Exhibit 10.2

Execution Version

AMENDED AND RESTATED GAS PROCESSING AGREEMENT

Between

PennTex North Louisiana Operating, LLC

“Processor”

and

MRD Operating LLC

“Customer”

Effective as of April 14, 2015

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TABLE OF CONTENTS

 

ARTICLE    PAGE  

ARTICLE I. CERTAIN DEFINITIONS

     1   

ARTICLE II. CUSTOMER RIGHTS AND OBLIGATIONS

     10     

2.1

 

Dedication

     10     

2.2

 

Prior Dedications

     11     

2.3

 

Covenant Running with the Land

     11     

2.4

 

Memorandum of Agreement

     11     

2.5

 

Customer Warranty

     12     

2.6

 

No Upstream Processing

     12     

2.7

 

Customer Gas in Excess of Maximum Daily Quantity

     12     

2.8

 

Gas for Lease Operations

     12   

ARTICLE III. DELIVERY AND PROCESSING OF GAS

     12     

3.1

 

Plant Operational Dates; Initial Operations; Design Basis

     12     

3.2

 

Delivery of Customer Gas

     14     

3.3

 

Processor Commitment

     14     

3.4

 

Delivery of Customer’s Residue Gas

     14     

3.5

 

Receipt and Processing of Gas

     14     

3.6

 

Maintenance

     15     

3.7

 

Customer’s MDQ

     15     

3.8

 

Plant Interruptions

     16     

3.9

 

Temporary Release

     16     

3.10

 

Permanent Release

     16     

3.11

 

Release under the AMI Agreement

     17     

3.12

 

Operation of the Plants

     17     

3.13

 

Delivery of Customer Plant Products

     17   

ARTICLE IV. NOMINATIONS AND BALANCING

     18     

4.1

 

Nomination Procedures

     18     

4.2

 

Balancing

     18     

4.3

 

Allocation of Received Gas

     18     

4.4

 

Plant Product Allocation Procedure

     18   

ARTICLE V. QUALITY

     18     

5.1

 

Gas Quality Specifications

     18     

5.2

 

Non-Conforming Gas

     18     

5.3

 

Hazardous Substances

     19     

5.4

 

Environmental, Health and Safety Laws

     20     

5.5

 

Gathering System Deliveries

     20   

 

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ARTICLE VI. MEASUREMENT AND TESTING

  20   

6.1

Measurement Equipment

  20   

6.2

Measurement Standards

  20   

6.3

Measurement Factors

  21   

6.4

Measurement Accuracy Verification

  22   

6.5

Measurement Error

  22   

6.6

Customer’s Right of Inspection

  22   

6.7

Gross Heating Value Determination

  22   

6.8

Hydrocarbon Content

  23   

6.9

Fractional Analysis

  23   

6.10

Modifications to Measurement Procedures

  23   

6.11

Measurement Disputes

  24   

ARTICLE VII. PLANT PRODUCTS AND CUSTOMER RESIDUE GAS

  24   

7.1

Conveyance of Rights to Processor

  24   

7.2

Title to Customer Gas and Plant Products

  24   

ARTICLE VIII. PLANT FUEL, LOST AND UNACCOUNTED FOR AND SHRINKAGE

  24   

8.1

Allocation of Plant Fuel and Lost and Unaccounted for Gas

  24   

8.2

Calculation of Shrinkage

  24   

8.3

Plant Fuel, Shrinkage and Lost and Unaccounted for Gas

  24   

ARTICLE IX. COMPENSATION AND FEES

  25   

9.1

Processing Fee

  25   

9.2

Fee Adjustment

  25   

9.3

Minimum Quantity Commitment

  25   

9.4

Deficiency Payments

  25   

9.5

Certain Other Payments

  26   

9.6

Electric Compression Reimbursement

  27   

ARTICLE X. ROYALTIES; WARRANTY OF TITLE

  27   

10.1

Royalties

  27   

10.2

Title; Warranties Regarding Title

  28   

ARTICLE XI. TERM

  28   

11.1

Term

  28   

11.2

Termination for Cause

  28   

ARTICLE XII. STATEMENTS AND PAYMENTS

  28   

12.1

Invoices and Statements

  28   

 

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12.2

Payment of Statements

  29   

12.3

Billing Disputes

  29   

12.4

Audit Rights

  29   

12.5

Creditworthiness

  29   

ARTICLE XIII. LIABILITY OF THE PARTIES

  30   

13.1

Control and Possession of Gas and Plant Products

  30   

13.2

Waiver of Certain Damages

  30   

13.3

Inert Constituents

  31   

13.4

Indemnification

  31   

ARTICLE XIV. FORCE MAJEURE

  32   

14.1

Suspension of Obligations

  32   

14.2

Definition of Force Majeure

  32   

14.3

Strikes

  33   

ARTICLE XV. GOVERNING LAW; VENUE; DISPUTE RESOLUTION

  33   

15.1

Governing Law

  33   

15.2

Venue

  33   

15.3

Negotiation

  33   

ARTICLE XVI. TAXES

  34   

16.1

Taxes on Processing and Plant Products

  34   

16.2

Other Taxes

  34   

16.3

Taxes on Processing Facilities

  34   

ARTICLE XVII. ASSIGNMENT

  34   

17.1

Restrictions on Assignment

  34   

17.2

Permitted Assignments

  34   

ARTICLE XVIII. NOTICES AND STATEMENTS

  35   

18.1

Notice

  35   

18.2

Change of Address

  36   

ARTICLE XIX. MISCELLANEOUS

  36   

19.1

Entire Agreement

  36   

19.2

Confidentiality

  36   

19.3

Waiver

  37   

19.4

No Third Party Beneficiaries

  37   

19.5

No Partnership

  37   

19.6

Published Indices

  37   

19.7

Headings

  38   

 

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19.8

Contract Interpretation

  38   

19.9

Agreement Subject to Laws

  38   

19.10

Federal Jurisdiction

  39   

19.11

Reports to Governmental Authorities

  39   

19.12

Material Adverse Change

  39   

19.13

Severability

  39   

19.14

Expenses

  40   

19.15

Joint Preparation

  40   

19.16

Further Assurances

  40   

19.17

Counterpart Execution

  40   

19.18

Survival

  40   

19.19

Customer-Affiliate-Subsidiary Obligations

  40   

19.20

Amendment

  40   

Exhibits

 

EXHIBIT A

AMI Description

EXHIBIT B

Customer Dedicated Leases

EXHIBIT C

Prior Dedications

EXHIBIT D

Memorandum of Agreement

EXHIBIT E

Gas Specifications

 

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AMENDED AND RESTATED GAS PROCESSING AGREEMENT

This Amended and Restated Gas Processing Agreement (this “Agreement”) is hereby
made and entered into effective as of the 14th day of April, 2015 (the
“Effective Date”) by and between PennTex North Louisiana Operating, LLC, a
Delaware limited liability company (“Processor”), and MRD Operating LLC, a
Delaware limited liability company (“Customer”). Hereinafter, Processor and
Customer may sometimes be referred to collectively as the “Parties” and
individually as a “Party.”

W I T N E S S E T H:

WHEREAS, PennTex North Louisiana, LLC, a Delaware limited liability company
(“PennTex JV”), and WildHorse Resources, LLC, a Delaware limited liability
company (“WildHorse”), entered into that certain Gas Processing Agreement, dated
March 17, 2014, pursuant to which PennTex JV agreed to provide certain
processing services for WildHorse (the “Existing Gas Processing Agreement”);

WHEREAS, in accordance with Section 17.2 of the Existing Gas Processing
Agreement, PennTex JV assigned its rights and obligations thereunder to
Processor pursuant that certain Contribution Agreement, dated December 19, 2014
and effective January 1, 2015, by and between PennTex JV and Processor;

WHEREAS, pursuant to that certain Agreement and Plan of Merger, dated
February 2, 2015, WildHorse merged with and into Customer, and Customer assumed
all of WildHorse’s rights and obligations under the Existing Gas Processing
Agreement in accordance with Section 17.2 thereof; and

WHEREAS, the Parties desire to amend and restate the Existing Gas Processing
Agreement as provided herein.

NOW, THEREFORE, in consideration of the premises and the mutual covenants herein
contained, the Parties covenant and agree as follows:

ARTICLE I.

CERTAIN DEFINITIONS

For the purposes of this Agreement, the following definitions have the meanings
as set forth below:

1.1. “Additional Term” shall have the meaning given to such term in Section
11.1.

1.2. “Affiliate” shall mean, when used with respect to any Person, any other
Person that, directly or indirectly, through one or more intermediaries,
Controls, is Controlled by, or is under common Control with, such Person in
question. For the purposes of this Agreement, (i) with respect to PennTex
Midstream Partners, LLC and its subsidiaries, the term “Affiliate” shall exclude
Memorial Resource Development Corp. and each of its subsidiaries and (ii) with
respect to Memorial Resource Development Corp. and its subsidiaries, the term
“Affiliate” shall exclude PennTex Midstream Partners, LLC and each of its
subsidiaries.

 

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1.3. “Aggregate Gas Commitment” shall mean, on the last Day of each Quarterly
Period during the MQ Period, the quantity of Gas (in MMBtu) equal to the
cumulative sum of the Maximum Daily Quantities for all Days during the period
beginning with the first Day of the MQ Period and ending with the last Day of
such Quarterly Period.

1.4. “Agreement” shall have the meaning given to such term in the preamble of
this Agreement.

1.5. “AMI Agreement” shall mean that certain Amended and Restated Area of Mutual
Interest and Midstream Exclusivity Agreement, dated April 14, 2015, by and among
PennTex NLA Holdings, LLC, MRD WHR LA Midstream LLC, PennTex JV and Customer.

1.6. “Annual Period” shall mean a period commencing at 9:00 a.m., Central Clock
Time, on the Plant Operational Date of the Lincoln Parish Plant and ending at
9:00 a.m., Central Clock Time on the same Day and calendar month of the
following calendar year and thereafter for succeeding periods of twelve
(12) consecutive Months each.

1.7. “Applicable Firm Rate” means, for any Day, (i) as to the applicable MDQ for
such Day up to 345,000 MMBtu, forty-three and one-half cents ($0.435) per MMBtu,
and (ii) as to the portion of such applicable MDQ above 345,000 MMBtu, if any,
thirty-five cents ($0.35) per MMBtu.

1.8. “Applicable Interruptible Rate” means, for Customer’s Interruptible
Receipts on any Day (i) through and including June 30, 2016, forty-seven cents
($0.47) per MMBtu, and (ii) on or after July 1, 2016, thirty-five cents ($0.35)
per MMBtu.

1.9. “Area of Mutual Interest” or “AMI” shall mean all of the land described in
Exhibit A attached hereto.

1.10. “Assumed Obligations” shall have the meaning given to such term in Section
17.2.

1.11. “Btu” shall mean one British thermal unit, the amount of heat required to
raise the temperature of one pound of water one degree Fahrenheit at standard
reference conditions.

1.12. “Business Day” shall mean any day (other than a Saturday or Sunday) on
which commercial banking institutions in Houston, Texas are generally open for
business.

1.13. “Central Clock Time” shall mean the current time in the Central Time Zone
taking into consideration the seasonal changes back and forth between Daylight
Savings and Standard time.

1.14. “Control” (including its derivatives and similar terms) means possession,
directly or indirectly, of the power to direct or cause the direction of the
management and policies of any such relevant Person by ownership of voting
interest, by contract or otherwise.

 

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1.15. “Credit Interruption Days” shall mean, with respect to any Quarterly
Period in the MQ Period, the Interruption Days, if any, occurring in such
Quarterly Period in excess of one (1) Interruption Day.

1.16. “Customer” shall have the meaning given to such term in the preamble of
this Agreement.

1.17. “Customer Dedicated Leases” shall mean all oil and gas leases owned by
Customer or any of its Subsidiaries covering lands located in the Dedicated
Area, including, without limitation, (a) any oil and gas leases owned by
Customer and/or any of its Subsidiaries covering any lands in the Dedicated Area
as of March 17, 2014, as set forth in Exhibit C hereto, and (b) any oil and gas
leases acquired by Customer or any of its Subsidiaries within the Dedicated Area
after March 17, 2014.

1.18. “Customer Gas” shall have the meaning given to such term in Section 2.1.

1.19. “Customer Plant Products” shall mean the aggregate volume of Plant
Products recovered at the Plants and allocated by Processor to Customer Gas.

1.20. “Customer Residue Gas” shall mean Gas having a Thermal Content equal to
(i) the Thermal Content of Customer Gas measured at the Point of Delivery minus
(ii) the Thermal Content of Inert Constituents removed from such Gas, Shrinkage
attributable to Customer Plant Products extracted from such Gas, the Thermal
Content of Plant Fuel allocated to such Gas and the Thermal Content of Lost and
Unaccounted for Gas allocated to such Customer Gas.

1.21. “Customer’s Inert Constituents” shall have the meaning given to such term
in Section 13.3.

1.22. “Daily” or “Day” shall mean a period of hours, commencing at 9:00 a.m.,
Central Clock Time, on a calendar day and ending at 9:00 a.m., Central Clock
Time, on the next succeeding calendar day.

1.23. “Dedicated Area” shall mean all lands within the AMI.

1.24. “Dedication” shall have the meaning given to such term in Section 2.1.

1.25. “Default Interest Rate” shall mean the U.S. Prime Rate (as published in
the “Money Rates” table of The Wall Street Journal, Eastern Edition) plus an
additional two points (2.00%) applicable on the first Business Day prior to the
due date of payment and thereafter on the first Business Day of each succeeding
Month (or, if such rate is contrary to any applicable usury laws, the maximum
rate permitted by such applicable laws).

1.26. “Deficiency Payment” shall have the meaning set forth in Section 9.4.

1.27. “Effective Date” shall have the meaning given to such term in the preamble
of this Agreement.

1.28. “EGM” shall have the meaning given to such term in Section 6.2.

 

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1.29. “Ethane Recovery Option” shall have the meaning given to such term in
Section 3.1(c).

1.30. “Ethane Rejection Option” shall have the meaning given to such term in
Section 3.1(c).

1.31. “Existing Gas Processing Agreement” shall have the meaning given to such
term in the recitals of this Agreement.

1.32. “Firm Receipts” shall mean receipts of Gas by Processor at the Plants,
from Customer or any other Person, for which Processor is contractually entitled
to interrupt its performance only to the extent of Plant Interruptions,
including Customer Gas delivered hereunder up to the MDQ.

1.33. “Force Majeure” shall have the meaning given to such term in Section 14.2.

1.34. “Gallon” shall mean one (1) U.S. gallon.

1.35. “Gas” shall mean natural gas and casinghead gas as produced from wells
classified as gas wells or oil wells.

1.36. “Gathering System” shall mean the Gas gathering facilities owned or
operated by Processor or its Affiliates that are used to gather Customer Gas and
deliver it to one or more Plants.

