by a desire to recover storage balance carrying costs, authorized for recovery in rates, without actually incurring those costs).

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Mountaineer has consistently run a large and effective hedging program. Even

after accounting for the changes in goals and actions on purchasing prompts that occurred

in late November and December, 2007, Mountaineer hedged 70% of its total annual

requirement over the course of the ACA period at issue here. Mountaineer has made

good use of Gas Buyer as a tool to assist it in executing its hedging ~ t ra tegy .~ Gas Buyer

cannot, however, replace the professional judgment of Mountaineer’s skilled and

experienced officers. Mountaineer’s management must constantly evaluate and adapt to

ever-changing circumstances, and make difficult decisions based on partial and imperfect

information and, as Mr. Taylor notes, with the utility’s financial and operation situation in

mind. It is my opinion that Mountaineer’s management should be able to do so without

later being second-guessed by a party that enjoys the benefit of hindsight in every 30C

filing.

DOES THIS CONCLUDE YOUR DIRECT TESTIMONY?

Yes, it does.

The Commission appeared to endorse this approach when it approved Mountaineer’s purchase of the software as “a tool to assist [Mountaineer] in capitalizing on the best opportunities to purchase natural gas, and thus reduce the overall gas costs to the customers.” See Mountaineer Gas Company, Case No. 02-0895-G-PC (Commission Order dated September 16,2002) at 2 (emphasis added).

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Kyle, Deborah

Exhibit TDW-1 Case No. 09-1268-G-30C

' 'tom: dent: To: Subject:

Westfall, Thomas Monday, October 29,2007 3:18 PM Kyle, Deborah: Suppa, Richard 2008 Gas Buyer Goals

We need to reduce our Jan, Feb, Mar, 2008 Gas Buyer Goals. It looks like we need to set them at about 70% of our original goals, We may have to reduce March even more to shoot for a storage target of near ZERO for April 1. This will require us to be extra vigilant in watching the weather and the storage estimate. At this time, we do not want to purchase any more for November or December 2007. We need to plan on meeting sometime tomorrow to discuss this. Thanks

Thomas Westfall General Manager, Gas Supply and T&E

Celi-304-539-5740 304-348-1 654

1

Exhibit TDW-2 Case No. 09-1268-G30C

Columbia Gas Transmission, LLC FERC Gas Tariff Third Revised Volume No. 1

Original Sheet No. 123

FSS RATE SCHEDULE FlRM STORAGE SERVICE

1. AVAILABILITY

Service under this Rate Schedule is available from Columbia Gas Transmission, LLC ITransporter) to any Shipper, provided that lil Transporter has SuEficient facilities and storage capacity available to inject, store, and withdraw gas for Shipper, (ii) Transporter has awarded capacity to Shipper under the provisions of Section 4 (Auctions of Available Firm Service) of the General Terms and Conditions, through construction of facilitiea, or pursuant to Transporter's Order No. 636 restructuring proceeding in FERC DOcket No. RS92-5-000, (iii) Shipper has executed an FSS Service Agreement with Transporter, and (iv) Shipper complies with the provisions of this Rate schedule and with all other applicable provisions of this Tariff.

2. APPLICABILITY AND CHARACTER OF SERVICE

(a) Service provided under this Rate Schedule shall be performed under Subpart B or G of Part 284 of the Conmission's Regulaticns. Subject to the limitations set forth below, Transporter shell inject and store quantities and withdraw thermally equivalent quantities, less storage gas 1013s~ for Shipper. Such service shall be provided on a firm basis and shall apply to all gas delivered to Transporter for Shipper and stored under this Rate Schedule, up to the Storage Contract Quantity (SCQ) set forth in Shipper's FSS Service Agreement,. Shipper's Maximum Daily Storage Quantity (HDSQ) under this FSS Rate Schedule shall be that specified in Shipper's FSS Service Agreement.

(b) Service provided under Chis Rate Schedule (i) shall have the priority specified in Section 7 (Capacity Allocation) of the General Terms and Conditions, (ii) shall be subject to interruption to the extent provided in this Rate Schedule or in Section 16 (Interruptions of Service) of the General Terms and Conditions, and (111) shall be subject EO operational flow orders issued by Transporter to protect the integrity, lncluding the performance capebility, of its storage facilities, or otherwise to the extent provided in this Rate Schedule or in Section 17 (Operational Flow orders) of the General Terms and Condftions.

(cl Shipper's FSS inventory under this Rate Schedule shall be increased or decreased by any actual imbalances (actual receipts compared to actual deliveries) created under any other Service Agreement(s) Shipper has wlth Transporter, except for the TPS Rate Schedule, and the imbalance shall be removed €rom such other Servico Agreement(s)i provided, however, a Rate Schedule TPS Shipper's FSS inventory may also be adjusted in accordance with the provisiona o f the TPS Rate schedule. Such increase or decrease shall be deemed to be a storage injection or withdrawal under Shipper's FSS Service Agreement. Such a transfer to or from FSS inventory shall nor relieve Shipper from its responsibility to pay all applicable transportation charges Cor the transportation into or out o f storage. The appropriate maximum ccuunodity charges and surcharges land any overrun charges) will be assessed for the transportation into or out of storage under the appropriate transportation Service Agreement held by Shipper in the following order of priority, it shipper holds more than one firm transportation agreement, up to the Transportation Demand under each: ( i ) SST Service Agreement; (ii) NTS service Agreement! (iii) NTS-S Service Agreement) or (iv) FTS Service Agreement: provided, that Shipper may notify Transporter i n writing of a preferred different order of priority for the specified Rate Schedules. Such notlce must be received by Transporter at leaat 30 days prior to the beginning of the Month for which it is to be inLtially effective. To the extent that the resulting debit or credit to Shipper's FSS inventory li) corrects a crsnsportation imbalance not associated with city gate deliveries, and (ii) causes Shipper to exceed its SCQ, Transporter shall waive that portion of any penalty resulting from such debit or credit. Any such action shall not incceaae Transpcrter's firm aervlce obligations.

Issued by: Claire A. Burum, SVP Regulatory Affairs Issued on: February 3, 2009 Effective on: March 3, 2009

Columbia Gas Transmiss ion , LLC FERC Gas T a r i P f T h i r d Revised Volume No. 1

O r i g i n a l Sheet No. 124

FSS RATE SCHEDULE FIRM STORAGE SERVICE (Cont'd)

(d) Subject to the limitacions and requirements set forth in this Rate Schedule or i n Shipper's FSS Service Agreement, Transporter shall ( I ) inject quantities receivud by Transportar from or on behalf of Shipper and designeted by Shipper for delivery to "FSS Storage", up to the SCO set forth in Shipper's Fss Service Agreement plus sufficient quantities for Storage Gas hss Retainage, (ii) deliver to Shipper thermally equivalent quantities of gas, leas Storage Gas Loss Retainage, up to the sco set forth i n shipper's FSS Service Agreement, and (Lii) inject or withdraw quantities to correct imbalances, as provided for in paragraph (c) lrmediately above. Tranaporcer shall not be obligated under this Rate Schedule on any Day to deliver to Shipper gas in excess of the quantities then held in storage for Shipper.

(e) Daily quantities nominated by Shipper for withdrawal from PSS storage under any of Shipper's transportation Service Agreements shall be deemed to be withdrawals from shipper's FSS account.

(f) Service rights under an FSS Service Agreement may be released and assigned in accordance with Section 14 (Release and Assignment--of/ Service Rights) of the General Terms and Conditions. Service to a replacement shipper under any such release and assignment shall be subject to the provisions set forth in this Rate Schedule and i n the General Terms and Conditions. I f a Shipper releases only a portion of its service rights under an FSS Service Agreement, such relesac shall not change the existing ratio of the SCQ and the MDSQ for Shipper's remaining unrcleased service.

(4) Transporter and Shipper may mutually agree on e not unduly discriminatory basis to (i) different termination dater for specified volumes of storage Contract Quantity and Maximum Daily Storage Quantity within the same Service Agreement and/or lii) combine Service Agreements under this Rate Schedule into a single Service Agreement under this Rate Schedule with different termination dated for specified volumes of Storage Contract Quantity and Maximum Daily Storage Quantity. Transporter and Shipper may mutually agree to combine Service Agreements only to the extent that the individual Service Agreement's rates, terms, and conditions can be distinctly maintained and will not be altered by the combination. For each service Agresment(8) executed i n accordance with this Section 2(g), each of the varying termination dates and associated volumes of Storage Contract Quantity and Maximum Daily Storage Quantity will be set forth on a separate AppBndix A to the Service Agreement applicable to service pursuant to this Rate Schedule. Each component with a different termination data for a specified volume of Storage Contract Quantity and Maximum Daily Storage Quantity within the same Service Agreement and reflected in a separate Appendix A will be regarded as a single Service Agreerent for purposes of Shipper's exercise of any right of first refusal under the provisions of Section 4 of the General Terms and conditions of Transporter's Tariff. ID the event of a constraint or other occurrence that precludes combined nominations or allocations, Transporter may advise Shippers under such combined Service Agreements that capacity must be nominated separately, and is subject to separate allocation, pursuant to the terms of each separate Appendix A of the Service Agreement. Each Appendix A of the combined Service Agreements will be identified by its original contract number or such other identification convention determined to be applicable by Transporter.

3. INJECTIONS INTO STORAGE

(a) Transporter shall not be obligated on any Day to inject gas into storsge for Shipper in excess of Shipper's Maximum Daily Injection Quantities (HDIQ), as described in this Section. A request by Shipper to make injections In excess o f its MDIQ shall he submitted to Transporter electronically through Transporter's EBB, and shaLl be received by Transporter at least 24 hours in advance of the requested injections. I n the event that Shipper makes such a request, Transporter will grant the request to the extent that additional injection ~?lexibility exists during the time period of the request in accordance with Section 7 (Capacity Allocation) of the General Terms and Conditions.

(b) Injections under this Rate Schadule shall have the priority described in Sectian 7 leapacity Allocation) of the General Terms and Conditions and shall be subject to interruption to the extent provided i n this Rete Schedule or in Section 16 (Interruptions of Service) of the General Terms and Conditions. Except for reasons of force majeure, Shipper shall notify Transporter electronicslly through Transporter's EBB at least 24 hours in advance of any change in the daily quantities of gas Shipper desires to deliver or cause to be delivered t o Transporter tor storage under this Rate Schedule. If a force majeure event causes a material change in the quantities of gas that will be delivered to Transporter for storage on Shipper's behalf under this Rate Schedule, Shipper shall notify or cause Transporter to be notieied as soon as possible after that force majeure event.

I s s u e d by: C l a i r e A . Burum, SVP Regulatory A f f a i r s I s s u e d on: Februa ry 3 , 2009 Effective on: March 3, 2009



FSS RATE SCHEDULE FIRM STORAGE SERVICE (Cont'd)

(c) Quantities to be stored hereunder may be delivered to Transporter throughout the year. The Maximum Monthly Injection Quantities (MMXQ) which may bo injected during the Months shall be limited to the following parcentages of Shipper's SCQ:

April 15% May 201 June 20% July 201

August 20% September 13% October 7 % November 59

December 101 January 101 February 10% March 101

Shipper's MOIQ shall be 1/25th of the applicable limitation on Shipper's MMIQ, except during the Months o i November and December when the MDIQ shall be 1/30th of the applicable limitation on Shippar's MMIQ. A request by Shipper for permission to make injections in excess of its MMIQ shall be submitted to Transporter electronically through Transporter's EBB at least 24 hours In advance. Transporter shall grant any such request to the extent that: (i) additional injection flexibility exists during the time period of the request in accordancs with Section 7 (Capacity AllOCetiOn) o f the General Terms and Conditions; and (ii) Transporter, in ita reasonable discretion, can operationally accommodate the request(s).

(d) A Shipper under this Rate Schedule may have no more than 602 of its SCQ in storage as of dune 30, and no more than 85C of its SCQ in storagc a8 of August 31.

[e) Quantities nominated for delivery to Shipper's delivery points on any Day under all Service Agreements with Transporter held by shipper and by other shippers delivering to Shipper, but not taken by shipper on such Day, shall be deenmd to bQ injections into FSS Storage €or Shipper under this Rate Schedule.

( f ) Transporter may waive a Shipper's default of any of the limitations set forth in this section that has already occurred. In addition, Transporter may waive a Shipper's default of such limitations in advance, provided chat such a waiver is to address a specific, temporary, operational problem. Any waiver granted pursuant to this section must be granted in a non-discriminatory manner on a case-by-case basis.

4 . WITHDRAWALS FROM STORRGE

(a) At o t before 11:OO a.m. Eastern Time on the Day before the Dey on which Shipper desires daliveries from Transporter under this Rate Schedule, or at such later time as Transporter may from time to time specify, shipper shall notify Transporter electronically through Transporter's EBB of the quantities to be withdrawn and delivered by Transporter to or Lor Shipper for transportation and the dates on which such withdrewals are requested. When Shipper's actual takes will n o t match total nominated withdrawal quantities, Shipper shall notify Transporter electronically through Transporter's EBB in advance on the delivery Day by means o f revised nominations. Transporter shall not Be obligated on any Day to withdraw and deliver gas to Shipper in exceos of Shipper'e Maximum Daily Withdrawal Quantity (MEW), as deacribed in this Section, plus sufficient quantities for Retainage under Shipper's transportation Service Agreement with Transporter. A request by Shipper EOr permission to make withdrawals in RXCGSS of its MDWQ shall be submitted to Transporter electronically through Transporter's EBB at least 24 hours in advance. In the event that Shipper makes such a request, Transporter will grant the request to the extent that additional withdrawal flexlbilfty exists during the time period oP the request in accordance with Section 7 (Capacity Allocation) of the General Terms and Conditions.

(bl Transporter shsll deliver Shipper's SCQ throughout the year, subject t o the limitations set forth herein. Shipper's MDWJ shall be based upon and limited by Shipper's SCQ inventory remaining in storaqe determined in accordance with Transporter's best estimates as follows:

0 of SCQ in Inventory

100% to 300 less than 309 to 20) less than 201 to 10% less than 10% to 0%

MDWQ as a 8 of MDSQ

1000 80% 65B 50%

Issued by: Claire A . Bururn, SVP Regulatory Affairs Issued on: February 3 , 2009 Effective on: March 3, 2009

Columbia Gas Transmission, LLC FERC Gas Tariff T h i r d Revised Volume No. 1


FSS RATE SCHEDULE FrRM STORAGE SERVICE (Cont'd)

(c) The minimum and maximum monthly net withdrawal quantities tor the Months November through March shall be as followsi

Month

Novembar December January February March

- Maximum 5 Minimum 8:

oe SCQ of SCQ

No minlmum No minimum No minimum 101 102

105 40I 401 301 2 0 1

A request by Shipper for permission to make withdrawals in excess of its maximum monthly net withdrawal limit shall be submitted to Transporter electronically through Txansporter's EBB at least 24 hours in advance. Transporter shall grant any such request to the extent that: (i) additional withdrawal Llexibility exists during the time period of the request in accordance with Section 7 (Capacity Allocation) of the General Terms and conditions; and (ii) Transporter, in ita reasonable discretion, can operationally accommodate the request(s). If Shipper exceeds the maximum monthly net withdrawal limit during any of the Months November through March, Shipper's maximum monthly net withdrawal quantity for the succeeding Month shell be reduced by an amount equal to the excesa quantities withdrawn during the excess withdrawal Month. Shipper's withdrawals during the Months April through October shall not be subject to maximum or minimum withdrawal limits8 provided, however, that Shipper's withdrawals during that period shall be subject to the limitations of Shippar's SCQ levels.

(d) Shipper's maximum storage inventory on April 1 shall not exceed 252 of its SCQ. Shipper's maximum storage inventory on February 1 shall not exceed 655 o f its SCQ. Quantities in excess o f 25% of Shipper's SCQ shall not be carried over beyond April 1.

(e) Quantities taken on any Day by Shipper under all Service Agretments with Transporter held by Shipper and by other shippers delivering to Shipper, but not nominated by Shipper on such Day, shall be deemed to be withdrawals from FSS storage for Shipper under this Rate Schedule.

( f ) Shipper may withdraw from storage on an interruptible basis, quantities in excess of Shipper's MOW. Such interruptible withdrawals shall have the priority set forth in section 7 (Capacity Allocation) of the General Terms and Conditions and shall be subject to interruption as set forth in Section 16 (Interruptions of Service) of the General Terms and Conditions.

(9) Transporter may waive a Shipper's default of any of the limitations set forth in this Section that has already occurred. I n addition, Transporter may waive a Shipper's default of such limitations in advancs, provided that such a waiver is to address a qpecific, temporary, operationel problem. Any waiver grented pursuant to this Section must be granted i n a non-discrimlnatory manner on case-by-case basis.

5. RECEIPT AND DELXVERY POINTS

Service under this Rate Schedule shall not be subject to the flexible receipt and delivery point provisions of Section 11 (Flexible Primary and Secondary Receipt and Delivery Points) of the General Terms and Conditions. The point of delivery for all gas tendered to Transporter for storage under this Rate Schedule shall be designated in transportation Service Agreement ( 8 ) with Transporter as "FSS Storage." The point of receipt for all gas delivered by Transporter to Shipper hereunder shall be designated in Shipper's Service Agreement8 with Transporter a8 "FSS Storage."

Issued by: Claire A. Bururn, SVP Regulatory Affairs Issued on: February 3 , 2009 Effective on: March 3, 2009

Columbia Gas Transmission, LLC FERC Gas Tari f f Third Revised Volume No. 1

Original Sheet No, 127

PSS RATE SCHEDULE FIRM STORAGE SERVICE (Cont'd)

RATE

la) The charger to be paid by Shipper, as set forth in paragraph (b) below, shall be no higher than any applicable maximum charges and no lower than any appllcable minimum charges set forth in the currently ef€ective Sheet No. 29 of this Tariff, unless otherwise mutually agreed to by Transporter and shipper with respect to the charges identified in Section 6(b) below.

- 6.

(b) For all service rendered under this Rate Schedule, Shippar each month shall pay Tran6pcrter the charges set forth below, unless otherwise mutually agreed to by Transporter and Shipper with respect to the charges identified in Section 6Ib) bslow and specified in Shipper's FSS Service Agreement.

(1) Reservation Charae. The maximum Reservation Charge for esch Month, assessed on each 0th of the HDSQ specified in Shipper's FSS Service Agreement.

( 2 ) Couacity Charqa. The maximum Capacity Charge for each Month, assessed on each Dth of the SCQ specified in Shipper's FSS Service Agreement.

( 3 ) Injection Charge. The Injection Charge per Dth oE daily net gas injections of gas i n t o storage by Transporter during the Month for the account of Shippsr under this Rate Schedule.

( 4 ) Withdrawal Charge. The Withdrawal Charge per 0th of daily net withdrpwals of gas from storage lor delivery by Transporter during the Month to or for the account of Shipper.

15) Overrun ChaKW3. The applicable maximum Overrun Charge per 0th of gas delivered on any Day during the Month in excess of Shipper's MDSQ.

( 6 ) Surcharaes. The Surcharges applicable to this Rate Schedule.

(cl The charges and surcharges described in this Rate Schedule ate subject to adjustment In accordance with the procedures set torth in the General Terms and Conditions.

(d) From the quantities delivered into storage for shipper, Transporter shall retain the Storage Gas Loss Retainage Percentage o f gas specified in the currently effective Sheet No. 44, unless othsrwise negotiated by Transporter and Shipper, and specified in Shipper's FSS Service Agreemnt. That percentage shall bc subject to adjustment in accordance wlth Section 35 (Retainage Adjustmtnt Mechanism) of the General Terms and Conditions.

(e) Shipper shall remain responsible for ell property or othor taxer associated with the quantities held for Shipper in storage under this Rate Schedule. Transporter periodically shall report t o Shipper the quentities in storoge, allooatod by State, to enable Shipper to calculate and pay all taxes associated with those storage quantlties. All of Transporter's storage Eielda shall be treated conjunctlvsly and each Shipper's stoeage gas shell be deemed to be proportionally allocated to all of Transporter's itorage fields based on total working gas in storage.

Issued by: Claire A . Burum, SVP Regulatory Affairs Issued on: February 3, 2009 Effective on: March 3 , 2009



FSS RATE SCHEDULE F I N STORAGE SERVICE (Cont'd)

(f! The Reservation Charge shall apply as of the date service is deemed to commence by the terms of Shipper's FSS service Agreement.

(g) Transprtcr shall be responsible for any loss, cost, or expense arising from any loss of Shipper's gas i n Transporter's storage that results from Transporter's negligence or failure to exercise due diligence. Notwithstandlng the provisions in Section 22 IPossessian o l Gas) of the General Terms and Condltions, Shipper shall be responsible for obtaining its own insurance for any gas in storage, and shall hold Transporter harmless Prom any 1098. cost, or expense arising from any loss of storage gas that results Prom a Poece majeure event or that is not the result o€ TranrpoKter's negligence or failure to cxerciae due diligence.

7 . PENALTIES

(a) I f Shipper eaila to comply with an interruption order issued by Transporter pursuqnt to this

(i) Injections in excess of 103 percent of the lowered MDIQ aet by Transporter's interruption order (Lowered Quantity), Shipper shall be assessed and pay penelties based on a price per Dth equal to three times the mldpolnt of the range o € prices reported for "Columbia Gas, Appalachia" as published in Platts Gas Daily price survey for all quantities tendered in excess o€ its Lowered Quantity; or

Rate Schedule or Section 16 (Interruptions of Service) of the General Terms and Conditions and thereby causes:

(ii) Withdrawals in excess of 103 percent of the lowered MDWQ set by Transporter's interruption order (Lowered Quantity), Shipper shall be assessed and pay penelties based on a price per Dth equal to three times the midpoint of the range of prices reported tor "Columbia Gas, Appalachia" as published in Platts Gas Daily price survey for ell quantities taken in excess of its Lowered Quantity.

(b) It Shipper fails to comply with an operational flow order issued by Transporter pursuant to Section 17 (Operational Flow OrdeKcP) of the General Terms and Conditions, a penalty based on a price per Dth equal to three times the midpoint o f the range of prices reported for "Columbia Gas, Appalachia" as published in Platts Gas Daily price survey ahall be assessed to Shipper for all quantities in violation of that operationaL flow order.

(c) On any Day on which Shipper's injections i n t o storage exceed 110 percent of its applicable MDIQ as described in Section 3(c) of this Rate Schedule, Shipper shall pay Transporter a penalty of 55.00 per Dth for all quantities injected in exceali of 110 percent of it6 MDIQ.

(d) In any Month in which Shipper'r total monthly injection quantities exceed 105 percent of the appllceble MMIQ ad described in section 3 of this Rate Schedule, Shipper shall pay Transporter a penalty of $ 5 . 0 0 per Dth Por all quantities injected in excess ot 105 percent of the applicable W I Q .

(e) In any Month in which Shipper's net withdrawals from storage exceed the applicable limits set forth i n Section 4 of this Rate Schedule, shipper shall pay Transporter a penalty of $5.00 per Dth Por all quantities withdrawn in excess o € such limits.

( f ) If Shipper's injectiohs into storage on any Day exceed its SCQ, Shipper shall pay Transporter a penalty of $5.00 per Dth for a11 quantities injected in excess OE its SCQ. L f Shipper's withdrawals from storage on any Day result In ita FSS account having a neqative SCQ bslance, Shipper shall pay TranSpOKtW a penalty of $5.00 per Dth.

Issued by: Claire A . Burum, SVP Regulatory A f f a i r s Issued on: February 3, 2009 Effective on: March 3 , 2009

Columbia Gas Transmission, LLC FERC Gas Tariff T h i r d Revised Volume No. 1


I PSS RATE SCHEDULE

FIRM STORAGE SERVICE (Cont'd)

tq) On any Day in which Shipper's unauthorized wlthdrawals from storage exceed 103 percent of its applicable MDWP, aa described in Section 4lb) of this Rate Schedule, Shipper shall pay Transporter a penalty baaed on a price per Dth equal to three times the midpoint o f the range of prices reported POI "Columbia Gas, Appalachia" as published in Platts Gas Daily price survey for a l l quantities withdrawn in excess of 103 percent of its MDWQ, provided Transporter shall reduce penalties under this provision to the extent Shipper may pay penalties under Service Agreementa under other Rate Schedules for the same quantities.

(h) If Shipper: (i) violates an operational flow order issued by Transporter to withdraw quantities; (ii) fails to withdraw the minimum monthly withdrawal quantity as described in Section 4(c) of this Rate Scheduler or (ill) carries over quantities beyond April 1 in excess oP the 25% of a Shipper'a SCO limitation set forth in Section 4(d) of this Rate Schedule, any such quantities automatically shall be Corfeited by Shipper to Transporter, free and clear of all liens and encumbrances. Transporter shall post such Porteited quantities on its EBB as ges available for sale to the highest bidder within a 24 hour notice period. Such posting may provide as a condition o f sale that such gas be withdrawn from storage within a period oL time to be specified in the notice. Upon receipt oP payment, Transporter sh411 treat the Corfeited gas proceeds 8s Penalty Revenues as defined in Section 19.6 oL the General Terms and Conditions.

(i) All penalties and charges assessed under.this Section shall be assessed and paid in addition to a11 applicable storage rates and charges under this U t e Schedule, lncluding any overrun charges.

Cj) In the event Shipper seeks to avoid any penalty provided for in this Section on the ground that such charge was incurred because o f a force majeure event as defined in Section 15 (Force Majeure) of the General Terms and Conditions, Shipper shall document such force majaure event to Transporter. Transporter shall waive penalties to the extent that it determlnes that the imbalance was caused by a bone fide Porce majeure event as defined in said Section 15.

(k) Transporter may waive its right to collect all or any portion of penalties assessed against Shipper or its right to retain a l l or any portion o f Shipper's gas, provided that any such waiver is granted in a nondiscriminatory manner.

8 . GENERAL TERMS AND CONDITIONS

All of the General Terms and Conditions are applicable to this Rate Schedule and axe hereby made a part hereof, with the exception of Sections 11, 19.1, 19.2, and 19.4, 33, 34, 36 through 41, and 44 through 46.

Issued by: Claire A. Burum, SVP Regulatory Affairs Issued on: February 3 , 2009 Effective on: March 3, 2009

2/11/2010

DAILY STORAGE euANmIEs FOR NOVEMBER 2007 (m) BASED ON STATISTICA'S ESTIMATED THROUGHPUT

2007 Nobmmbr

Oniine CNR Shenmdorh EqulUbbL Esaum MfTCO Cannael

1 2 3 4 5 8 7 8 9 0 1 2 3 4 5 8 7 8 9 0 1 2 3 4 5 8 7 8 9 0

130.155 132.316 131.262 144.5% 126.@39 179.507 203,241 158.356 140.562 156.147 136.545 111.373 115.695 120.668 212.125 154.139 142911 132.367 117.450 96.382 81.635

127.879 166.127 15 1.258

136.155 179.385 162.245 161,022 157.977

129.309

4.000 4.000 4.000 4.000 4 . m 4,000 4 . m 4,000 4 . m 4 . m 4 . m 4,000 4,000 4,000 4.000 4,000 4.000 4.000 4 . m 4 . m 4,000 4,000 4,000 4.000 4,WO 4 . m 4,000 4.000 4.004 4 . m

8,040 8,050 5,887 8.346 5.485 8,821 7.900 7.910 7.853 7.838 7.065

5.939 5.185 7.332 8,087 7,414 8.109 7,923 5,735 4.288 4.989 8.129 8,057 0.583 8,289 7.438 8138 8,000 8,000

e.288

5 900 5.900 5.800 5.900 5,800 5.9m 5,900 5,900 5,900 5.wO 5.900 5.900 5.800 5 000 5 . m 5.900 5,900 5,900 5.900 5.900 5.w 5.900 5.900 5.900 5.900 5.m 5,900 5.800 5,OW 5,900

54,004 52.257 81.082 82.224 83.878 53.982 51,039 52.238 64,882 87,880 69,035 72.844 57 473 80,985 58,132 59.279 80,870 82.012 83,505 54.030 76 273 80.W9 81.521 82,814 64.070 65.818 57,644 83.234 84.901 88.827

2.888 2.811 2.805 2,802 2,599 2.533 2,532 2,531 2.529 2.528 2.527 2,525 2,521 2.440 2.454 2.452 2,451 2.450 2,449 2.W8 2,373 2.387 2,384 2.961 2,359 2.359 2.358 2.359 2,357 2,359

3,441 3.438 3.455 3,435 3,433 3,433 3.434 3.432 3,432 3,431 3.429 3.431 3,432 3,432 3.428 3.428 3,425 3.428 3.424 3,429 3.428 3.428 3.423 3,423 3,419 3,421 5.421 3,425 3,425 3,425

1.283 1,189 1.329 1,388 1,396 1,307 1,333 1.279 1,275 1,288 1.545 1.202 1,283 1.281 1.288 1,271 1.227 1.222 1,245 1,273 1.137 1.583 1,525 1.388 1,147 1,208 1,428 1,2m 1,205 1,205

84.897 88.791 78,578 91.217 71,178

182.712 116.888 88,217

1 u . m

98.57~) 78,974 47,557 88.845 87,817

184,045 115,678 92,452 81.268 84,850 50.813 12,582 74,501

115,323 99,229 74,777 79.718

131,870 110,080 107,034 102.W1

74.797 78,891 88.878 81,317 81278

124.873 152.812 108.788 78.317 LM.878 89.074 37,857 58.04s 57.717

154,145 l(6.771 Lu.552 71.368 54,750 4c.713 2.882

04.601 105.423 89.329 84,877 89.818

121,970 100,180 97.134 92,181

44.035 540% 44.535 44,535 44.535 44.535 w.035 w.035 59 535 10.035 44.035 54.035 34.035 29.035 34.943 24.035 24.035 24.035 24,035 24.035 24,035 24.035 24.035 24.035 24.035 24.035 24,035 24,035 24.035 24,095

4,307.828 120.000 208.431 177,000 1,844830 74.287 102 882 38.783 2,750,278 ZEm 1.W9.518 1 383 759 0 1 383 831

101.51% l o l loh 101.06Yh 100.- 95.66% 991046 89.16% 98.- 98.628 98.76% 98.572 983% 9734% 96.668 96.17% 95.76% 35.5%

95.56% 95.2% 94.55% 94.01% 93.678 93.2% 92.47% 91.94% 91.23% 90.66%

sag*.


No Mlnlmum 40% No Mlnlmum 40% No Mlnlmum 40%

10% 30% 1Wh 20%

No Mlnlmum No Maxlhum No Mlnlmum No Maxlmum No Mlnlmum No MaxlIllum No Mlnlmum No Maxlmum No Mlnlmum No Maxlmum No Mlnlmum No Maxlmum No Mlnlmum No Maxlmum

Columbla On6 Ranimiision Corporatlon Storage Constraints

Storage Contract Quantlty CSCQ) . Mountalneer SCQ . Shenandoah

TOTAL SCQ

4,810,066 4,810,066 4,810,066

1,202,614 3,607,641 1,202,614 2,405,028

~ 6 5 % of SCQ ~ 2 5 % of SCQ

11,761,703 263,435

12,016,138

Maxlmum Net Monthly lnlectlon Quantltles (MMlQ) Maxlmum Net Dally lnlectlon Quantltles (MDIQ) A s Fractlon of

Month Aa % of SCQ Dth 5% Tolerance MMlQ Dth 10% Tolerance I

Aprll

J u n e July August September October November December January February

May

15% 20% 20% 20% 20% I 3% 7% 5% I oo/o I CPh I E 4

I ,803,77 I 2.405.028 2.405.028 2.405.028 2.405.028 1.563.268

841.760 601,257

1.202.5 I 4 1,202,514 1.202.514

1,893,969

2,616,279 2,626,079 2,526,279 1,641,431

883,648 631,320

1,262,639 1,262,639 1,262,899

2,6a~.z79 I /25 1 /25 1/25 I /25 1 /25 I /25 I /25 I /30 1/30 1/25 1 /25

72,161 96,201 96,201 96,201 96.201 62,531 33,670 20,042 40,084 48,101 48,101

79,366 106,821 106,821 106,821 106,811 68,784 37,037 22,MB 44,092 62,911 62,911

March I W h 1,202.5 14 1,262,639 1/25 48,101 62,911 Note-If net monthly iqfectiona exceed applicable MaarQ (inclusive of 6% tolerance). a penalty of $6.00 per Dth on all exceu is a u s u s d If on any da. net Injections exceed appllcahle MDlQ (incldve of 10% tolerance) , a penalty of $5.00 per Dth on all

Month

November December January February March A P ~ May J u n e July August September October

Note-If net monthly with&

Maxlmum Dally Storage Quantlty (MDSQ) 236,358

Maxlmum Net Dally Wlthdrawal

Quantltles Inventory Level (% Of SCQ) (MDWQ) - w Of

MDSQ Dth 3Oh Tolerance

30%. looom 1 oooh 236,368 243,449 (3.607541 - 12.025.138J

2 0 % - < 3 0 % 80% 189,086 194.769 (2.405.028~3.607.541)

1 0 % - < 2 0 % 65% 163,839 168.242 11,202,514~ 2,405,028)

0% - c IWh 500h 118.179 121,724

Vote-If on any day net injections exceed applicable MDWQ (includve of 3% tolerance), a penalty of $10.00 per Dth on all exceu Is waawd.

(0- 1,202,514)

C0LDx.U CAB TRAWBMI SSION COPPORATIOW

2720

Exhibit TDW-5 Case No. 09-1268-C-3OC l l lMICX DATXc 111 09/2007

DMI IIBRVICX rnvozcr mn ~ccmmmxo PXRIOB

OC?O11XR 2007

N E T DWS DATXd 11/20/2007

S I ROICX WprrSSWX/D DNNB NO 000633 112746458

WMlCt CODX TX-2007-01417- 51

00005 D X t T P B n ALLOCAT 52 0 0 0 1 ~ / 0 0 0 0 1 5 ~ 6 5 VFbRIW8-9 00006 OO- BUSIN688 801/000044597 LIUCB

00007 0- BWINUII BO 1/000044597 00008 BXLZVXX? ALLWT 52 00011/000015865 00000 OORRplT BU#IBB#S 101/000044597 00010 C'U- B U S M E 8 80 1/000044S97 00011 cI1IR.HT BUSISXSS 801/000044S97 O O O l l WJSISXSS BOl/OO0044597 00013 cIIuIB(T BUSIU8SS 80 1/000044597

L u c H f P t M VARIOUS-9

PPS

DELI V%RY/DUr LOCATIOW

27-i6/oooa69866 woc 3-16 28-30/000293110 M@C 10-30

CORTRICT 64013 TOTAL

a7-16/000169166 W C 3-16 29-3 5/000269172 MCC 8-31

CONTRACZ 78567 TmAL

9TB DELIV8RI/DXt8 L O ~ T I O W

11/01/2 007 ..*. *...** 1,383 ,642 ,0153 1,383 ,642

78 ,401 .04 ia 76 ,408

QUANTITY W I T PXICX

138 ,514- .0167 138 ,584 .Ole7

0

WAZITITX UNIT PXICX

11) ,908- .Dl67 11s ,908 .0167

0

PVwrl'ITI rmXT PXIC.

59 ,303 .0167 1,008 ,291- .0167

102 ,300 .0167 64 ,241 .0167 31 ,000 .0167 77 ,490 .0167 5 1 , 651 .Dl67

9 . 0 0

NtOUltT DUX

U2lr169.72 $21,16Y.72

mmT Dux

S3.230.41 33 ,230 .41

Axom am

$2,314.35- $2,314.35

9 .00

ltrow DUX

sa ,ooa .46 - 82,002.46

9.00

WOW DUS

$990.36 818,341.48-

91 ,701 .41

SS17.70 82.2B4.08

$862 -57

$ i , o ~ a . 8 z

Invoice 11/12/2007 0 6 : 5 5 : 2 8 AMCT Page 1 of 4

COLUHSIA (UB T W W I SSXON CORPORATZON INVOICX DATE1 U/ 09/2007 CAP BmIm ~ V D I m BOX ACCOWIlPE P BRIO0

OCTOBZR 2 0 0 7

ssnmcg ~ Q W S TORI

N O U X T A ~ M S CMAkSX 2401 S188ONVILLX D R M (gXILIISTW, W I T , 25312

NXT DUS DATE: 11/20/2007

iw RVICL RZQ~STOIVD m e wo 000633 112746458

IWOIC'E COD8 TIL-1007-01417- 51

00014 CORRBFT SUSINB88 80 1/000044597 00015 CURRP2IT BUSINXS8 80 1/000044597 00016 CURIcpTr BUPDRBS 80 lj000044597 00017 CU- SUSIMSS BO 1/000044597

00019 CU- SWSIMBII BO 1/000044597 00020 COXRUtY EUSIRXS8 80 1/000044597 00021 0- SUSINXBS 801/000044597 00022 CURxpTr BW8ppLBS 80 1/000044597 00023 C U w BUSOR89 BO 1/000044697 00024 CUIUBFP B U 8 ~ 9 8 801/000044597 00025 CO- BUBTNX88 80 1/000044597 00026 CU- B W S m S S 80 1/000044597

00028 CU(IuIQpp BUSXS88S 80 1/000044597

00018 CURIPR awupRBs 80 t / o o o o 4 4 5 ~ 7

00027 cosmsm awsrnms 80 1/000044597

WOC 3-16 m C 3-16 M 5 C 3-19 mc 8-35 XGC 3-18 1(oC 8-27 XGC 8-32 UUC 3-19 MQC 3-18 XGC 3-17 H 5 C 3-19 mC 3-19 XI EMIT-16 WOO 3-19 KX RXIT-16

798 3 1 TOTAL

00032 DILLXVBXY ALLOCAT 27 -16/000269866 XOC 3-16 8T01/000153621 STOP INJ-8 CONTRACT 7 9 8 3 3 TOTW

00033 64010-189 00034 79 832-388 00031 46127-FTS 00036 64013-FT8 00037 78 567-FT8

MONZE TOTAL TOTAL

QUANTI%'% W I T PRfQ

29 ,667 -0167 44 , 6 7 1 .ti167 13s ,846 .OM7 180 , 846 -0167

59 ,SS1 ,0167 89 ,342 .0167 59 ,551 .Ot67

265 ,256 .Ol67 187 ,666 .Ol67 119 , l O l .0167

29 ,667 . O N ? 45 ,000 .a167

U 9 ,102 .0167 32 ,500 .til67

923 ,664

238 ,a04 . o m

W T I T t mPrr PRIC.

138 ,415 .0165 26 ,858 .0165 26 ,858- .0165

138 ,415

QUANTITY (mIT PRICE

1,218 ,369 .Ol65 1,218 ,369

3,742 ,498 3.711 ,498

4 ,465 1.5050 231 ,893 1.5050

500 5.9670 4 ,535 5.9670 3 ,868 2.6490

rwDmrr DUt

$495.44 $746.01

$ a , ~ . a . a S3.020.13

$994.50 $1,492.01

$994.50

53,134 .02 (1 ,989.00 $3,978.01

5495.44 $752.50

$1.989.00 $542.75

815,425.18

91,419.78

DUX

$26283.81 $443.16 5443.16-

$1,283.85

AXOUHT DUE

$20.103.09 $20,103.09

$62.212 -25 $62,312.25

$6,719.83 $348,998.97

w .983 .50 $27,060.35 510,246.3 3

Invoice 11/12/2007 0 6 : 5 5 : 2 9 AMCT Page 2 of 4

S X R V I C L UEOUZSTOI/DDtiXOM(B NO 000633 112746458

m01c11 COD. TU-1007-01417- 5 1

00038 79 831-ITS D,Buum -0s 9 3 , 9 8 1 2.6490 6248.958.32 00039 64 O12-BST DBRWD -I 4 . 4 6 1 5.7970 $25,893.63 00040 79 833-88t DBRWD egARclX 231 ,a91 1.6910 8 3 9 z , i 3 i . o 6

+**.*+**+e OCPOBXR 2007 CUR- RISXUVATIOW -ITS . e * * f + a * * *

00047 6~010-188CP 00048 79832-FSBCP

1 5 0 0 0 RIU;WEClLlYF QaAIoS 5 ,000- .0300 s150.00-

aP)o= 150 DO WiLCASL CRDT CshRm 36 ,000- .0300 91,080.00- 1 5 0 0 0 RXLXMX CRDI W G C 20 ,703 . . O ~ O O $621.09-

PAPCEL 63020 SUBTOTAL 61 ,703- $1 t 851.09- CONTRJIC~! 79833 l'OTAL 61 ,703- 61,851.09-

D- F M X CBIUOC 263 ,435 .0290 $7,639.62 D- STOU CghROC 11,761 ,703 .0290 8341,089.39

T W 3 (304) 35 7-3701

COL.oIQIA o*) TPUISXI B R I M CORPOFATIOS

NET DUB DATX: 11/1 0/2007

IXVUICS CODE TR-1007-01417- 5 1

Invoice 11/12/2007 06:55:29 AMCT Page 4 of 4

Exhibit TDW-6 Case No. 09-1268-G-30C Suppa, Richard

From: ant:

To: cc:

Suppa, Richard Tuesday, November 13,2007 1 1 : 17 AM

Deb, to follow up our telephone conversation yesterday regarding the associated MDIQ, SCQ, and MMlQ penalties applied to MGC's October Transportation Gas Service Invoice (TR-1007-01417-51) you had indicated that the penalty calculations were made using the actual measurement information that was determined after the month of October was completed.

Please find attached MGC's Navigator Storage Balance Report that was generated shortly after the month closed but before TCO had made known the actual measurement information, As you can see this Storage Balance Report would support MGC's contention that none of the penalties assessed should be applied to Its October invoice as a result of using the actual data versus using the estimated data. Yoit should recall during the month of October that MGC addressed these concerns with you and Brad and attempted to mitigate those concerns by utilizing TCO's SIT Rate Schedule. However, those decisions and the level of SIT scheduled were being made with the best known data available at that time.

MGC strives to maxlmize Its storage account while it attempts to provide least cost gas requirements to its ratepayers. The same situations occurred in October and November 2003, and we worked with Steve Stonestreet and John McNamara to eliminate the penalties assessed to MGC that were the result of estimated versus actual data. SpecMcally, MGC relied then and now on Section 6,6 (b) MONITORING of the GENERAL TERMS AND CONDITIONS of TCO's FERC Gas Tariff. Based on this tariff provision MGC must place the penalty charges assessed to its October invoice in dispute and respectfully requests that TCO reverse these charges as soon as practicable.

Your anticipated assistance in this matter is greatly appreciated, Mike.

EstMGCStorageBal anceOclober200.. *

Mike Suppa Analyst, Gas Supply Mountaineer Gas Company 2401 Sissonville Drive Charleston, WV 25312 Phone: 304.347.0550 Fax: 304.348.1661

1


MOUNTAINEER GAS COMPANY

NYMEX NYMEX Date Time Monlh Year Last NYMEX Trade' Seniemenl Price* Difference Dato Time Month Year Last NYMEX Trade Selement Prlco Differencs

1/2/2007 958 AM Fob Mar Apr May Jun Jul Aug sap oct NOV Dec Jan

2/1/2007 9:58 AM Mar Apr May

AwJ Sep Oct NOV DW Jan Fab

3/1/2007 10:33AM Apr

Jun Jul

May Jun Jul Aug Sep oct NOV Dec Jan

Mar Feb

4/1/2007 1033 AM May Jun Jul AwJ Sep oct Nov Dec Jan Feb Mar Apr

5/1/2007 1O:ll AM Jun Jul A w SeP oct NOV Dec Jan Feb Mar Apr May

Aug Sep Oct Nov Dec Jan Feb Mar Apr May Jun

1/2/2008 10:04 AM Fab Mar Apr May

Aug Sep Oct Nov Dffi

6/1/2007 1011 AM Jul

Jun Jul

2007 2007 2007 2007 2007 2007 2007 2007 2007 2007 2007 2008

2007 2007 2007 2007 2007 2007 2007 2007 2007 2007 2008 2008

2007 2007 2007 2007 2007 2007 2007 2007 2007 2008 2008 2008

2007 2007 2007 2007 2007 2007 2007 2007 2008 2008 2008 2008

2007 2007 2007 2007 2007 2007 2007 2008 2008 2008 2008 2008

2007 2007 2007 2007 2007 2007 2008 2008 2008 2008 2008 2008

2008 2008 2008 2008 2008 2008 2008 2008 2008 2008 2008

$6.140 $6.351 $6.460 $6.570 $6.700 $6.825 $6.940 $7.040 $7.150 $7.880 $8.450 $8.750

$7.375 $7.470 $7.820 $7.590 $7.620 $8.060 $8.120 $7.950 $8.416 $8.890 $9.350 59.350

$7.120 $7.250 $7.400 $7.550 $7.640 $7.700 $7.795 $8.410 $8.970 $9.230 $9.230 $9.080

$7.770 $7.900 $8.040 $8.145 $8.190 $8.300 $8.940 S9.W $9.860 $9.810 $9.680 $8.120

$7.800 $7.915 $8.030 $8.195 $8.150 $8.935 $9.640 $9.900 $9.905 $9.715 $8.331 $8.201

$7.805 $8.010 $8.070 $8.210 $8.885 $9.540 $9.920 $9.895 $9.720 $8.400 $8.295 $8.340

$7.720 $7.660 $7.745 $7.575 $7.665 $7.765 $7.890 $7.885 $7.950 $8.310 $8.720

$6.92 $7.55 $7.56 57.51 57.59 $6.93 $6.11 $5.43 $6.42 $7.27 $7.20 $7.17

$7.55 $7.56 $7.51 $7.59 $6.93 $6.11 $5.43 $6.42 57.27 $7.20 $7.17 $8.00

$7.56 $7.51 $7.59 56.93 56.11 $5.43 56.42 $7.27 $7.20 57.17 $8.00 $8.93

$7.51 $7.59 $6.93 $6.1 1 55.43 $6.42 $7.27 $7.20 $7.17 $8.00 $8.93 $9.58

$7.59 $6.93 $6.11 $5.43 $6.42 $7.27 $7.20 $7.17 $8.00 $8.93 69.58

$11.28

$6.93 $6.11 $5.43 $6.42 $7.27 $7.20 $7.17 $8.00 $8.93 $9.58

$11.28 $11.92

$8.00 $8.93 $9.58

$11.28 $11.92 $13.11 $9.22 $8.39 $7.47 $6.47 $6.89

$0.78 $1.20 51.10 $0.94 $0.89 $0.10

($0.83) ($1.61) ($0.73) ($0.61) ($1.25) (51.58)

$0.17 $0.09

($0.31) $0.00

($0.69) ($1.95) ($2.69) (51.53) ($1.15) ($1.69) ($2.18) ($1.35)

$0.44 $0.26 $0.19

($0.62) ($1.53) ($2.27) ($1.37) ($1.14) ($1.77) ($2.06) ($1.23) ($0.15)

($0.26) ($0.31) ($1.11) ($2.04) ($2.76) ($1.88) ($1.67) ($2.30) ($2.69) ($1.81) ($0.75) $1.46

($0.21) ($0.99) ($1.92) ($2.77) ($1.73) ($1.67) ($2.44) ($2.73) (51.91) ($0.79) $1.25 $3.08

($0.88) ($1.90) ($2.64) ($1.79) (51.62) ($2.34) ($2.75) ($1.90) ($0.79) $1.18 $2.99 $3.58

$0.28 $1.27 $1.83 $3.71 $4.25 $5.24 $1.33 $0.51

($0.48) ($1.84) ($1.83)

7/2/2007 1013 AM Aug . Sep Oct NOV Dffi Jan Feb Mar Apr May Jun Jul

8/2/2007 10:08 AM Sep oct Nov Dec Jan Feb Mar APr May Jun Jul Aug

9/4/2007 1O:OB AM Ocl NOV Df f i Jan Feb Mar APr May Jun Jul AwJ Sep

10/2/2007 1045AM Nov Dec Jan Feb Mar Apr May Jun Jul Au9 Sep Ocl

11/1/2007 10:27 AM Dec Jan Feb Mar Apr May Jun Jul AW Sep OCl NOV

12/3/2007 10:23AM Jan Feb Mar Apr May

Aug Sep Oct Nov DW

7/1/2008 10:21 AM Aug Sep oct Nov DW Jan Fsb March

Jun Jul

APr May Jun

2007 2007 2007 2007 2007 2008 2008 2008 2008 2008 2008 2008

2007 2007 2007 2007 2008 2008 2008 2008 2008 2008 2008 2008

2007 2007 2007 2008 2008 2008 2008 2008 2008 2008 2008 2008

2007 2007 2008 2008 2008 2008 2008 2008 2008 2008 2008 2008

2007 2008 2008 2008 2008 2008 2008 2008 2008 2008 2008 2008

2008 2008 2008 2008 2008 2008 2008 2008 2008 2008 2008 2008

2008 2008 2008 2008 2008 2009 2009 2009 2009 2009 2009

$6.590 $6.715 $6.880 $7.670 $8.550 $8.867 $8.870 $8.540 $7.930 $7.750 $7.800 $7.959

56.430 $6.610 $7.505 $8.390 $8.785 $8.805 $8.550 $8.080 $8.010 $8.170 $8.180 $8.330

$5.?65 $6.375 $7.310 $7.720 $7.755 $7.600 $7.205 $7.330 $7.415 $7.400 $7.490 $7.530

$7.300 $7.920 $8.250 $8.280 $7.960 $7.670 $7.540 $7.630 $7.800 $7 850 $7.785 $7.960

$8.310 $8.655 $8.685 $8.465 $8.025 $8.090 $8.200 $8.051 $8.310 $7.930 $8.420 $8.790

$7.140 $7.185 $7.155 $7.095 $7.395 $7.425 $7.525 $7.610 $7.635 $7.670 $8.070 $8.400

$13.550 $13.590 513.680 $13.925 $14.260 514.440 $14.365 $14.120 $11.800 $1 1.760 $11.580

$6.11 $5.43 $6.42 $7.27 $7.20 $7.17 $8.00 $8.93 $9.58

$11.28 $11.92 513.11

$5.43 $6.42 $7.27 $7.20 $7.17 $8.00 $8.93 $9.58

$11.28 $11.92 $13.11 $9.22

$6.42 $7.27 $7.20 $7.17 58.00 58.93 $9.58

$11.28 $11.92 $13.11 $9.22 $8.39

$7.27 $7.20 $7.17 $8.00 $8.93 $9.58

$11.28 $11.92 $13.11 $9.22 $8.39 $7.47

$7.20 $7.17 $8.00 $8.93 $9.58

$11.28 $11.92 $13.11 $9.22 $8.39 $7.47 $6.47

$7.17 $8.00 $8.93 $9.58

$11.28 $11.92 $13.11 $9.22 $8.39 $7.47 $6.47 $6.89

$9.22 $8.39 $7.47 $6.47 $6.89 $6.14 $4.48 $4.06 $3.63 $3.30 $3.54

($0.48) ($1.29) ($0.46) ($0.40) ($1.35) ($1.70) ($0.87) $0.39 $1.65 $3.53 $4.12 $5.15

($1.00) ($0.19) ($0.24) ($1.19) ($1.61) ($0.81) $0.38 $1.50 $3.27 $3.75 $4.93 $0.89

$1.06 $0.89

($0.1 1) ($0.55) $0.24 $1.33 $2.37 $3.95 $4.50 $5.71 51.73 $0.86

($0.03) ($0.72) ($1.08) ($0.28) $0.97 $1.91 $3.74 $4.29 $5.31 $1.37 $0.61

($0.49)

($1.11) ($1.48) ($0.69) $0.47 $1.55 $3.19 $3.72 $5.05 $0.91 $0.46

($0.95) ($2.32)

$0.03 $0.81 $1.78 $2.48 $3.89 $4.49 $5.58 $1.61 $0.76

($0.20) ($1.60) ($1.50

($4.33) ( $ 5.2 0 ) ($6.21) ($7.46) (57.37) ($8.30) ($9.89)

($10.06) ($8.17) ($8.46) (S8.W)

NYMEX Date Time Month Year Last NYMEXTrade’ Seltlernenl Pilce’ OWerence

Jan 2009 $8.800 $6.14 ($2.66)

2/1/2008 1025 AM Mar Apr May Jun Jul Aug SeP oct Nov DEC Jan Feb

3/3/2008 10:45 AM Apr May Jun Jul A ~ Q Sep OCt N ov DRC Jan Feb March

4/1/2008 10:40AM May Jun Jul AU9 Sep OCt Nov DRC Jan Feb March Apr

5/1/2008 1038 AM Jun Jul Aug SeP Oct NOV DRC Jan Feb March APr May

Aug Sap OCt Nov DBC Jan Feb March Apr May

6/2/2008 10:17 AM Jul

Jun

2008 2008 2008 2008 2008 2008 2008 2008 2008 2008 2009 2009

2008 2008 2008 2008 2008 2008 2008 2008 2008 2009 2009 2003

2008 2008 2008 2008 2008 2008 2008 2008 2009 2009 2009 2009

2008 2008 2008 2008 2008 2008 2008 2009 2009 2009 2009 2009

2008 2008 2008 2008 2008 2008 2009 2009 2009 2009 2009 2009

$7.945 $7.914 $7.965 $8.055 $8.130 $8.188 $8.215 $8.260 $8.620 $8.910 $9.005 $9.010

$9.575 $9.610 59.550 $9.630 $9.690 $9.695 $9.770 $9.990

$10.580 $10.570 510.510 $10.280

$9.925 $IO.lW $ 10.105 $10.150 $10.160 $10.240 $10.360 $10.760 510.900 $10.880 $10.640 $9.085

$10.580 $10.850 $10.915 $10.915 $10.980 $11.230 $11.600 $11.820 $11.680 $11.410 $9.650 $9.540

$12.150 $11.730 $11.740 $11,840 $11.970 $12.635 $12.830 $12.675 $12.430 510.775 $10.370 $10.820

$8.93 $9.58

$11.28 $11.92 $13.11 $9.22 58.39 $7.47 $6.47 $6.89 $6.14 $4.48

$9.54 $11.28 $11.92 $13.11 $9.22 $8.39 $7.47 $6.47 $6.89 $6.14 $4.48 $4.06

$11.28 $11.92 $13.11 $9.22 $8.39 $7.47 $6.47 $6.89 $6.14 $4.48 $4.06 $3.63

$11.92 $13.11 $9.22 $8.39 $7.47 $6.47 $6.89 $6.14 $4.48 $4.06 $3.63 $3.30

$13.11 59.22 $8.39 $7.47 $6.47 $6.89 $6.14 54.48 $4.06 $3.63 $3.30 53.54

$0.98 $1.66 $3.32 $3.86 $4.98 $1.03 $0.18

($0.79) ($2.15) ($2.02) ($2.87) ($4.53)

$0.00 $1.67 $2.37 $3.48

($0.47) ($1.30) ($2.30)

(54.43)

($3.52) ($3.67)

($6.03) ($6.22)

$1.36 $1.82 $3.00 ($0.93) ($1.77) ($2.77) ($3.89) ($3.87) ($4.76) ($6.40) ($6.58) ($5.45)

$1.34 $2.26

($1.70) ($2.52) ($3.51) ($4.76) ($4.71) ($5.68) ($7.20) ($7.35) ($6.02) ($6.24)

$0.96 ($2.51) ($3.35) ($4.37) ($5.50) ($5.75)

($8.20) ($8.37) ($7.14) ($7.07) (57.28)

($6.69)

Date Time Monlh Jul

8/1/2008 1094 AM Sep oct Nov DEC Jan Feb March APr May

Aug

Jun Jul

9/2/2008 1032 AM Oct NOV OEC Jan Feb March Apr May

Aug Sep

Jun Jul

10/1/2008 1016AM NOV OW Jan Feb March Apr May Jun JUI A y l SeP OCt

11/3/2008 1O:ll AM DRC Jan Feb March Apr May Jun

Ay l Sep Od Nov

12/1/2008 1027 AM Jan Feb March

JUI

Apr May

AUQ Sap oct NOV DEC

Jun Jul

NYMEX Year Last NYMEX Trade Settlement Price Difference 2009 $1 1.480 $3.95 ($7.53)

2008 2008 2008 2008 2009 2009 2009 2009 2009 2009 2009 2009

2008 2008 2008 2009 2009 2009 2009 2009 2009 2009 2009 2009

2008 2008 2009 2009 2009 2009 2009 2009 2009 2009 2009 2009

2008 2009 2009 2009 2009 2009 2009 2009 2009 2009 2009 2009

2009 2009 2009 2009 2009 2009 2009 2009 2009 2009 2009 2009

$9.400 $9.520 $9.880

$10 250 $10.445 $10.215 $10.030 $9.270 $9.310 $9.240 $9.449 $9.514

$7.440 $7 905 $8.335 $8.585 $8.625

- $8.480 $8.215 $8.740 $8.830 $8.440 $8.510 $4.150

$7.580 $7.830 $8.055 $8.085 $7.970 $7.825 $7.840 $7.920 $8.028 $8.365 $8.550 58.280

$6.575 $6.840 $6.960 $6.760 $6.785 $6.835 $6.965 $7.300 $7.340 $7.380 57.270 $7.610

$6.404 $6.915 $6.455 $6.440 56.455 $6.585 $6.710 $6.800 $6.840 $6.940 $7.290 $7.705

1. ‘Last NYMEX Trade” Is the NYMEX price at the date and time listed in columns A and 8. This Is the futures price that is displayed on Gas Buyer.

$8.39 ($1.01) $7.47 (52.05) $6.47 ($3.41) $6.89 ($3.36) $6.14 ($4.31)

$4.06 ($5.97) $3.63 ($5.84) $3.30 ($6.01) $3.54 ($5.70) $3.95 ($5.50) $3.38 ($6.14)

$7.47 $0.03 $6.47 ($1.44) $6.89 ($1.45) $6.14 ($2.45) $4.48 ($4.15) $4.06 ($4.42) $3.63 ($4.58) $3.30 ($5.44) 53.54 65.29) $3.95 $3.38 $2.84

$6.47 $6.89 $6.14 $4.48 $4.06 $3.63 53.30 $3.54 $3.95 $3.38 $2.84 $3.73

$6.89 $6.14 $4.48 $4.06 $3.83 53.30 $3.54 $3.95 $3.38 $2.84 $3.73 $4.29

$6.14 $4.48 $4.06 53.63 $3.30 $3.54 $3.95 53.38 $2.84 $3.73 $4.29 $4.48

$4.48 ($5.74)

i14.49j ($5.13) ($6.31)

(51.11) ($0.94) ($1.92) ($3.61) ($3.91) ($4.19) ($4.54) ($4.38) ($4.08) ($4.99) ($5.71 ) (34.55)

$0.31 ($0.70) ($2.48) ($2.70) ($3.15) ($3.54) ( $3.4 3 ) ($3.35) ($3.96) ($4.54) ($3.54) ($3.32)

($0.27) ($2.44) ($2.40) ($2.81) ($3.16) ($3.05) ($2.76) (53.42) ($4.00) ($3.21) ($3.00) ($3.22)

2. ‘NYMEX Settlement Price Is the price that NYMEX settled at for the month Indicated (commonly referred to as ‘First of Month Settlement Price’).

PUBLIC SERVICE COMMISSION OF WEST VIRGINIA

CHARLESTON

CASE NO. 09-1268-G-30C

MOUNTAINEER GAS COMPANY, a public utility, Kanawha County.

Application to change rates effective November 1,2009, pursuant to Rule 30C, General Order No. 183.4, Purchased Gas Application.

DIRECT TESTIMONY OF

TOM M. TAYLOR

February 12,2010

{C 1676472.7)

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Direct Testimony of Tom M. Taylor Mountaineer Gas Company Case No. 09-1268-G-30C Page 1 of 41

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PLEASE STATE YOUR NAME AND POSITION.

My name is Tom M. Taylor. I serve as President of Mountaineer Gas Company (the

“Company” or “Mountaineer”).

BRIEFLY DESCRIBE YOUR EDUCATIONAL BACKGROUND AND WORK

EXPERIENCE.

I joined Mountaineer at the time of the acquisition of Mountaineer from Allegheny

Energy in October 2005. I have 40 years of experience in the energy business with the

last 23 years focused on natural gas and the last 17 years including LDC development

and operations. I graduated from the University of Arkansas in 1969 with a Bachelor of

Science of Industrial Engineering.

WHAT IS THE PURPOSE OF YOUR TESTIMONY?

On behalf of Mountaineer, I will describe the financial and other circumstances that

influenced the Company’s decision in late November and December 2007 not to forward

purchase certain gas contracts to deliver gas in March and April 2008. Mountaineer

explained its position on this issue at some length in its 2008 30C proceeding, Case No.

08-1304-G-30C (“2008 30C Case”), and I truly felt the evidence Tom Westfall presented

in that case validated Mountaineer’s gas purchasing approach, both in a general sense

and with respect to the forward gas purchasing decisions we made in late 2007, (The

practice of forward purchasing gas is Mountaineer’s hedging program.)

I wholeheartedly agree with Mr. Westfall’s assessment, presented in his 2008 30C

Case testimony and again in this case, that management of Mountaineer’s storage

limitations on the Columbia Gas Transmission system, and the avoidance of associated

{ C 1676472.7)


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penalties provided for in Columbia’s FERC tariff, were of paramount importance to

Mountaineer during that period. Mountaineer’s storage constraint concerns, and the

potential for storage-related penalties, were very real in the fall of 2007 - in fact,

Columbia assessed a penalty of over $2 million for exceeding its storage utilization

allowance in October 2007. Coupled with a warmer-than-normal start to the 2007-2008

heating season, the potential for violating the Columbia storage parameters made

Mountaineer highly wary of subjecting itself to potential storage-related penalties and

prompted Mountaineer not to commit in November and December 2007 to additional

forward purchases of gas for delivery in March and April 2008.