1.37. “Governmental Authority” shall mean any federal, state, local, municipal,
tribal or other government; any governmental, regulatory or administrative
agency, commission, body or other authority entitled to any administrative,
executive, judicial, legislative, regulatory or taxing authority or power; and
any court or governmental tribunal, including any tribal authority having or
asserting jurisdiction.

1.38. “Greenhouse Gas Surcharge” shall have the meaning given to such term in
Section 9.5(a).

1.39. “Greenhouse Gases” shall mean certain components which may from time to
time comprise part of Customer Gas consisting of carbon dioxide, methane,
nitrous oxide, and ozone.

1.40. “Gross Heating Value” shall mean the number of Btus produced by the
complete combustion in air, at constant pressure of one (1) cubic foot of Gas,
at a base temperature of sixty degrees Fahrenheit (60°F) and at a reference
pressure base equal to 14.65 psia, with air of the temperature and pressure of
the Gas, after the products of combustion are cooled to the initial temperature
of the Gas, and after the air and water formed by the combustion is condensed to
the liquid state. The gross heating value of the Gas shall be corrected for
water vapor under testing conditions to the actual water vapor content of the
Gas being delivered; provided, however, if the actual water vapor content is
seven (7) pounds per 1,000,000 standard cubic feet of Gas or less, the Gas shall
be deemed “dry” and no water vapor correction shall be made.

 

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1.41. “Hazardous Substances” shall have the meaning set forth Section 5.3.

1.42. “Ideal Gas Laws” shall mean the thermodynamic laws applying to perfect
gases.

1.43. “Inert Constituents” shall mean constituents other than Plant Products
contained in Gas, including carbon dioxide, hydrogen sulfide, water vapor,
ozone, nitrous oxide and mercury.

1.44. “Interests” shall mean any right, title, or interest in lands, wells, or
leases and the right to produce oil and/or Gas therefrom whether arising from
fee ownership, working interest ownership, mineral ownership, leasehold
ownership, farm-out or arising from any pooling, unitization or communitization
of any of the foregoing rights.

1.45. “Interruptible Receipts” shall mean receipts of Gas by Processor at the
Plants from Customer or any other Person for which Processor is contractually
entitled to interrupt its performance, in its sole and unfettered discretion,
for any reason or no reason, including Customer Gas delivered hereunder in
excess of the MDQ.

1.46. “Interruption Day” shall mean any Day in the MQ Period that the quantity
of Customer Gas accepted by Processor at the Point of Delivery is less than the
lesser of (i) the MDQ in effect for such Day or (ii) ninety percent (90%) of the
quantity of Customer Gas nominated hereunder that meets the Specifications and
is available for delivery on such Day, due to a Plant Interruption, curtailment,
or Processor’s failure to perform hereunder.

1.47. “Lincoln Parish Plant” shall mean that certain initial Gas processing
plant to be constructed by Processor or its Affiliate and located at 400 Elliott
Road, Arcadia, Louisiana.

1.48. “Losses” shall mean any actual loss, cost, expense, liability, damage,
demand, cause of action, suit, sanction, claim, judgment, lien, fine or penalty,
including attorney’s fees, which are incurred by the applicable indemnified
Persons on account of injuries (including death) to any person or damage to or
destruction of any property, sustained or alleged to have been sustained in
connection with or arising out of the matters for which the indemnifying party
has indemnified the applicable indemnified Persons.

1.49. “Lost and Unaccounted for Gas” shall mean Gas that is flared, vented
and/or lost and unaccounted for in the operation of the Plants.

1.50. “Maintenance” shall have the meaning given to such term in Section 3.6.

1.51. “Maximum Daily Quantity” or “MDQ” shall mean:

 

  1. with respect to each Day prior to the Plant Operational Date of the Mt.
Olive Plant, 115,000 MMBtu per Day;

 

  2. with respect to each Day in the period during the Primary Term beginning
upon the Plant Operational Date of the Mt. Olive Plant through and including
June 30, 2016, 345,000 MMBtu per Day;

 

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  3. subject to the occurrence of the Plant Operational Date of the Mt. Olive
Plant in accordance with Section 3.1(b), with respect to each Day beginning on
July 1, 2016 through and including June 30, 2026, (i) 460,000 MMBtu per Day,
plus (ii) the quantity of any Incremental MDQ Volumes (in MMBtu) determined
pursuant to Section 3.7(b);

 

  4. subject to the occurrence of the Plant Operational Date of the Mt. Olive
Plant in accordance with Section 3.1(b), with respect to each Day beginning on
July 1, 2026, through and including the date that is the fifteenth
(15th) anniversary of the Plant Operational Date of the Lincoln Parish Plant,
345,000 MMBtu per Day;

 

  5. with respect to each Day beginning on the Day immediately following the
date that is the fifteenth (15th) anniversary of the Plant Operational Date of
the Lincoln Parish Plant and ending on the last Day of the Primary Term, 115,000
MMBtu per Day; and

 

  6. with respect to each Day in any Additional Term, the quantity as determined
in Section 3.7(c).

1.52. “Measurement Dispute” shall have the meaning given to such term in
Section 6.11.

1.53. “Measurement Expert” shall have the meaning given to such term in
Section 6.11.

1.54. “MMBtu” shall mean one million (1,000,000) Btus.

1.55. “MMcf” shall mean one million (1,000,000) cubic feet at a pressure of
14.65 psia and a temperature of sixty degrees Fahrenheit (60°F).

1.56. “Month” shall mean a period of time beginning at 9:00 a.m., Central Clock
Time on the first Day of the calendar month and ending at 9:00 a.m., Central
Clock Time on the first Day of the next succeeding calendar month.

1.57. “Monthly MDQ” shall mean, for each Month, the aggregate of the MDQ for
each Day during such Month.

1.58. “MQ Period” shall have the meaning given to such term in Section 9.3.

1.59. “Mt. Olive Plant” shall mean that second Gas processing plant to be
constructed by Processor or its Affiliate and located at 155 LP&L Road-PVT,
Ruston, Louisiana.

1.60. “NGL Delivery Point” shall mean, with respect to each Plant, the outlet
flange of such Plant through which Processor delivers Customer Plant Products to
Customer or its designee for Customer’s account.

1.61. “NGL Election” shall have the meaning given to such term in
Section 3.1(c).

 

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1.62. “NGL Pipeline” shall mean the Plant Products pipeline owned or operated by
Processor or its Affiliate(s) that is used to transport Customer Plant Products
from the NGL Delivery Point for further delivery to Customer or Customer’s
designee.

1.63. “Non-Conforming Gas” shall have the meaning given to such term in
Section 5.2(a).

1.64. “Parties” shall have the meaning given to such term in the preamble of
this Agreement.

1.65. “Party” shall have the meaning given to such term in the preamble of this
Agreement.

1.66. “PennTex JV” shall have the meaning given to such term in the recitals of
this Agreement.

1.67. “Performance Assurance” shall have the meaning given to such term in
Section 12.5.

1.68. “Permanent Affected Volume” shall have the meaning set forth in
Section 3.10.

1.69. “Person” shall mean any individual or any corporation, company,
partnership, limited partnership, limited liability company, trust, estate,
Governmental Authority or other entity.

1.70. “Plants” shall mean the Lincoln Parish Plant, the Mt. Olive Plant and any
other gas processing plant owned by Processor and located within the AMI where
Customer Gas is processed hereunder, and “Plant” shall mean any of such Plants.

1.71. “Plant Fuel” shall mean, with respect to a Plant, Gas used to operate such
Plant.

1.72. “Plant Interruptions” shall have the meaning set forth in Section 3.8.

1.73. “Plant Interruption Credit Quantity” shall mean, with respect to any
Interruption Day, the difference between (i) the lesser of (a) the MDQ and
(b) the quantity of Customer Gas nominated hereunder and that meets the
Specifications and is (or would be) available for delivery at the Point of
Delivery on such Credit Interruption Day, and (ii) the quantity of Customer Gas
actually accepted by Processor hereunder at the Point of Delivery on such
Interruption Day. With respect to the end of any Quarterly Period, the Plant
Interruption Credit Quantity shall be the sum of the Plant Interruption Credit
Quantities for all Credit Interruption Days as of the end of such Quarterly
Period.

1.74. “Plant Operational Date” shall mean, with respect to a specified Plant,
the Day on which Processor notifies Customer that such Plant is operational and
ready to accept Customer Gas for processing hereunder; provided, that if such
Day is not the first Day of a Month, the Plant Operational Date shall be the
first Day of the following Month.

 

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1.75. “Plant Products” shall mean the mixture of liquefiable hydrocarbon
components consisting of ethane, propane, normal butane, iso-butane and natural
gasoline that Processor recovers and removes from Gas.

1.76. “Point of Delivery” shall mean:

 

  1. the custody transfer meter at a Plant where Customer Gas is measured and
delivered to a Plant;

 

  2. the meter or measurement facilities (if any) at which condensate and/or
drip liquids that are recovered from the Gathering System, vaporized, and
injected into a Plant for further processing are measured;

 

  3. the meter or measurement facilities (if any) at which Gas recovered by
vapor recovery units as part of the condensate stabilization process (if any)
and injected into a Plant for further processing is measured; and/or

 

  4. any other custody transfer meters or measurement facilities at which Gas or
condensate is delivered into a Plant for processing and is not measured by any
of the meters or measurement facilities described in clauses (a) through
(c) above.

1.77. “Point of Measurement” and “Points of Measurement” shall mean a “Receipt
Point”, or collectively, all “Receipt Points” as such terms are defined in the
Regency Gathering Agreement.

1.78. “Point of Redelivery” shall mean the custody transfer meter at or near the
tailgate of each Plant through which Processor redelivers Customer Residue Gas
to Customer or its designees for Customer’s account for further transportation
on downstream pipelines.

1.79. “PPI” shall mean the “Producer Price Index Industry Data for Oil and Gas
Field Machinery and Equipment” as determined and published by the Bureau of
Labor Statistics of the United States Department of Labor or its successor
index.

1.80. “PPI Escalator” shall have the meaning given to such term in Section 9.2.

1.81. “Primary Term” shall have the meaning given to such term in Section 11.1.

1.82. “Prior Dedications” shall mean, (a) as to the Interests owned by Customer
and/or any of its Subsidiaries in the Dedicated Area as of March 17, 2014, all
dedications or commitments for processing services burdening such Interests as
of March 17, 2014 as set forth in Exhibit C hereto and (b) as to any Interests
acquired by Customer or any of its Subsidiaries within the Dedicated Area after
March 17, 2014, all dedications or commitments for processing services burdening
such Interests which are existing as of the time of any such acquisition.

1.83. “Processing Fee” shall have the meaning given to such term in Section 9.1.

 

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1.84. “Processor” shall have the meaning given to such term in the preamble of
this Agreement.

1.85. “Quarterly Deficiency Quantity” shall have the meaning given to such term
in Section 9.4.

1.86. “Quarterly Gas Commitment” shall mean with respect to each Quarterly
Period during the MQ Period, the quantity of Gas (in MMBtu) equal to the
cumulative sum of the Maximum Daily Quantities for all Days during such
Quarterly Period.

1.87. “Quarterly Period” shall mean a period of time beginning at 9:00 a.m.,
Central Clock Time on the first day of a calendar quarter (or, if such Quarterly
Period is the initial Quarterly Period of the MQ Period, the first day of the MQ
Period), and ending at 9:00 a.m., Central Clock Time on the first day of the
next succeeding calendar quarter (or, if less, the last day of the MQ Period).

1.88. “Regency” means Regency Energy Partners LP, as gatherer under the Regency
Gathering Agreement, and its successors and assigns.

1.89. “Regency Gathering Agreement” means that certain Gas Gathering Agreement
dated November 1, 2012 between Regency and Customer, as amended and restated by
that certain Amended and Restated Gas Gathering Agreement dated April 1, 2013,
as may be further amended, supplemented or modified from time to time.

1.90. “Residue Gas” shall mean that gaseous portion of Gas delivered at the
Point of Redelivery.

1.91. “Residue Gas Pipeline” shall mean the Gas pipeline owned or operated by
Processor or its Affiliate(s) that is used to transport Customer Residue Gas
from the Point of Redelivery for further delivery to Customer or Customer’s
designee.

1.92. “SEC” shall have the meaning given to such term in Section 12.5(b).

1.93. “Senior Management Meeting” shall have the meaning given to such term in
Section 3.10.

1.94. “Shrinkage” shall mean that decrease in Thermal Content of Gas that
results from the conversion in a Plant of liquefiable components of such Gas
into Plant Products, but exclusive of Plant Fuel allocated to such Gas, Inert
Constituents removed from such Gas and Lost and Unaccounted for Gas allocated to
such Gas.

1.95. “Specifications” shall have the meaning given to such term in Section 5.1.

1.96. “Subsidiary” shall mean, with respect to any Person, at any date, any
other Person of which equity interests representing more than 50% of the equity
or more than 50% of the ordinary voting power or, in the case of a partnership,
any general partnership interests are, as of such date, owned, Controlled or
held by that Person or one or more of the other Subsidiaries of that Person or a
combination thereof.

 

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1.97. “Tail Period” shall mean the period beginning upon the end of the
fifteenth (15th) Annual Period following the Plant Operational Date of the
Lincoln Parish Plant and ending at 9:00 a.m., Central Clock Time, on the date
that is the fifteenth (15th) anniversary of the Plant Operational Date of the
Mt. Olive Plant.

1.98. “Taxes” shall mean any or all current or future taxes, fees, levies,
charges, assessments and/or other impositions levied, charged, imposed, assessed
or collected by any governmental authority having jurisdiction.

1.99. “Temporary Affected Volume” shall have the meaning given to such term in
Section 3.9.

1.100. “Thermal Content” shall mean (i) with respect to Gas, the product of a
volume of Gas and the Gross Heating Value of such Gas, adjusted to a same
pressure base of 14.65 psia, as expressed in MMBtus, and (ii) with respect to a
given Plant Product, the product of a volume of such Plant Product and the Gross
Heating Value of such Plant Product.

1.101. “Third Party Gas” shall have the meaning given to such term in
Section 3.7(a).

1.102. “Third Party Operator” shall mean any Person, other than Customer,
Processor and any of their respective Affiliates, that delivers Customer Gas to
the Gathering System, receives Customer Residue Gas from the Residue Pipeline or
receives Customer Plant Products from the NGL Pipeline.

1.103. “Third Party Processing Fees” shall mean, with respect to any period of
time, the processing fees received by Processor with respect to processing Third
Party Gas in a Plant during such period of time.

1.104. “Total Gas Commitment” shall mean, with respect to the MQ Period, the
quantity of Gas (in MMBtu) equal to the cumulative sum of the Maximum Daily
Quantities for all Days during such MQ Period.

1.105. “WildHorse” shall have the meaning given to such term in the recitals of
this Agreement.

ARTICLE II.

CUSTOMER RIGHTS AND OBLIGATIONS

2.1 Dedication. Subject to the terms of the AMI Agreement, and the other terms
and conditions hereof, Customer hereby dedicates for processing under this
Agreement and, commencing at 9:00 a.m., Central Clock Time, on the Plant
Operational Date of the Lincoln Parish Plant and continuing until the end of the
term as provided in Section 11.1 hereof, shall deliver, or cause to be
delivered, hereunder to the Point of Delivery the following (the “Dedication”
and, the Gas that is the subject of the Dedication, being herein referred to as
the “Customer Gas”):

(a) all Gas produced and saved from wells now or hereafter located on lands
covered by the Customer Dedicated Leases or on lands pooled or unitized
therewith to

 

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the extent such Gas is attributable to Interests now owned by Customer and/or
any of its Subsidiaries or hereafter acquired by Customer and/or any of its
Subsidiaries, and their respective successors and assigns, and not delivered or
used in lease operations as permitted pursuant to Section 2.8 or otherwise
excluded as provided herein; and

(b) with respect to such wells for which Customer and/or any of its Subsidiaries
is the operator, Gas produced from such wells that is attributable to Interests
in such wells owned by other working interest owners and royalty owners which is
not (i) taken “in-kind” by such working interest owners and royalty owners (and
which Customer has the contractual right to deliver under this Agreement) or
(ii) delivered or used in lease operations as permitted pursuant to Section 2.8,
and for which Customer and/or any of its Subsidiaries has the right and/or
obligation to deliver such Gas; provided, however, that with respect to Customer
Gas that is subject to a Prior Dedication, such Customer Gas may be delivered in
accordance with such Prior Dedication as provided in Section 2.2 hereof.

Notwithstanding the foregoing, the Parties acknowledge and agree that prior to
the Plant Operational Date of the Lincoln Parish Plant, Customer may deliver
Customer Gas to other gathering systems, processors and/or pipelines.

2.2 Prior Dedications. Other than the Prior Dedications and the Dedication
hereunder, Customer represents and warrants to Processor that, as of the
Effective Date, none of the Interests owned by Customer and/or any of its
Subsidiaries in the Dedicated Area are subject to any other dedication for Gas
processing services. Upon termination of a Prior Dedication, the Gas subject to
such Prior Dedication shall, to the extent not already subject to the
Dedication, automatically be subject to the Dedication for all purposes under
this Agreement without any further actions by the Parties.

2.3 Covenant Running with the Land.

(a) So long as this Agreement is in effect, this Agreement shall (i) be a
covenant running with the Interests now owned by Customer and/or any of its
Subsidiaries or hereafter acquired by Customer and/or any of its Subsidiaries
and their respective successors and assigns in the Dedicated Area and (ii) be
binding on and enforceable by Processor and its successors and assigns against
Customer, its Subsidiaries and their respective successors and assigns.

(b) Prior to assigning any of its Interests, Customer shall notify the potential
acquiring party of the existence and terms of the Dedication hereunder.

2.4 Memorandum of Agreement. Within thirty (30) days of the execution of this
Agreement, the Parties shall execute, acknowledge, deliver, and record a “short
form” memorandum of this Agreement, listing the townships within the Dedicated
Area, in the form of Exhibit D attached hereto which shall be placed of record
in the parishes comprising the Dedicated Area. Customer has delivered to
Processor a schedule showing, as of March 17, 2014, all Interests owned by
Customer and/or any of its Subsidiaries that cover lands located within the
Dedicated Area, which schedule contains, for each such Interest, the name of the
instrument

 

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creating the Interest, the date of such instrument, the parties to such
instrument, the legal description of the lands covered by such instrument and
the recording information for such instrument.

2.5 Customer Warranty. Customer represents and warrants to Processor that
Customer has the right to process the Customer Gas delivered hereunder and to
recover, remove and sell all Plant Products and Inert Constituents as are
contained in such Customer Gas.

2.6 No Upstream Processing. Customer agrees that Customer Gas shall be delivered
at the Points of Measurement to Regency pursuant to the Regency Gathering
Agreement without the prior extraction or removal therefrom of any liquefiable
hydrocarbons, except as provided in the Regency Gathering Agreement.

2.7 Customer Gas in Excess of Maximum Daily Quantity. To the extent that
Customer delivers, and Processor accepts, Customer Gas in excess of the MDQ,
such excess Customer Gas shall be treated as Interruptible Receipts for purposes
of Section 3.5. Notwithstanding the foregoing, the Parties agree that this
Agreement and the rates and other terms contained herein shall govern the
provision by Processor of processing services for the first 690,000 MMBtu per
Day of Customer Gas produced by Customer within the AMI and not subject to a
Prior Dedication.

2.8 Gas for Lease Operations. Customer reserves the right to withhold from
delivery any Customer Gas required for Customer’s oil and gas producing
operations with respect to wells within the AMI or lands pooled or unitized
therewith.

ARTICLE III.

DELIVERY AND PROCESSING OF GAS

3.1 Plant Operational Dates; Initial Operations; Design Basis.

(a) Lincoln Parish Plant Operational Date. Processor shall design, engineer,
procure and construct the Lincoln Parish Plant in a good and workmanlike manner
and in accordance with good industry practices, and shall use its commercially
reasonable efforts to complete the Lincoln Parish Plant, and commence service
hereunder, on or before May 15, 2015. The Lincoln Parish Plant, when complete,
will have a nominal design capacity of 200 MMcf per Day. Processor shall provide
at least thirty (30) Days’ prior written notice to Customer of the expected
Plant Operational Date of the Lincoln Parish Plant. If the Plant Operational
Date of the Lincoln Parish Plant has not occurred by November 1, 2015, as such
date shall be extended by the occurrence of Force Majeure events affecting
Processor not to exceed one-hundred-twenty (120) Days in the aggregate, then
Customer may terminate this Agreement upon written notice to Processor;
provided, however, (i) in the event that Customer or any Affiliate of Customer,
acting in its capacity as a member of the board of managers of PennTex JV, takes
any action, directly or indirectly, to materially delay or hinder Processor’s
performance of obligations hereunder, then Customer’s right of termination
pursuant to this Section 3.1(a) shall not apply, (ii) if the Plant Operational
Date of the Lincoln Parish Plant occurs after such date, but before Customer
notifies Processor of such termination, Customer’s

 

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right of termination under this Section 3.1(a) shall expire and be of no further
force and effect, and (iii) if any delay of the Plant Operational Date of the
Lincoln Parish Plant is caused by Customer or any Third Party Operator of
upstream or downstream pipelines or facilities sending or receiving Customer
Gas, then Customer’s right of termination pursuant to this Section 3.1(a) shall
not apply.

(b) Mt. Olive Plant Operational Date. Processor shall design, engineer, procure
and construct the Mt. Olive Plant in a good and workmanlike manner and in
accordance with good industry practices, and shall use its commercially
reasonable efforts to complete the Mt. Olive Plant, and commence service
hereunder, on or before October 1, 2015. The Mt. Olive Plant, when complete,
will have a nominal design capacity of 200 MMcf per Day. Processor shall provide
at least forty-five (45) Days’ prior written notice to Customer of the expected
Plant Operational Date of the Mt. Olive Plant. If the Plant Operational Date of
the Mt. Olive Plant has not occurred by July 1, 2016, as such date shall be
extended by the occurrence of Force Majeure events affecting Processor not to
exceed one-hundred-twenty (120) Days in the aggregate, then the MDQ with respect
to each Day in the Primary Term shall be 115,000 MMBtu per Day.

(c) Initial Plant Operation. The Parties agree each Plant shall startup and
initially operate in ethane rejection mode. Processor will not be responsible
for delays in a Plant Operational Date due to the actions or inactions of
Customer or a Third Party Operator.

(d) Processing Election. By 5:00 p.m. on the fifth (5th) Business Day prior to
the first Day of each Month commencing with the Month following the date on
which Processor notifies Customer that Processor is ready to operate the Lincoln
Parish Plant in full recovery mode, Customer shall notify Processor in writing
of Customer’s election (the “NGL Election”) to have the Customer Plant Products
for such Month determined using either (i) maximum recovery of Plant Products
(“Ethane Recovery Option”) or (ii) minimum recovery of Plant Products (“Ethane
Rejection Option”). Should Customer fail to make a timely NGL Election, Customer
shall be deemed to have elected to continue the option that is in place for the
immediately preceding Month. Notwithstanding Customer’s NGL Election for a given
Month, Processor shall not be required to operate its facilities in any
particular recovery mode during such Month; provided, however, Customer Plant
Products for such Month shall be determined in accordance with Customer’s NGL
Election for such Month.

(e) Plant Design Basis. Each Plant’s operating performance will be dictated by
the quality and delivery pressure of Customer Gas. Processor has designed and
constructed, and will operate, each Plant based on (i) the gas quality
specifications provided by Customer in Exhibit E, (ii) Customer Gas being
delivered to a Plant’s Point of Delivery at uniform rates of flow and a pressure
sufficient to cause the delivery pressure at such Plant’s Point of Delivery to
be not less than 500 Psig, but not greater than the maximum allowable operating
pressure of such Plant at such Point of Delivery, and (iii) delivery pressure at
the Point of Redelivery not being less than 1,100 psig during Ethane Recovery
Option and 1,085 psig during Ethane Rejection Option.

 

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3.2 Delivery of Customer Gas. Subject to the provisions of this Agreement, any
agreement applicable to the Gathering System, and the operational constraints of
the Gathering System, Customer shall deliver, or cause to be delivered, Customer
Gas to Processor at the Point of Delivery. Subject to the provisions of this
Agreement, commencing, in the case of each Plant, upon the Plant Operational
Date of such Plant, Processor shall accept delivery of Customer Gas at the
applicable Point of Delivery hereunder (Customer recognizes Customer Gas in
Processor’s custody may be commingled with Third Party Gas and that no
segregated services are provided hereunder).

3.3 Processor Commitment. Subject to the provisions of this Agreement,
commencing on the Plant Operational Date of the Lincoln Parish Plant, Processor
hereby agrees to (i) receive and accept hereunder, as Firm Receipts, all volumes
of Customer Gas up to the Maximum Daily Quantity, and as Interruptible Receipts,
all volumes of Customer Gas in excess of the Maximum Daily Quantity,
(ii) process hereunder, as Firm Receipts, all volumes of Customer Gas up to the
Maximum Daily Quantity, and as Interruptible Receipts, all volumes of Customer
Gas in excess of the Maximum Daily Quantity, (iii) redeliver Customer Residue
Gas to Customer or Customer’s designee at the Point of Redelivery, (iv) deliver
Customer Plant Products pursuant to Section 3.13 of this Agreement, and (v) at
Processor’s option, dispose of Inert Constituents removed from Customer Gas.
Notwithstanding any provision herein to the contrary, Processor shall not have
any obligation to receive or accept any volumes of Customer Gas if Customer
cannot deliver to Processor a minimum of 70,000 MMBtu of Customer Gas per Day.
Further, should Processor elect not to receive or accept Customer Gas pursuant
to the preceding sentence, such Customer Gas shall not be included in the
computation of Customer Gas delivered to a Point of Delivery for purposes of
determining the Quarterly Deficiency Quantity in Section 9.4.

3.4 Delivery of Customer’s Residue Gas. Customer, or Customer’s designee, shall
accept delivery of Customer Residue Gas from Processor at the Point of
Redelivery. Subject to the provisions of this Agreement (including, without
limitation, Section 3.1(e) hereof), Processor shall use commercially reasonable
efforts to deliver Customer Residue Gas into the facilities of interconnecting
pipelines at the Point of Redelivery at a pressure sufficient to overcome the
operating pressure existing in such receiving facilities from time to time, but
Processor shall not be obligated to install secondary residue compression in the
Plants to make deliveries of Customer Residue Gas.

3.5 Receipt and Processing of Gas.

(a) Firm Receipts. Subject to the terms and conditions of this Agreement, from
and after the Plant Operational Date of the Lincoln Parish Plant, Processor
shall receive and process, as Firm Receipts, all Customer Gas tendered by
Customer each Day in accordance with this Agreement up to the MDQ.

(b) Interruptible Receipts. Subject to the terms and conditions of this
Agreement, from and after the Plant Operational Date of the Lincoln Parish
Plant, Processor shall receive and process, as Interruptible Receipts, all
Customer Gas tendered by Customer each Day in accordance with this Agreement in
excess of the MDQ; provided, that the sum of the MDQ plus Interruptible Receipts
of Customer Gas for any Day shall not exceed the total operating capacity of the
Plants for such Day.

 

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3.6 Maintenance. Processor shall be entitled, without liability, to interrupt
its performance hereunder to perform necessary or desirable inspections,
maintenance, testing, alterations, modifications, connections, repairs or
replacements to its facilities as Processor deems necessary (“Maintenance”),
with reasonable, advance notice provided to Customer, except in cases of
emergency where such notice is impracticable or in cases where the provision of
services to Customer pursuant to this Agreement will not be affected; provided,
that Processor will reasonably cooperate with Customer to minimize adverse
effects due to such Maintenance work.

3.7 Customer’s MDQ.

(a) Curtailment. Subject to Plant Interruptions, Processor shall use
commercially reasonable efforts to maintain an aggregate processing capacity
available to Customer at the Plants of not less than the MDQ; provided, that
nothing herein shall restrict the right of Processor to receive, provide
services for and redeliver Gas from other Persons (“Third Party Gas”); provided,
further, that for any period during which the quantity of Gas available for
delivery to the Plants exceeds the aggregate physical processing capacity of the
Plants because of Force Majeure, Maintenance, operational considerations or the
recovery mode in which such Plants are operating, Processor shall have the right
to interrupt or curtail receipts of Gas in accordance with the following:

(i) Interruptible Receipts. First, Processor shall curtail all Interruptible
Receipts prior to curtailing any Firm Receipts. If Processor curtails some, but
not all, Interruptible Receipts on any Day hereunder, Processor shall allocate
the aggregate processing capacity of the Plants available to each Person
receiving service on an Interruptible Receipts basis on a pro rata basis based
upon Customer’s and each other Person’s actual aggregate volume of Gas delivered
to the Points of Delivery on the Day immediately preceding the date on which
Processor makes such allocation. Such allocation shall remain in effect for the
period of the curtailment.

(ii) Firm Receipts. Second, if additional curtailments are required beyond
clause (i) above, Processor shall curtail Firm Receipts. If Processor curtails
some, but not all, Firm Receipts on any Day, Processor shall allocate the
aggregate processing capacity of the Plants available to each Person receiving
service on a Firm Receipts basis on a pro rata basis based upon the ratio of
such Person’s Firm Receipts capacity to the aggregate Firm Receipts capacity of
all such Person’s. For the purposes of this Agreement, Customer’s Firm Receipts
capacity at any time of determination shall be the MDQ at such time.

(b) Incremental MDQ Volumes. Subject to the occurrence of the Plant Operational
Date of the Mt. Olive Plant, during the period from July 1, 2016 through
June 30, 2021, Customer may, upon not less than nine (9) months written notice
in each instance, increase the MDQ in increments of 57,500 MMBtu per Day (the
“Incremental MDQ Volumes”); provided, however, that the sum of all Incremental
MDQ Volumes during such period shall not exceed 230,000 MMBtu per Day.