Mountaineer’s financial condition during this period only heightened the need for

a conservative approach to managing its storage balances. As Mountaineer’s president,

I was centrally involved in Mountaineer’s analysis of its financial condition at the time

and in our extensive efforts in 2007 to ensure that Mountaineer would be able to meet its

debt service obligations, preserve access to short-term borrowing capacity, and continue

the provision of high-quality service to its customers. Much of my direct testimony in

this case relates to Mountaineer’s negotiations with its lenders during 2006 and 2007; I

was centrally involved in those discussions, and consequently am in a position to

In his May 2009 testimony in the 2008 30C Case, Mr. Westfall did not have the same first-hand knowledge of Mountaineer’s financial circumstances in 2007 that I possessed, particularly on issues relating to Mountaineer’s debt covenants, access to short-term credit, and upcoming debt maturities. Mr. Westfall’s May 2009 testimony, while certainly providing an accurate summary of the storage constraints under which Mountaineer was operating in late 2007, did not develop the impact of those financial factors on Mountaineer’s decision-making as fully as I would have been able to do if I had testified at the May 8, 2009 hearing.

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describe those efforts to the Commission and to explain how they affected

Mountaineer’s gas procurement and storage strategies during that period.

Critically, Mountaineer’s efforts to preserve access to its revolving credit facility

Without a were vital to the continuation of gas distribution service to its customers.

short-term credit facility, Mountaineer would have been unable to discharge its gas

purchasing functions, finance deferred payment programs for its customers, or carry the

cost of gas in storage and unrecovered purchased gas costs. Maintaining this access, and

avoiding defaults under its revolving credit facility, was crucial to Mountaineer’s ability

to deliver safe, reliable service. Any examination of Mountaineer’s decisions during this

period must appreciate that ensuring continued service to Mountaineer’s customers was

our first priority.

As this testimony will demonstrate, Mountaineer’s financial situation during late

2006 and throughout 2007 created an environment that necessitated the careful,

conservative approach Mountaineer utilized in modulating its storage situation to avoid

the possibility of storage penalties that, at the time and under the circumstances, would

have been crippling to Mountaineer and its customers. Although I’m discouraged that,

in 2010, we are still litigating about gas purchasing decisions made in 2007, I appreciate

how this case has developed and welcome the opportunity to bring additional clarity to

Mountaineer’s financial constraints at that time. I hope my testimony will complement

Mr. Westfall’s explanations of Mountaineer’s gas procurement tools, the storage

constraints facing Mountaineer at the time, and why, based on the information available


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at the time, Mountaineer’s decision not to accept certain Gas Buyer prompts was the

right thing to do for Mountaineer and its customers.

HOW IS YOUR DIRECT TESTIMONY ORGANIZED?

Section I of my testimony reviews Mountaineer’s financial situation in 2006 and 2007,

explaining in detail the covenants in Mountaineer’s credit agreement, Mountaineer’s

violations and near-violations of those covenants that resulted from an insufficiency of

revenues, and Mountaineer’s ultimately successful efforts, late in 2007, to refinance a

portion of its term debt and thereby to avoid substantial principal payment obligations in

early 2008 that Mountaineer was in no position to pay.

Section I1 of my testimony focuses on Mountaineer’s concerns about storage-

related penalties, and explains how the poor financial performance outlined in Section I

served as a backdrop for Mountaineer’s gas storage and hedging decisions in late 2007.

Stated simply, Mountaineer’s financial situation was so diminished, and its ability to

meet even the reduced credit-metric covenants in its debt agreements was so

compromised, that Mountaineer was required to operate its business in a very

conservative, risk-averse way to get through this challenging period. When faced with

the prospect of losing short-term borrowing capability entirely and having to make $7.5

million in principal payments in early 2008, and with the very real prospect of storage

penalties from Columbia, Mountaineer had little margin for error.

Section I11 provides my observations on some of the CAD criticisms of

I will show that Mountaineer’s hedging Mountaineer’s hedging decisions in 2007.

22 program was and is a robust one, fashioned on its own for the benefit of customers.


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Moreover, Mountaineer’s hedging program was implemented without any affirmative

guidelines from the Commission that would have circumscribed our hedging approach

or, as the CAD has suggested, precluded any temporary modification to it. In Section

111, I also explain why a utility’s hedging practices must be evaluated not in the abstract,

but in the context of the utility’s financial condition and constraints, and provide a

number of other observations on the CAD Penalty Recommendation.

DO YOU HAVE ANY EXHIBITS TO YOUR DIRECT TESTIMONY?

Yes. I will sponsor ten exhibits to my direct testimony, identified as Exhibits TMT-1

through TMT-1 Oa2 An index of these exhibits appears at the end of my testimony.

MOUNTAINEER’S FINANCIAL AND BORROWING SITUATION IN 2007

YOU’VE INDICATED THAT MOUNTAINEER’S FINANCIAL CIRCUMSTANCES

IN 2006 AND 2007 FORMED THE BACKDROP FOR ITS CONSERVATIVE

APPROACH TO ADDRESSING THE PROSPECT OF STORAGE PENALTIES, AND

INFLUENCED ITS HEDGING DECISIONS IN LATE 2007. PLEASE EXPLAIN

THOSE CIRCUMSTANCES.

When the CAD first challenged Mountaineer’s gas purchasing practices in the 2008 30C

Case, Mountaineer explained that its decision to not accept certain Gas Buyer prompts in

November and December 2007 was based on concerns about (i) applicable constraints

To reduce the bulk of this material, I have provided Exhibit TMT-5 in double-sided format. Also, to harmonize this testimony with Mr. Westfall’s direct testimony, I have adopted his use of several capitalized terms he defined in his testimony.

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regarding gas storage that had to be complied with to avoid financial penalties, and (ii)

concerns about certain financial constraints associated with debt covenants and principal

payment obligations contained in Mountaineer’s credit agreements3 In some ways, each

of these concerns was amplified by Mountaineer’s financial performance at the time.

In 2006 and 2007, Mountaineer’s financial performance was in a steady decline.

Mountaineer’s quarterly reports to the Commission for the last two quarters of 2006 and

the four quarters of 2007 illustrate this trajectory. Mountaineer reported a net income of

$3,8 15,000 on its jurisdictional operations for the twelve-month period ended September

30, 2006, representing a return of 3.53% on Mountaineer’s average equity investment

during that period of $87.8 million. Unfortunately, these results were to be the last

positive ones Mountaineer would report during 2006 or 2007. In each of the next five

reporting periods (for the twelve-month periods with quarters ending December 3 1, 2006

through December 3 1, 2007), Mountaineer’s utility operations reported net losses.

Although the December 3 1, 2007 report reflected some improvement, Mountaineer’s

quarterly report for the twelve months ended September 30, 2007 - the reporting period

immediately prior to the hedging decisions at issue here - reflected a net loss of nearly $4

million on its jurisdictional operations, and a return of (5.46%) for that period on an

average equity investment of $75.4 million.

See, e.g., Mountaineer’s October 9,2008 response in the 2008 30C Case, at 6-7. This explanation has been a consistent one throughout Mountaineer’s many pleadings on this subject in the 2008 30C Case. 3


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This financial performance is not surprising given important changes in

Mountaineer’s actual revenue being generated that had occurred since its last base rate

adjustment. The revenue levels on which the Company’s base rates had been established

in its 2004 rate case (“2004 Rate Case”), based on a 2003 test year. With the inclusion of

West Virginia Power Gas Service (“WVPGS”) customers and the equalizing of

WVPGS’s rates with those of Mountaineer, Mountaineer’s actual revenues in 2006 and

2007 were much lower than expected revenue level^.^ As we indicated in the evidentiary

portion of the 2009 Rate Case, this poor performance was primarily due to a dramatic

reduction in sales volumes as compared with those from the 2003 test year used in the

2004 Rate Case. In the 2004 Rate Case and taking into account the then-anticipated

merger of WVPGS into Mountaineer, annual post-WVPGS merger tariff sales of

approximately 29 Bcf were expected. In the space of just a few years, however, sales had

dropped considerably: by 2007, actual tariff sales had fallen to 24.3 BCF (2006 tariff

sales had been even lower). Because historically two-thirds of a residential customer’s

bill is the commodity cost, and consequently Mountaineer’s revenues are highly

dependent on sales volumes, one can see how these reductions would have had a

significant effect on Mountaineer’s financial performance. The negative earnings on

Excluding equity in earnings of Mountaineer Gas Services, Mountaineer lost over $438,000 in 2006 and over $2,000 in 2007. See Exhibit TMT-1, which is a copy of Exhibit SFK-1 to the testimony of Scott F. Klemm, Mountaineer’s Vice President of Accounting and Controller, from Mountaineer’s pending 2009 rate case, Case No. 09-0878-6-42T (“2009 Rate Case”).

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1 equity for Mountaineer’s gas distribution operations in 2006 and 2007 are evidence of

2 this impact.’

3 Q. WERE MOUNTAINEER’S FINANCIAL DIFFICULTIES REFLECTED IN

4 INDEPENDENT RATINGS OF ITS CREDIT QUALITY AND DEBT

5 OBLIGATIONS?

6 A. Yes. Fitch Ratings, which rates Mountaineer and its debt obligations, reviewed

7 Mountaineer several times during this period. Its ratings actions chronicle Mountaineer’s

8 deteriorating financial position, and highlight Mountaineer’s growing concern about its

9 continued access to short-term credit:

10 0 In October 2006, Fitch assigned Mountaineer an initial Issuer Default Rating

11 (“IDR’)6 of ‘BBB-’ with a Stable rating outlook and expectations that

12 Mountaineer’s financial profile would improve going forward resulting from its

13 August 2005 rate settlement. (‘BBB-’ is Fitch’s lowest investment-grade rating.)

14 0 But in December 2006, concerned about lower than forecasted cash flow

15 associated with “reduced demand due to warmer weather and conservation, lower

16 transport revenue, and one-time expenses from the development of a new

Exhibit TMT-2 shows graphically the drop in sales from the levels embedded in the 2004 Rate Case through 2008. It shows that during 2006 and 2007, the impact of this reduction in sales on Mountaineer’s financial performance was already quite pronounced. (Exhibit TMT-2 is a copy of the same exhibit introduced into evidence as Company Exhibit 3 at the July 16, 2009 hearing in the 2009 Rate Case.)

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Fitch assigns IDRs to issuers to reflect the issuer’s ability to meet all financial commitments in a timely manner, effectively measuring their probability of default. See Fitch Ratings, “Issuer Default Ratings and Recovery Ratings in the Power and Gas Sector,” November 7,2005, a copy of which (less its lengthy appendices, none of which directly relates to Mountaineer) is attached as Exhibit TMT-3.

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accounting system as well as a new technology department,” Fitch downgraded

Mountaineer’s IDR to ‘BB+’ from ‘BBB-’ and placed Mountaineer’s ratings on

Ratings Watch Negative. In this ratings action, Fitch also noted Mountaineer’s

first breach of its interest coverage covenant under its credit agreement (a default

I will describe below).

0 Fitch downgraded Mountaineer’s IDR again in May 2007 (to ‘BB-’ from ‘BB-t’),

keeping Mountaineer on Rating Watch Negative. This ratings action focused both

on the lack of resolution of accounting software implementation problems, which

were slowing the production of audited financial statements, as well as

Mountaineer’s credit metrics.

0 Fitch retained its ‘BB-’ IDR rating for Mountaineer in September 2007 but,

encouraged by improvements of the accounting system problems mentioned

above, removed the Negative outlook. Still, Fitch remained concerned with

“liquidity and bank facility financing risk” in view of several debt covenant

violations, as well as the scheduled principal payments of $18 million that

Mountaineer faced in 2008. Fitch warned that a “continuation of reduced demand

due to warmer weather and conservation” would lead to lower than forecasted

cash flows and, consequently, credit metrics that would continue to be out of

compliance with debt covenant requirements. Conversely, Fitch pointed to the

attainment of a “reasonable refinancing package” as an element that could

improve Mountaineer’s credit ratings.


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Fitch’s ratings actions over this period7 reflect what we at Mountaineer already knew,

and what the sales volume reductions shown in Exhibit TMT-2 illustrate: even with

rates established in August 2005, reductions in sales volumes were having a significant

adverse impact on Mountaineer’s “credit metrics,” which caused Mountaineer to violate

its debt covenants and put Mountaineer’s use of its existing credit facility at risk.

Revolving Credit Facility Concerns

DID MOUNTAINEER’S POOR FINANCIAL PERFORMANCE IN 2006 AND 2007

THREATEN ITS ACCESS TO SHORT-TERM BORROWINGS?

Yes. As the Fitch ratings actions suggest, ensuring adequate access to capital,

particularly the short-term revolving debt on which Mountaineer’s natural gas purchases

and operations are so dependent, was a continuing concern during this period due to

Mountaineer’s poor earnings.

In the 2009 Rate Case, Mountaineer explained to the Commission some of the

changes over time to the terms of its revolving credit facility with PNC Bank, National

Association (“PNC”), and various lenders under an original credit agreement dated as of

September 30, 2005 (“Original Agreement”), as amended on three separate occasions

Copies of Fitch’s rating action reports from October 13, 2006, December 12, 2006, May 7, 2007, 7

and September 7,2007 are collectively attached as Exhibit TMT-4 to this testimony.


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(collectively and as amended, the “Credit Agreement”).’ Mountaineer’s purpose in

providing this information in the 2009 Rate Case was to persuade the Commission to

implement rates earlier than on a full statutory suspension period to allow for enhanced

hedging efforts, and thus Mountaineer’s presentation focused on its projected compliance

with debt covenants on a going-forward basis. Much of that discussion, however, is

useful to demonstrate how those same covenants affected Mountaineer in 2006 and 2007.

Mountaineer’s access to additional borrowings under the revolving credit facility

component of the Credit Agreement (“Revolving Credit Facility”) was restricted by

certain debt covenants set forth in Sections 8.2.16 through 8.2.18 of the Original

Agreement. These three covenants, which were modified in December 2006, again in

June 2007, and yet again in December 2007 in connection with Mountaineer’s long-term

debt refinancing, controlled Mountaineer’s ability to use the Revolving Credit Facility for

a wide range of operational purposes, including Mountaineer’s gas procurement, hedging,

and storage programs, the carrying costs associated with unrecovered ACA balances, and

other working capital needs. The covenants in the Original Agreement were “Minimum

Consolidated EBITDA,” “Minimum Interest Coverage Ratio,” and “Maximum Debt to

A copy of the Original Agreement, together with amendments to it entered into on December 20, 2006 (“First Amendment”), June 21, 2007 (“Second Amendment”), and December 20, 2007 (“Third Amendment”), is attached to this testimony is Exhibit TMT-5.

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Note that the Credit Agreement also provided for a $50 million term loan facility (“Term Loan Facility”), with the notes issued thereunder (the “Term Loan Notes” described in Section 3.3 of the Credit Agreement) intended to redeem and prepay certain outstanding notes due in October 2009 and October 2019. In this testimony, I will also discuss Mountaineer’s eventual concerns with the timing of the principal payment obligations under the Term Loan.


Fiscal quarter ended

Three fiscal quarters ended 6/30/06 Four fiscal quarters ended 9/30/06 Four fiscal quarters ended 12/31/06 through four fiscal quarters ended 9/30/08

Two fiscal quarters ended 3/3 1/06

Capital Ratio,” found at Sections 8.2.16, 8.2.17, and 8.2.18, respectively (collectively, the

“Debt covenant^").^ The Minimum Consolidated EBITDA and the Minimum Interest

Coverage Ratio were the most important:

0 Under the Minimum Consolidated EBITDA test in the Original Agreement,

Mountaineer’s EBITDA was prohibited from falling below various levels ranging

from $20 million to $27 million at the end of each upcoming quarter.”

The Minimum Interest Coverage Ratio test in the Original Agreement prohibited

Mountaineer’s earnings before interest and income taxes to be less than two

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Consolidated EBITDA $20,000,000 $24,000,000 $25,000,000 $27,000,000

Upon Commissioner Staats’ request arising from the discussion of the Debt Covenants at the July 16, 2009 hearing in the 2009 Rate Case, Mountaineer filed “Commission Request Exhibit 1” with the Commission. This exhibit, which defines each of the Debt Covenants and describes their evolution from the Original Agreement through the execution of the Third Amendment, was filed with the Commission in the 2009 Rate Case docket on August 18,2009. A copy of the exhibit is attached as Exhibit TMT-6 to this testimony.

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Section 8.2.16 of the Original Agreement stated that: 10

Consolidated EBITDA, as calculated at the end of each fiscal quarter . . . to be less than the following amounts:

“Consolidated EBITDA” was defined as (i) the sum of Consolidated Net Income, depreciation, amortization, interest expense, income tax expense, other non-cash items of expense (exclusive of depreciation and amortization), and the aggregate expenses of the Borrower and the other Loan Obligors related to this Agreement, the Acquisition and the consummation of the transactions contemplated thereby, and the premium related to the prepayment of the Senior Notes with the proceeds of Term Loans (such aggregate expenses to be the amount deducted by the Loan Obligors in the determination of Consolidated Net Income), minus (ii) other non-cash items of income, in each case of the Borrower and its Subsidiaries for such period determined and consolidated in accordance with GAAP.


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times its interest expense.

shorthand of “ 2 . 0 ~ ” to represent this ratio.)

(For purposes of this discussion, I will use the

As we advised the Commission at the July 16, 2009 hearing, the key factors in meeting

these covenants (both in 2006-2007 and now) are (i) Mountaineer’s earnings levels, as

measured by EBITDA or EBIT, and (ii) Mountaineer’s interest expense.

WHAT WERE THE POTENTIAL RAMIFICATIONS UNDER THE CREDIT

AGREEMENT OF MOUNTAINEER’S FAILURE TO COMPLY WITH THESE

COVENANTS?

Under the Credit Agreement, failure to comply with any of the Debt Covenants would

constitute an event of default. See Original Agreement at Section 9.1.3. Following an

event of default, PNC and the various lenders that are party to the Credit Agreement: (i)

were under no further obligation to make loans or issue letters of credit; (ii) were

empowered to declare any unpaid principal, any interest accrued thereon, any unpaid

fees, and all other indebtedness due and payable; or (iii) could require Mountaineer to

deposit as cash collateral an amount equal to the maximum amount currently or at any

time thereafter available to be drawn on all outstanding letters of credit. See Original

Agreement Section 9.2.1. Obviously, none of these outcomes would have been positive

for Mountaineer.

In addition to the lenders’ remedies on default, another component of the Credit

Agreement complicated Mountaineer’s ability to access the amounts available under the

Revolving Credit Facility. Under Section 7.2 of the Credit Agreement, Mountaineer was

required to certify upon each draw under the Revolving Credit Facility that the draw


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would not result in a future default under the Credit Agreement (and specifically under

the Debt Covenants described above). l 1 This provision required Mountaineer to ensure

sound financial management and exercise extreme care in utilizing the credit available to

it. Moreover, Mountaineer’s management also had to be concerned about the impact of

future earnings and expense levels; if these turned out to be out of line with expectations

at the time of the draw request, then Mountaineer would have more difficulty justifjmg

the projections underlying its certification at the time the request was made, In view of

these constraints, Mountaineer was incentivized to manage its future expenditures

(including interest expensehhort term debt) as tightly as possible, so as to preserve the

availability of short-term ‘credit in the future (for any of the business purposes I’ve

outlined above or, indeed, for unforeseeable emergencies),

DID MOUNTAINEER’S FINANCIAL SITUATION IN 2007 REQUIRE

MOUNTAINEER TO SEEK RELIEF FROM THE DEBT COVENANTS?

Yes, on several separate occasions Mountaineer’s earnings situation, as reflected in its

EBITDA calculations, left Mountaineer in a difficult situation - compelled either (i) to

convince the lenders to temporarily relax the Debt Covenants or waive existing violations

of those covenants, or (ii) to default under the Credit Agreement and, absent a waiver the

See Credit Agreement at Section 7.2 (on the making of additional loans under the Credit Agreement, “and after giving effect to the proposed extensions of credit,” Mountaineer was required to demonstrate, among other things, that it had complied with all affirmative and negative covenants, including the Debt Covenants.

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lenders were under no obligation to provide, find itself without any additional short-term

borrowing capability and facing the remedies upon default described above.

Late 2006 DifJiculties - the First Amendment

Mountaineer’s first difficulties under the Credit Agreement were in 2006, and

stemmed from the reductions in sales volumes discussed above. Mountaineer’s

deteriorating financial performance caused Mountaineer to violate the Minimum Interest

Coverage Ratio for the fiscal quarter ended September 30, 2006. This violation

necessitated the negotiation of the First Amendment, executed on December 20, 2006. In

the First Amendment, Mountaineer achieved the relaxation of the Minimum Consolidated

EBITDA test from $27 million to $23.5 million for the fiscal quarter ended December 3 1,

2006 and a relaxation of the Minimum Interest Coverage Ratio test from 2 . 0 ~ to 1 . 2 ~ for

the fiscal quarter ended December 31, 2006. But for these concessions on the part of the

lenders and the lenders’ waiver of the event of default arising from the September 2006

non-compliance,’2 Mountaineer would have been subject to strict enforcement of the

lenders’ remedies on default under the Credit Agreement and, at the very least, to a

limitation on Mountaineer’s ability to draw additional amounts under the Revolving

Credit Facility.

l2 Exhibit TMT-7 is a copy of the Waiver and Agreement dated November 27, 2006 in which the lenders waived Mountaineer’s non-compliance with requirements of the Credit Agreement, including its first violation, as of September 30,2006, of the Minimum Interest Coverage Ratio test.


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Exhibit TMT-8 to this testimony, which provides a summary of Mountaineer’s

financial performance as compared with the Credit Agreement’s prevailing

requirements, l 3 demonstrates this situation. Under the First Amendment, however, this

relief was to be only temporary. The lenders insisted that once Mountaineer had gotten

“over the hump” at the end of 2006, these two tests would become more restrictive: the

Minimum Consolidated EBITDA test would increase to $25 million for the fiscal quarter

ended June 30, 2007 and thereafter, and the Minimum Interest Coverage Ratio test would

increase from 1 . 2 ~ to 1 . 5 ~ for the quarter ended June 30, 2007, and to 1 . 7 5 ~ for the

quarter ended December 3 1, 2007 and each quarter thereafter. Even under these relaxed

covenants, Mountaineer continued to have concerns about its ability to comply with them

in view of its revenues and financial projections. Consequently, Mountaineer focused on

conserving cash and reducing interest expense.

Mid-2007 Dvjculties - the Second Amendment

As it turned out, the reprieve that Mountaineer negotiated with its lenders in late

2006 would be too short - Mountaineer’s financial performance in late 2006 and early

2007 continued to be very poor, and would not even permit Mountaineer to meet the

relaxed Debt Covenants negotiated in the First Amendment. Exhibit TMT-8 shows that

as of December 31, 2006 and March 31, 2007, Mountaineer’s earnings profile again

l 3 Exhibit TMT-8 also attaches copies of Mountaineer’s Compliance Certificates under the Credit Agreement that show, for the end of each fiscal quarter identified, the relevant G M financial performance and Mountaineer’s compliance or non-compliance with the Debt Covenants.


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caused it to violate the Minimum Consolidated EBITDA and Minimum Interest Coverage

Ratio tests, even at the reduced levels established in the First Amendment. (See Exhibit

TMT-8 for the Compliance Certificates for these two quarters.) Moreover,

Mountaineer’s financial performance in early 2007 foreshadowed its probable failure of

both of these tests as of June 30, 2007, threatening to put Mountaineer in yet another

default situation. l 4 Consequently, Mountaineer was forced to ask the lenders for further

concessions and default waivers. The lenders, appreciating the likelihood of

Mountaineer’s failure of these tests, essentially abandoned the First Amendment’s

gradual increase in the EBITDA and interest coverage requirements, extending the $23.5

million EBITDA level and the 1 . 2 ~ coverage ratio to apply to the quarters ended June 30,

2007 and September 30, 2007, and increasing them only as of the quarter ended

December 31, 2007 and subsequent quarters (when they would increase to $25 million

and lSx , respectively - levels that were still far lower than the levels required in the

Original Agreement). The Second Amendment, dated as of June 21, 2007, documented

these concessions.

l4 Again, Exhibit TMT-8 shows, with reference to actual GAAP performance for the fiscal quarter ended June 30, 2007, that Mountaineer would have failed each of these tests had the requirements of the First Amendment continued to apply to that period.


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Fall 2009 - Mountaineer Near Default Yet Again

Without meaningful, reasonably assured access to a revolving credit line, any

public utility faces the risk of being unable to finance its operations, particularly in the

case of uncontrollable operational conditions or other unforeseen or emergent needs for

short-term credit. Mountaineer’s need for access to its Revolving Credit Facility was no

less significant. Having succeeded in achieving waivers of actual default for three

successive quarters and in extending the relaxed credit terms initially secured in

December 2006, Mountaineer’s ability to operate in a manner that would reduce

expenses, preserve cash and minimize short-term debt levels and interest expense was of

critical importance. Yet even with these relaxed covenants and the tight operational and

spending parameters Mountaineer faced, it still had serious difficulty meeting the Credit

Agreement’ s requirements.

In the fall of 2007, just as the hedging decisions the CAD criticizes were about to

be made, Mountaineer’s financial performance brought it alarmingly close to violating

the Debt Covenants, despite the relaxed EBITDA and interest expense metrics continued

in the Second Amendment. Mountaineer closed its books for the quarterly period ending

September 30,2007, on or about October 23,2007. Based on the financial results for the

four quarters ended September 30, 2007, Mountaineer’s consolidated EBITDA was

approximately $23.9 million, or roughly $400,000 more than the minimum requirement,

and the interest coverage ratio was 1 . 2 0 3 ~ -just barely above the required 1 . 2 ~ level.

Exhibit TMT-8 shows these results as compared with the prevailing covenant

requirements. Thus, Mountaineer narrowly met each loan covenant for the four-quarter

Direct Testimony of Tom M. Taylor .Mountaineer Gas Company Case No. 09-1268-G-30C Page 19 of 41

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period ending September 30, 2007, and avoided yet another default situation, only by the

3 Q. WHY ARE THESE REPEATED VIOLATIONS AND NEAR-VIOLATIONS OF THE

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5 HEDGING DECISIONS?

CREDIT AGREEMENT MEANINGFUL IN THE CONTEXT OF MOUNTAINEER’S

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There are two principal reasons, one of which will be amplified by an understanding of

Mountaineer’s long-term debt situation, which I’ll discuss below.

First, as I mentioned at the outset of this testimony, preserving access to short-

term debt was absolutely crucial to Mountaineer’s operations as a gas distribution utility.

We simply could not afford to violate the provisions of the Credit Agreement - to risk

default would be to give the lenders the contractual right to terminate the agreement,

leaving Mountaineer with no source of cash working capital with which to support many

critical business functions, including buying gas and pipeline capacity, financing

unrecovered gas costs, financing gas in storage balances, covering amounts owed by

customers under the budget payment plan, and other standard working capital needs, to

say nothing of emergency needs that might arise. Preserving access to short-term debt

was crucial to Mountaineer’s continued ability to serve its customers, Moreover, if

default and termination occurred, the amounts outstanding would be accelerated, and

Mountaineer would have absolutely no way to pay off that debt, short of a replacement

revolving credit agreement with other lenders or a long-term, unsecured financing; either

alternative would assuredly have been on very unfavorable terms for Mountaineer’s

22 customers relative to its existing credit arrangements. Accordingly, going into the 2007-


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2008 heating season, a season when the demands on Mountaineer’s public utility

services, foreseeable and unforeseeable, are the highest, maintaining access to short-term

debt was Mountaineer’s highest corporate priority. Consequently, actions that would

reduce interest expense were critically important.

Second, as I’ll explain below, the Revolving Credit Facility was not the only

financing arrangement that presented a challenge for Mountaineer in the fall of 2007.

The substantial quarterly payments required on the Term Loan in early 2008, to the

extent Mountaineer was unable to refinance the Term Loan and defer those payments into

the future, also would have threatened another default and acceleration under the Credit

Agreement.

Term Loan Concerns

PLEASE DESCRIBE MOUNTAINEER’S OBLIGATIONS UNDER THE TERM

LOAN IN THE FALL OF 2007.

As I indicated above, the Credit Agreement also governed the Term Loan. Under the

terms of those notes, Mountaineer would have no repayment obligations from the

issuance date through the end of 2007; however, on January 1, 2008 and the first day of

each subsequent calendar quarter through maturity, Mountaineer would be required to

make a payment of principal and interest. The January 1, 2008 and April 1, 2008

payments under the Term Loan were each $3,750,000.

So, at the same time Mountaineer was struggling with the requirements of the

Revolving Credit Facility, Mountaineer knew that absent a refinancing, meeting its

Direct Testimony of Tom M. Taylor Mountaineer Gas Company Case No. 09-1268-G-30C Page21 of41

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principal repayment obligations under the Term Loan would present an additional

challenge in early 2008. Due to its financial condition at the time, Mountaineer was very

concerned about its ability to make these principal payments, particularly the April 1,

2008 payment. On the one hand, Mountaineer could not safely assume that it could make

the required principal payments with funds available under the Revolving Credit Facility

since, as noted above, Mountaineer had just barely satisfied the Debt Covenants as of

September 30, 2007, and had no assurance it would be able to avoid default under those

covenants in early 2008.15 As with the Revolving Credit Facility, default under the Term

Loan could have meant immediate acceleration of the entire principal amount due and a

termination of the Credit Agreement. Mountaineer’s options at that point would be grim.

On the other hand, securing enough cash under the Revolving Credit Facility to make one

or more of these payments due under the Term Loan may have impaired Mountaineer’s

ability to meet the Debt Covenants which, as I’ve outlined above, were scheduled to

increase for December 31, 2007 and subsequent quarters. Either outcome would have

presented an untenable situation for Mountaineer and its customers.

Moreover, as I’ve indicated above, a requirement of the Credit Agreement that each time Mountaineer accessed additional short-term credit, it assure the short-term lenders that doing so would not result in a default on a later date, made it very difficult to use the Revolving Credit Facility for this purpose.

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Impact of Revolving Credit and Term Loan Obligations on Gas Storage and Purchasing

Decisions

YOU HAVE DESCRIBED MOUNTAINEER’S FINANCIAL SITUATION IN 2007 Q.

AND THE IMPENDING OBLIGATIONS UNDER ITS LONG-TERM AND

REVOLVING CREDIT AGREEMENTS. HOW DID THIS SITUATION AFFECT

MOUNTAINEER’S DECISIONS ON GAS STORAGE AND PROCUREMENT?

As we have seen, Mountaineer’s financial situation, including the many economic and

financing constraints that affected its operations in late 2007, was both dire and quite

complex. In addition to Mountaineer’s ongoing efforts to comply with the relaxed

covenants under the Second Amendment, in the fall of 2007 Mountaineer was working

toward refinancing its total debt, with a deadline of December 3 1, 2007. l 6 Projections of

its borrowing levels and future needs, including the cost of financing gas in storage, were

major considerations in the refinancing process, and consequently in Mountaineer’s gas

procurement decisions as well. The same is true for the administration of the storage

constraints on the Columbia system which Mr. Westfall describes in his testimony (and

on which I’ll offer a few perspectives below).

A.

Q. DID MOUNTAINEER HAVE A REASONABLE ASSURANCE THAT ITS

REFINANCING EFFORTS IN LATE 2007 WOULD BE SUCCESSFUL?

l6 See Second Amendment at 7 2.b (Mountaineer and the lenders agreed that unless Mountaineer was able to secure a third-party refinancing of the Term Loan, it would be required by December 3 1,2007 to seek approval to collateralize the outstanding obligations under the Credit Agreement, including a grant to the lenders of all of Mountaineer’s assets and the outstanding capital stock in Mountaineer).


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No. In October and November, and even well into December of 2007, Mountaineer did

not then know with any certainty whether its efforts to refinance the Term Loan, or to

enter into new agreements with the existing lenders, would ultimately prove successful.

What it did know is this: if Columbia were to penalize Mountaineer for violating the

storage limitations in its FERC tariff (as Columbia asserted that Mountaineer had done in

October 2007), the resulting financial impact would undermine Mountaineer’s ability to

restructure its long-term debt and revolving credit facilities. Consequently, Mountaineer

had to do all it could to strengthen its financial situation and prepare for the possibility

that it would have to make the January 1,2008 and April 1,2008 principal payments.

These efforts included Mountaineer’s modification of its gas purchasing strategy

to more closely manage its gas in storage with the objective of withdrawing substantially

all of it out of storage at the end of the heating season. By using storage gas rather than

buying flowing gas, Mountaineer could improve its cash flow, reduce to the extent

possible its borrowings under the Revolving Credit Facility, and better position itself to

make the April 1,2008 principal payment and meet other normal cash needs.

DID MOUNTAINEER’S EFFORTS TO REFINANCE THE TERM LOAN

AGREEMENT PROVE TO BE SUCCESSFUL?

Yes, ultimately they were. Through many weeks of negotiation with lenders,

Mountaineer succeeded in renegotiating the terms of the Credit Agreement. The Third

Amendment, which was dated as of December 20,2007, changed the structure of the Debt

21 Covenants and provided for the payment of the Term Loan with the issuance of new series

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of senior notes, which extended Mountaineer’s principal payment obligations to 201 2 and

201 7.

Yet, in the fall of 2007, when Mountaineer was faced with the series of

challenging circumstances described above, it was in no position to assume that these

efforts would be successful, nor was it certain what financial covenants and constraints

would exist under any new debt agreements. Had Mountaineer defaulted on its debt

agreements in early 2008, the entire debt could have become immediately due and

payable. Maintaining compliance with its debt agreements, then, was of critical

importance to Mountaineer and its customers: failure to do so would have cut off

Mountaineer’s access to credit, threatening its gas procurement activities and imperiling

its utility operations - obviously a calamitous situation that Mountaineer’s management

was duty-bound to avoid.

MOUNTAINEER’S CONCERNS ABOUT COLUMBIA STORAGE CONSTRAINTS

Q. YOU INDICATED EARLIER THAT YOU WISHED TO ADD A FEW PERSPECTIVES

TO MR. WESTFALL’S DISCUSSION OF THE STORAGE CONSTRAINTS

MOUNTAINEER FACED ON THE COLUMBIA SYSTEM.

Yes. I agree with Mr. Westfall’s summary of the constraints imposed by the Columbia

transportation tariff. I’d like to offer a few points to supplement his analysis, and to bring

into focus how storage constraints, combined with the financial and debt factors I

outlined above, bore on Mountaineer’s hedging decisions in late 2007.

A.


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To fully understand the complexity of the storage constraints on the Columbia

system, all of the factors that contribute to Mountaineer’s storage balance must be

understood. Mountaineer has approximately 240 metered delivery points on the

Columbia system that supply gas to Mountaineer’s distribution system. In addition to

those meters, Mountaineer also has over 4,000 field tap meters on the Columbia system.

The aggregate flow through those meters each month makes up Mountaineer’s total city

gate deliveries for the month. I emphasize the expansive nature of Mountaineer’s system

to stress the difficulty Mountaineer has in estimating its throughput and, in turn, its

storage activity on a daily and monthly basis. As Mr. Westfall explained, these imperfect

estimates, along with equally uncertain assumptions on weather, sales volume, and

transportation customer activity, make it impossible to predict with any degree of

accuracy Mountaineer’s actual storage levels months in advance.

Because meeting the storage constraints on the Columbia system is a significant

and uncertain task, Mountaineer’s conservative approach in the fall of 2007 to staying

within those constraints was both reasonable and prudent. Given Mountaineer’s financial

condition during that period, and in view of all of the debt covenant and refinancing

considerations with which Mountaineer was faced at the time, Mountaineer was simply in

no position to risk incurring penalties from Columbia arising from inherently inexact

estimates. In keeping Mountaineer’s operations afloat in 2007 and early 2008, every

dollar mattered. The fact that the CAD has purported to demonstrate that the 2007

Prompts could have been executed without violating the Columbia system storage limits

tells the Commission absolutely nothing about whether our concerns, considered at the


time the decisions were made and under the multiple exigent circumstances prevailing

then, were valid and reasonable.

Accordingly, Mountaineer’s hedging decisions were not “unreasoned,

uninformed, imprudent, and irresponsible,” as the CAD has ~0ntended.I~ They were

borne of financial and operational necessities, and were unquestionably motivated by a

desire to preserve Mountaineer’s access to credit and avoid potentially crippling monetary

penalties which, had they been imposed, might very well have been offered later as

evidence of Mountaineer’s imprudence and irresponsibility in the management of its

storage balances, Mountaineer’s actions were reasonable under the circumstances and the

facts then available at the time.

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12 OBSERVATIONS ON THE CAD PENALTY RECOMMENDATION

13 Q. DO YOU HAVE ANY OBSERVATIONS ON THE CAD PENALTY

14 RECOMMENDATION?

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Yes, I have several observations on the CAD proposal to penalize Mountaineer for its

hedging decisions. I want to highlight some aspects of this debate that have not received

much treatment, and to explain why I believe that the CAD recommendation, if adopted,

would represent very poor regulatory policy.

l7 See the CAD’S Initial Brief in the 2008 30C Case, dated May 18,2009, at 17.

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The CAD Has No Entitlement to Uninterrupted Hedging Efforts at Any Particular Level

IN 2007 AND 2008, DID MOUNTAINEER EVER DISCONTINUE ITS HEDGING

PROGRAM?

No. It is important to understand that even in the midst of the various storage, debt

covenant, and revenue constraints that confionted Mountaineer in 2007 and 2008, it never

discontinued its hedging program, or its general reliance on the Gas Buyer program as a

tool in its gas procurement efforts. Mr. Short’s 2008 30C Case testimony proves that this

dispute is about how much hedging Mountaineer chose to utilize or, more specifically,

whether Mountaineer was at liberty to make any modifications at all to a previously-

determined hedging strategy.

DOES THE CAD HAVE ANY LEGITIMATE BASIS TO INSIST THAT

MOUNTAINEER NEVER MODIFY PREVIOUSLY-ESTABLISHED HEDGING

GOALS?

I see no legitimate basis for this position. As Mr. Westfall shows, the 51 “buy” prompts

that the CAD asserts Mountaineer had an affirmative obligation to execute would have

represented only a small portion of Mountaineer’s hedged purchases that year - so small,

in fact, that Mountaineer’s decision not to execute on those contracts reduced its overall

hedging percentage in the 2007-2008 ACA period by only 6%, leaving that percentage at

over 70%. Even with Mountaineer’s challenged hedging decisions, Mountaineer’s

customers clearly received the price-smoothing benefits of a very extensive hedging

program that year. Mr. Short admitted in the 2008 30C Case that he had no basis to assert

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that a hedging goal of 70 contracts per month - Mountaineer’s previous Gas Buyer goal

for March 2008 - was presumptively valid, or that any departure from that previous goal

was inappropriate. l8 Given Mountaineer’s continued application, during the entire period

in dispute, of an active hedging program, I cannot understand how a temporary

modification of it could be alleged to be imprudent.

Mountaineer Has Historically Implemented a Robust Hedging Program, Even in the Absence of Definitive Regulatory Direction on Hedging

MR. WESTFALL EXPLAINS IN HIS DIRECT TESTIMONY THAT

MOUNTAINEER’S HEDGING PROGRAM HAS BEEN ROBUST AND LONG-

STANDING. DO YOU AGREE?

Most definitely. The CAD Penalty Recommendation suggests that in late 2007 and 2008,

Mountaineer abandoned hedging entirely for a period. Mr. Westfall’s direct testimony

shows that this is not the case. Mountaineer has long had an expansive hedging program

for its on-shore purchases; certainly for the entire time I have been involved in

Mountaineer’s management, Mountaineer has consistently hedged a significant

component of its purchases. The hedging decisions we made in November and December

2007 were relatively small in proportion to our overall hedging percentage for that ACA

review period, which as Mr. Westfall notes, remained above 70% of its on-shore

purchases.

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in the 2008 30C Case (“2008 30C Hearing Tr. at -”) at 93. See testimony of CAD witness Randall Short from the evidentiary hearing held on May 8,2009

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Q.

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HAS THE CAD ENDORSED GAS HEDGING PROGRAMS OF THE KIND

MOUNTAINEER HAS CONSISTENTLY APPLIED?

Yes, it has. In its filings in the Commission’s general investigation into gas utilities’

hedging practices, the CAD has endorsed gas hedging of the kind Mountaineer has long

implemented. The CAD believes that natural gas price hedging is the “most effective tool

available to gas utilities to mitigate the volatility in natural gas prices.”” This conception

of the benefits of gas hedging comports with Mr. Short’s expressed understanding of the

benefits of the Gas Buyer service Mountaineer uses: Gas Buyer’s goal “is not to always

get the lowest price of gas,” but instead to get a “more average or a smooth price” and

thus “to attempt to have a gas portfolio of less volatile pricing” and avoid “large

variances” in price over time. 2008 30C Hearing Tr. at 83-85 (Short). In other words, the

goal is to achieve a smoother, less volatile overall price, and to help ratepayers to avoid

the harrnhl impacts of commodity price volatility. “Although hedging will not

necessarily result in the lowest cost of gas, it will allow utilities (and their ratepayers) to

avoid the dramatic swings in natural gas prices.” CAD Initial Comments at 2. If these

goals are what truly motivate the CAD’S endorsement of gas hedging, then Mountaineer’s

long-standing gas hedging program - including its application of that program in 2007

and 2008 - was structured and implemented to achieve those same goals.

See “Comments of the Consumer Advocate Division” dated July 15, 2009 (“CAD Initial Comments”) in the Commission’s general investigation into gas hedging practices, Case No. 09-01 48-G- GI (“Gas Hedging GI Case”), at 2. A copy of the CAD Initial Comments is attached as Exhibit TMT-9 to this testimony.


1 Q. DID MOUNTAINEER SEEK THE PRE-APPROVAL OF THE COMMISSION, OR

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OTHER “ASSURANCES” FROM IT, BEFORE IMPLEMENTING ITS GAS HEDGING

No. Mountaineer has implemented and continued its hedging program because it is, as the

CAD has suggested, a valuable tool to manage commodity price volatility. With the

exception of Mountaineer’s request of the Commission to recover the costs of the Gas

Buyer program back in 2002,20 Mountaineer has never approached the Commission for

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“pre-approval” of any aspect of its hedging program, and to my knowledge has never

resisted implementing a hedging strategy or conditioned its willingness to do so on the

10 Commission’s pre-approval of the character or extent of its gas hedging activities, The

11 CAD has observed that some utilities have sought to “minimize their risk of any repricing

12 and have stated that they will only engage in hedging if the traditional parties to Rule 30C

13 proceedings (Staff, CAD, IOGA) agree to a settlement on how hedging is to be

14 conducted.” CAD Initial Comments at 2. This concern, according to the CAD, has

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“stalemated” several attempts to encourage additional utility hedging activities (id. at 3),

and consequently the CAD has recommended in the Gas Hedging GI Case that the

*’ See Commission Order dated September 16, 2002 in Mountaineer Gas Company and West Virginia Power Gas Service, Case No. 02-0895-G-PC (Commission approves recovery in purchased gas rates of costs of Gas Buyer program on an experimental basis).


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Commission explicitly address “the perception of regulatory uncertainty regarding

hedging. ”2

I bring this up not by way of self-congratulation, but to show that the CAD’S

policy efforts to encourage greater use of hedging and its actions in this‘ case are

diametrically opposed. The CAD laments that many gas LDCs do not undertake hedging

at all, and consequently do not afford to their customers the benefits available under a

robust hedging program. A very significant reason for this unwillingness to hedge, the

CAD has noted, is those utilities’ perception of regulatory uncertainty - specifically, the

“risk of repricing.” Yet the CAD appears not to appreciate that the CAD Penalty

Recommendation - which is premised on an allegedly imprudent modification to

Mountaineer’s hedging practices and which incorporates a proposed penalty calculated by

way of “repricing” - is exact@ what these utilities might have to fear.

If Mountaineer, like other utilities, had simply “played it safe” and avoided

hedging entirely, awaiting some insulation from regulatory risk in the form of a

stakeholder agreement or Commission order, then would it now be forced to defend the

prudence of its hedging efforts? Like the owners of utilities that currently do not hedge,

Mountaineer apparently would have faced no regulatory penalties arising from a decision

not to hedge at all. However, given the extraordinary volatility in natural gas markets

over the last several years, Mountaineer’s customers certainly would have suffered if

21 See “Reply Comments of the Consumer Advocate Division” filed on August 5, 2009 in the Gas Hedging GI Case (“CAD Reply Comments”) at 3. A copy of the CAD Reply Comments is attached to this testimony as Exhibit TMT-10.

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Q.

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Mountaineer had chosen to protect itself against allegations of imprudence by refusing to

hedge. We know, however, that this is not what happened: the CAD has held up

Mountaineer as an example of how a gas LDC can, over time, set its hedging goal far in

excess of 50% of annual gas supply.22

It seems rather inconsistent to me that the CAD can, on the one hand, promote

enhanced hedging efforts and ask the Commission to relieve the regulatory uncertainty

that inhibits gas LDCs fiom hedging, and on the other hand doggedly pursue a “repricing”

penalty against the utility that has been the CAD’S model for extensive, long-term gas

hedging efforts.23 As the president of the State’s largest gas utility, it is discouraging to

me that Mountaineer has been singled out for a monetary penalty when Mountaineer’s

hedging program has been more extensive than any other gas utility’s in West Virginia.

HOW WOULD A RECOMMENDED DECISION ADOPTING THE CAD PENALTY

RECOMMENDATION BE UNWISE FROM A POLICY PERSPECTIVE?

Penalizing the Company by $1.7 million for a modification to its hedging efforts would

run counter to the Commission’s endorsement of “the use of various hedging strategies to

protect customers against price volatility in the spot gas market.” Commission Order

22 See CAD Reply Comments at 5 (in response to Staff initial comments, CAD indicated that Mountaineer had, over the previous five years, set its hedging goals at 75% of its gas supply). Mr. Westfall’s direct testimony in this case bears out this assertion.

23 Perhaps the inconsistency was not lost on the CAD after all. See CAD Initial Brief at n.1 (CAD urges the Commission not to allow its determinations in the Gas Hedging GI Case - and, one must presume, the recommendations the CAD chose to advance in that case - to influence the Commission’s decision on the CAD Penalty Recommendation in the 2008 30C Case).


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dated June 11, 2009 initiating the Gas Hedging GI Case (“GI Order”), at 2. A

recommended decision adopting the CAD Penalty Recommendation would certainly be

“Exhibit No. 1” for all those who seek to avoid undertaking gas hedging for fear of

regulatory “repricing” risk.

At the very least, a decision to adopt the CAD Penalty Recommendation would

necessarily presume that affirmative answers already exist to questions the Commission,

in the GI Order, chose to ask, namely: (i) should gas utilities engage in hedging activities,

and (ii) what percentage of annual gas purchases should be hedged? Id, at 2-3. If the

Commission believed that the statutes and rules governing gas utilities or the

Commission’s prior orders sufficiently answered these questions and adequately specified

the nature and extent of gas LDCs’ hedging obligations, there would have been no reason

for the Commission to initiate the Gas Hedging GI Case (or, one must presume, for the

CAD to request that the Commission do so). Indeed, the CAD’s initial comments in the

Gas Hedging GI Case, rather than expressing confidence that Commission precedent had

already established the requirement for gas hedging and specified the nature and scope of

gas hedging programs, suggested instead that these questions were still unanswered. Even

the extent of a utility’s existing responsibility to hedge at all is, in the CAD’s estimation,

subject to question, and is a point on which the Commission should provide guidance:

The CAD urges the Commission to break this stalemate [the debate between ‘pre-approval’ and ‘management responsibility’], by clearly stating its view regarding the extent of management responsibility for hedging. Does the Commission believe that a gas price hedging plan should be pre-approved? Or, does the Commission believe that it is the responsibility of utility management to develop and implement a gas price hedging plan without the prior consent of the Commission?


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CAD Initial Comments at 3. Moreover, the CAD recommended that there should be no

“rigid requirement” for what portion of a utility’s gas purchases should be hedged, nor

should there be any rigid requirement “for any individual utility.” Id. These statements

are astoundingly different from the CAD’S apparent position in the 2008 30C Case, where

the CAD effectively asserted that any departure from Mountaineer’s previously-

established hedging percentage was evidence of irresponsibility and imprudence.

Furthermore, a decision to adopt the CAD Penalty Recommendation would

discount the very real likelihood that the Commission, in the Gas Hedging GI Case, will

eventually endorse the policy positions that Mountaineer has uniformly advanced, both in

the Gas Hedging GI Case and in the 2008 30C Case. Mountaineer has repeatedly

contended that (i) any evaluation of a utility’s gas hedging program, or of individual gas

hedging decisions, must consider that utility’s “specific situation in respect of financial

condition, delivery and storage conditions”; and (ii) the Commission should reject post

hoc evaluations of gas purchasing decisions based on outcomes determined after the fact,

where the utility could not reasonably have been expected to know the relevant facts at the

time the decisions were made.24 These positions are sensible, encouraging of expanded

hedging by gas utilities, and consonant with the Commission’s prior statements on gas

hedging - particularly its disinclination toward “gotcha” ratemaking and its preference to

24 See “Response of Mountaineer Gas Company to June 11,2009 Commission Order” filed on July 15, 2009 in Gas Hedging GI Case, at 3-4, quoting Hope Gas, Inc., Case No. 04-1188-G-30C (Commission Order dated Ami1 3.2006).


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assess hedging decisions “based on a rational and reasonable examination of the

conditions that existed at the time [the] decisions were made.” GI Order at 2. In my

view, there is no question that the CAD Penalty Recommendation flies in the face of these

positions; respectfully, a decision adopting the CAD Penalty Recommendation would as

well.

Any Hedging Program Must Continually Weigh Costs and Benejts, and Must Be Flexible Enough to Reflect Changes in Financial and Operational Circumstances Over Time

DOES THE CAD PENALTY RECOMMENDATION MAKE ANY ALLOWANCE FOR

CHANGES IN MOUNTAINEER’S FINANCIAL OR OPERATIONAL SITUATION?

No. To the contrary, the CAD position, at least as it was advanced in the 2008 30C Case,

appears not to permit any consideration of Mountaineer’s circumstances; indeed, one

strongly suspects the CAD wanted to avoid any discussion of what those circumstances

might have been. When asked whether he had investigated Mountaineer’s financial

circumstances at the time to determine whether Mountaineer’s hedging decisions might

have been reasonable, Mr. Short indicated that he had not, as it was not his job to “make

Mountaineer’s case for them.” 2008 30C Hearing Transcript at 113-1 14 (Short).

I believe that evaluating the prudence of decisions under any gas procurement

program simply must take into account the underlying circumstances - financial,

operational, and otherwise - confronting the utility at the time. Securing the price-

smoothing benefits of a rational hedging program is only one of many objectives that

management must consider in the day-to-day operations of a gas utility. In this case,

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storage constraints were another such objective, as was the pressing need to preserve

Mountaineer’s short-term borrowing authority in the face of its repeated violations of debt

covenants. Refinancing Mountaineer’s long-term debt, with a view to avoiding large

principal payments in early 2008, was another weighty consideration. Although these

were the constraints facing Mountaineer during this period, one easily can imagine

challenges of comparable gravity that might face other gas utilities.

Had Mountaineer failed to achieve any of these business objectives in late 2007

and early 2008, the consequences would have been severe. Yet the CAD recommendation

effectively discounts any of these efforts, refusing to accept the legitimacy of any

consideration, no matter how critical to Mountaineer’s provision of service, that might

have necessitated a change in Mountaineer’s previously-established hedging goals.

Mountaineer’s situation shows why any hedging program must be flexible enough to

reflect the utility’s business circumstances. In fact, Mountaineer’s circumstances and

hedging decisions in late 2007 exemplifl the need for hedging program flexibility that the

CAD, in its initial comments in the Gas Hedging GI Case, professed to advocate. CAD

Initial Comments at 3.

IN VIEW OF THE CIRCUMSTANCES FACING MOUNTAINEER IN LATE 2007,

DO YOU BELIEVE THAT MOUNTAINEER’S PURCHASED GAS COSTS WERE

“HIGHER THAN NECESSARY,” AS THE CAD HAS CONTENDED?

No, I do not. As the CAD has conceded, hedging is not necessarily intended to result in

the lowest cost of gas, or to “beat the market” on a consistent basis. For every situation in

which increased hedging might ultimately be shown to have reduced purchased gas costs,


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one can find another in which the opposite proved to be the case. The fact that the CAD

has identified a situation in which more hedging, rather than less, would have resulted in

lower gas prices overall, does not change the fundamental rationale for hedging programs

or demonstrate that reductions from already-high hedging levels will necessarily result in

“higher than necessary’’ gas prices.

Other Observations

WAS A DESIRE TO INCREASE MOUNTAINEER’S PROFITS THE MOTIVATING

FACTOR BEHIND MOUNTAINEER’S GAS STORAGE AND PROCUREMENT

DECISIONS IN LATE 2007?

No. As I’ve demonstrated, Mountaineer faced a variety of serious challenges during this

period, and its primary goals at the time were all centered, in one way or another, on

preserving its ability to provide gas distribution service. The fact is that in late 2007, we

had been losing money for over a year; this belies any assertion that Mountaineer’s gas

hedging decisions were directed toward padding its bottom line.

THE CAD HAS BEEN CRITICAL OF MOUNTAINEER’S LACK OF WRITTEN

STUDIES OR ANALYSES TO SERVE AS PRIOR SUPPORT FOR ITS DECISION

NOT TO MAKE FORWARD PURCHASES BASED ON THE 2007 PROMPTS.

WHAT IS YOUR RESPONSE TO THIS ASSERTION?

I was somewhat perplexed by this position. Running a gas utility, like any business, is a

dynamic endeavor that requires day-to-day decision-making. Gas procurement, and

22 especially the gas storage and storage management aspects of it, can be particularly


demanding of quick decisions, even with an established gas procurement program like 1

Mountaineer’s. In Mountaineer’s utility operations, we rarely would be in a position to 2

undertake a formal study before each gas purchasing decision we make, even those that 3

might temporarily depart from existing approaches. To label Mountaineer’s decisions in 4

late 2007 imprudent because, two years later, we were unable to pull a formal analysis 5

“off the shelf’ for presentation to the Commission suggests an insufficient appreciation of 6

how a gas utility is operated and the timeframes under which we sometimes are required 7

to make decisions. This is especially true where, as here, Mountaineer had not previously 8

been called upon to document isolated gas hedging decisions, and was dealing with some 9

very challenging financial circumstances in the fall of 2007 10

This is not to say, however, that Mountaineer’s management did not carefully 11

consider its decision to forego additional forward purchases for early 2008 delivery. In 12

this testimony and Mr. Westfall’s, we have laid out quite a few considerations that 13

affected this decision, and in most cases have provided documentation reflecting our 14

actions or the underlying concerns. These included: 15

Mountaineer’s day-to-day evaluation of its gas storage levels, including the uncertainties attendant to its storage estimates and its concern for the impact of potential violations of the Columbia tariff;

16 17 18 19 20 21 22 23 24 25 26 27 28

e Mountaineer’s assessment of the possibility of a warmer-than-normal 2007-2008 hearing season and its impact on storage levels;

e Mountaineer’s need to preserve its short-term debt capacity and its evaluation of the amounts of short-term debt it likely need to operate;

Mountaineer’s understanding of the strengths and limitations of the Gas Buyer program, the role of Gas Buyer as a tool in its gas procurement activities, and the continued high level of gas hedging that Mountaineer

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would maintain even when its temporary hedging decisions were taken into account;

Mountaineer’s deteriorating financial condition, as reflected in Mountaineer’s quarterly reports to the Commission, its credit metrics, and independent rating agency evaluations;

Mountaineer’s debt covenants, including its diminishing ability to satisfy those covenants, its violations of them, and its repeated need to renegotiate the terms of the Credit Agreement and secure waivers of its violations;

Mountaineer’s long-term debt obligations, which required significant principal payments in early 2008 and motivated Mountaineer’s efforts to reduce interest expense and thereby facilitate a refinancing to defer those principal payments; and

Mountaineer’s lack of awareness of any specific rules, constraints, or conditions imposed by the Commission on its use of Gas Buyer or on its hedging program in general.

If I understand its position correctly, the CAD asserts that there should have been a

formal document analyzing all of these considerations and setting for a detailed basis for

Mountaineer’s gas purchasing decisions. From our perspective, it certainly would be nice

to have such a document now or, better still, to have had the luxury of the time and effort

needed to produce it when the decisions were under consideration. I do not believe,

however, that our inability to produce, two years later, a formal written analysis and

justification of our decision is evidence of imprudence on our part.

Q. IN CLOSING, HOW WOULD ADOPTION OF THE CAD PENALTY

RECOMMENDATION AFFECT MOUNTAINEER’S OPERATIONS?

The gas in question has already been paid for and used by Mountaineer’s customers;

implementing the CAD’S proposed penalty would be a $1.7 million hit to Mountaineer’s

A.

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bottom line. In my rebuttal testimony in the 2009 Rate Case, I offered the Commission

the following assessment of Mountaineer’s projected financial performance in 201 0:25

Based on projections assuming an annual $20 million base rate increase to become effective April 1, 2010, the Company will likely lose money again in 2010 and only earn between 3% and 5% on equity in 201 1. This situation will make securing a new short-term credit facility very difficult. The current short term agreement expires in the fall of 2010 and the results of this rate case will determine both Mountaineer’s ability to secure a new short-term debt facility, as well as the cost rate and other terms that it is able to negotiate.

Assuming Commission approval of the two-tier increase recommended in the Joint

Stipulation in that case (an increase of $16 million effective March 29, 2010, and a

second increase of $3 million effective November 1 , 201 0), Mountaineer’s projections

are comparable - it will still lose money in 2010, despite significant rate relief to be

implemented this year.26 So, 2010 is expected to be the fifth straight year in which

Mountaineer’s utility operations have lost money.

Our financial performance in 2010 goes beyond investor concerns, however. As I

noted in late 2009, Mountaineer faces the need to refinance the Revolving Credit Facility

in the fall of 2010; the results of the 2009 Rate Case, we advised, would have a

significant impact on our ability to secure a replacement short-term debt facility at an

25

Exhibit TMT-R on hearing held on December 7,2009, at 12-13. See Rebuttal Testimony of Tom T. Taylor in 2009 Rate Case, admitted into evidence as Company

26 In my sponsorship of the Joint Stipulation at the December 11, 2009 hearing, in response to Chairman Albert’s inquiry, I advised that even with the settlement contemplated in the Joint Stipulation, we projected a loss for 2010 in the $1 million range, but that with additional efforts on the expense side, Mountaineer might get closer to “break-even’, for the year. December 1 1, 2009 hearing transcript at 26- 27. I still believe this is an accurate assessment.


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attractive cost rate and with reasonable financing terms. These debt costs will, of course,

be passed onto customers in subsequent rate cases, so customers have a very real interest

in Mountaineer’s ability to negotiate the best possible terms for its credit needs.

Not only would a $1.7 million penalty ensure Mountaineer’s fifth consecutive

annual loss, it would impair the credit metrics Mountaineer needs to justify favorable

financing terms when our current facility expires. Furthermore, a regulatory decision to

penalize Mountaineer’s gas hedging decisions would signal to potential lenders that the

West Virginia regulatory environment is risky and unpredictable. Beyond a shadow of a

doubt, such a decision would make the cost of Mountaineer’s debt more expensive that it

otherwise would be. For these reasons, and the many others I’ve highlighted in this

testimony, the Commission should reject the CAD Penalty Recommendation.

DOES THIS CONCLUDE YOUR DIRECT TESTIMONY? Q.

A. Yes, it does.

TMT- 1

TMT-2

TMT-3

TMT-4

TMT-5

TMT-6

TMT-7

TMT-8

TMT-9

TMT- 1 0

Index of Exhibits to Direct Testimony of Tom M. Taylor

Mountaineer Financial Performance, 2006-2008 (copy of Exhibit SFK- 1 from

2009 Rate Case)

Mountaineer Sales Volumes, Degree Days, and Pricing - 2003 to 2009

Fitch Ratings, “Issuer Default Ratings and Recovery Ratings in the Power and

Gas Sector,” November 7,2005

Fitch IDR Ratings for Mountaineer, October 2006 through September 2007

Credit Agreement, as amended

Copy of Commission Request Exhibit 1 from 2009 Rate Case (summary of Debt

Covenant Changes)

Waiver and Agreement - November 27,2006

Summary of Mountaineer’s Compliance with Debt Covenants in Credit

Agreement (with Compliance Certificates)

CAD Initial Comments in Gas Hedging GI Case

CAD Reply Comments in Gas Hedging GI Case

\

{C 1676472.7)

Ex h i bit S F K- I

Mountaineer Gas Company Case No. 09-0878-G-42T

Net Income / (Loss) Excluding including Equity in Equity in

Earnings of Earnings of 13-month Year Subsidiary Subsidiary Average Equity

2008 $ (446,483) $ (446,483) $ 79,874,795

2007 (2,388) 548,289

2006 (438,582) 1,043,624

Exhibit TMT-1 Case No, 09-1268-G-30C

Return on Equity Excluding lncludinn Equity in Equity in

Earnings of Earnings of Subsidiary Subsidiary

(0.56)% (0.56)%

NOTE: The 13-month Average Equity amount excludes Other Comprehensive Income balances.

35

Mountaineer Gas Company Volumes, Degree Days and Pricing

30

25

g 20 ai v

8 E 2 15

10

5

0 2003 2005 2006 2007 2008 2009

5000

4000

E n

CR c 1

2000 =

Exhibit TMT-3 Case No. 09-1268-G-30C

FitchRat ings Corporate Finance

Global Power/North America Issuer Default Ratings and Criteria Report Recovery Ratings in the Power and Gas Sector

Analysts Glen Grabelsky

[email protected]

Sharon E. Bonelli

Sharon. [email protected]

Ellen Lapson, CFA

ellen,lapson@fitchratings,com

+I 2 12 908-0577

+ I 212 908-0581

+ 1 2 12 908-0504

Robert Hornick

[email protected]

Hugh F. Welton

[email protected]

t 1 2 12 908-0523

+ I 212 908-0746

Related Research Recoverv Ratinas: ExDosinE the ComDonents of Credit Risk, Criteria Report, July 26,2005.