 

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(c) Additional Term MDQ. Prior to the commencement of any Additional Term,
Customer shall provide written notice to Processor of the MDQ that Customer
desires under this Agreement for each Annual Period in such Additional Term, not
to exceed the MDQ for the most recent Annual Period in the Primary Term or the
preceding Additional Term, as applicable; provided, however, the Parties
acknowledge and agree that the Quarterly Gas Commitment and Deficiency Payment
shall not apply at any time after expiration of the Primary Term.

3.8 Plant Interruptions. The Parties recognize that the processing services
provided by Processor hereunder may be interrupted from time to time as provided
herein. Accordingly, it is agreed and understood by the Parties that the receipt
and processing of Customer Gas hereunder by Processor shall be subject from time
to time to partial or total interruption by Processor in the following
circumstances ((i) and (iv) to be determined by Processor) (“Plant
Interruptions”): (i) to provide for the safe operation of a Plant;
(ii) conditions of Force Majeure affecting Processor; (iii) the inability or
failure of (a) the Gathering System to receive or deliver Customer Gas, (b) the
Residue Gas Pipeline to receive or deliver Customer Residue Gas or (c) the NGL
Pipeline to receive or deliver Customer Plant Products, in each case to the
extent that such inability or failure is solely caused by the action or inaction
of Processor or its Affiliates; and (iv) Maintenance. Except as provided in this
Section 3.8 and in Section 9.4, Processor shall have no liability of any kind to
Customer for any Plant Interruptions.

3.9 Temporary Release. Notwithstanding anything in this Agreement to the
contrary, if Processor is unable, whether due to Plant Interruptions or
otherwise (except for circumstances caused by the gross negligence or willful
misconduct of Customer), to provide processing services in one or more of the
Plants with respect to all or any volume of the Customer Gas that meets the
Specifications, then that volume of such Customer Gas for which Processor is
unable to provide processing services (the “Temporary Affected Volume”) will be
temporarily released from the Dedication and the Temporary Affected Volume may
be delivered by Customer to other gathering systems, processors or pipelines
until Processor provides to Customer written notice that Processor will be able
to resume receiving the Temporary Affected Volume hereunder. Customer shall
resume delivery of the Temporary Affected Volume under this Agreement as soon as
reasonably practicable after receiving such notice from Processor. As soon as
practicable after a temporary release, the Parties shall attempt to reach
agreement on a solution to the cause of such service interruption.

3.10 Permanent Release. If, after the Plant Operational Date of the Lincoln
Parish Plant, Processor is unable to receive Customer Gas hereunder for
processing in the Plants for more than one-hundred fifty (150) Days in any
twelve (12) consecutive Month period with respect to Customer Gas that meets the
Specifications up to the MDQ for any reason other than (i) circumstances caused
by the gross negligence or willful misconduct of Customer, (ii) circumstances
caused by the inability of Customer to deliver to Processor a minimum of 70,000
MMBtu of Gas per Day, or (iii) the inability or failure of (A) Customer or Third
Party Operators to deliver Customer Gas into the Gathering System, or
(B) Customer or Third Party Operators to receive Customer Residue Gas or
Customer Plant Products from the Residue Gas Pipeline or the

 

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NGL Pipeline, as applicable, in each case with respect to subclauses (A) and
(B) to the extent that such inability or failure is not solely caused by the
action or inaction of Processor or its Affiliates, Customer will provide written
notice to Processor along with Customer’s determination of the volume of such
Customer Gas for which Processor is unable to provide processing services
(“Permanent Affected Volume”), which volume will equal the Daily average of such
Customer Gas for which Processor was unable to provide processing services
during such twelve (12) Month period. If the Parties have not reached agreement
on a solution to such service interruption prior to the end of fourteen
(14) Days after Customer notifies Processor, then no later than five
(5) Business Days after the end of such fourteen (14) Day period, the senior
management of the Parties will meet in person (a “Senior Management Meeting”)
and negotiate in good faith in an attempt to reach agreement on an acceptable
solution to such service interruption. If the Parties are unable to reach
agreement on an acceptable solution to such service interruption during the
Senior Management Meeting, then Processor shall, at Customer’s option,
permanently release all or part of the Permanent Affected Volume from the
Dedication by delivering written notice thereof to Customer. The Parties
acknowledge and agree that the one-hundred fifty (150) Days referenced in this
Section 3.10 shall not include periods of time during which Processor is unable
to provide processing services due to (i) any act or omission of any
Governmental Authority, (ii) any inability, despite the exercise of commercially
reasonable efforts, to acquire replacement equipment used in Plant operations,
or (iii) during the pendency of any application for any license, permit or other
approval required by any Governmental Authority, in each case, that prevents
Processor from providing processing services hereunder, other than due to such
occurrences caused by the negligence of Processor, provided that the provisions
of Section 3.9 would continue to apply during such period.

3.11 Release under the AMI Agreement. If Customer Gas is released from the
Dedication pursuant to the AMI Agreement, such Gas may be delivered by Customer
to other gathering systems, processors or pipelines for so long as such Gas is
released.

3.12 Operation of the Plants. Processor shall at all times be entitled to full
and complete operational control of the Plants. Processor shall at all times be
entitled to manage, operate and reconfigure the Plants and its other facilities
in its discretion, and shall have the right to commingle Customer Gas received
by Processor with other Gas. Notwithstanding the foregoing, Processor will use
commercially reasonable efforts to operate the Plants in a manner that will
facilitate receipt of Customer Gas at the Plants and the redelivery of all
Customer Residue Gas and Customer Plant Products.

3.13 Delivery of Customer Plant Products. If Processor is not responsible for
the marketing of Customer Plant Products, Customer, or Customer’s designee,
shall accept delivery of such Customer Plant Products at the NGL Delivery Point.
Customer acknowledges that (i) Customer Plant Products will likely be commingled
with Plant Products belonging to other parties using Processor’s facilities, and
(ii) to the extent Processor is not responsible for marketing Customer Plant
Products, Customer will be responsible for making arrangements regarding the
further shipment and/or sale of Customer Plant Products. Notwithstanding
anything herein contained to the contrary, if Processor is not responsible for
the marketing of Customer Plant Products, and if Customer or Customer’s designee
fails to accept delivery of such Customer Plant Products at the NGL Delivery
Point at any time, Processor shall have the option, but not the obligation,
without the need to obtain further authorization from Customer, to

 

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(i) sell any such unaccepted volumes of Customer Plant Products either
(A) pursuant to the terms of a separate marketing agreement between Customer and
Processor in which such parties will negotiate in good faith, or (B) if no such
separate marketing agreement is entered into between Customer and Processor,
Processor shall pay to Customer the net proceeds of such sale (deducting all of
Processor’s costs and expenses related thereto) less a marketing fee of $0.05
per Gallon, and/or (ii) refuse acceptance of or curtail Customer Gas hereunder.

ARTICLE IV.

NOMINATIONS AND BALANCING

4.1 Nomination Procedures. Customer shall nominate gas for processing at the
Plants in accordance with Processor’s currently effective nomination procedures.
Processor’s nomination procedures will generally comply with the North American
Energy Standards Board’s nomination policies and timeline. Processor reserves
the right to modify its nomination procedures at any time provided that any
modification will not take effect until Processor provides Customer with at
least thirty (30) Days’ written notice of such modification.

4.2 Balancing. The Parties shall reasonably cooperate with each other in an
effort to keep imbalances at the Plants and with interconnecting residue
pipelines to a minimum and trending to zero.

4.3 Allocation of Received Gas. Processor shall allocate the total quantity of
Gas received hereunder on each Day at each Point of Delivery pro rata based upon
the actual flows of Customer Gas and Gas from all other customers to each such
Point of Delivery on such Day.

4.4 Plant Product Allocation Procedure. Each measurement period, Processor shall
allocate one hundred percent (100%) of the Plant Products recovered at each
Plant based on the hydrocarbon content and fractional analysis of Customer Gas
delivered to such Plant, relative to the hydrocarbon content and fractional
analysis of all other Gas delivered to such Plant during such measurement
period, in each case, as such hydrocarbon content and fractional analysis is
determined at the Point of Delivery for such Plant.

ARTICLE V.

QUALITY

5.1 Gas Quality Specifications. Customer Gas delivered hereunder shall meet each
of the quality specifications set forth in Exhibit E attached hereto
(collectively, the “Specifications”) at the Point of Delivery. If Customer Gas
satisfies the Specifications at the Point of Delivery, Processor shall deliver
(i) Customer Residue Gas that meets the quality specifications of the downstream
pipelines and other facilities owned or operated by Processor or its
Affiliate(s) and connected to the Point of Redelivery and (ii) Customer Plant
Products that meet the quality specifications of the downstream pipelines and
other facilities owned and operated by Processor or its Affiliate(s) and
connected to the NGL Delivery Point.

5.2 Non-Conforming Gas.

(a) If Customer becomes aware that any Customer Gas fails to conform to the
Specifications (such Gas, “Non-Conforming Gas”), Customer, as soon as reasonably

 

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possible after becoming aware of such condition, shall give written notice to
Processor of the Non-Conforming Gas and the manner in which such Non-Conforming
Gas does not conform to the Specifications.

(b) If Processor becomes aware that Non-Conforming Gas is being delivered by
Customer hereunder before receiving such written notice from Customer, Processor
shall, as soon as reasonably possible after becoming aware thereof, deliver to
Customer written notice of such Non-Conforming Gas, which notice may also serve
as Processor’s notice of acceptance or rejection of such Non-Conforming Gas
pursuant to Section 5.2(c) below.

(c) If any Non-Conforming Gas is tendered for processing by Customer at the
Point of Delivery at any time, Processor may in its sole discretion choose to
accept or to reject such Non-Conforming Gas.

(i) If Processor chooses to accept Non-Conforming Gas, Processor shall provide
written notice to Customer of its acceptance of such Non-Conforming Gas, and the
manner in which such Non-Conforming Gas does not conform to the Specifications.
Such acceptance will not constitute a waiver of this provision with respect to
any future receipt of Non-Conforming Gas. Processor’s option to refuse to accept
receipt of Non-Conforming Gas is in addition to other remedies available to
Processor under this Agreement. If Processor accepts such Non-Conforming Gas,
Customer shall reimburse Processor for the out-of-pocket costs incurred by
Processor to accept such Non-Conforming Gas. If Processor determines, in its
sole discretion, at any time that the continued acceptance of such
Non-Conforming Gas is not operationally feasible, Processor may notify Customer
that it intends to discontinue accepting such Non-Conforming Gas.

(ii) If Processor chooses to reject Non-Conforming Gas, Processor may in its
sole discretion shut in such Gas at any time. Processor shall follow up the
rejection of Non-Conforming Gas with a written notice of such rejection to
Customer, which notice shall specify the manner in which such Non-Conforming Gas
does not conform to the Specifications.

(d) If any Non-Conforming Gas is delivered into the Plants, Customer will
indemnify, defend, release and hold Processor harmless from and against all
Losses arising from or out of the quality deficiency of such Non-Conforming Gas,
except that Customer shall have no liability to Processor for any Losses arising
from or out of any such Non-Conforming Gas accepted by Processor pursuant to
Section 5.2(c)(i) above, but only with respect to, and to the extent of, the
exceptions to the Specifications set forth in the applicable written notice of
acceptance.

5.3 Hazardous Substances. Gas tendered by Customer for processing hereunder
shall not contain any substance that is determined to be a contaminant or a
hazardous waste or substance under the Resource Conservation and Recovery Act,
42 U.S.C. Section 1857, et seq., as amended from time to time, the Comprehensive
Environmental Response, Compensation and

 

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Liability Act, 42 U.S.C. Section 9601, et seq., as amended from time to time,
and the regulations issued thereunder, including 40 C.F.R. Parts 302 and 355,
together with any other applicable environmental, health, or safety statutes
(other than hydrocarbons and/or the natural constituent elements thereof)
(collectively, “Hazardous Substances”).

5.4 Environmental, Health and Safety Laws. Customer warrants that, with respect
to the Gas tendered at the Point of Delivery, it has complied or caused others
to comply with all environmental, health, and/or safety statutes and
regulations.

5.5 Gathering System Deliveries. Notwithstanding anything to the contrary in
this Agreement, Gas delivered to Processor from the Gathering System that met
the applicable requirements of the Gathering System when delivered thereto shall
be deemed to be in compliance with all requirements of this Article V.

ARTICLE VI.

MEASUREMENT AND TESTING

6.1 Measurement Equipment. Processor shall install, maintain and operate, or
cause to be installed, maintained and operated, suitable meters and/or other
necessary equipment of ample size and proper type for accurate measurement of
the following at each Plant:

(a) the volume of each type of Plant Product extracted from Gas delivered to
such Plant for processing;

(b) the volume, Gross Heating Value and components of Gas used as Plant Fuel in
processing Gas in such Plant;

(c) the volume, Gross Heating Value and components of Gas delivered to such
Plant for processing, including the mass, flowing density, and sampling
necessary to the determination of liquid yield, by component; and

(d) the volume, Gross Heating Value and components of Residue Gas delivered to
such Plant’s Point of Redelivery.

6.2 Measurement Standards. Measurement facilities installed, owned, operated and
maintained by Processor or its designees hereunder and processing of the data
obtained therefrom shall be done so in accordance with generally accepted
measurement standards as prescribed in, but not limited to, the latest versions
of:

(a) ANSI/API 2530, AGA Report No. 3, API 14.3, GPA 8185 “Orifice Metering of
Natural Gas and Other Related Hydrocarbon Fluids”;

(b) GPA 8182, API 14.7 “Mass Measurement of Natural Gas Liquids”;

(c) GPA 8173, API 14.4 “Converting Mass of Natural Gas Liquids and Vapors to
Equivalent Liquid Volumes”;

 

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(d) GPA 2172, API 14.5, “Calculation of Gross Heating Value, Specific Gravity,
and Compressibility of Natural Gas Mixtures from Compositional Analysis”;

(e) API 14.6 “Installing and Proving Density Meters”;

(f) API 21 “Flow Measurement Using Electronic Metering Systems”;

(g) API 14.8 “Liquefied Petroleum Gas Measurement”;

(h) API 5.6 “Measurement of Liquid Hydrocarbons by Coriolis Meters”;

(i) AGA Report No. 8, API 14.2 “Compressibility Factors of Natural Gas and Other
Related Hydrocarbon Gases” per “Detailed Methodology”;

(j) GPA 2165 “Standard for Analysis of Natural Gas Liquid Mixtures by Gas
Chromatography”; and

(k) GPA 2166 “GPA Methods of Obtaining Natural Gas Samples for Analysis by Gas
Chromatography”.

Where electronic gas measurement (“EGM”) and flow computers are used, the
Parties will use and accept the electronic derivations, measurements and
calculations in lieu of mechanical recordings, chart integration and subsequent
calculations. The official EGM data from the measuring equipment will remain the
property of Processor, or its designee, but, upon request by Customer,
Processor, or its designee, will submit its records and EGM data, together with
calculations to Customer for inspection and verification, subject to their
return to Processor, or its designee, within thirty-five (35) Days after their
receipt.