Process for Comorate Finance, Criteria Report, Aug. 9,2005.

0 Recoverv Ratings-Amroach and

Executive Summary Issuer default ratings (IDRs), assigned to issuers, reflect the ability of an issuer to meet all financial commitments in a timely manner, effectively measuring their probability of default. Long-term debt ratings are assigned to instruments in the capital structure. Recovery analysis is now incorporated in the credit process across the rating spectrum. Recovery prospects are reflected in the debt instrument ratings. Recovery ratings (RRs) are explicitly assigned to instruments of issuers with IDRs of ‘B+’ and lower. Rating distinctions between the most senior debt class and the most junior debt class in the capital structure may widen. Recovery analysis translates into higher senior unsecured and secured ratings for approximately one-half of ‘the B+’ and lower rated IDR issuers, with a minor effect on ratings of investment- grade issuers.

The methodological framework for initiating IDRs and RRs for issuers rated ‘B+’ or lower is detailed in two criteria reports: “Recovery Ratings: Exposing the Components of Credit Risk” (published on July 26, 2005) and “Recovery Ratings-Approach and Process for Corporate Finance” (published on Aug. 9, 2005). Both reports are integral in understanding the implementation of IDRs and RRs within the North American global power group (GPG).

This report identifies the specific methodology and procedures employed to incorporate recovery analysis and assign RRs and IDRs in the GPG portfolio. Applying these methodologies has presented significant challenges due to the complex corporate structures and the multiple debt classes across all layers of capital structure for issuer groups and entities in the GPG portfolio. Reflecting the uniqueness and individuality of these issuers within the GPG portfolio, this report will focus on the general approach utilized to assign IDRs and estimate the values that would be available to creditors in a hypothetical default scenario.

Simply put, under the new methodology, ratings are bifurcated into two components: the IDR’(or the issuer’s probability of default) and the debt rating, which incorporates Fitch Ratings’ recovery analysis across the capital structure to assign ratings to debt instruments. Recovery prospects bridge the IDR and instrument rating. Outstanding debt deemed to have above-average recovery prospects will have ratings notched above the IDR, and debt instruments with relatively

November 7,2005

www.fitchratings.com

mailto:[email protected]




http://www.fitchratings.com

FitchRatings Corporate Finance Recovery Ratings, IDR Notching and Representative Securities

IDR Notching Recovery Recovery Recovery Investment Noninvestment

Rating Band (%) Prospects Grade Grade Representative Securities -- ‘RR1‘ 91-100 Outstanding IDR +2 IDR +3 First Mortgage Bonds ‘RR2’ 71-90 Superior IDR +I IDR +2 Bank Credit Facilities with Covenant Protection ‘RR3’ 51-70 GWd IDR +I IDR +1 Senior Unsecured Bonds ‘RR4’ 31-50 Average IDR +O IDR +O Preferred Stock Regulated Utilities ‘RR5 11-30 Below Average IDR -1 IDR -1 Subordinated, Preferred Other Issuers ‘RR6’ 0-10 Poor IDR -2 IDR -2 or -3 Preferred Stock Represents Large Component of Capital Structure

Source: Fitch Ratings.

low recovery prospects will have ratings notched below the IDR. Average recovery levels are considered to be in the 31%-50% range, and when average recovery prospects are present, the senior unsecured rating will be equal to the IDR. For most issuers within the GPG portfolio, the senior unsecured debt level either coincides with the IDR or rests one notch above.

Fitch’s recovery analysis is now incorporated in all rating assignments and forms the basis for RRs. The process for assigning RRs differs according to the issuer’s position on the rating scale. A more generic approach is employed for issuers with IDRs in the ‘BB’ category and above, and an individualized approach is used for those with IDRs at ‘B+’ and below. While RRs for the ‘BB’ category and higher rated issuers are not disclosed, they are implicit in the notching between the IDR and the instrument rating. For ‘BB’ category and investment-grade credits, the financial distress scenario is arbitrary, rendering a precise recovery analysis difficult, particularly as the capital structure is likely to experience considerable transition during the period of distress. Accordingly, Fitch looks to past bankruptcies and historical performance of defaulted securities as indicators of potential recovery. To illustrate, the first-mortgage bonds of an investment-grade regulated utility would be considered to have outstanding recovery prospects, as full recovery has been evidenced in prior bankruptcies for that debt class. As a result of these outstanding recovery prospects, the ratings are typically two notches above the IDR.

For ‘B+’ and lower rated issuers, the recovery analysis is specific to the issuer. For such issuers, financial stress or distress may already exist, rendering a more reliable basis for an individual distressed enterprise valuation and allocation of the value in a waterfall to debt classes within the capital structure, starting with the most senior obligation (typically a first-mortgage bond or similarly secured

debt). First-mortgage bonds would typically be accorded an ‘RRl ’ rating, indicating outstanding recovery prospects, and would be rated three notches above the IDR.

The new recovery ratings’ effect and inter- relationship between IDR and debt instrument ratings are summarized in the table above.

Fitch has historically recognized recovery in its analytical considerations and rating assignments. The notching of debt instruments across the capital structure (i.e., securedfirst-mortgage bonds, senior unsecured, subordinated and hybriddpreferred) inherently recognizes the recovery prospects of those debt classes. However, probability of default and recovery were blended into one rating. The new recovery analysis provides a standardized and common platform across Fitch’s corporate, insurance, bank and real estate investment trust (REIT) rating universe of estimating potential recovery values in bankruptcy or liquidation. By quantifying recovery prospects in debt instrument ratings, Fitch believes investors will have considerably more information in order to render potential investment decisions.

To illustrate the effects of recovery on debt ratings, assume an issuer has an IDR of ‘B’ and a capital structure consisting of first-mortgage bonds rated ‘BB’ with an ‘RR1’ rating and senior unsecured debt rated ‘BB-’ with an ‘RR2’ rating. The 10-year cumulative U.S. default rate for an IDR of ‘B’ from 1994 to 2004 was 42%. Since ‘RR1’ denotes the expectation of a 95% recovery level, or inversely a 5% loss rate (based on the midpoint of its recovery range of 91%100%), the expected loss rate of the first-mortgage bond during that time frame was 2.1% (5% x 42% = 2.1%). Similarly, ‘RR2’ denotes an average recovery rate of 80%, and therefore, the expected loss rate would have been 8.4% (20% x 42% = 8.4%). The expected loss rates represent significant enhancements to the rating process.

Issuer Default Ratings and Recovery Ratings in the Power and Gas Sector

2

FitchRat ings Corporate Finance

Implementation and Assignment of

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IDRs in t h e GPG Portfolio All issuers are assigned an IDR. IDRs across all industry groups incorporate an implicit average recovery range of 3 1%-50%. lDRs are benchmarked to the senior unsecured rating. IDRs will typically be at or one notch below the senior unsecured rating.

The GPG portfolio includes many large corporate groups that encompass numerous debt issuing subsidiaries, including regulated utilities and other businesses, such as American Electric Power Co., Inc., FirstEnergy Corp. and Southern Company. GPG’s basic analytical and rating methodology has been to evaluate these large corporate families in a “bottom- up” approach, recognizing individual issuers as discrete credit risks. When there is a wide disparity in the individual credit profiles, Fitch has constrained ratings of stronger issuers due to the risks of common ownership and affiliation to a significantly weaker parent, The initiation of IDRs does not change this basic analytical approach. However, IDRs of commonly owned affiliates will, in many instances, be more closely aligned than their respective debt instruments, particularly in the investment-grade arena. In many instances, the IDR of the parent company will be equal to the IDRs of its regulated utility subsidiaries if there is little debt at the parent company and no significant nonregulated subsidiaries.

For speculative-grade investor-owned utilities (IOUs), IDRs within corporate families are likely to have greater rating dispersions. Fitch’s opinion as to the possibility of contagion, where one weak entity may cause stress to affiliates throughout the organization (or conversely, a weak entity owning an otherwise healthy subsidiary may extract large dividends and weaken its subsidiary), will play a significant role in rating assignments. An example is the recent bankruptcy of Entergy New Orleans Inc. (Entergy New Orleans), which has not had a direct effect on Fitch’s ratings of other Entergy Corporation affiliates. Similarly, Portland General Electric Company was largely (but not totally) immune from the financial consequences of its ownership by bankrupt Enron Corp. Special-purpose vehicles (SPVs) and project finance will not be assigned IDRs or RRs at this time.

At establishment, the IDRs for investment-grade regulated utilities are usually one notch below their prior long-term senior unsecured ratings. Before the

introduction of the new methodology, the low-risk nature of regulated utilities, as well as their predictable cash flows, was reflected in their debt instrument ratings. Such characteristics, however, are now more heavily weighted as part of the recovery exercise because regulated monopoly utilities have demonstrated more stable and predictable cash flows, which preserve enterprise valuations over business cycles.

Other types of issuing entities within the GPG portfolio are considered to possess moderate risk profiles, indicating average recovery prospects. The initial assignment of IDRs for this group is usually at the existing senior unsecured rating. Included in this group are utility holding companies and their unregulated subsidiaries, diversified energy companies, independent and merchant power providers, pipelines and MLPs. Certain business lines or conditions, such as asset concentration, midstream gathering and storage assets, oil and gas exploration and production, diversified investments, and proprietary marketing and trading are deemed to posses moderate to high risk characteristics and may influence Fitch’s assessment of overall risk.

IDRs treat all classes of debt within the capital structure (whether first-mortgage bonds, senior unsecured, subordinated or preferred stock) as merely one class of debt. Two otherwise identical issuers, for example (with the exception being that in one case, the debt structure is 70% first-mortgage bonds and 30% senior unsecured, while in the second case, there is 20% first-mortgage bonds, 50% senior unsecured and 30% preferred stock), would each have the same IDR, but their instrument ratings could differ. In this scenario, in the first case, the relative position of the first-mortgage bonds and senior unsecured is not as strong as in the second case, which benefits from the large preferred stock component of the capital structure in the first-loss position. The first-mortgage bonds and senior unsecured of the latter issuer are likely to be rated higher than in the first example.

The relationship of IDRs within corporate groups is not static. Following the initiation of IDRs, changes in capital structure components, creation of leverage, acquisitions, corporate reorganizations and off- balance-sheet items, among other analytical considerations, will factor into subsequent rating decisions.


3

FitchRatings Corporate Finance Typical IDR Notching for Investment-Grade and ‘BB’ Rated Issuers

Entity SecuredlFirst Mortgage Senior Unsecured SubordinatdPreferred Regulated Investor-Owned Utilities IDR +2 IDR +1 IDR +O Unregulated Subsidiaries IDR +l IDR +O IDR -1 Holding Companies N.A. IDR +O IDR -2 Diversified Energy, Independent Power Producers

Master Limited Partnerships, Midstream, Pipelines IDR +I IDR +O IDR -1

IDR - Issuer default rating. N.A. - Not applicable. Source: Fitch Ratings.

Implementation of Recovery Analysis in the GPO Portfolio Recovery assessments performed for all securities across the credit spectmm. RRs published for issuers with IDRs of ‘B+’ or lower and implicit for higher rated issuers. Outstanding recovery prospects for first- mortgage bonds and above-average recovery prospects for senior debt in the regulated utility sector lead to ratings above the IDR.

Recovery assessments are the integral link between the two public ratings, the IDR and the debt rating. Fitch’s approach to recovery analysis, however, differs between investment-grade/‘BB’ category issuers and ‘B+’ and lower rated issuers. This distinction reflects the remoteness of bankruptcy or default for higher rated issuers and the resultant inability to estimate recovery values with any precision. In developing distress scenarios for recovery analysis, the cause and outcome of historical bankruptcies and defaults are an important analytical consideration for distressed enterprise valuations and recovery prospects across the capital structure. Many prior bankruptcies have been event- driven, and the circumstances were unique to the issuer. Regulatory matters factor in a number of prior bankruptcies (see Appendix on page 7).

As reflected in the table of modem era bankruptcies and defaults in global power, the actual number of bankruptcies and defaults is small. Notably, during past (regulated) utility bankruptcies, secured financings, in the form of first-mortgage or general and refhding bonds, have been accorded adequate protection status by the courts, and such instruments have met current debt-service requirements throughout the bankruptcy process and 100% principal recovery. The recent bankruptcy of Entergy New Orleans may become an exception as a result of the catastrophic storm damage to the system and service area. Strong recovery prospects are also noted for senior unsecured creditors of regulated utilities,

and even more junior debt classes in the capital structure may receive substantial recoveries of their claims.

Regarding other GPG issuers, unregulated companies, such as utility parent companies, diversified energy, merchant power, midstream energy and master limited partnerships (MLPs) are likely to receive at least average recovery rates (U.S. corporate recoveries have averaged approximately 40% for unsecured senior claims).

Even under stressful conditions, with tangible assets and predictable cash flow available to obtain new financings, GPG issuers have often been able to avoid defaults or restructure outside of bankruptcy. Such new incremental financings, which typically are in the form of first-mortgage bonds or other secured debt, come at the expense of more junior stakeholders in the capital structure. The addition of a large secured component within the capital structure, or incremental issuance of such secured debt, will compromise that class of debt’s overall recovery prospects and the recovery prospects of more junior creditors.

GPO Recovery Analysis and Procedures For ‘B+’ and Lower Rated Issuers Recovery analysis specific to issuer and distilled into RRs across the capital structure. Predictable cash flows and asset-intensive nature of regulated utilities generates above-average recovery values.

0 New methodology places greater weight on recovery, resulting in higher ratings for select debt classes of distressed issuers.

0 Recovery estimates incorporate stressed valuations.

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Fitch performs a customized recovery analysis for issuers with IDRs of ‘B+’ and below (see pages 9- 20) in order to arrive at an RR. Most of the GPG


4

FitchRat ings Corporate Finance Issuers With IDRs of 'B+' or Lower

The AES Corporation Allegheny Energy Supply Co., LLC and Affiliates Aquila Inc. CMS Energy Corp. Dynegy Inc. and Affiliate Ferrellgas Partners, L.P. Midwest Generation LLC and Affiliates Reliant Energy, inc. SemGroup, L.P. Sierra Pacific Resources Star Gas Partners, L.P.

IDR - Issuer default rating. Source: Fitch Ratings.

issuers rated 'B+' or lower currently have, or formerly had, significant diversified energy or wholesale power operations (see Issuers With IDRs of 'B+' or Lower table) and are fallen angels. The wholesale power business has experienced considerable stress over the past few years as a result of the collapse of energy trading, the overbuild of gas-fired plant capacity and run-up in natural gas prices that resulted in weak spark spreads and reduced capacity utilization rates. Many merchant plants suffer from low utilization rates or have been mothballed. Fitch has traditionally analyzed future cash flow generation prospects under alternative price scenarios and performs individual asset valuations of these speculative issuers, which is a core component of the RR rating process. This analysis is supported by standardized valuation measures and recent sales of individual merchant plants or portfolios of merchant plants that offer a robust sample of valuations in a currently distressed environment for gas-fired generation.

The recovery and asset valuation analysis for 'B+' and lower rated issuers is specific to each issuer but follow a basic approach:

0 Fitch will first assign a default probability, or IDR, which measures the likelihood of default across the entire capital structure. The next step is to establish a distressed enterprise value (EV). Stress scenarios are specific to each issuer and such stresses may vary from issuer to issuer. General stress valuation scenarios include reducing cash flow by the amount needed to reduce the fixed-charge covenant ratio to less than 1:1, reducing credit metrics to the degree required to breach covenants, assuming a default caused by poor operating performance or failure to rollover impending debt maturities, or assuming adverse

commodity price environments. Additional stress scenarios may entail restrictions on intercompany cash flows and dividends.

0 Stress scenarios will be utilized to determine recovery values using EV, which is based on sustainable EBITDA. For this exercise, Fitch estimates a sustainable EBITDA for valuation purposes, which may be higher, lower or equal to current EBITDA. In addition to stress scenarios, EBITDA from international operations (subject to exchange, tax and dividend factors) would likely have further discounts. The GPG portfolio is typified by EBITDA variables due to weather and outages that affect current EBITDA but may not factor into estimated recovery valuations. The EV will be discounted by 10% to account for administrative and priority claims associated with the bankruptcy process. Concession payments representing 5% of the enterprise value will be allocated to junior-level claimants. This nominal allocation is considered reflective of the effort to shorten the bankruptcy process. RRs are based on the greater valuation from either a liquidation or going concern recovery approach. In nearly all cases, GPG issuers can be expected to reorganize based on the critical nature of the services provided. Fitch will establish recovery prospects for each creditor class (the basis for the RR ratings) by allocating the estimated EV across the capital structure in accordance with the rules of priority in bankruptcy, including assumptions of full drawdown of committed credit facilities.

0

RRs are assigned as part of the ordinary credit and rating process and are sensitive to corporate developments, such as asset sales and dispositions, debt repurchases and retirements, new debt financings (particularly those that alter the capital structure), and other strategic corporate actions. These actions may result in changes in RRs, while IDRs remain unchanged. Changes in RRs will have a direct and immediate effect on instrument ratings.

W GPO EnterpriselAsset Valuation

Fitch assigns individual asset values based on market comparables, review of outside appraisals and net revenues forecasts generated from Fitch's ' internal power pricing model in an adverse commodity price environment (refer to Wholesale Power Marker Updates, published semiannually).

Guidelines

issuer Default Ratings and Recovery Ratings in the Power and Gas Sector

5

FitchRat ings Corporate Finance Enterprise and Asset Valuation Guidelines

Asset Type Pipelines Integrated Electric Utilities and Transmission and Distribution

Utilities Midstream Gas Assets Proven Gas Reserves Individual Electric Generation Assets and Wholesale Generation

Companies

Trading, Other Nonregulated Assets

Typical Valuation Method(s)

6x-8x EBITDA or net book value of property, plant and equipment. 7x-8.X EBITDA.

5 . 5 ~ - 7 ~ EBITDA. $1.30-$2.00 per thousand cubic feet. $/kilowatt for noncontracted generation capacity, net present value

of future cash flows under capacity committed to power sales agreements or multiple of EBITDA applied to generation company.

Case by case.

EBITDA - Earnings before interest, taxes, depreciation and amortization. Source: Fitch Ratings.

Regulated pipelines and utilities are valued on historical and not current market valuation multiples, which are now well in excess of the multiples used for recovery under distressed conditions. Based on Fitch’s observations, natural gas pipeline assets and oil and gas reserves have recently been the most ’ liquid assets within the energy merchant business profile, reflecting the larger potential number of buyers outside the sector from private equity, financial players and corporate conglomerates. Interstate pipeline assets are generally valued at 7 times (x)-8x stressed EBITDA, which is well- below recent realized selling prices and intended to represent a more distressed valuation that is likely to occur at the bottom of a business cycle. Natural gas reserves are usually valued within a range, typically $1.3&$2.00 per thousand cubic feet, taking into consideration where the reserves are located relative to pipeline transportation. Recent market transactions for gas reserves have exceeded this range, reflecting the strong commodity price environment.

For individual electric generation assets and wholesale generation companies not part of a regulated utility rate base, an estimated $kilowatt (kw) value is based on the present value of future cash flows expected to be generated by the plant in an unfavorable commodity price environment (e.g., high gas prices for a gas-fired plant and low gas

prices for a coal-fired plant). For merchant generating facilities, this involves the calculation of the net present value of operating cash flows using Fitch’s dispatch model for the asset, projected market clearing prices in the relevant region and volatility estimates. For a modem, efficient natural gas combined-cycle gas turbine, these values ranged from as high as $700 per kw in the West to below $100 per kw in the most overbuilt regions of the Southeast over the past few years. For assets fully backed by long-term power purchase agreements, such as Public Utility Regulatory Policies Act of 1978 contracts, Fjtch will value the plant based on the discounted cash flow stream provided by fixed-capacity payments, energy payments, etc.

Asset valuations derived from forecasting or modeling are confirmed against realizable values from a long historical record of such sales in varying commodity pricing environments.

Summary Findings The adoption of recovery analysis and initiation of IDRs resulted in select upward rating revisions for five of 11 issuers with IDRs of ‘B+’ or lower. For investment-grade issuers, the new methodology has only very modest rating implications.


6

Fitch Press Release Page 1 of 2 Exhibit TMT-4

Case No. 09-1268-G-30C FitchRatincrs Fitch : Info Center : Press Releases

Fitch Assigns Initial 'BBB-' IDR & Sr Unsecured Rating to Mountaineer Gas Company; Outlook Stable Ratinas 13 Oct 2006 1:13 PM (EDT)

Fitch Ratings-New York-I3 October 2006: Fitch Ratings has assigned an initial rating of 'BBB-' to Mountaineer Gas Company's (MGC) senior unsecured $185 million credit facility ($135 million revolving credit facility and $50 million term loan) and $43.4 million of existing senior unsecured notes. Fitch has also assigned an initial Issuer Oefault Rating (IDR) of 'BBB-' and a short-term rating of 'F3'. The Rating Outlook is Stable.

MGC's ratings take into account the company's relatively stable and predictable cash flows as a regulated natural gas local distribution utility with a fuel recovery mechanism, stable competitive position, low business risk profile and solid operating characteristics, In addition, Fitch expects that the projected financial profile of MGC will improve going forward as a result of a favorable rate settlement approved by the West Virginia Public Service Commission in August 2005, The settlement calls for a $17.3 million per annum rate increase with $15,3 million included in rates in November 2005 and the remaining $2.0 miliion to be effective as of November 2006. Furthermore, the company benefits from limited exposure to commodity price risk through an annually adjusted fuel pass through mechanism and a gas procurement strategy that has been approved by the West Virginia Public Service Commission (WVPSC). Additionally, MGC has direct access to three major pipelines with supply from the Gulf of Mexico to the Northeast, as well as access to 10 billion cubic feet (bd) of storage. MGC's ownership of Mountaineer Gas Services (MGS) further provides a source of local in-house gas supply at below market prices, sewing to offset procurement needs and gas supply costs.

Rating concerns relate to the risks of rising operating costs during the period of frozen rates that extends through Jan. 1, 2009. As the company does not have a weather stabilization mechanism in rates it is subject to earning volatility from abnormal weather conditions. Additionally, a significant share of EBITDA is derived from large transport customers in highly cyclical businesses in an economically challenged area.

West Virginia has not always been a positive regulatory environment for investor owned utilities, however, the WVPSC has recently taken several positive regulatory actions for other utilities within in the state, in addition to the constructive base rate adjustment for MGC in 2005. A return to a more adverse regulatory environment could place pressure on the ratlngs of MGC.

The Stable Outlook for MGC takes into consideration Fitch's expectation that the company's earnings and cash flow will improve as a result of the favorable rate order. Additionally, the fuel adjustment clause is expected to help stabilize the company's credit profile going forward. Historical financial performance has been weak over the past several years as a result of an asset-impairment in 2002, an extended period of frozen tariffs and high operating expenses related to former parent, Allegheny Energy, Inc. Fitch forecasts significant improvement in interest coverage and leverage measures, with long-term debt-to-EBITDA declining to approximately 2.5 times (x) by Dec. 31,2007 from 4 . 7 ~ as of Dec. 31,2005, as a result of the 2005 rate adjustment and regularly scheduled note amortization. Fitch's Stable Outlook incorporates an improvement in the ratio of EBITDA-to-interest to approximately 3.75~ by year-end 2007 from 2 .67~ for the 12 months ended June 30,2006.

In 2005 the company was acquired by a private partnership between an affiliate of ArcLight Energy Partners Fund Ii LP and IGS Utilities LLC (IGS). Although IGS, the operating partner, has no performance record with these assets, the principal owners of the firm have extensive experience in the natural gas business. Additionally, most of the senior operations staff from the predecessor company remained with the newly formed MGC.

MGC is a natural gas local distribution company that is engaged in the sale, distribution and transport of natural gas to 223,500 customers in West Vlrginia. The company is jointly owned by an affiliate of private equity investor ArcLight Capital Partners LLC and managing operator, IGS Utilities, LLC. Unregulated operations are housed at MGS, an exploration and production subsidiary.

The following ratings have been assigned with a Stable Rating Outlook

Mountaineer Gas Company

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Fitch Press Release Page 2 of 2

-Issuer Default Rating 'BBB-I; -Senior unsecured rating 'BBB-'; -Short-term rating 'F3'.

Contact: Denise Furey +I-212-908-0672, New Yo&; or Karen Anderson +1-312-368-3165, Chicago,

Media Relations: Brian Bertsch, New York, Tel: + l 212-908-0549.

Fitch's rating definitions and the terms of use of such ratings are available on the agency's public site, 'www,fitchratings.com'. Published ratings, criteria and methodologies are available from this site, at all times. Fitch's code of conduct, confldentiality, conflicts of interest, affiliate firewall, compliance and other relevant policies and procedures are also available from the 'Code of Conduct' section of this site.

Copyright 8 2009 by Fitch, Inc., Fitch Ratings Lld. and its subsidiaries.

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Fitch Press Release

FitchRatings

Page 1 of 1

Fitch : Info Center : Press Releases K R W YOUR RlSR

Fitch Downgrades Mountaineer Gas IDR and Places Ratings on Rating Match Negative BJl.nm

12 Dec 2006 1056 AM (EST) ~~

Fitch Ratings-New York-12 December 2006: Fitch Ratings downgrades the Issuer Default Rating (IDR) for Mountaineer Gas Co (MGC) to 'BBt' from 'BBB-' and has placed MGC's ratings on Ratings Watch Negative. The affected ratings are listed below.

The Rating Watch Negative reflects Fitch's concern that the company may not meet its projections in the near term. MGC had lower than forecasted cash flow during the 12 months ended Sept. 30,2006 as a result of reduced demand due to warmer weather and consetvation, lower transport revenue, and one-time expenses from a e development of a new accounting system as well as a new technology department. The weaker than expected results for the first nine months of 2006 precipitated a breach of the interest coverage covenant in MGC's bank facility. The banks have given the company a waiver for the default and are currently negotiating a permanent change to covenant calculations.

Events that could lead to affirmation of the current ratings and assignment of a Stable Outlook include reaching an agreement on revised covenants with lenders, successful implementation of new accounting systems, and reaching credit metrics commensurate with the ratings category and company forecasts. On the other hand, the lack of an improvement in credit metrics and a resolution of accounting systems and procedure issues in the next three to six months would be likely to result in further negative rating actions.

Fitch has downgraded the following rating and placed it on Rating Watch Negative:

-iDR from 'BBB-' to 'BBt'

Fitch has also placed the following MGC ratings on Rating Watch Negative:

-Senior unsecured 'BBB-'; -Short term 'F3'.

Contact: Denise Furey +I-212-908-0672, New York.

Media Relations: Brian Bertsch, New York, Tel: +I 212-908-0549.

Fitch's rating definitions and the terms of use of such ratings are available on the agency's public site, W.fitchratings.com'. Published ratings, criteria and methodologies are available from this site, at all times, Fitch's code of conduct, confidentiality, conflicts of interest, affiliate firewall, compliance and other relevant policies and procedures are also available from the 'Code of Conduct' section of this site.

Copyright 0 2009 by Fitch, Inc., Fitch Ratings Ltd. and its subsidiaries.

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Fitch Press Release

FitchRat ings KNOW Y u t f ~ RISK

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Fitch : Info Center : Press Releases

Fitch Downgrades Mountaineer Gas IDR to 'BB-'; Remains on Rating Watch Negative R a m

Of-May 2007 2:Ol PM (EDT)

Fitch Ratings-New York-07 May 2007: Fitch Ratings has downgraded Mountaineer Gas Co. (MGC) as follows:

-Issuer Default Rating (IDR) to 'BB-' from 'SB+': -Senior unsecured to '86' from 'BBB-'; -Short-term debt to 'B' from 'F3'.

MGC's ratings also remain on Rating Watch Negative by Fitch. MGC's downgrade reflects the lack of resolution of accounting software implementation problems which have led to the company's inability to produce audited financial statements in time to meet reporting covenant requirements in its revolving credit facility and senior unsecured notes. The ratings action also reflects Fitch's expectation that actual results will be lower than management projections.

Management attributes the accounting system problems to financia) software issues related to the introduction of an independent accounting system in June 2006. Since the introduction, MGC has been unable to submit financial statements in a timely basis for subsequent quarterly and annual reporting periods.

MGC received waivers for the technical default that resulted from the reporting covenant violation for the period ending Sept. 30, 2006. MGC is currently requesting a covenant waiver for the reporting year ended Dec. 31,2006.

While Fitch believes it is likely that MGC will obtain covenant relief, accounting system implementation issues at MGC are viewed by Fitch as a significant operational risk that may impair the ability of MGC to continue financing its working capital needs going forward, If credit metrics are below Fitch's expectations and the accounting system issues are unresolved, then additional negative rating actions are possible.

MGC is a local gas distribution company that serves 223,500 customers in West Virginia. MCG was purchased by a private partnership between an affiliate of ArcLight Energy Partners Fund ll and IGS Utilities LLC (IGS) in 2005

Contacts: Denise M. Furey +212-908-0672 or Karima Omar +212-9084592, New York.


Fitch's rating definitions and the terms of use of such ratings are available on the agency's public site, 'www.fitchratings.com'. Published ratings, criteria and methodologies are available from this site, at all times, Fitch's code of conduct, conRdenMafity, conflicts of interest, affiliate firewall, compliance and other relevant policies and procedures are also available from the 'Code of Conduct' section of this site.

Copyright Q 2009 by Fitch, lnc., Fitch Ratings Ltd. and Its subsidiaries.

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Fitch Press Release

Fitc hR at i rigs LHBW YOUR RISK"

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Fitch : Info Center : Press Releases

Lagaina Info

Fitch Affirms Mountaineer Gas Co. IDR; Removes Rating Watch Negative Ratinm 07 Sep 2007 155 PM (ERT)

Fitch Ratings-New Yo&-07 September 2007: Fitch Ratings has affirmed the following Mountaineer Gas Company (MGC) ratings and removed the ratings from Rating Watch Negative:

-Issuer Default Rating (IDR) at 'BB-'; -Senior unsecured at '86 -Short-term debt at 'El'.

The Rating Outlook is Stable.

The Stable Ratlng Outlook on MGC reflects a resolution of accounting system problems that led to MGC's inability to produce audited financial statements in time to meet reporting covenant requirements contained in its $185 million credit facillty and unsecured notes ($30 million) for reporting periods prior to March 31,2007. The failure to produce timely financial statements for three separate reporting periods was attributed to accounting system problems and financial software issues related to the introduction of an independent accounting system in June 2006. Recent efforts on the part of management have led to the effective implementation of new accounting soffware to address systemic accounting and financial reporting problems. Consequently, MGC was able to submit financials on a timely basis for the periods ending March 31, 2007 and June 30,2007.

Fitch's rating and Stable Outlook assume that MGC will continue to report financial results on a timely basis as a result of these soffware enhancements and thereby prevent Mure reporting covenant violations. In addition to the implementation of new software, management initiatives taken to improve financial reporting and improve operating performance include an Internal equity committee, led by ArcLight Capital Partners, designed to meet monthly reporting requirements to the bank group, the appointment of a permanent Chief Financial Officer (CFO) based locally in Charleston, WV, and post-audit reviews.

Rating concerns relate to liquidity and bank facility refinancing risk as MGC seeks to obtain reasonable lending terms despite past covenant violations under the existing credit facility, and coincides with relatively large scheduled principal payments in 2008 ($18 million). Other rating concerns take into consideration the risks of rising operating costs during a period of frozen base rates that extends through Jan. 1,2009. In addition, a continuation of reduced demand due to wanner weather and conservation may lead to lower than forecasted cash flows and result in credit metrics that are out of compliance with covenant calculations.

Events that could lead to a ratings upgrade include the attainment of a reasonable refinancing package, a consistent ability to meet financial reporting covenants on a sustained basis, and an improvement in credit metrics.

MGC is a local gas distribution company that serves 223,500 customers in West Virginia. MGC was purchased by a private partnership between an affiliate of ArcLight Energy Partners Fund I1 and IGS Utilities LLC (IGS) in 2005.

Contacts: Denise M. Furey +I-212-908-0672 or Karima Omar +1-212-908-0592, New York.


Fitch's rating definitions and the terms of use of such ratings are available on the agency's public site, 'www.fitchratings.com', Published ratings, criteria and methodologies are available from this site, at all times. Fitch's code of conduct, confidentiality, conflicts of interest, affiliate firewall, compliance and other relevant policies and procedures are also available from the 'Code of Conduct' section of this site.

Copyright (B 2009 by Fltch, Inc., Fitch Ratings Ltd. and Its subsidiaries.

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http://www.fi

Exhibit TMT-5 Case No. 09-1268-G-30C

$135,000,000 REVOLVING CREDIT FACILITY $50.000.000 TERM LOAN

CREDIT AGREEMENT

by and among

MOUNTAINEER GAS COMPANY,

as Borrower,

and

THE LENDERS PARTY HERETO. PNC BANK, NATIONAL ASSOCIATION, as Agent,

PNC CAPITAL MARKETS, INC,. as Arranger,

UNION BANK OF CALlFORNlA and

KEYBANK NATIONAL ASSOCIATION, as Co-Documentation Agents

and

BANK OF MONTREAL, D/B/A HARRIS NESBITT. as Syndication Agent

Dated as of September 30, 2005

Section

TABLE OF CONTENTS

1 CERTAIN DEFINITIONS .................................................................................................. 1 1.1 Certain Definitions .................................................................................................. 1 1.2 Construction .......................................................................................................... 21

I . 2. I Number; Inclusion .................................................................................. 25 I . 2.2 Determination ......................................................................................... 25 1.2.3 Agent's Discretion and Consent ............................................................. 25 I . 2.4 Documents Taken as a Whole ................................................................ 25 I . 2.5 Headings. ................................................................................................ 25 1.2.6 Implied References to this Agreement ................................................... 25 1.2.7 Persons ................................................................................................... 25 I . 2.8 Modifications to Documents .................................................................. 26 1.2.9 From, To and Through ........................................................................... 26 1.2.10 Shall; Will .............................................................................................. 26

1.3 Accounting Principles ........................................................................................... 26

2 . REVOLVING CREDIT AND SWING LOAN FACILITIES ........................................... 26 2.1

2.2 2.3 2.4 2.5

2.6

2.7

2.8 2.9

Revolving Credit Commitments ........................................................................... 26 2.1.1 Revolving Credit Loans .......................................................................... 26 2,1.2 Swing Loan Commitment ...................................................................... 27 Nature of Lenders' Obligations with Respect to Revolving Credit Loans ............ 27 Commitment Fees. ................................................................................................ 27 [Intentionally Omitted] .......................................................................................... 28 Revolving Credit Loan Requests; Swing Loan Requests ...................................... 28 2.5.1 Revolving Credit Loan Requests ............................................................ 28 2.5.2 Making Revolving Credit Loans and Swing Loans .............................................. 29 2.6.1 Making Revolving Credit Loans ............................................................ 29 2.6.2 Making Swing Loans .............................................................................. 29 Revolving Credit Notes; Swing Loan Note ........................................................... 29 2.7.1 Revolving Credit Notes .......................................................................... 29 2.7.2 Swing Loan Note .................................................................................... 30 Use of Proceeds ..................................................................................................... 30 Letter of Credit Subfacility .................................................................................... 30 2.9.1 Issuance of Letters of Credit ................................................................... 30 2.9.2 Letter of Credit Fees ............................................................................... 30 2.9.3 Disbursements, Reimbursement. ............................................................ 31 2.9.4 Repayment of Participation Advances ................................................... 32 2.9.5 Documentation. ...................................................................................... 32 2.9.6 Determinations to Honor Drawing Requests .......................................... 33 2.9.7 Nature of Participation and Reimbursement Obligations ....................... 33

Swing Loan Requests ............................................................................. 28

* I

- 1 -

TABLE OF CONTENTS

Section Pag;e 2.9.8 Indemnity ................................................................................................ 35 2.9.9 Liability for Acts and Omissions ............................................................ 35

2 . 10 Borrowings to Repay Swing Loans 36 2.1 1 Right to Increase Revolving Credit Commitments ............................................... 37

.......................................................................

3 . TERM LOANS ................................................................................................................. 37 3.1 3.2 3.3 3.4 3.5

Term Loan Commitments; Term Loan Requests .................................................. 37 Nature of Lenders' Obligations with Respect to Term Loans ............................... 38 Term Loan Notes ................................................................................................... 38 Use of Proceeds ..................................................................................................... 39 Term Loan Commitment Fee ................................................................................ 39

4 . lNTEREST RATES .......................................................................................................... 39 4.1

3.2

4.3

4.4

4.5

Interest Rate Options ............................................................................................. 39 4.1 . 1 Revolving Credit Interest Rate Options ................................................. 39 4.1.2 Term Loan Interest Rate Options ........................................................... 40 4.1 . 3 Rate Quotations ...................................................................................... 40 Interest Periods ...................................................................................................... 40 4.2.1 Amount of Borrowing Tranche .............................................................. 40 4.2.2 Renewals ................................................................................................ 41 Interest After Default ............................................................................................. 41 4.3.1 Letter of Credit Fees, Interest Rate ......................................................... 41 4.3.2 Other Obligations ................................................................................... 41 4.3.3 Acknowledgment ................................................................................... 41 Euro-Rate Unascertainable: Illegality; Increased Costs; Deposits Not Available ............................................................................................................... 41 4.4.1 Unascertainable. ..................................................................................... 41 4.4.2 Illegality; Increased Costs; Deposits Not Available ............................... 42 4.4.3 Agent's and Lender's Rights ................................................................... 42 Selection of interest Rate Options ......................................................................... 43

PAYMENTS ..................................................................................................................... 43 j4 I Payments ............................................................................................................... 43 5.2 Pro Rata Treatment of Lenders ............................................................................. 43 5.3 Interest Payment Dates .......................................................................................... 44 5.4 Voluntary Prepayments ......................................................................................... 44

Right to Prepay ....................................................................................... 44 Replacement o f a Lender ........................................................................ 45

5 .

5.4.1 5.4.2 5.4.3 5.4.4

Change of Lending Office ...................................................................... 46 Voluntary Reduction of Commitments .................................................. 46

5.5 Mandatory Prepayments ........................................................................................ 17 - ii -

rABLE OF CONTENTS

Pace Section 5.5.1 Recoven, of Insurance Proceeds ............................................................. 47 5.5.2

5.5.3

5.6.1

5.6.2 Indemnity ................................................................................................ 39

Issuance of Certain Debt; issuance of Equity. Capital Contributions or Hybrid Securities ......................................................... 47 Application Among Interest Rate Options ............................................. 48

Additional Compensation in Certain Circumstances ............................................ 48

Reserves. Capital Adequacy Requirements, Expenses, Etc ................... 38

Settlement Date Procedures .................................................................................. 50

5.6 Increased Costs or Reduced Return Resulting from Taxes,

5.7

6 . REPRESENTATIONS AND WARRANTIES ................................................................. 50 6.1 Representations and Warranties. ........................................................................... 50

Organization and Qualification .............................................................. 50 Capitalization and Ownership ................................................................ 51

6.1.3 Subsidiaries ............................................................................................ 51 Power and Authority. ............................................................................. 51

6.1.7 Litigation ................................................................................................ 52 Title to Properties ................................................................................... 52

6.1.1 6.1.2

6.1.4 6.1.5 Validity and Binding Effect .................................................................... 52 6.1.6 No Conflict ............................................................................................. 52

6.1 . 8 6.1.9 Financial Statements. ............................................................................. 53 6.1.10 Use of Proceeds; Margin Stock; Section 20 Subsidiaries ...................... 54 6.1.11 Full Disclosure ....................................................................................... 54 6.1.12 Taxes. ..................................................................................................... 5 5 6.1 . 13 6.1.14 6.1.15 6.1.16 [Intentionally Omitted.] .......................................................................... 56

6.1, 18 6.1 . 19 6.1.20 6.1.2 1 6.1.22 6.1.23

6 . I . 25 6.1 . 26 6.1.27

Consents and Approvals ......................................................................... 5 5 No Event of Default; Compliance with Instruments .............................. 55 Patents, Trademarks, Copyrights, Licenses, Etc .................................... 5 5

6.1.17 [Intentionally Omitted.] .......................................................................... 56 [Intentionally Omitted.] .......................................................................... 56 Insurance ................................................................................................ 56 Compliance with Laws ........................................................................... 56 Material C. ontracts. Burdensome Restrictions ........................................ 56 Investment Companies; Regulated Entities ............................................ 56

6.1.24 Employment Matters .............................................................................. 58 Environmental Matters ........................................................................... 58 Senior Debt Status .................................................................................. 59 Anti-Terrorism Laws and Economic Sanctions ..................................... 60

Updates to Schedules ............................................................................................ 61

Plans and Benefit Arrangements. ........................................................... 57

6.2

... . 111 .

TABLE OF CONTENTS

Section Paae CONDITIONS OF LENDING AND ISSUANCE OF LETTERS OF CREDIT .............. 61 7.1 First Loans and Letters of Credit ........................................................................... 61

7 .

7.1.1 7 . I . 2 7.1.3 7.1.4 7.1.5 7.1.6 7.1.7 7.1.8 7.1.9 7.1.10 7.1.1 1 7.1.12 7.1.13 7.1.14 7.1.15 7.1.16 7.1.17 7.1.18 7.1.19 7.1.20 7.1.21 7.1.22 7.1.23 7.1.24 7.1.25 7.1.26

Officer's Certificate ................................................................................ 61 Secretary's Certificate ............................................................................. 62 Delivery of Loan Documents ................................................................. 62 Opinion of Counsel ................................................................................ 62 Legal Details ........................................................................................... 62 Payment of Fees ..................................................................................... 63 Environmental Audit .............................................................................. 63 [Intentionally Omitted.] .......................................................................... 63 Consents ................................................................................................. 63 Officer's Certificate Regarding MACs ................................................... 63 N o Violation of Laws ............................................................................. 63 No Actions or Proceedings ..................................................................... 64 insurance Policies; Certificates of Insurance .......................................... 64 [Intentionally Omitted.] .......................................................................... 64 [Intentionally Omitted.] .......................................................................... 64 [Intentionally Omitted.] .......................................................................... 64 Administrative Questionnaire ................................................................ 64 UCC . Lien and Judgment Searches ........................................................ 64 Acquisition Documents .......................................................................... 65 Due Diligence ......................................................................................... 65 Outstanding Senior Notes ....................................................................... 66 Consummation of Acquisition ............................................................... 66 [Intentionally Omitted.] ........................................................................... 66 Maximum Initial Revolving Advances .................................................. 66 Solvency ................................................................................................. 66 Certain Financial Conditions .................................................................. 67

7.2 Each Additional Loan or Letter of Credit .............................................................. 67

8 . COVENANTS ................................................................................................................... 67 Affirmative Covenants .......................................................................................... 67 8.1.1 Preservation of Existence, Etc ................................................................ 67 8.1.2 Payment of Liabilities, Including Taxes, Etc ......................................... 68 8.1.3 Maintenance of Insurance ....................................................................... 68 8.1.4 Maintenance of Properties and Leases ................................................... 69 8.1 S Maintenance of Patents. Trademarks, Etc .............................................. 69

8.1.7 Keeping of Records and Books of Account ........................................... 69 8.1.8 Plans and Benefit Arrangements ............................................................ 70 8.1.9 Compliance with Laws ........................................................................... 70

8 . I

8.1.6 Visitation Rights ..................................................................................... 69

- iv -

TABLE OF CONTENTS

Pape Use of Proceeds. ..................................................................................... 70 Satisfaction of Senior Notes ................................................................... 70

Anti-Terrorism Laws and Economic Sanctions ..................................... 71

8.2 Negative Covenants ............................................................................................... 71

Section 8.1. I O 8.1, I 1 8.1.12 [Intentionally Omitted.] .......................................................................... 70 8.1 . 13 8.1 . 14 Gas Purchase Requirements 71 ...................................................................

-. 8.2.1 8.2.2 8.2.3 8.2.4 8.2.5 8.2.6 8.2.7 8.2.8 8.2.9 8.2. I O 8.2.1 1 8.2.12 8.2.1 3 8.2.14 8.2.15 8.2.16 8.2.17 8.2.18 8.2.19 8.2.20

Indebtedness ........................................................................................... -/ 1 Liens ....................................................................................................... 72 Guaranties ............................................................................................... 72 Loans and Investments ........................................................................... 73 Dividends and Related Distributions ...................................................... 73 Liquidations, Mergers, Consolidations, Acquisitions ............................ 74

Affiliate Transactions 76

Continuation of or Change in Business .................................................. 76 Plans and Benefit Arrangements. ........................................................... 76 Fiscal Year .............................................................................................. 77 Issuance of Stock 78

Dispositions of Assets or Subsidiaries ................................................... 75

Subsidiaries, Partnerships and Joint Ventures ........................................ 76 .............................................................................

.................................................................................... Changes in Organizational Documents .................................................. 78 Capital Expenditures and Leases ............................................................ 78 Minimum Consolidated EBITDA .......................................................... 7 8 Minimum Interest Coverage Ratio ......................................................... 79

Management and Transition Service Expenses ...................................... 79 Maximum Debt to Capital Ratio ............................................................ 79

No Modification of Acquisition Documents, Hedging Contract Policies and Management Agreements .................................................. 79

8.3.1 [Intentionally Omitted.] .......................................................................... 80 8 .3 Reporting Requirements ........................................................................................ 80

Quarterly Financial Statements .............................................................. 80 Annual Financial Statements .................................................................. 80 Certificate of the Borrower ..................................................................... 81 Notice of Default .................................................................................... 81

8.3.2 8.3.3 8.3.4 8.3.5 8.3.6

8.3.8 8.3.9

. . Notice of Litigation ................................................................................ 81 8.3.7 Certain Events ........................................................................................ 82

Notices Regarding Plans and Benefit Arrangements ............................. 82 Budgets, Forecasts, Other Reports and Information .............................. 82

9 . DEFACJLT ......................................................................................................................... 84 Events of Default ................................................................................................... 84 9 . 1.1 Payments Under Loan Documents ......................................................... 84

9.1

- v -

TABLE OF CONTENTS

Section Parre Breach of Warranty ................................................................................ 84 Breach of Negative Covenants or Visitation Rights .............................. 84 Breach of Other Covenants .................................................................... 84 Defaults in Other Agreements or Indebtedness ...................................... 85 Final Judgments or Orders ..................................................................... 85 Loan Document Unenforceable .............................................................. 85 Uninsured Losses: Proceedings Against Assets ..................................... 85

Events Relating to Plans and Benefit Arrangements .............................. 86 Cessation of Business ............................................................................. 86 Change of Control .................................................................................. 87

9.1.14 Involuntary Proceedings ......................................................................... 87 9.1.15 Voluntary Proceedings ........................................................................... 87 Consequences of Event of Default ........................................................................ 87 9.2.1

Reorganization Proceedings ................................................................... 87 9.2.2 Bankruptcy, Insolvency or Reorganization Proceedings ........................ 88 9.2.3 Set-off ..................................................................................................... 88 9.2.4 Suits, Actions, Proceedings .................................................................... 89 9.2.5 Application of Proceeds ......................................................................... 89 9.2.6 Other Rights and Remedies .................................................................... 89

9.1 . 2 9.1.3 9.1.4 9.1, j 9.1 . 6 9.1.7 9.1.8 9.1.9 9.1 . I O 9.1.1 1 9.1.12 9.1.13

Notice of Lien or Assessment ................................................................ 86 Insolvency ............................................................................................... 86

9.2 Events of Default Other Than Bankruptcy, Insolvency or . .

10 . THE AGENT ..................................................................................................................... 90 I O . 1 10.2 10.3 10.4 10.5 10.6 10.7 10.8 Reliance by Agent ................................................................................................. 93 10.9 Notice of Default. .................................................................................................. 93 I O . 10 Notices ................................................................................................................... 93 10.11 Lenders in Their Individual Capacities; Agent in its Individual Capacity ............ 94 I O . 12 Holders of Notes .................................................................................................... 94 I O . 1 3 Equalization of Lenders ......................................................................................... 94 I O . 14 Successor Agent .................................................................................................... 95 I O . 1 5 Agent's Fee ............................................................................................................ 95 LO . 16 Availability of Funds ............................................................................................. 95

Appointment .......................................................................................................... 90 Delegation of Duties .............................................................................................. 90 Nature of Duties: Independent Credit Investigation .............................................. 90 Actions in Discretion of Agent; Instructions From the Lenders ........................... 91 Reimbursement and Indemnification of Agent by the Borrower .......................... 91 Exculpatory Provisions; Limitation of Liability .................................................... 92 Reimbursement and Indemnification of Agent by Lenders ................................... 92

10.17 Calculations ........................................................................................................... 96

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TABLE OF CONTENTS

Section Page . ................................... I O . 18 No Reliance on Agent's Customer Identification Program 96 . . . 10.19 Beneficlanes .......................................................................................................... 96

11 . MISCELLANEOUS .......................................................................................................... 97 Modifications . Amendments or Waivers .............................................................. 97 1 1.1.1 Increase of Commitment; Extension of Expiration Date or Term

Loan Maturity Date ................................................................................ 97 1 1.1.2 Extension of Payment; Reduction of Principal Interest or Fees;

Modification of Terms of Payment ........................................................ 97 1 1.1.3 Release of Guarantor .............................................................................. 97

11.2 No Implied Waivers; Cumulative Remedies; Writing Required ........................... 98 11.3 11.4 Holidays ................................................................................................................. 99 11.5 Funding by Branch, Subsidiary or Affiliate .......................................................... 99

1 1.5.1 Notional Funding .................................................................................... 99 1 1 . 5.2

1 I . 6 Notices ................................................................................................................. 100 11.7 Severability .......................................................................................................... 101 1 1.8 I 1.9 Prior Understanding. ........................................................................................... 101 1 1.10 1 1.1 1

11.1

11.1.4 Miscellaneous ......................................................................................... 98

Reimbursement and Indemnification of Lenders by the Borrower; Taxes ............ 98

Actual Funding ..................................................................................... 100

Governing Law .................................................................................................... 101

Duration; Survival ............................................................................................... 102 Successors and Assigns ....................................................................................... 102

Binding Effect; Assignments by Borrower .......................................... 102 11.1 1.2 Assignments and Participations by Lenders ......................................... 102

Non-U.S. Assignees and Participants ................................................... 103 1 1.11.4 Assignments by Lenders to Federal Reserve Banks ............................. 103

1 1.12.1 General ................................................................................................. 104 Sharing Information With Affiliates of the Lenders ............................ 105

1 1.13 Counterparts ........................................................................................................ 105 1 1.14 Agent's or Lender's Consent ................................................................................ 105 11.15 Exceptions ........................................................................................................... 105

CONSENT TO FORUM; WAIVER OF JURY TRIAL ................................ 105 Certifications From Lenders and Participants ..................................................... 106

Tax Withholding .................................................................................. 106 11.17.2 USAPatriot Act ................................................................................... 107

No Recourse. ....................................................................................................... 107 Subordination of Intercompany Loans ................................................................ 108

11.1 1.1

1 1.1 1.3

1 1 . 1 1.5 Additional Lender 104 1 1.12 Confidentiality ..................................................................................................... 104

.................................................................................

I 1.12.2

1 1.16 1 1.17

1 1.17.1

1 1.18 Joinder of Guarantors. ......................................................................................... 107 1 1 . 19 1 1.20

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LIST OF SCHEDULES AND EXHIBITS

SCHEDULES

SCHEDULE l .I(A) SCHEDULE l.l(B)

SCHEDULE 1 . 1 (P) SCHEDULE 6.1.1 SCHEDULE 6.1.2 SCHEDULE 6.1.3 SCHEDULE 6.1.7 SCHEDULE 6.1.13 SCHEDULE 6.1.15 SCHEDULE 6.1.19 SCHEDULE 6.1.23 SCHEDULE 6.1.25 SCHEDULE 8.2.1 SCHEDULE 8.2.10

EXHIBITS EXHIBIT 1 . 1 (A) EXHIBIT I , ] (B) EXHlBIT 1,1(G)( 1) EXHIBIT 1 + 1(G)(2) EXHLBIT 1 . 1 (R) EXHIBIT 1.1 ( S )

EXHIBIT 2.5.1 EXHIBIT 2.5.2 EXHIBIT 3.1 EXHIBIT 5 -4.4 EXHIBIT 7.1.4 EXHIBIT 8.2.6 EXHIBIT 8.3.4

EXHIBIT 1.1 ('r)

PRlCTNG GRID COMMITMENTS OF LENDERS AND ADDRESSES FOR N OTlCES PERMITTED LIENS QUALIFICATIONS TO DO BUSINESS CAPITALIZATION SUBSIDIARIES LITIGATION CONSENTS AND APPROVALS PATENTS, TRADEMARKS, COPYRIGHTS, LICENSES, ETC. WSURANCE POLICIES EMPLOYEE BENEFIT PLAN DISCLOSURES ENVIRONMENTAL DISC LO SU RE S PERMITTED LNDEBTEDNESS BUSINESS OF LOAN OBLIGORS AND SUBSIDIARIES

ASSIGNMENT AND ASSUMPTION AGREEMENT LENDER JOlNDER GUARANTOR JOINDER GUARANTY AGREEMENT REVOLVING CREDIT NOTE SWING LOAN NOTE TERM NOTE LOAN REQUEST SWING LOAN REQUEST TERM LOAN REQUEST COMMITMENT REDUCTION NOTICE OPINION OF COUNSEL ACQUISITION COMPLIANCE CERTIFICATE QUARTERLY COMPLIANCE CERTIFICATE

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CREDIT AGREEMENT

THIS CREDIT AGREEMENT is dated as of September 30,2005 and is made by and among MOUNTAINEER GAS COMPANY, a West Virginia corporation (the "Borrower"). the LENDERS (as hereinafter defined). and PNC BANK, NATIONAL ASSOCIATION, in its capacity as agent for the Lenders under this Agreement (hereinafter referred to in such capacity as the "Agent").

WITNESSETH:

WHEREAS, the Borrower has requested the Lenders to provide (i) a revolving credit facility to the Borrower in an aggregate principal amount not to exceed $135,000,000 for working capital and general corporate purposes, to fund a portion of the "Purchase Price" as set forth in Sections 3.l(b)(ii) and 3.l(c) ofthe Acquisition Agreement, to finance Permitted Acquisitions and to pay certain transaction costs and expenses associated with the Acquisition. and (ii) 'a $50,000,000 term loan facility to redeem and prepay in full the Senior Notes (each capitalized term set forth above, as hereinafter defined); and

WHEREAS, the Lenders are willing to provide such credit upon the terms and conditions hereinafter set forth;

NOW. THEREFORE, the parties hereto, in consideration of their mutual covenants and agreements hereinafter set forth and intending to be legally bound hereby, covenant and agree as follows:

1 CERTAIN DEFINITIONS

1. I Certain Definitions.

In addition to words and terms defined elsewhere in this Agreement, the following words and terms shall have the following meanings, respectively, unless the context hereof clearly requires otherwise:

Acauisition shall mean the acquisition of all of the issued and outstanding capital stock of Borrower by Parent and the conveyance by the Seller Party to the Borrower of the Related Assets, all the foregoing pursuant to the Acquisition Agreement.

Acauisition Agreement shall mean that certain Acquisition Agreement by and between the Seller Party and the Parent, and also executed by ArcLight dated as of August 4. 2004, including all schedules and exhibits thereto, as the same may be amended, modified, supplemented or restated in accordance with Section 8.2.20 [No Modification of Acquisition Documents, Etc.].

Acquisition Documents shall mean the Acquisition Agreement, the Transition Services Agreement and all material bills of sale, deeds, assignments, certificates and other material documents, certificates and agreements in connection therewith, as the same may be amended, modified, supplemented or restated in accordance with Section 8.2.20 P o Modification of Acquisition Documents, Etc.].

Additional Lender shall have the meaning assigned to such term in Section 1 1.11.5 [Successors and Assigns].

Affiliate as to any Person shall mean any other Person (i) which directly or indirectly controls, is controlled by, or is under common control with such Person, (ii) which beneficially owns or holds 5% or more of any class of the voting or other equity interests of such Person, or (iii) 5% or more of any class of voting interests or other equity interests of which is beneficially owned or held, directly or indirectly, by such Person. Control, as used in this definition, shall mean the possession, directly or indirectly, of the power to direct or cause the direction of the management or policies of a Person, whether through the ownership of voting securities, by contract or otherwise, including the power to elect a majority of the directors or trustees of a corporation or trust, as the case may be.

Agent shall mean PNC Bank, National Association, and its successors and assigns,

Agent's Fee shall have the meaning assigned to that term in Section 10.15.

Agent's Letter shall have the meaning assigned to that term in Section 10.15.

Agreement shall mean this Credit Agreement, as the same may be supplemented or amended from time to time, including all schedules and exhibits.

Annual Statements shall have the meaning assigned to that term in Section 6.1.9(i).

Anti-Terrorism Laws and Economic Sanctions shall mean any Laws relating to terrorism or money laundering, including Executive Order No. 13224, the USA Patriot Act, the Laws comprising or implementing the Bank Secrecy Act, and the Laws administered by the United States Treasury Department's Ofice of Foreign Asset Control (as any of the foregoing Laws may from time to time be amended, renewed, extended, or replaced).

Amlicable commitment Fee Rate shall mean the percentage rate per annum at the indicated level of Debt Rating or the Debt to Capital Ratio then in effect in the pricing grid on Schedule l . l (A) below the heading "Commitment Fee." The Applicable Commitment Fee Rate shall be computed in accordance with the parameters set forth on Schedule 1.1 (A).

Auulicable Letter ofcredit Fee Rate shall mean the percentage rate per annum at the indicated level of Debt Rating or the Debt to Capital Ratio then in effect in the pricing grid on Schedule 1 . 1 (A) below the heading "Letter of Credit Fee." The Applicable Letter of Credit Fee Rate shall be computed in accordance with the parameters set forth on Schedule 1 . 1 (A).

Audicable Margin shall mean, as applicable:

(A) the percentage spread to be added to Base Rate under the Revolving Credit Base Rate Option at the indicated level of Debt Rating or Debt to Capital Ratio then in effect in the pricing grid on Schedule l . l (A) below the heading "Revolving Credit Base Rate Spread,"

(B) the percentage spread to be added to Base Rate under the Term Loan Base Option at the indicated level of Debt Rating or the Debt to Capital Ratio then in effect in the pricing grid on Schedule 1.1 (A) below the heading "Term Loan Base Rate Spread,"

(C) the percentage spread to be added to Euro-Rate under the Revolving Credit Euro-Rate Option at the indicated leveJ of Debt Rating or the Debt to Capital Ratio then in effect in the pricing grid on Schedule 1 . 1 (A) below the heading "Revolving Credit Euro-Rate Spread," or

(D) the percentage spread to be added to Euro-Rate under the Term Loan Euro-Rate Option at the indicated level of Debt Rating or the Debt to Capital Ratio then in effect in the pricing grid on Schedule 1 I l(A) below the heading "Term Loan Euro-Rate Spread."

The Applicable Margin shall be computed in accordance with the parameters set forth on Schedule l.l(A).

ArcLight shall mean ArcLight Energy Partners Fund 11, L.P., a Delaware limited partnership.

Assignment and Assumution Agreement shall mean an Assignment and Assumption Agreement by and among a Purchasing Lender, a Transferor Lender and the Agent, as Agent and on behalf of the remaining Lenders, substantially in the form of Exhibit 1 .l(A).

Authorized Officer shall mean those individuals, designated by written notice to the Agent froin the Borrower and acceptable to the Agent in its reasonable judgment, authorized to execute notices, reports and other documents on behalf of the Loan Obligors required hereunder. The Borrower may amend such list of individuals from time to time by giving written notice of such amendment to the Agent.

Base Rate shall mean the greater of (i) the interest rate per annum announced from time to time by the Agent at its Principal Office as its then prime rate, which

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rate may not be the lowest rate then being charged commercial borrowers by the Agent, or ( i i ) the Federal Funds Open Rate plus %% per annum.

Base Rate Option shall mean either the Revolving Credit Base Rate Option or the Term Loan Base Rate Option.

Benefit Arrangement shall mean an "employee benefit plan," within the meaning of Section 3 ( 3 ) of ERISA, which is neither a Plan nor a Multiernployer Plan and whjch is maintained. sponsored or otherwise contributed to by any member of the ERISA Group.

Blocked Person shall have the meaning assigned to such term in Section 6.1.27.2.

Borrower shall mean Mountaineer Gas Company, a corporation organized and existing under the laws of the State of West Virginia, which, on and as of the Closing Date shall be the owner of all of the Related Assets.

Borrowing Date shall mean, with respect to any Loan, the date for the making thereof or the renewal or conversion thereof at or to the same or a different Interest Rate Option, which shall be a Business Day.

Borrowing Tranche shall mean specified portions of Loans outstanding as follows: ( i ) any Loans to which a Euro-Rate Option applies which become subject to the same Interest Rate Option under the same Loan Request by the Borrower and which have the same Interest Period shall constitute one Borrowing Tranche, and (ii) all Loans to which a Base Rate Option applies shall constitute one Borrowing Tranche.

Business Day shall mean any day other than a Saturday or Sunday or a legal holiday on which commercial banks are authorized or required to be closed for business in Pittsburgh, Pennsylvania and if the applicable Business Day relates to any Loan to which the Euro-Rate Option applies, such day must also be a day on which dealings are carried on in the London interbank market.

CaDital shall mean as of any date of determination the sum of ( i ) stockholders' equity, (ii) redeemable common stock (if redeemable common stock is excluded from stockholders' equity) and (iii) Long Term Debt, in each instance of the Borrower and its Subsidiaries as of such date determined and consolidated in accordance with GAAP.

Closing Date shall mean the Business Day on which the first Loan shall be made, which shall be September 30, 2005 or, if all the conditions specified in Section 7 have not been satisfied or waived by such date, not later than October 15. 2005. The closing shall take place at 9:OO a.m., New York City time. on the Closing Date at the offices of Skadden, Arps, Slate, Meagher & Flom, LLP, 3 Times Square, New York, NY 10036, or at such other time and place as the parties agree.

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Commitment shall mean as to any Lender the aggregate of its Revolving Credit Commitment and Term Loan Commitment, and. in the case of PNC Bank, its Swing Loan Commitment, and Commitments shall mean the aggregate of the Revolving Credit Commitments. Term Loan Commitments and Swing Loan Commitment of all of the Lenders.

Commitment Fee shall have the meaning assigned to that term in Section 2.3.

Commitment Reduction Notice shall have the meaning set forth in Section 5.4.3 [Voluntary Reduction of Commitments].

Comuliance Certificate shall have the meaning assigned to such term in Section 8.3.4.

Consideration shall mean with respect to any Permitted Acquisition, the aggregate of (i) the cash paid by any of the Loan Obligors, directly or indirectly, to the seller in connection therewith, (ii) the Indebtedness incurred or assumed by any of the Loan Obligors, whether in favor of the seller or otherwise and whether fixed or contingent, ( i i i ) any Guaranty given or incurred by any Loan Obligor in connection therewith. and (iv) any other consideration given or obligation incurred by any of the Loan Obligors in connection therewith.

Consolidated Adiusted EBIT for any period of determination shall mean ( i ) the sum of Consolidated Net Income, interest expense, income tax expense, other non-cash items of expense, and the aggregate expenses of the Borrower and the other Loan Obligors related to this Agreement, the Acquisition and the consummation of the transactions contemplated thereby, and the premium related to the prepayment of the Senior Notes with the proceeds of Term Loans (such aggregate expenses to be the amount deducted by the Loan Obligors in the determination of Consolidated Net Income), minus (ii) other non-cash items of income, in each case of the Borrower and its Subsidiaries for such period determined and consolidated in accordance with GAAP.

Consolidated EBITDA for any period of determination shall mean (i) the sum of Consolidated Net Income, depreciation, amortization, interest expense, income tax expense, other non-cash items of expense (exclusive of depreciation and amortization), and the aggregate expenses of the Borrower and the other Loan Obligors related to this Agreement, the Acquisition and the consummation of the transactions contemplated thereby, and the premium related to the prepayment of the Senior Notes with the proceeds of Term Loans (such aggregate expenses to be the amount deducted by the Loan Obligors in the determination of Consolidated Net Income), minus (ii) other non-cash items of income, in each case of the Borrower and its Subsidiaries for such period determined and consolidated in accordance with GAAP.

Consolidated Net Income for any period of determination shall mean net income after income taxes of the Borrower and other Loan Obligors on a consolidated basis for such period determined and consolidated in accordance with GAAP, but excluding:

(i) exceed capital losses and extraordinary charges;

the amount by which capital gains and other extraordinary credits

( i i ) of any shares of capital stock or other equity interest of the Borrower or any other Loan Obligor;

any gain arising from any write-up of assets or from the acquisition

( i i i ) earnings of any Person realized prior to the date it becomes a Loan Obligor or its assets are acquired by merger or otherwise by the Borrower or any other Loan Obligor;

(iv) Borrower or any other Loan Obligor has an ownership interest, not received by the Borrower or such other Loan Obligor in the form of cash distributions, provided that any earnings excluded pursuant to this clause (iv) may be included in the year in which they are actually received as cash distributions;

earnings of any Person (other than a Loan Obligor) in which the

(v) earnings denominated in any currency which is not freely convertible into Dollars, provided that any earnings excluded pursuant to this clause (v) may be included in the year in which they are actually converted into Dollars;

(vi) Borrower) which for any reason is unavailable for payment of dividends to the Borrower or any other Loan Obligor;

any portion of the earnings of any Loan Obligor (other than the

(vii) Borrower) realized prior to the date it acquires the assets of the Borrower by merger or otherwise: and

earnings of any Person (other than a Loan Obligor, except the

(viii) any gain arising from the termination of a Plan.

Contamination shall mean the presence or release or threat of release of Regulated Substances in, on, under or emanating to or from the Property, which pursuant to Environmental Laws requires notification or reporting to an Official Body, or which pursuant to Environmental Laws requires the investigation, cleanup, removal, remediation, containment, abatement of or other response action or which otherwise constitutes a violation of Environmental Laws.

Debt Rating shall mean the rating of the Borrower's senior unsecured long- term debt by each of Standard & Poor's, Moody's and Fitch, or any one or more of them.

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Debt to Capital Ratio shall mean as of any date of determination. the ratio of Long Term Debt of the Borrower and its Subsidiaries to Capital on such date.

Delayed Draw Reauest Termination Date shall mean November 15. 2005.

Distributing Company shall have the meaning given to such term in Section 1 1.20.

Dollar, Dollars, U.S. Dollars and the symbol $ shall mean lawful money of the United States of America.

Drawing Date shall have the meaning assigned to that term in Section 2.9.3.2.

Environmental Complaint shall mean any written complaint by any Person or Official Body setting forth a cause of action for personal injury or property damage, natural resource damage, contribution or indemnity for response costs, civil or administrative penalties, criminal fines or penalties, or declaratory or equitable relief arising under any Environmental Laws or any order, notice of violation, citation, subpoena, request for information or other written notice or demand of any type issued by an Official Body pursuant to any Environmental Laws.

Environmental Laws shall mean all federal, state, local and foreign Laws and any consent decrees, settlement agreements, judgments, orders or directives issued by or entered into with an Official Body pertaining or relating to: (i) pollution or pollution control; (ii) protection of human health or the environment; (iii) employee safety in the workplace; (iv) the presence, use, management, generation, manufacture, processing, extraction, treatment, recycling, refining, reclamation, labeling, transport, storage, collection, distribution, disposal or release or threat of release of Regulated Substances; (v) the presence of Contamination; (vi) the protection of endangered or threatened species; and (vii) the protection of Environmentally Sensitive Areas.

Environmentallv Sensitive Area shall mean (i) any wetland as defined by applicable Environmental Laws; (ii) any area designated as a coastal zone pursuant to applicable Laws, including Environmental Laws; (iii) any area of historic or archeological significance or scenic area as defined or designated by applicable Laws, including Environmental Laws; (iv) habitats of endangered species or threatened species as designated by applicable Laws, including Environmental Laws; or (v) a floodplain or other flood hazard area as defined pursuant to any applicable Laws.

ERISA shall mean the Employee Retirement Income Security Act of 1974, as the same may be amended or supplemented from time to time. and any successor statute of similar import. and the rules and regulations thereunder. as from time to time in effect.

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ERlSA Grouo shall mean the Borrower and all members of a controlled L group of corporations and all trades or businesses (whether or not incorporated) under common control and all other entities which, together with the Borrower, are treated as a single employer under Section 4 14 of the Internal Revenue Code.

Euro-Rate shall mean, with respect to the Loans comprising any Borrowing Tranche to which the Euro-Kate Option applies for any Interest Period, the interest rate per annum determined by the Agent by dividing (the resulting quotient rounded upwards, if necessary. to the nearest 1/100th of 1% per annum) (i) the rate of interest determined by the Agent in accordance with its usual procedures (which determination shall be conclusive absent manifest error) to be the average of the London interbank offered rates for U.S. Dollars quoted by the British Bankers' Association as set forth on Moneyline Telerate (or appropriate successor or, if the British Bankers' Association or its successor ceases to provide such quotes, a comparable replacement determined by the Agent) display page 3750 (or such other display page on the Moneyline Telerate service as may replace display page 3750) two ( 2 ) Business Days prior to the first day of such Interest Period for an amount comparable to such Borrowing Tranche and having a borrowing date and a maturity comparable to such Interest Period by (ii) a number equal to 1 .OO minus the Euro-Rate Reserve Percentage. The Euro-Rate may also be expressed by the following formula:

Average of London interbank offered rates quoted by BBA or appropriate successor as shown on Moneyline Telerate Service displav Dage 3750 Euro-Rate =

1 .OO - Euro-Rate Reserve Percentage

The Euro-Rate shall be adjusted with respect to any Loan to which the Euro-Rate Option applies that is outstanding on the effective date of any change in the Euro-Kate Reserve Percentage as of such effective date. The Agent shall give prompt notice to the Borrower of the Euro-Rate as determined or adjusted in accordance herewith, which determination shall be conclusive absent manifest error.

Euro-Rate Option shall mean either the Revolving Credit Euro-Rate Option or the Term Loan Euro-Rate Option.

Euro-Rate Reserve Percentape shall mean as of any day the maximum percentage in effect on such day, as prescribed by the Board of Governors of the Federal Reserve System (or any successor) for determining the reserve requirements (including supplemental, marginal and emergency reserve requirements) with respect to eurocunency funding (currently referred to as "Eurocurrency Liabilities").

Event of Default shall mean any of the events described in Section 9.1 and referred to therein as an "Event of Default."

Executive Order No. 13224 shall mean the Executive Order No. 13224 on Terrorist Financing, effective September 24. 2001, as the same has been, or shall hereafter be. renewed, extended, amended or replaced.

ExDiration Date shall mean, with respect to the Revolving Credit Commitments and the Swing Loan Commitment, September 30,2010.

Federal Funds Effective Rate for any day shall mean the rate per annum (based on a year of 360 days and actual days elapsed and rounded upward to the nearest lil00 of I %) announced by the Federal Reserve Bank of New York (or any successor) on such day as being the weighted average of the rates on overnight federal hnds transactions arranged by federal funds brokers on the previous trading day, as computed and announced by such Federal Reserve Bank (or any successor) in substantially the same manner as such Federal Reserve Bank computes and announces the weighted average it refers to as the "Federal Funds Effective Rate" as of the date of this Agreement; provided, if such Federal Reserve Bank (or its successor) does not announce such rate on any day, the "Federal Funds Effective Rate" for such day shall be the Federal Funds Effective Rate for the last day on which such rate was announced.

Federal Funds OPen Rate. The rate per annum determined by the Agent in accordance with its usual procedures (which determination shall be conclusive absent manifest error) to be the "open" rate for federal h n d s transactions as of the opening of business for federal funds transactions among members of the Federal Reserve System arranged by federal funds brokers on such day, as quoted by Garvin Guybutler, any successor entity thereto, or any other broker selected by the Agent, as set forth on the applicable Telerate display page; provided, however; that if such day is not a Business Day, the Federal Funds Open Rate for such day shall be the "open" rate on the immediately preceding Business Day, or if no such rate shall be quoted by a Federal knds broker at such time, such other rate as determined by the Agent in accordance with its usual procedures.

Financial Proiections shall have the meaning assigned to that term in Section 6.1.9(ii).

Fitch shall mean Fitch LBCA, Duff & Phelps, a division of Fitch, Inc. and its successors.

GAAP shall mean generally accepted accounting principles as are in effect from time to time. subject to the provisions of Section 1.3, and applied on a consistent basis both as to classification of items and amounts.

Governmental Acts shall have the meaning assigned to that term in Section 2.9.8.

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Guarantor shall mean each of the parties to the Guaranty Agreement and each other Person which joins the Guaranty Agreement as a Guarantor after the date hereof pursuant to Section I I . 18.

Guarantor Joinder shall mean a joinder by a Person as a Guarantor under the Guaranty Agreement and the other applicable Loan Documents in the form of Exhibit 1.1 (GM 1).

Guarantv of any Person shall mean any obligation of such Person guaranteeing or in effect guaranteeing any liability or obligation of any other Person in any manner, whether directly or indirectly, including any agreement to indemnifi or hold harmless any other Person, any performance bond or other suretyship arrangement and any other form of assurance against loss, except endorsement of negotiable or other instruments for deposit or collection in the ordinary course of business.

Guarantv Aueement shall mean the Guaranty and Suretyship Agreement in substantially the form of Exhibit 1. I(GH2) executed and delivered by each of the Guarantors to the Agent for the benefit of the Lenders.

Hancock Note Purchase Agreement shall mean that certain Note Purchase Agreement dated as of October 12, 1995, as amended, of the Borrower pursuant to which it issued promissory notes in the original principal amount of $60,000,000 in favor of John Hancock Mutual Life Insurance Company.

Historical Statements shall have the meaning assigned to that term in Section 6.1.9(i).

Hybrid Securitv shall mean any of the following: (i) beneficial interests issued by a trust or other entity which constitutes a Loan Obligor or a Subsidiary of any Loan Obligor, substantially all of the assets of which trust or other entity are unsecured Indebtedness of any Loan Obligor or any Subsidiary of any Loan Obligor or proceeds thereof, and all payments of which Indebtedness are required to be, and are, distributed to the holders of beneficial interests in such trust promptly after receipt by such trust, or (ii) any shares of capital stock or other equity interest that, other than solely at the option of the issuer thereof, by their terms (or by the terms of any security into which they are convertible or exchangeable) are, or upon the happening of an event or the passage of time would be, required to be redeemed or repurchased. in whole or in part, or have, or upon the happening of an event or the passage of time would have, a redemption or similar payment.

- IGS shall mean IGS Utilities LLC, a West Virginia limited liability company.

Indebtedness shall mean, as to any Person at any time, any and all indebtedness. obligations or liabilities (whether matured or unmatured, liquidated or

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unliquidated, direct or indirect, absolute or contingent, or joint or several) of such Person for or in respect of: ( i ) borrowed money, ( i i ) amounts raised under or liabilities in respect of any note purchase or acceptance credit facility, ( i i i ) reimbursement obligations (contingent or otherwise) under any letter of credit, currency swap agreement, interest rate swap, cap, collar or floor agreement or other interest rate management device, (iv) any other transaction (including forward sale or purchase agreements, capitalized leases and conditional sales agreements) having the commercial effect of a borrowing of money entered into by such Person to finance its operations or capital requirements (but not including trade payables and accrued expenses incurred in the ordinary course of business which are not represented by a promissory note or other evidence of indebtedness and which are not more than thirty (30) days past due), (v) any Guaranty of Indebtedness for borrowed money, (vi) any Hybrid Security described in clause ( i ) of the definition of Hybrid Security, or (vii) the mandatory repayment obligation of the issuer of any Hybrid Security described in clause (ii) of the definition of Hybrid Security.

Ineligible Security shall mean any security which may not be underwritten or dealt in by member banks of the Federal Reserve System under Section 16 of the Banking Act of 1933 (I2 U.S.C. Section 24, Seventh), as amended.

Insolvencv Proceeding shall mean, with respect to any Person, (a) a case, action or proceeding with respect to such Person (i) before any court or any other Official Body under any bankruptcy, insolvency, reorganization or other similar Law now or hereafter in effect, or ( i i ) for the appointment of a receiver, liquidator, assignee, custodian, trustee, sequestrator, conservator (or similar official) of such Person or otherwise relating to the liquidation, dissolution, winding-up or relief of such Person, or (b) any general assignment for the benefit of creditors, composition, marshaling of assets for creditors, or other, similar arrangement in respect of such Person's creditors generally or any substantial portion of its creditors; undertaken under any Law.

Intercompanv Indebtedness shall mean indebtedness of any Loan Obligor to another Loan Obligor and interest and premiums, if any, thereon and other amounts payable in respect thereof.

Interest Period shall mean the period of time selected by the Borrower in connection with (and to apply to) any election permitted hereunder by the Borrower to have Revolving Credit Loans or Term Loans bear interest under the Euro-Rate Option. Subject to the last sentence of this definition, such period shall be one, two. three or six Months. Such Interest Period shall commence on the effective date of such Interest Rate Option, which shall be (i) the Borrowing Date if the Borrower is requesting new Loans, or ( i i ) the date of renewal of or conversion to the Euro-Rate Option if the Borrower is renewing or converting to the Euro-Rate Option applicable to outstanding Loans. Notwithstanding the second sentence hereofi (A) any Interest Period which would otherwise end on a date which is not a Business Day shall be extended to the next succeeding Business Day unless such Business Day falls in the next calendar month. in which case such Interest Period shall end on the next preceding Business Day, and (B) the Borrower shall not select, convert to or renew an Interest Period for any portion of

- 1 1 -

the Loans that would end after the Expiration Date, in the case of Revolving Credit Loans, or the Term Loan Maturity Date, in the case of Term Loans.

Interest Rate Hedpe shall mean an interest rate exchange, collar, cap, swap, adjustable strike cap, adjustable strike corridor or similar agreements entered into by the Loan Obligors or their Subsidiaries in order to provide protection to, or minimize the impact upon, the Borrower, the Guarantor and/or their Subsidiaries of increahg floating rates of interest applicable to Indebtedness.

Interest Rate ODtjon shall mean any Euro-Rate Option or Base Rate Option.

Interim Statements shall have the meaning assigned to that term in Section 6.1.9(i).

Internal Revenue Code shall mean the Internal Revenue Code of 1986, as the same may be amended or supplemented from time to time, and any successor statute of similar import, and the rules and regulations thereunder, as from time to time in effect.

Knowledge means, in the case of the Borrower or any Guarantor, (i) as of the Closing Date, the actual knowledge of any senior personnel of IGS or ArcLight, and (ii) after the Closing Date, the actual knowledge of any senior personnel of IGS, ArcLight or the Borrower.

Labor Contracts shall mean all collective bargaining agreements and other agreements among any Loan Obligor or Subsidiary of a Loan Obligor and a union or other representative of its employees.

- Law shall mean any law (including common law), constitution, statute, treaty, regulation, rule, ordinance, opinion, release, ruling, order, injunction, writ, decree, bond, judgment, authorization or approval, lien or award by or settlement agreement with any Official Body.

Lender Joinder shall have the meaning assigned to such term in Section I 1 . 1 I .5 [Successors and Assigns].

Lender-Provided Interest Rate Hedge shall mean an Interest Rate Hedge which is provided by any Lender and with respect to which the Agent confirms meets the following requirements: such Interest Rate Hedge (i) is documented in a standard International Swap Dealer Association Agreement, (ii) provides for the method of calculating the reimbursable amount of the provider's credit exposure in a reasonable and customary manner, and (iii) is entered into for hedging (rather than speculative) purposes. The liabilities of the Loan Obligors to the provider of any Lender-Provided Interest Rate Hedge (the "Hedge Liabilities") shall be

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"Obligations" hereunder, guaranteed obligations under the Guaranty Agreement and otherwise treated as Obligations for purposes of each of the other Loan Documents.

Lenders shall mean the financial institutions named on Schedule 1.1(B) and their respective successors and assigns as permitted hereunder. each of which is referred to herein as a Lender.

Letter of Credit shall have the meaning assigned to that term in Section 2.9.1.

Letter of Credit Borrowing shall have the meaning assigned to such term in Section 2.9.3.4.

Letter of Credit Fee shall have the meaning assigned to that term in Section 2.9.2.

Letters of Credit Outstanding; shall mean at any time the sum of (i) the aggregate undrawn face amount of outstanding Letters of Credit and (ii) the aggregate amount of all unpaid and outstanding Reimbursement Obligations and Letter of Credit Borrowings.

- Lien shall mean any mortgage, deed of trust, pledge, lien, security interest, charge or other encumbrance or security arrangement of any nature whatsoever, whether voluntarily or involuntarily given, including any conditional sale or title retention arrangement, and any assignment, deposit arrangement or lease intended as, or having the effect of, security and any filed financing statement or other notice of any of the foregoing (whether or not a lien or other encumbrance is created or exists at the time of the filing).

LLC Interests shall have the meaning given to such term in Section 6.1.3.

Loan Documents shall mean this Agreement, the Agent's Letter, the Guaranty Agreement, the Notes, and any other instruments, certificates or documents delivered or contemplated to be delivered hereunder or thereunder or in connection herewith or therewith, as the same may be supplemented or amended from time to time in accordance herewith or therewith. and Loan Document shall mean any of the Loan Documents.

Loan Obligors shall mean the Borrower and the Guarantors.

Loan Request shall have the meaning given to such term in Section 2.5. I .

Loans shall mean collectively and Loan shall mean separately all Revolving Credit Loans, Swing Loans and the Term Loans or any Revolving Credit Loan, Swing Loan or Term Loan.

Long Term Debt shall mean Indebtedness, on a consolidated basis, classified as "1,ong Term Debt" in accordance with GAAP, including the current portion thereof

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and including the outstanding balance of the Loans, the Seller Long-Term Liabilities, the Outstanding Senior Notes and the Senior Notes. For the purposes of this definition, the aggregate outstanding balance of the Revolving Credit Loans, Swing Loans and Letters of Credit Outstanding shall include the lowest average balance outstanding. if any, for a period of thirty (30) consecutive days during the twelve ( I 2 ) months immediately preceding any date of determination; provided however, for all periods preceding the Closing Date, the aggregate outstanding balance of the Revolving Credit Loans, Swing Loans and Letters of Credit Outstanding shall be deemed to be $25,000,000.

Manaaement Agreement shall mean the Operations Management Agreement between IGS and the Borrower entered into effective September 30,2005, which appoints IGS as manager of the Borrower to perform certain management and administrative services, as the same may be amended modified, supplemented or restated in accordance with Section 8.2.20 [No Modification of Acquisition Documents, Etc.].

Management ExPenses shall mean, for any period, the sum of all expenses, fees, salaries, awards, bonuses and other compensation paid or incurred (in any case, whether in cash or otherwise) by any Loan Obligor or any of its Subsidiaries to any Affiliate (other than Affiliates who are employees of such Loan Obligor or Subsidiary) in connection with services rendered with respect to the management or supervision of any Loan Obligor or any of its Subsidiaries pursuant to the Management Agreement or any other management agreement.

Material Adverse Change shall mean any set of circumstances or events which (a) has or could reasonably be expected to have any material adverse effect whatsoever upon the validity or enforceability of this Agreement or any other Loan Document, (b) is or could reasonably be expected to have a material adverse effect on the business, properties, assets, financial condition, results of operations or prospects of the Loan Obligors taken as a whole, (c) impairs materially or could reasonably be expected to impair materially the ability of the Borrower to duly and punctually pay or perform its Indebtedness, or (d) impairs materially or could reasonably be expected to impair materially the ability of the Agent or any of the Lenders. to the extent permitted, to enforce their legal remedies pursuant to this Agreement or any other Loan Document.

'

Month, with respect to an Interest Period under the Euro-Rate Option, shall mean the interval between the days in consecutive calendar months numerically corresponding to the first day of such Interest Period. If any Euro-Rate Interest Period begins on a day of a calendar month for which there is no numerically corresponding day in the month in which such Interest Period is to end, the final month of such Interest Period shall be deemed to 2nd on the last Business Day of such final month,

Moody's shall mean Moody's Investors Service. Inc. and its successors.

Multiemulover Plan shall mean any employee benefit plan which is a "multiemployer plan" within the meaning of Section 400 1 (a)(3) of ERISA and to which the

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Borrower or any member of the ERISA Group is then making or accruing an obligation to make contributions or, within the preceding five Plan years. has made or had an obligation to make such contributions.

Multiole Emdover Plan shall mean a Plan which has two or more contributing sponsors (including the Borrower or any member ofthe ERlSA Group) at least two of whom are not under common control, as such a plan is described in Sections 4063 and 4064 of ERISA.

Net Cash Proceeds shall mean. with respect to any transaction, an amount equal to the cash proceeds received by the Borrower or any of its Subsidiaries from or in respect of such transaction (including, when received, any cash proceeds received as income, other deferred cash proceeds or other cash proceeds of any non-cash proceeds of such transaction), less any expenses or charges (including commissions, fees and taxes paid or payable) reasonably incurred by such Person in respect of such transaction.

Yon-consenting Lender shall mean any Lender who does not agree to an approval, consent, waiver or amendment to the Loan Documents as requested by the Borrower or the Agent (which approval, consent, waiver or amendment has been approved by the Required Lenders) and the approval, consent, waiver or amendment of such Lender is required in accordance with the terms of Section 1 1 . 1 [Modifications, Amendments or Waivers].

- Notes shall mean the Revolving Credit Notes. the Swing Loan Note and the Term Notes.

Notices shall have the meaning assigned to that term in Section 1 1.6.

Oblipation shall mean any obligation or liability of any of the Loan Obligors to the Agent or any of the Lenders, howsoever created, arising or evidenced, whether direct or indirect, absolute or contingent, now or hereafter existing, or due or to become due, under or in connection with this Agreement, the Notes, the Letters of Credit, the Agent’s Letter or any other Loan Document. Obligations shall include the liabilities to any Lender under any Lender-Provided Interest Rate Hedge but shall not include the liabilities to other Persons under any other Interest Rate Hedge.

Official Body shall mean any national, federal, state, local or other government or political subdivision or any agency, authority, board, bureau, central bank, commission, department or instrumentality of either, or any court, tribunal, grand jury or arbitrator, in each case whether foreign or domestic.

Outstanding Senior Notes shall mean the Mountaineer Gas Company 7.59% Senior Notes Due October 1, 2010, in the aggregate original principal amount of $60,000,000 issued pursuant to the Hancock Note Purchase Agreement.

Parent shall mean Mountaineer Gas Holdings Limited Partnership, a West Virginia limited partnership.

Particioation Advance shall mean, with respect to any Lender. such Lender's payment in respect of its participation in a Letter of Credit Borrowing according to its Ratable Share pursuant to Section 2.9.3.4.

PartnershiP Interests shall have the meaning given to such term in Section 6.1.3.

PBGC shall mean the Pension Benefit Guaranty Corporation established pursuant to Subtitle A of Title IV of ERISA or any successor.

Permitted Acquisitions shall have the meaning assigned to such term in Section 8.2.6.

Permitted Investments shall mean:

(i) direct obligations of the United States of America or any agency or instrumentality thereof or obligations backed by the full faith and credit of the United States of America maturing in twelve (12) months or less from the date of acquisition; repurchase agreements and reverse repurchase agreements relating to marketable direct obligations issued or unconditionally guaranteed by the United States or issued by any agency thereof and backed by the full faith and credit of the United States maturing within 365 days from the date of acquisition;

(ii) commercial paper maturing in 180 days or less rated not lower than A- 1, by Standard & Poor's or P-1 by Moody's on the date of acquisition;

(iii) demand deposits, time deposits or certificates of deposit maturing within one year in commercial banks whose obligations are rated A-1, A or the equivalent or better by Standard & Poor's on the date of acquisition;

(iv) municipal securities, including auction rate securities and variable rate demand notes having a minimum of a long-term credit rating of A2 or A, or equivalent, using the lowest credit rating by Moody's, Standard & Poor's or Fitch, or with a short- term credit rating of A-l/P-2 or A-2/P-1, or equivalent, using the lowest credit rating by Moody's, Standard & Poor's or Fitch. lssues with only one short-term credit rating must have a minimum credit rating of A-1, P-1, F-1 or the equivalent;

(v) funds invested excIusively in the investments described in clauses (i) through (iv) above.

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Permitted Liens shall mean:

( i ) Liens for taxes. assessments. or similar charges, incurred in the ordinary course of business and which are not yet due and payable;

( i i ) Pledges or deposits made in the ordinary course of business to secure payment of workmen's compensation, or to participate in any fund in connection with workmen's compensation, unemployment insurance. old-age pensions or other social security programs;

( i i i ) Liens of mechanics, materialmen, warehousemen, carriers, or similar Liens, securing obligations incurred in the ordinary course of business that are not yet due and payable and Liens of landlords securing obligations to pay lease payments that are not yet due and payable or in default;

(iv) Good-faith pledges or deposits made in the ordinary course of business to secure performance of bids, tenders, contracts (other than for the repayment of borrowed money) or leases, not in excess of the aggregateamount due thereunder. or to secure statutory obligations, or surety, appeal, indemnity, performance or other similar bonds required in the ordinary course of business:

(v) Encumbrances consisting of zoning restrictions, easements o r other restrictions on the use of real property, none of which materially impairs the use of such property or the value thereof, and none of which is violated in any material respect by existing or proposed structures or land use;

(vi) described on Schedule 1,1(P), provided that the principal amount secured thereby is not hereafter increased, and no additional assets become subject to such Lien;

Any Lien existing on the date of this Agreement and

(vii) Purchase Money Security Interests and Liens on property subject to capital leases, provided that the aggregate amount of loans and deferred payments secured by such Purchase Money Security Interests and capital leases shall not exceed $10,000,000 in the aggregate at any one time (excluding for the purpose of this computation any loans or deferred payments secured by Liens described on Schedule 1.1 (P)));

(viii) such other rights, liens, imperfections in or failures of title, charges, easements, leases, licenses, restrictions, encumbrances, encroachments and defects and zoning, entitlement, conservation restriction and other land use and environmental regulations by Official Bodies, which, in each case. do not materially interfere with the present use of the Related Assets or the use of the properties owned by the Borrower or its Subsidiaries, as the case may be;

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(ix) provided that such matters do not materially interfere with the present use of the Related Assets or the use ofthe properties owned by the Borrower or any of its Subsidiaries, as the case may be, such matters as an accurate survey would show: and

(x) The following, (A) if the validity or amount thereof is being contested in good faith by appropriate and lawful proceedings diligently conducted so long as levy and execution thereon have been stayed and continue to be stayed or (B) if a final judgment is entered and such judgment is discharged within thirty (30) days of entry, and in either case they do not. in the aggregate, materially impair the ability of any Loan Obligor to perform its Obligations hereunder or under the other Loan Documents:

{ 1) Claims or Liens for taxes, assessments or charges due and payable and subject to interest or penalty, provided that the applicable Loan Obligor maintains such reserves or other appropriate provisions as shall be required by GAAP and pays all such taxes, assessments or charges forthwith upon the commencement of proceedings to foreclose any such Lien;

(2) Claims, Liens or encumbrances upon, and defects of title to, real or personal property, including any attachment of personal or real property or other legal process prior to adjudication of a dispute on the merits;

( 3 ) Claims or Liens of mechanics, materialmen, warehousemen, carriers, or other statutory nonconsensual Liens; or

(4) Liens resulting from final judgments or orders described in Section 9.1.6.

Person shall mean any individual, corporation, partnership, limited liability company, association, joint-stock company, trust, unincorporated organization, joint venture, government or politicaI subdivision or agency thereof, or any other entity.

- Plan shall mean at any time an employee pension benefit plan (including a Multiple Employer Plan, but not a Multiemployer Plan) which is covered by Title IV of ERISA or is subject to the minimum funding standards under Section 4 I2 of the Internal Revenue Code and is maintained by any member of the ERISA Group for employees of any member of the ERISA Group.

PNC Bank shall mean PNC Bank, National Association, its successors and ass i gns .

Potential Default shall mean any event or condition which with notice, passage of time or a determination by the Agent or the Required Lenders, or any combination of the foregoing, would constitute an Event of Default.

Princbal Office shall mean the main banking office of the Agent in Pittsburgh, Pennsylvania located at One PNC Plaza, 249 Fifth Avenue, Pittsburgh. PA 15222.

Prohibited 'Transaction shall mean any prohibited transaction as defined in Section 4975 ofthe Internal Revenue Code or Section 406 of ERISA for which neither an individual nor a class exemption has been issued by the United States Department of Labor.

Property shall mean all real property, both owned and leased, of any Loan Obligor or Subsidiary of a Loan Obligor.

Purchase Monev Securitv Interest shall mean Liens upon tangible persona1 property securing loans to any Loan Obligor or Subsidiary of a Loan Obligor or deferred payments by such Loan Obligor or Subsidiary for the purchase of such tangible personal property.

Purchasing Lender shall mean a Lender which becomes a party to this Agreement by executing an Assignment and Assumption Agreement.

Ratable Share shall mean the proportion that a Lender's Commitment (excluding the Swing Loan Commitment) bears to the Commitments (excluding the Swing Loan Commitments) of all of the Lenders.

Regulated Substances shall mean, without limitation. any substance, material or waste, regardless of its form or nature, defined under Environmental Laws as a "hazardous substance," "pollutant," "pollution," "contaminant," "hazardous or toxic substance," "extremely hazardous substance," "toxic chemical," "toxic substance," "toxic waste," "hazardous waste," "special handling waste," "industrial waste," "residual waste," "solid waste," "municipal waste,'' "mixed waste," "infectious waste," "chemotherapeutic waste," "medical waste," or "regulated substance" or any other material, substance or waste, regardless of its form or nature, which otherwise is regulated by Environmental Laws.

Regulation U shall mean Regulation U, T, or X as promulgated by the Board of Governors of the Federal Reserve System, as amended from time to time.

Reimbursement Obligation shall have the meaning assigned to such term in Section 2.9.3.2.

Related Assets shall have the meaning given to such term in the Acquisition Agreement and shall include the assets of the Seller (other than the stock of the Borrower) which were previously assets of WVPG and used by the Seller Party in transporting, distributing and selling natural gas to commercial, residential and industrial customers in the State of West Virginia.

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ReDortable Event shall mean a reportable event described in Section 4043 of EMSA and regulations thereunder with respect to a Plan, other than any such event for which the reporting obligation has been waived pursuant to regulations of the PBGC.

Reauired Environmental Notices shall mean all notices, reports, plans, forms or other filings which pursuant to Environmentai Laws, Required Environmental Permits or at the request or direction of an Official Body either must be submitted to an Official Body or which otherwise must be maintained.

Kequired Environmental Permits shall mean all permits, licenses. bonds, consents, approvals or authorizations required under Environmental Laws to own, occupy or maintain the Property or which otherwise are required by Environmental Laws for the operations and business activities of the Borrower or Guarantors.

Rewired Lenders shall mean

(i) if there are no Loans, Reimbursement Obligations or Letter of Credit Borrowings outstanding, Lenders whose Commitments (excluding the Swing Loan Commitment) aggregate more than 50% of the Commitments (excluding the Swing Loan Commitment) of all of the Lenders, or

(ii) if there are Loans, Reimbursement Obligations or Letter of Credit Borrowings outstanding, any Lender or group of Lenders if both (i) the sum of the Revolving Credit Loans, Reimbursement Obligations and Letter of Credit Borrowings of such Lenders then outstanding aggregates more than 50% of the total principal amount of all of such Revolving Credit Loans, Reimbursement Obligations and Letter of Credit Borrowings then outstanding, and (ii) the sum of the Term Loans of such Lenders then outstanding aggregates more than 50% of the total principal amount of all of Term Loans then outstanding. Reimbursement Obligations and Letter of Credit Borrowings shall be deemed, for purposes of this definition, to be in favor of the Agent and not a participating Lender if such Lender has not made its Participation Advance in respect thereof and shall be deemed to be in favor of such Lender to the extent of its Participation Advance if it has made its Participation Advance in respect thereof.

Rewired Share shall have the meaning assigned to such term in Section 5.7.

Revolving Credit Base Rate Ootion shall mean the option of the Borrower to have Revolving Credit Loans bear interest at the rate and under the terms and conditions set forth in Section 4.1. I (i).

Revolving Credit Commitment shall mean, as to any Lender at any time, the amount initially set forth opposite its name on Schedule 1. I CB) in the column labeled "Amount of Commitment for Revolving Credit Loans," and thereafter on Schedule I to the most

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recent Assignment and Assumption ‘4greement to which such Lender is a party or Lender Joinder. as applicable. as the same may be reduced from time to time pursuant to Section 5.4.4 [Voluntary Reduction of Commitments], and Revolving: Credit Commitments shall mean the aggregate Revolving Credit Commitments of all of the Lenders.

Revolving Credit Euro-Rate Oetion shall mean the option of the Borrower to have Revolving Credit Loans bear interest at the rate and under the terms and conditions set forth in Section 4. I . 1 (ii).

Revolving Credit Loans shall mean collectively and RevolvinP Credit Loan shall mean separately all Revolving Credit Loans or any Revolving Credit Loan made by the Lenders or one ofthe Lenders to the Borrower pursuant to Section 2.1.1 or 2.9.3.

Revolving Credit Notes shall mean collectively and Revolving Credit Note shall mean separately all the Revolving Credit Notes of the Borrower in the form of Exhibit l . l(R) evidencing the Revolving Credit Loans together with all amendments, extensions, renewals, replacements, refinancings or refundings thereof in whole or in part.

Revolving Facilitv Usage shall mean at any time the sum of the Revolving Credit Loans outstanding, the Swing Loans outstanding and the Letters of Credit Outstanding.

Section 20 Subsidiarv shall mean the Subsidiary of the bank holding company controlling any Lender, which Subsidiary has been granted authority by the Federal Reserve Board to underwrite and deal in certain Ineligible Securities.

Seller Low-Term Liabilities shall mean the obligation of the Borrower to pay the Seller Party and its Affiliates the “Affiliate Long-Term Liabilities” (as such term is defined in the Acquisition Agreement) as such amount is reduced pursuant to Schedule 3.1(c)(ii) of the Acquisition Agreement, together with all amendments, extensions, renewals, replacements, refinancings or refimdings thereof in whole or in part in accordance with Section 8.2.20 m o Modification of Acquisition Documents, Etc.].

Seller Partv shall mean Monongahela Power Company, an Ohio corporation.

Senior Notes shall mean (i) the Mountaineer Gas Company 7.83% Senior Notes Due October 3 1, 2009, in the aggregate original principal amount of $10.000.000 issued pursuant to that certain Note Purchase Agreement dated as of October 15, 1999 between the Borrower and Teachers Insurance Annuity Association of America, and (ii) the Mountaineer Gas Company 8.09% Senior Notes Due October 3 1, 20 19, in the aggregate original principal amount of $30,000,000 issued pursuant to that certain Note Purchase Agreement dated as of October 15, 1999 between the Borrower and Teachers Insurance Annuity Association of America, American United Life Insurance Company, The State Life Insurance Company and Berkshire Life Lnsurance Company.

- 2 1 -

Settlement Date shall mean the Business Day on which the Agent, in its sole discretion, elects to effect settlement pursuant to Section 5.7.

Shares shall have the meaning assigned to that term in Section 6.1.2.

Significant Loss shall have the meaning assigned to that term in Section 8.1.3.

Solvent shall mean, with respect to any Person on a particular date. that on such date ( i ) the fair value of the assets of such Person is greater than the total m o u n t of liabilities, including, without limitation, contingent liabilities. of such Person, (ii) the present fair salable value of the assets of such Person is not less than the m o u n t that will be required to pay the probable liability of such Person on its debts as they become absolute and matured, (iii) such Person is able to realize upon its assets and pay its debts and other liabilities, contingent obligations and other commitments as they mature in the normal course of business, (iv) such Person does not intend to, and does not believe that it will, incur debts or liabilities beyond such Person's ability to pay as such debts and liabilities mature, and (v) such Person is not engaged in business or a transaction, and is not about to engage in business or a transaction, for which such Person's property would constitute unreasonably small capital after giving due consideration to the prevailing practice in the industry in which such Person is engaged. In computing the amount of contingent liabilities at any time, it is intended that such liabilities will be computed at the amount which, in light of all the facts and circumstances existing at such time, represents the amount that can reasonably be expected to become an actual or matured liability.

Standard & Poor's shall mean Standard & Poor's Ratings Services, a division of The McGraw-Hill Companies, Inc., and its successors.

Subsidiary of any Person at any time shall mean (i) any corporation or trust of which 50% or more (by number of shares or number of votes) ofthe outstanding capital stock or shares of beneficial interest normally entitled to vote for the election of one or more directors or trustees (regardless of any contingency which does or may suspend or dilute the voting rights) is at such time owned directly or indirectly by such Person or one or more of such Person's Subsidiaries. (ii) any partnership of which such Person is a general partner or of which 50% or more of the partnership interests is at the time directly or indirectly owned by such Person or one or more of such Person's Subsidiaries, (iii) any limited liability company of which such Person is a member or of which 50% or more of the limited liability company interests is at the time directly or indirectly owned by such Person or one or more of such Person's Subsidiaries or (iv) any corporation, trust, partnership, limited liability company or other entity which is controlled or capable of being controlled by such Person or one or more of such Person's Subsidiaries.

Subsidiaw Shares shall have the meaning assigned to that term in Section 6.1.3.

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Swing Loans to the up to $10.000.000.

Swing Loan Commitment shall mean PNC Bank's commitment to make Borrower pursuant to Section 2.1.2 hereof in an aggregate principal amount

Swing Loan Note shall mean the Swing Loan Note of the Borrower in the form of Exhibit I . 1 CS) evidencing the Swing Loans, together with all amendments, extensions, renewals, replacements, refinancings or rehndings thereof in whole or in part.

Swing Loan Request shall mean a request for Swing Loans made in accordance with Section 2.5.2 hereof.

Swing Loans shall mean collectively and Swine; Loan shall mean separately all Swing Loans or any Swing Loan made by PNC Bank to the Borrower pursuant to Section 2.1.2 hereof.

Swdications Period shall mean the period between the Closing Date and the date on which the Commitment of PNC Bank has been reduced to an amount equal to $35,000,000 or less.

Term Loan shall have the meaning given to such term in Section 3.1 ; Term Loans shall mean collectively all of the Term Loans.

Term Loan Base Rate Option shall mean the option of the Borrower to have Term Loans bear interest at the rate and under the terms and conditions set forth in Section 4.1.2( i).

Term Loan Commitment shall mean, as to any Lender at any time, the amount initially set forth opposite its name on Schedule I.l(B) in the column labeled "Amount of Commitment for Term Loans," and thereafter on Schedule I to the most recent Assignment and Assumption Agreement, as the same may be reduced from time to time pursuant to Section 5 .5 [Mandatory Prepayments], and Term Loan Commitments shall mean the aggregate Term Loan Commitments of all of the Lenders.

Term Loan Commitment Fee shall have the meaning assigned to that term in Section 3.5.

Term Loan Euro-Rate Option shall mean the option of the Borrower to have Term Loans bear interest at the rate and under the terms and conditions set forth in Section 4.1.2(ii),

Term Loan Maturity Date shall mean, with respect to Term Loans, September 30. 2010.

Term Notes shall mean collectively and Term Note shall mean separately all of the Term Notes of the Borrower in the form of Exhibit I . 1(T) evidencing the Tenn Loans

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together with all amendments, extensions, renewals, replacements, refinancings or rehnds thereof in whole or in part.

Term Loan Recluest shall have the meaning given to such term in Section 3.1.

rransferor Lender shall mean the selling Lender pursuant to an Assignment and Assumption Agreement.

Transition Service Expenses shall mean, for any period, the sum of all expenses, fees, salaries, awards, bonuses and other compensation paid or incurred (in any case, whether in cash or otherwise) by any Loan Obligor or any of its Subsidiaries to the Seller Party or any Affiliate of the Seller Party is connection with transition services rendered immediately following the consummation of the Acquisition to any Loan Obligor or any of its Subsidiaries pursuant to the Transition Services Agreement.

Transition Services Agreement shall mean the Services Agreement dated as of September 30, 2005, between the Borrower and Allegheny Energy Service Corporation, a Maryland corporation, as the same may be amended, modified, supplemented or restated in accordance with Section 8.2.20 D o Modification of Acquisition Documents, Etc.].

2005 Rate Case Auuroval shall mean the Commission Order entered August 24, 2005 by the WVPSC approving the Joint Stipulation and Agreement for Settlement at Case No. 04-1595-6-421 and Case No. 04-1596-G-PC pending before the WVPSC.

Universal Coil shall mean Universal Coil, LLC, a West Virginia limited liability company.

USA Patriot Act shall mean the Uniting and Strengthening America by Providing Appropriate Tools Required to Intercept and Obstruct Terrorism Act of 2001, Public Law 107-56, as the same has been, or shall hereafter be, renewed, extended, amended or replaced.

WVPG shall mean West Virginia Power Gas Service, a division of the Seller Party.

WVPSC shall mean the Public Service Commission of West Virginia.

I .2 Construction.

Unless the context of this Agreement otherwise clearly requires. the following rules of construction shall apply to this Agreement and each of the other Loan Documents:

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1.2.1 Number; inclusion.

references to the plural include the singular, the plural. the part and the N hole; "or" has the inclusive meaning represented by the phrase "and/or." and "including" has the meaning represented by the phrase "including without limitation";

1.2.2 Determination.

references to "determination" of or by the Agent or the Lenders shall be deemed to include good-faith estimates by the Agent or the Lenders (in the case of quantitative determinations) and good-faith beliefs by the Agent or the Lenders (in the case of qualitative determinations) and such determination shall be conclusive absent manifest error;

1.2.3 Agent's Discretion and Consent.

whenever the Agent or the Lenders are granted the right herein to act in its or their sole discretion or to grant or withhold consent such right shall be exercised in good faith;

1.2.4 Documents Taken as a Whole.

the words "hereof," "herein," "hereunder," "hereto" and similar terms in this Agreement or any other Loan Document refer to this Agreement or such other Loan Document as a whole and not to any particular provision of this Agreement or such other Loan Document;

1.2.5 Headings.

the section and other headings contained in this Agreement or such other Loan Document and the Table of Contents (if any), preceding this Agreement or such other Loan Document are for reference purposes only and shall not control or affect the construction of this Agreement or such other Loan Document or the interpretation thereof in any respect;

1.2.6 implied References to this Agreement.

article, section, subsection, clause, schedule and exhibit references are to this Agreement or other Loan Document, as the case may be, unless otherwise specified;

1.2.7 Persons.

reference to any Person includes such Person's successors and assigns but, if applicable, only if such successors and assigns are permitted by this Agreement or such other Loan Document, as the case may be, and reference to a Person in a particular capacity excludes such Person in any other capacity;

1.2.8 Modifications to Documents.

reference to any agreement (including this Agreement and any other Loan Document together with the schedules and exhibits hereto or thereto). document or instrument means such agreement, document or instrument as amended, modified. replaced, substituted for. superseded or restated;

1.2.9 From, Tu and Through.

relative to the determination of any period of time, "from" means "from and including," "to" means "to but excluding," and "through" means "through and including"; and

1.2.10 Shall: Will.

references to "shall" and "will" are intended to have the same meaning.

I .3 Accounting Principles.

Except as otherwise provided in this Agreement, all computations and determinations as to accounting or financial matters and all financial statements to be delivered pursuant to this Agreement shall be made and prepared in accordance with GAAP (including principles of consolidation where appropriate), and all accounting or financial terms shall have the meanings ascribed to such terms by GAAP; provided, however, that all accounting terms used in Section 8.2 megative Covenants] (and all defined terms used in the definition of any accounting term used in Section 8.2) shall have the meaning given to such terms (and defined terms) under GAAP as in effect on the date hereof applied on a basis consistent with those used in preparing the Annual Statements referred to in Section 6.1.9(i) [Historical Statements]. In the event of any change after the date hereof in GAAP, and if such change would result in the inability to determine compliance with the financial covenants set forth in Section 8.2 based upon the Borrower's regularly prepared financial statements by reason of the preceding sentence, then the parties hereto agree to endeavor, in good faith, to agree upon an amendment to this Agreement that would adjust such financial covenants in a manner that would not affect the substance thereof, but would allow compliance therewith to be determined in accordance with the Borrower's financial statements at that time.

2. REVOLVING CREDIT AND SWING LOAN FACILITIES

2. I RevolvinP Credit Commitments.

2.1.1 Revolving Credit Loans.

Subject to the terms and conditions hereof and relying upon the representations and warranties herein set forth, each Lender severally agrees to make Revolving Credit Loans to

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the Borrower at any time or from time to time on or after the date hereof to the Expiration Date provided that after giving effect to such Loan the aggregate amount of Loans from such Lender shall not exceed such Lender's Revolving Credit Commitment minus such Lender's Ratable Share of the Letters of Credit Outstanding, and provided hrther that the Revolving Facility Usage at any time shall not exceed the Revolving Credit Commitments of all the Lenders. Within such limits of time and amount and subject to the other provisions of this Agreement, the Borrower may borrow, repay and reborrow Revolving Credit Loans pursuant to this Section 2.1.1.

2.1.2 Swing Loan Commitment.

Subject to the terms and conditions hereof and relying upon the representations and warranties herein set forth, and in order to facilitate loans and repayments between Settlement Dates, PNC Bank may, at its option, cancelable at any time for any reason whatsoever, make swing loans (the "Swing Loans") to the Borrower at any time or from time to time after the date hereof to, but not including, the Expiration Date, in an aggregate principal amount up to but not in excess of $10,000,000 (the "Swing Loan Commitment"), provided that the Revolving Facility Usage at any time shall not exceed the Revolving Credit Commitments and the Ratable Share of Swing Loans of all the Lenders. Within such limits of time and amount and subject to the other provisions of this Agreement, the Borrower may borrow, repay and reborrow Swing Loans pursuant to this Section 2.1,2. In no event shall the Borrower request a Swing Loan to pay the balance on an outstanding Swing Loan.

2.2 Nature of Lenders' Obligations with ResDect to Revolving Credit Loans.

Each Lender shall be obligated to participate in each request for Revolving Credit Loans pursuant to Section 2.5.1 [Revolving Credit Loan Requests] in accordance with its Ratable Share, The aggregate of each Lender's Revolving Credit Loans outstanding hereunder to the Borrower at any time shall never exceed its Revolving Credit Commitment minus its Ratable Share of the Swing Loans and the Letters of Credit Outstanding. The obligations of each Lender hereunder are several. The failure of any Lender to perform its obligations hereunder shall not relieve any other Lender of its obligations hereunder or affect the Obligations of the Borrower to any other party nor shall any other party be liable for the failure of such Lender to perform its obligations hereunder. The Lenders shall have no obligation to make Revolving Credit Loans hereunder on or after the Expiration Date.

3.3 Commitment Fees,

Accruing from the date hereof until the Expiration Date. or, if earlier, the date on which the Lenders' Revolving Credit Commitments terminate, the Borrower agrees to pay to the Agent for the account of each Lender, as consideration for such Lender's Revolving Credit Commitment hereunder, a nonrefundable commitment fee (the "Commitment Fee") equal to the Applicable Commitment Fee Rate (computed on the basis of a year of 365 or 366 days, as the case may be, and actual days elapsed) on the average daily difference between the amount of

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( i ) such Lender's Revolving Credit Commitment as the same may be constituted from time to time (for purposes of this computation, PNC Bank's Swing Loans shall be deemed to be borrowed amounts under its Revolving Credit Commitment) and the (ii) the sum of such Lender's Revolving Credit Loans outstanding plus its Ratable Share of Letters of Credit Outstanding. All Commitment Fees shall be payable in arrears on the first day of each January, April, July and October after the date hereof and on the Expiration Date or upon acceleration of the Notes.

2.4 [ fntentionally Omitted].

2.5 Revolving Credit Loan Requests; Swing Loan Requests

2.5.1 Revolving Credit Loan Reauests.

Except as otherwise provided herein, the Borrower may from time to time prior to the Expiration Date request the Lenders to make Revolving Credit Loans, or renew or convert the Interest Rate Option applicable to existing Revolving Credit Loans or Term Loans pursuant to Section 4.2 [Interest Periods], by delivering to the Agent, not later than 1O:OO a.m., Pittsburgh time, (i) three (3) Business Days prior to the proposed Borrowing Date with respect to the making of Revolving Credit Loans to which the Euro-Rate Option applies or the conversion to or the renewal of the Euro-Rate Option for any Loans; and (ii) one ( I ) Business Day prior to either the proposed Borrowing Date with respect to the making of a Revolving Credit Loan to which the Base Rate Option applies or the last day of the preceding Interest Period with respect to the conversion to the Base Rate Option for any Loan, of a duly completed request therefor substantially in the form of Exhibit 2.5.1 or a request by telephone immediately confirmed in writing by letter, facsimile or telex in such form (each, a "Loan Request"), it being understood that the Agent may rely on the authority of any individual making such a telephonic request without the necessity of receipt of such written confirmation. Each Loan Request shall be irrevocable and shall speciQ (i) the proposed Borrowing Date; (ii) the aggregate amount of the proposed Loans comprising each Borrowing Tranche, which shall be in integral multiples of $500,000 and not less than $1,000,000 for each Borrowing Tranche to which the Euro-Rate Option applies and in integral multiples of $100,000 and not less than $500,000 for each Borrowing Tranche to which the Base Rate Option applies; (iii) whether the Euro-Rate Option or Base Rate Option shall apply to the proposed Loans comprising the applicable Borrowing Tranche; and (iv) in the case of a Borrowing Tranche to which the Euro-Rate Option applies, an appropriate Interest Period for the Loans comprising such Borrowing Tranche.

2 .5 .2 Swing Loan Reauests.

Except as otherwise provided herein, the Borrower may from time to time prior to the Expiration Date request PNC Bank to make Swing Loans by delivery to PNC Bank not later than 1 :00 p.m. Pittsburgh time on the proposed Borrowing Date of a duly completed request therefor substantially in the form of Exhibit 2.5.2 hereto or a request by telephone immediateiy confirmed in writing by letter, facsimile or telex (each, a "Swing Loan Request"), i t

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being understood that the Agent may rely on the authority of any individual making such a telephonic request without the necessity of receipt of such written confirmation. Each Swing Loan Request shall be irrevocable and shall specify the proposed Borrowing Date and the principal amount of such Swing Loan. which shall be not less than $100,000 and in integral niultiples of $100.000.

3.6 Making Revolving Credit Loans and Swing Loans.

2.6.1 Making Revolving Credit Loans.

The Agent shall, promptly after receipt by it of a Loan Request pursuant to Section 2.5.1 [Revolving Credit Loan Requests], notify the Lenders of its receipt of such Loan Request specifying: (i) the proposed Borrowing Date and the time and method of disbursement of the Revolving Credit Loans requested thereby; (ii) the amount and type of each such Revolving Credit Loan and the applicable Interest Period (if any); and (iii) the apportionment among the Lenders of such Revolving Credit Loans as determined by the Agent in accordance with Section 2.2 mature of Lenders' Obligations]. Each Lender shall remit the principal amount of each Revolving Credit Loan to the Agent such that the Agent is able to, and the Agent shall, to the extent the Lenders have made funds available to it for such purpose and subject to Section 7.2 [Each Additional Loan], fund such Revolving Credit Loans to the Borrower in US. Dollars and immediately available funds at an account of the Borrower designated by the Borrower in the applicable Loan Request prior to 2:OO p.m., Pittsburgh time, on the applicable Borrowing Date, provided that if any Lender fails to remit such funds to the Agent in a timely manner, the Agent may elect in its sole discretion to fund with its own funds the Revolving Credit Loans of such Lender on such Borrowing Date. and such Lender shall be subject to the repayment obligation in Section 10.16 [Availability of Funds].

2.6.2 Making Swing Loans.

So long as PNC Bank elects to make Swing Loans, PNC Bank shall, after receipt by it of a Swing Loan Request pursuant to Section 2.5.2, fund such Swing Loan to the Borrower in U.S. Dollars and immediately available hnds at an account of the Borrower designated by the Borrower in the applicable Swing Loan Request prior to 4:OO p.m. Pittsburgh time on the Borrowing Date.

2.7 Revolving Credit Notes; Swing Loan Note.

2.7.1 Revolving Credit Notes.

The Obligation of the Borrower to repay the aggregate unpaid principal amount of the Revolving Credit Loans made to it by each Lender, together with interest thereon, shall be evidenced by a Revolving Credit Note dated the Closing Date payable to the order of such Lender in a face amount equal to the Revolving Credit Commitment of such Lender.

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2.7.2 Swing Loan Note.

The obligation ofthe Borrower to repay the unpaid principal amount of the Swing Loans made to it by PNC Bank together with interest thereon shall be evidenced by a demand promissory note of the Borrower dated the Closing Date in substantially the form attached hereto as Exhibit 1 . 1 6 ) payable to the order of PNC Bank in a face amount equal to the Swing Loan Commitment.

2.8 Use of Proceeds.

The proceeds of the Revolving Credit Loans shall be used (i) to finance a portion of the "Purchase Price" as set forth in Sections 3.1(b)(ii) and 3.l(c) of the Acquisition Agreement, (ii) to finance Permitted Acquisitions, (iii) to pay certain transaction costs and expenses associated with the Acquisition, and (iv) for general working capital and corporate purposes, all in accordance with Section 8.1.10 [Use of Proceeds].

2.9 Letter of Credit Subfacilitv.

2.9.1 Issuance of Letters of Credit.

Borrower may request the issuance of a letter of credit (each a "Letter of Credit") on behalf of itself or another Loan Obligor by delivering or having such other Loan Obligor deliver to the Agent a completed application and agreement for letters of credit in such form as the Agent may specify from time to time by no later than 1O:OO a.m., Pittsburgh time, at least five ( 5 ) Business Days, or such shorter period as may be agreed to by the Agent, in advance of the proposed date of issuance, Subject to the terms and conditions hereof and in reliance on the agreements of the other Lenders set forth in this Section 2.9, the Agent or any of the Agent's Affiliates will issue a Letter of Credit provided that each Letter of Credit shall (A) have a maximum maturity of twelve (12) months from the date of issuance, and (B) in no event expire later than ten ( I O ) Business Days prior to the Expiration Date and providing that in no event shall (i) the Letters of Credit Outstanding exceed, at any one time, $135,000,000 or (ii) the Revolving Facility Usage exceed, at any one time, the Revolving Credit Commitments.

2.9.2 Letter of Credit Fees.

The Borrower shall pay (i) to the Agent for the ratable account of the Lenders a fee (the "Letter of Credit Fee") equal to the Applicable Letter of Credit Fee Rate then in effect, and (ij) to the Agent for its own account a fronting fee equal to .125% per annum (computed on the basis of a year of 360 days and actual days elapsed), which fees shall be computed on the daily average Letters of Credit Outstanding and shall be payable quarterly in arrears commencing with the first of each January, April, July and October following issuance of each Letter of Credit and on the Expiration Date. The Borrower shall also pay to the Agent for the Agent's sole account the Agent's then in effect customary fees and administrative expenses payable with respect to the Letters of Credit as the Agent may generally charge or incur from

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time to time in connection with the issuance, maintenance, modification (if any), assignment or transfer (if any), negotiation, and administration of Letters of Credit.

2.9.3 Disbursements. Reimbursement.

2.9.3.1 Immediately upon the Issuance of each Letter of Credit, each Lender shall be deemed to, and hereby irrevocably and unconditionally agrees to. purchase from the Agent a participation in such Letter of Credit and each drawing thereunder in an amount equal to such Lender’s Ratable Share of the maximum amount available to be drawn under such Letter of Credit and the amount of such drawing, respectively.

2.9.3.2 In the event of any request: for a drawing under a Letter of Credit by the beneficiary or transferee thereof, the Agent wiIl promptly notify the Borrower. Provided that it shall have received such notice prior to 1:OO p.m., Pittsburgh time (the “L/C Draw Notice“), the Borrower shall reimburse (such obligation to reimburse the Agent shall sometimes be referred to as a “Reimbursement Obligation“) the Agent prior to 3:OO p.m., Pittsburgh time on each date that an amount is paid by the Agent under any Letter of Credit (each such date, an “Drawing Date”) in an amount equal to the amount so paid by the Agent. In the event the Borrower fails to reimburse the Agent for the full amount of any drawing under any Letter of Credit by 3:OO p.m., Pittsburgh time, on the Drawing Date (or by 1O:OO a.m.. Pittsburgh time on the next Business Day immediately after the Drawing Date if the L/C Draw Notice is not received by the Borrower before 1 :00 p.m., Pittsburgh time), the Agent will promptly notify each Lender thereof. and the Borrower shall be deemed to have requested that Revolving Credit Loans be made by the Lenders under the Base Rate Option to be disbursed on the Drawing Date under such Letter of Credit, subject to the amount of the unutilized portion of the Revolving Credit Commitment and subject to the conditions set forth in Section 7.2 [Each Additional Loan] other than any notice requirements. Any notice given by the Agent pursuant to this Section 2.9.3.2 may be oral if immediately confirmed in writing; provided that the lack of such an immediate confirmation shall not affect the conclusiveness or binding effect of such notice. In the event the Borrower is deemed to have requested the Revolving Credit Loans as described above, the Borrower’s obligation to pay the Reimbursement Obligation shall convert to the repayment of the corresponding Revolving Credit Loans in accordance with the terms of this Agreement.

2.9.3.3 Each Lender shall upon any notice pursuant to Section 2.9.3.2 make available to the Agent an amount in immediately available finds equal to its Ratable Share of the amount of the drawing, whereupon the participating Lenders shall (subject to Section 2.9.3.4) each be deemed to have made a Revolving Credit Loan under the Base Rate Option to the Borrower in that amount. If any Lender so notified fails to make available to the Agent for the account of the Agent the amount of such Lender‘s Ratable Share of such amount by no later than 2 : O O p.m., Pittsburgh time on the Drawing Date, then interest shall accrue on such Lender‘s obligation to make such payment, from the Drawing Date to the date on which such Lender makes such payment (i) at a rate per annum equal to the Federal Funds Effective Rate during the first three days following the Drawing Date and (ii) at a rate per annum equal to the rate applicable to Loans under the Revolving Credit Base Rate Option on and after the fourth day

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following the Drawing Date. The Agent will promptly give notice of the occurrence of the Drawing Date, but failure of the Agent to give any such notice on the Drawing Date or in sufficient time to enable any Lender to ef'fect such payment on such date shall not relieve such Lender from its obligation under this Section 2.9.3.3.

2.9.3.4 With respect to any unreimbursed drawing that is not converted into Revolving Credit Loans under the Base Rate Option to the Borrower in whole or in part as contemplated by Section 2.9.3.2, because of the Borrower's failure to satisfy the conditions set forth in Section 7.2 [Each Additional Loan] other than any notice requirements or for any other reason, the Borrower shall be deemed to have incurred from the Agent a borrowing (each a "Letter of Credit Borrowing") in the amount of such drawing. Such Letter of Credit Borrowing shall be due and payable on demand (together with interest) and shall bear interest at the rate per annum applicable to the Revolving Credit Loans under the Base Rate Option. Each Lender's payment to the Agent pursuant to Section 2.9.3.3 shall be deemed to be a payment in respect of its participation in such Letter of Credit Borrowing and shall constitute a "Participation Advance" from such Lender in satisfaction of its participation obligation under this Section 2.9.3.