6.3 Measurement Factors. As related to Gas measurement hereunder:

(a) The unit of volume shall be one (1) cubic foot of Gas at a base temperature
of sixty degrees Fahrenheit (60°F) and at a base pressure of fourteen and
sixty-five hundredths (14.65) pounds per square inch absolute. The atmospheric
pressure shall be assumed to be a constant, determined by elevation and specific
site location, regardless of the variations of such atmospheric pressure from
time to time.

(b) Temperature shall be determined by use of a recording thermometer so
installed that it may continuously record the temperature of Gas passing the
meters.

(c) The specific gravity shall be determined by calculation from fractional
analyses of proportional samples taken at Processor’s measurement facilities.

(d) Corrections for deviation from Ideal Gas Laws shall be made for all Gas
metered hereunder as prescribed in the applicable standards.

(e) The Daily arithmetical flow weighted average recorded for temperature, the
factor for specific gravity, and the corresponding correction for deviation from
Ideal Gas Laws applicable during each Day shall be used to make computations of
volumes hereunder.

 

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6.4 Measurement Accuracy Verification.

(a) Custody Transfer Meters. The accuracy of the measurement facilities
specified herein and used for custody transfer of Customer Gas shall be verified
at least once each Month. Customer shall be given reasonable notice and shall
have the right to be present at the time of any installing, reading, cleaning,
changing, repairing, inspecting, testing, calibrating, or adjusting done in
connection with Processor’s measuring equipment hereunder. If after notice,
Customer fails to have a representative present, the results of the tests shall,
nevertheless, be considered accurate until the next tests are made and upon
request by Customer, Processor shall furnish Customer a written copy of such
test results. The costs of all tests of such measuring equipment shall be borne
by Processor except that the costs for additional tests requested by Customer
shall be borne by Customer.

(b) Non Custody Transfer Meters. The accuracy of the measurement facilities
specified herein and used for applications other than custody transfer shall be
verified at least once each quarter.

6.5 Measurement Error. If at any time any of the measuring or testing equipment
is found to be out of service or registering inaccurately in any percentage, it
shall be adjusted to read accurately, within the limits prescribed by the
manufacturer. If at any time any of the measuring or testing equipment used for
custody transfer is out of service or inaccurate by an amount exceeding two
percent (2%) at a reading corresponding to the average rate of flow for the
period since the last preceding test, the previous readings of such equipment
shall be disregarded for any period definitely known or agreed upon, or for a
period of one-half of the time elapsed since the last test of the measuring
equipment affected, not to exceed fifteen (15) Days. The volume measured during
such period shall be estimated by (a) using the data recorded by any check
measuring equipment if installed and registering accurately, or if not installed
or not registering accurately, (b) by correcting the error if the percentage of
error is ascertainable by calibration, test, or mathematical calculation, or if
neither (a) or (b) is feasible, (c) by estimating the quantity or quality
measured, based upon deliveries under similar conditions during a period when
the equipment was registering accurately. No correction shall be made for
recorded inaccuracies of two percent (2%) or less.

6.6 Customer’s Right of Inspection. At all times during business hours, Customer
shall have the right to inspect measurement equipment used for custody transfer
purposes that is installed or furnished by Processor, or its designee, and the
charts and other measurement or testing data retained by Processor. The reading,
calibration and adjustment of all metering equipment and changing of charts
hereunder shall be done only by Processor or Processor’s designee. Processor
shall preserve all original test data, charts, and other similar records for a
period of at least one (1) year or longer if required by law or regulation.

6.7 Gross Heating Value Determination. The Gross Heating Value of Customer Gas
delivered to each Plant hereunder shall be determined each Month by taking flow
proportional

 

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stream samples at the Point of Delivery for such Plant, or any other mutually
agreed point, using a continuous proportional to flow sampling device. The
samples will be collected for testing prior to the end of each Month. Processor
shall compute, or cause to be computed, the Gross Heating Value from fractional
analysis of the sample. The result shall be controlling and effective in the
Month succeeding the Month in which the sample is obtained. The Gross Heating
Value of Customer Gas to be used for the first Month of production after initial
flow has begun will be determined from spot samples which will be collected at
each applicable Point of Measurement approximately one (1) week after initial
flow begins. The Gross Heating Value so determined shall be corrected from the
condition of testing to a dry basis.

6.8 Hydrocarbon Content. For each Plant, Processor shall determine, or cause to
be determined, the hydrocarbon content of Customer Gas delivered hereunder to
such Plant, Gas from other sources delivered to such Plant for processing,
Residue Gas delivered to the Point of Redelivery for such Plant, and Plant Fuel
used by such Plant by a test conducted each Month. Such samples shall be taken
at a flow rate, pressure and temperature which will yield equitable and
representative test results.

6.9 Fractional Analysis. Fractional analysis of test samples shall be performed
by Processor at the laboratory of Processor’s choosing, through the use of gas
chromatography equipment or such other method as may be commonly used in the
industry. From such fractional analysis, Processor shall determine the
composition in mole percent of each of the following chemical compounds:
(a) carbon dioxide, (b) nitrogen, (c) methane, (d) ethane, (e) propane,
(f) iso-butane, (g) normal butane, (h) iso-pentane, (i) normal pentane and
(j) hexanes and heavier hydrocarbons. Processor shall compute or cause to be
computed, the Gross Heating Value, specific gravity, Plant Products content and
correction factors for deviation from Ideal Gas Laws from this fractional
analysis of samples. The results from these analyses shall be controlling and
effective in the Month succeeding the Month in which the sample is obtained and
shall apply to all subsequent deliveries until such time as new samples are
obtained and analyzed. Processor shall furnish to Customer each such fractional
analysis and Gross Heating Value which will accompany the statement described in
Section 12.1 herein.

6.10 Modifications to Measurement Procedures. Processor reserves the right, in
consultation with Customer, to modify the measurement procedures from time to
time in order to conform with the measurement standards set forth in Section 6.2
herein for the Plants and/or to remove any inequities which may be found to
exist, and it is agreed that any such modification will be applicable to this
Agreement; provided, however:

(a) Processor shall give Customer at least thirty (30) Days’ written notice
prior to any change or modification to such measurement procedures;

(b) such modification shall be in accordance with Gas Processors Association and
API measurement standards and practices; and

(c) any change or modification to such measurement procedures shall be
consistently applied to all customers who deliver Gas to any Plant for
processing.

 

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6.11 Measurement Disputes. Any dispute, controversy, or claim arising out of or
in connection with this Article VI (a “Measurement Dispute”) which the Parties
are unable to resolve shall be referred to and determined by an expert agreed
upon by both Parties in good faith (the “Measurement Expert”), as the sole and
exclusive remedy of the Parties as to the Measurement Dispute. The decision of
the Measurement Expert shall be final and binding upon the Parties.

ARTICLE VII.

PLANT PRODUCTS AND CUSTOMER RESIDUE GAS

7.1 Conveyance of Rights to Processor. Customer does hereby grant, bargain,
sell, transfer, convey and assign to Processor, its successors and assigns,
(i) the right to consume Customer Gas as Plant Fuel, and Lost and Unaccounted
for Gas, and (ii) the right to sell Customer Plant Products for the account of
Customer pursuant to Section 3.13 hereof.

7.2 Title to Customer Gas and Plant Products. Subject to other terms and
conditions hereof, title to Customer Gas and all constituents thereof, including
Customer Plant Products, shall remain with Customer at all times.

ARTICLE VIII.

PLANT FUEL, LOST AND UNACCOUNTED FOR AND SHRINKAGE

8.1 Allocation of Plant Fuel and Lost and Unaccounted for Gas. The Thermal
Content of Customer Gas that is consumed as Plant Fuel and Lost and Unaccounted
for Gas in the processing of Customer Gas during a given Month shall be
determined, for each Plant, by multiplying (i) the total quantity of Btus
consumed as Plant Fuel and Lost and Unaccounted for Gas in such Plant’s
operations during such Month by (ii) a fraction, the numerator of which is the
total Gallons of Customer Gas recovered and saved during such Month, and the
denominator of which is the total Gallons of Plant Products recovered and saved
in such Plant from all Gas processed at such Plant during such Month.

8.2 Calculation of Shrinkage. Customer’s share of Shrinkage shall be calculated
by Processor each Month, for each Plant, by multiplying (i) the number of
Gallons of each produced component of the mixed stream of Plant Products as
determined and allocated to Customer Gas pursuant to the terms of this
Agreement, by (ii) the Btu equivalent of each such component as set forth in the
GPA Technical Standards Publication No. 2145-03, as revised from time to time,
and as adjusted to sixty degrees Fahrenheit (60°F) and 14.65 psia pressure base,
with the aggregate Btus of all such components constituting Customer’s share of
Shrinkage hereunder.

8.3 Plant Fuel, Shrinkage and Lost and Unaccounted for Gas. Customer shall bear
one hundred percent (100%) of the Plant Fuel, Shrinkage and Lost and Unaccounted
for Gas attributable to processing Customer Gas, which will be deducted in
determining Customer Residue Gas. For the avoidance of doubt, Customer shall not
bear any costs related to third-party gas, if any.

 

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ARTICLE IX.

COMPENSATION AND FEES

9.1 Processing Fee. Each Month, Customer shall pay Processor, a fee equal to the
sum of (a) the product of (i) the Applicable Firm Rate per MMBtu and
(ii) Customer Gas up to the Monthly MDQ for such Month processed hereunder
during such Month, plus (b) the product of (i) the Applicable Interruptible Rate
per MMBtu and (ii) Customer Gas in excess of the Monthly MDQ for such Month
processed hereunder during such Month (the Applicable Firm Rate or the
Applicable Interruptible Rate, as applicable, each as may be adjusted pursuant
to Section 9.2 and Section 9.5(b), is referred to herein as the “Processing
Fee”).

9.2 Fee Adjustment. On each anniversary of the Plant Operational Date of the Mt.
Olive Plant, the Processing Fee shall automatically increase to reflect 50% of
the year-over-year increase in PPI in accordance with this Section 9.2. The
adjusted Processing Fee for each year shall be determined by multiplying the
Processing Fee for the prior year by the sum of (a) one, plus (b) the PPI
Escalator. The “PPI Escalator” means a fraction determined by dividing (a) the
difference between (i) a fraction, the numerator of which is the PPI for the
latest available month that is no longer subject to revision prior to the date
on which such adjustment is being made, and the denominator of which is the PPI
(using the same base date) for the corresponding month in the preceding calendar
year, and (ii) one, by (b) two; provided, however, that in no event shall the
adjusted Processing Fee for any year be less than the Processing Fee for the
prior year.

9.3 Minimum Quantity Commitment. Subject to the terms hereof, beginning on the
Plant Operational Date of the Lincoln Parish Plant, Customer agrees to make
available at the Point of Delivery for delivery to the Plants, (a) for each
Quarterly Period, at least a quantity of Customer Gas equal to the Quarterly Gas
Commitment for such Quarterly Period (less the Plant Interruption Credit
Quantity for such Quarterly Period), and (b) on or before the end of the
fifteenth (15th) Annual Period following the Plant Operational Date of the
Lincoln Parish Plant (such fifteen (15) Annual Periods, the “MQ Period”), at
least an aggregate quantity of Customer Gas equal to the Total Gas Commitment
(less the aggregate Plant Interruption Credit Quantity). Subject to the terms
hereof, for the period following the end of the MQ Period through the end of the
Tail Period, Customer agrees to make available at the Point of Delivery for
delivery to the Plants, at least an aggregate quantity of Customer Gas (in
MMBtu) equal to the cumulative sum of the Maximum Daily Quantity for all Days
during such Tail Period (less the aggregate Plant Interruption Credit Quantity
for all Days during such Tail Period).

9.4 Deficiency Payments. If a Quarterly Deficiency Quantity (as defined below)
exists as of the end of any Quarterly Period, then Customer shall pay to
Processor an amount equal to the product of (i) the Quarterly Deficiency
Quantity for such Quarterly Period multiplied by (ii) the Applicable Firm Rate
per MMBtu that would have been paid hereunder with respect to such Quarterly
Deficiency Quantity had such Quarterly Deficiency Quantity been processed
hereunder (such product being the “Deficiency Payment”). “Quarterly Deficiency
Quantity” means the amount (in MMBtu), if any, determined as of the end of each
Quarterly Period, by which (a) the Aggregate Gas Commitment as of the end of
such Quarterly Period exceeds (b) the sum of (x) the total cumulative quantity
(in MMBtu) of Customer Gas delivered at the Point of Delivery during the MQ
Period as of the end of such Quarterly Period, plus (y) the total cumulative
quantity (in MMBtu) of Customer Gas on which Customer has paid to Processor a

 

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Deficiency Payment under this Agreement as of the end of the preceding Quarterly
Period, plus (z) the total cumulative Plant Interruption Credit Quantity (in
MMBtu) as of the end of such Quarterly Period. Any such Deficiency Payments made
by Customer shall be treated by Processor as a prepayment of the Processing Fee
for Customer Gas that may be delivered by Customer after the date on which
Customer has delivered the Total Gas Commitment and shall be credited by
Processor to the payment of the Processing Fee that otherwise would be payable
hereunder for such quantities of Customer Gas delivered during the Primary Term
until such prepaid fees have been exhausted. Deficiency Payments due by Customer
hereunder shall be paid by Processor as provided in Article XII.

9.5 Certain Other Payments.

(a) Greenhouse Gas Surcharge. If, as a result of any new or amended law, rule or
regulation, Processor incurs additional costs related to any Greenhouse Gas
attributable to Customer Gas hereunder or any additional costs related to any
Greenhouse Gas are imposed with respect to Processor’s operations hereunder (any
such additional cost, a “Greenhouse Gas Surcharge”), then Processor shall be
responsible for and shall pay up to twenty percent (20%) of such Greenhouse Gas
Surcharge and Customer shall reimburse Processor for the remaining eighty
percent (80%) of such Greenhouse Gas Surcharge. Notwithstanding the foregoing,
Customer shall retain ownership of and sole responsibility for any carbon
emissions and/or other Greenhouse Gases contained within or removed from the Gas
received by Processor at the Point of Delivery. If Customer is required to make
any payment hereunder with respect to a Greenhouse Gas Surcharge imposed on any
Plant generally, and not specifically with respect to Customer Gas, Customer
shall only be responsible for its ratable share of such Greenhouse Gas Surcharge
based on the average volume of Customer Gas delivered to such Plant and the
average volume of all other Gas delivered to such Plant.