2.9.4 ReDavment of Participation Advances.

2.9.4.1 Upon (and only upon) receipt by the Agent for its account of immediately available funds from the Borrower (i) in reimbursement of any payment made by the Agent under the Letter of Credit with respect to which any Lender has made a Participation Advance to the Agent, or (ii) in payment of interest on such a payment made by the Agent under such a Letter of Credit, the Agent will pay to each Lender, in the same hnds as those received by the Agent, the amount of such Lender's Ratable Share of such funds, except the Agent shall retain the amount of the Ratable Share of such funds of any Lender that did not make a Participation Advance in respect of such payment by Agent.

2.9.4.2 If the Agent is required at any time to return to any Loan Obligor, or to a trustee, receiver, liquidator, custodian, or any official in any insolvency Proceeding, any portion of the payments made by any Loan Obligor to the Agent pursuant to Section 2.9.4.1 in reimbursement of a payment made under the Letter of Credit or interest or fee thereon, each Lender shall, on demand of the Agent, forthwith return to the Agent the amount of its Ratable Share of any amounts so returned by the Agent plus interest thereon from the date such demand is made to the date such amounts are returned by such Lender to the Agent, at a rate per annum equal to the Federal Funds Effective Rate in effect from time to time.

2.9.5 Documentation.

The Borrower agrees to be bound by the terms of the Agent's application and agreement for letters of credit and the Agent's written regulations and customary practices relating to letters of credit, though such interpretation may be different from the Borrower's own. In the event of a conflict between such application or agreement and this Agreement, this Agreement shall govern. It is understood and agreed that, except in the case of gross negligence

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or willfid misconduct, the Agent shall not be liable for any error, negligence and/or mistakes, whether of omission or commission, in following the Borrower's instructions or those contained in the Letters of Credit or any modifications. amendments or supplements thereto.

2.9.6 Determinations to Honor Drawing Requests.

In determining whether to honor any request for drawing under any Letter ofcredit by the beneficiary thereof, the Agent shall be responsible only to determine that the documents and certificates required to be delivered under such Letter of Credit have been delivered and that they comply on their face with the requirements of such Letter of Credit.

2.9.7 Nature of Participation and Reimbursement Obligations.

Each Lender's obligation in accordance with this Agreement to make the Revolving Credit Loans or Participation Advances, as contemplated by Section 2.9.3, as a result of a drawing under a Letter of Credit, and the Obligations of the Borrower to reimburse the Agent upon a draw under a Letter of Credit, shall be absolute, unconditional and irrevocable, and shall be performed strictly in accordance with the terms of this Section 2.9 under all circumstances, including the following circumstances:

(i) any set-off, counterclaim, recoupment, defense or other right which such Lender may have against the Agent or any of its Affiliates, the Borrower or any other Person for any reason whatsoever:

(ii) the failure of the Borrower or any other Person to comply, in connection with a Letter of Credit Borrowing, with the conditions set forth in Section 2.1.1 [Revolving Credit Commitments], 2.5.1 [Revolving Credit Loan Requests], 2.6.1 [Making Revolving Credit Loans J or 7.2 [Each Additional Loan] or as otherwise set forth in this Agreement for the making of a Revolving Credit Loan, it being acknowledged that such conditions are not required for the making of a Letter of Credit Borrowing and the obligation of the Lenders to make Participation Advances under Section 2.9.3;

(iii) any lack of validity or enforceability of any Letter of Credit:

(iv) any claim of breach of warranty that might be made by any Loan Obligor or any Lender against any beneficiary of a Letter of Credit, or the existence of any claim, set-off, recoupment, counterclaim, crossclaim, defense or other right which any Loan Obligor or any Lender may have at any time against a beneficiary, successor beneficiary any transferee or assignee of any Letter of Credit or the proceeds thereof (or any Persons for whom any such transferee may be acting), the Agent or its Affiliates or any Lender or any other Person or, whether in connection with this Agreement, the transactions contemplated herein or any unrelated transaction (including any underlying transaction between any Loan Obligor or Subsidiaries of a Loan Obligor and the beneficiary for which any Letter of Credit was procured);

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(v) the lack of power or authority of any signer of (or any defect in or forgery of any signature or endorsement on) or the form of or lack of validity, sufficiency, accuracy. enforceability or genuineness of any draft, demand, instrument, certificate or other document presented under or in connection with any Letter of Credit, or any fraud or alleged fraud in connection with any Letter of Credit, or the transport of any property or provisions of services relating to a Letter of Credit, in each case even if the lZgent or any of the Agent's Affiliates has been notified thereof;

(vi) payment by the Agent or any of its Affiliates under any Letter of Credit against presentation of a demand, draft or certificate or other document which does not comply with the terms of such Letter of Credit;

(vii) the solvency of, or any acts of omissions by, any beneficiary of any Letter of Credit, or any other Person having a role in any transaction or obligation relating to a Letter of Credit, or the existence, nature, quality, quantity, condition, value or other characteristic of any property or services relating to a Letter of Credit;

(viii) any failure by the Agent or any of Agent's Affiliates to issue any Letter of Credit in the form requested by the Borrower, unless the Agent has received written notice from the Borrower of such failure within three Business Days after the Agent shall have hrnished the Borrower a copy of such Letter of Credit and such error is material and no drawing has been made thereon prior to receipt of such notice;

(ix) any adverse change in the business, operations, properties, assets, condition (financial or otherwise) or prospects of any Loan Obligor or Subsidiaries of a Loan Ob1 igor;

(x) any breach of this Agreement or any other Loan Document by any party thereto;

(xi) the occurrence or continuance of an Insolvency Proceeding with respect to any Loan Obligor;

(xii) the fact that an Event of Default or a Potential Default shall have occurred and be continuing;

(xiii) the fact that the Expiration Date shall have passed or this Agreement or the Commitments hereunder shall have been terminated; and

(xiv) any other circumstance or happening whatsoever, whether or not similar to any of the foregoing;

provided that nothing in this Section 2.9.7 shall relieve the Agent from liability for the Agent's gross negligence or willhl misconduct in connection with actions or omissions described in clauses (i) through (xiv) above.

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2.9.8 lndemn itv.

In addition to amounts payable as provided in Section 10.5 [Reimbursement of Agent by Borrower. Etc.], the Borrower hereby agrees to protect, indemnify, pay and save harmless the Agent and any of Agent's Affiliates that has issued a Letter of Credit from and against any and all claims. demands, liabilities, damages, taxes. penalties, interest, judgments, losses. costs. charges and expenses (including reasonable fees, expenses and disbursements of counsel and allocated costs of internal counsel) which the Agent or any of Agent's Affiliates may incur or be subject to as a consequence, direct or indirect, of the issuance of any Letter of Credit, other than as a result of (A) the gross negligence or willful misconduct of the Agent as determined by a final judgment of a court of competent jurisdiction or (8) the wrongful dishonor by the Agent or any of Agent's Affiliates of a proper demand for payment made under any Letter of Credit, except if such dishonor resulted from any act or omission, whether rightful or wrongful, of any present or future de jure or de facto government or governmental authority (all such acts or omissions herein called "Governmental Acts").

2.9.9 Liabilitv for Acts and Omissions.

As between the Borrower and the Agent, or the Agent's Affiliates, the Borrower assumes all risks of the acts and omissions of, or misuse of the Letters of Credit by, the respective beneficiaries of such Letters of Credit. In hrtherance and not in limitation of the foregoing, the Agent shall not be responsible for any of the following including any losses or damages to any Loan Obligor or other Person or property relating therefrom: (i) the form, validity, sufficiency, accuracy, genuineness or legal effect of any document submitted by any party in connection with the application for an issuance of any such Letter of Credit, even if it should in fact prove to be in any or all respects invalid, insufficient, inaccurate, fraudulent or forged (even if the Agent or the Agent's Affiliates shall have been notified thereof); (ii) the validity or sufficiency of any instrument transferring or assigning or purporting to transfer or assign any such Letter of Credit or the rights or benefits thereunder or proceeds thereof, in whole or in part, which may prove to be invalid or ineffective for any reason; (iii) the failure of the beneiiciary of any such Letter of Credit, or any other party to which such Letter of Credit may be transferred, to comply fully with any conditions required in order to draw upon such Letter of Credit or any other claim of any Loan Obligor against any beneficiary of such Letter of Credit, or any such transferee, or any dispute between or among any Loan Obligor and any beneficiary of any Letter of Credit or any such transferee; (iv) errors, omissions, interruptions or delays in transmission or delivery of any messages, by mail, cable, telegraph, telex or otherwise, whether or not they be in cipher; (v) errors in interpretation of technical terms; (vi) any loss or delay in the transmission or otherwise of any document required in order to make a drawing under any such Letter of Credit or of the proceeds thereofi (vii) the misapplication by the beneficiary of any such Letter of Credit of the proceeds of any drawing under such Letter of Credit; or (viii) any consequences arising from causes beyond the control of the Agent or the Agent's Affiliates, as applicable, including any Governmental Acts, and none of the above shall affect or impair. or prevent the vesting of. any of the Agent's or the Agent's Affiliates rights or powers hereunder.

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Nothing in the preceding sentence or the following two paragraphs of this Section 2.9.9 shall relieve the Agent from liability for the Agent's gross negligence or willful misconduct in connection with actions or omissions described in such clauses ( i ) through (vi i i ) of such sentence or the following two paragraphs of this Section 2.9.9. [n no event shall the Agent or the Agent's Affiliates be liable to any Loan Obligor for any indirect. consequential, incidental, punitive, exemplary or special damages or expenses (including without limitation attorneys' fees), or for any damages resulting from any change in the value of any property relating to a Letter of Credit.

Without limiting the generality of the foregoing, the Agent and each of its Affiliates ( i ) may rely on any oral or other communication believed in good faith by the Agent or such Affiliate to have been authorized or given by or on behalf of the applicant for a Letter of Credit, (ii) may honor any presentation if the documents presented appear on their face substantially to comply with the terms and conditions of the relevant Letter of Credit; (iii) may honor a previously dishonored presentation under a Letter of Credit, whether such dishonor was pursuant to a court order, to settle or compromise any claim of wrongful dishonor, or otherwise, and shall be entitled to reimbursement to the same extent as if such presentation had initially been honored, together with any interest paid by the Agent or its Afliliate; (iv) may honor any drawing that is payable upon presentation of a statement advising negotiation or payment, upon receipt of such statement (even if such statement indicates that a draft or other document is being delivered separately), and shall not be liable for any failure of any such draft or other document to arrive, or to conform in any way with the relevant Letter of Credit; (v) may pay any paying or negotiating bank claiming that it rightfully honored under the laws or practices of the place where such bank is located; and (vi) may settle or adjust any claim or demand made on the Agent or its Affiliate in any way related to any order issued at the applicant's request to an air carrier, a letter of guarantee or of indemnity issued to a carrier or any similar document (each an "Order") and honor any drawing in connection with any Letter of Credit that is the subject to such Order, notwithstanding that any drafts or other documents presented in connection with such Letter of Credit fail to conform in any way with such Letter of Credit.

In furtherance and extension and not in limitation of the specific provisions set forth above, any action taken or omitted by the Agent or the Agent's Affiiiates under or in connection with the Letters of Credit issued by it or any documents and certificates delivered thereunder, if taken or omitted in good faith, shall not put the Agent or the Agent's Affiliates under any resulting liability to the Borrower or any Lender.

2.10 Borrowings to Repay Swing Loans.

PNC Bank may, at its option, exercisable at any time for any reason whatsoever, demand repayment of the Swing Loans, and each Lender shall make a Revolving Credit Loan in an amount equal to such Lender's Ratable Share of the aggregate principal amount of the outstanding Swing Loans, plus. if PNC Bank so requests, accrued interest thereon, provided that no Lender shall be obligated in any event to make Revolving Credit Loans in excess of its Revolving Credit Commitment. Revolving Credit Loans made pursuant to the preceding sentence shall bear interest at the Base Rate Option and shall be deemed to have been properly

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requested in accordance with Section 2.5.1 without regard to any of the requirements of that provision. PNC Bank shall provide notice to the Lenders (which may be telephonic or written notice by letter, facsimile or telex) that such Revolving Credit Loans are to be made under this Section 2.10 and of the apportionment among the Lenders, and the Lenders shall be unconditionally obligated to fund such Revolving Credit Loans (whether or not the conditions specified in Section 2.5.1 are then satisfied) by the time PNC Bank so requests, which shall not be earlier than 3 : O O p.m. Pittsburgh time on the Business Day next after the date the Lenders receive such notice from PNC Bank. Notwithstanding the foregoing, Swing Loans shall be repaid not more than fourteen (14) days after the making of the Swing Loan and in no event after the Expiration Date.

2.1 1

Provided no Event of Default or Potential Default has occurred and is continuing, if the Borrower wishes to increase the Revolving Credit Commitments, the Borrower shall notify the Agent thereof, provided that any such increase shall be requested in a minimum of $20,000,000 (it being understood that the amount of any actual increase shall be determined by the extent to which Lenders are willing to increase Revolving Credit Commitments and any Additional Lenders join in this Agreement as provided in Section 1 1.1 I .5 [Successors and Assigns]) and the aggregate of all such increases in the Revolving Credit Commitments shall not zxceed $40,000.000 after the Closing Date. Each Lender shall have the right at any time within thirty (30) days following such notice to increase its respective Revolving Credit Commitment so as to provide such added commitment pro rata in accordance with such Lender's Ratable Share. and any portion of such requested increase that is not provided by any Lender shall: (i) first be available to the other Lenders pro rata in accordance with their Ratable Share, (ii) next be available to the other Lenders in such a manner as the Borrower, the Agent and those Lenders shall agree, and (iii) thereafter, to the extent not provided by the Lenders, to any additional lender proposed by the Borrower, which is approved by the Agent (which approval shall not be unreasonably withheld) and that becomes a party to this Agreement pursuant to Section 1 1.1 1 [Successors and Assigns]. In the event of any such increase in the aggregate Revolving Credit Commitments effected pursuant to the terms of this Section 2.1 1, new Revolving Credit Notes shall, to the extent necessary, be executed and delivered by the Borrower in exchange for the surrender of the existing Revolving Credit Notes.

Right to Increase Revolving Credit Commitments.

3. TERM LOANS

3 . I Term Loan Commitments; Term Loan Requests.

Subject to the terms and conditions hereof. and relying upon the representations and warranties herein set forth, each Lender severally agrees to make a term loan (the "Term Loan") to the Borrower on or before the Delayed Draw Request Termination Date in such principal amount as the Borrower shall request up to. but not exceeding such Lender's Term Loan Commitment. Borrower may at any time prior to the Delayed Draw Request 'Termination Date

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request the Lenders to make the Term Loans. but the Borrower shall make only one such request, and the Lenders shall be obligated only to advance the Term Loan on one occasion. The Borrower shall make a request for the Term Loans in a duly completed request therefor substantially in the form of Exhibit 3.1 (the "Term Loan Request") or a request by telephone immediately confirmed in writing by letter, facsimile or telex in such form.

3.2 Nature of Lenders' Obligations with ResDect to Term Loans.

The obligations of each Lender to make Term Loans to the Borrower shall be in the proportion that such Lender's Term Loan Commitment bears to the Term Loan Commitments of all Lenders to the Borrower, but each Lender's Term Loan to the Borrower shall never exceed its Term Loan Commitment. The failure of any Lender to make a Term Loan shall not relieve any other Lender of its obligations to make a Term Loan nor shall it impose any additional liability on any other Lender hereunder. The Lenders shall have no obligation to make Term Loans hereunder after the Delayed Draw Request Termination Date. The Term Loan Commitments are not revolving credit commitments, and the Borrower shall not have the right to borrow, repay and rebonow Term Loans under Section 3.1 [Term Loan Commitments]. The Term Loan Commitment shall automatically terminate on the Delayed Draw Request Termination Date.

3.3 Term Loan Notes.

The Obligation of the Borrower to repay the unpaid principal amount of the Term Loans made to it by each Lender, together with interest thereon, shall be evidenced by a Term Note dated the Closing Date payable to the order of each Lender in a face amount equal to the Term Loan of such Lender. The principal amount as provided therein of the Term Notes shall be due and payable in consecutive quarterly installments on the first day of each January, April, July and October commencing on October 1,2007, with each installment in an amount as set forth below:

Pament Date January 1,2008 through October 1,2009 $3,750,000

Amount of Ouarterlv Pament

January 1,2010 through July 1, 20 10 $5,000,000

Term Loan Maturity Date Remaining principal and interest.

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3 .I Use of Proceeds.

The proceeds of the Term Loans shall be used to redeem and prepay in full the principal of and accrued and unpaid interest on the Senior Notes, and any premium related to the prepayment thereof. and in accordance with Section 8.1. I O [Use of Proceeds].

3.5 Term Loan Commitment Fee.

Accruing from the date hereof until the earlier of ( i ) the date upon which the Lenders make the Term Loans or (i i) the Delayed Draw Request Termination Date, the Borrower agrees to pay to the Agent for the account of each Lender, as consideration for such Lender’s Term Loan Commitment hereunder, a nonrehndable commitment fee (the “Term Loan Commitment Fee”) equal to .275% per annum (computed on the basis of a year of 365 or 366 days, as the case may be, and actual days elapsed) on the amount of each Lender‘s Term Loan Commitment. All such Term Loan Commitment Fees shall be payable in arrears on November 15, 2005, or upon acceleration of the Notes

4. INTEREST RATES

4.1 Interest Rate Ootions.

The Borrower shall pay interest in respect of the outstanding unpaid principal amount of the Loans as selected by it from the Base Rate Option or Euro-Rate Option set forth below applicable to the Loans, it being understood that, subject to the provisions of this Agreement, the Borrower may select different Interest Rate Options and different Interest Periods to apply simultaneously to the Loans comprising different Borrowing Tranches and may convert to or renew one or more Interest Rate Options with respect to all or any portion of the Loans comprising any Borrowing Tranche, provided that there shall not be at any one time outstanding more than ten ( 10) Borrowing Tranches in the aggregate among all of the Loans, and provided further that only the Base Rate Option shall apply to the Swing Loans. If at any time the designated rate applicable to any Loan made by any Lender exceeds such Lender’s highest lawfbl rate, the rate of interest on such Lender’s Loan shall be limited to such Lender’s highest lawful rate.

4.1.1 Revolving Credit Jnterest Rate Options.

‘The Borrower shall have the right to select from the following Interest Rate Options applicable to the Revolving Credit Loans (subject to the provisions above regarding Swing Loans):

(i) Revolving Credit Base Rate Option: A fluctuating rate per annum (computed on the basis of a year of 365 or 366 days. as the case may be, and actual days elapsed) equal to the Base Rate plus the Applicable Margin, such interest rate to change automatically from time to time effective as of the effective date of each change in the Base Rate; or

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( i i ) Revolving Credit Euro-Rate Option: A rate per. annum (computed on the basis of a year of 360 days and actual days elapsed) equal to the Euro-Rate plus the <4pplicable Margin.

3.1.2 Term Loan Interest Rate Ootions.

The Borrower shall have the right to select from the following Interest Rate Options applicable to the Term Loans:

( i ) Term Loan Base Rate Option: A fluctuating rate per annum (computed on the basis of a year of 365 or 366 days, as the case may be, and actual days elapsed) equal to the Base Rate plus the Applicable Margin, such interest rate to change automatically from time to time effective as of the effective date of each change in the Base Rate; or

(ii) Term Loan Euro-Rate Option: A rate per annum (computed on the basis of a year of 360 days and actual days elapsed) equal to the Euro-Rate plus the Applicable Margin.

4.1.3 Rate Quotations.

The Borrower may call the Agent on or before the date on which a Loan Request is to be delivered to receive an indication of the rates then in effect, but it is acknowledged that such projection shall not be binding on the Agent or the Lenders nor affect the rate of interest which thereafter is actually in effect when the election is made.

3.2 Interest Periods.

At any time when the Borrower shall select, convert to or renew a Euro-Rate Option, the Borrower shall notify the Agent thereof at least three (3) Business Days prior to the effective date of such Euro-Rate Option by delivering a Loan Request. The notice shall specify an Interest Period during which such Interest Rate Option shall apply, such Interest Period to be (i) one Month if Borrower selects the Euro-Rate Option during the Syndications Period, and ( i i ) one, two, three or six Months if the Borrower selects the Euro-Rate Option after the Syndications Period has ended. Notwithstanding the preceding sentence, the following provisions shall apply to any selection of, renewal of, or conversion to a Euro-Rate Option:

4.2.1 Amount of Borrowing Tranche.

each Borrowing Tranche of Euro-Rate Loans shall be in integral multiples of $500.000 and not less than $1,000,000;

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4.2.2 Renewals.

in the case of the renewal of a Euro-Rate Option at the end of an Interest Period, the first day of the new Interest Period shall be the last day of the preceding Lnterest Period. without duplication in payment of interest for such day.

3.3 Interest After Default.

To the extent permitted by Law, upon the occurrence of an Event of Default and unt i l such time such Event of Default shall have been cured or waived:

4.3.1 Letter of Credit Fees, Interest Rate.

the Letter of Credit Fees otherwise applicable pursuant to Section 2.9.2 [Letter of Credit Fees] shall be increased by 2.0% and the rate of interest for each Loan, regardless of that otherwise applicable pursuant to Section 4.1 [Interest Rate Options], shall be equal to the Base Rate Option plus an additional 2.0%; and

4.3.2 Other Obligations.

each other Obligation hereunder if not paid when due shall bear interest at a rate per annum equal to the sum of the rate of interest applicable under the Revolving Credit Base Rate Option plus an additional 2% from the time such Obligation becomes due and payable and until it is paid in full.

4.3.3 Acknowledment.

The Borrower acknowledges that the increase in rates referred to in this Section 4.3 reflects, among other things, the fact that such Loans or other amounts have become a substantially greater risk given their default status and that the Lenders are entitled to additional compensation for such risk; and all such interest shall be payable by Borrower upon demand by Agent.

4.4 Euro-Rate Unascertainable; Illegalitv: Increased Costs; Deposits Not Available.

4.4.1 Unascertainable.

If on any date on which a Euro-Rate would otherwise be determined, the Agent shall have determined that:

(i) adequate and reasonable means do not exist for ascertaining such Euro-Rate, or

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(ii) a contingency has occurred which materially and adversely affects the London interbank eurodollar market relating to the Euro-Rate, the Agent shall have the rights specified in Section 4.4.3.

3.4.2 Illeaalitv: Increased Costs: DeDosits Not Available.

[fat any time any Lender shall have determined that:

(i) the making, maintenance or funding of any Loan to which a Euro- Rate Option applies has been made impracticable or unlawful by compliance by such Lender in good faith with any Law or any interpretation or application thereof by any Official Body or with any request or directive of any such OfTicial Body (whether or not having the force of Law), or

(ii) such Euro-Rate Option will not adequately and fairly reflect the cost to such Lender of the establishment or maintenance of any such Loan, or

(iii) after making all reasonable efforts, deposits of the relevant amount in Dollars for the relevant Interest Period for a Loan, or to banks generally, to which a Euro-Rate Option applies, respectively, are not available to such Lender with respect to such Loan, or to banks generally, in the interbank eurodollar market,

then the Agent shall have the rights specified in Section 4.4.3,

3.4.3 Agent's and Lender's Rights.

In the case of any event specified in Section 4.4.1 above, the Agent shall promptly so noti@ the Lenders and the Borrower thereof, and in the case of an event specified in Section 4.4.2 above, such Lender shall promptly so notify the Agent and endorse a certificate to such notice as to the specific circumstances of such notice, and the Agent shall promptly send copies of such notice and certificate to the other Lenders and the Borrower. Upon such date as shall be specified in such notice (which shall not be earlier than the date such notice is given), the obligation of (A) the Lenders, in the case of such notice given by the Agent, or (B) such Lender, in the case of such notice given by such Lender, to allow the Borrower to select, convert to or renew a Euro-Rate Option shall be suspended until the Agent shall have later notified the Borrower. or such Lender shall have later notified the Agent, of the Agent's or such Lender's, as the case may be, determination that the circumstances giving rise to such previous determination no longer exist. If at any time the Agent makes a determination under Section 4.4.1 and the Borrower has previously notified the Agent of its selection of, conversion to or renewal of a Euro-Rate Option and such Interest Rate Option has not yet gone into effect, such notification shall be deemed to provide for selection of, conversion to or renewal of the Base Rate Option otherwise available with respect to such Loans. If any Lender notifies the Agent of a determination under Section 4.4.2, the Borrower shall, subject to the Borrower's indemnification Obligations under Section 5.6.2 [Indemnity], as to any Loan of the Lender to which a Euro-Rate Option applies, on the date specified in such notice either convert such Loan to the Base Rate

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Option otherwise available with respect to such Loan or prepay such Loan in accordance with Section 5.4 [Voluntary Prepayments]. Absent due notice from the Borrower of conversion or prepayment. such Loan shall automatically be converted to the Base Rate Option otherwise available with respect to such Loan upon such specified date.

4.5 Selection of Interest Rate ODtions.

If the Borrower fails to select a new Interest Period to apply to any Borrowing Tranche of Loans under the Euro-Rate Option at the expiration of an existing Interest Period applicable to such Borrowing Tranche in accordance with the provisions of Section 4.2 [Interest Periods], the Borrower shall be deemed to have converted such Borrowing Tranche to the Revolving Credit Base Rate Option or Term Loan Base Rate Option, as applicable, commencing upon the last day of the existing Interest Period.

5 . PAYMENTS

5.1 Payments.

All payments and prepayments to be made in respect of principal, interest, Commitment Fees, Letter of Credit Fees, Agent's Fee or other fees or amounts due from the Borrower hereunder shall be payable prior to 1 1 :00 a.m., Pittsburgh time, on the date when due without presentment, demand, protest or notice of any kind, all of which are hereby expressly waived by the Borrower, and without set-ofT, counterclaim or other deduction of any nature. Such payments shall be made to the Agent at the Principal Office for the account of PNC Bank with respect to the Swing Loans and for the ratable accounts of the Lenders with respect to the Revolving Credit Loans or Term Loans in U.S. Dollars and in immediately available hnds, and the Agent shall promptly distribute such amounts to the Lenders in immediately available funds, provided that in the event payments are received by 1 1 :00 a.m., Pittsburgh time, by the Agent with respect to the Loans and such payments are not distributed to the Lenders on the same day received by the Agent, the Agent shall pay the Lenders the Federal Funds Effective Rate with respect to the amount of such payments for each day held by the Agent and not distributed to the Lenders. The Agent's and each Lender's statement of account, ledger or other relevant record shall, in the absence of manifest error, be conclusive as the statement of the amount of principal of and interest on the Loans and other amounts owing under this Agreement and shall be deemed an " account stated . 'I

5 .2 Pro Rata Treatment of Lenders.

Each borrowing shall be allocated to each Lender according to its Ratable Share, and each selection of, conversion to or renewal of any Interest Rate Option and each payment or prepayment by the Borrower with respect to principal, interest, Commitment Fees. Letter of Credit Fees, or other fees (except for the Agent's Fee) or amounts due from the Borrower hereunder to the Lenders with respect to the Loans, shall (except as provided in Section 4.4.3

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[Agent's and Lender's Kights] in the case of an event specified in Section 4.4 [Euro-Rate Unascertainable; Etc.], 5.4.2 [Replacement of a Lender] or 5.6 [Additional Compensation in Certain Circumstances]) be made in proportion to the applicable Loans outstanding from each Lender and. if no such Loans are then outstanding, in proportion to the Ratable Share of each Lender. Notwithstanding any of the foregoing, each borrowing or payment or prepayment by the Borrower of principal, interest, fees or other amounts from the Borrower with respect to Swing Loans shall be made by or to PNC Bank according to Section 2.

5.3 Interest Payment Dates.

Interest on Loans to which the Base Rate Option applies shall be due and payable in arrears on the first day of each January, April, July and October after the date hereof and on the Expiration Date, in the case of Revolving Credit Loans and Swing Loans, or the Term Loan Maturity Date, in the case of Term Loans, or upon acceleration of the Notes. Interest on Loans (other than Swing Loans) to which the Euro-Kate Option applies shall be due and payable on the last day of each Interest Period for those Loans and, if such Interest Period is longer than three (3) Months, also on the 90th day of such Interest Period. Interest on mandatory prepayments of principal under Section 5.5 [Mandatory Prepayments] shall be due on the date such mandatory prepayment is due. Interest on the principal amount of each Loan or other monetary Obligation shall be due and payable on demand after such principal amount or other monetary Obligation becomes due and payable (whether on the stated maturity date, upon acceleration or otherwise).

5.4 Voluntary PreDavments.

5.4.1 Right to Prevav.

The Borrower shall have the right at its option from time to time to prepay the Loans in whole or part without premium or penalty (except as provided in Section 5.4.2 below or in Section 5.6 [Additional Compensation in Certain Circumstances]):

(i) at any time with respect to any Loan to which the Base Rate Option applies,

(ii) on the last day of the applicable Interest Period with respect to Loans to which a Euro-Kate Option applies,

(iii) on the date specified in a notice by any Lender pursuant to Section 4.4 [Euro-Rate Unascertainable, Etc.] with respect to any Loan to which a Euro-Rate Option applies.

Whenever the Borrower desires to prepay any part of the Loans, it shall provide a prepayment notice to the Agent by 1 :00 p.m. at least one ( 1 ) Business Day prior to the date of prepayment of the Revolving Credit Loans or Term Loans or no later than 3 : O O p.m., Pittsburgh time, on the date of prepayment of Swing Loans, setting forth the following information:

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(x) the date, which shall be a Business Day, on which the proposed prepayment is to be made;

(y ) a statement indicating the application of the prepayment among the Swing Loans. Revolving Credit Loans and Term Loans; and

(z) the total principal amount of such prepayment, which shall not be less than $100,000 for any Swing Loan and in increments of$100.000 or not less than $1,000,000 for any Revolving Credit Loan or Term Loan and in increments of $500.000.

All prepayment notices shall be irrevocable. The principal amount of the Loans for which a prepayment notice is given, together with interest on such principal amount except with respect to Loans to which the Base Rate Option applies, shall be due and payable on the date specified in such prepayment notice as the date on which the proposed prepayment is to be made. All Term Loan prepayments permitted pursuant to this Section 5.4.1 shall be applied to the unpaid installments of principal of the Term Loans in the inverse order of scheduled maturities and may not be reborrowed. Except as provided in Section 4.4.3 [Agent's and Lender's rights], if the Borrower prepays a Loan but fails to specify the applicable Borrowing Tranche which the Borrower is prepaying, the prepayment shall be applied (i) first to Swing Loans, then to Revolving Credit Loans and then to Term Loans; and (ii) after giving effect to the allocations in clause (i) above and in the preceding sentence, first to Loans to which the Base Rate Option applies. then to Loans to which the Euro-Rate Option applies. A n y prepayment hereunder shall be subject to the Borrower's Obligation to indemnify the Lenders under Section 5.6.2 [IndemnityJ.

5.4.2 Replacement of a Lender.

In the event any Lender (i) gives notice under Section 4.4 [Euro-Rate Unascertainable, Etc.] or Section 5.6.1 [Increased Costs, Etc.], (ii) does not fund Revolving Credit Loans because the making of such Loans would contravene any Law applicable to such Lender, (iii) becomes a Non-consenting Lender, or (iv) becomes subject to the control of an Official Body (other than normal and customary supervision), then the Borrower shall have the right at its option, with the consent of the Agent. which shall not be unreasonably withheld, to prepay the Loans of such Lender in whole, together with all interest accrued thereon, and terminate such Lender's Commitment within ninety (90) days after (w) receipt of such Lender's notice under Section 4.4 [Euro-Rate Unascertainable, Etc.] or 5.6.1 [Increased Costs, Etc.], (x) the date such Lender has failed to fund Revolving Credit Loans because the making of such Loans would contravene Law applicable to such Lender, (y) such Lender becomes a Non- consenting Lender, or (2) the date such Lender became subject to the control of an Official Body, as applicable; provided that the Borrower shall also pay to such Lender at the time of such prepayment any amounts required under Section 5.6 [Additional Compensation in Certain Circumstances] and any accrued interest due on such amount and any related fees; provided, however. that the Commitinent and any Term Loan of such Lender shall be provided by one or

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more of the remaining Lenders or a replacement lender reasonably acceptable to the Agent; provided, fiirther, the remaining Lenders shall have no obligation hereunder To increase their Commitments. Notwithstanding the foregoing, the Agent may only be replaced subject to the requirements of Section 10.14 [Successor Agent] and provided that all Letters of Credit have expired or been terminated or replaced.

5.4.3 Change of Lending Office.

Each Lender agrees that upon the occurrence of any event giving rise to increased costs or other special payments under Section 4.4.2 [Illegality, Etc,] or 5.6.1 [Increased Costs. Etc.] with respect to such Lender, it will ifrequested by the Borrower, use reasonable efforts (subject to overall policy considerations of such Lender) to investigate the effects of such occurrence including whether to designate another lending office for any Loans or Letters of Credit affected by such event, or assigning its rights and obligations under this Agreement to another office, branch or Affiliate, provided that such designation or assignment is made on such terms that such Lender and its lending office suffer no economic, legal or regulatory disadvantage, with the object of avoiding the consequence of the event giving rise to the operation of such Section. Nothing in this Section 5.4.3 shall affect or postpone any of the Obligations of the Borrower or any other Loan Obligor or the rights of the Agent or any Lender provided in this Agreement or any other Loan Document.

5.4.4 Voluntarv Reduction of Commitments.

The Borrower shall have the right, upon not less than five ( 5 ) Business Days' written irrevocable notice to the Agent, to terminate the Revolving Credit Commitments or, from time to time, to permanently reduce the amount of the Revolving Credit Commitments, which notice shall speciQ the date and amount of any such reduction and otherwise be substantially in the form of Exhibit 5.4.4 (a "Commitment Reduction Notice"). Any such reduction shall be in a minimum amount equal to $5,000.000 or an integral multiple of $1,000,000 in excess thereof, provided, that the Revolving Credit Commitments may not be reduced below the sum of the aggregate principal amount of all Revolving Facility Usage. Each reduction of Revolving Credit Commitments shall ratably reduce the Revolving Credit Commitments of the Lenders and shall be accompanied by (a) the payment in fhll of any Commitment Fee then accrued on the amount of such reduction or termination and (b) prepayment of the Revolving Credit Loans, together with the full amount of interest accrued on the principal sum to be prepaid (and all amounts referred to in Section 5.6 [Additional Compensation in Certain Circumstances] hereof), to the extent that the aggregate amount thereof then outstanding exceeds the Revolving Credit Commitments as so reduced or terminated. From the effective date of any such reduction or termination of the Revolving Credit Commitments, the obligations of Borrower to pay the Commitment Fee pursuant to Section 2.3 [Commitment Fees] shall correspondingly be reduced or cease and the Revolving Credit Commitments of the Lenders shall be ratably reduced.

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5.5 Mandatory Preuavments.

5 3 . 1 Recovery of Insurance Proceeds.

Within five (5) Business Days of the receipt of insurance proceeds (or the expiration of the 180-day period referred to in Section 8.1.3. if such proceeds are permitted to be reinvested under such Section 8.1.3) by a Loan Obligor or a Subsidiary of a Loan Obligor from a Significant Loss which are not reinvested as described in Section 8.1.3, the Borrower shall make a mandatory prepayment of principal on the Loans, together with accrued interest on such principal amount, equal to 100% of the net after tax proceeds thereof. All prepayments pursuant to this Section 5.5.1 shall be applied (i) first to payment in full of the principal amount of the Term Loans by application to the unpaid installments of principal in the inverse order of scheduled maturities which Term Loans may not be reborrowed, and (ii) then to Swing Loans and then to Revolving Credit Loans. Any prepayment hereunder shall be subject to the Borrower's Obligation to indemnify the Lenders under Section 5.6.2 [Indemnity]. So long as no Event of Default or Potential Default has occurred and is continuing, any portion of such prepayment that is to be applied to Loans (excluding Swing Loans) to which the Euro-Rate Option applies shall be deposited into an interest-bearing cash collateral account with the Agent and from which the Borrower shall have no right to withdraw any moneys (including any interest or earnings thereon), and shall be automatically applied to such Loans upon the expiration of the applicable Interest Periods. Such cash collateral account shall be subject to the Agent's right of set-off in accordance with Section 9.2.3 [Set-off]. Any interest earned on such cash collateral account shall be solely for the benefit of the Borrower and shall be promptly disbursed to the Borrower on or after the date of the application of the prepayment as set forth above. For so long as any hnds are held in such cash collateral account, interest at the applicable Interest Rate Option shall continue to accrue on the Loans.

5.5.2 Issuance of Certain Debt: Issuance of Eauitv, Capital Contributions or Hvbrid Securities.

Within five (5) Business Days of (i) the issuance by any Loan Obligor or any Subsidiary of a Loan Obligor of any debt security, equity security, or Hybrid Security for cash proceeds or of the incurrence of any Indebtedness (other than Indebtedness permitted under clauses (i) through (viii) inclusive of Section 8.2.1 [Indebtedness)) by such Loan Obligor or such Subsidiary of a Loan Obligor, except for such issuance to a Loan Obligor or Subsidiary of a Loan Obligor or (i i) the receipt by any Loan Obligor or Subsidiary of a Loan Obligor of any cash proceeds with respect to any contribution to the capital of such Loan Obligor or Subsidiary (other than any such contributions by ArcLight and IGS or any Affiliates of either ArcLight or IGS), the Borrower shall make a mandatory prepayment of principal on the Loans equal to 100% of the Net Cash Proceeds of any such debt security, Hybrid Security or Indebtedness. and 50% of the Net Cash Proceeds of any equity security or such capital contributions. in each case together with accrued interest on such principal amount. All prepayments pursuant to this Section 5.5.2 shall be applied (A) first to payment in full of the principal amount of the Term Loans by application to the unpaid installments of principal in the inverse order of scheduled maturities which Term

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Loans may not be reborrowed and (B) second to Swing Loans and then to Revolving Credit Loans. Any prepayment hereunder shall be subject to the Borrower's Obligation to the Lenders under Section 5 .6 .2 [Indemnity]. So long as no Event of Default or Potential Default has occurred and is continuing, any portion of such prepayment that i s to be applied to Loans (excluding Swing Loans) to which the Euro-Rate Option applies shall be deposited into an interest-bearing cash collateral account with the Agent and from which the Borrower shall have '

no right to withdraw any moneys (including any interest or earnings thereon), and shall be automatically applied to such Loans upon the expiration of the applicable lnterest Periods. Such cash collateral account shall be subject to the Agent's right of set-off in accordance with Section 9.2.3 [Set-off]. Any interest earned on such cash collateral account shall be solely for the benefit of the Borrower and shall be promptly disbursed to the Borrower on or after the date of the application of the prepayment as set forth above. For so long as any funds are held in such cash collateral account, interest at the applicable lnterest Rate Option shall continue to accrue on the Loans.

5.5.3 Auulication Among Interest Rate Options.

All prepayments required pursuant to this Section 5.5 shall first be applied among the Interest Rate Options to the principal amount of the Loans subject to the Base Rate Option, then to Loans subject to a Euro-Rate Option. In accordance with Section 5.6.2 [Indemnity], the Borrower shall indemnify the Lenders for any loss or expense, including loss of margin, incurred with respect to any such prepayments applied against Loans subject to a Euro- Rate Option on any day other than the last day of the applicable Interest Period.

5.6 Additional Compensation in Certain Circumstances.

5.6.1 Increased Costs or Reduced Return Resulting from Taxes, Reserves, Caoital Adequacy Requirements. Exuenses. Etc.

If any change in any Law, guideline or interpretation or application thereof by any Official Body charged with the interpretation or administration thereof or compliance with any request or directive (whether or not having the force of Law) of any central bank or other Official Body in any case issued after the date of execution of this Agreement:

(i) subjects any Lender to any material tax or materially changes the basis of taxation with respect to this Agreement, the Notes, the Loans or payments by the Borrower of principal, interest, Commitment Fees, or other amounts due from the Borrower hereunder or under the Notes (except for taxes on the overall net income of such Lender),

(ii) imposes, modifies or deems applicable any reserve, special deposit or similar requirement against credits or commitments to extend credit extended by, or assets (funded or contingent) of, deposits with or for the account of, or other acquisitions of funds by, any Lender, or

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( i i i ) imposes, modifies or deems applicable any capital adequacy or similar requirement (A) against assets (funded or contingent) of, or letters of credit, other credits or commitments to extend credit extended by, any Lender, or (B) otherwise applicable to the obligations of any Lender under this Agreement,

and the result of any of the foregoing is to increase the cost to, reduce the income receivable by, or impose any expense (including loss of margin) upon any Lender with respect to this Agreement, the Notes or the making, maintenance or hnding of any part of the Loans (or, in the case of any capital adequacy or similar requirement. to have the effect of reducing the rate of return on any Lender's capital, taking into consideration such Lender's customary policies with respect to capital adequacy) by an amount which such Lender in its sole discretion deems to be material, such Lender shall from time to time notify the Borrower and the Agent of the amount determined in good faith (using any averaging and attribution methods employed in good faith) by such Lender to be necessary to compensate such Lender for such increase in cost, reduction of income, additional expense or reduced rate of return. Such notice shall set forth in reasonable detail the basis for such determination. Such amount shall be due and payable by the Borrower to such Lender ten ( 10) Business Days after such notice is given.

5.6.2 Indemnity.

In addition to the compensation required by Section 5.6.1 [Increased Costs, Etc.], the Borrower shall indemnify each Lender against all liabilities, losses or reasonable expenses (including loss of margin, any loss or expense incurred in liquidating or employing deposits from third parties and any loss or expense incurred in connection with funds acquired by a Lender to fund or maintain Loans subject to a Euro-Rate Option) which such Lender sustains or incurs as a consequence of any

(i) payment, prepayment, conversion or renewal of any Loan to which a Euro-Rate Option applies on a day other than the last day of the corresponding Interest Period (whether or not such payment or prepayment is mandatory, voluntary or automatic and whether or not such payment or prepayment is then due),

(ii) attempt by the Borrower to revoke (expressly, by later inconsistent riotices or otherwise) in whole or part any Loan Requests under Section 2.5.1 [Revolving Credit Loan Requests], any Swing Loan Requests under Section 2.5.2 [Swing Loan Requests] or Section 1.2 [Interest Periods] or notice relating to prepayments under Section 5.4 [Voluntary Prepayments], or

(iii) default by the Borrower in the performance or observance of any covenant or condition contained in this Agreement or any other Loan Document, including any failure of the Borrower to pay when due (by acceleration or otherwise) any principal, interest, Commitment Fee or any other amount due hereunder.

If any Lender sustains or incurs any such loss or reasonable expense, it shall from time to time notify the Borrower of the amount determined in good faith by such Lender (which determination may include such assumptions, allocations of costs and expenses and averaging or attribution methods as such Lender shall deem reasonable) to be necessary to indemnify such Lender for such loss or reasonable expense. Such notice shall set forth in reasonable detail the basis for such determination. Such amount shall be due and payable by the Borrower to such Lender ten (10) Business Days after such notice is given.

5.7 Settlement Date Procedures.

In order to minimize the transfer of funds between the Lenders and the Agent, the Borrower may borrow, repay and reborrow Swing Loans and PNC Bank may make Swing Loans as provided in Section 2.1.2 hereof during the period between Settlement Dates. Not later than 1 :OO p.m. on each Settlement Date, the Agent shall notif) each Lender of its Ratable Share of the total of the Revolving Credit Loans and the Swing Loans (each a "Required Share"). Prior to 2:OO p.m., Pittsburgh time, on such Settlement Date, each Lender shall pay to the Agent the amount equal to the difference between its Required Share and its Revolving Credit Loans, and the Agent shall pay to each Lender its Ratable Share of all payments made by the Borrower to the Agent with respect to the Revolving Credit Loans. The Agent shall also effect settlement in accordance with the foregoing sentence on the proposed Borrowing Dates for Revolving Credit Loans and may at its option effect settlement on any other Business Day; provided however, that settlement shall be effected by the Agent at least once during each consecutive fourteen (14) day period. These settlement procedures are established solely as a matter of administrative convenience, and nothing contained in this Section 5.7 shall relieve the Lenders of their obligations to fund Revolving Credit Loans on dates other than a Settlement Date pursuant to Section 2.1.2. The Agent may at any time at its option for any reason whatsoever require each Lender to pay immediately to the Agent such Lender's Ratable Share of the outstanding Revolving Credit Loans and each Lender may at any time require the Agent to pay immediately to such Lender its Ratable Share of all payments made by the Borrower to the Agent with respect to the Revolving Credit Loans.

6. REPRESENTATIONS AND WARRANTIES

6.1 Reuresentations and Warranties.

The Borrower represents and warrants to the Agent and each of the Lenders as fo 11 ow s :

6.1.1 Organization and Qualification.

The Borrower and each Subsidiary of the Borrower is a corporation, partnership or limited liability company duly organized, validly existing and in good standing under the laws of its jurisdiction of organization. The Borrower and each Subsidiary of the

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Borrower has the requisite corporate or limited liability company power to own or lease its properties and to engage in the business it presently conducts or proposes to conduct except where the failure to have such power would be immaterial. The Borrower and each Subsidiary of the Borrower is duly licensed or qualified and in good standing in each jurisdiction listed on Schedule 6.1.1 and in all other jurisdictions where the property owned or leased by it or the nature of the business transacted by it or both makes such licensing or qualification necessary zxcept to the extent the failure to be so licensed or qualified would be immaterial.

6. I .2 Caoitalization and Ownership.

The authorized capital stock of the Borrower consists of 2,200,000, of which 1,83 1,687 shares (referred to herein as the "Shares") are issued and outstanding and are owned as indicated on Schedule 6.1.2. All of the Shares have been validly issued and are filly paid and nonassessable. There are no options, warrants or other rights outstanding to purchase

t any such shares except for the Acquisition Agreement or as indicated on Schedule 6.1.2.

6.1.3 Subs id i ar ies . Schedule 6.1.3 states the name of each of the Borrower's Subsidiaries, its

jurisdiction of incorporation, its authorized capital stock, the issued and outstanding shares (referred to herein as the "Subsidiary Shares") and the owners thereof if it is a corporation, its outstanding partnership interests (the "Partnership Interests") if it is a partnership and its outstanding limited liability company interests, interests assigned to managers thereof and the voting rights associated therewith (the "LLC Interests") if it is a limited liability company. The Borrower and each Subsidiary of the Borrower has good and marketable title to all of the Subsidiary Shares, Partnership Interests and LLC Interests it purports to own, free and clear in each case of any Lien. All Subsidiary Shares, Partnership Interests and LLC Interests have been validly issued, and all Subsidiary Shares are filly paid and nonassessable. All capital contributions and other consideration required to be made or paid in connection with the issuance of the Partnership Interests and LLC Interests have been made or paid, as the case may be. There are no options, warrants or other rights outstanding to purchase any such Subsidiary Shares, Partnership lnterests or LLC Interests except for the Acquisition Agreement or as indicated on Schedule 6.1.3.

6. I .4 Power and Authority.

The Borrower has full power to enter into, execute, deliver and carry out this Agreement, and the Borrower and each of the other Loan Obligors has fill power to enter into, execute, deliver and carry out the other Loan Documents to which it is a party, to incur the Indebtedness contemplated by the Loan Documents and to perform its respective Obligations under the Loan Documents to which it is a party. and all such actions have been duly authorized by all necessary proceedings on its part.

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6.1 .5 Validitv and Binding Effect.

This Agreement has been duly and validly executed and delivered by the Borrower. and each other Loan Document which any Loan Obligor is required to execute and deliver on or after the date hereof will have been duly executed and delivered by such Loan Obligor on the required date of delivery of such Loan Document. This Agreement and each other Loan Document constitutes, or will constitute, legal, valid and binding obligations of each Loan Obligor which is or will be a party thereto on and after its date of delivery thereof, enforceable against such Loan Obligor in accordance with its terms, except to the extent that enforceability of any of such Loan Document may be limited by bankruptcy, insolvency, reorganization, moratorium or other similar laws affecting the enforceability of creditors' rights generally or limiting the right of specific performance.

6.1.6 No Conflict.

With the exception of the Senior Notes, with respect to which the Borrower has received a forbearance agreement from Teachers Insurance Annuity Association of America for a period of at least forty-five (45) days starting from the Closing Date, neither the execution and delivery of this Agreement or the other Loan Documents by any Loan Obligor nor the consummation of the transactions herein or therein contemplated or compliance with the terms and provisions hereof or thereof by any of them will conflict with, constitute a default under or result in any breach of (i) the terms and conditions of the certificate of incorporation, bylaws, certificate of limited partnership, partnership agreement, certificate of formation, limited liability company agreement or other organizational documents of any Loan Obligor or (ii) any Law or any material agreement or instrument or order, writ, judgment, injunction or decree to which any Loan Obligor or any of its Subsidiaries is a party or by which it or any of its Subsidiaries is bound or to which it is subject, or result in the creation or enforcement of any Lien, charge or encumbrance whatsoever upon any property (now or hereafter acquired) of any Loan Obligor or any of its Subsidiaries.

6.1.7 Litigation.

Other than as set forth on Schedule 6. I .7, there are no actions, suits, proceedings or investigations pending or, to the Knowledge of the Borrower, threatened against such Loan Obligor or any Subsidiary of such Loan Obligor at law or equity before any Official Body which individually or in the aggregate may result in any Material Adverse Change. None of the Loan Obligors or any Subsidiaries of any Loan Obligor is in violation of any order, writ, injunction or any decree of any Official Body which may result in any Material Adverse Change.

6.1.8 Title to Properties.

The Borrower and each Subsidiary of the Borrower has good and marketable title to or valid leasehold interest in ail properties, assets and other rights which it purports to own or lease or which are reflected as owned or leased on its books and records

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except for minor defects in title that do not interfere with their respective ability to conduct their respective businesses as currently conducted or to utilize such properties for their intended use, free and clear of all Liens and encumbrances except Permitted Liens. and subject to the terms and conditions of the applicable leases. All leases of property are in ful l force and effect without the necessity for any consent which has not previously been obtained upon consummation of the transactions contemplated hereby.

6.1.9 Financial Statements.

(i) Historical Statements. The Borrower has delivered to the Agent (a) copies of the Borrower's audited consolidated year-end financial statements for and as of the end of the fiscal year ended December 3 1,2004, and (b) copies of WVPG's unaudited year-end financial statements for and as of the end of the fiscal year ended December 3 1,2004 (the "Annual Statements"). In addition, the Borrower has delivered to the Agent copies of Borrower's and WVPG's unaudited consolidated interim financial statements for the fiscal year to date and as of the end of the fiscal quarter ended June 30, 2005 (the "Interim Statements") (the Annual and Interim Statements being collectively referred to as the "Historical Statements"). The Historical Statements were compiled from the books and records maintained by the Borrower's and WVPG's management, and taken together, to the Knowledge of the Borrower, fairly represent the consolidated financial condition of the Borrower and its Subsidiaries and WVPG in all material respects as of their dates and the results of operations for the fiscal periods then ended and have been prepared in accordance with GAAP consistently applied, subject (in the case of the Interim Statements) to normal year-end audit adjustments.

(ii) Financial Projections. The Borrower has delivered to the Agent consolidated financial projections of the Borrower and its Subsidiaries fur the period beginning on the Closing Date and ending December 3 1 , 20 10 derived from various assumptions of the Borrower's management (the "Financial Projections"). The Financial Projections represent a reasonable range of possible results in light of the history of the business, present and foreseeable conditions and the intentions of the Borrower's management. The Financial Projections accurately reflect the material liabilities of the Borrower and its Subsidiaries upon consummation of the transactions contemplated hereby as of the Closing Date.

'

(iii) Accuracy of Financial Statements. To the Knowledge of the Borrower. ( i ) neither the Borrower nor any Subsidiary of the Borrower has any material liabilities, contingent or otherwise, or material forward or long-term commitments that are not disclosed in the Historical Statements or in the notes thereto, and (ii) except as disclosed therein there are no unrealized or anticipated losses from any commitments of the Borrower or any Subsidiary of the Borrower which may cause a Material Adverse Change. Since June 30, 2005, no Material Adverse Change has occurred.

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6.1. I O Use of Proceeds: Marein Stock; Section 20 Subsidiaries.

6.1.10.1 General.

The Borrower intends to use the proceeds of the Loans in accordance with Sections 2.8. 3.4 and 8.1 . I O .

6.1.10.2 Margin Stock.

None of the Loan Obligors or any Subsidiaries of any Loan Obligor engages or intends to engage principally, or as one of its important activities, in the business of extending credit for the purpose, immediately, incidentally or ultimately, of purchasing or carrying margin stock (within the meaning of Regulation U). No part of the proceeds of any Loan has been or will be used, immediately, incidentally or ultimately, to purchase or carry any margin stock or to extend credit to others for the purpose of purchasing or carrying any margin stock or to r ehnd Indebtedness originally incurred for such purpose, or for any purpose which entails a violation of or which is inconsistent with the provisions of the regulations of the Board of Governors of the Federal Reserve System. None of the Loan Obligors or any Subsidiary of any Loan Obligor holds or intends to hold margin stock in such amounts that more than 25% of the reasonable value of the assets of any Loan Obligor or Subsidiary of any Loan Obligor are or will be represented by margin stock.

6.1.10.3 Section 20 Subsidiaries.

The Borrower does not intend to use and shall not use any portion of the proceeds of the Loans, directly or indirectly, to purchase during the underwriting period, or for thirty (30) days thereafter, Ineligible Securities being underwritten by a Section 20 Subsidiary .

6.1.1 1 Full Disclosure.

To the Knowledge of the Borrower neither this Agreement nor any other Loan Document, nor any certificate, statement, agreement or other documents furnished to the Agent or any Lender in connection herewith or therewith, contains any untrue statement of a material fact or omits to state a material fact necessary in order to make the statements contained herein and therein, in light of the circumstances under which they were made, not misleading, provided that, with respect to the projected financial information, the Borrower represents only that such information was prepared in good faith based upon assumptions believed to be reasonable at the time. To the Knowledge of the Borrower there is no fact known to any Loan Obligor which materially adversely affects the business, property, assets. financial condition, results of operations or prospects of any Loan Obligor or Subsidiary of any Loan Obligor which has not been set forth in this Agreement or in the certificates, statements, agreements or other documents furnished in writing to the Agent and the Lenders prior to or at the date hereof in connection with the transactions contemplated hereby.

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6.1.12 Taxes.

To the Knowledge of the Borrower, all federal. state, local and other tax returns required to have been filed with respect to the Borrower and each Subsidiary of the Borrower have been filed other than those tax returns the failure of which to file would be immaterial. and payment or adequate provision has been made for the payment of all material taxes, fees, assessments and other governmental charges which have or may become due pursuant to said returns or to assessments received, except to the extent that such taxes, fees, assessments and other charges are being contested in good faith by appropriate proceedings diligently conducted and for which such reserves or other appropriate provisions. if any, as shall be required by GAAP shall have been made. To the Knowledge of the Borrower, there are no agreements or waivers extending the statutory period of limitations applicable to any federal income tax return of any Loan Obligor or Subsidiary of any Loan Obligor for any period.

6.1.13 Consents and Approvals.

No consent, approval, exemption, order or authorization of, or a registration or filing with, any Official Body or any other Person is required by any Law or any agreement in connection with the execution, delivery and carrying out of this Agreement and the other Loan Documents by any Loan Obligor, except as listed on Schedule 6.1-13, all of which shall have been obtained or made on or prior to the Closing Date except as otherwise indicated on Schedule 6.1.13.

6.1.14 No Event of Default; Compliance with Instruments.

No event has occurred and is continuing and no condition exists or will exist after giving effect to the borrowings or other extensions of credit to be made on the Closing Date under or pursuant to the Loan Documents which constitutes an Event of Default or Potential Default. None of the Loan Obligors or any Subsidiaries of any Loan Obligor is in violation of ( i ) any term of its certificate of incorporation, bylaws, certificate of limited partnership, partnership agreement, certificate of formation, limited liability company agreement or other organizational documents other than a violation that would be immaterial, or (i i) any material agreement or instrument to which it is a party or by which i t or any of its properties may be subject or bound where such violation would constitute a Material Adverse Change.

6.1,15 Patents, Trademarks. Copyrights, Licenses. Etc.

Except as set forth on Schedule 6.1.15, the Borrower and each Subsidiary of the Borrower owns or possesses, or otherwise has rights to use, all the material patents, trademarks, service marks, trade names, copyrights, licenses, registrations, franchises, permits and rights necessary to own and operate its properties and to carry on its business as presently conducted and planned to be conducted by such Loan Obligor or Subsidiary, without known possible. alleged or actual conflict with the rights of others.

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6.1.16 [Intentionaiiv Omitted.]

6.1 .I7 [Intentionally Omitted.]

6.1,18 [Intentionally Omitted.]

6.1.19 Insurance.

Schedule 6.1.19 lists all insurance policies and lists all other bonds in an amount greater than $250,000 to which any Loan Obligor or Subsidiary of any Loan Obligor is a party, all of which are valid and in full force and effect. No notice has been given or claim made and, to the Borrower's Knowledge, no grounds exist to cancel or avoid any of such policies or bonds or to reduce the coverage provided thereby. Such policies and bonds provide adequate coverage from reputable and financially sound insurers in amounts sufficient to insure the assets and risks of the Borrower and each Subsidiary of the Borrower in accordance with prudent business practice in the industry of the Loan Obligors and their Subsidiaries.

6 . I .20 ComDIiance with Laws.

The Loan Obligors and their Subsidiaries are in compliance in all material respects with all applicable Laws (other than Environmental Laws which are specifically addressed in Section 6.1.25 [Environmental Matters]) in all jurisdictions in which any Loan Obligor or Subsidiary of any Loan Obligor is presently or will be doing business except where the failure to do so would not constitute a Material Adverse Change.

6.1.2 1 Material Contracts; Burdensome Restrictions.

All material contracts relating to the business operations of each Loan Obligor and each Subsidiary of any Loan Obligor, including all Labor Contracts, are valid, binding and enforceable upon such Loan Obligor or Subsidiary and, to the Borrower's Knowledge, each of the other parties thereto in accordance with their respective terms, and there is no default thereunder, except such defaults as to which requisite waivers or consents have been obtained or which are immaterial, to the Loan Obligors' Knowledge, with respect to parties other than such Loan Obligor or Subsidiary. None of the Loan Obligors or their Subsidiaries is bound by any contractual obligation, or subject to any restriction in any organization document, or any requirement of Law which could reasonably be expected to result in a Material Adverse Change.

6.1.22 Investment Companies: Regulated Entities.

None ofthe Loan Obligors or any Subsidiaries of any Loan Obligor is an "investment company" registered or required to be registered under the Investment Company Act of 1940 or under the "control" of an "investment company'' as such terms are defined in the Investment Company Act of 1940 and shall not become such an "investment company" or under such "control." With the exception of the 2005 Rate Case Approval, which remains in full force and effect. no authorizations, approvals or consents of, and no filings or registrations with. any

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Official Body are necessary for the consummation of the Acquisition or the execution, delivery or performance by the Loan Obligors of this Agreement or any other Loan Document or for the kralidity or enforceability hereof or thereof, except for such authorizations. approvals and consents which have previously been obtained and such filings and registrations which have already been made. None of the Loan Obligors or any Subsidiaries of any Loan Obligor is subject to any other Federal or state statute or regulation limiting its ability to incur Indebtedness for borrowed money.

6.1.23 Plans and Benefit Arrangements.

Except as set forth on Schedule 6.1.23:

(i) There has been no Prohibited Transaction with respect to any Benefit Arrangement or any Plan or, to the Knowledge of the Borrower, with respect to any Multiemployer Plan or Multiple Employer Plan, which could result in any material liability of the Borrower or any other member of the ERlSA Group. The Borrower and all other members of the ERlSA Group have made when due any and all payments required to be made under any agreement relating to a Multiemployer Plan or a Multiple Employer Plan or any Law pertaining thereto. With respect to each Plan and Multiemployer Plan, the Borrower and each other member of the ERlSA Group (i) have fulfilled in all material respects their obligations under the minimum hnding standards of ERISA. ( i i ) have not incurred any liability to the PBGC (other than with respect to the payment of premiums that are not yet due), and (iii) have not had asserted against them any penalty for failure to fulfill the minimum funding requirements of ERISA.

(ii) To the Borrower's Knowledge, each Multiemployer Plan and Multiple Employer Plan is able to pay benefits thereunder when due.

(iii) Neither the Borrower nor any other member of the ERISA Group has instituted or intends to institute proceedings to terminate any Plan.

(iv) No event requiring notice to the PBGC under Section 302(f)(4)(A) of ERISA has occurred or is reasonably expected to occur with respect to any Plan, and no amendment with respect to which security is required under Section 307 of ERISA has been made or is reasonably expected to be made to any Plan.

(v) The aggregate actuarial present value of all benefit liabilities (whether or not vested) under all Plans in the aggregate, determined on a plan termination basis, as disclosed in, and as of the date of, the most recent actuarial report for each respective Plan, does not exceed the aggregate fair market value of the assets of the Plans by more than $3.000.000.

(vi) Neither the Borrower nor any other member of the ERISA Group has incurred or reasonably expects to incur any material withdrawal liability under ERISA to any

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Multiemployer Plan or Multiple Employer Plan. Neither the Borrower nor any other member of the ERISA Group has been notified by any Multiemployer Plan or Multiple Employer Plan that such Multiemployer Plan or Multiple Employer Plan has been terminated within the meaning of Title IV of ERISA and, to the Knowledge of the Borrower, no Multiemployer Plan or Multiple Employer Plan is reasonably expected to be reorganized or terminated, within the meaning of Title IV of ERISA.

(vii) Except as could not result in any material liability to the Borrower o r any other member of the ERISA Group, to the extent that any Benefit Arrangement is insured, the Borrower and all other members of the ERISA Group have paid when due all premiums required to be paid for all periods through the Closing Date, and to the extent that any Benefit b a n g e m e n t is funded other than with insurance, the Borrower and all other members of the ERISA Group have made when due all contributions required to be paid for all periods through the Closing Date.

(viii) A11 Plans and Benefit Arrangements have been administered in all material respects in accordance with their terms and applicable Law.

6.1.24 Emulovment Matters.

Each of the Loan Obligors and each of their Subsidiaries is in compliance with the Labor Contracts and all applicable federal, state and local labor and employment Laws including those related to equal employment opportunity and affirmative action, labor relations, minimum wage, overtime, child labor, medical insurance continuation, worker adjustment and relocation notices. immigration controls and worker and unemployment compensation, where the failure to comply would constitute a Material Adverse Change. There are no outstanding grievances, arbitration awards or appeals therefrom arising out of the Labor Contracts which could reasonably be expected to result in a Material Adverse Change or current or. tu the Knowledge of the Borrower, threatened strikes, or other organized work stoppages or slowdowns at facilities of any of the Loan Obligors or any of their Subsidiaries which in any case would constitute a Material Adverse Change.

6.1.25 Environniental Matters.

Except as disclosed on Schedule 6.1.25, and except for matters which could not reasonably be expected to result in an Material Adverse Change, individually or in the aggregate:

(i) None ofthe Loan Obligors has received any Environmental Complaint, whether directed or issued to any Loan Obligor or relating or pertaining to any prior owner, operator or occupant of the Property. and to the Knowledge of each Loan Obligor, there are no circumstances which could reasonably be expected to result in an Environmental Complaint.

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( i i ) No activity of any Loan Obligor at the Property is being or has been conducted in violation of any Environmental Law or Required Environmental Permit and to the Knowledge of any Loan Obligor no activity of any prior owner, operator or occupant of the Property was conducted in violation of any Environmental Law.

( i i i ) 'To the Knowledge of each Loan Obligor, there are no Regulated Substances present in, under, or emanating from, or to any Loan Obligor's Knowledge emanating to, the Property or any portion thereof which result in Contamination. To the Knowledge of each Loan Obligor, there are no Regulated Substances on the Property or any portion thereof, except in compliance with Environmental Laws and Required Environmental Permits.

(iv) Each Loan Obligor has all Required Environmental Permits and all such Required Environmental Permits are in full force and effect.

(v) Each Loan Obligor has submitted to an Official Body andor maintains, as appropriate, all Required Environmental Notices.

(vi) No activity of any Loan Obligor is being or has been conducted in violation of any Environmental Law or Required Environmental Permit and to the Knowledge of any Loan Obligor no activity of any of their respective predecessors was conducted in violation of any Environmental Law.

(vii) To the Knowledge of each Loan Obligor, no facility or site to which any Loan Obligor, either directly or indirectly by a third party, has sent Regulated Substances for storage, treatment or disposal has been or is being operated in vioIation of Environmental Laws or pursuant to Environmental Laws is identified or proposed to be identified on any list of contaminated properties or other properties which pursuant to Environmental Laws are the subject of an investigation, cleanup, removal, remediation or other response action by an Official Body.

(viii) To the Knowledge of each Loan Obligor, no portion of the Property is identified or proposed to be identified on any list of contaminated properties or other properties which pursuant to Environmental Laws are the subject of an investigation or remediation action by an Official Body.

(ix) No lien or other similar encumbrance authorized by Environmental Laws exists against the Property and none of the Loan Obligors has any reason to believe that such a lien or encumbrance may be imposed.

6.1.26 Senior Debt Status.

The Obligations of each Loan Obligor under this Agreement, the Notes. the Guaranty Agreement and each of the other Loan Documents to which it is a party do rank and will rank at least pari Dassu in priority of payment with all other Indebtedness of such Loan Obligor except Indebtedness of such Loan Obligor to the extent secured by Permitted Liens.

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There is no Lien upon or with respect to any of the properties or income of an) Loan Obligor or Subsidiary of any Loan Obligor which secures indebtedness or other obligations of any Person except for Permitted Liens.

6.1.27 Anti-Terrorism Laws and Economic Sanctions.

6.1.27.1 General.

None of the Loan Obligors nor or any Affiliate of any Loan Obligor, is in violation ofany Anti-Terrorism Law and Economic Sanction or engages in or conspires to engage in any transaction that evades or avoids, or has the purpose of evading or avoiding, or attempts to violate, any of the prohibitions set forth in any Anti-Terrorism Law and Economic Sanction.

6.1.27.2 Executive Order No. 13224.

None of the Loan Obligors, nor or any Affiliate of any Loan Obligor. or their respective agents acting or benefiting in any capacity in connection with the Loans, Letters of Credit or other transactions hereunder, is any of the following (each a "Blocked Person"):

(i) provisions of, the Executive Order No. 13224;

a Person that is listed in the annex to, or is otherwise subject to the

(ii) a Person owned or controlled by, or acting for or on behalf of, any Person that is listed in the annex to, or is otherwise subject to the provisions of, the Executive Order No. 13224;

(iii) a Person or entity with which any Lender is prohibited from dealing or otherwise engaging in any transaction by any Anti-Terrorism Law and Economic Sanction;

(iv) a Person or entity that commits, threatens or conspires to commit or supports "terrorism" as defined in the Executive Order No. 13224;

(v) a Person or entity that is named as a "specially designated national" on the most current list published by the US. Treasury Department Office of Foreign Asset Control at its official website or any replacement website or other replacement official publication of such list, or

(v i ) a person or entity who is affiliated or associated with a person or entity listed above.

No Loan Obligor or to the Knowledge of any Loan Obligor, any of Its agents acting in any capacity in connection with the Loans, Letters of Credit or other

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transactions hereunder ( i ) conducts any business or engages in making or receiving any contribution of funds, goods or services to or for the benefit of any Blocked Person, or ( i i ) deals in, or otherwise engages in any transaction relating to, any property or interests in property blocked pursuant to the Executive Order No. 13221.

6.2 I!pdates to Schedules.

Should any of the information or disclosures provided on any of the Schedules attached hereto become outdated or incorrect in any material respect. the Borrower shall promptly provide the Agent in writing with such revisions or updates to such Schedule as may be necessary or appropriate to update or correct same; provided, however, that no Schedule shall be deemed to have been amended, modified or superseded by any such correction or update, nor shall any breach of warranty or representation resulting from the inaccuracy or incompleteness of any such Schedule be deemed to have been cured thereby, unless and until the Required Lenders, in their reasonable discretion, shall have accepted in writing such revisions or updates to such Schedule.

7. CONDITIONS OF LENDING AND ISSUANCE OF LETTERS OF CREDIT

The obligation of each Lender to make Loans and of the Agent to issue Letters of Credit hereunder is subject to the performance by the Borrower of its Obligations to be performed hereunder at or prior to the making of any such Loans or issuance of such Letters of Credit and to the satisfaction of the following further conditions:

7.1 First Loans and Letters of Credit.

On the Closing Date:

7.1.1 Officer's Certificate.

After giving effect to the consummation of the Acquisition, the making of the Loans and the consummation of the other transactions contemplated by the Acquisition Documents and the Loan Documents. the representations and warranties of each of the Loan Obligors contained in Section 6 and in each of the other Loan Documents shall be true and accurate on and as of the Closing Date with the same effect as though such representations and warranties had been made on and as of such date (except representations and warranties which relate solely to an earlier date or time, which representations and warranties shall be true and correct on and as of the specific dates or times referred to therein), and each of the Loan Obligors shall have performed and complied with all applicable covenants and conditions hereof and thereof. no Event of Default or Potential Default shall have occurred and be continuing or shall exist; and there shall be delivered to the Agent for the benefit of each Lender a certificate of each of the Loan Obligors, dated the Closing Date and signed by an Authorized Officer of each of the Loan Obligors, to each such effect.

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7.1.2 Secretan's Certificate.

'There shall be delivered to the Agent for the benefit of each Lender a certificate dated the Closing Date and signed by the Secretary or an Assistant Secretary ofeach of the Loan Obligors certifying as appropriate as to:

( i ) all action taken by each Loan Obligor in connection with this Agreement and the other Loan Documents:

( i i ) the names of the officer or officers authorized to sign this Agreement and the other Loan Documents and the true signatures of such officer or officers and specifying the Authorized Of'ficers permitted to act on behalf of each Loan Obligor for purposes of this Agreement or the other Loan Documents and the true signatures of such officers, on which the Agent and each Lender may conclusively rely; and

(iii) copies of its organizational documents, including its certificate of incorporation, bylaws, certificate of limited partnership, partnership agreement. certificate of formation, and limited liability company agreement as in effect on the Closing Date certified by the appropriate state official where such documents are filed in a state office together with (A) certificates from the appropriate state officials as to the continued existence and good standing of each Loan Obligor in each state where organized or qualified to do business and a bring-down certificate by facsimile dated the Closing Date and (B) copies of any shareholder agreements with respect to any Loan Obligor, including those entering into force after giving effect to the consummation of the Acquisition, all of which shall be in form and substance reasonably satisfactory to the Agent.

7 . I .3 Delivery of Loan Documents.

The Guaranty Agreement and Notes shall have been duly executed and delivered to the Agent for the benefit of the Lenders.

7.1.4 ODinion of Counsel.

There shall be delivered to the Agent for the benefit of each Lender a written opinion of Skadden, Arps, Slate, Meagher & Flom, LLP and Jackson Kelly PLLC, counsel for the Loan Obligors (who may rely on the opinions of such other counsel as may be acceptable to the Agent), dated the Closing Date and in form and substance satisfactory to the Agent and its counsel as to the matters set forth in Exhibit 7.1.4.

7.1.5 Legal Details.

All legal details and proceedings in connection with the transactions contemplated by this Agreement and the other Loan Documents shall be in form and substance satisfactory to the Agent and counsel for the Agent. and the Agent shall have received all such other counterpart originals or certified or other copies of such docunients and proceedings in

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connection with such transactions, in form and substance satisfactory to the Agent and said counsel. as the Agent or said counsel may reasonably request.

7.1.6 Pavment of Fees.

The Borrower shall have paid or caused to be paid to the Agent for itself and for the account of the Lenders to the extent not previously paid all commitment and other fees accrued through the Closing Date and the costs and expenses for which the Agent and the Lenders are entitled to be reimbursed.

7.1.7 Environmental Audit.

The Loan Obligors shall have delivered to the Agent copies of all environmental reports, assessments and audits of which any of the Loan Obligors has Knowledge with respect to any Property, and the environmental condition of the Loan Obligors' and their Subsidiaries' assets, as substantiated by such reports, assessments and audits, shall be satisfactory to the Agent in all respects. On the Closing Date the appropriate officers of the applicable Loan Obligors shall have delivered to the Agent in form and substance satisfactory to the Agent a certificate to the effect that the Loan Obligors have made known to the Agent all material information of which they have Knowledge concerning environmental conditions and Environmental Complaints and the Loan Obligors and their Subsidiaries' compliance with the Environmental Laws relating to any of the Property and any other site or activity for which any Loan Obligor or Subsidiary of a Loan Obligor has received notice that it is potentially responsible for an environmental condition.

7.1.8 [Intentionally Omitted.]

7.1.9 Consents.

All material consents required to effectuate the transactions contemplated hereby as set forth on Schedule 6.1.13 shall have been obtained.

7 . I . I O Officer's Certificate Regarding MACs.

Since June 30,2005. and after giving effect to the consummation of the Acquisition, no Material Adverse Change shall have occurred and there shall have been delivered to the Agent for the benefit of each Lender a certificate dated the Closing Date and signed by an Authorized Officer of each Loan Obligor to each such effect.

7.1 I 1 1 No Violation of Laws.

The making of the Loans and the issuance of the Letters of Credit shall not contravene any Law applicable to any Loan Obligor or any of the Lenders.

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7.1.12 No .4ctions or Proceedings.

No action, proceeding, investigation, regulation or legislation shall have been instituted, threatened or proposed before any court, governmental agency or legislative body to enjoin, restrain or prohibit, or to obtain damages in respect of, this Agreement, the other Loan Documents, the Acquisition Documents or the consummation of the transactions contemplated hereby or thereby or which, in the Agent’s sole discretion. would make it inadvisable to consummate the transactions contemplated by this Agreement or any of the other Loan Documents.

7.1.13 Insurance Policies; Certificates of Insurance.

The Loan Obligors shall have delivered evidence acceptable to the Agent that adequate insurance in compliance with Section 8.1.3 [Maintenance of Insurance] is in full force and effect, including insurance binders and certificates with respect to each Loan Obligor’s property and liability insurance policies evidencing coverage satisfactory to the Agent.

7.1 , I 4 [Intentionallv Omitted.]


7.1,16 [Intentionally Omitted.]

7.1,17 Administrative Questionnaire.

Each of the Lenders and the Borrower shall have completed and delivered to the Agent the Agent’s form of administrative questionnaire.

7.1.18 UCC. Lien and Judgment Searches.

The Agent shall have received searches under the Uniform Commercial Code. and lien, tax lien and judgment searches against the Seller Party, Borrower and each Loan Obligor, in each case in the jurisdiction of each such Person’s formation, as reasonably required by the Agent, where each such Person conducts business or owns or operates material assets and the results of such searches shall be satisfactory in form, scope and substance to the Agent. Any liens (except Permitted Liens) or judgments against any of the assets or equity interests to be acquired by the Loan Obligors upon consummation of the transactions contemplated by the Acquisition Documents shall on or before the Closing Date be terminated and released and satisfied in hll. all to the satisfaction of the Agent in its sole discretion, and any Indebtedness secured by any such liens or judgments shall have been paid in fu l l and all commitments to make such loans shall have been terminated on or before the Closing Date. all to the satisfaction of the Agent in its sole discretion.

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7.1.19 Acauisition Documents.

A true and complete copy of the Acquisition Documents shall have been delivered to the Agent. as certified by an Authorized Officer of the Borrower to the Agent for the benefit of the Agent and the Lenders. including any consents to deviations therefrom made by the Parent. The Agent shall have received (i) testimony prepared by Tom Taylor and submitted to the WVPSC summarizing certain approval rights of ArcLight under the partnership agreement of the Parent, and ( i i ) Section 4.2 of that partnership agreement which sets out such approval rights in greater detail which shall, in each case, be reasonably satisfactory to the Agent. Pursuant to the Acquisition Documents ( i ) Parent shall have become the sole shareholder of Borrower, and ( i i ) the Related Assets shall have been conveyed by the Seller Party to the Borrower. The Acquisition Documents and the transactions contemplated thereby shall (i) provide the Consideration with respect to the Acquisition, including all fees, costs and expenses shall not exceed $280,000,000 and of that amount not more than $92,000,000 in the aggregate shall be indebtedness (A) of Borrower in connection with the Outstanding Senior Notes, and (B) outstanding under the Senior Notes, including any premium related to the prepayment thereof as contemplated hereby; and (ii) in all other respects, be reasonably satisfactory in form and substance to the Agent. On the Closing Date the Seller Long-Term Liabilities shall not exceed $500,000.

7.1.20 Due Diligence.

The Agent shall have completed its due diligence review of all aspects of the Loan Obligors and their Subsidiaries, and such review shall be satisfactory to the Agent in its reasonable discretion, including without limitation:

( i ) ArcLight's, IGS's and/or any of their respective Affiliates' cash contribution to the capital of the Borrower of not less than $104,000,000 in the aggregate; and

their respective capitalization and ownership, including

(ii) receipt of a report from PA Consulting Group, Inc. in substance satisfactory to the Agent which includes a review of each of the following (A) the 2005 Rate Case Approval and the related Joint Stipulation and Agreement for Settlement at Case No. 04-1 595-G-42T and Case No. 04-1596-G-PC pending before the WVPSC, (B) the incorporation of the 2005 Rate Case Approval and such Joint Stipulation and Agreement for Settlement into the Borrower's financial model. (C) exposure to purchased natural gas, (D) transportation agreements and savings estimates, and (E) the Financial Projections; and

(iii) a review of all documentation related to any guaranty or similar arrangement to be provided by a Loan Obligor or Subsidiary of a Loan Obligor in connection with the transactions described in the Acquisition Documents; and

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(iv) a review of the Borrower's and each other member of the ERISA Group's compliance with ERISA and the other matters set forth in Section 6.1.23 [Plans and Benefits] and Section 6.1.24 [Employment Matters].

7.1.2 1 Outstanding Senior Notes.

A true and complete copy of the Hancock Note Purchase Agreement with respect to the Outstanding Senior Notes. for which the outstanding aggregate principal amount shall not exceed $46,668,000 on the Closing Date, shall have been delivered to the Agent and shall be in form and substance satisfactory to the Agent.

7.1.22 Consummation of Acquisition.

On the Closing Date, the Acquisition and transactions contemplated by the Acquisition Documents shall have been consummated in accordance with the terms of the Acquisition Docunients, as certified by an Authorized Officer of the Borrower to the Agent for the benefit of the Agent and the Lenders. The Borrower shall have previously notified the Agent and the Lenders, in writing, of any changes to the Acquisition Documents. There shall be ( i ) no waiver of any materiat covenant, any material condition or any material compliance by any Person with any provision of the Acquisition Documents, the effect of which could reasonably be expected to be adverse to the Agent, the Lenders or any Loan Obligor (including, without limitation adverse to the liquidity of any Loan Obligor), nor (ii) any amendment to the Acquisition Documents, the effect of which could reasonably be expected to be adverse to the Agent, the Lenders or any Loan Obligor (including, without limitation, adverse to the liquidity of any Loan Obligor), in the case of either clause (i) or clause (ii), without the prior written approval of the Agent.


7.1.24 Maximum Initial Revolvine Advances.

The initial Revolving Credit Loans and Letters of Credit issued on the Closing Date in order to consummate the transactions contemplated under the Loan Documents and the Acquisition Documents shall not exceed $67,000.000 in the aggregate.

7.1.25 Solvency.

An Authorized Officer of each Loan Obligor shall have delivered a certificate in form and substance satisfactory to the Agent dated as of the Closing Date and certifiing that each Loan Obligor is Solvent after giving effect to the transactions contemplated by the Loan Documents and the Acquisition Documents. the making of the Revolving Credit Loans. the Swing Loans and Term Loans, and the issuance of all Letters of Credit.

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7.1 2 6 Certain Financial Conditions.

The Borrower shall have delivered to the Agent a certificate dated as of the Closing Date and signed by an Authorized Officer of the Borrower. in form. substance and detail together with supporting accounting and financial information satisfactory to the Agent, which certifies as to and sets forth ( i ) the Loan Obligors' compliance with Section 8.2.18 [Maximum Debt to Capital Ratio] afier giving effect to consummation of the transactions contemplated by the Acquisition Documents, and the Loans to be made and Letters of Credit to be issued on the Closing Date and ( i i ) a definitive Schedule of sources and uses of funds in connection with the transactions contemplated by the Loan Documents and the Acquisition Documents.

7 . 2 Each Additional Loan or Letter of Credit.

At the time of making any Loans or issuing any Letters of Credit other than Loans made or Letters of Credit issued on the Closing Date and after giving effect to the proposed extensions of credit: the representations and warranties of the Loan Obligors contained in Section 6 and in the other Loan Documents shall be true in all material respects on and as of the date of such additional Loan or Letter of Credit with the same effect as though such representations and warranties had been made on and as of such date (except representations and warranties which expressly relate solely to an earlier date or time. which representations and warranties shall be true and correct on and as of the specific dates or times referred to therein) and the Borrower shall have performed and complied with all covenants and conditions in Sections 8.1 and 8.2 hereof and shall have complied in all material respects with the other covenants and conditions hereof; no Event of Default or Potential Default shall have occurred and be continuing or shall exist: the making of the Loans or issuance of such Letter of Credit shall not contravene any Law applicable to any Loan Obligor or Subsidiary of any Loan Obligor o r any of the Lenders; and the Borrower shall have delivered to the Agent a duly executed and completed Loan Request, Swing Loan Request or application for a Letter of Credit as the case may be.

8 . COVENANTS

8.1 Affirmative Covenants.

The Borrower covenants and agrees that until payment in fu l l of the Loans. Reimbursement Obligations and Letter of Credit Borrowings, and interest thereon. expiration or termination of all Letters of Credit, satisfaction of all of the Loan Obligors' other Obligations under the Loan Documents and termination of the Commitments, the Borrower shall comply at all times with the following affirmative covenants:

8.1.1 Preservation of Existence, Etc.

(a) The Borrower shall, and shall cause each of its Subsidiaries to, maintain its legal existence as a corporation. limited partnership or limited liability company and

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its license or qualification and good standing in each jurisdiction in which its ownership or lease of property or the nature of its business makes such license or qualification reasonably necessary, except as otherwise expressly permitted in Section 8.2.6 [Liquidations, Mergers, Etc.].

(b) Borrower shall, and shall cause each of its Subsidiaries to, comply with the terms of the 2005 Rate Approval Case in all material respects.

8.1.2 Pavment of Liabilities. Includine 'Taxes. Etc.

'The Borrower shall, and shall cause each of its Subsidiaries to, duly pay and discharge all material liabilities to which it is subject or which are asserted against it, promptly as and when the same shall become due and payable, including all material taxes, assessments and governmental charges upon it or any of its properties, assets, income or profits, prior to the date on which penalties attach thereto, except to the extent that such liabilities, including material taxes, assessments or charges, are being contested in good faith and by appropriate and lawful proceedings diligently conducted and for which such reserve or other appropriate provisions, if any, as shall be required by GAAP shall have been made, but only to the extent that failure to discharge any such liabilities would not result in any additional liability which would adversely affect to a material extent the financial condition of any Loan Obligor or Subsidiary of any Loan Obligor, provided that the Borrower shall, and shall cause each of the other Loan Obligors and their Subsidiaries to pay all such liabilities forthwith upon the commencement of proceedings to foreclose any Lien which may have attached as security therefor.

8.1.3 Maintenance of Insurance.

The Borrower shall, and shall cause each of its Subsidiaries to, insure its properties and assets against loss or damage by fire and such other insurable hazards as such assets are commonly insured (including fire, extended coverage, property damage, workers' compensation, public liability and business interruption insurance) and against other risks (including errors and omissions) in such amounts as similar properties and assets are insured by prudent companies in similar circumstances carrying on similar businesses, and with reputable and financially sound insurers, including self-insurance to the extent customary, all as reasonably determined by the Agent. At the request of the Agent, the Borrower shall deliver to the Agent and each of the Lenders at least annually and upon the reasonable request of the Agent the insurance certificates signed by the Loan Obligors' independent insurance broker describing and certifying as to the existence of the insurance required to be maintained by this Agreement and the other Loan Documents. In the case of property losses, all insurance proceeds for losses of - greater than $5,000,000 (a "Significant Loss") shall be payable to the Agent for the benefit of the Lenders unless (i) no Event of Default exists, and (ii) the Borrower within one hundred eighty (1 80) days after receipt thereof, reinvests such proceeds to replace or restore such property. The Borrower shall notify the Agent promptly of any occurrence causing a material loss and the estimated (or actual, if available) amount of such loss or decline. Any monies received by the

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Agent constituting insurance proceeds shall be applied by the Agent in accordance with Section 5 .5 .1 .

8.1.4 Maintenance of ProDerties and Leases.

The Borrower shall, and shall cause each of its Subsidiaries to, maintain in good repair, working order and condition (ordinary wear and tear excepted) in accordance with the general practice of other businesses of similar character and size, all of those properties and assets usefbl or reasonably necessary to its business, and from time to time, the Borrower shall and shall cause each other Loan Obligor to make or cause to be made all appropriate repairs, renewals or replacements thereof in accordance with good industry practice provided that this Section shall not prevent the Borrower or any Subsidiary from discontinuing the operation and the maintenance of any of its properties if such discontinuance is desirable in the conduct of its business and such discontinuance is immaterial to the business of the Borrower or such Subsidiary.

8.1.5 Maintenance of Patents, Trademarks. Etc.

The Borrower shall, and shall cause each of its Subsidiaries to, maintain in full force and effect all patents, trademarks, service marks, trade names, copyrights, licenses, franchises, permits and other authorizations necessary for the ownership and operation of its properties and business, or shall procure rights to use the same, if the failure so to maintain or procure the rights to use the same would constitute a Material Adverse Change.

8.1.6 Visitation Rights.

The Borrower shall, and shall cause each of its Subsidiaries to, permit any of the officers or authorized employees or representatives of the Agent or any of the Lenders to visit and inspect any of its properties and to examine and make excerpts from its books and records and discuss its business affairs, finances and accounts with its officers, all in such detail and at such times and as often as any of the Lenders may reasonably request, provided that each Lender shall provide the Borrower and the Agent with reasonable notice prior to any visit or inspection. In the event any Lender desires to conduct an audit of any Loan Obligor, such Lender shall make a reasonable effort to conduct such audit contemporaneously with any audit to be performed by the Agent.

8.1.7 Keeping: of Records and Books of Account.

The Borrower shall, and shall cause each Subsidiary of the Borrower to, maintain and keep proper books of record and account which enable the Borrower and its Subsidiaries to issue financial statements in accordance with GAAP and as otherwise required by applicable Laws of any Official Body having jurisdiction over the Borrower or any Subsidiary of the Borrower, and in which full, true and correct entries shall be made in all material respects of all its dealings and business and financial affairs.

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8.1.8 Plans and Benefit Arrangements.

The Borrower shall. and shall cause each other member of the ERISA Group to, comply with ERISA, the Internal Revenue Code and other applicable Laws to the extent applicable to Plans and Benefit Arrangements except where such failure. alone or in conjunction with any other failure. would not result in a Material Adverse Change. Without limiting the generality of the foregoing, the Borrower shall cause all of its Plans and all Plans maintained by any member of the ERISA Group to be funded in all material respects in accordance with the minimum funding requirements of ERISA and shall make, and cause each member of the ERISA Group to make, in a timely manner, all material contributions due to Plans. Benefit Arrangements and Multiemployer Plans.

8.1.9 Compliance with Laws.

The Borrower shall, and shall cause each of its Subsidiaries to. comply with all applicable Laws, including all Environmental Laws, in all respects, provided that it shall not be deemed to be a violation of this Section 8.1.9 if any failure to comply with any Law would not result in fines, penalties, remediation costs, other similar liabilities or injunctive relief which in the aggregate would constitute a Material Adverse Change.

8.1 ..lo Use of Proceeds.

The Borrower will use (a) the Letters of Credit and the proceeds of the Revolving Credit Loans and Swing Loans only (i) to finance a portion of the "Purchase Price'' as set forth in Sections 3.l(b)(ii) and 3.l(c) ofthe Acquisition Agreement, (ii) to finance Permitted Acquisitions, (iii) to pay certain transaction costs and expenses associated with the Acquisition, and (iv) for general working capital and corporate purposes for general corporate purposes and for working capital, and (b) the proceeds of the Term Loans only to prepay in full and terminate Indebtedness outstanding under the Senior Notes. The Borrower shall not use the Letters of Credit or the proceeds of the Loans for any purposes which contravenes any applicable Law or any provision hereof.

8.1.1 1 Satisfaction of Senior Notes.

011 or before November 15, 2005, the Borrower shall have requested the Term Loans pursuant to a 'Term Loan Request and shall use the proceeds of the Term Loan to repay in full all obligations, indebtedness, interest fees, expenses and other amounts due and owing under Senior Notes, and all commitments to lend money or extend credit under the Senior Notes shall have been irrevocably terminated, and all liens thereunder shall have been terminated, all to the satisfaction of the Agent.

8. I . 12 [Intentionally Omitted.],

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8.1 13 Anti-Terrorism Laws and Economic Sanctions.

The Borrower and its Affiliates and agents shall not ( i ) conduct any business or engage in any transaction or dealing with any Blocked Person, including the making or receiving any contribution of funds. goods or services to or for the benefit of any Blocked Person, ( i i ) deal in. or otherwise engage in any transaction relating to, any property or interests in property blocked pursuant to the Executive Order No. 13224; or (iii) engage in or conspire to engage in any transaction that evades or avoids. or has the purpose of evading or avoiding, or attempts to violate. any of the prohibitions set forth in the Executive Order No. 13224, the USA Patriot Act or any other Anti-Terrorism Law and Economic Sanction. The Borrower shall deliver to Lenders any certification or other evidence requested from time to time by any Lender in its sole discretion. confirming Borrower's compliance with this Section 8.1.13.

8.1.14 Gas Purchase Reauirements.

The Borrower and each Subsidiary of the Borrower (i) shall comply with the 2005 Rate Case Approval and all other subsequent rate case approvals entered by the WVPSC with respect to gas purchases, including exercising prudent gas purchase practices, and ( i i ) shall at all times use commercially reasonable efforts to have in effect a fuel adjustment clause or a similar mechanism approved by the WVPSC by which the rates charged by the Loan Obligors are automatically adjusted to reflect variations in natural gas prices paid by the Loan Obligors.

8.2 Negative Covenants.

'The Borrower covenants and agrees that until payment in f i l l of the Loans, Reimbursement Obligations and Letter of Credit Borrowings and interest thereon, expiration or termination of all Letters of Credit, satisfaction of all of the Loan Obligors' other Obligations under the Loan Documents and termination of the Commitments, the Borrower shall comply with the following negative covenants:

8.2.1 Indebtedness.

The Borrower shall not. and shall not permit any of its Subsidiaries to, at any time create, incur. assume or suffer to exist any Indebtedness, except:

( i ) Indebtedness under the Loan Documents;

( i i ) Existing Indebtedness as set forth on Schedule 8.2.1 (including any exrensions or renewals thereof, provided there is no increase in the amount thereof or other significant change in the terms thereof unless otherwise specified on Schedule 8.2.1;

( i i i ) Capitalized leases and Indebtedness secured by Purchase Money Security Interests not exceeding $10,000,000 in the aggregate at any one time;

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( iv) fndebtedness of a Loan Obligor to another Loan Obligor which is subordinated in accordance with the provisions of Section 8.1. I2 [Subordination of Intercompany Loans];

( v ) Any Lender-Provided Interest Rate Hedge or other Interest Rate Hedge approved by the Agent;

(vi) Indebtedness relating to the Outstanding Senior Notes; provided there is no increase in the amount thereofor other significant change in the terms thereof unless approved by the Required Lenders;

(vii) Indebtedness incurred in connection with refinancing of the Outstanding Senior Notes or the Term Loan in an amount not to exceed 1 10% of the amount outstanding under the Outstanding Senior Notes or Term Loan, as the case may be, on the Closing Date, provided that (i) after giving effect to such refinancing the Borrower can demonstrate compliance with the financial covenants in Sections 8.2.17 [Minimum Interest Coverage Ratio] and 8.2.18 [Maximum Debt to Capital Ratio], and (ii) the terms on which such refinancing is consummated shall not, on the whole, be materially less favorable to the Borrower than the terms of this Agreement; and

(viii) Other Indebtedness in any aggregate amount not to exceed $20,000,000.

Notwithstanding the foregoing, in no event shall any Loan Obligor nor any of its Subsidiaries at any time create. incur, assume or suffer to exist any Indebtedness which. by its terms, prohibits, restricts or limits such Loan Obligor or Subsidiary from making or paying any dividend or other distribution of any nature payable to another Loan Obligor.

8.2.2 - Liens.

The Borrower shall not, and shall not permit any of its Subsidiaries to, at any time create, incur. assume or suffer to exist any Lien on any of its property or assets, tangible or intangible, now owned or hereafter acquired, or agree or become liable to do so, except Permitted Liens.

8.2.3 Guaranties.

The Borrower shall not, and shall not permit any of its Subsidiaries to, at any time. directly or indirectly, become or be liable in respect of any Guaranty, or assume, guarantee, become surety for, endorse or otherwise agree, become or remain directly or contingently liable upon or with respect to any obligation or liability of any other Person, except for Guaranties of Indebtedness of the Loan Obligors permitted hereunder.

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8.2.3 Loans and Investments.

The Borrower shall not, and shall not permit any of its Subsidiaries to, at my time make or suffer to remain outstanding my loan or advance to, or purchase. acquire or own any stock, bonds, notes or securities of. or any partnership interest (whether general or limited) or limited liability company interest in. or any other investment or interest in, or make any capital contribution to, any other Person, or agree, become or remain liable to do any of the foregoing, except:

(i) trade credit extended on usual and customary terms in the ordinary course of business;

(i i) advances to employees to meet expenses incurred by such employees in the ordinary course of business;

( i i i ) Permitted Investments; and

(iv) loans, advances and investments in other Loan Obligors.

8.2.5 Dividends and Related Distributions.

The Borrower shall not, and shall not permit any of its Subsidiaries to, make or pay, or agree to become or remain liable to make or pay, any dividend or other distribution of any nature (whether in cash, property, securities or otherwise) on account of or in respect of its shares of capital stock, partnership interests or limited liability company interests on account of the purchase, redemption, retirement or acquisition of its shares of capital stock (or warrants. options or rights therefor), partnership interests or limited liability company interests, except (i) dividends or other distributions payable to another Loan Obligor, (ii) dividends or distributions by the Borrower for taxes of the Borrower payable by the Parent, and (iii) dividends and distributions payable solely in shares of capital stock or in options, warrants or other rights to acquire capital stock which do not result in a transfer of control of the Borrower as described in Section 9.1.13 [Change of Control]. Notwithstanding the foregoing, the Borrower may make dividends and distributions if. prior to and after giving effect thereto:

( 1 )

(2)

no Event of Default or Potential Default shall have occurred and be

the Loan Obligors are in pro forma compliance with Section 8.2.17 continuing,

[Minimum Interest Coverage Ratio] and Section 8.2.18 [Maximum Debt to Capital Ratio] prior to and after giving effect to such dividend or distribution, and

(3) the aggregate amount of all such dividends and distributions made by the Borrower since the Closing Date does not exceed the sum of (i) $8,000.000 plus (ii) 90% of the cumulative Consolidated Net lncome from the Closing Date (or, if Consolidated Net Income is a loss for such period, minus 100% of such loss).

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8.2.6 Liauidations, Mergers, Consolidations. Acauisitions.

The Borrower shall not, and shall not permit any of its Subsidiaries to, dissolve, liquidate or wind-up its affairs, or become a party to any merger or consolidation, or acquire by purchase. lease or otherwise all or substantially all of the assets or capital stock of any other Person, provided that

( 1 ) any Loan Obligor other than the Borrower may consolidate or merge into another Loan Obligor which is wholly-owned by one or more of the other Loan Ob I igors,

(2) Universal Coil may be dissolved, liquidated or wind-up its affairs or become a party to a merger or consolidation with a Person that is not a Loan Obligor, and

( 3 ) any Loan Obligor may acquire, whether by purchase or by merger, (A) all of the ownership interests of another Person or (B) substantially all of assets of another Person or of a business or division of another Person (each an "Permitted Acquisition"), provided that each of the following requirements is met:

(i) if the Loan Obligors are acquiring the ownership interests in such Person, such Person shall execute a Guarantor Joinder and join the Guaranty Agreement as a Guarantor pursuant to Section 1 1.18 [Joinder of Guarantors] on or before the date of such Permitted Acquisition;

(ii) the Borrower shall. and shall cause each such Person and its owners, as applicable, to comply with Section 11.1 8 [Joinder of Guarantors] on or before the date of such Permitted Acquisition;

(iii) the board of directors or other equivalent governing body of such Person shall have approved such Permitted Acquisition and, if the Borrower shall use any portion of the Loans to h n d such Permitted Acquisition, the Borrower also shall have delivered to the Lenders written evidence of the approval of the board of directors (or equivalent body) of such Person for such Permitted Acquisition;

(iv) the business acquired, or the business conducted by the Person whose ownership interests are being acquired, as applicable, shall be substantially the same as one or more line or lines of business conducted by the Loan Obligors and shall comply with Section 8.2.10 [Continuation of or Change in Business];

(v) no Potential Default or Event of Default shall exist immediately prior to and afrer giving effect to such Permitted Acquisition;

(vi) the Borrower shall demonstrate that it shall be in compliance with the covenants contained in Sections 8.2.16 [Minimum Consolidated EBITDA], 8.2.17 [Minimum

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Interest Coverage Ratio] and 8.2.18 [Maximum Debt to Capital Ratio] after giving effect to such Permitted Acquisition (including in such computation Indebtedness or other liabilities assumed or incurred in connection with such Permitted Acquisition but excluding income earned or expenses incurred by the Person. business or assets to be acquired prior to the date of such Permitted Acquisition) by delivering at least five ( 5 ) Business Days prior to such Permitted Acquisition a certificate in the form of Exhibit 8.2.6 evidencing such compliance:

(vi i ) after giving pro forma effect to any Loans made or Letters of Credit issued in connection with such Permitted Acquisition, the highest monthly average Kevolving Facility Usage during the 12 months preceding such Permitted Acquisition shall not result in the Borrower having availability to borrow additional Revolving Credit Loans of less than $15,000.000;

(viii) the Consideration paid by the Loan Obligors for all Permitted Acquisitions made during the current fiscal year of the Loan Obligors shall not exceed $ IO,OOO,OOO, and the aggregate of the Consideration paid by the Loan Obligors for such Permitted Acquisition and all other Permitted Acquisitions made between the Closing Date and the date of such Permitted Acquisition shall not exceed $301000,000; and

(ix) the Borrower shall deliver to the Agent at least five ( 5 ) Business Days before such Permitted Acquisition copies of any agreements entered into or proposed to be entered into by such Loan Obligors in connection with such Permitted Acquisition.

8.2.7 Dispositions of Assets or Subsidiaries.

The Borrower shall not. and shall not permit any of its Subsidiaries to, sell, convey, assign, lease, abandon or otherwise transfer or dispose of, voluntarily or involuntarily. any of its properties or assets, tangible or intangible (including sale, assignment, discount or other disposition of accounts, contract rights, chattel paper, equipment or general intangibles with or without recourse or of capital stock, shares of beneficial interest, partnership interests or limited liability company interests of a Subsidiary of such Loan Obligor), except:

( i ) transactions involving the sale of inventory in the ordinary course of business;

( i i ) any sale, transfer or lease of assets in the ordinary course of business which are no longer necessary or required in the conduct of such Loan Obligor's or such fubsidiary's business;

(iii) any sale, transfer or lease of assets by any wholly owned Subsidiary of such Loan Obligor to another Loan Obligor;

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( i v ) business which are replaced by substitute assets acquired or leased within the parameters of Section 8.2.1 5 [Capital Expenditures and Leases]:

any sale. transfer or lease of assets in the ordinary course of

( v ) any other sale, transfer or lease of assets, not specifically excepted pursuant to clauses (i) through (iv) above; provided however, that the aggregate amount of the book value of the assets subject to all such sales. transfers and leases under this clause (v) shall not exceed 10% of the book value of total assets of the Loan Obligors from and after the Closing Date, as calculated in accordance with GAAP: or

(vi) any sale or disposition of Permitted Investments.

8.2.8 Affiliate Transactions.

The Borrower shall not, and shall not permit any of its Subsidiaries to. enter into or carry out any transaction with any Affiliate (including purchasing property or services from or selling property or services to any Affiliate of any Loan Obligor) unless such transaction is not otherwise prohibited by this Agreement, is entered into in the ordinary course of business upon fair and reasonable arm's-length terms and conditions which are h l l y disclosed to the Agent and is in accordance with all applicable Law.

8.2.9 Subsidiaries, Partnershim and Joint Ventures.

The Borrower shall not, and shall not permit any of its Subsidiaries to. own or create directly or indirectly any Subsidiaries other than (i) any Subsidiary (excluding Universal Coil) which has joined the Guaranty Agreement as a Guarantor on the Closing Date; and (ii) any Subsidiary formed after the Closing Date which joins the Guaranty Agreement as a Guarantor pursuant to Section 1 1. I8 [Joinder of Guarantors]. The Borrower shall not, and shall not permit any other Loan Obligor, to become or agree to (1) become a general or limited partner in any general or limited partnership, except that the Loan Obligors may be general or limited partners in other Loan Obligors, (2) become a member or manager of, or hold a limited liability company interest in, a limited liability company, except that the Loan Obligors may be members or managers of, or hold limited liability company interests in, other Loan Obligors, or (3) become a joint venturer or hold a joint venture interest in any joint venture.

8.2.10 Continuation of or Change in Business.

The Borrower shall not, and shall not permit any of its Subsidiaries to, engage in any business other than as set forth on Schedule 8.2.10, substantially as conducted and operated by such Loan Obligor or Subsidiary during the present fiscal year.

8.2.1 1 Plans and Benefit Arrangements.

The Borrower shall not, and shall not permit any of its Subsidiaries to:

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( i ) Internal Revenue Code with respect to any Plan;

fail to satisfy the minimum funding requirements of ERISA and the

(ii) request a minimum funding waiver from the Internal Revenue Service with respect to any Plan;

(iii) engage in a Prohibited 'Transaction with any Plan, Benefit Arrangement or Multiemployer Plan which. alone or in conjunction with any other circumstances or set of circumstances resulting in liability under ERISA, would constitute a Material Adverse Change;

(iv) permit the aggregate actuarial present value of all benefit liabilities (whether or not vested) under all Plans in the aggregate, determined on a plan termination basis, as disclosed in the most recent actuarial report completed with respect to each respective Plan, to exceed the fair market value of the assets of the Plans by more than $3,000,000;

(v) fail to make when due any material contribution to any Multiemployer Plan that the Borrower or any member of the ERISA Group may be required to make under any agreement relating to such Multiemployer Plan, or any Law pertaining thereto;

(vi) withdraw (completely or partially) from any Multiemployer Plan or withdraw (or be deemed under Section 4062(e) of ERISA to withdraw) from any Multiple Employer Plan, where any such withdrawal is reasonably likely to result in a Material Adverse Change;

(vii) terminate, or institute proceedings to terminate, any Plan, where such termination is reasonably likely to result in a Material Adverse Change;

(viii) make any amendment to any Plan with respect to which security is required under Section 307 of ERISA, where such failure is reasonably likely to result in a Material Adverse Change; or

(ix) fail to give any and all notices and make all disclosures and governmental filings required under ERlSA or the Internal Revenue Code in respect of any Plan or Benefit Arrangement, where such failure is reasonably likely to result in a Material Adverse Change.

8.2.12 Fiscal Year.

The Borrower shall not, and shall not permit any Subsidiary of the Borrower to. change its fiscal year from the twelve-month period beginning January 1 and ending December 3 1 .

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8.2.13 Issuance of Stock.


two fiscal quarters ended 313 1/06

The Borrower shall not, and shall not permit any of its Subsidiaries to, issue any additional shares of its capital stock or any options, warrants or other rights in respect thereof. unless (i) after giving effect to such issuance. no Event of Default would result under Section 9.1 . I 3 [Change of Control], and ( i i ) the proceeds thereof are paid the Agent tot the extent required under Section 5.5.2 [Issuance of Certain Debt: Issuance of Equity, etc.].

Consolidated EBITDA

$20,000,000

8.2.14 Chances in Orpanizational Documents.

three fiscal quarters ended 6/30/06

The Borrower shall not, and shall not permit any of its Subsidiaries to, amend in any respect its certificate of incorporation (including any provisions or resolutions relating to capital stock), bylaws, certificate of limited partnership, partnership agreement, certificate of formation, limited liability company agreement or other organizational documents without providing at least twenty (20) calendar days' prior written notice to the Agent and the Lenders and, in the event such change would be materially adverse to the Lenders as determined by the Agent in its reasonable discretion, obtaining the prior written consent of the Required Lenders.

$24,000,000

8.2. I5 Capital Expenditures and Leases.

four fiscal quarters ended 9/30/06

four fiscal quarters ended 1213 1/06 through four fiscal quarters ended 9130108

Except as may be required to comply with an order of an Official Body, including the WVPSC, the Borrower shall not, and shall not permit any of its Subsidiaries to, make any payments exceeding $15,000,000 in the aggregate in any fiscal year on account of the purchase or lease of any assets which if purchased would constitute fixed assets or which if leased would constitute a capitalized lease.

$25,000,000

$27.000.000

8.2.16 Minimum Consolidated EBITDA.

four fiscal quarters ended 1213 1/08 and the end of each tiscal quarter thereafter

8.2.17 Minimum Interest Coverage Ratio.

$30,000,000

1

The Borrower shall not permit the ratio of ( i ) Consolidated Adjusted EBJT to (ii) consolidated interest expense of the Borrower and its Subsidiaries. calculated as of the end of each fiscal quarter commencing with the fiscal quarter ended March 3 1,2006, to be less than 2.0 to 1 .O. Consolidated Adjusted EBIT and consolidated interest expense shall be calculated at March 3 1. 2006, for the two fiscal quarters then ended; at June 30, 2006. for the three fiscal quarters then ended; and at September 30,2006 and at the end of each fiscal quarter thereafter, for the four fiscal quarters then ended.

8.2.1 8 Maximum Debt to Capital Ratio.

The Borrower shall not permit the Debt to Capital Ratio calculated as of the end of each fiscal quarter to be greater than .60 to 1 .O.

8.2.19 Management and Transition Service Exuenses.

The Borrower shall not, and shall not permit any of its Subsidiaries to, be obligated to pay Management Expenses to any Person unless (i) the aggregate amount of such Management Expenses does not exceed the amount set forth in the Management Agreement, but in no event in an amount greater than that set forth in the 2005 Rate Case Approval. The Borrower shall not, and shall not permit any of its Subsidiaries to. be obligated to pay 'Transition Service Expenses to any Person unless the aggregate amount of such Transition Service Expenses accrued and paid by the Loan Obligors and their Subsidiaries does not exceed the amount set forth in the Transition Services Agreement.

8.2.20 No Modification of Acquisition Documents, Hedging Contract Policies and Management Agreements.

The Borrower shall not, and shall not permit any of its Subsidiaries to, (i) waive or consent to any change in any material covenant, any material condition or any material compliance by any Person with any provision of the Acquisition Documents or any Management Agreement without providing prior written notice to the Agent and each Lender, and i f the effect of such waiver or consent could reasonably be expected to be adverse in any material respect to the Agent, the Lenders or any Loan Obligor (including, without limitation adverse to the liquidity of any Loan Obligor), then the Borrower shall obtain the prior written approval of the Required Lenders to such waiver, which approval shall not be unreasonably withheld. or (i i ) amend the Acquisition Documents or any Management Agreement without providing prior written notice to the Agent and each Lender. and if the effect of an amendment

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could reasonably be expected to be adverse in any material respect to the Agent, the Lenders or any Loan Obligor (including, without limitation, adverse to the liquidity of any Loan Obligor), then the Borrower shall obtain the prior written approval of the Required Lenders to such amendment. which approval shall not be unreasonably withheld.

8.3 Reporting Reauirements.

The Borrower covenants and agrees that until payment in ful l of the Loans, Reimbursement Obligations and Letter of Credit Borrowings and interest thereon, expiration or termination of all Letters of Credit, satisfaction of all of the Loan Obligors' other Obligations under the Loan Documents and termination of the Commitments, the Borrower will, and will cause each of the other Loan Obligors, to furnish or cause to be furnished to the Agent and each of the Lenders:


8.3 -2. Ouarterly Financial Statements.

As soon as available and in any event within forty-five (45) calendar days after the end of each of the first three fiscal quarters in each fiscal year, unaudited financial statements of the Borrower, consisting of a consolidated and consolidating balance sheet as of the end of such fiscal quarter and related consolidated and consolidating statements of income, stockholders' equity and cash flows for the fiscal quarter then ended and the fiscal year through that date, all in reasonable detail and certified (subject to normal year-end audit adjustments) by an Authorized Officer of the Borrower as having been prepared in accordance with GAAP, consistently applied, and setting forth in comparative form the respective financial statements for the corresponding date and period in the previous fiscal year.

8.3.3 Annual Financial Statements,

As soon as available and in any event within one hundred twenty ( 1 20) days after the end of each fiscal year of the Borrower, financial statements of the Borrower consisting of a consolidated and consolidating balance sheet as of the end of such fiscal year, and related consolidated and consolidating statements of income, stockholders' equity and cash flows for the fiscal year then ended, all in reasonable detail and setting forth in comparative form the financial statements as of the end of and for the preceding fiscal year, and certified by independent certified public accountants of nationally recognized standing reasonably satisfactory to the Agent. The certificate or report of accountants shall be free of qualifications (other than any consistency qualification that may result from a change in the method used to prepare the financial statements as to which such accountants concur) and shall not indicate the occurrence or existence of any event. condition or contingency which would materially impair the prospect of payment or performance of any covenant, agreement or duty of any Loan Obligor under any of the Loan Documents. The Borrower shall deliver with such financial statements and certification by their accountants a letter of such accountants to the Agent and the Lenders

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substantially (i) to the effect that, based upon their ordinary and customary examination of the affairs of the Borrower, performed in connection with the preparation of such consolidated financial statements, and in accordance with generally accepted auditing standards, they are not aware of the existence of any condition or event which constitutes an Event of Default or Potential Default or, if they are aware of such condition or event. stating the nature thereof and confirming the Borrower's calculations with respect to the certificate to be delivered pursuant to Section 8.3.3 [Certificate of the Borrower] with respect to such financial statements and (ii) to the effect that the Lenders are intended to rely upon such accountant's certification of the annual financial statements and that such accountants authorize the Loan Obligors to deliver such reports and certificate to the Lenders on such accountants' behalf.

8 .3 .4 Certificate of the Borrower.

Concurrently with the financial statements of the Borrower furnished to the Agent and to the Lenders pursuant to Sections 8.3.2 [Quarterly Financial Statements] and 8 . 3 . 3 [Annual Financial Statements], a certificate (each a "Compliance Certificate") of the Borrower signed by an Authorized Officer of the Borrower, in the form of Exhibit 8.3.4, to the effect that, except as described pursuant to Section 8.3.5 [Notice of Default], (i) the representations and warranties of the Loan Obligors contained in Section 6 and in the other Loan Documents are true in all material respects on and as of the date of such certificate with the same effect as though such representations and warranties had been made on and as of such date (except representations and warranties which expressly relate solely to an earlier date or time) and the Loan Obligors have performed and complied with all covenants and conditions hereof and thereof. (ii) no Event of Default or Potential Default exists and is continuing on the date of such certificate and (iii) containing calculations in sufficient detail to demonstrate compliance as of the date of such financial statements with all financial covenants contained in Section 8.2 [Negative Covenants].

8.3.5 Notice of Default.

Promptly after any officer of any Loan Obligor has learned of the occurrence of an Event of Default or Potential Default, a certificate signed by an Authorized Officer of such Loan Obligor setting forth the details of such Event of Default or Potential Default and the action which the such Loan Obligor proposes to take with respect thereto.

8.3.6 Notice of Litigation.

Promptly after the commencement thereof, notice of all actions, suits, proceedings or investigations before or by any Official Body or any other Person against any Loan Obligor or Subsidiary of any Loan Obligor which involve a claim or series of claims in excess of $1 .OOO,OOO or which if adversely determined would constitute a Material Adverse Change.

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8.3.7 Certain Events.

Written notice to the Agent:

( i ) at least fifteen (15) calendar days prior thereto, with respect to any proposed sale or transfer of assets pursuant to Section 8.2.7 (v) [Disposition of Assets or Subsidiaries], and

( i i ) within the time limits set forth in Section 8.2.14 [Changes in Organizational Documents], any amendment to the organizational documents of any Loan 0 b ligor.

8.3.8 Budgets. Forecasts, Other ReDorts and Information.

Promptly upon their becoming available to the Borrower:

(i) the annual budget and any forecasts or projections of the Borrower, to be supplied not later than thirty (30) days prior to commencement of the fiscal year to which any of the foregoing may be applicable,

(i i) any reports including management letters submitted to the Borrower by independent accountants in connection with any annual, interim or special audit,

(iii) FERC Form 2 and WVPSC Annual Reports,

(iv) a copy of any order in any proceeding to which the Borrower or any of its Subsidiaries is a party issued by any Official Body, and

(v) such other reports and information as any of the Lenders may from time to time reasonably request. The Borrower shall also notifL the Lenders promptly of the enactment or adoption of any Law which may result in a Material Adverse Change.

8.3.9 Notices Reparding Plans and Benefit Arrangements.

8.3.9.1 Certain Events.

Promptly upon becoming aware of the occurrence thereof, notice (including the nature ofthe event and, when known, any action taken or threatened by the Internal Revenue Service or the PBGC with respect thereto) of:

(i) any Reportable Event with respect to the Borrower or any other member of the ERISA Group,

( i i ) any Prohibited Transaction which could subject the Borrower or any other member of the ERlSA Group to a civil penalty assessed pursuant to Section 502(i) of

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ERISA or a tax imposed by Section 3975 of the Internal Revenue Code in connection with my Plan, any Benefit Arrangement or any trust created thereunder,

( i i i ) any assertion of material withdrawal liability with respect to any Multiemployer Plan,

(iv) any partial or complete withdrawal from a Multiemployer Plan by the Borrower or any other member of the ERISA Group under Title IV of ERISA (or assertion thereot). where such withdrawal is reasonably likely to result in a Material Adverse Change,

(v) any cessation of operations (by the Borrower or any other member of the ERISA Group) at a facility in the circumstances described in Section 4062(e) of ERISA.

(vi) withdrawal by the Borrower or any other member of the EWSA Group from a Multiple Employer Plan,

(vii) a failure by the Borrower or any other member of the ERlSA Group to make a payment to a Plan required to avoid imposition of a Lien under Section 302(fJ of ERISA, or

(viii) any change in the actuarial assumptions or funding methods used for any Plan, where the effect of such change is to materially increase or materially reduce the unfunded benefit liability or obligation to make periodic contributions.

8.3.9.2 Notices of Involuntary Termination and Annual Reports.

Promptly after receipt thereof, copies of (a) all notices received by the Borrower or any other member of the ERISA Group of the PBGC's intent to terminate any Plan administered or maintained by the Borrower or any member of the ERISA Group, or to have a trustee appointed to administer any such Plan; and (b) at the request of the Agent or any Lender each annual report (IRS Form 5500 series) and all accompanying schedules and the most recent actuarial reports concerning each Plan.

8.3.9.3 Notice of Voluntarv Termination.

Promptly upon the filing thereof; copies of any PBGC Form 500, or any successor or equivalent form to PBGC Form 500, filed with the PBGC in connection with the termination of any Plan.

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9. DEFAULT

9.1 Events of Default.

An Event of Default shall mean the occurrence or existence of any one or more of the following events or conditions (whatever the reason therefor and whether voluntary, involuntary or efyected by operation of Law):

9.1.1 Payments Under Loan Documents.

The Borrower shall fail to pay (i) any principal of any Loan (including scheduled installments, mandatory prepayments or the payment due at maturity) or Letter of Credit Borrowing after such principal becomes due in accordance with the terms hereof or of any other Loan Documents, or (ii) within three (3) Business Days, any interest on any Loan or Letter of Credit Borrowing or any other amount owing hereunder or under the other Loan Documents after such interest or other amount becomes due in accordance with the terms hereof or thereof;

9.1.2 Breach of WarranR.

Any representation or warranty made at any time by the Borrower herein or by any of the Loan Obligors in any other Loan Document, or in any certificate, other instrument or statement furnished pursuant to the provisions hereof or thereof, shall prove to have been false or misleading in any material respect as of the time it was made or hrnished, provided that such representation or warranty shall not constitute an Event of Default if such conditions or circumstances are (i) subject to cure, and (ii) the facts or conditions giving rise to such breach of the representation or warranty are cured in such a manner as to eliminate such breach with thirty (30) days after the Borrower has Knowledge of such breach;

9.1.3 Breach of Negative Covenants or Visitation Rights.

The Borrower shall default in the observance or performance of any covenant contained in Sections 8.2.2 [Liens] , 8.2.3 [Guaranties] or 8.2.4 [Loans and Investments] and such default shall continue unremedied for a period of ten ( I 0) Business Days, or the Borrower shall default in the observance or performance of any other covenant contained in Section 8.2 [Negative Covenants] or of Section 8.1.6 [Visitation Rights] ;

9.1.4 Breach of Other Covenants.

Any of the Loan Obligors shall default in the observance or performance of any other covenant, condition or provision hereof or of any other Loan Document and such default shall continue unremedied for a period of fifteen (1 5 ) Business Days after any officer of any Loan Obligor becomes aware of the occurrence thereof, provided that if such default is not capable ofremedy within such 15-Business Day period, such IS-Business Day period shall be extended an additional thirty (30) Business Days so long as (i) the default is subject to cure, (ii)

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the Loan Obligors are diligently and continuously proceeding to cure such default, and (iii) the additional cure period could not reasonably be expected to have a Material Adverse Change.

9.1.5 Defaults in Other Agreements or Indebtedness.

A default or event of default shall occur at any time under the terms of any other agreement involving borrowed money or the extension of credit or any other Indebtedness under which any Loan Obligor or Subsidiary of any Loan Obligor may be obligated as a borrower or guarantor in excess of $7.500,000 in the aggregate. and such breach, default or event of default consists of the failure to pay (beyond any period of grace permitted with respect thereto, whether waived or not) any indebtedness when due (whether at stated maturity, by acceleration or otherwise) or if such breach or default permits or causes the acceleration of any indebtedness (whether or not such right shall have been waived) or the termination of any commitment to lend; provided however, it shall not be an Event of Default hereunder if an event of default occurs under the Senior Notes so long as (x) the ability of the noteholders thereunder to accelerate the indebtedness under the Senior Notes is subject to forbearance acceptable to the Agent, and (y) such Senior Notes and all related obligations are paid in full pursuant to Section 8.1.1 1 on or before November 15.2005;

9.1.6 Final Judgments or Orders.

Any final judgments or orders for the payment of money in excess of $7,500,000 in the aggregate shall be entered against any Loan Obligor by a court having jurisdiction in the premises, which judgment is not discharged, vacated, bonded or stayed pending appeal within a period of thirty (30) days fiom the date of entry;

9.1.7 Loan Document Unenforceable.

Any of the following occurs: (i) any of the Loan Documents shall cease to be legal, valid and binding agreements enforceable against the party executing the same or such party's successors and assigns (as permitted under the Loan Documents) in accordance with the respective terms thereof, (ii) any of the Loan Documents shall in any way be terminated (except in accordance with its terms) or become or be declared ineffective or inoperative or shall be repudiated or by any Loan Obligor, or (iii) any Guarantor shall send a notice to the Agent or any Lender which purports to terminate such Guarantor's obligations under the Guaranty Agreement with respect to either Obligations then existing or future advances to the Borrower;

9.1.8 Uninsured Losses; Proceedings Against Assets.

There shall occur any material uninsured damage to or loss, thee or destruction of any of the properties or assets of any Loan Obligor or any of their Subsidiaries in excess of $7,50O,OOO or any of the Loan Obligors' or any of their Subsidiaries' assets are attached, seized. levied upon or subjected to a writ or distress warrant; or such come within the possession

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of any receiver, trustee, custodian or assignee for the benefit of creditors and the same is not cured within thirty (30) days thereafter;

9.1.9 Notice of Lien or Assessment.

A notice of Lien or assessment in excess of $7.jOO,OOO which is not a Permitted Lien is filed of record with respect to all or any part of any of the Loan Obligors' or any of their Subsidiaries' assets by the United States. or any department, agency or instrumentality thereof, or by any state, county, municipal or other governmental agency or any taxes or debts owing at any time or times hereafter to any one of these becomes payable and the same is not paid within thirty (30) days after the same becomes payable;

9.1.10 Insolvencv.

Any Loan Obligor or any Subsidiary of a Loan Obligor (other than Universal Coil) ceases to be solvent or admits in writing its inability to pay its debts as they mature;

9.1 - 1 1 Events Relating to Plans and Benefit Arrangements.

Any of the following occurs: (i) any Reportable Event that constitutes grounds for the termination of any Plan by the PBGC or the appointment of a trustee to administer or liquidate any Plan shall have occurred and be continuing; (ii) proceedings shall have been instituted or other action taken to terminate any Plan, or a termination notice shall have been filed with respect to any Plan; (iii) a trustee shall be appointed by a court of competent jurisdiction on a motion by the PBGC to administer or liquidate any Plan; (iv) the PBGC shall give notice of its intent to institute proceedings to terminate any Plan or Plans or to appoint a trustee to administer or liquidate any Plan; (v) the Borrower or any member of the ERISA Group shall fail to make any contributions when due to a Plan or a Multiemployer Plan; (vi) the Borrower or any other member of the ERISA Group shall make any amendment to a Plan with respect to which security is required under Section 307 of ERISA; (vii) the Borrower or any other member of the ERISA Group shall withdraw completely or partially from a Multiemployer Plan; or (viii) the Borrower or any other member of the ERISA Group shall withdraw (or shall be deemed under Section 4062(e) of ERISA to withdraw) from a Multiple Employer Plan and, with respect to any of the events specified in this Section 9.1,11, any such occurrence would be reasonably likely to result in a Material Adverse Change;

9.1.12 Cessation of Business,

Any Loan Obligor or Subsidiary of a Loan Obligor (other than Universal Coil) ceases to conduct its business as contemplated, except as espressly permitted under Section 8.2.6 [Liquidations, Mergers, Etc.] or 8.2.7. or any Loan Obligor or Subsidiary of a Loan Obligor (other than Universal Coil) is enjoined, restrained or in any way prevented by court order

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from conducting all or any material part of its business and such injunction. restraint or other preventive order is not dismissed within thirty (30) days after the entry thereof;

9 . I . 13 Change of Control.

ArcLight andor its Affiliates shall fail to ( i ) own directly or indirectly the beneficial interests of more than 50% of the issued and outstanding capital stock of the Borrower, and (ii) have approval rights regarding the management and policies of the Borrower at least as favorable to ArcLight and/or its Affiliates as set forth in (a) the testimony prepared by Tom Taylor and submitted to the WVPSC summarizing certain approval rights of AtcLight under the partnership agreement of the Parent, and (b) Section 4.2 of that partnership agreement which sets out such approval rights in greater detail.