(b) If, exclusive of any Greenhouse Gas Surcharge, any material fee or charge is
assessed upon Processor by a Governmental Authority after the Effective Date in
connection with the performance of services for Customer Gas on behalf of
Customer hereunder, excluding normal fees or charges that are incurred by
Processor irrespective of whether Processor provides the services on behalf of
Customer and excluding Taxes addressed in Article XVI, then Processor may
increase the then-effective Processing Fee by up to ten percent (10%) to account
for such fees or charges (to the extent such fees or charges are attributable to
Customer Gas); provided, however, the cumulative effect of all such increases
pursuant to this Section 9.5(b) (but exclusive of any Greenhouse Gas Surcharges
or any adjustment pursuant to Section 9.2) during the Primary Term may not
exceed thirty percent (30%) of the initial Processing Fee (as the same may be
adjusted pursuant to Section 9.2 from time to time). If, in Processor’s
reasonable judgment, an increase in the Processing Fee of more than ten percent
(10%) would be required to place Processor in substantially the same economic
position as it was in prior to the imposition or assessment of such fees or
charges, Processor may call for a Senior Management Meeting to take place within
thirty (30) Days of written notice to Customer, and the Parties shall negotiate
in good faith to amend the provisions of this Agreement such that the Parties
are in substantially the same relative economic position as they were in prior
to the imposition or assessment of such fees or charges. If the Parties are
unable to agree

 

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on an economic adjustment within sixty (60) Days of the Senior Management
Meeting, then Processor may, in its sole discretion, terminate this Agreement
without penalty by delivering Customer written notice of Processor’s intent to
terminate. Such termination shall be effective, at the option of Customer,
(i) as of 9:00 a.m. on the first Day of the Month which follows the Month that
Processor delivered its notice of intent to terminate, or (ii) as of 9:00 a.m.
on the first Day of the Month which is twelve (12) Months after such date,
provided that the Processing Fee for such twelve (12) Month period before such
termination shall be increased to place Processor in substantially the same
economic position as it was in prior to the imposition or assessment of such
fees, charges, or costs. Customer shall exercise such option by delivery of
written notice to Processor of Customer’s election within ten (10) Business Days
of receipt of Processor’s notice to terminate, provided that if Customer has not
responded to Processor by the time described in clause (i) above, the Agreement
shall continue pursuant to clause (ii) above.

(c) Customer shall be entitled to audit Processor’s applicable books and records
for the limited purpose of determining if the amount of any increase pursuant to
this Section 9.5 is justified by the actually-incurred and reasonable amount of
the aggregate costs and/or expenses relating to the applicable Plants. If such
audit shall reflect that such increase was not justifiable in accordance with
the foregoing, Processor shall promptly credit the amount of such discrepancy to
Customer, unless Processor disagrees with the results of such audit, in which
case the matter shall be resolved pursuant to the dispute resolution provisions
set forth in Section 15.3 hereof.

9.6 Electric Compression Reimbursement. If Processor installs electric-driven
compression in lieu of or in addition to Gas-driven compression at a Plant,
then, each Month, Customer shall pay Processor an amount determined by
multiplying (i) 90% of the total cost of electricity at such Plant during such
Month used for compression by (ii) a fraction, the numerator of which is the
total Gallons of Customer Plant Products recovered and saved during such Month,
and the denominator of which is the total Gallons of Plant Products recovered
and saved in such Plant from all Gas processed at such Plant during such Month.
If Customer or Processor at any time believes that the determination in the
preceding sentence does not reflect the costs of electric-driven compression at
such Plant that should be allocated to Customer hereunder, either Party may
provide notice to such other Party. Upon the delivery of such notice, the
Parties agree to discuss and negotiate in good faith whether any changes in such
allocation are appropriate under the circumstances.

ARTICLE X.

ROYALTIES; WARRANTY OF TITLE

10.1 Royalties. As between Processor and Customer, Customer shall at all times
have the obligation to account for and pay or cause to be paid all royalties,
overriding royalties, and other sums due on production and to make settlement
with all other Persons having an interest in Customer Gas delivered hereunder.
Customer shall indemnify, defend and hold Processor harmless against all loss,
damage, and expense, including reasonable attorney’s fees, of every character on
account of adverse claims to all such Gas delivered to Processor hereunder, and
royalties, taxes, payment, or other charges due thereon or attributable thereto.

 

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10.2 Title; Warranties Regarding Title. Customer warrants that it will have, at
the time of receipt of Gas at the Point of Delivery for processing hereunder,
control of and good title to and/or the full right and authority to deliver such
Gas to Processor for processing hereunder. Customer warrants that the Gas
delivered to Processor hereunder shall be free and clear of all liens,
encumbrances, and claims whatsoever (other than liens, encumbrances and claims
granted by Company to secure any credit facility or indebtedness), and that it
will have at such time of receipt good right and title to the Gas or the right
to process such Gas hereunder. If any claim is made challenging Customer’s right
to deliver such Gas to Processor, Processor has the right to suspend receipt or
deliveries of such Gas hereunder until such issue is finally resolved to the
reasonable satisfaction of Processor. Processor shall not take any action that
would result in the creation of any liens, encumbrances or claims created by,
through or under Processor on Customer Gas or the Residue Gas and Plant Products
attributable thereto.

ARTICLE XI.

TERM

11.1 Term. This Agreement shall commence on the Effective Date and, unless
otherwise terminated as provided herein, shall continue in full force and effect
until fifteen (15) years after the Plant Operational Date of the Mt. Olive Plant
(the “Primary Term”). The term of this Agreement shall continue for additional
terms of one year each (each an “Additional Term”) unless this Agreement is
terminated by either Party as of the end of the Primary Term or an Additional
Term, as applicable, by providing not less than one-hundred eighty (180) Days’
prior written notice of termination to the other Party.

11.2 Termination for Cause. This Agreement may be terminated upon (i) a breach
termination date, or (ii) exercise by a Party of its rights under any provision
of this Agreement expressly providing such Party termination rights. For
purposes of this Section 11.2, “breach termination date” means the date on which
either Processor or Customer, upon written notice to the other Party, terminates
this Agreement upon (x) a material breach by such other Party of this Agreement
and (y) the failure by the breaching party to cure such breach (A) within sixty
(60) Days after receipt of written notice thereof from the terminating party, or
(B) if such breach is not curable within such sixty (60) Day period, failure by
the breaching party to diligently pursue its cure within thirty (30) Days after
receipt of written notice thereof from the terminating party (provided, however,
that notwithstanding the foregoing, the non-defaulting Party may terminate this
Agreement if such breach is not cured within seventy-five (75) Days of written
notice of breach); further provided, however, that (i) in order to exercise such
termination right, the terminating party shall not be in material breach of this
Agreement; and (ii) the cure period for undisputed payments shall be ten
(10) Days.

ARTICLE XII.

STATEMENTS AND PAYMENTS

12.1 Invoices and Statements. On or before the fifteenth (15th) Day of each
Month, Processor shall provide to Customer an invoice and statement for the
previous Month setting forth the calculation of the net amount due hereunder to
Processor, and with respect to Customer Plant Products that are marketed by
Processor, the net amount due to Customer.

 

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12.2 Payment of Statements. Within fifteen (15) Days following receipt of each
of Processor’s invoices and statements, Customer or Processor, as applicable
(the “Payor”), shall make payment to the other Party (the “Payee”) of all
undisputed amounts by wire transfer, in accordance with the account information
provided by the Payee to the Payor from time to time, unless another form of
payment is agreed to in writing by the Parties. Should a Party fail to make
payment in full of all undisputed amounts within such time period, interest
shall accrue on the unpaid balance at the Default Interest Rate, but not to
exceed any lesser maximum legal rate. If Customer fails to pay Processor amounts
due hereunder and such failure is not cured within ten (10) Business Days’
written notice from Processor to Customer, Processor may suspend receipt and
delivery of Customer Gas without prejudice to any other available remedies at
law or in equity.

12.3 Billing Disputes. If a good faith dispute arises as to any amount payable
hereunder, the Party responsible for payment shall nevertheless pay when due the
amount not in dispute. Such payment shall not be deemed to be a waiver of the
right to recoup any overpayment. If either Party withholds payment of any
disputed amount as authorized herein, such Party shall, within ten (10) Days
after the due date of the statement for the Month to which the disputed amount
pertains, submit to the other Party a written explanation of the dispute and any
available supporting documentation. The Parties shall then cooperate in good
faith to resolve such dispute as expeditiously as possible. If either Party
fails to forward the entire undisputed amount due to the other Party when same
is due, interest on the unpaid portion shall accrue at the Default Interest
Rate, from time to time, or the maximum legal rate, whichever is the lesser,
from the date such payment is due until the same is paid.

12.4 Audit Rights. Each Party or its designated representatives shall, upon
reasonable notice to the other Party, have the right, no more frequently than
one (1) time per twelve (12) consecutive Months, at its own expense, at
reasonable times and during normal business hours, to examine the books and
records of such other Party to the extent necessary to verify the accuracy of
any statement, charge, computation, or demand made under or pursuant to this
Agreement. Each Party agrees to keep records and books of the account in
accordance with generally accepted accounting principles and practices in the
industry. Each invoice and statement shall be final as to both Parties unless
questioned in writing within twenty four (24) Months following such invoice and
statement.

12.5 Creditworthiness. If Customer has failed to pay any amount when due under
this Agreement and if such non-payment is not being disputed in good faith by
Customer, Processor shall have the right to request and receive from Customer
adequate assurance of performance (“Performance Assurance”) which shall mean
credit support in a form reasonably acceptable to Processor and in an amount and
for the term reasonably acceptable to Processor. Any of the following shall be
an acceptable form of credit support:

(a) an irrevocable standby letter of credit from a bank satisfactory to
Processor;

(b) provide a prepayment or a deposit in advance of the Month in which
processing hereunder are to be provided; or

(c) a performance bond issued by a Person satisfactory to Processor.

 

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If the credit of Customer’s guarantor is satisfactory in Processor’s opinion, a
demand for Performance Assurance can be satisfied with a guarantee issued on
behalf of Customer in a form acceptable to Processor, but only for as long as
the credit of Customer’s guarantor continues to be acceptable to Processor.
Processor acknowledges and agrees that Memorial Resource Development Corp. is a
satisfactory guarantor.

Should Customer or its guarantor fail to provide Performance Assurance within
ten (10) Business Days after receipt of written demand for such assurance, then
Processor shall have the right to suspend performance under this Agreement until
such time as Customer furnishes Performance Assurance. For the avoidance of
doubt, such suspension of performance by Processor shall not relieve Customer of
its obligation to make payments of amounts due hereunder, including, without
limitation, payment of fees due hereunder.

If during the Term, if Processor has failed to pay any amount when due under
this Agreement and if such non-payment is not being disputed in good faith by
Processor, Customer shall have the right to request and receive from Processor
adequate Performance Assurance under similar terms and conditions as described
above, including the right to suspend performance under this Agreement until
such time as Processor furnishes Performance Assurance.

ARTICLE XIII.

LIABILITY OF THE PARTIES

13.1 Control and Possession of Gas and Plant Products. As between Customer and
Processor, Customer shall be deemed in control and possession of the Gas
delivered for processing hereunder and responsible for any Losses caused thereby
until such Gas shall have been delivered at the Point of Delivery. As between
Customer and Processor, Processor shall be deemed in control and possession of
the Gas delivered for processing hereunder and Plant Products recovered from
such Gas and, except as provided in Section 5.2(d), Section 9.5, Article X,
Section 13.3, Section 16.2 and Section 19.10, shall be responsible for any
Losses caused thereby until Residue Gas shall have been delivered to Customer or
its designee at the Point of Redelivery, and Customer Plant Products have been
delivered to Customer or its designee at the NGL Delivery Point. Except as
otherwise provided in Section 5.2(d), Section 9.5, Article X, Section 13.3,
Section 16.2 and Section 19.10, the Party who has control and possession of the
Gas or Plant Products shall be responsible for and shall indemnify the other
Party for any Losses caused thereby and occurring while the Gas or Plant
Products is in the indemnifying Party’s control and possession.

13.2 Waiver of Certain Damages. NOTWITHSTANDING ANYTHING TO THE CONTRARY IN THIS
AGREEMENT, IN NO EVENT SHALL EITHER PARTY BE LIABLE TO THE OTHER PARTY, ANY
SUCCESSORS IN INTEREST OR ANY BENEFICIARY OR ASSIGNEE OF THIS AGREEMENT FOR ANY
EXEMPLARY OR PUNITIVE DAMAGES OR ANY SPECIAL, INDIRECT, INCIDENTAL, OR
CONSEQUENTIAL DAMAGES OF ANY CHARACTER, INCLUDING LOSS OF USE, LOST PROFITS OR
REVENUES, COST OF CAPITAL, CANCELLATION OF PERMITS, UNABSORBED TRANSPORTATION OR
STORAGE CHARGES, TERMINATION OF CONTRACTS, OR TORT OR CONTRACT CLAIMS ARISING

 

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OUT OF OR IN CONNECTION WITH THIS AGREEMENT OR ANY BREACH HEREOF, IRRESPECTIVE
OF WHETHER CLAIMS FOR SUCH DAMAGES ARE BASED UPON CONTRACT, WARRANTY,
NEGLIGENCE, STRICT LIABILITY OR OTHERWISE. THIS SECTION 13.2 SHALL APPLY
NOTWITHSTANDING THE SOLE, JOINT OR CONCURRENT NEGLIGENCE, FAULT OR
RESPONSIBILITY OF THE PARTY WHOSE LIABILITY IS LIMITED BY THIS PROVISION, OR ANY
OTHER EVENT OR CONDITION, WHETHER ANTICIPATED OR UNANTICIPATED, AND REGARDLESS
OF WHETHER PRE-EXISTING PRIOR TO THE DATE OF THIS AGREEMENT.

13.3 Inert Constituents. Customer shall retain title to all Inert Constituents
in Gas (collectively, whether any such Inert Constituents are removed from the
Gas or not, “Customer’s Inert Constituents”), delivered by Customer under this
Agreement. To the extent that Processor removes Customer’s Inert Constituents
from such Gas and Customer has not made arrangements to utilize, market or
dispose of Customer’s Inert Constituents, Processor may, but is not required to,
dispose of Customer’s Inert Constituents by venting or other methods. If
(i) venting Customer’s Inert Constituents is ever prohibited or disallowed for
any reason or is deemed by Processor to be uneconomic, or (ii) additional costs
are required to vent, dispose of or handle Customer’s Inert Constituents due to
rules, regulations or other laws, then Customer shall promptly (A) make
alternate arrangements to utilize, market and/or dispose of Customer’s Inert
Constituents at Customer’s sole cost and expense, (B) notify Processor in
writing and in reasonable detail of such alternate arrangements, and
(C) reimburse Processor for any costs incurred by Processor in delivering
Customer’s Inert Constituents for such utilization, marketing and/or disposal.
If Customer fails to comply with Customer’s obligations under the immediately
preceding sentence, Processor shall have the right, but not the obligation,
without notice to Customer, to make arrangements for utilization, marketing
and/or disposal of Customer’s Inert Constituents for Customer’s account and at
Customer’s sole cost and expense; and Customer shall promptly reimburse
Processor upon demand for any costs and expenses incurred by Processor in
connection with such arrangements by Processor. CUSTOMER HEREBY RELEASES,
INDEMNIFIES, DEFENDS AND HOLDS HARMLESS PROCESSOR AND PROCESSOR’S MEMBERS,
DIRECTORS, OFFICERS, AGENTS AND EMPLOYEES FROM AND AGAINST ANY AND ALL CLAIMS,
DEMANDS, DAMAGES, LIABILITIES, EXPENSES, ACTIONS, CAUSES OF ACTION, LIABILITIES,
LOSSES, TAXES, PENALTIES AND FEES ARISING OUT OF OR IN ANY WAY RELATING TO
(I) CUSTOMER’S INERT CONSTITUENTS, INCLUDING THE UTILIZATION, MARKETING OR
DISPOSAL THEREOF, AND/OR (II) ANY PERSONAL INJURY, DEATH, PROPERTY DAMAGE,
ENVIRONMENTAL DAMAGE, POLLUTION, OR CONTAMINATION ARISING OUT OF OR RELATING TO
CUSTOMER’S INERT CONSTITUENTS, EXCEPT TO THE EXTENT THAT ANY SUCH CLAIMS,
DEMANDS, DAMAGES, LIABILITIES, EXPENSES, ACTIONS, CAUSES OF ACTION, LIABILITIES,
LOSSES, TAXES, PENALTIES OR FEES ARE ATTRIBUTABLE TO THE GROSS NEGLIGENCE OR
WILLFUL MISCONDUCT OF ANY SUCH INDEMNITEE.