9.1.14 Involuntary Proceedings.

A proceeding shall have been instituted in a court having jurisdiction in the premises seeking a decree or order for relief in respect of any Loan Obligor or Subsidiary of a Loan Obligor (other than Universal Coil) in an involuntary case under any applicable bankruptcy, insolvency, reorganization or other similar law now or hereafter in effect, or for the appointment of a receiver, liquidator, assignee, custodian, trustee, sequestrator, conservator (or similar official) of any Loan Obligor or Subsidiary of a Loan Obligor (other than Universal Coil) for any substantial part of its property, or for the winding-up or liquidation of its affairs, and such proceeding shall remain undismissed or unstayed and in effect for a period of thirty (30) consecutive days or such court shall enter a decree or order granting any of the relief sought in such proceeding; or

9.1.15 Voluntary Proceedings.

Any Loan Obligor or Subsidiary o f a Loan Obligor (other than Universal Coil) shall commence a voluntary case under any applicable bankruptcy, insolvency, reorganization or other similar law now or hereafter in effect, shall consent to the entry of an order for relief in an involuntary case under any such law, or shall consent to the appointment or taking possession by a receiver, liquidator, assignee, custodian, trustee, sequestrator, conservator (or other similar official) of itself or for any substantial part of its property or shall make a general assignment for the benefit of creditors, or shall fail generally to pay its debts as they become due, or shall take any action in furtherance of any of the foregoing.

9.2 Consequences of Event of Default.

9.2.1 Events of Default Other Than Bankruptcy. Insolvency or Reorganization Proceedings.

If an Event of Default specified under Sections 9.1. I through 9. I , 13 shall occur and be continuing, the Lenders and the Agent shall be under no further obligation to make

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Loans or issue Letters of Credit, as the case may be, and the Agent may. and upon the request of the Required Lenders, shall ( i ) by written notice to the Borrower, declare the unpaid principal amount of the Notes then outstanding and all interest accrued thereon. any unpaid fees and all other Indebtedness (excluding all obligations under interest Rate Hedges) of the Borrower to the Lenders hereunder and thereunder to be forthwith due and payable, and the same shall thereupon become and be immediately due and payable to the Agent for the benefit of each Lender without presentment. demand, protest or any other notice of any kind, all of which are hereby expressly waived. and (ii) require the Borrower to, and the Borrower shall thereupon. deposit in a non- interest-bearing account with the Agent, as cash collateral for its Obligations under the Loan Documents, an amount equal to the maximum amount currently or at any time thereafter available to be drawn on all outstanding Letters of Credit, and the Borrower hereby pledges to the Agent and the Lenders, and grants to the Agent and the Lenders a security interest in, all such cash as security for such Obligations. Upon the curing of all existing Events of Default to the satisfaction of the Required Lenders, the Agent shall return such cash collateral to the Borrower: and

9.2.2 Bankruutcv, Insolvency or Reorganization Proceedings.

If an Event of Default specified under Section 9.1,14 [Involuntary Proceedings] or 9.1.15 [Voluntary Proceedings] shall occur, the Lenders and the Agent shall be under no hrther obligations to make Loans or issue Letters of Credit hereunder, as the case may be, and the unpaid principal amount of the Loans then outstanding and all interest accrued thereon, any unpaid fees and all other Indebtedness of the Borrower to the Lenders hereunder and thereunder shall be immediately due and payable. without presentment, demand. protest or notice of any kind, all of which are hereby expressly waived: and

9.2.3 S et-o fT.

If an Event of Default shall occur and be continuing, any Lender to whom any Obligation is owed by any Loan Obligor hereunder or under any other Loan Document or any participant of such Lender which has agreed in writing to be bound by the provisions of Section 10.13 [Equalization of Lenders] and any branch, Subsidiary or Affiliate of such Lender or participant anywhere in the world shall have the right, in addition to all other rights and remedies available to it, without prior notice to such Loan Obligor, to set-off against and apply to the then unpaid balance of all the Loans and all other Obligations of the Loan Obligors hereunder or under any other Loan Document any debt owing to, and any other funds held in any manner for the account of. the Borrower or such other Loan Obligor by such Lender or participant or by such branch, Subsidiary or Affiliate, including all hnds in all deposit accounts (whether time or demand, general or special, provisionally credited or finally credited. or otherwise) now or hereafter maintained by the Borrower or such other Loan Obligor for its own account (but not including funds held in custodian or trust accounts) with such Lender or participant or such branch. Subsidiary or Affiliate. Such right shall exist whether or not any Lender or the Agent shall have made any demand under this Agreement or any other Loan Document, whether or not such debt owing to or h n d s held for the account of the Borrower or such other Loan Obligor is

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or are matured or unmatured and regardless of the existence or adequacy of any Guaranty or any security. right or remedy available to any Lender or the Agent. Each Lender agrees to promptly notify the Agent and the Borrower after any such set-off and application; and

9.2.4 Suits, Actions. Proceedings.

i f an Event of Default shall occur and be continuing, and whether or not the Agent shall have accelerated the maturity of Loans pursuant to any of the foregoing provisions of this Section 9.2, the Agent or any Lender, if owed any amount with respect to the Loans. may proceed to protect and enforce its rights by suit in equity, action at law andor other appropriate proceeding, whether for the specific performance of any covenant or agreement contained in this Agreement or the other Loan Documents, including as permitted by applicable Law the obtaining of the ex Darte appointment of a receiver, and, if such amount shall have become due, by declaration or otherwise, proceed to enforce the payment thereof or any other legal or equitable right of the Agent or such Lender; and

9.2.5 ADDlication of Proceeds.

From and after the date on which the Agent has taken any action pursuant to this Section 9.2 and until all Obligations of the Loan Obligors have been paid in full , any and all proceeds received by the Agent from the exercise of any remedy by the Agent, shall be applied as follows:

(i) first, to reimburse the Agent and the Lenders for out-of-pocket costs. expenses and disbursements, including reasonable attorneys' and paralegals' fees and legal expenses, incurred by the Agent or the Lenders in connection with collection of any Obligations of any of the Loan Obligors under any of the Loan Documents;

( i i ) second, to the repayment of all Obligations then due and unpaid of the Loan Obligors to the Lenders incurred under this Agreement or any of the other Loan Documents or a Lender-Provided Interest Rate Hedge, whether of principal, interest, fees, expenses or otherwise, in such manner as the Agent may determine in its discretion; and

(iii) the balance, if any, as required by Law.

9.2.6 Other Rights and Remedies.

In addition to all of the rights and remedies contained in this Agreement or in any of the other Loan Documents. the Agent shall have all of the rights and remedies under applicable Law, all of which rights and remedies shall be cumulative and non-exclusive, to the extent permitted by Law, The Agent may, and upon the request of the Required Lenders shall, exercise all post-default rights granted to the Agent and the Lenders under the Loan Documents or applicable Law.

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10. THE AGENT

10.1 A DUO in trnen t.

Each Lender hereby irrevocably designates, appoints and authorizes PNC Bank to act as Agent for such Lender under this Agreement and to execute and deliver or accept on behalf of each of the Lenders the other Loan Documents. Each Lender hereby irrevocably authorizes, and each holder of any Note by the acceptance of a Note shall be deemed irrevocably to authorize, the Agent to take such action on its behalf under the provisions of this Agreement and the other Loan Documents and any other instruments and agreements referred to herein, and to exercise such powers and to perform such duties hereunder as are specifically delegated to or required of the Agent by the terms hereof, together with such powers as are reasonably incidental thereto. PNC Bank agrees to act as the Agent on behalf of the Lenders to the extent provided in this Agreement.

10.2 Delegation of Duties.

The Agent may perform any of its duties hereunder by or through agents or employees (provided such delegation does not constitute a relinquishment of its duties as Agent) and. subject to Sections 10.5 [Reimbursement of Agent by Borrower, Etc.] and 10.6, shall be entitled to engage and pay for the advice or services of any attorneys, accountants or other experts concerning all matters pertaining to its duties hereunder and to rely upon any advice so obtained.

10.3 Nature of Duties; Independent Credit Investigation.

The Agent shall have no duties or responsibilities except those expressly set forth in this Agreement and no implied covenants, functions, responsibilities, duties. obligations, or liabilities shall be read into this Agreement or otherwise exist. The duties of the Agent shall be mechanical and administrative in nature; the Agent shall not have by reason of this Agreement a fiduciary or trust relationship in respect of any Lender; and nothing in this Agreement, expressed or implied, is intended to or shall be so construed as to impose upon the Agent any obligations in respect of this Agreement except as expressly set forth herein. Without limiting the generality of the foregoing, the use of the term "agent" in this Agreement with reference to the Agent is not intended to connote any fiduciary or other implied (or express) obligations arising under agency doctrine of any applicable Law. Instead. such term is used merely as a matter of market custom. and is intended to create or reflect only an administrative relationship between independent contracting parties. Each Lender expressly acknowledges (i) that the Agent has not made any representations or warranties to it and that no act by the Agent hereafter taken, including any review of the affairs of any of the Loan Obligors. shall be deemed to constitute any representation or warranty by the Agent to any Lender: (ii) that it has made and will continue to make, without reliance upon the Agent, its uwn independent investigation of the financial condition and affairs and its own appraisal of the creditworthiness of each of the Loan Obligors in connection with this Agreement and the making and continuance of the Loans hereunder; and

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( i i i ) except as expressly provided herein, that the Agent shall have no duty or responsibility, either initially or on a continuing basis, to provide any Lender with any credit or other information with respect thereto, whether coming into its possession before the making of any Loan or at any time or times thereafter.

10.4 Actions in Discretion of Agent; lnstructions From the Lenders.

The Agent agrees, upon the written request of the Required Lenders, to take or refrain from taking any action of the type specified as being within the Agent's rights, powers or discretion herein, provided that the Agent shall not be required to take any action which exposes the Agent to personal liability or which is contrary to this Agreement or any other Loan Document or applicable Law. In the absence of a request by the Required Lenders, the Agent shall have authority, in its sole discretion, to take or not to take any such action, unless this Agreement specifically requires the consent of the Required Lenders or all of the Lenders. Any action taken or failure to act pursuant to such instructions or discretion shall be binding on the Lenders, subject to Section 10.6 [Exculpatory Provisions, Etc.]. Subject to the provisions of Section 10.6, no Lender shall have any right of action whatsoever against the Agent as a result of the Agent acting or refraining from acting hereunder in accordance with the instructions of the Required Lenders, or in the absence of such instructions, in the absolute discretion of the Agent.

10.5 Reimbursement and Indemnification of Agent by the Borrower.

The Borrower unconditionally agrees to pay or reimburse the Agent and hold the Agent harmless against (a) liability for the payment of all reasonable out-of-pocket costs, expenses and disbursements, including reasonable fees and expenses of outside counsel, appraisers, and environmental and other consultants, incurred by the Agent (i) in connection with the development, negotiation, preparation, printing, execution, administration, syndication, interpretation and performance of this Agreement and the other Loan Documents, (ii) relating to any requested amendments, waivers or consents pursuant to the provisions hereof, (iii) in connection with the enforcement of this Agreement or any other Loan Document or collection of amounts due hereunder or thereunder or the proof and allowability of any claim arising under this Agreement or any other Loan Document, whether in bankruptcy or receivership proceedings or otherwise, and (iv) in any workout or restructuring or in connection with the protection, preservation, exercise or enforcement of any of the terms hereof or of any rights hereunder or under any other Loan Document or in connection with any fore~losure, collection or bankruptcy proceedings, and (b ) all liabilities, obt igations, losses. damages, penalties, actions, judgments, suits, costs, expenses or disbursements of any kind or nature whatsoever which may be imposed on. incurred by or asserted against the Agent, in its capacity as such, in any way relating to or arising out oftliis Agreement or any other Loan Documents or any action taken or omitted by the Agent hereunder or thereunder, provided that the Borrower shall not be liable for any portion of such liabilities, obligations. losses, damages, penalties. actions, judgments. suits, costs, expenses or disbursements if the same results from the Agent's gross negligence or willful misconduct. or i f the Borrower was not given notice of the subject claim and the opportunity to participate in the defense thereof. at its expense (except that the Borrower shall remain liable to the extent such

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failure to give notice does not result in a loss to the Borrower), or if the same results from a compromise or settlement agreement entered into without the consent of the Borrower, which shall not be unreasonably withheld. In addition, the Borrower agrees to reimburse and pay all reasonable out-of-pocket expenses of the Agent's regular employees and agents engaged periodically to perform audits of the Loan Obligors' books. records and business properties.

10.6 E x c u l ~ a t o r ~ Provisions: Limitation of Liability,

Neither the Agent nor any of its directors, officers, employees, agents, attorneys or Affiliates shall (a) be liable to any Lender for any action taken or omitted to be taken by it or them hereunder, or in connection herewith including pursuant to any Loan Document. unless caused by its or their own gross negligence or willfd misconduct, (b) be responsible in any manner to any of the Lenders for the effectiveness, enforceability, genuineness, validity or the due execution of this Agreement or any other Loan Documents or for any recital, representation, warranty, document, certificate, report or statement herein or made or hrnished under or in connection with this Agreement or any other Loan Documents, or (c) be under any obligation to any of the Lenders to ascertain or to inquire as to the performance or observance of any of the terms, covenants or conditions hereof or thereof on the part of the Loan Obligors, or the financial condition of the Loan Obligors, or the existence or possible existence of any Event of Default or Potential Default. No claim may be made by any of the Loan Obligors, any Lender, the Agent or any of their respective Subsidiaries against the Agent, any Lender or any of their respective directors, officers, employees, agents, attorneys or Affiliates, or any of them, for any special, indirect or consequential damages or, to the fullest extent permitted by Law, for any punitive damages in respect of any claim or cause of action (whether based on contract, tort, statutory liability, or any other ground) based on, arising out of or related to any Loan Document or the transactions contemplated hereby or any act, omission or event occurring in connection therewith, including the negotiation, documentation, administration or collection of the Loans, and each of the Loan Obligors, (for itself and on behalf of each of its Subsidiaries), the Agent and each Lender hereby waive, releases and agree never to sue upon any claim for any such damages, whether such claim now exists or hereafter arises and whether or not it is now known or suspected to exist in its favor. Each Lender agrees that, except for notices, reports and other documents expressly required to be furnished to the Lenders by the Agent hereunder or given to the Agent for the account of or with copies for the Lenders, the Agent and each of its directors, officers, employees, agents, attorneys or Affiliates shall not have any duty or responsibility to provide any Lender with an credit or other information concerning the business, operations, property, condition (financial or otherwise), prospects or creditworthiness of the Loan Obligors which may come into the possession of the Agent or any of its directors, officers, employees, agents, attorneys or Affiliates.

10.7 Reimbursement and Indemnification of Agent by Lenders.

Each Lender agrees to reimburse and indemnify the Agent (to the extent not reimbursed by the Borrower and without limiting the Obligation of the Borrower to do so) in proportion to its Ratable Share from and against all liabilities, obligations, losses, damages.

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penalties. actions, judgments, suits, costs, expenses or disbursements, including attorneys' fees and disbursements (including the allocated costs of staff counsel), and costs of appraisers and environmental consultants, of any kind or nature whatsoever which may be imposed on, incurred by or asserted against the Agent, in its capacity as such, in any way relating to or arising out of this Agreement or any other Loan Documents or any action taken or omitted by the Agent hereunder or thereunder, provided that no Lender shall be liable for any portion of such liabilities. obligations, losses, damages, penalties, actions. judgments, suits, costs. expenses or disbursements (a) if the same results from the Agent's gross negligence or willful misconduct, or (b) if such Lender was not given notice ofthe subject claim and the opportunity to participate in the defense thereof, at its expense (except that such Lender shall remain liable to the extent such failure to give notice does not result in a loss to the Lender), or (c) if the same results from a compromise and settlement agreement entered into without the consent of such Lender, which shall not be unreasonably withheld. In addition, each Lender agrees promptly upon demand to reimburse the Agent (to the extent not reimbursed by the Borrower and without limiting the Obligation of the Borrower to do so) in proportion to its Ratable Share for all amounts due and payable by the Borrower to the Agent in connection with the Agent's periodic audit of the Loan Obligors' books, records and business properties.

10.8 Reliance bv Agent.

The Agent shall be entitled to rely upon any writing, telegram, telex or teletype message, resolution, notice, consent, certificate, letter, cablegram, statement, order or other document or conversation by telephone or otherwise believed by it to be genuine and correct and to have been signed. sent or made by the proper Person or Persons, and upon the advice and opinions of counsel and other professional advisers selected by the Agent. The Agent shall be h l l y justified in failing or refusing to take any action hereunder unless it shall first be indemnified to its satisfaction by the Lenders against any and all liability and expense which may be incurred by it by reason of taking or continuing to take any such action.

10.9 Notice of Default.

The Agent shall not be deemed to have knowledge or notice of the occurrence of any Potential Default or Event of Default unless the Agent has received written notice from a Lender or the Borrower referring to this Agreement, describing such Potential Default or Event of Default and stating that such notice is a "notice of default.''

IO. 10 Notices.

The Agent shall promptly send to each Lender a copy of all notices received from the Borrower pursuant to the provisions of this Agreement or the other Loan Documents promptly upon receipt thereof. The Agent shall promptly notify the Borrower and the other Lenders of each change in the Base Rate and the effective date thereof

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10.1 1 Lenders in Their Individual Caoacities; Agent in its lndividual Capacitv.

With respect to its Revolving Credit Commitment, the Revolving Credit Loans, the Term Loan Commitment, the Term Loan, the Swing Loan Commitment and the Swing Loans, and the issuance of any Letter of Credit made by it and any other rights and powers given to it as a Lender hereunder or under any of the other Loan Documents, the Agent shall have the same rights and powers hereunder as any other Lender and may exercise the same as though it were not the Agent, and the term "Lender" and "Lenders" shall, unless the context otherwise indicates, include the Agent in its individual capacity. PNC Bank and its Affiliates and each of the Lenders and their respective Affiliates may, without liability to account, except as prohibited herein, make loans to, issue letters of credit for the account of. acquire equity interests in. accept deposits &om. discount drafts for, act as trustee under indentures of, and generally engage in any kind of banking, trust, financial advisory, underwriting or other business with, the Loan Obligors and their Affiliates, in the case of the Agent, as though it were not acting as Agent hereunder and in the case of each Lender, as though such Lender were not a Lender hereunder, in each case without notice to or consent of the other Lenders. The Lenders acknowledge that, pursuant to such activities, the Agent or its Affiliates may (i) receive information regarding the Loan Obligors or any of their Subsidiaries or Affiliates (including information that may be subject to confidentiality obligations in favor of the Loan Obligors or such Subsidiary or Affiliate) and acknowledge that the Agent shall be under no obligation to provide such information to them, and ( i i ) accept fees and other consideration from the Loan Obligors for services in connection with this Agreement and otherwise without having to account for the same to the Lenders.

10.12 Holders of Notes.

The Agent may deem and treat any payee of any Note as the owner thereof for all purposes hereof unless and until written notice of the assignment or transfer thereof shall have been filed with the Agent, Any request, authority or consent of any Person who at the time of making such request or giving such authority or consent is the holder of any Note shall be conclusive and binding on any subsequent holder, transferee or assignee of such Note or of any Note or Notes issued in exchange therefor.

IO. 13 Eaualization of Lenders.

The Lenders and the holders of any participations in any Notes agree among themselves that, with respect to all amounts received by any Lender or any such holder for application on any Obligation hereunder or under any Note or under any such participation, whether received by voluntary payment, by realization upon security, by the exercise of the right of set-off or banker's lien, by counterclaim or by any other non-pro rata source, equitable adjustment will be made in the manner stated in the following sentence so that, in effect, all such excess amounts will be shared ratably among the Lenders and such holders in proportion to their interests in payments under the Notes, except as otherwise provided in Section 4.4.3 [Agent's and Lender's Rights], 5.4.2 [Replacement of a Lender] or 5.6 [Additional Compensation in Certain Circumstances]. The Lenders or any such holder receiving any such amount shall purchase for

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cash from each of the other Lenders an interest in such Lender's Loans in such amount as shall result in a ratable participation by the Lenders and each such holder in the aggregate unpaid amount under the Notes, provided that if all or any portion of such excess amount is thereafter recovered from the Lender or the holder making such purchase, such purchase shall be rescinded and the purchase price restored to the extent of such recovery, together with interest or other amounts, if any, required by law (including court order) to be paid by the Lender or the holder making such purchase.

10.14 Successor Agent.

The Agent (i) may resign as Agent or (ii) shall resign if such resignation is requested by the Required Lenders (if the Agent is a Lender, the Agent's Loans and its Commitment shall be considered in determining whether the Required Lenders have requested such resignation) or required by Section 5.4.2 [Replacement of a Lender], in either case of (i) or ( i i ) by giving not less than thirty (30) days' prior written notice to the Borrower. If the Agent shall resign under this Agreement, then either (a) the Required Lenders shall appoint from among the Lenders a successor agent for the Lenders, subject to the consent of the Borrower, such consent not to be unreasonably withheld. or (b) if a successor agent shall not be so appointed and approved within the thirty (30) day period following the Agent's notice to the Lenders of its resignation, then the Agent shall appoint, with the consent of the Borrower, such consent not to be unreasonably withheld, a successor agent who shall serve as Agent until such time as the Required Lenders appoint and the Borrower consents to the appointment of a successor agent. Upon its appointment pursuant to either clause (a) or (b) above, such successor agent shall succeed to the rights, powers and duties of the Agent, and the term "Agent" shall mean such successor agent, ef'fective upon its appointment, and the former Agent's rights, powers and duties as Agent shall be terminated without any other or hrther act or deed on the part of such former Agent or any of the parties to this Agreement. After the resignation of any Agent hereunder, the provisions of this Section 10 shall inure to the benefit of such former Agent and such former Agent shall not by reason of such resignation be deemed to be released from liability for any actions taken or not taken by it while it was an Agent under this Agreement,

10.15 Arrent's Fee.

The Borrower shall pay to the Agent a nonrefundable fee (the "Agent's Fee") under the terms of a letter (the "Agent's Letter") between the Borrower and Agent, as amended from time to time.

IO. 16 Availabilitv of Funds.

The Agent may assume that each Lender has made or will make the proceeds of a Loan available to the Agent unless the Agent shall have been notified by such Lender on or before the later of ( 1 ) the close of Business on the Business Day preceding the Borrowing Date with respect to such Loan or two ( 2 ) hours before the t h e on which the Agent actually funds the proceeds of such Loan to the Borrower (whether using its own funds pursuant to this

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Section 10.16 or using proceeds deposited with the Agent by the Lenders and whether such funding occurs before or after the time on which Lenders are required to deposit the proceeds of such Loan with the Agent). The Agent may. in reliance upon such assumption (but shall not be required to). make available to the Borrower a corresponding amount. If such corresponding amount is not in fact made available to the Agent by such Lender, the Agent shall be entitled to recover such amount on demand from such Lender (or, i f such Lender fails to pay such amount forthwith upon such demand from the Borrower) together with interest thereon, in respect of each day during the period commencing on the date such amount was made available to the Borrower and ending on the date the Agent recovers such amount, at a rate per annum equal to (i) the Federal Funds Effective Rate during the first three (3) days after such interest shall begin to accrue and (ii) the applicable interest rate in respect of such Loan after the end of such three-day period.

I O . 17 Calculations.

In the absence of gross negligence or willful misconduct, the Agent shall not be liable for any error in computing the amount payable to any Lender whether in respect of the Loans, fees or any other amounts due to the Lenders under this Agreement. In the event an error in computing any amount payable to any Lender is made, the Agent, the Borrower and each affected Lender shall, forthwith upon discovery of such error, make such adjustments as shall be required to correct such error, and any compensation therefor will be calculated at the Federal Funds Effective Rate.

10.18 No Reliance on Agent's Customer ldentification Program.

Each Lender acknowledges and agrees that neither such Lender. nor any of its Affiliates, participants or assignees, may rely on the Agent to carry out such Lender's, Affiliate's, participant's or assignee's customer identification program, or other obligations required or imposed under or pursuant to the USA Patriot Act or the regulations thereunder, including the regulations contained in 3 1 CFR 103.121 (as hereafter amended or replaced, the "CIP Regulations"), or any other Anti-Terrorism Law and Economic Sanction, including any programs involving any of the following items relating to or in connection with any of the Loan Obligors, their Affiliates or their agents, the Loan Documents or the transactions hereunder or contemplated hereby: ( 1 ) any identity verification procedures, (2) any recordkeeping, (3) comparisons with government lists, (4) customer notices or ( 5 ) other procedures required under the CIP Regulations or such other Laws.

10.19 Beneficiaries.

Except as expressly provided herein, the provisions of this Section 10 are solely for the benefit of the Agent and the Lenders, and the Loan Obligors shall not have any rights to rely on or enforce any of the provisions hereof. In performing its functions and duties under this Agreement, the Agent shall act solely as agent of the Lenders and does not assume and shall not

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be deemed to have assumed any obligation toward or relationship of agency or trust with or for any of the Loan Obligors.

11. MISCELLANEOUS

1 1.1 Modifications. Amendments or Waivers.

With the written consent of the Required Lenders, the Agent, acting on behalf of ai1 the Lenders, and the Borrower, on behalf of the Loan Obligors, may from time to time enter into written agreements amending or changing any provision of this Agreement or any other Loan Document or the rights of the Lenders or the Loan Obligors hereunder or thereunder, or may grant written waivers or consents to a departure from the due performance of the Obligations of the Loan Obligors hereunder or thereunder. Any such agreement, waiver or consent made with such written consent shall be effective to bind all the Lenders and the Loan Obligors; provided, that, without the written consent of all the Lenders, no such agreement, waiver or consent may be made which will:

11 $1 .l Increase of Commitment: Extension of Expiration Date or Term Loan Maturitv Date.

Increase the amount of the Revolving Credit Commitment (except for any such increase pursuant to Section 2.1 1 [Right to Increase Revolving Credit Commitments] of any Lender hereunder, in which case only the consent of a Lender increasing its Revolving Credit Commitment shall be required and no consent of any other Lender shall be required) or Term Loan Commitment of any Lender hereunder or extend the Expiration Date or the Term Loan Maturity Date;

1 1.1.2 Modification of Terms of Payment.

Extension of Payment: Reduction of Princioal Interest or Fees;

Whether or not any Loans are outstanding, extend the time for payment of principal or interest of any Loan (excluding the due date of any mandatory prepayment of a Loan or any mandatory Commitment reduction in connection with such a mandatory prepayment hereunder except for mandatory reductions of the Commitments on the Expiration Date or Term Loan Maturity Date, as applicable), the Commitment Fee or any other fee payable to any Lender, or reduce the principal amount of or the rate of interest borne by any Loan or reduce the Commitment Fee or any other fee payable to any Lender;

1 1.1.3 Release of Guarantor.

Release any Guarantor from its Obligations under the Guaranty Agreement;

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1 1.1.4 Miscellaneous.

Amend Section 5.2 [Pro Rata Treatment of Lenders], 10.6 [Exculpatory Provisions, Etc.] or 10.13 [Equalization of Lenders] or this Section 1 1.1, alter any provision regarding the pro rata treatment of the Lenders, change the definition of Required Lenders, or change any requirement providing for the Lenders or the Required Lenders to authorize the taking of any action hereunder; provided, fiuther, that no agreement, waiver or consent which would modi@ the interests, rights or obligations of the Agent in its capacity as Agent or as the issuer of Letters of Credit or with respect to its Swing Loan Commitment or Swing Loans shall be effective without the written consent of the Agent.

1 1.2 No hDiied Waivers: Cumulative Remedies: Writing Reauired.

No course of dealing and no delay or failure of the Agent or any Lender in exercising any right, power, remedy or privilege under this Agreement or any other Loan Document shall affect any other or future exercise thereof or operate as a waiver thereof, nor shall any single or partial exercise thereof or any abandonment or discontinuance of steps to enforce such a right, power, remedy or privilege preclude any further exercise thereof or of any other right, power, remedy or privilege. The rights and remedies of the Agent and the Lenders under this Agreement and any other Loan Documents are cumulative and not exclusive of any rights or remedies which they would otherwise have. Any waiver, permit, consent or approval of any kind or character on the part of any Lender of any breach or default under this Agreement or any such waiver of any provision or condition of this Agreement must be in writing and shall be effective only to the extent specifically set forth in such writing.

1 1.3 Reimbursement and Indemnification of Lenders bv the Borrower: Taxes.

The Borrower agrees unconditionally within thirty (30) Business Days of receipt of an invoice to pay or reimburse to each Lender (other than the Agent, as to which the Borrower's Obligations are set forth in Section 10.5 [Reimbursement of Agent By Borrower, Etc.]) and to save such Lender harmless against (i) liability for the payment of all reasonable out- of-pocket costs, expenses and disbursements (including reasonable fees and expenses of outside counsel for each Lender except with respect to (a) and (b) below), incurred by such Lender (a) in connection with the administration and interpretation of this Agreement, and other instruments and documents to be delivered hereunder, (b) relating to any amendments, waivers or consents pursuant to the provisions hereof, (c) in connection with the enforcement of this Agreement or any other Loan Document, or collection of amounts due hereunder or thereunder or the proof and allowability of any claim arising under this Agreement or any other Loan Document, whether in bankruptcy or receivership proceedings or otherwise, and (d) in any workout or restructuring or in connection with the protection, preservation, exercise or enforcement of any of the terms hereof or of any rights hereunder or under any other Loan Document or in connection with any foreclosure, collection or bankruptcy proceedings, or (ii) all liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses or disbursements of any kind or nature whatsoever which may be imposed on, incurred by or asserted against such Lender, in its

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capacity as such, in any way relating to or arising out of this Agreement or any other Loan Documents or any action taken or omitted by such Lender hereunder or thereunder, provided that the Borrower shall not be liable for any portion of such liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses or disbursements (A) if the same results from such Lender's gross negligence or willful misconduct, or (B) if the Borrower was not given notice of the subject claim and the opportunity to participate in the defense thereof, at its expense (except that the Borrower shall remain liable to the extent such failure to give notice does not result in a loss to the Borrower), or ( C ) if the same results from a compromise or settlement agreement entered into without the consent of the Borrower, which shall not be unreasonably withheld. Absent (i) a conflict of interest which is not waived in writing by the Agent or the Lenders, or (ii) the need to employ specific attorneys based upon requisite jurisdictional requirements or specialization of practice, the Lenders will minimize the fees and expenses of legal counsel for the Lenders which are subject to reimbursement by the Borrower hereunder by the usage of one law firm to represent the Lenders and the Agent. The Borrower agrees unconditionally to pay all stamp, document, transfer, recording or filing taxes or fees and similar impositions now or hereafter reasonably determined by the Agent or any Lender to be payable in connection with this Agreement or any other Loan Document, and the Borrower agrees unconditionally to save the Agent and the Lenders harmless from and against any and all present or hture claims, liabilities or losses with respect to or resulting from any omission to pay or delay in paying any such taxes, fees or impositions.

I 1.4 Holidavs.

Whenever payment of a Loan to be made or taken hereunder shall be due on a day which is not a Business Day such payment shall be due on the next Business Day (except as provided in Section 4.2 [Interest Periods] with respect to Interest Periods under the Euro-Rate Option) and such extension of time shall be included in computing interest and fees, except that the Loans shall be due on the Business Day preceding, in the case of Revolving Credit Loans and Swing Loans, the Expiration Date if the Expiration Date is not a Business Day and, in the case of Term Loans, the Term Loan Maturity Date if the Term Loan Maturity Date is not a Business Day. Whenever any payment or action to be made or taken hereunder (other than payment of the Loans) shall be stated to be due on a day which is not a Business Day, such payment or action shall be made or taken on the next following Business Day, and such extension of time shall not be included in computing interest or fees, if any, in connection with such payment or action.

1 1.5 Fundine bv Branch, Subsidiarv or Affiliate.

1 1.5. I Notional Funding.

Each Lender shall have the right from time to time, without notice to the Borrower, to deem any branch, Subsidiary or Affiliate (which for the purposes of this Section 11.5 shall mean any corporation or association which is directly or indirectly controlled by or is under direct or indirect common control with any corporation or association which directly or indirectly controls such Lender) of such Lender to have made, maintained or finded

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any Loan to which the Euro-Rate Option applies at any time, provided that immediately following (on the assumption that a payment were then due fiom the Borrower to such other offrce), and as a result of such change, the Borrower would not be under any greater financial obligation pursuant to Section 5.6 [Additional Compensation in Certain Circumstances] than it would have been in the absence of such change. Notional h d i n g offices may be selected by each Lender without regard to such Lender's actual methods of making, maintaining or fbnding the Loans or any sources of funding actually used by or available to such Lender,

1 1.5.2 Actual Funding.

Each Lender shall have the right fiom time to time to make or maintain any Loan by arranging for a branch, Subsidiary or Affiliate of such Lender to make or maintain such Loan subject to the last sentence of this Section 1 1.5.2. If any Lender causes a branch, Subsidiary or Affiliate to make or maintain any part of the Loans hereunder, all terms and conditions of this Agreement shall, except where the context clearly requires otherwise, be applicable to such part of the Loans to the same extent as if such Loans were made or maintained by such Lender, but in no event shall any Lender's use of such a branch, Subsidiary or Affiliate to make or maintain any part of the Loans hereunder cause such Lender or such branch, Subsidiary or Affiliate to incur any cost or expenses payable by the Borrower hereunder or require the Borrower to pay any other compensation to any Lender (including any expenses incurred or payable pursuant to Section 5.6 [Additional Compensation in Certain Circumstances]) which would otherwise not be incurred.

11.6 Notices.

Any notice, request, demand, direction or other communication (for purposes of this Section 1 1.6 only, a "Notice") to be given to or made upon any party hereto under any provision of this Agreement shall be given or made by telephone or in writing (which includes means of electronic transmission (Le., "e-mail") or facsimile transmission or by setting forth such Notice on a site on the World Wide Web (a "Website Posting") if Notice of such Website Posting (including the information necessary to access such site) has previousIy been delivered to the applicable parties hereto by another means set forth in this Section 1 1.6) in accordance with this Section 1 1.6. Any such Notice must be delivered to the applicable parties hereto at the addresses and numbers set forth under their respective names on Schedule l.l(B) hereof or in accordance with any subsequent unrevoked Notice fiom any such party that is given in accordance with this Section 1 1.6. Any Notice shall be effective:

(i) In the case of hand-delivery, when delivered;

(ii) If given by mail, four days after such Notice is deposited with the United States Postal Service, with first-class postage prepaid, return receipt requested;

(iii) In the case of a telephonic Notice, when a party is contacted by telephone, if delivery of such telephonic Notice is confirmed no later than the next Business Day

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by hand delivery, a facsimile or electronic transmission, a Website Posting or overnight courier delivery of a confirmatory notice (received at or before noon on such next Business Day);

(iv) In the case of a facsimile transmission, when sent to the applicable party's facsimile machine's telephone number if the party sending such Notice receives confirmation of the delivery thereof from its own facsimile machine;

(v) In the case of electronic transmission, when actually received;

(vi) In the case of a Website Posting, upon delivery of a Notice of such posting (including the information necessary to access such web site) by another means set forth in this Section 11.6; and

(vii) If given by any other means (including by overnight courier), when actually received.

Any Lender giving a Notice to a Loan Obligor shall concurrently send a copy thereof to the Agent, and the Agent shall promptly notify the other Lenders of its receipt of such Notice.

1 1.7 Severability.

The provisions of this Agreement are intended to be severable. If any provision of this Agreement shall be held invalid or unenforceable in whole or in part in any jurisdiction, such provision shall, as to such jurisdiction, be ineffective to the extent of such invalidity or unenforceability without in any manner affecting the validity or enforceability thereof in any other jurisdiction or the remaining provisions hereof in any jurisdiction.

1 1.8 Governing Law.

Each Letter of Credit and Section 2.9 [Letter of Credit Subfacility] shall be subject to the Uniform Customs and Practice for Documentary Credits (1 993 Revision), International Chamber of Commerce Publication No. 500, as the same may be revised or amended from time to time. To the extent not inconsistent therewith, this Agreement and each other Loan Document shall be deemed to be a contract under the Laws of the State of New York and shall, pursuant to New York General Obligations Law 5-1401, for all purposes be governed by and construed and enforced in accordance with the laws of the State of New York,

1 1.9 Prior Understanding.

This Agreement and the other Loan Documents supersede all prior understandings and agreements, whether written or oral, between the parties hereto and thereto relating to the transactions provided for herein and therein, including any prior confidentiality agreements and commitments.

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1 1.10 Duration: Survival.

All representations and warranties of the Loan Obligors contained herein or made in connection herewith shall survive the making of Loans and issuance of Letters of Credit and shall not be waived by the execution and delivery of this Agreement, any investigation by the Agent or the Lenders, the making of Loans, issuance of Letters of Credit, or payment in full of the Loans. All covenants and agreements of the Borrower contained in Sections 8.1 [Affirmative Covenants], 8.2 [Negative Covenants] and 8.3 [Reporting Requirements] herein shall continue in full force and effect from and after the date hereof so long as the Borrower may borrow or request Letters of Credit hereunder and until termination of the Commitments and payment in full of the Loans and expiration or termination of all Letters of Credit. All covenants and agreements of the Borrower contained herein relating to the payment of principal, interest, premiums, additional compensation or expenses and indemnification, including those set forth in the Notes, Section 5.6 [Additional Compensation in Certain Circumstances] and Sections 10.5 [Reimbursement of Agent by Borrower, Etc.], 10.7 [Reimbursement of Agent by Lenders, Etc.] and 1 1.3 [Reimbursement of Lenders by Borrower; Etc.], shall survive payment in full of the Loans, expiration or termination of the Letters of Credit and termination of the Commitments.

1 1-11 Successors and Assims.

1 1.1 1. I Bindine Effect: Assignments by Borrower.

This Agreement shall be binding upon and shall inure to the benefit of the Lenders, the Agent, the Borrower and their respective successors and assigns, except that the Borrower may not assign or transfer any of its rights and Obligations hereunder or any interest herein.

1 1.1 1.2 Assignments and ParticiDations by Lenders.

Each Lender may, at its own cost, make assignments of or sell participations in all or any part of its Commitments and the Loans made by it to one or more lenders or other entities, subject to the consent of the Borrower and the Agent with respect to any assignee, such consent not to be unreasonably withheld, provided that (1) no consent of the Borrower shall be required (A) if an Event of Default exists and is continuing, or (B) in the case of an assignment by a Lender to an Affiliate of such Lender, and (2) any assignment by a Lender to a Person other than an Affiliate of such Lender may not be made in amounts less than the lesser of $5,000,000 or the amount of the assigning Lender’s Commitment, excluding any assignments made by PNC Bank during the Syndications Period and any assignments of a lesser amount consented to by the Agent and the Borrower. In the case of an assignment, upon receipt by the Agent of the Assignment and Assumption Agreement, the assignee shall have, to the extent of such assignment (unless otherwise provided therein), the same rights, benefits and obligations as it would have if it had been a signatory Lender hereunder, the Commitments shall be adjusted accordingly, and upon surrender of any Note subject to such assignment, the Borrower shall execute and deliver a new Note to the assignee in an amount equal to the amount

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of the Revolving Credit Commitment or Term Loan assumed by it and a new Revolving Credit Note or Term Note to the assigning Lender in an amount equal to the Revolving Credit Commitment or Term Loan retained by it hereunder. Any Lender which assigns any or all of its Commitment or Loans to a Person other than an Affiliate of such Lender shall pay to the Agent a service fee in the amount of $3,500 for each assignment. In the case of a participation, the participant shall only have the rights specified in Section 9.2.3 [Set-offJ (the participant's rights against such Lender in respect of such participation to be those set forth in the agreement executed by such Lender in favor of the participant relating thereto and not to include any voting rights except such Lender may agree with the Participant that it will not, without the consent of the Participant, agree to vote in favor of changes of the type referenced in Sections 1 1.1.1 [Increase of Commitment, Etc. 1, 1 1.1.2 [Extension of Payment, Etc.], or 1 1.1.3 [Release of Guarantor]), all of such Lender's obligations under this Agreement or any other Loan Document (including its Commitments hereunder) shall remain unchanged, and all amounts payable by any Loan Obligor hereunder or thereunder shall be determined as if such Lender had not sold such participation. The Agent, acting solely for this purpose as an agent of the Borrower, shall maintain at one of its offices a copy of each Assignment and Assumption Agreement delivered to it and one or more registers for the recordation of the names and addresses of the Lenders, and the Commitment of, and principal amount of the Loans owing to, each Lender pursuant to the terms hereof fiom time to time (the "Register"). The entries in the Register shall be conclusive and each of the Borrower, each Guarantor, the Agent and the Lenders shall treat each Person whose name is recorded in the Register pursuant to the terms hereof as a Lender hereunder for all purposes of this Agreement, notwithstanding anything to the contrary. The Register shall be available for inspection by each of the Borrower, any Guarantor, the Agent and any Lender, at any reasonable time and from time to time upon reasonable notice.

a.'

11.11.3 Non-U.S. Assignees and ParticiDants.

Any assignee or participant which is not incorporated under the Laws of the United States of America or a state thereof shall deliver to the Borrower and the Agent the form of certificate described in Section 1 1.17 [Tax Withholding Clause] relating to United States federal income tax withholding. Each Lender may furnish any publicly available information concerning any Loan Obligor or its Subsidiaries and any other information concerning any Loan Obligor or its Subsidiaries in the pqssession of such Lender fiom time to time to assignees and participants (including prospective assignees or participants), provided that such assignees and participants agree to be bound by the provisions of Section 1 1.12 [Confidentiality].

11.1 1.4 Assimments bv Lenders to Federal Reserve Banks.

Notwithstanding any other provision in this Agreement, any Lender may at any time pledge or grant a security interest in all or any portion of its rights under this Agreement, its Note and the other Loan Documents to any Federal Reserve Bank in accordance with Regulation A of the FRB or U.S. Treasury Regulation 31 CFR Section 203.14 without notice to or consent of the Borrower or the Agent. No such pledge or grant of a security interest

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shall release the transferor Lender of its obligations hereunder or under any other Loan Document.

11.11.5 -r.

A lender which is to become a party to this Agreement pursuant to Section 2.1 1 hereof or otherwise (each an "Additional Lender") shal1 execute and deliver to Agent a Lender Joinder to this Agreement in substantially the form attached hereto as Exhibit 1 .IrB) (each a "Lender Joinder"). Upon execution and delivery of a Lender Joinder, such Additional Lender shall be a party hereto and a Lender under each of the Loan Documents for all purposes, except that such Additional Lender shall not participate in any Revolving Credit Loans to which the Euro-Rate Option applies which are outstanding on the effective date of such Lender Joinder. If Borrower should renew after the effective date of such Lender Joinder the Euro-Rate Option with respect to Revolving Credit Loans existing on such date, Borrower shall be deemed to repay the applicable Revolving Credit Loans on the renewal date and then reborrow a similar amount on such date so that the Additional Lender shall participate in such Revolving Credit Loans after such renewal date. Schedule 1.1(B) shall be automatically amended and restated on the date of such Lender Joinder to revise the information contained therein as appropriate to reflect the information on the attachment to such Lender Joinder. Simultaneously with the execution and delivery of such Lender Joinder, Borrower shalf execute a Revolving Credit Note, and deliver it to such Additional Lender together with originals of such other documents described in Section 7.1 hereof as such Additional Lender may reasonably require.

1 1-12 Confidentiality.

11.12.1 General.

The Agent and the Lenders each agree to keep confidential all information obtained from any Loan Obligor or its Subsidiaries which is nonpublic and confidential or proprietary in nature (including any information the Borrower specifically designates as confidential), except as provided below, and to use such information only in connection with their respective capacities under this Agreement and for the purposes contemplated hereby. The Agent and the Lenders shall be permitted to disclose such information (i) to outside legal counsel, accountants and other professional advisors who need to know such information in connection with the administration and enforcement of this Agreement, subject to agreement of such Persons to maintain the confidentiality, (ii) to assignees and participants as contemplated by Section 1 1 . I 1, and prospective assignees and participants, (iii) to the extent requested by any bank regulatory authority or, with notice to the Borrower, as otherwise required by applicable Law or by any subpoena or similar legal process, or in connection with any investigation or proceeding arising out of the transactions contemplated by this Agreement, (iv) if it becomes publicly available other than as a result of a breach of this Agreement or becomes available from a source not known to be subject to confidentiality restrictions, or (v) if the Borrower shall have consented to such disclosure.

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11.12.2 SharinP lnformation With Affiliates of the Lenders.

The Borrower acknowledges that from time to time financial advisory, investment banking and other services may be offered or provided to the Borrower or one or more of its Affiliates (in connection with this Agreement or otherwise) by any Lender or by one or more Subsidiaries or Affiliates of such Lender and the Borrower hereby authorizes each Lender to share any information delivered to such Lender by such Loan Obligor and its Subsidiaries pursuant to this Agreement, or in connection with the decision of such Lender to enter into this Agreement, to any such Subsidiary or Affiliate of such Lender for the purpose of offering or providing services to the Borrower or any of its Afiliates, or in connection with regulatory matters affecting such Lender (or any of its Affiliates) or enforcing its rights under this Agreement or any of the other Loan Documents, it being understood that any such Subsidiary or affiliate of any Lender receiving such information shall be bound by the provisions of Section 1 1.12.1 as if it were a Lender hereunder. Such Authorization shall survive the repayment of the Loans and other Obligations and the termination of the Commitments.

1 1,13 Countemarts,

This Agreement may be executed by different parties hereto on any number of separate counterparts, each of which, when so executed and delivered, shall be an original, and all such counterparts shall together constitute one and the same instrument.

1 1.14 Agent's or Lender's Consent.

Whenever the Agent's or any Lender's consent is required to be obtained under this Agreement or any of the other Loan Documents as a condition to any action, inaction, condition or event, the Agent and each Lender shall be authorized to give or withhold such consent in its sole and absolute discretion and to condition its consent upon the giving of collateral, the payment of money or any other matter.

1 1.15 Exceotions.

The representations, warranties and covenants contained herein shall be independent of each other, and no exception to any representation, warranty or covenant shall be deemed to be an exception to any other representation, warranty or covenant contained herein unless expressly provided, nor shall any such exceptions be deemed to permit any action or omission that would be in contravention of applicable Law.

1 1.16 CONSENT TO FORUM: WAIVER OF JURY TRLQL.

THE BORROWER HEREBY IRREVOCABLY CONSENTS TO THE NONEXCLUSNE JURISDICTION OF THE COURTS OF THE STATE OF NEW YORK AND THE UNITED STATES DISTRICT COURT FOR THE SOUTHERN DISTRICT OF NEW Y O U , AND WAIVES PERSONAL SERVICE OF ANY AND ALL PROCESS UPON IT AND CONSENTS THAT ALL SUCH SERVICE OF PROCESS BE - 105 -

MADE BY CERTIFIED OR REGISTERED MAIL DIRECTED TO SUCH LOAN OBLIGOR AT THE ADDRESSES PROVIDED FOR IN SECTION 11.6 AND SERVICE SO MADE SHALL BE DEEMED TO BE COMPLETED UPON ACTUAL RECEIPT THEREOF, THE BORROWER WAIVES ANY OBJECTION TO JURISDICTION AND VENUE OF ANY ACTION INSTITUTED AGAINST IT AS PROVIDED HEREIN AND AGREES NOT TO ASSERT ANY DEFENSE BASED ON LACK OF JURISDICTION OR VENUE. THE BORROWER, THE AGENT AND THE LENDERS HEREBY WAIVE TRIAL BY JURY IN ANY ACTION, SUIT, PROCEEDING OR COUNTERCLAIM OF ANY KIND ARISING OUT OF OR RELATED TO THIS AGREEMENT, ANY OTHER LOAN DOCUMENT OR ANY COLLATERAL TO THE FULL EXTENT PERMITTED BY LAW.

1 1.17 Certifications From Lenders and Particbants.

1 1.17.1 Tax Withholdinq.

Each Lender or assignee or participant of a Lender that is not incorporated under the Laws of the United States of America, a state thereof or the District of Columbia (and, upon the written request of the Agent, each other Lender or assignee or participant of a Lender) agrees that it will deliver to each of the Borrower and the Agent two (2) duly completed, appropriate and valid Withholding Certificates (as defined below) certifying its status (Le. U.S. or foreign person) and, if appropriate, making a claim of reduced, or exemption from, U.S. withholding tax on the basis of an income tax treaty or an exemption provided by the lnternal Revenue Code. The term "Withholding Certificate" means a Form W-9; a Form W-8BEN; a Form W-8ECI; a Form W-8IMY and the related statements and certifications as required under 8 1.144 1-1 (e)(2) and/or (3) ofthe Regulations; a statement described in 1 1.871-14(~)(2)(~) ofthe Income Tax Regulations (the "Regulations"); any other certificates under the Internal Revenue Code or Regulations that certifj or establish the status of a payee or beneficial owner as a U.S. or foreign person; or any successor form to any Withholding Certificate. Each Lender, assignee or participant required to deliver to the Borrower and the Agent a Withholding Certificate pursuant to the preceding sentence shall deliver such valid Withholding Certificate as follows: (A) each Lender which is a party hereto on the Closing Date shall deliver such valid Withholding Certificate at least five ( 5 ) Business Days prior to the fvst date on which any interest or fees are payable by the Borrower hereunder for the account of such Lender; and (B) each assignee or participant shall deliver such valid Withholding Certificate at least five ( 5 ) Business Days before the effective date of such assignment or participation (unless the Agent in its sole discretion shall permit such assignee or participant to deliver such valid Withholding Certificate less than five ( 5 ) Business Days before such date in which case it shall be due on the date specified by the Agent). Each Lender, assignee or participant which so delivers a valid Withholding Certificate fiuther undertakes to deliver to each of the Borrower and the Agent two (2) additional copies of such Withholding Certificate on or before the date that such Withholding Certificate expires or becomes obsolete or after the occurrence of any event requiring a change in the most recent Withholding Certificate so delivered by it, and such amendments thereto or extensions or renewals thereof as may be reasonably requested by the Borrower or the Agent.

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Notwithstanding the submission of a Withholding Certificate claiming a reduced rate of or exemption from U.S. withholding tax, the Agent shall be entitled to withhold United States federal income taxes at the full YO withholding rate provided or imposed by Law if in its reasonable judgment it is required to do so under the requirements imposed upon a withholding agent under 8 I . 1441 -7(b) of the Regulations. Further, the Agent is indemnified under €j 1. I46 1-1 (e) of the Regulations against any claims and demands of any Lender or assignee or participant of a Lender for the amqunt of any tax it deducts and withholds in accordance with regulations under 9 144 1 of the Internal Revenue Code.

11.17.2 USA Patriot Act.

Each Lender or assignee or participant of a Lender that is not incorporated under the Laws of the United States of America or a state thereof (and is not excepted fiom the certification requirement contained in Section 3 13 of the USA Patriot Act and the applicable regulations because it is both (i) an affiliate of a depository institution or foreign bank that maintains a physical presence in the United states or foreign county, and (ii) subject to supervision by a banking authority regulating such affiliated depository institution or foreign bank) shall deliver to the Agent the certification, or, if applicable, recertification, certifying that such Lender is not a "shell" and certiwing to other matters as required by Section 3 13 of the USA Patriot Act and the applicable regulations: ( I ) within 10 days after the Closing Date, and (2) as such other times as are required under the USA Patriot Act.

1 1.18 Joinder of Guarantors.

Any Subsidiary of the Borrower which is required to join the Guaranty Agreement and any other Loan Document as a Guarantor pursuant to Section 8.2.9 [Subsidiaries, Partnerships and Joint Ventures] shall execute and deliver to the Agent (i) a Guarantor Joinder in substantially the form attached hereto as Exhibit l.l(GW] pursuant to which it shall join as a Guarantor each of the documents to which the Guarantors are parties; and (ii) documents in the forms described in Section 7.1 .modified as appropriate to relate to such Subsidiary. The Borrower shall, and shall cause each such Subsidiary to deliver such Guarantor Joinder and related documents to the Agent within five ( 5 ) Business Days after the date of the filing of such Subsidiary's articles of incorporation if the Subsidiary is a corporation, the date of the filing of its certificate of limited partnership if it is a limited partnership or the date of its organization if it is an entity other than a limited partnership or corporation.

I 1.19 No Recourse.

Notwithstanding anything to the contrary contained herein, in any Loan Document or in any other document, certificate or instrument executed or delivered by the Loan Obligors, each of the Lenders and the Agent acknowledges and agrees that no member or sponsor nor any officer, employee, controlling person, executive, director, agent, representative or Afiliate of the Loan Obligors nor any past, present or fiture stockholder, member or equity holder (collectively, the "Non-Recourse Persons") shall have any liability to any Lender or other Person (such

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liability, including such as may arise by operation of law, being hereby expressly waived) for the payment of any sums now or hereafter owing by the Loan Obligors under this Agreement or any Loan Document or for the performance of any of the Obligations of the Loan Obligors contained herein or therein or shall otherwise be liable or responsible with respect thereto. Notwithstanding the foregoing, nothing in this Section 1 I .I9 shall limit or affect or be construed to limit or affect the obligations and liabilities of any Non-Recourse Person arising from liability for such Non-Recourse Person's fraudulent actions, knowing misrepresentations or willful misconduct.

1 1.20 Subordination of Intercommnv Loans.

1 1.20.1 No Payment When Obligations in Default.

If any Event of Default shall have occurred and be continuing, or such an Event of Default or Potential Default would result from or exist after giving effect to a payment with respect to any portion of the Intercompany Indebtedness, unless the Required Lenders shall have consented to or waived the same, so long as any of the Obligations shall remain outstanding, no payment shall be made by the Borrower with respect to such Intercompany Indebtedness on account of principal or interest on any portion of the Intercompany Indebtedness.

1 1.20.2 Payment Over of Proceeds UDon Dissolution. Etc.

Upon any distribution of assets of any Guarantor in the event of (a) any insolvency or bankruptcy case or proceeding, or any receivership, liquidation, reorganization or other similar case or proceeding in connection therewith, relative to any such Guarantor or to its creditors, as such, or to its assets, or (b) any liquidation, dissolution or other winding up of any such Guarantor, whether voluntary or involuntary and whether or not involving insolvency or bankruptcy, or (c) any assignment for the benefit of creditors or any marshalling of assets and liabilities of any such Guarantor (a Guarantor distributing assets as set forth herein being referred to in such capacity as a "Distributing Company"), then and in any such event, the Agent shall be entitled to receive, for the benefit of the Agent and the Lenders as their respective interests may appear, indefeasible payment in full of all amounts due or to become due (whether or not an Event of Default has occurred or the Obligations have been declared due and payable prior to the date on which it would otherwise have become due and payable) on or in respect of any and all Obligations before the Borrower is entitled to receive any payment on account of the principal of or interest on such lntercornpany Indebtedness, and to that end, the Agent shall be entitled to receive, for application to the payment of the Obligations, any payment or distribution of any kind or character, whether in cash, property or securities, which may be payable or deliverable in respect of the Intercompany Indebtedness owed by the Distributing Company in any such case, proceeding, dissolution, liquidation or other winding up event. The Borrower hereby authorizes and empowers the Agent, at its election and in the name of either itself, for the benefit of the Agent and the Lenders as their respective interests may appear, or in the name of the Borrower, to execute and file proofs and documents and take any other action the Agent may deem advisable to completely protect the Agent's and the Lenders' interests in the Intercompany

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Indebtedness and their right of enforcement thereof, and to that end the Borrower hereby irrevocably makes, constitutes and appoints the Agent, its officers, employees and agents, or any of them, with full power of substitution, as the true and lawful attorney-in-fact and agent of the Borrower.

1 1.20.3 ReceiDt of Prohibited Paments.

If, notwithstanding the foregoing provisions of this Section 1 1.20, the Borrower shall have received any payment or distribution of assets fiom the Distributing Company of any kind or character, whether in cash, property or securities, then and in such event such payment or distribution shall be held in trust for the benefit of the Agent and the Lenders as their respective interests may appear, shall be segregated from other funds and property held by such Guarantor, and shall be forthwith paid over to the Agent in the same form as so received (with any necessary endorsement) to be applied (in the case of cash) to or held as collateral (in the case of noncash property or securities) for the payment or prepayment of the Obligations in accordance with the terms of this Agreement.

[SIGNATURE PAGES FOLLOW]

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IN WITNESS WHEREOF, the parties hereto, by their ofkers thereunto duly authorized, have executed this Agreement as of the day and year first above written.

ATTEST: MOUNTAINEER CAS COMPANY

By: Title:

SCHEDULE l.l(A)

PRICING GRID

or Bad

or BBB OR

Debt to Capital Rntio b l e 9 than or qaal to

.40 to. 1.0 Debt to Capital Ratlo is

greater than .40 to 1.0

but l e a than or qual to .45 to 1.0

Debt to Capital Ratio b greater than

.45 to 1.0 but leu than or qual to

,so to 1.0 Debt to Capital Ratio b

greater than .so to 1.0

.200%

.225%

.250%

.275%

0 % 0 H 1.25% 1.25% 1.25%

0% 0 % 1.50% 1.50% 1.50%

0 *h 0 Yo 1.75% 1.75*i'a 1.75%

For purposes of determining the Applicable Margin, the Applicable Commitment Fee Rate and the Applicable Letter of Credit Fee Rate:

(a) If there is only one Debt Rating among Standard & Poor's, Moody's and Fitch, that Debt Rating will determine the relevant pricing level.

(b) If a difference exists in the Debt Ratings of any two or more of Standard & Poor's, Moody's and Fitch, the higher of such Debt Ratings will determine the relevant pricing level, unless such Debt Ratings differ by more than one Level, in which case the Debt Rating one Level below that of the highest Debt Rating will determine the relevant pricing level.

(c) With respect to Level 11, that Level I1 will determine the relevant pricing level if either the Debt Rating requirement or the Debt to Capital Ratio requirement is met to allow the pricing level to be lower.

SCHEDULE 1.1 (A) - 1

(d) The initial pricing level fiom the Closing Date shall be fixed at Level V, and any increase or decrease to such initial pricing level shall not be effective until the date on which the Compliance Certificate and corresponding financial statements are due to be delivered under Section 8.3.4 [Certificate of the Borrower] and Section 8.3.3 [Annual Financial Statements] for the fiscal quarter ended June 30,2006.

(e) Any change in the Applicable Margin, the Applicable Commitment Fee Rate or the Applicable Letter of Credit Fee Rate by virtue of a change in the Debt Rating shall become effective :

(i) if the Applicable Margin, Applicable Commitment Fee Rate or the Applicable Letter of Credit Fee Rate is to be increased by virtue of such a change in the Debt Rating, five Business Days after any public announcement of the change in the Debt Rating requiring such a increase, or

(ii) if the Applicable Margin, Applicable Commitment Fee Rate or the Applicable Letter of Credit Fee Rate is to be decreased by virtue of such a change in the Debt Rating, on the later of (A) five Business days after any public announcement of the change in the Debt Rating requiring such a decrease, or (B) the date the Borrower provides the Agent with written notice of such public announcement.

Notwithstanding the foregoing in clauses (i) and (ii), the Applicable Margin for Loans (other than Swing Loans) subject to the Euro-Rate Option shall not become effective until the next succeeding applicable Interest Period for such Loans.

( f ) Except as provided in paragraph (d) above, any change in the Applicable Margin, the Applicable Commitment Fee Rate or the Applicable Letter of Credit Fee Rate by virtue of a change in the Debt to Capital Ratio shall be recomputed as of the end of each fiscal quarter based on the Debt to Capital Ratio as of such quarter end. Any increase or decrease in the Applicable Margin, the Applicable Commitment Fee Rate or the Applicable Letter of Credit Fee Rate computed as of a quarter end shall be effective on the date on which the Compliance Certificate and corresponding financial statements evidencing such computation is due to be delivered under Section 8.3.4 [Certificate of the Borrower]; provided, however, that if the Borrower has failed to deliver, or caused to be delivered, such Compliance Certificate and corresponding financial statements on or before the date such delivery is due as required, as the case may be, under Section 8.3.2 [Quarterly Financial Statements] or Section 8.3.3 [Annual Financial Statements], then the Debt to Capital Ratio shall be deemed, solely for the purposes of determining the Applicable Margin, the Applicable Commitment Fee Rate and the Applicable Letter of Credit Fee Rate, to be greater than S O to 1 .O from the due date of such Compliance Certificate until the Compliance Certificate and financial statements are delivered.

SCHEDULE 1.1 (A) - 2

SCHEDULE 1.1@)

COMMITMENTS OF LENDERS AND ADDRESSES FOR NOTICES

Page 1 of 2

Part 1 - Commitments of Lenders and Addresses for Notices to Lenders

Lender

Name: Address:

~

Attention: Telephone: ( ) - Telecopy: ( - Name: Address:

Attention: Telephone: ( ) - Telecopy: ( ) - Name: Address:

Attention: Telephone: ( 1 - Telecopy: C) -

Total

Amount of Amount of Commitment Commitment for Revolving for Term Credit Loans - Loans Commitment Ratable Share

$ $ $ %

$ $ $ %

SCHEDULE l . l(B) - 1

SCHEDULE l.l(B)

. COMMITMENTS OF LENDERS AND ADDRESSES FOR NOTICES

Page 2 o f 2

Part 2 - Addresses for Notices to Agent, Borrower and Guarantors:

AGENT

Name:PNC Bank, National Association Address:

Attention: Telephone: ( ) - Telecopy: ( ) - BORROWER:

Name: Mountaineer Gas Company Address:

Attention: Telephone: ( ) - Telecopy: ( ) - GUARANTORS:

Name: Mountaineer Gas Services, Inc. Address:

Attention: Telephone: ( ) - Telecopy: ( 1 -

SCHEDULE 1.1 (B) - 2

(SIGNATURE PAGE TO CREDIT AGREEMENT]

IN WITNESS WHEREOF, the parties hereto, by their officers thereunto duly authorized, have executed this Agreement as of the day and year first above written.

MOUNTAINEER GAS COMPANY

[SIGNATURE PAGE TO CREDIT AGREEMENT]

PNC BANK, NATIONAL ASSOCLATION, individually and as Agent

By: Name: Thomas d Maiesbo Title: 'Jice PrFtsideni


KEYBANK NATIONAL ASSOCIATION, individually and as Co-Documentation Agent

Name: Sherrie 1. Manson Title: Vice President


UNION BANK OF CALFORNLA, N.A., individually and as Co-Documentation Agent

By: JBk- Name: Dennis Blank Title: Vice President

[SIGNATURE PAGE TO CREDTT AGREEMENT]

HARRIS NESBITT FINANCING, INC., individually and as Syndication Agent

By: c Name: Cahal Carmodv Title: Vice President f


CITIZENS BANK OF PENNSYLVANIA

Title: Senior Vice President

[SIGNATURE PAGE TO CREDIT AGREEMENT)

THE HLXTPJGTON NATIONAL BANK

(SIGNATURE PAGE TO CREDIT AGREEMENT]

WACHOVLA BANK, NATIONAL ASSOCIATION

By: Gv-& Name: Jhathan R. Richardson Title: Vice President

L FIRSI' AMENDMENT TO

THIS FIR= AMENDMENT TO CREDIT AGREEMIWI' AND WMWR (tb is dated a of Decunbsr 20,2006, and is made by and amone

MOUNTAINEER GAS COWANY, e West Virglnjr coqmradon (the nBorrcrwsrl. the LENDERS PARTY HERBTO, and PNC BANK, NATIONAL ASSOCIATION, tu agont for the

RECITAL&

Lcndm (the "-9.

WHEREAS, thr B-wW, the M (M d d d therein), and the Agent M to that certain Credit Agreement, dated ea of Septemba 30,2005 (IU amended, modified or s u p p l ~ t d &om t h e to h e , the "-% end

Waiver and Agrccmsnt, dated 8) of No~rnbm 27,2006 (the "Wdw"), in which the Leaden wdved certain noa-compliarrco by the Borrower with (i) Soctionr 8.3.2 [Quarterly F i ~ n c i a l Stetcmnnts] aad Section 8.3.4 [Certificate of tt# Bonower] of the Crediit Agnament in connection with the Bomwer'8 dolryed delivay on Novcmbr 27,2006 of the finemid statements and the Compllmce CeMic&te fbr the fld qumter ended Septernber 30,2005 which ware to be delivered by November 1 S* 2006 and (ii) &don 8.3.17 minimum Interest Coverage Ratio] o€ the Credit Agrwment IS calculated et September 30, 2006 (the "- -), subject to tl# terms and conditions sst forth in the Waiver; and

a p e d to amend the Credit Agreement M herdnailer provided,

&, ths B O ~ W , ~IM R ~ U M and ~IH ~ucnt rn p m i a to thot certain

L WHEREAS, the Borrower dasirss to amend the Credit Agnement, and the Lenders have

NOW, THEREFORB, in considstation of the iotagoing and handing to be legally

1.

bound, and incorporating the tib0ve-d- term8 her& the parties hereto agree I fbllow:

& -. '2ha fofqpiq recitalr Ivc tn# and comct and incorporated herein by mfsrenw, Udem otherwise deflned herein, cepitalipd terms used herein shall hevr the meanings @van to than in the Credit Apemen&

subject to the tern and condition8 provided In this Fin# Amendment and in the Waiver, which are hcnby incorporated by rafasnee~ IM though filly set forth hemin, h t h m waiw the Potential Defidt and Event of Defiult, if any, su I. raruit of tho EBlTDA Noncompliance h m the parid from September 30,2006 through the Fint Amendruent E-ve Date (as defined below).

2. Waiva, The Ladm and the Agent hereby (i) d r m the Waiver* and (li)

3. to Cmdit

(a) DefinitioM. (i) New -. Secdon 1.1 [Certain Deflnitioas] of the Credit Agnemnt is hereby amended to insert immediately after the dcAnidon of "Financial Projectiona" the following new definitions:

Apcment and Waiver, dated as of December 20,2006, among the Bonower, the other Loan Obligors, If any, the L.mdcra party thereto and the Am(."

-shall me^ thrt d n First Amendment to Credit n o

ve Dsfp shall mean, the effbcthw date of the First Amendment in acwrdanw with its ttnnr."

(li) Purchase Aepennart set fmh in Section 1.1 [Cutah Deflnidom] of the Cndit Agreement is hereby amended and nststcd in its an- to read IU follows:

Agrrmrent dated a0 of October 12,1995, I amended, of the Bomw pursuant to which it i d promissory notm in the orim principal amount of $6O,OOO,OOO in favor of John Hancock M W Life lmuranco Compemy, including, without lidtdon, ILS mded in aocordm with Section 8.1 .I 5 wanooclr Note Purchase Agreement Amendment] hereof."

Section 3,3 [Team LomNotm] of the Credit Agreunent is

The dcflnltion of Hanwck Note

"Jlaacoek Note P u r c h a a e ~ shall meaa that certain Note Purc)lese

@) hereby amended and restnted in ita entSrety to read M follows:

ll3.3 w. The Obligetion of the Bomwer to npay the unpaid principal

mount of the Term Loans made to it by cech Jmder, together with Intnzot thereon, shall k evidenced by E Term Note datad the Closing Date payable io the order of each Lender in a faes bmount equal to the Tam Loan of such Leader. The principal amount as pmvidd therein of the Tcrm Notes shall be due and payable m consecutive quarterly instellmeats on the fixst day of each Jarmary, April, July and October commencing on January 1,2008, with each installment in M amount as set forth below:

Fment Datr; January 1,2008 thmugh October I , 2009 $3,750,000

Janwry 1,2010 through July 1,2010 S5,000,000

Amount * erlvPwm e a

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(c) 3 Secdon 8.1 [AfBrma!lve Covcnrats) of the W i t Agreement is h b y d e d by inserting immediately rrftsr Section 8.1.14 [Gao Purchase Requirement~] tbe following new Section 8.1.15 [llarmck Note Purchase Agreu~ient Amendmmt]:

" 8.1.15 & .c'mQk

Aft# the First Amendment Effcctiivo Date, but prior to May IS, 2007, the Borrower hall b v e sntsrsd into en amcnQaent of the Hmmk Not0 Purchue Agrcunenl with the holders of the Outstanding Senior Notcs, in fom and substance satisfhctary to tbc Ageat, ptnsurrntto which in&- incur4 provisions of Section 10.3(a)(ii) of the Hllnoock Note Purchrwc A@mnent me mended to be the same IU the finmcirrl covwIIIH1 set fbth in Section 8.2.1 7 (Minimum lntcnst COVen(ge Ratio] hsrsof. "

(d) Did- and Related D- ' W o n 8.2.5 [Dividends anl Rdated Distributions] of the Credit Agreement iS hereby mended and restated in its entirety to read 8s follow:

8.2.5 a and Relltrd Di-.

The Bonowsr shall not, and shall not pennit any of its Subsidiaries to, makc or pay, or agree to become or remain liable to make or pay, any dividtnd or other distribution of any nature (whethe in cash, pPopsrty, sacuritjw or otherwise) on account of or in r a p t of ita ehua of capital stock, partnerohip idwes& or limited liability company intmsta on rueoount of the purchase, redemption, retirement or aoquisidon of its shma Of OapiCd stock (of mmB, options or rights themfor), partnmhip interests or Urnited liability company interests, except (i) dividends rx other distributions payable to another Loan Obligor, (ii) dividends or distributions by tbe Borrow for twa ofthe Bonower payable by the Parent, and (iii) dividends and distributions payable solely in &ens of capital stock or in optiona, warrant8 or other right8 to acquire capital stock which do not result in a transfsr of control of h e B o r r o w as dwcribed in Section 9.1.13 [ w e of Control]. Notwithstanding the h g o h g . the Borrow may make dividmds and distributions at any t h e and fram time to time after September 30,2007 but only if, prior to and a f k giving effect thereto:

(1) no Event of Default or Potential Default shall have occuned and be continuing,

(2) the Loan Obliaors are in pro forma compliance with Section 8.2,17 [Minimum Interest Coverage Rad01 and Section 8.2.18 [Maximum Debt to Capital Ratio] pior to eud after @vine eff't to such dividend or distribution, and

W 3

L

Fiscal qurrrtcr ended

fiscal~ded12/3I/06

(3) thc aggregate amount of all such dividond8 nnd distributions made by the Bonowar since the Ctodng Date does not exceed the sum of (i) S8,000,000 plus (ii) 90% of the cumulStive Consolbtnf Net Income fiom the Closing Date (or, if Consolidated Net Sacorne is a loss fbr such penad, minur 100% of such loss)

Consolidated EBJTDA

$23,500,000

(e) Minim- amii*- , Section 8.2.16 [Minimum Cor~mlidatcd EBJTDA] of the Credit Agreement is hwby amendd and restated in its endrety to read iu follows:

8.2.16 w u m v. The Bonower shall not pamit Consolidated EBITDA, as calculated at the

end of each fiscr~I quarter, fw the f a t fiml quarters then ended, as spccifid on &e chart below, to be less than the following Mtounts:

fiscal quarta d e d a30107 d thedofdfiscalqrrarkr thereafter

s25,OoO,M)o "

through fiscal quartersadd 1 3/31/07

FiscaJ qwrter ended

fiscal end& 1/06 ttyough fiscal quarter ended 3/31/07

fiscei quarur ended 6/30/07 through fiscal quam ended 9/30/07

Consolidated Adjusted EBIT to consolidated interest expense

1.20 to 1 .oo

1.50 to 1 .OO

I I I

(0 Minimum €lWa c o v ~ = e B a g o ' Ssction 8.2.17 [Minimum Interest Covmge Ratio] of the Credit Agreement is heroby amended and restated in its entirety to reed BS follows:

4

fid quarter ended lU31/07 and the end of woh fiscal quarter thmafbr

(g) schedule 1,1(& Schedule 1. ](A) [Pricing Orid] of the Credit Agreement is hereby mended and restated m it8 Cntirsty to Schedule l.l(A) [Pricing Orid] attached hereto.

as set farth on the scbedule titled

1.75 to 1.00 'I

(h) &J&i&. Exhibit 8.2.6 [Form of Acquisition Compliance Certificate] and Exhibit 8.3.4 [Form of Cornplhce Cdficrb] to the Credit & m a r t ae henby amended and rustatd in their entirev to respec4vely d 81 Sa fortb on the exhibit titled Exhibit 8.2.6 [Fonn of Acquisition Compliance Certificate] and Exhibit 8.3.4 [Form of Complhce Cerrificste] attaohcd hereto.

4. Clpnkro. The fingoing waiver and amendments conteinsd in Section 2 md Section 3 of thir First Amendment shrll have p11 efyictive dote aad thio First Amendment shall be dated the date upon &ah eeoh of the following conditions b been satisfied to the Mtisfsction of the Agmt (the '~~h&Effs lodvb:

(8) @-dm ' v m of FirslAmcmdmsrrt. The Borrower, the other Lagn Obligors, if any, the Required Lard- and the Agmt shall haw ocewted Sir Fint Amendment, and all othor documentation mestmy for e f fdv - of this First Amendment shall hew been exe~utcd and delivered all to the dsfirction of the Borrows, the Required Lmdctrr and the Agent

co) The reprwcntations and wamnties contained in Section 6 of the Cndit Agrement Md this First Amendment, and of each Loan Obligor tn each of the other ban Docrrmeno, am tnre and cornet on and lls of the First Amendment Effective Date with the same effkct I though such repruentatiom and wmmties had been made on and as of such date (except representations and wananties which relate solely to an aerlier date or time, which reprsc#ntationr and wananties wen hue snd correct on snd as of the speciflo dates or times refe~~cd to tbmin), each of the Loan Obligors has psxformed and complied with all covmanb and condition5 hanof and thereof, and no Event of Defidt or Potential Default either: (i) haa occurrtd and ir con ti nu^ M of the Firat Amendment Effective Date or (ii) c x h as of the Fint Amendment Effective Date; and by its execution and delivery of this Fint Amendment, tbe Borrower and eaoh other LOM Obligor, if my, certifies to each sucb effect.

(c) pevmentof F e . The Borrower has paid or c a d to be paid to the Agent: (i) a fee in an amount equal to 0.25% of Commitment8 of all of the Leadm which shall be paid for the ratable account of the h d m which execute and deliver to the Agent their respective signature page to this First Amendment by not later than 2:OO p.m. Pittsbqh, Pennsylvania time, on December 20,2006 in accordance With the relative respecthe Commitments of such Lenders which have made such delivety to the Agent, and (ii) df other fas, costs and expenses payable to the Agent or for which the Agent is entitled to be reimbursed, including but not limited to the rensonable feer and expcnsttr of the Agent's le@ counsel.

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(d) All material wnscnt8 required to etbtuate the tmsactions contemplated by this First Amandmewt and the other Lorn Documents have been o W i .

(e) m. All le& details and p r o c e c d i in CMIIlCctjon with the transnetions contemplated by this First Amendment and the other Loan Docmntlr pn in form and substance satisfrrctory to the Agent and counsel for the A p t , and the Agent has recs'ved all such other counterpart originals or certified or other oopicw of such document8 and procdjngs in connection With such tranaactioas, in fonn d substnnce Satisfaotory to the Agent and ita counsel, as the Agent or its counsel may rsssonably request.

5. -. By ita execution and delivery of this Amendment to the Agent, the Bwrowbt. and each of the other Loan Obligors, if any, npnsmts and wmam to the Agent and the Leaden aa followr:

(4 . Each LOM Obligor hes duly authorized, executed and detivered this First Amendment

@) Advtne w. After giving &ct to this First Amendmen$ no Material Adverse Change shall have occuned With rsspeCt to ths Bonowcr or any of the othcr Lam Obligors, if any, since lhe Closing Date of tho Credit Agrement.

(c) w. After giving effect to this Fm Amondmmt, tbem an no actions, suits, invcsdgstions, litigntion or 80~mUncntal procedqp pending or, to the Bonowefs or any other Loan Obligor's knowledge. threatened agdnst any of the b a n Obligon that could nmn~bly be expected to result in a Material Actverse Chango.

(a or Nom. No clefhuh or event of default under the Hencock Note Purchase Agmmart either (i) has occumd and u contfndag after giving effect to this First Amendment or (ii) exists after giving efftct to this Fbst Amendment.

6. m. (4 Full Force and Effect e All provisions of the Credit Agreement remain in full force

and eff't on and after the First Amendment Wdve Date pad the date hereof except as expressly amended henby. The p d w do not amend any provhions of the Credit Agreement except BS expressly amended hersby.

(b) CountcrDar4. This First Amendment may be signed in countcrparta (by facsimile transmission or othsrwise) but di of which togethsr shall constitute one and the same instrument.

(4 rn-. This First Amendment shall be incorporated into the Credit Apeemcnt by this reference. All representations, wanantie$, Events of Default and covenants set forth bmin shall be a pert of the Credit Agrtement I if Originally contained therein.

(dl pov- . This First Amendment shall be deemed to be a contract under the Laws of the State of New York and shall, pursuant to New York Oeneral Obligations Law

6

\y

5-1401, for all pauposw be g o v d by end wnstrued and enforced in BCCOP(1mce with the laws of the State of New York

(4 N o v a Except as amended hereby, all of the tcm and conditions of the Credit Agreement and the other Lom Documsntr shell remain in full force md effect. Bonow, tbe other Lour Obligors, if any, each Lender, and tht Agent h w l e d g e and that this First amend men^ ir not intended to constihtte, nor doet it wnstitute, a novation, intmuption, suJpauion of continuity, mtisfa~tioa, dischugs or termindon of the obligations, loans, liabilities, or indebtedness under the Credit m t or the other Loen Documents.

(SIGNA"kR2t PAGES FOLLOW]

L 7

Deo 19 08 04107~ TRRTRN tlFINR6LHENT CO LC 9185920020 P.2

[SlGNATURlar PAGE TO FIWT AMENDMENT TO CREDIT AGREEMEN" AND WAIVER]

lN WITNESS W?IE!OF, tbe pwia hereto, by thtt offlcm drareunto duly autborizui, have executed thir Finr kncodmcnt a of tho d q ad yew f H above wrirten.

PNC BANK, NATIONU ASSOCIATION, individwlly and a# Agent

By: Name: moe:

BMO CAPITAL FINANCMO, PSC., inaividdy and u Syndicdon Agent

By: NarW: Title

UNION BANK OF CALIFORNIA, N.A., indMdurlly md a8 Co--Documentatioa A m t

...

By: NaIm Titk 4

I

!

I

i i i i I

i I i

I I

[SIGNATURE PAGE TO l" AMEND& TO CREDIT AGRICEMENT AND WAIyE)6t)

THE HUNTINGTON NATIONAL BANK

By: N-: Titlo:

WACHOVIA BANK, NATIONAL ASSOCUTION

By: Nuno: Title:

Fax Server 12/20/2000 12:35:07 Pl4 P M E 2/002 Fax Semer

. . . . . . . . . *" ,...,.,... . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ."...I... . . . . . . . . . . _.-. . . . . . . . . . . . . ...........

[SICTUTURE PAGE TO FIRST AMENDMENT TO CREDIT AGRREMENT AND WAIVERJ

BY: Name: Titls:

KEYBANK NATIONAL ASSOCIATION, individually and aa Cdhcmmtation Aged

By. NWC: Title:

THB HUNTINGTONNATlONAL BANK

ClTlZENS BANK OF PEW!3YLVANLA,

sy: Name Title:

WACHOVIA BANK, NATLONAL ASSOOATTON

12125 CITIZENS + 91412%21041

I CmzwSBANKOFPENNSYLVANIA

I

OEC. 18.2006 5:05PM NQ 2806 P a I

wAcHcwlA BANK, NATIONAL ASSOCIAnON

.- -.

F a x &rVer 12/20/2000 12:35:07 PM PAOE 21002 FSX server

_ . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .................................

(SIGNATURE PAGE TO FIRST AMENDMENT TO CREDCT AGREEMENT AND WAlVERl

KEYBANK NATIONAL ASSOCIATION, idividwrlly and BI C ~ - D o c u m ~ ~ ~ t i o n A . p t

THE HUNTINGTONNA'I'TONAL BANK

CITIZENS BANK OF PENNSYLVAMA

BY ..

NsnO: Title:

WACHQVlA BANK, NATlONAL ASSOClATlQN

SECOND AMENDMENT TO CREDITAGREEMENT AND WAIVE8

THIS SECOND AMENDMENT TO CREDIT AGREEMENT AND WAIVER (the “ S e c o ~ ” ) , is dated as of June 21 , 2007, and is made by and among MOUNTAINEER GAS COMPANY, 8 West Virginia corporation (thc ”Borrow&), the LENDERS PARTY HERETO, and PNC BANK, NATIONAL ASSOCIATION, in its capacity aa agent for the Lendsrs (hereinafter mfmed to in such capscity aa the “&imf) under the Credit Agreement (m hcrcimftcr defined).

W I T N B S S B T H :

WHEREAS, nfaence is mode tu that catah Credit Agreement, dated aa of September 30,2005, by and among the Bonowm, the Lenden prtr thud0 (tbe ”w) a d the Agent, a mended by that certain Firat Amendmsnt to Credit Agrccnnent and Waiver, dated as of December 20,2006 (m so mended, md as the swne may be amended, rcsmtd, supplemented or modifled from tima to h e , the ”- ;and

fwcal ycas ended Deccmbcr 3 1,2006 (the ’’- 9 in ac- with Section 8.3.3 fBppual F h c - of the Cxdt Agreement and the Compliance Certificate of the B o m e r related thereto as requind by Section 8.3.4 BOKOW~ of the Credit Agreement; (ii) Wled to comply with Section 8.2. S 7 t cov- in that the Borrower did not sath@ the h u m mtio of (A) Co~olidated Adjusted EBlT (as defined in the Credit A-t) to (B) consolidated interest expenaa of the Borrower and its Subsidiaries (aa defined in the Cndit A m n t ) of 1.20 to I .OO tu measured at the end of the fiscal quatcr of the Bonower ended Dumnber 3 1,2006 and the fiscal qusrtar of the Bomwer add March 3 1,2007; (iii) hiled to comply with Section 8.2.16

Consolidated EBITDA (aa dcfined ia the Credit Agrement) of S23,!m,,OOa as meaaued at the ad of the fiscal quarter of the Barrower mdd March 3 I , 2007; and (iv) M l d to artar into an amendment of the Hamock Note Purebus Agmmcnt in accordawo with W o n 8.1.15 [HanMck Note p U r W AaeemegtBLgmdgl4nfl of the C d t Agmmeng eacb of the f e i b and noacompljauce described in clausss (i) and (iv) wnstitutw an Event of Default (ar defined in the Credit Agreement) under S d o n 9.1.4 mofOths3.g, and each of the lrrilurss and noncompliance described in clams ( j i ) and (iii) condtutw an Event of Dcfiult under

‘ of the Credit Agmment Section 9.1.3 Beach of Negative Covcnanta or VISI- (collectively, tho ’’V D e h U ”); and

delivety of the Audited Financial StatunenU and the Compliance Certificate of the B o m ~ ~ g related thereto, (ii) waive the Designated Defaults as a resalt of (A) the faiIure of the Borrowa to

WHEREAS, tho B o n o ~ (j) filed to timely deliver the finaacial statuna for thc

in that the Borrower did not sade the minimum amount of

. .

WHEREAS, the B o m r ~ a bas nqmted that the Lenden (i) extend thc time period for

a . timely deliver the Audited Financial Statements, an required by Section 8.33 [CaDPurl F E U Stat- of the Credit Agrecrnont and the CompliMeo Certificab of the Borrower related thento as required by Section 8.3.4 [certificate of (B) thc failure to comply with Section 8.2.17 8.2.16 [w idated EBITDPI] and Section 8.1.15 w o e m-4 A , and (iii) amend d n provisions of the Credit Agmmcnc and the Borrower and ths Lenders agree to such waiver and extension, and such amendmsnts, as h d n a f f n provided.

NOW, THEREFORE, the parties hento, in oonsideration of their mutual covenants and agreements hereinafksset forth and intending to be legally bound henby, covenant and agne as folf o w :

of the Credit Agreement, and Cov- ' ,Section

1. Recitalr & Ddlaitiona

The foregoing recitals are tm and comet and incopreted herein by refaence. Unless othenvisc defined haein, capitalized tamu used herein shdl have the meanings given to them in the Credit A-t.

2. Amcodmcnb to Credit Agreemeat.

(a) New Section 1.1 Defirrr 'tinne] of the Credit Agrewmt i s hereby amended to insert the following new definitions h alphabetical order:

" S a n d shall mean that certain Second Amendment to Credit Agreement and Waiver, dated as of June 21,2007, among tbc Borrower, the other Loan Obligors, the Lend- and the Agent.

Second hendment in aceordmco with its tern. M l v e Datp shall mean the effwtive date of the

shall mean the htmd Control Project report dated March 16,2007, prepared by UHY Advisors with respect to the financial process internal controls and IT processes and controls of the Borrow."

of the Credit

in its entirrty with the following now Saction 8.1 .I 5 &2&~ to Pro vide SecuriM,

(b) qMLp vel fbr Col 1- Section8.1 Agrtement is hereby amended (I) by nplacing S d o n 8.1 .IS m w a and (ii) by adding the following new Sections 8.1.16 [mef F-id Ofk4L) and 8.2.17 rMonthlv:

"8.1.15 -.

may, at its election, refinance the Term Loan in firll. The tern of any such refinancing of the Term Loan shall be subject to the consent of the Requind

(a) On or before November 30,2007, the Bonuwer

2

Lenders and shall include, without limitation, a scheduled maturity date subsequent to December 31,2010.

Tam Loan in full by a refinancing contemplated by Section 8.1.1 5(a) A~OVC, then on or before December 31,2007, the Bomwcr sbd (i) submit 4 formal request to the WVPSC to approve the grant of security interests and liens m favor of the Agent far the benefit of the Lmders on substantially all the amct~ of the Borrower and the Ouerentor, as wdl as the capital stock of the Bomwer owned by MorPltaineer Oas Holdings Limited Partnership, securing, in each case, the B o n d s liability to npay the Obligations (the "Bonowa Security Interests"), and (ii) receive approval of the W S C to the grant of the Borrower Security Inmm.

(b) In the went that the Bonower does not satisfy tho

(c) In the event that the Borrower does not satis@ the Tenn Lolln in full by B refinancing contemplated by ScCriOrr 8.1.15(8) above, then on or before November 30,2007, the B m w e r shall df)( the Apnt and the Lwders in writing as to whether ths Borrower elects to either (i) grant the B m w a Security Intwests, or (ii) not grd the Borrower Security Interests.

(d) If the Borrower elects to grant the Borrow Security Interests, the Borrower shall, on or before December 3 1,2007 (i) mceive the consent of any other party which may be required in wder for the Bonowa, the Guarantor and Mountaineer aaa Holdhgi Limited Partmrshlp to grant the BMlower Security Interests, (ii) pant and pafect (or cause the @ant and perfection of) the Borrower !bewily Interests on or kfoe December 3 1,2007, and (iii) execute and deliver such collated documents and related documents (including an amendment to thi8 Agreement) reasonably ntccsILIlly in connection with the grant and pertcction of the Borrower Security Interests in form and substance satisfactory to the Required Lenders.

(e) The Applicable Margin and Commitment Fees shall be adjusted effective as of December 31,2007, in accordance with the Pricing arid set forth in Schedule I .](A) based upon Borrower's elections in respect of (I) the reflaancing of the Term Loan and (ii) the grant of the Barrower Security Interests. In tbe event that the Borrower elects to grant the Bomwer Secrnity Interests but the grant end pafection of Lims in fww of the Agent for the benefit of the Lcndap has not occurred by December 3 1,2007, then the imsecurcd pricing set forth in Section (a)@) of the Pricing Orid shall apply from Decembex 3 1, 2007, until such t h e as the Borrower Security lntmsts are granted and perfected.

8.1.16

The BOKOW~S shall use commercially reasonable efforts to bin, on or before September 30,2007, a Chief Financial Officer for the Borrower to be located in Charleston, West Virginia, or altetnatively, will hire an interim Chief Financial

3

OtZicer from 8 third party consulting firm on or before September 30,2007, each of whom is reasonably acceptable to the Agent.

8.1.17 --,

The B0mwe.r shall c8u9c the appropriate senior managers of the Borrowv to be available to participate h a monthly confsnnce call with the Lenders to provide M updata to the Lendem with rwpcot to ( i ) the audit of the Borrowds consolidated financial statements for tbe fiscal year d c d December 31,2006, (ii) the status of tbe Bomrwer‘s application to 7;wpsC for approval to grant the Borrower Security Interests, (iii) the Implementation of actions to correct the Bonowds financial controls and IT systems based upon the results of the UHY Project Report, and (iv) the nAMncing of the Term Loan“

. Section 82.5 I p i v i d w Related . . . (c) -Md.Rdatcdotlp

o d of the Credit Agmment is hereby amended and mstated in ita entirety to read as follows:

“82.5

The Boxrower shall not, and shall not permit any of its Subsidjarits to, make or pay, or a g m to become or moin liable to make or pay, any dividend oc otber distribution of any nrtuc (whether in casb, property, d t i a or otherwise) on account of or in respect of it3 sham of cepid stock, prtnmhip intmsm or limited liability company interuts on account of the purchase, redemption, retirement or acquisition of its sham of capital rrtock (or warrants, options or rightz thenfor), partnership interests or limited liability company intcnsts, except (j) dividends or other distributions payable to another Loan Obligor, (ii) dividends or distributions by the & m e r for taxes of the Borrower payable by the Parent, and (iii) dividends and distributions payable solely in s h a m of capital stock or in options, wanants or 0th rights to acquire capital stock which do not result in a transfer of control of the Borrower as desm’bed in Section 9. I. 13 [Chsnp of Control], Notwithstanding the foregoing, in no event shall the B o m m d e any such dividends or other distribution from and after Ibe Second Amendment Effccive Date until tb Borrower shall have delivered to the Agent the financial statements required by Section 8.3.3 [Annual Financial Statemenu] of this Agreement hr the fiscal year of the Borrower ended December 3 I , 2007 and the Compliance Catificate of the Bonowcr da ted thento os required by Scotion 83.4 [Certificate of the BonowQI.1 of this Agreement and thereafter, the Borrower may make dividends and distributions at any time and fiom time to time but only if, prior to and aftn giving effect thereto:

(1) no Event of Default or Potential Default shall have occuned and be continuing,

4

(2) thc Loan Obligors are in pro fonnacompliance with Section 8.2.17 [Minimum htcrest Coverage Ratio] and S&M 8.2.1 8 (Maximum Debt to Capital Ratio] prior 10 and after giving effect to such dividend or distribution, and


(3) the aggregate amount of dl such dividendo and distributions made by the Bonower since the Closing Date d a s not exceed the nna of (i) $8,000,000 plus (ii) 90% of the cumulative Consolidated Net home fiom t&e Closing Date (or, if Consolidated Net I m m e is a loss for such period, minus 100% of such loss). "

Consoiidated EBITDA

(4 Co-. Section 8.2.16 C o n s o w SITDAJ of the Cndit Agrement is hereby amended and reslated in its entirety to read as follows:

Fiscal quatter ended 6/3W07

Fiscal quarter end& 900107

$23,500,000

$23JOO,OOo

Fiscal quatta ended 12/31/07 and the end of each fiscal quarter thGll%lfk

$2s,ooo,000 " l

I I

(e) Minimum Interest C o w e rat^ 'Q. Stetion 8.2.17 -.St Coverag of the Credit Agreement is hereby amended and restated in its entirety to d as follows:

tuest C o v c n r p e . n a . 2 . 1 7 ~ ~ I I I 8 .

The Bomwer shall not permit the nttio of (i) Consolidated Adjusted EBIT to (ij) consoljdated interest expense of the Borrower and its Subsidiaries, calculated as of the md of each fiscal quarter, for the four fiscal quarters then ended, as specified on the chart below, to be less than the following amounts:

5


Fiscal quarter cad4 6/3WO7 and fiscal quarter ended 9/3W07

Fiscal quam d e d 1 2/3 1 IO3 and the end of each fiscal quarter thena&r

(0 Sch#lule. Schedule I.l(A) ' of the W i t Agreement is hereby amended and restatal in its entirety to read BS set forth on the schedule tided Schedule 1.1 (A) mcinn atlachedhacto.

is hucby amended and restated in its entjrety to read as set forth on the exhibit titled Exhibit 8.3.4

(8) m. Exblbit 8.3,4 to the Credit Agreement

of Co- C M attached hereto.

3,

(a)

Waiver of Non-Complianca by Borrower WW Certain Provisionr of Credit

Waiver with -d to Audited Fuurnclal SW,aru@. The Borrower hereby

Agreemaot.

requests and the tendm hemby waive the Ddgnatcd Defaults which resulled &om the failure of the Borrower to deliver on or before April 30,2007 the Audited Financial Statements as required by Section 8.3 $3 &giuai Financ ial Statemental of the C d i Agramcat, and the Compliance CcrtifIcate to be delivered in connection therewith o required by Section 8.3.4 lccrtificate of the Bornwed of the Credit Agreement.

waiver

. .

The Borrower hereby requests and the Lenden hereby waive the

(i) The Designated Defaults M c h resulted h m (A) the noncompliance of

(b) A following provisions:

the Bonower with section 8.2.17 & , (B) the noncompliance of the Bonowa with Section 8.2.16 m u m pIl'D4 and (C) the failure of the Bornwet to enter into an amendment of the Hancock Note Purchase Agreement in accordance with Section 8.1.15 [ H d N otp Purchesc Amanent Amen- of the Credit Apanent; and

Agreement set forth in the foregoing ciawe @Xi) of this Section 3 const~rudng an Event of Defdt or I Potential Default.

(ii) Tha Borrower's nan-complianco with the provision of the Credit

- Consolidated Adjusted EBIT to consolidated interest utpense

1.20 to 1.00

1.5oto 1.00"

6

4. R a k e ; No Discbarge.

As additional consideration for the A&ent and the Lenders entering into this Second Amendment, the Borrower and each other Loan Obligor heraby fully and unconditiodly release and forever discharge the Agent and the Lenders, their agents, employers, dimtors, officen, attorneys, branchea, aftiliates, subsidiaries, successon and d g n s and all persons, fms,

from any and ail claims, liabilities, demands, obligations, damages, losses, actions and caww of action whatsoever which the Bumwef or such other Loan Oblipr may now have or claim to have e n s ! the Agent or any Lender or any other Released Pa&s as of the date hereof, whether presently known or unknown and of any nature and extent whatsoever, including, without limitation, on PccOuDt of or in any way *tin& concerning or arising out of or founded upon this Socond Amsndmcnt or any of the other Laen Documents, inciuding but not limited to all such loss or damage of any kind hcntofbre sustained or that may arise aa a c01utque)lcc of the dealings betwetn the parties up to and including the date bereof, including but not ILnM to, the administration or enforcement of tho Obligations or any of the Loan Documents.

corporations and 0gMizations acting on any of their behalves (th, "&kasal Pub 'Cg? of d

5. Condition6 to Effectiveness.

The foregoing waivers and amendments contained in Section 2 and Section 3 of this Second Amendment shall have m effective date and this Second Amendment shall be dated the date upon which each of the following conditions hrrs been satisfied to the satisfaction of the Agent (the " S e c o n d t E f f e c t i ve Date "):

(a) a. The Bomwcr, the other Loan Obligors, if any, the Required Lenders, and the Agent shall heve executed this Second Amendment, and all other documentation necessary for effectiveness of this Second Amendment shali have been executed and delivered all to the satisfacton of the Borrower, the Required Lenden and the Agent.

Second Amendment, (1) the representations and wananties contdned in Section 6 of the Credit Agreement and this Second Amendment, and of each Loan Obligor in each of the other Loan Documents, are true and correct on and a of the Second Amendment Effiitive Date with &a same e m as though such reprtsentations and warranties had beua made on and as of such date (except repmentations and warranties which d a t e solely to an earlier W or time, which nprrsentetions and wananties wen true and comct on and as of the specific daw or times referred to therein), (ii) each of the Loan Obligors hm performed and complied with all covenants and conditions henof and thereof, and (i) no Event of Default or Potential Default either: (a) has o c d and is continuing as of the Second Amendment Effective Date or (b) mists as of the Second Amendment Effective Date; and by its execution end delivery of this Second Amendment, the Borrower and each other Loan Obiigor, if my, ceriifia to each such CffiXt.

PavmcntofFets . The Borrower has paid or caused to be paid to the Agent: (i) a fce in an amount equal to 0.20% of Commitments of all of thc knders which shall be paid for

@I l&!mm&mandw- 0 After giving effkct to this

(4

7

the ratable account of the tenders which execute and deliver to thc Agent their respeclive signature page to this Second Amendma by not later than 200 pm., Pittsburgh, Pmnsylvania time, OR June 2 1,2007 in accordance with the nldve respdva Commitments of such Lenders whicb have mode such delivery to the Agent, and (ii) all other fees, costs and cxpenses payable to the Agent or for which the Agent is attitled to be reimbursed, iacludhg but not limit#l to the reasonable few and expensu of the Ageat's legal counscl.

contemplated by this Second Amendrneot and the other Loan Docummts have been obtained.

transactions contemplated by this Second Amendment and the 0th Loan Documents am in form and substance satisfactory to the Agent aod counsel for the Agent, and the Agent has received all such otbu counterpart originals or certified or other copies of swh documents and proceedings in connection with such transactions, in form and substance satisladcwy to tho Agent and its c o d , as the Agent or its counsel may reasonably west

and complete copy of the most nant draft of the UHY Consulting Repart.

(d)

(4

ma. All material consents required to effectuate &e tranmedons

IdmKm4h * . AI1 legal details and proaxdings in connection with the

(4 UHY Consultinu Rewrg. The Bonower shall have delivered to the Apnt II trot

6. Representations and Hamafia.

By its execution and delivery of this Second Amendment to the Agent, the Borrow and each of the other Loan Obligors, if any, represents and wanants to the Agent and the Lenders as follows:

(a) Authorization.. Each Loan Obligor has duly autborizcd, executed and

Matwid Adverso Chaw% A h giving effixt to this Second Amendment, no

detivsred this S m n d Amendment.

(b) Material Adverse Change shall have occmtd with rrspect to the Borrower or MY of the other Loan Obligon, if any, since the Closing Date uf the Credit Agreement.

Litination. After giving effect to this Second Amendment, tbere are no actions, suits, investigations, litigstioa or gwemental proceedings pending or, to the Bomwe~'~ or any other Loan 0bligo1's knowkdge, threalcnzd ageinst any of the Loan Obligon that could reasonably be expected to result in a Matdal Adverse Change.

(c)

(d) ou-dinnor Noty . No default or event of default under the Haacock Note Purchase Agnemcnt either: (i) has occurred and is continuing a f k giving effect to this Second Amendment and the Hancock Waiver, or (ii) exists aAcr giving e&ct to this Second Amendment and the Hancock Waiver.

8

7. Delivery of Comsulting Report.

As soon as it is available, the Bomwer hereby covenants and agrees to dclim to the Agent a be, coIlocf and complete copy of the final UHY Consulting Report wben issued.

8. Delivery of Anamol Financial Statements

The Borrower hueby covcnauts and agrees to deliver lo the Agmt the Audited Financial Statements covering the year ended December 31,2006 d contemplated by Section 8.3.3

and the Compliance Certificate contemplated by Section 8.3.4 on or before July 31,2007. The Bamwer hatby acknowledges of

and a p a that the IS Business Day grace period in S d o n 9.1.4 [Breach of other covwreots] shall not apply for the delivery of the 2006 Audited Financial Statemcntr and the related Compliance Certificate; provided hower, no Event of Default shall exist unless the Barawer fails to deliver the 2006 Audited Financial Statcment~ and the related Compliance m c a t e within 1 5 days of the July 3 1,2007 dw date, but the failure to make such delivery within such I5 day period shall constitute an Event of Defbult.

(a) w e andEflE9ct:MoNon v ' 0 . The Credit Agreement and each ofthe other LOM Documents am hereby ratified and conf'inncd and arc in full foxce and e&ct on and after the Second Amendment Efkctivc Date and the date h m o f except as expressly amended hereby.

(b) OOV- . This Second Amendment shall be deemed to be a contmd under the Laws of the State of New York and shall, pursuant to New York General ObligatJons Law Section 5-1401, for all purposes be governed by and cmstrued and enforced in accoxdancc with the laws of the State of New York.

(4 incorporated into the Credit Agreement by this mfkrcnct. All npmntdons, warranties, Events of Defiuit and covenants set forth herein shall be a part of the Credit Agmment as if origiaefly contained therein.

bruomtion into Credit Amcement . This Second Amendment shall be

(d) Gountqgjg& This Second Amendment may be executed by different parties hereto on any number of separate counterparts, each of which, wben 90 orecuted and delivered, shall be an original, and all such countmparts shall together constitute one and the same instrument. Delivery by facsimile or electronic transmission of urccuted signature pagw hereof from one party hereto to another pw hereto shall be d m c d to constitute due acecution and delivery by such patty.

the Agent and hold the Agent harmless against liability for the payment of all out-of-pocket costs, expenses and disbursements, including without limitation, reasonable fces and expenses of counsel incuned by the Agent in connection with the development, prepdon, execution, administration, interpretation or performance of this Second Amendment and all other documents

(e) Fees and FJ(=wa . The Borrower unconditionally to pay and reimburse

9

or instruments to be delivered ia conmction hanwitb. Any feu or expenses paid by the Bormwer in CoNlCction with the negotiation and CxcCUtjon of this Amendment (including fees payable pursuant to Section S(c) or this Section vu)) or the negotiation and wcoutjon of a waiver under the Hmcock Note Purchase Agreement of tho failure to &liver 2006 audited financial statements in accordance with the t e r m thcreof shall not bo taken into Eonsideration in determining whether the Bonower is in compliance with the financial covenants Sct forth in Section 8.2.

lSlGNATURES BEGIN ON NEXT PAGE]

[SIGNATURE PAGE TO SEClOND AMENDMENT TO CREDIT AGREEMENT AND WAIVER]

M WlTNFSS WHEREOF, and intendtng to be legally bound hereby, lbe partice hereto have executed this Second Amendmeat as of the day and ymr f i s t above Written.

Tide: President

I 1

I

[SIGNATURE PAGE TO SECOND AMENDMENT TO CREDIT AGREEMENT AND WAIVER]

PNC BANK, NARONAL ASSOCZATION, individually and as Agent

Name: W M C L inden Title: Maa&Qkm

BMO CAPITAL MARKETS FTNANCING, INC.

By: Name: Title:

UNION BANK OF CAtlFORNIA, N.A.

By: Name: Title:

KEYBANK NATIONAL ASSOCIATION

12

ISIGNATURE PAGE TO SECOND AMENDMENT TO CREDIT AGREEMENT AND WAIVER]

PNC BANK, NATIONAL ASSOCIATION, individually aod as Agent

BMO CAPrrAL MARKETS FTNANCINO, INC.

By: Name: D Y Title: Vice President &

UNION BANK OF CALIFORNIA, N.A.

By: Name: Title:


By: Name: Tide:

12

[SIGNATURE PAGE TO SECOND AMENDMENT TO CREDIT AGREEMENT AND WAIVERJ

PNC BANK, NATIONAL ASSOCIATION, individually and as Agcnt

BMO CAPITAL MARKETS FMANCING, INC.

Title:


By: Name: Title:


Name: Sheme 1. Manson Title: Senior Vice President

12

[SIGNATURE PAGE TO SECOND AMENDMENT TO CREDIT AGREEMENT AND WAIVER]


ClTIZENS BANKOF PENNSYLVANIA

WACHOVIA BANK, NATIONAL ASSOCIATION

13

[SIGNATURE PAGE TO SECOND AMENDMENT TOCREDlTAGREWENTANDWA)[YER)

lY3 HUNTINOTON NATIONAL BANK

CITIZENS BANK OF PENNSYLVW


BV: N m . Titla

13

[SIGNATURE PAGE TO SECOND AMENDMENT TO CREDIT AGREEMENT AND WAfvERI

HUNTMmON NA'IIONAL BANK


13

The undusigncd hereby ecknowlcdgu the nccipt of a oopy of the fonpoing Second Amendment to Credit Agreerneat and W 8 h and hmby ackrrowlcdcpr nnd 8- that itS obligations UMjCr rhc Guaranty and Suniysllip A- dated PI ofscptCmba 30,2005, continue in full fora and efbt with respect to tho Obligations after givfo# efRct to the Sc~ond Amendment.

s

MOUNTAINEER GAS SERVICES, MC.

14

I

I

THIRD AMEM)MENT TO CREDIT AGREEMENT

t

THIS THIRD AMENDMENT TO CREDIT AGREEMENT (the "Third Amenbent"), is dated as of December 20,2007, and is made by and among MOUNTAINEER GAS COMPANY, a West Virginia corporation (the "Borrowe~"), +e LENDERS PARTY HERETO, and PNC BANK, NATIONAL ASSOCIATION, in its capacity as agent for the Lenders (hereinaflcr referred to in such capacity as the "Atzent") under the Credit Agreement (as hereinafter defined),

W I T N E S S ETH:

WHEREAS, reference is made to that certain Credit Agreement, dated as of September 30,2005, by and among the Bomwer, the Lenders party thereto (the "Lenders") and the Agent, as amended by that certain First Amendment to Credit Agrement and Waiver, dated as of December 20,2006, and Second Amendment to Credit Agreement and Waiver, dated as of June 21 , 2007 (a9 so amended, and as the same may be amended, restated, supplemented or modified from time to time, the "Credit Agreement"); and

.

WHEREAS, the Borrower desires to amend the Credit Agreement, and the Lenders have agreed to amend the Credit Agreement as bereinafter provided.

NOW, THEREFORE, the parties hereto, in consideration of their mutuaI covenants and agreements hereinafter set forth and intending to be legally bound hereby, covenant and agree as follows:

1. Recitals & Defrnitiona

The foregoing recitals am tnre and correct and incorporated herein by reference. Vnless otherwise defined herein, capitalized tems used herein shall have the meanings given to them in the Credit Agreement.

.#

I 2. Amendments to Credit Agreement.

(a) Articles 1 k u n h I \ . Articles f through 11 of the Credit Agreement are hereby amended and restated as set forth on Exhibit 1 hereto.

(b) Schedule I. 1 CAI. Schedule 1. I (A) [Pricing Grid] of the Credit Agreement is hereby deleted in its entirety.

(c) amended and restated in their entirety to read aa set forth on the schedules attached hereto titled a3 follows:

Other Schedule%. Each of the other schedules of the Credit Agreement are hereby

Schedule 1.1 (B), Commitments of Lenders and Addresses for Notices Schedule 1.1 (P), Permitted Liens

1 I

L.

Schedule 6.1.1 , Qualifications To Do Business Schedule 6.1.2, Capitalization Schedule 6.1,3, Subsidiaries Schedule 6.1.7, Litigation Schedule 6.1.13, Consents and Approvals Schedule 6.1.15, Patents, Trademarks, Copyrights, Licenses, Etc. Schedule 6. I . 19, Insurance Policies Schedule 6. I .23, Employee Benefit Plan Disclosures Schedule 6.1 -25, Environmental Disclosures Schedule 8.2.1, Permitted Indebtedness Schedule 8.2.10, Business of Loan Obligors and Subsidiaries

(d) Exhibit 8.2.5. The Credit Agreement is hereby amended to add a new Exhibit 8.2.5 [Form of Dividend Compliance Certificate] in the form attached hereto.

Certificate] and Exhibit 8.3.4 [Form of Comdiance Certificate] to the Credit Agreement are hereby amended and restated in their entirety to read as set forth on the exhibit titled Exhibit 8.2,6 [Form of Acauisition Comnliance Certificate] and Exhibit 8.3.4 [Form of Comdiance Certificate] attached hereto.

(e) Exhibits 8.2.6 and 8.3.4. Exhibit 8.2.6 [ F o n of Acauisition Compliance

3. Release; No Discharge.

As additional consideration for the Agent and the Lenders entering into this Third Amendment, the Borrower and each other Loan Obligor hereby fully and unconditionally release and forever discharge the Agent and the Lenders, their agents, employers, directors, officers, attorneys, branches, affiIiates, subsidiaries, successors and assigns and all persons, h s , corporations and organizations acting on any of their behalves (the "Released Parties") of and &om any and all claims, liabilities, demands, obligations, damages, losses, actions and causes of action whatsoever which the Borrower or such other Loan Obligor may now have or claim to have against the Agent or any Lender or any other Released Parties as of the date hereof, whether presently known or unknown and of any nature and extent whatsoever, including, without limitation, on account of or in any way affecting, concerning or arising out of or founded upon this Third Amendment or any of the other Loan Documents, including but not limited to all such loss or damage of any kind heretofore sustained or that may arise as a consequence of the dealings between the parties up to and including the date hereof, including but not limited to, the administration or enforcement of the Obligations or any of the Loan Documents.

4. Conditions to Effectiveness.

The foregoing amendments contained in Section 2 of this Third Amendment shall have an effective date and this Third Amendment shall be dated the date upon which each of the following conditions has been satisfied to the satisfaction of the Agent (the "Third Amendment Effective Date"):

2

I

I

(a) Execution and Delivew of Thxrd ' Amendment. The Borrower, the other Loan Obligors, if any, the Required Lenders, and the Agent shall have executed this Third Amendment, and all other documentation necessary for effectiveness of this Third Amendment shall have been executed and delivered all to the satisfaction of the Borrower, the Required Lenders and the Agent.

(b) Remesentations and Warranties: No Event of Default. After giving effect to this Third Amendment, (i) the representations and warranties contained in Section 6 of the Credit Agreement and this Third Amendment, and of each Loan Obligor in each of the other Loan Documents, are true and correct on and as of the Third Amendment Effective Date with the same effect as though such representations and warranties had been made on and as of such date (except representations and warranties which relate solely to an earlier date or the , which representations and warranties were true and correct on and as of the specific dates or times referred to therein), (ii) each of the Loan Obligors has performed and complied with all covenants and conditions hereof and thereof, and (iii) no Event of Default or Potential Default either: (a) has occuned and is continuing as of the Third Amendment Effective Date or (b) exists as of the Third Amendment Effective Date; and by ita execution and delivery of this Third Amendment, the Borrower and each other Loan Obligor, Zany, certifies to each such effect.

(c) Pavment of Fees. The Borrower has paid or caused to be paid to the Agent: (i) a fee in an amount quai to 0.25% of Commitments of all of the Lenders which shall be paid for the ratable account of the Lenders which execute and deliver to the Agent their respective signature page to this Third Amendment by not later than 5:OO p.m., Pittsburgh, Pennsylvania time, on December 19,2007 in accordance with the relative respective Commitments of such Lenders which have made such delivery to the Agent, and (ii) all other fees, costs and expenses payable to the Agent or for which the Agent is entitled to be reimbursed, including but not limited to the reasonable fees and expenses of the Agent's legal counsel.

(d) Consents. All material consents required to effectuate the transactions contemplated by this Third Amendment and the other Loan Documents have been obtained,

(e) L e d Details. AI1 legal details and proceedings in connection with the transactions contemplated by this Third Amendment and the other Loan Documents are in form and substance satisfactory to the Agent and counsel for the Agent, and the Agent has received all such other counterpart originals or certified or other copies of such documents and proceedings in connection with such transactions, in form and substance satisfactory to the Agent and its counsel, as the Agent or its counsel may reasonably request.

(9 Issuance of New Senior Notes and Reuavment in Full of Term Loans and m. ou A true and correct copy of the New Senior Notes and New Senior Note Purchase Agreement shall have been delivered to the Agent and shall be in form and substance satisfactory to the Agent, and the New Senior Notes shall have been issued in accordance with the terms of the New Senior Note Purchase Agreement and the proceeds thereof shall have been used to pay in full all amounts outstanding under the Term Loans and Outstanding Senior Notes.

(g) -. The Payment Sharing Agreement in the form attached hereto as Exhibit A shall have been executed and delivered by the parties thereto.

3

(h) Omanization, Authorization and Incumbency. There shall be delivered to the Agent for the benefit of each Bank a certificate, dated the date of thjs Amendment and signed by the Secretary or an Assistant Secretary of each Loan Obligor, certifqing as appropriate as to:

resolutions of each Loan Party evidencing all action taken by such party in (i) connection with this Amendment and the other Loan Documents;

(ii) the names of the officer or officers authorized to s i p this Amendment and the other documents exezuted and delivered in connection herewith and described in this Section 4 and the true signatures of such officer or officers and specifying the Authorized Omcers permitted to act on behalf of such Loan Party for purposes of the Loan Documents and the true signatures of such officers, on which the Agent and each bank may conclusively rely; and

the organizational documents of Borrower and any other Loan Obligor, (iii)

ODinion of Counse\. There shall be delivered to the Agent for the benefit of each

including that its articles of incorporation and bylaws.

(i) Bank a written opinion dated as of the date of this Amendment of Skadden, Arps, Slate, Meagher & Flom, LLP as to matters as the Agent shall reasonably request, with such opinions to be in form and substance satisfactory to the Agent.

5. Representations and W m t i e s .

By its execution and delivery of this Third Amendment to the Agent, the Borrower and each of the other Loan Obligors, if any, represents and warrants to the Agent and the Lenders as follows:

(a) Authorization. Etc . Each Loan Obligor has duly authorized, executed and delivered this Third Amendment.

(b) Material Adverse Change. Mer giving effect to this Third Amendment, no Material Adverse Change shall have occurred with respect to the Borrower or any of the other Loan Obligors, if any, since December 3 1,2006,

suits, investigations, iitigation or governmental proceedings pending or, to the Borrower's or any other Loan Obligor's knowledge, threatened against any of the Loan Obligors that could reasonably be expected to result in a Material Adverse Chan'ge.

(e) Litigation. After giving effect to this Third Amendment, there are no actions,

6. Miscellaneous.

(a) Force and Effect: No Novation. The Credit Agreement and each of the other Loan Documents are hereby ratified and confirmed and are in full force and effect on and after the Third Amendment Effective Date and the date hereof except as expressly amended hereby.

(b) Governing Law. This Third Amendment shall be deemed to be a contract under the Laws of the State of New York and shall, pursuant to New York General Obligations Law

4

Section 5-1401, for all purposes be governed by and construed and enforced in accordance with the laws of the State of New York.

(c) 2 1 . "his Third Amendment shall be incorporated into the Credit Agreement by this reference. All representations, warranties, Events of Default and covenants set forth herein shall be a part of the Credit Agreement as if originally contained therein.

(4 Countemarts. This Third Amendment may be executed by different parties hereto on any number of separate counterparts, each of which, when so executed and delivered, shall be an original, and all such counterparts shall together constitute one and the same instrument. Delivery by facsimile or electronic transmission of executed signature pages hereof from one party hereto to another party hereto shall be deemed to constitute due execution and delivery by such party.

(e) Fees and Exuenses. The Borrower unconditionally agrees to pay and reimburse the Agent and hold the Agent harmless against liability for the payment of all out-of-pocket costs, expenses and disbursements, including without limitation., reasonable fees and expenses of counsel incurred by the Agent in connection with the development, preparation, execution, administration, interpretation or performance of this Third Amendment and all other documents or instruments to be delivered in connection herewith.

[SIGNATURES BEGIN ON NEXT PAGE]

5

/SIGNATURE PAGE to THIRD AMENDMENT TO CREDIT ACREEMENTI

M WfTNESS WHEREOF, and intending to be legally bound hereby, the parties hereto have executed this Third Amendment as of the day and year first above written.

MO'LTNTAMEER GAS COMPANY

By: Name: William F i e l d s Title: Chief Flzldncial Officer

6

(SIGNATURE PAGE to TESIRD AMENDMENT TO CREDIT AGREEMENTI

PNC BANK, NATIONAL ASSOCIATION, individually and as Agent

Title: Manaaing Director

BMO CAPlTAL MAICKETS FINANCING, INC.

By: Name: Title:


By: Name: Title:


I

By: Name: Title:

7

[SlCNATURE PACE to TB(IRD AMENDMENT TO CREDIT ACREEMEPJrf


BY Name: Title:

BMO CAPnAL MARKETS FINANCING, MC.


BY Name: Title:


By: Name: Title:

7

(SIGNATURE PAGE to THDRD AMENDMENT TO CREDYT AGREEMENTI


By: Name: Title:

BMO CAPITAL MARKETS FINANCING, INC.

By: Name: Title:

UNION BANK OF

By: Name: De&> G. Blank' Title: Vice President


I

By: Name: Title:

I 7


By: Name: Title:

BMO CAPlTAL MARKETS FINANCING, INC.

By: Name: Title:


By: Name: Title:

KEYBANK NATIONAL ASSOCLATION

Title: Senior Vice President

7

[SIGNATURE PAGE to THIRD AMENDMENT TO CREDIT AGREEMENT)


ClTIzENS BANK OF PENNSYLVANIA

By: Name: Title:


By: Name: Title:

8

[SIGNATURE PAGE to THIRD AMENDMENT TO CREDIT AGRJlEMENT]


By: Name: Title:

CITIZENS BANK OF PENNSYL,VANlA r

Title: Vice Prcsidmt

WACHOVJA BANK, NATIONAL ASSOCIATION

BY Name: Title:

8

b

b

[SIGNATURE PAGE te THIRD AMENDMENT TO CREDIT AGREEMENT']


By: Name: Title:

CmZENS BANK OF PENNSYLVANIA

By: Name: Title:


8

GUARANTOR ACKNOWLEDGEMENT

The undersigned hereby acknowledges the receipt of a copy of the foregoing Third Amendment to Credit Agreement and henby acknowledges and agrees that its obligatjons under the Ouaranty and Suretyship Agrement dated as of Septemba 30,2005, continue in full force and effcct with respect to the Obligations after giving effect to the Third Amendment.

MOUNTAINEER GAS SERVICES, MC.

By: Name: Title:

9

i

SCHEDULE l.l(B)

D

D

D

P

B

D

B


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Part 1 - Commitments of Lenders and Addresses for Notices to Lenders

- Lender

Name: PNC Bank, National Association Address: One PNC Plaza - 22nd F'l. 249 Fifth Avenue Pittsburgh, PA 15222 Attention: Louis McLinden Telephone: (412) 762-8830 Telecopy: (412) 705-3232

Amount of Commitment for Revohrine Credit Loans Ratable Share

$23,648,648.65 18.91 891 8919%

Name: BMO Capital Markets Financing, Inc. Address 700 Louisiana St., Suite 4400 Houston, TX 77002 Atlention: Cahal Carmody Telephone: (71 3) 546-9750 Telecopy: (713) 223-4007 $20,270,270.27 16.21 621 621 6%

Name: Union Bank of California, N.A. Address: 445 South Figueroa Street Los Angeles, CA 90071-1601 Attention: Alex Wernberg Telephone: (2 13) 236-5016 Telecopy: (2 13) 236-4096 $23,648,648.65 1 8.91 89 1 89 19%

Name: Keybank National Association Address: 127 Public Square Cleveland, OH 441 14-1306 Attention: Sherrie Manson Telephone: (2 16) 689-3443 Telecopy: (2 16) 689-3832 $20,270,270.27 16.21 62 1621 6%

Name: The Huntington National Bank Address: 900 Lee Street, 2nd Floor Charleston, WV 25301 Attention: Blair Devan Telephone: (304) 348-71 38 Telecopy: (304) 348-5055 $1331 3,s 13.51 10,810810811%

Name: Citizens Bank of PennsyIvania Address: 525 WiIliam Penn Place

Pittsburgh, PA 1 52 19- 1729 Attention: Dwayne Finney Telephone: (412) 867-2425 Telecopy: (412) 552-6308 $IO,] 35,135.14

153-291 0

8.108108 108%

Name: Wachovia Bank, National Association Address: 201 South Jefferson Street, 2nd Fioor Roanoke, VA 2401 1 Attention: Jonathan Richardson Telephone: (540) 563-7691 Telecopy: (540) 563-6320 $ I3,5 133 13.5 1 10.81081081 1%

Total ~00.0000000~

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SCHEDULE l.l(B)

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Page 2 of 2

Part 2 - Addresses for Notices to Agent, Borrower and Guarantors:

AGENT

Name: PNC Bank, National Association Address: One PNC Plaza - 22nd Floor 249 Fifth Avenue Pittsburgh, PA 15222 Attention: Louis McLinden Telephone: (412) 762-8830 Telecopy: (412) 705-3232

BORROWER:

Name: Mountaineer Gas Company Address: 400 South Boston Suite 1000 Tulsa, Oklahoma 74103 Attention: Treasurer Telephone; (91 8) 592-4422 Telecopy:(918) 592-0020

GUARANTORS:

Name: Mountaineer Gas Services, Inc. Address: 400 South Boston Suite 1000 Tulsa, Oklahoma 74 103 Attention: Treasurer Telephone: (918) 592-4422 Telecopy: (91 8) 592-0020

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SCHEDULE l.l(P)

PERMITTED LIENS

Lien in favor of Robert J. Wallace as Trustee under that certain Trust Deed, dated June 24, 1999 ("Clawson Trust Deed"), by the Company to secure Indebtedness to Thomas A. & Grace E. Clawson of $22,500 (as of 12/20/07) in connection with the Company's purchase of a building that houses the Elkin Service Center, which is a service center for work crews.

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806164.3B-D.C. Server I A - MSW 4

SCEEDULE 6.1.1

QUALIFICATIONS TO DO BUSINESS

Mountaineer Gas Company - West Virginia

Mountaineer Gas Servjces, Inc. - West Virginia

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80616438-D.C. Snvtr I A - MSW D

SCHEDULE 6.1.2

CAPlTALIZATION

Mountaineer Gas Holdings Limited Partnership owns 100% of the issued and outstanding authorized capital stock of Mountaineer Gas Company.

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806164.3B-D.C.SCt~T IA -MSW

Name Jurisdiction of Outstanding Capital Incorporation

Mountaineer Gas West Virginia 100 shares authorized and outstanding Services, Inc. (11/19/92) ($l.OOprshare)

(100% by Mountaineer Gas Company)

SCEEDULE 6.1.3

Jurisdiction Qualified

to Do Business

West Virginia (1 111 9/92)

SUBSIDIARIES

806164.3B-D.C. S m IA-MSW

LIMKF L~ABILITY DEDUCWBLE6lElEMlON None (Guaranteed Cost Policy) None (Guaranteed Cost Policy)

I PLACEMENT INSURED West Virginia Workers' /Workers Compensation

Automobile Liability ,General Liability $35.000,000 each occurrence Excess Liability

$25,000,000 combined single limit

$65,000,000 each occurrence and

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Compensation Commission (Bri ckstreet)

$15,000 each occufrence London Mutual $250,000 each occurrence AEGIS None (Guaranteed Cost Policy) \Energy Insurance Mutual

SCHEDULE 6.1.19

PropeWBoiler & Machinery Directors & Officers Blanket Crime Fi duciaiy Liability/

INSURANCE POLICIES

aggregate I I

$25,000,000 per occurrence $250,000 per occurrence London Mutual

$3,000,000 aggregate $10,000 Each Loss Great American $1 0,000,000 aggregate $25,000 XL

$3,000,000 aggregate $50,000 Employment Practices XL 1

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IEmployment Practices ]$O fiduciary 1 I * All property and liability coverages include TRU (Terrorism) Insurance.

KI6164.3B-D.C. Servsr I A - MSW

SCHEDULE 8.2.1

PERMITTED INDEBTEDNESS

Mountaineer Gas Company

Indebtedness under the Clawson Trust Deed to Thomas A. & Grace E. Clawson, due April 1,2009, in an outstanding amount equal to $22,500 (as of 12/20/07), which was incurred in connection with the Company's purchase of a building that houses the E h Service Center, which is a service center for work crews.

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SCHEDULE 8.2.10

BUSINESS OF LOAN OBLIGORS AND SUBSIDIARIES

1. Mountaineer Gas Company is engaged in the business of transporting, distributing and selling natural gas to commercial, residential and industrial customers in the State of West Virginia

2. Mountaineer Gas Services, Inc. is engaged in the exploration for and production of naturai gas in the Appalachian Basin within the State of West Virginia and sells n a n d gas to Mountaineer Gas Company and other parties.

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806164.3B-D.C. SWU IA - MSW

JACKSON~QLLY - Public Service Commission of West Virginia

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