13.4 Indemnification. SUBJECT TO THE TERMS OF THIS AGREEMENT, INCLUDING SECTIONS
13.2 AND 13.3, PROCESSOR SHALL INDEMNIFY, DEFEND AND HOLD HARMLESS CUSTOMER AND
CUSTOMER’S MEMBERS, DIRECTORS,

 

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OFFICERS, AGENTS AND EMPLOYEES FROM AND AGAINST ANY AND ALL LOSSES, INCLUDING
LOSSES ARISING FROM ANY THIRD PARTY CLAIMS, ARISING OUT OF OR RELATING TO:
(i) THE OPERATIONS CONDUCTED HEREUNDER OR IN CONNECTION HEREWITH BY PROCESSOR TO
THE EXTENT RESULTING FROM THE GROSS NEGLIGENCE OR WILLFUL MISCONDUCT OF
PROCESSOR, EXCEPT TO THE EXTENT THAT SUCH LOSSES ARE ATTRIBUTABLE TO THE
NEGLIGENCE OR WILLFUL MISCONDUCT OF CUSTOMER OR ANY OF CUSTOMER’S MEMBERS,
DIRECTORS, OFFICERS, AGENTS OR EMPLOYEES, AND (ii) ANY BREACH OF THIS AGREEMENT
BY PROCESSOR.

(a) SUBJECT TO THE TERMS OF THIS AGREEMENT, INCLUDING SECTION 13.2, CUSTOMER
SHALL INDEMNIFY, DEFEND AND HOLD HARMLESS PROCESSOR AND PROCESSOR’S MEMBERS,
DIRECTORS, OFFICERS, AGENTS AND EMPLOYEES FROM AND AGAINST ANY AND ALL LOSSES,
INCLUDING LOSSES ARISING FROM ANY THIRD PARTY CLAIMS, ARISING OUT OF OR RELATING
TO: (i) THE OPERATIONS CONDUCTED HEREUNDER OR IN CONNECTION HEREWITH BY CUSTOMER
TO THE EXTENT RESULTING FROM THE GROSS NEGLIGENCE OR WILLFUL MISCONDUCT OF
CUSTOMER, EXCEPT TO THE EXTENT THAT SUCH LOSSES ARE ATTRIBUTABLE TO THE
NEGLIGENCE OR WILLFUL MISCONDUCT OF PROCESSOR OR ANY OF PROCESSOR’S MEMBERS,
DIRECTORS, OFFICERS, AGENTS OR EMPLOYEES, AND (ii) ANY BREACH OF THIS AGREEMENT
BY CUSTOMER.

ARTICLE XIV.

FORCE MAJEURE

14.1 Suspension of Obligations. If either Customer or Processor is rendered
unable, wholly or in part, by reason of Force Majeure, from carrying out its
obligations under this Agreement (other than the obligation to make payment of
amounts due hereunder), then upon said Party’s giving written notice and
reasonably full particulars of such Force Majeure to the other Party, which
shall be done as soon as practicable after the occurrence of the cause relied
on, the obligations of the Party giving such notice (other than the obligation
to make payment of amounts due hereunder), so far as they are affected by such
Force Majeure, shall be suspended during the continuance of any inability so
caused, but for no longer period, and such cause shall be remedied with all
reasonable dispatch.

14.2 Definition of Force Majeure. The term “Force Majeure” shall mean acts of
God, acts of any Governmental Authority, compliance with rules, regulations or
orders of any Governmental Authority, strikes, lockouts or other industrial
disturbances, acts of the public enemy, acts of terrorism, wars, blockades,
insurrections, riots, epidemics, landslides, lightning, earthquakes, fires,
extreme temperatures, storms, hurricanes, floods, or other adverse weather
conditions, washouts, arrests and restraint of rulers and people, civil
disturbances, explosions, breakage or accident to equipment, machinery or lines
of pipes, freezing of wells or lines of pipes, partial or entire failure or
refusal of operators of upstream or downstream pipelines or facilities to
receive Gas or Plant Products or increases in pressure of upstream or downstream

 

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pipelines or facilities, requisitions, directives, diversions, embargoes,
priorities or expropriations of Governmental Authorities, legal or de facto,
whether purporting to act under some constitution, decree, law or otherwise, the
necessity for making repairs, alterations, enlargements or connections to, or
performing maintenance on, machinery or facilities, inability to secure rights
of way, transportation embargoes or failures or delays in transportation or poor
road conditions, and any other cause or causes, whether of the kind herein
enumerated or otherwise, not reasonably within the control of the Party claiming
suspension, which, by the exercise of due diligence, such Party shall not have
been able to avoid.

14.3 Strikes. The settlement of strikes or lockouts shall be entirely within the
discretion of the Party having the difficulty. The requirement that any Force
Majeure shall be remedied with all reasonable dispatch shall not require the
settlement of strikes or lockouts by acceding to the demands of the opposing
party, when such is deemed inadvisable in the discretion of the Party having the
difficulty.

ARTICLE XV.

GOVERNING LAW; VENUE; DISPUTE RESOLUTION

15.1 Governing Law. This Agreement shall be governed, interpreted and construed
in accordance with the laws of the State of Texas without regard to the
conflicts of laws provisions thereof.

15.2 Venue. Exclusive venue for any suit, action or proceeding brought by either
Party in connection with this Agreement or arising out of the terms or
conditions hereof shall be in the state or federal courts situated in Harris
County, Texas. The Parties hereby irrevocably and unconditionally waive, to the
fullest extent they may legally and effectively do so, any objection they may
now or hereafter have to the laying of venue of any suit, action, or proceeding
arising out of or relating to this Agreement or the transactions contemplated
hereby in the state and federal courts situated in Harris County, Texas. EACH
PARTY HEREBY IRREVOCABLY WAIVES ALL RIGHT TO TRIAL BY JURY IN ANY ACTION,
PROCEEDING OR COUNTERCLAIM ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE
TRANSACTIONS CONTEMPLATED HEREBY OR THE ACTIONS OF ANY PARTY IN THE NEGOTIATION,
ADMINISTRATION, PERFORMANCE AND ENFORCEMENT OF THIS AGREEMENT.

15.3 Negotiation. Prior to submitting any dispute for resolution by a court, a
Party shall provide written notice to the other of the occurrence of such
dispute. If the Parties have failed to resolve the dispute within fifteen
(15) Business Days after such notice was given, the Parties shall seek to
resolve the dispute by negotiation between senior management personnel of each
Party. Such personnel shall endeavor to meet and attempt to amicably resolve the
dispute. If the Parties are unable to resolve the dispute for any reason within
thirty (30) Business Days after the original notice of dispute was given, then
either Party shall be entitled to pursue any remedies available at law or in
equity; provided, however, this Section 15.3 shall not limit a Party’s right to
initiate litigation prior to the expiration of the time periods set forth in
this Section 15.3 if application of such limitations would prevent a Party from
filing a lawsuit or claim within the applicable period for filing lawsuits
(e.g., statutes of limitation, prescription, etc.).

 

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ARTICLE XVI.

TAXES

16.1 Taxes on Processing and Plant Products. Any Tax in the nature of a
processing Tax, or any Tax on Plant Products resulting from the processing of
Customer Gas, or the sale of Plant Products extracted therefrom, and any and all
other Taxes now or hereafter levied, assessed, or collected on Plant Products
extracted, saved and sold from Customer Gas, shall be borne by Customer. In the
event Processor is liable and/or required to pay any such Tax for or on behalf
of Customer, Customer shall reimburse Processor for such taxes pursuant to
Processor’s invoice for the same.

16.2 Other Taxes. Customer shall pay, or cause to be paid, all production,
severance, gross receipts, ad valorem and similar or other Taxes levied or
imposed with respect to Customer Gas, and Customer shall bear and pay all Taxes
levied or imposed with respect to Customer Residue Gas. In the event Processor
is required to pay or remit any such Tax for Customer, Customer shall reimburse
Processor for such taxes pursuant to Processor’s invoice for the same. Customer
hereby agrees to indemnify, defend and hold harmless Processor from and against
any and all Losses arising out of or related to such Taxes. This indemnity and
defense obligation shall survive the expiration or termination of this
Agreement.

16.3 Taxes on Processing Facilities. Notwithstanding anything in this Agreement
to the contrary, Customer shall not be liable hereunder for any (x) Taxes
(including ad valorem taxes) assessed against Processor based on Processor’s
income, revenues, gross receipts, net worth or ownership of the Plants or any
equipment or facilities related thereto, and (y) state franchise, license and
similar Taxes required for the maintenance of Processor’s corporate existence.

ARTICLE XVII.

ASSIGNMENT

17.1 Restrictions on Assignment. This Agreement may not be assigned, disposed
of, alienated or otherwise transferred by either Party, in whole or in part,
without the prior written consent of the other Party, which consent shall not be
unreasonably withheld, conditioned or delayed, except as provided below.

17.2 Permitted Assignments. Notwithstanding the foregoing, (i) either Party may
assign this Agreement to an Affiliate of such Party without the consent of the
other Party, (ii) either Party may pledge this Agreement to secure any credit
facility or indebtedness of such Party or its Affiliates without the consent of
the other Party, (iii) Processor may assign this Agreement without Customer’s
consent in connection with the sale or transfer of all Plants, and (iv) Customer
may assign or partially assign this Agreement without Processor’s consent in
connection with the sale or transfer of all or part of Customer’s interests
subject to the Dedication, provided that such assignee has a credit rating
reasonably acceptable to Processor at the time of such sale or transfer. If any
such transfer described in (i) through (iv) above occurs, (a) the transferee
(other than any grantee under any lien, pledge, encumbrance or security
interest) shall assume in writing the obligations and liabilities of the
transferor under this Agreement (the “Assumed Obligations”); (b) in the case of
transfers under clause (iv) above, the

 

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transferor shall be released from its obligations and liabilities under this
Agreement to the extent of the Assumed Obligations, provided that Processor’s
combined obligations to Customer and to any partial transferee of Customer shall
be no greater than Customer’s obligations prior to such transfer; and (c) no
transfer or succession to the interest of Customer hereunder, wholly or
partially, shall affect or bind Processor until the first Day of the Month
following the date Processor has received a copy of the recorded transfer
document or other proof satisfactory to Processor that the claimant is legally
entitled to such interest.

ARTICLE XVIII.

NOTICES AND STATEMENTS

18.1 Notice. Any notice, statement, payment, claim or other communication
required or permitted hereunder shall be in writing and shall be sent by:
(i) facsimile transmission; (ii) delivered by hand; (iii) sent by United States
mail with all postage fully prepaid; or (iv) by courier with charges paid in
accordance with the customary arrangements established by such courier, in each
of the foregoing cases addressed to the Party at the following addresses:

 

Processor: NOTICES AND CORRESPONDENCE: PennTex North Louisiana Operating, LLC
Attn: Thomas Karam, Chief Executive Officer 11931 Wickchester Lane, Suite 300
Houston, Texas 77043 Fax: (832) 456-4050 ACCOUNTING MATTERS: PennTex North
Louisiana Operating, LLC Attn: Steven Jones, Chief Financial Officer 11931
Wickchester Lane, Suite 300 Houston, Texas 77043 Fax: (832) 456-4050 Customer:
NOTICES AND CORRESPONDENCE: MRD Operating LLC c/o Memorial Resource Development
Corp. 500 Dallas Street, Suite 1800 Houston, TX 77002 Attn: General Counsel
E-mail: kroane@memorialrd.com

 

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with a copy to: Attn: Jeremy Bolander E-mail: Jeremy.bolander@memorialrd.com

Such notices, statements, payments, claims or other communications shall be
deemed received as follows: (i) if delivered personally, upon delivery; (ii) if
sent by United States mail, whether by express mail, registered mail, certified
mail or regular mail, the notice shall be deemed to have been received on the
Day receipt is refused or is confirmed orally or in writing by the receiving
Party; (iii) if sent by a courier service, upon delivery; or (iv) if sent by
facsimile, on the Business Day following the Day on which it was transmitted and
confirmed by transmission report or such earlier time as confirmed orally or in
writing by the receiving Party.

18.2 Change of Address. Notices of change of address of either of the Parties
shall be given in writing to the other Party in the manner aforesaid and shall
be observed in the giving of all future notices, statements, payments, claims or
other communications required or permitted to be given hereunder.

ARTICLE XIX.

MISCELLANEOUS

19.1 Entire Agreement. This Agreement, including any attachments, constitutes
the entire agreement between the Parties pertaining to the subject matter
hereof, supersedes all prior agreements, understandings, negotiations and
discussions, whether oral or written, of the Parties with respect thereto, and
may not be amended or modified except by a written instrument signed by both
Parties expressly identifying it as an amendment or modification hereof.

19.2 Confidentiality. The Parties agree that the terms of this Agreement shall
be considered confidential, shall be kept confidential and shall not be
disclosed during the term of this Agreement to any Person that is not a Party,
except:

(a) to an Affiliate or an owner or indirect owner of such Party;

 

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(b) to the extent such information is required to be furnished in compliance
with applicable law, or pursuant to any legal proceedings or because of any
order of any Governmental Authority binding upon a Party;

(c) to prospective purchasers of the assets or equity interests of a Party;

(d) to prospective or actual attorneys engaged by either Party where disclosure
of such information is essential to such attorney’s work for such Party;

(e) to prospective or actual contractors and consultants engaged by either Party
where disclosure of such information is essential to such contractor’s or
consultant’s work for such Party;

(f) to a bank or other financial institution to the extent appropriate to a
Party arranging for funding;

(g) to the extent such information must be disclosed pursuant to any rules or
requirements of any stock exchange having jurisdiction over such Party or its
Affiliates;

(h) to its respective employees, subject to each Party taking customary
precautions to ensure such information is kept confidential; and

(i) any information which, through no fault of a Party, becomes a part of the
public domain.

Except as provided in subsection 19.2(b) above, any third party receiving
information pursuant to this Section 19.2 shall first execute a confidentiality
agreement with the Parties prior to receiving such information.

19.3 Waiver. Any failure by either Party to comply with any of its obligations,
agreements or conditions herein contained may only be waived in writing in an
instrument specifically identified as a waiver and signed by the Party to whom
such compliance is owed. No waiver of, or consent to a change in, any provision
of this Agreement shall be deemed or shall constitute a waiver of, or consent to
a change in, any other provisions hereof, nor shall such waiver constitute a
continuing waiver unless expressly provided in the waiver.

19.4 No Third Party Beneficiaries. Except for Persons indemnified hereunder,
this Agreement is not for the benefit of any third party and nothing herein,
expressed or implied, confers any right or remedy upon any Person not a party
hereto other than Persons which become successors or assigns pursuant to Article
XVII hereof.

19.5 No Partnership. It is not the intention of the Parties to create, nor is
there created hereby, a partnership, trust, joint venture or association. The
status of each Party hereunder is solely that of an independent contractor.

19.6 Published Indices. Unless expressly provided otherwise herein, if any
published price index referred to in this Agreement ceases to be published, the
Parties shall mutually agree to an alternative published price index
representative of the published price index referred to in this Agreement.

 

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19.7 Headings. The headings and captions in this Agreement have been inserted
for convenience of reference only and shall not define or limit any of the terms
and provisions hereof.

19.8 Contract Interpretation. In this Agreement, unless a clear contrary
intention appears:

(a) reference to any Person includes such Person’s successors and assigns but,
if applicable, only if such successors and assigns are not prohibited by this
Agreement, and reference to a Person in a particular capacity excludes such
Person in any other capacity or individually;

(b) the singular number includes the plural number and vice versa;

(c) reference to any gender includes each other gender;

(d) reference to any agreement, document or instrument means such agreement,
document or instrument as amended or modified and in effect from time to time in
accordance with the terms thereof;

(e) reference to any law means such law as amended, modified, codified, replaced
or reenacted, in whole or in part, and in effect from time to time, including
rules and regulations promulgated hereunder, and reference to any section or
other provision of any law means that provision of such law from time to time in
effect and constituting the substantive amendment, modification, codification,
replacement or reenactment of such section or other provision;

(f) “hereunder,” “hereof,” “hereto,” “herein,” “hereby,” and words of similar
import shall be deemed references to this Agreement as a whole and not to any
particular Article, Section or other provision hereof;

(g) “including” (and with correlative meaning “include”) means including without
limiting the generality of any description preceding such term;

(h) “or” is used in the inclusive sense of “and/or”;

(i) with respect to the determination of any period of time, “from” means “from
and including” and “to” means “to but excluding”;

(j) references to documents, instruments or agreements shall be deemed to refer
as well to all addenda, exhibits, schedules or amendments thereto;

(k) examples shall not be construed to limit, expressly or by implication, the
matter they illustrate; and

(l) all references in this Agreement to an “Article,” “Section,” “subsection,”
or “Exhibit” shall be to an Article, Section, subsection, or Exhibit of this
Agreement, unless the context requires otherwise.

 

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19.9 Agreement Subject to Laws. This Agreement is subject to all applicable
state and federal laws and to all applicable orders, rules, and regulations of
any Governmental Authority having jurisdiction. If either Party is ordered or
required to do any act inconsistent with the provisions of this Agreement, then
this Agreement shall continue nevertheless and shall be deemed modified to
conform with the requirements of such law or regulation.

19.10 Federal Jurisdiction. Customer shall take no action that, directly or
indirectly, could result in Processor being subjected to federal regulation,
other than as to safety, under the Natural Gas Act or Section 311 of the Natural
Gas Policy Act. If Customer takes any such action, in addition to all other
remedies available to it in connection with such breach, Processor shall have
the right to terminate this Agreement immediately. Customer shall be responsible
and pay for and shall release, defend, indemnify and hold harmless Processor to
the maximum extent permitted under applicable laws, from any and all Losses
arising from or out of any act or omission of Customer which results in
Processor or its Affiliates becoming subject to federal regulation, other than
as to safety, under the Natural Gas Act or Section 311 of the Natural Gas Policy
Act. In addition to the foregoing, Processor may terminate this Agreement
without penalty if Processor or any Plant becomes subject to federal regulation,
other than as to safety, under the Natural Gas Act or Section 311 of the Natural
Gas Policy Act, and Processor elects to discontinue providing processing or
other service to all customers at such Plant.

19.11 Reports to Governmental Authorities. Processor does not represent or
warrant that any information it may furnish to Customer under the provisions of
this Agreement will satisfy any of the requirements that may be imposed by any
applicable state or federal laws and by any applicable orders, rules, and
regulations of any Governmental Authorities having jurisdiction. Further,
Processor does not assume the responsibility for the making of any reports to
any Governmental Authorities that are required to be made by or on behalf of
Customer.

19.12 Material Adverse Change. If a federal or state statute, regulation or
order enacted or imposed by a Governmental Authority after the Effective Date
effects a change to a substantive provision of this Agreement that has a
material adverse impact upon the performance or benefits of either Party under
this Agreement, including the imposition of terms, conditions, or rate
restrictions that materially adversely affect the economic positions of the
Parties under this Agreement, then the Parties will enter into good faith
negotiations to attempt to revise this Agreement and any other ancillary
agreements between Customer and Processor so that (a) performance under this
Agreement is no longer impacted in a material adverse fashion and (b) this
Agreement and any other ancillary agreements between Customer and Processor are
revised in a manner that preserves, to the maximum extent possible, the
respective economic positions of the Parties. Each Party will provide reasonable
and prompt notice to the other Party as to any proposed law, regulations or any
regulatory proceeding or actions that could cause such Party to invoke its
rights under this Section 19.12. If, despite their good faith efforts, the
Parties are unable to revise this Agreement in accordance with the above within
ninety (90) Days from written notice of the occurrence, then the Party whose
performance and/or benefits is impacted in a material adverse fashion will have
the right to suspend or terminate this Agreement upon

 

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written notice delivered to the other Party within thirty (30) Days after
expiration of the ninety (90) Day period with such suspension or termination to
be effective no sooner than twelve (12) Months after the date of such written
notice. Until such time as this Agreement is suspended or terminated, each Party
will meet all obligations under this Agreement, unless otherwise prohibited by
law.

19.13 Severability. The invalidity of any one or more provisions of this
Agreement will not affect the validity of this Agreement as a whole, and in case
of any such invalidity, this Agreement will be construed as if the invalid
provision had not been included herein so long as the economic and legal
substance of the transactions contemplated by this Agreement is not affected in
any manner materially adverse to any Party. Upon such determination that one or
more provisions of this Agreement are invalid, the Parties shall negotiate in
good faith to modify this Agreement so as to effect the original intent of the
Parties as closely as possible in an acceptable manner to the end that the
transactions contemplated hereby are fulfilled to the extent possible.

19.14 Expenses. Each Party shall pay its own legal fees and other costs and
expenses incurred by it in connection with the execution and delivery of this
Agreement.

19.15 Joint Preparation. The Parties acknowledge and mutually agree that this
Agreement and all contents herein were jointly prepared by the Parties.

19.16 Further Assurances. Each Party shall take such acts and execute and
deliver such documents as may be reasonably required to effectuate the purposes
of this Agreement.

19.17 Counterpart Execution. This Agreement may be executed in any number of
counterparts, each of which shall be considered an original, and all of which
shall be considered one and the same instrument. Any signature delivered by a
Party by facsimile transmission or electronically shall be deemed an original
signature.

19.18 Survival. The respective indemnification obligations of the Parties set
forth in this Agreement and the limitations of liability set forth in
Section 13.2 shall survive the expiration of the Term and any termination of
this Agreement.

19.19 Customer-Affiliate-Subsidiary Obligations. Customer shall not, and shall
not permit its Subsidiaries to, seek to avoid its obligations hereunder by
acting through an Affiliate which is not a Subsidiary.

19.20 Amendment. This Agreement may be amended, restated or supplemented only by
written agreement of the Parties.

[Signature Page Follows]

 

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This Agreement is executed by the authorized representatives of the Parties, to
be effective on the date first set forth above.

 

CUSTOMER: MRD Operating LLC By: Memorial Resource Development Corp., its sole
member By:

/s/ Kyle Roane

Name:

Kyle N. Roane

Title:

Senior Vice President

Signature Page to Amended and Restated Gas Processing Agreement

--------------------------------------------------------------------------------

This Agreement is executed by the authorized representatives of the Parties, to
be effective on the date first set forth above.

 

PROCESSOR: PennTex North Louisiana Operating, LLC By:

/s/ Robert O. Bond

Name:

Robert O. Bond

Title:

Chief Operating Officer

 

Signature Page to Amended and Restated Gas Processing Agreement

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Exhibit A

AMI Description

All lands in the State of Louisiana lying north of the township line between
townships 14N and 15N, such lands being more particularly depicted as being all
lands lying north of the bold red line in the attached map.

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LOGO [g901177ridera2.jpg]

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Exhibit B

Customer Dedicated Leases

[Available upon request.]

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Exhibit C

Prior Dedications

[Available upon request.]

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Exhibit D

Memorandum of Agreement

THIS MEMORANDUM OF AMENDED AND RESTATED GAS PROCESSING AGREEMENT (this
“Memorandum”) is made and entered into effective as of April 14, 2015 (the
“Effective Date”), by and between PennTex North Louisiana Operating, LLC, a
Delaware limited liability company (“Processor”), with an address of 11931
Wickchester Lane, Suite 300, Houston, Texas 77043, and MRD Operating LLC, a
Delaware limited liability company (“Customer”), with an address of 500 Dallas
Street, Suite 1800, Houston, Texas 77002. Processor and Customer are sometimes
referred to herein individually as a “Party” and collectively as the “Parties.”

WHEREAS, Customer and Processor entered into that certain Amended and Restated
Gas Processing Agreement dated as of the Effective Date, as amended from time to
time (the “Agreement”). Capitalized terms used herein, but not defined herein,
shall have the meanings given to such terms in the Agreement

WHEREAS, the Parties desire to file this Memorandum in the applicable real
property records to give notice of the existence of the Agreement and certain
provisions contained therein.

NOW THEREFORE, for and in consideration of the premises and mutual covenants
contained in the Agreement, the Parties hereby agree as follows:

AGREEMENT

 

1. Term. The term of the Agreement commenced on the Effective Date and, unless
terminated sooner in accordance with its terms, continues in effect until
fifteen (15) years after the Plant Operational Date of the Mt. Olive Plant (the
“Primary Term”), and shall continue for successive one year terms thereafter
(each an “Additional Term”) unless the Agreement is terminated by either Party
as of the end of the Primary Term or an Additional Term, as applicable.

 

2. Definitions. “Customer Dedicated Leases” means (i) the oil and gas leases
described in Schedule 1 attached hereto and (ii) any oil and gas leases acquired
by Customer or any of its Subsidiaries in the Dedicated Area after the Effective
Date.

 

3. Dedication. As used herein, the “Dedicated Area” shall mean the area
described on the plat attached hereto as Schedule 2. Subject to the terms and
conditions of the Agreement, Customer has dedicated for processing under the
Agreement and shall deliver to Processor the following (the “Dedication,” and
the Gas that is the subject of the Dedication, being herein referred to as the
“Customer Gas”):

 

  a) all Gas produced and saved from wells now or hereafter located on lands
covered by the Customer Dedicated Leases or on lands pooled or unitized
therewith to the extent such Gas is attributable to Interests now owned by
Customer and/or any of its Subsidiaries or hereafter acquired by Customer and/or
any of its Subsidiaries, and their respective successors and assigns, and not
delivered or used in lease operations as permitted pursuant to the Agreement or
otherwise excluded as provided in the Agreement; and

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  b) with respect to such wells for which Customer and/or any of its
Subsidiaries is the operator, Gas produced from such wells that is attributable
to Interests in such wells owned by other working interest owners and royalty
owners which is not (i) taken “in-kind” by such working interest owners and
royalty owners (and which Customer has the contractual right to deliver under
the Agreement) or (ii) delivered or used in lease operations as permitted
pursuant to the Agreement, and for which Customer and/or any of its Subsidiaries
has the right and/or obligation to deliver such Gas; provided, however, with
respect to Customer Gas that is subject to a Prior Dedication, such Customer Gas
may be delivered in accordance with such Prior Dedication in accordance with the
terms of the Agreement.

 

4. Processing Services. Processor has agreed to receive, process and redeliver
Customer Gas and the Plant Products attributable thereto for the fees and on and
subject to the terms and conditions provided in the Agreement.

 

5. Covenant Running with the Land. So long as the Agreement is in effect, the
Agreement shall (i) be a covenant running with the Interests now owned by
Customer and/or any of its Subsidiaries or hereafter acquired by Customer and/or
any of its Subsidiaries and their respective successors and assigns in the
Dedicated Area and (ii) be binding on and enforceable by each Party and its
successors and assigns against the other Party and its successors and assigns.

 

6. Incorporation of Terms. The terms and conditions of the Agreement are
incorporated herein and made a part hereof for all purposes by this reference.
This Memorandum is executed and recorded solely for the purpose of giving notice
and shall not amend nor modify the Agreement in any way.

 

7. Counterparts. This Memorandum may be executed in one or more originals, but
all of which together shall constitute one and the same instrument.

[Signature Pages Follow]

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Exhibit E

Gas Specifications

Gas received at the Point of Delivery shall meet each specification set forth
below:

(a) Oxygen - not to exceed two-tenths percent (0.2%) by volume of uncombined
oxygen, and Customer shall make reasonable efforts to maintain the Gas free from
oxygen;

(b) Hydrogen Sulfide - not to exceed one quarter (1/4) grain per one hundred
(100) cubic feet;

(c) Carbon Dioxide - not to exceed two percent (2%) by volume;

(d) Sulfur – not to exceed twenty (20) grains per one hundred (100) cubic feet
(excluding sulfur contained in hydrogen sulfide);

(e) Dust, Gums and Solid Matter – Customer shall use common industry practices
to deliver Gas free of dust, gums, gum forming constituents, and other media or
solid matter;

(f) Nitrogen - not to exceed two percent (2%) by volume;

(g) Hazardous Waste – Gas shall not contain corrosion inhibitors, chemicals,
antifreeze agents, hazardous waste (except hydrogen sulfide) as defined in the
Resources Conservation and Recovery Act of 1976 or Hazardous Substances;

(h) Temperature – have a temperature of not less than forty degrees
(40o) Fahrenheit and not more than one hundred twenty degrees (120o) Fahrenheit;
and

(i) Heating Value – contain a Gross Heating Value of at least 950 Btu per cubic
foot.